Title: Relief for Defrauded Students Act of 2019
Policy area: Education

Summary:
Relief for Defrauded Students Act of 2019
This bill provides statutory authority for specific borrower defenses to repayment under the Federal Direct Loan program.
Specifically, the bill allows a defense to repayment of a loan under the program if (1) the institution of higher education (IHE) made a substantial misrepresentation of the nature of its educational program, its financial charges, or the employability of its graduates; (2) the IHE made an act or omission in violation of state law; or (3) the IHE made any other act or omission as specified by the Department of Education (ED). Under current law, ED is required to specify in regulation which acts and omissions of an IHE may be asserted by a borrower as a defense to repayment under the program.
The bill requires ED, upon determination that a borrower is entitled to student loan relief, to cancel any outstanding balance of principal and interest due on each loan and return to the borrower the amount of any payments made on each loan.

[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3662 Introduced in House (IH)]

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116th CONGRESS
  1st Session
                                H. R. 3662

   To amend the Higher Education Act of 1965 to ensure that student 
borrowers are provided relief from their student loans in the instance 
   of substantial misrepresentation or omission by an institution of 
                           higher education.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             July 10, 2019

 Mrs. McBath (for herself, Ms. Finkenauer, Ms. Porter, Mrs. Axne, Ms. 
Davids of Kansas, and Ms. Scanlon) introduced the following bill; which 
          was referred to the Committee on Education and Labor

_______________________________________________________________________

                                 A BILL


 
   To amend the Higher Education Act of 1965 to ensure that student 
borrowers are provided relief from their student loans in the instance 
   of substantial misrepresentation or omission by an institution of 
                           higher education.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Relief for Defrauded Students Act of 
2019''.

SEC. 2. AMENDMENTS TO TERMS AND CONDITIONS OF BORROWER DEFENSES.

    Section 455(h) of the Higher Education Act of 1965 (20 U.S.C. 
1087e(h)) is amended to read as follows:
    ``(h) Borrower Defenses.--
            ``(1) In general.--Notwithstanding any other provision of 
        State or Federal law, a defense to repayment of a loan under 
        this part shall include--
                    ``(A) a substantial misrepresentation under by an 
                institution of higher education described in section 
                487(c)(3);
                    ``(B) an act or omission of an institution of 
                higher education that would give rise to a cause of 
                action against such institution of higher education 
                under applicable State law; or
                    ``(C) any other act or omission by an institution 
                of higher education that the Secretary specifies in the 
                regulations under paragraph (3).
            ``(2) Procedures.--
                    ``(A) In general.--The Secretary shall, for each 
                borrower who submits to the Secretary an application 
                asserting a defense to repayment of a loan made under 
                this part--
                            ``(i) provide an expeditious and fair 
                        process to consider such application (without 
                        regard to whether the application is submitted 
                        by an individual borrower, a group of 
                        borrowers, or a representative of such 
                        individual or group); and
                            ``(ii) determine the entitlement of the 
                        borrower to relief based on all evidence 
                        available to the Department.
                    ``(B) Independent determination.--A determination 
                under subparagraph (A)(ii) with respect to a borrower 
                shall be independent of any action that the Department 
                may take under this Act to recover funds from an 
                institution of higher education for an act or omission 
                related to such determination.
                    ``(C) Cancellation of debt.--In a case in which the 
                Secretary determines under subparagraph (A)(ii) that 
                the borrower is entitled to relief, the Secretary 
                shall--
                            ``(i) cancel any outstanding balance of 
                        principal and interest due on each loan made 
                        under this part that the borrower received for 
                        enrollment at the institution of higher 
                        education against which the borrower is 
                        asserting the defense to repayment; and
                            ``(ii) return to the borrower the amount of 
                        any payments made on such loans.
            ``(3) Regulations.--The Secretary shall specify in 
        regulations which acts or omissions of an institution of higher 
        education a borrower may assert as a defense to repayment of a 
        loan made under this part, except that in no event may a 
        borrower recover from the Secretary, in any action arising from 
        or relating to a loan made under this part, an amount in excess 
        of the amount such borrower has repaid on such loan.''.
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