On August 26, 2021, the U.S. Department of Education announced it would provide $1.1 billion of student loan relief in closed-school discharges for at least 115,000 borrowers who attended the now-defunct ITT Technical Institute (ITT). (ITT, a chain of for-profit schools, quickly closed in 2016 after investigations revealed many potential instances of fraud.)
Under this initiative, borrowers who were unable to complete their degree due to ITT's closure, and didn't finish their degree elsewhere, will receive automatic discharges of their eligible federal student loans.
The closed-school discharge program allows borrowers to get a discharge of their federal student loans if they can't complete their degree program because their school shut down. To be eligible for a closed-school discharge, you must not have completed your program or transferred your credits or hours to another school.
Generally, you can get a discharge if you were enrolled when your school closed or you were on an approved leave of absence when your school shut its doors. But borrowers whose schools closed after they got their degrees don't qualify. Also, depending on the circumstances, borrowers usually aren't eligible if they withdraw more than 120 or 180 days before the school closed.
Federal Family Education Loans (FFELs), Direct Loans, and Perkins Loans are eligible for a closed-school discharge, but not private student loans.
The Education Department will automatically discharge loans for borrowers who didn't complete their degree or credential and left ITT on or after March 31, 2008. (In this situation, the Education Department decided to extend the closed-school discharge window to March 31, 2008, for former ITT students.)
According to the Department of Education, borrowers are eligible for a closed-school discharge under this initiative if they attended a covered institution that closed between November 1, 2013 and July 1, 2020, and will receive an automatic discharge of their associated federal student loans if they didn't enroll in another school within three years of the school's closure. Borrowers who enrolled elsewhere but didn't complete their program of study might still be eligible for a discharge, though they'll need to submit an application. Borrowers can get a closed-school discharge application by contacting their loan servicer or going to StudentAid gov/closedschoolform and returning a completed application to their servicer. For more information on closed-school discharges, go to the U.S. Department of Education's Federal Student Aid website.
The Department will begin processing the closed-school automatic discharges in September 2021, and borrowers will receive their discharges in the following weeks.
Since taking over the presidency, President Biden has canceled billions of dollars in federal student loan debt. In addition to the student loan relief discussed in this article, the Biden administration has:
Also, the American Rescue Plan Act exempts student debt forgiveness from federal taxation until January 1, 2026, and covers Direct Loans, FFELs, and private student loans.
Effective date: August 26, 2021