Submitted by Lee M. Perlman, New Jersey Bankruptcy Attorney
When you’re told that your college will be shutting down, there can be a lot of uncertainty about what comes next. In light of recent closures of certain for-profit colleges, we wanted to share some helpful advice to help you navigate the situation.
This information and answers to other common questions about student loans are also available through Ask CFPB.
If you have federal student loans
If you have federal student loans and are currently enrolled or recently left a college or university that has shut its doors, you may be able to discharge (cancel) your loans by applying for a closed school discharge, which requires you to fill out a form.
This option is only a possibility if your school closes. If you are attending a school that is sold, you may not be eligible to ask for discharge under this process, even if your school no longer offers your program of study.
If you do have your federal loans discharged and you end up transferring credits to a similar program, you may have to pay back the loans that were discharged.
If you have private student loans
Generally, if you have private student loans, you may still be responsible for repaying them. However, some states may have programs that assist students with private student loans in the event of a school closure. In addition, some private student lenders may offer options to assist certain borrowers in this situation.
If you think you won’t be able to afford to repay your private student loan, you should contact your student loan servicer immediately to learn more about your options. And if you run into trouble, you can also submit a complaint online or by calling (855) 411-2372.
If you’re offered an option for a “teach-out” to complete your program
If your school has announced that it is closing, you may be offered a “teach out,” an arrangement through which you may be able to complete your program and receive your degree or certificate.
If you accept a “teach-out” to complete your program at your school or another school, you will be responsible for repaying all of your student loans. If you decline a “teach-out” offer and the school closes, you may not have to pay back your federal student loans.
Originally published here by Rohit Chopra, the Consumer Financial Protection Bureau’s Student Loan Ombudsman