Education Department Releases Final Borrower Defense Rules September 06, 2019 Section 1 Content The Department of Education (ED) has released its final regulation on borrower defense to repayment, which cancels Direct Loans for students whose institutions misrepresented their educational offerings, job placement outcomes, or otherwise provided grossly misleading information to their students.“Borrower defense to repayment” allows student borrowers to seek loan forgiveness if a higher education institution misled them or engaged in other misconduct in violation of the law. This type of student loan forgiveness was rarely used prior to 2015, when several high-profile school closures—including Corinthian Colleges and ITT Tech—prompted the Obama administration to update the rule to help guide the process. The Trump administration’s rule—a revision to the Obama-era regulation finalized in 2016—was announced before the Labor Day weekend in an ED press release. Official publication in the Federal Register is pending. The new rule is likely to have a negative impact on borrowers in several ways. It narrows the window for filing such claims to three years and includes a rebuttable presumption that borrowers are not entitled to 100 percent cancellation. ED estimates the rule will save the government approximately $11 billion over 10 years. The department believes these savings stem from preventing unwarranted claims, but critics fear that many students who are due relief will not get it. Among the provisions, the rule imposes new burdens on students seeking debt relief who were enrolled at schools that closed or who withdrew just ahead of closure. It also rescinds the current prohibition against mandatory arbitration agreements and modifies the financial responsibility standards to allow the department to take immediate action when events occur, including lawsuits, that might impact an institution’s financial condition. ACE and 20 other associations submitted comments last year on the proposed rule, expressing concern that it would make asserting a successful borrower defense claim functionally impossible, eliminate accountability for the worst actors, and incentivize practices that are harmful to students.Politico reported this week that legal challenges over the final regulations are on the horizon. Harvard Law School's Project on Predatory Student Lending has said it will file a lawsuit to stop the rules from taking effect, and California Attorney General Xavier Becerra said in a statement that his office was prepared to fight the rule. Section 2 Content Section 3 Content Section 4 Content Section 5 Content Section 6 Content Button Content Rail Content 1Related Content U.S. Department of Education Finalizes Regulations to Protect Student Borrowers, Hold Higher Education Institutions Accountable and Save Taxpayers $11.1 Billion Over 10 YearsDepartment of Education press release | Aug. 30, 2019 ACE, Higher Ed Groups: Proposed Borrower Defense Rules Would Make Submitting a Successful Claim “Functionally Impossible” DeVos Finalizes 'Borrower Defense' Rules as Critics Plan LawsuitsPolitico | Sept. 3, 2019Ed Dept. Issues Final Rules for Defrauded Students; Activists Say the Rules Fall Short The Chronicle of Higher Education (sub. req.) | Aug. 30, 2019 Raising the Bar for Loan Forgiveness Inside Higher Ed | Sept. 3, 2019 Rail Content 2 Rail Content 3 Related News January 19, 2021 The Department of Education has announced its plan for distributing the largest pool of funding for students and higher education institutions in the COVID-19 relief bill passed in December. Read More News January 19, 2021 ED Announces Plans for Distributing Emergency Relief; Biden COVID-19 Relief Plan Would Give $35 Billion to Higher Education Statement December 21, 2020 We applaud the bipartisan agreement to simplify the process of applying for federal student aid, which will make it significantly easier for students and families to complete the FAFSA form and increase the number of individuals who receive aid. 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