March 19, 2021
Significant Changes Announced Regarding the Borrower Defense Rule
This week, U.S. District Judge Lorna Schofield ruled that the Trump Administration had illegally added the three-year deadline for when borrowers must apply for loan forgiveness citing that it was “not a logical outgrowth” of the Administration’s initial proposal. The rest of the Trump Administration’s changes to the rule were allowed to remain.
In 2019, the Trump Administration finalized borrower defense regulations, which went into effect on July 1, 2020. Among many changes from the Obama Administration’s borrower defense rule is a three-year statute of limitations that was added so a borrower could not apply for a claim after three years from when the student is no longer enrolled at the institution. This statute of limitations was a new policy and had not been a part of the regulations when they were put in place. While Judge Schofield ruled that it was illegal, she did not strike down the provision. Instead, she sent it back to the Department of Education to have the agency correct this issue. It is expected that the Biden Administration will rewrite the 2019 borrower defense rule.
As a first step, the Department announced this week that it would be streamlining the process for borrowers to have their borrower defense to repayment claims approved. The new process will allow for full forgiveness of loans, including reimbursement for prior payments. To accomplish this, the Department will be replacing a methodology first announced in December 2019 to determine the amount of relief granted to borrowers with approved claims. The Department anticipates this change will ultimately help approximately 72,000 borrowers receive $1 billion in loan cancellations. The Department will immediately implement this new approach. Updated information for borrowers will be posted to StudentAid.gov/borrower-defense.
In 2019, the Trump Administration finalized borrower defense regulations, which went into effect on July 1, 2020. Among many changes from the Obama Administration’s borrower defense rule is a three-year statute of limitations that was added so a borrower could not apply for a claim after three years from when the student is no longer enrolled at the institution. This statute of limitations was a new policy and had not been a part of the regulations when they were put in place. While Judge Schofield ruled that it was illegal, she did not strike down the provision. Instead, she sent it back to the Department of Education to have the agency correct this issue. It is expected that the Biden Administration will rewrite the 2019 borrower defense rule.
As a first step, the Department announced this week that it would be streamlining the process for borrowers to have their borrower defense to repayment claims approved. The new process will allow for full forgiveness of loans, including reimbursement for prior payments. To accomplish this, the Department will be replacing a methodology first announced in December 2019 to determine the amount of relief granted to borrowers with approved claims. The Department anticipates this change will ultimately help approximately 72,000 borrowers receive $1 billion in loan cancellations. The Department will immediately implement this new approach. Updated information for borrowers will be posted to StudentAid.gov/borrower-defense.
For more information, please contact:
Emmanual Guillory