After a year of revisions to the borrower defense to repayment student loan forgiveness program, the Department of Education is once again proposing changes.
In a draft proposal obtained by Politico, Betsy DeVos and her colleagues have set up new roadblocks for borrowers who were defrauded by for-profit colleges.
If the proposed changes go through, borrowers will face a higher burden of proof and other evidentiary hurdles for fraud claims, which could leave thousands of former students without a clear path to student loan forgiveness.
If you have a pending application for borrower defense, don’t panic. The rule is still under review. But here’s what it means so far — and what you can do to protect yourself.
You’d have to provide more evidence for your claim
Borrower defense offers student loan forgiveness to students who were defrauded by for-profit colleges. To date, 12,900 applicants have received relief after attending the now-defunct Corinthian Colleges, according to U.S. News & World Report.
Applications stalled in 2017, however, with the arrival of DeVos and the new administration. When they resumed, there was a caveat: The amount of student loan forgiveness would be adjusted in accordance with students’ earnings.
The Jan. 4 proposal would place more limits on the program, including a stricter standard of evidence for fraud claims. If it passes, you’ll have to provide “clear and convincing evidence” of your fraud claim. That’s a higher burden of proof than the current “preponderance of evidence” standard.
Further, DeVos’ proposal would require you to prove not only that your school misled you but also that the misrepresentation was intentional or demonstrated “a reckless disregard for the truth.” You’d have to demonstrate the misrepresentation resulted in monetary damage as well.
“The proposal would increase the burden of proof borrowers would have to meet, which would make it significantly more difficult for borrowers to prevail on their claims,” said student loan lawyer Adam Minsky. “As it is, it can be very difficult for borrowers to prove that they were defrauded because systematic misrepresentations are not always made in writing. This will make it even harder.”
You’d also have less time to file a claim: three years instead of six.
So, if this proposal passes, you’ll have to provide clear and convincing evidence that your college intentionally engaged in misleading practices as well as proof that those misleading practices led to monetary damage — and you’ll have less time to do so.
Consumer advocates are concerned for borrowers
According to DeVos, revisions to borrower defense are meant to improve the program. In December 2017, the Department of Education published a press release in which she reiterated her commitment to students and to protecting “taxpayers from being forced to shoulder massive costs that may be unjustified.”
But others are worried the proposal makes a difficult process even more complicated.
“Consumer advocates argue that even under the existing regulations, it is far from easy for borrowers to prevail on defense to repayment claims — as evidenced by the small number of applications that have been granted relative to the total amount of applications submitted,” said Minsky.
He added that borrowers who are already vulnerable might lose out on student loan forgiveness that was designed to protect them.
“Institutions engaging in the type of unfair, deceptive, and illegal conduct envisioned by the regulations often target the most vulnerable segments of the population, such as military veterans, single mothers, first-time college students, and people in poverty,” said Minsky.
“These communities may lack the resources necessary to be able to prove their case and meet their burden of proof under stricter standards envisioned by the current proposal,” he continued.
Steps you can take as a student loan borrower
At this point, it’s unclear whether these changes would be applied retroactively to applications already in the system.
Whether you’ve already applied for borrower defense or think you could be eligible, here are some resources and steps you can take to protect yourself:
- Consult a student loan lawyer. If you can’t afford legal services, you can find free resources from the National Consumer Law Center or search for nonprofit groups. You also can check out the Project on Predatory Student Lending at Harvard’s Legal Services Center.
- Hold on to your records. If you attended a fraudulent school, keep any materials or communications that could aid your application.
- Contact the Federal Student Aid Ombudsman Group, a confidential resource for borrowers with federal student loans.
- Research alternative student loan forgiveness programs. Federal student loan forgiveness can grant you relief in exchange for service.
- Learn about student loan repayment assistance programs. Many states, along with some private organizations and universities, will help you pay your student loan debt if you meet eligibility requirements.
- Discover other options for student loan discharge. Besides borrower defense, you could qualify for closed school discharge or another program.
- Apply for an income-driven repayment (IDR) plan. If your monthly bills are breaking the bank, get on an IDR plan for relief. After 20 or 25 years of repayment, you could qualify for loan forgiveness.
If you were duped by a fraudulent school, hopefully you’ll get some student loan relief with borrower defense. In the meantime, keep exploring all your options for managing your student loan debt.
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Laurel Road Disclosures
Savings example: average savings calculated based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were disclosed. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
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Total savings calculated by aggregating individual average savings across total borrower population from 9/2013 to 12/2017. Individual average savings calculation based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were provided. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
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