On May 16, 2023, the United States Department of Education (the “Department”) updated its Third Party Servicer Guidance issued in GEN-23-03. The new Dear Colleague Letter (“DCL”) officially delays indefinitely the previously issued guidance. It also removes the prohibition on contracts between institutions of higher education and foreign owned or operated third party servicers.
This DCL replaces the prior update posted in a blog by Undersecretary Kvaal, in which he commented that the department was effectively delaying the prior DCL. This formalizes that announcement.
The DCL indicates that institutions will be provided with at least six (6) months advance notice before the effective date of any future formal guidance. The deadlines for audit and contractual requirements in any new guidance will be delayed until the institution’s first fiscal year beginning after the effective date for the reporting requirements. We read this to mean that institutions and Third Party Servicers will not be required to retroactively implement the new guidance.
Finally, the Department also clarified that institutions may contract with foreign owned Third Party Servicers. It rescinded earlier guidance on this issue. The Department did note, however, that this issue may be subject to rulemaking in the future.
Institutions and potential Third Party Servicers should continue to evaluate how they may be impacted by new regulation or guidance in this area. It is clear that the Department is intent on increasing its oversight of Third Party Servicers by expanding the scope of services that fall into the Third Party Servicer bucket in the Higher Education Act. In addition, the Department has identified Third-Party Servicers and Related Issues for rulemaking in the fall of 2023. Concerned parties should continue to monitor developments from the Department as they arise over the next several months.
Institutions of higher education (IHEs) and companies providing services to IHEs (including so-called online program managers or OPMs) should take careful note of two announcements by the U.S. Department of Education that could significantly impact the institution/service provider relationship and the Department’s oversight of that relationship.
First, and most immediately effective, the Department has revised its subregulatory guidance regarding the activities that make an entity providing services to an IHE a “Third Party Servicer” (TPS) for Title IV purposes. In a significant expansion over prior guidance, an OPM providing services to an IHE related to student recruiting and retention, providing software products and services involving Title IV administration activities, or providing educational content and instruction are now defined as a TPS. Being defined as a TPS comes with significant increased risk and compliance obligations by the third party and the institution. There is an open public comment period on this change through March 17, 2023.
Important Update: On February 28, 2023, the Department published an update to Dear Colleague Letter 23-03 that makes clear the guidance does not become effective until September 1, 2023. The reporting deadline for institutions and third-party servicers to report to the Department is also extended until September 1, 2023. Further, the Department extended the comment period through March 30, 2023.
A common question for colleges today is whether to reduce tuition prices if they cannot provide on-campus classes due to the COVID-19 pandemic.
The short answer, both legally and morally, is that colleges should not charge students for services they cannot or do not deliver.
The ultimate answer is more complex and requires a disaggregating analysis of the services that that were included in the price of tuition, including a review of the value associated with in-person interactions.
Duane Morris was a sponsor of the 2020 ASU GSV summit. Several of our attorneys presented at this year’s virtual conference. Below are replays from select sessions.
Ed Tech Policy Session | September 29, 2020
Consumers of education services – students of all ages and the entities that serve them – are hungry for dramatic changes in the education landscape that will deliver increased access, equity, affordability, quality and workforce relevance. Ed Tech has begun to deliver on those needs in extraordinary ways, and the potential is untapped. However, innovation in the market has outpaced how existing regulations and policy govern education as a service. This session will: (1) review friction points our lawyers have observed between Ed Tech models and the current state, federal and accreditor regulatory regimes that apply to educational businesses and educational institutions (and how to spot, anticipate and plan for them), (2) report on recent changes in federal law and policy to promote and foster innovation (including the U.S. Department of Education’s new Distance Education and Innovation Final Rule and increased accreditor flexibilities) and (3) discuss threats and opportunities that may arise from the next Congress and Administration, and how Ed Tech stakeholders can help shape education policy.
We reported earlier this week on the U.S. Department of Education’s July 22, 2019, announcement, which clarified that California students attending online programs offered by out-of-state nonprofit and public institutions are not currently eligible for Title IV Federal Student Aid because of lack of a student complaint process. This issue is not limited to California students and could similarly impact students in many states across the country attending online programs offered by all California colleges and universities, including nonprofit, public and for-profit schools. California-based colleges and universities offering online programs in other states must seek state-by-state authorization or exemption because California does not participate in SARA (State Authorization Reciprocity Agreement). Many of these states do not provide a complaint process for exempt institutions.
A package of seven interrelated bills proposing tighter regulation of for-profit and private colleges in California moved closer to becoming law this week — but not fully intact.
One of the bills, a proposal to create the nation’s first state-level gainful-employment rule, was watered down to require only the collection and disclosure of data around employment outcomes of graduates at for-profit colleges.