Comment on FR Doc # 2026-09442

When considering whether to cancel loans due to a Borrower Defense claim, you should determine the amount of loans used for direct cost vs those used for indirect cost. This is important because particularly in the case of distance education, the indirect cost has nothing to do with the institution and institutions have no say over what students do with their loan stipends. Furthermore, students will often seek out distance education courses precisely because they often provide the easiest access to loans for outside costs (indirect cost is excluded from correspondence study for precisely this reason). Based on my decades in financial aid, indirect cost accounts for around 2/3 of cost of attendance on average. One way to determine this amount would be the inclusion of the student’s account statement, showing all refund proceeds received. It adds an extra step but is crucial to avoid awarding free money that could have been used for unrelated expenses. If a student’s tuition is fully covered by grants, scholarships or other government benefits such as VA benefits for example, then all loan proceeds essentially go straight in the student’s pocket for any purpose they wish (although indirect costs are described in statute, institutions have no way of monitoring what students do with them). That’s a problem if they are claiming a borrower defense. Those loans should be excluded from the claim, since they weren't used to pay the institution. This is not to say schools with poor outcomes shouldn’t be held accountable. When a student receives a sub-par education, there are often many warning signs that the average consumer would consider a red flag. These include but are not limited to lack of meaningful admission standards (almost everyone is admitted), getting into classes through a rushed process, bare bones participation requirements, admissions and financial aid working closely together without a meaningful division of duties, minimal rigor for receiving passing grades, clearly illiterate students in classes who cannot write a coherent sentence, low graduation rates and poor loan repayment rates (“making progress” per college scorecard, and similar measures). These shortcomings should be addressed through gainful employment, do no harm or administrative capability standards. For schools with a large volume of borrower defense claims, you should be looking at their loan repayment rates, job placement rates and graduation rates to determine if this is a systemic issue or not, then taking the appropriate action based on that. As you are starting to do now, you should also warn students in advance if any of these measures are low. In short, a borrower should not be able to claim a defense of their entire loan if a large part of it was sent to them as a stipend for indirect cost.