There are provisions in the Higher Education Act referred to as borrower defense to repayment (borrower defense) that allow borrowers to seek loan forgiveness if a college or university misled them, or engaged in other misconduct in violation of certain state laws.
Specifically, a borrower may assert borrower defense by demonstrating that their college or university, through an act or omission, violated state law directly related to their federal student loan or to the educational services for which the loan was provided.
This type of student loan forgiveness was rarely used prior to 2015. However, there were several school closures, including Corinthian Colleges, Inc., that led to the Department’s review of this practice and announcement of new steps pertaining to debt relief in June 2015. Under this guidance, students submitted an attestation form and selected a basis for their borrower defense application.
2017 to Present
The Department began an internal review of the policies and practices for this type of student loan forgiveness and discharge, assessing where efficiencies were needed to improve the process for student borrowers. Once the Department completed its review of the discharge practices, new guidance was announced in December 2017.
For denied applications, the Department will apply a credit that approximates any interest that accrued beyond one year after the borrower defense application is filed. All interest will be forgiven during the processing period on any approved applications.
Note: This report will be updated on a quarterly basis.