Borrower Defense To Discharge Your Student Loans

Borrower Defense to Discharge Your Student Loans

Student loan debt is out of control these days. So many people graduate with six-figure balances and struggle to pay it back. But did you know there are ways to get your federal student loans forgiven? One option is called “borrower defense to repayment.” Here’s what you need to know about claiming borrower defense and potentially getting your loans discharged.

Borrower defense allows you to have your federal student loans forgiven if your school did something wrong or illegal. For example, if your school misled you or engaged in misconduct, you might be able to get your loans discharged under borrower defense.

This applies to federal loans like Direct Loans and Perkins Loans. It does not apply to private student loans unfortunately. But it can be a lifesaver if you have federal loans and your school really messed up.

The Basis for Borrower Defense

The legal basis for borrower defense comes from an old law from the 1960s. Believe it or not, borrower defense has been around for a long time! The Higher Education Act of 1965 included language about borrower defense to repayment. It said that students aren’t required to repay federal loans if the school did something wrong.

At first, hardly anyone used borrower defense. But in the early 2010s, Corinthian Colleges got sued for lying about job placement rates. This led the Education Department to start promoting borrower defense as a way for Corinthian students to get loan forgiveness.

Since then, borrower defense has become more popular. The Education Department even created an online borrower defense application in 2016. So if you think your school screwed you over somehow, you can actually apply to have your loans discharged!

Claiming Borrower Defense

To claim borrower defense, you need to prove that your school did something illegal or unethical relating to your loans or education. Here are some examples of school misconduct that could support a borrower defense claim:

• Lying about job placement rates
• False advertising about program quality or career prospects
• Predatory recruitment tactics
• Violating state consumer protection laws
• Fraud
• Misrepresentation
• Breach of contract

As you can see, there are a lot of ways a school could do you wrong. The key is having evidence to back up your claim. For instance, if the school advertised a super high job placement rate but you know it was bogus, you could provide documents showing the real employment data.

Or if the school lied about accreditation or program quality, you could point to proof that they misled students. The more evidence you have the better. It also helps if other students report being misled too cuz it shows a pattern of misconduct across the board.

How to Apply for Borrower Defense

To start the process, you need to complete an official borrower defense to repayment application with the U.S. Department of Education. You can find the application at https://studentaid.gov/borrower-defense/.

The application will ask for basic info about you, your loans, and the school. Most importantly, it will ask you to explain why you feel your school misled you or engaged in misconduct. This is where you want to provide detailed info about what the school did wrong, with supporting evidence if possible.

For instance, if the school advertised a 90% job placement rate but you know only 50% of grads got jobs, explain that in your application. Or if the school lied about accreditation, describe how they misrepresented their accreditation status. The more details you can provide, the better.

After submitting the application, the Department of Education will review it and any evidence you provided. They may reach out for additional documentation too. It can take many months or even years to get a final decision on a borrower defense claim. So this is not a fast process, but it can be worth it if you end up getting approved!

Getting Your Loans Forgiven

If the Department of Education approves your borrower defense claim, you can get any federal loans you took out to attend that school forgiven. This includes:

• Direct Loans (Direct Subsidized, Unsubsidized, PLUS)
• Perkins Loans
• Consolidation Loans (only the portion that paid for the program in question)

So this is really powerful – you could potentially have tens of thousands in federal loans forgiven! The discharged loan amount is usually tied to your actual financial harm. But in many cases, borrowers have gotten their full loan balances erased through borrower defense.

Private student loans are not eligible for borrower defense, however. Only federal loans can be discharged this way. But wiping out your federal debt is still an amazing outcome if you can get approved!

The Downsides

Borrower defense can be a life-changing way to eliminate student debt. But it does have some potential downsides:

• It takes a long time – Often years before getting a decision
• No guarantee of approval – Just because you apply does not mean you’ll get approved
• Tax bill – Any loans forgiven are treated as taxable income by the IRS

So its definitely not a quick or sure solution. And you may still have to pay taxes on the discharged debt. But for many borrowers, its still worth pursuing borrower defense if their school really misled them or broke the law. At a minimum, its worth understanding this option in case you need it down the road.

Recent Controversies

In recent years, the borrower defense process has become pretty backlogged. Tens of thousands of claims are pending, some for years already. And the approval rate plummeted under Secretary of Education Betsy DeVos.

The DeVos DOE was denying over 95% of claims, arguing that borrowers need to prove financial harm from their school’s actions. But consumer advocates say its nearly impossible for defrauded students to quantify the financial impact.

Fortunately, the Biden administration has already started reversing some of DeVos’ restrictive policies on borrower defense. Advocates hope that will lead to more approvals and faster decisions. But its still an uphill battle for many borrowers trying to claim borrower defense today.

Should You Apply?

If you feel your school clearly misled you or engaged in misconduct related to your loans or education, borrower defense is likely worth pursuing. Just understand it can take years to get a decision from the Department of Education.

Having detailed evidence to support your claims is key. The more proof you can provide that the school lied or violated laws, the stronger your case will be. It also helps to file complaints with oversight bodies like your state attorney general’s office so there’s a paper trail of reported misconduct.

Borrower defense is not a perfect solution. But for students defrauded or abused by their school, its one of the only ways to seek justice. So don’t be afraid to apply if your school really screwed you over. And consider consulting a student loan lawyer who can help advise you on the process.

With perseverance and strong supporting evidence, you just might get the relief you deserve. Good luck and don’t give up hope!