Getting Your Student Loan Discharged

By: Gary Byers, FAS Sr. Consultant  

Borrower defense to repayment is a legal ground for discharging federal Direct Loans. According to the Department of Education , students and parents may have a borrower defense to repayment if your institution engaged in “certain misconduct related to the making of a federal loan or the educational services it provided which caused harm warranting a final discharge of your applicable federal Direct loans.  If the U.S. Department of Education (ED) approves your application for borrower defense, it will discharge any remaining balance on the federal student loans taken out to attend the school and may also refund loan payments you already made.” 

Below are six instances for which students may qualify for borrower defense: 

• Substantial Misrepresentation  When an educational institution engages in substantial misrepresentation, it effectively deceives or misguides individuals regarding critical aspects such as educational offerings, financial obligations, or the future employability of graduates. This misleading information plays a pivotal role in the decision-making process, whether it involves enrolling, staying enrolled, or obtaining loans. 
• Substantial Omission of Fact A significant omission occurs when an educational institution withholds or conceals crucial information that any reasonable person would find essential when deciding on enrollment, continued enrollment, or loan acquisition.  
• Breach of Contract A breach of contract takes place when a mutual agreement exists between a student and their school, and the school fails to fulfill its promises as outlined in that agreement. This agreement typically arises in connection with a student’s decision to attend or continue their education, secure loans, or disburse funds related to a loan.
• Aggressive and Deceptive Recruitment
  Aggressive and deceptive recruitment tactics come into play when a school employs various manipulative practices, including:

• • Coercing or pressuring individuals into making swift enrollment or loan-related decisions. 
  • Exploiting the limited knowledge or experience of prospective students regarding postsecondary institutions, programs, or financial aid. 
  • Dissuading individuals from seeking advice from others before making enrollment or loan-related choices. 
  • Obtaining contact information through deceptive means, such as misleading websites false employment claims, or fictitious institution rankings.
  • Employing threatening or abusive language towards individuals.
  • Persistently contacting individuals for enrollment purposes despite their explicit request to cease such communication. 

• Judgment A judgment against an educational institution signifies that a court has ruled that the institution has violated the law. This judgment typically results from the institution’s actions or omissions related to loan origination or the provision of educational services tied to loans. Settlements, however, do not qualify as judgments.
• Prior Secretarial Action Approval for a borrower defense discharge can occur when the U.S. Department of Education revokes a school’s provisional program participation agreement or denies recertification due to conduct that aligns with one of the borrower defenses outlined in points 1–4 above. This provides an avenue for relief in cases where a school’s behavior warrants such action. 

 

Based on the 2023 Borrower Defense Regulation, your application must be “materially complete” to be considered. If your application is not materially complete, your application will be denied. Just because your application is considered materially complete does not necessarily mean it will be approved.
To be materially complete, your application must contain the following information: 

• A description of one or more acts or omissions by your school 
  • ED can only approve your application if—after reviewing your claims, your evidence, and your school’s claims and evidence—we can determine that your claims are more likely than not to be true.
  • Explain what your school did or failed to do that is covered by the kinds of misconduct that qualify for borrower defense discharge discussed above. 
• The school or school representative who committed the act or omission
  • • Include what school or representative of the school committed the misconduct.  
      • What exactly did the school say or represent to, or conceal or suppress from you? 
      • Who or what provided you with this information or concealed this information from you (include the person’s name and title, if known)? 
      • When and where did this conduct occur (the approximate date or time of year, and whether it was during a campus tour or interview, in a meeting, or over the phone)? 
      • How was the information communicated to you (for example via email, in person, through an advertisement)? 
      • How was the information deceptive or misleading, and how did you determine that the information was deceptive or misleading? 
      • Why was the information provided to you or concealed from you important to you when you enrolled—in what way did it influence your decision? 
      • How did this conduct harm you?
• Approximately when the act or omission occurred Include when you experienced the misconduct that you allege. 
• How did the act or omission impact your decision to attend the school, to continue attending the school, or to take out the loan for which you are asserting a defense to repayment How did the alleged misconduct affect your decision to enroll or to continue your enrollment at the school. 
• A description of the detriment you suffered because of the school’s act or omission Explain what the result of the school’s misconduct was, specifically what harm you experienced because of the misconduct. 

For more information and to obtain a form, go to:  https://studentaid.gov/manage-loans/forgiveness-cancellation/borrower-defense