Katherine D. Brodie

May 17, 2023 by Katherine D. Brodie

U.S. Department of Education Releases Draft New Gainful Employment, Financial Responsibility, Administrative Capability, and Ability to Benefit Proposed Rules – 30 Day Public Comment Period

On May 17, 2023, the U.S. Department of Education (Department) released to the public the text of proposed regulations to establish a new iteration of a Gainful Employment (GE) rule, which would terminate access to Federal financial aid for career training programs that leave graduates with unaffordable debt burdens or with earnings that are no higher than workers without any education beyond high school.

The proposed regulations will be published in the Federal Register on May 19, 2023. The public may submit comments on the proposed rule through the Regulations.gov website for 30 days. The Department expects to finalize the rules later this year. Under the master calendar requirements of the Higher Education Act, rules finalized by November 1, 2023, will go into effect on July 1, 2024.

The proposed GE rule applies to all Title IV eligible programs offered by proprietary (for-profit) institutions of higher education and less than 2 year (certificate) programs offered by public and private non-profit institutions. Institutions offering such programs should closely analyze the proposed rule and submit public comments within the 30 day open comment period. We will be publishing a more detailed analysis of key components of the rule in the near future.

The Department also included proposed changes to three other regulatory areas:

Financial Responsibility, which includes proposals to make it easier for the Department to secure upfront financial protection when colleges start to exhibit signs of financial struggle, such as when an institution incurs significant debts or liabilities from a lawsuit or is at risk of losing access to Federal financial aid programs.
Administrative Capability, which includes proposals to increase requirements for colleges to provide adequate career services and clearer financial aid information, and to limit the employment of individuals with a past history of risky behavior or misconduct related to the Federal financial aid programs.
Certification Procedures, which includes proposals to make it easier for the Department to incorporate stronger safeguards into its written agreements with institutions for participating in Federal financial aid programs. These proposals also protect students by allowing the Department to require teach-out plans or agreements when a college is at risk of closure.

Finally, the regulations contain consensus language agreed to during negotiated rulemaking in Spring 2022 that will revise Ability to Benefit rules. These are provisions related to how students without a high school diploma may access Federal aid. In particular, the regulations would provide a more streamlined process for States to approve postsecondary opportunities for these students.

View an unofficial copy of proposed regulations here. A fact sheet on the GE and transparency parts of the rules can be found here and a fact sheet on the other provisions in the regulatory package are here. The Department is also releasing a version of the data that was used to model the effects of the proposed gainful employment and financial transparency rules in the Regulatory Impact Analysis, which can be found on this page.

Department of Education Releases Proposed Rules on Accountability for Certificate and For-Profit Programs and Transparency into Unaffordable Student Debt | U.S. Department of Education

April 11, 2023 by Katherine D. Brodie

Important April 11, 2023 Update on the Department of Education’s Third-Party Servicer Guidance – ED.gov Blog

On April 11, 2023, U.S. Department of Education Under Secretary James Kvaal posted an important update to Dear Colleague Letter 23-03 – https://fsapartners.ed.gov/knowledge-center/library/dear-colleague-letters/2023-02-15/requirements-and-responsibilities-third-party-servicers-and-institutions-updated-feb-28-2023D. That February 2023 DCL rocked the higher education and ed tech community by proposing broad changes to the reach of the Title IV Third Party Servicer definition (34 C.F.R. 668.2; 668.25), Specifically, that DCL described the types of services that would be considered activities of “third-party servicers”, a designation that the Department was seeking to utilize to secure additional transparency into the work of certain companies partnering with institutions of higher education that participate in Title IV, Higher Education Act student financial aid programs. The Department notes it received more than 1,000 comments in the public comment period after publication of the DCL, and that it continues to review those comments in preparation for release of revised guidance.

Most critically, the Department has decided to delay the effective date of the guidance letter, and the September 1, 2023 deadline for compliance in the DCL will no longer be in effect. The effective date of the forthcoming revised final guidance letter will be at least six months after its publication, to allow institutions and companies to meet any reporting requirements. Deadlines for audit and contractual requirements will follow in fiscal years that begin after the effective date for the reporting requirements.

The update also lists immediate changes in the interpretation of DCL 23-03 that the Department wanted to communicate immediately:

Specifically, the Department does not consider contracts involving the following activities to constitute third-party servicer relationships:

- Study abroad programs.
- Recruitment of foreign students not eligible for Title IV aid.
- Clinical or externship opportunities that meet requirements under existing regulations because they are closely monitored by qualified personnel at an institution.
- Course-sharing consortia and arrangements between Title IV-eligible institutions to share employees to teach courses or process financial aid.
- Dual or concurrent enrollment programs provided through agreements with high schools and local education agencies, which are exempt because they do not involve students receiving Title IV aid.
- Local police departments helping to compile and analyze crime statistics, unless they write or file a report on behalf of an institution for compliance purposes.
- The Department will identify any other services that fall into this category as it reviews comments.
- The Department also intends to remove the provision of the guidance document pertaining to foreign ownership of a third-party servicer. It will consider any further changes in the context of an announced future negotiated rulemaking on Third Party Servicer issues.
- The Department will carefully review public comments on areas of confusion or concern and consider clarifying and narrowing the scope of the guidance in several areas, including software and computer services, student retention, and instructional content. These clarifications could include other areas as it continues to review comments and seeks to balance the need for greater transparency and oversight against administrative burden, among other factors.
- While the Department reviews the comments and prepares revisions to the guidance letter, previous Dear Colleague Letters GEN 12-08, GEN 15-01, and GEN 16-15 (as amended by our March 8, 2017, electronic announcement) remain in effect.

See Update on the Department of Education’s Third-Party Servicer Guidance – ED.gov Blog

January 30, 2023January 30, 2023 by Katherine D. Brodie

Consumer Financial Protection Bureau Proposes Mandatory Registration of Terms and Conditions: Nonbank Student Loan Servicers Among Those Potentially Impacted

On January 11, 2023, the Consumer Financial Protection Bureau (“CFPB” or the “Bureau”) announced designs to create a public registry of terms and conditions in form contracts. Under the proposed rule (“Rule”), certain nonbank entities, including nonbank student loan servicers, would be required to register and submit information related to its terms and conditions that purport to waive or limit consumer rights and protections, along with identifying company information. The Bureau has opened up the Rule for a sixty-day comment period (closing on March 13, 2023), after which decisions will be made on its final form. Continue reading “Consumer Financial Protection Bureau Proposes Mandatory Registration of Terms and Conditions: Nonbank Student Loan Servicers Among Those Potentially Impacted”

December 20, 2022 by Katherine D. Brodie

Do College Athletes Have the Right to Join a Union? The Answer is Still “Maybe”

Overview: Back in September 2021, the National Labor Relations Board general counsel issued GC Memorandum 21-08, formally taking the prosecutorial position that certain college and university athletes are employees entitled to all of the rights guaranteed by the National Labor Relations Act. This would include the right to engage in certain protected concerted activities, such as strikes, and to organize to join a union. For private colleges and universities, formal, legal recognition of student-athletes as “employees” would significantly change the relationship between schools and athletes.

Discussion: Back in September 2021, General Counsel Jennifer Abruzzo of the National Labor Relations Board (the “Board”), who leads the enforcement arm of the Board, issued GC Memorandum 21-08, formally taking the prosecutorial position that certain college and university athletes are employees entitled to all of the rights guaranteed by the National Labor Relations Act (the “Act”). This would include the right to engage in certain protected concerted activities, such as strikes, and to organize to join a union.

This is not the first time a Board general counsel has taken this position; Richard Griffin, appointed by President Barack Obama, issued a similar memorandum in 2017 that was later rescinded by his Republican successor, Peter Robb, appointed by President Donald Trump. Abruzzo, however, has taken this legal analysis a step further, arguing that “misclassifying” collegiate athletes as mere “student-athletes,” and leading athletes to believe that they do not have statutory protections, violates the Act in and of itself.

For private colleges and universities (the Act does not apply to public institutions of higher education), formal, legal recognition of student-athletes as “employees” would significantly change the relationship between schools and athletes. To start, schools would have to guess whether an athlete qualifies as an employee in the first place. Guessing incorrectly could have expensive consequences, as merely mislabeling the student could risk violating the Act and require defending against the ensuing charge.

As employees, athletes would have the right to engage in collective action, which could clash with school codes of conduct or campus rules. And, should student-athletes choose to organize and vote to join a union, the school would be required to engage in good faith collective bargaining over wages, hours and other terms and conditions of the athletes’ “employment.” The implications of such an arrangement could be significant: Would this require negotiations over the costs of meal plans and housing? What about school-sponsored health insurance plans? Would student-athletes gain the right to have union representation in disciplinary proceedings? Classifying a school’s athletes as employees would undoubtedly unleash a Pandora’s box of issues and questions.

Since publishing the memorandum over a year ago, Abruzzo’s office has yet to prosecute a test case that would give the Board (currently a 3-2 Democrat majority) the opportunity to formally adopt the position that certain student-athletes are employees under the Act. However, private colleges and universities should not assume that this agenda item has been forgotten.

There are a couple of pending cases against the National Collegiate Athletic Association alleging that it has misclassified student-athletes. And, on December 15, 2022, Abruzzo announced that her office found merit in at least one pending unfair labor practice charge case, which could result in a formal charge (giving her a pathway to litigate the issue up to the Board). Meanwhile, there are other legal efforts to classify collegiate athletes as employees through legislative or judicial action.

In short, private colleges and universities should stay alert to this classification issue and keep an eye out for signs of union organizing among college athletes, particularly football players at Division I Football Bowl Subdivision private colleges and universities. Though it is impossible to predict how this battle over collegiate athletes will unfold, one thing is certain: It is not going away any time soon.

For More Information

If you have any questions about this Alert, please contact Elizabeth Mincer, Zev Grumet-Morris, Katherine Brodie, or any of the attorneys in our Education Industry Group or the attorney in the firm with whom you are regularly in contact.

February 23, 2021February 23, 2021 by Katherine D. Brodie

Temporary Expanded SNAP Benefits for College Students

Expanding access to postsecondary education for low income students includes more than just assistance with tuition and fees. Many low income students also need help with daily food costs while they pursue higher education. That need can adversely impact academic progress if not addressed. Needs have been exacerbated by the pandemic and high unemployment, and impact students whether they study on ground or online. Food insecurity among college students is gaining more attention, with the opening of college food pantries and other community support initiatives. The federal government is also stepping up. The U.S. Department of Education, in coordination with the U.S. Department of Agriculture, has issued new guidance to postsecondary institutions to raise awareness about temporarily expanded Supplemental Nutrition Assistance Program (SNAP) eligibility for students and urges institutions to make students aware of this resource. The expansion of benefits will be in effect until 30 days after the COVID-19 public health emergency is lifted. The new guidance can be found here: https://ifap.ed.gov/electronic-announcements/022321SNAPbenefitseligiblestudsCOVID19pandemic

February 23, 2021February 23, 2021 by Katherine D. Brodie

FY 2018 Draft Cohort Default Rates Released to Title IV Participating Institutions of Higher Education – Time Frame for Appeal Begins March 2, 2021

On Feb. 22, 2021, the U.S. Department of Education distributed the FY 2018 draft cohort default rate (CDR) notification packages to all eligible domestic and foreign schools for those schools enrolled in the Electronic Cohort Default Rate (eCDR) notification process. Any school not enrolled in eCDR may download their cohort default rates and accompanying Loan Record Detail Reports from the National Student Loan Data System (NSLDS®) via the NSLDS Professional Access website.

The time frame for appealing the FY 2018 draft cohort default rates under 34 C.F.R Part 668, Subpart N begins on Tuesday, March 2, 2021 for all schools.

Under the Title IV financial responsibility regulations at 34 C.F.R. 668.171(d)(6), the Department has discretion to determine that a Title IV institution is not able to meet its financial or administrative Title IV obligations (which can lead to a letter of credit requirement or other potential adverse action) if the institution’s two most recent official cohort default rates are 30 percent or greater and such circumstance is likely to have a material adverse effect on the financial condition of the institution, unless the institution has a challenge, adjustment or appeal pending or successfully finalized.

Note that any school that did not have a borrower in repayment, during the current or any of the past cohort default rate periods, will not receive a FY 2018 draft cohort default rate notification package. These schools are considered to have no cohort default rate data and no cohort default rate.

https://ifap.ed.gov/electronic-announcements/022221FY2018DraftCDRDistributedFeb222021

October 30, 2020 by Katherine D. Brodie

U.S. Department of Education Final Rule on Distance Education and Innovation: What You Need to Know

On September 2, 2020, the U.S. Department of Education (“Department”) published a Final Rule, available at https://ifap.ed.gov/federal-registers/FR090220, on distance education and innovation. The regulations are effective July 1, 2021; however, institutions are permitted to voluntarily implement any or all provisions as of September 2, the date of publication of the final rule. The Department states that the rule is intended to “strike a balance” between fostering increased innovation in distance education offerings while protecting students and taxpayers.The rule makes the following regulatory changes:

• Allowing asynchronous delivery of some courses or portions of courses delivered as part of clock hour programs (this significant change was made in response to public comments on the proposed rule);
• Providing flexibility to distance education, competency-based education (CBE), and other types of educational programs that emphasize demonstration of learning rather than seat time when measuring student outcomes;
• Clarifying the distinction between distance education and correspondence courses and more clearly defining the requirements of “regular and substantive interaction” between students and faculty and the permissibility of engaging instructional teams in the delivery of education through distance learning;
• Clarifying the requirements for direct assessment programs, including how to determine equivalent credit hours and how to distribute aid to simplify administration, reduce confusion, and protect taxpayers;
• Limiting the requirement for institutions with strong track records to obtain approval from the Education Secretary for only the first direct assessment program offered by the school at a given credential level;
• Requiring institutions to report to the Education Secretary when adding a second or subsequent direct assessment program or establishing a written arrangement for an institution or organization that is not eligible to participate in the title IV, HEA program to provide more than 25 percent, but no more than 50 percent, of a program;
• Recognizing the value of “subscription-based programs,” and simplifying rules regarding the disbursement of title IV funding to students enrolled in these programs; and
• Requiring prompt action by the Department on applications by institutions to the Education Secretary seeking certification or recertification to participate as an eligible institution in the HEA, title IV program.

The rule also adds a definition of “juvenile justice facility” to ensure that students incarcerated in a juvenile justice facility continue their eligibility for Pell Grants.

Additional regulatory changes include:

• Encouraging employer participation in developing educational programs by clarifying that institutions may modify their curricula based on industry advisory board recommendations without relying on a traditional faculty-led decision-making process;
• Simplifying clock-to-credit hour conversions and clarifying that homework time included in the credit hour definition do not translate to clock hours, including for the purpose of determining whether a program meets the Department’s requirements regarding maximum program length;
• Encouraging institutions to give students equal credit for time spent preparing for and participating in lecture and laboratory courses;
• Clarifying that an institution may demonstrate for purposes of participating in title IV, HEA programs, a reasonable relationship between the length of a program if the number of clock hours does not exceed either 150 percent of the minimum requirement to work in the State in which the institution is located or 100 percent of the minimum hours in an adjacent State;
• Providing that the Education Secretary will rely on the accrediting agency or State authorizing agency to evaluate an institution’s appeal of a final audit or program review determination by the Department that includes a finding about the institution’s classification of a course or program as distance education or the institution’s assignment of credit hours; and
• Encouraging closing institutions to offer quality teach-outs by permitting the application of sanctions to individuals or institutions affiliated with other institutions that closed without executing a viable teach-out plan or agreement.

The final rule culminated a rulemaking that began nearly two years ago, building on the Trump administration’s Rethink Higher Education agenda that “challenged past practices, assumptions, and expectations about what ‘college’ is, what it should do, and how it should operate.” It remains to be seen whether these regulations would be subject to amendment from a change in Secretary, but we view this set of rules as less controversial than others amended or rescinded by Secretary DeVos (such as Gainful Employment and Borrower Defense to Repayment) and not likely to be a priority for change by a new Administration. Institutions of higher education should familiarize themselves with these rule changes as they develop distance education programs.

July 10, 2020 by Katherine D. Brodie

U.S. Department of Education Extends Clery Act Annual Security Reporting to December 31

In a welcome bit of regulatory relief at time when institutions of higher education are working to comply with a new Title IX rule by August 14, 2020, the Department announced on July 10 that it is extending the date for institutions to distribute their Annual Security Report (ASR) and Annual Fire Safety Report (AFSR) to required recipients to December 31, 2020 (from October 1). The Department does encourage institutions to distribute their reports on the normal schedule if possible.

In addition, the electronic annual crime and fire statistics survey will now be open now from November 18, 2020 through January 14, 2021 for transmission of data to the Department.

The Department states in its July 10 announcement that it “encourages schools to take appropriate steps to ensure the health and safety of their students and employees, to continue to act in accordance with their campus safety policies and procedures, and to advise the campus community about changing conditions that may affect their safety or any major changes to safety policies or practices.” Institutions continuing or returning to partial or full on ground operations should keep in mind that they are still obligated to comply with their published campus safety policies and procedures, including with regard to emergency notifications and crime statistics collection and reporting. Any changes to published procedures should be communicated to the campus community.

https://ifap.ed.gov/electronic-announcements/040320UPDATEDGuidanceInterruptStudyRelCOVID19

June 22, 2020June 22, 2020 by Katherine D. Brodie

Foreign Gifts: New Online Portal Emphasizes DeVos “No Excuses” Approach to Reporting

On June 22, 2020, the U.S. Department of Education published an electronic announcement reminding institutions of higher education of their mandatory reporting obligations under Section 117 of the Higher Education Act (“Section 117”) (20 U.S.C. § 1011f) and launched a new reporting portal to streamline the mandatory reporting process: https://partners.ed.gov/ForeignGifts.

Secretary DeVos has explained that foreign gift reporting under Section 117 is essential to the “transparency and accountability” necessary to “protect academic freedom and our country’s national security and economic future.”

The Department has at least ten ongoing investigations of major universities underway regarding Section 117 compliance, and more are expected. With this clear signal from the Department that this is a significant enforcement priority, colleges and universities should evaluate their past and current disclosures, past and current interpretation of Section 117 requirements, and make determinations about the extent of any additional reporting required or recommended.

Section 117 requires institutions of higher education to disclose to the U.S. Department of Education information about ownership and control by foreign sources, contracts with foreign sources, and gifts from foreign sources. The reporting obligation applies to any institution, public or private, or, if a multi-campus institution, any single campus of such institution, in any State, that is legally authorized within such State to provide a program of education beyond secondary school, that provides a program for which the institution awards a bachelor’s degree (or provides not less than a two-year program which is acceptable for full credit toward such a degree) or more advanced degrees, and is accredited by a nationally recognized accrediting agency or association and to which institution Federal financial assistance is extended (directly or indirectly through another entity or person), or which institution receives support from the extension of Federal financial assistance to any of the institution’s subunits.

Institutions that are owned or controlled by a foreign source must file two disclosure reports per year—one no later than January 31 and the other no later than July 31. All other institutions that receive a gift from or enter into a contract with a foreign source, the value of which is $250,000 or more, considered alone or in combination with all other gifts from or contracts with that foreign source within a calendar year, must file a disclosure report no later than January 31 or July 31, whichever is sooner.

The announcement makes clear that foreign gift reporting is considered by the Department to be an “information collection” process subject to 18 U.S.C. § 1001, which provides that whoever knowingly and willfully falsifies, conceals, or covers up by any trick, scheme, or device a material fact; makes any materially false, fictitious, or fraudulent statement or representation; or makes or uses any false writing or document knowing the same to contain any materially false, fictitious, or fraudulent statement or entry, may be subject to fines and imprisonment.

The Department also states that if an institution fails to report as required, the Secretary may request that the Department of Justice initiate a civil action in federal district court.

The Electronic Announcement is available at: https://ifap.ed.gov/electronic-announcements/062220ReminderRprtOwnerContrlContrctsGiftsForeignSrc

May 18, 2020 by Katherine D. Brodie

U.S. Department of Education Releases Additional CARES Act and COVID-19 Guidance

On March 15, 2020, the U.S. Department of Education published additional guidance for postsecondary institutions extending and clarifying regulatory flexibilities contained in the CARES Act and related to COVID-19.

Key components of the guidance include:

Extension of the time frame for authorization by the Department of temporary distance education approval for previously on-ground programs to include payment periods that overlap March 5, 2020, or that begin on or between March 5, 2020, and December 31, 2020.
Waiver of the Department’s requirement that an institution offering at least 50% of a program by distance education to be accredited for distance education by an accrediting agency that has distance education in the scope of its recognition. The waiver is effective for payment periods that begin on or before December 31, 2020.
Six month extension of the Title IV financial statement and compliance audit deadlines.

The guidance also includes important new information concerning:

Accreditation site visit extension flexibilities and requirements.
Extension by six months of the “materially complete application” requirements following a Title IV change of ownership and control to allow additional time for the institution to remain TItle IV certified while secure state and accreditor approvals as well as the audited same day balance sheet.
Waiver of MCAT score requirement for foreign graduate medical school admissions for students admitted to medical school during an admissions year in which the MCAT was unavailable to students for some period of time during that year due to COVID-19 related interruptions.
Additional flexibilities concerning verification of high school (or equivalent) completion status that applies until December 31, 2020, for both the 2019-2020 and 2020-2021 award years.
Treatment of the PPP loan forgiveness amount in calculating the institution’s composite score.
Treatment of student workers when determining the number of employees for PPP loan eligibility.
Tax treatment of HEERF and emergency financial aid grants to students.
Clarifications regarding Campus-Based Waivers/Reallocation and FSEOG Emergency Aid Grants.
Clarifications regarding Leaves of Absence (LOA) flexibilities.
Return of Title IV Funds (R2T4) guidance and processing detail.
Clarifications regarding Satisfactory Academic Progress (SAP) flexibilities.
Clarifications regarding Teacher Education Assistance for College and Higher Education (TEACH) Grant Program flexibilities.

Institutions should carefully analyze the full guidance document and related Q&A , available here: https://ifap.ed.gov/electronic-announcements/051520UPDATEDGuidanceInterruptStudyRelCOVID19May2020