By Jill Desjean, Director of Policy Analysis
In the final days of the Biden administration, the Department of Education (ED) issued a Dear Colleague Letter (DCL) addressing its interpretation of misrepresentations by third-party service (TPS) providers engaged by institutions of higher education.
The primary purpose of the DCL is to remind institutions that the rules prohibiting them from engaging in misrepresentation apply equally to those institutions’ third-party servicers. It goes on to note that institutions may be held responsible for misrepresentations made by their TPS providers and that penalties can include fines or action from the department to limit, suspend, or terminate the institution’s access to Title IV student aid funds.
While the guidance applies broadly to third-party servicers, the DCL specifically calls out online program managers (OPMs).
Noting the list is not exhaustive, ED provides three specific examples of what they would likely consider misrepresentation, including:
Inaccurately identifying an individual employed by an external servicer provider as being employed by the eligible institution;
Inaccurately presenting a sales representative or recruiter employed by an eligible institution or an external service provider as an academic advisor, such as by referring to them as a “counselor;” and
Describing a program, or any of its components or resources, provided in substantial part by the external service provider as “the same as” a corollary residential or campus-based version of the program provided by the eligible institution.
Unlike earlier attempts at further regulating third-party services, ED characterizes the DCL as a reminder of existing rules and how they apply to TPS providers as opposed to new rules institutions must follow.
This parting word from the Biden administration on TPS providers comes after attempts in early 2023 to broadly redefine what would count as a TPS, which was met with significant opposition from NASFAA and the broad higher education community, including a lawsuit, and was ultimately rescinded. ED also began the formal process of issuing TPS regulations with its intent to establish a negotiated rulemaking committee, but the process stalled after public hearings were held in the spring of 2023.
While regulations require a formal process for a new administration to dismantle regulations, guidance can be more easily rescinded at an administration’s discretion. It is unclear whether the Trump administration will retain this guidance.
Keep up to date on this and more in NASFAA’s Today’s News.
Publication Date: 1/22/2025
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