Borrower Defense

Borrowers who have been defrauded can file a borrower defense claim with the U.S. Department of Education. If approved, defrauded borrowers will have their federal student loan debts incurred for these fraudulent programs discharged. The Department of Education can also, in cases of widespread and systemic misconduct by a school, grant borrower defense discharges to a group of affected students without requiring them to apply individually.

Borrower defense has been codified in law since 1993, but the Department of Education began utilizing BD on a wider scale following the 2015 collapse of Corinthian Colleges, a large for-profit college chain that government investigations revealed had ripped off hundreds of thousands of students. Corinthian Colleges represent just one of many predatory schools that have preyed on students’ dreams of improving their lives through education but left them with worthless degrees and thousands of dollars in student loan debt, all while raking in billions in student aid dollars before abruptly closing.

Following attempts by the Trump administration to repeal borrower defense and severely limit pathways to relief for defrauded borrowers, the Biden administration updated borrower defense regulations in 2022 to reinstate and strengthen this protection. The 2022 BD rule: 

• Strengthens the Department’s ability to grant discharges to both individual borrowers and groups of borrowers. 
• Clarifies the standards for approving claims, including: substantial misrepresentation, substantial omission of fact, breach of contract, aggressive and deceptive recruitment, and judgements and secretarial final actions.
• Streamlines the process by which the Department can recoup the cost of approved claims from fraudulent institutions. 

Since its implementation, the 2022 borrower defense rule has faced ongoing legal challenges from for-profit colleges. Most recently, a lawsuit filed by Career Colleges and Schools of Texas resulted in a nationwide injunction of the rule in April 2024. This order halted the implementation of the 2022 rule and has left borrowers with outstanding claims unprotected and in limbo. 

On July 4, 2025, President Trump signed into law a legislative package that, among other major changes to federal higher education policy, delays the implementation of the 2022 borrower defense and closed school discharge rules until July 1, 2035. This ten-year delay means the rules finalized under the Biden Administration do not apply to loans made before that date. During this delay, the borrower defense process reverts to the rules created under the first Trump Administration that made it nearly impossible for defrauded borrowers to receive relief. These regulations instituted claim review protocols designed to disregard evidence of misconduct, ensuring over 95 percent of borrower claims would be denied, and introduced a draconian formula to reduce the amount of loan cancellation for those few successful claims. The regulations faced bipartisan opposition in the House and Senate.  

Delaying the implementation of the 2022 rule will significantly impede student borrowers ripped off by predatory schools from accessing BD. As a coalition, we continue to advocate for the codification and protection of borrower defense in statute. 

Sweet v. Cardona

In the class action lawsuit Sweet v. Cardona (formerly Sweet v. DeVos), the Department of Education settled long-standing litigation impacting hundreds of thousands of student borrowers whose borrower defense applications had been ignored by the Department for years. In November 2022, a court approved a $6 billion settlement to cancel these loans and deliver relief to borrowers who attended known bad-actor schools such as Corinthian Colleges, ITT Technical Institute, and others. However, the Department failed to meet the January 2024 deadline for making discharges and is now on a court-ordered plan to take action to resolve these claims in keeping with the settlement.

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