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Business and Policy Areas
Business and Policy Areas

ED Adds Topics to Planned Rulemaking Effort

April 19, 2013

Last May, the Department of Education announced plans to convene a negotiated rulemaking team to consider possible changes to Title IV student aid regulations intended to discourage student aid fraud and also to update the regulations governing the campus-based programs, Federal Work-Study, Federal Supplemental Educational Opportunity Grants, and the Perkins Loan Program. After preliminary hearings were held in several places across the country, however, the process stalled.

In the meantime, ED's efforts to implement several parts of its program integrity rulemaking effort, including state authorization for distance education programs and most of its so-called gainful employment rule, failed to survive legal challenges and were stayed.

On April 16, ED announced that it would add these topics and more to the agenda for the negotiating process proposed last year. The Higher Education Act (HEA) mandates the use of a formal negotiated rulemaking process anytime ED wants to make changes to Title IV regulations, so this would be the first step that ED would need to take to cure the procedural issues that the courts had with ED's early rulemaking.

A small, bipartisan group of Congressmen have already registered their disapproval of ED's attempt to regulate on these topics absent a legislative mandate and have asked the department to wait until Congress considers the issues as part of the upcoming reauthorization of the HEA.

Cash Management Concerns

Of particular interest to business officers, ED proposes a broad review of its cash management regulations, expressing interest in the following:

  • Reducing the time by which an institution must refund a Title IV credit balance to a student (currently 14 days)
  • Amending the requirements for student authorizations specifying when and how credit balances will be disbursed
  • Addressing how Title IV funds are provided to domestic and foreign schools and to students
  • Regulating how an institution may use or invest Title IV program funds held in its federal or operating accounts or, if funds are transferred to a third-party servicer to make disbursement to students, how the funds are managed by the provider

Disbursement of credit balances to debit cards was raised as a potential topic in relation to the fraud issue last year. Indeed, the U.S. Public Interest Research Group (PIRG) used one of the ED hearings to release its report, the Debit Card Trap, which was highly critical of such arrangements. What is prompting ED concerns about other facets of the cash management regulations is unclear.

Time Frame

The first step in the formal negotiated rulemaking process consists of regional hearings to gather input on issues that should be included on the agenda. Hearings were held early last summer on the agenda put forth in 2012. ED will host another round of hearings on May 21 in Washington, DC, May 23 in Minneapolis, and May 30 in San Francisco. A fourth hearing in Atlanta on June 4 was added to the schedule in a subsequent notice. The public is invited to testify, but advance registration is required. The deadline for written comments has been extended to June 4. (Update:  ED published a subsequent notice on April 30 to correct the docket number for written submissions. The correct docket number is ED-2012-OPE-0008.)


Anne Gross
Vice President, Regulatory Affairs