What is a significant rule?
Significant regulatory action is a term used to describe an agency rule that has had or might have a large impact on the economy, environment, public health, or state or local governments. These actions may also conflict with other rules or presidential priorities. As part of its role in the regulatory review process, the Office of Information and Regulatory Affairs (OIRA) determines which rules meet this definition.
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The Program Integrity and Improvement rule is a significant rule issued by the U.S. Department of Education effective April 7, 2016, that amended department regulations concerning cash management. The rule implemented amendments to the Student Assistance General Provisions regulations under the Higher Education Act of 1965.[1]
HIGHLIGHTS
Name: Program Integrity and Improvement
Agency: Office of Postsecondary Education, Department of Education
Type of significant rule: Economically significant rule
Timeline
The following timeline details key rulemaking activity:
- April 7, 2016: The Department of Education announced early implementation of the final rule, changing the effective date from July 1, 2016, to April 7, 2016.[2]
- April 7, 2016: The Department of Education published a correction to the final rule.[3]
- October 30, 2015: The Department of Education published a final rule.[1]
- July 2, 2015: The Department of Education closed the comment period.[4]
- May 18, 2015: The Department of Education published a notice of proposed rulemaking and opened the comment period.[4]
Background
President Barack Obama (D) signed the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 into law in an effort to govern relationships between higher education institutions and credit card providers. The act implemented regulations to enforce protections for college students, transparency requirements, and eligibility standards. Around the same time, Congress authorized a ban on incentives for preferred student loans under the Higher Education Opportunity Act of 2008. This change prompted a shift to a direct loan program to implement the Obama administration's student loan reforms. Changes implemented by the CARD Act and the Obama administration's student loan reforms led colleges to seek alternative strategies for increasing revenue, such as "offering banking products to their students in the form of debit and prepaid cards issued through agreements with financial services providers."[4]
Government reports by the United States Public Interest Research Group (USPIRG) and the Government Accountability Office (GAO) outlined what they refer to as troubling practices by certain financial service providers. The Department of Education summarized the practices in the proposed rule published in the Federal Register, which included the following:[4]
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- Providers prioritizing disbursements to their own affiliated accounts over aid recipients' preexisting bank accounts;
- Providers and schools strongly implying to students that signing up for the college card account was required to receive Federal student aid;
- Private student information unrelated to the financial aid process being given to providers before aid recipients consented to opening accounts;
- Access to the funds on the college card was not always convenient; and
- Aid recipients being charged onerous, confusing, or unavoidable fees in order to access their student aid funds or to otherwise use the account.[5]
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In response to the practices outlined in government reports, the Department of Education proposed amendments to the cash management regulations under the Higher Education Act of 1965 in an effort to promote "more equitable treatment of student aid recipients."[4]
Summary of the rule
The following is a summary of the rule from the rule's entry in the Federal Register:
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The Secretary amends the cash management regulations and other sections of the Student Assistance General Provisions regulations issued under the Higher Education Act of 1965, as amended (HEA). These final regulations are intended to ensure that students have convenient access to their title IV, HEA program funds, do not incur unreasonable and uncommon financial account fees on their title IV funds, and are not led to believe they must open a particular financial account to receive their Federal student aid. In addition, the final regulations update other provisions in the cash management regulations and otherwise amend the Student Assistance General Provisions. The final regulations also clarify how previously passed coursework is treated for title IV eligibility purposes and streamline the requirements for converting clock hours to credit hours.[1][5]
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Summary of provisions
The following is a summary of the provisions from the final rule's entry in the Federal Register:[1]
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The regulations—
- Explicitly reserve the Secretary's right to establish a method for directly paying credit balances to student aid recipients;
- Establish two different types of arrangements between institutions and financial account providers: “tier one (T1) arrangements” and “tier two (T2) arrangements”;
- Define a “T1 arrangement” as an arrangement between an institution and a third-party servicer, under which the servicer (1) performs one or more of the functions associated with processing direct payments of title IV funds on behalf of the institution, and (2) offers one or more financial accounts under the arrangement, or that directly markets the account to students itself or through an intermediary;
- Define a “T2 arrangement” as an arrangement between an institution and a financial institution or entity that offers financial accounts through a financial institution under which financial accounts are offered and marketed directly to students. However, if an institution documents that, in one or more of the three recently completed award years, no students received credit balances at the institution, the requirements associated with T2 arrangements do not apply. If, for the three most recently completed award years, the institution documents that on average fewer than 500 students and less than five percent of its enrollment received credit balances then only certain requirements associated with T2 arrangements apply;
- Require institutions that have T1 or T2 arrangements to establish a student choice process that: prohibits an institution from requiring students to open an account into which their credit balances must be deposited; requires an institution to provide a list of account options from which a student may choose to receive credit balance funds electronically, where each option is presented in a neutral manner and the student's preexisting bank account is listed as the first and most prominent option with no account preselected; and ensures electronic payments made to a student's preexisting account are initiated in a manner as timely as, and no more onerous than, payments made to an account made available pursuant to a T1 or T2 arrangement;
- Require that any personally identifiable information shared with a financial account provider as a result of a T1 arrangement before a student makes a selection of that provider (1) does not include information about the student other than directory information under 34 CFR 99.3 that is disclosed pursuant to 34 CFR 99.31(a)(11) and 99.37, with the exception of a unique student identifier generated by the institution (that does not include a Social Security number, in whole or in part), the disbursement amount, a password, PIN code, or other shared secret provided by the institution that is used to identify the student, and any additional items specified by the Secretary in a Federal Register notice; (2) is used solely for processing direct payments of title IV, HEA program funds, and (3) is not shared with any other affiliate or entity for any other purpose;
- Require that the institution obtain the student's consent to open an account under a T1 arrangement before the institution or account provider sends an access device to the student or validates an access device that is also used for institutional purposes, enabling the student to use the device to access a financial account;
- Require that the institution or financial account provider obtain consent from the student to open an account under a T2 arrangement before (1) the institution or third-party servicer provides any personally identifiable information about that student to the financial account provider or its agents, other than directory information under 34 CFR 99.3 that is disclosed pursuant to 34 CFR 99.31(a)(11) and 99.37 and (2) the institution or account provider sends an access device to the student or validates an access device that is also used for institutional purposes, enabling the student to use the device to access a financial account;
- Mitigate fees incurred by student aid recipients by requiring reasonable access to surcharge-free automated teller machines (ATMs), and, for accounts offered under a T1 arrangement, by prohibiting both point-of-sale (POS) fees and overdraft fees charged to student account holders, and by providing students with the ability to conveniently access title IV, HEA program funds via domestic withdrawals and transfers in part and in full up to the account balance, without charge, at any time following the date that such title IV, HEA program funds are deposited or transferred to the financial account;
- Require that contracts governing T1 and T2 arrangements are conspicuously and publicly disclosed;
- Require that cost information related to T1 arrangements is conspicuously and publicly disclosed;
- Require that cost information related to T2 arrangements is conspicuously and publicly disclosed when on average over three years five percent or more of the total number of students enrolled at the institution received a title IV credit balance or the average number of credit balance recipients for the three most recently completed award years is 500 or more;
- Require that institutions that have T1 arrangements establish and evaluate the contracts governing those arrangements in light of the best financial interests of students; and
- Require that where a T2 arrangement exists and where either on average over three years five percent or more of the total number of students enrolled at the institution received a title IV credit balance, or the average number of credit balance recipients for the three most recently completed award years is 500 or more, the institution establish and evaluate the contract governing the arrangement in light of the best financial interests of students.
The regulations also—
- Allow an institution offering term-based programs to count, for enrollment status purposes, courses a student is retaking that the student previously passed, up to one repetition per course, including when a student is retaking a previously passed course due to the student failing other coursework, and
- Streamline the requirements governing clock-to-credit-hour conversion by removing the provisions under which a State or Federal approval or licensure action could cause a program to be measured in clock hours.[5]
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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
- ↑ 1.0 1.1 1.2 1.3 1.4 1.5 Federal Register, "Program Integrity and Improvement," October 30, 2015
- ↑ Federal Register, "Program Integrity and Improvement," April 7, 2016
- ↑ Federal Register, "Program Integrity and Improvement; Corrections," April 7, 2016
- ↑ 4.0 4.1 4.2 4.3 4.4 Federal Register, "Program Integrity and Improvement," May 18, 2015
- ↑ 5.0 5.1 5.2 Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
