New Watchdog Report: ED Needs to Streamline Process for Students Impacted by School Closures

08.10.22

New Watchdog Report: ED Needs to Streamline Process for Students Impacted by School Closures

WASHINGTON - Today, Chairman Robert C. "Bobby" Scott released a new report from the Government Accountability Office (GAO), which found that student loan borrowers whose schools close need more timely and complete information to know if they are eligible to have their loans discharged.

Under closed school discharge, student loan borrowers-who suffer school closures and do not complete their education elsewhere-may be eligible to have their loans discharged. Unfortunately, the GAO found that, between 2010-2020, the Department of Education could not identify approximately half of school closures until one or more months after the closure because the Department was not notified by the closing school as required. This means that impacted borrowers were not told about their loan discharge options until months later. Moreover, the GAO report found that loan servicers often used incomplete or confusing information to notify borrowers about the loan discharge process.

"Over the past decade, abrupt closures of large for-profit college chains have left hundreds of thousands of students with debt they cannot repay and worthless academic credits they cannot use. The closed school discharge provision of the Higher Education Act was designed to support students whose colleges closed,"said Chairman Scott.

"Unfortunately, the previous Administration abandoned the automatic discharge process put in place by the Obama Administration, adding to the confusion and distress students experience when their schools close. In addition to restoring the automatic discharge process, the Biden Administration should implement the GAO's recommendations and further streamline the process for students to ensure they can quickly access the relief to which they are legally entitled."

This report expands on a 2021 GAO report, which showed how borrowers who are affected by school closures suffer financially when they do not have access to swift and automatic loan discharge.

The Higher Education and Workforce Investment Subcommittee held a hearing last September on the need for swift automatic loan discharge to support borrowers.

To read the full GAO report, College Closures: Education Should Improve Outreach to Borrowers about Loan Discharges, clickhere.

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