If you enrolled in a college, university, or career school based on misleading information from the school, or you were the victim of other types of misconduct by the institution, you can apply to the government to have your federal loans forgiven under a process known as Borrower Defense Loan Discharge.
If your borrower defense application is approved, a discharge means you will no longer have to repay your federal student loans. In some cases, you may also see reimbursement for federal loans you’ve paid up to now, including interest on the loans.
Key Points
• Borrower Defense Loan Discharge potentially offers federal student loan forgiveness if a college, university, or career school misled students or engaged in misconduct. Students must apply and be approved.
• Eligibility criteria for borrower defense include substantial misrepresentation on the part of the school, omission of fact by the school, breach of contract, aggressive recruitment, or legal judgments against the school.
• The application process involves creating a StudentAid.gov account, describing the misconduct, and explaining its impact on educational and financial decisions.
• Challenges of applying for borrower defense include meeting the eligibility criteria, documenting the harm done by the school, and a lengthy decision process that can take up to three years.
• If approved, a student may get partial or full loan forgiveness and reimbursement of payments.
Understanding Borrower Defense to Repayment
The Borrower Defense to Repayment program has made a difference for a great many people. As of October 2024, the Department of Education (DOE) had forgiven $28.7 billion worth of debt for more than 1.6 million borrowers who were cheated by their schools, saw their institutions precipitously close, or were covered by related court settlements.
Borrower defense discharges apply only to federal student loans that are Direct Loans or can be consolidated into a Federal Direct Consolidation Loan, including Federal Family Education (FFEL) Program loans, Federal Perkins Loans, and Parent Loans for Undergraduate Students (PLUS).
Borrower defense discharges don’t apply to private student loans.
Definition and Purpose
Borrower defense loan discharge, which is sometimes shortened to “borrower defense” or “borrowers defense,” is a federal regulation that allows students who can demonstrate that they have been defrauded by their schools to get forgiveness of their debt.
According to the formal definition of borrower defense, people can apply who were “enrolled in a school or continued to attend a school based on misleading information from the school or other misconduct covered by the regulation, and suffered a detriment that is of a nature and degree warranting a full discharge of their applicable federal loans.”
Historical Context and Recent Developments
Borrower defense began in the 1970s. At that time, the federal government created an interagency committee to examine and address the growing problem of “educational abuses.” An amendment to the renewal of the Higher Education Act in 1993 codified borrower defense to repayment into the Act.
The law gives the Secretary of Education the power to determine when and under what circumstances valid defenses against repayment of federal student loans can be granted.
The Department of Education received a modest number of borrower defense claims in the 20th century. However, in the last 20 years, borrower defense has gained prominence. An official administrative process for borrower defense was created after the 2015 collapse of Corinthian Colleges, which affected tens of thousands of students.
The most famous borrower defense case is a class-action suit known as Sweet v. Cardona (formerly Sweet v. DeVos). On June 22, 2022, the Department of Education and the plaintiffs in the case agreed to a $6 billion settlement. Those payments are still being processed as of late 2024.
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Eligibility Criteria for Borrower Defense
There are six different grounds that may qualify an individual for a borrower defense discharge under the 2023 Borrower Defense Regulation, which sought to strengthen protections for borrowers. According to the Federal School Aid division of the DOE, the six criteria are:
1. Substantial Misrepresentation
A school makes a substantial misrepresentation when it lies to or misleads students about its educational services, financial charges, or the employability of its graduates, and that information is central to a student’s decision to enroll, stay enrolled, or take out loans.
2. Substantial Omission of Fact
A school makes a substantial omission when it suppresses, conceals, or omits important information that a reasonable person would have considered in deciding to enroll, stay enrolled, or take out loans.
3. Breach of Contract
A breach of contract has occurred when you have an agreement with your school and your school does not do what it promised to do in your agreement. The agreement must have been made in exchange for your decision to attend or continue attending, your decision to take out loans, or for funds disbursed in connection with a loan.
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4. Aggressive and Deceptive Recruitment
A school engages in aggressive and deceptive recruitment when it:
• Demands or pressures you into making enrollment or loan-related decisions immediately
• Takes unreasonable advantage of your lack of knowledge about, or experience with, postsecondary institutions, postsecondary programs, or financial aid
• Discourages you from consulting with others before making an enrollment or loan-related decision
• Obtains your contact information through websites or other means that falsely offer assistance to individuals seeking federal, state, or local benefits; falsely advertise employment opportunities; or present false rankings of the institution or its programs
5. Judgment
This means that a judgment has been issued against your school where a court has ruled that your school violated the law. This judgment must be based on your school’s act or omission relating to the making of a loan or on the provision of educational services for which the loan was provided. It’s important to be aware that a settlement is not a judgment.
6. Prior Secretarial Action
You may be approved for a borrower defense discharge based on a decision by the DOE to revoke your school’s provisional program participation agreement or deny its recertification to participate in the federal student aid programs, if that action is based on conduct that could give rise to a borrower defense.
Application Process
When you begin the application process, you’ll be asked to create a StudentAid.gov account so you can submit, review, and manage your borrower defense application online.
Alternatively, you can download a PDF version of the borrower defense application and submit your completed application by mail to the address listed on the application.
According to regulations, your application must meet the “materially complete” standard to be considered. Among the things you will need to provide are:
• A description of what your school did or failed to do that is covered by the kinds of misconduct that qualifies for borrower defense discharge.
• The names of the school or representative of the school that committed the misconduct and when the misconduct occurred.
• How the misconduct impacted your decision to attend the school, to continue attending the school, or to take out the loan for which you are applying for a defense to repayment
• A description of the harm you experienced because of the school’s misconduct.
Under the 2023 regulation, the Department of Education has three years to make a decision on your application after receiving it and determining that it is materially complete. However, the three-year period is paused if your application becomes part of a group application process at any time.
Potential Outcomes
A borrower defense claim can result in full loan forgiveness, partial loan forgiveness, or no loan forgiveness. A refund may include both principal and federal student loan interest. The remaining loan balance may also be discharged, meaning you won’t have to repay it.
However, your request for borrower defense may not be approved. If the evidence does not meet the DOE’s standard, your claim will be denied. You won’t receive a discharge of your federal student loans, and the forbearance or stopped collections period will end for all of your loans. You’ll be responsible for repaying these loans.
Alternatives to Borrower Defense
If you’re trying to get out of student loan debt, and you are denied borrower defense, you may qualify for a deferment or a forbearance. With both of these options, you can temporarily suspend your federal loan payments. However, there is a difference between the two options related to the interest on your loans. In deferment, interest doesn’t accrue on some types of Direct loans, while during a forbearance, interest accrues on all Direct loans.
If you are seeking student loan forgiveness through an income-driven repayment plan over a period of years, there are several programs that exist to help lower your monthly loan payments based on how much money you earn and your family size.
Another route to explore is refinancing your student loan to potentially obtain a lower interest rate or more favorable terms of repayment. When you refinance student loans, you replace your old loans with a new loan from a private lender. It’s important to know that if you refinance federal loans, they will no longer qualify for federal student loan forgiveness.
As you consider different methods to manage your student loan debt, a student loan payment calculator can help you determine what your loan payments might be in various scenarios.
The Takeaway
Borrower defense can be a path to federal loan forgiveness or even repayment for people who can prove misconduct on the part of their school. As of October 2024, the Department of Education had forgiven $28.7 billion for more than 1.6 million borrowers who suffered from misconduct by their schools, saw their institutions precipitously close, or were covered by related court settlements. The application requires proof of misconduct and the harm it caused you, and the Department of Education can take three years to decide whether to approve it.
If you don’t qualify for borrower defense to repayment, there are other options you can pursue for help repaying your student loan debt. These include deferment, forbearance, or student loan forgiveness, if you qualify.
Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.
FAQ
What types of school misconduct qualify for borrower defense to repayment?
The types of school misconduct that can lead to a successful case includes an institution lying to or misleading borrowers about its educational services, financial charges, or the employability of its graduates.
How long does the borrower defense to repayment process take?
The Department of Education (DOE) has three years in which to review an application for borrower defense. The DOE says, “We have three years to make a decision on your application once we determine that your application is materially complete. The three-year period is paused if your application becomes part of a group claim process.”
Can private student loans be discharged through borrower defense to repayment?
No, private student loans are not eligible for this program. Borrower defense to repayment is only applicable to federal student loans.
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