It has been an action-packed year thus far on the Federal regulatory front. In January, we shared a preview of the “coming attractions” and encouraged you to grab some popcorn and watch along with us. And, while we’re only through the first half of the year, our popcorn has been refilled multiple times!

small boxes of popcorn
Image by Devon Breen from Pixabay

And you may want to grab some more. Like the middle of a good mystery film, we now know the players, but we are left with many questions. What regulations will come out this year? What exactly will they require? What is the impact on my students and my institution? Stay tuned to find out…

Today, we would like to share with you the current status of the 2021-2022 Federal rulemaking committees and the timeline required to develop effective regulations. Additionally, we’ll share our teaser trailer for some other issues to watch for which we believe there will be either guidance or additional rulemaking.

Although this is a spoiler alert, please consider two takeaways from this post:

  • First, the U. S. Department of Education is juggling many matters including 19 issues from the two recent rulemaking committees, addressing the Government Accountability Office (GAO) report on OPMs, contemplating accessibility regulations, as well as Title IX, loan forgiveness, and more!
  • Second, the path from proposed language to final regulation has many time-consuming steps and must follow a strict calendar process making the ability to move all rulemaking issues to final regulations by November 1, 2022, a very difficult task.

The plot thickens and along with the release of summer blockbuster movies, the Federal regulatory action will continue, and we will keep the popcorn ready!

Negotiated Rulemaking for Higher Education 2021-2022

The Department is undertaking a Herculean task if they intend to move 19 issues from negotiated rulemaking through the many arduous steps to prepare and release the issues as final regulations to meet the November 1, 2022, deadline!

In the past year, the U.S. Department of Education under the Biden Administration has held two separate negotiated rulemaking committees.

The first in Fall 2021, was the Affordability and Student Loan Committee, focused on Borrower issues and Prison Education Programs.

The second, held in in Winter 2022, was the Institutional and Programmatic Eligibility Committee. Our previous posts have primarily focused on specific issues within the Winter 2022 rulemaking, which you can review: negotiated rulemaking surprises-February 2022, proposed changes to reciprocity and professional licensure-March 2022, and additional issues-March 2022.

If you would like a recap of the full picture of the Federal rulemaking process, go to the “Quick Recap” section at the bottom of this post. Please remember, the Department has many proposed rules in the hopper and a very strict and short timeline on which to act for the rules to become effective next year. If you decide to go to the Quick Recap, come back here. Otherwise, forge ahead.

Affordability and Student Loan Committee

In brief, this committee concluded in December 2021 having addressed approximately 12 issues, depending on how you count the various aspects of Borrower Defense. This committee reached consensus on four issues, which means that the Department is obligated to forward that language (listed below) as agreed upon by the Committee:

Institutional and Programmatic Eligibility Committee

Beginning in January, the Department began its second rulemaking committee covering seven issues. Most published reviews of this rulemaking focused on Gainful Employment and the 90/10 Rule, although there were five other very nuanced issues that were also addressed. This committee concluded in March 2022, reaching consensus on only two of the seven issues:

  • Ability to Benefit – Clarification of how a student who does not receive a high school diploma, or its equivalent can gain eligibility for Title IV Federal student aid.
  • 90/10 Rule – Federal regulations to implement Section 2013 of the American Rescue Plan Act to require that at least 10% of a proprietary institution’s revenue be derived from sources other than Federal educational assistance funds.

The Department is left to write five of the seven issues from this rulemaking, including two that we followed closely: Change of Ownership and Certification Procedures. We will be providing a more detailed look at these issues next week and share some of the work we have been doing behind the scenes to help support understanding of the nuances of the issues.

Issues to watch:

  • Change of Ownership:
    •  Revisions to the 34 CFR 600.2 definitions of Distance Education and Nonprofit Institution. The impact of these changes is unclear.
  • Certification Procedures:
    • Section 26: The Department to designate maximum hours for which a student is eligible for Title IV Federal financial aid for gainful employment programs that lead to a license or certification in a state.
    • Section 32: Professional Licensure: Institutions “ensure” that the curriculum satisfies the state educational prerequisites to obtain a license where the student is located at time of enrollment in order for the program to be eligible for Title IV Federal financial aid.
    • Section 32: Reciprocity: Institutions must comply with all state consumer protection laws both generally applicable and those specific to educational institutions. Looking for clarity regarding the Department’s view of the parameters of a State authorization reciprocity agreement.

What is next with rulemaking?

It is important for those watching the Federal rulemaking process unfold to remember that the review by the OMB is a critical and time-consuming part of the rulemaking process.

The next step is the Department’s submission of packages of rules to the Office of Management and Budget (OMB) for economic review. That time-consuming step has begun. There is consensus language for some of the issues submitted to OMB that is linked above.

However, for issues that did not reach consensus, we are awaiting the Department’s version that was written by the Department after the negotiated rulemaking meetings concluded.

  • On April 22, 2022, the first package of issues was received by OMB which includes the following issues from the Fall 2021 rulemaking: Borrower Release, Public Loan Service Forgiveness, Interest Capitalization, Total and Permanent Disability, False certification, and Closed School Discharge. As of this writing, this package of issues remains under review with the OMB.
  • On June 8, 2022, the second package of issues was received by OMB including two issues from the Fall 2021 rulemaking: Improving Income-Driven Repayment and consensus issue, and consensus issue, Pell Grants for Incarcerated Individuals and two issues from the Winter 2022 rulemaking: Clarifying Rules on Changes in Ownership and consensus issue, 90/10 Rule.

Most issues from the Fall 2021 rulemaking have now been moved forward for OMB review. We believe that the release of the consensus issue, Ability to Benefit, from the Winter 2022 rulemaking will be submitted this summer. However, we are not clear about next steps for the remaining issues from the Winter 2022 rulemaking that did not reach consensus: Administrative Capability, Gainful Employment, Financial Responsibility, and the issue we are watching closely, Certification Procedures. You can follow submissions on the OMB website by visiting List of Regulatory Actions Currently Under Review, hovering over the “ED” column on the “Regulatory Actions Currently Under Review by Agency,” and clicking to show the actions currently under review.

What Will Be Included This Year is Unclear

Trusted experts have shared the following possible pathways for the remaining Winter 2022 issues:

The Education Department has many proposals in the hopper. Due to capacity issues in the Department and OMB, it is unclear which additional issues will be released this year for implementation in July 2023 and which will have to wait.

  • The Department will prioritize some issues to move forward for this year to be released as final regulations by November 1, 2022, and may hold off on releasing some issues until later in 2023; or
  • The Department will pursue release of multiple packages including all issues in some sort of “NPRMpalooza,” attempting to seek a final regulation release for all issues by November 1, 2022.
    • Pursuing release of all regulations as final by November 1, 2022, causes the effective date of the regulations to be July 1, 2023.
    • Release of regulations as final after November 1, 2022, to be effective July 1, 2024, raises the concern that the regulations could be reversed by Congress utilizing the Congressional Review Act (CRA) if there is a change in administration.

Additional Issues to Watch

Online Program Managers (OPMs)

The Department expressed its agreement, appreciation, and a future response to findings of the May 5, 2022, U.S. Government Accountability Office (GAO) report addressing oversight of arrangements between colleges and OPMs. The report, Education Needs to Strengthen Its Approach to Monitoring Colleges’ Arrangements with Online Program Managers ultimately concluded that colleges and auditors lacked clear instructions from the Department to ensure that arrangements between colleges and OPMs were not violating the Higher Education Act (HEA) ban on incentive compensation. The GAO made recommendations to strengthen oversight of these arrangements.

An institution may use OPMs to help with the management of the institution’s online programs. These OPMs are third party contractors for which the institution contracts to receive certain services. These services can include student recruiting, program marketing, marketing analytics, course development, faculty and student support, and more. Institution’s use OPMs for degree programs and for short programs such as bootcamps.

OPMs often contract to receive a share of the tuition revenue as payment for their services or are paid on a fee-for-service basis. However, the HEA prohibits institutions from providing incentive payments. The Department issued guidance in the form of a Dear Colleague Letter in 2011 that clarified its view that institutions may provide payment to third parties for student recruiting based upon a sharing of the tuition revenue IF the payment is for bundled services for which recruiting is included and if there are other safeguards preventing abusive recruiting practices.

Because the GAO concluded that the Department had not provided clear instructions to monitor these arrangements, the following recommendations were made:

  1. The Department to provide additional instructions for auditors in the Compliance Supplement to identify and assess possible incentive compensation ban violations. The additional instructions should provide the auditors with direction to ask institutions specifically about OPMs and assist auditors to address compensation information for the OPM staff who provide recruiting services.
  2. The Department to provide institutions with more instructions about how they will provide the information about OPM arrangements during compliance audits and program reviews. These additional instructions should direct the institution to identify OPM contracts that include recruiting and provide the auditors with copies of the contracts that inform how the OPM staff is to be compensated.

The Department responded with their agreement to these recommendations and their intention to propose revisions to the Compliance Supplement to strengthen the oversight of the ban on incentive compensation. It is likely that we will see additional instructions and guidance for institutions that will support the Department’s enforcement of the ban. The extent to which the Department addresses revision or withdrawal of the 2011 guidance providing for an exception for “bundled service” remains to be seen. Stay tuned on this issue!

Intent to Amend Regulations Implementing Section 504 Disability Civil Rights Law

The Department of Education’s Office for Civil Rights (OCR) announced its intention to propose regulation amendments to the Department’s regulations at 34 C.F.R. pt. 104, implementing Section 504 of the Rehabilitation Act of 1973. This announcement includes a call for public written comments addressing how to improve the current regulations. Comments must be submitted by June 30, 2022 and sent to Section504@ed.gov.

The purpose of the development of amendments is to strengthen and protect the rights of students with disabilities. Section 504 of the Rehabilitation Act of 1973 prohibits discrimination on the basis of disability in public and private programs and activities that receive federal financial aid. This includes schools and postsecondary institutions. The regulations to implement Section 504 were originally implemented in 1977, forty-five years ago. The Department notes that the Department’s 504 regulations have largely been unaltered despite many other changes in the world. Therefore, there is an important need for updates to the regulations. The Department’s OCR looks forward to listening and soliciting public input including from people with disabilities to make improvements to the disability rights regulations.

Looking ahead

Although the Department is clearly hard at work, the timing and specifics of their plans are not completely clear, at this moment. However, we do believe that steps will be taken through the summer that will direct our communications with our readers. The State Authorization Network (SAN) created the U.S. Department of Education Rulemaking 2021-2022 Information Here! webpage that will continue to be updated with new information as it becomes available.

When proposed regulations are released, we hope you will consider participating in the rulemaking process by submitting a public comment. We will provide analysis of the proposed language and share key points for you to consider. The Department will appreciate public comments in support of regulations as well as comments that share the stories of concern for the impact on students. We look forward to sharing more with you soon!

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Quick Recap of the Negotiated Rulemaking Process Steps

It helps to understand the specific steps that must be accomplished and the strict timeline that must be followed to march the volumes of proposed language forward toward becoming Federal regulations. You can find details about the Department’s negotiated rulemaking documents and recordings of the meetings on the U.S. Department of Education website.

A master calendar guides the steps to reach the effective date for regulations tied to Title IV Federal Financial Aid. Generally speaking, the following steps are taken:

  • Announcement of intent to initiate rulemaking.
  • Announcement of the issues to be addressed along with request for nominations for the rulemaking committee, which should include:
    • Key stakeholders affected by the designated issues.
    • Subject matter experts regarding the designated issues.
  • The committee meets, typically, for a full week each month over three months. The meetings are streamed, for the public to view.
  • During the final day (or so) of week three, the committee votes on the proposed language.
  • Consensus is the goal for the voting, which means 100% agreement on the language.
  • If consensus is met, the language can move forward as proposed regulations subject to public comment.
  • If there is no consensus, the Department may write the regulations and release proposed regulations subject to public comment.
  • The Department must analyze the public comments.
  • Final regulations released by November 1, 2022, will become effective July 1, 2023 (for the financial aid year).
  • Final regulations released after November 1 will not be effective until the July 1, 2024.

*Please note that the Department must consider the time required for the Office of Management & Budget (OMB) to review the proposed regulations for economic impact before they can be released as proposed regulations subject to public comment AND the OMB must review the final regulations before they can be released to try to meet the November 1, 2022, deadline.


Cheryl Dowd

Senior Director, State Authorization Network & WCET Policy Innovations


cdowd@wiche.edu

@dowdcm

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