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Education Department says troubled private colleges will be on the hook for costs to U.S. taxpayers

The U.S. Department of Education in Washington, D.C.
Caroline Brehman | CQ-Roll Call, Inc. | Getty Images

The U.S. Department of Education announced on Wednesday that it would take steps to hold the owners of certain private colleges that closed or defrauded students accountable for taxpayer losses.

Companies that own these schools could be on the hook for liabilities including government costs for closed school discharges and borrower defense to repayment claims, under which former students get their federal loans canceled because of problems with their education.

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“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, in a statement.

“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,” Kvaal added.

Under the policy, organizations or entities could be responsible for financial losses if they have at least a 50% interest in a non-public college.

Since President Joe Biden took office, the Education Department has approved more than $17 billion in targeted loan debt forgiveness for more than 700,000 borrowers who attended problematic colleges.

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