Closed School Discharge 2026: Requirements & Application

Did your college shut down while you were still taking classes? You should not have to pay for a degree you could not finish. The Closed School Discharge program is a federal safety net designed to wipe out 100% of the student loans you took out for a school that closed its doors. This guide explains the 2026 eligibility rules and how to get your money back. For other forgiveness options, check our Student Loan Forgiveness 2026 Ultimate Guide.

What Are the Benefits?

This is one of the most generous forgiveness programs available. If approved, you get:

• 100% Forgiveness: The entire balance of the federal loans used for that school is erased.
• Refunds: You may receive a refund of any payments you already made on those loans.
• Credit Repair: The record of the loan is deleted from your credit report.

Who Is Eligible?

To qualify for a closed school discharge, you must meet specific timing rules:

1. Enrolled: You were enrolled when the school closed; OR
2. Withdrew Briefly: You withdrew from the school not more than 180 days before it closed.
3. No Transfer: You did not transfer your credits to a similar program at another school (called a “teach-out”). If you finished your degree elsewhere using those credits, you usually do not qualify.

Automatic vs. Manual Discharge

Under new regulations, some discharges are automatic.

• Automatic: If you do not enroll in another school within 1 year of the closure, the Department of Education may automatically discharge your loans.
• Manual: If you haven’t heard anything, do not wait. You should file the application immediately to start the process.

How to Apply

If your loans haven’t been wiped out yet, follow these steps:

1. Download the Form: Get the official Closed School Loan Discharge Application (OMB No. 1845-0058) directly from the Federal Student Aid website.
2. Gather Proof: It helps if you have your transcripts or enrollment documents proving you were there when it closed.
3. Submit: Send the completed form to your Loan Servicer (e.g., Nelnet, Aidvantage).
4. Stop Paying: You can request a “forbearance” while they review your application so you don’t have to make payments during the wait.
5. Check the List: Unsure if your school qualifies? Check the official list of closed schools to confirm the closure date.

Frequently Asked Questions

• “What if I graduated?” If you actually received your diploma or degree before the school closed, you generally do not qualify for this specific discharge (you might look into “Borrower Defense” instead).
• “Does this cover private loans?” No. This program only discharges federal Direct Loans, FFEL Loans, and Perkins Loans. You are still responsible for private bank loans.
• “Is it taxable?” No. Closed school discharges are not considered taxable income.