November 29, 2023

The US Department of Education (ED) has issued implementation guidelines Law on Higher Education Institutions provision which allow the Minister of Education to demand leaders private colleges do not operate with the financial responsibility to take personal responsibility for unpaid debts.Minister of Education Dr.  Miguel CardonaMinister of Education Dr. Miguel Cardona

The guidance clarifies when ED may require individuals to take personal responsibility for allowing their schools to participate in federal financial aid programs. This allows the ED to pursue these people for liabilities that the schools have not paid, including costs resulting from closed schools and discharges for the defense of debtors. ED expects to be most likely to impose such requirements on institutions with the greatest financial risk.

“The Biden-Harris administration is canceling the loans of more than a million borrowers defrauded by for-profit colleges. But too often the owners and executives of these colleges avoid responsibility,” said Deputy Minister James Kvaal. “Congress has given the Department the authority to hold college owners and operators personally liable for these losses under certain circumstances, and we will use that authority to hold them accountable, protect vulnerable students, protect taxpayer dollars, and deter future risky behavior.”

ED will now initiate such determinations when schools’ contracts to participate in the program are renewed or when ownership changes.

The guidance included factors that ED may consider in making these determinations, including civil or criminal lawsuits, settlements, or disciplinary or legal actions related to federal student aid or claims of dishonesty, fraud, misrepresentation, consumer harm, or financial misconduct; significant compliance issues; or an executive compensation or bonus structure that may significantly affect the school’s financial health.

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