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Student Defense Investigation Shows Department of Education’s Failure to Collect Unpaid Institutional Debts is Costing Taxpayers Billions

FOR IMMEDIATE RELEASE:
August 10, 2022

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Student Defense Investigation Shows Department of Education’s Failure to Collect Unpaid Institutional Debts is Costing Taxpayers Billions 

Student Defense today released a new report, The Growing Missing Billion: Growing Failure by the Department of Education to Collect Unpaid Debts from Colleges is Costing Taxpayers Billions. The new analysis finds that the U.S. Department of Education has made no progress towards collecting more than $1 billion in unpaid liabilities owed by predominantly for-profit colleges and universities. Instead the amount of unpaid liabilities has grown by more than $174 million, meaning colleges and universities now owe taxpayers at least more than $1.375 billion in arrears.

The analysis is a follow-up to Student Defense’s The Missing Billion report, which scrutinized the Department’s practice of opposing individual borrowers in bankruptcy proceedings while allowing school executives off the hook for these outstanding debts. The Missing Billion found the Department had not barred any schools from participating in federal student aid programs, even when they were found to be out of compliance with federal law.

“It is really unbelievable that the government allows institutions off the hook for paying billions in outstanding liabilities while it fights seniors and distressed student borrowers who are already struggling to repay their student loans,” said Student Defense President Aaron Ament. “The Department does not have an unlimited runway to collect these debts — the longer they wait, the closer we get to taxpayers picking up the bill for the debts of institutions drawing millions of dollars in government funds. The lack of accountability sends the wrong message to bad actors and I hope the Department acts quickly to remedy this situation.”

In addition to allowing the amount of unpaid liabilities to grow, the Department has also refused to hold any former executives personally accountable for the fraud committed by these schools. The agency has also failed to assess any new penalties on schools whose closures or misconduct led to loan discharges granted over the last several years, which the Department estimates to be roughly $8 billion.

A full copy of the report can be found on the Student Defense website.