NAICU Washington Update

Cash Management Regulations Proposed

May 29, 2015

Spurred by concerns about improper arrangements between schools, banks, and third party servicers regarding students’ use of debit and prepaid cards, the Department of Education published a Notice of Proposed Rulemaking (NPRM) on May 18, 2015 (Federal Register, Vol. 80, No. 95, Part III, pp. 28484-28536). According to the Department, the “proposed regulations are intended to safeguard students from excess fees and provide students the freedom to choose how to access their federal student aid funds when paying for college.”

According to the U.S. Government Accountability Office, 29 percent of public institutions had financial agreements, while less than 7 percent of nonprofit and less than 4 percent of for-profit colleges, respectively, had agreements with financial account providers.

The NPRM proposes slightly different rules for institutional relationships with financial institutions and with third party servicers that handle financial aid. The proposed regulations are intended to insure that students have easy access to their Title IV aid, do not incur unreasonable and uncommon financial account fees on the aid, and are not led to believe they must open a particular financial account to receive the aid.

In addition to the extensive cash management regulations, the May NPRM proposes rules for retaking courses and clock-to-credit-hour conversation.

Comments are due by July 2, 2015, and can be submitted electronically via the Federal Register.

The NPRM emerged from negotiated rule-making that took place in early 2014, on a set of program integrity issues (See March 7, 2014 Washington Update). There was no consensus reached on the six disparate issues considered during the negotiations. As a result, the issues are being addressed separately. The first item addressed was the definition of adverse credit, which can preclude eligibility for PLUS Loans. Final rules have already been published for this issue (See October 29, 2014 Washington Update).

Two issues have not yet been addressed: requirements for distance education programs related to state authorization (See April 11, 2014 Washington Update), and the issue related to debit cards (See May 22, 2014 Washington Update). This NPRM contains the other three.

MORE News from NAICU