Colleges and universities across the country have recently been receiving new rounds of borrower defense to repayment (BDR) claims from the U.S. Department of Education (ED). On March 30, 2026, ED issued an Electronic Announcement (EA) addressing the notices and providing clarifying guidance to institutions. In general, ED confirms in the EA that these BDR claims are unrelated to the 2022 Sweet settlement and will be adjudicated based on the date loans were first disbursed to the borrower, consistent with BDR regulations at 34 C.F.R. § 685.206 and § 685.222. ED also confirms that there is no requirement to respond to the BDR claims (and there will be no negative inference for institutions that choose not to respond).

For the vast majority of institutions, however, it will make sense to respond. After the 2025 One Big Beautiful Bill Act, it seems likely that BDR is here to stay and institutions should take the time now to develop processes and forms to optimize their ability to respond (and to mitigate the potential for BDR claims in the future).

For institutions that plan to respond, the EA provides some important clarifications, while also leaving open a number of ambiguities. We highlight certain of these topics below and offer strategic considerations for institutions that choose to respond to BDR claims at this stage.

  • Applicable BDR Standard. ED describes in the EA that BDR claims “may fall under a combination of three borrower defense regulations: (1) the borrower defense regulation published in 1994, 34 C.F.R. 685.206(c) (the 1994 Regulation) [(also referred to by ED as the “1995 Regulation” in its recent notices)]; (2) the borrower defense regulation published in 2016, 34 C.F.R. 685.222 (the 2016 Regulation); and (3) the borrower defense regulation published in 2019, 34 C.F.R. 685.206(e) (the 2019 Regulation).” The EA addresses the notification and adjudication processes under the 1994 Regulation and 2016 Regulation, which ED indicates are the only regulations to which the current set of BDR claim notices relate.

We recommend that institutions confirm the applicable BDR regulation(s) based on the borrower’s enrollment dates and federal loan information (i.e., NSLDS). Just as ED acknowledged there may be an “intake error” resulting in a BDR claim being sent to the wrong institution, it could be that BDR claims received here actually fall under the 2019 Regulation instead of the 1994 and/or 2016 Regulations.

  • Applicable State Law. For BDR claims falling under the 1994 Regulation, in addition to relating to the making of the loan for enrollment at the school or the provision of educational services for which the loan was provided, the allegations “would [have to] give rise to a cause of action against the school under applicable State law.” 34 C.F.R. § 685.206(c)(1). The “Key Takeaways” section of the EA states: “For cases adjudicated under the 1994 Regulation, ED will approve applications that allege a misrepresentation only if it has evidence that demonstrates that all elements of the applicable state law are met.” However, ED neither confirms how it determines the applicable state nor identifies what the relevant state law is.

ED previously addressed the “applicable state” issue in rulemaking related to the 2016 Regulation, suggesting that the applicable state is the state in which the institution is located (81 Fed. Reg. 39330, 39336 (Jun. 16, 2016)):

The current borrower defense regulations [(i.e., 1994 Regulation)] do not identify which State’s law is considered ‘‘applicable’’ State law on which the borrower’s claim can be based.4 Generally, the regulation was assumed to refer to the laws of the State in which the institution was located; we had little occasion to address differences in protection for borrowers in States that offer little protection from school misconduct or borrowers who reside in one State but are enrolled via distance education in a program based in another State.

4 In the few instances in which claims have been recognized under [the 1994 Regulation], borrowers and the school were typically located in the same State.

With respect to the relevant state law, in the currently effective BDR application (OMB No. 1845-0163, Exp. Date: 07/31/2026) - which likely is not the version completed by the borrowers at issue here - ED suggests that the relevant law generally is the consumer protection statute:

In determining whether you would have a basis to sue the school under applicable state law, we will consider your allegations under the consumer protection statute of the applicable state. If you believe another type of law was violated, please include that information.

Absent further clarification from ED, we suggest that institutions include this topic - i.e., which state law(s) is relevant to the claim - in any strategic discussions related to BDR responses. This may necessitate research and analysis of particular state laws.

  • Requests for Extension. The EA states that ED’s policy is to give institutions 60 days to respond to a BDR claim; such requirement is not reflected in the 1994 Regulation or 2016 Regulation. Although the EA explains that ED “may grant extensions if the request is reasonable,” the notices to institutions have said the opposite: “Extensions are strongly disfavored and only granted in exceptional circumstances.”

We suggest that institutions consult ED early in the 60-day period if extension requests are being considered because of volume or other factors.