Borrower Defense NPRM Frequently Asked Questions 6.13.16

Q: What is borrower defense? 

A: A provision in the law and regulations called "defense to repayment" or "borrower defense" allows

borrowers to seek Federal student loan forgiveness if they believe they were defrauded by their college. 

This provision has rarely been used in the past. Now, the Department is revising its regulations to create 

a streamlined process that is fair to students who may have been victims of fraud, and that holds 

colleges accountable to taxpayers.

Q: What is the timing on the proposed regulations and who do they pertain to? 

A: The Department’s proposed borrower defense regulations: 

 Clarify the process for relief for all current FFEL borrowers and current and future Direct Loan 

borrowers; 

 Prospectively (after the expected July 1, 2017 effective date) streamline the standard by which 

Direct Loans can be discharged and the ways in which Title IV-receiving institutions will be held 

accountable for their actions; 

 Prospectively and retroactively release Direct Loan borrowers from their school’s mandatory 

pre-dispute arbitration agreements and class action waivers;

 Prospectively revise the closed school discharge regulations to ensure Direct Loan borrowers are 

able to benefit from their ability to receive the discharge; and 

 Prospectively and retroactively streamline the false certification regulation for FFEL and Direct 

Loan borrowers.

Q: Will this regulation help Corinthian borrowers and/or affect current borrowers? 

A: Yes. While the new Federal standard would not apply to current borrowers, the Department 

anticipates that the regulations would help define the process that the Department will be using to 

determine borrower defenses for all claims, including those from Corinthian borrowers. 

Q: Under the proposed regulations, could borrowers who think they have a claim stop payment on 

their loans or stop collection on a defaulted loan? 

A: Yes. All borrowers, including FFEL borrowers, who apply for defense to repayment under the 

proposed regulations, would be able to have their loans placed into administrative forbearance or stop 

collection while their claims are being evaluated. 

Q: Is the Department going to provide a way for FFEL borrowers of loans owned by the Department 

to receive borrower defense relief?

A: As announced in March, the Department is developing a plan to provide FFEL borrowers a path to the

same borrower defense relief as Direct Loan borrowers through Direct Consolidation Loans. The 

proposed regulations would also ensure that borrowers with FFEL Loans will have the same access to 

administrative forbearance as Direct Loan borrowers while their borrower defense claims are being 

evaluated. 
Q: Will ED be providing relief to groups of borrowers? 

A: Yes, the proposed regulations would establish a process for resolving claims based on conduct that 

harmed a group of borrowers. 

Q: Can people receive relief without applying? 

A: Yes, the Secretary can identify a group of borrowers from individually filed applications or from any 

other source of information and, if the Secretary determines that common facts and claims exist that 

apply to groups of borrowers, including some who may have not filed an application, the Secretary could 

include such borrowers in the determination of a group claim. 

Q: How are you going to ensure that the Department’s decisionmakers make independent decisions?

A: ED’s decisionmakers make independent decisions daily regarding the merit of objections to loan 

enforcement raised by borrowers who have defaulted on their loans, and borrower defense is no 

different. ED also makes decisions regarding liabilities of institutions to the Department and 

enforcement actions against institutions. We do so by meeting standards that have been established for 

such decisions made by administrative agencies. 

Q: How are the Institutional Accountability provisions going to protect taxpayers? 

A: Schools that show signs of financial risk will be required to provide an irrevocable letter of credit as 

an insurance against the risks they pose to taxpayers. Schools demonstrating multiple risks will need to 

provide cumulative letters of credit.

Q: What are the next steps for this regulation? Will you publish by November 1st? 

A: The 45-day public comment period for these proposed regulations will begin once they are published 

in the Federal Register on June 16th. Public Comment will conclude on August 1st. We look forward to 

hearing from the public about what we’ve proposed, and we are working towards publishing final 

regulations by November 1st.