The U.S. Department of Education (Department) is responsible for minimizing the risk that Federal funds will be lost when an Institution of Higher Education (IHE) stops participating in the programs authorized by Title IV of the Higher Education Act of 1965, as amended. When an IHE stops participating in Title IV programs, either voluntarily or involuntarily (due to closure or other circumstances), the closeout procedures it is required to perform and the liability assessment processes Federal Student Aid (FSA) performs, identify any program funds the IHE is required to return to the Department. If the required closeout procedures are not completed, an alternative assessment is conducted by FSA to determine whether the IHE must return program funds to the Department. We performed our inspection to determine the results of the Department’s processes for assessing and recouping liabilities from IHEs that closed from October 1, 2020, through September 30, 2023. We performed our inspection to determine the results of the U.S. Department of Education’s (Department’s) processes for assessing and recouping liabilities from IHEs that closed from October 1, 2020, through September 30, 2023.
We found that the Department has processes in place for assessing and recouping liabilities from IHEs that close. Based on these processes FSA’s School Participation Divisions (SPD) determined that as of March 2024, 47 of the 161 IHEs that closed between October 1, 2020, and September 30, 2023, should repay the Department a total of $34,593,135 in Title IV program funds. These processes also led to FSA’s SPDs assessing liabilities totaling $30,507,138 during the period we reviewed for 13 of the 19 closed IHEs we selected for review. The Department’s Office of Finance and Operations recouped a total of $812,998 of those liabilities from 8 of the 13 IHEs. However, despite these efforts, we found that five of the seven sampled SPDs that oversee IHEs and that we included in our review did not always follow the established processes to timely determine whether liabilities should be assessed against IHEs that closed. These processes are necessary to timely determine closed schools’ liabilities and to make those determinations in a manner consistent with established guidance. We also found that four of the seven SPDs did not always comply with procedures requiring staff to send notices to FSA stakeholders regarding an IHE’s closure or pending closure. Further, the seven SPDs included in our review did not always comply with procedures requiring staff to send a Close-Out Audit Reminder letter to closed IHEs within 10 business days after closure.
We did not identify any issues with the Department’s actions to recoup liabilities from the IHEs we sampled in our review.
We made six recommendations to strengthen the policies, procedures, and processes that the Department has in place for assessing liabilities against IHEs that closed and to ensure required notifications are sent to appropriate stakeholders and IHEs about closure and the pending closure of IHEs.
See other work related to the Federal Student Aid Programs.