This analysis was prepared by Venable, LLP, on behalf of AACOM.

On May 24, 2021, the Department of Education (the Department) announced it will hold virtual public hearings on June 21, 23, and 24 to receive stakeholder feedback on potential issues for future negotiated rulemaking sessions. Following the public hearings, the Department will solicit nominations for non-federal negotiators who can serve on the negotiated rulemaking committees, which will convene in late summer 2021. 

Individuals who would like to make comments at the public hearings must register by sending an email message to negreghearing@ed.gov no later than 12:00 PM (EST) on the business day prior to the public hearing at which they wish to speak. More information on the public hearings is available here. 

The Department announced more than a dozen topics for future regulatory action, which include the following that are relevant for osteopathic medical education:

Institutional Eligibility for Federal Student Aid Programs 

• Certification procedures for participation in federal financial aid programs (34 C.F.R. § 668.13): To participate in the Title IV programs, an institution of higher education (institution) must satisfy the program integrity triad, which includes (1) state authorization (i.e., legal authority to operate a postsecondary educational program in a state); (2) accreditation by a Department-recognized accrediting body; and (3) certification by the Department. Under the certification prong, the Department is responsible for verifying the first two prongs and evaluating an institution’s financial responsibility and administrative capability to administer the Title IV programs. An institution can be certified to participate in Title IV for up to six years before applying for recertification.  
  If an institution is seeking initial certification, the Department can grant it up to one year of provisional certification. The Department can also grant an institution provisional certification for up to three years if the Department is determining the institution’s administrative capacity and financial responsibility for the first time, if the institution has experienced a partial or total change in ownership, or if the Department determines that the administrative or financial condition of the institution may hinder its ability to meet its financial responsibilities. Additionally, if an accrediting agency loses its Department recognition, any institution that was accredited by that agency may continue to participate in Title IV programs for up to 18 months after the Department’s withdrawal of recognition.

• Financial responsibility for participating institutions of higher education, such as events that indicate heightened financial risk (34 C.F.R. Subpart L): As part of its certification process (discussed above), the Department must determine whether an institution is financially responsible. The Department does so based on the institution’s ability to provide the services described in its official publications, to administer the Title IV programs in which it participates, and to meet all its financial obligations.  
   
  A public institution is deemed financially responsible if its debts and liabilities are backed by the full faith and credit of the state or another government entity. A for-profit or private nonprofit institution is financially responsible if it meets specific financial ratios (e.g., equity ratio) established by the Department, has sufficient cash reserves to make any required refunds (including the return of Title IV funds), is meeting all of its financial obligations, and is current on its debt payments.  
   
  Even if an institution meets the above requirements, the Department does not consider it financially responsible if the institution does not meet third-party financial audit requirements or if the intuition violated past performance requirements, such as failing to satisfactorily resolve any compliance issues identified in program reviews or audits. Alternatively, if an institution does not meet the above standards of financial responsibility, the Department may still consider it financially responsible or give it provisional certification, under which it may operate for a time, if it qualifies under an alternative standard. These alternative standards include submitting an irrevocable letter of credit to the Department that is equal to at least 50% of the Federal Student Aid (FSA) program funds that the institution received during its most recently completed fiscal year, meeting specific monitoring requirements, or participating in the Title IV programs under provisional certification.

• Standards of administrative capability (34 C.F.R. § 668.156): Along with demonstrating financial responsibility, an institution must demonstrate its ability to properly administer the Title IV programs in which it participates and to provide the education it describes in public documents (e.g., marketing brochures). Administrative capability focuses on the processes, procedures, and personnel used in administering Title IV funds and indicators of student success. 
   
  Administrative capability standards address numerous aspects of Title IV administration, including using the Department’s electronic processes, developing a system to identify and resolve discrepancies in Title IV information, referring cases of Title IV student fraud or misconduct to the Department Office of Inspector General, offering all students financial aid counseling, and having an internal system of checks and balances that includes dividing the functions of authorizing payments and disbursing funds between two separate offices.  
   
  Institutions are required to have a capable staff member to administer Title IV programs and coordinate those programs with other aid received by students. This person must also have an adequate number of qualified staff to assist with aid administration. Before receiving Title IV funds, an IHE must certify that neither it nor its employees have been debarred or suspended by a federal agency. 
   
  Relating to indicators of student success, an institution must have satisfactory academic progress (SAP) standards for students receiving Title IV funds. In general, institutions must develop SAP standards that establish a minimum grade point average (or its equivalent) for students and a maximum time frame in which students must complete their educational programs. 
   
  An institution may also be deemed administratively incapable if it has a high cohort default rate (CDR). An institution will be found administratively incapable if one of the following conditions is met:
  1. An institution’s CDR is greater than 40% in one year for loans made under the Federal family Education Loan (FFEL) program and William D. Ford Federal Direct Loan (DL) program;
  2. An institution’s CDR is 30% or greater for each of the three most recent fiscal years for loans made under the FFEL and DL programs; or
  3. An institution’s CDR is 15% or greater in any single year for loans made under the Federal Perkins Loan program.

• Change of ownership and change in control of institutions of higher education (34 C.F.R. § 600.31): Generally, a private nonprofit, private for-profit, or public institution that undergoes a change in ownership that results in a change in control ceases to qualify as an institution eligible to participate in the Title IV programs. A change of ownership that results in a change in control includes any change by which a person who has or thereby acquires an ownership interest in the entity that owns the institution or the parent of that entity, acquires or loses the ability to control the institution.  
   
  To reestablish eligibility and resume participation in the Title IV programs, the institution must (i) demonstrate to the Department that after the change in ownership and control, the institution satisfies all the applicable requirements contained in 34 C.F.R. §§ 600.4, 600.5, and 600.6, except that for-profits or postsecondary vocational institutions need not have been in existence for two years before seeking eligibility; and (ii) the institution qualifies to be certified to participate under 34 C.F.R. part 668, subpart B.

• Gainful employment (formerly located in 34 C.F.R. Subpart Q): Most nondegree programs offered by public and private nonprofit institutions must prepare students for “gainful employment in a recognized occupation.” Gainful employment requirements also apply to almost all programs offered by for-profit and postsecondary vocational institutions, regardless of whether they lead to a degree. In response to concerns about the quality of programs that prepare students for gainful employment and the level of student debt assumed by individuals who attend these programs, the Department under the Obama Administration issued final rules on gainful employment. However, the Trump Administration repealed the Obama-era gainful employment regulations. 
   
  The Obama-era regulations required gainful employment programs to meet minimum performance standards (i.e., debt-to-earnings (D/E) ratios) to be eligible for Title IV programs. They also required institutions to disclose specific information about its gainful employment programs to students and report information to the Department to calculate D/E ratios.  
   
  Under the framework, the Department would have annually calculated two D/E rates for each gainful employment program, the discretionary income rate, and the annual earnings rate. These rates measured a gainful employment program’s completers’ debt (their annual loan payments) as a percentage of their post-completion earnings. Using these measures, institutions would be considered “passing,” “in the zone,” or “failing.” Programs that failed in two out of any three consecutive years or that were in the zone for four consecutive years would have been be ineligible for Title IV participation for three years. 
   

Student Eligibility for Federal Student Aid 

• Ability to Benefit (ATB) (34 C.F.R. § 668.156): The ATB provision in the Higher Education Act permits individuals without a high school diploma or equivalent to qualify for federal financial aid for postsecondary education when they participate in an eligible career pathway. ATB may be demonstrated by passing an examination approved by the Department or by successfully completing six credits or 225 clock hours of college work applicable to a certificate or degree offered by a postsecondary institution. A career pathway program combines occupational skills training, counseling, workforce preparation, high school completion, and postsecondary credential attainment.

Student Loan Discharges and Other Student Protections 

• Borrower Defense to Repayment (34 C.F.R. §§ 682.410, .411, 685.206, .222): The borrower defense to repayment program allows federal student loan borrowers to seek cancellation of their DL program loans if their institution misled the student or engaged in other conduct or violated state law related to the student’s loans or to the educational services provided. In March, the Department announced it would streamline the borrower defense relief process by rescinding the formula for calculating partial relief and adopting an approach for granting full relief under regulations now in effect.

• Closed school discharges (34 C.F.R. §§ 685.214, 682.402): The closed school discharge option permits a student to seek discharge of their federal student loans if the student’s school suddenly closes while they are enrolled. To be eligible for a 100% discharge, the student must have been unable to complete their program because their school closed and:
  1. The student was enrolled or was on an approved leave of absence when their school closed;
  2. The student’s school closed within 120 days after the student withdrew, if the loans were first disbursed before July 1, 2020; or
  3. The student’s school closed within 180 days after they withdrew, if the loans were first disbursed on or after July 1, 2020.

A student is not eligible if they are completing a comparable educational program through a teach-out, by transferring academic credits or hours earned at the closed school to another school, or by any comparable means, or the student completed all the coursework for the program before the school closed, even if they did not receive a diploma or certificate.

• Discharges for borrowers with a total and permanent disability (TPD) (34 C.F.R. §§ 674.61, 682.402, 685.213): A TPD discharge relieves a borrower from having to repay a DL program loan, a FFEL program loan, and/or a Federal Perkins Loan or to complete a TEACH Grant service obligation. To qualify for a TPD discharge, the borrower must complete and submit a TPD discharge application, along with documentation showing that they meet the Departments requirements for being considered totally and permanently disabled.
  1. VA Documentation: Veterans qualify for a TPD discharge by providing documentation from the VA that shows they have received a VA disability determination because they (1) have a service-connected disability that is 100% disabling; or (2) are totally disabled based on an individual unemployability rating.
  2. SSA Documentation: Individuals eligible for Social Security Disability Insurance or Supplemental Security Income can qualify for a TPD discharge if they provide a copy of their Social Security Administration (SSA) notice of award or Benefits Planning Query showing that the borrower’s next scheduled disability review will be five to seven years or more from the date of their last SSA disability determination.
  3. Physician’s Certification: An individual can also qualify for a TPD discharge by having a physician certify on the TPD discharge application that the borrower is unable to engage in any substantial gainful activity due to a physical or mental impairment that (i) can be expected to result in death; (ii) has lasted for a continuous period of at least 60 months; or (iii) can be expected to last for a continuous period of at least 60 months.

• Discharges for false certification of student eligibility (34 C.F.R. §§ 685.215(a)(1), 682.402): A borrower may be eligible for discharge of a DL loan or FFEL loan if their school falsely certified their eligibility to receive a loan. A borrower may qualify under any of the following three categories:
  1. ATB: The school falsely certified the borrower’s eligibility to receive the loan based on the student’s ability to benefit from its training, and the student did not meet the ATB student eligibility requirements that were in effect at the time the school determined the student’s eligibility.
  2. Disqualifying Status: The school certified the borrower’s eligibility to receive the loan, but at the time of the certification, the student had a status (e.g., physical or mental condition, age, criminal record, or other circumstance) that disqualified them from meeting the legal requirements for employment in the student’s state of residence in the occupation for which the program of study was preparing the student.
  3. Unauthorized Signature or Unauthorized Payment: The school signed the student’s name on the loan application or promissory note without the student’s authorization or the school endorsed the student’s loan check or signed their authorization for electronic funds transfer without the student’s knowledge, and the loan money was not given to the student or applied to charges the student owed to the school.

• Mandatory pre-dispute arbitration and prohibition of class action lawsuits provisions in institutions’ enrollment agreements (formerly 34 C.F.R. § 685.300) and associated counseling about such arrangements (34 C.F.R. § 685.304): The Obama Administration issued regulations that prohibited colleges from requiring students to give up their right to sue their college, whether directly or through a class-action lawsuit. These protections were repealed by the Trump Administration.  
   

Student Loan Repayment and Forgiveness 

• Income-driven loan repayment plans (34 C.F.R. §§ 682.209, 682.215, 685.208, 685.209): Most federal student loans are eligible for at least one income-driven repayment plan. An income-driven repayment plan sets a borrower’s monthly student loan payment at an amount that is intended to be affordable based on a borrower’s income and family size, which may be as low as $0 per month. Currently, the Department offers four income-driven plans:
  1. Revised Pay As You Earn Repayment Plan (REPAYE Plan), which generally caps payments at 10% of a borrower’s discretionary income and forgives any unpaid balance after 20 years of qualifying payments, if all loans in repayment under the plan were for undergraduate study, and 25 years, if any loans in repayment under the plan were for graduate or professional study.  
     Any federal student loan borrower is eligible for the REPAYE Plan.
  2. Pay As You Earn Repayment Plan (PAYE Plan), which generally caps payments at 10% of a borrower’s discretionary income, but payments will never exceed the 10-year Standard Repayment Plan amount. Any unpaid balance will be forgiven after 20 years of qualifying payments.
     To qualify, the borrower must be a new borrower (i.e., no outstanding balance on a DL or FFEL loan when the borrower received a DL or FFEL loan after October 1, 2007, and the borrower must have received a disbursement of a DL loan on or after October 1, 2011). Additionally, the payment the borrower would be required to make under the PAYE plan (based on income and family size) must be less than what the borrower would pay under the Standard Repayment Plan with a 10-year repayment period.
  3. Income-Based Repayment Plan (IBR Plan), which generally caps payments at (i) 10% of a borrower’s discretionary income for new borrowers on or after July 1, 2014, or (ii) 15% of a borrower’s discretionary income for borrowers who are not new borrowers on or after July 1, 2014. Payments will never exceed the 10-year Standard Repayment Plan amount. Any unpaid balance will be forgiven after 20 years of qualifying payments for new borrowers on or after July 1, 2014 and 25 years for borrowers who were not new borrowers on or after July 1, 2014. 
     To qualify, the borrower must be a new borrower (i.e., no outstanding balance on a DL of FFEL loan when the borrower received a DL or FFEL loan after October 1, 2007, and the borrower must have received a disbursement of a DL loan on or after October 1, 2011). Additionally, the payment the borrower would be required to make under the IBR plan (based on income and family size) must be less than what the borrower would pay under the Standard Repayment Plan with a 10-year repayment period.
  4. Income-Contingent Repayment Plan (ICR Plan), which generally caps payments at the lesser of (i) 20% of the borrower’s discretionary income, or (ii) what the borrower would pay on a repayment plan with a fixed payment over the course of 12 years, adjusted for income. Any unpaid balance will be forgiven after 25 years of qualifying payments. 
     Any borrower with eligible federal student loans can enroll in the ICR Plan. Additionally, this is the only available income-driven repayment option for parent PLUS loan borrowers.

• Public service loan forgiveness (PSLF) (34 C.F.R. § 685.219): The PSLF program incentivizes careers in public service by granting tax-free student loan forgiveness to borrowers who make 120 qualifying monthly payments under a qualifying income-driven repayment plan while working full-time for a qualifying employer, such as a government agency, tax-exempt nonprofit organization, non-exempt nonprofit that provides public services.

Please contact AACOM Government Relations at aacomgr@aacom.org with questions or for further information.

Click here to return to the AACOM Action Center.