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Focus on Regulation

U.S. Department of Education Issues Guidance on Student Eligibility for Closed School Discharge

Department of EducationOn December 7, 2016, the U.S. Department of Education (“ED”) issued an Electronic Announcement providing guidance about the eligibility requirements that apply if a student wishes to receive a closed school discharge of a Title IV loan.

In general, a student borrower may receive a discharge of a Title IV loan if the borrower (1) was unable to complete his or her program of study because the school closed while the borrower was enrolled or (2) withdrew from the school not more than 120 days before the school closed.

However, a borrower is not eligible for a closed school discharge if he or she is completing a “comparable program of study” at another school either:

• Through a teach-out agreement with the school,
• By transferring academic credits/hours earned at the closed school to the school, or
• By “any other comparable means”.

In the Electronic Announcement ED stated that it is responsible for interpreting the closed school discharge statute and regulations, including with respect to what constitutes a “comparable program of study” at another school. In ED’s view no single factor determines program comparability. However, factors that may be relevant in making a determination of comparability include:

• The academic or professional nature of the programs;
• The similarity in course requirements;
• The treatment of transfer credits by the school accepting the credits (e.g., as general education or elective credits vs. as credits toward completion of the core program requirements); and
• The disposition of a state approving agency or accrediting agency on the comparability of the programs.

ED also identified factors that would indicate that a borrower is completing a comparable educational program by “any other comparable means.”  Such considerations include, but are not limited to, the receiving school evaluating the borrower’s competencies through testing or interviews that translate to credit or steps toward completion of core credits for the comparable program.

In many cases a student borrower considering a closed school discharge may also consider transferring credits to another school. In the Electronic Announcement ED encouraged institutions to provide student borrowers with information concerning the number of credits earned at the closing school that will transfer toward the receiving institution’s comparable program. ED also stated that the receiving school should have a publicly available statement of its transfer of credit policy, including its criteria regarding transfer of credit and a list of institutions with which it has articulation agreements, if applicable. ED encouraged student borrowers to consider the number of credits that will transfer into a comparable program before choosing to transfer credits rather than applying for a closed school discharge because “forgoing the discharge in order to transfer a small number of credits may not be in the borrower’s best interest.”

For more information on ED’s guidance for student borrowers related to closed school discharge, see here.