Education Department Extends Compliance Deadline Regarding Third-Party Servicers

The Department of Education has extended the deadlines related to its recent guidance on third-party servicers (TPSs). The new guidance came as a surprise and has generated significant concerns due to its broad scope and potential impact on campus operations. If the guidance remains unchanged, it will likely subject a vast array of higher education vendors to regulations governing TPSs. 

This week, the Department announced that the following deadlines have been extended:

• The guidance becomes effective on September 1 (formerly effective immediately).
• The reporting deadline is now September 1 (formerly May 1).
• The deadline for submitting comments to the Department is March 30 (formerly March 17).​

The Department’s decision to extend the deadlines comes in response to community comments that NAICU and other higher education associations submitted last week. These comments expressed initial concerns with the guidance and requested an extension of the public comment period. More detailed community comments will be submitted in the coming weeks.

The new guidance dramatically expands the Department’s interpretation regarding the types of entities that are considered to be TPSs. While the guidance appears designed to more closely regulate online program management (OPM) companies, intentionally or not, the broad sweep of the guidance appears to affect far more institutional vendors than just OPMs.

According to the guidance, entities that perform a wide array of functions “necessary to perform any other aspect of the administration of the Title IV programs or comply with the statutory and regulatory requirements associated with those programs” qualify as third-party servicers for purposes of agency oversight. Under the guidance, such activities include:

• Student recruiting and retention;
• The provision of software products and services involving Title IV administration activities; and
• The provision of educational content and instruction.

Traditionally, statutory and regulatory requirements governing TPSs have applied only to companies that directly help institutions administer federal financial aid. Under the new interpretation, many entities not previously considered TPSs – such as companies providing online program management, learning management systems, services for at-risk students, clinical programs, course materials, and more – could potentially be subject to requirements governing TPSs. Under these requirements, TPSs must, among other things:

• Be based in the U.S. (including subcontractors);
• Be owned and operated by a U.S. citizen, national, or lawful permanent resident;
• Submit annual compliance audits; and
• Agree to be held jointly and severally liable with the institution for any applicable statutory and regulatory violations.

In addition, colleges and universities that contract with TPSs are subject to reporting requirements. Institutions must report any previously unreported arrangements with TPSs by September 1.

In the meantime, institutions should begin a review to determine whether any of their contracts or relationships with outside entities meet the Department’s expanded definition of a TPS. Institutions are also encouraged to submit their comments regarding the guidance to the Department and to share those comments or other feedback with NAICU. For more details about how to submit comments to the Department or to NAICU, please see the NAICU alert from earlier this week.

 

For more information, please contact:
Jody Feder