ED Kicks Off First Negotiated Rulemaking Session for Program Integrity and Institutional Quality

By Hugh T. Ferguson, NASFAA Managing Editor

The Department of Education (ED) on Monday began its latest negotiated rulemaking, or “neg reg,” focused on a number of regulations that directly impact institutions of higher education and their oversight providing entities.

As a reminder, neg reg brings together stakeholders from the higher education community with the goal of reaching consensus on new or revised regulatory language.

The first day’s session focused on getting the committee members acclimated to the process and began to dig into the issue papers provided to the committee. The first day’s session primarily focused on cash management.

In opening remarks, Under Secretary James Kvaal briefly joined negotiators and thanked them for their participation and dedicating their time to the rulemaking process.

“We hope that these new regulations will help students get the most from their education and from the federal investment in college affordability,” he said.

Prior to reading through the regulatory framework, the committee held a discussion about adding additional seats to the committee. Members sought to add constituency groups that they said should be represented during the committee’s discussions due to their perspectives and experience.

Consumer advocates, for example, urged the committee to split their seat, composed of civil rights organizations and consumer advocates, into their own groups so that each could have a primary negotiator at the table.

The motion to add the seat failed due to a single negotiator opposing the addition.

The committee also considered adding a seat for distance education experts, but the federal negotiator indicated ED was not amenable to adding a distance education expert constituency on the basis that the negotiating table already included experts in this area, so no vote was held.

Negotiators then began their discussion on cash management, as ED provided an overview of the newly proposed regulatory text.

According to ED, the goal of the proposed regulatory changes is to create more “consumer-friendly policies to ensure students have access to the aid they are entitled to, to cover the cost of attendance.”

First, ED is seeking to establish a 180-day time frame within which institutions subject to heightened cash monitoring and receiving funds under a reimbursement payment method (HCM2) must submit their final HCM2 requests after losing eligibility to participate in the Title IV student aid programs. Currently there is no such time frame, which in some instances has forced ED to track down payments for as long as two years.

ED said that the 180-day time frame is an “applicable number” to encourage schools to complete their requests in a timely manner.

The next provision concerned requiring institutions to return Title IV funds from students’  unused meal plan accounts back to students instead of the common practice of institutions retaining those funds, commonly referred to as “sweeping.” If a student has any unused funds from flex accounts that students can use like cash, the institution would be required to return those funds to students within 14 days of the end of the payment period.

Negotiators for ED said they feel strongly that these funds are the student’s money and should be made available to them.

The committee suggested giving students an option to apply any potential leftover meal plan flex funds to offset debts they may owe to the institution, which ED indicated they would consider.

Jason Lorgan of the University of California, Davis, a primary negotiator for public four-year institutions of higher education, suggested students have the option to roll unused meal plan funds over so that they can use them between terms, such as students who sometimes rely on funds between semesters if they remain on campus during that time; ED was amenable to this inclusion.

Magin Misael Sanchez, of UnidosUS, serving as an alternate negotiator for civil rights organizations and consumer advocates, said that having unused meal plan funds refunded would be helpful for students so they can have more choice and flexibility.

However David Cohen, of Five Towns College and APC Board of Directors, an alternate for proprietary institutions of higher education, took issue with the proposed regulations. Cohen said the regulations would limit institutional meal plan offerings, particularly at small institutions, and lead to a decline in service and that returning funds to students would ultimately favor more wealthy students who can afford to pay for food off campus.

Committee members also requested that ED ensure that the regulatory text clearly stated that the funds being impacted only applied to “flex plans” and not all student meal plans, such as the more traditional fixed number of all-you-can-eat meals per day.

While ED did not offer the committee specific data to detail how many complaints the department had received on this topic, officials did explain that they’ve heard it voiced that this is an area that needs to be addressed.

ED then turned to the next change in regulatory text, which would increase the amount of current year funds that may be credited against prior year charges from $200 to $300. This increase is intended to account for inflation since the $200 limit was set in 2007. Going forward, ED would assess adjusting this amount on a five-year basis through a Federal Register notice.

The committee then moved onto provisions concerning the inclusion of books and supplies in tuition and fees charges.

In the regulatory text, ED seeks to eliminate the provision allowing institutions to include the cost of books and supplies as part of tuition and fees. Current regulations allow schools to automatically apply Title IV funds to tuition and fees charges (including books and supplies if the school includes those in tuition and fees.)

Under the proposed language, ED allows for two exceptions to barring this inclusion: if a school documents on a current basis that the materials are not available elsewhere or accessible by students enrolled in that program from sources other than those provided or authorized by the institution; or the institution demonstrates there is a compelling health or safety reason for including books and supplies charges in tuition and fees.

But negotiators expressed concern about how these rules could impact pricing and availability of course materials. In some instances, negotiators noted that when institutions buy in bulk they are able to get materials at discounted prices and can ensure that students have materials at the start of their coursework.

ED countered that institutions can still make books and supplies an institutional charge under the proposed rule; they just cannot include those costs in tuition and fees, which allows them to automatically apply Title IV funds to cover those costs. Under the proposal, if the school treated books and supplies as a non-tuition institutional charge, it would only have to collect authorization from the student to apply Title IV aid to those costs.

ED then moved on to discussing how it would seek to require institutions to refund within 14 days any credit balance in excess of allowable charges to any student that receives Title IV aid, regardless of whether the credit balance arose from Title IV funds.

Negotiators then offered no comments on a pair of revised sections  granting ED authority, on a case-by-case basis during the audit or program review processes, to direct institutions to make late disbursements beyond the 180-day limitation; and allowing late disbursement of loan funds in any payment period regardless of whether the student successfully completed the period for which the loan was intended.

The committee then wrapped up its discussion on a few consolidated regulations that touched on program-specific regulations to cash management regulations related to overpayments, establishing new deadlines, and modifying small balance write-offs.

The session for Monday concluded with public comments on issues covered that day, including course material fees and access and affordability programs. Those interested in watching Tuesday’s session can register to watch online. Additionally, updates in the negotiated rulemaking process will be available on ED’s website.


Publication Date: 1/9/2024

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