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New Education Department Rules on Failing For-Profit Colleges

Inside Higher Ed

Scott Jaschik
March 24, 2022
The Education Department announced new measures that will hold companies that own for-profit colleges that fail responsible for the funds owed to the federal government, including liabilities arising from closed-college loan discharges and borrower defense to repayment claims. This will ensure that even if a college closes, the department can recover funds from entities that had a direct or indirect ownership interest in the college instead of leaving the bill to taxpayers.
“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 nonpublic college that meets certain other conditions will generally join that institution’s leadership in signing the college’s Program Participation Agreement. The additional signature will be required in cases where the institution has not met financial responsibility requirements, where the college is provisionally certified to participate in the federal financial aid programs, and for colleges with significant liabilities for borrower defense or other findings, among other circumstances.