Washington News Brief

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

Department provides notice to CFPB regarding intent to terminate MOU; Director Cordray seeks accommodation; House and Senate Democrats urge ED to reevaluate its CFPB decision; State AGs urge ED to reconsider its CFPB decision

On Aug. 31, 2017, Kathleen Smith, Acting Assistant Secretary, Office of Postsecondary Education, and Dr. A. Wayne Johnson, Chief Operating Officer, Federal Student Aid, sent a letter to Richard Cordray, Director of the Consumer Financial Protection Bureau (CFPB), notifying him of the Department’s intent to terminate two Memoranda of Understanding (MOUs) between the U.S. Department of Education and the CFPB regarding the sharing of information in connection with oversight of federal student loans. The letter states that the Department’s mission is to serve students and borrowers, but the CFPB’s actions have undermined that mission by violating the intent of the MOUs. The CFPB was to direct to the Department all complaints related to Title IV federal student loans within 10 days of receipt by the CFPB; however, the CFPB has failed to direct complaints to the Department and has instead handled such complaints itself. ED noted that “Our goals are to ease the burden for borrowers and to enhance the efficiencies of our servicers – not to complicate the federal student loan process with potentially inaccurate and inconsistent directives.”

A copy of the Department of Education letter to the CFPB is found at: A copy of the letter to Secretary DeVos is found at: https://edworkforce.house.gov/uploadedfiles/2017-09-01_signed_letter_to_cfpb.pdf

Congresswoman Virginia Foxx (R-NC), Chairwoman of the House Education and the Workforce Committee, issued a statement praising the Department’s actions to end the MOUs with the CFPB.

“Specifically, the department has shown that partnership with the CFPB was complicating and undermining its efforts to act in the best interest of borrowers and students.”

A copy of Congresswoman Foxx’s statement is found at: https://edworkforce.house.gov/news/documentsingle.aspx?DocumentID=401966

On Sept. 7, 2017, Director of the CFPB Cordray wrote to the Secretary requesting a meeting with her and her staff to have a “constructive conversation” on sharing federal student loan data, suggesting that “there is plenty of work for each of us to do, but I believe we can generally do it better together.” Director Cordray’s letter outlines how he believes the Bureau has complied with the MOUs.

A copy of the CFPB response to the Department is found at: https://consumermediallc.files.wordpress.com/2017/09/director-cordray-letter-to-department-of-education-9-7-17.pdf

On Sept. 14, 2017, a total of 39 House and Senate Democrats sent a letter to Secretary DeVos, urging her to reverse her decision to end data-sharing agreement between the Department and the CFPB. They said: “Cooperation between the Department and CFPB is in the best interest of students, borrowers, and taxpayers and the Department’s decision to abandon this partnership is contrary to its stated mission to ‘ease the burden for borrowers.’” The letter goes on to state: “While the Department does have the authority to administer the federal student loan programs, that authority is not exclusive and has been intentionally constrained by law due to the Department’s historical negligence in carrying out many of its oversight responsibilities over federal student loan servicers.” The letter also called on the Department to provide Congress with documents relating to its decision and any plans the Department has for coming back into compliance with the law.

A copy a press release of Sept. 15, 2017, which includes a link to the Senators’ letter to Secretary DeVos is found at: https://www.brown.senate.gov/newsroom/press/release/brown-murray-lead-senate-house-members-calling-on-secretary-devos-to-reverse-rollback-of-student-loan-borrower-protections

On Sept. 18, 2017, Senators Elizabeth Warren (D-MA) and Sherrod Brown (D-OH) sent a letter to Mr. Cordray encouraging the CFPB to continue its work to ensure that “students are protected from unfair, deceptive, and abusive acts committed by the Department’s student loan servicers and contractors…” The Senators concluded that no federal agency has done more” to curb abusive practices in the student loan industry than the CFPB.”

A copy of the Senators’ letter is found at: https://www.warren.senate.gov/files/documents/2017_09_18_CFPB_Letter_on_termination%20of%20ED_MoUs.pdf

On Sept. 26, 2017, 21 Attorneys General (AGs), led by Pennsylvania AG Josh Shapiro, sent a letter to Secretary DeVos expressing concern with the Department’s recent action to terminate the two Memoranda of Understanding on information sharing with the CFPB. The letter said that the action was troubling because the Department falsely asserted it has exclusive jurisdiction over companies that service federal student loans, the termination will harm taxpayers and millions of families struggling to repay their loans, and the CFPB has provided critical leadership in protecting families from loan servicers and proprietary schools.

A copy of the AGs letter is found at: https://ag.ny.gov/sites/default/files/multistate_letter_to_devos_re_federal_loan_servicers.pdf

Department reminds institutions to protect the security and privacy of sensitive personal tax and income information on the FAFSA

On Sept. 5, 2017, the Department of Education issued an Electronic Announcement reminding institutions of higher education and state agencies of their obligation to guard the security and privacy of sensitive personal tax and income information collected on the FAFSA. This reminder comes in light of the changes made to the IRS Data Retrieval Tool (DRT) beginning with the 2018-2019 FAFSA award cycle. To provide for maximum access to the IRS DRT among all applicants, the information that is displayed to the applicant is limited to enhance the security and privacy of sensitive personal tax and income information. Institutions of higher education and state agencies must not disclose income and tax information from the FAFSA with the applicant (and spouse or parents) unless the FAFSA applicant (and spouse or parents) can authenticate his/her identity with an unexpired photo identification card.

A copy of the Electronic Announcement is found at: https://ifap.ed.gov/eannouncements/090517RemindertoinsthigheredstagenciesregardprivsectydataFAFSA.html

Senate Appropriations Committee passes FY 2018 Labor/HHS/ED Appropriations bill

On Sept. 7, 2017, the Senate Appropriations Committee passed a bipartisan bill, S. 1771, the FY 2018 Labor, Health and Human Services, Education, and Related Agencies Appropriations Act, by a vote of 29-2. The bill includes the following funding levels:

• Pell Grants: The bill includes $22.5 billion in discretionary funding for Pell Grants, which will increase the maximum award by $100 to a new level of $6,020, and will continue Year-Round Pell Grants.
• FSEOGs: The bill includes $733 million for the FSEOG program.
• FWS: The bill proposes $990 million for the FWS program.
• Federal Student Loan Servicing: The bill includes language ensuring competition in student loan servicing, to promote accountability and high quality service for student borrowers.
• Pell Grant Eligibility: The bill includes language restoring Pell Grant eligibility for students impacted by the closing of an institution or false certification or students who have a successful assertion of a defense to repayment of a loan claim.
• ACICS: The bill includes language extending the period of time by an additional 18 months for those institutions of higher education impacted by the Department’s revocation of the recognition ACICS have to find an alternative accreditor to remain eligible for federal financial aid.

In addition, the report accompanying the bill directs the Secretary of Education to:

• Enter into a Memorandum of Understanding with the Secretaries of Defense and Veterans Affairs to automate the application of loan benefits to eligible service members and veterans using information in existing federal databases in a timely manner so that service members and veterans can receive the benefits under law.
• Fully implement the Memorandum of Understanding establishing a framework regarding the requirements for electronically sharing tax data over multiple years for federal student loan borrowers participating in Income-Driven Repayment plans, as announced by the Department of Treasury and Education on Jan. 17, 2017.
• Issue guidance, within 180 days from enactment, clarifying how colleges and universities can allow state-based organizations to participate in advising students on campus without violating the Preferred Lender List rules.
• Update guidance, information, and processes regarding borrower eligibility for the Public Service Loan Forgiveness Program in coordination with its federal loan servicer.
• Issue a common policies and procedures manual to help improve the consistency of servicing for student loan borrowers and to encourage the Department to pursue the development of a simple, consistent, and unified experience for all student borrowers through a universal web portal.

A copy of the report is found at: https://www.appropriations.senate.gov/imo/media/doc/FY2018%20Labor%20HHS%20Education%20Appropriations%20-%20Report%20115-150.pdf

House Democrats introduce the America’s College Promise Act of 2017

On Sept. 7, 2017, Congressman Bobby Scott (D-VA), ranking member of the House Committee on Education and the Workforce; Congresswoman Susan Davis (D-VA), ranking member of the House Subcommittee on Higher Education and Workforce Development; Congressman Donald Norcross (D-NJ); Congressman Seth Moulton (D-MA); and Congressman Anthony Brown (D-MD) introduced H.R. 3709, the America’s College Promise Act of 2017, which would make two years of community college free and provide an affordable pathway to a four-year college degree for low-income students. The bill provides a federal match of $3 for every $1 invested by the state to waive community college tuition and fees for eligible students before other financial aid is applied. H.R. 3709 would either cover a significant portion of tuition and fees for either the first two years or last two years of college for low-income students who choose to attend Historically Black Colleges and Universities (HBCUs), Hispanic-Serving Institutions (HSIs), Asian American and Native American Pacific Islander-Servicing Institutions (AANAPISIs), and Minority-Serving Institutions (MSIs).

A copy of the press release is found at: https://democrats-edworkforce.house.gov/media/press-releases/democrats-introduce-bold-legislation-to-broadly-expand-access-to-higher-education

Secretary discusses better way forward on Title IX enforcement

On Sept. 7, 2017, Secretary of Education Betsy DeVos discussed a better way to address Title IX enforcement with students and faculty at George Mason University. In her remarks, Secretary DeVos described the problems with the current failed system and the need to establish a regulatory framework that serves all students. She also asserted that “the era of ‘rule by letter’ is over.”

Secretary DeVos said: “To ensure that America’s schools employ clear, equitable, just, and fair procedures that inspire trust and confidence, we will launch a transparent notice-and-comment process to incorporate the insights of all parties developing a better way. We will seek public feedback and combine institutional knowledge, professional expertise, and the experiences of students to replace the current approach with a workable, effective and fair system. To implement sustainable solutions, institutions must be mindful of the right of every student.”

A copy of Secretary DeVos’ speech is found at: https://www.ed.gov/news/speeches

A copy of the press release is found at: https://www.ed.gov/news/press-releases/highlights-secretary-devos-remarks-title-ix-enforcement?utm_content=&utm_medium=email&utm_name=&utm_source=govdelivery&utm_term=

Senators Blumenthal and Murphy re-introduce Students Before Profits Act

On Sept. 8, 2017, Senators Richard Blumenthal (D-CT) and Chris Murphy (D-CT), along with Senators Dick Durbin (D-IL), Sherrod Brown (D-OH), Al Franken (D-MN), Elizabeth Warren (D-MA), and Kamala Harris (D-CA), introduced S. 1784, Students Before Profits Act, a bill designed to protect students from predatory lending and deceptive marketing practices at for-profit colleges. The bill ensures students have access to accurate information, strengthens oversight and regulation, and holds schools and their executives accountable for violations and poor performance. Senator Murphy authored this bill when it was first introduced in 2015. The bill would:

• Authorize enhanced civil penalties on institutions and their executive officers if it is determined that the institution misrepresented its cost, admission requirements, completion rates, employment prospects or default rates, and uses those penalties to fund a Student Relief Fund to help defrauded students;
• Improve oversight of default rates by requiring the Secretary of Education to use corrected data to recalculate cohort default rates for institutions of higher education that have engaged in default manipulation and make determinations on whether an institution should be disqualified from participating in the Title IV federal financial aid programs;
• Make college executives share the risk, giving the Department of Education broader discretion to require owners and executives to assume personal liability for financial losses associated with federal student aid funds and including owner and executives among those against whom the Department can pursue a claim after discharging borrowers’ debts; and
• Prevent “repeat offenders” by prohibiting board members and executive officers of an institution against which the Department has brought an enforcement action from serving in leadership positions at another college.

A copy of the press release is available at: https://www.murphy.senate.gov/newsroom/press-releases/murphy-durbin-brown-franken-blumenthal-warren-and-harris-introduce-students-before-profits-act

Department releases updates on Department response to Hurricanes Harvey and Irma

On Sept. 12, 2017, the Department of Education released a press release updating its responses to Hurricane Harvey and Hurricane Irma. Federal Student Aid (FSA) has also updated its guidance that relates to students, parents and borrowers affected by a federally declared natural disaster. On Sept. 22, 2017, the Department issued a second Dear Colleague letter (GEN-17-09) that provides non-regulatory guidance on flexibility and waivers for grantees and program participants impacted by federally-declared disasters.

A copy of the press release is found at: https://www.ed.gov/news/press-releases/update-department-education-response-hurricane-harvey-and-hurricane-irma?utm_content=&utm_medium=email&utm_name=&utm_source=govdelivery&utm_term=

A copy of the Department’s guidance on natural disasters is found at: https://studentaid.ed.gov/sa/about/announcements/disaster

A copy of GEN-17-09 is found at: https://ifap.ed.gov/dpcletters/GEN1709.html

GAO reports that students lose almost half of their college credits when they transfer

According to the Government Accountability Office (GAO) study released on Sept. 13, 2017, students lose almost half of the college credits they earned by transferring to another college, which places them at risk of exhausting their federal grants and loans to repeat courses that do not transfer. The GAO report titled, “Students Need More Information to Help Reduce Challenges in Transferring College Credits,” estimated that students who transferred between 2004 and 2009 lost an estimated 43 percent of their credits. Credit loss varied based on the transfer path. For example, students who transferred between public schools, which represented the majority of transfer students, lost about 37 percent of their credits. However, students who transferred from for-profit institutions to public institutions, which accounted for 4 percent of all transfer students, lost about 94 percent of their credits.

The GAO recommended that all schools be more transparent about their transfer credit policies. Further, the GAO recommended that schools should be required to disclose on their websites the list of other schools with which they have articulation agreements and, when no articulation agreements are in place, provide general transfer information to students.

The GAO report (GAO-17-574) is available at: http://www.gao.gov/products/GAO-17-574

House passes Departments of Labor, HHS, and Education Appropriations Bill for FY 2018

On Sept. 14, 2017, the U.S. House of Representatives passed H.R. 3354, the Make America Secure and Prosperous Appropriations Act for FY 2018, which includes the text of the remaining eight appropriations bills, including the text of H.R. 3358, the Departments of Labor, Health and Human Services, and Education Appropriations for FY 2018. H.R. 3358 provides $66 billion for the U.S. Department of Education. The bill includes the following funding levels:

• Pell Grants: The bill includes $22.5 billion in discretionary funding for Pell Grants, which will maintain the maximum Pell Grant at $5,920.
• FSEOG: The bill includes $733 million for the FSEOG program.
• FWS: The bill includes $990 million for the FWS program.

The report language included in the Senate bill (see article below) was not included in the House bill.

With passage of H.R. 3354, the House has completed its work on the appropriations process for FY 2018. The question is what steps the Senate will take to complete its work on the budget process since the Senate has not passed a single appropriations bill. Congress recently passed a Continuing Resolution to keep the federal government operating until Dec. 8, 2017.

A copy of the report that accompanied H.R. 3358 is found at: https://www.gpo.gov/fdsys/pkg/CRPT-115hrpt244/pdf/CRPT-115hrpt244.pdf

Senators introduce Federal Perkins Loan Program Extension Act of 2017

On Sept. 14, 2017, Senators Tammy Baldwin (D-WI), Susan Collins (R-ME), Rob Portman (R-OH), and Bob Casey (D-PA) introduced S. 1808, the Federal Perkins Loan Extension Act of 2017. The bipartisan bill is identical to the bill introduced in the House on May 17, 2017, as H.R. 2482, which was sponsored by Congresswoman Elise Stefanik (R-NY). The bill would extend the Perkins Loan program for an additional two years. Graduate and professional students would have Perkins eligibility restored for only the first of those two years. Without congressional action, the program will expire on Sept. 30, 2017.

On Sept. 26, 2017, Representatives Elise Stefanik (R-NY) and Mark Pocan (D-WI) announced that they had secured the support of 223 members of the House, more than the majority needed to pass H.R. 2482. A copy of the announcement is found at: https://stefanik.house.gov/media-center/press-releases/stefanik-and-pocan-call-vote-extend-perkins-loans-more-220-members-join

CFPB takes action against National Collegiate Student Loan Trusts and Transworld Systems for illegal student loan debt collection lawsuits

On Sept. 18, 2017, the Consumer Financial Protection Bureau (CFPB) took action against the National Collegiate Student Loan Trust and their debt collector, Transworld Systems, Inc. for illegal student loan debt collection lawsuits. According to the complaint, consumers were sued for private education loan debt that the companies could not prove was owed or was too old to sue over. CFPB ordered the National Collegiate Student Loan Trusts to pay at least $21.6 million, stopping them from filing illegal lawsuits, and requiring the trusts to audit their portfolio to identify any other consumers who were harmed.

A copy of the press release is found at: https://www.consumerfinance.gov/about-us/newsroom/cfpb-takes-action-against-national-collegiate-student-loan-trusts-transworld-systems-illegal-student-loan-debt-collection-lawsuits/

Trump Administration selects Holified for HBCU initiative

On Sept. 18, 2017, the Trump Administration announced its selection of Johnathan Holified, a former NFL player who now heads an economic development firm, to head the White House Initiative on Historically Black Colleges and Universities.

Senate HELP Committee holds nomination hearing for ED’s new General Counsel

On Sept. 19, 2017, the Senate Health, Education, Labor and Pensions (HELP) Committee held a hearing on the nomination of Carlos Muñiz to serve as the Department of Education’s next General Counsel. In his opening remarks, Mr. Muñiz said that he had a record of providing “candid and independent legal advice, even when doing so is difficult.” He also said that he would be guided by a “reverence for the Constitution and for the rule of law” if confirmed for the General Counsel’s position. Carlo Muñiz is only the third Senate-confirmed education official to be nominated by the Trump Administration after Secretary Betsy DeVos and Assistant Secretary of Education for Legislation and Congressional Affairs Peter Oppenheim.

An archived webcast of the hearing is found at: https://www.help.senate.gov/hearings/nominations7

OIG recommends that WGU repay almost $713 million in federal dollars

On Sept. 20, 2017, the Department of Education’s Office of Inspector General (OIG) issued a final audit report titled, “Western Governors University Was Not Eligible to Participate in the Title IV Programs.” The final audit report (ED-OIG/A05M0009) concluded that Western Governors University (WGU) did not comply with the institutional eligibility requirements that limit the percentage of regular students who may enroll in correspondence courses, and, therefore, the Department should require the school to return $712,670,616 in Title IV funds received from July 1, 2014, through June 30, 2016, and any additional funds received after June 30, 2016. WGU is a leading provider of online competency-based education. The OIG found that may of the courses under review were not designed to offer regular and substantive interaction with an instructor and, therefore, the courses did not meet the definition of distance education. Regular and substantive interaction is what distinguishes distance education from correspondence courses. The final audit report found that of the 61,180 regular students enrolled in 2013-2014, at least 62 percent were enrolled in one or more courses that did not meet the federal definition of distance education. The OIG report included WGU’s responses, which disputed the findings included in the final audit report.

The OIG cannot require an institution to repay Title IV funds because it is up to the Secretary of Education. It was reported in a number of higher education newsletters that higher education experts do not expect Secretary DeVos to follow the OIG recommendations.

A copy of the OIG final audit report is found at: https://www2.ed.gov/about/offices/list/oig/auditreports/fy2017/a05m0009.pdf

GAO report recommends that Department should address oversight and communication gaps in its monitoring of the financial condition of schools

On Sept. 20, 2017, the Government Accountability Office (GAO) released a study titled, “Education Should Address Oversight and Communication Gaps in its Monitoring of the Financial Condition of Schools,” which examined how the Department of Education oversees the financial condition of schools. The GAO report said that the use of the composite score is an imprecise risk measure, predicting only half of the school closures since the 2010-2011 school year. The composite score, which was developed in 1997, does not reflect updates in accounting practices, it does not incorporate new financial metrics that would provide a broader indication of schools’ financial health, and it is vulnerable to manipulation by some schools that inflate their scores by taking out loans.

The Department rejected the GAO’s recommendation to update the composite score, although it agreed to improve communication about how it calculates the composite score.

A copy of the GAO report (GAO-17-555) is found at: http://www.gao.gov/assets/690/687225.pdf

Department posts loan portfolio information and cash management contracts on the FSA Data Center

On Sept. 21, 2017, Federal Student Aid (FSA) posted seven new reports related to the Direct Loan portfolio on the FSA Data Center. The Department also posted on the FSA Data Center any contracts disclosed by institutions with respect to a financial account provider.

A copy of the Electronic Announcement is found at: https://ifap.ed.gov/eannouncements/092117FSAPostsNewReportsToFSADataCenter.html

Department of Education issues new interim guidance on campus sexual misconduct

On Sept. 22, 2017, the Department of Education announced that it was withdrawing the Dear Colleague letter on Sexual Violence dated April 4, 2011, and the “Questions and Answers on Title IX Sexual Violence” dated April 29, 2014. According to the press release, the withdrawn documents “ignored notice and comment requirements, created a system that lacked basic elements of due process and failed to ensure fundamental fairness.” In the coming months, the Department plans on engaging in rulemaking on Title IX responsibilities arising from complaints of sexual misconduct.

In the interim, the Department released a new set of “Questions and Answers on Campus Sexual Misconduct” that institutions should use to investigate and adjudicate allegations of campus sexual misconduct. The new guidance advises colleges that they may pick the standard they would like to use when adjudicating sexual assault cases: either the preponderance of the evidence, the standard that the 2011 letter told colleges to use, or the clear and convincing evidence, a higher standard. (Both standards are lower than the one used in criminal cases, known as beyond a reasonable doubt.) Another change is that colleges no longer have to resolve sexual assault cases within 60 days of a report being filed. There is no fixed time for a college to complete a Title IX investigation. In the 2011 guidance, mediation was not seen as appropriate, but the 2017 guidance allows a school to facilitate an informal resolution using mediation to assist the parties to reach a voluntary resolution.

A copy of the press release is found at: https://www.ed.gov/news/press-releases/department-education-issues-new-interim-guidance-campus-sexual-misconduct

A copy of the interim “Questions and Answers on Campus Sexual Misconduct” is found at: https://www2.ed.gov/about/offices/list/ocr/docs/qa-title-ix-201709.pdf

ACICS announces plans to apply for recognition by the Department of Education

The Accrediting Council for Independent Colleges and Schools (ACICS) announced plans to submit a formal petition by Oct. 1, 2017, for recognition by the Department of Education. ACICS has begun communicating with the Department and has asked to be included on the Agenda for the Spring 2018 meeting of the National Advisory Committee on Institutional Quality and Integrity (NACIQI). The new ACICS President and Chief Executive Officer (CEO) Michelle Edwards said in a press release: “ACICS has strengthened its standards to be clear that institutions must come into compliance with the council’s standards within specified time frames or accreditation will be withdrawn. ACICS has taken prompt action to withdraw accreditation from institutions that have failed to meet its standards.”

A copy of the ACICS press release is found at: http://www.acics.org/news/content.aspx?id=7003#undefined.uxfs

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.