Now that the Department of Education (ED) has wrapped up its second negotiated rulemaking committee, NASFAA has combined its daily coverage into one standalone article detailing how the Institutional and Programmatic Eligibility committee wrapped up its work, highlighting where members reached consensus and detailing where significant disagreements remained.
For original sourcing and reference guides be sure to make use of the resource page published by ED at the outset of the negotiating committee’s session.
Consensus: Negotiators reached consensus on two of seven topics. On the two areas outlined below, ED is obligated to use the consensus language in the regulatory text it publishes for comment:
– 90/10: One of the more contentious issue papers — that surprisingly garnered consensus among the negotiators — was the 90/10 rule issue paper, which was discussed at length during the committee's final day of negotiations. The rule was changed by Congress last year to close the so-called 90/10 loophole, which limited federal funds to be counted in the 90% federal revenue calculation to only Title IV student aid. In its proposed regulations to implement the law, ED expanded the federal funds to be counted in the revenue calculation to include all federal educational assistance funds, including the federal portion of funds administered by a nonfederal agency.
A few caucus meetings ultimately yielded a consensus vote. ED addressed regulatory language concerning revenues generated from programs and activities and agreed to add back two provisions from the current regulations that it had initially proposed to eliminate. The pair of provisions that were ultimately reinstated related to revenue generated from training provided by the institution for students or practitioners to maintain or meet licensing requirements. According to ED, the language revisions made during the caucuses represented a compromise position by all parties, and that reaching consensus would send a powerful message that the community is behind this rule.
– Ability to Benefit (ATB): Initially, this issue paper did not reach consensus when the committee voted during the start of the final week’s session. One committee member had expressed concern that ED did not change language related to reapplication for state process approval after the two-year initial approval period that requires institutions to demonstrate that students at each participating institution have a success rate within 95% of the success rate of students with high school diplomas. There was a suggestion that ED change that rate to 75%. On the final day of the session, ED returned to the topic and offered to use 85%, which resulted in consensus.
No Consensus: The remaining five issues that did not reach consensus are outlined below. While ED is free to draft language as it sees fit, it typically does not make substantive changes to areas where the group was largely in agreement even if ultimate consensus was not reached.
– Administrative Capability: Throughout the discussions several negotiators raised concerns over ED’s retention of language proposed in the first and second negotiating sessions related to a condition of administrative capability being that institutions provide “adequate career services.” Since the first week of discussions, negotiators had pushed back on the department to either be more clear or to abandon the language altogether. Ultimately Brad Adams, representing proprietary institutions of higher education, cited concern with the language concerning career services, and lack of definitions for the high dropout rate metric along with misrepresentation as his reasons for withholding consensus. This was the lone negative vote on the issue paper.
– Gainful Employment (GE): Negotiators were far from consensus on the GE issue paper, with six committee members rejecting ED’s regulatory language. A common sentiment among those casting “no” votes was that they are in favor of GE regulations, but could not agree with the details of the current proposal, with several citing the rushed nature of the process that allowed limited time for discussion, and ED’s unwillingness to compromise on important issues. Marvin Smith FAAC®, a negotiator on behalf of four-year public institutions and a NASFAA member who voted “no,” said the current GE regulations being considered have him worried that institutions will question whether it's worth the risk of offering GE programs to low-income students.
Following the vote, negotiators on behalf of students and student loan borrowers took issue with the vote against GE regulations and argued that the public would perceive the lack of consensus as failing to put students’ interest first.
– Financial Responsibility: Here there was a back-and-forth over mandatory triggering events, with a number of committee members urging ED to retain proposed language that two discretionary triggers become an automatic mandatory trigger, arguing that it would provide more timely protection for students. However, Adams had serious reservations with new language, specifically that an institution receiving more than 10% of Title IV revenue from failing GE programs would constitute a mandatory trigger. He argued that the 10% of Title IV revenue could represent a single GE program’s failure, and was the lone “no” vote.
– Changes in Ownership: Several negotiators expressed concern about the addition — in ED’s definition of a nonprofit institution — of qualifying language related to reasonableness, market price, and fair market value with respect to revenue sharing deals and agreements with former owners, arguing that the language could unintentionally provide a safe harbor for problematic deals. Others noted the difficulty ED would have with assessing fair value given the likely lack of comparable transactions given their unique nature. A vast majority of negotiators issued "no" votes on the consensus check, with the only "yes" vote coming from the department. Negotiators who explained their "no" votes overwhelmingly called on the department to return to language from the second rulemaking session, reiterating concerns that committee members previously raised.
– Certification Procedures: Following a number of concerns at the outset of the issue paper’s discussion, ED made changes to language in the section on student disclosures related to whether a program meets the educational requirements for licensure or certification in a state. The language was changed to be consistent with language in another section of the same issue paper related to program eligibility for Title IV funds that would be contingent upon the program’s meeting state licensure requirements. Negotiators requested that ED be clear in the language requiring programs to meet state licensure requirements in order to qualify for Title IV aid that institutions would only be responsible for making that determination at the time the student enrolled in the program and not in the event that the student changed locations after enrollment. A few breaks were taken during the final day’s session so ED could update language as needed before a consensus vote was taken on the issue paper. However, when it came time for a vote, multiple negotiators issued a “no” vote.
ED will next publish the consensus language for public comment for the two topics that reached consensus, as well as the language it develops for the other five issues. After reviewing public comments, ED will draft final rules. If the final regulations are published on or before Nov. 1, 2022 they will go into effect July 1, 2023.
Publication Date: 3/24/2022