Washington News Brief

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

Veterans and military organizations send letter to Department thanking ED for implementing streamlined process for discharging federal student loans for totally and permanently disabled veterans

On Jan. 27, 2020, 22 veterans and military organizations sent a letter to Secretary of Education Betsy DeVos thanking the Department of Education for moving forward with a process to ensure totally and permanently disabled (“TPD”) veterans’ legal right to loan forgiveness is honored. The streamlined process is in accordance with the Presidential Memorandum signed by President Trump Aug. 21, 2019, which promises to significantly streamline the process to discharge federal loans for totally and permanently disabled veterans. The letter also requested the Department continue to ensure that the process is running smoothly and alert veterans to the state tax implications following a loan discharge. The letter also asked the Secretary to make whole those veterans who were wrongly put into default on loans that should have been forgiven. According to the letter, in November 2018, ED’s records indicated that over half of the TPD-eligible veterans were wrongly put in default of their federal student loans that were eligible for loan forgiveness. “Being put in default on federal student loans caused these veterans to suffer damaged credit scores, the impact of which makes life far more expensive for many necessities of 21st-century life: housing, telecommunications, automobiles, insurance and more. Worse, defaulting on federal student loans can result in the garnishment or offsetting of a veteran’s much-needed VA disability payments and tax returns.”

A copy of the letter is found at: https://vetsedsuccess.org/22-veterans-military-organizations-letter-to-education-department-re-disabled-veterans-loans/

A copy of the Presidential Memorandum is found at: https://www.whitehouse.gov/presidential-actions/presidential-memorandum-discharging-federal-student-loan-debt-totally-permanently-disabled-veterans/

SBPC sends letter to CFPB director regarding the National Student Clearinghouse

On Jan. 28, 2020, the Student Borrower Protection Center (SBPC) sent a letter to Consumer Financial Protection Bureau (CFPB) Director Kathy Kraninger asking her to take certain actions regarding the National Student Clearinghouse (NSC). The NSC collects and maintains data on about 97% of all students enrolled in colleges and universities in America. Because some student loan companies use data from NSC to determine a borrower’s enrollment status and how they should be charged interest, SBPC asserted that any inaccurate data could lead to higher costs for student loan borrowers. SBPC urged CFPB to ensure that consumers know they have the right to request reports about themselves held by NSC. In addition, SBPC urged CFPB that the NSC should be subject to supervision under the Fair Credit Reporting Act (FCRA) to ensure that any data maintained by the NSC is accurate. The letter describes a $2 million settlement pertaining to alleged violations of the FCRA and multiple Massachusetts state consumer laws.

Based on the allegations made regarding the NSC, SBPC recommended that the CFPB take immediate actions:

• Update the Bureau’s List of Consumer Reporting Companies. These companies are subject to the FCRA; and
• Supervise National Student Clearinghouse as a “larger participant” in the Consumer Reporting Market. In 2013, CFPB finalized a rule establishing supervisor authority over “larger participants” in the consumer reporting market, defined as companies with more than $7 million per year in annual receipts. The letter noted that NSC crosses the threshold, disclosing about $50 million or more in revenue in 2016, 2017, and 2018.

A copy of the letter is found at: https://protectborrowers.org/how-a-data-company-at-the-center-of-the-student-loan-system-is-costing-borrowers-millions/

ED considers ways to stem rapid closures of colleges and universities

On Jan. 29, 2020, the Department of Education hosted a meeting for members of the triad to have an open dialogue about how to improve communication and information sharing to better serve and protect students when there are college and university closures. According to a Politico article, attending the event were Secretary of Education Betsy DeVos, Diane Auer Jones, and other Department of Education officials along with accreditors and state regulators. The meeting “is the first of its kind in more than a decade,” and to ensure candid conversation among the triad member, it was closed to the press. The goal of the discussion was to mitigate risks and potential harm to students associated with school closures and to work more collaborately to address other challenges that institutions and students might face in the future. Many concluded that it was unclear as to what the Department’s next steps would be.

Senator Warren urges Education Secretary DeVos to collect the $22.3 million owed by Navient

On Jan. 29, 2020, Senator Elizabeth Warren (D-MA) sent a letter to Secretary of Education Betsy DeVos, urging her to collect the $22.3 million that Navient Corporation, a student loan servicer, owes the Department of Education. According to the press release, in August 2009, an audit by the Office of Inspector General (OIG) found that Navient had overcharged the Department by about $22.3 million after the servicer claimed special allowance payments for ineligible student loans. The press release explained that the OIG found that Navient’s billing practices “did not comply” with the requirements for payments and recommended that FSA direct Navient to return the payments to the Department. Since this OIG audit, Navient has been found on multiple occasions, including by an administrative law judge, to be responsible for the repayment of the funds, but has continued to deny responsibility and delays repayment. “Further delays are unacceptable: it is time for you to hold Navient accountable and finally collect the $22.3 million the company owes to American taxpayers.”

A copy of the press release, which includes the text of the letter, is found at:
https://www.warren.senate.gov/oversight/letters/warren-calls-on-education-secretary-devos-to-recoup-223-million-owed-by-student-loan-giant-navient

ED publishes Federal Register notice to create a single application for those borrowers applying for the PSLF and the TEPSLF Program

On Jan. 30, 2020, the Department of Education published a notice in the Federal Register seeking to create a single application for those borrowers applying for the Public Service Loan Forgiveness (PSLF) Program and the Temporary Expanded Public Service Loan Forgiveness (TEPSLF) Program. The Department’s action resulted from criticism from the Government Accountability Office (GAO) and consumer groups that few borrowers had taken advantage of the TEPSLF Program in its first year because they had not first applied for and been denied benefits under the PSLF Program. The Department hopes to reduce confusion for borrowers and to offer another change to simplify the Program.

A copy of the Federal Register Notice is found at: https://www.govinfo.gov/content/pkg/FR-2020-01-30/pdf/2020-01715.pdf

U.S. District Court for the District of Columbia Judge Moss denies a motion for summary judgment in CAPPS v. Education Secretary

On Jan. 31, 2020, U.S. District Court for the District of Columbia Judge Randolph Moss denied a motion for summary judgement in California Association of Private Postsecondary Schools v. Education Secretary Betsy DeVos, a case that challenged the U.S. Department of Education’s 2016 final borrower defense to repayment rule that prohibited colleges from forcing their students to settle complaints against their school through arbitration agreements rather than in court. The rule also prevents institutions of higher education from requiring that their students sign away their legal right to enter into class-action lawsuits. Judge Moss ruled that the restrictions on mandatory arbitration agreements were a condition the Department could legally impose on colleges that want to receive federal student aid. The ruling means that the Obama-era rule published on Nov. 1, 2016, will stay in effect until July 1, 2020, when the Sept. 23, 2019 borrower defense to repayment rule goes into effect.

A copy of the Memorandum of Opinion is found at:
https://www.courtlistener.com/recap/gov.uscourts.dcd.186760/gov.uscourts.dcd.186760.110.0_1.pdf

ED and CFPB announce agreement on a new MOU to share complaint data on student loan borrowers

On Feb. 3, 2020, the Department of Education and the Consumer Financial Protection Bureau (CFPB) announced that they had reached agreement on a new memorandum of understanding (MOU) to share complaint data on student loan borrowers. The agreement requires both agencies to share complaint information from borrowers and meet quarterly to discuss observations about the nature of complaints received, characteristics of borrowers, and available information about resolution of complaints. The MOU also calls for the sharing of complaint data analysis, recommendations, and analytical tools. Secretary of Education Betsy DeVos said: “All student loan borrowers, whether they have a federally-held or private student loan, deserve world-class service and quick resolution when facing issues.”

A copy of Secretary DeVos’ press release announcing the agreement is found at: https://www.ed.gov/news/press-releases/us-department-education-consumer-financial-protection-bureau-sign-memorandum-understanding-better-serve-student-loan-borrowers

House Oversight and Reform Committee Chairman Maloney sends letter to Secretary DeVos threatening subpoena over testimony

On Feb. 3, 2020, House Oversight and Reform Committee Chairman Carolyn Maloney (D-NY) sent a letter to Secretary of Education Betsy DeVos threatening to subpoena her to appear before the Committee following the Secretary’s refusal to testify at a previous hearing and instead attended campaign events in Iowa and Pennsylvania. The Secretary was sent a letter in December from Chairman Maloney inviting her to testify in January regarding “critical issues facing the Department, including oversight of federal student loans, policies on campus sexual harassment and assault, protections for students at for-profit colleges, the independence of the Department’s Inspector General, compliance with collective bargaining requirements, and other matters.” Chairman Maloney’s letter set a new hearing date of March 3, 2020, and gave the Secretary until Feb. 7, 2020, to respond.

A copy of the Chairman’s letter is found at: https://oversight.house.gov/sites/democrats.oversight.house.gov/files/2020-02-03.CBM%20to%20DeVos-DoED%20re%20Hearing.pdf

Accreditation Reform Act of 2020 introduced to make higher education more equitable and higher quality

On Feb. 6, 2020, Representatives Lori Trahan (D-MA), Madeleine Dean (D-PA), and Johana Hayes (D-CT) introduced H.R. 5768, the Accreditation Reform Act of 2020. According to the press release, H.R. 5768 aims to address some of the problems of higher education, such as a grave student debt problem, persistent disparate outcomes by race and income, and bad institutional actors who prey on vulnerable students. The objective of the bill is to protect students and taxpayers by modernizing evaluation and increasing transparency in the accreditation system. Congresswoman Trahan said: “For too long, a lack of accountability and weak oversight from accreditors and the federal government has left the door open for fraudulent and low-performing schools to cheat students out of a return on their investment. The collapse of for-profit institutions like Corinthian and ITT Tech underscore the failures of our current system.”

The Accreditation Reform Act of 2020 would:

• Modernize the federal review and evaluation of accrediting agencies by requiring ED to consider information at its disposal, such as audit reports and program reviews;
• Strengthen checks and balances by empowering the National Advisory Committee on Institutional Quality and Integrity (NACIQI) to actively influence and participate in recognition reviews;
• Safeguard transparency through the creation of a federally maintained, public database on the Department of Education’s website that includes all final documents produced on accrediting agencies’ reviews of a school; and
• Increase accountability by encouraging the Department of Education to lawfully utilize its “limited recognition” ability when measuring accrediting agencies review of institutions.

A copy of the press release is available at: https://trahan.house.gov/news/documentsingle.aspx?DocumentID=1370

White House releases budget proposal for FY 2021

On Feb. 10, 2020, the White House Office of Management and Budget (OMB) released the President’s budget request for FY 2021, which includes $4.8 trillion in mandatory and discretionary spending proposals for the federal government. The President’s budget includes $66.6 billion in discretionary funds for elementary, secondary, and higher education programs under the Department of Education, a $5.6 billion or a 7.8% reduction below the FY 2020 level. Items of particular interest include the following:

• Pell Grant Program: The budget request includes $22.5 billion in discretionary funding for Pell Grants, which combined with mandatory funding, will support the continuation of the current maximum award of $6,345. The budget proposes to expand Pell Grant eligibility to incarcerated students and for high-quality, short-term programs that provide a student with a credential, certification, or license in an in-demand field.
• Campus-based aid programs: The budget request proposes to eliminate funding for Federal Supplemental Educational Opportunity Grants, calling them duplicative of Pell Grants. It reduces funding for Federal Work-Study to $500 million and changes the means to allocate funding to institutions based in part on enrollment of Pell Grant recipients to support workforce and career-oriented training opportunities for low-income undergraduate students.
• Federal loan programs: The budget request proposes to:
  • Consolidate the five current Income Driven Repayment (IDR) plans into a combined IDR plan that would cap a student’s monthly payments at 12.5% of discretionary monthly income and eliminate the “standard repayment” cap to ensure that high-income, high-balance borrowers make payments commensurate with their income. The repayment term would be limited to 15 years for borrowers with undergraduate debt only and 30 years for borrowers with any graduate debt. Remaining balances after these periods would be forgiven;
  • Eliminate the Public Service Loan Forgiveness Program;
  • Eliminate Subsidized Stafford Loans;
  • Establish new annual and aggregate loan limits for the Parent PLUS and Grad PLUS Programs. For Parent PLUS borrowers, the aggregate for undergraduate students would be $26,500 (the difference between what dependent and independent students are eligible for [$31,000 and $57,500, respectively]), and the annual and aggregate loan limits for Grad PLUS borrowers would be $50,000 and $100,000 respectively;
  • Allow financial aid administrators the authority to set loan limits for their students; and
  • Allow schools to mandate annual loan counseling as a condition of receiving a loan disbursement.
• New structure for FSA: The budget request includes a proposal to start an “evaluation of FSA as a separate organization, with reformed governance,” which could improve its ability to serve students and taxpayers.
• Movement on NextGen: The budget request includes $1.9 billion, a $115 million increase, for student aid administration to support FSA’s NextGen initiative. Specifically, the Administration expressed its support for the “multiyear effort” to build the technology for a new loan servicing platform, adding that FSA is also currently working to “consolidate all of its customer-facing websites into a single, user-friendly hub to complement a new mobile platform and give students, parents, and borrowers a seamless experience from application through repayment.”

Following the release of the budget proposal, Secretary of Education Betsy DeVos stated that the budget proposal “is about one thing – putting students and their needs above all else.” Congressman John Yarmuth (D-KY), Chairman of the House Budget Committee, said at the time of the budget proposal’s release that Congress “will stand firm against this President’s broken promises and his disregard for the human cost of his destructive policies.” House Budget Committee Ranking Member Steve Womack (R-AR) stated that “the President’s budget includes deficit reduction measures – $4.6 trillion between 2021-2030. However, more work remains to be done to put the country on a solid fiscal path. The assumption of 3% growth and continued low interest rates are critical to achieving balance in the 15-year window.”

Like all Presidents’ budgets in the last few years, the White House budget proposal for FY 2021 is likely to be dead on arrival.

Secretary of Education Betsy DeVos released a press release, which provides a link to the full budget request, and is found at: https://www.ed.gov/news/press-releases/president-trump-proposes-transformative-student-first-budget-return-power-states-limit-federal-control-education

A copy of Chairman Yarmuth’s press release is found at: https://budget.house.gov/news/press-releases/initial-statement-chairman-yarmuth-president-s-2021-budget

A copy of Ranking Member Womack’s press release is found at: https://republicans-budget.house.gov/press-release/ranking-member-womack-statement-on-president-trumps-fiscal-year-2021-budget-request/

Senator Merkley sends letter to Secretary of Education urging her to review and approve outstanding borrower defense to repayment claims for students who were defrauded or displaced by their closed schools

On Feb. 14, 2020, Senator Jeff Merkley (D-OR) sent a letter to Secretary of Education Betsy DeVos urging her to ensure that the Department of Education review and approve outstanding borrower defense to repayment claims for students who have been defrauded by their closed schools. The letter also noted that Concordia University located in Portland, OR has announced that it will be closing at the end of the spring 2020 semester, impacting more than 6,000 students. “This latest closure underscores the need for the Department to take action on existing, pending borrower defense claims and new claims for borrower defense or applications for a closed school discharge without delay.”

A copy of Senator Merkley’s letter is found at: https://www.merkley.senate.gov/news/press-releases/following-concordia-university-closure-merkley-presses-secretary-devos-over-federal-student-loan-discharge-requests-2020

Former Mayor Michael Bloomberg releases his higher education plan

On Feb. 18, 2020, former New York Mayor Michael Bloomberg released his $700 billion higher education plan, which includes the following:

• Make college affordable:
  • Make two-year public colleges tuition free;
  • Expand Pell Grants to help students cover the full cost of college;
  • Launch a federal-state funding partnership to boost states’ investments in higher education; and
  • Reform the federal student loan system so no one pays more than they can afford.
• Make college fair:
  • End legacy preferences and restore fairness to the college admissions process;
  • Increase completion rates for low- and middle-income students by helping more of them attend selective colleges with high graduation rates; and
  • Expand investments in institutions serving students from low-income backgrounds and underrepresented groups.
• Make college count:
  • Invest in proven strategies and student supports to boost college completion rates;
  • Help working adults enroll in strong programs and get better jobs;
  • Strengthen career-training programs so all students have the skills required for good-paying jobs; and
  • Promote transparency by focusing the higher education system on student outcomes.

A copy of Mike Bloomberg’s plan is found at: https://static.politico.com/cb/cf/57d73c9740d5b2595203d66c4639/bloomberg-higher-ed-policy-prose.pdf.pdf

FSA releases updated information on its FSA Data Center

On Feb. 19, 2020, the Office of Federal Student Aid (FSA) released updated information on its FSA Data Center that includes data through Dec. 31, 2019. According to the recent report, the federal student loan portfolio currently is $1.51 trillion. The Direct Loan portfolio represents almost 83% of the outstanding portfolio. The report includes some of the following items:

• In the first quarter of 2020-2021, more than 5.5 million FAFSA applications were submitted, a slight increase compared to the same time period last year;
• Enrollment in income-driven repayment (IDR) plans continues to increase. As of December 2019, 7.9 million Direct Loan borrowers were enrolled in IDR plans, a seven percent increase from December 2018.
• During the first quarter of FY 2020, the percentage of defaulters slightly increased compared to the same time last year, while the percentage of dollars entering default remained on par with last year;
• During the last quarter, FSA received about 12,000 new borrower defense to repayment applications, which resulted in a total count of about 300,000 applications. Of these applications, almost 49,000 applications have been approved, 25,000 applications have been deemed ineligible, and more than 8,000 applications have been closed with no need for adjudication. The remaining 217,000 applications are pending;
• As of Dec. 31, 2019, about 127,000 borrowers had submitted more than 161,000 applications for loan forgiveness under the Public Service Loan Forgiveness (PSLF) program. Of the 151,000 applications that have been processed, 76% were ineligible due to not meeting the program requirements and 22% of the applications were ineligible due to missing information. As of Dec. 31, 2019, 2,246 applications have been approved by the PSLF loan servicer as meeting all program requirements, resulting in $99.2 million in loan discharges for 1,565 borrowers; and
• As of Dec. 31, 2019, about 31,400 borrowers with loans totaling $347.1 million were eligible for an automatic closed school discharge and about 30,000 borrowers had received those discharges.

A copy of the announcement is found at:
https://ifap.ed.gov/electronic-announcements/021920fsapostsnewreportstofsadatacenter

Department announces selection of 190 institutions to participate in new FWS experimental site

On Feb. 19, 2020, the Department of Education announced that it had selected 190 institutions of higher education to participate in a new experimental site that seeks to increase private sector participation in the Federal Work-Study (FWS) program. Under the FWS program, students are permitted to work with private sector employers; however, during the 2016-2017 award year, more than 600,000 students participated in the FWS program, but fewer than 1% of the 3,000 colleges supported off-campus employment with private employers. Secretary of Education Betsy DeVos said: “We know that early, meaningful work experience can be an important steppingstone toward students obtaining good jobs and having successful careers.” Secretary DeVos went on to say: “For too long, Federal Work-Study has put up artificial barriers between education and industry and deprived students from gaining useful experience in their field of study. Rather than working the dorm cafeteria line, students – particularly low-income students – will be able to ‘earn and learn’ in ways that will set up future success.”

Institutions participating in the experimental site will be granted waivers, which encourage them to expand the use of FWS funds to support more students working in the private sector and for the first time, “allow them to pay low-income students for work experiences required by their academic programs, such as student teaching and clinical rotations.” The initiative is aimed at gathering more data to determine if students are better served by being able to get FWS experience off-campus related to their field of study.

A copy of the Secretary’s press release is found at:
https://www.ed.gov/news/press-releases/secretary-devos-expands-earn-and-learn-opportunities-students-190-schools-through-federal-work-study-reform-initiative

Consumer groups file lawsuit against Secretary of Education over final borrower defense to repayment rule

On Feb. 19, 2020, Public Citizen Litigation Group and the Project on Predatory Student Lending, on behalf of the New York Legal Assistance Group, filed a lawsuit against Secretary of Education Betsy DeVos challenging the Department’s final rule on borrower defense to repayment. The complaint was filed in the U.S. District Court for the Southern District of New York. The lawsuit asserts that the Department violated the Administrative Procedures Act (APA) by failing to engage in meaningful public consultation and negotiated rulemaking before promulgating draft regulations; violated the APA by failing to provide the plaintiff and other interested members of the public a meaningful opportunity to comment on its proposed changes to the original rule in 2016; violated the APA by not fairly apprising interested persons that it was considering placing a three-year statute of limitations on “defensive” borrower defense claims; and violated the APA as the final rule is arbitrary and capricious.

“This devastating rule goes above and beyond the Department’s other significant efforts to deny defrauded students loan relief,” said Project on Predatory Student Lending Director Toby Merrill in a press release.

A copy of the press release is found at: https://predatorystudentlending.org/news/press-releases/student-advocates-challenge-devos-borrower-defense-rule-press-release/

ED announces new features in the NextGen FSA initiative

On Feb. 21, 2020, the Department of Education announced that on Feb. 23, 2020, FSA will introduce additional features designed to promote financial literacy for borrowers and improve the information and self-service tools available to its customers. The three new features include:

• Aid summary: This feature will provide authenticated users with an aid summary dashboard that displays information about all Title IV aid they have received populated using NSLDS data. Customers will be able to “drilldown” to view detailed information about each grant, loan and aid overpayment. Customers will also be able to keep track of their remaining eligibility for Direct Subsidized Loans. Borrowers will also be able to see their progress in repaying their loans, receive alerts about their accounts, and if applicable, track the number of payments toward the Public Service Loan Forgiveness (PSLF) program. In addition, the aid summary will include information about a borrower’s loan servicer and a link to the loan servicer’s website.
• Loan simulator: This new tool will provide borrowers more personalized information about their federal student loan repayment options. This tool will permit borrowers to choose a repayment plan that provides them with the lowest monthly repayment, the fastest payoff, or the lowest amount paid overall. It replaces the existing Repayment Estimator, which will be retired.
• Make a payment pilot (for Great Lakes and Nelnet borrowers only): This pilot will allow borrowers whose loans are in repayment and assigned to these servicers to schedule their upcoming payment on their loan(s) directly through the StudentAid.gov website. Eventually, ED plans to provide the ability for borrowers to make payments on all federally owned student loans through the StudentAid.gov website.

A copy of the announcement is found at:
https://ifap.ed.gov/electronic-announcements/022120NGFSAAddalStudAidgovWebFeaturesFeb2020

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.