By Katherine Lee Carey, Special Counsel with the Education Regulatory Practice Group, Cooley LLP
A bit of history
Some of us are old enough to remember when the saga of the Borrower Defense to Repayment (BDR) regulations began … all the way back in 2015. Corinthian Colleges had just collapsed, and thousands of students across the country were shocked and frustrated that their school had closed without warning, leaving them with tuition debt and no degree to show for it. During that time, the Department of Education actively encouraged students to seek loan relief through closed school discharge, and the little known, and little utilized, borrower defense to repayment option. For those students who were still enrolled when their campus closed (or had been within the most recent 120 days), closed school discharge was likely a good option, but one that could only be employed if the student agreed to forego the credits they had already earned and start all over at a new school. For other students, who had withdrawn prior to the 120-day cut-off, or wanted to try and complete what they had started at a new institution, closed school discharge was not available.
Thus the Department encouraged students to pursue BDR by submitting documentation of “acts or omissions” of their institution that could be the basis for a claim that the debt should not be repaid. But this invitation created its own set of problems.
The rule didn’t explain what acts or omissions could be used, the regulation was not intended to serve as a loan discharge option (but rather as a defense in a collection proceeding against the borrower), and the regulations that governed it were so limited in scope, that the Department could not rely on them to handle the tens of thousands of applications that began pouring in. At that point, the Department announced its intent to… (continue reading)