For-profit colleges, be warned: DOE is set to hold leaders personally liable for reckless spending

To curb the deepening student loan crisis, the Department of Education aims to impede the abuse of federal funding at for-profit colleges by forcing school leaders to assume personal liability for unpaid institutional debt.

In the midst of President Joe Biden’s Supreme Court defense of student loan relief, the Department of Education formally announced it would personally pursue leaders of for-profit institutions to pay unanswered debts their institution incurred from reckless spending and non-compliance with federally allocated financial aid dollars.

The Department noted in its press release that students “cheated by for-profit colleges” motivated their vigilant direction, leveraging Section 498(e) of the Higher Education Act to hold schools “accountable, defend vulnerable students, protect taxpayer dollars, and deter future risky behavior.” 

The Department will deliberate on dumping personal liability of institutional debts to individuals on a case-by-case basis typically upon a for-profit school’s program participation renewal or a change in ownership. They will review a particular school’s history of lawsuits regarding federal student aid fraud or consumer harm, unpaid liabilities stemming from significant audit findings and egregious spending on executive salaries and bonuses.

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A for-profit college’s closure has hitherto mostly burdened state funding and the enrolled students, which is why the Department believes it “will not only be protecting students and borrowers but also fulfilling Congress’ statutory direction” to “protect the financial interests of the United States.”

As the Biden administration fights to relieve Americans of student debt, it also believes it must take a proactive step to manage a student loan resurge. Their solution: impeding for-profit leaders’ likelihood of abusing federal funding and securing the tuition of suckered-in students.

Alcino Donadel
Alcino Donadel
Alcino Donadel is a UB staff writer and Florida Gator alumnus. A graduate in journalism and communications, his beats have ranged from Gainesville's city development, music scene, and regional little league sports divisions. He has triple citizenship from the U.S., Ecuador, and Brazil.

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