Neg Reg Day 4: Committee Works Through Three Issue Papers as Session Begins to Wind Down

By Hugh T. Ferguson, NASFAA Managing Editor

The Institutional and Programmatic Eligibility Committee approached the end of its current session by working through the financial responsibility regulatory text, running through work on certification procedures, and beginning discussion on changes of ownership.

More work remains for Friday's meeting, which will wrap up discussion on the remaining issue papers, but the committee's progress throughout this week indicates that they should have no trouble working through its final day's agenda

In kicking things off for Thursday's session, negotiators briefly revisited some comments from Wednesday's session concerning the committee's commitment to keeping institutions accountable to students.

Ernest Ezeugo, a negotiator on behalf of students and student loan borrowers, underscored the importance of the committee's work by sharing his family's personal experience with a small for-profit institution that misled his mother and failed to provide her with gainful employment, which ultimately devastated her financial well-being.

At the outset of Thursday's discussions of the issue papers, the Department of Education (ED) returned to the financial responsibility issue paper and walked through the end of the regulatory text that concerned "change in ownership" language. ED highlighted that this section was updated from the last session.

ED underscored that a number of changes were made at the request of the committee and that other changes were made to reflect the complexity of corporate structures and to acknowledge that when a corporate entity owns several institutions, financial responsibility rolls up to that higher corporate level and does not end with the individual institutions themselves.

Following a brief discussion, the committee reported a positive temperature check on the section.

The remainder of the discussion concerned the conditions for Title IV eligibility under a provisional Program Participation Agreement (PPA) following a change in ownership, which contained only minor updates to the regulatory text from the last session. 

Negotiators reported a positive temperature check on this section, which concluded the committee's discussion of the issue paper. 

The committee then moved on to discussing the certification procedures issue paper and began with the "provisional certification" section detailing the conditions under which an institution's certification can automatically become provisional if it fails to meet certain compliance requirements.

In the last session, ED had proposed that institutions automatically be placed on provisional certification if they received the same finding of noncompliance on more than one program review or audit. In this round, ED moved the provision from the list of events that lead to automatic provisional certification and instead moved it to the section where ED may use its discretion to do so. Sam Veeder, representing financial aid administrators at postsecondary institutions of higher education, highlighted drafted language that would revise the text to include that findings would have to be material in nature, to specify that the findings of noncompliance would have to have taken place in consecutive years, and that there would have to have been no corrective action taken by the institution.

For the first section of this issue paper the committee reached a negative temperature check from a pair of members who stated that the inclusion of Veeder's language would placate their concerns. 

The committee then began discussions focused on the issue paper's "program participation agreement" section where ED made changes to requirements for institutions that offer gainful employment programs with respect to what would be considered a reasonable program length. ED's proposal is to limit program length to the lesser of the minimum hours required by the state the institution is located, or the national median in cases where an occupation is licensed by at least half of states. 

Anne Kress, the primary negotiator on behalf of two-year public institutions of higher education, cited concern over ED overly dictating program length for state-licensed professions, which is out of the scope of their authority. She and others suggested that the language as written could make it such that schools in some states would not be able to offer a program of sufficient length to meet its own state's licensure requirements.

Other areas with robust discussion included ED's changes from last session that expanded the number of individuals who must sign the PPA and whether signers were providing any type of personal guarantee. Federal negotiator Gregory Martin confirmed that the entity the individual signs on behalf of, and not the individual themselves, are liable for noncompliance. ED counsel noted that ED's intent with these changes was to get higher level corporate entities to sign the PPA to ensure that the assets of the corporate entity are accessible for liabilities.

ED resumed conversation on the issue paper diving into language requiring institutions to ensure that all programs that require programmatic accreditation by their state or a federal agency have obtained such accreditation. Laura Rasar King, representing accrediting agencies, stressed the importance of ED adding pre-accreditation status as acceptable for this section, noting that the language as written would prevent all new programs from being eligible for Title IV aid for several years until they received full accreditation. 

Negotiators also discussed proposed language that would require institutions to attest on the PPA that their programs satisfy the applicable educational requirements for licensure or certification in every state the program is offered. While the issue of burden was raised, ED countered that institutions choose whether to offer programs out of state and that if they choose to do so, they choose to take on the associated burden. 

As promised earlier in the week, the conversation turned to the practice of withholding transcripts from students who owe a balance to the institution. 

Johnson Tyler, a negotiator on behalf of the legal aid community, urged ED to incorporate language that would bar the practice of transcript withholding. Several negotiators supported his proposal, but ED said there were a number of things they needed to examine further and that they would come back to the committee with a more official position in March.

On the transcript issue, Marvin Smith, FAAC®, representing four-year public institutions of higher education, said the issue of transcript withholding needed more conversation, citing concern of unintended consequences such as institutions turning away from transcript withholding and toward debt collection agencies to recover debts, noting the potential harm with that approach as well. In developing potential language on the issue, Smith urged members to look at how California has banned the practice of transcript withholding to best protect students. 

ED initially took a temperature check on the entirety of this section, which resulted in a negative temperature check. Following that check the committee broke up the section to provide ED with clarity on the specific points of concern.

The committee then recorded negative temperature checks on the language related to program length requirements, on required programmatic accreditation, and on the state licensure language. 

ED then walked through the issue paper's "provisional certification" section, which lays out conditions ED may apply as appropriate, including, for schools ED deemed at risk of closure, a requirement to release all transcript holds.  

This section resulted in a negative temperature check, with several members citing concern over ED's inclusion of banning transcript holds here, but not in other areas of the regulations like the PPA and financial responsibility. Johnson disagreed with the message ED would be sending by prohibiting transcript withholding only in extreme circumstances where a school is in danger of closure.

Next up was a discussion of conditions for proprietary institutions seeking to convert to nonprofit status following a change in ownership. ED clarified that they were not restricting an institution from saying they are a 501(c)(3) tax exempt organization, but that they sought to prevent institutions from claiming not-for-profit status for TItle IV funds prior to ED granting said status.

A temperature check on this section was positive.

For the remainder of the section, ED indicated that they updated some cross references and went through the "institutional information" section, where they re-added a previously deleted required disclosure listing the states where the institution offers a program and where it meets licensure requirements and where it does not per request of negotiators. Ultimately, the committee recorded a negative temperature check, with one member concerned that the burden of this disclosure might have the unintended consequences that four-year public institutions decide not to offer some programs.

In wrapping up the discussion, the committee moved on to the change of ownership issue paper and went through a brief walkthrough of the definitions section, which resulted in a positive temperature check.

The session's public comment period included testimony from a student veteran, gainful employment, unfairness in singling out proprietary institutions, stories of student loan borrowers struggling to repay their loans, and examples of how higher education programs have benefited a number of students.

Facilitators again reiterated that the committee may have the opportunity to return to other issue paper topics on Friday with time permitting. Friday's final session will return to the change of ownership and 90/10 issue papers, and then pick up the remaining issues on the agenda. 

Stay tuned to NASFAA's Today's News for more coverage of negotiated rulemaking sessions throughout the week, and read up on our previous rulemaking coverage


Publication Date: 2/18/2022

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