At Long Last…ED Issues Guidance Regarding Implementation of the 2016 Borrower Defense to Repayment Rules


By Kate Lee Carey

Following a court ruling in September 2018 making the delayed Obama-era Borrower Defense to Repayment regulations immediately effective, the Department of Education has been promising guidance to institutions so they (and potentially affected past and present students) could understand ED’s expectations for compliance. After six months, that guidance was finally issued on March 15 via an electronic announcement available at

For those who have forgotten the broad and complex BDTR rule of 2016, we encourage you to review Cooley’s November 2016 blog post, which provides a detailed analysis of the now-effective 2016 rule. The rule is complicated but can be broken into four main parts: the basis and process for the resolution of BDTR claims, the financial responsibility triggers, the pre-dispute arbitration and class action waiver bans, and required disclosures. It should be noted that only the first component, providing through regulation the basis for a student to assert a claim for relief from repayment of his or her federal loan, and the process for securing that relief, was required by the statutory BDTR provision. The remaining provisions were added by the previous administration in response to broader concerns respecting institutional compliance and performance. Note also that the BDTR rules apply with limited exception to all institutions participating in the Title IV student financial aid programs. (The financial responsibility triggers only apply to for-profit and independent institutions, since a public institution that is backed by the Full Faith and Credit of a state is automatically financially responsible. And the repayment rate disclosure requirement applies only to for-profit institutions.)

BDTR Claims

With its March 15, 2019 guidance, ED indicated it will begin applying the 2016 BDTR claim standards to all claims asserted by borrowers for loans disbursed after July 1, 2017. A borrower who seeks a loan discharge under the BDTR rules will need to establish the existence of one of the following bases in support of that claim:

  • A decision of a court or administrative tribunal in favor of the student (whether as a plaintiff, member of a class or covered party in a proceeding brought by a government agency against the school) in a contested proceeding.
  • Evidence that his or her school has breached a contractual obligation to the student, which is generally the enrollment agreement, either in its express or implied terms, but may also include other documents such as program brochures and catalogs that make up the entire contract with a student.
  • Evidence of a “substantial misrepresentation” by the school or any of its representatives regarding the nature of the educational program offered, the nature of the school’s financial charges or the employability of graduates upon which the borrower reasonably relied to his or her detriment. The department expanded its current definition of misrepresentation to encompass any statement that has the likelihood or tendency to “mislead under the circumstances” and further expanded this concept to include any statement that omits information that makes the statement false, erroneous or misleading, including such statements made unintentionally. ED also clarified that the borrower must demonstrate actual and reasonable reliance on the misrepresentation and that reliance was to the borrower’s detriment.

Addressed without much detail or fanfare in the announcement, ED indicated that it will utilize the process for gathering information from students and institutions and process claims as prescribed in the 2016 rule and the January 19, 2017 procedural amendments that added the BDTR process to Subpart G (Fine, Limitation, Suspension and Termination Proceedings). This process includes the department granting loan discharge relief to a student based on the student’s claim, followed at the department’s discretion, by an action to recoup the cost of the discharge from the institution.

Financial Responsibility Triggers

The 2016 rule included a compendium of factors that were determined by ED to indicate that… (continue reading)