Notices informing student-loan borrowers of debt relief have contained 'grammatical errors and incomplete sentences' and looked like a scam, a government watchdog report finds

• When a school shuts down, student-loan borrowers are often entitled to debt forgiveness.
• But a new GAO report found issues with communicating that relief to borrowers.

When a school shuts its doors, the students who took out loans are often entitled to get that debt erased. But poorly-written notices from loan companies might make borrowers think that relief is a scam.

On Wednesday, the Government Accountability Office (GAO) released a report analyzing closed-school discharges, or debt relief following a school closure for borrowers who do not complete their education elsewhere. It found a host of issues with actually letting the borrower know they could get their dept wiped out.

For example, the GAO found the Education Department is often slow in identifying school closures, meaning it might take a long time for borrowers to know they qualify for relief, and there's a lack of outreach toward those at risk of default, presenting an extra risk to those borrowers.

But another problem arises with the notice of debt relief itself. Not only will loan companies fail to describe eligibility for relief or relevance of the notice to borrowers — the notices will often include "grammatical errors and incomplete sentences," the report said. The errors can make the notices look scammy to borrowers, leading them to miss out on forgiveness.

"Education expressly warned borrowers to be skeptical of loan letters containing spelling and grammatical errors," the report said. "These errors could lead borrowers to think the letter was a scam and thus potentially untrustworthy. Two organizations representing student borrowers said that so much misinformation is directed at borrowers during a college closure that it is hard for borrowers to know whom to trust."

The studentaid.gov website has a list of ways a borrower can identify scams, one of which includes communications that do not have proper grammar or spelling. "If you notice unusual capitalization, improper grammar, or incomplete sentences in the communication you receive, that's likely a red flag that the company is not affiliated with ED," the website said.

The problem is, some legitimate communications attempting to inform borrowers of closed-school discharges are actually affiliated with the department and have the kinds of errors the department flagged as signs of a scam.

The GAO noted that the department does not typically provide loan companies with guidance on the content of notices and has only provided templates in "exceptional circumstances," and it recommended that Federal Student Aid develop guidance on the content of discharge notices. Federal Student Aid Director Richard Cordray responded in a letter that the agency has provided a letter template to loan companies to address the issues raised in GAO's report.

Both lawmakers and advocates have been working to ensure borrowers do not get left in the dust once a school shuts down, leaving them with big student debt loads. Advocacy group Student Defense in 2020, along with three state attorneys general, called for the Education Department in 2020 to restore automatic closed-school discharges, implemented under former President Barack Obama but repealed under former President Donald Trump.

And Chair of the House education committee Bobby Scott wrote in a statement following GAO's findings that "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."

"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," Scott added. "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."

Have you received a notice from a student-loan company with grammatical and/or spelling errors? Reach out to Ayelet Sheffey at asheffey@insider.com.