Borrower Defense to Repayment Discharge
This discharge is currently one of the more confusing options due to recent events surrounding the rules for the borrower defense discharge. While the discharge has existed for over twenty years, it was fairly unknown to consumers and even most industry players. In 2016, sudden closures and allegations of fraud surrounding several large institutions caused the Department of Education to put together a committee to reevaluate the rules for the borrower defense discharge (BD). Those rules were set to take effect July 1, 2017 and would have made the discharge more accessible to borrowers who were the victims of fraud by their school. Unfortunately, the current administration chose to pull back on these new rules, and start the process again. The eligibility described below is based on the old, still existing, rules. Borrowers who do not feel they qualify for these rules but still feel that they were victimized by their school may want to keep an eye on this page for further developments over the next year through 2018.
Eligibility for Borrower Defense Discharge
To be eligible for the BD discharge, the borrower must be able to prove that their school violated state consumer protection laws in the applicable state. While these laws vary by state, they generally focus on false advertising and the misrepresentation of program outcomes. Most state consumer protection laws have a statute of limitations, which is a timeframe where such allegations may be made. They vary by state but the average timeframe is about six years. In many cases, this statute of limitations will also apply to your BD claim. Some examples that could qualify a borrower for full or partial discharge under the current BD rules include but are not limited to:
- The school misrepresented the cost of the program in a significant way
- The school advertised 100% job placement for program completers, however evidence shows the actual job placement rate was significantly less than that
- The school advertized that the program made completers eligible for certification in a certain field or in a certain state when in fact it did not
- The school stated that all of its staff were fully certified in a certain area when in fact they were not
Examples of situations that would likely not be eligible for a BD discharge include:
- Not completing your program
- Not getting the job or salary you were expecting to (unless the school advertised a guaranty for such things)
- Not working in your field of study
- Not being able to afford your loan payments
- Discrimination allegations at the school
- Being dismissed from the school or academic or disciplinary reasons
- Injuries occurring on campus, civil rights violations, and other non-program or loan related situations.
To apply for a BD discharge, you would fill out this form. For best results include a detailed narrative of the events and as much evidence as you can find. Prior court cases related to the activities you are claiming are helpful, as are old copies of advertisements (Google archive is your friend for this kind of research). There are several schools where such evidence may not be required, such as for students who recently attended Corinthian College.
Note that as of October, 2017, the timeframe for the Department of Education to review these claims is unclear. We are of the understanding that some borrowers have been waiting well over a year for a response. While your loan will be put into forbearance and not be due for payment during this review period, note that you will be responsible for all interest that accrues during that time. If unpaid, it will be added to the balance of your loan. If you are not confident of your eligibility for this discharge, you may want to request that the forbearance be removed and you continue payments during this time.