VES Fact Sheet: Proposed Borrower Defense Rule: Worse than 2016 for Military-Connected Students

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In 1993, Congress authorized loan discharges for students who enrolled based on misleading marketing concerning costs, job placement rates, quality, transfer of credits, and other issues. Few students, however, sought federal loan discharges. With mounting claims for loan forgiveness from defrauded Corinthian students, the Department of Education initiated rulemaking in 2015 to better define the standards and process for federal loan discharges. After robust debate by interested parties, such as individuals representing veterans and servicemembers, the Department released a new rule in 2016 with strong protections for students as well as provisions to deter schools from committing fraud.

The Education Department stopped implementation of the rule before it took effect in July 2017 and convened a new rulemaking panel. The rationale for developing a new rule was the Department’s belief that the 2016 rule created a “muddled process that’s unfair to students and schools, and puts taxpayers on thehook for significant costs.” The Education Department released a new draft rule for public comment on July 31, 2018. Here are the key differences between the 2018 and 2016 rule: