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NACUBO Fed.Up Recommendations

July 20, 2001

July 20, 2001

NACUBO's Fed.Up Recommendations

  1. Return of Title IV Funds [HEA Sec. 484B; 34 CFR 668.22] The regulations on the return of Title IV funds are excessively complex and impose undue administrative burdens on colleges and universities. The Department of Education issued sub-regulatory guidance to "clarify" these rules, further confusing specific requirements. The resulting rules stray significantly from the original intent of simplifying the student refund rules.
    1. Requirement to take attendance [HEA Section 484B(c)(1)(B); Dear Colleague Letter GEN-00-24, question #10]
      1. Issue: ED has stated that if the only way that an institution can meet any agency’s requirements is by taking attendance, the institution must take attendance for that population for purposes of the return of Title IV funds calculations. This interpretation inappropriately expands the statutory requirement.
      2. Recommendation: Clarify that institutions required to take attendance are those required to do so by their accrediting agency or state licensing board.
      3. Rationale: NACUBO believes that ED’s interpretation is too broad and confusing for institutions. ED would treat an institution as "required" to take attendance in relation to some populations and, as an institution "not required to take attendance" in relation to other student populations. Institutions need consistency and simplicity in which rules to follow.
    2. Date of withdrawal for institutions that are not required to take attendance [HEA Section 484B(c); CFR 668.22(c)]
      1. Issue: ED has become overly prescriptive in the regulations regarding the date of withdrawal for purposes of the return of Title IV Funds regulation.
      2. Recommendation: Prohibit ED from issuing regulations on the date of withdrawal for institutions that do not take attendance.
      3. Rationale: The statute clearly states that the "day the student withdrew is the date that the institution determines." However, ED has promulgated prescriptive regulations regarding how this date is determined for purposes of the return of Title IV regulations.
    3. Late disbursement [HEA Section 484B(a)(4)(A); CFR 668.22(a)(4)]
      1. Issue: The late disbursement rules promulgated by ED are overly burdensome for students and institutions. In some cases, the rules require the release of funds to students who may not need them, and in other cases, they fail to provide funds for expenses students have already incurred.
      2. Recommendation: Provide financial aid administrators with discretionary authority to make late disbursements of funds earned by the student.
      3. Rationale: ED rules for the return of Title IV funds fail to provide institutions with the necessary latitude to address student needs while protecting the federal fiscal interest.
    4. Leave of absence [HEA Section 484B(a)(2); CFR 668.22(d)]
      1. Issue: The current leave of absence regulations are detailed, prescriptive, and override institutional policies. These regulations prevent repeated leaves of absence — a situation that disadvantages chronically ill students.
      2. Recommendation: Clarify that multiple leaves of absence are permitted within the statutory timeframes.
      3. Rationale: ED regulations limit the institution’s ability to grant leaves of absence for legitimate reasons. Institutions should be given the authority to set their own policies taking into account satisfactory academic progress.
    5. De Minimus repayment amount [HEA Section 484B(b)]
      1. Issue: The current regulations provide for no de minimus repayment amount in the return of Title IV funds calculation.
      2. Recommendation: Provide a de minimus amount for the return of Title IV funds of $100 for students and institutions.
      3. Rationale: Federal fiscal interest can be preserved while providing reasonable consideration of institutional administrative costs and student needs by authorizing a de minimus amount to be returned by the student or the institution.
    6. 50% grant protection [HEA Section 484B(b)(2)(C); CFR 668.22(h)]
      1. Issue: Current regulations treat the neediest students unfairly by demanding that a large sum of grant money be returned even if the funds have already been spent. The student should not have to return more than 50% of total grant funds received.
      2. Recommendation: Students should not be required to return more than 50% of the total grant funds received for purposes of the return of Title IV calculations.
      3. Rationale: The Department of Education’s interpretation of this section of the law unduly penalizes needy students by providing the least possible grant protection.
  2. Federal Perkins Loan Program Issues [34 CFR 674] The Federal Perkins Loan program has provided low-interest rate loans to millions of needy postsecondary students since the program’s inception more than 40 years ago. Despite numerous legislative and regulatory changes that have been made to the Perkins program over the years, it continues to serve as an important source of funding for low-income students.
    1. Perkins Loan Write-offs [34 CFR 674.47(h)]
      1. Issue: Currently, institutions must continue attempt collection efforts on Perkins loans with unpaid balances as low as $5 indefinitely.
      2. Recommendation: Amend the current write-off provisions for the Federal Perkins Loan program to permit institutions to write-off balances of $50 or less, following due diligence on the accounts.
      3. Rationale: Current regulations require institutions to continue collection efforts on accounts with balances of $5 or more, regardless of the likelihood of collecting these loans. Collection and servicing costs for the institution far exceed this amount each year. Further, the Department of Education will not accept the assignment of a loan if the balance (including principal, interest, collection costs, and late charges) is less than $25. Thus, institutions are required to keep these low balance accounts ($5 - $25) on their books. From a business process perspective, resources can be better spent servicing higher balance loans than having institutions or the Department of Education investing large sums to recover small balance accounts.
    2. Rehabilitation of Perkins Loans [HEA Section 464(h)(1)(A); CFR 674.39]
      1. Issue: Currently, students must make 12 consecutive, on-time payments in order to realize the benefits associated with rehabilitation (e.g., a clean credit report).
      2. Recommendation: Expand the rules for Perkins rehabilitation to permit a borrower to satisfy the conditions by making a single payment equal to the full amount of principal, interest, and collections costs outstanding.
      3. Rationale: A borrower who pays off the entire outstanding balance on a defaulted Perkins loan should receive the same benefit of clearing the default off his credit report as one who rehabilitates his loan over a 12-month period. This change would benefit students, institutions, and the federal fiscal interest by providing additional incentives for defaulters to repay their outstanding balances.
      4. Recommendation: Amend the statute to prohibit ED from requiring institutions to rehabilitate a defaulted loan where a judgment has been entered against the borrower.
      5. Rationale: Institutions are reluctant to ask the courts to vacate judgments, because this may jeopardize their ability to go back to court if the borrowers subsequently default on the rehabilitated loans. Institutions expend considerable effort attempting collection prior to seeking legal recourse to force borrowers to repay their outstanding loans, and should not be required to offer loan rehabilitation to borrowers with judgments.
  3. FFEL and Direct Loan Program Issues
    1. Waiver of certain disbursement rules [HEA 428G(a)(3) and (b)(1)]
      1. Issue: Two current provisions in the HEA that reduce regulatory burden will expire on September 30, 2002. The first provision allows institutions with cohort default rates below 10 percent to disburse a loan in a single installment for any period of enrollment that is not more than one semester, one trimester, one quarter, or four months.
      2. The second expiring provision lets institutions with low cohort default rates waive the requirement that loan proceeds for a first-year, first-time borrower be withheld for thirty days. This allows institutions to give first-year students access to their loan in order to purchase books and supplies, pay housing costs, and meet other expenses. Without extension of this provision, many students will face serious financial pressure at the start of their postsecondary education.
      3. Recommendation: Extend current law permitting institutions with cohort default rates less than 10 percent to make single disbursements for enrollment periods of one semester/ trimester/quarter. This gives institutions the flexibility, especially in the case of students attending summer sessions and graduating mid-year seniors, to disburse the proceeds of their loan in a single payment rather than in multiple installments.
      4. Recommendation: Extend current law waiving the 30-day delayed disbursement rule for first-year, first-time borrowers at institutions with cohort default rates less than 10 percent. This allows institutions to give first-year students access to their loan in order to purchase books and supplies, pay housing costs, and meet other expenses.
      5. Rationale: These provisions should be renewed to help reduce the regulatory burden on institutions and provide students with the necessary funds to meet their educational expenses.
    2. Death and Disability Discharge Regulations [34 CFR Sec. 682.402]
      1. Issue: Over the objections of the higher education community, ED imposed new rules in November 2000 to tighten procedures governing death and disability discharges of student loans. This decision was based solely on anecdotal evidence provided by the Inspector General. ED refused to provide the underlying evidence on which the change was based.
      2. Recommendation: Repeal the death and permanent and total disability regulations issued by ED in November 2000.
      3. Rationale: ED issued new regulations last fall, which impose burdensome documentation requirements on institutions, students, and their families. These rules should be set aside and ED should be required instead to work with the higher education community to improve the forms and processes used to certify borrowers for loan discharge.
  4. Non-traditional Programs [HEA Sec. 481(b); 34 CFR Sec. 668.8]
    1. Issue: The rapid growth of non-traditional academic programs has meant that many regulations, such as the 12-hour rule developed a decade ago to prevent fraud and abuse, are now obsolete or unnecessarily complicated. Many of these regulations actually limit the development of educational innovation and thereby restrict educational opportunities.
    2. Institutions have moved away from standard terms to nonstandard terms and non-term courses in an effort to serve nontraditional students and adult workers through weekend colleges and distance education programs. In such an environment, 12 hours of seat time makes little sense as a proxy for program quality.
    3. Recommendation: Current regulations must be restructured to accommodate these new approaches to learning. NACUBO supports the elimination of the 12-hour rule that, for some institutions, establishes a federal standard for classroom instruction. Not only is this particular law obsolete, it is incomprehensible.
    4. In addition, NACUBO endorses the recommendation made by ACE in its response on behalf of the national higher education associations: ED should resume its review of regulations that limit nontraditional programs and work with the higher education community to develop a regulatory framework appropriate for these programs. If necessary, statutory changes should be enacted to clear the way for these modifications. Such an effort should consider the desirability of changing other provisions, such as the definition of an academic year, that may also restrict nontraditional educational programs.
  5. Institutional Security Policies and Crime Statistics [HEA Sec. 485(f); 34 CFR 668.46]
    1. Issue: The intent of the campus security provisions of the HEA have been lost in myriad requirements that contribute little to the increased safety of students on and around our nation’s campuses. Crime statistics now must be broken down in so many categories—more than 700 cells—their value to students and parents is questionable. Complex and confusing reporting requirements divert resources from more valuable activities, frustrate campus safety officials, and seem to be designed to "catch" institutions in inadvertent errors.
    2. Recommendation: The Clery Act and the implementing regulations need to be rewritten with an emphasis on clear, unambiguous requirements and simplified reporting mechanisms.
    3. Rationale: After four revisions, each of which added new reporting requirements, the statutory provisions need to be overhauled. When presenting information intended to heighten awareness, too much detail obscures the message. Complicated definitions and procedures ensure confusion and errors in the preparation of reports. Students would be better served with statistics that are easy to read and understand.
  6. Audit requirements for foreign institutions [HEA Section 498(g)(3); 34 CFR 668.15(h) and 668.23(d)(3); SFA Guide]
    1. Issue: A number of foreign institutions participate in the Federal Family Education Loan program, broadening the educational opportunities available to American students of limited means. If onerous provisions drive institutions out of the program, these students are the ones who lose.
    2. Recommendation: Revise the statute to allow ED greater flexibility in determining that another country’s accounting standards and governmental oversight of public and nonprofit institutions are sufficient to protect U.S. interests.
    3. Rationale: Foreign institutions whose students receive more than $500,000 in FFEL funds annually should not necessarily be required to have their financial statements reaudited following U.S. auditing standards. This can be a very costly undertaking that adds little value. If the statute permitted greater flexibility, ED could, on a country-by-country basis, decide that the federal interest could be protected without subjecting colleges and universities to needless expense.