Completing Borrower Defense Discussions and Beginning PSLF: Neg Reg Day 3 Agenda Continues to Make Headway on Regulatory Agenda

By Owen Daugherty and Hugh T. Ferguson, NASFAA Staff Reporters 

The Department of Education’s (ED) negotiated rulemaking session picked up Wednesday where it left off by working through the remaining borrower defense regulatory discussions and also began conversations on issue papers related to the Public Service Loan Forgiveness (PSLF) program.

In terms of the agenda, Jennifer Hong, the federal negotiator for ED, highlighted that the initial discussions for PSLF were moved to coincide with the department’s newly announced temporary changes to the program to better prompt discussions.

“I wanted to acknowledge that the department, as you all know, has made a major announcement this morning regarding Public Service Loan Forgiveness and several immediate and temporary relief efforts to assist borrowers and provide debt relief for those working in public service,” said Jennifer Hong, ED’s federal negotiator. “This is why we switched the agenda around to take borrower defense before PSLF because we wanted this announcement prior to our discussion.”

With the continuation of borrower defense topics, Dixie Samaniego, a student at California State University, engaged with the negotiator representing proprietary institutions to give more details as to why they were against ED’s proposal to make a group process the default in adjudicating borrower defense claims, meaning that if ED identified an individual claim with the same circumstances or common facts to other individuals claims, they would adjudicate those claims together instead of individually.

Jessica Barry, of The Modern College of Design in Kettering, Ohio, representing proprietary institutions, highlighted that as discussions on a variety of regulatory issues evolve her position could change. 

“This is the very first couple of days of the negotiations and I know it’s been questioned whether I am here in good faith. I am here in good faith,” Barry said. “I am voicing my concern for some of these things up front. That doesn't mean that through the negotiations, as I learn more from students… and from others on the committee, that I won’t start to change my mind on some of these things and make compromises that are best for students.”

Overall, the committee yielded tentative agreements and positive temperature checks on issues related to borrower defense language, including considering a borrower’s application to stand on its own as evidence supporting the claim and ED’s effort to codify a process to consider information from existing department program review or audit findings as the basis of borrower defense claims. 

While there were positive temperature checks to the proposed language, there were some sticking points during the morning portion of the session.

One issue of contention centered around Issue Paper #6 concerning regulatory language proposed for borrower status during and after adjudication. Negotiators expressed concern over there being any interest accrual during forbearances granted while claims are being adjudicated, and urged for further discussion on unlawful collections. 

ED proposed that borrower defense claims still in process after 180 days would have interest stop accruing on their loans, but several members pushed for interest accrual to pause as soon as the borrower applies for borrower defense and for the entirety of the adjudication process, not just when it exceeds six months. 

Joshua Rovenger, of Legal Aid Society of Cleveland, pushed for a more specific timeline for adjudication claims detailing examples of the harm ED’s inaction on borrower defense claims has caused borrowers.

The department also proposed removing the statute of limitations on borrowers seeking defense to repayment, noting that the existing limitation period is different from the closed school discharge, and stating its general belief that so long as a borrower holds a loan they should be able to file a borrower defense claim. 

There was also a concern related to ED’s efforts to streamline the process for borrowers with FFEL program loans from Jaye O’Connell of Vermont Student Assistance Corporation who voiced concerns over statutory authority. ED’s proposal was to allow FFEL borrowers to apply for defense to repayment without first consolidating into the Direct Loan (DL) program. If approved, the lender would provide the borrower with the relief, then submit a claim to the guarantor who would then submit a claim to ED for reimbursement for the approved claim. This would simplify the process for borrowers by removing the consolidation step, but O’Connell noted that borrower defense to repayment only applies in statute to Direct Loans, and questioned ED’s authority to process FFEL claims as proposed. 

The committee used the afternoon portion of the session to wrap up borrower defense and move on to conversations surrounding the PSLF program.

The reconsideration process was the first subtopic related to borrower defense that negotiators tackled at the onset of the afternoon session, with ED proposing to establish a reconsideration process that the borrower may pursue if a borrower defense claim is denied or if partial relief is granted.

In order for a borrower to be eligible for reconsideration, they would have to provide additional evidence or request adjudication under a specific state standard, according to an issue paper on the topic. While there was support among negotiators for a reconsideration process to be adopted, a concern from yesterday’s discussions was raised again from negotiators who believe that a state standard should be part of the first review of a borrower’s defense to repayment claim and not solely serve as the backup to the federal one. 

Further, some negotiators took issue with the fact that being able to provide additional evidence is the only reason a borrower could be eligible for reconsideration of their borrower defense claim.

Hong said ED took into consideration consumer protection laws from other states in establishing a federal standard and said the reconsideration process proposed by ED is an attempt to have an efficient process that is not overly burdensome on borrowers. 

Negotiators did not come to a tentative agreement on this subtopic. 

Negotiators then moved to the next issue paper on borrower defense, discussing the department’s proposal regarding recovery from institutions. 

Considering ED “must maintain the ability to recoup funds from institutions with approved borrower defense claims,” as it stated in the paper, the department is proposing separating the process of institutional recoupment from the borrower approval process. 

Negotiators largely praised that portion of ED’s proposal, noting students should not have to wait for ED to take action against a school before they get relief through their borrower defense claim. Rovenger noted his strong support for decoupling the two, and Barry asked who would be responsible for conducting a program review should the department decide to recoup funds from the institution. 

The Office of Federal Student Aid (FSA) would be responsible for such a program review, Hong said, noting the program review would be based upon evidence from borrower defense applications, institutional response, and any other relevant information.

A temperature check on this subtopic did not yield tentative agreement. 

The final subtopic related to borrower defense discussed Wednesday was the limitation period for ED to seek recovery of funds from institutions. ED is proposing adopting a six-year limitations period, instead of the five-year period in place per the 2019 borrower defense regulation. ED noted the clock on the limitation period “would stop when the institution is notified of claims during the institutional response process.”

There was not consensus on the limitation period among negotiators. Daniel Barkowitz, assistant vice president of financial aid and veterans' affairs at Valencia College and a NASFAA member, said since the department has proposed that a borrower can file a borrower defense claim at any point during repayment, it means documentation from the school can be requested for decades after the student left school.  

“I would strongly urge the department to think carefully about what's a reasonable timeframe for response if we're going to accrue a penalty against an institution for an action that they can't even respond to because they don't have documentation available to respond,” he said. 

The group then moved on to discussing the issue paper related to improving the PSLF application process, though before diving in, temporary waivers to the PSLF program issued earlier Wednesday by ED were discussed at length, as Ian Foss FSA’s director of policy implementation and oversight came on to detail the changes.

Foss fielded several questions from negotiators about the temporary waivers and was urged to consider what, if any, of these temporary flexibilities afforded to borrowers can be made permanent to ensure the PSLF program works for borrowers. 

Removing application requirements when the Secretary of Education determines they do not need one was the first subtopic related to PSLF discussed. ED said it is working to use data matches with federal agencies whenever possible, removing the need for certain application requirements. 

“Giving the secretary flexibility to not require an application when it is not needed will assist in efforts to increase future automation in the PSLF program,” ED stated in the issue paper. 

Marjorie Dorime-Williams, an assistant professor of higher education at the University of Missouri, said she appreciated efforts by the department to make the process easier for borrowers. 

As a professional who works in higher education, this is very difficult,” she said. “So I can imagine, certainly, for other borrowers what this looks like.”

Persis Yu, director of the Student Loan Borrower Assistance Project at the National Consumer Law Center®, praised ED’s desire to automate more processes and urged the department to continue to do so whenever possible. Tentative agreement on this subtopic was reached by negotiators. 

Negotiators also came to a tentative agreement on ED’s proposal to simplify regulations so that an amount paid by the borrower equal to the full scheduled payment due counts toward forgiveness, even if the payment is made in multiple installments or outside the 15-day payment window. This proposal would also align the tracking of payments toward forgiveness between PSLF and IDR and would streamline payment-tracking overall, ED noted. 

Negotiators also discussed whether or not to allow certain deferments and forbearances to count as payments toward PSLF progress. ED is proposing to expand the types of deferments and forbearances that qualify for PSLF to reflect two types of situations. One is instances where status counts as qualifying employment and a qualifying payment and the other is instances where the status counts as a payment if the borrower proves qualifying employment.

Draft regulatory language included deferments for cancer treatment, unemployment, Peace Corps or military service as instances that would continue to count as monthly payments. 

There was not tentative agreement on this subtopic, however, as Yu noted there should be other instances considered, such as when a borrower is incorrectly steered into forbearance, among other examples.

Negotiators also discussed ED’s consideration of whether to stop resetting the clock on the number of qualifying payments made to zero when loans are consolidated.

Several negotiators shared experiences of either themselves or borrowers they have spoken with being in a situation where progress toward PSLF was stopped or restarted when consolidation takes place, noting that many times the borrower is unaware this would happen. Tentative agreement was reached among the negotiators on this subtopic. 

Negotiators briefly discussed the subtopic of FFEL lender notifications to borrowers about PSLF eligibility, but did not get to a temperature check on this before the public comment period began.

Discussions for the fourth day’s agenda will continue with PSLF. 

 

Publication Date: 10/7/2021


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