Negotiations Underway to Rewrite Borrower Defense Rules

By Karen McCarthy, Policy & Federal Relations Staff

Higher education stakeholders assembled yesterday in Washington, DC for the first of three days of negotiated rulemaking, or "neg reg," to rewrite borrower defense to repayment regulations. But disagreement over whether to allow the event to be livestreamed nearly derailed the full day of negotiations. Advocates from student, consumer and veterans groups argued that members of the public had a right to livestream the event, while other non-federal negotiators and the Department of Education (ED) negotiator, Annmarie Weisman, asserted that allowing livestreaming or video recording could prevent some from sharing and debating freely.

In addition to the potential for a chilling effect on debate, ED also expressed concern that a livestream of the session not provided by ED could be misconstrued as an official record of the negotiations, but said it was unable to devote the necessary resources to offer an official ED livestream.

As a temporary compromise, ED officials said the Department would consider providing delayed audio recordings of the rulemaking sessions to the public and would report back with its decision by Tuesday morning. If ED declines to provide said audio recordings, the committee will re-open their debate of the governing protocols.

The protocols, while discussed at the beginning of every rulemaking session, are not usually subject to such extensive debate. Negotiations on borrower defense to repayment issues cannot commence until all negotiators consent to the protocols.

Regulations published by the Obama administration to address the many fraud claims submitted following the collapse of the now-defunct Corinthian Colleges were set to take effect July 1, 2017. But Education Secretary Betsy DeVos in June announced ED intended to do a "regulatory reset" and consequently would be halting implementation of the regulations, as well as gainful employment regulations. The Trump administration's goal in writing borrower defense rules, Acting Assistant Secretary of Postsecondary Education Kathleen Smith said yesterday, is "to protect students from predatory practices while also providing clear, fair and balanced rules for colleges and universities to follow."

The federal negotiator made clear that the starting point for discussion when devising borrower defense rules will be the original 1994 regulations, not the 2016 Obama-era regulations, since the 2016 regulations never went into effect. Although negotiators are free to introduce proposals similar to or the same as those included in the 2016 rules, negotiators were instructed to generally proceed as if the 2016 regulations never occurred.

During the previous neg reg on these topics, negotiators did not reach consensus on proposed regulatory language. If the same is true at the conclusion of this committee’s three sessions in February, ED will be able to press forward as it sees fit with desired regulatory language in its Notice of Proposed Rulemaking

After the compromise on audio recordings was tentatively reached near the end of the day, the committee began discussing the first of eight issues on its agenda: whether to establish a federal standard for the purpose of determining if a borrower can establish a defense to the repayment of a loan based on an act or omission of an institution.

The 1994 regulations currently in place require a Direct Loan borrower to establish the existence of an “act or omission” by the school that would give rise to a cause of action against the school under applicable state law to demonstrate a defense to repayment.

Several non-federal negotiators expressed support for a single, federal standard as a way to provide consistency and clarity to borrowers and a more efficient evaluation process for ED. However, John Ellis, representing the state attorney general’s office in Texas, was not supportive of the concept of a federal standard, believing that it undermines state authority to establish consumer protection rules and provides a disincentive for defrauded students to pursue action against their institutions through established state processes. Ellis supports retention of the current state-based process.

Stay tuned to Today's News for coverage throughout the negotiated rulemaking process this week.


Publication Date: 11/14/2017

Marcia M | 11/14/2017 12:41:47 PM

I wish there was a way to protect those students who graduated from a school that was closed by the Department of Education but wasn't attending at the time of the closing. I know students who got their associate degree at one of these schools and then found out their credits were worthless and had to retake many classes to continue toward their bachelor's degree.

They used their Pell and Direct Loan eligibility before they completed their Bachelor's degree because of the time they spent at the school that is now closed. I would like to see some of their Pell and Direct Loan eligibility restored. It isn't just the students who were at the time of the closer that are affected.

Marcia Mendez
Director of Financial Aid
Hesston College
Hesston KS
[email protected]

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