2016 Borrower Defense to Repayment
On March 19, 2019, the U.S. Department of Education (Department) published in the Federal Register the long-awaited announcement that the 2016 borrower defense to repayment rule (2016 Rule) is officially in effect. The announcement, considered largely procedural housekeeping at this point, comes five months after a federal court ordered the previously delayed rule take effect on October 16, 2018.
The March 19 announcement follows on the heels of significant guidance published by the Department on March 15, 2019, which is intended to assist institutions with their obligation to comply with the now-effective 2016 Rule. The guidance, issued through an Electronic Announcement, clarifies the responsibilities of institutions concerning selected provisions of the rule, including Financial Responsibility, Predispute Arbitration Agreements, Class Action Bans, and Repayment Rate and Financial Protection Disclosures.
Update: The Department issued on June 3, 2019 a Questions and Answers document that supplements the March 15 Electronic Announcement.
Institutions are encouraged to carefully review the various guidance documents as specific financial responsibility-related actions, events, or conditions that occurred since July 1, 2017 (the original effective date of the 2016 Rule) may result in needing to notify the Department of that action, event, or condition within a stated period. Furthermore, the guidance also lists additional deadlines -- one as short as 10 days -- by which institutions must comply if they entered into mandatory predispute arbitration agreements or other predispute agreements addressing arbitration and class action bans since July 1, 2017 with a Direct Loan borrower.
As the Department moves to enforce the 2016 Rule fully, Education Secretary Betsy DeVos remains committed to rewriting the rule, provisions of which she has previously called “bad policy.”
Though no date has been announced, the new borrower defense to repayment rule is expected out in October 2019. According to Department officials, the final rule will include substantive policy changes from the proposed rule the Trump administration published in July 2018.
CECU’s comments on the Department’s proposed rule are available here.
Please direct any questions regarding the borrower defense to repayment regulations to Nicholas Kent, Senior Vice President of Policy and Research, at (571) 800-6524 or Nicholas.Kent@career.org.