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Focus on Regulation

U.S. Department of Education Announces Further Delays to Borrower Defense to Repayment Regulations

On October 24, the U.S. Department of Education (“ED”) published an interim final rule to delay until July 1, 2018 the effective date of selected provisions of what have become known as the borrower defense to repayment regulations, which were published November 1, 2016. In the interim final rule, ED explained that it believes delay of the regulations’ effective date to July 1, 2018 (or July 1 of a later year) is necessary to provide adequate notice in accordance with the Higher Education Act’s master calendar requirement for changes to regulations affecting the Title IV federal student financial aid programs. Under the master calendar requirement, a regulatory change that has been published in final form on or before November 1 may take effect only at the beginning of the next federal financial aid award year (i.e., July 1 of the following calendar year).

ED had previously announced on June 16, 2017 that in light of pending litigation, it had decided to delay indefinitely the implementation of a majority of the borrower defense to repayment regulations, which would have established new standards and processes for determining whether a borrower has a defense to repayment of a Federal Direct Loan based on an institution’s act or omission. The regulations also would have added new requirements related to discharge of federal education loans from closed schools, pre-dispute resolution agreements, and financial responsibility. ED has not postponed the effective date of certain aspects of the final rule, including provisions that expand the types of documentation that may be used for the granting of a discharge based on the death of a borrower; amend the regulations related to consolidation of certain Nursing Student Loans and Nurse Faculty Loans; and make limited technical corrections.

In addition, on October 24, ED published a notice of proposed rulemaking to delay until July 1, 2019, the effective date of the borrower defense to repayment regulations that the interim rule delays until July 1, 2018. In announcing the proposed rule, ED explained that it is proposing a further delay “to ensure that there is adequate time to conduct negotiated rulemaking and, as necessary, develop revised regulations.” ED had previously announced that it plans to convene a negotiated rulemaking committee to develop proposed regulations to revise the borrower defense to repayment regulations described above and the authority of guarantee agencies in the Federal Family Educational Loan Program to charge collection costs to a defaulted borrower who enters into a repayment agreement with the guaranty agency. ED also previously announced that it plans to form a financial responsibility subcommittee to focus on modifications to ED’s financial responsibility regulations.

ED is accepting public comments on each of the delays until November 24, 2017.