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Student Loans and Borrower Defense to Repayment

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In a Nutshell

If your school engaged in misconduct when attempting to persuade you to attend and/or take out the loan, you could be eligible for student loan forgiveness using the “borrower defense to repayment” program.

Written by Attorney John Coble
Updated January 6, 2021

If your school engaged in misconduct when attempting to persuade you to attend and/or take out the loan, you could be eligible for student loan forgiveness using the “borrower defense to repayment” program. A few examples of misconduct that can lead to loan cancellation include schools lying about their job placement rates (this happened with Corinthian College in Vara v. DeVos), schools lying about the school’s accreditation (as in Carr v. DeVos), lying about graduation rates, or lying about the school’s credits being able to transfer to another school. 

The Obama Administration expanded the borrower's defense cancellation program. The Obama rules protect student borrowers from predatory lending tactics.  These new rules went into effect on November 1, 2016. Since the beginning of the Trump Administration, Betsy Devos’ Department of Education has been working to undermine borrower defense loan forgiveness. 

Court filings show the U.S. Department of Education has denied 94% of borrower defense claims (see Sweet v. DeVos).  Fortunately, there's an expectation that the incoming Biden administration will provide strong support for the borrower defense provisions. 

The borrower defense regulations' effective date was July 1, 2017.  A lawsuit by an industry trade group of private post-secondary institutions delayed the implementation of these rules. Another group sued the government to end the delay in the enforcement of the regulations. As a result, the regulations finally went into effect on October 16, 2018. 

In September 2019, the Department announced new regulations that would go into effect on July 1, 2020. As a result, we have three different sets of applicable regulations. There's one set of regulations for loans made before July 1, 2017. And another set of regulations for loans made on or after July 1, 2017, but before July 1, 2020. Finally, there's another set of regulations for loans made on or after July 1, 2020. Stayed tuned for yet another set of regulations within the next year or two.


To qualify for borrower defense, you need to be the student borrower for Direct Loans and Direct Graduate PLUS Loans. A parent is eligible for a borrower defense discharge with Direct Parent PLUS Loans. The borrower defense to repayment program is available for subsidized Direct, unsubsidized Direct, and Direct PLUS loans. Federal Family Education Loan Program (FFEL) loans, Perkins Loans, and private student loans aren't eligible. FFEL Loans and Perkins Loans can qualify for borrower defense if bundled into a Direct Consolidation Loan.  

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Which Rules Apply to You?

The Borrower Defense to Repayment Program rules that apply to you depend on when the loan was taken out. If your loan was taken out before July 1, 2017, you’re under the old rules. If your loan was taken out between July 1, 2017, and June 30, 2020, you'll be under the “Obama rules.” For loans taken out on July 1, 2020, and after, you’re under the “Trump rules.”

The Old Rules – Before July 1, 2017

For loans made before July 1, 2017, the requirement was that you relied on an act or omission that was actionable under state law. If you meet this requirement, you're eligible for the borrower defense discharge for these older loans. 

The Obama Rules – July 1, 2017, Through June 30, 2020

For loans made on or after July 1, 2017, but before July 1, 2020, the borrower defense rules spell out some types of prohibited behavior of the schools. The target of these rules is for-profit colleges and other for-profit schools that engage in predatory lending. 

In the past, most students attended nonprofit colleges and such deceptive trade practices weren’t an issue. These rules were an attempt to prevent the practices exposed in the Villalba et al. v. ITT case. The following situations make a borrower eligible for the borrow defense loan discharge: 

  1. A judgment based on Federal or State law by a court or administrative tribunal;

  2. Breach of contract by the school;

  3. The school makes a  misrepresentation that you reasonably rely upon to your detriment or that the school should have expected you to have relied upon.

  4. The following is considered evidence of the reasonableness of your reliance on the misrepresentation:

    1. Demanding that you make enrollment or loan decisions immediately,

    2. Placing an unreasonable incidence on unfavorable consequences of delay,

    3. Discouraging you from consulting an adviser, a family member, or other resources;

    4. Failing to respond to your requests for more information including the cost of the program and the nature of any financial aid or federal student aid; or

    5. Otherwise unreasonably pressuring you or taking advantage of your distress or lack of knowledge or sophistication.

  5. To be eligible to recover your loan payments to these institutions, you must file your application for a borrower defense discharge 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.

The Trump Rules – July 1, 2020, and After

President Trump's rules went into effect on July 1, 2020. These rules were so unpopular the House and the Republican-controlled Senate voted to reverse the rules. Unfortunately, the president vetoed this legislation and Congress didn't have the 2/3 majority needed to override the veto. 

In March of 2020, the New York Legal Assistance Group (NYLAG) filed the lawsuit titled NYLAG v. DeVos to reverse these regulations. This case is currently pending in federal court. The complaint filed by NYLAG claims these new regulations: 

  • Eliminated protections against forced arbitration and class action bans;

  • Inserted a three-year time limit on student loan borrowers’ ability to raise claims, on both defaulted and non-defaulted loans;

  • Removed key disclosure requirements that inform students about their schools’ status;

  • Eliminated the ability for borrowers to seek to have their claims decided as part of a group of similarly situated students; and

  • Narrowed the bases and standards on which borrowers can assert defenses; 

  • Heightened the evidentiary standard to which borrowers’ claims would be held, including requiring students to offer proof of financial harm beyond that of the federal loan itself.

In short, the Obama Administration sided with the students and the Trump administration sided with the institutions accused of corruption. There's a high probability that the Trump administration's regulations will either be overturned by the new administration or be thrown out due to NYLAG's lawsuit. 

Should you wait to apply for a discharge under borrower defense if you're eligible? No. You need to get moving with the process. 

The Trump rules requires the following standard be met for a borrower defense discharge for misrepresentation by the school:

A “misrepresentation,” is a statement, act, or omission by an eligible school to a borrower that is false, misleading, or deceptive; that was made with knowledge of its false, misleading, or deceptive nature or with a reckless disregard for the truth; and that directly and clearly relates to enrollment or continuing enrollment at the institution or the provision of educational services for which the loan was made. 

It's much more difficult to prove the person making the misrepresentation “knowingly” made the misrepresentation or made the misrepresentation with “reckless disregard for the truth” than it is to prove a simple misrepresentation occurred. 

Under the Trump regulation, you have to prove the state of mind of the person making the misrepresentation. Under the Obama regulation, you only needed to prove the misrepresentation occurred and you reasonably relied on it in your decision to enroll or take out a loan to pay the school. 

Under the Trump regulation, you have to prove you took the loan based on a misrepresentation that caused you financial harm. This isn't necessary under the Obama regulation. Financial harm is understood to occur if you took a loan out to attend a school based on a misrepresentation and didn't get what you were promised. 

The financial harm is in the form of the useless loan you have to pay back. See The Students Are Victims of Fraud, but the Government Won’t Help from the New York Times. In this story, the Department of Education is approving borrower defense discharges in the amount of $0.00 because there was no proof of financial harm.  

Procedure to Apply for a Borrower Defense to Repayment Discharge

If you have a borrower defense, you can seek a discharge of your loans by filing this form with the Department of Education at this address: 

      US Department of Education

      Borrower Defense to Repayment

      P.O. Box 1854

      Monticello, KY 42633

or you can email BorrowerDefense@ed.gov. 

You can send all your supporting documentation also by mail or email. Supporting documentation would include transcripts, enrollment agreements, promotional materials from your school, and any other documents that can help to prove your case.

Due to the huge backlog of cases at the Department of Education, it's a good idea to send this form and documentation by certified mail, return receipt requested. It's easy for the Department to lose this important form and your supporting documents. You need to use certified mail to have proof of sending. Send copies of the original documents so you will still have evidence in case the Department loses your application.

While your application is pending, if you're not in default, you will be automatically granted a forbearance along with a notice you can decline the forbearance. With a forbearance, you're not responsible for making payments on the loan. With a forbearance, you're not responsible for making payments on the loan. But, interest will continue to accrue. 

So, with a forbearance, if your application is denied, you'll owe more money after your borrower defense attempt has completed. If you're in default on the loan at the time of your borrower defense application, you can't get a forbearance. 

Still, collection activity will stop while your application is pending. The effect is the same as a forbearance should your application be granted in full. If your application is denied and you believe the decision was incorrect, it's time to seek legal advice. 

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 and any accrued interest during the forbearance period will be eliminated. If you receive a partial discharge, since you still owe on the loan, you will only be refunded the accrued interest during forbearance to the extent applicable to the discharged amount.

When you’re approved for the discharge, the federal government steps into your shoes for purposes of collecting against the school or other third parties for your discharged loans. You have assigned your legal right to sue to collect against the school, over to the federal government. This is how the federal government protects both your interest and the interest of these taxpayer funded student aid programs against the bad acts of some schools or school employees. 


If you have a borrower defense to repayment claim, you should file your claim for debt relief regardless of who the President is. Yet, if anything can be learned from this article, it’s that the administration in power can make a big difference as to how difficult it is to get this discharge. 

Trump’s Department of Education Secretary, Betsy Devos, made it extremely difficult to get this discharge. She did it, not only by “industry” biased rulemaking but also by failing to properly enforce the rules as they existed when she took office. There will be a new President in January 2021. The new Administration is expected to be much more friendly to borrower defenses for federal student loan debt. If you’ve been waiting to apply for this discharge, now is a good time to do it.

Written By:

Attorney John Coble


John Coble has practiced as both a CPA and an Attorney. John's legal specialties were tax law and bankruptcy law. Before starting his own firm, John worked for law offices, accounting firms, and one of America's largest banks. John handled almost 1,500 bankruptcy cases in the eig... read more about Attorney John Coble

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