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From: Michael Brustein, Julia Martin, Steven Spillan, Kelly Christiansen
Re: Federal Update
Date: January 5, 2018
Legislation and Guidance
Congress Returns this Month to Address Spending, Healthcare, Immigration
ED to Propose Stricter Standard for Borrower Defenses
ED Opens Application Period for Innovative Assessment Pilot
Warren Asks for Investigation on ED’s Use of Earnings Data
Members of Congress found their first day back from the holiday recess delayed this week as a rare winter cyclone swept the east coast from Boston to Florida, cancelling flights and making travel difficult. But once they return, lawmakers will have to address a number of pressing issues.
First on the list is appropriations. The most recent continuing resolution (CR) passed late last month only extended federal funding for the current fiscal year – including funding provided by the Department of Education (ED) to States on July 1 – until January 19. Negotiations have been complicated by a number of factors – most fundamentally, a disagreement over whether to raise Congressionally-determined spending caps, but also questions over whether to extend the Children’s Health Insurance Program (CHIP) and how to handle the Trump Administration’s cancellation of the Deferred Action for Childhood Arrivals (DACA) immigration program. Some lawmakers have predicted that yet another temporary budget measure will be needed to give Congress an opportunity to address these issues, though White House officials and President Trump have met with Congressional leaders this week in an attempt to resolve some of the conflicts. There will be an additional meeting this weekend at Camp David to discuss appropriations.
Congress may also have some work to do on healthcare. Despite the passage of a tax bill last month that would eliminate the individual mandate to purchase healthcare – part of the Affordable Care Act (ACA) – Congressional leaders have said there is still more to do. Senators Lamar Alexander (R-TN) and Patty Murray (D-WA) say they are working on bipartisan legislation to address some of the cost and operations issues with the ACA, while Republican leadership has indicated they want to work on legislation that would modify entitlement programs like Medicare and Medicaid – including school-based Medicaid services.
And if Congress can get all that done, they may turn to the reauthorization of the Higher Education Act (HEA). Legislation to modify many parts of the HEA and its accompanying regulations passed the House Committee on Education and the Workforce in December, but has not yet been taken up by the full House. The Senate Committee on Health, Education, Labor, and Pensions is also reportedly drafting HEA legislation and members have said they want to continue work on Perkins reauthorization, but the Committee may be preoccupied with healthcare for the time being.
The U.S. Department of Education (ED) has announced plans to issue new requirements next week stating that student loan borrowers be required to demonstrate that their institution intended to mislead them before they can have their loans discharged. This proposal is already drawing criticism from consumer and student groups, especially because it seems to be a drastic departure from student borrower rules promulgated by the Obama Administration. Student advocates are already arguing that the proposed rule would effectively mean no borrowers are able to get relief on their student loan debt through a provision of federal statute known as borrower defense to repayment. ED can expect to receive an overwhelming number of comments if this proposal makes it to the final stages of the rulemaking process.
ED is in the midst of an overhaul of borrower-defense regulations through a negotiated rule-making process launched after Secretary Betsy DeVos delayed a 2016 Obama Administration rule from taking effect. ED officials will make the proposal at the second round of meetings next week between negotiators from a wide range of interest groups. The proposed language would require that a borrower offer “clear and convincing evidence” that his or her college acted with an intent to deceive or misrepresent in claims about job placement rates, licensure passage rates, transferability of credits, enrollment requirements or other facts involving the institution and its graduates.
The proposal would also allow successful claims when a borrower shows that his or her college acted with a “reckless disregard for the truth” or when the borrower has won a judgment against the college in a court or through an arbitrator. The new standards would apply to borrower-defense claims filed on loans issued beginning in July 2019. While the language leaves open other circumstances for a successful claim, critics believe most borrowers will not have the resources, for example, to file a lawsuit against their college.
Before leaving office, the Obama Administration crafted a new rule that provided a federal standard for loan relief and clarified how borrowers could pursue their claims. But the Trump Administration’s proposed requirement is far removed from what was in the 2016 rule and even from what ED is currently using to adjudicate existing claims, according to Clare McCann, the Deputy Director of Higher Education Policy at New America and a former ED official in the Obama Administration.
Negotiators tasked with reaching consensus on a new rule will have the opportunity to weigh in on the proposed language Monday. Colleges themselves, which are among the interest groups represented at negotiations, would likely welcome the tougher standard. Steve Gunderson, President and CEO of Career Education Colleges and Universities, said in an emailed statement that the Obama Administration had crafted the 2016 borrower-defense rule to target the for-profit sector. He said asking for clear and convincing evidence “seems fair.”
When the Obama Administration was finalizing its borrower-defense rule in 2016, even college lobby groups outside the for-profit sector argued that borrowers should have to demonstrate intent for a successful claim. They complained that otherwise a mistake by a college employee in a publication or on a website could leave the institution on the hook for the cost of student loan relief. And the National Association of Student Financial Aid Administrators said ahead of the release of a final rule in 2016 that ED should make a distinction between misleading statements and a pattern of fraud or deception.
But gathering evidence of intent would “likely be nearly impossible for borrowers,” the Obama Administration said in comments published along with the final 2016 rule. ED, at the time, said institutions themselves possessed the best evidence of intent to mislead. And it found that intent on the part of the institution was irrelevant to whether a borrower was harmed.
While the rulemaking committee will hear comments and criticisms from negotiators, ED is not bound by any such comments unless the entire committee reaches a consensus, which seems unlikely. As such, it is entirely possible this proposal could make it into any rules proposed for public comment. Even then, ED is only required to consider such comments. Unless critics could successfully argue that the inclusion of this proposal was arbitrary and capricious on the part of the Department, the final rule could stand.
Andrew Kreighbaum, “Proposal Would Raise the Bar for Borrowers Seeking Loan Relief,” Inside Higher Ed, January 3, 2018.
In a Federal Register notice published on Wednesday, the U.S. Department of Education (ED) announced that the application period for the Innovative Assessment Demonstration Authority authorized by the Every Student Succeeds Act (ESSA) is now open.
State educational agencies (SEAs) chosen to participate in the pilot program will be granted the authority to develop and implement innovative assessments in a small number of districts in their States, with a goal of expanding Statewide in the future. No additional funds, however, are provided to participating SEAs, and only 7 States or consortia of States will be selected to participate.
Although the pilot program provides flexibility to States to innovate with new assessments, there are still a number of requirements that those assessments would have to meet, such as ensuring test results are comparable across districts and that a representative sample of students from different subgroups across the State are taking the test, among others.
ED encourages SEAs planning to apply for the program to notify ED by February 2 of their intent to submit an application, but it is not required. Applications are due to ED on April 2, 2018. The Federal Register notice announcing the application period is available here.
Alyson Klein, “Trump Education Dept. Hits the Start Button on Innovative Tests,” Education Week: Politics K-12, January 2, 2017.
Senator Elizabeth Warren (D-MA) has asked the U.S. Department of Education’s (ED’s) Office of Inspector General to investigate ED’s overall use of earnings data to grant partial loan forgiveness to student borrowers who claim they were defrauded by their colleges via a letter sent earlier this week.
ED said late last month that it would offer some loan forgiveness to former students of Corinthian Colleges, which folded last year. Forgiveness would be calculated by comparing the average earnings of students in similar vocational programs, collected under the so-called “gainful employment” rule. That rule penalizes colleges for producing graduates who are not able to use their credentials to secure sufficient employment to repay their loans. Under this calculation, applicants will receive full loan forgiveness if their earnings are less than 50 percent of their peers’.
But Warren said that she is not sure the earnings data, which is supplied by the Social Security Administration, can be used for this purpose without further proceedings, saying that ED must first publish a notice in the Federal Register and solicit public comment in order to be permitted to use the data in this way. The current data use agreement, she writes, only allows the data to be used for gainful employment and has not been changed. Warren also noted that this is an imprecise way to calculate forgiveness as the earnings data only reflects the take-home pay of those who have completed programs, while many of the Corinthian borrowers never finished school.
Danielle Douglas-Gabriel, “Elizabeth Warren Wants the Education Dept.’s Use of Earnings Data Investigated,” The Washington Post, January 2, 2018.
To stay up-to-date on new regulations and guidance from the U.S. Department of Education, register for one of Brustein & Manasevit’s upcoming webinars. Topics cover a range of issues, including grants management, the Every Student Succeeds Act, special education, and more. To view all upcoming webinar topics and to register, visit www.bruman.com/webinars.
The Federal Update has been prepared to inform Brustein & Manasevit, PLLC’s legislative clients of recent events in federal education legislation and/or administrative law. It is not intended as legal advice, should not serve as the basis for decision-making in specific situations, and does not create an attorney-client relationship between Brustein & Manasevit, PLLC and the reader.
© Brustein & Manasevit, PLLC 2018
Contributors: Julia Martin, Steven Spillan, Kelly Christiansen