Student Loan Forgiveness Changes For Defrauded Borrowers

The U.S. Department of Education rolls back the previous administration’s borrower defense to repayment rules, even as a judge upholds some of the DeVos-era regulatory changes.

The borrower defense to repayment discharge cancels federal student loan debt of borrowers who have been defrauded by their colleges under federal or state law and refunds all payments made by these borrowers.

The U.S. Department of Education announced changes in the debt relief determinations for the borrower defense to repayment on March 18, 2021.

• The formula for calculating partial relief will be rescinded.
• Full relief will be provided to all borrower defense claims that have been approved to date.
• This includes borrowers who were previously approved under the previous administration, but who received less than a full discharge.
• The U.S. Department of Education will provide a streamlined path for affected borrowers to receive a full discharge.

In addition to a full refund of all payments and a full discharge of the debt, the U.S. Department of Education will contact credit bureaus to remove all negative credit reporting related to the borrower defense to repayment discharge. Federal student aid eligibility will be restored for these borrowers, if applicable.

The U.S. Department of Education found that the previous methodology for partial relief “did not result in an appropriate relief determination.”

This change will help 72,000 borrowers receive $1 billion in borrower defense to repayment discharges.

The announcement did not mention whether it will review the denials of borrower defense to repayment claims under the previous administration.

The U.S. Department of Education expects to issue new regulations in the future.

Additional information may be found on the U.S. Department of Education web site at StudentAid.gov/borrower-defense.

Separately, a judge in a case brought by the New York Legal Assistance Group (NYLAG) upheld some of the previous administration’s regulations, but rejected the three-year statute of limitations.