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MEMORANDUM

Date: March 16, 2016

To: U.S. Department of Education 

From: Eileen Connor and Noah Zinner, Negotiators for Legal Assistance Organizations 

That Represent Consumers

Re: Issue Paper 11 – Department’s Authority To Compromise Debts

In our memo of February 2, we made a technical proposal to increase the amount of debt 

the Department may compromise without Department of Justice (DOJ) approval from 

$20,000 or less to $100,000 or less, to conform the regulations to the changes made to the 

Federal Claims Collection Act in 1990. 

We appreciate that the Department accepted this proposal. We propose two minor 

changes, below, to address the following issues: 

1) In its proposal regarding section 30.70(e)(1) (currently section 30.70(h)), the 

Department removes the reference to older loan programs that predate the FFEL 

Program. Because many legal aid clients continue to owe outstanding debts under 

older loan programs, we think it important that the Department retain the

authority to compromise older loan program debts under this provision.

2) In its proposal regarding section 30.70(e)(1), the Department also proposes to 

insert a requirement that it apply the standards under 31 CFR parts 902 and 903 in 

evaluating debt compromises. The Department is not bound by these standards 

under current section 30.70(h). This proposal would impose new limits to the 

Department’s authority and discretion to compromise debts.

While these standards may be prudent in most circumstances, they may hamstring 

the Department’s ability to compromise debts in situations that it deems 

appropriate. We therefore propose that the Department’s proposal be modified to 
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maintain the Department’s authority to compromise debts without applying these 

standards.

Proposal: Department’s proposals are in red, our proposals are in blue.

34 C.F.R. § 30.70 How does the Secretary exercise discretion to compromise a debt 

or to suspend or terminate collection of a debt? 

. . . .

(h) Notwithstanding paragraphs (b) through (f)(e) (1) Subject to paragraph (e)(2), under 

the provisions of this section31 CFR part 902 or 903, the Secretary may compromise a 

debt in any amount, or suspend or terminate collection of a debt, in any amount, if the 

debt arises under the Guaranteed Student Federal Family Education Loan Program 

authorized under title IV, part B, of the Higher Education ActHEA, the William D. Ford 

Federal Direct Loan Program authorized under title IV, part D of 1965, as amendedthe 

HEA, or the Perkins Loan Program authorized under title IV, part E, of the Higher 

Education Act of 1965, as amended. HEA, or any other loan programs authorized under 

title IV of the HEA. In compromising a debt under this paragraph, the Secretary may 

apply the standards of 31 CFR part 902 or 903.

(i(2) The Secretary refers a proposed compromise, suspension or termination of 

collection of a debt to the General Accountingthat exceeds $1,000,000 and that arises 

under a loan program described in paragraph (e)(1) to the Department of Justice for 

review. The Secretary does not compromise, suspend, or terminate collection of a debt 

referred to the Department of Justice for review until the Department of Justice has 

provided a response to that request.