Title II — Student and borrower protections

S. 867 · 116th Congress · Mar 26, 2019 · Lineage

II Student and borrower protections

Sec. 201 Gainful employment programs

(a)

In general— Section 102 (20 U.S.C. 1002), as amended by sections 4(b) and 101, is further amended—

(1)

in subsection (b)(1)(A)—

(A)

by striking clause (ii);

(B)

by striking “(i) provides” and inserting “provides”; and

(C)

by striking “recognized occupation; or” and inserting “recognized occupation, as described in subsection (e);”;

(2)

in subsection (c)(1)(A), by inserting “, as described in subsection (e)” after “recognized occupation”; and

(3)

by adding at the end the following:

“(e) Gainful employment in a recognized occupation

“(1) Definitions—In this subsection:

“(A) Debt-to-earnings rates—The term debt-to-earnings rates means the discretionary income rate and the annual earnings rate, as determined under the gainful employment rules.

“(B) Eligible training program—The term eligible training program means a program of training that—

“(i) in order to qualify for assistance under title IV, is required under subsection (b)(1)(A)(i) or (c)(1)(A), or section 101(b)(1), to satisfy the gainful employment requirements of this subsection; and

“(ii) is offered by an institution eligible to receive assistance under such title.

“(C) Gainful employment rules—The term gainful employment rules means the rules issued under subpart Q of title 34, Code of Federal Regulations, as published on October 31, 2014, relating to gainful employment in a recognized occupation.

“(2) In general—An eligible training program prepares students for gainful employment in a recognized occupation if the eligible training program complies with all requirements of the gainful employment rules (including any modifications made by this subsection), including—

“(A) the provisions relating to the calculation of debt-to-earnings rates for the eligible training program, using actual annual earnings data of students who completed the eligible training program;

“(B) the provisions relating to the determination of outcomes for an eligible training program based on the debt-to-earnings rates, including whether an eligible training program is a “passing”, “failing”, or “zone” program;

“(C) the provisions relating to the associated consequences for an eligible training program that is not passing the debt-to-earnings rates, including a student warning and ultimate loss of eligibility for assistance under title IV;

“(D) the requirements relating to disclosure, reporting, and certification; and

“(E) the calculation of completion rates, withdrawal rates, repayment rates, program cohort default rates, and median loan debt for the eligible training program.

“(3) Annual calculations and verifications—The Secretary shall carry out all of the following:

“(A) On an annual calendar year basis (notwithstanding section 668.403(c)(5) of the gainful employment rules) and for each eligible training program, calculate for each award year both of the debt-to-earnings rates for the eligible training program, issue a notice of determination, and enforce restrictions based on those determinations. In order to carry out the preceding sentence, the Secretary shall—

“(i) create a list of students who completed the eligible training program during the cohort period identified by the Secretary;

“(ii) provide the list to the institution offering the eligible training program and allow the institution a 45-day period beginning the day after the date that the Secretary provides the list to the institution, to submit any corrections to the list;

“(iii) after resolving any corrections, provide the institution with the final list and submit the final list of students who completed the eligible training program to the Social Security Administration, the Internal Revenue Service, or any other Federal agency that administers a database that contains earnings information that can be matched to the individuals named in the final list, and retrieve the mean and median annual earnings of students on the lists, in aggregate and not in individual form, within 10 business days after submission;

“(iv) calculate and send the debt-to-earnings rates to the institution offering the eligible training program and allow the institution a 45-day period, beginning after the date the Secretary notifies an institution of the debt-to-earnings rates, to challenge the accuracy of information used to calculate the eligible training program’s median loan debt;

“(v) subject to the resolution of any challenge, issue a notice of determination informing the institution—

“(I) of the final debt-to-earnings rates of each eligible training program to the institution offering the program;

“(II) of the final determination regarding whether the program is a passing, failing, or zone program, or is ineligible, and the consequences of that determination;

“(III) whether the program could become ineligible based on its final debt-to-earnings rates for the next award year;

“(IV) whether the institution is required to provide warnings to enrolled students and prospective students; and

“(V) if the program is determined to be a failing or zone program due to the final debt-to-earnings rates, how the program may make an alternate earnings appeal, in accordance with paragraph (4);

“(vi) with respect to an institution that receives a notification from the Secretary under clause (v)(III) and that does not submit an intent to appeal in accordance with paragraph (4) or for which the appeal is denied, require the institution, not later than 30 days after receiving the notification of the determination or denial, to—

“(I) issue warnings to enrolled students and prospective students; and

“(II) update the disclosure template, as required by the gainful employment rules, as modified by paragraph (5); and

“(vii) enforce restrictions whereby—

“(I) an institution may not disburse program funds under title IV to students enrolled in an ineligible program; and

“(II) an institution may not seek to reestablish the eligibility of a failing or zone program that it discontinued voluntarily, reestablish the eligibility of a program that is ineligible under the debt-to-earnings rates, or establish the eligibility of a program that is substantially similar to the discontinued or ineligible program, until 3 years following the date specified in the notice of determination informing the institution of the program’s ineligibility or the date the institution discontinued the failing or zone program; and

“(B) develop processes to verify, on an annual calendar year basis, that—

“(i) required warnings under the gainful employment rules are delivered to enrolled students and prospective students and are published on the eligible training program’s disclosure template, in accordance with subparagraph (A)(vii); and

“(ii) each eligible training program is publishing the disclosure template on the website of the eligible training program, as required by the gainful employment rules, as modified by paragraph (5).

“(4) Alternate earnings appeals process—The Secretary shall establish and enforce an appeals process for any institution of higher education that wish to file an alternate earnings appeal for an eligible training program that is a failing or zone program under the debt-to-earnings rates. The appeals process shall be carried out in accordance with the gainful employment rules, except that the appeals process shall also—

“(A) allow an institution to file an alternate earnings appeal, in accordance with the gainful employment rules, to request the recalculation of a gainful employment program’s most recent final debt-to-earnings rates issued by the Secretary, except that—

“(i) any institution that elects to submit alternate earnings from an institutional survey shall, in addition to the other requirements in the gainful employment rules—

“(I) include a test for non-response bias;

“(II) allow for an exception to issues of bias due to sample sizes below 10; and

“(III) subject the institutional survey instrument and survey responses to an audit by the Inspector General of the Department; and

“(ii) the Inspector General of the Department shall—

“(I) audit the institutional survey instrument, and the survey responses, submitted by an institution under clause (i); and

“(II) furnish data showing the Inspector General verified the accuracy of student survey responses; and

“(B) require the Secretary to accept the alternate earnings estimate from an institutional survey if the test for non-response bias includes a response rate that guarantees that the lower bound of the 95 percent confidence interval of the alternate earnings estimate is at or above the earnings level retrieved from the Social Security Administration, the Internal Revenue Service, or any other Federal agency with a database containing individual-level earnings data.

“(5) Gainful employment disclosure requirements—Notwithstanding section 668.412(a) of the gainful employment rules, the Secretary shall include in the disclosure template all the information listed in paragraphs (1) through (16) of section 668.412(a) of the gainful employment rules, unless the Secretary—

“(A) determines that consumer testing supports the noninclusion of the information listed in any such paragraph; and

“(B) publishes the Secretary's determination, and the consumer testing supporting the determination, on the public website of the Department.

“(6) Role of Social Security Administration, the Internal Revenue Service, and other Federal agencies—The Commissioner of Social Security, the Commissioner of Internal Revenue, and the head of any other Federal agency that administers the database of individual-level earnings data shall, in coordination with the Secretary, timely provide the Secretary with the earnings information as required in accordance with paragraph (3)(A)(iii) and the gainful employment rules.”

(b)

Conforming amendment— Section 101(b)(1) (20 U.S.C. 1001(b)(1)) is amended by inserting “, as described in section 102(e),” after “recognized occupation”.

(c)

Effective date— Notwithstanding section 3, this section shall take effect on the date of enactment of this Act.

Sec. 202 Prohibition on institutions limiting student legal action

(a)

Enforcement of arbitration agreements—

(1)

In general— Chapter 1 of title 9, United States Code, (relating to the enforcement of arbitration agreements) shall not apply to an enrollment agreement made between a student and an institution of higher education.

(2)

Definition— In this section, the term institution of higher education has the meaning given such term in section 102 of the Higher Education Act of 1965 (20 U.S.C. 1002), as amended by section 101 of this Act.

(b)

Prohibition on limitations on ability of students To pursue claims against certain institutions of higher education— Section 487(a) (20 U.S.C. 1094(a)), as amended by section 101, is further amended by adding at the end the following:

“(29) The institution will not require any student to agree to, and will not enforce, any limitation or restriction (including a limitation or restriction on any available choice of applicable law, a jury trial, or venue) on the ability of a student to pursue a claim, individually or with others, against an institution in court.”

(c)

Effective date— Notwithstanding section 3, this section shall take effect on the date of enactment of this Act.

Sec. 203 Enforcement unit established in the Office of Federal Student Aid

Section 141 (20 U.S.C. 1018) is amended—

(1)

by redesignating subsections (g) through (i) as subsections (h) through (j), respectively; and

(2)

by inserting after subsection (f) the following:

“(g) Enforcement unit

“(1) In general—The Chief Operating Officer, in consultation with the Secretary, shall establish an enforcement unit within the PBO (referred to in this section as the “enforcement unit”).

“(2) Appointment

“(A) Chief enforcement officer—The Chief Operating Officer, in consultation with the Secretary, shall appoint a Chief Enforcement Officer as a senior manager, in accordance with subsection (e), to perform the functions described in this subsection. The Chief Enforcement Officer shall report solely and directly to the Chief Operating Officer.

“(B) Bonus—Notwithstanding subsection (e), the Chief Enforcement Officer may receive a bonus, separately determined from the methodology which applies to the calculation of bonuses for other senior managers, based upon the Chief Operating Officer’s evaluation of the Chief Enforcement Officer’s performance in relation to the goals set forth in a performance agreement related to the specific duties of the enforcement unit.

“(3) Duties—The enforcement unit shall—

“(A) receive, process, and analyze allegations and complaints regarding the potential violation of Federal or State law (including civil and criminal law) or other unfair, deceptive, or abusive acts or practices, by institutions of higher education, third party servicers that contract with such institutions, and third party contractors;

“(B) investigate and coordinate investigations of potential or actual misconduct of institutions of higher education, third party servicers that contract with such institutions, and third party contractors; and

“(C) enforce compliance with laws governing Federal student financial assistance programs under title IV, including through the use of an emergency action in accordance to section 489A, the limitation, suspension, or termination of the participation of an eligible institution in a program under title IV, or the imposition of a civil penalty in accordance with section 489A.

“(4) Coordination and staffing—The enforcement unit shall—

“(A) coordinate with relevant Federal and State agencies and oversight bodies, including the For-Profit Education Oversight Coordination Committee established under section 125; and

“(B) hire staff, (including by appointing not more than 10 individuals in positions of excepted service, as described in subsection (h)(3)) with such expertise as is necessary to conduct investigations, respond to allegations and complaints, and enforce compliance with laws governing Federal student financial assistance programs under title IV.

“(5) Divisions

“(A) In General—The enforcement unit shall have separate divisions with the following focus areas:

“(i) An investigations division to investigate potential or actual misconduct at institutions of higher education, third party servicers that contract with such institutions, and third party contractors.

“(ii) A division focused on evaluating the claims of borrowers who assert a defense to repayment of Federal student loans, or groups of borrowers who qualify to assert such a defense to repayment, under section 455(h).

“(iii) A division focused on oversight of the Jeanne Clery Disclosure of Campus Security Policy and Campus Crime Statistics Act, the reporting of crime and fire statistics by institutions of higher education, and the oversight and enforcement of section 120 (relating to drug and alcohol abuse prevention).

“(iv) A division to administer the Secretary’s authority to fine, limit, suspend, terminate, or take action against institutions of higher education, third party servicers that contract with such institutions, and third party contractors, participating in the Federal student financial assistance programs under title IV.

“(v) A division that administers a program of compliance monitoring and oversight of institutions of higher education, third party servicers that contract with such institutions, and third party contractors, including systems and procedures to support the eligibility, certification, and oversight of program participants, for all institutions of higher education participating in the Federal student financial assistance programs under title IV.

“(vi) Any other division that the Chief Enforcement Officer, in coordination with the Chief Operating Officer and the Secretary, determines is necessary.

“(B) Reporting—The staff of each division described in subparagraph (A) shall report to the Chief Enforcement Officer.

“(6) Actions recommended—The Chief Enforcement Officer may recommend, as appropriate to the particular circumstance, that the Chief Operating Officer—

“(A) terminate, suspend, or limit an institution of higher education, a third party servicer that contracts with such institution, or a third party contractor, from participation in one or more programs under title IV (in accordance with section 489A), or provisionally certify such participation (in accordance to section 498(h));

“(B) impose a civil penalty in accordance with section 489A;

“(C) make a recommendation to the Secretary about whether to approve or deny the claims of borrowers, including groups of borrowers, who assert a defense to repayment in accordance with section 455(h); or

“(D) carry out any other enforcement activity applicable to the Department under section 489A.

“(7) Definitions—In this subsection—

“(A) the term institution of higher education has the meaning given that term in section 102; and

“(B) the term third party servicer has the meaning given that term in section 481(c).”

Sec. 204 Establishment and maintenance of complaint resolution and tracking system

Title I (20 U.S.C. 1001 et seq.) is amended by adding at the end the following new part:

“F Complaint tracking system

“161. Complaint tracking system

“(a) In General

“(1) In general—The Secretary shall maintain a complaint tracking system that includes a single, toll-free telephone number and a website to facilitate the centralized collection of, monitoring of, and response to complaints and reports (including evidence, as available) of suspicious activity (such as unfair, deceptive, or abusive acts or practices) regarding—

“(A) Federal student financial aid and the servicing of postsecondary education loans by loan servicers;

“(B) educational practices and services of institutions of higher education; and

“(C) the recruiting and marketing practices of institutions of higher education.

“(2) Definitions—In this section—

“(A) the term institution of higher education has the meaning given that term in section 102; and

“(B) the term recruiting and marketing activities means activities described in section 126(d)(2) (as added by section 301 of the Preventing Risky Operations from Threatening the Education and Career Trajectories of Students Act of 2019).

“(b) Complaints—Complaints and reports of suspicious activity submitted to the tracking system by students, borrowers of student loans, staff, or the general public—

“(1) may remain anonymous, if the complainant so chooses; and

“(2) may describe problems that are systematic in nature and not associated with a particular student.

“(c) Establishment of complaint tracking office—The Secretary shall establish within the Department an office whose functions shall include establishing and administering the complaint tracking system, and widely disseminating information about the complaint tracking system, established under this subsection. The Secretary shall—

“(1) to the extent necessary, combine and consolidate the other offices and functions of the Department to ensure that the office established under this subsection is the single point of contact for students and borrowers with complaints or reports of suspicious activity regarding Federal student financial aid, student loan servicers, educational practices and services of institutions of higher education, and recruiting and marketing activities of institutions of higher education; and

“(2) to the extent practicable, ensure that the office established under this subsection will work with the Student Loan Ombudsman appointed in accordance with section 141(f) and the Student Loan Ombudsman of the Bureau of Consumer Financial Protection to assist borrowers of Federal student loans that submit complaints or reports of suspicious activity to the complaint tracking system.

“(d) Handling of complaints

“(1) Timely response to complaints—The Secretary shall establish, in consultation with the heads of appropriate agencies (including the Director of the Bureau of Consumer Financial Protection), reasonable procedures to provide a response to complainants not more than 90 days after receiving a complaint in the complaint tracking system, in writing where appropriate. Each response shall include a description of—

“(A) the steps that have been taken by the Secretary in response to the complaint or report of suspicious activity;

“(B) any responses received by the Secretary from the institution of higher education or from a servicer; and

“(C) any additional actions that the Secretary has taken, or plans to take, in response to the complaint or report of suspicious activity.

“(2) Timely response to secretary by institution of higher education or loan servicer—If the Secretary determines that it is necessary, the Secretary shall notify an institution of higher education or loan servicer that is the subject of a complaint or report of suspicious activity through the complaint tracking system under this subsection regarding the complaint or report and directly address and resolve the complaint or report in the system. Not later than 60 days after receiving such notice, such institution or loan servicer shall provide a response to the Secretary concerning the complaint or report, including—

“(A) the steps that have been taken by the institution or loan servicer to respond to the complaint or report;

“(B) all responses received by the institution or loan servicer from the complainant; and

“(C) any additional actions that the institution or loan servicer has taken, or plans to take, in response to the complaint or report.

“(3) Further investigation—The Secretary may, in the event that the complaint is not adequately resolved or addressed by the responses of the institution of higher education or loan servicer under paragraph (2), ask additional questions of such institution or loan servicer or seek additional information from or action by the institution or loan servicer.

“(4) Provision of information

“(A) In general—An institution of higher education or loan servicer shall, in a timely manner, comply with a request by the Secretary for information in the control or possession of such institution or loan servicer concerning a complaint or report of suspicious activity received by the Secretary under this subsection, including supporting written documentation, subject to subparagraph (B).

“(B) Exceptions—An institution of higher education or loan servicer shall not be required to make available under this subsection—

“(i) any nonpublic or confidential information, including any confidential commercial information;

“(ii) any information collected by the institution for the purpose of preventing fraud or detecting or making any report regarding other unlawful or potentially unlawful conduct; or

“(iii) any information required to be kept confidential by any other provision of law.

“(5) Compliance—An institution of higher education or loan servicer shall comply with the requirements to provide responses and information, in accordance with this subsection, as a condition of receiving funds under title IV or as a condition of the contract with the Department, as applicable.

“(e) Transparency

“(1) Collecting and sharing information with Federal, State, and nationally recognized accrediting agencies—In accordance with section 444 of the General Education Provisions Act (20 U.S.C. 1232g) (commonly referred to as the “Family Educational Rights and Privacy Act of 1974”) and other laws, the Secretary shall coordinate with the heads of relevant Federal or State agencies or entities, and nationally recognized accrediting agencies or associations recognized by the Secretary pursuant to section 496 to—

“(A) collect any complaints and reports of suspicious activity described in subsection (a)(1) from such agencies, entities, or associations; and

“(B) route complaints and reports received by the complaint tracking system under this section and complaints and reports collected in accordance with subparagraph (A) to the Department, the Department of Justice, the Department of Defense, the Department of Veterans Affairs, the Federal Trade Commission Consumer Sentinel Network, the Bureau of Consumer Financial Protection, any equivalent State agency, or the relevant nationally recognized accrediting agency or association.

“(2) Interaction with existing complaint systems—To the extent practicable, all procedures established under this section, and all coordination carried out under paragraph (1), shall be established and carried out in accordance with the complaint tracking systems established under Executive Order 13607 (77 Fed. Reg. 25861; relating to establishing principles of excellence for educational institutions serving servicemembers, veterans, spouses, and other family members).

“(3) Public information

“(A) In general—The Secretary shall, on an annual basis, publish on the website of the Department information on the complaints and reports of suspicious activity received for each institution of higher education or loan servicer under this subsection, including—

“(i) the number of complaints and reports received;

“(ii) the types of complaints and reports received; and

“(iii) where applicable, information about the resolution of the complaints and reports.

“(B) Data privacy—In carrying out subparagraph (A), the Secretary shall—

“(i) comply with applicable data privacy laws and regulations; and

“(ii) ensure that personally identifiable information is not shared.

“(4) Reports—Each year, the Secretary shall prepare and submit to Congress a report describing—

“(A) the types and nature of complaints or reports the Secretary has received under this section;

“(B) the extent to which complainants are receiving adequate resolution pursuant to this section;

“(C) whether particular types of complaints or reports are more common in a given sector of institutions of higher education or with particular loan servicers;

“(D) any legislative recommendations that the Secretary determines are necessary to better assist students and families regarding the activities described in subsection (a)(1); and

“(E) the institutions of higher education and loan servicers with the highest volume of complaints and reports, as determined by the Secretary.”

Sec. 205 Borrower defense to repayment

Section 455(h) (20 U.S.C. 1087e) is amended to read as follows:

“(h) Borrower defenses

“(1) Application

“(A) In General—A borrower of a loan under this part or part B may submit an application to the Secretary claiming a defense to repayment of the loan (as described in paragraph (7)) (referred to in this subsection as a “borrower defense”), at any time and regardless of the current payment status of the loan. The application shall—

“(i) certify that the borrower received the proceeds of a loan or loans issued under this part or part B to attend an eligible institution of higher education;

“(ii) provide evidence that supports the borrower defense;

“(iii) indicate whether the borrower has made a claim with respect to the information underlying the borrower defense with any third party, such as the holder of a performance bond or a tuition recovery program, and, if so, the amount of any payment received by the borrower or credited to the borrower’s loan obligation; and

“(iv) provide any other information or supporting documentation reasonably requested by the Secretary.

“(B) Borrower defense for a group

“(i) In general

“(I) Group defense—The Secretary may initiate and carry out a process to determine whether a group of borrowers, identified by the Secretary, has a borrower defense.

“(II) Identification of group—The Secretary may—

“(aa) identify members of such a group from individually filed applications submitted under subparagraph (A); or

“(bb) if the Secretary determines that there are common facts and claims that apply to borrowers who have not filed an application under subparagraph (A), identify such members based on information in the possession of the Secretary.

“(III) Representative—In the case of a group identified by the Secretary under this clause, the Secretary shall designate a Department official to present the group’s claim in the process described under paragraph (2).

“(ii) Application for a group—A State attorney general or nonprofit legal assistance organization that represents borrowers may submit an application described in subparagraph (A) on behalf of a group of borrowers whose claims are similar or identical, without requiring an application from each individual borrower in that group or class.

“(iii) Notification

“(I) Upon initiation of the process under clause (i) or receipt of an application under clause (ii), the Secretary shall provide the borrowers who may be members of a group borrower defense claim with a written notice of such initiation or receipt, as the case may be, and an option to opt out of the proceeding under this subsection for that group.

“(II) Upon receipt of an application on behalf of a group of borrowers under clause (ii), the Secretary shall provide the entity submitting that application with a written determination, not later than 120 days after receipt of the application, stating—

“(aa) whether the Secretary will forgo the review of claims for individual borrowers and instead will review the claims for the group described in that application (or for a subset of borrowers in that group, if applicable);

“(bb) if the Secretary determines not to evaluate the application for that group (or not to evaluate the application for all the requested members of that group), the reasons for the determination; and

“(cc) that the Secretary may reconsider the determination in item (bb) if presented with new evidence that would allow for the consideration of claims for the group described in the application.

“(iv) Relief—If the Secretary approves a group application for relief under this subsection, all borrowers in the group who have not affirmatively opted out are entitled to relief, regardless of whether an individual borrower filed an application.

“(2) Process

“(A) In General—Upon receipt of an application from an individual borrower or upon receipt of an application from a group of borrowers or initiation of a claim on behalf of a group of borrowers, as described in paragraph (1)(B), the Secretary shall carry out the following activities:

“(i) With regard to the borrower's payment status (including each borrower in such group who does not opt out under paragraph (1)(B)(iii)(I)), the Secretary shall—

“(I) grant an administrative forbearance without requiring documentation from the borrower, including a forbearance for any period necessary for the Secretary to determine the borrower's eligibility for discharge;

“(II) notify the borrower of the option to decline that forbearance and continue making payments on the loan;

“(III) provide the borrower with information about the availability of an income-based repayment plan; and

“(IV) if the borrower’s loan is in default—

“(aa) suspend collection activity on the loan, including any garnishments or offsets, until a decision on the borrower’s claim is issued;

“(bb) notify the borrower of the suspension of collection activity;

“(cc) notify the borrower that if the Secretary determines the borrower does not qualify for a discharge of the loan, collection activity will resume unless the borrower chooses to make payments under any repayment plan, including income-based repayment described under section 493C; and

“(dd) notify the borrower that if the Secretary determines the borrower does not qualify for a discharge of the loan, and if the borrower makes payments under any repayment plan, including an income-based repayment, as described in item (cc), the Secretary shall submit a report to the consumer reporting agencies to which the Secretary previously made adverse credit reports with regard to the borrower’s loan under this part or part B to remove the borrower's record of default and the Secretary shall refund any collection costs paid by the borrower subsequent to the borrower submitting an application under paragraph (1), but prior to the suspension of the collection activity, as described in item (aa).

“(ii) With regard to the fact-finding process, the Secretary shall designate a Department official (which shall not be an official designated under paragraph (1)(B)(i)(III) and shall be a staff member in the enforcement unit, in accordance with section 141(g)) to—

“(I) notify the institution of higher education of the borrower defense application or the initiation of the borrower defense claim;

“(II) determine whether the borrower has established a borrower defense, which shall include—

“(aa) consideration of evidence or argument presented by the borrower; and

“(bb) consideration of additional information, including—

“(AA) Department records;

“(BB) any response or submission from the institution; and

“(CC) any additional information; and

“(III) upon the borrower’s reasonable request, identify and provide to the borrower any records the Secretary is considering as part of the borrower’s claim.

“(iii) Not later than 18 months after the date of receipt of an application under paragraph (1)(A) or (1)(B)(ii), or the initiation of a claim under paragraph (1)(B)(i), as the case may be, the Secretary shall determine if a borrower or group of borrowers has a successful borrower defense claim. If the Secretary fails to issue a determination by the date that is 18 months after the date of receipt of such application or initiation, the loan underlying the borrower defense claim shall be automatically discharged.

“(B) Institution's response—An institution shall provide information to the Secretary, not later than 30 days after the date of a request by the Secretary, and as directed by the Secretary, regarding any response or submission that is requested from the Secretary relating to a borrower defense claim.

“(3) Standard of evidence—A borrower defense claim shall be approved under this subsection, if the Secretary finds that a preponderance of the evidence shows that the borrower has established a borrower defense that meets the requirements of this subsection.

“(4) Successful borrower defense claim

“(A) Borrower relief—If a borrower is determined to have a borrower defense in accordance with this subsection, the Secretary shall—

“(i) discharge the borrower of the borrower’s obligation to repay the loan (including associated interest, costs, and fees that the borrower would otherwise be obligated to pay) in regards to which there is a borrower defense;

“(ii) notify the borrower of the discharge described in clause (i) and the other information described in subparagraph (C);

“(iii) retroactively waive any interest that accrued after the borrower submitted an application under this subsection;

“(iv) provide the borrower such further relief as the Secretary determines is appropriate under the circumstances, which shall include—

“(I) reimbursing the borrower for amounts paid toward the loan voluntarily or through enforced collection; and

“(II) determining that the borrower is not in default on the loan and is eligible to receive assistance under title IV; and

“(v) not later than 30 days after the date of such determination, submit new reports to consumer reporting agencies to which the Secretary previously made adverse credit reports with regard to the borrower’s loan under this part or part B.

“(B) Amount of loan discharge

“(i) In General—There shall be a presumption that on the finding of a successful borrower defense claim, the full amount of the borrower's loan shall be discharged as described in subparagraph (A). If the Secretary determines that discharge of the full amount of the loan is not appropriate in a particular case, the Secretary shall provide the borrower with—

“(I) a written explanation as to why partial relief is appropriate; and

“(II) if the borrower defense is a defense based on State law and described in paragraph (7)(B)(i) or is a defense described in paragraph (7)(B)(ii) or (7)(B)(iii), include an assurance that the amount of relief is not less than the amount of relief that would be afforded under State law.

“(ii) Substantial misrepresentation—Notwithstanding clause (i), in the case of a determination that a borrower defense based on paragraph (7)(B)(iv) has been established, the full amount of the borrower's loan shall be discharged.

“(iii) Limitation—The total amount of relief granted with respect to a borrower defense regarding a loan under this part or part B shall not exceed the amount of the loan under this part or part B, as the case may be, and any associated interest, costs, and fees. Such amount will be reduced by the amount of any refund, reimbursement, indemnification, restitution, compensatory damages, settlement, debt forgiveness, discharge, cancellation, compromise, or any other financial benefit received by, or on behalf of, the borrower that was related to the borrower defense and that reduced the borrower’s debt for the loan under this part or part B.

“(iv) Relief for a non-Federal loan or out-of-pocket expenses—Any relief provided to a borrower, such as relief for an education loan that is not a Federal loan or refunds from a State tuition recovery fund for out-of-pocket expenses, shall not decrease the amount of relief that the borrower shall be entitled to for a loan under this part or part B based on a borrower defense.

“(v) Minimum amount of relief—A borrower that has a borrower defense based on State law and described in paragraph (7)(B)(i) or a defense described in paragraph (7)(B)(ii) or (7)(B)(iii) shall not receive an amount of relief that is less than the relief the borrower would receive under the applicable State law.

“(C) Notification—If a borrower defense is successful the Secretary shall notify the borrower (or the entity that submitted the application, in the case of an application described in paragraph (1)(B)(ii)) in writing—

“(i) of the reasons for the approval and the evidence that was relied upon;

“(ii) that the borrower is relieved of the obligation to repay the loan (or a portion of the loan, as described in subparagraph (B)) and associated costs and fees that the borrower would otherwise be obligated to pay;

“(iii) in the event the Secretary does not grant a discharge of the full amount of the loan, an explanation of the reason why partial relief is granted, and (if applicable) an assurance described in subparagraph (B)(i)(II);

“(iv) that the borrower will be reimbursed for some or all of the amounts paid toward the loan voluntarily or through enforced collection, if applicable;

“(v) of the amount of any portion of the loan that is due and payable to the Secretary;

“(vi) that if any balance remains on the loan, the loan will return to the status prior to the borrower's submission of the application, except that in the case of a loan that was in default prior to such application, the borrower shall first be removed from default status and given the opportunity to enter repayment, including income-based repayment described under section 493C, before the loan will be sent to collections;

“(vii) that if the borrower chooses to make payments, including payments under income-based repayment as described in clause (vi), the Secretary shall—

“(I) submit a report to the consumer reporting agencies to which the Secretary previously made adverse credit reports with regard to the borrower’s loan under this part or part B to remove the record of default; and

“(II) refund any collection costs paid with regard to that loan by the borrower subsequent to the borrower submitting an application under paragraph (1);

“(viii) that if only some of the loan will be discharged, the borrower will have the opportunity for reconsideration of the borrower's claim as described in paragraph (6);

“(ix) that the borrower is eligible to receive assistance under title IV, if applicable; and

“(x) that reports to consumer reporting agencies to which the Secretary previously made adverse credit reports with regard to the borrower’s loan shall be updated not later than 30 days from the date the determination under this paragraph was made.

“(5) Denial of borrower defense claim—If the Secretary denies a borrower defense, the Secretary shall retroactively waive a portion of interest that accrued during the forbearance period (as described in subparagraph (B)) and notify the borrower—

“(A) of the reasons for the denial and the evidence that was relied upon;

“(B) that the interest accruing on the relevant loan after the first 12-month period of forbearance that occurred from the time the borrower's application was submitted under this subsection will be retroactively waived;

“(C) of the amount of any portion of the loan that is due and payable to the Secretary;

“(D) whether the Secretary will reimburse any amounts previously collected prior to the suspension of the collection activity, as described in paragraph (2)(A)(i)(IV)(aa);

“(E) that if any balance remains on the loan, the loan will return to the status prior to the borrower's submission of the application, except that in the case of a loan that was in default prior to such application, the borrower shall first be removed from default status and given the opportunity to enter repayment, including income-based repayment described under section 493C, before the loan will be sent to collections; and

“(F) that the borrower shall have the opportunity for reconsideration of the borrower's claim as described in paragraph (6).

“(6) Reconsideration

“(A) In General—The decision of the Secretary and any relief that may be granted on the claim shall be considered the final agency action that shall be subject to appeal in district court, except that—

“(i) if the borrower defense is denied in full or in part, the borrower may request that the Secretary reconsider the borrower defense upon the identification of new evidence in support of the borrower’s claim; and

“(ii) the Secretary may reopen a borrower defense application at any time to consider evidence that was not considered in making the previous decision on that application.

“(B) Prohibition on rescinding relief—The Secretary shall not reduce the amount of any relief that was previously granted to a borrower under this section, or reinstate any amounts owed on a previously discharged loan.

“(7) Borrower defense claims and establishing a borrower defense

“(A) Claims

“(i) In General—Notwithstanding any other provision of State or Federal law, a borrower may claim as a defense to repayment of a loan made under this part or part B any borrower defense established under subparagraph (B). Such a borrower defense claim may include—

“(I) a defense to repayment of amounts owed to the Secretary on a loan under this part or part B, in whole or in part; and

“(II) a right to recover amounts previously collected by the Secretary on such loan, in whole or in part.

“(ii) Consolidation loan—In the case of a Direct Consolidation Loan—

“(I) the Secretary shall consider a borrower defense claim to such loan by determining whether a borrower defense described in subparagraph (B) has been established with regard to a loan made under this part or part B that was paid off by the Direct Consolidation Loan;

“(II) the Secretary shall discharge the appropriate portion of the Direct Consolidation Loan if the borrower is determined to have a borrower defense with respect to a loan made under this part or part B that was paid off by the Direct Consolidation Loan; and

“(III) the Secretary shall return to the borrower any payments made by the borrower or otherwise recovered on the Direct Consolidation Loan or the loans that were paid off by the Direct Consolidation Loan that exceed the amount owed on that portion of the Direct Consolidation Loan that was not discharged, if—

“(aa) the borrower is determined to have a borrower defense with respect to a loan made under this part or part B that was paid off by the Direct Consolidation Loan; and

“(bb) the payment was made directly to the Secretary on the loan.

“(iii) PLUS Loan—In the case of a Direct PLUS Loan made on behalf of a student, the Secretary shall consider a borrower defense claim related to the student on whose behalf the Direct PLUS Loan was borrowed. Any amounts discharged will be applied to the parent or borrower of the Direct PLUS Loan.

“(B) Establishing a borrower defense—A borrower has established a borrower defense if—

“(i) the borrower (whether as an individual or as a member of a group or class) or a government agency, has obtained against the institution of higher education a judgment relating to the borrower's claim based on State or Federal law in a court or administrative tribunal of competent jurisdiction;

“(ii) the institution of higher education that the borrower attended using a loan under this part failed to perform the institution’s obligations under the terms of a contract with the borrower;

“(iii) the borrower was subject to any act or omission of the institution related to the making of the loan for enrollment at the institution or the provision of educational services for which the loan was provided that would give rise to a cause of action against the institution under applicable State law;

“(iv) the institution of higher education, a third servicer that contracts with such institution, or third party contractor made a substantial misrepresentation; or

“(v) the institution has made any other act or omission that the Secretary, through regulations, or any Federal law, has established is an act or omission that constitutes a borrower defense under this subsection.

“(C) Limitation—A violation by an institution of a requirement in this Act (including implementing regulations) is not a basis for a borrower defense under this subsection unless the violation would otherwise constitute a basis for a borrower defense, as described in this paragraph.

“(8) Finding of substantial misrepresentation—An eligible institution is deemed to have engaged in a substantial misrepresentation for purposes of this subsection when an eligible institution, third party servicer that contracts with such institution, or third party contractor, commits a substantial misrepresentation, as defined in section 489A. A sworn statement or attestation from the borrower shall be considered as evidence, and, in the Secretary’s discretion, may be sufficient evidence for the Secretary to find that a substantial misrepresentation was made to a borrower. If the Secretary determines that an eligible institution, third party servicer that contracts with such institution, or third party contractor, has engaged in a substantial misrepresentation, the Secretary shall, in addition to finding a borrower defense under this section, take enforcement action against the institution, third party servicer that contracts with such institution, or third party contractor, in accordance with section 489A.

“(9) Action against the institution—If a borrower is determined to have established a borrower defense in accordance with this subsection, the Secretary shall initiate an appropriate proceeding to require the institution whose act or omission resulted in the borrower defense to repay to the Secretary the amount discharged under paragraph (7)(A) whether by offset, claim on a letter of credit, or other protection provided by the institution.

“(10) Reporting—Not less than once every 3 months, the Secretary shall publish on a website, and report to Congress, data—

“(A) for each institution, on—

“(i) the number of claims considered under this subsection;

“(ii) the number of those claims pending and the date of receipt of the application, or the date of the initiation of the claim by the Secretary, of those claims; and

“(iii) the number of claims under this subsection for which a determination has been made and the results of each such determination; and

“(B) in the aggregate, and disaggregated by State, on—

“(i) the total number of claims pending under this subsection;

“(ii) the number of those claims that are approved borrower defense claims and total dollar amount of relief;

“(iii) the percentage of those total approved claims receiving partial relief and the median student loan debt remaining for borrowers receiving partial relief; and

“(iv) the number of those claims that are denied borrower defense claims.”