Dec. 17, 2021
Last week, negotiators serving on the Affordability and Student Loans Committee convened for their third and final week-long work period as part of the Department of Education’s (ED) negotiated rulemaking process, or “neg reg.” (See our summaries of the first and second work periods here and here, respectively.) Committee members considered 9 topics across 12 revised proposals, which reflected, to varying degrees, input from negotiators over the course of the past two months.
During the work period, negotiators took final consensus votes on each proposal. Consensus required zero dissenting votes across representatives of 18 constituencies, including the Department. As in the first two sessions, student and borrower representatives were among the negotiators urging ED to center the importance of advancing racial and economic equity in designing regulations.
The committee reached consensus on four topics, the representatives of proprietary institutions down-voted proposals on three issues, and many negotiators diverged from the Department on the remaining two.
Where Negotiators Found Consensus
Total and Permanent Disability (TPD) Discharge – Throughout the previous two work periods, disability rights advocate negotiators pushed to ensure that certain categories of borrowers were eligible for discharges, including those who have received Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) for five years prior to application. During the last work session, ED included language in its proposed regulations that encompassed this group of borrowers.
Pell Grant Eligibility for Prison Education Programs – A subcommittee to discuss regulations to restore Pell eligibility for incarcerated students met twice before the third work session of the full committee. (Recaps of subcommittee meetings can be found here and here.) Subcommittee members presented recommended regulatory language, and full committee members were generally receptive to the proposal. The language is an effort to balance securing access to higher education programs for people who are incarcerated and ensuring the quality of those programs.
Additional discussion helped resolve concerns about reporting requirements, evaluating whether a program is operating in the best interest of students, the role of accreditors, and potential administrative burden placed on institutions providing programs in prisons.
False Certification Discharge – ED agreed to add language to the proposed regulations to permit a state attorney general or non-profit legal services representative to submit applications for group discharges when institutions falsely certify students’ loan eligibility.
Interest Capitalization – ED proposed—and all negotiators agreed—to eliminate all instances of interest capitalization not required by statute, including when borrowers enter repayment and when they exit forbearances, among others.
Proprietary Schools Withheld Support on Three Issues
All negotiators except those representing proprietary institutions supported these proposals—something legal aid and other advocate negotiators suggested indicates ED should keep the proposals as currently structured. They warned ED against weakening the consumer and borrower protections in the proposals based on industry concerns about liabilities they might incur for defrauding students of their financial aid and veterans’ benefit dollars.
Borrower Defense to Repayment (BD) – In this round of discussions, ED included language to allow legal aid attorneys and other third parties to petition for group discharges; to count violation of state law as a defense to repayment; to permit reconsideration of claims by both individuals and groups; and to clarify what constitutes aggressive and deceptive recruitment tactics by schools. Several negotiators raised concerns about record-keeping by colleges and what it means, practically, when ED fails to meet the review timeframes outlined in regulatory language.
The for-profit negotiator requested opportunities for institutions to receive reconsideration of borrower defense claims, indicated that the current process facilitates erroneous discharges, and requested that BD standards set by ED look at reliance on incorrect information, financial harm, and intentionality of the act by the school when processing claims.
Closed School Discharge – During this work period, ED included consideration of whether a school violated state or federal law when determining whether a borrower should receive a closed school discharge. ED also removed language from its proposed regulations that would have prevented a closed school discharge if borrowers reenrolled in a “comparable program” within a certain amount of time after their schools closed.
Despite negotiators’ appreciation of these changes, several negotiators encouraged ED to give continued attention to what constitutes a “closed” school; they wanted the Department to ensure operating schools do not face financial liability for closing certain programs. ED provided—and agreed to distribute widely—additional guidance to help institutions better understand closed school discharge-related provisions, but the for-profit negotiator remained the lone thumbs down vote, preventing the group from reaching full consensus.
Pre-Dispute Arbitration – No substantive changes were made between proposals introduced in the second and third work sessions. Most negotiators signaled strong support for restoring this regulation—rescinded by the previous administration—as a critical tool to hold schools accountable. Proprietary schools underscored their support for the existing regulation (without the reforms proposed by ED), arguing arbitration ensures timely consideration of claims and tailored relief. As legal aid and other negotiators noted, however, this timeliness and tailoring comes at the expense of consumers’ rights and due process.
A Long Way to Go on IDR and PSLF
Negotiators noted that they had never experienced a neg reg in which so many negotiators were in agreement on goals for regulatory reform yet so far apart from ED’s perspective as they were on income-driven repayment (IDR) and Public Service Loan Forgiveness (PSLF).
Income-Driven Repayment (IDR) – At the start of the discussions, ED outlined its priorities—including the need to help borrowers avoid default and target benefits for undergraduates and low-income borrowers—that led to the introduction of a new “Expanded Income-Contingent Repayment (EICR)” plan. ED representatives acknowledged that negotiators had submitted a large number of proposals, but contended they could not enact many of them. These sidelined proposals included those facilitating incremental forgiveness.
To address its priorities, as well as some negotiator concerns, ED included a hold-harmless provision meant to address forbearance steering; introduced a marginal rate in terms of the percentage of discretionary income repaid by borrowers; increased the percentage of protected income from 150% or 200% of federal poverty guidelines; allowed borrowers in default to access income-based repayment plans; counted pre-consolidation payments toward forgiveness; and permitted borrowers to be automatically enrolled in IDR if they have missed a certain number of payments.
Although they expressed appreciation for certain aspects of the proposal–including access to income-based payments for borrowers in default–across the board, negotiators expressed disappointment at the incremental nature of ED’s proposed reforms. They emphasized that EICR would add complexity and administrative burden to the repayment system while neither addressing the questions raised by ED prior to the first work session nor fully meeting the needs of borrowers, especially borrowers of color and other disproportionately debt-burdened groups.
As discussions about IDR concluded, 12 of the 18 negotiators voted against consensus.
Public Service Loan Forgiveness (PSLF) – ED began by noting places Department officials had expanded the PSLF program and further aligned it with IDR, including broadening what qualifies as full-time employment and a qualifying payment. However, ED’s new language still excluded employees at for-profit companies from qualifying for PSLF, regardless of their job type or function.
Several negotiators emphasized the link between IDR and PSLF, and they contended the current (and proposed) IDR options were insufficient to help vulnerable borrowers. As a result, they pushed to expand PSLF as a path to forgiveness. For example, a core group of negotiators suggested borrowers working at for-profit entities should not be excluded, noting no such requirement in the PSLF statute.
Now that formal negotiations have concluded, ED officials must craft regulatory language to issue for public comment next year. After receiving those comments, they will have to respond to substantive issues raised by stakeholders and publish final regulatory text by November 1, 2022 in order for these regulations to take effect on or before July 1, 2023.
Even as ED finalizes regulations from the Affordability and Student Loans Committee, officials will begin managing another committee in January through March focused on institutional and programmatic eligibility. That committee will take up issues including gainful employment, closing the 90/10 loophole for for-profit college revenues, standards of financial responsibility for colleges, and changes of institutional ownership.
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