What's Next With the Renegotiation of Borrower Defense and Gainful Employment Rules

By Joan Berkes, Policy & Federal Relations Staff

Last week, the Department of Education (ED) announced its intent to re-negotiate two sets of rules governing controversial topics:

  • Borrower defense to repayment, which includes financial instability triggers, misrepresentation, and institutional penalties; and

  • Gainful employment.

The first step in any negotiated rulemaking process is to solicit public input on specific issues to be negotiated. Once ED has reviewed that public input, it will refine and publish the topics of negotiation with a request for nominees to form the negotiating committee. NASFAA is preparing comments for submission to ED, and would welcome member suggestions for issues related to both of the broad topics in ED’s announcement.

The borrower defense, financial responsibility, and related rules, published November 1, 2016, were to become effective July 1. Pending the new rulemaking, that date has been postponed for most of the new and revised regulations, which are currently also the subject of litigation. There were several regulatory changes included in the rules package that are unrelated to borrower defense, and those will go into effect on July 1 as scheduled, including documentation requirements for death discharges, hardship and payment recalculation for income contingent repayment of Direct Loans, and consolidation of certain health program loans.

Gainful employment (GE) regulations that were published on October 31, 2014, will be re-negotiated, but it is unclear at this time whether any requirements under those rules, which became effective July 1, 2015, will be suspended. Certain changes to disclosures using an ED template were scheduled to become effective January 1, 2017, but were postponed until July 1. The postponement was to “permit the Department’s further review of the GE regulations and their implementation,” but ED has given no indication that those disclosures will be placed on further hold. While the borrower defense and financial trigger rules are being postponed without yet having been in effect, the gainful employment rules have already been in effect. NASFAA advises schools to prepare the July 1 GE disclosures as currently scheduled, and to be prepared for the ongoing annual reporting requirements that are next scheduled for October 1.

Calling for a “regulatory rest” in a June 14 press release, Education Secretary Betsy DeVos stated that the borrower defense rules are “a muddled process that's unfair to students and schools, and puts taxpayers on the hook for significant costs.” ED acknowledged that schools “are especially concerned about the excessively broad definitions of substantial misrepresentation and breach of contract, the lack of meaningful due process protections for institutions and ‘financial triggers’ under the new rules.”

Concerning gainful employment, the press release revealed that “As the Department worked on implementing this regulation, it became clear that, as written, it is overly burdensome and confusing for institutions of higher education.” 

The notice of intent to negotiate new rules allows written testimony to be submitted no later than July 12. In addition, two hearings will permit oral testimony, on July 10, 2017, in Washington, D.C. and July 12, 2017, in Dallas, Texas. ED will propose specific topics for negotiation based on those hearings and testimony, which will be published in another Federal Register notice. ED also maintains a web page to which further developments will be posted: www2.ed.gov/ policy/highered/reg/hearulemaking/ 2017/index.html.

NASFAA will submit testimony on these two sets of rules, and would like your help in identifying those areas that should be re-negotiated. Please send your concerns (about both issues that should be re-negotiated and aspects of the rules that should be retained) to [email protected], with “Re-negotiation” in the subject line.

Negotiations are likely to begin in November or December of 2017.


Publication Date: 6/21/2017

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