What Is Borrower Defense to Repayment?

• Former college students defrauded by their institution can have their student loan balances erased.
• Borrowers must fill out a borrower defense application to qualify.
• The Biden administration recently enacted changes to make it easier to qualify for forgiveness.
• The borrower defense to repayment rule is in legal limbo due to an ongoing court case.

College is seen as a gateway to higher wages, but the reality is that not every college and university leads to a better future.

Thankfully, there are systems in place that can assuage the financial burden that comes from attending a college that doesn't fulfill its promises to students. Borrower defense to repayment is one of the more popular paths to federal student loan debt forgiveness for students who fall into this bucket.

A borrower defense application may lead to the total forgiveness of someone's student loans.

Here's how some students can take advantage of the program to get out from underneath thousands of dollars in debt from a university that offered false promises.

What Is Borrower Defense to Repayment?

Borrower defense to repayment is the process former college students can use to apply for student loan debt forgiveness if they feel their former school defrauded them.

People would need to file a borrower defense claim with the Department of Education. That application asks for details about how their former school misled or defrauded them and how those false promises negatively impacted them. If approved, the department would erase a borrower's federal student loans taken out to attend that school.

Borrowers may even have past loan payments refunded on a successful borrower defense claim.

The program, however, only applies to loans from the Direct Loan program.

How Do I Qualify for Borrower Defense?

The Department of Education recently expanded who could qualify for debt forgiveness through a borrower defense claim.

The department's new regulations say borrowers can file a claim for any of the following five reasons:

• Substantial misrepresentation
• Substantial omission of fact
• Breach of contract
• Aggressive or deceptive recruitment
• A federal, state, or department action taken against an institution

Here's what each category means.

• Substantial misrepresentation: When a college or university puts out false or misleading information that convinces a student to enroll and take out a student loan to pay tuition and fees. Examples the department gives are if an institution tells a student their credits will transfer but they do not or if it falsely claims the school has a 90% job placement rate.
• Substantial omission of fact: When an institution conceals, suppresses, or fails to provide information that affected a student's decision to enroll or take out a student loan. For example, if a school conceals who would provide the education, suppresses the availability of slots, or fails to tell students a program doesn't meet future requirements for the field they intend to enter post-graduation.
• Breach of contract: This applies when an institution fails to fulfill a promise to a student, usually related to providing certain courses or services. If a school says students could earn a credential by taking a set of courses, for example, but those courses don't exist or are removed, that may constitute a breach of contract.
• Aggressive or deceptive recruitment: Aggressive recruitment is new ground for a borrower defense claim and can be wide-ranging.
  
  In many cases, institutions would violate this policy if they pressured students to enroll using arbitrary time restraints like falsely claiming there are a limited number of seats in a program or exploiting a student's lack of experience with higher education. Deceptive recruitment may also apply if a university recruiter shares information different from what the school posted online, such as job placement rates.
• Federal, state, or department action: Essentially, if a federal or state court rules that an institution violated federal or state law, a borrower could qualify for borrower defense if the judgment impacted them. For example, if a state attorney general wins a case in which a college is found to have engaged in false advertising, a former student may piggyback off that declaration if they can prove that the false advertising impacted their decision to enroll.

What Schools Are Included in Borrower Defense?

Former students of any type of institution can file a claim for borrower defense to repayment.

That includes:

• Public colleges and universities
• Private, nonprofit institutions
• Private, for-profit institutions

Nevertheless, the Department of Education admits that borrower defense claims are most common among former students of private, for-profit colleges and universities. During negotiated rulemaking in late 2021, the negotiator representing for-profit institutions was the only representative from the committee to vote against the proposed borrower defense changes.

Historically, most borrower defense claims are filed against for-profit colleges. According to a 2017 analysis from the Century Foundation of over 98,000 borrower defense claims, nearly 99% of claims were made against for-profit schools.

The Department of Education's new borrower defense rule went into effect on July 1, 2023.

However, an ongoing court case resulted in the indefinite suspension of that rule.

How to Apply for Borrower Defense

Borrowers can apply for borrower defense through the Federal Student Aid (FSA) website.

Borrowers can complete the process through the FSA website or download the application and mail it to the Department of Education. The mailing address is included in the application.

There are a few things borrowers should gather before they start filling in details.

FSA recommends that borrowers prepare an outline of their claims against the school beforehand to aid them in the application process. FSA also recommends that borrowers gather all documents that may support their case for loan discharge.

These documents include:

• Emails or other communications between you and your school that support a claim that the institution lied to or misled you
• Course catalogs, student handbooks, or advertisements from the school that support your claims
• Documents that confirm dates of enrollment
• A copy of a contract with your school that may support a breach of contract claim
• A copy of a court's judgment against the institution that supports your claim, but a settlement does not count as a judgment

Borrowers can download a copy of the borrower defense to repayment application to give them a better understanding of what they may need before they start the process.

If a borrower plans to apply online, they will need a StudentAid.gov account. Many borrowers will already have an account because they have outstanding student loans. If not, borrowers can create an account before they start the application.

How to Fill Out a Borrower Defense Application

The borrower defense application is a seven-step process:

1. Borrower Information

The application first asks borrowers to give some general information about themselves. This includes:

• Name
• Date of birth
• Social Security number
• Contact information
• Address

2. School Information

The application then asks for identifying information about the school the borrower is making a claim against. This includes:

• School name
• Campus name
• Campus location
• Enrollment dates
• Program name or major
• Current enrollment status

3. Reason for Borrower Defense Claim

This section may be the most important for the borrower defense claim, and this is where applicants should be as detailed as possible.

The application includes different sections for the reasons someone may be filling out a borrower defense to repayment application. These sections include:

• Employment prospects
• Career services
• Accreditation and licensure qualifications
• Transferring credits
• Educational services
• Program cost and nature of loans
• Aggressive and deceptive recruitment
• Judgment
• Breach of contract
• Other

Borrowers only need to fill in the sections that apply to their claim.

For example, if someone was promised help finding a career in their field after graduation but their institution never provided that service, they would fill in the section career services. If a school told a borrower that they were receiving only grants and scholarships but they later discovered some of their funding came from loans, they would fill in the section program cost and nature of loans.

Most of these sections ask for detailed responses concerning what claim was made, who made the claim, when the claim was made, how the information was communicated, and why it was provided.

FSA recommends that borrowers be as detailed as possible in their answers. Borrowers should include names and dates wherever possible.

It is crucial that you provide as much detail as possible when filling out your application, FSA states. The more detail and evidence that you provide, the easier it is for us to evaluate your claim(s).

4. Harm

The next part of the application asks borrowers to detail how each type of misconduct harmed the borrower.

The application breaks this into three parts:

• What harm did you experience as a result of the school's statements, acts, or omissions?
• How did the school's statements, acts, or omissions cause you this harm?
• How has your life been impacted by this harm?

5. Other Refunds, Remedies, and Actions

This section only applies to borrowers who may have already received some relief through other systems.

For example, if a borrower had some or all of their student loans forgiven through closed school discharge, they must list that here and include the amount forgiven. If a borrower received funds from a class-action lawsuit or settlement involving their former college, they should also record that here.

The application asks applicants to attach any documents related to past relief.

6. Forbearance Opt-In

Borrowers can put their loan in forbearance while their borrower defense application is being considered.

A borrower who opts in would not have to make payments on their loans while their application is pending. Interest will continue to accrue for the first 180 days the application is pending, but if the department takes longer to consider the application, interest will stop accruing after 180 days.

Borrowers who don't select an option here will be automatically placed into forbearance if they haven't defaulted on their loan.

If they have defaulted, the Department of Education will stop collections on applicable loans while it reviews the application.

7. Certification

Lastly, the application asks borrowers to certify that all the information provided is true and accurate.

Borrower defense to repayment applications must be filed under penalty of perjury. Lying on an application can have legal consequences for borrowers.

How Long Does a Borrower Defense Application Take to Process?

The processing time for a borrower defense application may vary depending on how complete the application is.

Once a borrower submits an application, the Department of Education will review the application to determine if it is materially complete. This is to ensure that there is enough information in the application to make a determination either way.

FSA may also email an applicant asking for missing information if they don't include basic identifying information like the school's name, the borrower's signature, or their Social Security number.

If an application isn't materially complete, the department will deny the application.

If it is materially complete, the Department of Education will send the application to the school in question if the institution is still open. The college or university will then have the chance to respond to the borrower's claims and provide its own evidence.

It's unclear how long the institution has to submit a response.

The department then reviews the application and the school's responses to make a determination. The department will evaluate whether the borrower's claims are more likely than not to be true.

How Long Does a Borrower Defense Case Take?

The timeline to hear back from the Department of Education may vary depending on the case.

The department has three years to make a decision after determining whether it is materially complete. If a borrower opts for forbearance while the department considers the application, their loans will only accrue interest for the first 180 days. After that, the borrower won't need to make loan payments, and interest won't accrue until the department issues a decision.

Borrowers can check the status of their application online.

They may also call the Borrower Defense Hotline at 1-855-279-6207 for an update.

The three-year timeline is paused if a borrower's claim becomes part of a group application at any point. The department may choose to group similar claims against the same institution for a group claim, which may increase the likelihood of a claim being approved.

What Is the Status of Biden's New Borrower Defense to Repayment Rule?

President Joe Biden's administration reworked the borrower defense to repayment rule in late 2021. That new rule became official on July 1, 2023.

However, the rule is currently in legal limbo.

Shortly after its effective date, the 5th U.S. Circuit Court of Appeals granted a motion to block enforcement of the rule indefinitely on Aug. 7, 2023. Career Colleges and Schools of Texas, a trade organization representing 70 for-profit institutions in Texas, filed a lawsuit in February to stop the rule from going into effect in the first place.

Biden's new borrower defense rule widened the scope of claims that might qualify for loan forgiveness.

Institutions, primarily for-profit colleges and universities, took umbrage with the new rule. Career Colleges and Schools of Texas' suit called the new rule unfair to institutions and overly vague.

The court's injunction pending appeal will stop the Department of Education from being able to enforce the new borrower defense rule. The 5th U.S. Circuit Court of Appeals heard the case on Nov. 6, 2023, but has yet to issue a decision.

The court’s eventual ruling will likely be the final say on the legality of Biden’s borrower defense to repayment rule.