The U.S. Department of Education (Department) recently forgave nearly $1 billion in student loan debt for those who were defrauded by their schools into taking out loans. The relief was granted under the Borrower Defense to Repayment program and will impact roughly 72,000 individuals. The loan forgiveness only applies to those student loan borrowers who attended for-profit schools and who were previously approved by the Department for relief under the Borrower Defense to Repayment program.

The Borrower Defense to Repayment program allows federal borrowers to seek cancellation of certain federal loans if their educational institution engaged in specific misconduct. Former President Obama enacted regulations in 2016 governing the loan forgiveness program to provide student debt relief to students who were misled, defrauded, or otherwise harmed by colleges and universities — often times for-profit schools. The Obama administration previously cracked down on Corinthian College and ITT Technical Institute and approved more than $650 million in loan cancellations from those institutions.

The Biden administration’s forgiveness policy stands in contrast to the Trump administration policies, which only offered partial student loan forgiveness to those defrauded by for-profit institutions. Some claimed the Trump administration policies made it more challenging for borrowers to obtain relief by increasing the burden of proof required to obtain relief. Recently confirmed Education Secretary Miguel Cardona announced the Department’s changed policy regarding Borrower Defense applications. Eligible borrowers will be able to receive complete student loan forgiveness, refunds for payments already made, as well as the removal of associated negative credit reporting. Cardona said, “[b]orrowers deserve a simplified and fair path to relief when they have harmed by their institution’s misconduct.” Cardona further went on to say the relief will “grant [borrowers] a fresh start from their debt.”

The Biden administration’s policy change does not impact a recent ruling issued by Judge Lorna Schofield from the Southern District of New York, which largely upheld the stricter regulations enacted by former Education Secretary Betsy DeVos under the Trump administration. These regulations required borrowers to show they were harmed financially and narrowed the definition of school-related misrepresentations. It’s currently unclear whether the Biden administration will attempt reverse the more stringent Trump administration regulations to enact more borrower-friendly regulations. Such a move would require the proposed regulations to comply with the Administrative Procedures Act and must consider significant input from the public. The Biden administration could try to rely on Congress to pass legislation reversing the current rules.

The Borrower Defense to Repayment relief represents the latest move in student loan relief, and what is turning into a highly publicized topic the Biden administration has promised to address. A provision was included in the most recent COVID-19 bill, the American Rescue Plan, which exempts all student loan forgiveness from taxation through January 1, 2026. Many believe this provision helps pave the way for further student loan forgiveness, either through executive order or legislation. Look for continued efforts from the Biden administration to address a variety student loan issues in the coming months.

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Photo of Tim Bado Tim Bado

Tim is an attorney in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group, with a primary focus on financial services litigation. He is part of the firm’s national practice defending consumer-facing companies in both individual and class actions against claims brought…

Tim is an attorney in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group, with a primary focus on financial services litigation. He is part of the firm’s national practice defending consumer-facing companies in both individual and class actions against claims brought under the Fair Credit Reporting Act (FCRA), Fair Debt Collection Practices Act (FDCPA), Telephone Consumer Protection Act (TCPA), Real Estate Settlement Procedures Act (RESPA), and the Driver’s Privacy Protection Act (DPPA). Tim also defends national banks and mortgage servicers from complaints and investigations brought by federal regulators. He has defended companies in individual and class actions in numerous states, including, Georgia, California, Colorado, Florida, Illinois, Kentucky, Louisiana, Minnesota, Missouri, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Tennessee, Texas, Virginia, and Washington.

Photo of Ethan G. Ostroff Ethan G. Ostroff

Ethan Ostroff’s practice focuses on financial services litigation and consumer law compliance counseling. Ethan is part of the firm’s national practice representing consumer-facing companies of all types in defense of individual and class action claims and counseling them on compliance with federal and

Ethan Ostroff’s practice focuses on financial services litigation and consumer law compliance counseling. Ethan is part of the firm’s national practice representing consumer-facing companies of all types in defense of individual and class action claims and counseling them on compliance with federal and state laws.