Federal Court Blocks ED’s New Borrower Defense Regulations for Some Texas Schools

By Hugh T. Ferguson, NASFAA Senior Staff Reporter

A federal court late on Friday partially blocked the Department of Education’s (ED) final rules on borrower defense to repayment from taking effect.

The final rules were slated to go into effect on July 1, but a three judge panel sided with a Texas for-profit association, Career Colleges and Schools of Texas, and temporarily prevented the final rules from taking effect for members of the institutions involved in the lawsuit.

The panel declined to issue a broader nationwide injunction that would have blocked the final regulations for all institutions.

The borrower defense regulations have been contentious, with ED seeking to create an easier path for borrowers defrauded by their institutions to receive student debt relief. The final regulations were originally issued in November of 2022.

NASFAA has also detailed a full summary of those regulations.

Publication Date: 7/5/2023

Jeff A | 7/5/2023 5:29:11 PM

That is one small piece of this. For one thing, the closed school definition is ridiculous when coupled with automatic discharge and recoupment process. If your college leases a facility 2 miles from your main campus to teach 50% of a program, and demand changes and you bring it back to the main campus, everyone that attended that location and did not graduate from the exact same CIP gets all their loans discharged and the school would be liable for the total of the discharged loans.
This is one of many, many problems.

David S | 7/5/2023 3:0:13 PM

Jeff, all I can say is you should have heard the stories that the DTR Neg Reg committee heard. If these things happened to your or someone in your family, I guarantee you'd hire the meanest attorney you could find. Borrower Defense is in statute, and there's nothing unconstitutional about fraud victims taking action to seek justice.

Like all entities, colleges get sued all the time; I suspect most are frivolous and go nowhere. If you want to make sure that your school can't be held liable in a Borrower Defense case, I can offer some pretty simple but effective advice; don't lie to students and prospective students.

Jeff A | 7/5/2023 2:5:01 PM

David, I also was an GE negotiator. We already have BDR regulations in place that are proving to allow ED to be quite generous with forgiveness. This new set of rules is subjective, has no proper due process, oversteps what congress intended in the HEA, violates the constitution in some places, and uses definitions of aggressive recruiting as a defense that would allow a case to made against nearly every college in the country, including most large public colleges. If you want to know all the problems, read some of the key BDR NPRM responses.

David S | 7/5/2023 10:16:14 AM

I'd love to know more about why/on what grounds these regulations were blocked (full disclosure; I was on the original DTR Neg Reg committee in 2016). I am also curious as to who appointed the judge/s in this case.

Yes, the borrower defense regulations have been contentious. But they are to protect students and taxpayers from fraud; fighting against them is not a good look. If this is the beginning of these regulations being more broadly overturned, public trust in financial aid programs and higher ed in general - already diminished - will erode further. That's worse than any burdensome regulations I can think of.

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Federal Court Blocks ED’s New Borrower Defense Regulations for Some Texas Schools

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