Washington News Brief

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

ED issues revisions to May 6 Electronic Announcement on posting emergency financial aid grants for students

On Aug. 31, 2020, the Department of Education published a Revised Electronic Announcement as a Federal Register Notice revising its May 6, 2020, Electronic Announcement describing school requirements to publicly post specific emergency financial aid grants for students on the institution’s primary website as part of the reporting requirements under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. [ED updated the May 6, 2020 Electronic Announcement on Sept. 1, 2020.]

The revised Notice maintains the same seven reporting elements but adds a definition for “total number of eligible students” and decreases the frequency of reporting after the initial 30-day period from 45 days thereafter to no later than 10 days after the end of each calendar quarter (Sept. 30, 2020, December 31, 2020, March 31, 2021, June 30, 2021) and thereafter.

For purposes of this reporting, institutions should calculate the number of eligible students adding the number of students for whom the institution has received an Institutional Student Information Record (ISIR), plus the number of students who completed an alternative application form developed by the institution for this purpose. Of the total, the number of students who are eligible for an emergency grant per the institution’s awarding criteria would be the final total of eligible students at the institution. The institution is not asked to make assumptions about the potential eligibility of students for whom the institution has not received an ISIR or an alternative application form.

A copy of the Notice is found at: https://www.govinfo.gov/content/pkg/FR-2020-08-31/pdf/2020-19041.pdf

The Sept. 1, 2020, Update to the May 6, 2020, Electronic Announcement is found at: https://ifap.ed.gov/electronic-announcements/050620HigherEdEmergencyReliefFundRptg

OIG releases report outlining challenges in implementing the CARES Act

In early Sept. 2020, the Department of Education’s Office of Inspector General (OIG) released a report titled, “Challenges for Consideration in Implementing and Overseeing the CARES Act,” which stated that the Department is struggling with issues, such as providing guidance, training, technical assistance, outreach, monitoring, and oversight, related to the grant programs funded under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. With respect to the section dealing with student financial assistance, the OIG stated that the Department needs to provide guidance to postsecondary institutions, contracted servicers, collection agencies, guaranty agencies, and accrediting agencies to effectively implement the CARES Act. The report stated that past audits have found continued instances of noncompliance and weaknesses in Federal Student Aid’s (FSA) oversight and monitoring of student financial assistance programs.

The report concluded that the Department will need to:

• Work with contracted loan servicers, collection agencies, guaranty agencies, and others to implement borrower and teacher assistance provisions;
• Work with postsecondary institutions and contracted servicers to implement student financial assistance refund waivers and loan cancellation provisions and monitor those entities to ensure the correct Direct Loans are cancelled;
• Work with and monitor contractors to implement provisions to exclude periods of enrollment that are not completed because of COVID-19 emergency from the calculation of a student’s lifetime Pell Grant limit and subsidized Direct Loan usage; and
• Monitor postsecondary institutions and accreditors’ use of waivers of and flexibilities for certain student financial assistance program requirements.

The report also stated that the Department will need to address these requirements while continuing to provide adequate oversight of existing student financial assistance program participants. “Further, the Department should consider its oversight and monitoring of postsecondary institutions and their ability to meet financial responsibility criteria, an area where recent audit work has found weaknesses, given the probability that the pandemic could negatively impact the finances of institutions and cause some to fail to meet the required criteria for financial responsibility.”

In response to the report, Deputy Secretary Mitchell Zais stated that the Department was under “enormous pressure” by the language in the CARES Act to quickly and effectively distribute the funding while doing so with maximum flexibility. Deputy Secretary Zais stated: “It is our hope that the audit work of the [OIG] will take these facts into account.”

A copy of the OIG report is found at: https://www2.ed.gov/about/offices/list/oig/auditreports/fy2020/x20dc0003.pdf

FSA advises that it has identified multiple ransomware attacks on schools

On Sept. 1, 2020, Federal Student Aid (FSA) announced that it has identified multiple ransomware attacks that lead to denial of access to sensitive data and systems unless a ransom is paid. FSA said that schools are an attractive target for criminals looking for privacy information, research data, financial information, and intellectual property. FSA provided cybersecurity best practices so that each school can strengthen its cybersecurity posture.

A copy of the electronic announcement is found at: https://ifap.ed.gov/electronic-announcements/090120TechSecurityAlertActiveRansomwareCampaignTargetingEDInst

ED publishes verification requirements for 2021-2022 award year

On Sept. 3, 2020, the Department of Education published a Notice in the Federal Register announcing the FAFSA information that an institution and an applicant may be required to verify for the 2021-2022 award year. The verification items and acceptable documentation for the 2021-2022 award year will be unchanged from the 2020-2021 award year. However, the COVID-19 verification flexibilities do not apply to the 2021-2022 award year, but may happen at a later date. The Federal Register states: “The Secretary will extend the effective period of its guidance to include the 2021-2022 award year if circumstances warrant an extension and will inform the public of such an extension at the appropriate time.”

A copy of the Notice is found at: https://ifap.ed.gov/sites/default/files/attachments/2020-09/FR090320.pdf

ED’s OCR distributes questions and answers on final Title IX Rule

On Sept. 4, 2020, the Department of Education’s Office for Civil Rights (OCR) issued technical assistance to support institutions with meeting their obligations under the Title IX Rule. The topics covered in the Questions and Answers include:

• Effective Date for the Rule
• Title IX Coordinator and Other Personnel Issues
• The Definition of Sexual Harassment
• Filing a Formal Complaint
• Conducting an Investigative Hearing

A copy of the Questions and Answers is found at: https://www2.ed.gov/about/offices/list/ocr/docs/qa-titleix-20200904.pdf?utm_content=&utm_medium=email&utm_name=&utm_source=govdelivery&utm_term=

Senate introduces slimmed down COVID-19 relief package; Senate bill is blocked from consideration

On Sept. 8, 2020, Senate Majority Leader Mitch McConnell (R-KY) released the “Delivering Immediate Relief to America’s Families, Schools and Small Businesses Act,” a slimmed down COVID-19 relief package that is similar to an earlier version released by Senate Republicans in August. Senate Republicans hoped that a narrowly crafted bill would jumpstart negotiations between Congress and the Trump Administration that fell apart in August. However, the Senate failed to pass the “skinny” COVID-19 relief package, by a vote of 52-47. Rand Paul (R-KY) was the only Republican to join all of the Democrats in blocking the bill, which needed 60 votes to override a Democratic filibuster.

The bill would have provided $105 billion in additional funding for the Education Stabilization Fund authorized under the Coronavirus Aid, Relief, and Economic Security (CARES) Act with one-half percent reserved for the outlying areas and Bureau of Indian Education; 5% or $5.2 billion for the Governor’s Emergency Education Relief (GEER) Fund; 67% or $69.6 billion for the Elementary and Secondary School Emergency Relief (ESSER) Fund; and 28% or $29.1 billion for the Higher Education Emergency Relief (HEER) Fund. HEER funds would have been provided to institutions of higher education in the following way:

• 85% of funds ($24.7 billion) would be provided to public and private nonprofit institutions of higher education and postsecondary vocational institutions, with 90% based on each institution’s full-time-equivalent Pell Grant enrollment and 10% based on full-time, non-Pell Grant enrollment. Exclusively online students are excluded from both formula factors.
• 10% of funds ($2.9 billion) would be provided for additional awards through programs that receive funds through Parts A and B of Title III of the Higher Education Act (Historically Black Colleges and Universities and other MSIs), Parts A and B of Title V of the Higher Education Act (Hispanic-Serving Institutions), and Part A of Title VII of the Higher Education Act.
• 5% of funds ($1.45 billion) would be provided to institutions determined by the U.S. Department of Education to have the greatest unmet need, including for-profit colleges and other institutions that serve exclusively online students. Colleges and universities that did not receive funds from either of the other two pots and have unmet needs are prioritized.

Under the program, institutions could use funds to defray expenses associated with COVID-19 and provide financial grants to students, including students exclusively enrolled in distance education. But funds could not be used to fund contractors for the provision of pre-enrollment recruitment activities, endowment, or capital outlays associated with facilities related to athletics, sectarian instruction, or religious worship. Institutions that were required to pay an excise tax based on investment income (endowment tax) would only receive 50% of their total allocation and be required to use such funds to provide financial grants to students only. The bill would also allow 529 College Savings Accounts to be used for additional private school tuition, books, tutoring, and homeschooling related expenses.

The Republican “skinny” bill is more favorable than the HEROES Act passed by the House, which excludes for-profit institutions. It is unclear whether congressional negotiations will breach the congressional stalemate.

A copy of the press release is found at: https://www.mcconnell.senate.gov/public/index.cfm/pressreleases?ID=E0ED0AB9-EFE3-4928-9220-B14C2D5F0C74

ED distributes 2021-2022 FAFSA

On Sept. 10, 2020, Federal Student Aid (FSA) released the final versions of the 2021-2022 Free Application for Federal Student Aid (FAFSA). FSA states that the PDF versions of the FAFSA form are provided as a resource for training purposes.

A copy of the electronic announcement is found at: https://ifap.ed.gov/electronic-announcements/091020FAFSA2122FOTWWkshtStudAidEligWksht4Quest23

Transworld Systems and National Collegiate Student Loan Trusts settle suit with New York State Attorney General

On Sept. 14, 2020, New York Attorney General (AG) Letitia James and Transworld Systems, the principal debt collector for National Collegiate Student Loan Trusts, reached a settlement where the company agreed to make significant changes to its debt collection practices and pay $600,000 that will be disbursed as restitution to New York borrowers and penalties to the state. The settlement was reached after the AG’s office found that Transworld Systems violated multiple federal and state consumer protection laws by making false, misleading, and deceptive statements in National Collegiate Student Loan Trusts lawsuits and in communications with borrowers, and for filing these lawsuits beyond the applicable statute of limitations.

AG James said in a press release: “Today, my office is holding Transworld accountable for the unlawful and manipulative student loan debt collection practices that affected thousands of New Yorkers.”

A copy of the press release is found at: https://ag.ny.gov/press-release/2020/attorney-general-james-stops-debt-collection-company-unlawful-practices-harming

CFPB announces judgement with owner of private loans for students at ITT

On Sept. 16, 2020, the Consumer Financial Protection Bureau (CFPB) announced that it had reached a settlement with PEAKS Trust 2009-1, along with Deutsche Bank National Trust Company, Deutsche Bank Trust Company Delaware, and Deutsche Bank Trust Company Americas, in their capacity as trustees to PEAKS Trust 2009-1. PEAKS owned and managed private student loans for students attending ITT Technical Institute. The complaint said that CFPB alleged that PEAKS provided substantial assistance to ITT Educational Services, Inc., in putting together the PEAKS loan program that was used to improve the appearance of ITT’s financial statements and its standing among investors; that it engaged in unfair acts and practices in violation of the Consumer Financial Protection Act of 2010 as it rushed students through financial aid appointments, using aggressive tactics, and, in some cases, gaining unauthorized access to student accounts to sign them up for loans without permission; and that it allegedly knew or was reckless in not knowing that many student borrowers did not understand the terms and conditions of those loans, could not afford them, or did not even know they had them, in some cases.

PEAKS would be required to stop collecting on all outstanding PEAKS loans, discharge all outstanding PEAKS loans, and ask all consumer reporting agencies to which PEAKS provided information to delete information related to the loans. The order would also require PEAKS to provide notice to all consumers with outstanding PEAKS loans that their debt has been discharged and is no longer owed and that PEAKS is seeking to have the relevant consumer reporting information deleted. The total amount of loan forgiveness is estimated to be $330 million for about 35,000 consumers with outstanding balances owed on their PEAKS loans.

The CFPB announcement is found at: https://www.consumerfinance.gov/about-us/newsroom/cfpb-multiple-states-enter-settlement-itt-private-loans-owner-assisting-itt-unfair-practices/

Senate HELP Committee holds hearing on fixing the FAFSA

On Sept. 17, 2020, the Senate Health, Education, Labor, and Pensions (HELP) Committee held a hearing titled, “Time to Finish Fixing the FAFSA (Free Application for Federal Student Aid).” In his opening statement, Chairman of the HELP Committee Lamar Alexander (R-TN) stated that 10 million students and their families are in the middle of what he believes is the strangest first semester of college. He stated that nearly every aspect of college has changed for students as a result of the spread of COVID-19, except for the 108 questions on the FAFSA they must fill out to get financial aid. He would like the number of items on the FAFSA to be reduced to 33 items. Chairman Alexander explained that this issue of simplifying the FAFSA was particularly serious this year, as many students are questioning their investment in a college education when many classes are only available in an online format. He concluded by expressing his desire to pass bipartisan legislation on this issue before the end of the year.

In her opening statement, Ranking Member Patty Murray (D-WA) said that the FAFSA must be a tool to access higher education, not a barrier that prevents qualified students from receiving the financial aid they need to attend college. She stated that there was a necessity for making the FAFSA easier to navigate, especially for students experiencing homelessness and living in foster care, as well as low-income students. Ranking Member Murray stated that it is necessary to make students’ and families’ lives easier by simplifying the financial verification process, determining Pell Grant eligibility based on the federal poverty level, and fully implementing the Fostering Undergraduate Talent by Unlocking Resources for Education Act or the FUTURE Act as soon as possible. She concluded by stating that she was happy to continue working on simplifying the FAFSA and continue to improve the federal financial aid process for students.

The witnesses agreed with the Senators, particularly with respect to simplifying the FAFSA, modifying the need analysis formula, and simplifying the verification process.

A copy of the Chairman’s press release is found at: https://www.help.senate.gov/chair/newsroom/press/alexander-finish-fixing-the-fafsa_this-year

Senators Schumer and Warren urge President to provide student loan forgiveness

On Sept. 17, 2020, Senate Minority Leader Chuck Schumer (D-NY) and Senator Elizabeth Warren (D-MA) introduced a resolution urging the President to take executive action to cancel up to $50,000 in student loan debt for federal student loan borrowers. The resolution is co-sponsored by 11 other Senators. The resolution states that the Secretary of Education has “broad administrative authority” under section 432(a) of the Higher Education Act, as amended, to cancel student debt and that the President should take executive action to cancel federal student loan debt by using that authority. It also requests executive action to ensure that borrowers do not incur a tax liability resulting from debt cancellation and to ensure the cancellation helps close racial wealth gaps and avoids helping the wealthiest borrowers. Finally, the resolution asks the President to continue to pause student loan payments and interest accumulation for the entirety of the COVID-19 pandemic.

The press release said:

“Studies show that student debt cancellation can substantially increase Black and Latinx household wealth and help close the racial wealth gap, provide immediate relief to millions who are struggling during this pandemic and recession, and give a boost to our struggling economy through a consumer-driven economic stimulus that can result in greater home-buying rates and housing stability, higher college completion rates, and greater small business formation. Over 100 community, civil rights, consumer, and student advocacy organizations have already come out in support of using executive authority to cancel student loan debt.”

A copy of the resolution is found at: https://www.warren.senate.gov/imo/media/doc/Schumer%20Warren%20resolution.pdf

A copy of the Senators’ press release is found at: https://www.warren.senate.gov/newsroom/press-releases/schumer-warren-the-next-president-can-and-should-cancel-up-to-50000-in-student-loan-debt-immediately-democrats-outline-plan-for-immediate-action-in-2021

DeVos to be investigated for potential violation of the Hatch Act

On Sept. 22, 2020, the New York Times, as well as other publications, reported that the U.S. Office of Special Counsel, which has jurisdiction to investigate violations of the Hatch Act, will conduct an inquiry as to whether Secretary of Education Betsy DeVos violated the law. The Hatch Act forbids federal employees from engaging in political activities on the job. The complaint stems from Secretary DeVos’ appearance on Fox News when she said Mr. Biden’s pledge to abandon her school-choice proposal was “shameful.” She asserted that Mr. Biden “turned his back on the kids” and “turned his face in favor of the teachers’ union.”

A copy of the article from the New York Times is found at: https://www.nytimes.com/2020/09/22/us/politics/betsy-devos-hatch-act-investigation.html

FSA releases new reports to FSA Data Center

On Sept. 22, 2020, Federal Student Aid (FSA) released a series of quarterly updates to its portfolio reports on its FSA Data Center found at: https://studentaid.gov/data-center, as of June 30, 2020. These results reflect changes made to borrower accounts because of the Administration’s executive action in late March and provisions included in the CARES Act, signed on March 27, 2020. As a result of the CARES Act, payments were suspended, collections were stopped, and interest was waived on all ED-held student loans. About 30,000 Direct Loan borrowers had loans in repayment status as of June 30, 2020 compared with almost 19 million borrowers who were in repayment a year ago. The approximately 300,000 borrowers still making payments are mainly those who opted out of the CARES Act payment suspension.

The release also includes the July and August Borrower Defense to Repayment and Public Service Loan Reports. As of August, more than 330,000 borrower defense to repayment applications have been submitted and of those, 39% are pending decisions, including about 85,000 applications that are awaiting adjudication and about 45,000 applications that are pending notification. As of the end of August, about 171,000 borrowers had submitted more than 220,000 PSLF applications with about 203,000 applications being processed. Of those, only about 4,400 or 2.2%, have been approved.

As of June 30, 2020, the outstanding federal student loan portfolio is $1.5 trillion representing 42.3 million unduplicated aid recipients.

A copy of the electronic announcement is found at: https://ifap.ed.gov/electronic-announcements/092220FSAPostsNewReportstoFSADataCenter

ED releases HEERF reporting requirements

On Sept. 23, 2020, by email to grantees, the Department of Education released guidance on HEERF reporting, which clarifies the July 9, 2020, Electronic Announcement regarding the FFATA Subaward Reporting System (FSRS) for purposes of reporting the use of HEERF funds for the institutional share. The Department determined that institutions receiving HEERF formula funding will not likely have subawards and will not be able to use FSRS for reporting their use of HEERF funds. First reports are to be posted on an institution’s website by Oct. 30, 2020, covering the period from the date of the first HEERF grant award through Sept. 30, 2020. ED used its authority provided by Section 18004(e) of the CARES Act to specify how institutions will publish certain information on a quarterly basis on their websites. The new quarterly budget and expenditure reporting form was published in the Federal Register on Sept. 28, 2020

A copy of the Federal Register Notice is found at: https://www.nasfaa.org/uploads/documents/Federal_register_09_28_2020_2.pdf

Also included in the email was a description of the changes made to the May 6, 2020, Electronic Announcement on reporting for the emergency financial aid grants to students, which was superseded by the Aug. 31, 2020, Electronic Announcement and Federal Register Notice, which is found at: https://www.govinfo.gov/content/pkg/FR-2020-08-31/pdf/2020-19041.pdf

Finally, the email provided guidance regarding the use of the institutional portion of the HEERF funds for personal protective equipment. The guidance said that grants may use the institutional portion for the reasonable costs of PPE, cleaning supplies, facility cleaning, or the purchase of items to help detect or prevent the spread of COVID-19. In addition, non-permanent changes to existing instructional facilities to ensure social distancing can be covered by the institutional portion.

The email regarding updates to the CARES Act, including information on the HEERF Reporting webpage, is found at: https://www2.ed.gov/about/offices/list/ope/heerf-reporting-email.pdf

ED announces additional COD System changes to support the CARES Act

On Sept. 23, 2020, the Department of Education announced additional changes to the Common Origination and Disbursement (COD) System planned for Sept. 27, 2020, to support the reporting requirements for withdrawn students who qualify for a Title IV waiver under the CARES Act.

• As a reminder, schools should add the Coronavirus Indicator to disbursements qualifying for CARES Act relief no later than December 31, 2020.
• Schools are expected to report Title IV aid not returned under R2T4 requirements due to CARES Act relief no later than Sept. 30, 2021.
• Beginning Sept. 27, 2020, ED will expand the payment period start date window so that the Coronavirus Indicator will be accepted when the payment period start date is a date inclusive of or between July 1, 2019 and December 31, 2020.
• Beginning Sept. 27, 2020, the Subsidized Usage Limit Applies (SULA) calculator will be updated to include a Coronavirus Indicator. Once selected, the disbursements flagged with the Coronavirus Indicator will be excluded from the subsidized usage calculation.
• ED modified the Return of Title IV (R2T4) calculator to allow schools to perform an R2T4 calculation specifically for aid recipients who withdrew due to COVID-19-related circumstances. The updated tool will provide schools with a mechanism for reporting the amount of Title IV grant or loan assistance not returned due to the CARES Act provisions.

A copy of the Electronic Announcement is found at: https://ifap.ed.gov/electronic-announcements/092320CODSystemImpInfoAddCODSysChangesSupCARESActPhaseTwo

ED releases FY 2017 Official Cohort Default Rates

On Sept. 28, 2020, the Department of Education released the FY 2017 Official Cohort Default Rate (CDR) notification packages to all eligible and foreign schools only. The rates were publicly released on Sept. 30, 2020.

The Electronic Announcement is found at: https://ifap.ed.gov/electronic-announcements/092820FY2017OfficialCDRDistributedSept282020

On Sept. 30, 2020, the Department released data on the three-year FY 2017 Official Cohort default rates, which indicated that the national rate of 9.7% is slightly reduced from the three-year 10.1% rate for the FY 2016 national Official Cohort default rate. The for-profit sector also experienced a decline from 15.2% to 14.7%.

A chart of the FY 2017 Official Cohort rates by sector is found at: https://www2.ed.gov/offices/OSFAP/defaultmanagement/schooltyperates.pdf

ED investigates Princeton University for noncompliance with Title VI of the Civil Rights Act

After Christopher L. Eisgruber, President of Princeton University, announced in an open letter of Sept. 2, 2020, to the Princeton community that the institution’s educational program is and for decades has been racist, the Department of Education announced that it was investigating Princeton for a possible violation of Title VI of the Civil Rights Act. In the President’s letter, the President outlined steps that the institution planned to take “to address systemic racism at Princeton and beyond.” These steps included exploring the possibility of a new credit- or degree-granting program that would extend Princeton’s teaching to students who had been affected by racism and implementing “race-based diversity measures for hiring, procurement, teaching, fellowship, and research funding.”

In the letter to Princeton University, the Department said “[b]ased on its admitted racism, the U.S. Department of Education (“Education”) is concerned Princeton’s nondiscrimination and equal opportunity assurances in its Program Participation Agreements from at least 2013 to the present may have been false.” “Finally, the Department is further concerned Princeton’s many nondiscrimination and equal opportunity claims to students, parents, and consumers in the market for education certificates may have been false, misleading, and actionable substantial misrepresentations in violation of 20 U.S.C. § 1094(c)(3)(B) and 34 C.F.R. § 668.71(c).” As a result, the Department is opening the investigation of Princeton University and is seeking material in nine categories including the names of employees and outside advisors who contributed to the drafting of the President’s letter.

A copy of the Department’s letter is found at: https://www.princeton.edu/sites/default/files/documents/2020/09/Princeton-Letter-9-16-20-Signed.pdf

CFPB releases the first episode of a two-part podcast series on managing finances

The Consumer Financial Protection Bureau (CFPB) released the first episode of a two-part podcast series for students, parents, and practitioners on managing their finances before, during, and after college. The podcast series, Financial inTuition, will include interviews with experts in financial aid, student loans, financial coaching, and planning. The Financial inTuition podcast focuses on a variety of topics pertaining to saving and paying for higher education, managing money, and repaying student loan debt.

The episodes can be found at: https://www.consumerfinance.gov/practitioner-resources/students/financial-intuition/

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.