The third and final round of negotiations for the Institutional and Programmatic Eligibility Committee concluded on March 18, with the committee reaching consensus on only two issues: “ability to benefit” and the Department of Education’s 90/10 rule.
The ability to benefit regulations outline the criteria a student without a high school diploma must meet in order to gain eligibility for Title IV aid at an institution.
The 90/10 rule outlines how much revenue of a for-profit institution must come from sources other than federal educational assistance funds. Previously, only Title IV aid was included in the calculation. The American Rescue Plan made changes to the statute to include “federal funds that are disbursed or delivered to or on behalf of a student.”
Because consensus was reached, ED is required to draft the Notice of Proposed Rulemaking (NPRM) using the language agreed to for those topics during the negotiations.
Consensus was not reached on administrative capability, gainful employment, financial responsibility, changes in ownership, and certification procedures. For these issues, ED is free to draft the language in the NPRM as it sees fits. Though ED oftentimes tries to use language where there was general agreement with the committee, it is not required to do so.
Many not-for-profit institutions have expressed concern over financial responsibility requirements that took effect July 1, 2020, especially the ability to refinance long-term debt allowable in financial responsibility submissions before July 1, 2020. Although ED admitted that it is aware of issues with the composite score and is looking into addressing issues in a future rulemaking, ED declined to add the refinancing issue to the agenda and reiterated that it is not proposing or entertaining changes to the composite score calculation.
Some financial responsibility topics addressed during the session only affect proprietary institutions: how proposed 90/10 and owner equity changes impact composite score calculations. However, proposed discretionary and mandatory borrower defense triggers and their impact on an institution’s most recent composite score would affect both not-for-profit and proprietary institutions. Discussions around trigger materiality, known liabilities for pending settlements, audit disclosures, and if combinations of discretionary triggers would equate to a mandatory trigger failed to yield agreement. Because consensus was not reached, NACUBO and institutions will have to pay close attention to proposed requirements in the NPRM.
The NPRM is expected to be published in the Federal Register this summer, with a comment period of at least 30 days. Once the comment period closes, ED will review all comments and then begin work on final regulatory language. Under master calendar provisions of the Higher Education Act, ED must issue final rules no later than November 1, 2022, for the rules to become effective at the start of the next award year (July 1, 2023). If ED misses the November 1 deadline, the earliest effective date for the regulations would be July 1, 2024.