UNITED STATES DEPARTMENT OF EDUCATION

 OFFICE OF POSTSECONDARY EDUCATION

Proposed Regulatory Text for Issue Paper #2: Closed School Discharge

Session 2: November 1-5, 2021

§685.214 Closed school discharge.

(a) General. (1) The Secretary discharges the borrower's (and any endorser's) obligation to repay a 

Direct Loan in accordance with the provisions of this section if the borrower (or the student on whose 

behalf a parent borrowed) did not complete the program of study for which the loan was made because 

the school at which the borrower (or student) was enrolled closed, as described in paragraph (c) of this 

section.

(2) For purposes of this section—

(i) A school's closure date is the earlier of the date that the school ceases to provide educational 

instruction in all most programs, as determined by the Secretary, or a date chosen by the Secretary that 

reflects when the institution had ceased to provide meaningful educational instruction for most of its 

students; and

(ii) “School” means a school's main campus or any location or branch of the main campus, 

regardless of whether the school or its location or branch is considered eligible;

(iii) “Program” means the credential defined by the level and Classification of Instructional Program 

code in which a student is enrolled, except that the Secretary may define a borrower’s program as 

multiple levels or Classification of Instructional Program codes if:

(A ) Tthe enrollment occurred at the same institution in closely proximate periods;

(B ) The school granted a credential in a program while the student was enrolled in a different 

program; or

(C ) The programs stack or were presented as necessary for borrowers to complete in order to 

succeed in the relevant field of employment

: and

(iii) “Comparable program” means--—

(A) For schools that closed before [MONTH/DAYJuly 1, /2014] a program at the same credential 

level and in the same field of study that the borrower was enrolled in at the closed school and which 

accepted most of the credits transferred from the closed school.

Commented [A1]: Reflects ability to capture institutions that 

postpone closure date while otherwise essentially closing.

Commented [A2]: Addresses the issue of if a college chains 

programs together or awards retroactive credentials that could end 

up partly denying a borrower a discharge. 
Closed school discharge proposed regulatory text session two 2

(B) For schools that closed on or after [MONTH/DAY/July 1, 2014] and before [MONTH/DAY/June 

30, 2019] a program at the same level and with the same Classification of Instructional Program (CIP) 

code as the program that the borrower was enrolled in at the closed school.

(C) For schools that closed on or after [MONTH/DAY/July 1, 2019] a program designed to be a 

continuation of the program that the borrower was enrolled in at the closed school.

(b) Relief pursuant to discharge. (1) Discharge under this section relieves the borrower of any past 

or present obligation to repay the loan and any accrued charges or collection costs with respect to the 

loan.

(2) The discharge of a loan under this section qualifies the borrower for reimbursement of amounts 

paid voluntarily or through enforced collection on the loan.

(3) The Secretary does not regard a borrower who has defaulted on a loan discharged under this 

section as in default on the loan after discharge, and such a borrower is eligible to receive assistance 

under programs authorized by title IV of the Act.

(4) The Secretary reports the discharge of a loan under this section to all consumer reporting 

agencies to which the Secretary previously reported the status of the loan, so as to delete all adverse 

credit history assigned to the loan.

(c) Discharge without an application. (1) If the Secretary determines based on information in the 

Secretary’s possession that the borrower qualifies for the discharge of a loan under this section, the 

Secretary discharges the loan without an application from the borrower, if the borrower did not 

subsequently re-enroll in any title IV-eligible institution within a period of one year from the school’s 

closure date. 

(dc) Borrower qualification for discharge. (1) UnlessExcept as provided in paragraph (h) of this 

section, For loans first disbursed before July 1, 2020, in order to qualify for discharge of a loan under this 

section, a borrower must submit to the Secretary a written request and sworn statement,a completed 

application and the factual assertions in the statementapplication must be true The statement need not 

be notarized but and must be made by the borrower under penalty of perjury. In the statement,The 

application explains the procedures and eligibility criteria for obtaining a discharge and requires the 

borrower to must—

(i) State that the borrower (or the student on whose behalf a parent borrowed)—

(A) Received the proceeds of a loan, in whole or in part, on or after January 1, 1986 to attend a 

school;

(B) Did not complete the program of study at that school because the school closed while the 

student was enrolled, or the student withdrew from the school not more than 120180 calendar days 

before the school closed. The Secretary may extend the 120180-day period if the Secretary determines 

that exceptional circumstances, as described in paragraph (i) of this section, related to a school's closing

justify an extension. Exceptional circumstances for this purpose may include, but are not limited to: the 

school's loss of accreditation; the school's discontinuation of the majority of its academic programs; 

Commented [A3]: We have proposed to strike this section in 

the definitions, but leave it within the automatic discharge 

provision, for simplicity. 

Commented [A4]: The non-redlined language is existing text. 

We are not raising the burden on the application front.
Closed school discharge proposed regulatory text session two 3

action by the State to revoke the school's license to operate or award academic credentials in the State; 

or a finding by a State or Federal government agency that the school violated State or Federal law; and; 

and 

(C) Did not complete the program of study or a comparable program through either an 

institutional teach-out plan performed by the school or a teach-out agreement at another school, 

approved by the school’s accrediting agency and, if applicable, the school’s State authorizing agency.an 

approved teach-out at another school or by transferring academic credits or hours earned at the closed 

school to another school;

(ii) State whether the borrower (or student) has made a claim with respect to the school's closing 

with any third party, such as the holder of a performance bond or a tuition recovery program, and, if so, 

the amount of any payment received by the borrower (or student) or credited to the borrower's loan 

obligation; and

(iii) State that the borrower (or student)—

(A) Agrees to provide to the Secretary upon request other documentation reasonably available to 

the borrower that demonstrates that the borrower meets the qualifications for discharge under this 

section; and

(B) Agrees to cooperate with the Secretary in enforcement actions in accordance with paragraph 

(d) of this section and to transfer any right to recovery against a third party to the Secretary in 

accordance with paragraph (e) of this section.

(2) For loans first disbursed on or after July 1, 2020, in order to qualify for discharge of a loan under 

this section, a borrower must submit to the Secretary a completed application, and the factual 

assertions in the application must be true and made by the borrower under penalty of perjury. The 

application explains the procedures and eligibility criteria for obtaining a discharge and requires the 

borrower to—

(i) Certify that the borrower (or the student on whose behalf a parent borrowed)—

(A) Received the proceeds of a loan, in whole or in part, on or after July 1, 2020 to attend a school;

(B) Did not complete the program of study at that school because the school closed on the date 

that the student was enrolled, or the student withdrew from the school not more than 180 calendar 

days before the date that the school closed. The Secretary may extend the 180-day period if the 

Secretary determines that exceptional circumstances, as described in paragraph (i) of this section,

related to a school's closing justify an extension;. Exceptional circumstances for this purpose may 

include, but are not limited to: The revocation or withdrawal by an accrediting agency of the school's 

institutional accreditation; revocation or withdrawal by the State authorization or licensing authority to 

operate or to award academic credentials in the State; the termination by the Department of the 

school's participation in a title IV, HEA program; the teach-out of the student's educational program 

exceeds the 180-day look-back period for a closed school loan discharge; or the school responsible for 

the teach-out of the student's educational program fails to perform the material terms of the teach-out 
Closed school discharge proposed regulatory text session two 4

plan or agreement, such that the student does not have a reasonable opportunity to complete his or her 

program of study or a comparable program; and

(C) Did not complete the program of study or a comparable program through a teach-out at 

another school or by transferring academic credits or hours earned at the closed school to another 

school;

(ii) Certify that the borrower (or the student on whose behalf the parent borrowed) has not 

accepted the opportunity to complete, or is not continuing in, the program of study or a comparable 

program through either an institutional teach-out plan performed by the school or a teach-out 

agreement at another school, approved by the school's accrediting agency and, if applicable, the 

school's State authorizing agency.

(3) If the Secretary determines, based on information in the Secretary's possession, that the borrower 

qualifies for the discharge of a loan under this section, the Secretary—

(i)Mmay discharge the loan without an application from the borrower; and

(ii) With respect to schools that closed on or after November 1, 2013, and before July 1, 2020, will 

discharge the loan without an application from the borrower if the borrower did not subsequently reenroll in any title IV-eligible institution within a period of three one years from the date the school 

closed.

(ed) Cooperation by borrower in enforcement actions. (1) In order to obtain a discharge under this 

section, a borrower must cooperate with the Secretary in any judicial or administrative proceeding 

brought by the Secretary to recover amounts discharged or to take other enforcement action with 

respect to the conduct on which the discharge was based. At the request of the Secretary and upon the 

Secretary's tendering to the borrower the fees and costs that are customarily provided in litigation to 

reimburse witnesses, the borrower must—

(i) Provide testimony regarding any representation made by the borrower to support a request for 

discharge;

(ii) Produce any documents reasonably available to the borrower with respect to those 

representations; and

(iii) If required by the Secretary, provide a sworn statement regarding those documents and 

representations.

(2) The Secretary denies the request for a discharge or revokes the discharge of a borrower who—

(i) Fails to provide the testimony, documents, or a sworn statement required under paragraph 

(d)(1) of this section; or

(ii) Provides testimony, documents, or a sworn statement that does not support the material 

representations made by the borrower to obtain the discharge.

Commented [A5]: We have collapsed paragraphs (1) and (2) of 

(c) to reduce complexity in the language, because we propose to 

apply the 180-day window regardless of whether the borrower took 

out the loans before or after July 1, 2020.

We are conducting data analysis to understand the difference 

between 180 and 270 days but are not yet ready to share that.
Closed school discharge proposed regulatory text session two 5

(fe) Transfer to the Secretary of borrower's right of recovery against third parties. (1) Upon 

discharge under this section, the borrower is deemed to have assigned to and relinquished in favor of 

the Secretary any right to a loan refund (up to the amount discharged) that the borrower (or student) 

may have by contract or applicable law with respect to the loan or the enrollment agreement for the 

program for which the loan was received, against the school, its principals, its affiliates and their 

successors, its sureties, and any private fund, including the portion of a public fund that represents 

funds received from a private party.

(2) The provisions of this section apply notwithstanding any provision of State law that would 

otherwise restrict transfer of those rights by the borrower (or student), limit or prevent a transferee 

from exercising those rights, or establish procedures or a scheme of distribution that would prejudice 

the Secretary's ability to recover on those rights.

(3) Nothing in this section limits or forecloses the borrower's (or student's) right to pursue legal 

and equitable relief regarding disputes arising from matters unrelated to the discharged Direct Loan.

(fh) Discharge without an application. (1) If the Secretary determines based on information in the 

Secretary’s possession that the borrower qualifies for the discharge of a loan under this section, the 

Secretary mayshall discharges the loan without an application from the borrower, if the borrower did 

not subsequently re-enroll in any title IV- eligible institution within a period of one year from the 

school’s closure date the school closed. 

(gf) Discharge procedures. The discharge procedures in this paragraph (f) apply to loans first 

disbursed before July 1, 2020.

(1) After confirming the date of a school's closure, the Secretary identifies any Direct Loan borrower (or 

student on whose behalf a parent borrowed) who appears to have been enrolled at the school on the 

school closure date or to have withdrawn not more than 120 180 days prior to the closure date.

(2) If the borrower's current address is known, the Secretary mails the borrower a discharge 

application and an explanation of the qualifications and procedures for obtaining a discharge. The 

Secretary also promptly suspends any efforts to collect from the borrower on any affected loan. The 

Secretary may continue to receive borrower payments.

(3) If the borrower's current address is unknown, the Secretary attempts to locate the borrower 

and determines the borrower's potential eligibility for a discharge under this section by consulting with 

representatives of the closed school, the school's licensing agency, the school's accrediting agency, and 

other appropriate parties. If the Secretary learns the new address of a borrower, the Secretary mails to 

the borrower a discharge application and explanation and suspends collection, as described in 

paragraph (f)(2) of this section.

(4) If a borrower fails to submit the application described in paragraph (c) of this section within 960

days of the Secretary's providing the discharge application, the Secretary resumes collection and grants 

forbearance of principal and interest for the period in which collection activity was suspended. The 

Secretary may capitalize any interest accrued and not paid during that period.

Commented [A6]: We are trying to set up a standard 90 days 

before going back into repayment across multiple programs.
Closed school discharge proposed regulatory text session two 6

(5) Upon resuming collection on any affected loan, the Secretary provides the borrower another 

discharge application and an explanation of the requirements and procedures for obtaining a discharge.

(6) If the Secretary determines that a borrower who requests a discharge meets the qualifications 

for a discharge, the Secretary notifies the borrower in writing of that determination.

(7) If the Secretary determines that a borrower who requests a discharge does not meet the 

qualifications for a discharge, the Secretary notifies that borrower in writing of that determination and 

the reasons for the determination.

(g) Discharge procedures. The discharge procedures in this paragraph (g) apply to loans first 

disbursed on or after July 1, 2020.

(1) After confirming the date of a school's closure, the Secretary identifies any Direct Loan 

borrower (or student on whose behalf a parent borrowed) who appears to have been enrolled at the 

school on the school closure date or to have withdrawn not more than 180 days prior to the closure 

date.

(2) If the borrower's current address is known, the Secretary mails the borrower a discharge 

application and an explanation of the qualifications and procedures for obtaining a discharge. The 

Secretary also promptly suspends any efforts to collect from the borrower on any affected loan. The 

Secretary may continue to receive borrower payments.

(3) If the borrower's current address is unknown, the Secretary attempts to locate the borrower 

and determines the borrower's potential eligibility for a discharge under this section by consulting with 

representatives of the closed school, the school's licensing agency, the school's accrediting agency, and 

other appropriate parties. If the Secretary learns the new address of a borrower, the Secretary mails to 

the borrower a discharge application and explanation and suspends collection, as described in 

paragraph (g)(2) of this section.

(4) If a borrower fails to submit the application described in paragraph (c) of this section within 60 

days of the Secretary's providing the discharge application, the Secretary resumes collection and grants 

forbearance of principal and interest for the period in which collection activity was suspended. The 

Secretary may capitalize any interest accrued and not paid during that period.

(5) If the Secretary determines that a borrower who requests a discharge meets the qualifications 

for a discharge, the Secretary notifies the borrower in writing of that determination.

(6) If the Secretary determines that a borrower who requests a discharge does not meet the 

qualifications for a discharge, the Secretary notifies that borrower in writing of that determination and 

the reasons for the determination, and resumes collection.

(28) Notwithstanding paragraph (fh)(41) of this section, a borrower who re-enrolled at another 

school does not qualifiesy for a discharge without an application if the school the borrower was enrolled 

in—

(i) Closed before July 1, 2014] ;

Commented [A7]: We have collapsed paragraphs (f) and (g) 

into just (f) to reduce complexity in the language, because we 

propose to apply the 180-day window regardless of whether the 

borrower took out the loans before or after July 1, 2020.

Additionally, (f)(5) ensures that borrowers who do not receive an 

automatic discharge and do not submit a completed a closed school 

discharge application are provided with another application upon 

the resumption of payments.
Closed school discharge proposed regulatory text session two 7

(ii) Closed on or after July 1, 2014 and before June 30, 2019 and the borrower did not re-enrolled in 

a program at the same level and with the same four-digit CIP code as the program that the borrower 

was enrolled in at the closed school; or

(iii) Closed on or after July 1, 2019 and the borrower. did not accepted and completed an 

approved teach out program.

(hi) Exceptional circumstances. For purposes of this section, exceptional circumstances include, but 

are not limited to—

(1) The revocation or withdrawal by an accrediting agency of the school's institutional 

accreditation;

(27) Tthe institutionschool is or was placed on probation or issued a show-cause order, or placed 

on an accreditation status that poses an equivalent or greater risk to its accreditation, by its accrediting 

agency for failing to meet one or more of the agency's standards;

(23) The revocation or withdrawal by the State authorization or licensing authority to operate or to 

award academic credentials in the State;

(43) The termination by the Department of the school's participation in a title IV, HEA program;

(54) A finding by a State or Federal government agency that the school violated State or Federal 

law related to education or services to students;

(65) The teach-out of the student's educational program exceeds the 180-day look-back period for 

a closed school discharge; 

(76) The school responsible for the teach-out of the student's educational program fails to 

perform the material terms of the teach-out plan or agreement, such that the student does not have a 

reasonable opportunity to complete his or her program of study or a comparable program;

(7) the institution is or was placed on probation or issued a show-cause order, or placed on an 

accreditation status that poses an equivalent or greater risk to its accreditation, by its accrediting agency 

for failing to meet one or more of the agency's standards;

(8) Tthe school discontinued a significant share of its academic programs. 

(9) The school permanently closed all or most of its ground-based locations while maintaining 

online programs.

(10) The school was placed on the heightened cash monitoring payment method as defined in 

section 668.162(d)(2).

Last updated 10/25/2021

Commented [A8]: The Department historically required 

borrowers to apply for a closed school discharge in order to receive 

an attestation that they did not transfer their credits, because the 

statute states that the borrower is only eligible if they are unable to 

complete their program. 

In 2016, largely due to improvements in administrative data, the 

Department determined it was able to limit the number of 

borrowers who would be required to submit an application, and 

would automatically discharge loans for any borrower who did not 

subsequently re-enroll in an institution. The Department is now 

proposing to further expand that universe for automatic discharges 

by capturing all borrowers who did not re-enroll in a comparable 

program automatically. 

Due to recent changes in data reporting requirements, such 

information on program of study is available beginning only in 

2014. Additionally, new reporting requirements in 2019 mean that 

ED can automatically discharge loans for borrowers who reenrolled, even in a comparable program, as long as they did not 

complete a teach-out at their original institution.

The Department is conducting data analysis to look at how 

outcomes vary for borrowers who re-enrolled and those who did 

not. We do not yet have that ready for sharing prior to issuing 

regulatory text.

Commented [A9]: This refers to HCM2. We do not think HCM1 

is appropriate as an exceptional circumstance because institutions 

can be placed on that status for a wide range of reasons that may 

not have any relation to closure.