The U.S. Department of Education announced its plan to hold private college owners liable for unpaid student loan debts to the federal government. The announcement comes two days after advocating for student loan debt forgiveness before the U.S. Supreme Court.
In a press release, the Department stated that it would require owners that “fail to operate in a financially responsible way” to bear personal liability for unpaid federal student loan debts.
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Furthermore, the Department will decide on a case-to-case basis whether to require college owners to assume personal liability. The decisions will be made either when an institution’s program participation agreement undergoes a change in ownership or is up for renewal. The Department also published guidance on Thursday that it will block certain schools from participating in financial aid programs unless those school put their finances on the line.
Rick Cordray, the chief operating officer of Federal Student Aid, said individuals who control schools and reap substantial profits are responsible for running healthy institutions. The Department would make those individuals accountable if they took advantage of the students and the government’s Title IV funds.
The U.S. Department of Education has the authority to require private college leaders to reimburse the government for unpaid federal student loan debt. (Photo: Business Insider)
See: What will happen if you stop Student Loans payments?
Yahoo! Finance reports that the Higher Education Act gives the Education Secretary authority to oblige private college owners for default student borrowers. It should be noted that even before issuing the new guidance, the Department has the legal authority to require college owners and administrators to reimburse the government for unpaid federal student loan debt. However, the practice was never enforced before.
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