Navigating Student Loan Forgiveness Through Borrower Defense to Repayment

For student loan borrowers who believe they were misled or subjected to misconduct by their school, the Borrower Defense to Repayment program offers a potential path to loan forgiveness. This article delves into the requirements, processes, and recent developments surrounding this critical safeguard.

Understanding Borrower Defense to Repayment

Borrower defense to repayment, often shortened to "borrower defense," is a legal provision ensuring that federal student loan borrowers are not obligated to repay loans for programs or degrees from institutions that engaged in deceptive or misleading practices. It serves as a crucial safety net for students whose loans were made under false pretenses due to failures within the higher education system, encompassing the Department of Education, accreditors, and the schools themselves.

The borrower defense program allows borrowers to request cancellation on the basis of certain forms of school misconduct, such as misrepresenting admissions selectivity or program costs, or lying about graduate earnings and career prospects.

This program is an important safeguard for student borrowers whose loans should not have been made in the first place and were only made because of a failure in the higher education system at large - by the Department of Education, the accreditor, and/or the school itself. It is also a critical safeguard for the taxpayer investment in higher education. Department of Education regulations, student loan contracts, and rules that govern creditor-borrower relationships all support borrower defense.

Eligible Federal Student Loans

The following federal student loans may be eligible for forgiveness under the borrower defense program:

Federal Direct Subsidized Loans
Federal Direct Unsubsidized Loans
Federal Direct Parent PLUS Loans
Federal Direct Graduate PLUS Loans
Federal Direct Consolidation Loans
Federal Family Education Loans (FFEL)
Federal Perkins Loans

Any borrower who has attended any school may qualify to have some or all of their federal student loans forgiven if they believe their school has misled them or engaged in other misconduct in violation of certain laws. This applies regardless of whether the school has closed or remains open.

Grounds for Borrower Defense Claims

Borrower defense cases can be based on various forms of institutional misconduct. Under the 2016 final regulations, borrower defense cases are based on "an act or omission of the school attended by the student that relates to the making of a Direct Loan for enrollment at the school or the provision of educational services for which the loan was provided," under any of three mechanisms: (1) a judgment against the school; (2) a breach of contract with the student; or (3) substantial misrepresentation. Under the 2019 final regulations, borrower defense cases are based on: (1) a misrepresentation on the behalf of the institution attended by the borrower on which the borrower relied upon “in deciding to obtain a Direct Loan, or a loan repaid by the Direct Consolidation Loan” that directly relates to enrollment and educational services and (2) financial harm caused by the misrepresentation.

Claims may be based on one of five categories of actionable circumstances: substantial misrepresentation, substantial omission of fact, breach of contract, aggressive and deceptive recruitment, or judgments or final secretarial actions.

Some schools may make you feel an urgency to enroll. If you felt pressured to make a written commitment to attend a school quickly, this detail might strengthen your case.

How to Apply for Borrower Defense

Gather Supporting Documents: Before applying, compile any documents that support your claim. These documents can help refresh your memory about the school's actions and include: What exactly did the school say to you or fail to tell you? Who told you this information? When and where were you told this information? How was the information communicated to you? How were you harmed by the school’s misconduct? Would you still have attended the program if you’d known the truth? Were you able to get a job using your degree?

Read also: Guide to UC Davis Student Housing
Complete the Application: Apply through the Department of Education (via StudentAid.gov). If you do not have documents available-that’s OK! When you fill out the application, include as many details as possible about the misrepresentations the school made to you.
Provide Necessary Information: You may also need to provide documentation to verify your identity and support your claim. You will be required to upload an electronic version of your signature. You may upload a picture file of your signature by using a smartphone or digital camera. You can also electronically upload additional supporting documentation found below with your application (for example, scanned PDF documents). You may upload a picture file of your signature by using a smartphone or digital camera.
Submit the Application: Department of Education P.O. Department of Education. It is possible that submitting multiple forms may delay the processing of your form.

The Application Review Process

After you submit your application, it may be months before you hear from the Department of Education. The Education Department has up to three years to evaluate your application (after determining that it’s not missing key information).

For purposes of adjudicating a borrower defense claim other than those based on prior Secretarial final actions in accordance with § 685.404, the Department official notifies the institution of the group claim under § 685.402 or individual claim under § 685.403 and requests a response from the school.

Read also: Investigating the Death at Purdue

(a) Adjudication. (b) Group process, adjudication. (c) Individual process, adjudication. For an individual process under § 685.403, the Department official adjudicates the borrower defense using the information available to the official and makes a recommendation to the Secretary regarding adjudication.

If the Department official requests additional information from the school, the school must respond to the Department official's information request within 90 days.

The Department official will provide an interim update to the individual borrower submitting a claim under § 685.403, the third-party requestor requesting a group process under § 685.402, and the institution contacted for the institutional response under § 685.405 no later than 1 year after receipt of a materially complete application.

Important Considerations During Review

Interest Accrual: Please note that interest will continue to accumulate on federal student loans (including subsidized loans-unless you are currently enrolled at a school) regardless of what status they are in.
Forbearance: When seeking borrower defense, you can request a forbearance - or postponement - of your monthly loan dues while your application is under review. To qualify for the reprieve, your federal loans must not be in default. Just be aware that forbearance allows interest to accrue onto your outstanding loan balances.
Loan Collection Activities: Loan collection activities during adjudication of borrower defense claim.

Outcomes of Borrower Defense Claims

(f) Written decision. (1) Approval of a Borrower Defense Claim. (ii) The Secretary places a borrower's Direct Loans associated with a group borrower defense claim into forbearance until the Secretary discharges the loan obligations under § 685.212(k). If any balance remains on the Direct Loans not associated with the borrower defense claim, those loans will return to their status prior to the claim process. The Secretary resumes collection activities on those Direct Loans not associated with the borrower defense claim no earlier than 90 days from the date the Department official issues a written decision.

(i) Denial, group. If the Secretary denies the borrower defense claim, the written decision states the reasons for the denial, the evidence upon which the decision was based, and the loans that are due and payable to the Secretary. The Secretary informs the borrowers that for the Direct Loans associated with the group borrower defense claim, those loans will return to their status prior to the group claim process. The Secretary resumes collection activities on the Direct Loans associated with the group borrower defense claim no earlier than 90 days from the date the Secretary issues a written decision.

(ii) Denial, individual. If the Secretary denies the borrower defense claim, the written decision states the reasons for the denial and the evidence upon which the decision was based. The Secretary informs the borrowers that their loans will return to their status prior to the claim process. The Secretary resumes collection activities on the loans under which a forbearance or stopped collection was granted during adjudication of the claim in accordance with §§ 685.403(d) and (e), no earlier than 90 days from the date the Secretary issues a written decision.

The decision of the Secretary is final as to the merits of the borrower defense and any discharge that may be granted on the claim.

Group Discharges

Sometimes the Department of Education will automatically cancel loans for groups of students if it finds that a school or program at the school acted in a particularly bad way-this is called a “group discharge.” More information about the group discharges in effect is below.

Schools with Group Discharges in Effect

Art Institutes: Students who attended from Jan.
Ashford University: Students who attended from March 1, 2009, through April 30, 2020.
Center for Excellence in Higher Education: Students who attended Independence University, CollegeAmerica, Stevens-Henager College, and California College San Diego between 2006 and Aug.

If you attended one of the above schools during the relevant time period and you have outstanding Direct, FFEL loans, or Department-held Perkins loans (the most common types of federal student loans) that you borrowed to attend the above predatory schools, the Department should provide you with relief on those loans. All types of Direct and FFEL loans, including Parent PLUS loans, are included. If you had Department-held loans, you will also receive a refund of the payments made on those loans (Department-held loans include all Direct Loans; more information about how to see whether your loans are Department-held is available here.).

Sweet v. McMahon Class Action Lawsuit

There is a class action lawsuit, Sweet v. McMahon, that covers borrower defense applications submitted before November 22, 2022. The Department of Education agreed to settle that lawsuit by setting special decision and relief deadlines and processes for borrowers who submitted applications before November 22, 2022. Borrowers who submitted an application before June 22, 2022, or had a borrower defense application denied between December 2019 and October 2020 are class members in the Sweet v.

Sweet v. Cardona Settlement: Key Points

The Sweet v. Cardona settlement essentially put student loan borrowers into two broad classes.

First, borrowers who submitted a Borrower Defense to Repayment application on or before June 22, 2022, and who attended one of dozens of schools outlined on an exhibit appended to the settlement agreement, are considered “class members.” These borrowers would be entitled to “full settlement relief” which includes a discharge, a refund of past payments made on the covered student loans, and a correction of any associated negative credit reporting.

A second group of borrowers is known as “post-class applicants.” These are borrowers who submitted their Borrower Defense to Repayment applications between June 22, 2022 (which is when the settlement agreement was first entered) and November 16, 2022 (which is when the court overseeing the Sweet v. Cardona legal challenge approved the settlement). “If your application is approved, you should receive your settlement relief within one year of the date when you receive your approval notice. If you do not receive a decision by January 28, 2026, you are entitled to Full Settlement Relief.”

Recent Developments and Challenges

Borrower defense regularly comes under attack by hostile administrations, the for-profit college lobby, and trade groups with direct financial interests in removing accountability guardrails and keeping the spigot of federal money flowing to profit-making ventures.

The Trump Administration’s recent decision to not defend the Education Department’s proposed rule changes to borrower defense could be a signal that getting a discharge could be challenging.

Anyone who feels their school misled them can apply for borrower defense to repayment.

Education Department Efforts to Delay Relief

Despite having three years to process the batch of Borrower Defense applications for post-class applicants, the Education Department indicated in a court filing last November that it would not be able to meet the January 28, 2026 deadline, and asked for an extension of 18 months. At the time, the department suggested the post-class applicant pool was around 207,000. The department indicated that the post-class pool was larger than anticipated, and it did not have the resources to evaluate so many applications by the deadline.

Despite the court’s ruling, last week the Education Department again tried to persuade the court to extend the deadline for post-class applicants by a year and a half. The department filed what it characterized as an “administrative” motion for reconsideration, asking to extend the time to review relevant post-class Borrower Defense applications to July 2027. The implication is that would also push out the date for automatic discharges of applicable student loans to be after July 2027, as well.

Current Status of Discharges for Post-Class Applicants Under Sweet Settlement

As of right now, the January 28, 2026 deadline has passed. The situation remains in flux, and a hearing has been scheduled for February 10th. But for now, barring any further orders from the court, the department has a legal and contractual obligation to comply with the settlement agreement, which means discharging the student loans for any post-class applicants where no Borrower Defense decision has been issued, refunding any past payments made on those loans, and updating any relevant adverse credit reporting.

Historical Context

Under the Higher Education Act (HEA), a student loan may be forgiven under certain circumstances to include a borrower’s death or disability; closure of the school the borrower attended; public service over time; false certification by the institution the borrower attended; and certain institutional misconduct harmful to the student. The last of these is referred to as a borrower defense to repayment (borrower defense).

The ability of a student to submit a claim to the Department of Education if they believe, and have proof, that the institution they attended engaged in harmful misconduct can be found in Section 455(h) of the HEA. While the borrower defense provision had only been used a handful of times between 1995 and 2015, the collapse of Corinthian College, which harmed thousands of students, and the patchwork of state consumer protection laws gave the Department reason to establish more explicit borrower defense regulations.

Prior regulations permitted a borrower defense based only on an act or omission of the institution that would give rise to a cause of action under applicable state law.

Rulemaking History

After holding a series of negotiated rulemaking sessions, the Department, under the Obama Administration, published an expanded final rule regarding borrower defense on November 1, 2016. These final regulations were scheduled to be implemented on July 1, 2017. However, the Department, under the Trump Administration, delayed the final regulations and began a new negotiated rulemaking process in an effort to rewrite the regulations to better align the policy with the Trump Administration’s vision.

The Department released a Notice of Proposed Rulemaking (NPRM) on July 31, 2018. The Department received over 30,000 comments in response to the NPRM, but the process was halted due to court actions. This delay meant the Trump Administration had to temporarily implement the final regulations from the Obama Administration on March 19, 2019.

Shortly after the Obama regulations went into effect, the Trump Administration pushed forward with releasing a new regulation on September 23, 2019. This new Trump Administration rule went into effect on July 1, 2020.

As a result of this back and forth, the 2019 Trump Administration regulations apply to borrowers who took out a loan on or after July 1, 2020, while the 2016 Obama Administration regulations apply to borrowers who took out a loan on or after July 1, 2017, and before July 1, 2020. Previous borrowers live by earlier rules. So, there are now three different sets of borrower defense regulations for various cohorts of borrowers (pre-2016 final regulations, 2016 final regulations, and 2019 final regulations).

Borrower Defense to Repayment: Current Regulations

These regulations establish a framework for borrowers to raise a defense to repayment. This includes the ability to decide claims individually or as a group. It will apply to all claims pending on or received on or after July 1, 2023.

Other Key Regulatory Changes

Pre-dispute Arbitration: The final rule prohibits institutions that participate in the Direct Loan Program from requiring borrowers to agree to mandatory pre-dispute arbitration agreements and/or requiring them to waive the ability to participate in a class-action lawsuit with respect to a borrower defense claim.
Interest Capitalization: The final rule eliminates all instances where interest capitalization is not required by statute. This means interest will no longer be added to a borrower’s principal balance the first time a borrower enters repayment, upon exiting a forbearance, and leaving any income-driven repayment plan besides Income-Based Repayment.
Public Service Loan Forgiveness: The rule allows borrowers to receive credit for payments that are made late, in installments, or in a lump sum. The rule also allows certain periods in deferment or forbearance to count toward PSLF to avoid instances where a borrower may have faced confusing choices about pausing payments or getting credit toward PSLF. Additionally, the rule provides a hold harmless option for borrowers to have other periods of deferment and forbearance potentially counted toward PSLF if they make payments equivalent to what they would have owed at the time. The rule adopts a single standard of full-time employment at 30 hours a week and requires employers, for purposes of PSLF, to give adjunct and contingent faculty credit of at least 3.35 hours of work for every credit hour taught.
Total and Permanent Disability: The final rule provides additional pathways for borrowers who have a total and permanent disability to receive a discharge including additional disability review codes from the Social Security Administration (SSA) qualifying for a discharge.
Closed School Discharge: The final rule provides an automatic discharge one year after a college’s closure date for borrowers who were enrolled at the time of closure or left 180 days before closure and who do not accept an approved teach-out agreement or a continuation of the program at another location of the school.
False Certification: The final regulation streamlines the process for when a college falsely certifies a borrower’s eligibility for student loans when, in fact, the student was ineligible.

tags: #student #loan #borrower #defense #requirements