Government report finds $17 billion in student loans discharged under borrower defense program
Republican lawmakers have raised concerns about the misuse of a federal borrower defense program after a recent Government Accountability Office report showed $17 billion in student loans being wiped out.
The report found a massive increase in borrower defense claims submitted by college students in recent years. The government has only denied 1 percent of these claims, and has spent over $17.2 billion under the program as of April 2024, according to the report.
Republican leaders of the U.S. House Education Committee blamed the expansion on the Obama administration and the continuance of its policies under the Biden-Harris administration.
“The denial rate is so low because the Biden administration has turned borrower defense into a backdoor for loan forgiveness,” Congressman Burgess Owens told The College Fix in a recent emailed statement.
“When their other schemes got shut down by the courts, they found this loophole to push through the same agenda,” the Utah Republican stated. “It’s a reckless strategy that sidesteps accountability and sticks taxpayers with the bill, all while pretending it’s about protecting students.”
Borrower defense is a program that allows for the discharge of federal student loans to applicants harmed by their university’s “misconduct.”
The program was established in 1995 but was rarely used in the early years. Then the Obama-Biden administration expanded the program, prompted by students affected by the closure of the “predatory and unlawful” Corinthian Colleges in 2015 in California.
The expansion opened up another pathway to loan forgiveness, allowing a “‘group discharge’ process when … a college engaged in widespread and pervasive misconduct,” according to the GAO report. Prior to the changes, the program only allowed individuals to apply.
“For the first 20 years of the rule prior to these changes, there were 59 claims,” according to a news release from U.S. Rep Virginia Foxx, who chairs the House Education Committee.
But the GAO report found that applications rose more than 300,000 after the Obama administration “encouraged more and more applications from borrowers, without any need to demonstrate financial harm,” the release stated.
However, Preston Cooper, a senior fellow at the American Enterprise Institute, said the changes under Obama do not completely explain the influx of claims.
“I think it’s mostly due to the fact that people are becoming more aware that this is a potential pathway to loan forgiveness,” Cooper said in a recent phone interview with The College Fix.
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Cooper’s observations are based on real world data. A search of “borrower defense” on TikTok results in dozens of videos with titles such as “Borrower defense can get your student loans forgiven” that encourage students to apply for the program. Some of these videos have racked up more than 20,000 views.
Cooper shared concerns that borrower defense is being repurposed to forgive student debt instead of assisting with legitimate claims.
“I often do think that borrower defense is seen as just another loan forgiveness tool,” he said. “Students are encouraged to submit borrower defense claims even if they are tenuous.”
According to the GAO report, only 1 percent of borrower defense claims have been denied. Cooper pointed the blame on bureaucracy.
“It’s up to the assessments of the bureaucrats,” he said. “A lot of them want PR mileage out of borrower defense and want to approve as many as possible. This speaks to a problem with the program.”
Congressman Owens, who serves on the U.S. House Education Committee, said the Democrat administrations are using the program to “shift the cost” of college onto taxpayers.
“The problem is, [the Department of Education is] using resources meant for other important programs, like FAFSA, that help students who truly need financial aid,” he said.
“It’s not about protecting borrowers who were truly wronged; it’s about finding new ways to shift the cost of student loans onto taxpayers,” Owens stated to The Fix. “This isn’t fairness—it’s a government-sanctioned bailout at everyone else’s expense.”
He said there are ways to reign in the program.
“The Department of Education could start by actually verifying whether borrower defense claims are legitimate,” Owens said. “We need to protect borrowers who have legitimate grievances, but that doesn’t mean rubber-stamping every application. Taking a closer look at each claim and eliminating the automatic approval process would be a stopgap step in the right direction.”
Cooper offered The Fix his own take on how the government could overhaul the program.
“I would like to see something like the FDIC model,” he said. “Colleges would pay into a common fund that they can take money out of as the need arises.”
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