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Institutional Eligibility Under the Higher Education Act of 1965, as Amended; Student Assistance General Provisions; Federal Perkins Loan Program; Federal Family Education Loan Program; and William D. Ford Federal Direct Loan Program rule (2023)

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The Institutional Eligibility Under the Higher Education Act of 1965, as Amended; Student Assistance General Provisions; Federal Perkins Loan Program; Federal Family Education Loan Program; and William D. Ford Federal Direct Loan Program rule is a significant rule issued by the U.S. Department of Education effective July 1, 2023, that established department regulations regarding institutional eligibility for certain student financial aid programs under the Higher Education Act.[1]

HIGHLIGHTS
  • Name: Institutional Eligibility Under the Higher Education Act of 1965, as Amended; Student Assistance General Provisions; Federal Perkins Loan Program; Federal Family Education Loan Program; and William D. Ford Federal Direct Loan Program
  • Code of Federal Regulations: 34 CFR Parts 600, 668, 674, 682, and 685
  • Agency: Office of Postsecondary Education, Department of Education
  • Type of significant rule: Economically significant rule

    • Timeline

    The following timeline details key rulemaking activity:

    Background

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    President Lyndon Johnson (D) signed the Higher Education Act (HEA) into law on November 8, 1965, in an effort to strengthen educational resources and financial assistance for college students by increasing federal grants to universities, creating low-interest student loans, and issuing scholarships. Title IV of the HEA established standards for offering financial assistance to college students, which governed Student Assistance General Provisions regulations.[4][1]

    Provisions of the HEA, as amended, established eligibility conditions to grant loan discharges to certain borrowers. The Department of Education argued that "too many borrowers have been unable to access loan relief authorized by statute. In some situations, this has been due to regulatory requirements that created unnecessary or unfair burdens for borrowers," according to the rule. In response to the department's concerns, amendments to the regulations were proposed on July 13, 2022, to modify discharges available to borrowers for federal student loan programs under the HEA.[1]

    Summary of the rule

    The following is a summary of the rule from the rule's entry in the Federal Register:

    “ The Secretary establishes new regulations governing the William D. Ford Federal Direct Loan (Direct Loan) Program to establish a new Federal standard and a process for determining whether a borrower has a defense to repayment on a loan based on an act or omission of their school. We also are amending the Direct Loan Program regulations to prohibit participating schools from using certain contractual provisions regarding dispute resolution processes and to require certain notifications and disclosures by institutions (institutions or schools) regarding their use of mandatory arbitration. Additionally, we are amending the Direct Loan regulations to eliminate interest capitalization in instances where it is not required by statute. We are also amending the regulations governing closed school discharges and total and permanent disability (TPD) discharges in the Federal Perkins Loan (Perkins), Direct Loan, and Federal Family Education Loan (FFEL) programs. We are also amending the regulations governing false certification discharges in the Direct Loan and FFEL programs. Finally, we are amending the regulations governing Public Service Loan Forgiveness (PSLF) in the Direct Loan program to improve the application process, and to clarify and expand definitions for full-time employment, qualifying employers, and qualifying monthly payments. The changes would bring greater transparency and clarity and improve the administration of Federal student financial aid programs to assist and protect students, participating institutions, and taxpayers.[1][5] ”

    Summary of provisions

    The following is a summary of the provisions from the final rule's entry in the Federal Register:[1]

    “ The final regulations—
    • Amend the Direct Loan regulations to establish a new Federal standard for BD claims applicable to applications received on or after July 1, 2023. Applications pending on July 1, 2023, will also be considered under the new standard. In addition, this final rule expands the existing definition of misrepresentation, provides an additional basis for a BD claim based on aggressive and deceptive recruitment practices, and allows claims based on State law standards for loans first disbursed prior to July 1, 2017.
    • Provide that the Department will use a preponderance of the evidence standard to determine whether the institution committed an actionable act or omission and, as a result, the borrower suffered detriment, such that the circumstances warrant BD relief and the borrower's BD claim should be approved. In determining whether relief is warranted the Secretary will consider the totality of the circumstances, including the nature and degree of the acts or omissions and of the detriment caused to borrowers.
    • Provide for a full discharge of all remaining loan balances and a refund of all amounts paid to the Secretary for loans associated with an approved BD claim.
    • Establish processes for group BD claims that may be formed in response to evidence provided by third-party requestors or at the Secretary's discretion, including based on prior Secretarial Final Actions. We define Secretarial Final Actions as fine, limitation, suspension, or termination actions taken by the Department against the institution, denying the institution's application for recertification, or revoking the institution's provisional program participation agreement.
    • Stop interest accrual on the borrowers' loans beginning 180 days after the initial grant of forbearance or stopped collections in the case of an individual BD claim and immediately upon formation for a group BD claim.
    • Issue decisions on claims within a certain period or the loans will be deemed unenforceable.
    • Establish a reconsideration process for review of denied BD claims.
    • Establish a process for recouping the cost of approved discharges.
    • Prohibit institutions that wish to participate in title IV programs from requiring borrowers to agree to mandatory pre-dispute arbitration agreements or waiver of class action lawsuits.
    • Require institutions to disclose publicly and notify the Secretary of judicial and arbitration filings and awards pertaining to a BD claim.
    • Eliminate interest capitalization on Direct Loans where such capitalization is not required by statute.
    • Modify the Perkins, FFEL, and Direct Loan regulations to streamline the application process for a TPD discharge by expanding the Department's use of Social Security Administration (SSA) continuing disability review codes beyond “Medical Improvement Not Expected” when deciding if a borrower qualifies for TPD discharge.
    • Revise the Perkins, FFEL, and Direct Loan regulations to eliminate the 3-year post-discharge income monitoring period for borrowers eligible for TPD discharge to allow borrowers to retain their discharges without unnecessary paperwork burden.
    • Allow borrowers to receive a TPD discharge if the established onset date of their disability as determined by SSA was at least 5 years prior to the application to better align the regulations with statutory requirements for a TPD discharge.
    • Expand the list of health professionals who may certify that a borrower is totally and permanently disabled to include licensed nurse practitioners (NPs), physician's assistants (PAs), and clinical psychologists to help borrowers more easily complete the application for a TPD discharge.
    • Amend the Perkins, FFEL, and Direct Loan regulations to simplify the closed school discharge process by expanding access to automatic discharges and clarify the circumstances when borrowers who reenroll in a comparable program are not eligible for a discharge.
    • Streamline the FFEL and Direct Loan false certification regulations to provide one set of regulatory standards that will cover all false certification discharge claims.
    • Clarify that, to determine eligibility for a false certification discharge, the Department relies on the borrower's status at the time the Direct loan was originated, and at the time the FFEL loan was certified.
    • Revise the regulations for PSLF to improve the application process, expand what counts as an eligible monthly payment, expand the definition of “full-time” employment, and provide additional clarifying definitions of public service employment to reduce confusion and to clearly establish the definitions of qualifying employment for borrowers.
    • Expand the definition of “employee” or “employed” to include someone who works as a contracted employee for a qualifying employer in a position or provides services which, under applicable State law, cannot be filled or provided by a direct employee of the qualifying employer.[5]
    		 ”

    Significant impact

    See also: Significant regulatory action

    The Office of Management and Budget (OMB) deemed this rule economically significant pursuant to Executive Order 12866. An agency rule can be deemed a significant rule if it has had or might have a large impact on the economy, environment, public health, or state or local governments. The term was defined by E.O. 12866, which was issued in 1993 by President Bill Clinton.[1]

    Text of the rule

    The full text of the rule is available below:[1]

    See also

    External links

    Footnotes

    1. ↑ 1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 Federal Register, "Institutional Eligibility Under the Higher Education act of 1965, as Amended; Student Assistance General Provisions; Federal Perkins Loan Program; Federal Family Education Loan Program; and William D. Ford Federal Direct Loan Program," November 1, 2022
    2. ↑ Federal Register, "Institutional Eligibility Under the Higher Education Act of 1965, as Amended; Student Assistance General Provisions; Federal Perkins Loan Program; Federal Family Education Loan Program; and William D. Ford Federal Direct Loan Programs; Correction," July 6, 2023
    3. ↑ 3.0 3.1 Federal Register, "Student Assistance General Provisions, Federal Perkins Loan Program, Federal Family Education Loan Program, and William D. Ford Federal Direct Loan Program," July 13, 2022
    4. ↑ Federal Student Aid, "Gainful Employment Information," accessed April 20, 2023
    5. ↑ 5.0 5.1 Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
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