NAICU Washington Update

Education Department to Miss Publication Deadline for Regulations

October 16, 2018

The immediate futures of the Borrower Defenses to Repayment and Gainful Employment regulations are in doubt after the Department of Education revealed that it will likely miss a key publication deadline.
In the Higher Education Act, Congress mandates that the Department of Education must publish certain regulations by November 1, in order for those regulations to be implemented in the next award year. Final regulations regarding both the Gainful Employment and Borrower Defenses to Repayment would need to be published by November 1, 2018 in order to go into effect for the 2019-2020 award year (which begins on July 1, 2019). Should the Department miss the publication deadline, the regulations would not go into effect until the second award year after that publication date at the earliest – in this case, the award year beginning on July 1, 2020.
However, it has been made public through court documents that the Department does not believe it will be able to meet the November 1, 2018 publication date for either the Gainful Employment or Borrower Defenses to Repayment regulations. This means that the final regulations will not be able to go into effect on campuses until July 1, 2020.
As a reminder, the Borrower Defenses to Repayment regulations govern the terms and conditions under which a borrower can have their federal student loans forgiven by the Department if their college or university has engaged in fraudulent or misleading activity. Complicating things further, a recent Washington Update story outlines an ongoing court case in which a federal judge ruled that Secretary DeVos acted unlawfully in delaying certain parts of the Borrower Defenses to Repayment regulations. The U.S. District Court for the District of Columbia ruled on October 16, 2018 to clear the way for the re-implementation of the Obama-era borrower defenses regulations.
While this would not have presented a major problem to the Trump Administration had it met the November 1, 2018 publication deadline for its new Borrower Defenses regulations, missing the deadline means that the Department could be required to enforce the Obama Administration’s rules until the 2020-2021 award year. Assuming there are no additional unforeseen publication setbacks, the Trump Administration’s final regulations likely will replace the Obama Administration’s regulations on July 1, 2020.
The Gainful Employment regulations are aimed at vocational and certificate programs at all colleges and universities, as well as degree programs at for-profits schools. The regulations have a long and complicated regulatory and judicial history, but were finalized by the Obama Administration in 2014. After debt-to-earnings ratios, as required by the regulations, were published for the first time in 2016. the Trump Administration delayed reporting and enforcement of the Obama-era rules until award year 2019-2020. Failing to meet the November 1, 2018 publication deadline will require the Department to take additional administrative action to further delay the rule, and could leave the Department vulnerable to pending litigation brought by Attorneys General from several states.

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