U.S. Department of Education Approves $415 Million in Borrower Defense to Repayment Discharges | Alston & Bird

Our educational group is exploring how the protection of borrowers is once again expanding under the Biden administration, starting with a huge decision involving for the first time nonprofit schools that are still operating.

  • Nearly 16,000 students will receive $ 415 million
  • The total assistance under the program reaches $ 2 billion for more than 107,000 borrowers
  • Power was expanded under Obama, narrowed under Trump, and now revived under Biden

Yesterday, the U.S. Department of Education announced the approval of $ 415 million to protect borrowers to repay nearly 16,000 student borrowers who studied at the University of DeVree, Westwood College, ITT Technical Institute and the Minnesota School of Business / Globus University. It is important to note that “These are the first approved borrower protection requirements related to the existing institution, and the Department will seek to recoup costs from DeVry,” the department said in a February 16, 2022 press release.

The Borrower Protection Rule follows from an amendment to the Higher Education Act of 1993 that required educational institutions to take responsibility and financial responsibility for failing to perform their functions under their participation agreements with the Ministry of Education. The Borrower Protection Rule allows the borrower to defend against the repayment of a federal direct loan based on the “action or inaction” of the borrower’s school. The department’s actions bring the total amount of approved aid under the Borrower Protection Rule to about $ 2 billion for more than 107,000 borrowers and signal that the department continues to provide assistance to student borrowers.

The use of the Borrower Protection Rule was significantly expanded in 2016 under the Obama administration to allow claims based on “substantial misinformation” of the school to the borrower, and then significantly narrowed in 2019 under the Trump administration, which required borrowers to demonstrate that a false notion of being “substantial” and that the borrower “reasonably hoped” for distortion. As shown in this recent announcement, it appears that under the Biden administration this rule is widely used to provide significant assistance to student borrowers. The decision suggests that in addition to forgiving the debt on the federal loan, the department may soon begin actively seeking foreclosures directly from agencies.

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