NAICU Washington Update

Education Department to Re-Issue Notice of Proposed Rulemaking

January 30, 2019

In a surprising revelation, the U.S. Department of Education has announced it intends to re-issue a Notice of Proposed Rulemaking (NPRM) document outlining a new approach to the Borrower Defenses to Repayment regulations.
In a federal negotiated rulemaking panel held in mid-January 2019, the Department revealed that instead of finalizing the currently proposed regulations it will, instead, issue a completely new NPRM. Though not unprecedented, it is rare for the Department to take such a step. As a result of issuing a new NPRM, the Department must reopen the docket for public comments and responses before it can finalize the regulations. The final regulations must be published by November 1, 2019 to be implemented on July 1, 2020 for the 2020-21 academic year.
In addition to the new NPRM, the Department also signaled it intends to propose two major policy changes that depart from its July 2018 NPRM. The first change is related to student eligibility for a closed school discharge. Under the previously issued NPRM, a student would be ineligible for loan forgiveness if their closed school had offered the student the opportunity to continue their pursuit of the degree program through an accreditor-approved teach out plan. The Department intends to abolish this proposal in the new NPRM. The Department is also rumored to be dropping a proposal that students must enter loan default before they can submit a claim to have their loans forgiven. Both changes are widely viewed to be more borrower friendly.
The Department published an NPRM to rewrite the Obama-era Borrower Defenses to Repayment regulations in July 2018. Following the publication of an NPRM and the completion of a public comment period, the Department will typically issue final regulations for implementation by colleges and universities. In the case of the Borrower Defenses to Repayment Regulations, however, the Department missed a key publication deadline which resulted in an indefinite delay in the publication of the final regulations.
As a further complication, a federal judge ruled in October 2018 that Secretary DeVos’ delay of the Obama-era rule violated federal administrative procedure guidelines. As a result, the Department of Education has been forced to implement the Obama-era Borrower Defenses rules until the Trump Administration finalizes its own proposal. The Obama-era rules are likely to stay in effect until July 1, 2020.

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