NAICU Washington Update

On Most Issues Consensus Eludes Negotiated Rulemaking Committee

March 25, 2022

The Institutional and Programmatic Eligibility negotiated rulemaking committee concluded its three-months of work last week having covered many issues critical to private, nonprofit higher education. Of the seven broad topics considered, each of which had several underlying issues to be negotiated, consensus was reached on just two, one of which, the ability to benefit, applies to private, nonprofit higher education.  

In the instances where consensus is not reached, the Department of Education has the ability to rewrite the proposed regulation as it wishes and is not bound to language proposed by the committee. When consensus is reached, the Department is bound to the agreement when releasing its draft regulations for public comment and no negotiator is allowed to express negative views of the agreed upon language. 

Except for the few areas negotiators agreed on, the Department is now free to propose its own regulations, which are likely, but not required, to reflect the agency’s proposals at negotiated rulemaking.  There will then be a period of public comment in the near future before final rules are issued, which are expected by November 1, 2022, with an effective date of July 1, 2023.  NAICU will be actively engaged in the public comment period.

Emmanual Guillory, NAICU’s director of student and institutional aid policy, and Kelli Hudson Perry, assistant vice president for finance and controller at Rensselaer Polytechnic Institute, served as negotiators representing private, nonprofit institutions. 

NAICU has prepared a more detailed summary of the issue topics and outcomes, but the following are among the most important issues for the sector.  

Nonprofit Status of Institutions

The Department is concerned about the growing number of for-profit institutions converting to nonprofit status and whether they are truly behaving as nonprofits.  To protect the integrity of the nonprofit sector, the Department proposed new rules on those who convert that was generally acceptable.  However, the Department went a step further and proposed that any nonprofit that has any net earnings that benefit a private entity or a revenue-sharing agreement with any party (related or unrelated) that is unreasonable based on the market price could also lose its nonprofit status.  Consensus was not achieved.

Multi- State Licensing Requirements

The Department is concerned that distance education students pursuing careers that require state licensing may be enrolled in programs that do not meet the licensing requirements of the states.  Due to this, the Department proposed that licensure programs meet licensing requirements in both the state of the institution’s location and in the states where students are located. Current regulations only require institutions to disclose whether or not their programs meet the licensing requirements of all states. There was a great deal of push back from all sectors that this would be excessively burdensome, so consensus was not reached.  

Multi-State Consumer Protection Laws

The Department proposed that institutions meet the consumer protection laws for each state in which distance education is offered, regardless of NC-SARA status.  NC-SARA is deeply concerned that such a measure would greatly undermine their reciprocity agreements. No consensus was reached.  

Career Services

The Department proposed that all institutions offer adequate career services and defined what “adequate” must include.  The proposal was modified to allow institutions to set their own standards but ultimately consensus was not reached.

Gainful Employment (GE)

All programs at proprietary institutions are considered GE programs and all non-degree programs at public and private, nonprofit institutions are considered GE programs.  The Department wants to reinstate Obama Administration regulations (subsequently rescinded by the Trump Administration) that required student cohorts from each GE program to meet certain debt-to-earnings rates to continue to have Title IV eligibility.  The Department’s new proposal did not include an institutional appeals process for faulty data, and it also proposed that small programs (less than 30 graduates per year) that had not previously been counted under the rule, now be included by rolling together students from multiple graduation years or from multiple (but potentially unrelated) programs.  Most importantly, if an institution fails the debt-to-earnings rate or the new earnings threshold rate, the Secretary of Education may deem the entire institution ineligible for Title IV aid.  The Secretary would also have the authority to use the small program rates of the GE programs on campus to deem the entire institution ineligible for Title IV aid. More than half of all GE programs at private, nonprofit colleges are currently not considered under GE rules because of program size.  Consensus was not reached.

Financial Responsibility

After more than a decade of concerns about the financial responsibility composite score and system, negotiated rulemaking addressed the issue but did not address the most vexing problems of the composite score or the lack of an appeals process for mistaken scores.  In general, the proposals from the Department were aimed at adding a series of new accountability metrics under the financial responsibility framework that could trigger negative consequences for institutions.  The lack of a comprehensive approach to fixing current program weaknesses, in addition to excessive new consequences for institutions, prevented consensus from being reached.   

Transcript Withholding 

Several negotiators proposed to ban the practice of transcript withholding by institutions seeking to recoup funds owed by the student. Proponents saw this as an equity issue given that many low-income students of color are subject to transcript withholding. The Department proposed that institutions are banned from withholding transcripts if they are at risk of closure or if they made an error in administering a Title IV program that resulted in the student requesting the transcript owing the institution funds. Consensus was not reached because of concerns with unrelated components of the issue package.  

Verification of High School Diplomas

Current regulations state that institutions must follow their own procedures for validating a high school diploma.  However, the Department proposed to define what those procedures must be in cases in which the institution has reason to believe a diploma might not be valid, including how the institution obtains documentation from the state and the methods for verification.  Consensus was not reached.

90/10 (applies to for-profit institutions only)

The Department proposed, and negotiators agreed, to consider all federal benefits when calculating the 90%limit on the amount of revenue a for-profit institution can receive from federal sources.  This change will mean that GI bill and veterans’ educational benefits will now be included in the 90%calculation.

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