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

The fourth day of the Department of Education’s (ED) second negotiated rulemaking session focused on borrower defense to repayment, with the entire morning portion discussing the topic at length by breaking down the issue paper into several subsections.

Considering the importance of borrower defense as it relates to borrowers and student loans, negotiators discussed multiple subtopics at length, though they were unable to reach tentative agreement on ED’s regulatory text related to any of the subtopics covered during Thursday’s morning session.

The first subtopic of adjudication of borrower defense applications drew focus from negotiators on the lack of a proposed timeline for ED to adjudicate these claims.

Josh Rovenger, a negotiator from Legal Aid Society of Cleveland, expressed disappointment that there is no timeline in the processing of applications and suggested there should be a 180-day timeline. However, Jennifer Hong, a negotiator on behalf of ED, said it is not possible for ED to resolve borrower defense claims in 180 days. 

“It's not a short process to ensure an actual thorough review of a borrower defense claim,” she said. “If you can imagine if this was a court process, it would be occurring over years, and so we just believe any meaningful review of claims cannot possibly be completed within 180 days.”

Daniel Barkowitz, director of financial aid at Valencia College and a NASFAA member, suggested a one-year timeline to process applications, stressing the importance of having some sort of timeline so borrowers can know when to expect resolution, a point that several negotiators agreed with. He noted the importance of a timeframe for institutions as well, so they can be aware of any potential liability.

A temperature check on this topic did not bring tentative agreement. The committee then moved on to discuss reconsideration of borrower defense applications.

Rovenger said he appreciated the fact that there is a reconsideration process, but wanted to better understand who at ED would be deciding these claims, noting that it should be someone separate from who handled the initial claim.

Justin Hauschild, representing student veterans, drew attention to the fact that it appeared the reconsideration process was limited to new evidence, and said procedural errors in the process should be a part of reconsideration as well. He added that doing so is important, considering the context of denied claims or applications that sat idle under the previous administration.

A temperature check on reconsideration did not bring consensus among negotiators considering the concerns that were raised during the discussion.

The next topic of relief for borrowers regarding the borrower defense process also failed to bring consensus among the negotiators. Several negotiators wanted clarity from ED around proposed language that allowed for the possibility of partial relief when a borrower’s claim does not cover "systemic problems at the school.” Negotiators argued that borrowers are entitled to full relief any time a misrepresentation occurs and not just if it is part of a broader systemic issue. They also noted that ED might be not aware that an issue is systemic from reviewing a single borrower defense claim.

A final temperature check before the lunch break on the remaining sections of borrower defense, including recovery from the institution, cooperation by the borrower, transfer to the Secretary of the borrower’s right of recovery against third parties, and severability also failed to reach consensus among negotiators, meaning that on no topic related to borrower defense did negotiators achieve consensus on the proposed regulatory text issued by ED.

Negotiators pointed to ED’s proposed limitation on recovery from institutions of six years from the borrower’s last date of attendance as problematic given the three-year retention requirement for financial aid records. They also pushed back on ED’s assertion that there is no limit to how long they choose to retain records beyond three years, citing that auditors cite longer record retention as a cybersecurity risk. Barkowitz suggested a carve-out related to record retention, while still requiring institutions to retain records beyond the three years if ED notified them within those three years of a claim that had been filed. 

ED moved on to its predispute arbitration issue paper, where a number of 2016 regulations that were rescinded in 2019 were written to be formally reinstated in the regulatory text. The paper also included a pair of new concepts regarding publication of centralized databases related to judicial records on borrower defense claims.

Following ED’s presentation, Rovenger welcomed the reinstatement of previous regulations and said that ED could make minor technical improvements to questions of enforcement and notice to borrowers — but ultimately was supportive of the framework.

The committee then broke out into a caucus meeting where members discussed a data provision. In reconvening, the committee recorded a negative temperature check on this issue paper, with a caucus member telling ED that they’d be working toward a solution based on forthcoming information requests, but remained concerned over student privacy when it came to the publication of certain data. ED made a point to reiterate that any publicly available data would not contain any personally identifiable information that could impact borrower privacy.

With that negative temperature check on the predispute arbitration issue paper, members then turned to income-driven repayment (IDR), which began with a presentation from advisor to the committee Raj Darolia that looked to spur discussion on how negotiators might think about changes to income assessment and income protections. Darolia provided specific examples of policy changes showing how different levels of income protection impacted monthly repayment amounts, total amount repaid, and total amount forgiven.

Here is an example using $45,000 income (debt $30,000). Payments drop under increase income protection limit which results in smaller payments, but longer time horizon to pay. #NegReg pic.twitter.com/QEilCFCskK

— Neg Reg 2021 (@HigherEdNegReg) November 4, 2021

The committee then delved into IDR, but at the outset members expressed concern that there would not be enough time to fully explore the issue. Bethany Lilly, a negotiator for individuals with disabilities or groups representing them, suggested that the next committee session start off with IDR and designate more time for the topic area, citing the complicated nature of the program.

ED began discussion of the inclusion of definitions under the IDR paper, which also highlighted the department's newly proposed Expanded Income-Contingent Repayment (EICR) plan. Throughout this issue paper, ED cited a number of sections with the label “TK” where they hope negotiators will provide specific comments to help shape a more finalized language.

Michaela Martin, representing independent students, argued for lowering the time to forgiveness, noting that 25 years is a “lifetime of debt” and that low-income people will stop recertifying their income because the situation seems hopeless. She asked why the department couldn’t consider, as an example, forgiveness at year seven for a borrower who had qualified for $0 payments the entire time.

The committee just began work on issue paper 10 and outlined some concepts surrounding regulatory language and definitions related to IDR, but the bulk of conversation is expected to take place during Friday’s final session.

The majority of Thursday’s public comments centered on borrower experiences with the Public Service Loan Forgiveness (PSLF) program, where commentators urged ED to make improvements to how the program is carried out and improve experiences with navigating the process. Public service workers detailed servicing issues and struggles to correctly enroll in eligible repayment programs.

Other commentators spoke on the importance of restoring access to Pell Grants for people in prison and oversight of the for-profit sector. Rep. Greg Murphy (R-N.C.), who serves as ranking member of the House Higher Education and Workforce Investment subcommittee, also offered comments on interest capitalization and called on ED to take a more moderate approach to regulations centered on borrower defense regulations, warning that a Republican administration would simply undo any changes that would create what was, in his words, a “moral hazard” for students accessing debt cancellation.

On Friday, the committee will resume discussion of the IDR issue paper sections A through D, and then work through the remaining papers to conclude this session.

Publication Date: 11/5/2021

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