Appeals court blocks Biden’s borrower defense rules

Higher Ed Dive

Natalie Schwartz

August 7, 2023

Dive Brief: 

• An appeals court on Monday temporarily blocked the Biden administration’s new regulations governing the borrower defense to repayment program, which clears the debts of students whose colleges defrauded them.

• The blocked regulations, which initially took effect in July, also cover closed-school loan discharges. Consumer advocates had praised the rules, while for-profit college representatives blasted them, saying they deprive institutions of due process rights.

• In Monday’s order, the 5th U.S. Circuit Court of Appeals said a three-judge panel would hear the case in early November. Career Colleges and Schools of Texas, an association representing for-profit institutions in the state, brought the legal challenge.

Dive Insight: 

The borrower defense program has morphed over the past decade from a little-known rule to a major vehicle for loan forgiveness. Its transformation started in 2015, when the abrupt closure of Corinthian Colleges, a for-profit chain, left thousands of students burdened with debt and no degree to show for it.

Since then, each presidential administration has released its own version of the borrower defense rules.

The Biden administration released its iteration in October. It made several changes to the program, including expanding who was eligible for relief, restoring the ability for borrowers to receive automatic loan discharges, and allowing the Education Department to consider claims brought as a group.

The new rules also included provisions laying out how the Education Department can seek to recover the cost of forgiving student loans directly from colleges.

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