How Borrower Defense to Repayment Works
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Borrower defense to repayment forgives borrowers' student loans if they were defrauded by their schools. Borrowers can also get relief if their schools closed before they could complete a degree.
The Biden-Harris administration has approved the discharge of more than $28.7 billion of debt among 1.6 million borrowers through borrower defense claims and closed school discharge, as of May 2024. And that tally includes an additional $6 billion in relief due to 264,000 borrowers as a result of the Sweet v. Cardona class action lawsuit.
Borrowers whose claims were approved can expect:
• Full discharge (100%) of federal student loans, which could be automatic.
• Reimbursement of any amount paid toward the loan according to regulations.
• Requests to remove negative credit reporting with the credit bureaus.
• Reinstatement of federal student aid eligibility for those who lost it.
Who gets relief under the Sweet v. Cardona settlement?
On Nov. 16, 2022, a federal judge in California gave approval on Sweet v. Cardona (formerly Sweet v. DeVos), a settlement of borrower defense claims that will provide up to 264,000 student loan borrowers with at least $6 billion in debt relief. The decision was upheld on Feb. 24, 2023.
The final settlement will provide full relief including student loan forgiveness, payment refunds and credit repair to 200,000 borrowers who filed before June 2022 and attended one of about 150 mostly for-profit schools involved in the case. The remaining 64,000 have pending claims against schools not on that list; decisions on their cases would be streamlined.
Borrowers who attended one of the schools below and submitted a borrower defense application on or before June 22, 2022, would be eligible for discharge under the Sweet v. Cardona settlement if they haven't received a decision or received a denial. Those who submitted a borrower defense application after June 22 and before Nov. 16, 2022 will qualify as a "post-class applicant."
Seventy-five percent of all class members would receive loan discharges or refunds by November 2023. The remaining 25% of class members would receive an individual borrower defense decision on a rolling basis, which could result in loan discharges or refunds.
What eligibility requirements are borrowers still expected to meet?
The Education Department, under Secretary Miguel Cardona, says it plans to pursue additional actions, including re-regulation of changes made under former Secretary Betsy DeVos that tightened eligibility requirements and placed a larger burden on the borrower to prove the school committed fraud.
These changes remain in place until the Department of Education acts:
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 canceled.
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 the following ways:
Intentionally misled you about your education program.
Caused you harm as a result to a degree that warrants full discharge of your loans.
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, a professor of higher education the University of Tennessee, Knoxville.
If your loans disbursed before July 1, 2020, a judgment against your school can be grounds for a successful borrower defense. Under the new rule a judgment 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, on the Federal Student Aid office's website. An updated online application will roll out on July 30, 2023.
After you complete and submit your application, you can expect a determination from the Department of Education within about three weeks. Notifications are sent out via email.
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.
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.
If you've applied for borrower defense, you might stay in forbearance after student loan payments resume in October 2023. Sign up for federal student aid notifications to get updates about borrower defense.
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.
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