Neg Reg Wraps Up With Discussion of Scope of Regulations, Visit From Special Master

By Allie Bidwell and Brittany Hackett, Communications Staff, and Karen McCarthy, Policy & Federal Relations Staff

During the final negotiated rulemaking (also called “neg reg”) session on Thursday, committee members grappled with the scope of potential borrower defense to repayment regulations, with several financial aid administrators expressing concern that new regulations aimed at bad actors could be overly burdensome for all institutions.

The last session for this round of negotiation partly focused on the fourth issue on the neg reg agena: whether to update and expand the the grounds for false certification discharges. Many negotiators felt that including situations such as wherein an institution misled borrowers about job prospects, the total cost of their education, the quality of the programs, and individuals’ eligibility to qualify for certain jobs as eligible for false certification would be beneficial to borrowers as this discharge process is often easier for them to navigate on their own than the current defense to repayment process.

U.S. Public Interest Research Group’s Chris Lindstrom said that many students “do not have the … recourse necessary to get justice” when they are “taken advantage of by their schools” and called for “more generous recourse, not narrower.”

While most negotiators agreed that students like those who attended Corinthian schools would benefit from false certification discharges, Department of Education (ED) staff pointed out that historically, eligibility for false certification discharge has been based on characteristics of the individual borrower (e.g., the borrower claims that the institution signed his or her name on a master promissory note) rather characteristics of the institution or academic program (e.g., an ineligible program). Several financial aid administrators on the committee questioned the extent of school involvement in the false certification discharge process, and expressed concerns about their ability to defend themselves against claims..

Mark Justice, associate director of graduate assistantships, scholarships, and financial aid at The George Washington University’s Milkin Institute School of Public Health, said that while the fraud and misrepresentation scenarios discussed by the committee were likely to occur at only a small number of schools, all institutions participating in the Title IV programs would be subjected to the regulations. He suggested that a tiered approach that looks for patterns of fraud or wrongdoing at schools might be one way to address concerns.

Angela Johnson, executive director of enrollment operation, student financial aid and scholarships at Cuyahoga Community College in Cleveland, Ohio, discussed instances where fraud occurs on the part of a student, such as when false documentation is provided to an institution and requested any proposed regulatory language take those situations into consideration.

The fifth issue – whether to revise financial responsibility or administrative capability regulations and the possibility of adding disclosure to protect students, taxpayers, and the federal government – was also discussed, with the conversation largely focusing on potential triggers or early-warning indicators , that might be indicative of failing financial responsibility, administrative capability, or other standards and can be used to prevent another collapse like Corinthian.

Among the various suggestions made by the committee of actions ED might take were:

  • Increase the frequency of reviews of schools that are not meeting financial benchmarks;
  • Require a letter of credit or other financial guarantee in certain situations;
  • Prohibit leaders of defunct schools from moving on to other leadership positions at new institutions;
  • Create some kind of financial stress test similar to what is used in the banking industry; 
  • Require institutions to notify ED when they being investigated at the state or local level for consumer fraud;
  • Increase the number of consumer disclosures schools must issue when they are under investigation for fraudulent acts; and
  • Use the rate-of-repayment metric to determine an institution’s long-term health.

Some members also suggested using cohort default rates (CDRs) for parent PLUS and Direct loans, in addition to the regular rates issued by ED, as a trigger for financial responsibility enforcement. Sharon Oliver, assistant vice chancellor for scholarships and student aid at North Carolina Central University, expressed concern with that idea, noting that institutions that serve, and graduate, a large population of minority or low-income students may be unduly punished for low CDRs.

Christine McGuire, associate vice president of enrollment and student affairs at Boston University, also expressed caution at the idea of using CDRs as a trigger, adding that some proposed ideas could lead to great administrative burden and cost at institutions. “I don’t want us to overreact to a terrible situation … and create new hoops and issues that raise the cost of higher education,” she said.

In the afternoon, Special Master Joseph Smith spoke briefly to the committee about the work surrounding borrower defense claims.

“I’m confident that your participation will help make the borrower defense regulations stronger, better, and more durable,” Smith said. “Your work here is essential to making sure both students and taxpayers are rigorously protected.”

Smith said he and his team are working to create a general application for borrower defense claims – an idea some committee members also brought up during the second day of negotiated rulemaking. Smith said the form would ideally be comprehensive and detailed enough to capture the scope of the problem, but easy enough for borrowers to complete without needing to hire a lawyer.

“The unfortunate reality … is that too many students have been preyed upon by schools that exploited their desire to get an education to help them advance their career goals,” Smith said. “Hearing about the stories has been as infuriating as it is heartbreaking.”

The committee then spent the remainder of the afternoon discussing other possible triggers and methods of disclosure for students.

Maggie Thompson of Higher Ed, Not Debt offered several options for potential triggers to be considered in a calculation for some type of action to be taken, including: the potential for a school to fail the 90/10 rule, the likelihood a school will fail a gainful employment standard, institutional debt, withdrawal rates and enrollment declines.

However, several committee members cautioned that no one trigger metric or complaint should be given too much weight. One student complaint, for example, should not automatically trigger action, whereas 100 similar complaints might be examined more closely.

While some suggested that the College Scorecard could be used as a method of disclosure for students – listing if a school is under investigation by a governmental agency, or if it is in financial trouble – , others felt there were problems with the idea.

David Sheridan of Columbia University, for example, said it’s unclear how many students are actually using ED’s College Scorecard to make decisions about where to apply and attend college.

ED officials said, though, that they often struggle with finding the best way to reach students, as some don’t frequently check their mail or email.

The next session of negotiated rulemaking for borrower defense will take place February 17-19, in Washington, D.C.

 

Publication Date: 1/15/2016


You must be logged in to comment on this page.

Comments Disclaimer: NASFAA welcomes and encourages readers to comment and engage in respectful conversation about the content posted here. We value thoughtful, polite, and concise comments that reflect a variety of views. Comments are not moderated by NASFAA but are reviewed periodically by staff. Users should not expect real-time responses from NASFAA. To learn more, please view NASFAA’s complete Comments Policy.

Related Content

Today's News for February 8, 2024

MORE | ADD TO FAVORITES

ED Continues Neg Reg Session With Discussion on State Authorization and Distance Education

MORE | ADD TO FAVORITES

VIEW ALL
View Desktop Version