Borrower Defense Discharge: Eligibility, Filing, and Appeals

Borrower defense discharge is a federal program that cancels your Direct Loans if the school you attended lied to you or misrepresented something important about your education. You apply for free at StudentAid.gov/borrower-defense, and if the Department of Education approves your claim, it wipes out your qualifying loan balance and refunds what you already paid.¹ The Department may also request that negative marks tied to those loans be deleted from your credit reports.²

The catch in 2026 is that the standard you have to meet depends on when your loan was disbursed, and a July 2025 law restored a stricter set of rules for newer loans.

Who Can Apply

Only Direct Loans, or loans that have been consolidated into a Direct Consolidation Loan, are eligible.³ If you have Federal Family Education Loan (FFEL) Program loans, you can consolidate them into a Direct Consolidation Loan first and then file. A 2017 Dear Colleague Letter confirmed that path and noted consolidation lets FFEL borrowers avoid some additional requirements that apply to unconsolidated FFEL loans.⁴

Private student loans are not covered. Parent PLUS loans, Grad PLUS loans, and undergraduate Direct Loans all qualify if they are federal Direct Loans.

Which Rule Applies to Your Loan

Three different regulations govern borrower defense claims, and which one you fall under is determined by the first disbursement date of the loan you want discharged. A fourth rule, finalized by the Biden administration in 2022, was blocked in court and then formally suspended by the One Big Beautiful Bill Act, signed on July 4, 2025. Section 85001 of that law says the 2022 regulations “shall not be in effect” for any loan originating before July 1, 2035, and restores the 2019 regulations as they existed on July 1, 2020.⁵

Loans Disbursed Before July 1, 2017

Under the 1994 rule, you have to show the school made untruthful or misleading statements that were material to your decision to enroll, that the misconduct caused you harm, and that you would have a basis for a successful lawsuit against the school under applicable state law.⁶ The state-law element makes these claims complicated, and the Department has acknowledged that pinning down the right state law in every case remains unsettled.⁷

Loans Disbursed Between July 1, 2017, and June 30, 2020

The 2016 rule created a federal standard and broadened the grounds for relief. Beyond misrepresentation, you can seek discharge based on a favorable court judgment against the school or the school’s breach of its enrollment contract.⁶ There is no deadline for claims seeking to discharge outstanding balances, though a six-year window applies if you want a refund of payments you already made.⁸

Loans Disbursed On or After July 1, 2020

This is the 2019 rule, now restored by statute, and it sets a much higher bar. You must show the school made a “substantial misrepresentation” with actual knowledge that it was false or with reckless disregard for accuracy.⁶ You also have to prove financial harm beyond simply owing the loan, and you have to show that the harm wasn’t attributable to broader economic conditions. There is a three-year filing deadline after you leave the school, group discharges are prohibited, and a denial is final with no reconsideration. The Department of Education estimated at the time it wrote the rule that only about three percent of loans tied to school misconduct would be cancelled under it.⁹

How to File

Apply online at StudentAid.gov/borrower-defense, or mail a paper application to the Federal Student Aid Information Center in Monticello, Kentucky.¹⁰ The application is free. Be wary of any company charging a fee to help you file.¹¹

The form asks you to select the categories of misconduct you experienced and to write a narrative describing what happened. Relevant categories include misrepresentations about employment outcomes, accreditation, credit transferability, program cost, faculty qualifications, and career services.⁶

The strongest claims are specific. Name the employees who made false statements when you can, describe when and where the conversations happened, quote or paraphrase what was actually said, and explain how those statements shaped your decision to enroll.¹² The application is signed under penalty of perjury, and knowingly submitting false information can carry criminal consequences.⁶

Evidence That Helps

Documentation is not required, but it makes a real difference. Useful materials include emails or letters from the school, recruitment or marketing materials, course catalogs, enrollment agreements, and transcripts.⁶

If your loan was disbursed on or after July 1, 2020, and therefore falls under the restored 2019 rule, put extra effort into documenting financial harm beyond the loan itself. That can include lost wages, tuition you had to pay at another school because credits didn’t transfer, and damage to your credit.¹²

How Long It Takes

The Department describes its adjudication process as “lengthy,” and borrowers routinely wait years for a decision.⁶ After you submit, the Department reviews the claim, notifies the school, and gives it 60 days to respond before moving to adjudication.¹³ Schools are not required to respond, and the Department does not treat silence as an admission.⁷

As of March 2026, the Department was working through a new round of claim notifications under the 1994 and 2016 regulations. It had not yet begun sending school notifications for claims falling under the 2019 rule.¹³

Group Discharges and Sweet v. McMahon

You do not always have to file individually. When the Department finds widespread misconduct at a particular school, it can approve relief for entire groups of borrowers at once. Between 2021 and 2024, group discharges covered more than 1.2 million borrowers. The largest involved Corinthian Colleges (roughly 560,000 borrowers, $5.8 billion in relief), The Art Institutes (317,000 borrowers, $6.1 billion), and ITT Technical Institute (208,000 borrowers, $3.9 billion). Westwood College, DeVry University, Marinello Schools of Beauty, and CollegeAmerica also had group discharges approved.¹⁴ Borrowers in approved groups received full relief: loan discharge plus a refund of payments made.¹

The restored 2019 rule prohibits automatic group discharges for claims on loans disbursed on or after July 1, 2020.⁹ The 1994 and 2016 regulations, which still govern older loans, do not contain that restriction.

A second track for group-style relief comes from Sweet v. McMahon, a class action that challenged the Department’s failure to process pending applications. The settlement became effective on January 28, 2023, and covers two groups: “class members” with borrower defense applications pending as of June 22, 2022, and “post-class applicants” who filed between June 23, 2022, and November 15, 2022.²

If you attended a school on the settlement’s “Exhibit C” list, which includes the University of Phoenix, DeVry University, The Art Institutes, ITT Technical Institute, Corinthian Colleges, Kaplan, Walden University, Grand Canyon University, and dozens of others,¹⁵ relief under the settlement was mandatory. When the Department missed its decision deadlines, those borrowers automatically received full settlement relief: loan discharge, refund of payments made, and deletion of associated credit tradelines.² By May 2025, more than 271,000 borrowers had received settlement relief.¹⁶

The Department tried to delay its obligations to post-class applicants, but the district court refused in February 2026, and on March 25, 2026, the Ninth Circuit denied the Department’s emergency motion for a stay. Post-class applicants who attended Exhibit C schools and did not receive a decision by January 28, 2026, are entitled to full settlement relief, and the Department was ordered to send eligibility notices by March 30, 2026.¹⁶

If Your Claim Is Denied

For most pending claims, you can request reconsideration within 90 days of the denial. The request has to be based on an administrative or technical error, new evidence you did not previously submit, or, for loans disbursed before July 1, 2017, consideration under an applicable state-law standard. A different Department official reviews the reconsideration than the one who issued the denial.¹⁷

Reconsideration is limited to supporting the claims you originally raised. If you want to bring entirely new allegations of misconduct, you have to file a separate borrower defense application. While your reconsideration is being reviewed, you can request forbearance if you are not in default, or a suspension of collection activity if you are.¹⁸

Under the restored 2019 rule, which now governs loans disbursed on or after July 1, 2020, a denial is final and reconsideration is not available.⁹

Will a Discharge Increase My Taxes

No. Under IRS Revenue Procedure 2020-11, borrowers whose federal student loans are discharged because of school misconduct, including through borrower defense, closed school discharge, or a legal settlement, do not have to include the discharged amount in gross income. The guidance applies retroactively to discharges on or after January 1, 2016, and instructs loan servicers not to issue a Form 1099-C for these discharges.¹⁹

The One Big Beautiful Bill Act separately wrote a statutory tax exclusion for borrower defense and closed school discharges into law.²⁰ The broader American Rescue Plan Act exclusion that covered all student loan discharges from 2021 through 2025 has expired, so other kinds of forgiveness, such as discharges under income-driven repayment plans, may now be taxable. Borrower defense discharges are not.

1
U.S. Government Accountability Office. Borrower Defense to Repayment
2
Federal Student Aid. Sweet v. McMahon Settlement Information
3
U.S. Government Accountability Office. Borrower Defense to Repayment
4
Federal Student Aid Partners. GEN-17-01: Treatment of FFEL Program Loans When Borrower Asserts Defense to Repayment
5
Federal Student Aid Partners. Federal Student Loan Program Provisions Under One Big Beautiful Bill Act
6
Federal Student Aid. Borrower Defense to Repayment Application
7
Hogan Lovells. Borrower Defense to Repayment Guidance Issued by U.S. Department of Education
8
Student Loan Borrower Assistance. Rules on Student Loan Relief for School Closures and Misconduct
9
The Institute for College Access & Success. Borrower Defense Rule Side-by-Side Comparison
10
Student Loan Borrower Assistance. Borrower Defense to Repayment
11
Project on Predatory Student Lending. Sweet v. McMahon Class Members
12
New York Legal Assistance Group. Borrower Defense to Repayment Application Guide
13
Federal Student Aid Partners. School Notification Process Under 1994 and 2016 Borrower Defense Regulations
14
U.S. Senate, Office of Senator Markey. Department of Education Borrower Defense Discharges
15
Federal Student Aid. Sweet v. Cardona School List (Exhibit C)
16
Project on Predatory Student Lending. Sweet v. McMahon
17
Cornell Law Institute. 34 CFR § 685.407
18
U.S. Department of Education. Borrower Defense Reconsideration Process
19
Project on Predatory Student Lending. IRS Moves to Prevent Defrauded Borrowers From Massively Overpaying Taxes
20
Thomson Reuters Tax & Accounting. Changes Ahead for Taxpayers With Discharged Student Loan Debt