On December 13, 2018, the U.S. Department of Education announced that it was automatically discharging the student loans of approximately 15,000 borrowers who attended a college or university that closed between November 1, 2013 and December 4, 2018. The approximate amount of loans that will be automatically discharged is $150 million, of which approximately $80 million is attributable to loans taken out by borrowers who attended schools operated by Corinthian Colleges, Inc.
The Department’s seemingly friendly action was actually prompted by a decision from a federal court in Washington, DC that forced the Department to act. The court invalidated the Department’s repeated attempts to delay the effective date of a regulation issued by the prior administration. That regulation, commonly known as the Borrower Defenses to Repayment regulation, amended the closed school discharge provisions with respect to schools that closed on or after November 1, 2013.
Those amendments require the Department to automatically discharge any student loan under circumstances in which the borrower did not complete the program because the covered school closed while the borrower was enrolled, or the borrower withdrew from the school not more than 120 days before the school closed, so long as the borrower did not subsequently re-enroll in any school within a period of three years from the date of the school closure.
Any borrower who attended a closed college or university should explore the available options under the Education Department’s closed school discharge provisions. Even if the school did not close, borrowers may have loan repayment and loan discharge options under certain circumstances.
Jonathan A. Vogel, a former deputy general counsel with the U.S. Department of Education and a former federal prosecutor, is the managing member of Vogel Law Firm PLLC, an education law firm focused on legal issues that arise in K-12, higher education, and student loans.