NASFAA Members Increasingly Concerned About Rise in Borrower Defense Claims

NASFAA

October 4, 2023

Since this Summer, NASFAA has heard from an increasing number of members that their institutions have received a growing number of borrower defense claim notifications, leading to significant confusion as to how schools should handle these filings due to the rollout of regulatory updates, ongoing legal challenges, and a lack of communication from the Department of Education (ED).

As a reminder, borrower defense is a long-existing, but previously rarely-used, provision of law [Higher Education Act, Sec. 455(h)] that enables students who have been the victims of certain types of institutional misconduct to have their federal student loans forgiven.

Below are some of the most common questions NASFAA has been hearing from member institutions.

Many of the borrower defense claims we’ve received notice of seem frivolous or baseless or don’t meet the definition of a borrower defense claim. Is the department doing any sort of filtering on these claims before sending them to schools?

Recently NASFAA received several examples of borrower claims that, upon first glance, fail to meet the standards for a borrower defense claim or lack merit, leading some aid professionals to wonder whether ED is conducting any sort of filtering of these claims before sending them to schools.

Borrowers can apply for a borrower defense discharge through Federal Student Aid and should provide supporting documentation about how they were harmed by the institution. However, it is NASFAA’s understanding that ED is not necessarily reviewing these claims for “material completeness” before sending them to institutions.

The reasons that ED is not reviewing them for material completeness may vary, including:

1. Material completeness is a concept only included in the most recent 2023 borrower defense rules, which are currently blocked under a national injunction.

2. ED is working through back-logged claims in an expedited timetable in accordance with a court settlement (Sweet v Cardona)

3. Borrower defense claims filed before November 15, 2022, and therefore under previous regulations, stipulate that all pending borrower defense claims must be sent to institutions regardless of their status.

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