A major victory for cheated students on borrower defense regulations

Tuesday, October 16, 2018

Consumer Action strongly supports today’s federal court ruling, which clears the way for the Borrower Defense Rule to take effect immediately. Borrower defense regulations are aimed at cancelling the debt of students who were defrauded by for-profit schools. This means that more than 165,000 students who’ve been waiting to get their federal loans discharged by unscrupulous schools like Corinthian Colleges, ITT Tech, Everest College and Heald College should finally get their federal student loans cancelled.

In today’s ruling, Judge Moss rejected a request to postpone enforcement of the Borrower Defense Rule by an association of for-profit colleges. This means the 2016 rule will finally be implemented, though future challenges from the Trump Administration and the for-profit industry are likely.

“Today’s court decision is a big win for defrauded students and taxpayers,” said Consumer Action’s national priorities director, Linda Sherry. “After repeated attempts by the Trump Administration and the for-profit college industry to delay the borrower defense regulations, there is now a clear path for defrauded borrowers to have their federal student loans discharged. We urge the Department of Education to immediately begin processing the thousands of borrower defense claims so that students who have been in financial limbo for years can finally get on with their lives.”

The borrower defense to repayment regulations were set to go into effect in July 2017; Education Secretary Betsy DeVos has delayed their implementation over the past 16 months.

Not only does the 2016 Borrower Defense Rule tackle the federal student loan debt of those who were scammed by their school, it also prevents schools that receive federal funding from forcing students to sign their rights away through forced arbitration clauses, and it forbids the banning of class action lawsuits. These restrictions were typically found in student contracts—documents students were required to sign before being allowed to begin their courses.

If you were defrauded by your school, you may file a claim to have your debt cancelled under the Borrower Defense Rule. If you have already filed a borrower defense claim, you may call the customer support hotline at 855-279-6207 to check on the status of your application.

To read more about the 2016 borrower defense to repayment rules, please visit our colleagues at National Consumer Law Center, who break down all that the regulation entails.