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# U.S. Department of Education Announces Steps to Hold Institutions Accountable for Taxpayer Losses

# U.S. Department of Education Announces Steps to Hold Institutions Accountable for Taxpayer Losses

March 23, 2022

**Contact:  **press@ed.gov

                                    -        
The U.S. Department of Education (Department) today announced updated steps to ensure that companies that own institutions are held responsible for funds owed to the federal government, including liabilities arising from closed school loan discharges and borrower defense to repayment claims. This will ensure that even if a school closes, the Department can recover funds from entities that had a direct or indirect ownership interest in the school instead of leaving the bill to taxpayers. These new procedures will protect taxpayers, students, and borrowers through incentivizing better performance by the schools and allowing the Department to recover liabilities from corporate owners.  

“If a company owns, controls, or profits from a college,  it should also be on the hook if the institution fails students,” said Under  Secretary of Education James Kvaal. “Today’s steps will ensure taxpayers aren’t  held liable for colleges that fail their students or close their doors,  especially without the opportunity for students to finish their courses of  study.”

Under this policy, any organization or entity with at  least a 50 percent interest in a non-public college that meets certain other  conditions will generally join that institution’s leadership in signing the  school’s Program Participation Agreement (PPA). The additional signature will  be required in cases where the institution has not met financial responsibility  requirements, where the school is provisionally certified to participate in the  federal financial aid programs, and for schools with significant liabilities  for borrower defense or other findings, among other circumstances. This  approach will also apply when a group of related owners together hold at least  a 50 percent interest. Private colleges will be required to obtain the  additional signature(s) when their PPAs are recertified or when undergoing a  change in ownership.

"Too often the Department has seen those who reap  the rewards of colleges' actions when things go well leave us holding the bag  when things go badly,” said Richard Cordray, head of Federal Student Aid. “We  will be vigilant in our oversight and enforcement of this new  policy.

The additional signature(s) will ensure that sole or  controlling entities—and not just their defunct institutions—are held  responsible for losses to taxpayers when institutions close. These signatures  will help to avoid the substantial losses taxpayers have shouldered when  colleges close.

College closures have left many students academically  stranded, often bearing debt for an education they were unable to complete or  that did not live up to the school’s promises. The Biden-Harris Administration  is also taking steps to ensure that students are better protected in the event  of school closures. Since the start of the Administration, the Department has  granted $3.2 billion in closed school and  borrower defense discharges to borrowers who attended ITT Technical Institute,  Corinthian Colleges, and other institutions. In February 2022, the Department announced the first  approved borrower defense claims against  an open institution, DeVry  University, and it will seek to recoup the costs of the discharges from DeVry.  Through these and other actions the Department has approved over $17 billion in  targeted loan debt for more than 700,000 borrowers.

The Department is also engaged in rulemaking on a variety  of issues related to affordability and student loans, including proposals to  expand access to closed school discharge and borrower defense, and on  institutional and programmatic eligibility. Additionally, the Department  reestablished the Office of Enforcement within Federal Student Aid to investigate and take action against institutions  that pose widespread risks to students and taxpayers.

For more information on the policy related to owner  signatures, please click  here. For more on the Department’s rulemaking, click here. 
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