Student Loan Law: 34 C.F.R. § 685.406 Adjudication of borrower defense applications.
(a)10 Adjudication. The Department official adjudicates a borrower defense claim in accordance with this section.
(b) Group process, adjudication.
(a)10 Adjudication. The Department official adjudicates a borrower defense claim in accordance with this section.
(b) Group process, adjudication.
(a) General.
(1) For loans first disbursed prior to July 1, 2017, a borrower asserts and the Secretary considers a borrower defense in accordance with the provisions of § 685.206(c), unless otherwise noted in § 685.206(c).
(a)4 General.
(1) The Secretary discharges the borrower’s (and any endorser’s) obligation to repay a Direct Loan in accordance with the provisions of this section if the borrower (or the student on whose behalf a parent borrowed) did not complete the program of study for which the loan was made because the school at which the borrower (or student) was enrolled closed, as described in paragraph (d) of this section.
(a)11 The decision of the Secretary is final as to the merits of the borrower defense and any discharge that may be granted on the claim. Notwithstanding the foregoing—
(1) If the borrower defense is denied, an individual may request that the Secretary reconsider their individual borrower defense claim on the following grounds:
(i) Administrative or technical errors;
(a) General.
(1) Borrowers who entered repayment before July 1, 2006.
(i) A Direct Subsidized Loan, a Direct Unsubsidized Loan, a Direct Subsidized Consolidation Loan, or a Direct Unsubsidized Consolidation Loan may be repaid under—
(A) The standard repayment plan in accordance with paragraph (b) of this section;
(a)5 Definitions. For the purposes of this subpart, the following definitions apply:
Borrower means
(i) The borrower; and
(ii) In the case of a Direct PLUS Loan, any endorsers, and for a Direct PLUS Loan made to a parent, the student on whose behalf the parent borrowed.
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(a) Basis for discharge.
(1) False certification. The Secretary discharges a borrower's (and any endorser's) obligation to repay a Direct Loan in accordance with the provisions of this section if a school falsely certifies the eligibility of the borrower (or the student on whose behalf a parent borrowed) to receive the proceeds of a Direct Loan. The Secretary considers a student's eligibility to borrow to have been falsely certified by the school if the school—
(a)12 The Secretary discharges the obligation of the borrower in accordance with the procedures described in subpart D of this part.
(b) Members of a group that received a written notice of an approved borrower defense claim in accordance with § 685.406(f)(1) may request to opt out of the discharge for the group.
(a)3 Pay As You Earn repayment plan: The Pay As You Earn repayment plan is an income-contingent repayment plan for eligible new borrowers.
(1) Definitions. As used in this section, other than as expressly provided for in paragraph (c) of this section—
(a)6 Group process, generally. Upon consideration of factors including, but not limited to, the existence of common facts and claims by borrowers, the likelihood of actionable acts or omissions that were pervasive or widely disseminated, and the promotion of compliance by an institution or other title IV, HEA program participant, the Secretary may determine whether a group of borrowers from one institution or commonly owned institutions identified by the Secretary has a borrower defense
(a)(1)13 For loans first disbursed on or after July 1, 2023, the Secretary may collect from the school, or in the case of a closed school, a person affiliated with the school as described in § 668.174(b) of this chapter, any liability to the Secretary for any amounts discharged or reimbursed to borrowers for claims approved under § 685.406.
(a)(1) The definitions of the following terms used in this part are set forth in the Student Assistance General Provisions, 34 CFR part 668:
Academic year
Campus-based programs
Dependent student
Disbursement
Eligible program
Eligible student
Enrolled
(a) For purposes of adjudicating a borrower defense claim other than those based on prior Secretarial final actions in accordance with § 685.404, the Department official notifies the institution of the group claim under § 685.402 or individual claim under § 685.403 and requests a response from the school. Such notification also may include, but is not limited to, requests for documentation to substantiate the school's response.
(a) Definitions. As used in this section—
(1) Adjusted gross income (AGI) means the borrower’s adjusted gross income as reported to the Internal Revenue Service. For a married borrower filing jointly, AGI includes both the borrower’s and spouse’s income. For a married borrower filing separately, AGI includes only the borrower’s income.
(a) Obligation of repayment in general.
(1) A borrower is obligated to repay the full amount of a Direct Loan, including the principal balance, fees, any collection costs charged under § 685.202(e), and any interest not subsidized by the Secretary, unless the borrower is relieved of the obligation to repay as provided in this part.
(a) Payment application and prepayment.
(1) Except as provided for the income-contingent repayment plan under § 685.209(a)(3) or the income-based repayment plan under § 685.221(c)(1), the Secretary applies any payment first to any accrued charges and collection costs, then to any outstanding interest, and then to outstanding principal.
(a) Direct Consolidation Loans. A borrower may consolidate education loans made under certain Federal programs into a Direct Consolidation Loan. Loans consolidated into a Direct Consolidation Loan are discharged when the Direct Consolidation Loan is originated.
(b) Loans eligible for consolidation. The following loans may be consolidated into a Direct Consolidation Loan:
(1) Subsidized Federal Stafford Loans.
(a) General.
(1) A Direct Subsidized Loan or Direct Subsidized Consolidation Loan borrower who meets the requirements described in paragraphs (b), (d), (e), (f), (g), (h), (i), or (j) of this section is eligible for a deferment during which periodic installments of principal and interest need not be paid.
(a) Student Direct Subsidized or Direct Unsubsidized borrower.
(1) A student is eligible to receive a Direct Subsidized Loan, a Direct Unsubsidized Loan, or a combination of these loans, if the student meets the following requirements:
(i) The student is enrolled, or accepted for enrollment, on at least a half-time basis in a school that participates in the Direct Loan Program.
(a)(1) Unpaid refunds in closed school situations. In the case of a school that has closed, the Secretary discharges a former or current borrower’s (and any endorser’s) obligation to repay that portion of a Direct Loan equal to the refund that should have been made by the school under applicable law and regulations, including this section. Any accrued interest and other charges associated with the unpaid refund are also discharged.
(2) Unpaid refunds in open school situations.
(a) Initial selection of a repayment plan.
(1) Before a Direct Loan enters into repayment, the Secretary provides the borrower a description of the available repayment plans and requests the borrower to select one. A borrower may select a repayment plan before the loan enters repayment by notifying the Secretary of the borrower’s selection in writing.
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(a) Death.
(1) An institution must discharge the unpaid balance of a borrower’s Defense, NDSL, or Federal Perkins loan, including interest, if the borrower dies. The institution must discharge the loan on the basis of—
(i) An original or certified copy of the death certificate;
(ii) An accurate and complete photocopy of the original or certified copy of the death certificate;