Federal Appeals Court Dismisses Challenge to 2019 Student Loan Discharge Rules

A federal appeals court dismissed a challenge to 2019 Education Department rules that impose stricter standards for discharging federal student loans through the Borrower Defense to Repayment program. U.S. Court of Appeals for the Second Circuit ruled on Wednesday that the 2025 One Big Beautiful Bill Act, signed by President Trump, restored and codified the 2019 rules.

Because the standards now rest on statutory authority rather than agency regulation, the court held that the Administrative Procedure Act no longer provides a basis for the challenge.

The Borrower Defense to Repayment program allows borrowers to seek discharge of federal Direct Loans when a school engaged in misconduct such as misrepresenting job prospects or admissions statistics. The Education Department states that approved claims result in cancellation of remaining loan balances and possible refunds of prior payments.

The 2019 rules added requirements that borrowers prove the school knew of the misrepresentations, demonstrate financial harm separate from the loans themselves, and submit corroborating documentary evidence. Borrowers must also file claims within three years of leaving the school.

The Project on Predatory Student Lending, which led the challenge, said in a statement on X that the decision is a setback but not the end of borrower defense efforts. The group noted that other legal avenues remain available. The Second Circuit observed that the 2025 legislation restored the 2019 rules as they existed on July 1, 2020, including the three-year filing deadline that a lower court had previously blocked.

The court concluded that Congress immunized the rules from further Administrative Procedure Act challenges.