Federal Student Aid’s Processes for Identifying At-Risk Title IV Schools and Mitigating Potential Harm to Students and Taxpayers

We determined that FSA had adopted and implemented new tools and processes in this area in response to the April 2015 closure of one of the largest for-profit education companies in the United States, but further improvements were needed. We reported that FSA needed to improve its processes for reviewing a school’s composite score calculation and any related composite score appeal made by a school. We further noted that FSA needed to implement controls to prevent schools from manipulating composite scores to avoid sanctions or increased oversight by FSA. We concluded that improvements in these areas could better protect students and taxpayers. Specifically, unexpected or abrupt school closures can have significant adverse effects on large numbers of students, including potentially being displaced from their educational program before completion, having credits that cannot transfer to another school, incurring significant student loan debt without obtaining a degree or certificate, and significantly diminished job prospects. Taxpayers are also adversely affected when those types of school closures result in significant volume of loan discharges. We pointed to the financial responsibility provisions that were to have gone into effect in July 2017 as part of the borrower defense regulation changes as including tools to improve the Department’s oversight of schools.