Student Loan Borrower Defense: What to Know About This Relief Program

We haven’t seen universal student loan forgiveness under the Biden administration so far, but there’s been targeted student loan relief for borrowers to the tune of $1.5 billion under the “Borrower Defense to Repayment” provision.

If you feel that your school lied or misled you to get you to enroll, you might be eligible for a fresh start by submitting the Borrower Defense application form for student loans discharge. Let’s dive into what this student loan relief option is all about.

What is student loan Borrower Defense to Repayment?

Borrower Defense to Repayment, also called Borrower Defense,

”is a provision that discharges federal student loans if your school misled you or participated in any misconduct prohibited by state law.

According to the Department of Education, the most common types of conduct that might make a borrower eligible for loan relief through Borrower Defense to Repayment discharge are “misrepresentations of the truth made by the school or its representatives during their efforts to recruit you to enroll at the school or to continue your enrollment at the school.”

These misrepresentations typically take the form of:

• Untruthful representations of the school's selectivity in admitting students
• The school’s rankings as compared to other schools
• The job placement and earnings outcomes of its prior graduates
• The likelihood that its credits will be accepted by another school(s) or that it will accept credits from other schools

What isn’t considered misconduct under Borrower Defense?

Dissatisfaction alone with one’s educational choices doesn't meet the eligibility requirements for federal student loan relief. According to the Department of Education, example situations that likely wouldn’t be eligible for relief include, but are not limited to:

• Inability to enroll in a preferred program (unless it was guaranteed by the school)
• Dissatisfaction with the school's program, classes, grades received, perceived teaching skills of instructors.
• Disappointment with the school's housing, facilities, and student or campus life.
• A distinguished faculty member who’s left the school.
• Informal comments by students who aren’t official spokespeople and not participating in school-sponsored student recruitment activities.
• School's that don’t comply with rules for administering Federal Aid.
• Violations of local, state, or federal laws unrelated to issuing federal student loans.
• Legal or civil rights violations, like personal injury or sexual harassment.
• Disputes regarding academic issues.

If you believe you’re eligible for Borrower Defense due to an institution’s misconduct, read on.

What loans are eligible for Borrowers Defense discharge?

Only Direct federal loans are eligible for this type of loan discharge. Private loans, Federal Family Education Loan (FFEL) Program loans, and/or Perkins Loans are not eligible for discharge under the Borrower Defense to Repayment law or regulations, currently.

How much could be discharged?

One-hundred percent of a borrower's related Direct federal student loans could be discharged by Borrowers Defense.

Previously, eligible applicants could’ve received a full or partial relief of their loans depending on a complicated formula based on your perceived monetary harm. As of March 18, 2021, the Department of Education rescinded this formula, because it believed it didn’t result in an appropriate relief determination for borrowers.

This change in its discharge approval methodology allows for anyone who’s already gotten a partial loan discharge through an approved application to now get full approval.

Full relief under the new regulations includes:

• 100% discharge of borrowers’ related federal student loans.
• Reimbursement of any amounts paid on the loans, where appropriate under the regulations.
• Requests to credit bureaus to remove any related negative credit reporting. And,
• Reinstatement of federal student aid eligibility, if applicable.

How to apply for student loan Borrower Defense

You can submit a Borrower Defense claim online on the Department of Education website. You’ll need access to your StudentAid.gov account by logging in with your username and password (FSA ID) and the following information:

• School name(s) and program of study
• Your enrollment dates
• Documentation to support why you believe you qualify for Borrower Defense

When answering questions on this application, be as detailed as possible. We highly recommend submitting documentation with your application to be considered for loan cancellation such as flyers, email correspondence with the school, orientation and promotional materials, enrollment agreements, website screenshots, ads (digital or paper), PDF brochures, sponsored testimonials, etc.

What happens to loans while applications are under review?

If you’re not currently in default on any Federal student loan, you can request a forbearance on the loans that are applicable to your Borrowers Defense application while it’s under review. “Forbearance” means that you don’t have to make loan payments.

If you have outstanding loans for another school that you’re not filing a claim for, you still must repay those loans.

If your federal student loans are in default at the time of the application, you can request a “stopped collections” status. This status halts federal government or debt collection companies from attempting to collect on the defaulted loans, including wage garnishment, while your Borrower Defense application is pending.

Interest will continue accruing on all federal student loans regardless of their status, including subsidized loans. If your Borrower Defense application is denied, the total amount you owe on those loans could be higher due to the accrued interest, and any outstanding interest may be capitalized (added to your principal balance). You could make interest payments while your application is pending, if desired.

You don’t have to place your loans in forbearance or stopped collections to apply for Borrower Defense relief. It might make more sense to continue payments on your loans to reduce the interest accrual if your loans don’t get discharged. This strategy might also be helpful if you’re in loan rehabilitation to remove your loans from default, or might be a candidate for Public Service Loan Forgiveness if Borrowers Defense doesn’t work out.

How will I know if my application for Borrowers Defense is approved?

The Department of Education notifies applicants via email regardless of the loan discharge decision that’s made. Log in to StudentAid.gov to check your application status, or call the Borrower Defense hotline at 1-855-279-6207 Monday through Friday from 8 a.m. to 8 p.m. Eastern time (ET).

You might be eligible for a refund of payments made on the loans approved for Borrowers Defense discharge but a time limit applies. Your student loan servicer will be informed about your application decision and whether you applied for Borrower Defense within the applicable number of years after leaving your school. Your loan servicer will let you know if you’re eligible or ineligible for a refund of payments.

Discharged loans via Borrowers Defense are tax-free as of the current tax code.

Borrowers Defense is different than a Closed-School Discharge

I hear folks get these two confused sometimes. There is a separate student loan discharge opportunity available called Closed-School Discharge where borrowers could be eligible for a 100% discharge of their Federal Direct Loans, FFEL loans, or Federal Perkins Loans.

Borrowers who were unable to complete their program because their school closed, AND:

• Were enrolled when the school closed;
• Were on an approved leave of absence when the school closed;
• The school closed within 120 days after the student withdrew, if their loans were first disbursed before July 1, 2020; or
• The school closed within 180 days after the student withdrew, if their loans were first disbursed on or after July 1, 2020.

You are not eligible for closed school discharge if you simply completed coursework for a program that’s now closed unless you fell within the 120- or 180-day window described above, even if you didn’t receive a diploma or certificate.

More Borrowers Defense loan discharge to come

Since the Department of Education’s $1 billion commitment to help relieve student loan borrowers, there have been other developments and discharge opportunities announced for claims regarding:

• ITT Technical Institute (ITT). 100% loan discharge was approved for 18,000 borrowers who attended ITT and whose borrower defense applications were approved. The cumulative loan discharge totaled approximately $500 million.
• Court Reporting Institute (CRI), Marinello Schools of Beauty (Marinello), and Westwood College (Westwood). More than 1,800 borrower defense applications were approved for individuals who attended these institutions. Students will receive 100% loan discharge, resulting in approximately $55.6 million in student loan relief.

What if Borrower Defense doesn’t discharge your loans?

If your Borrower Defense application isn’t approved and you need help navigating student loan programs and repayment options, consider our student loan repayment help.

Student Loan Planner® ‘s experts are highly experienced in slaying student loan balances. We’ve helped over 6,000 clients take on over $1.45 billion worth of student debt. We can create a custom repayment plan for you, too. You don’t have to go at it alone anymore.