Note: There is a lot to consider when your school closes! We held a webinar to help students understand their options on August 3, 2021. You can view a recording of the webinar here.
On July 28th, Center for Excellence and Higher Education (CEHE) schools (Independence University, Stevens-Henager College, CollegeAmerica, and California College San Diego) announced that they were shutting down, leaving thousands of students across the country high and dry with mountains of debt and no degree.
When a school closes suddenly, it is difficult to determine what to do next. Many students face a fork in the road: should I complete my program via a “teach out” at another school or by attempting to find and transfer to another school, or should I get rid of my federal student loan debt through a “closed school discharge” and get a fresh start at a new school or path? Here is what students should keep in mind.
Before you decide what to do next, gather crucial information.
First, borrowers should find out exactly how much federal student loan debt and private student loan debt they have. You can figure out how much federal student loan debt you have by calling your servicer, or by logging into studentaid.gov (a guide to understanding what type of debt you have is here). The best way to figure out how much private student loan debt you have is by checking your credit report (which you can do once a year for free here). However, not all private creditors report to the credit bureaus. Second, students should download a copy of their transcript and request a copy of their official transcript from the school. You will need a transcript to determine which credits might transfer to another school.
You might decide to apply for a closed school discharge.
A closed school discharge wipes away any federal student debt borrowed to attend a closing CEHE school. The Department of Education allows students to apply for a closed school discharge to wipe away their federal student loans if they were unable to complete their program of study because their school closed. This relief does not apply to private loans. Applying for relief is free, and there is no deadline to apply for this relief (information on how to apply is here). Students who withdrew within 180 days of the closure (if they borrowed loans after July 1, 2020) or 120 days of closure (if they borrowed loans before July 1, 2020) and did not complete their program are also eligible for this form of relief. Borrowers are eligible for cancellation even if they do enroll in a new school, but study a different program than they did at their CEHE schools.
The upside of a closed school discharge: The federal debt is discharged, and the borrower’s Pell grant eligibility will be restored. Borrowers can return to a better school where they can complete a different program. Plus, borrowers can take their time to determine if this option is for them!
A potential downside: If you transfer your credits to finish the same program you were in at a CEHE school after you receive a closed school discharge, the Department of Education may reinstate your debt. A closed school discharge is a great option if you decide that you will not complete a teach-out or transfer your credits to a new school. Another downside is that this relief only applies to federal student loan debt.
You might decide to keep the student debt you took on at your CEHE school and complete a teach-out.
Independence University may offer to allow you to complete your program via a “teach-out,” or arrangements they have made for students to complete their degrees at other schools. If you complete your program via a “teach-out,” you will not be eligible for a closed school discharge.
The upside: The student has the opportunity to complete their program.
Potential downsides: You will not be eligible for a closed school discharge, and if you accept the teach-out, you will likely need to borrow more student loans. You should consider: 1) if the degree is still worth the cost and 2) if the teach-out will provide you with high-quality classes and any career support. Be careful to check that the teach-out school is high-quality and that they will provide students with robust career services after graduation. You can look at the Department of Education’s College Scorecard website to learn more about students’ outcomes at the teach-out school. Instead of completing a program at a teach-out, a more affordable and worthwhile option may be completing a program at a local community college or state school.
You might decide to keep your CEHE school student debt and complete the same or a comparable program at a new school.
Some students try to transfer credits from their closed school to the same program at another school. Whether a school accepts credits (and how many) depends on the school. Many students learn that transferring credits does not actually save time or money, because the new school has different course requirements than the old school. Students should consider whether transferring credits to the same program at a new school is worthwhile and should carefully assess whether the new school is worth the investment. Students looking at transfer options should consider local community colleges and state schools.
The upside: You complete your program at another school and are able to “use” the credits you accrued at your CEHE school.
The downside: Even if you transfer just one credit to the new school, you will not be eligible for a closed school discharge if you complete your original program at the new school. Moreover, transferring credits may not save you time or money when completing your program at the new school.
We know this is a ton of information and is often overwhelming for students. We held a webinar to help students understand their options on August 3, 2021. You can view a recording of the webinar here.