NEW INSTITUTIONAL ACCOUNTABILITY CHANGES

As part of the “Borrower Defense to Repayment Final Rules (dubbed institutional accountability final rules), The U.S. Department of Education amended the Student Assistance General Provisions regulations. New rules were added establishing conditions and events that could have an adverse, material effect on an institution’s financial condition, thus warranting protections for students and taxpayers. These are broken up into two categories; mandatory and discretionary financial responsibility triggering events.

Unlike the Borrower Defense to
Repayment regulations included in this package which will go into effect on
July 1, 2020, the amendments below are scheduled for immediate implementation.

Financial Responsibility – Mandatory and Discretionary Triggering Events

The Final Regulations establish mandatory and
discretionary triggering events that have, or could have, a materially adverse
impact on an institution’s financial condition that warrant financial
protection. 

The mandatory triggering events are: 

1) Liabilities arising from a settlement,
final judgment from a court, or final determination arising from an
administrative action or proceeding initiated by a Federal or State
entity; 

2) Withdrawal of owner’s equity from the
institution, unless the withdrawal is a transfer to an entity included in the
affiliated entity group upon whose basis the institution’s composite score was
calculated;

3) For publicly traded institutions, the
Securities and Exchange Commission issues an order suspending or revoking the
registration of the institution’s securities or suspends trading of the
institution’s securities on any national securities exchange, the national
securities exchange notifies the institution that it is not in compliance with
the exchange’s listing requirements and the institution’s securities are
delisted, or the SEC is not in timely receipt of a required report and did not
issue an extension to file the report; and 

4) For the fiscal year reported, when an
institution is subject to two or more discretionary triggering events, those
events become mandatory triggering events, unless a triggering event is
resolved before any subsequent event(s) occurs.  

Discretionary triggering events in the Final Regulations include:

1) The institution’s accrediting agency issues
an order, such as a show-cause order or similar action, that if not satisfied
could result in the loss of institutional accreditation; 

2) The institution violated a provision or
requirement in a security or loan agreement with a creditor; 

3) The institution’s State licensing or
authorizing agency notified the institution that it has violated a State
licensing or authorizing agency requirement and that the agency intends to
withdraw or terminate the institution’s licensure or authorization, if the
institution does not take the steps necessary to come into compliance; 

4) The institution’s failure to meet the 90/10
requirement; 

5) As calculated by the Secretary, the
institution has high annual dropout rates; and

6) The institution’s two most recent official
cohort default rates are thirty percent or greater, unless the institution
files a challenge, which results in reducing below thirty percent the official
cohort default rate for either of or both of those years or precludes the rates
from either or both years from resulting in a loss of eligibility or
provisional certification.

Finally, the Final Regulations also
update the definitions and terms used to calculate an institution’s composite
score and the composite score methodology to align with changes in FASB
accounting standards. Existing leases will be grandfathered, and the new
regulations only apply to new leases.  Existing
long-term debt rules are also being grandfathered, but the new rules require
tie-ins to plant, property, and equipment new long-term debt.  In addition, the Final Regulations revise
Appendices A and B of the financial responsibility regulations to conform with
the updates and changes in accounting standards.

BORROWER DEFENSE FINAL REGULATIONS RELEASED

The United States Department of Education released final regulations for institutional accountability related to Borrower Defense to Repayment loan discharges for Federal Direct Loans. The new regulations revise the standards the Department will use to adjudicate borrower defense to repayment claims and will take effect for all new loans first disbursed on or after July 1, 2020, while preserving the standards for loans that were issued under prior regulations. The Final Regulations preserve three borrower defense periods: 1) Loans first disbursed prior to July 1, 2017, which are subject to pre-2016 regulations; 2) Loans first disbursed on or after July 1, 2017 and before July 1, 2020, which are subject to final regulations published on November 1, 2016, and 3) Loans first disbursed on or after July 1, 2020, which are subject to the 2019 regulations. Under the new regulations, borrowers who are misled and can demonstrate financial harm caused by their institution can file a claim to have their loan discharged. The Department’s new rules give borrowers up to three years from the time they leave school to file a claim. Claims will be reviewed by ED staff using the “preponderance of the evidence” standard. Both borrowers filing claims and institutions that the borrower attended will be required to provide supporting evidence to ED which will determine if a discharge is warranted. In the Final Regulation, the Department defines a “misrepresentation” as: a statement, act, or omission by an eligible school to a borrower that is (a) false, misleading, or deceptive, (b) that was made with knowledge of its false, misleading, or deceptive nature or with a reckless disregard for the truth, and (c) that directly and clearly relates to either 1) enrollment or continuing enrollment at the institution; or 2) the provision of educational services for which the loan was made. According to ED, some examples of misrepresentation include:
  • actual licensure passage rates that are different from those in marketing materials, website, and communications;
  • actual employment rates materially different from those in the institution’s marketing materials, website, and communications;
  • institutional selectivity or rankings, student admission profiles, or institutional rankings that are materially different from those in marketing materials, websites, and communications;
  • the institution does not possess certifications, accreditation, or approvals for programs that it represents that it possesses; representations regarding the educational resources provided;
  • representations regarding the transferability of credits that, in fact, do not transfer to other institutions;
  • representations regarding the employability or specific earnings of graduates without evidence;
  • representations regarding the availability, amount, or nature of financial assistance provided;
  • representations regarding the amount, method, or timing of payment of tuition and fees that is materially different from the amount, method, or timing of actual tuition and fees;
  • representations regarding whether an institution’s courses or programs are endorsed by employment agencies, industry members, government officials, former students, US armed forces, or others without permission; and
  • representations regarding the prerequisites for enrollment in a course or program.
Within these “Institutional Accountability” regulations, the Department also amended several other regulations including regulations for class action waivers, pre-dispute arbitration agreements, and rules for closed-school and false certification discharges. The new regulations will permit institutions to use class-action waivers and arbitration agreements if an institution discloses information about their internal dispute resolution and arbitration processes to students as part of in the borrower’s entrance counseling. The Final Regulations also allow for the borrower to choose whether to apply for a closed school loan discharge or accept a teach-out opportunity. In addition, the closed school discharge window is expanded from 120 days to 180 days prior to the school’s closure. For borrowers claiming a false certification by their school they can also apply and must complete an application.
This information is for informational and educational purposes only. To learn more about how your institution can adjust its processes and reporting to minimize its risk of these federal student aid compliance issues, please contact us.

COMING COMPETITION IN COLLEGE ADMISSIONS

It’s been almost two years since the Department of Justice’s Antitrust Division began an inquiry into the National Association for College Admission Counseling’s (NACAC) Code of Ethics. The Statement of Principles of Good Practice: Code of Ethics and Professional Practice (SPGP – CEPP) is followed by nearly 8000 NACAC members from colleges and universities. Among enrollment management professionals, the SPGP isn’t just a code of ethics. Instead, it’s a matrix upon which all of admissions operates, and there’s the rub. Is a system that’s arranged with as much pomp and circumstance as college admissions rigged to be anti-competitive? The Department of Justice seems to think so.

Earlier this week, NACAC’s Board of Directors recommended changing course to help the association avoid litigation and trial and to show good-faith and compliance with the DOJ investigation. In a memo to their Assembly leadership and delegates who will be meeting next month, NACAC’s Board and legal counsel recommended that delegates “seriously consider deleting statements within the Code of Ethics and Professional Practices assumed to violate antitrust laws.”

NACAC’s board is recommending that their leadership approve a motion to suspend procedural rules of the Assembly prohibiting amendments to the CEPP, except those recommended by their legal counsel.

Additionally, they’ve proposed a moratorium on enforcing the rules outlined in the of the Code of Ethics and Professional Practices which govern everything from admissions cycle dates, deadlines and procedures to transfer admission and of course early and regular decision. According to NACAC, these are the four main areas that Department of Justice considers to be potentially anti-competitive under anti-trust laws .

Early Decision

NACAC’s guidelines have long prohibited colleges from offering special incentives to students applying or admitted for Early Decision. NACAC proposes removing language that would prohibit colleges from doing so, which in theory will allow colleges to lure students to their campus with offers of preferential housing, better financial aid packages and even special scholarships.

Responsible Practice of College Admission

NACAC member institutions have an agreement that they won’t poach each other’s students. Once a student has committed themselves to a college, institutions simply stop trying to recruit them. This has insulated colleges from competition by members. By striking this language from the CEPP, it seems that colleges may be able to recruit whomever they want , whenever they want, even before or after NACAC’s deadlines.

Admission Cycle Dates, Deadlines and Procedures for First-Time Fall Entry Undergraduates

May 1st is a big day in admissions. That’s when students are expected to commit to a college under regular decision and that’s also when college admission offices have to stop trying to recruit students who have committed to other institutions. NACAC is proposing to remove the language preventing colleges from trying to get students to change their college decision.

Transfer Admission

Under existing NACAC rules, colleges can’t contact applicants or prospective students from prior years unless that contact was initiated by the student themselves. This prevents colleges from recruiting transfer students. If the Assembly indeed votes to remove this provision, colleges will be able to contact students at other colleges and offer incentives for them to transfer.

It’s quite likely that NACAC’s Assembly leadership and delegates will adopt these changes when they meet next month and that means that college admissions is about to change.

Absent the protections provided by NACAC SPGP-CEPP institutions are going to have to work smarter, harder and most of all compete to attract students to their campus. What remains to be seen is whether these changes if adopted will appease the Department of Justice and what repercussions if any will be felt by individual institutions (or even individuals at institutions) who have operated under NACAC’s admissions principals.

REPORT ON BEST PRACTICES FOR FINANCIAL LITERACY AND EDUCATION

In a recent electronic announcement, Federal Student Aid announced that a new report on Financial Literacy Best Practices has been released. The report dubbed Best Practices for Financial Literacy and Education at Institutions of Higher Education is the result U.S. Financial Literacy and Education Commission. According to the Electronic Announcement, the report provides general best practices for financial education programs. Specifically, the report makes recommendations in the following areas:
  • Providing clear, timely and customized information to inform student borrowing;
  • Effectively engaging students in financial literacy and education;
  • Targeting different student populations by use of national, institutional and individual data;
  • Communicating the importance of graduation and major on repayment of student loans; and
  • Preparing students to meet financial obligations upon graduation.
This is useful information for helping student access information to make college affordable.

STATE AUTHORIZATION PING PONG NEARS RESOLUTION 

STATE AUTHORIZATION PING PONG NEARS RESOLUTION 
As we reported in May, the U.S. Department of Education was ordered by a U.S. District Court in California to implement the 2016 State Authorization Regulations. Although the original effective date of the regulations was July 1, 2018, the Department delayed them until July 1, 2020 and began the process of negotiating and writing new regulations which are still expected to be released later this year. The lawsuit brought by student and consumer advocates and the National Education Association, a teacher’s union, sought to force the Department of Education to implement the 2016 regulations and on May 26, 2019 the courts sided with the NEA. As a result, the court ordered the Department to implement the rules right away.

The 2016 state authorization amendments required institutions to obtain approval from each state in which they enroll students via online, distance education, and/or correspondence programs, or participate in a state authorization reciprocity agreement that includes the states they’re enrolling students in. States were required to have a means for students to lodge complaints and as of last year every state except California (and a few U.S. Territories) have either established a complaint process and process for approving out of state entities or joined a reciprocity agreement like NC-SARA.

Recognizing the effect this would have, the court allowed the Department time to consider how to implement the rules, since many schools and colleges have been enrolling Californians with the understanding that the State Authorization regulations had been delayed. On July 22, 2019 the Department released an electronic announcement explaining that the State Authorization rules were put into effect retroactively on May 26, 2016, causing a scramble in the distance education world. Reports of as many as 80,000 to more than 100,000 students enrolled in distance education programs all around the country were suddenly in jeopardy of losing access to their federal financial aid. As an attachment to the electronic announcement the Department provided some information about states’ complaint processes and pointed out that California didn’t have one for its private non-profit and public institutions. California’s Bureau of Private Postsecondary Education handles complaints for out-of-state for-profit institutions.     

California acted quickly to establish a complaint process for these schools, and authorized BPPE through the California Department of Consumer Affairs to begin handling complaints beginning on July 29, 2019. In a statement, the DCA said they expect that the ED will find the proposed process satisfactory, so that California is following federal rules, affected colleges can inform their students of the process, and students will not lose Title IV federal financial aid funding.

Although the Department hasn’t historically approved or denied individual state complaint processes, the U.S. Department of Education and California Regulators appear to be coordinating closely to avoid any missteps that could prolong or further deny federal aid to students receiving distance education because their institutions cannot meet the complaint process requirement due to problems with state procedures. The nation’s college students wait for the Department’s decision. Considering the potential to disrupt the education of thousands of online students affected. a conclusion to this issue needs to be carried out swiftly.

According to WCET, 4-6 states and territories may still be out of compliance after noting that some complaint procedures in some states were unclear and may not meet the federal requirements. So far, they have not released the names of the states or territories in question.  Education Secretary Betsy DeVos has also called for NEA to drop its lawsuit which although unlikely to happen could also resolve this issue by allowing the Department to continue their original plan to delay the regulations until such time as new rules are carried out or states comply.

IS YOUR PASSWORD ABOUT TO EXPIRE?

If you’re a “professional user” accessing Federal Student Aid Systems like COD, eCDR Appeals, FAA Access to CPS, NSLDS Professional Access or your school’s SAIG or Edconnect software, you already know that if you haven’t logged in for a while your access may have been disabled or deactivated. Beginning on June 16, 2019 Federal Student Aid will begin tracking the number of days a user is inactive in each of their systems. If a user doesn’t log into any particular system for 90 days, their access to that system will be deactivated. For example, if you’re a regular user of COD, NSLDS and FAA Access to CPS online, but rarely log in to FAA Access to CPS, only FAA Access to CPS will be deactivated if you don’t log in at least once every 90 days. If you get locked out, you’ll have to call the Access and Identity Management System (AIMS) customer service center listed for that system to have your access restored.

If you haven’t logged in for a year, your access will be permanently deactivated after 365 days of inactivity and you’ll have to have your institution’s Primary Destination Point Administrator re-enroll you. If you happen to be the Primary DPA and you somehow let your access lapse for that long…you’ll have to jump through some hoops to get access restored. But don’t worry…FSA has a new report especially for you. It’s a Monthly User Status Report. You can get it right through your Edconnect SAIG Mailbox, just look for the PDPAEAOP file. This monthly report will help you keep track of users at your school who are in danger of losing access. CHeck out this electronic announcement from Federal Student Aid for info.

DRAFT 2020-2021 FISAP MATERIALS RELEASED

Federal Student Aid recently released draft versions of the 2020-2021 FISAP, accompanying instructions and updated Technical Reference to help schools prepare for the upcoming FISAP due on October 1, 2019. Although the final documents won’t be published until August 2019, schools can use these draft documents to begin preparing the information needed in October. For more information check out the recent electronic announcement from FSA here.

Changes to the FISAP

In addition to award year and date references, the following FISAP fields have been updated and/or added:

Part I, Section A, Field 5

Two new data fields have been added to Field 5 to include the Federal Supplemental Educational Opportunity Grant (FSEOG) and Federal Work-Study (FWS) amounts allocated to each additional eligible institution for the 2018–19 reporting year.

Part III, Section B, Fields 1–8

Fields 1–8 have been updated to no longer allow for data entry on new loans due to the expiration of the authority to award new Federal Perkins Loans (Perkins Loans).

Part III, Section B, Fields 12 & 13

Fields 12 and 13 have been added to collect data on permissible servicing costs and cancellation reimbursement, if applicable, respectively.

Part VI, Section A, Fields 1a–26a & 1b–26b

Federal Perkins Loan Recipients (column a) and amount of funds (column b) fields have been updated to no longer allow for data entry due to the expiration of the authority to award new Perkins Loans.

Changes to FISAP Instructions

In addition to updates to the annual award year, date references, acronyms, and hyperlinks, the following changes have been made to the FISAP Instructions:

All

Updates have been made throughout the instructions to address the expiration of the authority to award new Perkins Loans and all impacted fields that will no longer allow for data entry as a result.

Introduction to the FISAP

The due date for the FISAP has been updated to Monday, October 1, 2019, and the correction deadline has been updated to December 13, 2019. Clarification has been added on the requirements around reporting for additional eligible institutions on a single FISAP (Part I, field 5).

Part I, Identifying Information, Certification and Warning

Clarification has been added about FISAP signature submission requirements. Instructions have been added for new data fields required in Part I, Section A, field 5 when reporting for additional eligible institutions.

Part III, Section B

Clarification has been added on the loan assignment process for cases of total and permanent disability. Instructions have been added for the new Fields 12 and 13, to report servicing costs and loan cancellation reimbursements received.

Parts IV & V

Removed paragraphs about reporting prior year recoveries on the FISAP, so as not to repeat or conflict with guidance provided in Volume 5 of the Federal Student Aid Handbook.

Parts VI, Section B

Clarification has been added around claiming and reporting administrative cost allowance (ACA).

2019-2020 FINAL FUNDING AUTHORIZATIONS FOR THE CAMPUS-BASED PROGRAMS

The Final Authorizations for the 2019-2020 Campus-Based programs have been posted to the Department’s COD website (not eCB anymore). Awards for each Campus-Based program in which a school participates is reflected in the school’s 2019-2020 Statement of Account.

Each institution that applied for funds under the Federal Supplemental Educational Opportunity Grant (FSEOG), Federal Work-Study (FWS), and/or Federal Perkins Loan (Perkins Loan) programs for the 2019-2020 Award Year receives a tentative funding level which is based on a Base Guarantee and a Fair Share Increase. However, if the amount of unexpended 2017-2018 funds exceeds 10% of the institution’s 2017-2018 allocation and no waiver for that unexpended amount was approved, the allocation is reduced by the unexpended amount. The final funding worksheets posted on the COD website will show the information that was used in the calculation of each school’s 2019-2020 Campus-Based allocations.

The total 2019-2020 federal funds available for allocation to schools under the FWS, FSEOG, and Perkins Loan programs are as follows:

Program           Total Federal Funds Available for Allocation to Schools

FWS                  $1,130,000,000

FSEOG              $840,000,000

For more information about the 2019-2020 Final Funding Authorizations read the Department’s Electronic Announcement Here.

FINAL GAINFUL EMPLOYMENT COMPLETERS LISTS AND DRAFT CORRECTION RESULTS RELEASED

The Memorandum Of Understanding (MOU) between the Social Security Administration and the Department of Education that allowed the two agencies to share earnings data expired last year. As a result, ED cannot calculate the Debt-To-Earnings Rates (D/E) that would be used measure program outcomes and to impose sanctions on schools and colleges under the current Gainful Employment rules.

Although the MOU hasn’t been renewed, rendering the calculations useless, the Gainful Employment rules are still in effect. Last month Federal Student Aid distributed the Final Gainful Employment Completers Lists and Draft Gainful Employment Lists Corrections Results to institutions via NSLDS and institution’s SAIG mailboxes. Although the deadline for corrections expired on July 13, 2018 and no additional corrections may be submitted, schools can access this data to see the outcome of their corrections if they submitted one. For more information about this data check out Gainful Employment Electronic Announcement 118 here.

2018-2019 VERIFICATION REPORTING AND VERIFICATION STATUS CODE “W” WARNING MESSAGE

As the 2018-2019 award year nears its end for many schools, the Department has begun its annual sweep of, outstanding verification status codes on the COD website. Although the regulations on interim disbursements changed to limit the scenarios under which a FAO can submit an interim disbursement on a student’s Pell award several years ago, there are still a few times when it is appropriate to do so. When this occurs, disbursement information is typically reported to COD with a verification status code of “W”, for any interim disbursements that have been made. For all other recipients selected by the CPS the FAO will either report a “V” for applications which have been verified or for those which were selected but never verified simply “S”. Schools must verify all applicants that were selected by the CPS must report one of these statuses for each student unless they meet one of the exemptions (i.e. student never enrolls, dies etc.). If you didn’t report all your verifications by April 24, funds were automatically deobligated and on April 24 and reduced to zero ($0.00) on COD for anyone still in a W status. Since your school’s CFL on G5 is driven by disbursements, your CFL was likely reduced too.

Institutions with year-round rolling admissions and non-term courses often package students from the current award year right up to June 30 each year. As a result, many students who begin their program in the spring or early summer may be within the allowable timeframes for submitting verification documents and completing the verification process. In those cases, and in accordance with the allowable timeframe in the Federal Register notice, the school may resubmit a disbursement record with a value greater than zero ($0.00) until October 1, 2019. Otherwise, verification documents typically must be reviewed by the institution no later than September 21, 2019 or 120 days after the students last date of enrollment for the 2018-2019 award year or whichever is earlier. Remember for students selected for verification tracking groups V4 and V5, institutions must submit identity and high school completion status verification results no later than 60 days after the student was first selected for verification.