A new report released by the Department of Education’s inspector general shows that no borrower defense claims have been approved since President Donald Trump took office. According to this report, the Education Department has approved none of the 25,991 borrower defense claims it has received since President Trump’s inauguration. This is a major contrast to the last six months of the Obama Administration, where, 27,986 borrower defense claims were approved.
The Education Department’s borrower defense program has come to a halt. Under this program, debtors with loans under the Direct or FFELP programs could receive loan forgiveness if their colleges used illegal tactics to entice them into borrowing money and enrolling. Although the rule has existed since the mid-1990s, it had only been used a handful of times until the collapse of Corinthian Colleges.
Earlier this year, Secretary of Education Betsy DeVos delayed revisions to the borrower defense rule weeks before they were to go into effect. The gainful employment rule was also paused. Under the gainful employment rule, for-profit institutions were required to prepare students for gainful employment in recognized occupations. Betsy DeVos and the Education Department were sued for pausing the further implementation of these rules.
There is a backlog of more than 87,000 borrower defense applications. Affected borrowers have suffered an assortment of negative consequences. Borrowers have accumulated interest, fees and have suffered damage to their credit. Many attended expensive for-profit schools that did not offer adequate training for jobs that could help repay the loans. According to the inspector general’s report, these borrowers may owe more because they sought debt relief. They could have been better off if they had continued making payments on their loans.
Unfortunately, this news gets worse. Many people are unaware that the PROSPER Act, at least in its current form, would repeal the borrower defense to repayment and gainful employment rules.
If you have federal loans and are struggling with repayment, then you should discover whether you are eligible to enroll in an income-driven repayment plan. These repayment plans limit monthly payments to a percentage of your discretionary income. While you could still file a borrower defense claim, the future of this debt relief option is uncertain.