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Thousands of Public Comments Prompt ED to Remove Third-Party Servicer Guidance Effective Date

By Allie Arcese, Sr. Director of Strategic Communications & Engagement

Department of Education (ED) Under Secretary James Kvaal on Tuesday published a blog post with an update to the department’s third-party servicer guidance, stating that ED will remove the Sept. 1, 2023 effective date for the guidance due to an influx of “significant and helpful feedback” from more than 1,000 public comments. 

“The careful review of these comments and consideration of any revisions to the guidance letter will take time,” Kvaal wrote. “We know that many institutions and companies have already begun to analyze their contracts in anticipation of reporting and compliance deadlines, and we understand the concerns that can cause. We are therefore providing additional time for institutions and companies to come into compliance with the guidance.”

ED will work to publish a revised final guidance letter, and the new effective date for the guidance will be at least six months after the publication of that guidance, Kvaal wrote. 

In comments submitted to ED last month, NASFAA questioned ED’s decision to change the regulatory definition of third-party service through the guidance, and noted that the expanded definition captures many types of services and functions institutions hire external parties to conduct that fall outside of Title IV aid administration. The inclusion of so many new outside entities in the definition, NASFAA warned, risks essential service providers leaving the higher education marketplace due to onerous requirements. 

Kvaal also noted in his blog post that contracts involving several activities do not constitute third-party servicer relationships, including: 

  • Study abroad programs.  

  • Recruitment of foreign students not eligible for Title IV aid.  

  • Clinical or externship opportunities that meet requirements under existing regulations because they are closely monitored by qualified personnel at an institution.  

  • Course-sharing consortia and arrangements between Title IV-eligible institutions to share employees to teach courses or process financial aid.   

  • Dual or concurrent enrollment programs provided through agreements with high schools and local education agencies, which are exempt because they do not involve students receiving Title IV aid.   

  • Local police departments helping to compile and analyze crime statistics, unless they write or file a report on behalf of an institution for compliance purposes.  

“We will carefully review public comments on areas of confusion or concern and consider clarifying and narrowing the scope of the guidance in several areas, including software and computer services, student retention, and instructional content,” Kvaal wrote. “These clarifications could include other areas as we continue to review comments and seek to balance the need for greater transparency and oversight against administrative burden, among other factors. ”

Kvaal also noted that while the department reviews the comments received, previous Dear Colleague Letters GEN 12-08, GEN 15-01, and GEN 16-15 (as amended by the March 8, 2017 electronic announcement) remain in effect. 

“The Department has already benefited from listening to the feedback from stakeholders. We will continue to review the helpful suggestions we have received and continue to engage with the community as allowable and appropriate,” Kvaal wrote. “Doing so will help us ensure we ultimately strike the right balance between transparency, oversight, and institutional and third-party burden.”

 

Publication Date: 4/12/2023


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