NAICU Washington Update

Consensus Eludes Rulemaking Negotiators on Borrower Defenses to Repayment and Gainful Employment

February 23, 2018

After weeks of debate, negotiators have failed to find consensus in the rulemaking committee on borrower defenses to repayment, and are still working to find common ground on gainful employment. 
Borrower Defenses to Repayment
After failing to reach consensus on borrower defenses to repayment, the Department of Education now enjoys full authority to write a proposed rule regulating borrower defenses to repayment in whatever manner it chooses. The earliest that any such rule could be implemented is July 1, 2019.
The borrower defenses negotiators could not reach agreement on numerous policy issues, including the statute of limitations for bringing claims, and the applicable standard of evidence on which claims will be judged. Other contentious issues included whether an institution would be held liable for a claim if the school unintentionally misrepresented a fact, as well as the materiality of that misrepresentation on whether a student relied on it when making an enrollment decision.
Of note, the subcommittee on financial responsibility submitted a series of proposals to the negotiators to ease reporting compliance based on recent FASB changes. While the recommendations are limited to technical changes due to the scope of the negotiations, some of the major challenges confronting financial statement reporting are addressed in the recommendations. 
Gainful Employment
A similar fate seems likely in the gainful employment negotiated rulemaking committee. While a final week of negotiations is scheduled for March, bridging the vast divides among the varying sectors represented in the negotiations will be difficult.
The main debate in the committee deals with the question of whether all majors at all institutions will be required to disclose gainful employment statistics to prospective and enrolled students. Currently, the gainful employment regulations apply only to certificate programs at nonprofit and public institutions, but all programs at for-profit institutions. During the negotiations, the Department has proposed taking the penalties for failure out of the current regulations so all programs at all institutions would be under the same, uniform reporting requirements.  Should consensus not be reached, the Department will similarly have the authority to write proposed regulations without further input.

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