WASHINGTON—Today, the U.S. Department of Education finalized regulations that will protect student borrowers, hold higher education institutions accountable and provide financial protections to taxpayers. The Institutional Accountability regulations, posted on the Department’s website today, come after more than two years of deliberations, public hearings, negotiated rulemaking with a wide variety of higher education stakeholders and careful consideration of tens of thousands of public comments.

“If a school defrauds students, it must be held accountable,” said U.S. Secretary of Education Betsy DeVos. “There is no place for fraud in higher education, and it will not be tolerated by this Administration. From the recent college admissions scandal and intentional misrepresentations by schools to boost their U.S. News & World Report rankings to fraudulent marketing practices from proprietary intuitions, too many institutions of higher education are falling short. The new regulations are aimed at preventing this behavior because students deserve better, and all institutions must do better.

“I called for this regulatory reset more than two years ago, as it became clear the old rules just weren’t working. I want to thank all those who provided thoughtful feedback during the process. We made substantive changes to our proposed rule based on your input. We believe this final rule corrects the wrongs of the 2016 rule through common sense and carefully crafted reforms that hold colleges and universities accountable and treat students and taxpayers fairly.”

The final Institutional Accountability regulations, which would apply to all federal student loans made on or after July 1, 2020, would:

  • Grant borrowers the right to assert borrower defense to repayment claims against institutions, regardless of whether the loan is in default or in collection proceedings.
  • Maintain the current rule’s preponderance of the evidence standard for all borrower defense to repayment claims.
  • Allow borrowers ample opportunity to file defense to repayment claims – three years from either the student’s date of graduation or withdrawal from the institution.
  • Create streamlined and fair procedures, regardless of the borrower’s current repayment status, that ensure basic due process for all parties.
  • Give students the ability to allege a specific amount of financial harm and to obtain relief in an amount determined by the Department, which may be greater or lesser than their original claim amount.
  • Extend the closed school discharge window from 120 days to 180 days, ensuring that students have a meaningful opportunity to obtain relief if they cannot complete their programs due to school closures.
  • Reduce precipitous closures by encouraging institutions to close only after the completion of well-planned teach-outs that allow students a reasonable opportunity to finish their programs.
  • Allow students to choose between accepting an institution’s offer of a teach-out opportunity or submitting a closed school discharge to the Department.
  • Provide fair, clear and verifiable financial triggers for recalculating an institution’s financial responsibility composite score and triggering additional security to protect taxpayers.
  • Update composite score calculations to reflect changes to Financial Accounting Standards Board (FASB) accounting standards.
  • Provide taxpayers with a net federal budget savings over the 2020-2029 loan cohorts of $11.1 billion, including $9.8 billion for changes to the defense to repayment provisions and $1.3 billion for changes related to closed school discharges.

The regulations will take effect July 1, 2020; however, the regulations relating to financial responsibility will be available for immediate implementation. For more information on the regulation, click here. To read the regulations in their entirety, click here.