Insight into Borrower Defense claims
November 09, 2023
Financial aid professionals received some explanation this week into the borrower defense applications they've been receiving over the past few months.
In a November 8 Electronic Announcement (EA), the Department of Education (ED) said that, as a part of the settlement reached in the Sweet v. Cardona litigation, they are sending schools notice of borrower defense applications received from June 23, 2022 to November 15, 2022.
According to the Department, the Sweet v. Cardona settlement requires ED to adjudicate these applications under the 2016 Regulation. That regulation requires ED to notify schools of all applications before they are substantively reviewed.
In the announcement, the Department said, “schools have the option to respond to the notices, and there is no negative inference against a school if it does not respond.”
The EA explains the notification and adjudication process under the 2016 Regulation. It also discusses the separate recoupment process, which includes its own notification and response components, if ED approves applications and seeks to recoup the cost of the discharged loans.
The Department listed the following “key takeaways” in the EA:
- ED is notifying most schools of all applications received from June 23, 2022 to November 15, 2022 in a single send.
- Schools are notified of all applications prior to any substantive review by ED. This is because the 2016 Regulation requires fact-finding prior to adjudicating applications, and the notification process is a part of fact-finding.
- Under the 2016 Regulation, it is optional for a school to respond to the applications, and a nonresponse does not give rise to a negative inference against the school.
- Applications that allege substantial misrepresentations will only be approved if ED has evidence that demonstrates that a borrower’s school made a substantial misrepresentation that the borrower reasonably relied on to their detriment.
- ED will separately decide whether to recoup on any approved claim. Any recoupment actions ED chooses to initiate have their own notification and response processes, which include providing additional evidence to the school.
Schools with questions about a specific application can reach out to the Borrower Defense Customer Support line at 1-855-279-6207 to speak to a representative.