Reimbursement for Perkins Loan Cancellations
We all recognize as laudable federal law that provides Perkins Loan forgiveness for qualified borrowers who serve in public service fields such as teaching, nursing, and the military, but Congress has not funded the loan forgiveness program since 2010. Colleges and universities have been on the hook for these loan cancellations.
Now, the U.S. Department of Education has announced it will reimburse colleges and universities for these forgiven loans, the total for which over the last 10 years totals about $300 million. Though the Department has not released details, it has promised a letter “later this year” that will flesh out the details.
Higher Education Act Reauthorization
Higher Education Act Reauthorization continues to churn behind closed doors, with congressional staffers trying to iron out differences between the competing Republican and Democrat priorities. It is possible that the House Committee on Education and Labor, chaired by Rep. Bobby Scott (D-VA), will produce a bill with the hope of having it on the floor by the end of the year. It remains to be seen if it will be a bi-partisan effort.
As I’ve mentioned before, Sen. Lamar Alexander (R-TN), chairman of the Senate Health, Education, Labor and Pensions Committee, would desperately like to see a reauthorization pass before he retires in 2020. However, stumbling blocks with ranking minority member Sen. Patty Murray (D-ME) remain, prominently Title IX.
As reported last month, the House budget, which was very generous to student aid programs, was passed before the new spending caps were put into place. Senate Republicans also have different spending priorities. The bottom line: Senate Democrats were informed last week the Labor-HHS-Education bill would be funded at the same level as 2019, or $11 billion less than the House-passed bill.
While previously Senate budget writing for Labor-HHS-Education has been bipartisan, the meeting for mark-ups was cancelled until further notice. As pleased as we were with the House budget, we may well be disappointed in the Senate version. Avoiding cuts may be a victory.
The drafting and negotiation of Borrower Defense to Repayment regulations has not been a straight path. A quick history: Very few claims had been made under the broad regulations implemented during the Clinton administration, but the fall of Corinthian Colleges in 2015 demonstrated the need for enhanced borrower defense.
The final regulations produced by the Obama Administration had the objective of providing recourse to students who took out federal loans to attend for-profit institutions. They created a structure difficult for all schools to operate under, including creating a broader standard for “misrepresentation” that no longer included intent, and potentially burdensome institutional financial disclosure requirements.
The Trump administration put those final regulations on hold while conducting another round of negotiations, but a federal court ruled the delay violated federal administrative procedure rules, putting the Obama regulations back in play.
The new Trump administration regulations will go into effect July 1, 2020, and are the product of extensive negotiations that reflect the potential negative impact of the Obama regulations on private, non-profit institutions. The statute of limitations is now three years and group claims are no longer allowed. Additionally claimants no longer need be in active default to file a claim.
Potentially confusing for claimants are the three different regulatory standards that will apply, based on when students took out their federal loans.
Prior to July 1, 2017 – the original Clinton Administration regulations apply.
July 1, 2017 to June 30, 2020 – students are subject to the Obama Administration regulations.
After July 1, 2020 – The new regulations apply.
Admissions and the Department of Justice
For the last two years the Department of Justice (DOJ) has been conducting an investigation into the National Association for College Admission Counseling’s (NACAC) Code of Ethics and Professional Practice that could may impact admissions practices at our institutions.
In response to the DOJ’s investigation, NACAC announced a proposal to delete several provisions from its code of ethics DOJ believes constitute unlawful restrictions on competition in violation of federal antitrust laws:
- Preclude institutions from providing exclusive incentives to early decision applicants;
- Bar the recruitment of students who have committed to another college unless the students initiate an inquiry; and
- Prohibit the recruitment of transfer students unless the students initiate contact.
These changes that NACAC hopes will satisfy DOJ and avoid litigation, pertain to collective behavior. Individual campuses can develop and execute recruiting and admissions practices as they see fit. However, you will risk running afoul of DOJ if you cooperate with other institutions to continue these kinds of practices.