UNITED STATES DEPARTMENT OF EDUCATION

 OFFICE OF POSTSECONDARY EDUCATION

Proposed Regulatory Text for Issue Papers #6, 7, and 8: Borrower Defense to Repayment

Session 2: November 1-5, 2021

§ 685.103 Applicability of subparts.

(a) Subpart A contains general provisions regarding the purpose and scope of the Direct Loan 

Program. 

(b) Subpart B contains provisions regarding borrowers in the Direct Loan Program. 

(c) Subpart C contains certain requirements regarding schools in the Direct Loan Program. 

(d) Subpart D contains provisions regarding school eligibility for participation and origination in 

the Direct Loan Programborrower defense to repayment in the Direct Loan Program.
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§ 685.206 Borrower responsibilities and defenses.

* * *

* * * * *

(e) Borrower defense to repayment for loans first disbursed on or after July 1, 2020 and before 

July 1, 2023. This paragraph (e) applies to borrower defense to repayment for loans first disbursed on or 

after July 1, 2020 and before July 1, 2023. 
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[NEW TEXT]

SUBPART D: Borrower Defense to Repayment

§685.400 Scope and Purpose

This subpart sets forth the provisions under which a borrower defense to repayment may be asserted 

and applies to borrower defense applications received on or after July 1, 2023 and to applications 

pending with the Secretary on July 1, 2023.
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§685.401 Borrower Defense-General

(a) Definitions. For the purposes of this subpart, the following definitions apply: 

(1) “Borrower” means 

(i) The borrower; and 

(ii) In the case of a Direct PLUS Loan, any endorsers, and for a Direct PLUS Loan made to a 

parent, the student on whose behalf the parent borrowed. 

(2) A “borrower defense to repayment” means an act or omission of the school attended by the 

student that relates to the making of a Direct Loan for enrollment at the school or the provision of 

educational services for which the loan was provided, and includes one or both of the following:

(i) A defense to repayment of amounts owed to the Secretary on a Direct Loan, or a Direct 

Consolidation Loan that was used to repay a Direct Loan, FFEL Program Loan, Federal Perkins Loan, 

Health Professions Student Loan, Loan for Disadvantaged Students under subpart II of part A of title VII 

of the Public Health Service Act, Health Education Assistance Loan, or Nursing Loan made under part E 

of the Public Health Service Act; and 

(ii) Any accompanying request for reimbursement of payments previously made to the Secretary 

on the Direct Loan or on a loan repaid by the Direct Consolidation Loan. The Secretary does not limit the 

period on a borrower’s ability to receive a reimbursement of payments previously made that are 

associated with a fully or partially approved claim.

(3) The “Department official’’ means the individual who administers the group process as 

described in section 685.402 and the institutional response process in § 685.405.

(4) A “Direct Loan” means a Direct Subsidized Loan, a Direct Unsubsidized Loan, a Direct PLUS 

Loan, or a Direct Consolidation Loan. 

(5) The term “provision of educational services” means the educational resources provided by 

the institution that are required by an accreditation agency or a State licensing or authorizing agency for 

the completion of the student's educational program. 

(6) The terms “school” and “institution” may be used interchangeably and include an eligible 

institution as defined in section 600.2, one of its representatives, or any ineligible institution, 

organization, or person with whom the eligible institution has an agreement to provide educational 

programs, or to provide marketing, advertising, recruiting, or admissions services. “School” or 

“institution” also includes persons affiliated with the institution as described in § 668.174(b).

(b) Federal standard for borrower defense applications received on or after July 1, 2023 and for 

applications pending with the Secretary on July 1, 2023. A borrower with a balance due on a Direct Loan 

or other federal student loan that could be consolidated into a Federal Direct Consolidation Loan may 

assert a defense to repayment under this subpart, at any time, if the borrower establishes by a 

preponderance of the evidence that -

(1) The institution, any of its representatives, or any institution, organization, or person with 

whom the institution has an agreement to provide educational programs, or to provide marketing, 

advertising, recruiting, or admissions services, made a misrepresentation as defined in 34 CFR part 668,

Commented [A1]: For negotiators: This language comes 

from 2016 regulations. Any comments?
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Subpart F, in connection with the borrower’s decision to attend, or to continue attending, the institution 

or decision to take out a Direct Loan or other federal student loan that could be consolidated into the 

Federal Direct Consolidation Loan Program;

(2) The institution, any of its representatives, or any institution, organization, or person with 

whom the institution has an agreement to provide educational programs, or to provide marketing, 

advertising, recruiting, or admissions services, made an omission of fact, as defined in 34 CFR part 668, 

Subpart F, in connection with the borrower’s decision to attend, or to continue attending, the 

institution or decision to take out a Direct Loan or other federal student loan that could be consolidated 

into the Federal Direct Consolidation Loan Program;

(3) The institution that the borrower received the Direct Loan or other federal student loan that 

could be consolidated into the Federal Direct Consolidation Loan Program to attend failed to perform its 

obligations under the terms of a contract with the student; 

(4) The institution, any of its representatives, or any institution, organization, or person with 

whom the institution has an agreement to provide educational programs, or to provide marketing, 

advertising, recruiting, or admissions services, engaged in aggressive and deceptive recruitment tactics 

as defined in section 685.401(c), in connection with the borrower’s decision to attend, or to continue 

attending, the institution or decision to take out a Direct Loan or other federal student loan that could 

be consolidated into the Federal Direct Consolidation Loan Program; or, 

(5)(i) The borrower, whether as an individual or as a member of a class, or a governmental 

agency, has obtained against the institution a favorable judgment based on State or Federal law in a 

court or administrative tribunal of competent jurisdiction in connection with the borrower’s decision to 

attend, or to continue attending, the institution or decision to take out a Direct Loan or other federal 

student loan that could be consolidated into the Federal Direct Consolidation Loan Program;,

(ii) The Secretary sanctioned or otherwise took adverse action against the institution at which 

the borrower enrolled; or,

(iii) The institution’s institutional or programmatic accrediting agency took corrective action, 

sanctioned, or otherwise took adverse action against the institution at which the borrower enrolled.

(c) [RESERVE FOR AGGRESSIVE AND DECEPTIVE RECRUITMENT TACTICS DEFINITION] [separate 

document]

(d) Exclusions. An institution’s violation of an eligibility or compliance requirement in the Act or 

its implementing regulations is not a basis for a borrower defense under this subpart unless the violation 

would otherwise constitute a basis for a borrower defense under this subpart. 

Commented [A2]: For negotiators: please see revised 

definition of “misrepresentation” and revisions to subpart F, 

part 668.

Commented [A3]: For negotiators: please see separate 

document for proposed options on defining “omission of 

fact” in subpart F, part 668.

Commented [A4]: For negotiators: This comes from 2016 

regulation. Should this be tied to the provision of education 

services or not? 

Commented [A5]: For negotiators: please see separate 

document on proposed options on defining “aggressive and 

deceptive recruitment”
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§685.402 Group Process for Borrower Defense

(a) Group process, generally. Upon consideration of factors including, but not limited to, 

common facts and claims, fiscal impact, and the promotion of compliance by an institution or other title 

IV, HEA program participant, the Secretary may initiate a process to determine whether a group of 

borrowers identified by the Secretary has a borrower defense under this subpart.

(b) Secretary initiated group process. The Secretary may create a group based upon information 

from sources that include but are not limited to--

(1) Actions by the federal government, State attorneys general, other State agencies or officials, 

or other law enforcement activity;

(2) Lawsuits related to educational programs filed against institutions or judgments rendered 

against institutions; or,

(3) Individual borrower defense claims pursuant to § 685.403.

(c) State initiated group process. The Secretary shall consider a request to form a group from 

States, State attorneys general, or State oversight or regulatory agencies, in which they

(1) Submit an application to the Secretary, on a form approved by the Secretary—

(i) Identifying the requested group, including at minimum:

(A) The name of the institution;

(B) Campuses or programs, if applicable;

(C) A description of the conduct that forms the basis for the borrower defense claim under the 

federal standard in section 685.401(b); and,

(D) The period under which the activity in (c)(1)(C) of this section occurred;

(ii) Providing evidence that supports the claims made in paragraph (c)(1); and, 

(2) Provide any other information or supporting documentation reasonably requested by the 

Secretary.

(3) There shall be a rebuttable presumption that the Secretary will form a group based upon a 

request received under paragraph (c) of this section unless the Secretary already has formed a similar 

group under paragraph (b) of this section.

(4) The Secretary shall provide a response to any State initiated group request under paragraph 

(c) within 180 days of receipt. That response shall include:

(i) Whether the Secretary will choose to form a group and a definition of the group formed;

(ii) If the Secretary chooses not to form a group, the reasons for not doing so, including rebuttal 

of the presumption in favor of group formation; and
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(iii) Any additional information needed from the State, State attorney general, or State oversight

or regulatory agency to continue the State initiated group process.

(5)(i) A State, State attorney general, or State oversight or regulatory agency may request that

the Secretary reconsider the group formed under this State initiated group process if the Secretary 

denies the request to create a group in whole or in part upon the identification of new evidence that 

was not previously available to the Secretary in forming the group.

(ii) The State, State attorney general, or State oversight or regulatory agency must request 

reconsideration in forming the group under subsection (c) of this section no later than 90 days from the 

date of the Secretary’s initial decision regarding formation of the group. 

(iii) The Secretary shall provide a response to the State, State attorney general, or State 

oversight or regulatory agency’s reconsideration request to form the group within 90 days of receipt of 

the reconsideration request to form the group. That response must include a definition of the group 

formed.

(d) Borrower status after group formation. (1) Upon formation of a group of borrowers under 

this section, the Secretary—

(i) Designates a Department official to present the group’s claim in the institutional response

process described in § 685.405; and,

(ii) For borrowers who have an application pending with the Secretary prior to the formation of 

the group, notifies those borrowers that they are an identified member of the group formed under this 

section and follows 685.403(d) or 685.403(e) as appropriate.
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§685.403 Individual Process for Borrower Defense

(a) Individual process, generally. If § 685.402 does not apply to an individual borrower who has 

submitted a borrower defense application, the Secretary shall initiate a process to determine whether 

an individual borrower has a borrower defense under this subpart.

(b) Individual process. (1) The Secretary shall consider a request from an individual borrower in 

which the borrower--

(i) Submits an application to the Secretary, on a form approved by the Secretary; and,

(ii) Provides evidence that supports the application claims made in paragraph (b)(1)(i);

(2) The individual must provide any other information or supporting documentation reasonably 

requested by the Secretary.

(c) Individual borrower status. (1) Upon receipt of a materially complete application under this 

section, the Secretary—

(i) Designates a Department official to present the individual’s claim in the institutional response

process described in § 685.405;

(ii) Notifies the borrower that it will adjudicate the claim under § 685.406(a)(3); and

(iii) Places all the borrower’s loans under forbearance in accordance with subsection (d) of this 

section or stopped enforcement collections in accordance with subsection (e) of this section, as 

applicable. 

(d) If the borrower is not in default on the loan for which a borrower defense has been asserted, 

grants forbearance on all of the borrower’s Title IV loans in accordance with § 685.205(b)(6)(i) and—

(i) Notifies the borrower of the option to decline the forbearance and to continue making 

payments on the loan and the availability of the income-contingent repayment plans under § 685.209 

and the income-based repayment plan under § 685.221; and,

(ii) Ceases charging the borrower interest on the borrower’s loans 180 days from the date the 

borrower was initially granted forbearance in accordance with subsection (d) of this section, if the 

Department official has failed to make a determination on the borrower’s claim.

(e)(1) If the borrower is in default on the loan for which a borrower defense has been asserted, 

the Secretary—

(i) Suspends collection activity on all loans until the Secretary issues a decision on the borrower 

defense claim;

(ii) Ceases charging the borrower interest on the borrower’s loans 180 days from the date the 

Secretary initially suspended collection activity in accordance with (e)(1)(i) of this section;

(ii) Notifies the borrower of the suspension of collection activity and explains that collection 

activity will resume no earlier than 90 days following final adjudication of the borrower defense claim if 

the Secretary determines that the borrower does not qualify for a full discharge; and

Commented [A6]: For negotiators: If we grant a 

forbearance, we believe we have to do it on all the 

borrower’s loans because we may not be able to 

differentiate the ones tied to the borrower defense claim.
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(iii) Notifies the borrower of the option to continue making payments under a rehabilitation 

agreement or other repayment agreement on the defaulted loan.
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§685.404 Group Process Based on Prior Secretarial Final Actions

(a) For purposes of forming a Secretary group process in accordance with § 685.402(b), the 

Department official may consider final actions imposed by the Secretary that directly relate to section 

685.401(b). Such final actions include but are not limited to:

(1) Actions arising from a final program review determination or final audit determination 

defined under § 668.112(a) or (b), respectively; 

(2) An institution’s failure to meet its administrative capability requirements that relate to the 

education provided by the institution, in accordance with § 668.16;

(3) An institution’s loss of eligibility due to its cohort default rates, in accordance with 34 CFR 

part 668, subpart N; 

(4) Fines, limitations, suspension, or other emergency actions taken by the Secretary that relate 

to misrepresentation, aggressive recruitment, or omissions of fact to borrowers; 

(5) Other final actions as determined by the Secretary.

(b) For groups based on prior Secretarial final actions in accordance with this section, section 

685.405 shall not apply to the affected institutions.
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§685.405 Institutional Response

(a) The Department official notifies the institution of the basis for the group's borrower defense

under section 685.402 or individual borrower defense under § 685.403 for purposes of adjudicating the 

borrower defense claim and to request a response from the school. 

(b)(1) The notification in subsection (a) of this section waives any limitation period by which the 

Secretary may recover from the institution under § 685.409. 

(2) The Department official requests a response from the institution within 60 days from the 

Department official’s notification.

(c) The institution must submit an affidavit to the Department official, on a form approved by 

the Secretary, certifying under penalty of perjury that the information submitted to the Department 

official is true and correct. 

(d) If the institution does not respond to the information request, the Department official shall 

presume that the institution does not contest the borrowers’ defense to repayment claim.
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§685.406 Adjudication of borrower defense applications

(a) The Department official adjudicates the borrower defense claim in accordance with this 

section.

(b)(1) Group process, adjudication. For a group formed under § 685.402, the Department official 

considers any evidence related to the claim, including materials submitted as part of the group 

application, individual claims that are part of the group, evidence in the Secretary’s possession, evidence 

provided during the institutional response process described in § 685.405, and any other relevant 

information.

(2) For a group of borrowers under § 685.402, for which the Department official determines that 

there may be a borrower defense under § 685.401(b) there is a rebuttable presumption that each 

member of the group was affected by the act or omission or reasonably relied on such act or omission.

(c) Individual process, adjudication. For an individual process under § 685.403, the Department 

official adjudicates the borrower defense using the information available to it. The Department official 

considers any evidence related to the claim, including materials submitted as part of the individual 

application, evidence in the Secretary’s possession, evidence provided during the institutional response 

process described in § 685.405, and any other relevant information.

(d) If the Department official requires additional information from the school, the school must 

respond to the Department official’s information request within a reasonable timeframe.

(e) The Department official issues a written decision as follows:

(1)(i) If the Department official approves some or all of the allegations in the borrower defense, 

the written decision states that determination and the relief provided on the basis of that claim as 

determined under § 685.408.

(ii) If the Department official approves some or all of the allegations in the borrower defense, 

the Secretary places the borrower’s Direct Loans associated with the group borrower defense claim 

under an interest-free forbearance until the Secretary discharges the loan obligations under §

685.212(k). 

(2)(i) Full denial, group. If the Department official denies the borrower defense in full, the 

written decision states the reasons for the denial, the evidence that was relied upon, the portion of the 

loans that are due and payable to the Secretary, and whether reimbursement of amounts previously 

collected is granted, and informs the borrowers that if any balance remains on the Direct Loans 

associated with the group borrower defense claim, those loans will return to their status prior to the 

group claim process. The Secretary resumes collection activities on those Direct Loans associated with 

the group borrower defense claim no earlier than 90 days from the date the Department official issues a 

written decision. The Department official also informs members of the group of the opportunity to 

request reconsideration of the claim pursuant to § 685.407. 

(ii) Denial, individual. If the Department official denies the borrower defense in full, the written 

decision states the reasons for the denial, the evidence that was relied upon, the portion of the loans 

that are due and payable to the Secretary, and whether reimbursement of amounts previously collected 

is granted, and informs the borrowers that if any balance remains on the Direct Loans associated with 
BD proposed regulatory text session two 13

the borrower defense claim, those loans will return to their status prior to the claim process. The 

Secretary resumes collection activities on those Direct Loans associated with the borrower defense 

claim no earlier than 90 days from the date the Department official issues a written decision. The 

Department official also informs the borrower of the opportunity to request reconsideration of the 

claim pursuant to § 685.407.

(3) The Secretary provides copies of the written decision in this subsection to:

(i) An individual who was adjudicated under § 685.406(b)(3), as applicable; 

(ii) The members of the group who were adjudicated under § 685.406(b)(1), as applicable; and,

(iii) To the school, to the extent practicable.
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§685.407 Reconsideration

(a) The decision of the Department official is final as to the merits of the group borrower 

defense and any relief that may be granted on the group claim. Notwithstanding the foregoing—

(1) If the borrower defense is denied in full or in part, an individual or a borrower from the 

group may request that the Secretary reconsider the borrower defense for reasons including:

(i) Consideration under an otherwise applicable State law standard under § 685.206(c) in lieu of 

the federal standard; or,

(ii) Identification of evidence that was not previously provided by the borrower and that the 

final decision did not identify as a basis for the final decision; 

(2) Request by a State, State attorney general, or State oversight or regulatory agency that the 

Secretary reconsider the borrower defense in accordance with subsection (a)(1)(i) of this section. Any 

such request must provide:

(i) The applicable State law standard;

(ii) Why the State, State attorney general, or State oversight or regulatory agency requests use 

of such applicable State law standard;

(iii) Why application of the State law standard would result in a different outcome for the group 

than adjudication under the federal standard; and

(iv) Why the applicable State law standard would lead to a borrower defense; and

(3) The borrower must request reconsideration under this section no later than 90 days from 

the date of the Department official’s written decision, for any decisions issued on or after the effective 

date of these regulations. 

(b) The Department official follows the procedures in § 685.405 to notify the institution of the 

basis for the group's borrower defense under § 685.402 or individual borrower defense under § 685.403 

for purposes of adjudicating reconsideration of the borrower defense claim and to request a response 

from the school to the reconsideration request;

(c) If accepted for reconsideration by the Secretary, the Department official follows the 

procedures in §§ 685.402(d)(2) or 685.403(d) for granting forbearance and §§ 685.402(d)(3) or

685.403(e) for defaulted loans, as applicable; and, 

(d) The Department official adjudicates the borrower’s reconsideration request under § 685.406

and provides notice of the final decision upon reconsideration in accordance with § 685.406(e).

(e) The Secretary may reopen a borrower defense application at any time to consider evidence 

that was not considered in making the previous decision. If a borrower defense application is reopened 

by the Secretary, the Secretary follows the procedures in §§ 685.402(d)(2) or 685.403(d) for granting 

forbearance and for §§ 685.402(d)(3) or 685.403(e) for defaulted loans, as applicable.
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§685.408 Relief

(a) There is a rebuttable presumption that a borrower with an approved claim under §

685.406(c) or § 685.406(b) is eligible for full relief unless the Department official is presented with 

countervailing evidence to the contrary.

(b) The Department official may rebut the presumption that the borrower or borrowers are 

eligible for full relief under the following conditions:

(i) The borrower or borrowers’ borrower defense claim did not cover systemic problems at the 

school; or,

(ii) The level of harm incurred by the borrower or borrowers was of a de minimis value or of a 

value clearly below that of full relief.

(c) In rebutting the presumption that the borrower or borrowers are eligible for full relief under 

(b) of this section, the Department official may consider the examples in Table A to this subpart.

(d) The Department official recommends an appropriate amount of relief to the Secretary, 

which may include a discharge of all amounts owed to the Secretary on the loan at issue and the 

reimbursement of amounts previously collected by the Secretary on the loan, or some lesser amount.

(e) The Secretary renders a final decision after taking into account the Department official’s

recommendation and the record compiled under §§ 685.402, 685.403, 685.404, 685.405, and 685.407, 

as applicable. 

(f) The Secretary issues a written decision setting forth the relief granted, after which the 

designated Department official deciding the claim notifies the borrower of the relief provided and—

(i) Specifies the relief determination;

(ii) Advises that there may be tax implications; and

(iii) If the borrower does not receive a full discharge of all loans covered by the claim, advises 

the borrower of the requirements to file a request for reconsideration in accordance with section

685.407.

(g) Consistent with the determination of relief under this section, the Secretary discharges the 

borrower's obligation to repay all or part of the loan and associated costs and fees that the borrower 

would otherwise be obligated to pay and, if applicable, reimburses the borrower for amounts paid 

toward the loan voluntarily or through enforced collection.

(h) The Secretary affords the borrower such further relief as appropriate under the 

circumstances. Such further relief includes, but is not limited to, one or both of the following:

(1) Determining that the borrower is not in default on the loan and is eligible to receive 

assistance under title IV of the Act.

(2) Updating reports to consumer reporting agencies to which the Secretary previously made 

adverse credit reports regarding the borrower's Direct Loan.
BD proposed regulatory text session two 16

(i) The total amount of relief granted with respect to a borrower defense cannot exceed the 

amount of the loan and any associated costs and fees, and will be reduced by the amount of any refund, 

reimbursement, indemnification, restitution, compensatory damages, settlement, debt forgiveness, 

discharge, cancellation, compromise, or any other financial benefit received by, or on behalf of, the 

borrower that was related to the borrower defense. The relief to the borrower may not include nonpecuniary damages such as inconvenience, aggravation, emotional distress, or punitive damages.

TABLE A: 

SCENARIO EXAMPLE APPROPRIATE RELIEF

Issues that do not speak to 

systemic problems

A school represents in its 

marketing materials that one of 

its faculty members in a 

particular course received the 

highest award in their field. 

That course is not foundational 

or a core part of the academic 

program. A borrower enrolls in 

that program in reliance on the 

representation about this 

renowned faculty member. The 

school failed to update the 

marketing materials to reflect 

the fact that the award-winning 

faculty is on sabbatical for the 

next two years.

Appropriate relief:

The borrower should receive no 

relief. Although the borrower 

reasonably relied on a 

misrepresentation about the 

faculty in deciding to enroll at 

this school, she still received the 

value of the program and that 

course was not foundational or 

a core part of the academic 

program. Furthermore, the 

faculty member’s absence in 

one course does not speak to 

systemic problems at the 

institution. Therefore, no relief 

is appropriate.

Easily quantifiable de minimis

levels of harm

A school represents to current 

and prospective students, in 

widely disseminated materials, 

that its required books and 

materials to complete the 

program cost $1,200 and can 

only be purchased from the 

institution. It then charges 

student $1,500 to purchase the 

materials.

Appropriate relief:

This borrower should receive 

partial relief of $300. Although 

the Department presumes that 

students and prospective 

students all rely on widely 

disseminated published 

materials, the harm is a 

quantifiable de minimis amount. 

The school provided the 

education that the student was 

seeking but misrepresented the 

cost of books and materials and 

it set the price that students 

were required to pay. 

An institution promises a 

borrower a free set of materials 

valued at $150. The institution 

ultimately provides the 

materials, but not for free. The 

Appropriate relief: This 

borrower should receive partial 

relief equal to the total cost of 

materials, which is $150. The 

institution promised to provide 
BD proposed regulatory text session two 17

borrower takes out $5,000 in 

loans to attend the institution.

a specific item with a clear value 

and did not do so.
BD proposed regulatory text session two 18

§685.409 Recovery from Institution

(a) For loans first disbursed on or after July 1, 2023, the Secretary shall collect from the school, 

or in the case of a closed school, a person affiliated with the school as described in § 668.174(b), any 

liability to the Secretary for any amounts discharged or reimbursed to borrowers under the relief 

process as described under § 685.408. 

(b) Notwithstanding the foregoing subsection (a), the Secretary may choose not to collect from 

the school, or in the case of a closed school, a person affiliated with the school as described in §

668.174(b), any liability to the Secretary for any amounts discharged or reimbursed to borrowers under 

the relief process as described under § 685.408 under the following conditions:

(1) The cost of collecting would exceed the amounts received;

(2) The claims were approved outside of the limitations period in subsection (c) of this section; 

(3) A pre-existing settlement agreement determined by a court or administrative tribunal of 

competent jurisdiction precludes seeking additional financial recoveries; or

(4) The Secretary previously collected on the claim in a separate proceeding. 

(c)(1) Limitations period to recover from school. The Secretary shall initiate a proceeding to 

collect from the school the amount of relief resulting from a borrower defense under § 685.408 no later 

than six years after the borrower’s last date of attendance at the institution; 

(2) The limitations period described in paragraph (c)(1) of this section shall not apply if the 

Department official notifies the school of the borrower’s claim in accordance with § 685.405(b) prior to 

the end of the limitations period.
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§685.410 Cooperation by the Borrower

To obtain relief under this subpart, a borrower must reasonably cooperate with the Secretary in 

any proceeding under this subpart. 
BD proposed regulatory text session two 20

§685.411 Transfer to the Secretary of the Borrower’s Right of Recovery Against Third Parties

(a) Upon the granting of any relief under this subpart, the borrower is deemed to have assigned 

to, and relinquished in favor of, the Secretary any right to a loan refund (up to the amount discharged) 

that the borrower may have by contract or applicable law with respect to the loan or the contract for 

educational services for which the loan was received, against the school, its principals, its affiliates, and 

their successors, its sureties, and any private fund. If the borrower asserts a claim to, and recovers from, 

a public fund, the Secretary may reinstate the borrower's obligation to repay on the loan an amount 

based on the amount recovered from the public fund, if the Secretary determines that the borrower's 

recovery from the public fund was based on the same borrower defense and for the same loan for 

which the discharge was granted under this subpart.

(b) The provisions of this section apply notwithstanding any provision of State law that would 

otherwise restrict transfer of those rights by the borrower, limit or prevent a transferee from exercising 

those rights, or establish procedures or a scheme of distribution that would prejudice the Secretary's 

ability to recover on those rights.

(c) Nothing in this section limits or forecloses the borrower's right to pursue legal and equitable 

relief against a party described in this section for recovery of any portion of a claim exceeding that 

assigned to the Secretary or any other claims arising from matters unrelated to the claim on which the 

loan is discharged.
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§685.499 Severability

If any provision of this subpart or its application to any person, act, or practice is held invalid, the 

remainder of the subpart or the application of its provisions to any person, act, or practice shall not be 

affected thereby.

Last updated 10/25/2021