Borrower Defense Rule to Protect Students

The rule protects students and taxpayers against school fraud and abrupt closures and ensures that predatory schools are held accountable.


Numerous investigations by state and federal law enforcement have uncovered widespread fraud by schools that preyed on students’ dreams of improving their lives through education but instead left them with worthless degrees and thousands of dollars in student loan debt. Corinthian Colleges is just one example: it deceived students and regulators, including by providing false information about the value of its degrees, all while raking in billions in student aid dollars before abruptly closing.

Predatory schools leave students with unfair and unaffordable student loan debt and expose taxpayers when students cannot repay those debts. Many predatory schools are heavily dependent on taxpayer funding and target veterans in particular for their GI Bill funds.

Unscrupulous schools have evaded accountability and detection through forced arbitration “rip-off clauses” slipped into student enrollment agreements. These clauses strip students of their rights to challenge illegal conduct in court and silence legitimate complaints about school fraud.

Many schools also have abruptly closed. Students show up for class to find a notice posted on a locked door and are left to figure out what to do about their mountains of debt without a degree.

After a public rulemaking process, the U.S. Department of Education issued the “Borrower Defense” rule to protect students and taxpayers by:

  • Creating a long-overdue process for defrauded borrowers to apply for loan forgiveness they are entitled to seek under the Higher Education Act;
  • Restricting schools that participate in the federal student loan program from using forced arbitration clauses to evade accountability for fraud;
  • Ensuring students at closed schools get the relief afforded them under law by automatically forgiving their loans if they do not complete their studies; and
  • Protecting students and taxpayers by requiring the riskiest schools to warn students and to put money aside to cover the cost if their students’ loans are forgiven.

Veterans describe ways that predatory schools mislead them during recruitment.

Michael Adorno-Miranda, former Corinthian College student and Debt Collective member, describes how predatory colleges have cheated students.

School Fraud and Rip-Off Clauses

ITT Tech closed and filed for bankruptcy in 2016 after coming under increasing scrutiny for its recruitment practices and failing to meet accreditation standards. For years, ITT used forced arbitration clauses to block student and government lawsuits. This meant that students like James Eric Brewer, who is asking the government for student loan relief, were never able to get relief from the school directly.

Brewer is a father of two in Indiana. Prior to attending ITT, he had a GED and worked in construction. Brewer wanted to be able to provide a better life for his family and became interested in ITT after seeing ads promoting the school as a way to a good career.

An ITT recruiter assured him that attending ITT would be the best decision of his life. The recruiter said ITT placed 80 percent of graduates in employment in their field and would place Brewer in a great job, earning $55,000 a year upon graduating.

Brewer worked hard and graduated with a degree in Computer Network Systems in 2012, but found he had been sold an expensive bill of goods. The only employment ITT ever helped him obtain was a $10/hr temporary data entry position while he was a student. Since graduating, Brewer’s calls to career services went unanswered. He got more responses to his resume after removing ITT from it. His job prospects are no better than before he went to ITT, but now he owes over $70,000 in student loans he never would have taken out had he known the truth about graduate outcomes.

Brewer is not alone. ITT degrees are expensive, yet recent data shows that on average, ITT graduates earn no more than high school graduates with no college education. Over 2,000 other former ITT students have submitted similar testimony to the Department of Education, stating that ITT deceived them about the value of its degrees and graduate employment outcomes when recruiting them.

The Borrower Defense rule would not guarantee these students relief, but would provide a process for their claims to be heard and ensure that students like them can challenge fraud in court.

Closed Schools

Thousands of schools across the country have closed in recent years, upending students’ lives. While many impacted students are eligible for federal student loan forgiveness, few are aware of this right. The new rule would help them by automatically forgiving loans for eligible borrowers, rather than requiring them to navigate a complicated student loan maze.

Daniel, who unnecessarily suffered for more than 20 years before his loans were forgiven, is an example of the type of borrower who would be helped by this rule.

Daniel enrolled the American Career Training Travel School in 1989. The next year, the school abruptly closed, leaving Daniel with thousands of dollars in debt and no degree. Although he was eligible to have his student loans forgiven, no one told him that. Instead, Daniel struggled while debt collectors harassed him to pay.

When he couldn’t make payments, thousands of dollars were seized from his paychecks and tax refunds to collect on the loan — which continued to balloon over the years due to interest and fees. Daniel ultimately wound up homeless. It was only in 2011, when a shelter happened to connect Daniel with a legal services attorney, that Daniel found out about his right to have his student loans forgiven — after more than 20 years of unnecessary suffering.


Big corporations and for-profit school industry lobbyists have been trying to stop the Department of Education from protecting students’ rights to fight against school fraud and abuse of the federal student loan program. For-profit higher education is a big business that is highly subsidized by federal student aid. More than 200 for-profit schools get more than 90 percent of their revenue from federal aid (including student loans and grants through the Department of Education and GI Bill benefits for veterans), taking in an estimated $8 billion in federal aid.

The industry, including the for-profit college trade group Career Education Colleges and Universities (“CECU,” formerly the Association of Private Sector Colleges and Universities) is well-funded and well-connected. In fact, the head of CECU is a former congressman: Steve Gunderson (R-Wis.). Hired lobbyists have been hard at work trying to fight against this accountability rule by placing op-eds in newspapers, trying to convince public and nonprofit school leaders to join them in opposing the rule, and meeting with administration leaders and members of Congress.

While claiming to be looking out for taxpayers and student choice, the industry is clearly looking to protect its own bottom line against the interests of students and taxpayers. A recent poll showed that 78 percent of Americans support loan relief for student loan borrowers whose school engaged in fraud. This rule would save taxpayers money by ensuring that risky schools are required to put money aside to cover potential student loan discharges for fraud or closure, allowing students to hold schools accountable directly for fraud in court, and deterring fraud by making clear that schools will be held accountable if they break the law.

Jerry Falwell Jr., president of Liberty University (which raked in over $340 million in federal student aid in 2015), has been more direct in explaining his complaints about the rule. He recently announced that he would head up a new task force on higher education created by President Donald Trump and said he was concerned about the rule because he wants to give colleges “more leeway” in how they recruit students. But the rule already gives colleges plenty of leeway in how they recruit — the only restriction is that they cannot use fraud to recruit federal student loan borrowers and keep the money.

TABLE: Political Spending by Opponents of the Borrower Defense Rule

Industry/Group Lobbying (2015) Political Spending (2016) % Political Spending to Republicans
 For-profit colleges  $5,625,185  $1,963,006 66%



Jan Kruse, National Consumer Law Center,, (617) 542-8010

Eileen Connor, Legal Services Center of Harvard Law School,, (617) 522-3003

Walter Ochinko, Veterans Education Success,, (202) 657-1254

Julie Murray, Public Citizen,, (202) 588-1000

Shannon Serrato, The Institute for College Access & Success, (510) 318-7915

Sarah Schultz, Young Invincibles, (202) 734-6510


Loosening of For-Profit School Rules Worries Student Advocates
USA Today: March 22, 2017

Trump Administration’s Delay of Rule to Regulate Career-Training Programs Sparks Protest
The Washington Post: March 22, 2017

50+ Groups Call on Congress to Support Borrower Defense and Other Provisions to Protect Students and Taxpayers from Fraud and Abuse in Higher Education
Protect Students and Taxpayers: March 22, 2017

Audit Report Finding New Borrower Defense Rules would Improve Ability to Identify Schools at Risk of Abrupt Closure and Better Protect Students and Taxpayers
U.S. Department of Education: February 24, 2017

Letter from 16 Veterans Organizations Urging Congress to Support the Borrower Defense Rule
16 Veteran and Military Organizations: February 2, 2017

With Falwell as Education Advisor, His Own University Could Benefit
The New York Times: February 1, 2017

Defend the Department of Education’s Borrower Defense Rule (Issue Brief)
National Consumer Law Center: January 2017

Borrower Defense Final Regulations: Summary of Major Provisions
Department of Education: October 28, 2016

How College Enrollment Contracts Limit Students’ Rights (Report)
The Century Foundation: April 28, 2016

47 Groups Call on Department of Education to Halt Federal Funding for Predatory Schools That Deny Students’ Legal Rights (Letter)
47 Student, Veteran, Civil Rights, Consumer and Civil Justice Groups: March 4, 2016

78,000 Individuals and 50 Organizations Urge the U.S. Department of Education to Grant Debt Relief to Corinthian Colleges’ Students (Press Release and Petition)
Various Organizations: May 19, 2015

For Profit Higher Education: The Failure to Safeguard the Federal Investment and Ensure Student Success (Report)
Senate HELP Committee: July 30, 2012