Washington News Brief

By Sharon H. Bob, Ph.D., Higher Education Specialist, Powers Pyles Sutter and Verville, PC

Secretary DeVos announced that ED will overhaul how it will manage the financial aid programs

On Nov. 28, 2017, Secretary of Education Betsy DeVos announced at the U.S. Department of Education’s Federal Student Aid (FSA) Conference that the Department must rethink higher education since “students should be able to pursue their education where, when and how it works for them and their schedules.” She said that is why it restored year-round Pell funding. Secretary DeVos also said that she is a member of the White House Task Force on Apprenticeship Expansion, and the Task Force is rethinking what effective apprenticeships look like. She noted that on another front, the Department is looking carefully at some of the “previous administration’s well-intentioned, but poorly designed, regulations including the Borrower Defense to Repayment and Gainful Employment rules.” With negotiated rulemaking underway, the Department is looking to develop rules that “protect both students and taxpayers.” Secretary DeVos said the effort to look at these two specific rules was part of a broader regulatory review process.

To better serve students, Secretary DeVos said that the Department must modernize the infrastructure and revamp the way it connects with them. The Secretary described the student borrowers’ experience with the Department: A student may apply through at least three different portals, and he/she will select from over 10 different repayment plans from up to nine different servicers, all with unique websites and forms. If a student decides to consolidate his/her loans, there may be another servicer to deal with that has a different website and forms. The Secretary received applause when she said that students should be able to complete their FAFSAs on their phones and in one sitting, and her goal is that the customer experience with the Department should “rival Amazon or Apple’s Genius Bar.”

A copy of the Secretary’s prepared remark is found at: https://www.ed.gov/news/speeches/prepared-remarks-us-secretary-education-betsy-devos-federal-student-aids-training-conference-financial-aid-professionals

Highlights of the planned improvements are found at: https://financialaidtoolkit.ed.gov/tk/

FSA COO announces vision to transform student aid and improve customer service

On Nov. 29, 2017, Dr. A. Wayne Johnson, Chief Operating Officer for Federal Student Aid, announced the blueprint for FSA’s Next Generation (Next Gen) Financial Services Environment at the recent U.S. Department of Education’s Federal Student Aid (FSA) Conference. The new approach will modernize the technology and operations that support the federal student aid programs from application to repayment. Here are the highlights of the planned improvements:

• Spring 2018 – FSA will launch its mobile platform to allow students and parents to complete and submit the FAFSA on a mobile device.
• Fall 2018 – FAFSA.gov will be integrated into StudentAid.gov, making it easier for students to apply for financial aid directly from FSA’s leading website. FAFSA applicants will be able to switch seamlessly between mobile and web while filling out the FAFSA, allowing students and parents to apply for financial aid from anywhere and on any device.
• TBD – FSA will consolidate all its customer-facing websites into a single, user-friendly hub to complement the new mobile platform and provide a seamless experience from beginning to end.
• To address future loan servicing needs, FSA is researching how world-class financial services organizations design and operationalize their customer service engagement practices so that FSA can refine its strategy to implement the Next Generation Financial Services Environment. On Dec. 11, 2017, the Department of Education posted a request for advanced market research information in regard to its Next Generation Financial Services Environment.

See: https://www.fbo.gov/index?s=opportunity&mode=form&id=ac904b86af5aa5025d10aeda0964be74&tab=core&_cview=1

In terms of enforcement, Dr. Johnson promised that FSA would be going after more debt relief companies that charge students fees to obtain free government benefits. He said that the Department is coordinating with other federal agencies on this issue.

A copy of the press release following Dr. Johnson’s presentation is found at: https://www.ed.gov/news/press-releases/us-department-education-announces-vision-transform-federal-student-aid-improve-customer-service

Senate Democrats ask Senate Appropriations Committee to strike language on accrediting agency provision

It was recently reported in Politico that on Dec. 4, 2017, Senate Democrats, led by Senator Elizabeth Warren (D-MA), sent a letter to the Senate Appropriations Committee asking them to strike a provision granting an 18-month extension for colleges previously accredited by the Accrediting Council for Independent Colleges and Schools (ACICS) from the Departments of Labor, Health and Human Services, and Education Appropriations Act. The letter states that by extending the deadline “for colleges whose track record or performance makes them struggle or unable to secure a new accreditor, this provision provides a free pass to receive more federal taxpayer funds and to sign up more students for federal student loan debt that they may never be able to repay.”

GAO reports on how FSA and schools manage federal student aid records

On Dec. 4, 2017, the Government Accountability Office (GAO) released a report titled “Better Program Management and Oversight of Postsecondary Schools Needed to Protect Student Information” (GAO-18-121). GAO was asked by the House Oversight and Government Committee to examine how Federal Student Aid (FSA) and institutions of higher education manage federal student aid records. The GAO concluded that FSA is not doing enough to protect student data collected as part of the federal student aid programs, and FSA should hold colleges and universities accountable for their information security practices as a condition for participating in federal student aid programs. “GAO’s review of selected schools’ policies found that schools did not always include required information security elements, such as assessing risks or designing and implementing safeguards. Moreover, Education’s implementing regulations do not require schools to demonstrate their ability to protect student information as a condition for participating in federal aid programs. This raises concerns about FSA’s oversight and how effectively schools are protecting student aid information.”

GAO recommended that FSA establish a document outlining a standard procedure for disposing of electronic records, require that staff receive regular training on managing online information, and set up a review of FSA’s records management program every three years. It also suggested that security procedures be reviewed annually.

To improve FSA’s oversight of schools, GAO recommended that it include a review of schools’ security procedures for managing data in its regular audits, and that the Secretary of Education should require that the ability to protect personal information be included in the assessment of a school’s administrative capability. At the recent FSA Conference, it was announced at the session covering the audit guide that in 2018 or 2019, ED would begin requiring the review of schools’ security procedures as part of the audit.

A copy of the GAO report is found at: https://www.gao.gov/assets/690/688604.pdf

OIG issues management information report following review of borrower defense to repayment loan discharge process

On Dec. 8, 2017, the Office of Inspector General (OIG) issued the “Management Information Report, Review of Federal Student Aid’s Borrower Defense to Repayment Loan Discharge Process” (Control Number ED-OIG/I04R0003). The OIG found that while policies and procedures were established in 2015 and modified in April 2016, the OIG identified weaknesses in the policies and procedures. In addition, the report stated that FSA did not have an adequate system to manage borrower defense data. Despite the weaknesses found during the review, the OIG recommended that the review of applications for borrower defense claims resume since there has not been a single ruling under the Trump Administration. The OIG also recommended that the Department of Education establish a time frame for reviewing claims and either issue a denial or discharge the loans.

A copy of the management information report is found at: https://www2.ed.gov/about/offices/list/oig/auditreports/fy2018/i04r0003.pdf

House Education Committee approves bill to reauthorize the Higher Education Act

On Dec. 13, 2017, following a 13-hour markup session of H.R. 4508, the Promoting Real Opportunity, Success, and Prosperity through Education Reform (PROSPER) Act, the bill to reauthorize the Higher Education Act was approved by a vote of 23 to 17. During the markup, over 60 amendments were introduced with more than half coming from Democrats. In the end, the Republican majority voted down all but two of the Democrats’ amendments. The Democrats believe that the bill would make college less affordable for students and would remove provisions that currently hold institutions accountable, but the Republicans believe that the bill will ultimately help students and address the nation’s skills gap. The bill had been introduced on Dec. 1, 2017 by Chairwoman of the House Education and the Workforce Committee Virginia Foxx (R-NC) and Chairman of the House Higher Education and Workforce Development Subcommittee Brett Guthrie (R-KY). The PROSPER Act is a 590-page proposal, focusing on helping low-income Americans gain a college education. In releasing H.R. 4508, Congresswoman Foxx issued a statement saying:

With six million unfilled jobs and over a trillion dollars in student debt, simply reauthorizing the Higher Education Act will help no one. A hard truth that students, families, and institutions must face is that the promise of a postsecondary education is broken. We need a higher education system that is designed to meet the needs of today’s students and has the flexibility to innovate for tomorrow’s workforce opportunities. The PROSPER Act is higher education’s long overdue reform.”

The press release, which includes the updated text of the bill, is found at: https://edworkforce.house.gov/news/documentsingle.aspx?DocumentID=402157

A bill summary released by the House Education Committee describes the goals of the PROSPER Act in terms of helping more Americans earn a lifetime of success by:

• Promoting innovation, access, and completion;
• Simplifying and improving student aid;
• Empowering students and families to make informed decisions; and
• Ensuring strong accountability and a limited federal role.

A copy of the bill summary for the PROSPER Act is found at: https://edworkforce.house.gov/uploadedfiles/the_prosper_act_-_short_summary_-_12.5.pdf

On Dec. 1, 2017, the White House released a set of principles for the reauthorization of the Higher Education Act that mirrors the goals of the PROSPER Act. According to the “Higher Education Act Reauthorization Principles,” Congress should create a framework for reforming America’s higher education law that:

• Helps students and parents make informed financial decisions when making educational choices;
• Encourages colleges and universities to deliver more affordable and accessible education to traditional and non-traditional students;
• Protects taxpayers from the Federal government’s substantial exposure for student loans;
• Promotes innovation; and
• Protects academic freedom and promotes the exercise of free speech on college campuses.

A copy of the White House’s reauthorization principles is found at: https://secure.aacte.org/apps/rl/res_get.php?fid=3714&ref=res

An article in The Wall Street Journal of Nov. 29, 2017, said that the House bill is aimed at both deregulating and laying the conditions for “shorter, faster pathways to the workforce.” The bill also focuses on ensuring that students enroll and graduate with skills that the labor market is seeking. The last reauthorization was in 2008 and was set to expire in 2013, but was extended to allow Congress more time to work on it. It is likely that the reauthorization process, beginning with the House bill, will take more than a year to wind through Congress. While there are many elements that have bipartisan support, there are many elements that are opposed by the higher education community. A review of the bill that passed the House Education Committee provides an understanding of how Republicans view the higher education system.

Following the bill’s passage, Chairman Foxx released a statement discussing the importance of the Committee’s action. “The PROSPER Act delivers the serious reforms needed to empower students and families to achieve an essential part of the American dream: earning a high-quality education, finding a good-paying job, and living a successful life.” Ranking Member Bobby Scott (D-VA) released a statement saying: “Under this bill, corporate interests are put first and students are put last.”

A copy of Chairman Foxx’s statement is found at: https://edworkforce.house.gov/news/documentsingle.aspx?DocumentID=402211

A copy of Ranking Member Scott’s statement is found at: https://democrats-edworkforce.house.gov/media/press-releases/after-13-hour-markup-republicans-pass-partisan-hea-reauthorization-under-the-cover-of-night_

Bills introduced that amend the HEA

In addition to the House proposal to reauthorize the Higher Education Act or the PROSPER Act, a number of bills have been introduced on the House and Senate sides that would amend the Higher Education Act. Some bills of relevance:

• On Dec. 14, 2017, Senators Jeanne Shaheen (D-NH) and Orrin Hatch (R-UT) introduced S. 2231, to amend the Higher Education Act of 1965 to provide for institutional ineligibility based on low cohort repayment rates and to require risk-sharing payments from institutions of higher education. Beginning in FY 2022 and each succeeding year, an institution with a cohort repayment rate that is equal to or less than 15 percent would not be eligible to participate in Title IV programs. Beginning in FY 2022 and each succeeding year, an institution participating in the Direct Loan program would remit a risk-sharing payment based on the cohort non-repayment loan balance of the institution.
• On Dec. 13, 2017, Senator Mike Lee introduced S. 2228, the Higher Education Reform and Opportunity (HERO Act, a companion bill to H.R. 4274, which was introduced on Nov. 7, 2017 by Congressman Ron DeSantis (R-FL) and 7 co-sponsors. The bill would amend the Higher Education Act of 1965 to provide for accreditation reform, to require institutions of higher education to publish information regarding student success, to provide for fiscal accountability, and to provide for school accountability for student loans. According to Congressman DeSantis’ press release: “Giving states the ability to innovate will make it possible for students to use Title IV funds in pursuit of a wide-range of educational approaches at potentially a fraction of the cost.” The bill would:
  • Authorize states to create an alternative, state-run process for accreditation, providing states with the same authority as the Secretary of Education has in selecting institutions eligible to participate in the Title IV programs;
  • Promote transparency by requiring that all institutions that participate in the federal student loan programs publish the percentage of students who receive federal, state, and institutional grant aid or loans by source and the average amount of federal loan debt; and
  • Require institutions to shoulder a portion of student loans that end in default.

A copy of Congressman DeSantis’ press release is found at: https://desantis.house.gov/press-releases?ID=E79FA0FE-A9A0-44BD-BAB1-425C796058E6

• On Dec. 12, 2017, Representatives Jackie Speier (D-CA), Walter Jones (R-NC), and Mark Takano (D-CA) introduced H.R. 4632, the Military and Veterans’ Education Protection Act, a companion bill to S. 2109, which was released on Nov. 9, 2017 by Senators Tom Carper (D-DE), Richard Durbin (D-IL), Richard Blumenthal (D-CT), Patty Murray (D-WA), and Jon Tester (D-MT) that would close the loophole “that allows for-profit schools to avoid having to secure at least 10 percent of their revenue from non-federal sources.” The bill would close the loophole on the 90/10 calculation by counting Veterans benefits and Department of Defense Tuition Assistance funds as federal dollars.
  A copy of Senator Carper’s press release is found at: https://www.carper.senate.gov/public/index.cfm/pressreleases?ID=16CA61FD-F7BD-4F7A-B414-2F0AFCE268CB
• On Nov. 30, 2017, Congressmen Duncan Hunter (D-CA), Brian Fitzgerald (R-CA), André Carson (D-IN), and Scott Peters (D-CA) introduced H.R. 4479, the Student Right to Know Before You Go Act of 2017, a companion bill to S. 2169, a bill released on Nov. 29, 2017 by Senators Ron Wyden (D-OR), Marco Rubio (R-FL), and Mark Warner (D-VA) that provides for greater transparency in the cost of education. According to the press release, the bill would establish new metrics to be published by the Department of Education to focus on data that provides future students and their families with post-graduation information, such as average annual earnings, amounts of federal loan debt, rates of remedial enrollment, credit accumulation, and graduation rates. Congressman Hunter said in a press release: “It is critical that students and their parents are provided with as much information as possible allowing them to make the best decisions for their family. Students should be able to easily access information from universities regarding earnings data for graduates, graduation rates for nontraditional students, transfer rates, frequency with which graduates go on to pursue higher levels of education, and debt levels.”

A copy of the press release from Congressman Hunter’s office is found at: https://hunter.house.gov/press-release/bipartisan-education-bill-introduced-provide-increased-information-college-costs

A copy of the press release from Senator Wyden’s office is found at: https://www.wyden.senate.gov/news/press-releases/wyden-rubio-warner-introduce-student-right-to-know-before-you-go-act-to-empower-students-as-consumers-and-showcase-new-privacy-protecting-technology

• On Nov. 14, 2017, Congressmen Drew Ferguson (R-GA), Paul Mitchell (R-MI), and Thomas Garrett (R-VA) introduced H.R. 4372, the Help Students Repay Act, which would consolidate the income-driven student loan repayment plans into one. The plan would:
  • Calculate the borrower’s monthly payment at 15 percent of discretionary income;
  • Maintain the same total loan repayment amount as the standard repayment plan; and
  • Not include time-based loan forgiveness, but no additional interest would capitalize after 10 years.

A copy of the press release is found at: https://ferguson.house.gov/media/press-releases/ferguson-introduces-legislation-streamline-student-loan-repayment

Five Senate Democrats ask Education Secretary and FSA COO about ED’s change in monitoring and enforcement tactics for federal student aid programs

On Dec. 13, 2017, five Senate Democrats, led by Patty Murray (D-WA), sent a letter to Secretary of Education Betsy DeVos and Chief Operating Officer for Federal Student Aid (FSA) Dr. Wayne Johnson asking them more than a dozen questions regarding the Department’s plans to change its monitoring and enforcement tactics for federal student aid programs. They noted that their questions take on “a new urgency since the Department has rolled back or refused to properly implement rules that were designed to protect students, borrowers, and taxpayers.” The Senators also asked for clarity as to how the roles of compliance and enforcement will be delineated. In addition, the Senators asked that the Department respond to the recommendations made by the Office of Inspector General’s “FY 2018 Management Challenges” report, “which identified several areas that FSA needs to address serious flaws in college oversight and accountability,” including program reviews, financial responsibility, and noncompliance and fraud among program participants.

A copy of the letter is found at: https://www.help.senate.gov/imo/media/doc/121317%20ED%20FSA%20Enforcement%20Letter%20Dec%202017.pdf

State Attorneys General sue Department over borrower defense to repayment claims

On Dec. 14, 2017, Attorneys General (AG) for Massachusetts, New York, Illinois, and California filed two lawsuits against the Department of Education for its failure to process and approve pending borrower defense to repayment claims made by former students of closed for-profit institutions. AG Maura Healey from Massachusetts issued a press release stating that: “Secretary DeVos and her team continue to demonstrate that they would rather give a free pass to predatory schools than give struggling student borrowers the relief they deserve.” See: https://www.mass.gov/news/ag-healey-sues-secretary-betsy-devos-for-halting-debt-relief-promised-to-defrauded-students

California AG Xavier Becerra said in a press release: “After having their American Dreams stolen by a so-called higher education institution, Corinthian students are now being denied critical relief by a Secretary of Education hostile to their plight.” See: https://oag.ca.gov/news/press-releases/attorney-general-becerra-takes-education-secretary-devos-court-withholding

ED announces improved defense discharge process

On Dec. 20, 2017, the Department of Education announced an improved discharge process for borrower defense to repayment (BDR) claims. For pending claims, no changes will be made to the existing approval criteria. However, the improved process will provide tiers of relief to compensate former Corinthian students based on damages incurred. Students whose current earnings are less than 50 percent of their peers from a passing gainful employment (GE) program will receive full relief, but those whose earnings are at 50 percent or more of their GE program peers will receive proportionately tiered relief to compensate for the difference and make them whole. Under the previous rules, when borrowers were found to have been defrauded, they were automatically granted full relief. Additionally, to mitigate the inconvenience for how long it has taken to adjudicate claims, the Department will apply a credit to interest that accrues on loans starting one year after the borrower defense application is filed.

To date, the Department has approved for discharge 12,900 pending claims submitted by former Corinthian Colleges, Inc. students, and 8,600 pending claims have been denied. The claims that were settled accounted for more than 20 percent of the claims that had been outstanding and all Corinthian Colleges students’ claims have now been processed. Secretary DeVos said that when she announced the Department’s regulatory reset on June 14, 2017, the previous regulatory process yielded a “muddled process that’s unfair to students and schools and puts taxpayers on the hook for significant costs.” Secretary DeVos said that it is the Department’s aim to “protect students from predatory practices while also providing clear, fair and balanced rules for colleges and universities to follow.”

ED OIG releases its “Fiscal Year 2018 Annual Plan”

On Dec. 20, 2017, the Department of Education’s Office of Inspector General (OIG) released its “Fiscal Year 2018 Annual Plan,” which outlines a number of goals it plans to work on in FY 2018. “The Department continues to face significant challenges in FY 2018 that impact its ability to effectively achieve its mission of promoting student achievement and preparing for global competiveness by fostering educational excellence and ensuring equal access.” In response to these challenges, the new work within the “Fiscal Year 2018 Annual Plan” will focus on oversight and monitoring federal student financial assistance, information technology, data quality, and other emerging areas.

Some of the new priority work to address the need to strengthen the delivery of student financial assistance includes the determination as to whether the Department:

• Has implemented procedures to ensure that only eligible borrowers are approved for the Public Service Loan Forgiveness Program;
• Is adequately monitoring schools’ compliance with satisfactory academic progress; and
• Ensures that schools perform verification of the FAFSA.

Continuing work includes the assessment as to whether the Department’s processes ensure that accrediting agencies meet the criteria for recognition and the extent of the Department’s monitoring of accrediting agencies. The OIG concluded its “Fiscal Year 2018 Annual Plan” by stating: “We will also continue to devote significant resources towards the investigation of allegations of fraud in student financial assistance programs, with an ongoing focus on distance education programs.”

A copy of the “Fiscal Year 2018 Annual Plan” is found at: https://www2.ed.gov/about/offices/list/oig/misc/wp2018.pdf

President signs tax reform package into law

On Dec. 22, 2017, H.R. 1, the Tax Cuts and Jobs Act, was signed into law by President Trump (P.L. 115-97). As related to higher education, H.R. 1:

• Maintains the American Opportunity Tax Credit, the Lifetime Learning Tax Credit, and the Hope Scholarship Tax Credit;
• Excludes from taxable income student debt that has been forgiven as a result of death or total and permanent disability;
• Imposes an excise tax of 1.4 percent on the net investment income of private colleges’ endowments. The tax would cover those private colleges and universities that have at least 500 students, in which at least 50 percent of those students are located in the United States, and that have assets of at least $500,000 per student;
• Expands the use of 529 plans to allow tax-free withdrawals (up to $10,000 per beneficiary per year) to cover tuition at public or private elementary and secondary schools;
• Maintains the deduction for interest on student loans;
• Retains the deduction for tuition and other related expenses;
• Maintains the exclusion for interest on U.S. savings bonds used for higher education expenses; and
• Maintains the exclusion of employer-provided educational assistance programs.

“Semiannual Report to Congress, No. 75” disapproves of ED’s decision to delay implementation of the borrower defense to repayment and gainful employment rules

The Office of Inspector General (OIG) released its “Semiannual Report to Congress, No. 75,” which stated that it disapproved of the delay in the implementation of the borrower defense to repayment and gainful employment rules. Inspector General Kathleen Tighe said: “On borrower defense, we did not agree with the Department’s delay of financial responsibility provisions that provided tools to improve the Department’s oversight options for schools at risk of closure…On gainful employment, we did not agree with the Department’s decision to delay a provision requiring schools to provide consumer protection disclosures directly to students before they enroll and Federal student aid funds are committed or disbursed.” IG Tighe said that OIG plans to work closely with ED on both regulations as negotiated rulemaking continues. “As with past negotiated rulemaking efforts, we expect to be fully engaged with the Department as it proceeds. We will not hesitate to voice our concerns regarding program integrity matters.”

A copy of the “Semiannual Report to Congress, No. 75” is found at: https://www2.ed.gov/about/offices/list/oig/semiann/sar75.pdf

SHARON H. BOB PH.D., Higher Education Specialist on Policy and Regulation, is a member of the Education Group at the Washington, DC law firm of Powers Pyles Sutter & Verville, PC. Dr. Bob advises all sectors of higher education regarding strategic issues pertaining to their participation in the federal student financial assistance programs, accreditation, licensure, education tax benefits, and related regulatory matters.