ED Further Delays Third-Party Servicer Guidance, Clarifies Certain Arrangements
4/17/2023
In a blog post on April 11, the Department of Education announced that it will again postpone the roll out of its guidance on third-party servicers (TPS).
In order to review all comments and concerns, ED announced that any new guidance on TPS will not be effective until at least six months after it is shared with the public. Until then, existing guidance governing TPS remains in place.
In general, a TPS performs functions or services necessary—
- For the institution to remain eligible to participate in Title IV programs
- To determine a student's eligibility for Title IV funds
- To provide Title IV-eligible educational programs
- To account for Title IV funds
- To perform any other aspect of the administration of the Title IV programs or to comply with the statutory and regulatory requirements associated with those programs
Earlier this year, ED shared a Dear Colleague Letter announcing new updates to its TPS guidance, potentially bringing many new entities and contracts into scope. The higher education community sent comments to ED expressing concerns with that update, resulting in the Department initially delaying the effective date until September 1 so it would have time to review potential impacts resulting from the changes. Later, associations asked for a blanket rescission of ED’s proposal.
ED’s recent blog post states that it needs additional time to review the “significant and helpful feedback” on some of its changes. The post also identifies several activities that generated numerous comments but are not subject to TPS requirements under its guidance. Notably, ED shared it intends “to remove the provision of the guidance document pertaining to foreign ownership of a third-party servicer,” adding that it believes the issues better suited to be resolved through the agency’s negotiated rulemaking process this fall.
ED indicated it seeks to “understand how the Dear Colleague Letter would affect the field and to identify areas of confusion or inconsistency, as well as any potential consequences that were not initially apparent.”
Next Steps
Business officers should review ED’s post in its entirety, noting comments about certain activities not falling into the category of TPS. Additionally, campus officials should continue to examine their contracts with other entities in advance of ED’s next update on TPS and make sure those agreements are in compliance with ED’s previous TPS guidance.
While ED has indicated it will give institutions plenty of time to review subsequent guidance, the size and scope of future changes is unknown. NACUBO will continue to monitor this issue.
