by Emily Shupe
The 2016 Borrower Defense To Repayment Regulations (the “BDR Regulations”) were published in November 2016, but implementation was stayed until 2018. The stated purpose of the BDR Regulations is to protect “student loan borrowers from misleading, deceitful, and predatory practices of, and failures to fulfill contractual promises by, institutions participating in the Department [of Education]’s student aid programs.” To that end, the Department of Education monitors and measures an institution’s financial condition by calculating a composite score. The Department of Education considers an institution with a score equal to or higher than 1.5 to be financially responsible. If an institution’s score is 1.0 or lower, the institution is subject to stricter oversight and other restrictions.
The BDR Regulations set forth a number of “triggering events” that may cause an institution’s composite score to be recalculated, including final judgments, settlements, teach-out plans, and other litigation that is likely to go to trial. Institutions must report triggering events to the Department, generally within 10 days.
On June 3, 2019, the Department of Education released guidance regarding the litigation reporting requirements in BDR Regulations. In short, the Department confirmed that: (1) the reporting requirements in the BDR Regulations apply to both public and private institutions; (2) settlements reached prior to the initiation of a lawsuit must be reported; and (3) all litigation that meets the summary judgment deadline-related requirements must be reported, regardless of the nature of the claim or amount in controversy.
The BDR Regulations are difficult to navigate, and many questions remain regarding how the Department will interpret and enforce them. If you have questions regarding the BDR Regulations or other higher education matters, please contact Rathje Woodward’s Higher Education practice group.