Borrower Defense

The Borrower Defense to Repayment Rule (BD Rule) protected students and taxpayers against school fraud and abrupt closures and ensured that predatory schools were held accountable to taxpayers. In 2019 this important protection for students was repealed by the Trump Administration and replaced by a process that will result in just 3 cents of every dollar borrowed being forgiven. Colleges, meanwhile, will repay only about a penny for every dollar of loans stemming from illegal misconduct such as fraud.

Numerous investigations by state and federal law enforcement, including a bipartisan 49 state Attorneys General settlement with Career Education Corporation (Perdecho), and a record-breaking settlement between the University of Phoenix and the FTC, both in 2019, have detailed widespread misconduct and lies by schools that preyed on students’ dreams of improving their lives through education but instead left them with worthless degrees and thousands of dollars in student loan debt. Corinthian Colleges and ITT Tech are examples: the schools deceived students by providing false information about the value of their degrees, all while raking in billions in student aid dollars before abruptly closing.

The 2016 “Borrower Defense” rule protected students and taxpayers by:

  • Creating a process for defrauded borrowers to apply for loan forgiveness they are entitled to seek under the Higher Education Act;
  • Ensuring students at closed schools get the relief afforded them under law by automatically forgiving their loans if they do not complete their studies; and
  • Protecting students and taxpayers by requiring the riskiest schools to warn students and to put money aside to cover the cost if their students’ loans are forgiven.

The 2019 DeVos rule makes it virtually impossible for students to obtain loan forgiveness or taxpayers to recover against predatory colleges.  The rule:

  • Makes it impossible for students to seek forgiveness even when the misconduct is not discovered or made public for several years.
  • Requires every student to pursue forgiveness individually even if the school’s misconduct is the same.
  • Makes it impossible for students at closed schools to automatically have loans forgiven.
  • Requires students to demonstrate harm above and beyond the student loans.

Links to Key Borrower Defense Congressional Review Act Documents

Borrower Defense Media Coverage

Borrower Defense Posts

Who Supports Borrower Defense