Overview

Borrower defense is a long-existing, but previously rarely-used, provision of law [Higher Education Act, Sec. 455(h)] that enables students who have been the victims of certain types of institutional misconduct to have their federal student loans forgiven. Following the collapse of Corinthian Colleges, borrower defense applications poured in to the Department of Education, exposing the limitations of the existing rules, including:

• Reliance on a standard tied to an act or omission of the institution that would give rise to a cause of action under applicable state law provided uneven relief, was confusing for borrowers, and was difficult to apply with the rise in distance education;
• Lack of a mechanism for seeking reimbursement from the offending institutions; and
• Lack of a specified process for application and review of borrower defense claims. 

These limitations prompted the Department of Education to develop more detailed regulations, through the negotiated rulemaking process.   

Final rules published on Nov. 1, 2016 were scheduled to take effect on July 1, 2017. In the interim, there was a change in presidential administrations and before the 2016 rules went into effect, the Trump administration announced that it would not implement the regulations on July 1, 2017 and would instead renegotiate the final regulations in late 2017, and early 2018.

While the renegotiation process was underway, there were several lawsuits filed against ED, claiming that its delay of the implementation of the 2016 rules was unlawful. Ultimately the plaintiffs prevailed and the 2016 rules went into effect in October 2018. 

Final rules resulting from the 2017-18 renegotiation were officially released on September 23, 2019, with an effective date of July 1, 2020.

2017-18 Borrower Defense Overview

In 2017-18, ED conducted a renegotiation of borrower defense rules that were developed under the previous administration.

NASFAA Summary of Final Rules

• September 11, 2019 - Breaking Down Borrower Defense Regs: New Rules for Certain Loan Discharges, Pre-Arbitration Agreements
• September 10, 2019 - Breaking Down Borrower Defense Regs: ED Introduces Another Borrower Defense Framework
• September 6, 2019 - Breaking Down Borrower Defense Regs: ED Issues New Set of Financial Responsibility Standards

NASFAA Public Comments

• August 30, 2018 - NASFAA Comments on Proposed Rules
• July 12, 2017 - NASFAA Response to Intent to Re-Negotiate Borrower Defenses to Repayment and Gainful Employment

Department of Education Resources

• 2017-18 ED Negotiated Rulemaking Page with supporting documents
• ED Press Release: U.S. Department of Education Finalizes Regulations to Protect Student Borrowers, Hold Higher Education Institutions Accountable and Save Taxpayers $11.1 Billion Over 10 Years
• 2018 Borrower Defense Final Rules
• 2018 Borrower Defense NPRM
• ED Press Release: Secretary DeVos Announces Regulatory Reset to Protect Students, Taxpayers, Higher Ed Institutions

NASFAA Comprehensive Coverage of the 2017-18 Borrower Defense Process

• September 11, 2019 - Breaking Down Borrower Defense Regs: New Rules for Certain Loan Discharges, Pre-Arbitration Agreements
• September 10, 2019 - Breaking Down Borrower Defense Regs: ED Introduces Another Borrower Defense Framework
• September 6, 2019 - Breaking Down Borrower Defense Regs: ED Issues New Set of Financial Responsibility Standards
• September 4, 2018 - NASFAA Expresses Concern With ED's Proposed Borrower Defense Rules
• July 26, 2018 - ED's Proposed Borrower Defense Regulations Could Narrow Path to Debt Relief
• February 16, 2018 - Déjà Vu: Borrower Defense Neg Reg Ends in Non-Consensus
• February 15, 2018 - Neg Reg Day 3: Committee Speeds Through Remaining Borrower Defense Issue Papers
• February 14, 2018 - Neg Reg Day 2: Borrower Defense Discussions Snag on Misrepresentation, Process
• February 13, 2018 - Stakeholders Gather for Final Borrower Defense Neg Reg Session
• January 12, 2018 - Borrower Defense Neg Reg Day 4: Closed School and False Certification Discharge, Revisiting Standard of Evidence, Intent
• January 11, 2018 - Borrower Defense Neg Reg Day 3: Reconsideration of Claims, Partial Relief, Financial Responsibility, and Arbitration Agreements
• January 10, 2018 - Borrower Defense Neg Reg Day 2: Committee Discusses Partial Relief, Institutional Liability, Statute of Limitations
• January 9, 2018 - Negotiators Clash Over Borrower Defense Standard of Evidence in Second Neg Reg Session
• November 16, 2017 - Neg Reg Committee Concludes Review of All Agenda Items
• November 15, 2017 - Second Day of Borrower Defense Neg Reg Focuses on Partial Relief, Standard of Proof
• November 14, 2017 - Negotiations Underway to Rewrite Borrower Defense Rules
• November 9, 2017 - As Borrower Defense Negotiations Kick Off, Old Issues May Resurface
• July 11, 2017 - NASFAA Encourages ED to Strike a Balance Between Institutional Accountability, Student Protections
• June 21, 2017 - What's Next With the Renegotiation of Borrower Defense and Gainful Employment Rules
• June 15, 2017 - ED Announces Plans to Re-Write Borrower Defense, Gainful Employment Rules

Other Resources

• NACUBO Borrower Defense Resources
• Senator Murray Press Release on Borrower Defense NPRM

2016 Borrower Defense Overview

Through the negotiated rulemaking process, stakeholders debated five issues related to borrower defense regulations:

1. Whether to establish a new standard for the purpose of determining whether a borrower can establish a defense to repayment on a loan based on an act or omission of a school;
2. The time period of availability for borrower defense to repayment claims;
3. Developing a regulatory framework for the process of submitting, reviewing, and determining the veracity of borrower defense to repayment claims;
4. Updating and expanding the existing categories of false certification discharges; and 
5. Whether to revise the financial responsibility or administrative capability regulations and whether to add disclosure agreements to protect students, taxpayers, and the federal government against potential school liabilities and risks.

On Nov. 1, 2016, the Department of Education(ED) published final regulations concerning borrower defense to repayment and other related matters. In response to a lawsuit filed by the California Association of Private Postsecondary Schools, ED delayed the original effective date (July 1, 2017) of these regulations under section 705 of the Administrative Procedures Act (APA), which states that when an agency finds "that justice so requires, it may postpone the effective date of action taken by it, pending judicial review." A second lawsuit was filed by student borrowers and 19 states and the District of Columbia objecting to ED's implementation delay, and the two cases were ultimately consolidated by the courts. By order of the courts, the 2016 final regulations took effect in October 2018.

NASFAA Summary of Final Rules

• November 18, 2016 - ED Simplifies Loan Discharges, Issues Prohibition on Certain Contractual Agreements Under New Borrower Defense Rules 
• November 17, 2016 - ED Makes Few Changes to Borrower Defense Standard and Process in Final Rules 
• November 10, 2016 - ED Revamps Financial Responsibility Rules 

NASFAA Public Comments

• August 3, 2016 - NASFAA Submits Comments on Borrower Defense NPRM
• August 1, 2016 - NASFAA Signs on to ACE Borrower Defenses NPRM Comments
• August 1, 2016 - NASFAA Signs on to NACUBO Borrower Defenses NPRM Comments

Department of Education Resources

• 2016 Negotiated Rulemaking Page with Supporting Documents
• Questions & Answers Document with Additional Guidance
• Electronic Announcement on Financial Responsibility Provisions
• Final Regulations in the Federal Register on the Announcement of Effective Date
• Electronic Announcement on Some Provisions of Borrower Defense and Implementation Date
• ED Press Release: Improved Borrower Defense Discharge Process Will Aid Defrauded Borrowers, Protect Taxpayers
• Electronic Announcement on Final Rule, Notification of Partial Delay of Effective Dates for "Borrower Defense to Repayment" Regulations
• Final Regulations in the Federal Register Announcing Partial Delay of Borrower Defense Effective Dates
• Final Regulations in the Federal Register on Recovery of Funds From Schools
• Final Regulations in the Federal Register
• 2016 Borrower Defense NPRM
• 2016 Borrower Defense NPRM FAQ
• 2016 Borrower Defense NPRM Fact Sheet

NASFAA Comprehensive Coverage of the 2016 Borrower Defense Process

• November 14, 2018 - Group Sues DeVos for Failing to Automatically Cancel Loans of Students Whose Schools Closed
• October 17, 2018 - Obama-Era Borrower Defense Regulations Go Into Effect After Federal Judge Ruling
• October 1, 2018 - California AG Amends Lawsuit on Delayed Processing of Borrower Defense Claims
• September 13, 2018 - Judge Rules Against DeVos in Lawsuit Over Delayed Borrower Defense Rule
• April 24, 2018 - Consumer Group Sues ED for Documents to Justify Delay of Borrower Defense Implementation
• April 18, 2018 - Borrowers Challenge DeVos on 'Tiered Relief' in Class Action Lawsuit
• January 18, 2018 - ED Borrower Defense Analysis Breaks Down Thousands of Claims
• January 3, 2018 - Warren Asks Inspector General to Review ED's Use of Earnings Data for Loan Discharge
• December 21, 2017 - ED Rules on 21,500 Borrower Defense Claims Using New Tiered System
• December 5, 2017 - Semiannual Report to Congress Condemns Delay of Borrower Defense, Gainful Employment Regulations
• January 27, 2017 - Borrower Defense Rules on Recovery of Funds from Schools Effective Immediately
• November 18, 2016 - ED Simplifies Loan Discharges, Issues Prohibition on Certain Contractual Agreements Under New Borrower Defense Rules 
• November 17, 2016 - ED Makes Few Changes to Borrower Defense Standard and Process in Final Rules 
• November 10, 2016 - ED Revamps Financial Responsibility Rules 
• June 14, 2016 - Proposed Rules Would Help Defrauded Student Loan Borrowers 
• March 21, 2016 - Borrower Defense Neg Reg Meets Anti-Climactic End Without Consensus 
• March 18, 2016 - Neg Reg Committee Greenlights Mandatory Arbitration Ban, Tussles on Repayment Rates
• March 17, 2016 - New Borrower Defense Draft 'A Vast Improvement,' But Negotiators Want More
• February 22, 2016 - Negotiators Wrap Up Second Round Of Neg Reg With Focus on False Certification Discharges 
• February 19, 2016 - Negotiators Discuss Trigger Warnings, Student Disclosures for Borrower Defense Regs
• February 18, 2016 - Negotiators Enter Tense Second Session on Proposed Borrower Defense Rules
• January 15, 2016 - Neg Reg Wraps Up With Discussion of Scope of Regulations, Visit From Special Master
• January 14, 2016 - Day Two of Neg Reg Focuses on Time and Structure of Borrower Defense Process 
• January 13, 2016 - Borrower Defense Neg Reg Kicks off With Discussion on Role of Consumer Protection

Other Resources

• Court Ruling: California Association of Private Postsecondary Schools vs Elisabeth DeVos
• Court Ruling: Meaghan Bauer, et. al., vs Elisabeth DeVos 
• Court Filing: National Consumer Law Center vs. United States Department of Education 
• California Attorney General Statement on ED Decision to Provide Partial Relief
• Court Filing: State of California vs. United States Department of Education and Betsy DeVos 
• Court Filing: Nine Attorneys General File Motion to Intervene in CAPPS Lawsuit
• Democratic Senators' Letter to ED Requesting Information About Implementation
• Court Filing: California Association of Private Postsecondary Schools vs Elisabeth DeVos