NASFAA Gives Comments on R2T4 and Third-Party Servicers at ED’s Public Hearings

By Maria Carrasco, NASFAA Staff Reporter

NASFAA on Wednesday provided public comment and expressed concerns related to return of Title IV funds (R2T4) and recent guidance on third-party servicers during the Department of Education’s (ED) second day of negotiated rulemaking public hearings.

Jill Desjean, NASFAA’s senior policy analyst, spoke on behalf of the association and urged ED to reevaluate regulations related to Title IV student aid, rather than “continually tacking on new requirements to accommodate changes” to modes of instruction delivery. 

Specifically, when it comes to R2T4, Desjean called on ED to simplify the process to reduce the burden on students and institutions. She noted that while NASFAA appreciates ED’s recent regulatory efforts on certain R2T4 requirements in 2020, the regulations “pile complexity” and make it difficult for aid offices, and especially for students. 

“Students leaving school before completing a term are likely doing so under already stressful circumstances,” Desjean said. “The R2T4 process should be simplified to ensure that it does not add to their stress.”

She said that rules and regulations for the R2T4 process already comprise nearly 200 paragraphs of regulatory text and nearly 150 pages in the Federal Student Aid Handbook. When it comes to NASFAA’s AskRegs Knowledgebase, NASFAA has 271 regulatory assistance articles devoted to R2T4 alone. Further, according to Desjean, financial aid administrators mentioned R2T4 more than twice as often as any other topic area in requests for input on regulatory relief. 

“This is not an area rife with fraud and abuse; it’s an area rife with complexity, confusion, and frustration,” Desjean said. “We are grateful the department is looking to ease R2T4-related barriers to students, as well as institutional R2T4 administrative burden through negotiated rulemaking. The R2T4 process needs a complete overhaul with a focus on where we can sacrifice precision — and the complexity inherent therein —  with minimal impact on program integrity.” 

Desjean also spoke about ED’s third-party servicer (TPS) guidance, which has raised significant confusion because of a change in the definition of a third-party servicer.

“As noted in our previously submitted comments, it is an unusual path to issue subregulatory guidance before conducting negotiated rulemaking sessions and issuing final rules,” Desjean said. “We continue to disagree with the greatly expanded definition of third-party servicer in the updated guidance and do not believe the scope of the guidance falls within the regulatory definition of a TPS.”

However, Desjean noted NASFAA was grateful for Education Under Secretary James Kvaal’s announcement on Tuesday that the department is reevaluating the guidance in light of public comments received. 

Along with NASFAA, other higher education experts gave comments on R2T4, including Yolanda Watson Spiva, president of Complete College America. Watson Spiva said it’s crucial for ED to address the requirement for students to complete at least 60% of a course to retain their financial aid, noting that the process negatively impacts degree completion, especially for low-income students. She added that satisfactory academic progress (SAP) policy already exists to incentivize completion, so ED should reevaluate if R2T4 is even necessary.

“Currently, the complexity of the policy leads to frequent financial aid audit flags,” Watson Spiva said. “The department has indeed made strides in humanizing the FAFSA completion process and clarifying financial aid eligibility. We must therefore extend these efforts to R2T4, to verification, and to SAP, demystifying how financial aid can be revoked, and ensuring a more equitable system for all students.” 

Kelly McManus, vice president of higher education at Arnold Ventures, focused part of her comments on urging ED to strengthen its accreditation process, noting that more than 7 million borrowers are in default on their student loans.

“Famously, accreditors provide second, third, and fourth chances even to the lowest performing schools,” McManus said. “One even defended schools where 90% of students don't graduate saying that a school can be ‘good for those 10% who graduate.’ The department must raise the bar for creditors that serve as gatekeepers to billions in federal student aid.”

Edward Conroy, senior advisor with the education policy program at New America, spent part of his comments speaking on how crucial it is for borrowers to be able to easily enroll into ED’s income-driven repayment (IDR) plan. 

“The department must ensure that when borrowers are making decisions about repayment, accessing IDR is as easy as choosing any other option,” Conroy said. “The department has taken important steps towards remedying past issues with deferments and forbearances through its IDR and PSLF waivers, increased oversight of servicers, and by designing a new streamlined IDR plan, that is more clearly the best choice for many borrowers. But to truly eliminate barriers to it, our department must act outside of the negotiated rulemaking process to ensure robust implementation of the FUTURE Act.

ED said that it is canceling Thursday’s public hearing sessions since all commenters were accommodated on Tuesday and Wednesday. 

NASFAA members can submit their own comments about negotiated rulemaking to or share with NASFAA at [email protected]. Comments may be submitted until April 24, 2023. 

Stay tuned to Today’s News for coverage throughout the negotiated rulemaking process.


Publication Date: 4/13/2023

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