How Borrower Defense to Repayment Works

Borrowers defrauded by their schools may seek loan forgiveness through borrower defense to repayment.

Student Loan Discharge Eligibility Relaxes for Defrauded Borrowers

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Borrower defense to repayment gives loan forgiveness to student loan borrowers if they were defrauded by their schools. Borrowers can also get relief if their school closed before they could complete a degree.

New rules for the program are scheduled to take effect July 1, 2020. But loans disbursed before then won't be affected.

What are the changes to borrower defense to repayment?

The new borrower defense program tightens eligibility requirements for loan forgiveness and places a larger burden on the borrower to prove the school committed fraud. Here are some big changes to watch out for.

  • If your school closes after July 1, 2020 while you are still enrolled, it's on you to apply for student loan relief through the borrower defense program. Previously, those loans were automatically cancelled.

  • You will still need to apply even if the Education Department has evidence of wrongdoing by your school that qualifies for student loan forgiveness. No forgiveness is automatic.

  • Under the new rule, you must prove that your school intentionally misled you and that you suffered specific financial harm as a result. The loan itself doesn’t count as financial harm, but being unemployable as a result of your program might.

  • Under the new rule, you can file a claim if you leave your school up to 180 days before it closes. That expands the previous window of 120 days.

  • The old rule allowed six years to apply for relief. The new rule shortens that window to three years.

  • If your claim is initially denied and new information becomes available, you cannot resubmit your claim for further consideration.

Do you qualify for borrower defense forgiveness?

You might qualify for federal loan forgiveness under this program if you believe your school defrauded you in one or both of the following ways:

  • Intentionally misled you about your education program.

  • Violated certain state laws, such as consumer protection statutes or laws related to your loan or educational services.

You can submit a claim whether or not your school closed and even if you’re eligible for other loan forgiveness programs. You can’t submit a claim for private loans or costs you paid out of pocket.

Not sure if you should apply? Find out if your school has been the subject of legal action by the federal government, state attorneys general or the Consumer Financial Protection Bureau. “The biggest indicator is if the college has been sued or are they currently facing legal action for their practices,” says Robert Kelchen, assistant professor of higher education at Seton Hall University in South Orange, New Jersey.

If your loans disbursed before July 1, 2020, a judgement against your school can be grounds for a successful borrower defense. Under the new rule a judgement against your school can be used as evidence for your claim, but – without additional support – probably won’t be sufficient for loan forgiveness.

How to apply for borrower defense to repayment

You can submit a borrower defense to repayment claim application electronically at borrowerdischarge.ed.gov or by filling out a PDF and returning it to the Education Department via email or regular mail. Submission details are available on the federal student aid website.

To strengthen your claim, submit a detailed explanation of why your loans might qualify, along with any supporting evidence. This could include:

  • Actual licensure passage rates that are different from what the school advertised.

  • Actual employment rates that are different from what the school advertised.

  • Actual selectivity and admissions profiles that are different from what the school advertised.

  • Dishonest representation of school held certifications or approval for programs.

  • Dishonest representation of the education resources the school provided.

  • Dishonest representation of the transferability of credits.

  • Dishonest representations of graduate placement rates and salaries.

  • Dishonest representations regarding financial assistance.

For loans disbursed before July 1, 2020, you can also submit written accounts of verbal conversations with school officials. “Just because it was verbal doesn’t mean [the borrower] shouldn’t provide a narration of that,” says Betsy Mayotte, president and founder of the Institute of Student Loan Advisors. “If they felt … pressured to sign something quickly, for example, they should include that information because it’s taken into consideration.”

For help with your claim, find clinics in your area, such as local nonprofits, law schools or legal aid, suggests Suzanne Martindale, a senior attorney for Consumers Union. You may also contact the National Consumer Law Center, suggests Ben Miller, senior director for postsecondary education at Center for American Progress, a nonpartisan policy institute.

Be wary of debt settlement groups that ask for money to submit your application. You can complete this process yourself for free.

How applying can affect your loans

You can choose to put your loans in forbearance – which will halt payments and collections – as part of your claim. After you submit your application, the Education Department will send you a confirmation with more information about your forbearance via email. Although the process should be automatic, you should contact your student loan servicer to make sure they received your forbearance notification and are processing it appropriately.

A borrower defense claim can result in full loan forgiveness, partial loan forgiveness, or no loan forgiveness. The new rule sets a high bar for full loan forgiveness and leans more toward partial relief based on financial damages. Interest will accrue while the Education Department evaluates your application and you will be responsible for interest on any part of your loans that is not cancelled.

Key terms in this story

Borrower defense to repayment: A federal student loan forgiveness program for borrowers whose schools violated certain laws, or defrauded or misled students. Borrowers can also get relief if their school closed before they could complete a degree. New rules for eligibility and forgiveness amounts make successful borrower defenses to repayment claims more difficult, but you should still make a claim if you believe you’ve been defrauded.

Forbearance: A period of authorized nonpayment for up to 12 months at a time. Interest accrues on all loans in forbearance, so it’s usually not a good option unless you can’t pay your loans and don’t qualify for deferment. An income-driven repayment plan is a better option if you won’t be able to make your payments for an extended period.

Student loan forgiveness: Government programs that cancel federal student loan debt for borrowers who meet specific requirements. Public Service Loan Forgiveness (PSLF) and Teacher Loan Forgiveness (TLF) are examples of student loan forgiveness programs. Borrowers with private student loans are not eligible for student loan forgiveness programs, but have other options to manage their debt.

Student loan servicer: The private company that manages your federal student loan payments until they are repaid. Student loan servicers might not always offer the best repayment options, so it’s important to ask questions and advocate for yourself.

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