The U.S. Department of Education (Department) has determined that this guidance is significant guidance under the Office of Management and Budget’s, Final Bulletin for Agency Good Guidance Practices.i Significant guidance is non-binding and does not create or impose new legal requirements. The Department is issuing this guidance to provide institutions of higher education with information to assist them in meeting their obligations under the Higher Education Act of 1964 and implementing regulations, specifically at 34 CFR 668.41, 668.171, and 685.300 that the Department enforces. ii
On November 1, 2016, the Department of Education published final regulations concerning borrower defense to repayment and other related matters in the Federal Register (81 Fed. Reg. 75,926). The original effective date (July 1, 2017) of these regulations was delayed by the Department, but by order of the U.S. District Court for the District of Columbia in the case Bauer et al. v. DeVos, Civil Action No. 17-1330 (RDM) the 2016 Final Regulations took effect.
The Borrower Defense to Repayment Standard
The 2016 Final Regulations established a federal standard for borrower defense to repayment applications based upon judgments against institutions, breaches of contract by institutions, and substantial misrepresentations by institutions, in 34 C.F.R. § 685.222. This standard will be applied for borrower defense to repayment claims asserted as to loans first disbursed on or after July 1, 2017.
The Financial Responsibility Events, Actions, and Conditions
Among other things, the 2016 Final Regulations included revisions to the Department’s regulations in 34 CFR 668.171, specifying the standards institutions must meet to be deemed financially responsible. The 2016 Final Regulations, in 34 CFR 668.171(h), require institutions to notify the Secretary within specified timeframes for any of the following events, actions, or conditions that occur on or after July 1, 2017. Cites below refer to the locations of the definitions of each event, condition, or action, which you may see in the 2016 Final Regulations, at 81 Fed. Reg. 76,073 to 76,074 (pages 148-149 of the linked pdf):