You can raise borrower defense claims (also known as “defense to repayment” or “DTR”) asserting that the Department should discharge your federal student loan debt due to school misconduct whether or not you are in default on the loans. If your borrower defense application is successful, the government will forgive/cancel all or part of your outstanding federal student loan debt and, in some circumstances in theory, you also may be reimbursed for amounts you have already paid on those loans.
Although borrowers have long had the right to raise school-related defenses to repayment, the Department only recently began creating a borrower defense to repayment process. The Department issued final rules on November 1, 2016 that were supposed to go into effect July 1, 2017. However, an industry trade group sued to delay the implementation of these rules, leading the Department to announce delays.
The Project on Predatory Student Lending and Public Citizen sued the government to stop the delay. In October 2018, a judge agreed that the delay was illegal and as a result, the rules took effect on October 16, 2018. In March 2019, the Department announced that the final rules from November 2016 will be applied for borrower defense claims asserted as to loans first disbursed on or after July 1, 2017.
Then in September 2019, the Department issued a new version of the rule that applies to loans disbursed July 1, 2020 or later. This new version makes it even harder for borrowers to get relief. There is currently a legal challenge to this new version of the rule.
The Department says that these rules apply to Direct Loans and not to Federal Family Education Loans (FFEL) or other government loans. There are separate borrower defense rights for the FFEL program, but the Department has not explained how borrowers can get relief through this separate process. We will post information for borrowers with government loans other than Direct Loans when we have it.
It’s important to stay tuned and check this website for new developments and also check the Department’s website on borrower defense. The Project on Predatory Student Lending also posted FAQs for borrowers waiting for decisions on defense to repayment applications and for those who have received decisions.
The Department’s data center also includes reports and updates about the borrower defense process.
Borrower Defense Application Process
Unless you fit into one of the categories described below for certain Corinthian or ACI students, since February 2017 the Department has required borrowers to use its borrower defense application form. You can complete the online application form or download and complete a fillable PDF application form. Information on what to include in your borrower defense application is available on-line and on the application form.
Borrowers should carefully complete the application form and provide as much accurate and detailed information as possible. If borrowers are familiar with any lawsuits that were filed against their school, they should mention it on their application form. Although not required, the application form encourages borrowers to submit additional documentation or other evidence such as transcripts, enrollment agreements, and/or school promotional materials.
Before filling out the borrower defense form, you should review the borrower defense guide the New York Legal Assistance Group (NYLAG) created to assist you in filling out each section of the borrower defense application. This guide is for informational purposes only. You can download the guide in English and Spanish. The Debt Collective has additional information about the borrower defense application process.
After substantial delays in processing applications, in April 2020, the Department promised to process the borrower defense claims of nearly 170,000 student borrowers, some of which have been pending for more than four years. This long-awaited processing came as the result of a settlement proposed in the class action lawsuit Sweet v. DeVos. The case challenged the Department’s illegal refusal to process any borrower defense claims for over a year, and the resulting unlawful delay in processing the claims.
Process for Certain Corinthian Borrowers
There are a few exceptions to the general process described above for groups of students from particular schools. One such group is borrowers from some Corinthian Colleges programs. The Department created a streamlined process and has provided specific information for some former Corinthian school borrowers. Whether you are eligible for this process depends on when you attended.
For now, the Department has provided this information:
Certain Heald College Borrowers: The Department found that between 2010 and 2014, Heald College misrepresented job placement rates for many of its programs of study. The Department has stated that these Heald College findings qualify students enrolled in the covered programs and time periods to apply for a discharge of their federal Direct Loans through an expedited process using a simple attestation form. Borrowers who enrolled in a Heald College program on or after the dates specified here may apply for a discharge based on a borrower defense by doing the following:
- Complete an online attestation form, which can be submitted electronically; or
- Complete the fillable PDF attestation form, print it, and sign it (view a non-fillable HTML version of the attestation form here), and send your completed form to ED by email to BorrowerDefense@ed.gov or by regular mail to U.S. Department of Education – Borrower Defense to Repayment, P.O. Box 1854, Monticello, KY 42633.
Certain Everest and Wyotech borrowers: The Department previously announced that it found that between 2010 and 2014, Everest Institute, Everest College, and Everest University (“Everest”), and WyoTech misrepresented job placement rates for many of their programs of study. The Department stated that these findings qualify students enrolled in the covered programs and time periods to apply for a discharge of their federal Direct Loans through an expedited process using a simple attestation form. This includes parents of Everest and WyoTech students with parent PLUS loans. Borrowers who enrolled in one of the Everest or WyoTech programs listed here on or after the date listed may apply for a discharge based on a borrower defense by doing the following:
- Complete an online attestation form, which can be submitted electronically; or
- Complete the fillable PDF attestation form, print it, and sign it and send your completed form to ED by email to BorrowerDefense@ed.gov or by regular mail to U.S. Department of Education – Borrower Defense to Repayment, P.O. Box 1854, Monticello, KY 42633.
Other Corinthian Borrowers: Corinthian borrowers who enrolled outside of the program dates listed in the above charts can apply for borrower defense relief using the general application and process available to all student loan borrowers.
In 2018, a federal district court preliminarily prevented the Department from collecting on Direct Loans held by certain Corinthian borrowers. The lawsuit, Manriquez v. Devos, is a national class action brought by four borrowers against the Department of Education for illegally and unfairly denying relief to tens of thousands of former Corinthian students whom the Department of Education determined are entitled to have their loans discharged and their loan payments refunded. These borrowers are represented by the Project on Predatory Student Lending and the Housing and Economic Rights Advocates (HERA). You can use this tool to find out if you are a class member.
Automatic Group Relief for American Career Institute Borrowers
In January 2017, the Department announced plans to grant borrower defense relief for federal student loan borrowers who attended the now-defunct American Career Institute (ACI) in Massachusetts. Federal student loans taken out to attend ACI should be automatically discharged without requiring students to submit applications. This move follows the Department’s investigation as well as numerous admissions by the school that it made false and misleading representations to students, misstated job placement rates and employed instructors who were unauthorized to teach under applicable state laws.
Forbearance and Stopped Collections
Unless you request otherwise, once the Department receives your borrower defense application, the Department should place your loan in forbearance or stopped collection status if you are in default. According to the Department, for borrowers who are in default, “…stopping collections means that the government will stop attempting to collect on the loan, including by not withholding money from wages or income tax refunds. This will continue until the borrower defense review process of your application is completed. ”
If you previously defaulted on your federal student loan(s) and entered a rehabilitation plan, the Department advises that you should contact the collection agency you have been working with to help you determine whether there may be any negative consequences if you choose to enter stopped collections status.
You can remove the forbearance or stopped collection status if you choose. This is an individualized decision, but you should take into account that interest continues to accrue during the forbearance period, including for subsidized loans. For applications submitted before January 1, 2020, the Department has stated that waive interest that has accrued on Department-held loans between the date you submitted your borrower defense application and the date of the decision letter. Applications submitted after January 1, 2020 will continue to accrue interest while your application is pending. That interest will be capitalized if the Department denies or only partially approves your application. However, this may change if the Department changes its policy again; you should watch the Department’s website for updates.
You should not assume that your account is in forbearance or stopped collections after applying for borrower defense. Be sure to check with your servicer.
To help avoid an unnecessary tax refund offset, borrowers with defaulted loans may want to confirm that they are in stopped collection status by calling the Default Resolution Group at 1-800-621-3115 before filing their taxes. You should also consider calling the I.R.S. at 1-800-304-3107 to get more information about whether your loan is certified for offset.
The government has delayed taking action on the thousands of pending borrower defense applications. In June 2019, defrauded former for-profit college students filed a lawsuit seeking to force the Department to follow existing law and issue the debt relief to which the former students are entitled. The named plaintiffs are suing on behalf of a class of more than 158,000 former students who have filed applications for borrower defense to repayment.
The Department, as of 2020, is starting to evaluate and send out determinations for some borrower defense claims. For approved claims, the Department announced it would use a new methodology for calculating how much relief to provide granted borrower defenses That methodology rarely grants a 100% discharge to granted claims and is currently being challenged in court. You can find more information about the lawsuit challenging the relief methodology here.
It’s important to stay tuned and check this website for new developments and also check the Department’s website on borrower defense. There are a number of options a borrower could consider after receiving a borrower defense decision. What steps a borrower should take after they receive a decision from the Department depends on their circumstances and the facts they have regarding their school. Borrowers looking to challenge a decision should seek legal advice from someone specializing in student loans when deciding what to do next. The Project on Predatory Student Lending has posted FAQs for borrowers waiting for decisions on defense to repayment applications and for those who have received determinations.
For a long time, there was clarity about taxability only for a few schools: The Department of Treasury has issued a ruling that loan discharges for Corinthian borrowers and of American Career Institute (ACI) borrowers will not be considered taxable income. In July 2018, the Department of Treasury (I.R.S.) issued a ruling extending the 2015 relief for Corinthian and ACI federal student loan borrowers to Corinthian and ACI private student loan borrowers.
In January 2020, the Department of Treasury issued a new procedure stating that all borrower defense discharges since 2016 will be considered non-taxable, as will private loans forgiven in legal settlements with schools or certain private lenders resolving allegations of unlawful business practices, including unfair, deceptive, and abusive acts and practices against a nonprofit or for-profit school or private lenders that made student loans to finance attendance at these schools. Borrowers will also not be liable to repay tax credits received on payments. This Project on Predatory Student Lending blog post will help you understand this January 2020 tax procedure.
Where to Go for More Information
If you have questions about borrower defense, you may call the Department’s borrower defense hotline: (855) 279-6207. Representatives are available Monday through Friday from 8:00 a.m. to 8:00 p.m. Eastern time.
According to the Department, if you received an email from a email@example.com email address with the term “Borrower Defense Claim” in the subject line, it is an official U.S. Department of Education (ED) communication that relates to a full or partial approval of your borrower defense to repayment application. The Department says it will follow up with more information or you may hear from your loan servicer with more information.