Neg Reg Day 4: Institutional and Programmatic Eligibility Committee Wraps Up First Week of Work

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

The final day of the first negotiated rulemaking session for the Institutional and Programmatic Eligibility Committee saw the group of negotiators finish preliminary discussions on all seven issue papers they were tasked with reviewing.

The negotiators on Friday finished combing through the last two issue papers, as they discussed the Department of Education’s (ED) draft regulatory language on certification procedures and the 90/10 rule.

Negotiators began the day with the certification procedures issue paper, as ED proposed updating the regulatory language surrounding the procedures for certification to participate in federal student aid programs.

ED’s proposed changes are aiming to provide for heightened oversight of institutions, particularly those that have previously engaged in activities that are high-risk for students or taxpayers. “We believe that these proposed changes will help ensure that students have access to high-quality educational opportunities and are protected from predatory or abusive behaviors,” the issue paper said.

Some of those changes include eliminating the requirement for ED to automatically recertify institutions on a month-to-month status in cases where ED had not yet made a determination after one year, outline additional events that will lead to provisional certification for institutions, including when an institution has incurred repeated findings related to the same compliance concern from program reviews or audits, and requiring recertification for certain provisionally certified schools after two years.

Regulations regarding the requirements of a Program Participation Agreement (PPA) that institutions enter into as a condition of participation in federal aid programs were also discussed at length.

Jessica Ranucci, a negotiator on behalf of the legal assistance organizations that represent students or borrowers, voiced her support for ED’s proposal, saying it includes important consumer protections and will give the department the ability to shut down schools once early warning signs are identified.

Still, other negotiators raised concerns that provisional certification on a month-to-month basis should have a generic statement that entitles the secretary of education to make additional demands on the institution.

Carolyn Fast, a negotiator on behalf of consumer advocacy organizations, said she could envision a scenario where problematic institutions will continue on month-to-month status for an extended period of time.

Other negotiators suggested ED include language on implementing a timely review process so institutions are not left waiting for recertification. 

A temperature check on the period of participation brought a tentative consensus with no thumbs down among negotiators.

The committee then moved on to discuss the topic of provisional certification and what criteria ED is proposing to use to grant provisional certification. There are three standards ED is proposing utilizing to automatically turn an institution’s certification to provisional certification: the institution triggers one of the financial responsibility events requiring the institution to post financial protection; the institution has received the same finding of noncompliance on more than one program review or audit; or the institution or an owner of the institution with control over that institution also owns another institution with liabilities owed to ED.

There was agreement among several negotiators representing the perspective of institutions of higher education that the proposed language was too vague. Negotiators asked ED officials to clarify whether they meant to place institutions on provisional status for consecutive repeat audit findings or for repeated findings over the course of many years, as well as whether ED intended to include even immaterial audit findings in this provision. 

They urged ED to use caution, noting that an audit finding in one year might not be reported by the auditor to the institution until the next year, such that even if corrected during the second year it would be a repeat finding that year. Conversely, if ED did not specify that repeat findings had to be in consecutive years, an institution with a Return of Title IV (R2T4) funds finding in one year and then again five years later would be subject to provisional certification, noting the frequency of R2T4 findings given its complexity. 

Barmak Nassirian, a negotiator on behalf of groups representing student veterans, questioned why there are only three criteria ED is proposing to use, noting there are other indicators that an institution is in trouble.

A temperature check on provisional certification did not reach consensus, as there were three thumbs down recorded.

During discussion of PPA, several negotiators applauded the department for adding state attorneys general to the list of entities that have the authority to share with each other and ED any information pertaining to an institution's eligibility for participation in the Title IV program. However, some negotiators wanted to take it a step further and include other entities such as the Department of Defense and the Consumer Financial Protection Bureau (CFPB).

Temperature checks on proposed regulatory text for CFR 668.14(a) and (b) of PPA did not reach consensus, as Adams was the only negotiator to issue a thumbs down for both. The items covered in those sections included a new requirement for an institution’s PPA to be signed by an authorized representative of an entity with direct or indirect ownership of the institution in cases where that entity has power to exercise control over the institution, a proposal to consider changes to the maximum program length for gainful employment programs, and a new requirement that institutions obtain programmatic accreditation where required by federal of state law and ensure that programs satisfy prerequisites for licensure or certification requirements in the state.

Before breaking for lunch, ED introduced a proposed nonexhaustive list of conditions ED may apply to institutions with provisional certification, including submission of a teach out or records retention plan, restrictions on adding new programs or locations, additional reporting requirements, and a required review of marketing and recruiting materials for schools that have engaged in misrepresentation. After the break, a temperature check failed to yield agreement.

As the committee continued discussions, Yael Shavit, a negotiator on behalf of state attorneys general, noted that the use of fraudulent marketing materials is one of the biggest problems that state attorneys general face and found it reasonable that ED review materials if there has been a history of fraudulent materials.

The committee further broke down discussions on this issue paper and recorded a negative temperature check for conditions to be applied by ED to institutions following a conversion from proprietary status to not for profit status. Conditions included continuing to meet 90/10 and gainful employment requirements and submitting regular reports on agreements entered into with the institution's former for-profit owner or affiliated or related entities. 

The committee then moved to its final issue paper on the 90/10 rule. ED provided a walkthrough of the regulation, noting that its methodology for calculating 90/10 will be provided at the next session in February. 

At the outset of the issue paper, Adams used his comments to underscore that for-profit institutions are opposed to 90/10 in principle. In his remarks Adams argued that the rule harms student choice. 

Adams also expressed concern on reporting requirements outlined in the rule and argued that the proposed timeline of 45 days to report on whether an institution has passed or failed 90/10 was not enough time for institutions to adequately report.

From the perspective of student veterans, negotiators highlighted that for their constituents the prospect of closing the 90/10 loophole remains a top educational priority for service members. 

ED clarified that it is still identifying sources of federal funds that can be used for higher education, as well as exploring data sharing agreements with other federal agencies which will be necessary in order for institutions to be aware of payments made directly to students. ED’s proposed language does not list the sources of federal aid that would count in the 90% and Martin noted ED’s intention for those sources to be listed annually via Federal Register notice to account for the need for data sharing agreements. 

ED then moved on to prompt further discussions on the issue paper by highlighting its proposed new disbursement rule, revenue generated from programs and activities,application of funds, revenue generated from institutional aid, funds excluded from revenues, and sanctions.

Throughout these wide-ranging discussions, ED also underscored that the regulation would broaden the 90/10 rule so for-profit institutions may not receive more than 90% of their revenue from federal funds, rather than just Title IV federal student aid programs. In terms of developing a specific definition for federal funds, ED said it could provide one in the regulation, but indicated that it would likely mirror what is in statute.

In discussing the remainder of the paper, negotiators brought up concerns in addressing third-party loans and predatory institutional lending, with some members expressing approval of recent actions from CFPB’s  oversight plans

In the end, the committee recorded a negative temperature check on the entire paper, with Adams serving as the lone dissenting member.

During public comment, speakers provided details in their experiences with higher education and urged the committee to use appropriate levels of accountability for all schools, part-time work regulations, gainful employment metrics, the benefits of trade school programs, closing the 90/10 loophole, student protections with professional licensure, and more. 

ED’s goal is to send out amended text to negotiators one week before the next session, and facilitators urged that any proproped language discussed during this week’s session be submitted as soon as possible.

The committee’s next session will begin on February 14. Stay tuned to Today’s News for more details and get caught up on all of our coverage through NASFAA’s Negotiated Rulemaking resource page.

 

Publication Date: 1/22/2022


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