Borrower defense to repayment is a legal way to cancel your federal loans if your school has defrauded you. Student loans have affected millions in the U.S., and most struggle to repay each month.
There aren’t many options available for people who are barely getting by besides refinancing and income-based repayment options.
Like the borrower’s defense program, student loan discharge is less popular, but it can be a way to eliminate your debt.
This guide will explore all the essential things you need to know about borrower defense to repayment.
What Is Borrower’s Defense Program?
This loan discharge program is for federal Direct Loans, generally referred to as federal student loans.
The U.S. Education Department issued the regulation to aid federal loan borrowers’ partial or complete discharge.
The borrowers who qualify obtained loans from a for-profit college, university, or career institution that defrauded them.
The school must have also broken state laws about their loan or education. Borrower defense may be able to eliminate your federal loan debt if you fit this description.
Here are a few instances of being deceived or a school breaking the law:
- Promising you a specific wage once you graduate
- Falsely reporting employment data
- Overly optimistic graduation rates
- Falsifying credentials
- Untrue claims regarding financial help
- Promising particular roles or titles once you graduate
- Fraud involving credit transfers
- The advertised licensure passage rates are different
How Borrower’s Defense Program Works
You may be able to get all or a portion of your federal loans canceled if you qualify for loan discharge through BDAR’s program. Additionally, payments you made on your student loans might be refunded.
But the process can take a while. It may take months or even years to be eligible for discharge.
The amount of discharge you qualify for may only be a small portion by the time your application is processed. And it doesn’t matter even if the Education Department authorizes it.
Although you may be entitled to repayment for sums paid, it can take some time for the funds to reach you.
Should You Apply For The Borrower’s Defense Program?
Check the Education Department Student Aid website to determine if you have a claim if you think you were taken advantage of by your school.
Before pursuing a claim further, ensure you are aware of the limitations of the borrower’s defense. That’s because this program is limited to certain situations.
First, remember that only federal direct loans are eligible for forgiveness under the borrower’s defense. You must have taken out the federal loans to pay the school; that is the basis of your claim.
Furthermore, your school must have broken a state law or specific federal criteria for your claim to be successful. Borrower defense doesn’t apply to claims unrelated to your loan or the educational services you received.
Borrower defense doesn’t apply to harassment or personal injury lawsuits.
Also, you must be financially prepared. If you apply for discharge and stop making your monthly payments, your loans may get higher if you get rejected.
How To Be Eligible For Borrower’s Defense Program
Receiving a loan discharge can be a difficult process. The government frequently rejects applications because loans aren’t acceptable. Only government direct loans are permitted under the current legislation.
FFEL or Perkins Loans may be eligible in certain circumstances if borrowers combine them into a single direct consolidation loan. In that instance, the Education Department will notify you that debt consolidation is required before your application may be approved.
Borrower defense is only available if the institution committed fraud, misrepresentation, or other wrongdoings with the federal loan program or the educational services it rendered.
Again, borrower defense to repayment discharge doesn’t apply to other claims, such as those for harassment or personal injuries.
This program could be a smart way to receive assistance if you have substantial student loan debt and believe your institution committed fraud against you. In addition, borrowers will have additional safeguards implemented.
Providing evidence of fraud is a significant obstacle. Keep copies of any correspondence with your school in writing. And file away any brochures or other documentation you receive.
Many schools are forthright and honest, but taking a few precautions might prevent many problems in the long run.