Neg Reg Day 3 Agenda Tackles Borrower Defense to Repayment

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

The Department of Education’s (ED) negotiated rulemaking session picked up Wednesday with department officials warning negotiators about the need to continue to make progress in moving through the agenda, noting that regulations will be published regardless of whether the committee reaches consensus on pressing issues.

“Our goal here is consensus, we want to have everybody on board, we're here in good faith,” said Jennifer Hong, a negotiator on behalf of ED, at the outset of Wednesday’s session. “But if we don't reach consensus, then the department will publish whatever rule or policy direction we see fit.”

David Tandberg of the State Higher Education Executive Officers Association suggested adding additional hours to work through the agenda, noting that due to the virtual nature of the sessions, the committee has less time than it did in previous negotiated rulemaking sessions. That suggestion was ultimately shot down, as Hong said an extra day was added and the department wanted to avoid stretching negotiators thin.

The committee then began discussing borrower defense to repayment, splitting the lengthy issue paper into individual sessions to ensure feedback could be targeted to specific topics. Negotiators started by discussing misrepresentation, including language specific to the nature of financial charges and the employability of graduates in ED’s current borrower defense regulations.

Misty Sabouneh, a negotiator on behalf of private nonprofit institutions, said while she was in support of desiring schools to disclose information regarding the employability of their graduates, there is no standardized metric for schools to use.

Several negotiators raised the issue, for example, of whether a graduate landing an internship would count toward a school’s metric of employability of graduates.

Josh Rovenger, a negotiator on behalf of legal aid organizations, said as long as an institution qualifies what their employment rate includes, then it wouldn’t be considered misrepresentation, which Hong said was correct.

A temperature check on misrepresentation was then conducted, which did not yield a tentative agreement among negotiators.

The committee then moved on to discuss aggressive recruitment as a basis for a borrower defense claims, with Daniel Barkowitz, director of financial aid at Valencia College and a NASFAA member, saying that while he agrees that instances of aggressive recruitment should form a basis for a borrower defense claim, he took issue with some of the subjective language included in the text.

“I'm not sure how one would demonstrate the exploiting of a consumer's fears, or the interfering with the ability to understand the term,” he said. “The subjectivity concerns me on some of these. And while I understand and support the intent, I wonder if there's another way to get to this without it being subjective.”

Hong said ED is attempting to include language that is measurable. Jeri O’Bryan-Losee, a negotiator on behalf of student loan borrowers, said the existing language is necessary to protect students and borrowers, noting that there is longstanding evidence of these practices taking place.

She and other negotiators asked for the language surrounding aggressive recruitment to be strengthened even further. There was also discussion on not instituting language that would discourage schools from non-aggressive recruiting practices, such as on social media and by phone and mail.

“For particularly students who don't think they are college material, to be recruited wakes them up, they see more options,” Tandberg said. “So we don't want to restrict helpful recruitment that is reasonable, that helps keep campuses alive, that helps students see their options.”

Ultimately, the committee worked through roughly half of issue papers on borrower defense to repayment, with mixed feedback from stakeholders.

The committee reached a positive temperature check on the inclusion of aggressive recruiting tactics as a basis for asserting a defense to repayment claim.

As the committee worked through the issue papers, negotiators briefly switched gears back to closed school discharge in order to participate in apresentation from advisor to the committee Raj Darolia with data on the number of schools that have closed over the past decade, as requested earlier by negotiators . The presentation detailed the distinction between closed branch campuses and closed institutions by showing the same closure data using 8-digit vs. 6-digit OPEIDs.

Returning to the borrower defense to repayment issue paper, the committee yielded a negative temperature check on the Department’s five proposed bases for a borrower defense claim, with a variety of members expressing specific concern over breach of contract, group process, and retroactivity.

Committee members also reported a negative temperature check on regulatory language for borrower defense group claims. Josh Rovenger of Legal Aid Society of Cleveland took issue with ED not including a route for third party groups to be included in a petition for group discharge under the outlined group process list. He specifically cited concern that some state attorneys general might not be conducting significant oversight of the student loan sector.

The committee gave positive temperature checks on issue papers focusing on the department forming a group process for borrower defense based on prior secretarial actions — such as an institution’s failure to meet administrative capability requirements, or an institution’s loss of eligibility due to its cohort default rates — and institutional response to borrower defense claims. Though there was some discussion over some technical use of language, no member expressed significant concerns.

During the day’s public comment section, a pair of veterans discussed their experiences with institutions that closed, alleging misuse of their GI benefits. Other student loan borrowers detailed their experiences with borrower defense regulations and the PSLF program, where individuals documented their struggles to meet the complex requirements to access debt forgiveness.

A pair of congressional Democrats — Rep. Josh Harder of California and Rep. Alma Adams of North Carolina also offered comments. Harder detailed a regulatory issue that prevents certain doctors in Texas and California from being made eligible for PSLF, while Adams urged for borrowers to be protected through changes to the closed discharge petition. 

The committee will reconvene tomorrow, resuming conversations on the borrower defense paper starting with conversation on adjudication of borrower defense applications before moving on to language on predispute arbitration


Publication Date: 11/4/2021

David S | 11/4/2021 3:35:39 PM

My wife recently walked out of a store because within a few minutes, 3 different salespersons approached her offering to help. Was that aggressive? Annoying? Attentive customer service? Or simply the way retail works? There has to be a way to measure if a school is in compliance with a regulation or not, and I would argue that you can't do that with what's being proposed. A recruitment effort on the part of a school may make one prospective student uncomfortable, but another might find it a helpful way to get more information and may even feel good that their application is being considered carefully enough that someone would take the time to reach out. Let's focus and crack down on schools misrepresenting facts when they recruit. Gray area like this is unenforceable.

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