If you have federal student loan debt because of your school’s deceptive practices, you may be able to get them forgiven by applying for the Borrower Defense to Repayment program.
This program allows federal student loan borrowers to have their loans discharged if their school engaged in deceptive or illegal practices, leaving them misled and in debt.
This guide will help you understand what Borrower Defense to Repayment is, who qualifies, how to apply, and what to expect during the process.
Understanding Borrower Defense to Repayment
Borrower Defense to Repayment is a federal regulation that allows students to have their federal student loans forgiven if they were defrauded or misled by their college or university. This program, managed by the U.S. Department of Education, was established under the Higher Education Act of 1965.
The program came into prominence in the mid-2010s after a series of high-profile for-profit college closures, which left many students with significant debt and worthless degrees. The Department of Education then clarified and expanded the rules for Borrower defense claims, allowing more borrowers to potentially seek relief.
Eligibility for Borrower Defense to Repayment
To qualify for Borrower Defense to Repayment, you must have a federal student loan (Direct Loans, FFEL Program loans, or Perkins Loans) and believe you were misled by your school or that your school violated state laws related to your federal student loan or the educational services for which the loan was provided.
Common reasons for eligibility include the school:
- Providing false information about job placement rates, program costs, or accreditation
- Persuading you to take out a loan by providing incorrect information
- Violating state laws regarding your loan or educational service
Types of Loans Eligible
The following types of federal student loans are eligible for Borrower Defense to Repayment:
- Federal Direct Loans: These are loans made directly by the U.S. Department of Education. This includes Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans.
- Federal Family Education Loan (FFEL) Program Loans: While these loans were made by private lenders, they were guaranteed by the federal government. FFEL Loans are only eligible for Borrower Defense to Repayment if they’ve been consolidated into a Direct Loan.
- Federal Perkins Loans: These school-based loans are eligible if they’ve been consolidated into a Direct Loan.
Understanding Legal Claims
A valid legal claim for Borrower Defense to Repayment typically involves showing that your school violated state law. This could be a law related to the loan itself or the educational service provided. For example, if your school falsely advertised job placement rates or lied about the cost of the program, these could be valid legal claims.
The exact laws vary by state, so it’s important to research your state’s specific laws regarding educational services and loan practices. In many cases, successful claims involve showing that the school committed fraud or made misrepresentations that you relied on when deciding to attend the school and take out loans.
How to Apply for Borrower Defense to Repayment
Applying for Borrower Defense to Repayment involves a few key steps:
- Gather your documents: This includes any records, emails, enrollment agreements, promotional materials, or other documents that support your claim. Be ready to provide specific examples of how you were misled by your school.
- Complete the application: You can submit your application online or via mail. On the application, you’ll need to provide details about your school, your program of study, when you attended, and the specific deceptive or illegal actions that your school took. Be as detailed and specific as possible.
- Submit your application: Online applications can be submitted directly through the U.S. Department of Education’s website. If you prefer to mail your application, you can download a fillable PDF form and send it to the address provided on the form.
Here’s the link: Borrower Defense Application
If you prefer to mail your application, you should download the fillable PDF application from the website, complete it, and mail it to the following address:
U.S. Department of Education
P.O. Box 1854 Monticello, KY 42633
After Submission: The Review Process
Once your application has been submitted, the Department of Education will review your claim. During this process:
- You might be contacted for additional information or clarification. Be sure to respond promptly to any inquiries.
- Your loans may be placed into forbearance or collections on defaulted loans may be stopped, which means you won’t need to make payments while your application is being reviewed. Note, however, that interest will continue to accrue.
- The review process can be lengthy. It’s important to monitor your email and postal mail for updates or requests for additional information.
There are three possible outcomes for your application:
- Approval and loan discharge: If your application is approved, you may have your entire federal student loan balance for that program discharged, or forgiven. You will also be reimbursed for any payments you’ve already made on those loans.
- Partial relief: In some cases, the Department of Education may grant partial relief, which means only a portion of your loans will be discharged.
- Denial: If your application is denied, you will not receive any loan discharge and you’ll be responsible for repayment. If your loans were in forbearance or collections were stopped, you’ll need to start making payments again.
If you’re unhappy with the decision, you may have options to appeal. This process varies, so be sure to follow the instructions provided in the decision letter.
Impact on Credit Score and Tax Implications
Having your loans discharged through Borrower Defense to Repayment can have financial implications:
- Credit score: Generally, loan discharge does not negatively impact your credit score. However, any late payments or defaults prior to the discharge will not be removed from your credit report.
- Tax implications: As of the time of writing (2023), loan amounts discharged due to Borrower defense are not considered taxable income by the IRS. This was a change implemented by the American Rescue Plan Act of 2021. However, tax laws can change, so you should consult with a tax professional to understand potential future tax implications.
Alternatives to Borrower Defense to Repayment
If you’re struggling to repay your student loans but don’t have a valid claim for Borrower Defense to Repayment, there are other options available:
- Income-Driven Repayment plans: These plans cap your monthly loan payments at a percentage of your discretionary income. After a certain period of time (usually 20-25 years), any remaining loan balance is forgiven.
- Public Service Loan Forgiveness (PSLF): This program forgives the remaining balance on your Direct Loans after you’ve made 120 qualifying payments while working full-time for a qualifying employer, typically a government or non-profit organization.
- Student loan consolidation: Direct Loan Consolidation allows you to combine multiple federal education loans into one loan, resulting in a single monthly payment instead of multiple payments. This can also make you eligible for other repayment plans or forgiveness programs.
List of For-Profit Colleges Qualifying for Borrower Defense to Repayment
It’s important to note that any school (for-profit, non-profit, or public) could potentially be involved in a Borrower Defense to Repayment claim if they engaged in misleading or illegal practices.
However, the program has often been associated with for-profit colleges due to a series of high-profile cases.
Below are some of the for-profit institutions that have been involved in Borrower Defense claims:
- Corinthian Colleges (including Everest, Heald, and WyoTech)
- ITT Technical Institute
- University of Phoenix
- DeVry University
- Art Institutes (various locations)
- Argosy University
- Kaplan University
- Ashford University
- Westwood College
- American InterContinental University
- Colorado Technical University
- Globe University and Minnesota School of Business
- National American University
- Bridgepoint Education
- Education Management Corporation (including Brown Mackie College and South University)
- Strayer University
- Walden University
- Career Education Corporation (including Sanford-Brown, Le Cordon Bleu, and Colorado Technical University)
- Full Sail University
- Grand Canyon University
- Capella University
- Purdue University Global (formerly Kaplan University)
- Rasmussen College
- Keiser University
- Southern New Hampshire University (SNHU)
- American Public University System
- Sullivan University
- Chamberlain University
Please note that the presence of a school on this list does not necessarily mean that all programs or students at that school are eligible for Borrower Defense to Repayment.
Eligibility for this program is not about the school’s profit status, but about whether the school misled students or violated state laws related to the student’s federal loan or educational services.
Additionally, it’s important to know that the status of these schools can change. Some may have closed, some may have changed ownership, and others may have resolved their legal issues. Always verify the current status of the school and any associated legal issues.
Final Thoughts and the Importance of Professional Advice
We’ve covered a lot of ground in this comprehensive guide to the Borrower Defense to Repayment program. From understanding what the program is, its history, and eligibility criteria, to the step-by-step process of application and the list of for-profit colleges often associated with Borrower Defense claims, it’s clear that the terrain of student loans and potential forgiveness can be complex and at times overwhelming.
However, remember that you’re not alone in this journey. There are numerous resources and professionals available to help guide you through this process.
A student loan advisor can provide invaluable assistance, helping to navigate the complexities of the Borrower Defense to Repayment program and other loan forgiveness options.
Reach out to a student loan advisor today.