Federal Update – Jan. 26

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Smucker Amendment: The inclusion of the Smucker Amendment—which blocks the implementation of the 150% certification rule—in the final appropriations bill will likely be determined by negotiations during a formal conference committee between the House and Senate.

Chevron Doctrine: The Supreme Court heard oral arguments in two cases that could significantly impact the ability of federal agencies, including the U.S. Department of Education, to promulgate new regulations.

Chairwoman Foxx introduced H.R.6951, the College Cost Reduction Act, which is a bipartisan effort to fix the current student loan debt crisis. The legislation includes measures related to increased transparency, policies focused on access and affordability, and additionally provides accountability provisions focused on student success.

The accountability measures included in the College Cost Reduction Act are of particular importance to AACS members. Many of the accountability measures will repeal current regulations that are harmful to our membership, such as:

• Gainful Employment and Financial Value Transparency: Repeals current regulations by the Secretary and eliminates authority for any future regulations.
• 90/10 Rule: Repeals current regulations and eliminates authority for any future regulations.
• Financial Responsibility: Repeals current regulations and clarifies circumstances in which ED determines whether an institution is financially responsible; requires ED to undergo a new rulemaking process to update the financial responsibility ratios no later than 18 months after enactment.
• Changes in Ownership: Includes the Change of Ownership and Conversion Improvement Act (Rep. Owens and Rep. Miller Meeks), which repeals current regulations and reforms the process to require IHEs to pay an administrative fee when submitting change of control and conversion applications; these fees will be used by ED and the IRS to hire staff and reduce the application processing time as well as conduct oversight.
• Other Repeals: Repeals new regulations issued by ED related to closed school discharges, borrowers defense to repayment, pre-dispute arbitration, false certification, administrative capability, certification procedures, and ability to benefit, as well as guidance related to personal liability for owners of proprietary institutions. Prohibits any substantially similar regulation on these topics from being issued by ED.
• Loan Limits: Simplifies and streamlines the types of federal student loans offered to students and allows annual loan limits to vary by program.
• Loan Repayment: Restructures federal student loan repayment plans to two plans: a standard 10-year “mortgage-style” plan and one income-driven repayment (IDR) plan dubbed the “repayment assistance plan”. Current borrowers paying under one of the existing fixed repayment plans eliminated under the bill will be able to continue paying under those plans or choose to pay under the standard 10-year plan or the new repayment assistance plan.
• Institutional Accountability: IHEs will be required to compensate the government annually for a portion of the unpaid interest and principal on the loans associated with their former students based on the total price the institution charges students for a program of study and the value-added earnings of students after they graduate or, in the case of students who do not graduate, the IHE’s completion rate.

Smucker Amendment

The inclusion of the Smucker Amendment—which blocks the implementation of the 150% certification rule—in the final appropriations bill will likely be determined by negotiations during a formal conference committee between the House and Senate. The Smucker Amendment was included in the latest text of the Labor, HHS, and Education Appropriations Act that was approved by the House Appropriations Committee. The Senate’s Labor, Health and Human Services, and Education, and Related Agencies Appropriations Act was marked up this past July and did not include a similar amendment. Following the passage of House and Senate appropriations bills, the next step in the appropriations process is to hold a formal conference committee between the House and Senate to negotiate compromised text. As part of this process, Members from each chamber will be appointed as conferees to negotiate a compromise text, which then has to be approved by both chambers. The conferees are chosen from the membership of the Appropriations Committees.

As a reminder, Representative Lloyd Smucker (R-PA) introduced an amendment to the House, Labor, Health and Human Services, and Education Appropriations Bill that “prohibits the Department from using funds to implement, administer, or enforce a provision of their October 31, 2023 final rule that would prohibit education and training programs from exceeding their state’s minimum hours requirements.” The Amendment was in response to the Department’s Non-GE Final Rule, which included a provision that eliminated the 150% certification rule for Title IV institutions.

Continuing Resolution

On January 18, 2024, Congress passed another stopgap measure, funding the federal government (at current levels) through March 1 and March 8, 2024. This is the third Continuing Resolution that Congress has approved in FY 2024. The measure passed the House 314-108, and the Senate 77-18.

Republican Oversight of FAFSA Rollout

Sen. Bill Cassidy (R-LA), Rep. Virginia Foxx (R-NC) and other Republican Members are pressuring the Government Accountability Office to investigate the Department’s recent launch of the new Free Application for Federal Student Aid (“FAFSA”) application. The launch of the application took place this past December, however, it was met with several technical problems that prevented users from completing the application. This, in turn, caused a backlog of applications for the Department. The Department recently announced that these technical problems have been fixed and that the form is now available 24/7 for students and families. Over one million students and families have already filled out the new FAFSA application.

On January 17, 2024, the Supreme Court heard oral arguments in two cases that could significantly impact the ability of federal agencies, including the U.S. Department of Education, to promulgate new regulations. The two cases brought by fishing companies challenge a rule issued by the National Marine Fisheries Service that requires herring vessels to pay the salaries of federal monitors aboard those ships. These cases—Loper Bright Enterprises, Inc. v. Raimondo and Relentless, Inc. v. Department of Commerce—implore the Court to limit or entirely overturn the “Chevron doctrine,” a 40-year-old precedent and bedrock principle of American administrative law. The Court’s decisions in these cases will have ripple effects that extend far beyond the fishing industry, and may usher in a potential sea change in the law that would drastically curtail federal agencies’ discretion to interpret ambiguous laws across every federally regulated industry.

Negotiated Rulemaking Committee: Program Integrity and Institutional Quality

The Department held its first Negotiated Rulemaking session to develop new regulations on institutional quality and program integrity. The topics included: Secretary’s recognition of accrediting agencies, institutional eligibility including state authorization as a component of eligibility, program requirements for distance education, return of Title IV funds, cash management including timely student disbursements, and eligibility requirements for TRIO program participation.

The committee was comprised of non-federal negotiators from 15 constituency groups. The primary negotiator on the Rulemaking Committee representing proprietary institution is Jillian Klein. Ms. Klein is the senior vice president of government and external affairs for Strategic Education. David Cohen, Five Towns College and APC Board of Directors, is the alternate for the Rulemaking Committee.

A copy of the proposed regulatory text is available here. Updates on the student debt relief rulemaking process will be posted here.

Student Loan Forgiveness

The Department announced that it had approved $4.9 billion in student loan forgiveness. The debt relief was provided through two sources:

• $1.7 billion for nearly 29,700 borrowers through fixes to IDR that will provide borrowers with an accurate count of progress toward forgiveness and address longstanding concerns with misuse of forbearance.
• $3.2 billion for 43,900 borrowers through PSLF. This includes borrowers who have benefited through the limited PSLF waiver and ongoing regulatory improvements to the programs.

The Department announced that beginning on January 21, 2024, it will start providing forgiveness after as few as 10 years of payments for borrowers on the Saving on a Valuable Education (SAVE) Plan who originally took out $12,000 or less for college. Borrowers enrolled in SAVE who are eligible for early forgiveness will have their debts cancelled immediately starting next month, with no action on their part.

Penalties against Student Loan Servicers

The Department announced it is withholding payments to three student loan servicers as part of the Department’s continued efforts to strengthen protections for student loan borrowers and hold servicers accountable. The Department has found that Aidvantage, EdFinancial, and Nelnet all failed to meet contractual obligations to send timely billing statements to a combined total of 758,000 borrowers for the first month of repayment. As a result of identifying these errors, the Department is withholding payments of $2 million from Aidvantage, $161,000 from EdFinancial, and $13,000 from Nelnet based on the number of borrowers impacted by these errors.

Antitrust Lawsuit against Five Universities

Columbia, Duke, Brown, Yale and Emory have all agreed to settlements in an antitrust lawsuit, which alleged the Universities of colluding for the purpose of limiting financial aid packages offered to eligible students. The Universities will pay a total of $104.5 million with Columbia and Duke each paying $24 million, Brown paying $19.5 million, and Yale and Emory each paying $18.5 million. The funds will be given to students who were harmed by the actions of the Universities. A copy of the complaint can be found here.

Department Announcements

Final PDF versions of the 2024–25 FAFSA forms are now available on StudentAid.gov in both English and Spanish. After the FAFSA form is processed, the student will receive a FAFSA Submission Summary, which contains the answers provided on the FAFSA form and gives basic estimates about the student’s eligibility for federal student aid. To provide more information about the new FAFSA application, the Department is holding an additional webinar for schools in the Better (FAFSA®) Better Future Webinar Series. The webinar is on February 22, 2024, from 1:00 – 2:00 PM, EST.

The Secretary published a notice in the Federal Register announcing the 2024–25 award year deadline dates for the submission of requests and documents from postsecondary institutions for the Federal Perkins Loan (Perkins Loan) Program, Federal Work-Study (FWS), and Federal Supplemental Educational Opportunity Grant (FSEOG) programs (collectively, the “Campus-Based programs”), Assistance Listing Numbers 84.038, 84.033, and 84.007.

The Department has released the Application and Verification Guide of the 2024-2025 Federal Student Aid Handbook as well as the 2023-2024 FSA Assessments. The Federal Student Aid Handbook is posted digitally on Federal Student Aid’s Knowledge Center and consists of the Application and Verification Guide; nine numbered volumes; and appendices.

Closeout of all 2022–23 Campus-Based program awards will be completed by March 1, 2024, using the data submitted on the Fiscal Operations Report for 2022–23 and Application to Participate for 2024–25 (FISAP).

The Joint Consolidation Loan Separation Act (JCLSA), amended the Higher Education Act of 1965, as amended (HEA) to allow joint consolidation co-borrowers to apply to separate an existing joint Direct Consolidation Loan or Federal Consolidation Loan into individual Direct Consolidation Loans. The JCLSA allows for either joint application or separate application. Under the joint application option, each joint consolidation loan co-borrower applies for an individual Direct Consolidation Loan. Unless the co-borrowers agree on an alternate amount specified in a divorce decree, court order, or settlement agreement, each co-borrowers new individual Direct Consolidation Loan will be made for an amount equal to the co-borrowers’ portion of the remaining outstanding balance of the joint consolidation loan. Under the separate application option, a co-borrower who certifies that they have experienced an act of domestic violence or economic abuse from the other co-borrower, or that they are unable to reasonably reach or access the loan information of the other co-borrower, may apply separately for a new individual Direct Consolidation Loan, without regard to whether or when the other co-borrower applies.

Institutions participating in the FWS and FSEOG programs are normally required to provide a non-federal share under each program. Certain institutions, however, are eligible for a waiver of those requirements under 34 CFR 675.26(d) of the FWS regulations and 34 CFR 676.21(b) of the FSEOG regulations. To receive this waiver of the FWS and FSEOG non-federal share requirement, an institution must be designated by the Department of Education’s Office of Postsecondary Education Institutional Service (OPE/IS) as an eligible Title III or Title V institution under the Higher Education Act of 1965 (HEA). If an institution is designated as a Title III or Title V institution for federal fiscal year 2024, it will receive a waiver of the requirement for the non-federal share of earned compensation paid to students under the FWS Program and of FSEOG funds awarded to students for the 2024–25 award year.

The Department has published its annual experimental sites initiative 2023 annual report. The report provides updates on current experiments and a summary of completed experiments conducted as part of the Experimental Sites Initiative (ESI).

Other Federal Agencies Headlines

The Department of Veterans Affairs (VA), published a Final Rule amending its educational assistance regulations by eliminating the four 85/15 rule calculation exemptions for students in receipt of certain types of institutional aid. The Department of Veterans Affairs (VA), published a Final Rule, Amendments to 85/15 Rule Calculations, Waiver Criteria, and Reports, through a Federal Register Notice. The Notice is available here: Federal Register: 85/15 Rule Calculations, Waiver Criteria, and Reports. This rule is effective 30 days after date of publication in the Federal Register. However, VA believes it is in the best interest of the students, schools, and the Federal government to provide schools with an extended amount of time after publication of the rule to prepare for and mitigate any impacts these new rules may have. Therefore, VA will delay the applicability date to one year after the publication of this final regulation to ensure both that VA will have adequate time to train schools as much as needed about the regulatory provisions herein as well as allow schools enough time to implement any necessary changes in their policies to comply with these provisions.

The Consumer Financial Protection Bureau (CFPB) published a report on the CFPB’s oversight of student loan servicing practices in the early months of the resumption of federal student loan repayments after over three years of a payment pause due to the COVID-19 emergency. It concluded that borrowers are encountering long hold times when trying to reach their student loan servicer, experiencing significant delays in application processing times for income-driven repayment plans, and receiving inaccurate billing statements and disclosures. The CFPB has been closely monitoring student borrowers’ experiences during the return to repayment, using consumer complaints to identify emerging problems and using its supervisory authority to examine loan servicer conduct and performance.

For More Information

If you have any questions about this Update, please contact info@beautyschools.org.