What We and Our Partners Think of the Department of Education’s New “Borrower Defense” Rule

The U.S. Department of Education today issued its proposed “defense to repayment” or “borrower defense” rule. The proposed rule shows DOE intends to:

  1. Ban the arbitration clauses that have prevented students from filing class action lawsuits and from having their day in court.
  2. Allow for collective discharges in cases where groups of students were harmed by the school. In some cases, individuals will not have to apply to be considered for group-wide relief.
  3. Allow FFEL borrowers to get forbearance while their claims are being reviewed.

Here’s what the Higher Ed, Not Debt campaign partners think:


“We applaud the steps in the proposal to protect students from forced arbitration—a practice used by many for-profits schools that AFR has long advocated against which forces students to give up their right to sue the moment they enroll. We urge the Department to strengthen this proposal by making certain all students are covered by it; currently, the proposal appears to leave out non-federal borrowers, meaning that students who pay tuition out-of-pocket, and students who rely on scholarships and grants such as the GI bill may still be subject to unfair forced arbitration clauses.

We appreciate that the Department has taken this step today, and look forward to working with the Department to improve the final proposal so that all students victimized by unlawful and deceptive conduct receive every penny of relief they deserve.”

Center for American Progress Executive Vice President for Policy Carmel Martin:

This proposed rule contains important provisions that will help ensure that predatory institutions, not taxpayers, are held accountable when a school fails. The proposed rule puts in place tools that the department can use to ensure the financial responsibility of a school so that fraud or financial instability are caught early.

For-profit colleges have also frequently utilized forced arbitration clauses to restrict students’ ability to take meaningful legal action. Given the history of abuses in this sector, the proposals’ ban of such clauses is an essential protection for students and taxpayers alike, ensuring that schools can be held accountable for harmful actions. A number of federal agencies are increasingly recognizing the harm posed by mandatory arbitration, and the Department of Education should be commended for taking action on such clauses.

Debt Collective:

Make no mistake: the fact that this rule contains any good news is the result of the collective work of debtors who have refused to give up the fight. But we continue to believe that the Department is making it far too difficult for students to get the relief they are entitled to by law. The bottom line is that they have given us no reason to trust them.

We will keep organizing to make sure that the Department does more than issue statements and promise to help. We will keep fighting for a full discharge for everyone. The road is long but we won’t give up until we reach the end together!

Generation Progress Executive Director Maggie Thompson:

When a college or career program commits fraud, their students deserve an automatic and full discharge of their federal loans—and the fraudulent school, not taxpayers, should be on the hook to repay the federal dollars wasted. Predatory for-profit colleges have profited enormously from taking advantage of students for far too long. The collapse of Corinthian Colleges showed that it was past time for the Department of Education to act to protect students and taxpayers.

The proposed borrower defense rule that the Department of Education announced today is an important step forward to give defrauded students a path to some relief. The proposed rule gives individual borrowers a path to debt relief and also contains provisions for groups of borrowers to obtain automatic relief—at the secretary of education’s discretion—in cases where a school is found to have committed widespread fraud or misrepresentation.

TICAS President Lauren Asher:

“TICAS and more than 30 other organizations had urged the Department to make it easier for borrowers to get the relief they are entitled to under law, and the proposed rules take important steps in that direction. The Department’s proposed rules provide a pathway for group discharges, recognizing that students defrauded as a group deserve relief as a group, without having to apply. The proposal also gives borrowers the ability to submit claims for relief from outstanding debt without a time limit, and to recoup debts already repaid for up to six years based on the type of claim. Also among the proposed new protections is a ban on mandatory arbitration clauses in enrollment agreements, so that colleges can no longer hide fraud by blocking students’ access to the courts. And schools receiving federal funds can no longer prevent students from combining their complaints into class actions.

“However, there are several ways in which the proposed rules need to be improved to be more fair, transparent, and efficient. For example, providing full loan relief to defrauded students is the most appropriate and equitable course of action. Instead, the Department proposes an unclear and complex method for limiting relief to borrowers. And, while we applaud that the Department’s proposal allows automatic group discharges, we are concerned that the designation of a group is at the Department’s sole discretion, without a process for state attorneys general or legal aid attorneys to file group claims.

“We look forward to commenting on the proposed rules. Their importance for students and taxpayers cannot be overstated.”

Young Invincibles Executive Director Jen Mishory:

“We’re encouraged by the scope of protections included in this latest version of the Department of Education’s borrower defense regulation, which makes it easier for students to discharge their loans if their school has engaged in illegal or deceptive practices. The draft proposal widens the window during which a student can file a claim, and provides clearer guidance to borrowers about what qualifies as fraud or misrepresentation by an institution. There are also increased, though at times discretionary, avenues for group or automatic discharge of debt, and a welcome ban on forced arbitration and gag rules.

These improvements are a big step forward for defrauded students, who for far too long bore the burden of proof in the legal process. We look forward to the comment period to raise up the voices of students looking for a clear, automatic path to debt relief after schools have engaged in illegal practices.”

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