NAICU Washington Update

Gainful Employment and Borrower Defense to Repayment Regulations Get Public Hearing

July 11, 2017

The U.S. Department of Education recently held a public hearing in Washington, DC to solicit feedback on its plans to renegotiate the gainful employment and borrower defense to repayment regulations. The Department is also holding a public hearing in Dallas, Texas.
More than 50 stakeholders offered testimony, often pitting consumer advocacy groups against the for-profit college industry. Generally, the consumer advocacy groups have called for the Department to immediately implement both the gainful employment and borrower defense to repayment regulations.  However, the for-profits applauded the Department for its decision to delay elements of the gainful employment regulations, and its consideration of renegotiation of both Obama-era regulations.
NAICU testified and submitted a brief letter in which it detailed its opposition to using the financial responsibility standards as a proxy for financial stability. NAICU has asked the Department to convene a separate negotiated rulemaking panel, devoted solely to fixing the non-profit financial responsibility standards. Using the flawed, outdated, and often miscalculated financial responsibility ratios could have a devastating impact on small and under-resourced institutions. Errors made by the Department have consistently required financially stable non-profit colleges to seek costly letters of credit. Some of the problems with the financial responsibility standards are outlined in the report published by the NAICU Financial Responsibility Task Force in 2012. Further changes to non-profit accounting standards, as mandated by the Financial Standards Accounting Board (FASB), make a reevaluation of the financial responsibility standards a necessity.
Following the public hearings, the Department will announce its plans to move forward in the renegotiation process. The Department will solicit nominations for negotiators, with negotiations likely to begin in November or December of this year. A final rule must be published by November 1, 2017 in order to meet Master Calendar requirements for a July 1, 2018 implementation date; if a final rule is not published before November 1, 2017, the earliest that the renegotiated regulations can be implemented will be July 1, 2019. 

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