Mid-Continent University in Kentucky Closing – Should You Pursue Student Loan Discharge?
May 8, 2014

Kentucky is losing a college. As of next month, Mid-Continent University near Mayfield, KY, will close its doors for good. The private Christian college was founded in 1949, but last year was placed on warning status by the Southern Association of Colleges and Schools. Since 2013, the college went through a number of regime changes in the head office, but none was able to salvage the school’s finances.

School closures may qualify for loan discharge

Mid-Continent University in Kentucky is closing June 2014

Last month the university announced it could no longer afford to pay professors and staff and that the school would close in June 2014. Typically, when a school closes that you’ve taken out federal student loans to attend, you have the option to pursue a discharge of your debt. But for Mid-Continent students, this may not be the best course of action.

At the time of its closure next month, Mid-Continent will have nearly 300 students in its on-campus program and double that in online and remote learning students. Likely, many of these students have accumulated debt although Mid-Continent is a very reasonably priced school, particularly for a private institution. For those with student loans, there are some options open to them and among these may be student loan discharge, but this is not always the best course.

Closed school loan discharges are more common with trade and vocational schools that go out of business or are providing shoddy educational services or who enroll students that will not qualify for a certification. In cases of loan discharge for a school closing, Direct Loans and FFEL program loans are dischargeable, but Perkins Loans are not.

The minimum criteria for a student loan discharge because of school closure is if your college closes while you’re enrolled as a student and you can’t complete your program of study because the school closed. Only loan amounts used to pay the cost of attendance can be discharged. In other words, if you borrowed over and above school costs to pay living and other expenses, those amounts would not be dischargeable.

This sounds great, right? No more student loans… Ahhh. But there’s a caveat. If you plan to transfer to another college to finish out your degree, you can’t get the discharge. If you do apply for and take the discharge and then later transfer credits and finish out your degree at another institution, you will have to pay the government back for the amount that was forgiven through discharge.

So if you’re a Mid-Continent student disappointed by your school’s closure, but excited at the notion your loans could be discharged, you need to slow your roll and think hard before you request a loan discharge. Likely there are few students of this school that should pursue a loan discharge. If you’re 70 and have completed only two years of college and don’t need the degree, ditching the debt may be wise.

If you have been pursuing a degree in philosophy and have decided you want to be a plumber instead, you may be a likely candidate for discharge. But if you will be using the credits you accumulated in any way, you should not pursue discharge. Mid-Continent is working with other local Kentucky universities to determine which programs will best fit your coursework completed and they will post recommendations on their site.

To find out more about student loan discharge, please visit our Student Loan Help Center for How-To guides on applying. Also, sign up for our free student loan tool to track and optimize your debt and read our blog every day for news and tips on dealing with student loans.