ECFR 206_222 Borrowers Defense

1. Qualifying Loan Types 

1. All Federal Loans 

2. Qualifying Origination Dates (QOD) 

1. loans first disbursed prior to July 1, 2017 

2. loans first disbursed on or after July 1, 2017, and before July 1, 2020 

3. loans first disbursed on or after July 1, 2020. 

3. Requirements 

1. All QOD sections – loans must have been taken out for payment to the school that is the source of the claim. 

2. For QOD section A. If the claim relates to federal loans taken out prior to 2011, they may not be eligible if they are part of the federal Perkins loan program or the Federal Family Education Loan Program.  

3. For QOD Section A. If borrower consolidates the above mentioned FFEL or Perkins loans into a direct consolidation loan, they may become eligible for borrower defense loan forgiveness. 

4. Eligibility 

The borrower may be eligible for borrower defense in the following circumstances: 

1. Judgment against the school.  

2. Breach of contract by the school.  

3. Substantial misrepresentation by the school.  

5. Timeframe 

1. Three years from the end of the last award year in which the student attended the institution; or 

2. The limitation period that State law would apply to an action by the borrower to recover on the cause of action on which the borrower defense is based. 

6. Individual Borrower Process 

1. Submit an application to the Secretary, on a form approved by the Secretary certifying that the borrower received the proceeds of a loan, in whole or in part, to attend the named school.  

2. Provide evidence that supports the borrower’s defense; and  

3. Indicate whether the borrower has made a claim with respect to the information underlying the borrower’s defense with any third party, such as the holder of a performance bond or a tuition recovery program. If so, the amount of any payment received by the borrower or credited to the borrower’s loan obligation; and  

4. Provide any other information or supporting documentation reasonably requested by the Secretary. 

7. Transfer to the Secretary of the borrower’s right of recovery against third parties. 

1. If a borrower’s defense claim is approved the borrowers is required to assign any refunds received from a third-party back to the DOE up to the amount that was paid by the DOE to the borrower. Example. If borrowers defense claim was approved for 100k and the borrowers receives refunds from a third-party claim in the amount of 120k then the borrower is required to give the DOE 100k and they can keep the remaining the 20k.