ED Continues Negotiated Rulemaking With Public Hearings on Third-Party Servicers, Return of Title IV Funds, and More

By Maria Carrasco, NASFAA Staff Reporter

Many advocates and higher education experts on Tuesday shared comments with the Department of Education (ED) in the first of several public hearing sessions happening this week on negotiated rulemaking topics the department plans to tackle in the coming year. 

In March, ED announced that it would host virtual public hearings from April 11-13 to receive stakeholder feedback on potential issues for future rulemaking sessions. Topics discussed ranged from accrediting agencies, institutional eligibility, third-party servicers, return of Title IV funds, federal TRIO programs, and more. 

On Tuesday, many showed up to deliver comments to ED on third-party servicers, including Aurie Clifford, assistant director of Title IV compliance at Pima County Community College District. In February, ED announced new guidance on third-party servicers, which clarified that online program managers (OPMs) are considered third-party servicers. ED later in February adjusted the effective date of its new guidance after pushback from multiple higher education organizations. 

Clifford said that the third-party servicer guidance ED proposed will create unintended and negative consequences for many institutions. 

“Most notably, the scope of this DCL will unintentionally sweep in an enormous amount of entities and activities, that pose no risk of creating harms, that ED is trying to avoid,” Clifford said. “It has created uncertainty and has taken precious institutional resources from the important work that we do of serving our students. It has also imposed a large and unmanageable burden on schools in order to come into compliance by reporting the broad categories that are listed in this DCL.”

ED Under Secretary James Kvaal on Tuesday wrote in a blog post an update to ED’s third-party servicer guidance, noting that ED has reviewed over 1,000 comments on the new guidance. Because of those comments, ED is providing additional time for institutions and companies to come into compliance with the guidance, by removing the Sept. 1, 2023 effective date and implementing a new one at least six months after the updated guidance’s final publication. 

Kyle Southern, associate vice president of higher education quality at The Institute for College Access & Success (TICAS), began his comments urging ED to create negotiated rulemaking committees with balanced views, noting that student consumer, civil rights, and public interest groups need to have a voice at the table.

Southern added that TICAS supports ED’s attention to issues including accreditation, state authorization, third-party servicers, and defining distance education. Specifically, he noted, it will be critical for ED to ensure the quality of online and distance education programs.

“Recent years have shown that in some cases, accreditors have allowed low-quality and fraudulent institutions to continue conducting business as usual while the department has continued to use a largely opaque process for reviewing accreditors,” Southern said. “The previous administration's actions to weaken accreditation recognition requirements related to failing schools only worsens this failure of oversight. To protect students and ensure the quality of institutions accessing federal financial aid, we support a comprehensive review of accreditation regulations.”

Michelle Dimino, deputy director of education at Third Way, also spoke on issues of accreditation, noting that while accreditors should be a trusted gatekeeper for institutional access to over $100 billion in annual federal aid and should promise a good education for students, they sometimes don’t. 

“Yet it is too common that both of these promises go unfulfilled with accreditors continuing to recognize schools of dubious quality that leaves students worse off than before they enrolled, sometimes right up until the day the school shuts their doors,” Dimino said. “Regulations that provide better definitions of standards for student achievement, and offer clear parameters for the collection and disaggregation of student outcome measures, would serve the field and improve our understanding of institutional and accredited performance.”

Dimino and Satra Taylor, director of higher education and workforce policy at Young Invincibles, during their comment periods both urged ED to include young adults, current students, and borrowers in the negotiated rulemaking committees. 

“We believe in young adults' abilities to lead social change and understand that providing young adults with opportunities to develop their leadership skills strengthens their ability to voice their concerns for a brighter future for us all,” Taylor said. “On that same note, students must have a seat at any decision making table pertaining to policies that directly impact their educational journey.”

Other experts that spoke on Tuesday include Khandice Lofton, counsel at the Student Borrower Protection Center, who focused on cash management. She added that cash management at institutions needs stronger rules and better oversight for students. 

“This is important as we continue to see abuses in the campus card space that are empowered by ED’s historically lack of regulation of cash management,” Lofton said. “These products and the background deals that produce them continue to bury students under mountains of hidden, exploitative, and unavoidable fees. For students, the imposition of these fees can make the difference between whether they can afford their textbooks or even pay for food.”

Lofton also advocated for student loan borrowers to have an important role in the negotiated rulemaking process. 

“This is necessary because borrowers have been failed time and time again by policymakers and representatives of institutions, or worse for-profit institutions, who claim to have their best interests at heart, but who ultimately prioritize their profit or other concerns, while borrowers fall to the wayside,” Lofton said. “On behalf of 43 million student loan borrowers, we encourage a distinct representative who will always tend to borrowers first and foremost a seat at this table.”

NASFAA will give its public comments to ED on negotiated rulemaking on Wednesday. Stay tuned to Today’s News for more coverage on these public hearings and negotiated rulemaking.  


Publication Date: 4/12/2023

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