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Project on Predatory Student Lending Comments on Proposed Borrower Defense Rule

On August 1, 2016, the Project on Predatory Student Lending of the Legal Services Center, in partnership with the National Consumer Law Center, submitted comments on behalf of legal aid providers to the U.S. Department of Education about its proposed regulations on when and how defrauded student loan borrowers can obtain relief on the federal student loans they borrowed to attend predatory schools.

As detailed in our comments, we support aspects of the proposed Borrower Defense rule such as its move toward banning schools from including forced arbitration, its mechanism for providing relief to entire groups of students in cases of widespread wrongdoing, and its provisions that will help borrowers whose schools have closed while they were in attendance.

We also urge the Department to improve other aspects of the proposed rule, by ensuring that borrowers retain the protections of their state’s consumer protection laws, ensuring that the rule does not unfairly and arbitrarily limit the loan forgiveness available to borrowers whose rights have been violated, restoring the ability of state attorneys general and legal aid advocates to petition the Department for relief on behalf of a group of students, and by providing a fair and reasonable process for borrowers with FFEL (bank-originated, government-backed) loans.

The comments share experiences and circumstances of the Project’s clients and clients of other legal aid organizations. They are low-income student borrowers who have been harmed by predatory practices of for-profit colleges, and come to us struggling to repay their student loans.

The Project also submitted a separate comment that provides additional context to the Department’s use of the term “educational malpractice,” and refutes the spurious argument that the proposed rule somehow opens the litigation floodgates for previously-unsustainable claims against schools.

Eileen Connor, the Project’s Director of Litigation, was a negotiator on behalf of legal aid providers who represent borrowers.