Borrower Defense Claims Expand Beyond For-Profits

Student loan forgiveness tied to borrower complaints of fraud has long been seen as a problem confined to for-profit colleges. But new federal data shows that’s no longer the case.

According to recent data obtained in response to a Freedom of Information Act request, 22% of all borrower defense claims involve public and private nonprofit colleges. Even more surprising, applications involving nonprofit colleges had a higher approval rate than those filed against for-profit schools: 50% compared to just 23%. That data contradicts years of assumptions that borrower defense issues are isolated to one sector of higher education.

The allegations span a wide range of misconduct, from overstated job placement rates and inflated program costs to false claims about accreditation and credit transfer. And while the bulk of claims still stem from for-profit colleges, the presence of nonprofit and public universities in this space suggests a broader pattern of student issues.

This shift in narrative is important. Borrower defense to repayment isn’t just a policy backstop for the worst actors, it’s increasingly relevant across all institution types. And with hundreds of thousands of applications still pending, questions remain about who gets relief and why.

Related: College Ranking Fraud And Student Loan Forgiveness

What Is Borrower Defense To Repayment?

The borrower defense to repayment discharges the federal student loans of borrowers who were misled or defrauded by their college with regard to the college's educational programs, financial charges or the employability of its graduates. This must have affected the student’s decision to enroll or to take out federal student loans.

Examples include lying about accreditation, licensing eligibility and credit transfer,  providing false information about job placement rates and earnings after graduation, and providing false information to college ranking organizations.

The main categories of borrower defense to repayment include substantial misrepresentation, substantial omission of fact, breach of contract, aggressive and deceptive recruitment, and court judgment against the college. Court judgments may include findings that the college violated federal and/or state law and regulations related to educational services, financial charges and employability of graduates.

If a borrower's discharge application is approved by the U.S. Department of Education, the U.S. Department of Education will discharge the remaining balance on the federal student loans borrowed to attend the college. The U.S. Department of Education will also refund payments that have already been made.

Statistics Concerning Borrower Defense To Repayment

More than three-quarters (78%) of borrower defense to repayment applications related to for-profit colleges, with 22% relating to public and private non-profit colleges.

Half (50%) of borrower defense to repayment applications relating to private non-profit colleges were approved, representing nearly a third (29%) of the total. Almost a quarter (23%) of borrower defense to repayment applications concerning private for-profit colleges were approved, representing 71% of the total. 

Almost no applications concerning public colleges were approved, but this may be because many of these applications are still pending.

As shown in this table, 78% of borrower defense to repayment applications concerning public colleges are still pending, compared with 61% of applications concerning private for-profit colleges and 39% of applications concerning private non-profit colleges. 

More than 80% of pending applications concern private for-profit colleges, and 19% concern private non-profit (10%) and public colleges (9%).  

The most common allegations involve employment prospects, program cost and nature of loans, educational services, career services and transferring credits.

• Employment Prospects (15.7%)
• Program Cost and Nature of Loans (14.0%)
• Educational Services (13.6%)
• Career Services (13.2%)
• Transferring Credits (10.3%)
• Other (8.1%)
• Job Placement Rate (5.8%)
• Urgency to Enroll (5.6%)
• Admissions and Urgency to Enroll (4.7%)
• Admissions Selectivity (4.6%)
• Representations to Third Parties (4.0%)
• Breach of Contract (0.3%)
• Court Judgment (0.1%)

Most of the allegations are proportional to the number of applications, with a few exceptions. 

• A greater percentage of complaints at private non-profit colleges involve the job placement rate than at private for-profit colleges, 20.5% vs. 4.2%. 40% of the complaints about the job placement rate occur at private non-profit colleges, with 60% occurring at private for-profit colleges, must different than the typical 80% to 90% rate for other complaints at private for-profit colleges. 
• A greater percentage of complaints at public colleges involve program cost and nature of loans (17.9%) than at private for-profit colleges (13.9%) and private non-profit colleges (12.4%). 
• A greater percentage of complaints at public colleges involve educational services (15.5%) than at private for-profit colleges (13.7%) and private non-profit colleges (11.5%). 
• A greater percentage of complaints at private for-profit colleges involve employment prospects (16.3%) than at public colleges (13.2%) and private non-profit colleges (12.6%). Likewise, a greater percentage of complaints at private for-profit colleges involve career services (13.7%) than at public colleges (11.9%) and private non-profit colleges (10.4%). 

Related: 30 Most Expensive Colleges In The United States

Important Note On How Schools Are Labeled

Private Nonprofit: These are private nonprofit schools such as Harvard or Yale.

Proprietary: These are for-profit schools.

Public: These are state schools (like the UC System).

Foreign: These are schools located in foreign countries that have an eligible FSA school code.

Data Relating To Borrower Defense To Repayment

Here is the full data set of February 2023, showing over 760,000 applications received, along with their status, school type, and allegation on the application.

Approximately 12,800 borrower defense to repayment applications are excluded because they did not list a college on the application. 

This table has been split into three parts so that it can fit the width of the page. The allegation count exceeds the number of applications for a borrower defense to repayment discharge, since each application may involve more than just one allegation.

Final Thoughts

The latest data on borrower defense claims reveals that issues with student loans are not confined to for-profit institutions.

Complaints and approvals are rising at private nonprofit and public colleges as well, suggesting a broader pattern of student dissatisfaction and potential misconduct.

As more applications are reviewed and processed, the spotlight may continue to shift beyond the usual targets. Borrowers considering a claim should document their experiences carefully, as the approval rates vary widely by institution type and allegation.

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