Recap: First Week of Negotiated Rule Making

The Department of Education held its first negotiated rule-making session of the Biden administration last week, during which stakeholders discussed their views on potential changes to several federal student aid programs, including closed-college discharges, total and permanent disability discharges, and Public Service Loan Forgiveness. This negotiated rule-making session, however, looked much different than sessions held during previous administrations.

The department is planning to rewrite regulations to improve student borrowers’ access to Title IV programs created by Congress and end “patterns of wrongdoing” by colleges that aren’t meeting expectations, said Under Secretary of Education James Kvaal on the first day of the session. What stood out from the discussions throughout the week is the need to focus on those most underserved by the current system, said Sarah Sattelmeyer, project director for education, opportunity and mobility at the think tank New America.

“The conversations this week further highlighted the need to ensure that reforms and programs governed by the regulations that are being negotiated are equity-focused and really explicitly consider and address the needs of underserved and underresourced populations, including communities of color, student parents, those who don’t complete a degree, veterans, et cetera,” Sattelmeyer said.

The biggest change for this negotiated rule making is that all the meetings are being held virtually due to the COVID-19 pandemic. That makes it more challenging for negotiators to talk among themselves throughout the negotiation and with members of the public who attend in person, said Karen McCarthy, vice president of public policy and federal relations at the National Association of Student Financial Aid Administrators.

The department has also added more student voices to the negotiating committee than there have been in previous sessions, said McCarthy. There are three student constituency groups represented in the makeup of the committee -- dependent students, independent students and student loan borrowers, as well as negotiators representing individuals with disabilities and military service members.

The committee includes two nonvoting advisers, one providing economic and higher education data and another advising on the qualifying employers for the Public Service Loan Forgiveness program. The adviser role is new and was added in response to requests from negotiators in the past who wanted research and data support that the department was limited in its ability to provide.

Now that the first session is complete, here’s where the negotiated rule-making process currently stands:

What’s happened so far? The department held three public hearings in June to solicit feedback on 14 topics for possible regulation. It then established the Affordability and Student Loans Committee and settled on nine topics for committee members to negotiate. It also established the Prison Education Program Subcommittee to consider proposed regulations granting Pell Grant eligibility to incarcerated students.

What happens next? The Affordability and Student Loans Committee will meet for two more sessions in November and December. At the end of the final session, the committee will vote on the draft regulatory language developed by the department and refined based on the input of the negotiators. If consensus is reached -- meaning that no member of the negotiating committee dissents -- the department will use the regulatory language agreed upon during negotiations in its Notice of Proposed Rulemaking, the published document of proposed regulations. If not, the department decides whether to proceed with regulations and has broad authority in developing the regulatory language. This session’s process of reaching final consensus will be different -- while committee members used to vote on the regulatory language for the entire package, this time they’ll be voting issue by issue.

Who is negotiating? The Affordability and Student Loans Committee has 16 primary negotiators and 16 alternates representing nonfederal stakeholder constituencies, including all types of postsecondary institutions, students, accrediting agencies, state attorneys general and financial aid administrators. The negotiators were selected by the department following a public request for nominees. On the first day of the session, there was a motion to add two members to the committee -- a student at a for-profit institution and a consumer advocate -- but consensus was needed and it wasn’t reached. One concern raised by observers on the makeup of the committee is the department’s decision to choose an administrator from Southern New Hampshire University to represent private nonprofit institutions, given that SNHU has one of the largest online enrollments in the country and isn’t entirely representative of the traditional private nonprofit sector.

What issues did they cover during Week 1? The committee discussed improvements to the process for granting total and permanent disability discharges, improving borrower access to closed-college discharges, eliminating interest capitalization for certain capitalizing events, improving the Public Service Loan Forgiveness application process, determining employer eligibility and defining full-time employment for the Public Service Loan Forgiveness program, the adjudication process for borrower defense to repayment, the postadjudication process for borrower defense to repayment, the process of recouping funds from institutions for approved borrower defense to repayment claims, pre-dispute arbitration and class action waivers, creating a new income-driven repayment plan, and improving borrower access to false certification discharges.

What did they decide? Because this was only the first session, committee members were able to reach tentative agreements quickly on some of the more straightforward issues -- like eliminating interest capitalization -- though the committee will still have to vote on final agreement on the regulatory language. The more contentious issues will come later in sessions two and three, said McCarthy.

Still, there were topics last week on which negotiators didn’t reach consensus. Most of those came during discussions about changes to borrower defense to repayment and the Public Service Loan Forgiveness program.

For borrower defense, those included the department’s proposals to establish a reconsideration process if a claim is denied or yields only partial relief and adopt a six-year limitation period for the department to seek recovery of funds from institutions. For Public Service Loan Forgiveness, negotiators didn’t reach consensus on whether to allow certain deferments and forbearances to count toward PSLF progress, requiring Federal Family Education Loan lender notifications to borrowers about PSLF eligibility and defining full-time employment as 30 hours for all borrowers.

And there were plenty of issues where negotiators agreed with the department’s proposals over all but still raised concerns. For example, the department is proposing to reinstate automatic closed-college discharges for students who don’t re-enroll at a different institution after their college closes. Negotiators raised questions about how equity could be better achieved, given the potential for harmful effects on at-risk borrowers who don’t receive automatic discharges and have to be aware of its availability in order to receive relief.

The next negotiated rule-making meeting will be held Oct. 18 through 20 for the Prison Education Program Subcommittee. The Affordability and Student Loans Committee will reconvene for session two on Nov. 1.