NAICU Washington Update

Education Department Releases Proposed Borrower Defenses to Repayment Regulation

August 08, 2018

After failing to reach consensus during a negotiated rulemaking process, the Education Department has released a proposed borrower defenses to repayment regulation. The Department is soliciting public comments through August 30, 2018. A final rule will be released after Department officials have parsed the public comments, likely in Fall 2018.
The proposed rule would create a new federal standard for repayment claims starting with loans disbursed beginning July 1, 2019; loans previously disbursed will not be impacted by the proposed changes to the borrower defenses rules. The proposed rule, among other policy changes and reversals, also:
  • Disallows group claims
  • Changes the definition of misrepresentation to require students to display “financial harm”
  • Establishes a preponderance of the evidence standard
  • Permits institutions to include pre-dispute arbitration and class action waivers as a condition of enrollment
NAICU has prepared an initial analysis, highlighting some of the most significant elements of the proposed rule.
Notably, the proposed rule also suggests that the Department is interested in the creation of a separate negotiated rulemaking panel dedicated to reforming the composite scores under the financial responsibility standards – a move pushed by NAICU and its allies for nearly a decade. NAICU’s financial responsibility standards issue brief and a 2012 NAICU report on the negative impact of the outdated financial responsibility standards can be found on the website.