Two Different Programs, and a Rule Change You Need to Know About
Closed School Discharge (34 CFR § 685.214) is a genuine federal loan discharge for Direct Loan/FFEL borrowers whose school closed while they were enrolled, or within a set window after withdrawal, and who didn’t complete the program. Under the currently operative rule, that window is 180 days after withdrawal for loans first disbursed on or after July 1, 2020 (120 days for older loans). If you completed your program through a teach-out or by transferring credit to a comparable program elsewhere, you generally aren’t eligible for this discharge on your original loans.
Borrower Defense to Repayment is a separate program for loans discharged because the school itself committed fraud or substantial misrepresentation — not simply because it closed. This area has been genuinely volatile: a more generous 2022 rule was blocked in part by litigation, and then the One Big Beautiful Bill Act, signed July 4, 2025, statutorily delayed that 2022 rule’s effective date all the way to July 1, 2035. That means the currently operative standard for both programs is the stricter 2019 rule — which, for Borrower Defense, requires proving the school knowingly misrepresented facts, applies a 3-year statute of limitations, and demands corroborating documentary evidence. Treat any source describing the 2022 rule’s more borrower-friendly standard as describing a rule that is not currently in effect.
One important carve-out: the automatic, no-application discharge process the 2022 rule introduced ran roughly from 2023 to mid-2025 and discharged loans for a specific past cohort of borrowers — it processed real relief for real people, but it is not the current operating standard going forward. If your school closed recently, expect to need to actively apply rather than assume an automatic discharge will happen.
What Discharge Actually Gets You
This relieves federal loan debt — it does not reimburse cash or private-loan tuition payments on its own
Closed School Discharge
Full discharge of the federal loan(s) tied to the closed program, reimbursement of amounts already paid, and removal of related adverse credit reporting.
Borrower Defense (2019 rule)
Discharge of federal loans where you can prove the school knowingly misrepresented facts, within a 3-year window of discovering the issue — a materially harder standard than the paused 2022 rule.
Sweet v. Cardona/McMahon settlement (if you’re a class member)
Automatic discharge, refunds, and credit correction under court order, for the specific named-school population covered by the settlement.
The Sweet v. Cardona/McMahon Settlement — A Separate, Court-Ordered Track
Independent of the regulatory rollback described above, a class-action settlement (originally Sweet v. Cardona, now proceeding under the current Education Secretary’s name) covers roughly 200,000 borrowers who filed a Borrower Defense claim against one of about 150 named schools by a set 2022 deadline. Class members are entitled to automatic discharge, refunds of amounts paid, and correction of adverse credit reporting under a binding court order — a genuinely different and more favorable path than the current regulatory standard, but only available to borrowers within that specific class. verify whether your specific school and claim date fall within the settlement’s coverage before assuming it applies to you
How to Apply, Step by Step
Both programs are applied for through your loan servicer and studentaid.gov, not automatically
Check whether you’re covered by the Sweet v. Cardona/McMahon settlement first
If your school is one of the roughly 150 named in the settlement and you filed a Borrower Defense claim by the relevant 2022 deadline, you may already be entitled to automatic relief under that court order — check with your servicer or the settlement administrator before assuming you need to apply from scratch.
Confirm you didn’t transfer credit to a comparable program
Completing your program elsewhere via a teach-out or credit transfer generally disqualifies you from Closed School Discharge on the original loan — confirm your status before applying.
Submit the Closed School Discharge application via studentaid.gov or your loan servicer
Provide your enrollment and withdrawal dates and confirmation that you didn’t complete the program. verify current application deadline, if any, directly on studentaid.gov before relying on there being no deadline
For a Borrower Defense claim, apply separately and gather corroborating evidence
Under the current 2019 standard, you’ll need documentary evidence supporting that the school knowingly misrepresented something material, filed within 3 years of discovering the issue.
Check for a state tuition recovery fund
Roughly 20 states run some form of tuition recovery fund for closed-school situations, with widely varying scope and payout caps — check your state’s higher-education authorization agency. verify per state
Request your transcript before records become harder to access
Accreditors generally require transcript retention, and many states require a "custodian of records" arrangement when a school closes — request your transcript as early as possible rather than assuming it will remain easy to obtain.
Documents to gather
- Enrollment agreement, admission letter, and proof of enrollment dates
- Withdrawal date or the school’s closure announcement date
- Loan account information and servicer contact details
- Any evidence of school misrepresentation (marketing materials, program accreditation claims, job-placement statistics given to you)
- Transcript or transcript request confirmation
Timelines and Limitation Periods
The closure window is fixed; the Borrower Defense deadline runs from when you discovered the issue
These programs run on different clocks from each other, and from the Sweet v. Cardona/McMahon settlement’s own deadlines — confirm which applies to your situation.
| Jurisdiction | Limitation Period |
|---|---|
| US — Closed School Discharge window (loans disbursed on/after 7/1/2020) | 180 days after withdrawal |
| US — Closed School Discharge window (loans disbursed before 7/1/2020) | 120 days after withdrawal |
| US — Borrower Defense claim (current 2019 rule) | 3 years from when you knew or should have known about the basis for the claim |
| US — Sweet v. Cardona/McMahon settlement class claims | Governed by court-ordered processing deadlines specific to the settlement verify current status with the settlement administrator |
Realistic Outcomes and Caveats
Closed School Discharge itself is comparatively straightforward to qualify for if you meet the basic criteria (enrolled at closure or within the window, didn’t complete via transfer) — the harder cases are Borrower Defense claims, where the current 2019 standard requires proving the school knowingly misrepresented something, a meaningfully higher bar than the paused 2022 rule.
If you’re within the Sweet v. Cardona/McMahon settlement class, your path is likely faster and more favorable than filing fresh under the current regulatory standard — worth checking before you assume you need to start from zero.
This page can help you understand which program and standard applies, but it cannot predict how quickly a specific discharge application will be processed or guarantee approval, especially for a Borrower Defense claim under the stricter current rule.
Common Pitfalls
Assuming discharge will happen automatically
The 2022 rule’s automatic, no-application discharge process is not the current operating standard — apply directly rather than waiting for automatic relief, unless you’re confirmed to be part of the Sweet v. Cardona/McMahon settlement class.
Relying on older articles describing the 2022 rule
The 2022 Closed School Discharge/Borrower Defense rule was statutorily delayed to 2035 by the 2025 OBBBA — content describing its more generous standards as currently operative is out of date.
Transferring credit without understanding the eligibility trade-off
Completing your program through a teach-out or transferring credit to a comparable program generally makes you ineligible for Closed School Discharge on the original loan — weigh this before deciding.
Waiting too long to request your transcript
Records can become harder to access after a school closes, even though transcript-preservation requirements generally exist — request yours as early as possible.
Assuming a federal discharge covers your private loans
Federal discharge relieves federal Direct/FFEL loan debt specifically — private loans require a separate state fund claim or legal action, where available.
Organize Your School Closure Case
Use the calculator to document your enrollment, the closure, and your loan details before applying for discharge.
Organize Your School Closure Case
Use the calculator to document your enrollment, the closure, and your loan details before applying for discharge.
This stays in your private workspace until you choose a next step. It does not submit a claim on your behalf on its own.
Official and Legal References
- StudentAid.gov — Closed School Discharge
- StudentAid.gov — Borrower Defense to Repayment
- 34 CFR § 685.214 — Closed School Discharge (Cornell LII)
- Forbes — "Strict Limits On Discharging Student Loans To Remain After Court Dismisses Challenge" (May 2026)
- Brookings — How OBBBA Reshapes Student Lending
- California BPPE — Student Tuition Recovery Fund
Frequently Asked Questions
Real edge cases, answered in plain language
Will my loans be discharged automatically now that my school closed?
I transferred my credits to another school — can I still get Closed School Discharge?
What’s the difference between Closed School Discharge and Borrower Defense?
Organize Your School Closure Case
Use the calculator to document your enrollment, the closure, and your loan details before applying for discharge.