Institutions Report Recent Increase in Borrower Defense to Repayment Claims
By Jill Desjean, Director of Policy Analysis
NASFAA members have reported receiving an increase in the number of borrower defense to repayment (BDR) claims over the past several weeks, leading to questions about the reason for the sudden uptick, whether more claims will follow and how many to expect, and whether and how schools should respond given the fact there are a number of different regulations governing borrower defense claims.
As a reminder, BDR is a long-existing, but previously rarely-used, provision of the Higher Education Act (HEA) that enables students who have experienced certain types of institutional misconduct to have their federal student loans forgiven.
Below are some of the most common questions NASFAA has been hearing from member institutions.
Why the sudden increase in BDR claims?
NASFAA has reached out to the Department of Education (ED) to ask what triggered this release of BDR claims to schools. ED officials said that the claims reflect, “Federal Student Aid (FSA) sending borrower defense notifications based on existing application inventory.” They also confirmed that these claims fall outside the scope of the Sweet vs. McMahon settlement, where ED was presumably directing resources prior to turning to these applications that fall outside of the settlement.
Do we know how many claims were sent to institutions, if more claims are coming and, if so, how many?
ED officials did not share numbers, but told NASFAA that, “schools may receive applications in batches as part of the Department’s standard notification and fact-finding process under the current framework.”
Many of the borrower defense to repayment claims we’ve received notice of seem frivolous, baseless or don’t meet the definition of a borrower defense claim. Is ED doing any sort of filtering on these claims before sending them to schools?
Schools in the past have shared examples of borrower claims that, upon first glance, appear not to meet the standards for a borrower defense claim or lack merit, leading some financial aid professionals to wonder whether ED is conducting any sort of pre-screening of these claims before sending them to schools.
ED is not necessarily required to review BDR claims for “material completeness” before sending them to institutions, because material completeness is a concept only included in the most recent 2023 borrower defense rules, which are currently delayed from being implemented until 2035 in accordance with the One Big Beautiful Bill Act. As such, BDR claims that would have been subject to the 2023 rules are currently subject to the 2019 rules.
Is the school required to respond?
No, institutions are not required to respond. It is always the school’s choice to respond to a borrower defense claim notification. It is NASFAA’s understanding that a nonresponse from an institution will not be viewed as automatically favorable for a borrower’s claim. However, institutions should work with their legal counsel when determining whether a response is warranted.
If they choose to respond, institutions have 60 days to respond following ED’s notification of a borrower defense claim. A lack of response is presumed by ED to mean the institution does not contest the claim. If the department rules in favor of the applicant, however, and seeks recoupment from the institution, the institution is provided a second opportunity to respond as part of a separate recoupment proceeding.
Will institutions be liable for loans that are forgiven under borrower defense claims?
The claim review and recoupment processes are separate and distinct processes. It is NASFAA’s understanding that a lack of a response from an institution is not an admission of wrongdoing and that if an approved claim did move to the recoupment stage, there would be another opportunity for the school to respond. NASFAA has asked ED to confirm this.
Will ED be issuing any guidance related to these BDR claims?
ED officials have indicated that FSA is preparing an electronic announcement (EA) to be released “shortly.” The EA is expected to include “additional context on what schools are seeing, what to expect going forward, and where to direct questions.”
As things currently stand, if a school decides to respond, it should follow the institutional response requirements in 34 CFR 685.405 and as outlined in the notification the institution receives from ED. The content of the institutional response is entirely up to the institution.
For more background and information we encourage members to utilize our borrower defense web center and AskRegs: How Does a School Respond To Borrower Defense Claims?
Publication Date: 3/20/2026
Matt R | 3/25/2026 3:52:20 PM
What I find most concerning about this is the complete disconnect from how Title IV has always operated.
For decades, institutions have been required to document—thoroughly and consistently—every aspect of eligibility, disbursement, and compliance in order to access and retain federal funds.
Yet now, we’re seeing a process where claims can be submitted without clear expectations for supporting documentation, and in some cases, not even reviewed for completeness before being forwarded to institutions.
That is fundamentally inconsistent with the level of documentation and verification required on the institutional side.
At a time when financial aid offices are already navigating:
Significant regulatory change
Staffing shortages and turnover
Increased scrutiny and accountability
The lack of clear guidance—and in many cases, non-answers—from the Department only adds to the operational burden.
Even more confusing is the contradiction in messaging—where institutions are told a response is optional, yet non-response may be interpreted as not contesting the claim.
That kind of ambiguity creates risk without providing clarity.
I do appreciate NASFAA continuing to push for answers and advocate for institutions, because right now, what we’re seeing feels less like a structured process and more like a reflection of the broader uncertainty in the current regulatory environment.
Vincent F | 3/23/2026 10:7:35 AM
I've been in aid for over 30 years, and I've never received one of these until a few weeks ago, when I received two. What's really odd is that both of them date back to the early 1990s, back before we became a degree-granting institution. In other words, we weren't even participating in Title IV aid at the time.
Anthony M | 3/20/2026 2:36:36 PM
Having a hard time reconciling the two statements, "It is NASFAA’s understanding that a nonresponse from an institution will not be viewed as automatically favorable for a borrower’s claim" and yet "A lack of response is presumed by ED to mean the institution does not contest the claim."
The notices to institutions state, "Please note that schools are not parties to the process of resolving claims made to the Department in pending borrower defense applications."
If that is the case, then why would a non-response be taken to mean that an institution does not contest the claim? Especially since, as noted, many of the claims are frivolous. Others are downright nonsensical, such that disputing them is not even possible -- like proving a negative.
Paula L | 3/20/2026 10:11:03 AM
Sec. 685.405 (2) indicates institutions have 90 days to respond. Why have institutions only been given 60 days to respond? Again, if the school so chooses to do so.
You must be logged in to comment on this page.