Borrower Defense: Meaning and Application

What Is Borrower Defense?

Borrower defense loan discharge, often shortened to “borrower defense,” is a federal regulation that allows students who have been defrauded by a college, university, or career school to seek forgiveness for their student loans.

You may have a case for borrower defense if your school misled you about the education you would receive there. There are many examples of this: Your school may have made false promises about your employment prospects, the cost of your education, or even whether the school was actually accredited.

Borrower defense is only extended to people with direct federal student loans, not loans from a bank or other private institution. You can visit the Federal Student Aid website to see if your loan meets the requirements for forgiveness eligibility.

Understanding Borrower Defense

Borrower defense was an obscure rule added to the terms and conditions for federal student loans in 1994, but it only exploded into public awareness in 2015 when the predatory for-profit institution Corinthian Colleges Inc. shut down. Hundreds of thousands of current and former Corinthian students were stuck with worthless degrees, student debt, or both.

Fifteen students, known as the Corinthian 15, started a loan repayment strike. Their refusal to pay caught on with other students who felt they had been victims of misrepresentation by various institutions. Former Department of Education Secretary Arne Duncan announced shortly thereafter that the department would forgive the loans of the students affected by Corinthian's closure.

Since then, the rule has had a volatile history. In 2019, former President Donald Trump's administration tightened the standard for complete forgiveness of student loans. The new rules required that schools must have had knowledge of the fraudulent nature of their claims, and students had to prove that they experienced financial harm as a result of these claims.

In 2021, President Joe Biden’s administration announced that it would revert the borrower defense rules to those that had been in effect during the Obama administration. All students who have been approved for forgiveness to date—including those eligible for partial forgiveness under the Trump administration rules—were granted full loan forgiveness.

“Full forgiveness,” in this context, means:

• Total discharge of the related federal direct loans
  
• Reimbursement of any amounts paid on them, where permitted by regulations
• Requests to credit bureaus to remove any related negative credit reporting
  
• Reinstatement of federal student aid eligibility

Should You Apply for Borrower Defense?

If you believe that you’ve been defrauded by a college, university, or career school, start by checking the Department of Education Student Aid website to see if you have a claim. Borrower defense is limited to specific situations, so make sure you understand its limits before pursuing a claim further.

First, bear in mind that only federal direct loans are eligible for forgiveness under borrower defense and you must have taken out these loans in order to pay the school that is the source of your claim.

Second, in order for your claim to be successful, your school must have violated a state law or certain specific federal standards. For example, borrower defense doesn’t cover personal injury claims or allegations of harassment.

Third, be financially prepared. If your claim is unsuccessful and you don’t keep making your student loan payments while you are appealing for borrower defense, your loans might be higher after your application than before it.

How to Apply for Borrower Defense

First, identify whether you are eligible for a claim by filing an application for borrower defense on the Federal Student Aid website.

You can also call the borrower defense hotline at the Department of Education at 855-279-6207 for assistance. Telephone representatives are available Monday through Friday from 8 a.m.–8 p.m. Eastern time.

If you think you may have a case and would like legal advice, the National Consumer Law Center's Student Loan Borrower Assistance project offers additional resources and advice for finding legal help with student loans, loan servicers, and repayment.

The Bottom Line

Borrower defense is a way for students and former students who have been defrauded by a college, university, or career school to wipe out the debt they incurred getting a substandard education. If your federal student loans went to a college that misled you about the education you received, you may apply to have your loans forgiven.