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Borrower defense claims against community colleges rising

The American Association of Community Colleges reports that a growing number of community colleges are receiving “borrower defense” claims against them. A borrower defense claim is a complaint that a student loan recipient files in which filers claim that the Department of Education should relieve them of their repayment obligations because the institution they attended defrauded, misled, or otherwise lied to them about something that led them to enroll.

Borrower defense claims typically affect for-profit institutions and less commonly, four-year universities. Community colleges rarely receive these claims because the amounts students borrow tend to be comparatively small.

These claims are serious and people who file them can face perjury charges for making false reports. Additionally, the application process is somewhat arduous. A borrower cannot simply claim that s/he was defrauded. The filer’s claim must include evidence of the misrepresentation.

Borrower defense claims have succeeded in the past when borrowers could demonstrate that the institution told them they would have a job after graduation; that they would earn a specific salary; or that the credits they earned at their institutions would transfer elsewhere.

In a successful borrower defense claim, the Department of Education will discharge the borrower’s remaining debt obligation. Additionally, the borrower will receive a refund for any student loan payments they have made in the past.

Recently, the Department of Education adopted new borrower defense rules that clarify the grounds under which a borrower can seek relief. They include substantial misrepresentation; substantial omission of facts; breach of contract; aggressive and deceptive recruitment; adverse court judgment; or prior secretarial action. (The last item refers to previous claims that can open the door to borrower defense claims.)

Borrower defense claims seek to hold community colleges responsible

Claims of fraud against community colleges are interesting because unlike for-profit schools, community colleges don’t have a profit motive. That doesn’t mean they can’t fall into some significant traps, though. I have written about WCC’s time-worn slogan regarding employment. Does that count as a misrepresentation? The last time WCC submitted post-graduation employment data on its students, it reported that fewer than half of WCC graduates were working in their fields of study.

Worse, WCC has doubled down on this slogan by extending it to those who merely attended WCC. You can look at the slogan in one of two ways: it’s dangerous because it appears to promise employment as a benefit of attending WCC. Or you could look at it as a whole lot of nothing because the majority of its students have a job before they ever enroll at WCC. In other words, they’re employed going into WCC, and they’re employed after graduation.

When you look at WCC’s online course catalog, it implies that people who attend WCC and earn a certain certificate or degree program become qualified to hold certain jobs they’re not educationally or experientially qualified to have.

If nothing else, the potentially emerging borrower defense trend should put community college marketing departments on notice that what they promise and what the institution delivers should strongly resemble each other.

Photo Credit: Nick Stenning , via Flickr