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FY 2016 OFFICIAL COHORT DEFAULT RATES RELEASED

On September 23, 2019, the Official Cohort Default Rates were released for the 2016 Fiscal Year.

The national default rate has fallen since last year after it rose to more than 11.5%. Since 2013, the National Student Loan Cohort Default Rate is trending down again. The official 2016 rate is now 10.1%, down 6.5% from the Official FY 2015 rate of 10.8%

According to Federal Student Aid’s National Default Briefing, the highest Defaults are still coming from the proprietary school sector which has an average of 15.2% for the 2016 CDR. Public institutions fared much better at 9.6%, followed by private institutions with just 6.6% of students defaulting on their loans.

The Fiscal Year 2016 Three-Year CDR is calculated by dividing the number of borrowers who entered repayment in 2016 by the number of borrowers who entered repayment in 2016 and defaulted in 2016, 2017 or 2018. A school with a high default rate will face sanctions and may lose its eligibility to participate in Federal Student Aid Programs or expand their scope of participation with ED. Schools with Three-year CDRs of 30% or greater for three consecutive years or with CDRs greater than 40% for one year are subject to federal sanctions.

The official Three-Year rates were sent to all schools via their Student Aid Internet Gateway (SAIG) mailbox. Federal Student Aid’s Operations Performance Management Services calculates the rates which measure the ratio of students who enter repayment during a cohort year and who later default on those loans. Since the data isn’t always right, schools can challenge and appeal their CDR calculation to have their rates adjusted. Schools may begin submitting challenges and appeals on Tuesday, October 1, 2019 through the eCDR appeals website.

UPDATED FISAP RESOURCES

It’s FISAP Time.

The Fiscal Operations Report for 2018-2019 and Application to Participate for 2020-2021 (FISAP) is now available on the Common Origination and Disbursement (COD) Web Site.

If your school had Campus-Based expenditures for the 2018-2019 Award Year and schools that wish to request funding under the Campus-Based programs for the 2020-2021 Award Year are required to electronically submit a FISAP via the COD Web Site.

The deadline for the electronic submission of the FISAP is 11:59 p.m. Eastern time (ET) on October 1, 2019. Transmission must be completed by midnight.

You have lots of resources to help you with the FISAP including updated FISAP Instructions, Desk Reference and the 2019-20 Technical Reference.

FISCAL YEAR 2016 OFFICIAL COHORT DEFAULT RATES COMING SOON

ED will release FY 2016 Official Cohort Default Rates (CDR) to all eligible institutions in mid-September. Schools will receive their CDR electronically via their SAIG mailbox.
The Cohort Rates are an important metric used to determine school or program quality. Schools with 3-year CDRs of 30% or greater for three consecutive years or with CDRs greater than 40% for one year may face federal sanctions. Institutions may challenge, appeal, or have their rate adjusted in certain circumstances. Be on the lookout for more information such as an Electronic Announcement announcing the official release dates of the 2016 CDR package from FSA’s Operations Performance Division in the forthcoming days. In the meantime, check out the Default Management Web site which contains resources for Financial Aid Professionals, Data Managers and Students here.

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

National Association for College Admission Counseling’s NACAC Code of Ethics.

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.

2019-2020 IPEDS REGISTRATION AND DATA COLLECTION SCHEDULE

Registration for the 2019-2020 IPEDS Data Collection Schedule opens in August. Reporting to IPEDS is mandatory thus; all institutions are required to register for the 2019-2020 data collection cycle. UserIDs and passwords for 2019-2020 will be distributed to all institutions on August 7. Those with designated keyholders will receive information via email. All institutions for which there is no designated keyholder will receive a letter directed to the CEO containing registration information. To register, visit the IPEDS website at: https://nces.ed.gov/ipeds/report-your-data

During the Registration Period, institutions are encouraged but not required to complete Report Mapping, Institution Identification, and IC Header. Report Mapping (if applicable) and Institution Identification must be completed, and IC Header must be locked before the Fall surveys can be started. Report Mapping and IC Header are available until the end of the Fall collection. Institution Identification is available through Spring.
On August 28, NCES will review the registration status of each institution. If an institution has not registered as of this date, a letter will be sent to the CEO requesting appointment of a new keyholder.

If you are responsible for reporting IPEDS data at your school, here are some other important dates to mark on your calendar.

  • September 4, 2019 – Fall Collection Opens – Institutional Characteristics; Completions; 12-month Enrollment
  • December 11, 2019 – Winter Collection Opens – Student Financial Aid; Graduation Rates; 200% Graduation Rates; Admissions; Outcome Measures
  • December 11, 2019 – Spring Collection Opens – Fall Enrollment; Finance; Human Resources; Academic Libraries

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.

UPDATED – QUESTIONS REMAIN ON RECENT COLLEGE CYBERSECURITY VULNERABILITIES

On July 17, the U.S. Department of Education’s Office of Federal Student Aid issued an Electronic Announcement regarding what they deemed an “active and ongoing exploitation” of a known vulnerability potential in some versions of Ellucian’s Banner software. According to FSA’s “Technology Security Alert, the vulnerability affects Ellucian Web Tailor versions 8.8.3, 8.8.4, and 8.9 and Banner Enterprise Identity Services versions 8.3, 8.3.1, 8.3.2, and 8.4. Pointing to advisory bulletin by the National Institute of Standards and Technology (NIST), FSA reported that hackers may be able to breach the system through an institutional account and could then potentially use that access to set up “thousands of student fake student accounts”. The Department says that 62 colleges or universities have been identified which may be affected. Federal Student Aid’s Cyber Incident Team is working with institutions to identify if systems were impacted and to facilitate the necessary fixes. FSA asked institutions using Ellucian Banner to do the following:

  1. review the vulnerability details as provided in NIST advisory CVE-2019-8978;
  2. contact Ellucian to receive information needed to patch or upgrade affected systems; and
  3. respond immediately to the Department via email to both FSASchoolCyberSafety@ed.gov and CPSSAIG@ed.gov.
  • Include the following information in your email:
  • Institution’s Name
  • Information Technology (IT) Contact at Institution (Name, Email Address, Phone Number)

Ellucian has since pushed back on ED’s characterization of the nature of breach and its impact, stating that Banner’s potential software vulnerabilities, which were brought to light by both Ellucian and the National Institute of Standards and Technology in May, are unrelated to some of the other cybersecurity concerns outlined by ED. Ellucian said neither they nor ED have reason to suspect that a breach occurred as a result of the Banner software vulnerability. Schools using the impacted software should implement the system patch issued by Ellucian in May, if they have not already done so.

This is the second summer in a row that ED released a Technology Security Alert. In August of 2018, FSA released a warning about a malicious phishing campaign aimed at student email accounts. Officials cautioned that cybercriminals could change student account information including information such as direct deposit banking information which could be used to funnel student refunds and aid distributions into accounts controlled by the attackers. FSA offered this guidance to institutions:

How to protect IHEs: FSA strongly encourages IHEs to strengthen their cybersecurity posture through the use of two-factor or multi-factor authentication processes. These types of authentication rely on a combination of factors, for example, username and password combined with a PIN or security questions or access through a secure, designated device.

If you believe your institution has fallen victim to an attack, report the incident immediately to cpssaig@ed.gov and FSASchoolCyberSafety@ed.gov. Include the following:

  • Name of the institution
  • Date the incident occurred (if known)
  • Date the incident was discovered
  • Copy of the phishing email (if available)
  • Extent of the impact (number of students)
  • Remediation status (what has been done since discovery)
  • Institution point of contact

Suggested remediation steps if an institution falls victim to the attack:

  • Temporarily freeze refund requests until the scope of the incident can be known. Note, refunds must still be provided within regulatory guidelines which may require a change in how impacted IHEs issue refunds, e.g. issue paper checks.
  • Temporarily disable changes to direct deposits for refunds.
  • Block IP addresses observed in institution logs related to the attack.
  • Disable campus credentials or passwords for potentially affected students and require password resets.
  • Perform additional forensic analysis on server and application logs from recent weeks.
  • Notify all students, warning them of active phishing attempts and encourage them to be vigilant and careful about using links and entering personally identifiable information into websites.

UPDATED – On Tuesday August 6, the Department of Education released an updated Technology Security Alert regarding the vulnerability in Banner Web Tailor and Banner Enterprise Identity Services.

The Department dialed back their claims that Banner products were affected and instead point to vulnerabilities in “third-party software” being used as “front-end access points to the Ellucian Banner System and similar administrative tools”. The Department also confirmed what Ellucian has been saying all along – “To date, based on reports from targeted institutions, we have not found any instances where the Ellucian Banner System vulnerability has been exploited or is related to the issues described in the original alert.”

In an emailed statement from Ali Robinson, an Ellucian spokesperson, he said

“Research by the Department has found:

  • no instances where the known Banner vulnerability has been exploited or where it is related to the issues described in the original alert.
  • an industry-wide issue in which attackers use automation tools to submit fraudulent admission applications in order to obtain new student accounts.

Additionally, I should note that, Ellucian has conducted its own research and monitoring that has produced no evidence of any attempt to attack the known Banner vulnerability.”

The Department is advising institutions to  review any third-party front-end applications to ensure that they are not introducing unpatched vulnerabilities, or increasing the risk of potential future issues through automation attacks. The Department reccommends that insitutions implement human validation checks as part of their front-end portal submission process.