The U.S. Department of Education has failed to collect more than $1 billion in debt from nearly 1,300 colleges, according to a report from a nonprofit student advocacy group.
According to the National Student Legal Defense Network’s report, the debt was calculated as of February, citing documents it obtained over the past two years through Freedom of Information Act requests.
The report, released last Thursday, blasted the department for failing to use the same aggressive methods on colleges that it applies to collect student loans.
“While the Department aggressively attempts to collect from borrowers, institutions and their owners and executives walked away from more than a billion dollars owed to taxpayers,” the report said.
“Meanwhile, the Department’s use of preventative measures to protect taxpayer interests—such as enhanced financial monitoring and requiring institutions to post sureties to guard against losses—have proven ineffective at preventing harm to students and taxpayers alike.”
The student nonprofit groups chief counsel, and one of the authors of the report, Dan Zibel, told CNBC the problem is clear.
“The department continues to spend a lot of time, energy and money on its collection systems from student borrowers,” he told the news outlet.
“Yet there is nothing happening to collect debt from institutions, owners and executives of for-profit colleges. That sort of disparity in the way the department treats them is grossly unequal.”
According to Zibel, among the reasons why the schools owe money is the improper distribution of a student aid program designed to lessen the financial strain of attending higher education.
The department each year provides more than $115 billion in funding to colleges participating in Title IV of the Higher Education Act students funds program.
The money gets distributed to eligible students who have to repay the department directly, the report states. If a college improperly administers the funds to ineligible students or overdraws funds, it must repay the department for wasted costs, according to the report.
One tactic the department uses to hold colleges accountable for their debt is to cut them off from federal funding, according to the report. However, the report said nearly 200 of the almost 1,300 schools continued to receive Title IV funding during the 2019-2020 academic year.
“We hope that the department will do everything in its power to protect students and borrowers, and that means holding bad actors to account and rethinking how it treats struggling student loan borrowers,” Zibel told CNBC.
Department of Education press secretary Kelly Leon told CNBC the agency is “committed to improving our policies and practices to better hold colleges accountable for their actions and to provide borrowers with fair and streamlined access to the benefits to which they are entitled.”
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