OIG Criticizes Some of Congress' Proposals for HEA Reauthorization

By Joelle Fredman, NASFAA Staff Reporter

The Department of Education's (ED) Office of Inspector General (OIG)—an independent entity within ED responsible for identifying fraud, waste, abuse—expressed concerns last week about intentions from both the House and Senate to change measures aimed at improving schools' accountability and the way ED disburses and manages federal funds in their proposals to reauthorize the Higher Education Act (HEA).  

Inspector General Kathleen Tighe sent a letter to the chairs and ranking members of the House and Senate committees tasked with drafting bills to reauthorize the HEA recommending several changes to proposals included in the House Republicans' PROSPER Act, as well as in the white paper released by Sen. Alexander Lamar (R-TN), chairman of the Senate Health, Education, and Labor (HELP), detailing his priorities for the bill, and in a document outlining the Senate Democratic Caucus' principles.

"It is imperative for Congress to address long-standing and emerging challenges, amend outdated HEA provisions to address awarding and disbursing aid in distance education and other alternative educational environments, and continue to provide for accountability, all while not stifling innovation," Tighe wrote.   

While Tighe said her office shares the position with both the House and Senate that cohort default rates and the 90/10 rule have not been effective in improving institutions' accountability because of their ability to be manipulated, she recommended that instead of eliminating the provision as they intend to, Congress strengthen their definitions.

"For example, default rates could be adjusted to account for nonperforming loans (no payment amounts due under forbearances or income-driven repayment,) and 90/10 could be simplified and adjusted to eliminate veterans' benefits from the schools' calculation of the 10 percent of revenue derived from non-Title IV funds," Tighe suggested.

OIG also warned that the House proposal to replace all loan repayment measures with a programmatic measurement and establish a metric based on repayment status that would determine a school's eligibility for federal funds would place a heavy burden on schools and ED.

"Implementation of a programmatic repayment measure would require a massive data collection and reporting effort by schools and would require the Department to track millions of student borrowers enrolling in all programs at over 6,100 schools," Tighe wrote. "Although the measure is well-intended, the OIG is concerned that the proposed massive data collection necessary for the Department to track and administer a single accountability measure could result in a metric nearly impossible to successfully implement and it would be rendered ineffective."

While OIG supported the House's proposal of multiple disbursements for Pell Grants and Direct Loans, it warned that the House's intentions to allow schools to disburse unequal amounts of aid to adjust for costs would continue to allow institutions to abuse federal funds. Through past audits, OIG said it found some bad actors among distance education programs who were stealing the identity of students for the purpose of taking out federal funds in their names and benefited from the large disbursement of funds at the start of the academic year. OIG recommended that Congress improve its efforts to verify academic attendance to protect against fraud, and make smaller disbursements as well as align them with charges from schools.

"This would eliminate unnecessary large credit balances paid to students at the start of a payment period and would reduce the risk of fraud and abuse," Tighe wrote.

OIG did express its full support for the House's provision to change the way institutions receive and return Title IV funds. Currently, schools receive 100 percent of federal funds if a student remains at the institution for 60 percent of the payment period, "creating a significant incentive for schools to avoid withdrawing a student before the 60 percent point." The House's new proposal would mandate that an institution would earn a percentage of aid based on a range of percentages within which the student's withdrawal date occurs.

In response to this proposal NASFAA wrote that is it intrigued by the idea to simplify the current "complicated and archaic mechanism whereby schools try to calculate how much money must be returned to the government when a student withdraws."

 OIG disagreed, however, with other House proposals such as eliminating gainful employment regulations and restricting ED from requiring that institutions post a letter of credit as part of a yearly determination of its financial responsibility.

Additionally, OIG warned that the House's proposal to eliminate the credit hour would result in confusion for ED in awarding aid, its intentions to eliminate requirements for accrediting agencies poses risks to students and taxpayers, and its proposed changes to loan programs, such as replacing the Direct Loan program with a new Federal ONE Loan Program, may carry heavy, hidden costs.  

"The Federal student aid programs are staples in our annual list of top management challenges facing the Department. Although statutory improvements have been accomplished over the years, deficiencies continue, and risks constantly emerge as the educational environment and workforce educational needs evolve. The HEA has not kept pace with these changes," Tighe wrote. "The HEA, regulations, and Departmental operations must promote innovation, access, outcomes, and affordability."


Publication Date: 3/7/2018

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