Duane Morris Analyzes USDE’s Notice Establishing Negotiated Rulemaking Committee and First Round of Negotiation Topics

On August 6, 2021, the U.S. Department of Education (USDE) announced that it would be establishing a negotiated rulemaking committee, entitled the “Affordability and Student Loans Committee,” that will, starting in October, meet to begin rewriting certain Title IV-related regulations. The announcement also included a schedule for the virtual negotiation sessions and instructions on how to submit nominations for committee, subcommittee, and advisor spots. The full announcement, officially published on August 10, can be found here.

The Issues Up for Negotiation

After announcing an ambitious schedule of topics in May, USDE has followed up with a similarly ambitious agenda for the first round of negotiations for the Biden Administration’s Department of Education. USDE remarked that this initial list does not include all of those announced topics – plus the upcoming 90/10 rulemaking (which cannot begin until after October 1, 2021) and any additional topics proposed by commenters – but that those topics “may be considered by a separate rulemaking committee(s) formed at a later date.” We note that Topics #5 and #6 below were not on the USDE’s proposed list of topics in May. It also worth pointing out the notable topics not included in this round of rulemaking, including gainful employment (an Administration priority), change of ownership/change in control, certification procedures, administrative capability, and financial responsibility.

The announced topics include:

  • Borrower Defense to Repayment
  • Closed School Discharges
  • Total and Permanent Disability Discharges
  • False Certification Discharges
  • Loan Repayment Plans for FFEL and Direct Loan Borrowers, including income-based repayment programs
  • Interest Capitalization on Federal Student Loans
  • Mandatory Pre-Dispute Arbitration and Prohibition of Class Action Lawsuits and associated counseling
  • Pell Grant Eligibility for Prison Education Programs
  • Public Service Loan Forgiveness Programs

USDE also announced the formation of a Prison Education Program Subcommittee to “expand the range of expertise and constituencies represented.” The full committee will consider the subcommittee’s recommendations in its consideration of proposed regulations. The call for nominations expressly includes nominations for individuals to represent interested parties on this subcommittee.

Negotiation Session Schedule

The Affordability and Student Loans Committee will meet for three sessions:

First Session – October 4-8, 2021

Second Session – November 1-5, 2021

Third Session – December 6-10, 2021

The Prison Education Program Subcommittee will meet for two sessions, three days each, in October and November. The dates of the Subcommittee meetings will be announced at a later date.

Negotiator Constituencies

Additionally, USDE announced the constituencies for negotiator nominations, for both the committee and subcommittee, as well as the process for nominating an individual.

Regarding represented constituencies, besides publishing a list, USDE will particularly encourage organizations that represent the interests of historically underserved and/or low-income communities to submit their nominations. The constituencies for the Affordability and Student Loans Committee are:

  • Dependent Students
  • Independent Students
  • Student Loan Borrowers
  • Legal Assistance Organizations
  • S. Military Service Members, Veterans, or Groups
  • State Attorneys General
  • State High Education Executive Officers, State Authorizing Agencies, and/or State Regulators
  • Individuals with Disabilities or Representative Groups
  • Financial Aid Administrators at Postsecondary Institutions
  • Two-year Public Institutions
  • Four-year Public Institutions
  • Private Non-Profit Institutions
  • Proprietary Institutions
  • Minority-Serving Institutions
  • Federal Family Education Loan Lenders or Guaranty Agencies
  • Accreditors

For the Prison Education Program Subcommittee, USDE requests individuals to represent:

  • Consumer Advocacy Organizations
  • Financial Aid Administrators
  • Formerly Incarcerated Students
  • Groups that Represent Incarcerated Students
  • Postsecondary Institutions that are Prison Education Program Providers
  • State Correctional Education Directors
  • State Higher Education Executive Officers

USDE also invited nominations for two advisors, who will not be members of the committee or vote, but who will serve as a “resource” if questions arise. The first advisor will represent qualifying employers on the topic of Public Service Loan Forgiveness. The second advisor will have expertise in economic and/or higher education policy analysis and higher education data to support the committee in evaluating and understanding its options. Each advisor will be expected to be available throughout the committee sessions.

Nominating a Committee Member

The process of nominating a member for the committee or subcommittee is relatively easy. USDE does not suggest including any additional information besides what has been deemed necessary. The information requested includes:

  • Exact name of the constituency the nominee is being nominated for;
  • Name of the nominee;
  • Nominee’s place of employment or institution at which they are or were enrolled and, if different, the organization the nominee represents;
  • A resume or evidence of the nominee’s expertise and experience in the topics proposed for negotiations; and
  • Nominee’s contact information, including email address, telephone number, and physical mailing address/post office box.

The above information should be submitted via email to negregnominations@ed.gov. If you would prefer a hard copy submission, USDE directed those nominations to be sent to: Vanessa Gomes, U.S. Department of Education, 400 Maryland Ave., SW, Room 2C179, Washington, DC, 20202.

Nominations are due on August 31, 2021.

Analysis

While it is still early, the Cardona Department of Education is full-speed ahead on its agenda of Title IV regulatory changes. Our initial analysis indicates some things to watch out for, including: list of topics and chances of consensus; topics that were left out of this round and why; breakdown of the constituencies; and the role of experts at the negotiation table.

The long list of (somewhat) unrelated topics is ambitious, making consensus unlikely. If consensus is not reached, it would allow USDE to write its own regulations (subject to an open public comment period after publication of a Notice of Proposed Rulemaking). The topics also include some not-so-controversial topics that could reach consensus. Even though many opposed it at the time, USDE could use the DeVos Administration approach of “bucketing” the votes into multiple consensus votes. Therefore, consensus would be possible on topics such as total and permanent disability discharges, public service loan forgiveness, and interest capitalization, without reaching consensus on much more controversial subjects – such as borrower defense to repayment, arbitration and class action waivers, and closed school discharges. Consensus on those highly contentious topics is very unlikely.

It also is apparent that the announced topics are not the most “high interest” that could have been chosen. USDE may have chosen Borrower Defense to Repayment instead of Gainful Employment for this first rulemaking round in an attempt to relieve a portion of student loans to be responsive to advocates for student loan forgiveness. At the time of writing, the White House and progressive Democrats in Congress continue to be far apart on an approach to comprehensive student loan forgiveness, including whether the Executive Branch even has the authority to forgive loans. With that being said, loan discharges as a result of borrower defense claims or closed school loan discharges are only a partial solution that is not likely to placate advocates in D.C. think-tanks or on the Hill. Further, discharges that result from such regulatory changes are not likely to happen for another 2 years; a fact that the advocates will not appreciate.

At the same time, the topics with the least public attention, but perhaps the most interest inside our higher education community, also were not chosen: financial responsibility, change in ownership/change of control, administrative capability, and certification procedures. This is interesting because the DeVos Administration publicly expressed an interest in conducting a similar rulemaking and did much preparatory work if the former president had been reelected. We fully expect this rulemaking to be undertaken before the end of President Biden’s first term.

Also, the “big ticket” item on the proposed topic list has not been included in this first round: a new gainful employment rule. As mentioned elsewhere on this blog, USDE has indicated that it is interested in creating a new debt-to-income accountability metric. Given the multiple versions of this rule, and the numerous legal challenges to them in the Obama Administration – and given that so many Biden appointees also served under Obama – it is curious that USDE did not include this topic early. While USDE has not announced why it was not included, it is possible that the lack of high ranking political appointees at the Department has stayed the agenda on this most important topic as they determine the best path forward on gainful employment re-negotiation.

The topic list also shows that the Cardona Department is listening to public commenters. Two of the topics announced were not on the original list. That is a good indication that USDE position is moveable – at least on topics on which they agree with public commenters.

Finally, the constituencies are stacked against proprietary institutions. Only one permanent seat at the table is exclusively set aside for institutions that will be the target of the borrower defense regulations. The Cardona Department and its political nominees have made no secret of their hostility towards for-profit institutions. Whomever is nominated to represent proprietary institutions will need to be a strong advocate for the sector and for for-profit institutions’ students, graduates and employers.

It is also unclear how USDE will use the advisor role, which is a break from recent tradition. While on the surface, an expert on higher education policy could inform the committee on the potential consequences of their decisions, the identity and background of that expert could impact the legitimacy of their role and the data that they are asked to provide to the negotiation committee.

 

For more information on this topic and others, please contact, Jonathan Helwink, Katherine D. Brodie, any of the attorneys in the Higher Education Group or the attorney in the firm with whom you are regularly in contact.

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