Despite granting billions of dollars of debt relief to students who attended the now-defunct Corinthian Colleges, the Department of Education has determined that it lacks the legal authority to collect penalties from the former owners and executives of the for-profit institution.

Shortly after the Department forgave the federal loans of Corinthian students earlier this month, Representative Bobby Scott (D-VA), Chairman of the House Committee on Education and Labor, sent a letter asking the Department “to hold owners, executives, and board members of defunct for-profit and converted for-profit colleges individually responsible for liabilities of the institution to the federal government.” 

While the Department agreed that such officials should be held liable, the agency stated that they could not hold Corinthian’s owners liable because they had not co-signed the program participation agreement (PPA) that would have required them to assume the responsibility for losses incurred by their institutions. However, the Department noted that current Title IV regulations limit the ability of an individual who formerly owned or controlled a closed school with unpaid liabilities to assume ownership or control of a new institution. 

According to the Department, in the future, the agency will seek to identify high-risk institutions to determine if it is appropriate to require individuals with ownership or substantial control to co-sign the PPA, thus assuming liability from losses in the event of a closure. The Department took regulatory steps to make that possible in March.