When a for-profit college shuts its doors, former students are often left with debt and no degree. Two federal programs can cancel those loans: a closed school discharge and Borrower Defense to Repayment. They work very differently, and picking the wrong one can mean a long wait for a likely denial. Here is how each one works in 2026, who qualifies, and how Legal Touch handles the work for you.
If you were enrolled when your school or campus closed, or you left shortly before it closed and never finished the program anywhere else, a closed school discharge is usually the first thing to check. If you graduated, left years earlier, or the school is still open, Borrower Defense may fit better. Here is how the two compare:
| Question | Closed school discharge | Borrower Defense |
|---|---|---|
| What it is based on | The school or campus closed before you could finish | The school misled you about something that mattered to your decision to enroll or borrow |
| When you had to be there | Enrolled on the closure date, on an approved leave of absence, or withdrew within 120 days before closure (180 days for loans first disbursed on or after July 1, 2020), unless an extended date applies | Any time you attended, as long as the misconduct affected you |
| If you graduated | Generally not eligible | Can still apply |
| If the school is still open | Not available | Can still apply |
| Proof needed | Mostly dates: closure date, your last day, and whether you finished elsewhere | Evidence of what the school told you and how you relied on it |
| Filing limit | No set filing deadline while you still owe the loans | A 3-year limit under the 2019 rule for loans first disbursed on or after July 1, 2020 |
The July 2025 budget law (the One Big Beautiful Bill Act, Sec. 85002) set aside the 2022 closed school rules for loans first originated before July 1, 2035 and restored the rules in effect on July 1, 2020. Federal Student Aid confirmed this in Dear Colleague Letter GEN-25-04. In plain terms, you generally qualify if:
The Department can extend the 120 or 180 day window when a school closed under exceptional circumstances, such as a loss of accreditation, a state shutdown order, or the end of its federal aid eligibility. Each loan is checked on its own first disbursement date, so one person can have two different windows.
On January 16, 2025, the Department found that several school groups closed under exceptional circumstances and pushed their look-back dates back by years. As listed on the Project on Predatory Student Lending group discharge page:
A proposed class action filed in October 2026, Gaussoin v. McMahon, says the Department has not been honoring these extended dates. No class has been certified and no court has ordered any discharges, so the case does not change what you can do today. If you attended one of these schools in the covered period, an application can still be filed now. See our pages on Le Cordon Bleu, Argosy University, Brightwood College and the Art Institutes.
Under the restored rules, borrowers whose school closed between November 1, 2013 and July 1, 2020, and who did not enroll at another school that takes federal aid within three years of the closure, can receive an automatic discharge without applying, according to a Department of Education issue paper. Anyone outside that window, or anyone who enrolled somewhere else, usually needs an application. If you think you were covered and your loans are still showing, it is worth checking your records rather than waiting.
Under 34 CFR 685.214, an approved closed school discharge generally:
If your loans are in default right now, our guide on wage garnishment and tax refund offset explains where collections stand.
Borrower Defense is not tied to a closure. It is based on what the school told you, such as false job placement rates, credits that would not transfer, or misleading costs. It is often the better route when:
Timing matters. Our guides on whether Borrower Defense is still available in 2026 and the 3-year rule explain which standard applies to your loans. If you consolidated older FFEL or Perkins loans, read this consolidation warning before anything else is filed. Our full Borrower Defense guide and application status page cover the rest.
Some schools have already had loans cancelled for whole groups of students, such as ITT Technical Institute and Corinthian Colleges for set dates. If you are already covered, you should not pay anyone. The PPSL group discharge list shows the schools and dates, and our histories of ITT Tech and Corinthian Colleges explain what happened.
You tell us about your school once. We do the work:
If you also need help with repayment or default, see all of our loan help services, including default resolution by consolidation.
A closed school discharge cancels federal student loans you took out to attend a school that closed before you could finish your program. If it is approved, the Department of Education generally cancels the eligible loans, refunds payments made on them, and removes related default and negative credit reporting.
Under the rules restored in July 2025, it is generally 120 days before the closure date for loans first disbursed before July 1, 2020, and 180 days for loans first disbursed on or after July 1, 2020. The Department can extend the window when a school closed under exceptional circumstances, and it did so for several school groups in January 2025.
On January 16, 2025, the Department extended the look-back date to May 6, 2015 for closed Career Education Corporation campuses (including Le Cordon Bleu, Sanford-Brown and Brooks Institute), to December 16, 2016 for Education Corporation of America campuses (Virginia College and Brightwood College), to October 17, 2017 for Education Management Corporation campuses (the Art Institutes and Argosy University), and to April 23, 2021 for Bay State College.
Sometimes. Under the restored rules, borrowers whose school closed between November 1, 2013 and July 1, 2020 and who did not enroll at another federally eligible school within three years can receive an automatic discharge. Many other borrowers still need an application, so waiting can mean years of payments that did not need to be made.
Generally not if you transferred credits and completed, or are completing, a comparable program at another school, or finished through a teach-out. If you started a completely different program, or the new school did not accept your credits, you may still qualify.
If you were enrolled when the school closed, or left shortly before, a closed school discharge is often the simpler claim because it turns on dates rather than proof of misconduct. If you graduated, left long before the closure, or the school is still open, Borrower Defense may be the better route. Legal Touch reviews both before anything is filed.
Yes, unless your servicer confirms a pause in writing. Federal Student Aid tells borrowers to keep making payments until the discharge is approved. If the discharge is approved, payments made on the discharged loans are generally refunded.
No. Only the U.S. Department of Education decides these applications. Legal Touch is not a law firm and makes no guarantees. We check your dates and records, tell you which route is more likely to be approved, and handle the paperwork for you.
Find out whether a closed school discharge or Borrower Defense fits your loans. Check My Eligibility or call 800-261-2946.
Questions first? Contact our team.
Sources: Public Law 119-21 (One Big Beautiful Bill Act), Sec. 85002; Federal Student Aid, GEN-25-04 (July 18, 2025); 34 CFR 685.214; Federal Student Aid, School Closure Discharge Application and closed school information for affected students; U.S. Department of Education, closed school discharge issue paper; Project on Predatory Student Lending, Group Discharges.
Legal Touch is not a law firm and does not give legal advice. Results are not guaranteed. Every decision is made by the U.S. Department of Education or your loan servicer, and Legal Touch is not affiliated with any government agency. You can apply for a closed school discharge or Borrower Defense yourself, for free, at StudentAid.gov or through your loan servicer. We will never ask for your StudentAid.gov username or password.
Attorney-formed document preparation for Title IV federal student loan program applications. Not a law firm.
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