When you’re told that your college will be shutting down, there can be a lot of uncertainty about what comes next. Here is 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 if you apply for a loan discharge.
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.
You may have to pay income taxes if you get your student loans discharged when your school closes. If you don’t think you can afford to do so, you can petition the IRS to reduce your tax bill. Contact the Office of the Taxpayer Advocate to learn about your options.
If you have private student loans
Generally, if you have private student loans, you will 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.
Rohit Chopra is the CFPB’s Student Loan Ombudsman. To learn more about the CFPB’s work for students and young Americans, visit consumerfinance.gov/students.
Continue Reading
Today, we’re releasing our third Snapshot of Complaints Received from Servicemembers, Veterans and their Families. The report details the data and trends from consumer complaints we’ve received from members of the military community since July 2011.
Here are just a few highlights:
- Debt collection complaints have continued to rise since our last report, and now make up 39 percent of total complaints. It is our largest category of complaints from the military community.
- Credit reporting remains a top category of concern. 72 percent of these complaints are about incorrect information on credit reports. This remains a significant issue for the military community, one that we highlighted earlier this year.
- Student loans are another concern. 49 percent of these complaints are about problems dealing with a lender or servicer. In these complaints, we continue to see long-standing trends, such as servicemembers complaining about not being provided their Servicemembers Civil Relief Act rights.
This year our report also highlights our outreach efforts that allowed us to connect with thousands of members of the military community, as well as three of our enforcement actions that recovered millions of dollars for affected consumers, primarily servicemembers, veterans, and their families. These figures represent the positive impact of the work we continue to do on behalf of those who serve.
Problems with account services
Basic account servicing stands out as a significant area of concern for servicemembers. Most consumers can call their financial institution, visit a branch, or connect online to try and get the help they need to maintain their account. Unfortunately, for military personnel and their families, the realities of military life, including deployments, frequent moves, and a high operational tempo, can sometimes make access to those services extremely challenging.
We found that servicemembers were often subject to a variety of account maintenance or penalty fees, as well as account-access restrictions, which were triggered due to aspects of their military service.
These problems raise concerns that financial institutions may not have a true understanding of the servicing needs of their military customers and may lack proper procedures and protections for them. Detailed examples of servicemember experiences can be found in Section II of the report.
Check out the snapshot to learn more.
We’re listening
As always, if you have a problem with a consumer financial product that you can’t resolve on your own; or if you know someone in that situation, please remember that you can submit a complaint online or by calling (855) 411-2372. We make your voice heard.
