Statement on the Closing of Charlotte School of Law

As of August 15, 2017, the Charlotte School of Law appears to have closed. In response to the closure, the North Carolina Justice Center issues the following information for current and former students of the Charlotte School of Law regarding their options going forward.

Closed-School Discharge

Pursuant to federal law, the following students may be eligible for a “closed-school” discharge, which would discharge 100% of their federal student loans that were taken out to attend the Charlotte School of Law:

• Students who did not complete their degree at the school because the school closed while they were enrolled (students who were on an approved leave of absence at the time of the closure are considered to be enrolled students); and
• Students who withdrew from the Charlotte School of Law within 120 days of the closure.

The federal law governing the closed-school discharge allows for an extension of the 120-day withdrawal cut-off if it is warranted by “exceptional circumstances.” Based on this provision, North Carolina Attorney General Josh Stein has urged the U.S. Department of Education (USDOE) to extend the period of eligibility for a closed school discharge beyond 120 days for students who withdrew from the Charlotte School of Law. There is a clear precedent for granting such an extension: During the Obama Administration, the USDOE extended the closed-school discharge deadline for students who had withdrawn from programs run by Corinthian Colleges (Everest, Wyotech, and Heald Universities), a for-profit school empire that was forced to close down in 2014 under very similar circumstances to the Charlotte School of Law.  It remains to be seen, however, how Secretary Betsy DeVos will rule on Attorney General Stein’s request.

Extending the 120-day withdrawal cut-off date would dramatically increase the number of students eligible for a closed-school discharge. In the fall of 2016, the Charlotte School of Law reportedly had about 700 students enrolled.¹ On December 19, 2016, the USDOE announced that it was cutting off access to federal student financial aid for the Charlotte School of Law.²The USDOE stated that its decision to cut off the flow of financial aid dollars to the school was based on repeated findings by the American Bar Association, the law school’s accreditor, that the Charlotte School of Law “does not prepare students for participation in the legal profession” and nevertheless “continuously misrepresented itself to current and prospective students as hitting the mark.”³

Had the law school closed shortly after the USDOE’s decision to cut off financial aid, those 700 students would have been eligible for a full discharge of their federal student loans. After the USDOE stripped the law school of its financial aid eligibility, a school spokesman indicated that only about 268 students remained enrolled at the Charlotte School of Law for the Spring Semester of 2017.⁴ Thus, hundreds of students who left the school after the USDOE cut off financial aid would be ineligible for a closed school discharge absent a determination by Secretary DeVos to extend the deadline.

Note that a “closed school” discharge only applies to federal financial aid and does not apply to any private student loans. Information about applying for a closed-school discharge is available here.

NC State Protection Fund

A student, or the student’s parent or guardian, who has suffered a loss of tuition, fees, or any other instructional-related expenses paid to the Charlotte School of Law by reason of the school ceasing to operate may qualify for repayments under the North Carolina Student Protection Fund. This fund is administered by the State Board of Proprietary Schools.

To learn more about accessing the NC State Protection Fund, see: http://www.nccommunitycolleges.edu/proprietary-schools.

What if a Student is Not Eligible for a Closed School Discharge?

Students who believe they have been victimized by the school’s misconduct can seek to have their loans discharged based on a borrower defense to repayment. Under federal law, students may be eligible for cancellation of their federal student loans if they can show that Charlotte School of Law misled them, or engaged in other misconduct in violation of North Carolina law.

This type of loan forgiveness has been difficult to obtain, and the guidelines for approval of such claims are uncertain.⁵ Unlike those who meet the criteria for and apply for a “closed school discharge,” there is no guarantee that your loan will be forgiven. You can apply for this type of loan forgiveness even if you transfer credits earned at the Charlotte School of Law to another school. However, if this discharge is granted, it will only apply to loans incurred at the institution that broke the law.

Information about the borrower defense to repayment application can be found here.

[1] https://www.nytimes.com/2017/05/12/business/dealbook/for-profit-charlott…
[2] https://www.ed.gov/news/press-releases/charlotte-school-law-denied-conti…
[3] Id.
[4] http://wfae.org/post/charlotte-school-law-enrollment-shrinks-student-rec…
[5] New guidelines for borrower defense to repayment claims were supposed to go into effect on July 1, 2017, but Secretary DeVos postponed their implementation and indicated that the rules might be revised.