The Education Dept. insists you repay all your student loans but isn't collecting about $1 billion owed by colleges, report finds

college graduates — Brad Doherty/AP Images

The National Student Legal Defense Network found 1,300 colleges owe $1.2 billion to the Education Dept.
Most of it is held for-profit colleges that shut down in past years over allegations of fraud.
Meanwhile, the department is preparing to resume student loan collections in October.
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Once the payment pause on student loans lifts in October, the Education Department will resume efforts to collect student debt from 43 million borrowers across the country. But according to a new report, collection of debt held by higher education institutions - and owed to taxpayers - doesn't appear to get similar treatment.

The nonprofit National Student Legal Defense Network released a report last week that found as of February 2021, nearly 1,300 higher education institutions owed approximately $1.2 billion to the Education Department. Most of the debt is held by for-profit schools, with the largest outstanding debt of over $244 billion owed by the defunct Vatterott College.

"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.

The report noted that even thought the department has a "wide array" of methods to require institutions to repay their debt, it has failed to make use of those tools, allowing debt to go uncollected.

Department of Education Press Secretary Kelly Leon told Insider in a statement that the department "is committed to improving our policies and practices to better hold institutions accountable for their actions and to provide borrowers with fair and streamlined access to the benefits to which they are entitled."

Here are the other main findings from the report, obtained by the group through Freedom of Information Act requests:

About 200 of the 1,300 institutions with debt still received Title IV funding from the government;
The department has recertified institutions owing debt for participation in student aid programs;
And the department's failure to collect has cost at least $218 million because the statue of limitations on collections had expired.

The report added that the department has not collected relatively small debt amounts. For example, the for-profit University of the Rockies owed $883,613 in 2019 that the department had not collected as of the data collected in the report.

President Joe Biden's Education Department has begun to act on fraudulent behavior of for-profit schools through cancelling student debt for some defrauded borrowers. Most recently, Education Secretary Miguel Cardona cancelled student debt for 18,000 borrowers defrauded by now-defunct ITT Technical Institutes, totaling to about $500 million in debt relief.

But even as institutions still owe taxpayers billions in debt, the Education Department is preparing to transition borrowers back into repayment in October - something lawmakers have advocates are strongly urging against.

"When we organize together, fight together, and persist together, we win together," Massachusetts Sen. Elizabeth Warren wrote on Twitter on Sunday. "We've all got to raise our voices and call on the Biden administration to extend the pause on student loan payments and #CancelStudentDebt."

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