DRAFT

# U.S. Department of Education

# Title IV Loans

# Borrower Defenses

# Meeting Summary

# January 12-14, 2016

**Welcome**

Deputy Under Secretary Jeff Appel welcomed the members of the Committee and thanked them for agreeing to assist the Department in developing proposed regulations for determining which acts or omissions of an institution of higher education a borrower may assert as a defense to repayment. 

**Introductions**

All members who were present introduced themselves. 

**Overview of the Negotiated Rulemaking Process**

Susan Podziba and Jacki Wilson, the facilitators, provided an overview of the negotiated rulemaking process. They explained that the goal of Committee’s discussions is to develop consensus regulatory text that will form the basis of the regulations proposed by the Department of Education.

**Review and Adopt Protocols**

Committee members discussed, revised, and adopted the draft organizational protocols, which will govern the Committee’s activities throughout the negotiated rulemaking process. 

They agreed to list the members of the Borrower Defenses Negotiated Rulemaking Committee****as follows:

US Department of EducationGail McLarnonFederal Negotiator

Fred MarinucciOffice of General Counsel

FacilitatorsSusan Podziba*Podziba Policy Mediation*

Jacqueline Wilson

Community of InterestPrimary NegotiatorAlternate Negotiator

Students/BorrowersAnn BowersChris Lindstrom

*For-profit CollegeU.S. Public Interest Research*

*BorrowerGroup*

Legal assistance organizationsNoah ZimmerEileen Connor

that represent students*Housing and Special Litigation Unit*

*Economic RightsNew York Legal Assistance*

*AdvocatesGroup*

Consumer advocacy organizationsMaggie ThompsonMargaret Reiter

*Higher Ed, Not DebtAttorney*

Community of InterestPrimary NegotiatorAlternate Negotiator

State attorneys general and otherBernard EskandariMike Firestone

Appropriate State officials*Deputy AttorneyAssistant Attorney*

*General, CaliforniaGeneral, Commonwealth of*

*Massachusetts*

Groups representing U.S. militaryWalter OchinkoWill Hubbard

Servicemembers or veterans*Veterans Education Student Veterans*

*Successof America*

AccreditorsKaren SolinskiMichale McComis

*Higher Learning Accrediting Commission of*

*CommissionCareer Schools and Colleges*

State higher educationBecky Thompson 

executive officers*Washington Student*

*Achievement Council*

Financial aid administratorsAlyssa DobsonMark Justice

*Slippery Rock The George Washington*

*UniversityUniversity*

Minority serving institutionsSharon OliverEmily London Jones

*North CarolinaXavier University of*

*Central UniversityLouisiana*

Two-year public institutionsAngela JohnsonShannon Sheaff

*Cuyahoga**Mohave Community*

*Community CollegeCollege*

Four-year public institutionsKay LewisJean McDonald Rash

*University ofRutgers University*

*Washington*

Private, non-profit institutionsChristine McGuireDavid Sheridan

*Boston UniversityColumbia University*

Private, for-profit institutionsDennis CarielloChris DeLuca

*Hogan MarrenDeLuca Law*

*Babbo & Rose, Ltd.*

FFEL Program lenders and loanWanda HallDarin Katzberg

Servicers*Edfinancial ServicesNelnet*

FFEL Program guaranty agencies Betsy MayotteJaye O’Connell

and guaranty agency servicers*American StudentVermont Student Assistance*

(including collection agencies)*AssistanceCorporation*

**Petitions for Membership**

There was a petition for membership that was denied by the Committee. A petition to add an alternate for the groups representing U.S. military servicemembers or veterans was approved.

**Overview of the Issues**

Gail McLarnon, the federal negotiator, provided a brief overview of the five issues that are part of the scope of issues to be negotiated: 1) Whether to establish a new standard for the purpose of determining whether a borrower can establish a defense to repayment on a loan based on an act or omission of a school; 2) Time period for availability of Borrower Defense to Repayment claims; 3) Developing a regulatory framework for the process of submitting, reviewing, and determining the veracity of Borrower Defense to Repayment (DTR) claims; 4) Update and expand the existing categories of false certification discharges; and 5) Whether to revise the financial responsibility or administrative capability regulations, and whether to add disclosure requirements, to help protect students, the federal government, and taxpayers against potential school liabilities and risks.

**Formally Finalize the Agenda**

Committee members proposed nine items to be added to the agenda of issues to be negotiated. The Committee approved four of the proposed items. They are: 1) Allow loan holders to rely on faxed or electronically submitted death certificates for purposes of discharging loans or TEACH Grant service obligations based on the death of the borrower or TEACH Grant recipient; 2) Revise the Direct Consolidation Loan regulations to include Nurse Faculty Loans in the listing of loans that are eligible for consolidation; 3) Provide Technical Changes to the REPAYE Plan regulations to (a) specify that a borrower’s monthly payment amount is not adjusted to take into account the student loan debt of the borrower’s spouse if only the borrower’s income is used to calculate the payment amount, and (b) remove an incorrect reference to loss of partial financial hardship status; and 4) Conform compromise and settlement regulatory authority to Treasury amounts.

One item, Notice of investigations to prospective students, was considered to be part of Issue 5.

The following four items remain under consideration by various Committee members:  1) Prohibiting Guaranty Agency Interest Capitalization; 2) Upon Loan Rehabilitation Revise 34 CFR 682.410(b), regarding the charging of collection costs by a guaranty agency to a defaulted borrower who responds within 60 days to the initial notice sent by the guaranty agency after it pays a default claim and acquires the loan from the lender; 3) Closed school discharge; and 4) Removal of FFEL from Income Contingent Repayment Plans at Section 685.209.

Decisions about the remaining four items will be communicated to the Committee as such information becomes available. The Department will prepare and/or revise and distribute issue papers for items that are added to the scope prior to the next meeting.

In addition, some Committee members requested that the Department provide for early implementation of the Borrower Defense regulations.  The Department will consider that request internally.

**Discussion of Issues**

The Committee discussed in detail the original five substantive issues and the four added issues, which are currently within the scope of issues to be negotiated. The discussions began with a review of the issue papers prepared and distributed by the Department and included the questions posed. Committee members posed additional questions and offered their interests, concerns, and preferences relative to elements of each issue.

**Special Master Briefing**

Joseph A. Smith, Jr., Special Master for Borrower Defense, U.S. Department of Education****briefed the Committee on the status of his work to develop a process for discharging loans, loans that have been discharged, and expectations for the discharge of loans in the near future.

The Committee members, by consensus, formally requested that the Special Master attend a future negotiated rulemaking session when he can be available for a longer presentation, including time for a question and answer period. The Department took note of this request.

# Public Comment

# Opportunities were provided at the end of each meeting day for members of the public in attendance to provide comments.  Public comments were made on each day of the meeting.

# Next Meeting

# The next Committee session will be held on February 17-19, 2016 at the U.S. Department of Education in the 8th Floor Conference Center located at 1990 K St. NW in Washington, D.C. Sessions will begin at 9:00 a.m. and conclude at 5:00 p.m. each day.

**Next Steps**

The Facilitators will distribute a draft summary of the meeting, and a draft agenda for the next meeting.  In addition, they will distribute draft regulatory text provided by the Department for the issues discussed and issue papers for the items that will be added to the scope of issues to be negotiated. Information that committee members want to share with the Department should be sent to the facilitators for distribution to the entire committee.

Committee members will communicate with others within their communities of interest to inform and get feedback from them.

Kay Lewis will research questions related to record retention and provide relevant information to the Committee.  Michael Firestone will provide information about bond requirements and state auditor methods for determining bond amounts required of institutions of higher education in the Commonwealth of Massachusetts.

**Members Present**

Non-Federal Members

Ann Bowers

Dennis Cariello

Eileen Connor

Chris DeLuca

Alyssa Dobson

Bernard Eskandari

Mike Firestone

Wanda Hall

Will Hubbard

Angela Johnson

Emily London Jones

Mark Justice

Darin Katzberg

Kay Lewis

Chris Lindstrom

Betsy Mayotte

Dr. Michale McComis

Christine McGuire

Walter Ochinko

Jaye O’Connel

Sharon Oliver

Jean McDonald Rash

Margaret Reiter

Shannon Sheaff

David Sheridan

Karen Solinski

Becky Thompson

Maggie Thompson

Noah Zimmer

Federal Members

Gail McLarnon

Fred Marinucci

Facilitators

Susan Podziba

Jacqueline Wilson

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U.S. Department of Education, Borrower Defenses Negotiated Rulemaking

1

Summary of Meeting One – January 12-14, 2016

Draft – 1/20/15