After announcing plans for a new rule last summer, the Department of Education has, unofficially, issued its long awaited new update to the borrower defense to repayment rule.
After announcing plans for a new rule last summer, only to miss the publication deadline, the Department of Education (ED) has – albeit still unofficially – issued its long awaited new update to the borrower defense to repayment rule (BDTR), first updated and greatly expanded during the Obama administration. As a reminder, the 2016 version of the BDTR rule is currently effective and applies to all institutions that participate in the Title IV Direct Loan programs, regardless of their public, nonprofit or for-profit status. Barring the unforeseen, and with one exception noted below, the new BDTR rule will go into effect July 1, 2020.
To recap, triggered by the collapse of the Corinthian Colleges at the tail end of the Obama administration, a new BDTR rule was promulgated, replacing long-standing and truly minimal language that failed to provide effective guidance for implementing the statutory provision that could relieve a student of his or her federal loan obligation. In addition to incorporating substantial procedural provisions, the 2016 rule diverged sharply from the original in adding entirely new elements related to institutional “financial responsibility,” intended, as described by then-Secretary Arne Duncan, to better enable ED and the public to identify institutions in imminent peril of failure.