Closed School and Borrower Defense Discharges: Status Check
If your school shut down while you were enrolled, or lied to get you to enroll, you may not have to repay your federal student loans. Both programs still exist, but the rules have changed repeatedly, and the 2025 law froze the more generous 2022 borrower defense rules for years. Here's where each stands as of November 2026 and how to apply.
- Closed school discharge: available if your school closed while you were enrolled, or soon after you withdrew (within 120 or 180 days, depending on your loan dates), and you didn't finish through a teach-out or transfer credits to a comparable program.
- Borrower defense: available if your school misled you. Which rules apply depends on when your loans were disbursed. For loans since July 1, 2020, it's the 2019 rules.
- The 2022 borrower defense rules never took effect. The One Big Beautiful Bill Act suspended them for loans first made before July 1, 2035.
- Sweet v. McMahon settlement still covers many borrowers who applied before June 22, 2022.
- Both applications are free. If you might qualify for both, apply for both.
Closed school discharge
Who qualifies
- You were enrolled when the school (or your campus) closed, or you withdrew shortly before it closed: within 120 or 180 days, depending on when your loans were issued.
- You did not complete your program through a teach-out plan at another school.
- You did not transfer credits to a comparable program at a new school. Advocates warn that transferring even one credit can disqualify you. You can take the discharge and then start over somewhere else.
- Campus closures can count even if the school's other campuses stayed open.
What you get
If approved, ED cancels the federal loans you took out to attend that school, refunds payments you made on them, and removes the related negative history from your credit report. If you used GI Bill benefits, you may also be able to restore some of them through the VA Education Call Center (1-888-442-4551).
How to apply
- Confirm the school's official closure date. StudentAid.gov and your state's school licensing agency can help, and the licensing agency is also where you request transcripts from a closed school.
- Complete the closed school discharge application from StudentAid.gov's closed school page.
- Send it to your federal loan servicer and keep a copy with your confirmation.
- Watch your account for the discharge and any refund.
Automatic discharges: ED has discharged some closed school loans automatically, without an application, for borrowers who didn't enroll elsewhere within a set period after the closure. Whether that applies to you depends on your closure date and which rules govern your loans, and those rules have changed several times. Don't wait for an automatic discharge. Apply.
Borrower defense to repayment
Borrower defense cancels federal loans when your school misled you or broke certain laws in ways that relate to your loans or education, such as lying about job placement rates, costs, accreditation or transferability of credits.
Which rules apply to you
| Your loans were first disbursed | Rules that apply | Key points |
|---|---|---|
| Before July 1, 2017 | Pre-2017 standard | Based on an act or omission by the school that would give rise to a claim under state law. |
| July 1, 2017 – June 30, 2020 | 2016 rules | Included a group discharge process. |
| On or after July 1, 2020 | 2019 rules | You must show the school made a misrepresentation knowingly or with reckless disregard for the truth, that you reasonably relied on it, and that you suffered financial harm. You generally must file within 3 years of leaving the school. |
| 2022 rules | Never took effect | Blocked by a Fifth Circuit injunction, then suspended by the One Big Beautiful Bill Act for loans first made before July 1, 2035. |
The Sweet v. McMahon settlement
Borrowers who filed a borrower defense application before June 22, 2022 may be covered by the class settlement in Sweet v. McMahon (originally Sweet v. Cardona). Applicants who attended schools on the settlement's “Exhibit C” list have had automatic relief triggered because ED missed court-ordered deadlines for deciding their claims. If you applied before that date and haven't heard anything, check your StudentAid.gov account and ask your servicer about your Sweet status.
How to apply
- Gather evidence: enrollment agreements, ads, emails, texts, recruiter notes, course catalogs, and your own written account of what you were told and when.
- Apply at StudentAid.gov/borrower-defense. Be specific: what the school said, why it was false, how you relied on it, and how it harmed you.
- Ask your servicer how your account will be handled while the application is pending, including whether interest will accrue.
- Keep copies of everything and check your account periodically.
Status as of November 2026
| Program | Status |
|---|---|
| Closed school discharge | Open. Apply through StudentAid.gov and your servicer. |
| Borrower defense (individual applications) | Open, but slow. Staffing cuts in early 2025 slowed processing further, and there's no firm timeline. Some decisions take months, others years. |
| 2022 borrower defense rules | Suspended for loans first made before July 1, 2035. |
| Sweet v. McMahon | Settlement relief continues for class members. Exhibit C automatic relief has been triggered. |
For ED's own updates, see the borrower defense update page.
Taxes and other discharges
- Borrower defense: federal loans discharged through borrower defense are not treated as taxable income by the IRS.
- Closed school: tax treatment can depend on your situation, now that the 2021–2025 broad exclusion has expired. If you receive a Form 1099-C, ask a tax preparer. See the IDR tax bomb for background.
- False certification discharge is a separate option if the school enrolled you without a high school diploma or GED (in some cases), if a condition such as a criminal record legally barred you from working in the field you studied, or if someone forged your signature or used your identity to take out loans.
If your loans are in default because of a school that closed or misled you, apply for discharge before choosing consolidation or rehabilitation. See getting out of default. Parents with Parent PLUS loans for that school can apply too.
For-profit “borrower defense filing” services often charge large fees for an application you can file yourself. Every federal application, from IDR and consolidation to PSLF, discharges and default resolution, is free at StudentAid.gov or through your servicer. Anyone who charges a fee, asks for your FSA ID password, or promises guaranteed forgiveness is a red flag. See how to spot student loan scams.
What to do this week
- Find your school's closure date or gather your evidence of what the school told you.
- If you qualify for both programs, file both: closed school through your servicer, borrower defense at StudentAid.gov/borrower-defense.
- If you applied for borrower defense before June 22, 2022, check your account and ask your servicer about your Sweet settlement status.
- Don't transfer credits from a closed school until you've decided on a closed school discharge.
FAQ
Is closed school discharge still available in 2026?
Yes. If your school closed while you were enrolled, or within 120 or 180 days after you withdrew depending on your loan dates, and you didn't finish through a teach-out or transfer credits to a comparable program, you can apply through StudentAid.gov and your servicer.
What happened to the 2022 borrower defense rules?
They never took effect. A Fifth Circuit injunction blocked them, and the One Big Beautiful Bill Act suspended them for loans first made before July 1, 2035. Loans disbursed since July 1, 2020 use the 2019 rules.
How long does borrower defense take?
There's no firm timeline. Some applications take months and others years, and staffing cuts in 2025 slowed processing further.
Is a borrower defense discharge taxable?
Federal loans discharged through borrower defense are not treated as taxable income by the IRS.
Can I apply for both closed school and borrower defense?
Yes. If both might apply, file both. Closed school discharge is often faster.
Sources
Checked October 31, 2026. Rules are changing quickly; when an official notice and this page disagree, the official notice wins.
- Tate Law: Borrower defense to repayment (updated Oct. 4, 2026)
- Student Loan Borrower Assistance (NCLC): Closed school discharge
- Student Loan Borrower Assistance (NCLC): School-related discharges and false certification
- StudentAid.gov: Closed school discharge
- StudentAid.gov: Borrower defense
- StudentAid.gov: Borrower defense updates