Public Interest Comment: Dept. of Education's Student Assistance & Loan Programs

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By: Daniel R. Pérez
September 07, 2018

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The George Washington University Regulatory Studies Center improves regulatory policy through research, education, and outreach. As part of its mission, the Center conducts careful and independent analyses to assess rulemaking proposals from the perspective of the public interest. This comment on the Department of Education’s (ED) proposal to amend the regulations governing the Direct Loan Program does not represent the views of any particular affected party or special interest, but is designed to evaluate the effect of ED’s proposal on overall consumer welfare.

Introduction

The Department published a final rule on November 1, 2016 which made substantive changes to its treatment of borrower defenses and other loan discharges (i.e., loan forgiveness for borrowers) related to its Federal Direct Loan Program. The final rule also broadened the agency’s ability to recover losses directly from institutions resulting from approved borrower defenses. Finally, it expanded the conditions under which postsecondary schools would have to satisfy additional requirements to continue being eligible to be paid by borrowers using federal funds appropriated under title IV of the Higher Education Act (HEA). This rule had an original effective date of July 1, 2017.

However, in response to the California Association of Private Postsecondary Schools (CAPP) court challenge to the 2016 final rule, ED issued both a final rule on June 16, 2017 delaying its implementation until further notice and a proposed rule to establish negotiated rulemaking committees to inform changes to its Federal Direct Loan Program.[1] Additional regulatory actions taken by ED have further delayed the effective date until July 1, 2019. [2]

ED’s current proposed rule would rescind a majority of the changes made by the 2016 rule which have not yet taken effect. Additionally, the proposed rule would make several new amendments to the regulations governing ED’s Federal Direct Loan Program—with which schools have had to comply since 1992 to be eligible to be paid by student borrowers using federal funds appropriated under title IV of the Higher Education Act (HEA).[3]

ED estimates its proposed rule would have annual federal budget savings of $1.27 billion over 10 years compared to changes from the 2016 rule that would otherwise go into effect on July 1, 2019 (i.e. in the absence of the proposed rule). That makes it a deregulatory action under Executive Order 13771 (E.O. 13771).[4] The Department specifically requests comments on “complying with…Executive Orders 12866 and 13563 and their overall requirement of reducing regulatory burden that might result from these proposed regulations.”

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[1]    Here, ED cited its authority under section 705 of the Administrative Procedure Act (APA) to postpone the effective date of its regulatory actions “[w]hen an agency finds that justice so requires…pending judicial review.” 82 FR 27621. Available at: https://www.federalregister.gov/documents/2017/06/16/2017-12562/student-assistance-general-provisions-federal-perkins-loan-program-federal-family-education-loan

[2]    Subsequent to the June 2017 final rule and proposed rule, ED issued an interim final rule (IFR) on October 24, 2017—citing its requirement under the Master calendar—which further delayed the effective date of the 2016 rule to July 1, 2018; on the same date it issued its IFR, ED also issued a notice of proposed rulemaking (NPRM) which further delayed the effective date until July 1, 2019 (citing the agency’s inability to finalize negotiated rulemaking before November 1st of that year—i.e. the master calendar requirement). 82 FR 49114 Available at: https://www.federalregister.gov/documents/2017/10/24/2017-22851/student-assistance-general-provisions-federal-perkins-loan-program-federal-family-education-loan; 82 FR 49155. Available at: https://www.federalregister.gov/documents/2017/10/24/2017-22850/student-assistance-general-provisions-federal-perkins-loan-program-federal-family-education-loan. It is worth noting here the relevance of section 482 of the HEA, since its criteria set the effective date of regulatory changes affecting any programs under title IV of the HEA. According to 20 U.S.C. 1089, Master calendar: “any regulatory changes initiated by the Secretary…that have not been published in final form by November 1 prior to the start of the award year…shall not become effective until the beginning of the second award year after such November 1 date.” 20 U.S.C. 1089(c)(1).

[4]    Executive Order 13771 of January 30, 2017 “Reducing Regulation and Controlling Regulatory Costs.” Available at: https://www.gpo.gov/fdsys/pkg/FR-2017-02-03/pdf/2017-02451.pdf