Congress Must Preserve Protections for Student Loan Borrowers Whose Schools Closed or Defrauded Them

April 3, 2025 — Press Release

National Consumer Law Center Releases Fact Sheets Detailing How Shrinking Borrower Defense and the Closed School Discharge Student Loan Relief Programs Would Hurt Millions of Borrowers

WASHINGTON – As Congress seeks ways to extend tax cuts to the country’s richest, it is considering scrapping programs created to protect student borrowers whose schools put them at great financial risk. Two new issue briefs from the National Consumer Law Center (NCLC) examine why Congress must preserve programs for student loan borrowers whose schools closed before they completed and for students who were lured to attend a low-value school or take out loans based on misrepresentation, omissions, or other school misconduct. The College Cost Reduction Act (H.R. 6951), proposed by Rep. Virginia Foxx (R-NC), and being considered to offset the costs of tax cuts for the wealthy as part of the current reconciliation process in Congress, would hobble these programs, leaving students harmed by their school with mountains of debt and little to nothing in return. 

Debt Without a Degree: Preserving Protections for Students When Schools Close examines the Closed School Discharge program created by Congress to protect students whose lives are thrown into chaos by a postsecondary school closure. Rolling back this commonsense program, the authors warn, would leave more people in debt without a degree. 

Borrower Defense: What Will Happen to Students in Debt Because They Were Scammed by Their School if the 2022 Rule is Rescinded? describes the top four ways rolling back the 2022 borrower defense regulations would make it harder for students scammed by their school to get relief. 

“For many borrowers, the borrower defense program is the only safety valve to escape a lifetime of debt after schools lied or engaged in other misconduct to get students to enroll or borrow federal student loans,” said Kyra Taylor, senior attorney at the National Consumer Law Center. “The borrower defense program empowers students to sound the alarm, alerting the Department of Education when their school is engaged in misconduct that wastes taxpayer dollars.” 

“Likewise, school closures wreak havoc on students, and often leave them with debt but no degree. Further, the debt from closed schools often prevents students from completing their program and these students are significantly more likely to default on their federal student loans,” said Taylor. “The closed school discharge program is a critical safety net and should be protected, not weakened.”

“Congress should be working to make the lives of defrauded people better, not closing doors to much-needed relief,” said Taylor. “Congress should not cut or shrink these crucial relief programs that disproportionately benefit low-income students to provide tax cuts to the rich.”

Related Resources

• Student Loan Borrower Assistance Project
• Press release: Shutting Down the Department of Education Threatens Students and Working Families Who Rely on Federal Student Aid, March 20, 2025
• Student Loan Toolkit, May 20, 2024
• Delivering Distress to Borrowers in Default, Oct. 11, 2023