Washington News Brief

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

Department distributes FY 2015 Draft Cohort Default Rates

On Feb. 26, 2018, the Department of Education distributed its FY 2015 Draft Cohort Default Rates. The Electronic Announcement also disclosed the time period for appealing the FY 2015 Draft Cohort Default Rates, which begins on March 6, 2018, for all schools.

A copy of the announcement is found at: https://ifap.ed.gov/eannouncements/022818FY2015DraftCDRDistributedFeb26.html

Bill to award tax credits to support apprenticeships introduced

On March 1, 2018, Congressmen Lloyd Smucker (R-PA) and Alexander Mooney (R-WV) introduced H.R. 5153, the USA Workforce Tax Credit Act, which would award up to $2 billion in tax credits to individuals and corporations that make charitable donations to groups that award K-12 scholarships and institutions offering career and technical education and community-based apprenticeship programs. The bill would allow a tax credit of up to 25 percent of an individual or corporation’s tax liability. According to his press release, Congressman Smucker said: “The goal of this legislation is to encourage investment in organizations and programs that are preparing individuals for the jobs of today.”

A copy of the press release is found at: https://smucker.house.gov/media/press-releases/smucker-introduces-bill-create-new-tax-credit-support-workforce-development-and

Senator Warren and Representative Clark release report outlining ways Secretary DeVos has failed students in her first year

On March 1, 2018, Senator Elizabeth Warren (D-MA) and Representative Katherine Clark (D-MA) released a report titled, “DeVos Watch, Year One: Failing America’s Students.” The report found that Secretary of Education Betsy DeVos’ first year in office “has been a boon for for-profit colleges, student loan companies, and advocates of school privatization at the expense of America’s K-12 and college students.” The report summarizes the Secretary’s major actions during the first year and concluded that she has “failed as Education Secretary.” Detailed findings of the review include:

• Questionable ethics and conflicts of interest by hiring personnel with clear conflicts of interest;
• Favoring for-profit colleges over students by eliminating and delaying regulations aimed at protecting students from fraud;
• Weakening public education by undermining key protections for public school students; and
• Turning back the clock on civil rights protections by leaving vulnerable populations of learners, such as transgender students, without safeguards.

A copy of the report is found at: https://www.warren.senate.gov/imo/media/doc/DeVos%20Report%202-26.pdf

A copy of Senator Warren’s press release is found at: https://www.warren.senate.gov/oversight/reports/new-warren-clark-report-devos-tenure-has-been-a-boon-for-shady-for-profit-colleges-student-loan-companies-and-school-privatization-advocates-

Senator Baldwin re-introduces free community college bill

On March 1, 2018, Senator Tammy Baldwin (D-WI) reintroduced S. 2483, the America’s College Promise Act, which would create a new federal-state partnership to provide two years of tuition-free access to community or technical college programs that lead to a degree or industry-recognized credential. The bill would provide 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. Senator Baldwin stated in the press release: “Higher education should be a path to shared prosperity, not a path into suffocating debt.” According to the press release, the bill “would give students the opportunity to access quality and affordable higher education that gives them the skills and knowledge they need to succeed in the 21st century economy.”

A copy of the press release is found at: https://www.baldwin.senate.gov/press-releases/americas-college-promise

IG outlines concerns with the PROSPER Act and the white paper on higher education accountability

On March 5, 2018, the Department of Education’s Inspector General (IG) Kathleen Tighe sent a letter to Chairman Virginia Foxx (R-NC) and Ranking Member Bobby Scott (D-VA) of the House Education and the Workforce Committee and Chairman Lamar Alexander (R-TN) and Ranking Member Patty Murray (D-WA) of the Senate Health, Education, Labor and Pensions (HELP) Committee outlining concerns with H.R. 4508, the Promoting Real Opportunity, Success, and Prosperity through Education Reform Act (PROSPER Act), which passed the House Committee on Education on Dec. 13, 2017, and with the Higher Education Accountability White Paper (White Paper) issued by Chairman Alexander on Feb. 1, 2018. IG Tighe said that the financial aid programs are “inherently risky because of their complexity, the amount of funding involved, the number of program participants, and the characteristics of student populations.” She also said that there are “persistent and emerging problems in the Federal student aid programs authorized by the HEA,” and “it is imperative for Congress to address long-standing and emerging challenges, amend outdated HEA provisions to address awarding and disbursing aid in distance education and other alternative educational environments, and continue to provide for accountability, all while not stifling innovation.”

Some of IG Tighe’s views are as follows:

• Cohort Default Rates and 90/10 Rule: IG Tighe said that while her office shares the position in the PROSPER Act and the White Paper that cohort default rates and the 90/10 rule have not been effective in improving institutions’ accountability because of their ability to be manipulated, she recommended that instead of eliminating the provisions, Congress should strengthen them. IG Tighe suggested that cohort default rates could be adjusted to account for nonperforming loans and 90/10 could be simplified and adjusted to eliminate veterans’ benefits from the schools’ calculation of the 10 percent revenue derived from non-Title IV funds.
• Gainful Employment: IG Tighe said that they continue to believe that a school receiving funding for programs designed to provide training for a specific occupation need to be held accountable for the success in securing employment for its students in that occupation.
• Loan Repayment: IG Tighe said that the “implementation of a programmatic loan repayment measure would require a massive data collection and reporting effort by schools and would require the Department to track millions of student borrowers enrolling in all programs at over 6,100 schools,” and “could be nearly impossible to implement.”
• Regular and Substantive Interaction: Since the PROSPER Act removes the definition of “distance education” and replaces it with “correspondence education,” the “distance education” requirement of regular and substantive interaction between students and instructors would be eliminated. The definition of “correspondence education” is further amended to add: “Interaction between the institution and the student is limited and the academic instruction by the faculty is not regular and substantive.” IG Tighe said that by removing the definition of distance education and replacing “instructor” with “faculty” in correspondence education, institutions would be allowed full participation in the federal student aid programs based on email contact between the student and faculty in matters unrelated to the subject matter of a program. Further, she noted that eliminating the definition of distance education may present difficulties for schools in the awarding, disbursing and refunding of Federal student aid funds.
• Definition of Credit Hour: IG Tighe said that eliminating the current regulatory definition of credit hour would create difficulties in awarding, disbursing, and returning student aid because schools would no longer be held to any standard for the quantity and quality of education offered to justify the debt incurred by students.
• Multiple Disbursements: While IG Tighe supported the proposal of multiple disbursements, she warned that the House’s intentions to allow schools to disburse unequal amounts of aid to adjust for costs would continue to allow abuse in the Federal student aid programs. Through past audits, OIG found some bad actors among distance education programs who were stealing the identity of students for the purpose of taking out Federal funds in their names and benefited from the large disbursement of Federal funds at the start of the academic year.
• Return of Title IV: IG Tighe supported the proposal to change the way institutions receive and return Title IV funds.
• Financial Responsibility: IG Tighe stated that when the Department proposed the delay of the borrower defense to repayment rules, the OIG had recommended that the Department leave in place the financial responsibility improvements that were not related to borrower defense. However, the Department delayed the entire borrower defense regulations. The OIG has recommended that the Department propose regulations to address schools that are at risk of precipitous closure.
• Information Security: IG Tighe suggested that specific safeguards included in the Gramm-Leach-Bliley Act be mandated to ensure that student data are adequately protected.
• Accrediting Agencies: IG Tighe stated that the PROSPER Act would eliminate most standards required for accrediting agencies, which she believed would create “unnecessary and unacceptable risks to students and taxpayers.” She noted that their audits found that accrediting agencies “are not always reliable” and rather than eliminating the standards, the OIG recommends “retaining and strengthening expectations for accrediting agencies to ensure the quality of education member schools provide.”

A copy of the IG letter is found at: https://www2.ed.gov/about/offices/list/oig/misc/lettertocongRessonoighearecommendationsmarch2018.pdf

Century Foundation releases report on college promise programs

On March 6, 2018, The Century Foundation released a report titled, “The Future of Statewide College Promise Programs,” which examined the future of statewide College Promise programs. The report defines Promise programs as programs that provide at least free or debt-free tuition to a significant subset of students. According to the report, with the current focus on college affordability and student debt, a number of states and localities have proposed or implemented “free college” policies. The Obama administration focused on the concept and, in 2014, the Tennessee Promise program was launched. A total of 16 states now have at least one statewide Promise program, with two states running two different versions of a Promise program. Of those 16 states, 10 have enacted and funded a Promise program in 2017. The report found that while states often describe their programs as universal, the programs include extensive eligibility requirements intended to either ration the benefits in order to bring down the costs or direct the benefit to certain populations of students or both. The report concluded that: “[P]romise programs are becoming an increasingly common pathway for states to pursue urgently needed new – though frequently narrow – investments in higher education.”

A copy of the report is found at: https://tcf.org/content/report/future-statewide-college-promise-programs/

Department expands closed school discharges for former Charlotte School of Law students

On March 9, 2018, the Department of Education announced that it was expanding the number of former Charlotte School of Law students who are eligible to have their federal loans discharged following the closure of the school last year. In a press release, Secretary of Education Betsy DeVos said that she was exercising her authority to expand the pool of former students who are eligible for closed school loan discharges. “My focus is and will continue to be on doing what’s right for individual students.”

A copy of the press release is found at: https://www.ed.gov/news/press-releases/secretary-devos-extends-closed-school-discharge-more-charlotte-school-law-students

Department issues Notice of Interpretation Preempting State Student Loan Laws

On March 12, 2018, the Department of Education published a Notice in the Federal Register that clarified that only the federal government, and not the States, can oversee federal student loan servicers. The Notice stated that the Department of Education issued this Notice to assert its view that the federal government has the power to regulate those companies hired by the Department to collect on Federal Direct Loans and that “State regulation of the servicing of Direct Loans impedes uniquely federal interest, and that State regulation of the servicing of the Federal Family Education Loan Program is preempted to the extent that it undermines uniform administration of the program.”

The Department wrote that “Congress created and expanded the Direct Loan Program with the goal of simplifying the delivery of student loans to borrowers, eliminating borrower confusion, avoiding unnecessary costs to taxpayers, and creating a more streamlined student loan program that could be managed more effectively at the federal level. Recently, several States have enacted regulatory regimes or applied existing State consumer protection statutes that undermine these goals by imposing new regulatory requirements on the Department’s Direct Loan servicers, including State licensure to service Federal student loans.” The Department concluded that subjecting Federal student loan servicers to a requirement to comply with 50 different State-level regulatory regimes would “significantly undermine the purpose of the Direct Loan Program to establish a uniform, streamlined, and simplified lending program managed at the Federal level.”

A copy of the Notice is found at: https://www.gpo.gov/fdsys/pkg/FR-2018-03-12/pdf/2018-04924.pdf

On March 13, 2018, the National Governors Association (NGA) released a statement urging the Department of Education to reconsider the Notice of Interpretation. “With this declaration, the Department moves to block state policies protecting student borrowers by establishing a federal regulatory ceiling.”

A copy of the NGA statement is found at: https://www.nga.org/cms/govs-voice-concerns-over-new-student-borrower-proposal

On March 15, 2018, a bipartisan group of 30 attorneys general (AGs) sent a letter to Congressional leaders urging them to reject language contained in H.R. 4508. The PROSPER Act, that would pre-empt state student loan licensing laws. The AGs ask the House and Senate to preserve states’ rights to regulate federal student loan servicers.

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

Coalition of AGs urge congress to reject legislation to reauthorize HEA that would block states from overseeing student loan servicers

On March 15, 2018, New York Attorney General Eric T. Schneiderman and Colorado Attorney General Cynthia H. Coffman sent a letter to Congress on behalf of a coalition of 30 Attorneys General opposing a provision in the PROSPER Act that would ban states from regulating student loan servicers. Describing the language as “an all-out assault on states’ rights and basic principles of federalism,” the letter urges Congress to strip the language from the House reauthorization bill and omit it from consideration in the Senate bill. This letter follows a Notice issued by Secretary of Education Betsy DeVos on March 12, 2018, that said that the federal government exclusively had the authority to provide oversight over loan servicing companies.

A copy of the AGs’ letter is found at: https://ag.ny.gov/press-release/ny-ag-schneiderman-co-ag-coffman-lead-bipartisan-coalition-30-ags-urging-congress

Department announces plans to distribute draft GE Completers List

On March 16, 2018, the Department of Education issued Electronic Announcement #112 announcing its intention to distribute Draft Gainful Employment (GE) Completers Lists later this spring. The Draft GE Completers List is a list of students who completed a GE Program during the applicable cohort period. For programs with at least 30 completers in award years 2011-12 and 2012-13, a two-year cohort period will be used. For programs with fewer than 30 completers in the two-year cohort period, completers from award years 2009-10 and 2010-11 will be added for a four-year cohort period. An institution will have 45 days to submit corrections to the information included in the Draft GE Completers List. Schools are encouraged to review previously reported data and make any necessary changes now but not later than March 30, 2018.

A copy of the Electronic Announcement is found at: https://ifap.ed.gov/eannouncements/031618GEEA112CorrectingReportedDataPriorDistribuDraftCompletersLists.html

OIG releases FAQs for the audit guide

On March 16, 2018, the Office of Inspector General (OIG) released a set of Frequently Asked Questions for the “Guide for Audits of Proprietary Schools and for Compliance Attestation Engagements of Third-Party Servicers Administering Title IV Programs.” The FAQs are provided to offer additional guidance.

A copy of the FAQs is found at: https://www2.ed.gov/about/offices/list/oig/nonfed/auditguidefaqs.pdf

Democratic Senators express concern over conflicts of interest for James Manning

On March 22, 2018, Senators Catherine Cortez Masto (D-NV), Elizabeth Warren (D-MA), Richard Durbin (D-IL) and Kamala Harris (D-CA) sent a letter to the Department of Education’s Designated Agency Ethics Official, Marcella Goodridge-Keiller, expressing concern over the increasing number of responsibilities of James Manning during his time at the Department. He is currently serving as both the Acting Under Secretary of Education and the Acting Chief Operating Office of Federal Student Aid. Further, as a member of the senior executive service, Mr. Manning is not subject to the Trump ethics pledge, Executive Order 13770, Ethics Commitments by Executive Branch Employees. The Senators were also critical of Mr. Manning’s prior relationship with Strada Education Network (formerly USA Funds). A list of questions related to Mr. Manning’s role at the Department was included in the correspondence since the Senators want to understand how he and the Department have addressed “potentially significant conflicts of interest that appear to exist in his current roles.”

A copy of the Senators’ letter is found at: https://www.cortezmasto.senate.gov/imo/media/doc/Manning%20conflicts%20letter%20DRAFT%20FINAL.PDF

Trump signs Consolidated Omnibus Appropriations Bill, 2018 into law

On March 23, 2018, President Trump signed the Consolidated Omnibus Appropriations Act, 2018 into law (P.L. 115-141), which includes many unexpected victories for student aid programs. The $1.3 trillion omnibus appropriations package provides discretionary funding for all federal agencies, including the Department of Education, through Sept. 30, 2018. The following is a summary of the provisions included in the bill that affect higher education:

• Overall ED Funding: The bill provides $70.9 billion in discretionary funding for the Department of Education, an increase of $3.9 billion above the FY 2017 level.
• Pell Grant Program: The bill increases the maximum Pell Grant award to $6,095, an increase of $175, for the 2018-2019 academic year. [ED will have to revise the 2018-2019 payment and disbursement schedules.] The bill also includes the Children of Fallen Heroes Scholarship Act, which automatically makes children of first responders who have died in the line of duty eligible for the maximum Pell Grant. Year-round Pell is continued.
• Campus-Based Programs: The bill provides $840 million, an increase of $107 million for the FSEOG program; and $1.1 billion, increase of $140 million for the FWS program.
• Student Loan Servicing: The bill prevents the Department from moving forward with specific components of its Next Generation Financial Services Environment unless the solicitation requirements are modified to include certain elements to promote accountability, transparency, and competition. Specifically, the new procurement must provide for the participation of multiple student loan servicers that contract directly with the Department to manage a unique portfolio of borrower accounts and the full life-cycle of loans from disbursement to pay-off and allocates student loan borrower accounts to eligible student loan servicers based on performance.
• Public Service Loan Forgiveness (PSLF) Program: The bill modifies eligibility for the PSLF program and makes student borrowers eligible for PSLF if they were enrolled in an ineligible repayment plan, but they otherwise would have been eligible for PSLF if they were enrolled in an eligible repayment plan by making 120 otherwise qualifying payments under an extended or graduated repayment plan.
• Borrower Defense Claims Reporting: The report directs the Department to provide quarterly reports pursuant to the borrower default claims reporting instructions in Senate Report 115-150.
• Sharing of Financial Data: The bill clarifies current law and allows for the continued sharing of financial aid data to scholarship-granting or tribal organizations to assist the applicant in applying for and/or receiving financial assistance. Other eligibility determinations for state benefits are not addressed in the bill.
• Cohort Default Rates: The bill allows the Secretary of Education to waive the cohort default rate provision in current law for an institution of higher education that offers an associate degree, is a public institution, and is located in an economically distressed county; and for an institution that is a public institution or tribal college or university whose fall enrollment was comprised of a majority of students who are Indian or Alaskan Natives.

While many Democrats felt very good about the bill, many Republicans criticized the bill for its bloated spending and rushed process. Some Democrats rejected the bill since it failed to include permanent protections for recipients of the Deferred Action for Childhood Arrivals (DACA) program.

The bill did not include an amendment granting additional time beyond June 12, 2018, for ACICS institutions to make necessary changes to comply with their new accrediting agencies’ standards and/or provide the accreditors with updated data confirming their compliance.

A copy of the bill text is found at: http://docs.house.gov/billsthisweek/20180319/BILLS-115SAHR1625-RCP115-66.pdf

A copy of the report language is found at: http://c.ymcdn.com/sites/www.ncher.us/resource/resmgr/daily_briefing/DIV_H_LABORHHS_SOM_FY18_OMNI.pdf

District Court Judge announced that the Department had “procedurally erred” in terminating ACICS

On March 23, 2018, U.S. District Court Judge Reggie B. Walton wrote in a 66-page opinion that the Department of Education had “procedurally erred” in terminating the Accrediting Council for Independent Colleges and Schools (ACICS), by violating the Administrative Procedure Act (APA), because it failed to consider supplementary information provided by ACICS. Specifically, the Department failed to consider a supplement to ACICS’ response to a set of questions the Department asked ACICS in March 2016, as well as information ACICS gave the Department about its placement verification and data integrity procedures. By failing to consider the additional evidence, the Department acted “arbitrarily and capriciously.” As a result, Judge Walton remanded the case to Secretary of Education Betsy DeVos for reconsideration of the relevant evidence. While the decision does not unwind the termination, the Secretary could reverse the Department’s previous decision. A hearing of the National Advisory Committee on Institutional Quality and Integrity (NACIQI) in May 2018 will be considering ACICS’ initial application for federal recognition.

A copy of the decision is found at: https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2016cv2448-76

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.