Posted Date: July 31, 2018

Author:  Office of Postsecondary Education

Subject: Notice of Proposed Rulemaking on the Institutional Accountability Regulations, including Defense to Repayment, under Title IV of the Higher Education Act of 1965, as amended.

Today, the U.S. Department of Education (Department) published a Notice of Proposed Rulemaking in the Federal Register proposing to amend the regulations governing the William D. Ford Federal Direct Loan (Direct Loan) Program to establish a Federal standard for evaluating, and a process for adjudicating, borrower defenses to repayment.  The regulations would apply to loans first disbursed on or after July 1, 2019, and will provide for actions the Secretary may take to collect from schools financial losses due to successful borrower defense to repayment discharges.

The proposed regulations would revise the Student Assistance General Provisions regulations to amend the financial responsibility standards to provide time to update the Composite Score to accommodate recent changes to accounting standards, identify events that may have an adverse material effect on an institution’s financial condition, and provide for alternate forms of financial protection.

The proposed regulations would also:

  • require schools that direct Federal student loan borrowers to sign pre-dispute arbitration agreements or class action waivers as a condition of enrollment to disclose those requirements in plain language to prospective and enrolled students, place the information on their websites and make clear to students how to initiate arbitration actions;
  • revise the Federal Perkins Loan, Federal Family Education Loan (FFEL), and Direct Loan programs’ closed school discharge regulations;
  • clarify the conditions under which an FFEL or Direct Loan borrower may qualify for a false certification discharge;
  • bar guaranty agencies in the FFEL program from charging collection costs to a defaulted borrower who enters into a repayment agreement with the guaranty agency within 60 days of receiving notice of default from the agency and from capitalizing interest on a loan that is sold following the completion of loan rehabilitation; and
  • codify the Department’s current policy regarding the effect of a discharge of a Direct Subsidized Loan on the 150 Percent Direct Subsidized Loan Limit.

You may submit comments on the proposed regulations electronically through regulations.gov.

We must receive your comments no later than August 30, 2018.

   

End of Page