The Plans of the Education Department on Unpaid Student Loan Debt
The U.S. Department of Education has announced plans to require college leaders to assume personal liability for unpaid student loan debts left unpaid to the federal government, on a case-by-case basis.
They said they may block certain schools from participating in federal financial aid programs if necessary. The department said that it will require leaders that “fail to operate in a financially responsible way” to assume personal liability for unpaid student loan debts. The department also stated that they may pursue those individuals for the cost of liabilities that are not otherwise paid for by their institutions, including those stemming from closed schools and borrower defense discharges, Yahoo reported.
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The Biden administration argues that the Higher Education Act gives the Education Secretary authority to put private college owners on the hook for student borrower defaults. However, the claim could face legal challenges. To evaluate financial responsibility, the Education Department will consider factors such as fraud-based litigation filed against the schools, settlements and disciplinary actions taken by government authorities, significant regulatory compliance issues, and executive compensation.
The Education Department’s new measure about unpaid student loan debts comes in addition to the administration’s cancellation of student loan debt for over a million borrowers who took out loans for now-shuttered for-profit colleges. It also follows a settlement of claims that the Education Department announced last summer that would give roughly 264,000 student loan borrowers from for-profit schools approximately $7.5 billion in debt relief.
The move is significant as it sends a message to private college leaders that they may face consequences for financial mismanagement that results in unpaid student loan debt to the federal government. The move may also encourage greater accountability for colleges and universities that have benefited from federal financial aid programs while protecting vulnerable students and taxpayers.
It remains to be seen how the Education Department’s new measure will be implemented and enforced, but it represents a step forward in addressing the unpaid student loan debt crisis in the United States.
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