Note
We have developed a training video that explains the borrower defense school notification and adjudication process under 34 CFR § 685.222 (the 2016 Borrower Defense Regulation). It also discusses the separate recoupment process, which includes its own notification and response components, if ED approves applications and seeks to recoup the cost of the discharged loans.
To access the training video:
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Log into the FSA Training Center with your username and password.
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Select “Systems Training” from the main menu bar.
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From the drop-down menu, choose “Borrower Defense”.
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Select "Start Here" to launch the course.
Note: If you do not have a username and password for the FSA Training Center, scroll to the bottom of the login page and choose "Create new account". Follow the instructions to create a username and password.
As a part of the settlement reached in the Sweet v. Cardona litigation, the Department of Education (ED) is sending schools notice of borrower defense applications received from June 23, 2022, to Nov. 15, 2022. The Sweet v. Cardona settlement requires ED to adjudicate these applications under the 2016 Regulation. That regulation requires ED to notify schools of all applications before they are substantively reviewed. Schools have the option to respond to the notices, and there is no negative inference against a school if it does not respond. This Electronic Announcement explains the notification and adjudication process under the 2016 Regulation. It also discusses the separate recoupment process, which includes its own notification and response components, if ED approves applications and seeks to recoup the cost of the discharged loans.
The Borrower Defense Process
The 2016 Regulation requires ED to notify schools of all borrower defense applications filed by its former or current students and provides an optional opportunity for the school to respond before adjudication. Such notification occurs prior to any substantive review of the application. ED notifies schools by sending the school the borrower’s application form. ED’s policy is to provide schools that wish to respond 60 days from the date the school receives the notification. A nonresponse does not create an inference in favor of the borrower.
ED is attempting to batch applications so schools receive all claims from the June 23 to Nov. 15, 2022 period in a single notification. Over 90% of the schools receiving notices from this period have fewer than 100 applications. For the small number of schools that have over 500 applications filed by former or current students during this period, ED will reach out and explain how it will pace the number of notifications sent each week. ED anticipates completing the initial notification to all schools by approximately April 2024.
After the notice period ends and the fact-finding process is complete, ED adjudicates the application(s) on the merits. The 2016 Regulation provides for approvals based on substantial misrepresentation; a nondefault, favorable contested judgment; or breach of contract. Substantial misrepresentations are the most common type of alleged misconduct.
For substantial misrepresentations, ED must have evidence that demonstrates that a borrower’s school made a substantial misrepresentation that the borrower reasonably relied on to their detriment (34 C.F.R. § 685.222). Applications are approved or denied based on these elements. To meet this standard, ED requires facts to prove each of these elements; these facts typically answer the who, what, when, where, why, and how questions relating to the alleged misconduct.
If the application and other available evidence does not satisfy the regulatory standard, ED will deny it and notify the borrower. If they satisfy the regulatory standard, ED will approve the application, discharge the relevant loans, and may issue a refund of payments to the borrower.
The Recoupment Process
If a discharge is approved, ED will at a separate date determine whether to engage in a separate proceeding to recoup borrower defense costs from the school. Schools will have an opportunity to contest any recoupment action before a hearing officer if they choose to do so. During that process, ED will send a second notification to the school with the application form for all loans for which recoupment is requested, all attachments submitted by the borrower, and the rationale for ED’s decision to discharge.
Key Takeaways
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ED is notifying most schools of all applications received from June 23, 2022 to Nov. 15, 2022 in a single send.
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Schools are notified of all applications prior to any substantive review by ED. This is because the 2016 Regulation requires fact-finding prior to adjudicating applications, and the notification process is a part of fact-finding.
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Under the 2016 Regulation, it is optional for a school to respond to the applications, and a nonresponse does not give rise to a negative inference against the school.
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Applications that allege substantial misrepresentations will only be approved if ED has evidence that demonstrates that a borrower’s school made a substantial misrepresentation that the borrower reasonably relied on to their detriment.
ED will separately decide whether to recoup on any approved claim. Any recoupment actions ED chooses to initiate have their own notification and response processes, which include providing additional evidence to the school.
2016 Notification Letter Information
Does ED review the applications substantively before sending notice?
No. The 2016 Regulation requires that ED conduct fact-finding before it conducts a substantive review of the application.
Will I keep receiving additional claims?
The Department is attempting to send all claims against a school associated with this finite group of borrowers in a single send. The small number of schools with more than 500 claims may receive them in batches.
What should I expect to receive as part of the notice process?
During the school notification process, ED sends the borrower’s application form and a notification email.
How long do I have to respond?
ED’s policy is to give schools 60 days to respond.
What kind of information is helpful to send back?
You should review the application and consider how best to respond, if at all, to the information in the application. Each application is unique and will require your review to determine what information would be helpful to provide. Under the 2016 Regulation, ED does not draw an adverse inference against a school which does not respond to an application.
What should I do if the application is vague or doesn’t have a clear allegation against my school?
Again, you have to decide for yourself how to respond, if at all, to any application. If you conclude that an application is vague or doesn’t have a clear allegation against your school, you may include that conclusion in your response to ED, should you decide to respond.
Is an affidavit required under the 2016 regulation?
ED requests that schools provide an affidavit if they choose to respond, but it is not required.
Can I have an extension?
Extensions are strongly disfavored and only granted in exceptional circumstances.
Will I have a second opportunity to respond if ED grants a discharge and decides to seek recoupment?
Yes. If the borrower’s application is approved and ED seeks recoupment, you will be able to respond a second time during the recoupment process. Schools are not parties to the process which ED uses to resolve claims made to ED in pending borrower defense applications. At the fact-finding stage, the information you provide assists ED in determining how to adjudicate the application. If the application is denied, your initial school notification letter will be the only time you will hear about the application. If the application is approved and ED seeks recoupment, you will be a party to the recoupment process and will have an additional opportunity to respond to the borrower’s application.
Logging into the Common Origination and Disbursement (COD) System
The 2016 notification letter includes information about how to receive assistance with uploading your responses to COD.
If you have questions about how to use COD or how to upload your response, please contact COD School Relations at CODSupport@ed.gov or 1-800-848-0978.
We Are Here to Help
If you have questions about a specific application, you can reach out to the Borrower Defense Customer Support line at 1-855-279-6207 to speak to a representative.
And as always, we strive to provide the most up to date information available on our website at StudentAid.gov/borrower-defense.