Deadline Draws Near for Compliance with U.S. Department of Education’s 2016 Borrower Defense to Repayment (BDR) Rule

DuaneMorris

May 8, 2019

Institutions have ongoing reporting obligations to report triggering events, many of which must be reported within 10 days of occurrence.

This is the third in our series of Alerts focused on the U.S. Department of Education’s 2016 Borrower Defense to Repayment (BDR) Rule, promulgated by the Obama administration, and the March 15, 2019, guidanceregarding the current effectiveness and implementation of that rule.

The deadline for complying with certain provisions of the U.S. Department of Education’s borrower defense regulations is Tuesday, May 14. These requirements are summarized briefly below and in greater detail in our March 21, 2019, Alert and April 9, 2019, Alert.

Arbitration Agreements and Class Action Waivers

Starting Tuesday, May 14, schools must either stop using binding predispute arbitration agreements and class action waivers or include the language from the regulation removing borrower defense claims from the scope of these agreements. In addition, starting May 14, students who previously signed a binding predispute arbitration agreement must be provided with specified notice language no later than upon exit counseling or the filing of the school’s initial response to a demand for arbitration or service of a complaint involving a borrower defense claim.

Events Triggering Reporting

By Tuesday, May 14, schools must notify the Department of any of the following events if they occurred between the fiscal year end for the most recent annual audit submission to the Department and March 15, 2019:

• A debt or liability arising from a final judgment/determination (judicial or administrative proceeding) or from a settlement.
• A requirement by the school’s accrediting agency to submit a teach-out plan.
• For an institution with a composite score of less than 1.5, any withdrawal of owner’s equity from the institution.

Institutions must also notify the Department by May 14 of any of the following events if they occurred between July 1, 2017, and March 15, 2019:

• Certain lawsuits filed after July 1, 2017, that were still pending as of March 15, 2019;
• State authorizing agency citations and accreditor show-cause orders or probation, unless they have been resolved as of March 15, 2019;
• Violations of a loan agreement;
• For for-profit schools, any violation of the 90/10 rule; and
• For publicly traded institutions, certain SEC and stock exchange actions.

The above information covers events occurring during the grace period provided by the Department in its March 15, 2019, guidance that trigger a reporting obligation under the rule. Institutions have ongoing reporting obligations to report triggering events, many of which must be reported within 10 days of occurrence.

Mark Your Calendars

June 13, 2019, is the deadline for submitting records to the Department relating to arbitrations and lawsuits involving borrower defense claims that are pending as of, or initiated after, July 1, 2017.

For Further Information

If you have any questions related to this Alert, please contact Edward Cramp, Katherine D. Brodie, Brandi A. Taylor, any of the attorneys in the Higher Education Practice Group or the attorney in the firm with whom you are regularly in contact.