This Week In Washington
On Tuesday, the Treasury Department released a report that included an assessment and provided recommendations on how the U.S. Department of Education (ED) handles the Federal student loan portfolio and programs. Specifically, the report criticized ED saying that loan-servicing companies “lack[ ] effective minimum servicing standards,” and recommended that ED create a common servicing manual for companies to follow. The report slammed ED for lack of transparency on the loan portfolio’s performance, and recommended ED publish more information the how servicers perform and how ED estimates the cost of the loan programs. The report also offers support for institutional risk-sharing, potential state regulation of servicers, and using e-signatures to help borrowers.
On Monday, ED announced its intent to engage in negotiated rulemaking around issues of accreditation, state authorization, and more. In its official notice, ED stated it will focus on providing accreditors flexibility to encourage “innovation” in higher education. Among other things, the sessions will reevaluate online education requirements, the definition of the credit hour, competency-based education and the eligibility of certain religious institutions for some federal grants programs. This new higher education regulatory announcement comes on the heels of ED rewriting the Obama-era Borrower Defense to Repayment regulations and scrapping the Gainful Employment regulations almost entirely (see below). You can submit formal written comments until September 14, 2018. ED will host three public hearings on the proposals in September 2018 and plans to begin rulemaking sessions in January 2019.
Last Friday, the New York Times obtained a draft of ED’s rewrite of the Gainful Employment (GE) regulations, and the Times reports that ED is effectively scrapping the regulations altogether. The Obama-era rules required for-profit, vocational, and certain other programs to prove that their programs resulted in a significant number of students obtaining gainful employment after graduating or else risk eligibility for federal funding. During the negotiated rulemaking to craft a set of new GE regulations, negotiators discussed expanded GE to all institutions, including law schools (summaries in our previous weekly roundups in December, February, and March). According to the Times and other outlets, the only accountability provision under the new rules is institutions will now be required to track some program-level data that will be added to the College Scorecard (a site hosted by ED that contains data points about most higher education institutions). The regulations have not been officially published yet, so they could change from what the Times has seen. We will keep you posted on any new developments.
Last week, Senator Richard “Dick” Durbin (D-IL) introduced an amendment to a government spending bill that would bar federal subcontractors from using federal dollars to contest borrowers who claim repayment would cause an “undue hardship,” when trying to get their loans discharged in bankruptcy. The amendment would specifically protect four classes of borrowers: veterans deemed unemployable due to a service-connected disability; family caregivers of veterans; those receiving Social Security disability or whose only income is Social Security payments; and borrowers who have finished school but have spent at least five years earning less than $24,000 per year. The text of the amendment can be found here (pg. S5388).
News You Can Use
If Democrats take control of the House in November, expect the education committee to focus on higher education, teacher pay, and stronger oversight of the U.S. Department of Education.
As the cost of college continues to rise, the Federal Reserve Bank of St. Louis finds that racial wealth gaps are exacerbated, making it harder for college-educated African Americans to move into or remain in the middle class.
The following bill(s) have been recently introduced for consideration by the 115th Congress (2017-2018):
S. 3294 – Fund for Innovation and Success in Higher Education (FINISH) Act [Sen. Orrin Hatch (R-UT)] would allow certain federal grant recipients to use a portion of their funds to support initiatives that increase access to higher education for high-need students, increase degree attainment, and improve efficiency in higher education.
H.R. 6473 – Transparency in Student Loan Consultation Act of 2018 [Rep. Rosa DeLauro (D-CT)] would require schools to provide accurate and complete information to borrowers with respect to loan repayment options for federal student loan borrowers.