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Federal Court Reinstates Student Borrower Defense Protections

Washington, DC – Earlier today, U.S. District Judge Randolph Moss ruled that the U.S. Department of Education must reinstate the 2016 borrower defense rule, effective at noon today. The borrower defense rule created a clear process for misled or defrauded student loan borrowers to get their federal loans discharged and expanded consumer protections for students. This ruling follows a ruling from Judge Moss earlier this year that determined the Department acted illegally when it suspended the Obama-era borrower defense rule in 2017 before it went into effect.

In response to today’s ruling, Reid Setzer, Government Affairs Director for Young Invincibles, issued the following statement:

“Today’s ruling strikes a blow on behalf of students and borrowers, ensuring that young people can fight back against fraudulent or predatory lenders. The borrower defense rule never should have been suspended, but the Trump Administration has made it clear from day one that it didn’t prioritize protecting America’s students. Now, misled or defrauded borrowers will have the robust consumer protections they deserve and a clearer process to apply for loan discharge. We expect the Department to implement the borrower defense rule as required by law and urge them to begin resolving borrower defense applications and granting loan discharges to all those who qualify immediately.”

In the initial ruling against the Department, Judge Moss ruled that “the Department…did not come close to satisfying” the legal requirements to take protections away from misled student loan borrowers.” In fact, he ruled that “the Department did little more than pay lip service to the good cause requirement” which the Department partially relied on to suspend the rule. Judge Moss also said that the Department showed “a fundamental and unexplained inconsistency” with their claim that the Department could not ban forced arbitration clauses in enrollment contracts.

This ruling, combined with the Department’s failure to respond in a timely manner to public comments on their newly-written rule that eviscerates borrowers’ rights, means that, as of now, the 2016 borrower defense rule will remain in effect until at least July 1, 2020.