Title IV – UpdateED

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

April 10, 2023 by Duane Morris

Department of Education Expands Regulatory Jurisdiction Over Service Providers for Institutions of Higher Education

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.

Read the full text of this Alert on the Duane Morris website.

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.

October 13, 2021 by Jonathan Helwink

U.S. Department of Education Negotiated Rulemaking – Session One Recap

On Friday, October 8, 2021, the U.S. Department of Education wrapped up its first week-long session of the (virtual) Affordability and Student Loan Negotiated Rulemaking. The Department’s agenda (see here) kicked off with a discussion of each of the twelve issue papers, some with proposed regulatory language, provided to the committee prior to the beginning of the sessions. Continue reading “U.S. Department of Education Negotiated Rulemaking – Session One Recap”

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

June 2, 2020June 12, 2020 by Duane Morris

Department of Education Publishes Title IX Final Rule

On May 19, 2020, the U.S. Department of Education issued its final rule on Title IX of the Education Amendments of 1972 regulations. These are the first comprehensive regulations issued under Title IX since 1975. The final rule, which applies to school districts, colleges and universities, including all institutions of higher education receiving Title IV funding, contains a number of significant changes, such as: a definition for sexual harassment, publication of Title IX materials, triggers for an institution’s legal obligation to respond and investigate, and a requirement that institutions conduct courtroomlike hearings.

To read the full text of this Duane Morris Alert, please visit the firm website.

March 12, 2020June 12, 2020 by Duane Morris

U.S. Department of Education Issues COVID-19 Guidance to Schools

Due to the outbreak of coronavirus (COVID-19), the Centers for Disease Control and Prevention recommends that institutions of higher education consider postponing or canceling upcoming study abroad or foreign exchange programs. However, this advice has raised pressing questions about how this would affect Title IV, Higher Education Act (HEA) federal financial aid and a student’s ability to finish the term if a program is interrupted or canceled. In response, on March 5, 2020, the U.S. Department of Education’s office of Federal Student Aid (FSA) offered guidance permitting temporary flexibility and clarifying how higher education institutions can continue to comply with Title IV regulations for students whose activities are impacted by COVID-19.

To read the full text of this Duane Morris Alert, please visit the firm website.

March 3, 2020June 12, 2020 by Duane Morris

Cybersecurity Update: Protecting Student Data Critical to Continued Participation in the Federal Student Aid Programs

On February 28, 2020, the U.S. Department of Education’s Office of Federal Student Aid (FSA) issued an electronic announcement regarding the enforcement of the Gramm-Leach-Bliley Act’s (GLBA) cybersecurity requirements for all institutions of higher education participating in the Title IV, Higher Education Act (HEA) federal student financial aid programs and their third-party servicers. The announcement states that auditors are expected to evaluate three GLBA information safeguard requirements in annual compliance audits of postsecondary institutions and third-party servicers. Any finding of noncompliance will be sent to both the Federal Trade Commission (FTC) and the FSA’s cybersecurity team for further investigation and potential adverse action. All Title IV participating institutions should consult with counsel about the very serious consequences and administrative actions that may be taken if they or their third-party servicers fail to meet the GLBA’s information security requirements.

To read the full text of this Duane Morris Alert, please visit the firm website.