What Happens if Your College Goes Bankrupt?
A couple years ago, a Harvard Business School professor made headlines when he predicted that 50% of all colleges would go bankrupt in a decade. He reasoned that cheaper online education would soon make many 2- and 4-year degree programs obsolete. So far, his predictions have not played out. However, college bankruptcies definitely do occur. And when they do, students are often left in a lurch.
If your college declares bankruptcy and shuts its doors, then you probably have many questions about what you can do. Below, we provide some tips.
Your Program Might Not Disappear
Many colleges are shuttering only because they are merging with other, nearby colleges or universities. In other words, the school isn’t disappearing so much as losing its identity as a stand-alone institution. This has happened several times in the past few years.
If your school merges with another, there is a decent chance that your program will continue to exist at the new institution. Before starting to look to transfer, you should at least discuss this possibility with your advisor, who might know whether the program will continue.
Ask if There is a “Teach Out” Plan
This is a plan schools put in place for students so that they can complete their program either at their school or at a nearby institution. Schools should create a teach-out plan for every student in the program and should reach out to students to notify them. With his plan, you might complete credits at another institution and then transfer them back to your home college to earn your degree. If you haven’t heard anything, check with your advisor or department head. Review any plan carefully to see whether it works for you.
Check which Schools will Accept Your Credits
You might decide to transfer to another school and complete a degree there. Realize that transferring credits is not as easy as you might imagine. Some colleges might only accept certain courses. Or they will accept classes for credit but count them as electives and not as requirements for your major.
Perform a thorough search of which school is best to transfer to, depending on your circumstances. If you are tied to a geographical location, then you might have to go to the nearest college, even if they don’t accept all your credits.
Look into Student Loan Discharge
There is good news for those with federal student loans. According to the Consumer Financial Protection Bureau, you might be able to discharge your student loans if your school closes (but not if it is sold). However, you don’t qualify if you are completing a teach-out or if you are transferring credits to another school.
The process for discharging the loans should be automatic after 3 years if you have not enrolled in another school, and you will be notified by your servicer when the discharge is complete. If you don’t want to wait the 3 years, contact the servicer to get the process moving.
If you have private loans, you should contact your loan servicer as soon as possible to discuss options. Private lenders have different programs and options, but you should start early.
The Plantation bankruptcy attorneys at Nowack & Olson help consumers and small businesses negotiate the bankruptcy laws. We have experience with student loans and can discuss your ability to get them discharged. Contact us today to schedule a consultation at 888-813-4737.