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My School Closed Before I Could Graduate; Do I Still Have to Pay My Federal Student Loans?

What if you are attending a school for a particular degree or certification, you got federal student loans to pay for it, and the school closes before you get your degree or certification? Do you still have to pay back the loan?

There Is a Way Out

Maybe not, according to the U.S. Department of Education. You may be eligible for discharge of your Direct Loans and FFEL Program loans under either of these two circumstances:

  • Your school closes while you are enrolled, and you do not complete your program because of the closure. This is the case even if you were on an approved leave of absence; you are still considered to have been enrolled at the school.
  • Your school closes within 90 days after you withdraw.

But There Are Some "Gotchas"

However, you still need to be careful. The closing of the school has to prevent you from completing your education. Therefore:

  • If you complete a comparable educational program at another school, you could still be on the hook.
  • If you complete such a program at another school after your loan is discharged, you might later have to pay it back.
  • If you have completed all the coursework for the program, but you have not received a diploma or certificate at the time the school closed, you could still have to pay.

Should you fit the requirements for loan forgiveness under these circumstances, you need to complete a closed school discharge application. To get one, you need to contact your loan servicer.

So What Do I Do?

If you live in southern New Jersey and would like to consult with me on your loans, please feel free to call my office at 856-432-4113 or contact me through this site to schedule an appointment in my Woodbury office to discuss your case.

If you would like more information about student loans, you can dowload my free book, I Graduated; Now What? A Guide to Dealing with Your Student Loans.

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