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ED Outlines New Plan for Borrower Defense Claims

By Owen Daugherty, NASFAA Staff Reporter

The Department of Education (ED) on Tuesday formally detailed its reversal of the borrower defense policy instituted under former Education Secretary Betsy DeVos that afforded borrowers whose claims were approved only partial relief, reiterating that all borrowers with previously approved claims will see full relief, except in certain circumstances where evidence necessitates a reduction to the amount of relief provided.

The notice published Tuesday follows a March announcement and provides a legal rationale for reversing the previous policy that limited relief under the borrower defense program. Additionally, ED said it won’t create a new formula to replace the partial relief formula that the agency adopted under DeVos.

ED has “decided that as of March 18, 2021, approved claims will be assessed using a rebuttable presumption of full relief,” the notice stated. “This approach aligns with the applicable regulations in that a borrower may ultimately be granted full, partial, or no relief.”

ED announced in March that it would be rescinding the partial relief policy for previously approved borrower defense applications, meaning borrowers with approved claims would receive full student loan forgiveness, in addition to refunds for payments already made. Following that change, ED noted it has issued a total of $1.5 billion in relief for more than 90,000 borrowers. 

While ED in the most recent notice stated that partial relief could still be used under the new regulations, it “will use a presumption of full relief as the starting point.”

An example of an instance in which a borrower would receive partial relief is if they file a borrower defense claim after taking out $25,000 in federal student loans to pay for a program at a college that misrepresented the total cost as $20,000. In that instance, ED noted it wouldn't provide the borrower with full relief of $25,000, instead issuing partial relief of $5,000.

The new policy is likely to result in more borrowers seeing full debt relief if their borrower defense claims are approved as ED sifts through a backlog of thousands of applications. 

ED did not rule out the possibility of developing new regulations for borrower defense in the future as it seeks to best address the issue.

 

Publication Date: 8/25/2021


Jeff A | 8/25/2021 9:32:13 AM

What about 'neg reg'? Fait accompli?

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