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My School Closed: What Happens To My Student Loan?

ITT Educational Services, Inc., aka ITT Technical Institute, closed its doors on September 6, 2016, and filed for bankruptcy relief under Chapter 7 on September 16, 2016. The closure has caused great concern among ITT students who wonder about the status of their student loans. The Department of Education has published information on its website on how former ITT students can continue their education, apply for closed school loan discharges, retrieve student records, and more.

ITT students basically have the following options:

  • Apply for a closed school loan discharge;
  • Transfer earned credits to another institution to continue their education in a comparable program;
  • File a Defense to Repayment (DTR) application and receive a forbearance of payments until a final outcome. However, with a forbearance, interest continues to accrue and if the DTR is denied, the accumulated interest capitalizes, thus increasing the loan balance; or
  • Apply for an Income Driven Repayment (IDR) to receive the lowest possible payment in the present, and wait for the final DTR regulations to be published. If the chances of a DTR appear promising, a student may then pursue a DTR. If unsuccessful, the student will at least have accumulated some forgiveness time.

Students who were enrolled when the school closed, or within 120 days of the closure, which would mean still enrolled anytime after May 6, 2016, are eligible for a closed school discharge, provided the student is not transferring any earned credits. Because many schools don’t accept ITT credits, the Department of Education and state education agencies are currently trying to persuade educational institutions to accept them. Students that transfer and don't complete their studies will have to repay the loan.

A closed school discharge is a 100 percent discharge of the federal Direct Loans, Federal Family Education Loan (FFEL) Program loans, or Federal Perkins Loans taken out to attend the closed school and a reimbursement of amounts already paid to the government. A Closed School Loan Discharge Application must be sent to your loan servicer. Affected students may also be eligible for State Tuition Recovery Fund refunds.

As an alternative to a closed school loan discharge, students may desire to keep their earned credits from ITT and transfer them to another school with a comparable program. Typically, the school will evaluate the applicant's ITT course work and make a decision about whether or not to accept the student and award credit for work already completed.

As mentioned, the Department of Education, as well as representatives from state licensing and postsecondary education oversight agencies, are expeditiously working with representatives from ITT to process student records from the affected schools so that transfer schools can start assessing students’ remaining eligibility for federal student aid funds as soon as possible.

The federal government will hold ITT responsible for any return of federal student aid funds which were due to students and received, but not earned, prior to closure. The Department of Education is working with ITT reps to ensure that unearned student Pell and loan funds are restored for future eligibility.

Defense to Repayment may not work for ITT students trying to salvage their education and work around a presently existing student loan obligation. At least those with federal loans may have some recourse obtaining a closed school discharge or transferring to another school with a comparable program. Sadly, students with private loans have little to make them optimistic at this time.

At Loan Lawyers, our South Florida consumer rights and debt defense attorneys can help individuals experiencing difficulty repaying their student loans. For a no-risk, no-cost consultation, contact one of our South Florida consumer defense attorneys today by calling (888) FIGHT-13 (344-4813).