Institutions owe $1.2 billion to Education Department

Nearly 1,300 colleges owe approximately $ 1.2 billion in debt to the Department of Education. Even so, the department is more aggressively tracking debts held by student loan borrowers, according to a recent report by the National Student Legal Defense Network. Findings agree with experts’ experience navigating the student loan system, but others argue that the report lacks a complete picture of the department’s debt collection efforts.

Student Defense filed with the Freedom of Information Act division in February for a full list of all institutions with any financial liability or unpaid obligations that remain unpaid, whether or not they are still in Title IV programs. They also asked for the amount of these liabilities and the date of their valuation.

Approximately $ 574 million of outstanding debt is from 2018 or earlier, with some debt listed as being more than 10 years old. According to the report, around $ 218 million was lost due to a five-year statute of limitations on the department’s debt collection authority, according to the report.

“I don’t think we were counting on a figure in excess of a billion dollars,” said Daniel Zibel, vice president and chief counsel at Student Defense and one of the authors of the report. “If you look at the diagram, there are some pretty old ones. It’s surprising to see how the department just makes these things happen. “

It was unclear what exactly the debts of the individual institutions were – that was not part of the information that the student defense received from the department, said Zibel. They can relate to exam findings, layoffs from closed schools, fines, improper withdrawals from Title IV funds, or borrower defense claims.

Of the 1,300 institutions listed in the report, only about 200 are still participating in Title IV programs. The vast majority of the listed institutions are for-profit institutions, and the institution with the largest outstanding debt is the now-closed Vatterott College, which owes the department over $ 244 million.

Several states are also listed: Arizona, Florida, and West Virginia combined owe the department approximately $ 885,000. And some charitable institutions are also listed with outstanding debt, including Coastal Carolina University, University of Southern California, University of Alabama at Birmingham, University of North Carolina at Charlotte, and University of Illinois Chicago.

Inside Higher Ed reached out to these universities for comment – only the University of Illinois Chicago and Coastal Carolina University responded.

“In August 2017, liability was found during a grant review conducted by the Department of Education for the 2014-15 and 2015-16 academic years,” said a Coastal Carolina spokesman. “CCU paid the liability on September 22, 2017, nearly five months prior to the date stated in the report.”

The University of Illinois Chicago presented the faculty with a proposal in 2018 to clarify their exam results over a five-year period. However, if the department finds that UIC has failed to meet its obligations, it may, according to a letter sent to UIC by the department, issue a reset to reclaim the $ 1.2 million the university owes.

Zibel said the student defense analysis is based on exactly what it got from the FOIA request, and any errors in the data are the department’s fault.

A ministry spokesman did not comment on possible errors in its data, but said it is “committed to improving our policies and practices to better hold institutions accountable for their actions and to give borrowers fair and optimized access to the benefits.” to enable “. to which they are entitled. “

In addition to describing the debts that the department’s institutions owe, the report highlights several cases where the department has used aggressive collection tactics to obtain funds from student loan borrowers. It discusses the case of a woman named Ronishia who filed for bankruptcy protection in 2019. According to the report, the department “steadfastly opposed any payment of its debts in a series of legal disputes,” then brought the matter to court in March.

“While the department is aggressively trying to collect from borrowers, institutions and their owners and executives have withdrawn more than $ 1 billion in taxpayers,” the report said.

However, this creates a false dichotomy, said Nicholas Kent, senior vice president of Policy and Regulatory Affairs at Career Education Colleges and Universities – the organization that represents for-profit colleges – creating the impression that the department can only track debt that comes from institutions be held or individuals, but not both.

“As former employees of the department, the authors should acknowledge that the federal government has a legal obligation on taxpayers to collect past due debts from both borrowers and institutions, and indeed does so on a regular basis,” Kent said. “Unfortunately, since the report is based on selected data, it is only intended to misinform the public and spread a false story that institutions are being let off the hook at the expense of students in difficulty.”

The report doesn’t shed much light on the extent to which the department is doing collections with institutions other than a few specific indications that it doesn’t – by not collecting small debts from Ashford University and not using letters of credit from Fortis College to pay the Meet institution liabilities and recertify institutions to continue participating in student aid programs despite their debts.

However, the report appears to be on par with what Adam Minsky, a student credit attorney specializing in, saw during his time assisting student borrowers.

“I know the department has generally been quite aggressive in the past when it came to collecting overdue student debts,” Minsky said. “I also understand that they have not shown the same level of concern to institutions in the past. Therefore, many schools of predators are allowed to stay in business for some time before countering inappropriate practices. “

Overall, Zibel hopes the report will encourage the department to review how it holds institutions accountable for taxpayer-funded losses and how it treats individuals during bankruptcy proceedings. And the report certainly raises questions about why the two cases appear to be treated differently, Minsky said.

“If they claim that anyone who owes debt should pay it back, why are they extremely aggressive in going after student loan borrowers and comparatively much less up when it comes to institutional debt?” Minski said.

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