Neg Reg Day 5: Second Session Concludes Discussion of Issue Papers, With 90/10 and Gainful Employment Headlining

By Hugh T. Ferguson, NASFAA Senior Staff Reporter

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

The Institutional and Programmatic Eligibility Committee wrapped up work on its second negotiated rulemaking session, having completed discussion on all of the adenda's outlined issue papers.

Now that negotiators have made their positions clear on the proposed language outlined by the Department of Education (ED), the department will incorporate the committee's feedback into updated regulatory text to be used during the committee's third and final session slated for March, seeking to reach consensus. 

In kicking things off on Friday's session, the committee facilitators underscored the importance of the committee providing ED with as much information as possible, to enable the department to work through potential amendatory text in the weeks ahead as it works toward consensus. 

Facilitators urged negotiators to focus their comments on the issues at hand, to not verbally repeat points that have been made, and to instead highlight their support in the chat feature and follow up with written proposals to ensure that the available time was maximized.

The committee then returned to the change of ownership issue paper that it had begun during Thursday's session, with no negative temperature checks recorded. 

ED then moved on to walking through its final issue paper on 90/10

Brad Adams, a negotiator on behalf of proprietary institutions, at the outset of conversations said that the 90/10 rule provides no indication of the quality of a given program and that the rule must be set up in a way that proprietary institutions can administratively follow.

Federal negotiator Gregory Martin noted updated text from the last session's proposed language regarding federal funds to be counted toward the revenue percentage. The change would now explicitly exclude non-Title IV funds provided directly to the student for expenses other than tuition, fees, books and supplies from being counted as federal revenue. ED's proposal to include direct-to-student payments, even when those  payments were specifically designated for non-tuition expenses such as the Veterans Administration (VA) Basic Allowance for Housing, was met with pushback from some negotiators in January, and ED responded by amending the language.

In the same section, however, ED added new language requiring institutions to count as federal revenue the federal portion of grants provided or administered by a non-federal agency. Adams noted the difficulty institutions would have with distinguishing the federal share from the non-federal share, but David Socolow, a negotiator for the state higher education executive officers, state authorizing agencies, and/or state regulators of institutions of higher education and/or loan servicers, noted that states are required to provide federal/state split data in order to report back to the relevant federal agency who gave them this money.

The committee then reached a negative temperature check on this section, with Adams outlining a number of concerns related to administrative burdens for proprietary institutions.

ED then conducted a walkthrough and discussion of proposed changes to the 90/10 cash basis accounting section, where the department is attempting to prevent what it described as institutions' “gaming” the 90/10 metric by strategically waiting to draw down Title IV funds until the start of the next fiscal year so as not to fail the GE ratio in the prior fiscal year. 

Adams again disagreed with ED's direction, noting that it is not possible for ED to determine whether the delayed drawdown was an attempt to subvert the rules. He provided as an example semester start dates that occur only days before the end of an institution's fiscal year and an institution's inability to draw down funds in such a short timeframe. The department appeared amenable to his suggestions and while the committee recorded a negative temperature check, Adams committed to work with ED on new language. 

The committee continued working its way through the 90/10 issue paper following lunch, picking up with the application of funds portion. 

Amanda Martinez, a negotiator on behalf of civil rights organizations, urged ED to consider prioritizing both the 90/10 and gainful employment topics when the committee reconvenes next month by placing those discussions first in the order. Adams and a few other negotiators agreed.

Regarding the 90/10 application of funds, Adams questioned whether revenue from non-enrolled students taking a certification course at one of the institution's locations would be counted toward the 10% nonfederal revenue as it applies to the 90/10 rule. Martin confirmed in such an instance that under the proposed text, such income would not count towards the 10%.

Ultimately, the committee reached a negative temperature check on this section, with Adams recording a thumbs down due to the issues he raised. 

The committee then moved on to discuss funds excluded from revenues, with Yael Shavit, a negotiator on behalf of state attorneys general, pushing for income-share agreements (ISA) to be excluded from nonfederal revenue in the 90/10 rule so institutions aren't able to pad their revenue calculations by relying on ISAs, fearing it could be used as a loophole in the future. 

Martin acknowledged Shavit's written proposal submitted after the first session and said ED has not yet made a determination on the proposed language on ISAs and was not ready to address it at the moment, though the department is not dismissing the concern surrounding ISAs.

Adams challenged proposed text from ED that would exclude from non-Title IV revenues any amount from the proceeds of the factoring or sale of accounts receivable or institutional loans, regardless of whether the loans were sold with or without recourse. 

Steve Finley, representing ED as general counsel, justified ED's proposal, reiterating the intent of the 90/10 rule to ensure a student is willing to pay out of pocket for the education being offered, noting the distinction between a student making payments on a loan, who is paying for an education, and payments from an entity for loans purchased from the institution, who is instead making a business decision. 

Adams argued the rule in its current form would encourage institutions to not offer institutional loans and instead require students to pay out of pocket. 

A negative temperature check was recorded, with three negotiators voting thumbs down. 

A temperature check on the final portion of the 90/10 issue paper, on the topic of sanctions on an institution if it does not derive at least 10% of its revenue from sources other than federal funds, also garnered a negative temperature check as Adams issued a thumbs down. 

Following a brief break, the committee devoted the remainder of the afternoon to further discussions on two issue papers ED and negotiators expressed the desire to have more time on gainful employment and the ability to benefit (ATB).

Regarding ability to benefit, Socolaw asked ED to develop stricter language for Eligible Career Pathway Programs (ECPPs) that would be eligible for Title IV aid for students enrolling using ATB standards. He stressed that Congress intended for stricter standards when it reinstated ATB with the ECPP language added. 

He suggested that, as written, the language could potentially allow an institution to simply certify that it offered ECPPs and enroll students under the ATB criteria, whereas schools should have to actually demonstrate that they were working with workforce and training partners outside of the institution if they wanted to offer Title IV aid for such programs.

As for the gainful employment issue, negotiators spent more time discussing ED's directed questions about an additional accountability metrics based exclusively on earnings, to address the fact that programs with low earnings but also low debt would pass the GE metrics in the proposed regulations without either adding a standalone earnings metric or removing the debt-to-annual earnings metric. 

While several negotiators expressed interest in exploring an earnings-based metric, they also lamented the fact that distinguishing between the options ED presented was difficult in the absence of data modeling how the different options would play out. 

With respect broadly to data requests, ED indicated that the vetting process required by the department holds up the processing of such requests, but that ED would have informed negotiators if their requests could not be honored. Both Adams and Martinez asked that data be distributed by ED as it becomes available so negotiators have time to review it.

The third session of work for the Institutional and Programmatic Eligibility Committee is slated to begin on March 14. ED will come to those meetings with largely final regulatory language, which negotiators will have the opportunity to weigh in on and suggest changes, after which final consensus votes will be taken on each individual issue paper. 

Stay tuned to Today's News for more coverage and details on updates to the regulatory language.

 

Publication Date: 2/22/2022


Peter G | 2/22/2022 2:18:05 PM

I'm surprised there isn't more chatter considering the stakes on a few of these, but perhaps people are
a) feeling like the outcome is more or less set
b) just overwhelmed and burnt from the last 2 years.

Or perhaps
c) convinced half of this will be overturned in 2026 and we'll just yo-yo back and forth on GE 'til the heat death of the universe.



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