Washington Update: Neg Reg 2022 Implications for Higher Education Policy

Our latest Washington Update with Tom Netting reviews the outcomes of this year’s Negotiated Rulemaking (Neg Reg) process and reveals a mix of wins and losses among 16 total issue papers up for debate. Beneficial gains in key areas were made during this critical part of the Department of Education’s rulemaking process in Washington D.C., which has far-reaching implications for all institutions of higher education, including for-profit and community colleges.

The Neg Reg 2022 agenda was divided into two committees: Committee 1: Affordability and Student Loans, and Committee 2: the Institutional and Programmatic Eligibility.

“I think it’s noteworthy that in Committee 1 they were able to get four areas of consensus, and in Committee 2, they were able to get another two — candidly, one more than I think all the handicappers thought they would get.”

Fewer than half of all 16 issue papers achieved consensus, which requires unanimous support with no dissenting opinion. However, huge gains were made in key areas including many beneficial changes in permanent and total disability for students, elimination of interest-rate capitalization, false certification discharges, and the new regulatory language around individuals that are incarcerated.

Tom Netting takes us through the outcomes and implications of this year’s sessions, adding his take on which key areas are most noteworthy and which outcomes came as a surprise to many experts.

Neg Reg 2022 Implications for Higher Ed — Successes, Failures, and Surprises

The benefit of having so many detailed proposals up for discussion, Netting explains, despite the enormity of the task for the committee members, is in the diversity of practical ideas for improving higher education. The 16 proposals included a wealth of detailed, innovative ideas for creating meaningful, positive change in the lives of students, not just the institutions and their shareholders.

The level of complexity and detailed information pertaining to each issue paper cannot be overstated. In addition to the enormous depth of detail accompanying every issue brought forth for consideration, the language used for every regulation and amendment was also debated. Parsing such complex issues among committees ultimately resulted in some upsets and surprises, including proposals that were widely expected to achieve consensus and others that were widely expected to fail.

It’s important to remember that each committee is made up of individuals who each have different interests and stakes in the outcomes of every negotiated point. Given these reasons, Netting notes that achieving consensus on any of the proposals represents a remarkable achievement.

Rather than focusing on the failed initiatives, Netting implores the higher education community to focus on the positive and beneficial gains that were achieved. No process of negotiation is perfect; the process is an arduous one and negotiating is never easy. But collaborating and building consensus through NegReg, though slow and painstaking, results in real beneficial gains.

Committee 1: Affordability and Student Loans

Nine issue papers were debated by this committee, which targeted issues that impact students financially.

1. Borrower defense to repayment (BDR)
2. Closed school discharges
3. Discharges for borrowers with a total and permanent disability
4. Loan repayment plans
5. Elimination of interest-rate capitalization on federal student loans
6. Mandatory pre-dispute arbitration and prohibition of class action lawsuits in institutions’ enrollment agreements and associated counseling about such arrangements
7. Pell Grant eligibility for prison education programs
8. The Public Service Loan Forgiveness (PSLF) plan
9. Discharges for False Certification

Affordability and Student Loan Consensus was achieved in four key areas:

1. Second-chance Pell Grant eligibility for prison education programs
2. Discharges for false certification
3. Elimination of interest-rate capitalization on federal student loans
4. Discharges for student borrowers with a total and permanent disability

Consensus was not reached on the remaining issue papers:

• Closed school discharges
• The Public Service Loan Forgiveness (PSLF) plan
• Borrower defense to repayment (BDR), including binding arbitration
• Mandatory pre-dispute arbitration and prohibition of class action lawsuits in institutions’ enrollment agreements and associated counseling about such arrangements
• Income-driven repayment

The areas of consensus achieved by this committee include important changes regarding incarcerated students. These students will now be eligible for second-chance Pell Grants.

A huge amount of attention was given to the issue of BDR, including binding arbitration. However, this issue paper was widely expected to fail — so there was no surprise there.

Committee 2: Institutional and Programmatic Eligibility

The second committee focused on institutional and programmatic eligibility and discussed the following seven issue papers:

1. Ability to Benefit (ATB) / Discharges for false certification of student eligibility
2. The 90/10 rule
3. Certification procedures for participation in Title IV and HEA Programs
4. Change of ownership and change in control of institutions of higher education.
5. Financial responsibility for participating institutions of higher education such as events that indicate heightened financial risk
6. Gainful Employment (GE)
7. Standards of administrative capability

These issues presented a number of problems among different types of institutions and their stakeholders.

Committee 2 Consensus on ATB and 90/10 Rule

• Ability to Benefit (ATB), an area expected to achieve consensus.
• The 90/10 rule and eligible career pathways, an area not expected to achieve consensus.

The consensus reached on Ability to Benefit changes an existing rule regarding eligibility for federal college benefits. The existing rule would no longer require a high school degree or GED for eligibility to receive federal benefits for attending college.

Many experts were confident that consensus would be achieved with Ability to Benefit. In fact, consensus wasn’t achieved until the final session at the last moment, when one minor tweak was made.

The surprise win in this committee came with the successful consensus on the 90/10 rule. Netting notes, “I can tell you that I would have bet every bit of money I have that consensus would not be reached on the 90/10 rule.”

Changes that were made to the definition of the 90/10 rule came about due to the American Rescue Plan. Through Congress, the Department of Education, all the federal negotiators, and through a lot of negotiating behind closed doors, a final draft of the 90/10 proposal emerged — and consensus on the changes to that definition was reached.

Changes to the 90/10 rule, which affects for-profit institutions, implicate that all federal assistance will now be included in the 90%, as well as changes to the rules regarding what goes into the 10%.

No consensus was reached on five out of seven issues debated by committee 2:

• Certification procedures for participation in Title IV and HEA Programs
• Change of ownership and change in control of institutions of higher education.
• Financial responsibility for participating institutions of higher education such as events that indicate heightened financial risk
• Gainful Employment (GE)
• Standards of administrative capability

Impacts of No Consensus for Neg Reg 2022 on Higher Ed Policy

Each issue paper that failed to achieve consensus puts an onus on the Secretary of Education to come up with a fair and correct rule.

BDR affects for-profit institutions and was not expected to achieve total consensus.

Regarding GE, certain institutions of higher education were concerned about putting this information into the public arena, which would likely damage their own enrollments and programs.

The issue paper regarding change of ownership and change in control of institutions of higher education would have made a major change to for-profit colleges and universities. This change would have prompted a for-profit to nonprofit conversion, changing the very definition of a nonprofit organization.

That change could have potentially undermined the current definitions of what a nonprofit is. According to Netting, “members of the nonprofit community pointed out that many of the changes would be problematic or even undermine the established community of what is private nonprofit.” It’s possible for this issue to revert to its original proposal, or for some balance to be achieved in the future.

No Consensus on Distance Education Policy: An Important Area to Watch

A major area to watch, one in which consensus was not achieved, relates to distance education policy. This was one of the issues related to the certification procedures.

The Department of Education wants all higher education programs to emanate from a physical main campus. There is no apparent reason for this requirement. Because of the major changes in higher education due to the pandemic, and an increasing number of college and university programs being offered online, this is an important issue.

Online education has grown, especially through the pandemic, and this will hurt many institutions if the Department decides to go this way.

Had consensus been reached on this issue, the change in certification procedures issue paper would have mandated compliance with each state’s requirements vs. reciprocity standards dictated in NC-SARA. As a result of the failure to achieve consensus, the DE is reverting to leaving the requirements for distance education up to the states. This is a hot-button issue.

“NC-SARA really lifted the bar.”

NC-SARA set a good bar for standardized criteria across the states, and this result essentially dismantles all the good that NC-SARA has done.

Key Beneficial Outcomes of Neg Reg 2022

Netting points out some of the most impactful decisions that were reached: “For incarcerated students, the fact that we have a statute with eligibility for Pell is important, and I think that is going to be very beneficial. The significant changes that build upon what the Biden administration has done in total and permanent disabilities are impactful and important.”

“The Ability to Benefit (ATB) issue provides the ability for states to develop processes for individuals without a high school diploma or equivalent to matriculate, creating new pathways to higher education.”

Netting also points to the 90/10 rule as a major win.

With six total areas of consensus reached, Netting stresses that the outcomes of Neg Reg achieved a “nice balance.”

“We will never achieve consensus on every proposal aimed at improving higher education, but that has never been the point of Neg Reg. The truth is that consensus was achieved in several key areas that are critical, and that’s a big step in the right direction.”

Higher Education Policy Moving Forward

Under master calendar requirements of the Higher Education Act, the items on which consensus was reached will get published as drafted in the Federal Register by November 1 of this year to go into effect July 1 of the following year.

On those items where consensus was not reached, the Department has the authority to publish rules as they see fit. Generally, they try to lean toward where the group was going — but there is no legal reason that they must.

The public may make comments on those areas where consensus was not reached within 30 days. For the areas where consensus was reached, no public comment is solicited or needed.

Understaffing at the DE:

“…given all the cutbacks of staffing at the department and retirements, etc., I would be willing to bet that the staffing is probably not there to get all these things done. Just a guess on my part.” -Dr. Drumm McNaughton

There are also other phases of the process. All issues, regardless of consensus, must go through the Office of Management and Budget Review (OMB) and other internal review processes. “To do that for all of these would be Herculean — and that may be an understatement. However, they wouldn’t have put forth all these issues if they weren’t significant and important enough to work to achieve change on.” Some issues may rise to the top as a high priority, while others may wait another year.

In other words, if publication is delayed past November 1, implementation will be delayed another year. Institutional leaders should be watching the Federal Register and adding their comments within the time allowed.

Title IX and Sex Discrimination

For quite some time, issues around Title IX have been quiet. However, many signals predict that comprehensive revisions to Title IX are pending. “We’ll all have to wait and see what the devil of those details are,” says Netting. “Remember that this is the area where the most public comment has ever been received.”

Title IX issues include:

• Female athletics
• Protections are forms of concerns related to the Violence Against Women Act (VAWA)
• Cleary Act provisions deal with everything from firing campus security to protections for the LGBT+ community Bullying and stalking
• Bullying and stalking, including protections for victims and the accused
• Many other things that are vitally important to all students

It’s too early to know which direction any comprehensive package on Title IX may be leaning, but this is an essential area to watch as it becomes clear.

Importantly, only Title IV regulations must go through the NegReg process. Title IX issues do not undergo the same review. Given the vital importance of Title IX issues, there has been considerable comment. However, unlike the Master Calendar under Title IV, these regulations could go into effect upon publication or, likely, publication and transitional times that are embedded in the proposals themselves. While there may be transitional periods, institutions will likely have to start making changes post haste.

Additional Higher Education Legislation

On the legislative side, there is much to talk about regarding higher education. “We just witnessed congress completing work on a comprehensive appropriations bill for 2022, which we are already halfway through,” commented Netting.

Congress’s fiscal year starts on Oct. 1 of the previous year and runs through Sept. 31 of the current year. While it took Congress five months before completing the process, there was added support from the House, Senate, and the Biden Administration for increases in higher education.

“While we didn’t hit the high-water mark, there were significant increases.”

The Biden Administration is now working on a plan for 2023 including a doubling of Pell and grant assistance for students from our most impoverished areas, in addition to funding for HBCUs, HSIs, Tribal, and other types of institutions, and vocational programs.

Two other extensive proposals of statutory changes and modifications, including protections for cyber security, are currently going through legislative review, including the College Transparency Act.

With so many issues on the table, it’s difficult to distill key takeaways. However, Netting implores institutional leaders from the president down to be aware of the coming changes to Title IX and prepare to implement those revisions.

About the Author

Dr. Drumm McNaughton provides strategic planning, implementation, and change management consulting, for higher ed institutions.

See more of our Neg Reg Washington Updates to get insights on what these updates mean to you and your college or university.