Semiannual Report to Congress Condemns Delay of Borrower Defense, Gainful Employment Regulations

By Joelle Fredman, Communications Staff  

In the Office of Inspector General's (OIG) semiannual audit of the Department of Education (ED), Inspector General Kathleen Tighe said she disapproved of ED’s decision to delay the implementation of gainful employment and borrower defense regulations.

The release of the 75th report to Congress falls out on the first day of the first negotiated rulemaking session, or "neg reg," on gainful employment.

The borrower defense regulation and a central disclosure requirement of the gainful employment regulation were set to go into effect in July. Education Secretary Betsy Devos, however, announced in June that the Trump administration planned to delay the implementation of the borrower defense regulation and halt the ongoing implementation of the gainful employment regulation.

"My first priority is to protect students. Fraud, especially fraud committed by a school, is simply unacceptable," DeVos said. "Unfortunately, last year's rulemaking effort missed an opportunity to get it right. It's time to take a step back and make sure these rules achieve their purpose: helping harmed students. It's time for a regulatory reset."

ED originally said that the implementation of the borrower defense regulation would be delayed until July 2018. In October, however, it announced an additional extension to July 2019 to accommodate the negotiated rulemaking process, which began in November.

The Obama administration took special interest in the regulation, originally drafted in 1994, after the sudden closure of a chain of for-profit schools, Corinthian Colleges. The administration revitalized the rule the following year to accommodate the unprecedented number of borrower defense claims it had received and to hold schools accountable for their behavior.

"We did not agree with the Department’s delay of financial responsibility provisions that provided tools to improve the Department’s oversight options for schools at risk of closure," Tighe wrote in the report. “We previously reported that these provisions were needed to avoid costs to students and taxpayers that result from school closures."

While ED pushed off the implementation of the borrower defense regulation, Tighe recommended that it should not delay the changes to its standards under which a non-profit or for-profit institution's financial responsibility is judged, which were set to go into effect July 1, 2017. Rather than waiting for a weakness to be revealed through the audit process, the new rules, which were published in November 2016, establish triggers that can indicate potential threats in order to enable ED to take action early on in the process. An institution that has an action or event considered a trigger would, in some situations, be required to put up a letter of credit for a certain percentage of the Title IV funds it received the previous year.

"The enforcement of the financial responsibility regulations would improve FSA's processes for mitigating potential harm to students and taxpayers," Tighe wrote.

The gainful employment regulation was also written to protect students from abuse by certain for-profit institutions and career colleges. Under the regulation, schools must report graduates' debt-to-earnings ratios, and could lose the ability to offer federal financial aid to students for low-quality programs.

In July, ED announced that institutions would have additional time to comply with the regulation, pushing the effective date to July 1, 2018. ED also extended the deadline for schools to file alternative earnings appeals.

In a response to Sen. Patty Murray (D-WA) on a request to review these regulations in October, Tighe made similar claims to those in her report to Congress, arguing that the delay would only serve as a disadvantage to students.

"Granting what would effectively be an 18-month extension negatively impacts program integrity," she wrote. "While there are different ways that the statutory requirement for gainful employment could be given meaning, without some criteria for what gainful employment is, schools cannot be held accountable and students can be harmed by not being able to pay loan debt. It is critical to inform students of potential risks presented in enrolling in certain programs."

In the letter, Tighe wrote that OIG plans to work closely with ED on both regulations as negotiated rulemaking continues.

"Negotiated rulemaking required by the HEA should provide for a public, fair and balanced vetting of concerns by all parties impacted by the subject regulations. As with past negotiated rulemaking efforts, we expect to be fully engaged with the Department as it proceeds. We will not hesitate to voice our concerns regarding program integrity matters," Tighe wrote.


Publication Date: 12/5/2017

David S | 12/5/2017 11:8:25 AM

And cue the tweets in 3...2...1..."The OIG is failing! Low ratings! In tatters! Only by delaying and at best never enforcing these regulations can we #MAGA!"

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