Department of Education lets colleges off the hook for $1 billion owed to taxpayers

CNN

Posted on Jun 24, 2021 9:26 AM

Updated June 24, 2021 10:09 am

Originally published: Jun 24 21 10:16 ET

Posted by Katie Lobosco on CNN

(CNN) – The federal government has failed to collect more than $ 1 billion in fines and other monies owed by colleges, most of which are owed by for-profit institutions, according to a report released Thursday by a nonprofit advocacy group .

There are nearly 1,300 colleges that owe the Department of Education money, according to the National Student Legal Defense Network’s review of a number of documents the National Student Legal Defense Network received over the course of two years through inquiries under the Freedom of Information Act.

The group, formed by former Education Department officials, claims the agency has not used all of its tools in years to raise money from colleges and their owners while requiring students to keep paying their debts.

“The Department of Education continues to spend time and money countering struggling student borrowers while doing nothing to collect more than $ 1 billion that colleges and for-profit companies owe the government,” said Dan Zibel vice, vice president and chief counsel the National Student Legal Defense Network, which oversaw higher education litigation for the Obama administration.

In a statement to CNN, Education Department spokeswoman Kelly Leon said the agency “has an obligation to improve our policies and practices to better hold institutions accountable for their actions and to provide borrowers with fair and optimized access to the benefits to which they are entitled “. entitled.”

The missing $ 1 billion

According to the report, there are several reasons these institutions owe money to the Ministry of Education. Some are fined for misconduct. Others owe money for loan relief resulting from the closure or for scamming students.

When a college closes or misleads students with false claims about employment rates, it may repay the debt in lieu of the borrower.

The Biden government recently canceled $ 1.5 billion in loans to borrowers who participated in the now defunct ITT Tech and thousands more who were scammed by other for-profit colleges but President Joe Biden did defies demands from its Democrats to cancel additional debt.

The government can cancel a borrower’s debt before the school repays the money, but the process slowed under former Education Secretary Betsy DeVos trying to change the forgiveness rules.

One of the tools the Education Department has to collect the schools’ outstanding debts is to separate them from federal funding, which allows them to provide student loans and grant grants. However, according to the report, nearly 200 of those schools continued to receive federal funding in the 2019-2020 school year.

Comprehensive student debt relief

In the past 15 months, the government has not withdrawn anything from federal student debt borrowers due to a pandemic relief that expires October 1. Usually, however, she uses various tactics to collect from the borrowers, ranging from wage and tax garnishments to combating debt relief in bankruptcy courts.

Borrowers currently owe the government $ 1.5 trillion in student debt.

Democrats like Senate Majority Leader Chuck Schumer and Massachusetts Senator Elizabeth Warren are calling on Biden to cancel $ 50,000 in federal student loan debt per borrower.

This week, more than 60 Democrats also called on Biden to extend the pandemic hiatus in student loan payments from October 1 to at least next April.

Biden, who said during the campaign he would support the cancellation of $ 10,000 per borrower, has resisted pressure repeatedly since taking office, arguing that the government is helping the people who have gone to “Harvard and Yale and Penn” should not forgive any debt.

But the president has directed Education Minister Miguel Cardona to write a memo to the executive judiciary to cancel debt. It would be an unprecedented move, but a memo from attorneys at Harvard Legal Services Center and its Project on Predatory Student Lending says the Department of Education has authority to do so.

Biden did not include a student debt relief provision in his proposed US $ 1.8 trillion family plan, which calls for community college to be made free and Pell grants to be expanded for low-income college students.

More progressive members of the Democratic Party have been calling for student debt relief for years. Independent Senator Bernie Sanders of Warren and Vermont put forward forgiveness plans when they ran in the Democratic primary.