Student Loans and Borrower Defense to Repayment: An Essential Guide

What Is a Borrower Defense Loan Discharge?

If your school did something wrong to convince you to enroll or take out a student loan, you might qualify for student loan forgiveness through the Borrower Defense to Repayment Program. 

You may be eligible for loan cancellation if:

• Your school lied about its job placement rates.

• Your school lied about its accreditation.

• Your school lied about its graduation rates.

• Your school lied about the transferability of credits to another institution.

• Your school exhibited predatory lending tactics.

• Your school closed before you got a degree.

Who Is Eligible for a Borrower Defense Loan Discharge?

Eligibility for a borrower defense loan discharge is based on a few factors, including:

• What kind of loans you have

• What kind of misconduct your school engaged in and what kind of financial harm it caused you (and how much evidence you have to support your claim of misconduct) 

• How long ago you took out the loans and the misconduct occurred

Loans Eligible for Borrower Defense Loan Discharge

Only federal student loan borrowers qualify for the borrower defense program. Most loans in the Federal Direct Loan Program qualify, including:

• Direct Loans (subsidized or unsubsidized loans taken out by student borrowers)

• Direct Graduate PLUS Loans (taken out by graduate or professional students)

• Direct Parent PLUS Loans (taken out by parents on behalf of students)

• Direct Consolidation Loans

  • If you have Federal Family Education Loans (FFEL) or Perkins Loans, you must first consolidate those loans into a Direct Consolidation Loan to be eligible for a borrower defense discharge

Private student loans aren't eligible for a borrower defense discharge.

School Misconduct and Financial Harm Considerations in Borrower Defense Loan Discharge

As of mid-2023, to qualify for a student loan discharge through borrower defense, you must prove that your school or one of its representatives both intentionally engaged in misconduct or misrepresentation and caused you financial harm. This can be tricky to prove because taking out the loan itself doesn’t qualify as causing financial harm. If you are unemployed or have suffered financially due to negative credit reporting, you may be able to make a stronger claim.

You can also try to prove that your school violated state laws, including consumer protection laws or laws regulating schools or educational services.

President Trump added the intentionality and financial harm aspects to the borrower defense discharge eligibility during his tenure. Many aspects of borrower defense have changed over time as the political party in power changes, so it’s possible that these requirements will shift again in the future. President Biden and the Biden administration have been working hard to address inequities related to student loan repayment and loan forgiveness programs, including the borrower defense program.

How Long You Have To Apply for Borrower Defense

If you took out your loans between July 1, 2017, and June 30, 2020, you have six years to make a borrower defense claim. Under more recent rules, you have only three years from the date of the school’s misconduct to file your borrower defense application.

How Do You Apply for a Borrower Defense to Repayment Discharge?

The application process for borrower defense is simple but not necessarily easy. There’s a 25-page application form. We’re here to help break it down.

You can submit your application and supporting documentation through your account on StudentAid.gov. That’s the website where you applied for federal student aid through the FAFSA. If you prefer to mail your application, you’ll need to print out the application form, add your supporting documents, and send the whole packet to the Department of Education (ED) at this address:

      US Department of Education

      Borrower Defense to Repayment

      P.O. Box 1854

      Monticello, KY 42633

What Supporting Documents Should You Include in Your Borrower Defense Application?

The ED’s application clearly lists several forms of supporting documentation that can help you prove your case, including:

• Transcripts

• Enrollment agreements

• Promotional materials from your school

• Communications with school officials or employees

• Student manual

• Course catalog

• Legal documents (including documents from class action lawsuits against the school)

• Findings or determinations made by government entities

• Any other documentation you believe supports your application

In addition to this supporting documentation, the application for borrower defense includes space for you to provide details about your case and how the school misrepresented itself.

Should You Keep Paying Your Student Loans if You’ve Submitted a Borrower Defense Application?

While your application is pending, you will be automatically granted a forbearance unless your loans are in default. Forbearance simply means you get a repayment pause and aren’t responsible for making payments on your loan. Keep in mind that interest will continue to accrue while your loans are in forbearance. Depending on the state of your personal finances, you can choose to deny the forbearance or to accept it but continue making interest-only payments to your loan servicer

If your application for discharge is approved, you’ll have all or part of your loan discharged. If you receive a full discharge, you will be reimbursed for the amount of the loan that you have paid.

Does Borrower Defense To Repayment Really Work?

Student loan forgiveness and debt relief information has dominated the news lately, so it’s natural to wonder, “Is borrower defense to repayment real?” The answer is “yes” … but you may have to wait a while to hear back about your application.

According to the U.S. Department of Education, as of Jan. 21, 2023, almost 60% of all borrower defense applications are still pending review. That amounts to a backlog of over 460,000 applications. About 25% of the applications that have been processed were approved and 14% were denied.

Here are some notable numbers that may give you hope:

• 560,000 borrowers who took out loans to attend Corinthian College between 1995 and 2015 received $5.8 billion in full loan discharges in 2022.

• 208,000 borrowers who attended ITT Technical Institute got a group discharge to the tune of $3.9 billion in 2022.

A Brief History of the Borrower Defense To Repayment Program

The Borrower Defense to Repayment Program has evolved over time. Before July 1, 2017, your eligibility for a borrower defense discharge depended entirely on state law, and you had to demonstrate that you were misled or harmed by an act or omission that violated state laws.

During Obama’s tenure as president, he established federal rules to address misconduct by for-profit colleges and schools. These rules were aimed primarily at addressing predatory lending practices of for-profit schools like Corinthian or ITT Tech.

Borrower Defense To Repayment Under President Obama

Under the so-called “Obama rules,” you could be eligible for a borrow defense loan discharge if any of the following apply to you:

• A court or administrative tribunal has issued a judgment based on federal or state law.

• Your school breached the contract you had with them.

• Your school made a misrepresentation that you reasonably relied on to your detriment or that the school should have expected you to rely on.

To determine the reasonableness of your reliance on the misrepresentation, the following factors are considered:

• If the school demanded immediate enrollment or loan decisions

• If the school imposed unreasonable consequences if you delayed making a decision

• If the school discouraged you from seeking advice from an advisor, family member, or other resource

• If the school failed to provide requested information, including program costs and details about financial aid

To recover your loan payments to these institutions, you must file a borrower defense claim within six years of a breach of contract by the school or within six years of when you discovered or could have reasonably discovered a substantial misrepresentation by the school.

Borrower Defense To Repayment Under President Trump

President Trump's rules went into effect on July 1, 2020. They required borrowers to meet a strict standard of “misrepresentation” to be eligible for a borrower defense discharge.

A misrepresentation is a statement, act, or omission that is both false, misleading, or deceptive and made by someone who knew it was false, misleading, or deceptive but had a reckless disregard for the truth. 

The statement of misrepresentation must also have directly and clearly related to enrollment or continued enrollment at the institution or for educational services for which the loan was made. Finally, the borrower had to prove the school’s misrepresentation caused the borrower financial harm.

Current ED Secretary Miguel Cardona has said he will make changes to some of these requirements, but for now this standard continues to apply.

What if Borrower Defense Isn't Right for Me, but I Still Can't Pay My Student Loans?

If you have overwhelming student loan debt and you can't seem to find a solution, you may want to consider filing bankruptcy. Contrary to popular belief, it is possible to get your student loans erased through bankruptcy. In fact, recent government guidelines have made this easier for federal student loan borrowers.

To qualify for discharge in Chapter 7 or Chapter 13 bankruptcy, you must

• Demonstrate that repaying the loan would cause "undue hardship"

• Show that you have made efforts to repay the debt in good faith

• Submit additional paperwork for an adversary proceeding — for more information on the adversary proceeding process, you can refer to our article titled "How To Fight Student Loan Debt in Bankruptcy: Adversary Proceedings Explained"

If you want to learn more or see if you're eligible for a student loan discharge, use our free screener to check your eligibility now. Upsolve is proud to offer its services free of charge.