Washington News Brief

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

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/

WSCUC announces that it will consider proposals to accredit institutions outside its geographic boundaries

According to a Feb. 26, 2020 letter released by the Western Association of Schools and Colleges’ Senior College and University Commission (WSCUC) and reported in Inside Higher ED on Feb. 27, 2020, the WSCUC Commission voted unanimously to “broaden our reach.” WSCUC has historically accredited colleges and universities in California, Hawaii, and American territories in the Pacific.

Dropping regional accreditors’ historical geographic boundaries is one of the several changes to the Department’s new rules on accreditation and state authorization issued Nov. 1, 2019 that go into effect on July 1, 2020. The Trump Administration believes that the distinction between the regional and national accrediting agencies was discriminatory against for-profit colleges and sought to eliminate the distinction. The Trump Administration stated that its rationale was to allow for additional competition so that an institution may select an accrediting agency that aligns with the institution’s mission. Initially, the seven regional accrediting agencies opposed the proposed change, which would eliminate the geographic distinction. However, they ultimately signed off on the regulations.

The WSCUC signed by the Chair, Reed Dasenbrock, and the President, Jamienne S. Studley, stated that the Commission will first consider applications from WSCUC-accredited and affiliated institutions that could result in accrediting institutions in states outside its current scope, and the accreditor plans to notify the Department of Education of the change.

A copy of the WSCUC letter is found at: https://www.insidehighered.com/sites/default/server_files/media/LetterToTheCommunity_February26_2020.pdf

Senate Democrats ask Department to investigate racial disparities in federal student loan program

On Feb. 27, 2020, Senators Elizabeth Warren (D-MA), Cory Booker (D-NJ), and Kamala Harris (D-CA) sent a letter to the Department of Education’s Office of Civil Rights (OCR) asking for a federal civil rights investigation into racial disparities in the federal student loan program. The Senators cited data showing that black students are more likely to borrow federal student loans and less likely to be able to pay down their debt compared with their peers. The Senators urged the Department to address the “alarming racial disparities in student borrowing and student loan outcomes faced by students of color.” The Senators asked OCR to engage in a comprehensive investigation into the roles that “predatory colleges and the student loan industry play in contributing to racial disparities in student borrowing and student loan outcomes,” and to develop a plan to address racial disparities.

The Senators concluded by saying that racial disparities in the federal student loan program could violate Title VI of the Civil Rights Act of 1964, which OCR enforces.

A copy of the letter is found at: https://www.warren.senate.gov/oversight/letters/warren-booker-harris-press-education-depts-office-of-civil-rights-on-crisis-facing-student-loan-borrowers-of-color

Secretary DeVos requires sweeping changes at USC after Title IX investigation finds university failed to protect students from sexual abuse

On Feb. 27, 2020, Secretary of Education Betsy DeVos announced that the Office of Civil Rights (OCR) will require the University of Southern California (USC) to make changes to its Title IX procedures after finding that the school failed to protect students from Dr. George Tyndall, formerly employed as a gynecologist at the school’s student health clinic as far back as 1989. The Department is requiring the school to overhaul its Title IX processes, conduct a formal review of current and former employees to determine if they responded appropriately to notice of possible sex discrimination, and allow OCR to monitor its compliance for three years.

A copy of the press release is found at: https://www.ed.gov/news/press-releases/secretary-devos-requires-sweeping-changes-usc-after-title-ix-investigation-finds-university-failed-years-protect-students-sexual-abuse

Secretary DeVos launches innovative pilot at four universities for students to access financial aid refunds

On Feb. 28, 2020, Federal Student Aid (FSA) launched the myFSApay program pilot for students at Jackson State University, Purdue University, the University of California-Riverside, and the University of Georgia. The pilot will allow students at the participating schools to choose to receive their financial aid refunds, after expenses such as tuition, fees, and room and board are paid, on a prepaid card with a linked online account accessible through the myStudentAid mobile app.

This pilot is to give students an alternative to receiving financial aid refunds via direct deposit, check, or on a prepaid debit card. The myFSApay account does not charge fees for most transactions in stores and at ATMs. Students can use the account to pay for other educational expenses, like transportation, books, food, and supplies and can deposit checks from an employer or parent into the account and complete peer-to-peer payments.

A copy of the press release is found at: https://www.ed.gov/news/press-releases/secretary-devos-launches-innovative-pilot-four-universities-students-access-financial-aid-refunds

VA notifies five institutions of its intent to disapprove enrollment of new GI Bill recipients

On March 9, 2020, the Office of Public and Intergovernmental Affairs for the Department of Veterans Affairs (VA) announced that the VA notified the University of Phoenix, Career Education Corporation (Colorado Technical University American InterContinental University), Bellevue University, and Temple University of the agency’s intent to disapprove the enrollment of new GI Bill students at these institutions. “After careful review and consideration of findings provided by the Federal Trade Commission and State Attorneys General Offices, VA has concluded there is sufficient evidence to support a finding that the schools have utilized advertising, sales, or enrollment practices that are erroneous, deceptive, or misleading either by actual statement, omission, or intimidation against GI Bill beneficiaries in violation of the law.”

The announcement stated that the VA intends to suspend enrollment of new students for all programs in 60 days unless the schools take corrective action. All affected GI Bill students have been apprised of their options moving forward.

A copy of the VA announcement is available at: https://www.va.gov/opa/pressrel/pressrelease.cfm?id=5399

Implementation of Annual Student Loan Acknowledgement delayed until 2021-2022 award year

On March 27, 2020, Federal Student Aid (FSA) released an electronic announcement announcing the delay of the requirement that borrowers complete the Annual Student Loan Acknowledgement prior to disbursement for the 2020-2021 award year due to the disruptions caused by the COVID-19 disaster. Instead, the borrower completion requirement will begin with the 2021-2022 award year.

A copy of the electronic announcement is found at: https://ifap.ed.gov/electronic-announcements/032720ASLAPreliminImplementApr2020BorrowerCompletionRequireDelayUntil2021

FTC announces settlement with third-party server debt relief companies

On March 30, 2020, the Federal Trade Commission (FTC) announced that three third-party relief companies have agreed to be permanently banned from the debt relief business in order to settle charges that they falsely promised to lower or eliminate consumers’ student loans in return for an illegal upfront fee of $699 and a monthly fee of $39. The three companies are SLAC (under the name Aspyre), Navloan, and Student Loan Assistance Center.

Under a related issue, the FTC announced that it would begin mailing checks totaling more than $3.1 million to consumers who were victims of a student loan debt relief and credit repair scheme. Under a recent agreement, Strategic Student Solutions confirmed that they had charged consumers illegal upfront fees and falsely promised to reduce their student loan debt or monthly payments by enrolling them in loan forgiveness or other programs.

Copies of the announcements are found at: https://www.ftc.gov/news-events/press-releases/2020/03/student-loan-debt-relief-companies-agree-settle-ftc-charges-they
and
https://www.ftc.gov/news-events/press-releases/2020/03/ftc-returns-more-31-million-victims-student-loan-debt-relief

Department publishes proposed distance education rules

On April 2, 2020, the Department of Education published the Notice of Proposed Rulemaking (NPRM) that would govern distance learning. Secretary of Education Betsy DeVos said: “With our support, colleges and universities were among the first to transition to online and distance learning so learning could continue during the coronavirus pandemic. Frankly, though, they are working within the confines of state rules and regulations that are in desperate need of rethinking…Fortunately, we started work last year to develop a new set of standards that are responsive to current realities, that embrace new technology, that open doors for much needed innovation in higher education.”

The proposed regulation would accomplish the following:

• Emphasize demonstrated learning over seat time;
• Remove confusion over whether a course is eligible for Title IV by defining “regular and substantive” interaction between students and instructors;
• Clarify and simplify the requirements for direct assessment programs, including how to determine equivalent credit hours;
• Simplify clock-to-credit hour conversions to eliminate confusion about the inclusion of homework time in the determination;
• Address the challenges to institutions posed by minimum program length standards associated with occupational licensing requirements;
• Add a definition of “juvenile justice facility” to ensure that incarcerated students remain Pell eligible;
• Allow students enrolled in Title IV, HEA-eligible foreign institutions to complete up to 25% of their programs at an eligible institution in the United States;
• Encourage employer participation in developing educational programs;
• Create a new, student-centric system for disbursing Title IV, HEA assistance to students in subscription-based programs; and
• Require prompt action by the Department on applications to participate, or continue to participate, as an eligible institution in the Title IV programs.

A copy of the Department’s press release is found at: https://www.ed.gov/news/press-releases/coronavirus-public-health-emergency-underscores-need-department-educations-proposed-distance-learning-rules

A copy of the NPRM is found at: https://ifap.ed.gov/sites/default/files/attachments/2020-04/FR040220_1.pdf

Democratic Senators send letter to Department of Education urging it to exclude for-profit institutions from COVID-19 funds

On April 7, 2020, Senators Elizabeth Warren (D-MA), Richard Durbin (D-IL), Sherrod Brown (D-OH), and Richard Blumenthal (D-CT) sent a letter to Secretary of Education Betsy DeVos asserting that the Coronavirus Aid, Relief, and Economic Security (CARES) Act only grants the Department the authority to distribute funds to “institutions of higher education” as defined in the Higher Education Act (HEA), which only includes public and nonprofit institutions. The Senators wrote: “By extension, for-profit colleges are currently excluded from all other non-Title IV grant programs authorized by HEA … As such, we believe the most legally sound interpretation of the CARES Act would exclude for-profit colleges from the fund entirely.”

The letter urged the Department to target funds to public and nonprofit institutions. However, if the Department determines that for-profit institutions are eligible to receive allocations of funds from the CARES Act, the Senators recommend the following accountability policies to support students and protect taxpayers:

• Require for-profit colleges to use 100% of the funding under the CARES Act for student instruction, emergency financial aid to students, and student support services central to the colleges’ mission;
• Prohibit for-profit colleges from using funds under the CARES Act for executive compensation and to freeze executive compensation for at least one year after the receipt of funds;
• Prohibit publicly-traded for-profit colleges from engaging in stock or share repurchases, dividend payments, or any other capital distribution to shareholders;
• Prohibit for-profit colleges from using funds under the CARES Act for any advertising, marketing, or recruitment;
• Prohibit for-profit colleges that receive funds under the CARES Act from seeking additional stimulus funds from other sources;
• Consider any funds made available to for-profit colleges under the CARES Act as federal revenues for the purpose of calculating 90/10 rule; and
• In the required report to Congress, detail how for-profit colleges used funds made available under the CARES Act.

A copy of the Senators’ letter is found at: https://www.warren.senate.gov/imo/media/doc/2020.04.07%20Letter%20to%20ED%20re%20for-profit%20colleges%20in%20CARES.pdf

Department of Education announces the availability of more than $6 billion in emergency relief funds for students

On April 9, 2020, Secretary of Education Betsy DeVos announced the availability of more than $6 billion that will be distributed to colleges and universities to provide emergency cash grants to their students whose lives were disrupted by COVID-19. The Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136) provides almost $14 billion to support postsecondary education students and institutions. The Secretary said in a press release that the Department is prioritizing getting funding out the door to college students who need it the most. School allocations were set by a formula prescribed in the CARES Act that is weighted significantly by the number of full-time students who are Pell-eligible, but to a lesser extent, the formula considers the non-Pell-eligible population of the school. The Department used the data from IPEDS and FSA for this calculation.

Colleges and universities are required to utilize the $6.28 billion made available on April 9 to provide grants to students for expenses related to disruptions to their education due to the COVID-19 crisis, including course materials, technology, food, housing, health care, and childcare. Institutions are expected to develop their own systems and processes for distributing funds to students and must report 30 days after the date of the Certification and Agreement, and every 45 days thereafter, to the Secretary how grants were distributed to students, the amount of each grant awarded to each student, how the amount of each grant was calculated, and any instructions or directions given to students about the grants. In addition, the institution must document that it has continued to pay all of its employees and contractors during the period of any disruptions or closures to the greatest extent possible.

In the cover letter to college presidents, the Secretary encouraged institutions to prioritize students with the greatest need, but at the same time, institutions should consider establishing a maximum funding threshold for each student to ensure that these funds are distributed as widely as possible. The Secretary suggested that “[a]s a point of reference, you might consider using the maximum Federal Pell grant (for the 2019-2020 academic year, $6,195) as the threshold.” In the guidance released on April 21, 2020, the Department of Education informed institutions that they are only allowed to issue emergency financial aid grants to students who are Title IV eligible (i.e., being a citizen or eligible noncitizen, have a Social Security number, and a high school diploma, GED, or completed high school as a homeschooled student), which eliminates international students and undocumented immigrants.

In order to access the funds, the Department must receive a signed Funding Certification and Agreement from the educational institution affirming they will distribute the funds in accordance with the law. The Funding Certification and Agreement requires educational institutions to make emergency grants available to students promptly and prohibits the reimbursement of any costs or expenses, “including any refunds or other benefits that [institutions] previously issued to students.” Failure to comply with the terms and conditions in the Funding Certification and Agreement could result in penalties to an institution.

The letter to college presidents said that the remaining 50% of the funds to be used for institutional purposes will be allocated soon, which the Department is working on expeditiously.

A copy of the Secretary’s press release is found at:
https://www.ed.gov/news/press-releases/secretary-devos-rapidly-delivers-more-6-billion-emergency-cash-grants-college-students-impacted-coronavirus-outbreak

A copy of the cover letter to college presidents is found at: https://www2.ed.gov/about/offices/list/ope/caresactgrantfundingcoverletterfinal.pdf

A copy of the Funding Certification and Agreement is found at: https://www2.ed.gov/about/offices/list/ope/caresheerfcertificationandagreementfinalombapprovedforissuance.pdf

A copy of the allocations to institutions is found at:
https://www2.ed.gov/about/offices/list/ope/allocationsforsection18004a1ofcaresact.pdf

On April 10, 2020, the Department of Education issued additional instructions on the submission of the Funding Certification and Agreement on the CARES Act: Higher Education Emergency Relief Fund website. The posting is available at: https://www2.ed.gov/about/offices/list/ope/caresact.html

A copy of the Frequently Asked Questions for emergency financial aid grants for students is found at: https://www2.ed.gov/about/offices/list/ope/heerfstudentfaqs.pdf

Department releases Q&A’s on financial responsibility issues

On April 9, 2020, the Department of Education released an electronic announcement regarding the changes made to the new financial responsibility provisions included in the Sept. 23, 2019 final regulations. The electronic announcement includes Q&A’s addressing concerns raised by institutions, auditors, and other community partners regarding how these new requirements will be implemented.

A copy of the electronic announcement with the Q&A’s is found at: https://ifap.ed.gov/electronic-announcements/040920FinancialResponsibilityQuestionsAnswers

Department of Education holds conference calls to provide updates on the Trump Administration’s response to the COVID-19 national emergency

On April 9, 2020, Secretary of Education Betsy Devos, Principle Deputy Under Secretary Diane Auer Jones, and Assistant Secretary for Postsecondary Education Robert King completed a brief call with higher education stakeholders in which they shared information regarding the April 9 announcement of the availability of over $6 billion in federal support for students enrolled in institutions of higher education. They confirmed the need for institutions to submit a Funding Certification and Agreement, acknowledging the terms and conditions for the use of funds. If the Certification process is completed, institutions could expect funding as soon as April 8. Finally, institutions will have a great deal of flexibility on how they award the funds, but the funds should not be used for the reimbursement of expenses schools incurred such as providing laptops.

On March 31, 2020, Secretary of Education DeVos, along with Chief Operating Officer Mark Brown of the office of Federal Student Aid and Assistant Secretary Scott Stump of the Office for Career, Technical, and Adult Education, held a conference call with higher education leaders to provide an update on the Trump Administration’s response to the COVID-19 national emergency. After thanking the participants for their continued work on behalf of students, the Secretary briefed the group on the Department’s quick action to provide regulatory relief so that colleges and universities could limit disruptions by moving students to online learning.

The Secretary also stated that the Department plans to publish the composite scores based on data from 2017 and 2018 because that data is not impacted by the COVID-19 disaster. She also said that while institutions are concerned with meeting the SARA agreement for institutions delivering programs by online learning, Secretary DeVos said ED had no authority over SARA.

General Brown then briefed the participants on the immediate action taken by the Department to provide student loan relief to borrowers including setting student loan interest rates to 0%, suspending student loan payments, and stopping wage garnishments. He also discussed the six-month extension until Sept. 30, 2020 provided by the recently enacted CARES Act.

Assistant Secretary Stump discussed new flexibilities announced for Perkins plan submission deadlines for community and technical colleges as they apply for federal support. He also summarized a recent set of FAQs that provide clarification, flexibilities, and supports to state adult education offices as states seek to provide continuity of operations for adult learners during the COVID-19 disaster.

A copy of the summary of the conference call is found at: https://www.ed.gov/news/press-releases/readout-us-department-educations-covid-19-conference-call-higher-education-stakeholders

Department delivers $6.2 billion in additional grant funding for colleges and universities to cover costs associated with significant changes for the delivery of instruction due to COVID-19

On April 21, 2020, after making available more than $6 billion for colleges and universities to provide direct emergency financial aid grants to students, Secretary of Education Betsy DeVos announced the availability of an additional $6.2 billion to higher education institutions to ensure “learning continues when unexpected circumstances arise. Accordingly, the additional funds made available today can be used to expand remote learning programs, build IT capacity, and train faculty and staff to operate in a remote learning environment so that at any moment institutions can pivot quickly.” The institutional funds may be used to reimburse themselves for refunds they made to students for room and board and other services, such as internet access, that are no longer available because the school is closed. The guidelines also prohibit schools from using the funds for marketing, recruiting students, increasing endowments, and building sports facilities. School allocations are set by a formula prescribed in the CARES Act, which is weighted significantly by the number of full-time students who are Pell-eligible, but also takes into consideration the total population of the school and the number of students who were not full-time online before the coronavirus. The funding allocations are part of the almost $31 billion Congress allocated to the Department to distribute to students, K-12 students, and higher education.

The Recipient’s Funding Certification and Agreement requires institutions to comply with all reporting requirements, which require the submission of quarterly reports to the Secretary. Institutions will have to report on the use of the funds for Recipient’s Institutional Costs, accounting for the amount of reimbursements to the Recipient for costs related to refunds made to students for housing, food, or other services that the Recipient could no longer provide, and describing any internal controls the Recipient has in place to ensure that funds were used for allowable purposes and in accordance with cash management principles. Similar to the HEERF-student share requirements, institutions must certify that they will “to the greatest extent practicable” continue to pay their employees and contractors during the period of disruption.

A copy of the Secretary’s press release is found at: https://www.ed.gov/news/press-releases/secretary-devos-delivers-6-billion-additional-grant-funding-support-continued-education-americas-colleges-universities

On April 21, 2020, Secretary of Education DeVos, Acting Under Secretary Diane Auer Jones, and Assistant Secretary for Postsecondary Education Bob King held a briefing to provide clarifying guidance regarding the use of the emergency financial aid grants for students as well as announcing that the Department was making the remaining $6.2 billion for the institutional share of funds available under the Higher Education Emergency Relief Fund (HEERF).

The Secretary released Frequently Asked Questions for the institutional share and the emergency financial aid grants for students. The Department also released the application process for the institutional funds. The FAQs for the institutional shares is:
https://www2.ed.gov/about/offices/list/ope/heerfinstitutionalfaqs.pdf

Secretary calls on wealthy institutions to reject federal emergency fund

On April 22, 2020, in conjunction with the announcement of the availability of institutional grants under the HEERF on April 21, 2020, Secretary of Education Betsy DeVos called on wealthy institutions to reject the federal emergency funds. Secretary DeVos said that “wealthy institutions that do not primarily serve low-income students do not deserve additional taxpayer funds.” As a result, Stanford University withdrew its application for $7.4 million in funding, Princeton University rejected the $2.4 million in funding, and Yale University indicated that it plans to reject the funding.

A copy of the press release is found at: https://www.ed.gov/news/press-releases/secretary-devos-calls-wealthy-institutions-reject-taxpayer-emergency-funds-congress-change-eligibility

Deadline extended for CDR appeals and FWS community service requirements waived

On April 23, 2020, the Department of Education issued an electronic announcement delaying the appeals of institutions’ draft CDRs for FY 2017. A notice to this effect will be published in the Federal Register.

A school is expected to expend at least seven percent (7%) of its FWS federal allocation to pay the federal wages to students employed in community service jobs in an award year. A school is also expected to pay the institutional share of wages to students employed in community service jobs. In addition, one or more of the school’s FWS students must be employed as a reading tutor for children in a reading tutoring project or performing family literacy activities in a family literacy project. To reduce the burden on schools, and in recognition that some community service employment opportunities may be disrupted because of the COVID-19 pandemic, ED is sending a notice to the Federal Register granting a waiver of the FWS community service requirements for the 2019-2020 and the 2020-2021 award years. No action needs to be initiated by schools in order to request the waiver for either year.

A copy of the electronic announcement is found at: https://ifap.ed.gov/electronic-announcements/042320FY2017CDRDeadlineModUpdateFWSCommRelatedCOVID19

Department expands Second Chance Pell experiment

On April 24, 2020, Secretary of Education Betsy DeVos announced that the Department is inviting a new cohort of 67 schools to participate in its Second Chance experiment, creating more education opportunities for incarcerated students. Secretary DeVos said: “I’ve had the pleasure of visiting several Second Chance Pell institutions and have seen firsthand the transformative impact the experiment has on the lives of individuals who are incarcerated. The expansion more than doubles the size of the experiment, allowing incarcerated students to use Federal Pell Grants at 130 schools located in 42 states and the District of Columbia. Prior to this announcement, there were 63 schools located in 26 states participating in this experiment.

A copy of the press release is found at: https://www.ed.gov/news/press-releases/secretary-devos-expands-second-chance-pell-experiment-more-doubling-opportunities-incarcerated-students-gain-job-skills-and-earn-postsecondary-credentials

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.