Student loan borrowers who believe they were defrauded by their schools may only get a portion of their loans forgiven, depending on their income, the Department of Education announced Wednesday.
Students who already submitted “borrower defense to repayment” claims won’t face the changes, but students who file future claims may receive “tiers of relief” in compensation.
Borrower defense to repayment is a federal student loan forgiveness program for borrowers whose schools violated certain laws, or defrauded or misled students.
Under the new criteria, students will receive full loan forgiveness if their earnings are less than half that of their peers who studied in a comparable program. Students who make 50% or more than their peers will receive less relief. The department will measure an applicant’s income against typical earnings using federal employment data. Here’s how the new rules break down.
|Income as a percentage of peers’ earnings||Loan forgiveness amount|
|1% to 49%||100%|
|50% to 59%||50%|
|60% to 69%||40%|
|70% to 79%||30%|
|80% to 89%||20%|
|90% and above||10%|
In addition to the updated forgiveness criteria, the department says it will apply a credit to borrowers’ accounts for any interest that accrues on loans beginning one year after a borrower defense application is submitted. This move acknowledges the notoriously lengthy relief process for submitted claims.
In one of the most prominent examples of borrower defense to repayment, a federal court found that the now-defunct Corinthian Colleges engaged in deceptive practices such as advertising programs the schools didn’t offer and false job placement rates. As of late December, 12,900 pending claims submitted by former Corinthian Colleges students were approved, while 8,600 were denied, the Education Department reports.
The future of borrower defense to repayment
Additional regulations, originally put in place during the Obama administration, were delayed earlier this year. They would have simplified borrower defense guidelines, making it easier to obtain loan forgiveness, and would have extended eligibility to existing borrowers who consolidated their loans. The rules also added financial responsibility and disclosure requirements for schools.
They were initially put on hold in June 2017, ahead of their expected July 1 start date. The delay until July 1, 2018, comes amidst a legal battle between a California for-profit group and the Department of Education over the new regulations. There may be an even longer delay until July 1, 2019, so that the new administration can further revise the rules.
How to tell if you qualify
In the meantime, you can still submit a borrower defense to repayment claim. You might qualify for federal loan discharge under this program if your school:
- Misled you in any way about your loans or education program
- Violated certain state laws, such as consumer protection statutes or laws related to your loan or educational services
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, assistant professor of higher education at Seton Hall University in South Orange, New Jersey. “Otherwise, it gets much more subjective: Is there clear fraud? Is there misrepresentation? That’s when it may take a court to decide.”
Forgiveness of loans, even those from the discontinued Federal Family Education Loan Program, should not be subject to a statute of limitations.
How to apply
You can submit a borrower defense to repayment claim application electronically at borrowerdischarge.ed.gov or by filling out a PDF and returning it to the Education Department via email or regular mail. Submission details are available on the federal student aid website.
To strengthen your claim, experts suggest submitting a detailed explanation of why your loans might qualify, along with any supporting evidence. This could include:
- Confirmation of attendance
- Emails or correspondence with school officials
- Related promotional or school-produced materials
If you don’t have communication records, you can still apply. “Just because it was verbal doesn’t mean [the borrower] shouldn’t provide a narration of that,” says Betsy Mayotte, director of consumer outreach and compliance at the education nonprofit American Student Assistance. “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, contact the National Consumer Law Center, suggests Ben Miller, senior director for postsecondary education at Center for American Progress, a nonpartisan policy institute. Be wary of debt settlement groups that ask for money to submit your application. You can complete this process yourself for free.
How applying can affect your loans
Once you submit a claim, you should request that your loans be placed into forbearanceor stopped collections status, which will halt payments and collections. Interest will accrue while the Education Department evaluates your application.