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Future of Borrower Defense May Look Different
Inside Higher Ed
Jonathan Helwink
April 13, 2023
New borrower defense to repayment regulations may bring increased compliance risks to colleges of all types, Jonathan Helwink writes.
On July 1, the U.S. Department of Education’s new borrower defense to repayment (BDTR) regulations will go into effect. Now in its fourth iteration, the latest BDTR rule will be much stronger than its predecessors in terms of the protections it offers to student loan borrowers who claim they were misled by their colleges. Among many other significant changes, the new BDTR rule makes it easier to file claims. In fact, new provisions allow for third parties to file massive claims on behalf of borrowers—sometimes without their knowledge. The result is a BDTR rule that carries the potential for institutions to face significant adverse findings, negative publicity and substantial liabilities.
For much of the history of BDTR, department enforcement has been directed at for-profit institutions. However, recent events suggest that the next stage of BDTR may be different. Media scrutiny and Capitol Hill attention to high-profile incidents like the false reporting of rankings information and a Government Accountability Office report suggesting that institutions obscure the total cost of programs may indicate that the next stage of BDTR enforcement could be directed at nonprofit colleges and universities. Moving forward, institutions of all types should prepare for compliance and review any past practices that could come under severe scrutiny.
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