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Federal File

Coverage of legislation and regulatory activity that affects higher education

By Anne Gross

Rulemaking Moves Forward at Department of Education

Department of Education SealOn November 20, the Department of Education (ED) published a request for nominations to a negotiated rulemaking committee that will draft changes to the Title IV cash management regulations, among others. This Program Integrity and Improvements Committee will focus on use of debit cards and third-party servicers when paying credit balances, protection against fraud, state authorization for distance education and foreign locations of U.S. institutions, lending criteria for PLUS loans, and several other topics. As part of the standard protocol for negotiated rulemaking, the committee will have the opportunity to add other issues to the agenda at its first meeting.

The deadline for nominations was December 20, and NACUBO nominated several individuals to represent its members at the negotiating table. The negotiating team is scheduled to hold a three-day meeting each month during February, March, and April 2014.

Narrowing In on Fraud

Student aid fraud was a major focus of the original 2012 notice of intent to establish a negotiated rulemaking committee. However, the November negotiated rulemaking notice narrows ED's scope to that of considering whether the cash management rules provide "opportunities to deter fraud and otherwise ensure proper use of Title IV funds within the context of current technologies."

In the meantime, consumer groups, the Consumer Financial Protection Bureau, and ED have become more interested in issues related to the disbursement of Title IV credit balances, including institutions' use of third-party servicers to help process payments and other arrangements between institutions and financial institutions. That process, critics argue, may disadvantage students.

Status of State Authorization

Last year, the U.S. Court of Appeals for the District of Columbia Circuit upheld a lower court ruling that struck down part of the state authorization requirement in ED's program integrity rules. The original rule had required institutions to obtain authorization for distance education programs from states in which students reside—if required by state law—to remain eligible for Title IV student assistance.

The Violence Against Women Reauthorization Act of 2013 necessitates changes to the campus safety and security requirements of the Higher Education Act.

The court ruled that ED had not followed proper procedures when it added the distance education provision to the final rule (it had not been in the proposed rule). The court found that the public had not been given sufficient opportunity to comment on the change.

Even without the distance education provision in the state authorization regulation, laws are still on the books and remain in force in a number of states. A coalition has been working to draft model reciprocity agreements that states could adopt to acknowledge online coursework done in other states and recognize other states' decisions in regard to institutional authorization.

Changes in Violence Against Women Act

ED has already selected negotiators for the rulemaking committee reviewing the Violence Against Women Act (VAWA); the first session is scheduled for January 13.The panel will develop regulations to deal with the changes made by Congress to the Violence Against Women Reauthorization Act of 2013 and signed into law in March. The law necessitates changes to the campus safety and security requirements of the Higher Education Act.

The new law adds "national origin" and "gender identity" to the list of hate crime categories institutions are required to report, and adds three additional crimes: domestic violence, dating violence, and stalking. Institutions will be required to provide additional education and notice to students and employees about certain dangers, as well as related rights.

Negotiators will attempt to clarify definitions to help ensure accurate and uniform reporting across the country as well as to spell out what policies, notices, and programs will be required of institutions. This committee should complete its work in March.

Revisiting Gainful Employment

In 2012, just as ED released a preliminary run of the debt measures for so-called "gainful employment" programs, the U.S. District Court for the District of Columbia vacated most of the rules. The day before ED's rules establishing debt measures were to take effect, a judge found that ED had acted arbitrarily when it established a minimum acceptable repayment rate for Title IV loans. According to the ruling, ED's rationale for picking a 35 percent repayment rate was based on the proportion of programs that would pass or fail at that level and, therefore, was not reasonable.

A new panel was convened in November to consider ED's revised proposals regarding regulations to determine the eligibility of college-based career-training programs—including nondegree programs offered by public and nonprofit institutions—to participate in the federal student aid programs. The final ED draft would keep the two current debt-to-earnings ratios as indicators of acceptable programs and add program-level cohort default rates (pCDR) as a third measure. Programs would receive "grades" (pass, fail, in the zone) for the debt-to-income measures and be evaluated over several years. A pCDR over 30 percent for three years would render a program ineligible for Title IV participation. At-risk programs would need to provide warnings and financial guarantees to students.

Despite an extra negotiating session held on Friday, Dec. 13, 2013, the panel was unable to reach a consensus. ED is eager to release a new version of the regulations this year for public comment and is expected to move forward with its own proposal. Because there was no consensus, ED can now propose its own final version and is not obligated to use any of the proposals presented during negotiations, although many expect the department to use some of the language developed by the negotiators.

Getting to Final

After each of these three negotiated rulemaking efforts is completed, ED will publish proposed rules for comment, likely in late spring or early summer. Under the Higher Education Act, ED must publish final rules no later than November 1 in order for them to take effect the following July 1. Thus, in this case, July 2015 is the earliest such changes would take effect.  

NACUBO CONTACT Anne Gross, vice president, regulatory affairs, 202.861.2544