Sec. 452. Borrower defenses
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Section 455(h) ( 20 U.S.C. 1087e(h) ) is amended to read as follows: In any proceeding to collect on a loan made under this part on or after July 1, 2018 to a borrower, the Secretary shall abide by the following: In no event may the borrower recover any amount previously collected or be freed of amounts owed to the Secretary without submitting an individually-filed application for approval. In no event may the borrower recover amounts previously collected by the Secretary, in any action arising from or relating to a loan made under this part, in an amount in excess of the amount that has been paid by the borrower on such loan.
In no event may the borrower submit an application to recover amounts previously collected by the Secretary later than 3 years after the misconduct or breach of contract on behalf of the institution takes place that gives rise to the borrower to assert a defense to repayment of the loan. In no event may anyone other than an administrative law judge or its equivalent preside over hearings of any kind related to applications submitted under this subsection. In no event may the Secretary approve or disapprove the borrower’s application under this subsection without allowing for the equal consideration of evidence and arguments presented by a representative on behalf of the student or students and a representative on behalf of the institution, if either such party makes a request.
In no event may the Secretary withhold from an institution any materials, facts, or evidence used when processing an application submitted by the borrower. In no event may the borrower of a loan made, insured or guaranteed under this title (other than a loan made under this part or a Federal ONE Loan) submit an application under this subsection without consolidating the loans of the borrower into a Federal ONE Consolidation Loan. An application submitted by a borrower under this subsection to the Secretary shall— certify the borrower’s receipt of loan proceeds, in whole or in part, to attend the named institution of higher education; provide evidence described in subparagraph
(B)that supports a borrower defense to repayment of the loan; and indicate whether the borrower has made a claim with respect to the information underlying the borrower defense with any third party and, if so, the amount of any payment received by the borrower or credited to the borrower’s loan obligation. The borrower has a borrower defense if— the borrower, whether as an individual or as a member of a class, or a governmental agency, has obtained against the institution of higher education a nondefault, favorable contested judgment based on State or Federal law in a court or administrative tribunal of competent jurisdiction; the institution of higher education for which the borrower received the loan made under this part failed to perform its obligations under the terms of a contract with the student; or the institution of higher education described in clause
(ii)or any of its representatives engaged directly in marketing, recruitment or admissions activities, or any other institution of higher education, organization, or person with whom such institution has an agreement to provide educational programs, or to provide marketing, advertising, recruiting, or admissions services, made a substantial misrepresentation within the meaning of section 487(c)(3)(B)(i)(II) that the borrower reasonably relied on when the borrower decided to attend, or to continue attending, such institution. Upon receipt of a borrower’s application, the Secretary— if the borrower is not in default on the loan for which a borrower defense has been asserted, shall grant a forbearance and notify the borrower of the option to decline the forbearance and to continue making payments on the loan; if the borrower is in default on the loan for which a borrower defense has been asserted— shall suspend collection activity on the loan until the Secretary issues a decision on the borrower’s claim; shall notify the borrower of the suspension of collection activity and explain that collection activity will resume if the Secretary determines that the borrower does not qualify for a full discharge; and shall notify the borrower of the option to continue making payments under a rehabilitation agreement or other repayment agreement on the defaulted loan; and shall to the extent possible, notify the institutions against which the application is filed, which notification shall include— the reasons that the application has been filed; and the amount of relief requested. If a borrower’s application is approved in full or in part, the Secretary shall— notify the borrower and the institution in writing of that determination and of the relief provided; and inform the institution of the opportunity to request a one-time reconsideration of the claim in the application if new evidence that was not previously provided can be identified. If a borrower’s application is not approved in full or in part, the Secretary— shall notify the borrower and the institution of the reasons for the denial, the evidence that was relied upon, any portion of the loan that is due and payable to the Secretary, whether the Secretary will reimburse any amounts previously collected, and inform the borrower that the loan will return to its status prior to the borrower’s submission of the application; and shall inform the borrower of the opportunity to request a one-time reconsideration of the claim in the application if new evidence that was not previously provided can be identified. During a proceeding for an individual borrower, the Secretary may consolidate individually-filed applications that have common facts and claims and resolve the borrowers’ borrower defense claims for faster processing. For purposes of this paragraph, the term new evidence means relevant evidence that the borrower or the institution did not previously provide and that was not identified in the final decision as evidence that was relied upon for the final decision. If accepted for reconsideration by the Secretary, the Secretary shall follow the procedure under this paragraph. After a borrower submits an application, the Secretary shall include in the notification to the borrower— the actions, including deadlines and document requests, that will be taken by the Secretary when processing an application by the borrower; and that the final action by the Secretary shall be available for review under subchapter II of chapter 5, and chapter 7, of title 5, United States Code (commonly known as the Administrative Procedure Act ). During a proceeding for an individual borrower, the Secretary shall process a submitted application and notify the borrower of the final determination in a manner that is timely and efficient. Not later than two years after the date of enactment of the PROSPER Act, the Secretary shall submit to the authorizing committees a report that includes— the established policies and procedures for processing applications; the established policies and procedures for approving an application; the established policies and procedures for denying an application; the method used to calculate the amount and type of relief to be awarded to borrowers who submit an application; and the established timeframes for the policies and procedures identified in clauses
(i)through (iii). The Secretary shall determine the appropriate method for calculating the amount of relief to be awarded to a borrower as a result of a proceeding described in this subsection based on the materials, facts, and evidence presented during the proceeding. The Secretary may afford the borrower such further relief as the Secretary determines is appropriate under the circumstances, but which shall not exceed the following: Reimbursing the borrower for amounts paid toward the loan voluntarily or through enforced collection. Restoring eligibility for assistance under this title after determining that the borrower is not in default on the loan. Updating reports to consumer reporting agencies to which the Secretary previously made adverse credit reports with regard to a loan made under this part after July 1, 2018. The Secretary may initiate an appropriate proceeding to require the institution of higher education whose act or omission resulted in the borrower’s successful defense against repayment of a loan made under this part to pay to the Secretary the amount of the loan to which the defense applies not later than 3 years from the end of the last award year in which the student attended the institution. The Secretary may initiate a proceeding to collect at any time if the institution received notice of the claim before the end of the later of the periods described in subparagraph (A). For purposes of this subparagraph, notice includes receipt of— actual notice from the borrower, from a representative of the borrower, or from the Department; a class action complaint asserting relief for a class that may include the borrower; or written notice, including a civil investigative demand or other written demand for information, from a Federal or State agency that has power to initiate an investigation into conduct of the institution of higher education relating to specific programs, periods, or practices that may have affected the borrower. .
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Sec. 452
Borrower defenses
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