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On August 24, the Department of Education formally provided details and legal rationale describing its recission of a Trump Administration borrower defense to repayment policy that had allowed only partial relief for borrowers with approved claims.

The guidance is a follow-up to a March 18, 2021, press release where ED indicated that it planned to streamline debt relief determinations for borrowers with claims that their institution engaged in certain misconduct.

ED has indicated that approved claims as of March 18, 2021, will be assessed using a rebuttable presumption of full relief, stating, “this approach aligns with the applicable regulations in that a borrower may ultimately be granted full, partial, or no relief.” This approach gives ED discretion to determine the appropriate relief for borrowers in a case-specific manner.

While partial relief may still be granted, ED was careful to note that it is not proposing a new, formula-based partial relief methodology at this time. Instead, it will use the presumption of full relief “as the starting point and will reduce the amount of relief provided in a manner consistent with the applicable regulations if warranted by evidence provided by the school, the borrower, or other sources.”

For example, say a borrower files a claim based on a school’s misrepresentation of the amount of the cost of a program where the borrower had to pay $25,000, all of which was financed with student loans. If evidence received by ED demonstrates that the school told the student that the program would cost $20,000, ED would determine full relief was not appropriate and that the borrower should receive partial relief of $5,000. The institution provided the education the student was seeking but misrepresented the price.

ED indicated it will continue to examine its borrower defense to repayment policies, solicit stakeholder input, and consider the development of new regulations.

Contact

Bryan Dickson

Director, Student Financial Services and Educational Programs

202.861.2505


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