Update on Department of Education’s Postsecondary Education Regulatory Work – ED.gov Blog

By: James Kvaal, U.S. Under Secretary of Education

No president in history has done more to fix a broken student debt system than President Biden – including approving loan forgiveness for more than 4.7 million people and creating the SAVE plan, the most affordable repayment plan ever. But loan relief, alone, is not enough. We must also address the root causes of unaffordable debt.

Already, the Biden-Harris Administration has issued the most effective set of regulations ever to make sure that career programs deliver value for their students. And because not all programs that leave students with unaffordable debts are career programs, the U.S. Department of Education (Department) will be giving American students and families more transparency into what they can expect to pay for college and their financial outcomes than ever before. Additionally, we issued new rules that strengthen the Department’s ability to protect students and taxpayers from the negative effects of sudden college closures, restrict colleges from withholding course credits paid for with Federal taxpayer money from students’ transcripts, and require colleges to clearly communicate to students how much financial aid they will receive. We are also working to hold schools accountable for the costs of borrower defense discharges when they lie to their students.

Now, the Department is considering a series of steps to further protect students and taxpayers, including textbook costs, accreditation, State oversight of colleges, and public-private partnerships. Getting accountability right requires careful thought and consideration of its possible impacts on students and schools. As we approach the end of the current school year and look forward to the next, I wanted to provide a brief update on several of our ongoing accountability initiatives.

Next Steps on Forthcoming Improvements to Regulations

This winter and spring the Department conducted negotiated rulemaking sessions to consider a range of important issues mostly centered around accountability. These included proposals around State authorization and accreditation, as well as issues related to textbooks, distance education, Return of Title IV funds (R2T4), and eligibility for Federal TRIO programs.

Under our process, the next step is to publish proposed regulatory text in a Notice of Proposed Rulemaking (NPRM) before revising the proposals based on public input and finalizing them. Since negotiated rulemaking ended, we’ve heard from institutions and other stakeholders interested in or affected by these rules seeking clarity on the timing of the NPRM as they prepare to provide comments and plan for potential changes.

This week, we will publish an NPRM focused on the issues of distance education, R2T4, and Federal TRIO Programs. This package of proposed rules will update and improve outdated processes, consolidate rules, and establish more consumer-friendly policies for students to access the aid to which they are entitled. The NPRM will also propose improvements to how institutions report enrollment in distance education programs to get better data on the outcomes of students who attend those types of programs and help the Department more accurately determine eligibility for closed school loan discharges. Additionally, the proposed rule will address eligibility for certain Federal TRIO programs.

Proposed regulations related to State authorization, including State authorization reciprocity agreements, cash management, and accreditation will be published by next year. This schedule allows us to take additional time to carefully consider these important, complicated issues and refine solutions that address important challenges for students while balancing the need for quality oversight and improved student protections with the burden on institutions and changes impacting college accrediting agencies.

Third-Party Servicers

In February 2023, the Department released a Dear Colleague Letter (GEN-23-03) to bring more transparency into the contractors who work closely with institutions of higher education (institutions) on Title IV program management and delivery, particularly in the critical areas of recruitment and marketing. Third-party servicers are the contractors who perform critical functions of Title IV program management and delivery on behalf of institutions.

While the Department does not usually seek public comment on guidance, we did so in this instance to ensure we fully understood the effects of the guidance and to identify possible areas of confusion or inconsistency. We received more than 1,000 comments. In May 2023, we announced that we were delaying the effective date of GEN-23-03 and planning to develop revised guidance, and we rescinded 2016 guidance regarding foreign-owned third-party servicers.

Today, the Department is announcing that, after careful consideration of all comments, we have decided to conduct negotiated rulemaking to consider regulations related to third-party servicers broadly. We believe this approach, which was suggested by many commenters, will allow the Department to use the negotiated rulemaking process to collaborate with the affected community on these issues. We will consider clarifying the scope of third-party servicer rules in several areas, including software and computer services, student retention, and instructional content. In addition to considering the definition of third-party servicers, we may also consider audit requirements; an application process; reporting, financial, past performance, and other compliance requirements; and other ideas proposed by the community. The Department will provide further detail on this rulemaking at a later date.

While we work toward continuing the regulatory process on third-party servicers, we remind the higher education community of the need to comply with the statute and regulations, as clarified by the guidance in effect. GEN 12-08, GEN 15-01, and GEN 16-15 (as amended by our March 8, 2017 electronic announcement and GEN-23-08) remain in effect. The implementation of GEN-23-03 has been delayed and is not in effect. We encourage institutions to review the law and guidance and, in particular, remind them of the requirement to report a third-party servicer. Updates to third-party servicer reporting can be made through the Department’s E-App process. If you have questions about required reporting contact the School Participation Division at CaseTeams@ed.gov.

Incentive Compensation Guidance

In February 2023, the Department also announced that we would hold listening sessions and accept public comment on the impact of Department guidance on how institutions of higher education may compensate their recruiters. The Department received more than 250 comments from institutions, companies, faculty, consumer advocates, and more. Since then, we have reviewed those comments to better understand the impact of this exception and whether any updates are necessary to the guidance. We continue to review those comments and plan to issue revised guidance no sooner than late this year.

Conclusion

Getting our accountability work right is critical. For students and families, postsecondary education is likely the second largest purchase they ever make after buying a home. High-quality postsecondary programs can unlock a lifetime of opportunity and financial security, while poor-performing ones can leave students worse off than if they had never attended. We also have an obligation to make sure the tens of billions of dollars in taxpayer funds that support postsecondary education each year are well spent.

At the same time, innovation and creativity within our nation’s postsecondary education system is critical to ensuring we increase rates of college going and completion, as well as bending the cost curve of higher learning.

We appreciate all the feedback we have received already and look forward to continuing to engage with the community as we work together to serve students.