By Sharon H. Bob, Ph.D., Higher Education Specialist, Powers Pyles Sutter and Verville, PC
Judge dismisses AFT claims against Department’s management of Public Service Loan Forgiveness program
Various publications reported that U.S. District Court for the District of Columbia Judge Dabney Friedrich issued an opinion dismissing the claims of the American Federation of Teachers (AFT) and its President, Randi Weingarten, in a lawsuit that accused the Department of Education of mishandling the Public Service Loan Forgiveness (PSLF) program. The AFT, along with eight student loan borrowers who worked in public service jobs, asked the Judge to order the Secretary of Education Betsy DeVos to implement a better process to handle PSLF applications. Judge Friedrich ruled that the AFT lacked standing to bring the suit, but the Judge also ruled that two of the claims brought by the individual borrowers with regard to violations of the Administrative Procedure Act (APA) and constitutional due process could proceed.
IG’s Semiannual Report to Congress discusses oversight for HCM
The Department of Education’s (ED) Office of Inspector General (OIG) released its Semiannual Report to Congress, for the period Oct. 1, 2019, to March 3, 2020, which identified areas of improvement being needed for heightened cash monitoring (HCM) payment methods. While the summary determined that the Office of Federal Student Aid’s (FSA) oversight of HCM was an “effective” tool, the audit also determined that FSA had inconsistent placement of schools on HCM, and did not have “adequate internal controls” to enforce HCM that would prohibit schools from drawing certain federal funds.
The report said: “FSA did not have adequate internal controls to reasonably ensure it consistently placed schools on HCM payment status when the schools submitted late annual financial statements or had composite scores that fell below the minimum financial responsibility score.” Due to this inconsistency, the report said that FSA regional offices that monitor schools to determine Title IV eligibility, for example, were unable to consistently place schools on provisional certification and HCM for submitting late financial statements.
Additionally, the report found that FSA lacked the ability to track a school’s method of payment status during the time between when the School Participation Division recommended a school’s placement on HCM status and the time that placement occurred, leaving an opportunity for at-risk institutions to continue to draw down funds under the advance payment method and putting Title IV dollars at risk.
In order to combat these discrepancies, the report recommended that FSA develop and implement controls to:
- Ensure consistent, appropriate, and timely actions are taken when schools fail to submit financial statements timely or receive non-passing composite scores;
- Track a school’s method of payment status from the recommendation for placement until the change is implemented; and
- Ensure that all required HCM documentation is retained.
A copy of the IG Semiannual Report is found at: https://www2.ed.gov/about/offices/list/oig/semiann/sar80.pdf
Senate HELP Committee Ranking Member Murray releases CRS memorandum challenging Secretary’s conclusion that emergency financial aid grants are only for Title IV-eligible students
On May 20, 2020, Senate Health, Education, Labor and Pensions Committee Ranking Member Patty Murray (D-WA) released a memorandum prepared by the Congressional Research Service (CRS), an independent arm of Congress, which analyzed whether educational institutions may award emergency financial aid grants only to students who are eligible for Title IV funds. CRS concluded that neither the Coronavirus Aid, Relief, and Economic Security Act nor the Higher Education Act explicitly prohibits non-Title IV eligible students from receiving emergency financial aid grants, and a potential court case might invalidate Secretary of Education Betsy DeVos’s determination that such grants are only to be awarded to Title IV-eligible students because the Secretary did not announce that interpretation through notice-and-comment rulemaking and the Secretary’s interpretation is not a particularly persuasive reading of the statute.
A copy of the memorandum is found at: https://cdn.ymaws.com/www.ncher.us/resource/resmgr/daily_briefing/db2020/CRS_memo.pdf
Ranking Member Patty Murray (D-WA) and Congresswoman Rosa DeLauro (CT-03), Chair of the House Appropriations Subcommittee on Labor, Health and Human Services, and Education, urged Secretary DeVos to reverse her unauthorized decision squandering crucial emergency funds by unnecessarily providing at least $500,000 from the Coronavirus Aid, Relief, and Economic Security (CARES) Act to institutions regardless of need. The lawmakers stressed that Secretary DeVos’ decision violates Congressional intent and comes at the expense of students at institutions with significant unmet needs related to coronavirus.
A copy of Senator Murray’s and Congresswoman DeLauro’s letter is found at: https://delauro.house.gov/media-center/press-releases/murray-delauro-slam-devos-unauthorized-decision-squandering-cares-funds
Bipartisan Senators urge Secretary to make changes to FAFSA reflecting financial circumstances due to COVID-19
On May 27, 2020, Senators Maggie Hassan (D-NH), Tim Scott (R-SC), Cory Booker (D-NJ), and Kelly Loeffler (R-GA) sent a letter to Secretary of Education Betsy DeVos urging her to ensure that students whose financial circumstances have changed as a result of COVID-19 receive financial aid. The letter said that the Department of Education should reissue guidance for financial aid administrators regarding professional judgement to clarify that income earned from work performed by recently unemployed students should be treated as zero, and to include accommodations and documentation requirement flexibilities with respect to individuals who have applied for, but not yet received, Unemployment Insurance benefits.
The Senators also urge the Secretary to make important changes to the Free Application for Federal Student Aid (FAFSA) to provide an additional opportunity for applicants to note recent changes to income. Such efforts should include highlighting on the Department’s website that there is an existing “dislocated worker question” on the FAFSA and adding a temporary question on the 2020-2021 FAFSA and the 2021-2022 FAFSA that asks: “Was your income significantly reduced due to the COVID-19 emergency?”
A copy of the Senators’ letter is found at: https://www.scott.senate.gov/media-center/press-releases/senators-scott-booker-hassan-loeffler-call-on-education-department-to-support-students-whose-financial-aid-eligibility-is-impacted-by-covid-19-pandemic
Senate Democrats urge the Secretary to take action against Great Lakes Educational Loan Services
On May 28, 2020, Senate Democrats, led by Senator Elizabeth Warren (D-MA), sent a letter to Secretary of Education Betsy DeVos urging her to take immediate action against Great Lakes Educational Loan Services because of reports that the servicer had provided incorrect payment information to the credit reporting companies for almost 5 million federal student loan borrowers. The incorrect reporting violated the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Instead of reporting to Equifax, TransUnion and Experian that borrowers’ payments were automatically suspended by the CARES Act, the payments were reported as in a “deferment” on their federal student loans. While the company and the Department insist that there was no damage to the borrowers’ credit scores, the Senators said that was not the case.
At the time the error was discovered, the Department said that providing incorrect information to credit bureaus was “totally unacceptable,” but that Great Lakes had “quickly corrected the coding issues” and sent corrected information to the credit bureaus.
Nevertheless, the Senate Democrats urged the Department to audit all of the federal student loan servicers to make sure the information was corrected. The Senate Democrats’ letter follows a similar letter sent from Congressional Democrats’ led by Susan Wild (D-PA) on May 28, 2020.
A copy of the Senate Democrats’ letter is found at: https://www.warren.senate.gov/imo/media/doc/2020.5.28%20Letter%20to%20ED%20re%20Great%20Lakes%20credit%20reporting%20error%20FINAL.pdf
A copy of the Congresswoman’s letter is found at: https://wild.house.gov/sites/wild.house.gov/files/Rep.%20Wild%20Letter%20to%20Secretary%20DeVos%20re%20Student%20Loan%20Credit%20Reporting%20Error_%205.27.20.pdf
Congressman Harder sends letter to Education Secretary DeVos and Treasury Secretary Mnuchin demanding that their agencies stop garnishing tax refunds from student loan borrowers
On June 11, 2020, Congressman Josh Harder (D-CA) sent a letter to Secretary of Education Betsy DeVos and Treasury Secretary Steve Mnuchin demanding that their agencies stop garnishing tax refunds from student loan borrowers as required under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Congress passed the CARES Act to provide economic relief to Americans, and one of the provisions guaranteed that student loan borrowers would be protected from having their tax refunds taken to cover loan expenses. However, the federal government continued to take these payments.
A copy of Congressman Harder’s letter is found at: https://harder.house.gov/media/press-releases/harder-demands-devos-mnuchin-stop-stealing-tax-refunds-americans-student-loan
Senate Democrats send letter to Senators McConnell and Schumer urging them to increase federal support for institutions of higher education
On June 11, 2020, Senate Democrats, led by Jeff Merkley (D-OR), sent a letter to Senate Majority Leader Mitch McConnell (R-KY) and Minority Leader Chuck Schumer (D-NY) urging them to include $47 billion in support for institutions of higher education in the next COVID-19 relief package that is currently under discussion in Congress. The Senators also stated that “students are facing complex financial emergencies that threaten their ability to remain on their path to degree completion.” The Senators concluded that “the threat of ongoing financial uncertainty stemming from enrollment declines and state cuts threaten the financial stability of schools” which is why institutions need significant additional emergency relief from Congress.”
A copy of the letter is found at: https://www.merkley.senate.gov/news/press-releases/merkley-colleagues-urge-senate-leadership-to-give-higher-education-students-and-institutions-much-needed-relief-in-upcoming-legislation-2020
Department issues updated guidance to May 15, 2020, updated guidance for interruptions of study related to COVID-19
On June 16, 2020, the Department of Education released updated guidance to the May 15, 2020, updated guidance for interruptions of study related to COVID-19. The June 16, 2020 update extended the timeframe for relief from Return of Title IV (R2T4) Funds requirements under the CARES Act to periods that include March 13, 2020, or begin between March 13 and the later of December 31 or the last date that the national emergency is in effect. ED also clarified that an institution cannot automatically apply CARES Act R2T4 relief to all students who withdraw during a payment period or period of enrollment unless a disruption to instruction occurred during that period. For institutions that did not undergo changes in educational delivery or campus operations as a result of COVID-19, the institution will be required to obtain a written attestation (including by email or text messages) from the student explaining why the withdrawal was the result of COVID-19.
A copy of the June 16, 2020, update is found at: https://ifap.ed.gov/electronic-announcements/051520UPDATEDGuidanceInterruptStudyRelCOVID19May2020
ED releases supplemental FAQs on the HEERF Fund
On June 16, 2020, the Department of Education released Supplemental Frequently Asked Questions (FAQs) on the Higher Education Emergency Relief Fund (HEERF) under Section 18004 of the CARES Act for emergency financial aid grants to students. The Department notes that the FAQs represents ED’s current thinking and lack the force of law and effect of law. Two items of note include the deadline for the expenditure of HEERF funds being Sept. 30, 2022 and the clarification that if funds remain after institutions make immediate disbursements to students, “eligible students enrolled during subsequent terms may receive emergency financial aid grants even if they were not enrolled during the spring 2020 term.”
A copy of the Supplemental FAQs is found at: https://www2.ed.gov/about/offices/list/ope/caresactsupplementalfaqs61620.pdf
Judges block DeVos’ efforts to deny HEERF funds to non-Title IV students
On June 17, 2020, Politico reported that on June 17, U.S. District Judge Yvonne Gonzales Rogers granted a preliminary injunction blocking Secretary of Education Betsy DeVos from enforcing her policies that restrict CARES Act funding only to students who are eligible for Title IV aid. The preliminary injunction only applies to students attending California community colleges, which had brought the legal challenge. Judge Rogers wrote that the California community colleges had “argued persuasively” that the welfare reform law did not apply to the CARES Act funding. The ruling blocks the Secretary from “imposing or enforcing any eligibility requirement for students to receive” emergency financial aid grants under the CARES Act.
Politico reported that on June 12, 2020, a similar ruling was released from U.S. District Court for the Eastern District of Washington Judge Thomas Rice, who issued a preliminary injunction against implementing the Department’s rule in the State of Washington. Judge Rice said: “The disruption of campus operations due to COVID-19 has caused students at Washington colleges and universities to incur unexpected expenses such as food, housing, course materials, technology, health care, and childcare.” He went on to write: “The harm to students that stems from the eligibility restriction is not only the inability to access HEERF; the harm is in the inability to access these emergency relief funds in a timely manner. Absent injunctive relief, students will continue to be denied access to emergency relief funds to which they are likely otherwise entitled.”
ED publishes interim final rule on CARES Act emergency grants
On June 17, 2020, the Department of Education published an interim final regulation in the Federal Register, which states that the distribution of emergency financial aid grants to students must be made to those who are Title IV eligible. The rule became effective June 17, 2020, but there is a 30-day comment period until July 17, 2020. The rule officially bars students from receiving the emergency financial aid grants individuals who are living in the country illegally, like those enrolled in the Deferred Action for Childhood Arrivals (DACA), international students, those who defaulted on their student loan, or those who were convicted of the sale or possession of drugs.
A copy of the interim final regulations is found at: https://www.govinfo.gov/content/pkg/FR-2020-06-17/pdf/2020-12965.pdf
A copy of the Secretary’s press release is found at: https://www.ed.gov/news/press-releases/us-department-education-issues-rule-protect-american-taxpayers-waste-fraud-and-abuse-ensure-covid-19-relief-funds-get-eligible-students
Department of education delays consideration of ACICS accreditation to Feb. 2021
On June 22, 2020, the Department of Education published the agenda of the next National Advisory Committee on Institutional Quality and Integrity (NACIQI), which did not include a discussion of ACICS, as expected. NACIQI was to consider whether ACICS was meeting federal standards around institutional quality because the Department had concluded that ACICS had failed to meet the federal standards in Dec. 2018. The Department’s reason for the delay was that by mistake, the Department had sent ACICS the wrong version of a staff report in April on the findings of their inquiry into ACICS’ oversight of two nonprofit institutions. ACICS responded to the report on May 29, 2020, but the Department realized on May 30, 2020, that it had sent the wrong letter. On June 23, 2020, the Department sent ACICS a letter granting it an extra 90 days to further respond to the correct version of the report and delaying ACICS’ consideration until the Feb. 2021 NACIQI meeting.
A copy of the letter to ACICS is found at: https://cdn.ymaws.com/www.ncher.us/resource/collection/556B1E94-921B-4A43-B61E-A9EB3944EE42/db0625_2020.pdf
FSA releases Electronic Announcement on sequester law changes to Direct Loan Fees
On June 23, 2020, the Department of Education’s Office of Federal Student Aid (FSA) released an Electronic Announcement providing information regarding changes to Direct Loan fees and the percentage reduction that institutions must apply to awards in the Iraq-Afghanistan Service Grant and TEACH Grant Programs as a result of the enactment of the Budget Control Act of 2011.
For loans where the first disbursement is made on or after Oct. 1, 2020, and before Oct. 1, 2021:
- The loan fee for Direct Subsidized Loans and for Direct Unsubsidized Loans is 1.057%.
- The loan fee for Direct PLUS Loans (for both parent borrowers and graduate and professional student borrowers) is 4.228%.
A copy of the Electronic Announcement is found at: https://ifap.ed.gov/electronic-announcements/062320FY21SequesterRequiredChangesTitleIVStudentAidPrograms
ED announces the availability of a new online portal for higher education institutions to report foreign gifts and contracts
On June 23, 2020, the Department of Education issued an Electronic Announcement reminding institutions of their statutory requirement to disclose to the Department information about ownership and control by foreign sources, contracts with foreign sources, and gifts from foreign sources valued at $250,000 or higher. The Department also announced the availability of a new online portal for higher education institutions to report foreign gifts and contracts. The new reporting system goes into effect immediately and should be used for the upcoming July 31, 2020 reporting deadline.
A copy of the Electronic Announcement is found at: https://ifap.ed.gov/electronic-announcements/062220ReminderRprtOwnerContrlContrctsGiftsForeignSrc
A copy of the Secretary’s press release is found at: https://www.ed.gov/news/press-releases/secretary-devos-unveils-enhanced-online-portal-higher-education-institutions-report-foreign-gifts-and-contracts
FSA announces BPO contracts for Next Generation Financial Services Environment
On June 24, 2020, Federal Student Aid (FSA) announced that it had awarded five contracts under the Business Process Operations (BPO) component of the Next Generation Financial Services Environment. The five companies are: Edfinancial Services LLC, F.H. Cann & Associates LLC, MAXIMUS Federal Services Inc., Missouri Higher Education Loan Authority (MOHELA), and Texas Guaranteed Student Loan Corporation (Trellis Company). Under the BPO contract, the companies will support customers through direct engagement via contact centers and provide back-office processing support for students, parents, borrowers, and partners at more than 5,800 postsecondary institutions.
A copy of the Electronic Announcement is found at: https://www.ed.gov/news/press-releases/us-department-educations-office-federal-student-aid-announces-new-contracts-five-companies-improve-customer-service-increase-accountability
Senate Democrats sends letter to Education Secretary DeVos and Treasury Secretary Mnuchin urging them to halt the seizure of tax refunds from student loan borrowers
On June 25, 2020, Senate Democrats, led by Senate Finance Committee Member Ron Wyden (D-OR) and Senate Health, Education, Labor and Pensions Committee Ranking Member Patty Murray (D-WA), sent a letter to Secretary of Education Betsy DeVos and Treasury Secretary Steven Mnuchin, urging them to halt the seizure of tax refunds from federal student loan borrowers in default and refund any payments seized despite the prohibition in the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
The Senate Democrats’ letter said: “The continued seizure of tax refunds, known as a tax offset, violates a provision in the CARES Act that suspends the collection of all federally held defaulted student loans until Sept. 30, 2020. This provision was intended to provide relief to student loan borrowers experiencing financial strain during the COVID-19 crisis.”
A copy of the Senate Democrats letter is found at: https://www.wyden.senate.gov/news/press-releases/wyden-murray-demand-end-to-seizure-of-tax-refunds-from-americans-shouldering-federal-student-debt-during-covid-19-crisis-
House fails to override President’s Veto of H.R. Res. 76 to nullify the borrower defense rule
On June 26, 2020, the U.S. House of Representatives failed to override the President’s veto of House Joint Resolution 76, which used the Congressional Review Act to nullify the Department of Education’s borrower defense to repayment rule. The vote to override H.J. Res. 76 failed by a vote of 238-173. Therefore, the Sept. 23, 2019, borrower defense to repayment rule will go into effect on July 1, 2020. The House passed H.J. Res. 76 in January by a vote of 231-180 and the Senate passed the Resolution by a vote of 53-42 in March.
A copy of the President’s veto message is found at: https://www.whitehouse.gov/briefings-statements/presidential-veto-message-house-representatives-h-j-res-76/
Secretary releases statement on Executive Order signed by President Trump to transform the federal hiring process
On June 26, 2020, Secretary of Education released a press release praising the President for signing an Executive Order, which would transform the federal hiring process to replace one-size-fits-all degree-based hiring with skills-based hiring.
The President’s Executive Order states:
“This order directs important, merit-based reforms that will replace degree-based hiring with skills- and competency-based hiring and will hold the civil service to a higher standard — ensuring that the individuals most capable of performing the roles and responsibilities required of a specific position are those hired for that position — that is more in line with the principles on which the merit system rests.”
A copy of the Executive Order is found at: https://www.whitehouse.gov/presidential-actions/executive-order-modernizing-reforming-assessment-hiring-federal-job-candidates/
A copy of the Secretary’s press release is found at: https://www.ed.gov/news/press-releases/us-secretary-education-betsy-devos-released-following-statement-executive-order-signed-president-donald-j-trump-today-which-will-transform-federal-hiring-process-replace-one-size-fits-all-degree-based-hiring-skills-based-h
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.
Contact Information: Sharon H. Bob, Ph.D. // Higher Education Specialist // Powers Pyles Sutter and Verville, PC // 1501 M Street, NW, Suite 700, Washington, DC 20005 // 202-872-6772 // Sharon.Bob@PowersLaw.com // http://www.powerslaw.com