Déjà Vu: Borrower Defense Neg Reg Ends in Non-Consensus

By Allie Bidwell, Communications Staff

After three months of negotiations, the attempt to rewrite federal regulations for borrower defense to repayment came to a familiar end as committee members failed to come to a consensus on regulatory language Thursday. Throughout the day, members on the negotiated rulemaking committee debated revised language the Department of Education (ED) presented — based on discussions from this week — but could not move past several areas of clear divide, such as on which evidentiary standard to use, and whether to include or how long a statute of limitations should be.

The negotiated rulemaking process, or neg reg, came to the same end when stakeholders attempted to develop regulations in 2016. Although during that process it appeared negotiators were closer to a consensus, similar issues prevented the group from reaching a consensus. Now, as in 2016, ED can move forward with writing the regulations as it sees fit, presumably taking into account the information gathered during the neg reg process. ED will publish a Notice of Proposed Rulemaking (NPRM), which will have a period of public comment. Final regulations will be published by Nov. 1, 2018, and would be set to take effect July 1, 2019.

"We came together here to work as a committee and we came together in good faith. I believe we each did that," said ED negotiator Annmarie Weisman. "We all worked really hard and the lack of consensus … is not representative of failure."

Weisman said the negotiators have given ED "a starting point as we move forward."

"We still have our original goals in mind. We are here to support borrowers who were wronged — and seriously wronged," she said. "We are mindful of those borrowers. We first want to acknowledge that as our primary goal. We also want to balance the needs of the institutions and the taxpayers. We continue our work in the best interest of all and will work to produce regulations."

One debate that continued throughout the entire monthslong process was which evidentiary standard would be used in evaluating claims. The 2016 regulations used a preponderance of the evidence standard — essentially that the misrepresentation was more likely than not to have occurred — but some negotiators representing mainly proprietary institutions wanted a stronger standard of "clear and convincing evidence."

ED initially proposed using a standard requiring that the "substantial weight of the evidence" would show a misrepresentation occurred, which officials said was intended to be a midway point between the two standards. Negotiators debated the evidentiary standard at length during the first day of negotiations this session. However, that standard, combined with the fact that borrowers would be required to submit corroborating evidence in addition to their signed attestation forms caused some consumer advocate negotiators to take issue with the regulatory language.

In the afternoon on Thursday, ED's final proposed language reverted the evidentiary standard back to a preponderance of the evidence, but maintained language that would require a borrower to submit evidence in addition to an attestation form. Both sides of the negotiating committee took issue with the change, for various reasons.

ED also in its final revised language proposed changes to the statute of limitations for filing a claim. A borrower would have five years from the date of graduation, withdrawal, or termination to file a claim, unless the borrower was in affirmative defense (in default, collection activity, wage garnishment, etc.) in which case the statute of limitations would be 10 years. ED would also have up to three years after the final decision of the borrower defense claim to pursue an institution for recovery.

Alyssa Dobson, director of financial aid and scholarships at Slippery Rock University, worried that the extended timeline for seriously delinquent borrowers would incentivize some to purposely fall behind on payments. Again, ED officials said they were attempting to find middle ground between two different proposals for a statute of limitations that would not be overly burdensome for institutions, but still fair for borrowers and protective of taxpayer interests.

Some negotiators were also hoping for the regulations to include a framework for a voluntary, alternative dispute resolution process with the condition that ED would need to be involved in any sort of resolution or mediation. ED was open to such a process and proposed relevant regulatory language for consideration, but repeatedly said throughout the day that it could not commit the resources to being involved in such a process and ultimately removed any language outlining an alternative dispute resolution process. However, ED officials said the regulations as written would not prevent an institution from making that offer to students.

In the end, negotiators continued to take issue with changes in the proposed language and struggled to develop new wording that would satisfy all parties.

Barmak Nassirian, director of federal policy analysis for the American Association of State Colleges and Universities, made a plea to the committee to "step back and think about how much you've accomplished in terms of gaining protections you did not have in previous iterations of this regulation."

"It's in all of our collective interest to be as accommodating of things as possible and walk away with something instead of nothing. I am very dissatisfied with this rule. I think it significantly erodes protections for borrowers," he said. "[But] I'd much rather take lots of the specific black ink protections I see here, rather than walk away from a deal and leave it to [ED] and its devices to write the regulation."

From there, negotiators developed a list of "non-starters" from the collective issue papers and attempted to find areas where they could trade and compromise.  

Linda Rawles, an attorney representing large for-profit institutions, said the hastily attempted bartering of regulatory provisions was "no way to do a rule."

"We have a half an hour. These are hugely important issues for everyone at this table," she said. "If we get to the point where we are horse trading off our hip, to me that's malpractice, as an attorney."

It soon became clear the committee would not reach a consensus, and the day ended with a brief public comment period.


Publication Date: 2/16/2018

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