1

UNITED STATES DEPARTMENT OF EDUCATION

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BORROWER DEFENSES AND FINANCIAL RESPONSIBILITY 

NEGOTIATED RULEMAKING COMMITTEE 2017-2018

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SESSION 3

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TUESDAY

FEBRUARY 13, 2018

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The Negotiated Rulemaking Committee 

met in Barnard Auditorium, 400 Maryland Avenue, 

S.W., Washington, D.C., at 9:00 a.m., Ted Bantle, 

Moira Caruso and Rozmyn Miller, Facilitators, 

presiding.

PRESENT

TED BANTLE, Federal Mediation and Conciliation 

Service, Facilitator

MOIRA CARUSO, Federal Mediation and Conciliation 

Service, Facilitator

ROZMYN MILLER, Federal Mediation and 

Conciliation Service, Facilitator

ROBERT ANDERSON, President, State Higher 

Education Executive Officers Association

BRYAN BLACK, Attorney

MICHAEL BOTTRILL, CFO and CEO, SAE Institute 

North America

KIMBERLY BROWN, Vice President, Enrollment 

Management and Student Affairs, Des Moines 

University

MIKE BUSADA, General Counsel and Vice President, 

Ayers Career College
2

STEVAUGHN BUSH, Student, Howard University 

School of Law

EVAN DANIELS, Assistant Attorney General, 

Government Accountability and Special 

Litigation Unit, Office of the Arizona 

Attorney General

CHRIS DELUCA, Attorney at Law, DeLuca Law LLC

ALYSSA DOBSON, Director of Financial Aid and 

Scholarships, Slippery Rock University

JOHN ELLIS, Principal Deputy General Counsel and 

Division Chief, State of Texas Office of 

the Attorney General

ROBERT FLANIGAN, JR., Vice President for Business

and Financial Affairs and Treasurer,

Spelman College

JULIANA FREDMAN, Bay Area Legal Aid

JOSELINE GARCIA, President, United States 

Students Association

WANDA HALL, Senior Vice President and Chief 

Compliance Officer, Edfinancial Services

ASHLEY HARRINGTON, Special Assistant to the 

President and Counsel, Center for

Responsible Lending

WILLIAM HUBBARD, Vice President of Government 

Affairs, Student Veterans of America

KELLI HUDSON PERRY, Assistant Vice President for 

Finance and Controller, Rensselaer 

Polytechnic Institute

GREGORY JONES, President, Compass Rose 

Foundation

AARON LACEY, Partner, Thompson Coburn LLP

DALE LARSON, Vice President for Business and 

Finance/Chief Financial Officer, Dallas 

Theological Seminary

KAY LEWIS, Assistant Vice-Provost, Enrollment 

Executive Director of Financial Aid and 

Scholarships, University of Washington

DAN MADZELAN, Associate Vice President for 

Government Relations, American Council on 

Education

JULIANNE MARIE MALVEAUX, President Emerita, 

Bennett College, President and Owner of 

Economic Education
3

SUZANNE MARTINDALE, Senior Attorney, Consumers 

Union

MICHALE MCCOMIS, Executive Director, Accrediting 

Commission of Career Schools and Colleges

JEFFREY MECHANICK, Assistant Director-Nonpublic 

Entities, Financial Accounting Standards 

Board

SUSAN M. MENDITTO, Director, Accounting Policy, 

National Association of College and 

University Business Officers

LODRIGUEZ MURRAY, Vice President, Public Policy 

and Government Affairs, United Negro 

College Fund

BARMAK NASSIRIAN, Director of Federal Policy 

Analysis, American Association of State 

Colleges and Universities

JAY O'CONNELL, Director of Collections and 

Compliance, Vermont Student Assistance 

Corporation (VSAC)

WALTER OCHINKO, Research Director, Veterans 

Education Success

JOHN PALMUCCI, Interim President, Chief Business 

Officer, Maryland University of Integrative

Health

KAREN PETERSON SOLINSKI, Executive Vice 

President, Higher Learning Commission

LINDA RAWLES, Rawles Law

ASHLEY ANN REICH, Senior Director of Financial 

Aid Compliance and State Approvals, 

Liberty University

SHELDON REPP, Special Advisor and Counsel, 

National Council of Higher Education 

Resources

DAWNELLE ROBINSON, Associate Vice President for 

Finance and Administration, Shaw 

University

RONALD E. SALLUZZO, Partner, Attain

ABBY SHAFROTH, Staff Attorney, National Consumer 

Law Center

VALERIE SHARP, Director, Office of Financial 

Aid, Evangel University

COLLEEN SLATTERY, Federal Contract and 

Compliance Officer, MOHELA
4

KAREN PETERSON SOLINSKI, Executive Vice 

President, Higher Learning Commission

JONATHAN TARNOW, Partner, Drinker Biddle & Reath 

LLP

STAFF PRESENT

CAROLINE HONG, Office of General Counsel

BRIAN SIEGEL, Office of General Counsel

JOHN KOLOTOS, Office of Postsecondary Education

JIM MANNING, Acting Under Secretary of Education

ANNMARIE WEISMAN, Federal Negotiator, Office of 

Postsecondary Education
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1 P-R-O-C-E-E-D-I-N-G-S

2 MS. CARUSO: Well, good morning, 

3 everyone. Welcome back to day two. 

4 We are going to pick up where we left 

5 off in issue paper number one. There are edits 

6 in the works. They are not ready to reintroduce 

7 back to this group so we are going to pick up where 

8 we left off and not waste any more time.

9 Your facilitators, just a quick note, 

10 your facilitators are operating under the 

11 assumption that everyone at this table wants to 

12 achieve consensus through this process.

13 And I think it's obvious after 

14 yesterday's discussion that consensus is going to 

15 take compromise from everyone at this table.

16 So that's all that we would like to 

17 leave you with. We're not going to waste much of 

18 your time this morning with opening remarks. Just 

19 that quick reminder. 

20 So thank you for your work thus far. 

21 There's a lot more to go. And with that I will 

22 turn it over to the department for their opening 

23 remarks and to pick up where we left off in issue 
6

1 paper number one.

2 PARTICIPANT: Good morning. I'd like 

3 to welcome everyone back and thank you for again 

4 your hard work from yesterday and your continued 

5 hard work that we anticipate throughout the rest 

6 of this session.

7 I'd also like to make a quick note about 

8 the idea of consensus. I've heard a couple of 

9 remarks from people that maybe it doesn't behoove 

10 us to meet consensus.

11 And I have to say I was a little taken 

12 aback. I think that in general we all came with 

13 the idea of let's meet consensus, but perhaps 

14 something along with these proceedings has changed 

15 people's minds about that.

16 And so I'd kind of like to just 

17 reinforce that as a starting point to follow up 

18 on the facilitator note that from the department 

19 perspective we are very interested in reaching 

20 consensus. And we hope that you all are as well.

21 I would say that in my opinion it 

22 behooves us to meet consensus. People who think 

23 that they might get something they like better by 
7

1 not coming to agreement I think would be 

2 disappointed. 

3 Again that's my personal opinion. I 

4 think that people might think that they'll do better 

5 by letting the department write all of the text, 

6 but I think what you need to keep in mind is it 

7 would not just be me and the staff that you see 

8 over here writing the text and coming to agreement 

9 on that.

10 There would be many other people who 

11 would want to weigh in on that language, many who 

12 were not all here to hear what was said and to hear 

13 our discussions.

14 And while certainly they would be 

15 following the proceedings and reviewing what we've 

16 done just as we kind of do some trading here it 

17 may be that someone has a very strong opinion about 

18 one item that we didn't and then they pull out and 

19 say this is what we're going to do for this item.

20 And I think that people here might be 

21 very disappointed by that outcome. 

22 I think that we always can come up with 

23 a stronger outcome by reaching consensus right here 
8

1 at the table. You walk away knowing what you've 

2 gotten.

3 Yes, you have to give a little, but I 

4 do think that everyone would have to give a little 

5 regardless. 

6 So I think if we can come to that 

7 agreement and give a little herewith each other 

8 we have a stronger rule.

9 So I would just like to encourage you 

10 to kind of hit the reset button if you were thinking 

11 maybe consensus isn't the way to go and kind of 

12 come back with us as a team and try to work toward 

13 this.

14 I know that some people felt a little 

15 down yesterday and I hope that we can start fresh 

16 this morning and keep the conversation going.

17 I think as long as we're still talking 

18 and we're still working together we've got a good 

19 chance at this.

20 So again thank you for being here. I 

21 thank you for working with us. 

22 I'd like to pick it up on issue paper 

23 one on page 3 in about the middle of the page. 
9

1 We were starting to discuss this yesterday. But 

2 we'd like to pick up with the definition of 

3 misrepresentation.

4 The department has proposed language 

5 again making some changes to this text from session 

6 two. It would now read a misrepresentation is a 

7 statement, act, or omission by an eligible 

8 institution to a borrower that is intentionally 

9 false or misleading or made with reckless disregard 

10 for the truth and that relates to the making of 

11 a direct loan for enrollment at the institution 

12 or the provision of educational services for which 

13 the loan was made.

14 Evidence that a misrepresentation 

15 described in paragraph B(1)(i) of this section has 

16 occurred includes but is not limited to, and then 

17 we go through kind of our list of items.

18 We made a couple of edits from the last 

19 session based on your feedback. We changed job 

20 placement rates to employment rates. In paragraph 

21 C we added accreditation.

22 Over on page 4 in H we mentioned this 

23 yesterday as well we added the U.S. Armed Forces 
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1 or other individuals or entities when the 

2 institution has no permission to use such an 

3 endorsement.

4 We also talked about the idea of 

5 educational resources. These are items that we 

6 added in at the last session I believe. So these 

7 are items you've seen.

8 We also did remove K which was any other 

9 circumstances determined by the Secretary. Again 

10 the feeling was we didn't need that text since we 

11 put in the stem that it was included but not limited 

12 to.

13 In (ii) we talked about what would not 

14 make for a borrower defense claim. We can 

15 certainly continue through and reach all of that, 

16 or we can focus the topic on just misrepresentation. 

17

18 I'm kind of thinking that might be the 

19 way to go to start since misrepresentation is large 

20 enough. So let's cap it with just (i) where we 

21 strike section K. I think we can focus our 

22 conversation there to start us.

23 MR. HUBBARD: I'd just like to briefly 
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1 applaud the department on the inclusion of the 

2 language that states the United States Armed Forces 

3 or other individuals or entities, et cetera. 

4 I think that's an important inclusion. 

5 We've seen too often that schools in some cases, 

6 the predatory ones, not all, but certainly the 

7 predatory ones with bad behavior go out of their 

8 way to make it appear that there's an affiliation 

9 with the U.S. Armed Forces by doing things like 

10 including the service seals, the emblems of the 

11 branches. So that's definitely an important one 

12 that we applaud.

13 PARTICIPANT: Abby.

14 MS. SHAFROTH: On page 3 I think it's 

15 4(i) the definition of misrepresentation. I 

16 reiterate my strong opposition to requiring the 

17 borrower to demonstrate that the institution's 

18 false or misleading statement was made 

19 intentionally or with reckless disregard.

20 I think that it is very, very difficult 

21 if not impossible for a borrower to demonstrate 

22 what the institution knew or should have known or 

23 was thinking, or what the recruiter who talked to 
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1 them knew.

2 So I think as a practical matter this 

3 is going to make borrower defense relief much harder 

4 to access for borrowers who were misled by their 

5 school.

6 In addition this would be raising the 

7 standard well above and beyond what it currently 

8 is under either the 1994 state law standards since 

9 the state consumer protection laws do not require 

10 a showing of intent or reckless disregard except 

11 in I think five states.

12 And it is raising the standard well 

13 above and beyond the 2016 standard when we all 

14 debated at length and came to the conclusion that 

15 it was improper to require intent because it would 

16 make it too hard for borrowers to access relief. 

17 I think that stays true today.

18 So I would propose striking that 

19 language that is intentionally false or misleading 

20 or made with reckless disregard for the truth.

21 PARTICIPANT: Michale.

22 MR. MCCOMIS: I had a question about 

23 that as well. And it's really more of a process 
13

1 question. Because I read this in conjunction with 

2 the reasons for which and by which a student can 

3 make a claim.

4 And what it says is that the -- under 

5 the reasons that give rise to a claim, the 

6 institution at which the borrower enrolled made 

7 a misrepresentation.

8 So it doesn't say that the borrower has 

9 to show that the institution made a 

10 misrepresentation.

11 And then when you go to the definition 

12 of a misrepresentation it says that it's a statement 

13 that is intentionally false.

14 So my question is is it process-wise 

15 then to Abby's point solely upon the student to 

16 make a showing affirmatively that there was intent, 

17 or will the department through the weight, 

18 substantial or otherwise, to all the evidence make 

19 its own determination about intentionality.

20 That is to say if the institution comes 

21 back and says oh well, it was just a mistake, there 

22 was no intention here. When I read those two things 

23 together I don't see anything that says that the 
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1 student has to make an affirmative proven case of 

2 intent.

3 PARTICIPANT: So we agree with you that 

4 the borrower is not compelled to prove that so to 

5 speak. We require the intent to be there, but we're 

6 going to look for it in the information that we 

7 receive from all parties.

8 MR. MCCOMIS: Thank you. That's what 

9 I thought. 

10 So then can I -- one more comment? 

11 Okay. So I just wanted to remind the department 

12 I had suggested moving the material fact, opinion, 

13 intention, or law language over into this section 

14 here just so people knew that it was on the screen. 

15 We moved it over from the other area.

16 PARTICIPANT: Mike Busada. 

17 PARTICIPANT: Hang on. So I just want 

18 to go back to Abby. Abby, does that change how 

19 you feel about (i) and if not I also have a question 

20 about the person who's typing and what they've 

21 struck out. 

22 MS. SHAFROTH: I don't think it fully 

23 addresses my concern because the standard here 
15

1 still appears to require the borrower to submit 

2 the -- to put forward their claim, their testimony, 

3 and support it with corroborating evidence.

4 I mean this gets into issue paper two 

5 a bit where the borrower, the initial review looks 

6 for corroborating evidence.

7 But my sense is still that the ultimate 

8 burden of persuasion is on the borrower, not on 

9 the school. So it's not that the borrower gets 

10 to just say there was a misrepresentation and then 

11 the school has the burden of proving to the 

12 department that it was an innocent mistake or 

13 negligent even. 

14 I'm surprised that even negligence 

15 wouldn't be enough to get the borrower relief here.

16 But ultimately I do think that the 

17 standard as the department has set out ultimately 

18 leaves the burden on the borrower. Even if they 

19 don't have to come up with all of the evidence there 

20 has to be corroborating evidence that the lie was 

21 intentional or made with reckless disregard. 

22 There has to be evidence of that.

23 And if there's no evidence either way 
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1 then the borrower loses under this standard.

2 Additionally I do have, I know that not 

3 everyone at this table agrees with me, but I remain 

4 of the belief that if a school makes a material 

5 misrepresentation to a borrower that the borrower 

6 reasonably relies on to enroll in the school and 

7 to take out thousands of dollars of loans, and the 

8 borrower suffers financial harm that the borrower 

9 should be eligible for getting their loans 

10 discharged even if the institution says sorry, I 

11 didn't mean to.

12 That's a philosophical difference. So 

13 even if we were able to somewhat alleviate the 

14 evidentiary pragmatic concern I do think that our 

15 rule should allow the department to discharge 

16 students' loans in that instance.

17 PARTICIPANT: Okay. Thank you, Abby. 

18 And just a question because we did have some edits 

19 here based on your remarks.

20 Was it your intention to strike all that 

21 language, or was it just to strike intentionally 

22 and the -- do you agree with false or misleading, 

23 but just not intentionally.
17

1 MS. SHAFROTH: Oh, sorry. 

2 Misrepresentation. Yes, it should be false or 

3 misleading.

4 PARTICIPANT: Right. Okay. So can 

5 we unstrike false or misleading?

6 MS. SHAFROTH: That is false or 

7 misleading and that relates to. So to be clear.

8 PARTICIPANT: So strike 

9 intentionally.

10 MS. SHAFROTH: Strike intentionally 

11 and strike or made with a reckless disregard for 

12 the truth. Thank you.

13 PARTICIPANT: Thank you.

14 PARTICIPANT: Mike Busada. Michale 

15 McComis, were you finished with your -- okay. Mike 

16 Busada.

17 MR. BUSADA: Let me say at my school 

18 in most schools that I know of, small schools that 

19 I work with go and talk to the association meetings, 

20 I think that they would agree overall in principle 

21 with what Abby's saying in terms of if a student 

22 comes to us and we made a mistake we're going to 

23 make it right. That's what we're going to do.
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1 I think most people in here would do 

2 the same thing.

3 Here's my concern and this is what I'd

4 like to address. The problem is right now anytime 

5 there's a borrower defense claim that's successful, 

6 whether it's a mistake or whether it's intentional 

7 we've heard all week, we've heard for the last 

8 several weeks, we heard yesterday a distinguished 

9 congressman.

10 And basically the word was you're con 

11 artists, you're fraudulent, you're scamming, 

12 you're this, you're this. It's always bad and 

13 there's never a distinction made whether or not 

14 was it a mistake or not.

15 And so at a small school for instance, 

16 I mean that is what the message has been is that 

17 if a student gets any kind of relief the school 

18 is fraudulent. The school is a crook. The school 

19 is predatory.

20 And I'm not saying that about people 

21 on this panel, but I'm just saying I mean you can 

22 just read the newspaper. I mean that's what's in 

23 there.
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1 And so the issue is that a small school 

2 whether it's in Shreveport, Louisiana, Little Rock, 

3 Mississippi, wherever it is across the country. 

4 And if one student comes with a borrower 

5 defense claim and it was an honest mistake and that 

6 loan is discharged and it allows for it to be 

7 discharged for a mistake the message is going to 

8 be oh, that school is a bad school. And in a small 

9 community when that goes on Facebook then your 

10 school is done. You've lost your reputation.

11 And so I guess my point is, and it goes 

12 back to an issue that we raised last time. I would 

13 be much more comfortable with a lot of these 

14 discussions if there was inclusion of as we 

15 discussed last time some type of voluntary 

16 mediation to allow small schools like ours that 

17 maybe a student for whatever reason doesn't want 

18 to -- thinks they need to go directly to the 

19 department that's fine.

20 But if there's an opportunity for us 

21 to at least say hey, yes, that was a mistake, we're 

22 going to take care of it.

23 There's got to be a process here, a 
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1 mediation process like there are in a lot of other 

2 areas of the federal government.

3 I would be more comfortable if there 

4 was something like that in a lot of these 

5 discussions.

6 PARTICIPANT: Valerie.

7 MS. SHARP: I just wanted to -- I 

8 support some of what Mike just said and I support 

9 the language that Michale McComis has suggested.

10 I felt -- at first when I read the 

11 rewrite I was a bit concerned because I'm one that 

12 thinks intent is important. That we had moved it 

13 from section -- and then I realized that we'd moved 

14 it into misrepresentation.

15 And I felt like that was a good 

16 compromise because it moved from the section of 

17 this constituting the borrower defense and what 

18 the loans would be over into a definition of 

19 misrepresentation.

20 And I felt that that did give me the 

21 picture that Michale just asked the department 

22 about that we're moving that more onto the 

23 department is going to determine the intention.
21

1 I also just in supporting this felt like 

2 if the intentionality was retained I was more 

3 comfortable with moving the level of evidence that 

4 would be required and supporting some of the changes 

5 that have been suggested there, comfortable with 

6 discussing the switch to sufficient evidence 

7 because the intent is left there at the 

8 misrepresentation section.

9 So I felt like that's a compromise 

10 position to keep the intent because it is something 

11 that's important to us. And I know it may seem 

12 funny but I agree with Mike it helps you say wait 

13 a minute. 

14 Because we do make mistakes when they 

15 come to our attention. But saying okay, was there 

16 intention or not. Reputation is everything 

17 especially to the small schools. So it is a big 

18 deal for schools across the country.

19 But if you're looking at that in the 

20 misrepresentation definition there is some 

21 possible room for discussion on the levels of 

22 evidence. And I think the two together could work 

23 to support what schools are concerned about and 
22

1 also the concerns that the students would have to 

2 provide so much.

3 So I think there's a balance there 

4 between the two.

5 I was also curious and I don't know if 

6 Evan is ready to speak to this or not, but last 

7 time Evan did make some suggestions about adding 

8 some comments to this definition about deceptive 

9 acts or practices. And we didn't really flesh that 

10 out.

11 I don't know if he has a suggestion 

12 there that might be helpful for the committee to 

13 look at, any other suggested wording that everyone 

14 might be in support of.

15 PARTICIPANT: Do we have the ability 

16 to see Michale's suggested change here adding --

17 oh it's in there? Got it. You put it there. 

18 Thank you.

19 PARTICIPANT: Suzanne.

20 MS. MARTINDALE: Thank you. Well of 

21 course I share the concerns that others have raised 

22 about a borrower's ability to prove some sort of 

23 evidence on their own to demonstrate intent.
23

1 From a consumer protection perspective 

2 there's a reason why in the context of cases that 

3 are brought under state law or say under the FTC 

4 Act for unfair or deceptive acts or practices 

5 there's a reason why the focus is typically on the 

6 conduct, the conduct that causes harm.

7 Because consumers in the marketplace 

8 are at disadvantage. There's a power imbalance. 

9 And so businesses are better positioned to prevent 

10 harm the vast majority of the time than the consumer 

11 is able to prevent the harm simply by being the 

12 savviest consumer in the world and somehow having 

13 perfect knowledge of business practices.

14 So I appreciate what the department 

15 said that the department is looking at evidence 

16 other than -- potentially looking at evidence other 

17 than what the borrower submits.

18 But I hear that you want to see evidence 

19 that in your view looks like something like intent. 

20

21 So what I want to know from the 

22 department is could you give me a concrete example 

23 of what kind of evidence in your view would show 
24

1 you intent or reckless disregard, so forth, and 

2 is it going to be the case because it's not clear 

3 to me in the language as drafted that -- I know 

4 that you say that you're going to look at evidence 

5 in your possession as well as what the borrower 

6 submits.

7 But are you going to commit to always 

8 seeking to gather evidence to ensure that you have 

9 a full picture and full context when evaluating

10 the borrower's claim. Would you be willing to say 

11 that the Secretary shall gather evidence when 

12 assessing a borrower's claim if you are indeed going 

13 to be looking for intent.

14 PARTICIPANT: So we certainly can't 

15 commit resources or commit the Secretary to doing 

16 something in particular right now.

17 We'll never say the Secretary shall 

18 because when we're referring to the Secretary our 

19 reg writer experts believe that it is best to say 

20 the Secretary will.

21 But I think our position has always been 

22 that we are going to use evidence in our possession. 

23 In our possession means the information supplied 
25

1 from the borrower with their claim.

2 Some of this will make a little more 

3 sense when we get into the process piece in issue 

4 paper two, but we'll be going out to the institution 

5 to get their information. And then any information 

6 that we have from other sources.

7 And so if we have findings from our own 

8 investigations or program reviews that could 

9 include information from other outside sources, 

10 other agencies. It could mean state agencies, 

11 various agencies.

12 So again I think we'll cover more of 

13 this as we get to process, but hopefully that's 

14 helpful for now.

15 PARTICIPANT: I just want to take a 

16 quick temperature check for this provision as it's 

17 currently written, adding Michale's language in 

18 there and Abby's striking of intentionally and the 

19 reckless disregard. You want to separate them into 

20 two? That's fine.

21 Okay. So quick show of thumbs adding 

22 in the regarding material fact, opinion, intention, 

23 or law and leaving in the rest of the language as 
26

1 written. Can I get a quick show of thumbs?

2 Okay, three thumbs down. How about 

3 combining the two, adding in the regarding material 

4 fact, opinion, intention, or law and striking the 

5 intentionality language and reckless disregard 

6 language. 

7 Four thumbs down. Okay. So I'd like 

8 to get a little bit more discussion around that 

9 and see if we can find something that's going to 

10 work for everyone. 

11 PARTICIPANT: Caroline.

12 MS. HONG: Just a quick question for 

13 Suzanne. So you mentioned whether or not there 

14 would be a commitment from the department about 

15 what we would look for and AnnMarie was mentioning 

16 that we just, we have a resource problem.

17 But I wanted to know are there specific 

18 categories of things you think are in the 

19 department's possession that you would like listed. 

20 Or what do you think would be relevant that the 

21 department might have in its possession already.

22 MS. MARTINDALE: Well, I think I was 

23 trying to understand a little bit more of what kind 
27

1 of evidence would in your view demonstrate 

2 something like reckless disregard for the truth 

3 or intent.

4 Because the borrower is going to know 

5 what they were told. Maybe they'll have written 

6 marketing materials and so forth. They're going 

7 to know how the school acted toward them.

8 But certainly at the initial, I mean 

9 filling out this application we're not in court, 

10 we don't have discovery rights and all that sort 

11 of thing. I can't visualize right now sitting here 

12 what kind of evidence would satisfy your concern 

13 that you're trying to get at something like at 

14 minimum reckless conduct.

15 What would that look like concretely 

16 so I can try to understand what would in your view 

17 create a valid claim that warrants relief.

18 Again, typically in UDAP law you look 

19 at the conduct and whether it has a tendency to 

20 mislead someone who's acting reasonably under the 

21 circumstances because what matters is the harm to 

22 the person who has been harmed.

23 And that person, if you're talking 
28

1 about businesses versus consumers the consumer is 

2 usually not the one in the best position to prevent 

3 the harm, it's the business that's engaging in the 

4 misconduct.

5 So I'm trying to be responsive but my 

6 question back to you is what kind of evidence would 

7 in your view satisfy your need to see that there 

8 was some sort of level of intent to deceive.

9 PARTICIPANT: So I think for part of 

10 that it's the amount of information that an 

11 institution has available to it.

12 So when an institution has information 

13 that says their placement rates or their employment 

14 rates are 30 percent and they go out and they say 

15 they're 80 percent the information is there.

16 Other people at the institution might 

17 even confirm that yes, we knew it was 80 percent.

18 Saying it's 30 percent, that's a reckless 

19 disregard for the truth. They had that information 

20 in their possession but when let's say prospective 

21 students came in they constantly consistently 

22 quoted a different piece of information. That's 

23 a disregard for the truth.
29

1 And we've seen that type of behavior 

2 and I think should we see it again that would be 

3 ripe for a borrower defense claim.

4 And just to confirm I wasn't saying that 

5 there was a resource problem. What I was saying 

6 is that we in this rule cannot commit certain 

7 resources that are not already in place. That 

8 would be something we'd have to take back for 

9 discussion.

10 PARTICIPANT: AnnMarie is too kind, 

11 that was my mistake so I apologize.

12 PARTICIPANT: William.

13 MR. HUBBARD: Thank you. I don't know 

14 that necessarily any school, and correct me if I'm 

15 wrong, but any school believes that the burden of 

16 proof of intent should be on the student.

17 I mean that is difficult to prove. I 

18 think we can all agree on that. So just maybe as 

19 a starting position coming from that point of view 

20 would be worthwhile considering.

21 And perhaps it's worth maybe presenting 

22 some sort of guarantee that the preamble might 

23 identify or make it more explicit that it's the 
30

1 department's burden to prove intent versus the 

2 student's just to allay some of those concerns.

3 I don't know exactly what that language 

4 looks like, but that might be worth discussing.

5 Also to Mike's concerns about 

6 reputation. And reputation is everything, you're 

7 absolutely right, especially with a small school.

8 And I think that's why this rule being 

9 so strong is that much more important is to weed 

10 out the bad behavior in the industry to ensure that 

11 schools that are doing well, small schools have 

12 the opportunity to bolster their reputation.

13 And quite frankly if there's any 

14 student out there for whatever reason it might be 

15 that's committed to destroying the reputation of 

16 a school I mean there's social media, folks. 

17 They're going to do it.

18 Additionally there's an opportunity 

19 for them to file a BD claim under the existing rules 

20 as it stands.

21 My hope would be that the rules that 

22 we come up with here are so strong and fair that 

23 it prevents some of that firing from the hip or 
31

1 freewheeling student that might be out -- committed 

2 to get a school, that would provide the recourse 

3 for both the student and the school to address that.

4 I think too Mike to your point in terms 

5 of mediation, I mean I've never had -- speaking 

6 from a military perspective never had any problem 

7 with mediation as long as it was voluntary. I think 

8 the force piece is the challenge. 

9 And so providing that as a potential 

10 recourse might be worthwhile.

11 So between the fact that sufficient 

12 evidence and then making more explicit that the 

13 burden of proof as far as intent is not on the 

14 student but on the department, I think those two 

15 pieces combined with guaranteeing that mediation 

16 will be voluntary. That's a package that 

17 ultimately I think we could get behind.

18 PARTICIPANT: And I agree with you. 

19 I want a strong rule that once and for all gets 

20 rid of bad actors in education. 

21 It has been just a detriment to every 

22 student, to every school out there that's trying 

23 to do the right thing. And it's cost everybody. 
32

1 So I'm with you.

2 My concern is in reality what you 

3 typically see, and this is any industry. You can 

4 look at any industry. The small guys can't afford 

5 to meet the regulatory bar that's set based on bad 

6 acts of big guys.

7 And it becomes unaffordable. And so 

8 the big guys buy the small guys and then there are 

9 no more small guys, or they go out of business. 

10 That's across the board. Go look at 

11 the discussion they're having with banks. That's 

12 what typically happens.

13 And so I agree with what you're saying, 

14 but I think there's got to be another approach to 

15 make sure that you protect the small operators that 

16 can't afford all of the attorneys and the staffs 

17 and the accountants to meet all of these things. 

18 That would be my only thing.

19 But I appreciate what you're saying in 

20 terms of I'm for voluntary mediation. Our thing 

21 is I want the opportunity before it becomes an 

22 adversarial thing to say for the student through 

23 the department or through any neutral party to say 
33

1 hey, look, let's both of you all look at this and 

2 we say yes, okay.

3 I wish you would have brought it to us 

4 before. I understand some people aren't 

5 comfortable. But now that we know it, let's fix 

6 it.

7 That's the only way that that student 

8 is going to be happy and quite frankly it's the 

9 only way that that student is going to leave your 

10 school and tell their friends hey, that's a good 

11 place to go.

12 PARTICIPANT: So, a couple of things 

13 that are going across the table right now and it 

14 sounds like there might be an appetite for is 

15 specifying, whether in the preamble or elsewhere, 

16 that the burden to prove intent lies with the 

17 department.

18 And then adding something about 

19 voluntary mediation. So we want to check both of 

20 those. So I will start with specifying that the 

21 burden to prove intent lies with the department. 

22 Can I get a show of thumbs?

23 PARTICIPANT: I mean maybe Caroline 
34

1 can comment on this. I'm not sure that it's that 

2 the burden to prove intent lies with the department 

3 but it's the finding of intent is the responsibility 

4 of the department if that makes sense.

5 And that finding can occur -- the 

6 borrower doesn't have to provide all evidence or 

7 corroborating evidence that would allow the 

8 department to reach that conclusion.

9 But I just want to -- I think at least 

10 from a legal standpoint that's sort of an important 

11 distinction. So I don't know if there's another 

12 way you'd like to word that.

13 PARTICIPANT: I'll just confirm that 

14 that is right. So long as the elements are met 

15 regardless of how they're achieved or found then 

16 that would be enough for a claim to be discharged.

17 PARTICIPANT: Okay. So would you like 

18 to specify what could potentially be added in terms 

19 of a finding that there is intent? Sure.

20 PARTICIPANT: So one of the things that 

21 we're talking about for (i) but then we've got A, 

22 B, C, D, E, F, G, H. We've got a list here of things 

23 that the way I read it this is evidence of intent.
35

1 So if a school's actual license passage 

2 rate is materially different than those included 

3 in the institution's marketing materials, 

4 websites, or other communications made to the 

5 student that is evidence of intent or reckless 

6 disregard from the school.

7 Same thing with employment rates, 

8 marketing materials about accreditation. 

9 So getting to the conversation of how 

10 does a student prove this and this impossible 

11 burden, I don't see that because I see we've got 

12 this list that the department has put here 

13 specifically saying this is what we're talking 

14 about.

15 The only way that your license rates 

16 are materially different than what you've included 

17 in your materials is that you either, you intended 

18 to do that, or you had reckless disregard for 

19 putting together your licensing rates, or your 

20 placement rates, or whether or not your program 

21 is accredited.

22 You don't put your program is 

23 accredited in your marketing materials when it's 
36

1 not unless you're either intending to do that or 

2 you've got reckless disregard. 

3 So it seems to me that that's included 

4 in this section.

5 PARTICIPANT: I need to respond to that 

6 because I think that's an important distinction.

7 The way it was written when we included 

8 the word intentional I think it did that because 

9 we then listed that list below.

10 But then there was the proposal to take 

11 out the word intentional -- opposite, yes, opposite 

12 way around.

13 So I think that it could do what you're 

14 saying, but I think we have to pay attention to 

15 the changes that we make in this language.

16 PARTICIPANT: Sorry, just to clarify. 

17 So when this was originally drafted the change 

18 that Michale suggested with the intentionally false 

19 or misleading or made with reckless disregard for 

20 the truth was previously in the other section about 

21 how misrepresentation could be made.

22 So when these examples were drafted in 

23 here it was just to go to what would be a 
37

1 misrepresentation. It didn't talk about the 

2 intentional piece.

3 So that's certainly something we should 

4 discuss here, whether or not the addition of this 

5 language here would then go to show that these 

6 additional A through J would then be as Chris is 

7 suggesting would be proof of intentionality or 

8 reckless disregard.

9 PARTICIPANT: Michale, was that what 

10 you were suggesting?

11 MR. MCCOMIS: Well, no. The language 

12 that I put in had to do with the material fact, 

13 opinion, intention and law. Because Caroline, you 

14 and I talked about that yesterday and you said that 

15 it was important if we were going to strike it from 

16 B(1)(i) that you felt like the materiality piece 

17 was important.

18 So I had said it would fit better in 

19 the definition of misrepresentation. 

20 And it got thumbs down. I didn't make 

21 that language up. It was there. I don't even know 

22 what it means. I was just suggesting where it went. 

23 So don't hold that against me.
38

1 But since I have the microphone 

2 Caroline, could the absence of evidence be 

3 considered corroborating?

4 MS. HONG: You're going to have to give 

5 me a little bit more than that.

6 MR. MCCOMIS: So if the school has no 

7 response. The student makes an affirmative 

8 statement they told me the placement rates were 

9 90 percent and the school has no response to that 

10 or they have no evidence to say one way or the other.

11 I'm just trying to spin this out a 

12 little bit. So that's part of the evidentiary 

13 record that the school chooses to submit in that 

14 particular regard.

15 And it could be that the lack of 

16 response doesn't disprove the student's claim.

17 MS. HONG: But we did say we would 

18 require something in addition to the signed 

19 statement.

20 MR. MCCOMIS: Okay.

21 MS. HONG: So assuming they had 

22 something in addition to the signed statement the 

23 idea -- right, a piece of advertising. The idea 
39

1 that the school responded or not, we consider what 

2 we've received at that point.

3 MR. MCCOMIS: Okay. So then my next 

4 question really has to do with -- or point really 

5 is that intent is not required in every single case 

6 because you've chosen the conjunction or as opposed 

7 to and.

8 So it's intentionally false or 

9 misleading, or there's reckless disregard. Is 

10 that correct? All right.

11 Then I'm not sure that I understand that 

12 there's a real need for recklessness as part of 

13 the evidence. 

14 I'm good with the intent piece, the 

15 intentionality piece because the burden's not on 

16 the student exclusively. But I don't know that 

17 there needs to be reckless disregard.

18 Because it seems to me getting to some 

19 of the conversations and the public comments that 

20 were made the last time around that harm to student 

21 regardless of whether it was a mistake or not, there 

22 is a sense of well, you should have known. Even 

23 if it was a mistake did you have the policies and 
40

1 the procedures in place such that these mistakes 

2 wouldn't occur.

3 Did you have the right kind of 

4 checkpoints and did you have the right 

5 infrastructure. And maybe this is a costly lesson 

6 to you, but you need to have these things in place 

7 so that harm doesn't occur again.

8 So raising that bar to recklessness 

9 maybe is a bridge too far. To kind of meet 

10 somewhere in the middle on this proposed language 

11 here maybe it's just we keep intentionally but 

12 strike reckless would be another position that I 

13 would put forward.

14 PARTICIPANT: Michale, would you then 

15 be taking out your initial addition regarding 

16 material fact, opinion?

17 MR. MCCOMIS: No, I did that as a favor 

18 to Caroline. I'm just suggesting intentionally 

19 false or misleading, or made with a disregard for 

20 the truth.

21 PARTICIPANT: With the understanding 

22 as we've heard it earlier that the burden is not 

23 solely on the student to prove intentionality.
41

1 MR. MCCOMIS: Given the question that 

2 I asked and the answer that I got then yes, I believe 

3 that is the case.

4 PARTICIPANT: Caroline.

5 MS. HONG: I just want to clarify one 

6 thing. The mistake was mine. Chris had the 

7 reading right. So that's certainly something we 

8 should discuss here, whether or not that would work 

9 for everyone.

10 PARTICIPANT: Okay. So with that 

11 addition striking reckless, keeping intentional, 

12 how does the group feel? I'm asking for thumbs. 

13 I'm asking for thumbs.

14 PARTICIPANT: Two thumbs down.

15 PARTICIPANT: Okay, can we just hear 

16 from the thumbs down first?

17 PARTICIPANT: I appreciate what 

18 Michale's trying to do here and I think it's a step 

19 in the right direction.

20 I'm still not sure sort of what it would 

21 take to show disregard for the truth, sort of what 

22 that would mean.

23 The law has recklessness standards and 
42

1 negligence standards and I'm not sure if this would 

2 ultimately be interpreted as a recklessness 

3 standard versus a negligence standard versus 

4 something else.

5 So I'm concerned that I don't know

6 entirely what it would mean.

7 I do think it's a step in the right 

8 direction though.

9 I'd had my tag up before because I 

10 wanted to respond to Mike's proposal. Can I do 

11 that now as well or do you want to keep the 

12 conversation on this?

13 MR. MCCOMIS: I would just say in 

14 response to that we keep going back to this idea 

15 that there are concepts in the law. But yet we've 

16 also said this is not a judicial proceeding.

17 So you can't have it both ways.

18 PARTICIPANT: Okay. I just want to 

19 stick to this for the moment. We can come back.

20 MR. MCCOMIS: But that's what I'm 

21 talking about. My concern is not whether or not 

22 there is an evidentiary burden in terms of the 

23 judicial review of what it means in the law for 
43

1 disregard versus negligence versus -- I don't know 

2 any of that stuff.

3 What I know is that the department is 

4 going to make some decisions. And I'm trying to 

5 help give them the tools that they can make good 

6 decisions and put some faith and trust and 

7 confidence in their ability to make those, keeping 

8 in mind that part of their intent is in the best 

9 interest of students, institutions and taxpayers 

10 weighted equally. And that's what I'm trying to 

11 get to.

12 And so I get where you're saying well 

13 you don't understand what it means, but we have 

14 to put some faith and confidence in the department's 

15 ability to take these regulations that we give them 

16 and to fairly and objectively use those.

17 PARTICIPANT: Joseline, can we hear 

18 from you? You were the other thumbs down. Aaron?

19 MR. LACEY: Several comments. So on 

20 intentionality from my perspective I'm glad that's 

21 back there and I just want to confirm that I feel 

22 it's very important to have that intentionality 

23 there in that particular spot because without it 
44

1 it does become a mistake standard.

2 If you take intentionality out then 

3 false or misleading becomes the lower of the two 

4 standards. You would have false or misleading, 

5 or a reckless disregard for the truth.

6 And that means if an institution made 

7 a statement unintentionally but it was false, so 

8 even if it's a mistake, that that could be a basis 

9 for a claim and I know I and my constituency have 

10 many times said we don't think this is supposed 

11 to be a mistake standard.

12 I am sympathetic to the view that if 

13 students are wronged even if it is a mistake and 

14 they are harmed that they should have some form 

15 of resolution with the institution.

16 I don't disagree with that, I just don't 

17 think it's a basis for a borrower defense claim. 

18 I think that a student should go to the institution 

19 and say I was wronged, you made a mistake, you need 

20 to make me whole. And I think a good institution 

21 should do that. In my experience they very 

22 frequently will.

23 But what we're talking about here is 
45

1 is it a basis to discharge $80,000 in loans and 

2 my view is no. If you're talking about what's a 

3 basis to discharge the loans in a borrower defense 

4 proceeding there needs to be something more than 

5 a mistake. There needs to be some level of 

6 intentionality or reckless disregard on the part 

7 of the institution.

8 Trying to move things forward. So the 

9 lower of the two standards there right now if you 

10 leave intentionality in is as Abby has accurately 

11 pointed out is this reckless disregard for the 

12 truth.

13 There are other standards out there as 

14 she has also pointed out.

15 The problem I have and that is a real 

16 challenge with this process, it's just inherent, 

17 I'm not being critical, but there's not a lot of 

18 option to give and take like you would if you had 

19 attorneys sitting around negotiating an agreement. 

20 You'd say how about this or how about that.

21 So I understand that there's a concern 

22 with reckless disregard and the idea that that may 

23 be too high of a standard. 
46

1 I cannot get behind changing that 

2 standard without confirmation that the evidentiary 

3 standard is not going to move.

4 My constituency, I and when you're 

5 talking -- again I keep going back to this overall 

6 model risk allocation, that would be a degradation 

7 on both key levels for my constituency which is 

8 a non-starter.

9 But if I can get some sort of 

10 confirmation that we can live with substantial 

11 weight of the evidence and the notion that a student 

12 has to supply something besides a certified 

13 statement, i.e., corroborating evidence, then I 

14 would be willing to talk about potentially 

15 modifying the reckless disregard standard.

16 But they are inextricably linked. I 

17 don't see how we can try to negotiate or do thumbs 

18 on one or the other. It just doesn't work that 

19 way in my mind.

20 PARTICIPANT: Are you making a 

21 proposal, Aaron?

22 MR. LACEY: Well, I guess my proposal 

23 is I'm willing to discuss or entertain -- I agree 
47

1 with Abby, although I also understand Michale's 

2 point. This disregard concept is not a concept 

3 that's really out there.

4 But my point is if other proposals want 

5 to be made whether it be simply disregard, or 

6 negligence, or something along those lines I'm 

7 willing to entertain that provided that substantial 

8 weight of the evidence and the corroborating 

9 evidence standards as written are maintained.

10 PARTICIPANT: How does the group feel?

11 PARTICIPANT: Do we need a minute to 

12 think about it before we do a show of thumbs? 

13 Repeat.

14 MR. LACEY: I'm not -- I mean we don't 

15 have to vote on this, but I'm just trying to move 

16 us forward in the sense of understanding how for 

17 a framework toward resolution it might work.

18 And my point is these two are -- if the 

19 folks, the consumer advocates and the folks really 

20 representing student rights -- I know this is all 

21 linked.

22 But if it is a greater concern that 

23 reckless disregard, if that's the bigger hangup, 
48

1 then my point is if we can get a confirmation that 

2 we can live with substantial weight of the evidence. 

3 So in other words that we can live with B(1) and 

4 (2) as they were originally proposed yesterday 

5 because I know there's maybe some edits -- I'm 

6 sorry, B(1) -- I probably misspoke there. Sorry. 

7

8 Yes, those two, the one where you talk 

9 about substantial weight of the evidence and define 

10 that. Yes, sorry, (3).

11 If we can leave those as they are 

12 proposed then I am much more comfortable talking 

13 about potentially modifying the reckless disregard 

14 standard to consider some other standard that might 

15 be deemed more accessible to students.

16 But with the first part of that in flux 

17 it makes it all the more important to me that the 

18 second part remain the same. So I'm trying to 

19 suggest a way that we might move forward. 

20 Understanding by the way that if we 

21 couldn't reach resolution on the second part that 

22 likely folks would not agree on part one either 

23 of that equation.
49

1 PARTICIPANT: So I'm not entirely sure 

2 that we have enough clarity to take a temperature 

3 check, but does someone want to help out with that?

4 PARTICIPANT: Well, I think simply 

5 what Aaron is saying is that under B(1) on page 

6 2 substantial weight of the evidence stays and that 

7 under 4(i) reckless goes. Is that right, Aaron? 

8 MR. LACEY: Well, either that reckless 

9 goes or if we want to propose negligent disregard, 

10 if that's a concept that would make folks more 

11 comfortable because it's got a connection.

12 But my point is we're trying to figure 

13 out how do we move forward. And the problem I have 

14 is these two are linked. And so I can't negotiate 

15 them in isolation.

16 PARTICIPANT: Yes, I get it. So 

17 substantial weight of the evidence stays and either 

18 reckless is stricken or it's replaced with 

19 negligent disregard.

20 PARTICIPANT: So can we hear from some 

21 of the student advocates some assistance as to what 

22 might be acceptable to get us close. So when we 

23 do take a check we're a little bit more accurate 
50

1 about what might get accepted.

2 PARTICIPANT: Will.

3 MR. HUBBARD: So what I would propose, 

4 and I probably wasn't as clear before but I think 

5 Aaron, I think you and I are getting pretty close 

6 to the same point on this.

7 We would be comfortable, we the 

8 military community would be comfortable with in 

9 B(1) having sufficient evidence. I think that's 

10 a fair standard in the sense that if there's not 

11 sufficient evidence obviously the claim doesn't 

12 go through.

13 And then under 4(i) striking the 

14 disregard language and then also including the 

15 finding on intent in the preamble as kind of a 

16 package offer.

17 PARTICIPANT: Will, could you repeat 

18 it.

19 MR. HUBBARD: Yes, no worries. So 

20 instead of substantial weight of the evidence 

21 saying sufficient evidence, that's B(1).

22 And then in the language under 

23 misrepresentation, so that's 4(i) striking the 
51

1 disregard language, keeping the intentionality, 

2 but also noting in the preamble finding of intent 

3 being the burden of the department, not the student.

4 PARTICIPANT: Okay, Linda and then 

5 Michale.

6 MS. RAWLES: I have a question before 

7 the vote for the department. Whatever we're going 

8 to vote on such as if we vote on sufficient as 

9 opposed to substantial weight I'd like at each stage 

10 for Caroline to answer whether or not you consider 

11 that a higher standard than preponderance.

12 PARTICIPANT: I'm sorry, just to 

13 clarify, you want to know whether or not sufficient 

14 or substantial is higher than preponderance?

15 MS. RAWLES: Whenever we vote if we're 

16 voting on this change, sufficient evidence, I'd 

17 like you to tell me if you think that is a higher 

18 standard than preponderance.

19 Because we had some conversation 

20 yesterday that the department was trying to split 

21 the difference between preponderance of the 

22 evidence and clear and convincing.

23 And I feel like we're going below 
52

1 preponderance. And not everyone in this room even 

2 agrees if substantial weight is above or below 

3 preponderance. 

4 So I'd like to know the department's 

5 position on when we're voting on an evidentiary 

6 standard if it's above preponderance of the 

7 evidence. Thank you. 

8 PARTICIPANT: So I'm going to have to 

9 give a very lawyerly answer to that. I'm sorry.

10 But just with regard to specifically 

11 to sufficient evidence I think it depends on how 

12 the language shapes up. 

13 Just because with the way the edits 

14 turned out yesterday I'm not clear whether or not 

15 it comes with your additional last sentence that 

16 you propose about the probative value.

17 I've spoken to other people around this 

18 room. Different people seem to attribute 

19 different things to corroborating versus 

20 sufficient. And as a lawyer I think that's 

21 something to consider and take back.

22 But I think it really depends I think 

23 on the language. So it's hard to comment on these 
53

1 sort of concepts right now.

2 PARTICIPANT: Any more comments about 

3 this proposal? 

4 MS. RAWLES: I just want to say that 

5 if it's a lower standard than preponderance, if 

6 we can't agree that it's a higher standard than 

7 preponderance then I would certainly be opposed 

8 to it.

9 PARTICIPANT: Will, can you say a bit 

10 about your intent by using the word sufficient?

11 MR. HUBBARD: Oh boy. I think 

12 ultimately it's twofold. Number one, it's plain 

13 language. There's been an expressed interest by 

14 the department to have plain language that all could 

15 understand. I think it meets that box.

16 Additionally I think the second piece 

17 is it affords a level of fairness between the 

18 student and school where if the student can't 

19 provide sufficient evidence they don't have a 

20 claim, period.

21 And so I think it kind of goes between 

22 the two.

23 Not having a JD myself, kicking myself 
54

1 saying that, but I don't know necessarily between 

2 clear and convincing and preponderance, hard to 

3 thread that needle. I think sufficient kind of 

4 meets all buckets. So that's the intent with that.

5 PARTICIPANT: Michale.

6 MR. MCCOMIS: But for me the key is 

7 really in B(3) because that's where it's defined 

8 for corroboration. 

9 It's not just the statement, it's that 

10 there must also be corroborating -- that's what 

11 gives the claim and the evidence substantial weight 

12 or sufficiency or whatever term you want to use. 

13 Those to me are just adjectives.

14 What gives it weight is the 

15 corroboration either as provided by the borrower 

16 so that they have a claim and they can prove that 

17 claim, or otherwise in the possession of the 

18 Secretary.

19 So preponderance, sufficient, what's 

20 important I think is the concept of corroboration. 

21 And that's here. So whatever words you choose 

22 to describe it I think for me are not as important 

23 as is the concept of corroboration.
55

1 PARTICIPANT: So if I could jump in. 

2 Will, just to clarify. In your proposal which 

3 was building on Aaron's proposal were you 

4 envisioning paragraph 3 to build off of Michale's 

5 comments as it stands on the screen right now, or 

6 as it was proposed coming in to this session? 

7 Because there is that addition at the end.

8 MR. HUBBARD: No, building on 

9 Michale's piece I think is reasonable. 

10 PARTICIPANT: So to include the 

11 language at the end there and the evidence proves 

12 the assertion is at least more probable than not? 

13 Okay.

14 And Linda, I see you standing up. Does 

15 that help address your concern?

16 MS. RAWLES: It is a package.

17 PARTICIPANT: Any other thoughts on 

18 this or any additions to this?

19 PARTICIPANT: So just to clarify we've 

20 added sufficient, we've added and the evidence 

21 proves that the assertion is at least more probable 

22 than not, the regarding material fact, opinion, 

23 intention, or law is still there, false or 
56

1 misleading is still there, reckless regard is taken 

2 out. And we've got the language in the preamble 

3 about intentionality. And intention is taken out 

4 of this section.

5 Oh intentionality stays here with the 

6 preamble language. Yes, thank you. Oh right, 

7 disregard is supposed to be in there still. It's 

8 just reckless that's stricken out.

9 Any other changes we need to make to 

10 the language on the screen? Walter.

11 MR. OCHINKO: Yes, I had a suggestion, 

12 it was probably about 20 minutes ago and the 

13 conversation has moved on quite a bit so I'm not 

14 sure if it's still relevant.

15 But I had a couple of points I wanted 

16 to make. I really want to underscore the point 

17 that Abby made that the misrepresentation doesn't 

18 necessarily have to be with intent. It could be 

19 a mistake.

20 And that the student still deserves to 

21 have restitution for even an honest mistake.

22 I also want to point out that in 2016 

23 when we had these negotiations we were in the throes 
57

1 of Corinthian and soon to follow ITT.

2 And I take with a grain of salt the fact 

3 that as a student you can go to an institution like 

4 that and you can have an honest conversation with 

5 them and they can say yes, I made a mistake. Here's 

6 your money back or we're going to fix this.

7 Because the kind of predatory behavior 

8 that they engaged in went on for years. I have 

9 seen multiple, multiple complaints from veterans 

10 that attended these institutions and they did try 

11 and correct the problems. They did go to the 

12 institutions. Nothing happened.

13 So I really do think it's important to 

14 recognize that it's not just by intent, but that 

15 it can be an honest mistake. And I would suggest 

16 that we change the language here to say a borrower 

17 that is either mistakenly or intentionally -- I'm 

18 sorry, a statement that is either mistakenly or 

19 intentionally false or misleading.

20 PARTICIPANT: Joseline.

21 MS. GARCIA: I support Walter's 

22 statement and his suggestion. And I say this 

23 coming from the student perspective because again 
58

1 whether it was an honest mistake or not these 

2 people's lives are ruined and students came in there 

3 with good intention to get their dreams to come 

4 true.

5 They put in the work. Also many of 

6 these cases they do go to the institutions to try 

7 to resolve these matters.

8 I wouldn't support a statement that has 

9 the intent standard in there because what would 

10 stop an institution from claiming that all of these 

11 things are mistakes to save themselves.

12 PARTICIPANT: Okay. So we're going to 

13 have to test this. We're going to test it both 

14 ways. 

15 So with this last addition that Walter 

16 made everyone has had a chance to review the 

17 language. Let me see a show of thumbs.

18 With Walter's addition of either 

19 mistakenly or let me see a show of thumbs.

20 PARTICIPANT: At least eight thumbs 

21 down.

22 PARTICIPANT: Now can you strike the 

23 either mistakenly or. Yes, please ask your 
59

1 question.

2 PARTICIPANT: So my question is for 

3 Abby. Is negligent disregard better than just 

4 disregard. I know you expressed a concern and I 

5 share it that disregard, understanding Michale's 

6 point about this is not a legal proceeding, but 

7 I don't know if that's better for you or worse for 

8 you. I'm just asking before we vote if you have 

9 a strong sense one way or the other.

10 Understanding you may vote the whole 

11 thing down. I get that. But just on this one 

12 point.

13 MS. SHAFROTH: I don't at this time 

14 have a -- it's not clear to me which is better.

15 PARTICIPANT: Fair enough. I'm in the 

16 same boat.

17 PARTICIPANT: So have you added 

18 negligent? Okay. So now please let me see a show 

19 of thumbs, the language as it's written on the 

20 screen right now.

21 PARTICIPANT: Four thumbs down.

22 PARTICIPANT: Okay, so we have four 

23 thumbs down. I'm going to ask for a response from 
60

1 the thumbs down and I need the result of that 

2 conversation to be a proposal that the thumbs downs 

3 believe will result in all thumbs up, please.

4 PARTICIPANT: Okay, Mike Busada and 

5 then Abby.

6 MR. BUSADA: As I said, I cannot vote 

7 for anything that will change this language in good 

8 conscience without there being a commitment to 

9 revisiting and including a voluntary mediation 

10 process.

11 To do so, to vote on anything to weaken 

12 this standard without that for small good acting 

13 schools would be a death sentence to small schools 

14 across the country. It will put them out of 

15 business. I can't do that.

16 So if we can include the mediation then 

17 I definitely am willing to make changes here.

18 PARTICIPANT: Where would you put it, 

19 Mike?

20 MR. BUSADA: In issue paper two.

21 PARTICIPANT: Abby.

22 MR. BUSADA: I mean we all agreed in 

23 principle on it too. So as long as everybody's 
61

1 willing to include that into issue paper two then 

2 that would change the game for me at least.

3 MS. SHAFROTH: So I'm not sure if we 

4 all agree in principle on it but I do think that 

5 this is a potential avenue for moving towards 

6 consensus.

7 If we were to get rid of the intent --

8 standards. Get rid of intentionally, recklessly,

9 whatever, or negligent disregard and just make it 

10 a false or misleading statement.

11 To alleviate Mike's concern that good 

12 schools that make a mistake get the reputational 

13 harm concern, when there are mistakes if schools 

14 want to make it right through a mediation I would 

15 be comfortable making that -- working towards that 

16 compromise.

17 So striking intentionally and striking 

18 or made with negligent disregard for the truth and 

19 adding to issue paper two an early complaint 

20 resolution process along the lines that Michale 

21 proposed at session two.

22 PARTICIPANT: Just a point of note 

23 here. If we're spending all this time crafting 
62

1 these last two lines why is it that Abby comes up 

2 and basically says let's just strike the whole 

3 thing. Why didn't you tell us ahead of time that 

4 you're not going to approve any of this?

5 It's really frustrating to sit here and 

6 work really hard on crafting two lines, going back 

7 and forth, Michale's making points, Aaron's making 

8 points. And Abby just responds when we have come 

9 to what I thought was a somewhat reasonable 

10 conclusion that even William agreed to.

11 She just comes back and says no, I want 

12 the whole thing stricken. Why didn't we start off 

13 with that?

14 PARTICIPANT: Actually, Kay, you've 

15 had your card up for a while.

16 MS. LEWIS: I don't think this will 

17 solve it all. But one of the things that -- I don't 

18 have a problem taking out the word intentionally 

19 and one of the things I thought might make schools 

20 more comfortable with that is that if the department 

21 could add some language somewhere that talks about 

22 -- so give the student their relief, give the 

23 borrower their relief, but then in the section where 
63

1 you're going to the school and asking the school 

2 to repay have some language in there about the 

3 one-off mistakes that might happen, or significant 

4 findings, something that would give the school some 

5 relief if it really is just a legitimate mistake 

6 that was made.

7 PARTICIPANT: We discussed at the 

8 beginning of the session that we were trying to 

9 balance the needs of the borrowers or the students, 

10 the schools as well as the taxpayers.

11 To give schools a pass because they made 

12 an innocent mistake, I understand the idea behind 

13 it, but how does that protect the interests of the 

14 taxpayer. 

15 You've covered the borrower which I 

16 appreciate, you're helping the school, but then 

17 you're putting it on the backs of the taxpayer.

18 MS. LEWIS: Can I respond? I 

19 understand that. There have been many examples 

20 in the department's history where they've let 

21 guarantors and lenders and others off the hook and 

22 kept the taxpayer on the hook.

23 So making a small, insignificant 
64

1 findings kind of pass for the schools occasionally 

2 seems to me within reason.

3 PARTICIPANT: Okay, folks. It's 

4 10:15. We're going to take a 15-minute break. 

5 Please come back at 10:30.

6 (Whereupon, a break was taken)

7 PARTICIPANT: Just a quick update. 

8 We've had a request for an additional 10 minutes 

9 that we've granted so please come back at 10:40. 

10 10:42.

11 (Whereupon, the above-entitled matter 

12 briefly went off the record.)

13 PARTICIPANT: Okay, everyone. 

14 Returning to work where we left off hopefully to 

15 find a way forward. 

16 I know that there are three or four 

17 folks who do want to go ahead and get us started. 

18 We're going to make our way around the room this 

19 way. Chris, Linda, William and Walter. Chris.

20 MR. DELUCA: So again I guess I wanted 

21 to just go back to 4(i) as originally proposed or 

22 as presented to the group here in our third session.

23 I look at this and we're talking about 
65

1 what is a misrepresentation. When has something 

2 occurred that should provide relief to a borrower.

3 And we've got this list. We've got A 

4 through H. We've got these things that are listed 

5 here saying here are examples of things.

6 And again getting to the idea of when 

7 do you have to prove intent. It's important for 

8 me that we get beyond a mistake standard because 

9 some of the proposals that we have up here would 

10 make it, again, from schools that I work with and 

11 represent that have 50 students in a massage therapy 

12 program, they represent the 40 out of 50 who 

13 graduated were placed, that's an 80 percent 

14 placement rate.

15 Well, what if the auditor comes in or 

16 the accrediting agency comes in and says well, we've 

17 reviewed your files and there's one student where 

18 you didn't get a signed affidavit back to say that 

19 they were self-employed so you can only count 39. 

20 Well, that's 78 percent. That's a misstatement 

21 on a material fact which is placement rates.

22 Is that going to put a school at risk 

23 for that. I would say that's not a material 
66

1 statement so then that shouldn't.

2 But that's what we get to here. We've 

3 got a list of things that say here are the things 

4 that -- here are examples. We've got eight things 

5 here, nine things here that list that out.

6 And we've got the history now, we've 

7 got 100,000 claims, borrower defense claims that 

8 have been filed.

9 If we need to add more to this list 

10 because it's not inclusive. And again recognizing 

11 we can't predict 10 years out in the future, but 

12 the way it's drafted it says evidence that a 

13 misrepresentation described in paragraph B(1)(i) 

14 of this section has occurred includes but is not 

15 limited to.

16 If there are things -- we've talked for 

17 three sessions now about these bad things that 

18 schools have done, that some schools have done. 

19 And that's what we've included in here.

20 I mean, are there other things that are 

21 going on that we're missing that maybe if we add 

22 those to here that we can get comfortable.

23 But again it seems to me that the way 
67

1 that this is drafted contemplates here's the deal. 

2 We want to protect students against these bad acts. 

3 These are bad acts.

4 And again, I don't see where a school 

5 could say oh, it was a simple mistake. I didn't 

6 mean to tell you that your credits could transfer 

7 when they really don't. Or that we were accredited 

8 in that program when we really weren't.

9 That's not a mistake, that is by 

10 definition intentionally false or misleading or 

11 made with reckless disregard.

12 So again that's where I would just ask 

13 to the folks around the table if there are things 

14 that are missing from this list. But it seems to 

15 me that this list spells out these are the things 

16 that -- if this happens to a student then they should 

17 get relief.

18 PARTICIPANT: So just to clarify and 

19 I think open this up to the table. I want to focus 

20 on this issue.

21 But Chris, are you saying that you 

22 believe that this list is a list of items or acts 

23 that may be misrepresentation and would meet the 
68

1 requisite required intent?

2 MR. DELUCA: So maybe we say that 

3 evidence of an intentionally false or misleading 

4 statement or made with reckless disregard may 

5 include but is not limited to and then have this 

6 list.

7 And maybe others can say to this, 

8 counter this. But I have a hard time seeing how 

9 materially different licensure rates, materially 

10 different employment rates, misstatements about 

11 whether or not your programs are accredited or not, 

12 how they can be anything other than intentional 

13 or reckless.

14 So I'm comfortable as far as a point 

15 of moving forward to say those may be -- that's 

16 evidence or may be evidence of intentionally false 

17 or reckless statements.

18 PARTICIPANT: I guess to put the 

19 department on the spot is that the same -- for the 

20 department and the table is that the interpretation 

21 that everyone has?

22 PARTICIPANT: So just to clarify, from 

23 my perspective yes it is the same. We've defined 
69

1 misrepresentation and then in the end of that we 

2 essentially say evidence that a misrepresentation 

3 described where we described it includes but is 

4 not limited to these items.

5 So what we're saying is these meet the 

6 definition. These are examples of something that 

7 already give cause to that claim.

8 So I'm not sure what changing the word 

9 misrepresentation there gets us because we've 

10 defined misrepresentation and then we say examples 

11 of such a misrepresentation include this. 

12 Hopefully that helps.

13 MR. DELUCA: And I agree with you. But 

14 I think the challenge is there's been a lot of 

15 conversations about well, how does a student prove 

16 intent.

17 In my mind it's not the student trying 

18 to get into the head of the people at the school 

19 or trying to figure out what was the school 

20 thinking. This list is showing intent or 

21 intentional disregard.

22 PARTICIPANT: So if I can piggyback off 

23 of that. To use your example of accreditation, 
70

1 if an institution has a program that they know is 

2 not accredited, it's not accredited. And they say 

3 on their website that it is, and they tell students 

4 that it is.

5 And a student comes in and they file 

6 an application and with it they attach a copy of 

7 a print screen from the website that says this 

8 program is accredited by and it names an accrediting 

9 agency. There you go. To me you're there.

10 The student doesn't have to do 

11 something to prove. Because it's so obvious by 

12 saying that they're accredited when they're clearly 

13 not.

14 We've outlined that here. We've said 

15 this meets the definition. So I thought we were 

16 there, but I'm sensing that not everybody felt that 

17 we were there.

18 MR. DELUCA: And the only other thing 

19 because I think we are. I think the way that this 

20 is drafted we are there.

21 And my question is we've got this list 

22 of things to show examples of based on experience. 

23 So if there are other things that needed to be 
71

1 added here, if there are other misrepresentations 

2 or harms that are befalling students and borrowers 

3 that are out there that we haven't discussed.

4 But it seems to me that whenever anybody 

5 talks about these are the things the bad schools 

6 are doing I think we've got it covered in A through 

7 H.

8 Again, if we need to add I, J and K I 

9 think we can discuss that, but I think we've got 

10 it covered.

11 PARTICIPANT: And I think just to kind 

12 of again lay that foundation as I mentioned at the 

13 first session our goal here is not to create a 

14 regulation based on everything just that we've seen 

15 in the past, it's to be forward thinking and to 

16 say what we might see in the future.

17 We can't predict the future so that's 

18 why we did the includes but is not limited to. 

19 There are going to be things that we cannot envision 

20 today that could happen later.

21 If you had asked somebody 100 years ago 

22 about online education they'd have said what. 

23 So again I want to be willing to be 
72

1 flexible enough that we leave this open for behavior 

2 that we can't anticipate.

3 While I appreciate your comments, I 

4 don't want anybody to feel like well, we have to 

5 sit here now and come up with this exhaustive list 

6 because if it's not on the list it'll never fly 

7 later.

8 I think that we're trying to 

9 intentionally leave it open for the types of things 

10 that we cannot anticipate right now.

11 PARTICIPANT: Michale, did you have a 

12 comment in response?

13 MR. MCCOMIS: Yes, just quickly. 

14 Would it then be helpful AnnMarie, to make that 

15 more clear if it was examples of evidence? Would 

16 that make it broader to those that have some 

17 discomfort with this is maybe too restrictive? 

18 So examples of evidence of a misrepresentation 

19 described in that last sentence?

20 I don't know if that helps, but Chris 

21 seems to think that some folks around the table 

22 have some discomfort with it being a definitive 

23 list or an exhaustive list. Clearly it's not and 
73

1 you've made it clear that that's not the intent.

2 PARTICIPANT: Chris, you also 

3 mentioned something about adding intentionally 

4 false before or around misrepresentation. Is that 

5 something that you wanted to?

6 MR. DELUCA: I'm just going back to the 

7 language as originally presented to us in the issue 

8 paper because it included the language 

9 intentionally false or misleading or made with 

10 reckless disregard for the truth.

11 And again this is where it seems like 

12 in conversations this is where there's a hangup 

13 on it in the idea how does a student prove intent.

14 But again I think the examples, the last 

15 sentence there, evidence that a misrepresentation 

16 described in paragraph B(1)(i) of this has occurred 

17 includes but is not limited to. 

18 Those examples are examples of schools 

19 with an intent to mislead or engaging in reckless

20 behavior. 

21 Again, I think as written it works. 

22 It includes is not limited to. So we're not saying 

23 something else could happen in the future that we're 
74

1 not covering.

2 But as far as based on what we know now 

3 here's the things that we know about, but you know 

4 what, if there's something else that comes up in 

5 the future that could be included too.

6 PARTICIPANT: Any questions or 

7 comments on this discussion? I know it's sort of 

8 a different approach to the intent discussion that 

9 we were having before the break. Linda.

10 MS. RAWLES: I'm going to pass because 

11 I don't want to interrupt the flow that I understand 

12 you're trying to create, but I do have something 

13 I want to say when we are in the flow.

14 PARTICIPANT: Okay. So going back to 

15 our discussion prior to the break. We had a package 

16 for lack of a better term of a number of different 

17 concepts proposed I think originally by Will and 

18 added to by Aaron and Michale which included some 

19 statement of the department making the finding of 

20 intent in the preamble, a change to B(i) with 

21 substituting sufficient for substantial, a change 

22 to B(3) substituting sufficient for substantial.

23 The inclusion of the more probable 
75

1 language in B(3). 

2 And then we had the -- I think this was 

3 Michale's proposal on the addition of -- or the 

4 substitution of negligent disregard instead of 

5 reckless disregard.

6 And the combination from Mike Busada 

7 on voluntary mediation in some context.

8 Now I know we had some questions on the 

9 intent standard itself. Does the discussion we've 

10 just had, the clarifying discussion, change that 

11 in any way, change the concerns around the table? 

12 Are there additional things, understanding the 

13 list is not all-inclusive, are there different 

14 items that could be added to that list that would 

15 help assuage individuals' concerns?

16 Is there a way to work through the 

17 intent boulder in the road at this time, or do people 

18 need more time?

19 PARTICIPANT: Abby.

20 MS. SHAFROTH: So I hadn't originally 

21 read this enumerated list in the way that it has 

22 been recently discussed so I would like to take 

23 more time to think about it and to discuss it with 
76

1 my community of interest and to think through 

2 whether there's additions or other ways it could 

3 be modified that would better address our concerns.

4 I will put out there another possible 

5 way to try to find some compromise is one of our 

6 major concerns with the proposal is that it really 

7 only allows borrowers to get relief on the basis 

8 of a misrepresentation.

9 And so if that's the case then 

10 misrepresentation is really the whole ball game 

11 and the further we limit that basis the harder it 

12 is going to be for borrowers to get relief.

13 We might be more comfortable giving on 

14 a more limited definition of misrepresentation if 

15 there are other bases preserved for borrowers to 

16 attain relief.

17 So John has spoken about allowing state 

18 law claims. If borrowers could continue to bring 

19 state law claims then I would be less concerned 

20 about a narrower standard for misrepresentation.

21 We and the constituencies representing 

22 consumer advocacy groups also submitted a proposal 

23 allowing borrowers to bring claims on the basis 
77

1 of unfair or abusive practices. If borrowers were 

2 allowed to bring claims on the basis of unfair or 

3 abusive practices in addition to 

4 misrepresentations then we would be more 

5 comfortable negotiating a more restrictive 

6 definition of misrepresentation than we had in 

7 2016.

8 PARTICIPANT: But Abby, those things 

9 exist, right? The state claim exists and it 

10 doesn't require a finding of misrepresentation. 

11 As I read what is currently being proposed here.

12 So are you asking for something else 

13 to be added in to the state law action piece of 

14 it? Are you asking for additional or different 

15 language in (ii) or (iii)?

16 Because they only discuss that there's 

17 a final action that was against the institution 

18 relating to what I had suggested enrollment at the 

19 institution or the provision of educational 

20 services.

21 So the misrepresentation is not the 

22 entire ball of wax. Those already exist. And so 

23 I guess I don't know what you're asking for.
78

1 MS. SHAFROTH: Sure, just to respond 

2 briefly. We haven't really had much time to get 

3 into (ii) and (iii).

4 My concern is particularly in light of 

5 the entire package that the department has proposed 

6 that those are -- (ii) and (iii) are so narrow as 

7 to be pretty much illusory. They would require 

8 the borrower to have a final definitive judgment 

9 rendered in a contested proceeding that awarded 

10 them monetary damages.

11 It is extremely rare for a case to go 

12 through all the way to final judgment and it's very 

13 difficult for a borrower to obtain a judgment. 

14 Really it's rare for a defrauded borrower to obtain 

15 a lawyer in the first place.

16 But if they do obtain a lawyer they're 

17 going to have a hard time bringing their claim in 

18 court because of the arbitration agreements that 

19 predatory schools tend to use.

20 And even if they do go to court most 

21 cases are settled. 

22 This also requires a contested 

23 proceeding so if the school has already gone belly 
79

1 up then the proceeding I don't think would be 

2 contested. So a default judgment I think wouldn't 

3 count.

4 Basically this is a really narrow 

5 standard. Our proposal would be something -- if 

6 we're going to allow state law claims something 

7 more along the lines of the existing standard that 

8 allows a claim on the basis of state law.

9 We could have a discussion whether 

10 there's something appropriate about settlements 

11 or investigations or some other ways to get at that. 

12 But as is (ii) and (iii) I think, I can't imagine 

13 they will -- I can't think of any circumstances 

14 really where they would be used.

15 PARTICIPANT: So, Abby, a little 

16 facilitator prerogative here. Did I hear you 

17 assigning yourself some homework to think about 

18 what additional categories for lack of a better 

19 term you might need to see to get into this kind 

20 of construct that we're discussing?

21 MS. SHAFROTH: I can do that. I would 

22 prefer to do that if people think that there's a 

23 possibility of that being. I don't want to give 
80

1 myself futile homework. 

2 So if folks think there's no way they're 

3 going to consider that then I'd rather spend my 

4 time doing something else. The Olympic Games are 

5 going on right now.

6 PARTICIPANT: Caroline.

7 MS. HONG: I just had a question. So 

8 you were mentioning investigations or settlements. 

9 Could you explain a little bit more what kind of 

10 parameters you're thinking about?

11 MS. SHAFROTH: I don't have specific 

12 parameters in mind, but I would say that a lot of 

13 -- the Massachusetts and California state AGs who 

14 participated in the last rulemaking explained that 

15 they rarely take a case through to a final judgment 

16 because it takes too long and it doesn't allow them 

17 to get relief to their citizens fast enough, and 

18 that it generally makes most sense for all parties 

19 to settle. 

20 And I think most lawyers in the room 

21 know it often makes sense to settle.

22 So it may be that a settlement wouldn't 

23 be an automatic basis for relief but would be a 
81

1 possible basis for relief. Just something to allow 

2 borrowers to get relief if they have -- if there's 

3 pretty good evidence out there that the school 

4 violated the relevant state law even if it doesn't 

5 fall neatly to this fraudulent misrepresentation 

6 bucket.

7 PARTICIPANT: So Chris, I saw your card 

8 going up. Bryan, yours has been up for a while. 

9 Is it kind of on the same topic? Okay.

10 MR. BLACK: I apologize, I wasn't here 

11 yesterday but I did listen online and listened to 

12 all the discussion here today.

13 To me it seems that we're making this 

14 a lot more complicated than it needs to be. 

15 Quite honestly when you inject legal 

16 concepts and principles into a discussion and 

17 you're dealing with people that haven't dealt with 

18 those issues, litigated those issues you can really 

19 have a deep misunderstanding what these legal 

20 concepts mean.

21 For me what we basically have is an 

22 umbrella here. We have an umbrella of intentional 

23 acts, misleading acts and reckless disregard for 
82

1 the truth, or I think you could even say negligent 

2 disregard for the truth.

3 But under this umbrella you have this 

4 laundry list. As a school, a co-owner of a number 

5 of schools if we ever had somebody suggest that 

6 they weren't treated fairly we would look at this 

7 laundry list because it's an example of -- the 

8 including but not limited to is an example of 

9 defining what is under this umbrella, these legal 

10 concepts.

11 I would look at did we ever misrepresent 

12 intentionally, negligently licensure, employment, 

13 accreditation. You go down this entire list and 

14 I can tell you as a co-owner of a number of schools 

15 and we too are a very small school. But there's 

16 many Paul Mitchell schools around the nation and 

17 I consult with owners.

18 We would look at all these and see if 

19 we fell short in any of them. And if we did fall 

20 short we would have to ask ourselves did we do this 

21 negligently, did we do this intentionally.

22 And if we did it makes the analysis 

23 very, very easy. If there's a misrepresentation 
83

1 even of like employability right there it's whether

2 we lied about it, we deceived somebody. Intent 

3 is established very simply quite honestly.

4 So I really agree with Chris and 

5 AnnMarie. As I read this over this seems to be 

6 a very, very fair balance and it seems to lay out 

7 exactly what a borrower would look at and what a 

8 school would look at and the Department of Education 

9 would look at.

10 To me all these examples here just fall 

11 perfectly under the umbrella of the burden of 

12 persuasion that we're so hung up on, whether it's 

13 intentional, misleading, or reckless, or negligent 

14 disregard.

15 So to me it's laid out actually and 

16 drafted very well. Once these bad acts are looked 

17 at it's very easy to check it off. You could almost 

18 use a chart with all the burdens of persuasion at 

19 the top and licensure and accreditation check off, 

20 yes, they fell short here and this needs to be 

21 rectified.

22 So to me it strikes a very good balance. 

23 I think it's written very well. I think we just 
84

1 need to add that simplicity back to the equation 

2 here. That's what's going on in my mind at least. 

3 Thank you. 

4 PARTICIPANT: So, and we'll go to Linda 

5 and then Chris and then William and Walter.

6 But I want to just return. Abby, what 

7 I had heard you say and correct me if I'm wrong 

8 was that you weren't necessarily thinking about 

9 adding items to the list under 4(i) it was adding 

10 things to the other, potentially adding other 

11 categories affording relief to the other romanettes 

12 and that would potentially allow you to consider 

13 the 4(i) language. Was that correct? You were 

14 asking if that was a worthwhile homework 

15 assignment.

16 MS. SHAFROTH: Yes, I was asking if 

17 that's a worthwhile homework assignment.

18 PARTICIPANT: What does the group --

19 what is the thought of the group? Linda?

20 MS. RAWLES: I just want to say that 

21 I did come in here in good faith to negotiate and 

22 I think that my constituency and some of my 

23 colleagues' constituencies, I won't speak for them, 
85

1 but I think there are more than just me at this 

2 table did like the language the department first 

3 came out with.

4 We have moved a lot. So I don't think 

5 anyone in the audience or who's watching this live 

6 streaming thinking from where we started that we 

7 wanted clear and convincing. Now we're down to 

8 sufficient. 

9 Any lawyer who understands those 

10 phrases will either say they don't know what that 

11 means, the department doesn't know what that means, 

12 or we've gone down three or four levels of 

13 evidentiary standard. We've weakened the intent 

14 standard.

15 I'm a little worried because every time

16 we compromise other people say no. Then we come 

17 back in the room and we compromise some more and 

18 other people say no.

19 So in all fairness we have gone far 

20 beyond 50 percent to the other side. And then the 

21 way this process works is we come back in the room 

22 and we're pushed to give another 50 percent. As 

23 long as other folks continue to say no that aren't 
86

1 berated for saying no they get more and more of 

2 what they want.

3 I don't think that's a conciliatory 

4 process. I don't feel that this is turning into 

5 a conciliatory process.

6 Frankly, and I was one of those people 

7 that said at some point if what we have on the table 

8 is worse than what we think would be written we 

9 owe it to our constituencies to say no.

10 That doesn't mean I'm not willing to 

11 reach consensus in the room. What some of us are 

12 afraid of is that if we sit here and concede and 

13 concede and concede that we're sending a signal 

14 to the department that if you go back and write 

15 the rule we're okay with sufficient evidence when 

16 really we started wanting clear and convincing. 

17 Because you're taking notes and if we don't reach 

18 consensus you're going to go write the rule.

19 So I just want to say we're willing to 

20 reach consensus. We've gone far over halfway. 

21 But if we don't reach consensus please don't take 

22 some of the things we're conceding on to mean that 

23 we're not fine with the original language that you 
87

1 first came out with because that's really what we 

2 want.

3 So we've gone a long way off that and 

4 I feel like we're just going down this black hole 

5 where you might get someone on that side of the 

6 table to say yes and we can't possibly say yes.

7 I also wanted to add that there's been 

8 a lot of criticism of legal terms. It isn't because 

9 lawyers want mysterious phrases put in here that 

10 only we understand.

11 It's that sometimes when it's a legal 

12 phrase we do know what it means and we think it's 

13 good to have a regulation that somebody knows what 

14 it means.

15 So if you put a phrase in like 

16 sufficient evidence that no one really knows what 

17 that means you might think you do as you sit there 

18 but it doesn't have any case law or anything to 

19 say it that you really end up maybe without legalese 

20 but you end up without a rule that means anything 

21 or that anybody understands, even the department 

22 that is interpreting it.

23 So I wanted to throw that in. But my 
88

1 main point is that some of us like the language 

2 as written. We've gone a long way and every time 

3 we go a long way we hear okay, now we have to go 

4 further. And that's very frustrating. 

5 And I thought that was an important 

6 point to say. I don't mean to interrupt the flow 

7 of your attempting to reach consensus. But if your 

8 goal is to reach consensus in the end that needs 

9 to be addressed.

10 PARTICIPANT: Chris.

11 MR. DELUCA: So, I wanted to follow up. 

12 Abby was talking about the issues with going back 

13 to B(1)(ii) and (iii) and the idea that it requires 

14 a final judgment, final definitive judgment from 

15 a state and talking about state AGs' actions.

16 This is my understanding of how the rule 

17 is drafted is that if a student is part of a group 

18 and a state AG's office does an investigation and 

19 the state AG's office has a finding and there is 

20 a public settlement that says we find this against 

21 school X, and there is a student that was in school 

22 X, again I think the idea of the rule is that student 

23 files a complaint, provides a copy of that 
89

1 settlement as corroborating evidence, and so that 

2 is part of the consideration and that's part of 

3 the Secretary's determination. So that settlement 

4 does get into it. 

5 And I'm looking at this list, I've been 

6 saying A through H and pardon me, it's A through 

7 J, there's 10 things on here that are examples of 

8 but not limited to.

9 So are there things that AGs are finding 

10 or have found. I mean, again this is just where 

11 we are today as examples but not limited to.

12 Are there things that AGs are finding 

13 that aren't covered here. Because again it seems 

14 to me that the behavior that we've talked about, 

15 the behavior that some AGs have found against some 

16 schools, that the department has found against some 

17 schools is captured here. We've got that here.

18 And again the way the rule is intended 

19 be is okay, so the student can't -- it's not a final 

20 definitive contested judgment but that settlement 

21 still gets into the determination and can still 

22 be used by the student as corroborating evidence 

23 for his or her claim.
90

1 Am I missing something? Is my 

2 interpretation wrong, or is that how this rule is 

3 drafted and is supposed to work?

4 PARTICIPANT: Did you want us to 

5 respond?

6 MR. DELUCA: Please.

7 PARTICIPANT: Certainly the rule as 

8 written talks about the borrower submitting 

9 evidence and evidence the way I read this is not 

10 limited to anything.

11 So if a borrower has a copy of a 

12 settlement or a default judgment that would not 

13 fall under the final definitive judgment of a 

14 contested hearing. That could be submitted as part 

15 of their claim that would be evaluated by the 

16 department.

17 PARTICIPANT: Okay. William, Walter, 

18 I know you guys have been patiently waiting. Thank 

19 you. 

20 MR. HUBBARD: Thank you. I just want 

21 to quickly see if there's anybody that disagrees 

22 around the table with the concept that students 

23 shouldn't be on the hook to prove intent. No one 
91

1 disagrees with that.

2 PARTICIPANT: So I think I just want 

3 to clarify the idea of students on the hook for 

4 proving versus the discussion that I heard earlier 

5 that talked about the department would have the 

6 burden to prove intent.

7 The department at this time does not 

8 feel that taking intent out is appropriate. So 

9 we believe in that intent standard being there.

10 That said I think there seems to be some 

11 confusion about the idea of what it means to prove 

12 intent. 

13 It's more that I would say the 

14 department will determine. I don't see it so much 

15 as the student has to prove it versus the department 

16 has to prove it. It's more that the department 

17 will review the information received and make a 

18 determination. 

19 And I would feel better phrasing it in 

20 that way versus it being anyone's burden to prove.

21 MR. HUBBARD: Okay, great. So 

22 understanding that I suppose is there a way that 

23 we can maybe codify that that's the case? 
92

1 It just doesn't feel like that that is 

2 how the language reads. As I interpret it

3 essentially the student, it ultimately is up to 

4 them to prove it.

5 And I fully appreciate Chris's points 

6 about in some cases it's easy for the student to 

7 demonstrate that readily and clearly. There's no 

8 doubt there will be examples of that.

9 I think alternatively there's -- I 

10 could come up with literally thousands of other 

11 examples that make that demonstrating that nearly 

12 impossible.

13 PARTICIPANT: So I would need a 

14 suggestion then in terms of the place that you think 

15 would be most appropriate for that. Because I 

16 think that earlier what I heard you request was 

17 putting it in the preamble. And I know I've said 

18 this multiple times, but I'm a big believer in if 

19 it's really that important it should be in the 

20 regulation as opposed to something in the preamble 

21 which is just meant to explain the regulation.

22 I don't want to introduce significant 

23 new concepts in that preamble space. It's more 
93

1 for explanation and clarification.

2 MR. HUBBARD: I'm fine with that too. 

3 I'd actually prefer it to be in the regulation 

4 myself. 

5 The reason of proposing the preamble 

6 was recognizing that some were a little 

7 uncomfortable with that being included. I was just 

8 trying to -- a little bit of a give and take there.

9 I think the point about this being 

10 forward thinking is important. It provides 

11 flexibility, you're 100 percent right. Eventually 

12 when AI takes over and none of us are thinking at 

13 all there's going to be a whole new type of 

14 education.

15 And so that is important. I appreciate 

16 that. I just want to emphasize the fact that in 

17 some cases for an individual to demonstrate intent 

18 whatsoever or for that to be found on the part of 

19 the student is nearly impossible.

20 The bad behavior schools find ways 

21 around that. They literally will comb this 

22 language and find the loopholes and exploit the 

23 crap out of them. And we want to try and buffer 
94

1 that as much as possible while also recognizing 

2 that good schools should be allowed to operate in 

3 a good way. I think that's important as well.

4 I would say as a proposal where it says 

5 examples of evidence, et cetera, somewhere in that 

6 sentence and maybe AnnMarie if you can provide the 

7 language that you sort of stated that it would be 

8 a determination. It sounds like that might be more 

9 appropriate. I don't know exactly how that would 

10 look.

11 PARTICIPANT: Okay, we've got a 

12 recommendation from Kelli.

13 MS. PERRY: In that sentence that 

14 starts with evidence maybe it says evidence that 

15 the department will use to determine that a 

16 misrepresentation described in this section has 

17 occurred includes but not limited to.

18 PARTICIPANT: I'm sorry, could you 

19 repeat that.

20 MS. PERRY: Evidence and then add that 

21 the department will use to determine that a 

22 misrepresentation described in paragraph B(1)(i) 

23 of this has occurred includes but is not limited 
95

1 to.

2 PARTICIPANT: Thoughts from the group? 

3 Chris, do you have another suggestion?

4 MR. DELUCA: Along those same lines. 

5 The way that I was thinking about drafting this, 

6 and again it's that same last sentence there.

7 It's because there seems to be this 

8 concern about proving intent. So this is my 

9 suggestion. 

10 That last sentence starting with 

11 evidence that a misrepresentation, that sentence, 

12 I would change that to say evidence of a 

13 misrepresentation described in paragraph B(1)(i) 

14 of this section that is intentionally false or 

15 misleading or made with reckless disregard for the 

16 truth may include but is not limited to and then 

17 we've got our list.

18 So putting into that sentence the idea 

19 of here are examples of evidence that may prove 

20 that the statement was intentionally false or 

21 misleading or that the statement was made with 

22 reckless disregard for the truth. 

23 So putting that concept there to make 
96

1 it clear that it's not the student's burden, it's 

2 not the department's burden, it's looking at does 

3 the evidence show that there was intentionally 

4 false statement or reckless disregard for the 

5 truth.

6 It's going to be based on the evidence 

7 and this is evidence. And again in this list it's 

8 based on evidence -- cases that have been gathered 

9 over the years in this area.

10 PARTICIPANT: Can I respond to that 

11 really quickly? I think that's good. I would say 

12 the reckless piece, if we can strike that and then 

13 keep everything else as you stated with the piece 

14 about the determination of the department I think 

15 that would be a pretty strong approach. 

16 MR. DELUCA: I didn't have the sentence 

17 that the department will use to determine that. 

18 That was Kelli's suggestion.

19 PARTICIPANT: And I think Will's 

20 suggestion that they be combined for building the 

21 proposal.

22 PARTICIPANT: My proposal included the 

23 phrases intentionally false or misleading or made 
97

1 with reckless disregard for the truth.

2 I think that that's -- it might not have 

3 been intentional but some of the statements on here 

4 you could argue -- a school could legitimately argue 

5 I didn't intend to do that. But if you publish 

6 80 percent placement rates when it was really 25 

7 it's hard to say that it's not reckless to do that.

8 PARTICIPANT: Chris, do we actually 

9 need that though? Because I feel like we've 

10 defined what misrepresentation is and this is 

11 duplicative of the definition.

12 So I know you said that some people are 

13 not comfortable, or seem to be not comfortable. 

14 So by re-adding what we already have 

15 like two sentences earlier, does that make it any 

16 different for people? Because that's not the way 

17 I read it.

18 I feel like we've already defined this. 

19 We do not need to say it again.

20 PARTICIPANT: I just want to add onto 

21 that and say it's almost like we're saying it three 

22 times. Because we say it in a sentence, we then 

23 repeat it again and then we also make the reference 
98

1 where we say in B(1) of this section. To me we're 

2 saying it three different times within two 

3 sentences.

4 PARTICIPANT: I agree, but it seemed 

5 to me that there were folks at the table that weren't 

6 clear or wanted more clarity that this list here 

7 gets into the idea of these are things that prove 

8 whether the statement was intentionally false or 

9 made with reckless disregard.

10 So that's why, it's just trying to 

11 clarify for this list.

12 I don't think it needs to be here but 

13 if that gives -- I mean it was being proposed in 

14 an attempt to provide a little more comfort to 

15 people who didn't read it the same way I did.

16 PARTICIPANT: So if we keep the 

17 department will use to determine does anyone still 

18 feel that that duplicatous language is necessary? 

19 Can we take that out, please.

20 PARTICIPANT: Thoughts from the group. 

21 Understanding that this language would be part 

22 of a larger proposal which we've discussed multiple 

23 elements of this morning is the group comfortable 
99

1 with this sentence as it stands. Show of thumbs. 

2 On this sentence. I see no thumbs down.

3 PARTICIPANT: Walter please, and then 

4 John and then Ashley Harrington.

5 MR. OCHINKO: I feel compelled to make 

6 a comment about some of the comments that have been 

7 made around the table about what other negotiators 

8 have said or what the reaction to some of the 

9 proposals is.

10 I think we all came here in good faith. 

11 We don't always see eye to eye on some of the 

12 statements or some of the text.

13 But I don't think it's really helpful 

14 to impugn the intent or statements of other 

15 negotiators.

16 It's very easy to do that. I think we 

17 have strong held beliefs and I think some of the 

18 people at the opposite side of the table have strong 

19 held beliefs.

20 But I think we all came here in good 

21 faith and I just don't think that it's appropriate 

22 to make those kinds of comments.

23 PARTICIPANT: John.
100

1 MR. ELLIS: Forgive me that I'm a 

2 little off the thread here, but I wanted to go back 

3 to something that was said earlier just so that 

4 no one's surprised later.

5 There was some discussion of including 

6 investigations and possibly investigations by 

7 attorneys general as evidence that there had been 

8 misrepresentation in the case.

9 A number of attorneys general have 

10 written the department in another context to make 

11 it clear that they have some due process concerns 

12 with the mere existence of an AG investigation being 

13 evidence that misconduct has occurred.

14 And also just some practical objections 

15 that it makes it very difficult for an AG's office 

16 to make the decision to launch an investigation 

17 if they know the mere existence of that 

18 investigation could have legal consequences before 

19 it's even concluded.

20 So we obviously think that the AGs 

21 should have a role in state investigations and 

22 judgment should have a role in this process, but 

23 we do want to make sure we're respectful of the 
101

1 rights of the people who are the subject of the 

2 investigation too, and also the prerogatives of 

3 AGs to protect consumers by not feeling that they 

4 can't launch an investigation without causing legal 

5 consequences.

6 PARTICIPANT: John, just as your 

7 community of interest is the AGs is there a modifier 

8 to the investigation term in the AGs' world that 

9 would allay that concern?

10 MR. ELLIS: It's difficult to 

11 generalize because every AG's office is a little 

12 different.

13 Obviously a public settlement that's 

14 been reached with a defendant that admitted some 

15 kind of wrongdoing, I don't think we have concerns 

16 with at least the department considering that 

17 probative of whether or not misconduct occurred.

18 And in some cases some states have a 

19 process where AGs render formal decisions on these 

20 complaints that become public that may not end up 

21 in litigation.

22 Certainly I don't think we would have 

23 a problem with the department considering those.
102

1 But there's also been discussion in the 

2 past, and I'm not saying anyone suggested it here 

3 today, but in the past there's been discussion of 

4 consequences being triggered by the mere fact that 

5 an attorney general's office has launched an 

6 investigation.

7 Investigations get launched all the 

8 time. Frequently they find misconduct and 

9 frequently they don't. 

10 PARTICIPANT: I think I can alleviate 

11 that concern and say that that's not something that 

12 the department has been considering. 

13 We agree that the idea of an 

14 investigation just as when we open a program review 

15 does not imply guilt of anything, wrongdoing of 

16 any type. We're going to take a look.

17 It would be the results of an 

18 investigation that rose to a different level that 

19 I think we would be willing to consider.

20 PARTICIPANT: Ashley Harrington.

21 MS. HARRINGTON: I just want to 

22 piggyback on what Walter said because I think it 

23 bears expressing again how frustrating it is that 
103

1 some folks are being characterized as 

2 non-compromisers or that they didn't come in good 

3 faith.

4 And I just want to say that for those 

5 who feel like they've perhaps given up so much so 

6 far in this process perhaps they could consider 

7 or remember that they came in with so much. And 

8 we feel like we came in with very little.

9 As the issue papers were written from 

10 session to session, as they were characterized from 

11 the very beginning we had so much further to go 

12 in what we feel like would protect and help our 

13 constituencies.

14 So it is really, really frustrating 

15 that that has happened a couple of times today to 

16 the point where specific people have been called 

17 out for being non-compromisers or not coming in 

18 good faith and it's just not fair and not true.

19 PARTICIPANT: Abby.

20 MS. SHAFROTH: Thanks, Ashley. I 

21 wanted to respond to the point I think Chris had 

22 made. And there was a discussion of sort of isn't 

23 it enough that borrowers can point to potentially 
104

1 state AG investigations or settlements as 

2 corroborating evidence to help them support a 

3 fraudulent misrepresentation claim under the 

4 federal standard that the department has provided.

5 Part of what that leaves out is that 

6 there are other types of predatory misconduct that 

7 state law prohibits that are things other than 

8 misrepresentations. So that wouldn't help the 

9 borrower out here.

10 For example, I think every state has 

11 an unfair and deceptive acts and practices law. 

12 And unfair acts or practices are ones that offend 

13 established public policy, are unethical, 

14 oppressive, or unscrupulous, or cause substantial 

15 and unfair injury to consumers.

16 Those practices might not involve a 

17 misrepresentation but they might be otherwise 

18 unfair. They might be using really coercive 

19 high-pressure sales tactics and taking advantage 

20 of a vulnerable group in a way that we would all 

21 agree is really outrageous. But they manage to 

22 do it without specifically lying about something.

23 That's something that we have seen and 
105

1 that would be excluded under just the 

2 misrepresentation standard. 

3 So if we opened things up by allowing 

4 borrowers to have claims based on unfair acts or 

5 practices in addition to misrepresentations that 

6 would make me feel better about this.

7 Alternatively if we allowed --

8 continued to allow borrowers to make claims based 

9 on their state law that would make me feel better. 

10 That's an example of the sort of thing. 

11 Massachusetts where I'm from has really robust 

12 consumer protection laws and a number of unfair 

13 and deceptive provisions laid out specifically 

14 about school recruiting that involve things that

15 are other than misrepresentations but that would 

16 be a legal conduct that are the type that we care 

17 about as a community and that seem relevant to the 

18 discussion we're having now.

19 PARTICIPANT: That's a fair concern. 

20 I just wanted to point out I think that this 

21 language does capture unfair practices. It is a 

22 definition of misrepresentation and I know we're 

23 sort of appropriating a word that does show up in 
106

1 other states and is used in different ways, but 

2 here if you look at these evidence of 

3 misrepresentation, some of these examples would 

4 be unfair practices. They're not actual 

5 misrepresentations.

6 For example, a representation 

7 regarding employability or specific earnings of 

8 graduates without an agreement between the 

9 institution and another entity. 

10 Well, that's not a misrepresentation 

11 but apparently the department is taking the view 

12 that it is an unfair practice or act.

13 Similarly if we adopt Will's 

14 formulation in H which I don't have a problem with 

15 and you talk about a representation without 

16 permission to use, a representation without 

17 permission again is not a misrepresentation, but 

18 you're doing something you shouldn't be doing.

19 So the department and Will are making 

20 the point that look, even if you have that 

21 theoretically an endorsement, even if someone made 

22 the endorsement if you didn't get permission to 

23 use the endorsement that's an unfair practice.
107

1 So my point is just I think this 

2 language is responsive to that concern. And of 

3 course these are examples that are illustrative. 

4 So I think the department has the flexibility to 

5 the extent that there is an act that falls within 

6 the range of what these different things illustrate 

7 to find that an unfair act or practice is a 

8 misrepresentation under this standard.

9 PARTICIPANT: Mike Busada.

10 MR. BUSADA: And also when we look at 

11 state law I think we need to be very careful. I 

12 spoke with some people in my state about this and 

13 asked them about our laws just to get more 

14 education.

15 And keep in mind, and I fully support 

16 the consumer protection laws in my state, but keep 

17 in mind most of those law makers will tell you that 

18 they came up with their standards after a long, 

19 thoughtful discussion that included a number of 

20 due processes. 

21 So there was the thought that yes, we 

22 can allow more causes of action because there's 

23 going to be plenty of due process for anybody that's 
108

1 accused of that.

2 And so that's -- it was created in that 

3 context.

4 What we're creating is not a legal 

5 procedure. This is basically a way recognizing 

6 that students have limited resources and that there 

7 have been some students harmed, this is a way to 

8 say you know what, we're going to allow you to bypass 

9 that long, arduous process and come through this 

10 process that is not a judicial process but we feel 

11 like it needs to be there because there is a need 

12 for that.

13 But as Aaron has talked about so much, 

14 keep in mind you can't just take the state law 

15 because they weren't creating this non-judicial 

16 process. They were creating a judicial process. 

17 So I don't think that you can take 

18 something that they created for a totally different 

19 situation and just put it on top of here. 

20 So I just think that's important to 

21 remember that that context has a lot of importance.

22 PARTICIPANT: So I'm going to put this 

23 back on the department. Has the department heard 
109

1 enough information.

2 PARTICIPANT: Yes. That said, we do 

3 have to get to issue paper two soon.

4 PARTICIPANT: We do. And the time is 

5 now 11:42. So do we want to move forward and work 

6 until 12 or until lunchtime? Okay.

7 Are we on (ii) which starts on page 4? 

8 A violation. Comments, thoughts, suggestions to 

9 the department language. 

10 PARTICIPANT: And AnnMarie, correct me 

11 if I'm wrong, thinking back to yesterday you I 

12 believe mentioned there is a lot of red ink but 

13 that is because it has been moved to issue paper 

14 two, correct? 

15 MS. WEISMAN: That is correct. Not 

16 absolutely everything but most of it, especially 

17 that on pages 6 and 7.

18 PARTICIPANT: So (ii) to the end, 

19 correct? Okay. Chris DeLuca.

20 MR. DELUCA: I'm looking at (ii) and 

21 this is an issue I'm just trying to understand how 

22 this might play out. And I appreciate the 

23 limitations of saying this is not borrower defense.
110

1 But I'm having a hard time -- here's 

2 the issue.

3 So we've got under borrower defense if 

4 a school materially misstates their job placement 

5 rates and I rely on those job placement rates to 

6 go to that school that that may give rise to a 

7 borrower defense claim. Correct.

8 What if a school materially misstates 

9 its campus crime statistics and there's a finding 

10 by FSA the Clery enforcement that there was 

11 intentional disregard for the school as far as their 

12 Clery enforcement. They failed to train staff, 

13 they failed to report crimes. 

14 And say you've got a student who thinks 

15 that he or she is going to a safe school, enrolls 

16 in that school and given the sad statistics that 

17 we see on this area is subject to sexual violence 

18 on school. 

19 Would that student have a borrower 

20 defense claim to say hey, I thought I was going 

21 to a safe school. Now I find out that that school 

22 has got findings from FSA saying that they're not 

23 safe. I took out loans to go to that school and 
111

1 maybe as a result of this I've dropped out of school. 

2 Can I get my loans forgiven.

3 MS. WEISMAN: So that is not really 

4 part of provision of educational services. It's 

5 not what we intended under the construct of borrower 

6 defense. And there would be separate avenues for 

7 relief for those types of issues that are not 

8 covered here.

9 PARTICIPANT: Dan and then Aaron.

10 MR. MADZELAN: I think Chris started 

11 to make my point for me but I'll go a little bit 

12 broader.

13 We were just talking about in the 

14 previous section our laundry list of evidence but 

15 not limited to.

16 Could we construe (ii) here as being 

17 sort of speaking to that not limited to. Because 

18 you say generally a violation of the Higher 

19 Education Act is not applicable for this purpose 

20 unless that violation gives rise to something.

21 And so trying to look forward several 

22 years about some things that we don't know now but 

23 might know later, and some of those things that 
112

1 we might know later might otherwise be covered. 

2 I'm thinking administrative capability for 

3 example.

4 So, can we read (ii) as providing an 

5 avenue for a borrower defense claim that is not 

6 obviously explicitly stated previously but would 

7 fall under what we stated previously as other things 

8 that we just haven't thought about yet.

9 MS. WEISMAN: It makes sense but I'd 

10 need to see some language to kind of get behind 

11 it or not.

12 MR. MADZELAN: I don't know if there's 

13 language that's needed because what you've already 

14 said here in (ii) that violations of HEA don't 

15 matter unless they do, and they do if they give 

16 rise to -- the violation gives rise to an 

17 opportunity for a borrower to assert a defense.

18 And does that opportunity for a 

19 borrower to assert a defense arise from your 

20 previous section where we have an inexhaustive list 

21 of actions that give rise to a borrower defense. 

22 Yes, no? Too convoluted?

23 PARTICIPANT: I'm sorry, so what 
113

1 you're proposing assumes that the list previously 

2 is a definitive list and not an illustrative list?

3 MR. MADZELAN: No, no, not at all. 

4 Because you've said that we have 10 items plus other 

5 things that maybe we haven't thought about yet. 

6 And I'm suggesting that the other 

7 things that we haven't thought about yet because 

8 we are not living in the future, that some of those 

9 future things may in fact be addressed or covered 

10 or umbrellaed under an existing provision in the 

11 Higher Education Act that you say in (ii) does not 

12 give rise to a defense unless it does.

13 And maybe it would if it's a violation 

14 of the program participation agreement or some 

15 action that's a violation of the administrative 

16 capability standards, or something like that.

17 I'm thinking back to Abby's comment 

18 earlier where she said that misrepresentation is 

19 a box and she would like to be able to address things 

20 outside that box. And I'm wondering if this is 

21 a way to get outside that box.

22 Because we sort of know where the box 

23 is today, but we're not going to know where the 
114

1 box is tomorrow.

2 PARTICIPANT: Can you be a little bit 

3 more concrete about what that would look like and 

4 the language?

5 MR. MADZELAN: No. I'll have to think 

6 about a concrete example, but again what I'm getting 

7 at is in (ii) a violation of the HEA doesn't count 

8 unless it does. 

9 And we don't know if it does today, but 

10 it may tomorrow. And the thing that might occur 

11 tomorrow perhaps is a violation of a provision, 

12 I'll just use administrative capability, that would 

13 otherwise -- my answer's still the same, I can't 

14 give a concrete example.

15 MS. WEISMAN: So I think that we're in 

16 a similar place in terms of the concept, but I 

17 thought we were kind of already covered by the 

18 language that we have here.

19 Because the idea is that the other list 

20 does say includes but is not limited to. And so 

21 here we're more putting a box around some things 

22 that we already know are not fair game to create 

23 a claim. 
115

1 You would not bring a claim because of 

2 a personal injury and expect to get borrower defense 

3 relief. So we can essentially save the borrower 

4 some time from applying because we know we're not 

5 going to approve that.

6 Again, maybe you feel that this list 

7 should include something else and then we could 

8 certainly entertain that if you had an item you'd 

9 like to add in H or however much further you'd like 

10 to go.

11 But I think right now we're just trying 

12 to give some examples of things that it is not. 

13 We've already said what it is so here's this is 

14 what it's not.

15 And while it's true that we may want 

16 to add to the list of what it is not later, again 

17 we don't live in the future so we can't necessarily 

18 do that now. 

19 But I don't think we'd want this list 

20 to say and could include a bunch of other things 

21 not knowing what those things are.

22 MR. MADZELAN: So I guess then what I'm 

23 asking is can we construe this to be a route to 
116

1 the other unknown things in the future that we 

2 previously spoke to. Remember we have the 10 

3 misrepresentations basically, plus whatever else 

4 we didn't think of.

5 So the whatever else we didn't think 

6 of has to be a misrepresentation, or the everything 

7 else we couldn't think of could be some violation 

8 of the HEA not listed here because these are not 

9 allowed, personal injury, et cetera. 

10 But some other thing that is beyond 

11 misrepresentation but is a violation of a program 

12 rule that would give rise to a borrower action.

13 MS. WEISMAN: So I think that we have 

14 an idea that might help with this. On the bottom 

15 of page 4 what is currently (ii) involves two 

16 different items and I think that that might be a 

17 little confusing as I hear Dan's comments.

18 So what I would suggest is that perhaps 

19 we need to split these out. Because they're almost 

20 implying a oneness that doesn't exist.

21 So if we would make what is currently 

22 two that says a violation by the institution of 

23 a requirement of the HEA or the department's 
117

1 regulations is not a basis for a borrower defense 

2 claim unless the violation would otherwise give 

3 rise to a successful borrower defense claim under 

4 this section or section 685.206(C) as applicable. 

5 I think we could stop it there and then drop the 

6 next sentence down and make that (iii).

7 And that way that sentence would stand 

8 alone, and I think it would clarify what we're 

9 trying to say here. The other piece of it is just 

10 saying okay, and now here's the things we won't 

11 approve.

12 But yes, that then gives us the 

13 flexibility if the Higher Education Act is 

14 reauthorized at some point in the future and it 

15 includes things that are not there now that it would 

16 give us the ability to go back to those and consider 

17 those as well without having to change this text.

18 PARTICIPANT: Does that address your 

19 question, Dan?

20 MR. MADZELAN: Yes, I think so.

21 PARTICIPANT: Okay. Just a check.

22 MR. MADZELAN: I'm not sure I can say 

23 that concretely.
118

1 PARTICIPANT: Is everyone around the 

2 table on the same page with their understanding 

3 of this? Does everyone feel they understand the 

4 comments AnnMarie just made? Okay. Walter. 

5 Sorry, Michale was up and then we'll go to Walter. 

6 And we have your cards as well.

7 MR. MCCOMIS: I think that's right. 

8 I would support that change because I think that 

9 breaks out the two things.

10 I was just going to make the point that 

11 what is now (ii) has a very important component 

12 to it. And I'm in favor of the language as it is 

13 because it's the unless the violation would 

14 otherwise give rise.

15 So there are other sections that would 

16 give rise within the HEA such as subpart F under 

17 668 that is the definition of misrepresentation 

18 in the other areas, correct? Do I read that 

19 correctly that if the department were to find that 

20 an institution violated those misrepresentation 

21 regulations under subpart F of 668 then that would 

22 be, for example, corroborating evidence that the 

23 department would have -- no?
119

1 MS. WEISMAN: So, I would disagree with 

2 that because the language that we have here as 

3 written says would otherwise give rise to a 

4 successful borrower defense claim under this 

5 section or 685.206(c). It doesn't mention the 

6 other regulations that you mentioned.

7 MR. MCCOMIS: What I'm suggesting is 

8 that --

9 PARTICIPANT: Aaron, do you have a 

10 clarifying?

11 MR. LACEY: If I can jump in, Michale. 

12 I think I understand where you're going but let 

13 me try.

14 I agree with Michale, I think the point 

15 is there are violations of the HEA that could serve 

16 to substantiate that this standard in this section 

17 was violated.

18 So it's not a guarantee that if you 

19 violated one of those other sections it would 

20 necessarily rise to a borrower defense, but 

21 certainly to Michale's point evidence that the 

22 department had of another could serve as 

23 corroborating evidence under this standard.
120

1 MR. MCCOMIS: Yes and why I think 

2 that's important is because the box now has some 

3 air holes in it. It's more opportunity for the 

4 department to use the tools and the resource and 

5 the information that it has at hand.

6 I point that out because there has been 

7 some evidence -- there's a broader swath of 

8 information there that the department will have 

9 at its resource.

10 And if that gives any comfort to folks. 

11 If there were other violations then they probably 

12 or could have been determined in other proceedings 

13 like a program review or some other finding where 

14 the department has made an affirmative finding 

15 under subpart F.

16 That finding will sit there. And if 

17 a student submits a BD claim then the department 

18 will have that to use as corroborating evidence.

19 PARTICIPANT: Do we all understand? 

20 MR. MCCOMIS: So if you don't know 668 

21 subpart F is another definition of 

22 misrepresentation that's used in other sections 

23 of the HEA.
121

1 I think -- is it under the PPA 

2 requirements? It's just another section.

3 PARTICIPANT: Okay. We're back to our 

4 list of names and I apologize. I misstated the 

5 order earlier. It is Aaron, Valerie, Michale, 

6 Ashley and then Walter.

7 MR. LACEY: So I have unrelated 

8 comments but in these sections. 

9 I will though just because it's up on 

10 the screen. We made this comment during last time 

11 during session two.

12 I think that J probably needs to be 

13 wordsmithed to conform in a way that makes sense. 

14 Right now if you read it it says evidence of a 

15 misrepresentation is the nature or extent of 

16 prerequisites for enrollment in a course or 

17 program.

18 I think what we want to say is the 

19 representation that's significantly different from 

20 the nature or extent of prerequisites for 

21 enrollment or rather a representation regarding 

22 the nature or extent of prerequisites for 

23 enrollment in a course or program that is 
122

1 significantly different from, and if I look here 

2 it's like the actual, you can use the language from 

3 I that's right up above, the actual nature or 

4 extent.

5 But the point is it needs to reference 

6 a distinction of some sort. So that's just a 

7 drafting note.

8 PARTICIPANT: I'm sorry, Aaron, could 

9 you repeat that one more time.

10 MR. LACEY: Sure, I can try. Although 

11 I'm not wed to the language. Really the point is 

12 just right now it doesn't -- you get the idea. 

13 Just a drafting note.

14 The second point I have is sort of in 

15 the same -- it's a little more substantive, but 

16 really in the same vein. It's on the next page. 

17 It's B so it's I guess (iv)(b) is that what it 

18 is or (iii)(b). It's the lower or lost wages. 

19 It's just on the next page.

20 My concern here is sort of similarly 

21 we don't say lower than what. And I think that's 

22 a problem for both institutions and students.

23 We're talking about trying to quantify 
123

1 or represent that this is somehow represents 

2 financial harm. 

3 Certainly from the institutional 

4 perspective I would be concerned if we're talking 

5 about lower and we don't have some way of 

6 quantifying how significant it has to be.

7 If I were a student I would also be upset 

8 if I brought a claim and found out it was not lower 

9 enough.

10 But the other thing I'll point out is 

11 A speaks to a significant difference between the 

12 borrower's earnings after completing the program 

13 and earnings listed on the borrower's program of 

14 study in the institution's marketing materials, 

15 et cetera.

16 So A is about a difference between 

17 earnings which I would also equate to wages after 

18 graduation and there is a way that we're measuring, 

19 you know, we've got significant difference and 

20 we've got the benchmark that we're measuring 

21 against.

22 So in a sense it seems to me that B is 

23 redundant of A at least insofar as it's talking 
124

1 about lower. I don't know if that covers lost.

2 So I guess my two points are lower is 

3 ambiguous or vague. And A also seems to already 

4 define lower wages, what would represent financial 

5 harm in the context of lower wages.

6 So I would suggest probably striking 

7 lower and just going with A or otherwise somehow 

8 defining lower so that borrowers and institutions 

9 alike would know what we're talking about and how 

10 significant that has to be.

11 My final comment. So the department 

12 removed, it's on page 6 of my redline. I don't 

13 know if it's going to show up up there. But it 

14 was this (4) that talked about circumstances the 

15 Secretary would take into consideration in 

16 determining whether or not there were either 

17 mitigating facts or efforts on the part of an 

18 institution that should -- in this case it was sort 

19 of defeat a borrower defense claim.

20 Michale made some comments previously 

21 about whether this was appropriately placed here 

22 or whether it might be better placed in subpart 

23 G.
125

1 I will just say and of course others 

2 may have opinions about whether it should be here 

3 or not. 

4 But I would certainly and strongly 

5 advocate to the department that it would be of great 

6 value in the least to include this in subpart G.

7 It is a may on the part of the Secretary 

8 so we're not suggesting that any of these items 

9 are an absolute defeat to a recovery action. But 

10 I do think there's a public policy reason, we talked 

11 about this a little bit last time, to articulate 

12 in subpart G the types of actions on the part of 

13 an institution that could be considered or taken 

14 into consideration when determining whether or not 

15 it was appropriate to recover against the 

16 institution. 

17 So this doesn't impact the borrower's 

18 right to recover on the claim. But what it does 

19 mean is you know in ALG (phonetic) when considering 

20 these facts and whether or not it's appropriate 

21 to recover would take into account whether the 

22 institution cured a misrepresentation or whether 

23 this was really a one-off bad actor scenario, that 
126

1 kind of thing.

2 I think that's very valuable to include 

3 in subpart G. We don't have a draft of subpart 

4 G so I don't know if that's the department's 

5 thinking.

6 PARTICIPANT: Sorry to jump ahead but 

7 my comment is on the same topic.

8 Maybe I missed it but I wasn't sure 

9 where this moved once it came out. But assuming 

10 it's moved somewhere my only concern about what 

11 my colleague has said is I haven't seen anything 

12 about provisionally certified schools and whether 

13 subpart G is available to them on borrower defense.

14 And we had talked about that last time. 

15 Now maybe I've missed it in one of the papers. 

16 And I was waiting till we got further along.

17 But because this has come out now I 

18 think it's very important. Where has this gone, 

19 and if it moves to subpart G is subpart G available 

20 to provisionally certified schools.

21 MS. WEISMAN: So some of the text that 

22 we removed from this section went over to issue 

23 paper two. Some of it was just removed.
127

1 The idea of the one-off claim that Aaron 

2 had mentioned, I think our feeling was that we could 

3 remove some of those items because we had the intent 

4 standard there, that we didn't need some of this 

5 other text.

6 Regarding provisionally certified 

7 schools my understanding is that they do not have 

8 the same protections afforded to them that a fully 

9 certified school would have.

10 But I think that that discussion will 

11 come up more as we get into process and that piece 

12 about recovery from schools. So as we're getting 

13 closer to lunch I don't want to shut down the 

14 conversation, but I think that we need to postpone 

15 that until that period.

16 PARTICIPANT: I'm fine with that. I 

17 just don't want that to get lost. Thank you. 

18 PARTICIPANT: I would like to get 

19 through the tags we have up prior to lunch. With 

20 that in mind, Aaron you had made changes I think 

21 to J and then -- J in the previous list and then 

22 B in this list.

23 And I wanted to open that up to the 
128

1 group. Are those changes things the group 

2 generally agrees with in concept? And I don't know 

3 if the B changes that are on the board are the same, 

4 but we'll start with J.

5 I believe it was just drafting. Okay, 

6 we'll scroll down to B. And I believe your concern 

7 was that A and at least the beginning of B were 

8 repetitive. I guess it's the next page if you could 

9 continue to scroll down.

10 PARTICIPANT: Quickly on J, that 

11 drafting piece though has to have -- it has to have 

12 the difference. It can't just be a representation 

13 that is materially different than what they said.

14 PARTICIPANT: So what do we need to add 

15 to that?

16 PARTICIPANT: At the end of the 

17 sentence it has to just be parallel to what you've 

18 done up above in some of the other pieces. Right, 

19 Aaron?

20 PARTICIPANT: I think we're --

21 PARTICIPANT: We had said to add that 

22 are materially different at the end of that 

23 sentence. 
129

1 PARTICIPANT: Maybe that's something 

2 the department can take a look at. But the concern 

3 has been noted.

4 And then going down to the next concern 

5 which was the repetition between A and I think the 

6 beginning of B.

7 MR. LACEY: My point was sort of 

8 similar to J when you say -- it's two points.

9 One is we have in A a concept of lower 

10 wages that does create two standards. And we say 

11 you have a significant difference between A and 

12 B meaning earnings that the borrower actually had 

13 and those that the institution represented.

14 But the other thing is just more 

15 specifically lower just like J previously. That's 

16 not a standard, it just says lower wages. And we 

17 don't know what that means. Lower than what. And 

18 I think that's problematic for all the parties 

19 because folks need to have some sense as to what 

20 the department's thinking is here and what 

21 constitutes lower wages that would be financial 

22 harm.

23 PARTICIPANT: And do you have a 
130

1 proposal on how to resolve your concerns?

2 MR. LACEY: My proposal was to strike 

3 lower or and just say lost wages with the 

4 understanding that A represents the standard for 

5 lower wages.

6 PARTICIPANT: Suzanne, is that a 

7 comment on this section?

8 MS. MARTINDALE: Yes, in response. I 

9 think I read this a little differently. And the 

10 department should please correct me if I'm wrong 

11 if I'm misinterpreting your intent here with the 

12 drafting.

13 But I think that the idea is that 

14 basically that the student is worse off than if 

15 they had never enrolled. I think that's what 

16 that's trying to get at which I think is a different 

17 concept from A.

18 Given the fact that there has been 

19 extensive data showing that students who attended 

20 certain bad schools in fact received lower wages 

21 than they had before they enrolled.

22 I think that's a different concept than 

23 a difference between the borrower's actual earnings 
131

1 and what was being marketed to them as their 

2 potential earnings.

3 So I don't know if it would need to be 

4 lower or lost wages, et cetera compared with prior 

5 to enrollment. That's kind of what I'm trying to 

6 get at. I don't know if I have exactly the quite 

7 right wording.

8 You could say lost wages, extended 

9 periods of involuntary unemployment or the cost 

10 of -- comma, the cost of obtaining 

11 non-transferrable credits, comma, or wages that 

12 are lower than the borrower had prior to enrollment 

13 or something kind of like that.

14 But I don't want to lose that concept 

15 because it's really important and it's based on 

16 past experience.

17 PARTICIPANT: So I believe that 

18 suggestion is now on the screen. Thoughts from 

19 the group. 

20 PARTICIPANT: I'm not philosophically 

21 opposed to that. I think the practical challenges 

22 are a lot of students aren't employed before they 

23 go to school.
132

1 I also think there's a fact-intensive 

2 dilemma for students and institutions alike because 

3 students might have a challenge of validating or 

4 demonstrating it.

5 But those are challenges the student 

6 would face. Because presumably the student would 

7 have to substantiate what their wages were before. 

8 The institution would have no way to do that. 

9 So that's really a burden on the student.

10 But the other question is just to the 

11 department. Is that the standard? Because I hear 

12 you. I understand there's a concept other than 

13 this distinction between earnings and earnings that 

14 were marketed. There are other ways to interpret 

15 lower earnings.

16 But to your point there are lots of 

17 other ways you could determine what represents 

18 lower earnings.

19 So my point to the department is just 

20 I don't think that's sufficient the way it's written 

21 and we need better clarity on exactly what the 

22 department means when they say lower wages. 

23 Because you have to have some benchmark 
133

1 against which to compare the wages that the student 

2 actually is earning to know if they're lower or 

3 not. And both sides may have concerns about that 

4 benchmark and how it's determined.

5 PARTICIPANT: Valerie and then Ashley 

6 Reich.

7 MS. SHARP: I'm moving us onto a 

8 different topic so if you want to respond to that 

9 one before I -- do you have anything you want to 

10 say on that one?

11 MS. REICH: Well, I think that Suzanne 

12 gave one example. If a borrower enrolls in a 

13 program and they believe they're going to make a 

14 certain income when they finish and they make 

15 substantially lower than that I think that is a 

16 concern of the department.

17 So if there are other ways to say that 

18 I'm open to the drafting changes. We'll just say 

19 that the department has other homework over the 

20 lunch hour. We've already got some of the other 

21 items that we had discussed even from yesterday 

22 that we are still trying to nail down to present 

23 back to you this afternoon or in the morning.
134

1 So anything that we can do here that 

2 we can come to some tentative agreement on is 

3 helpful. 

4 PARTICIPANT: My one comment to that 

5 would be I don't speak for anyone else obviously 

6 except my constituency but I expect institutions 

7 would have a significant issue if the benchmark 

8 were the borrower's expectations independent of 

9 any representation that was made by the 

10 institution.

11 MS. REICH: No, it would obviously --

12 well, maybe not obviously because you didn't 

13 understand what I meant, but I definitely meant 

14 that it would include a representation made. Not 

15 just what they think.

16 PARTICIPANT: In which case it ties to 

17 A. So I guess not to be glib. So we can talk about 

18 it, but you can see why there could be significant 

19 concerns depending on how that's going to be 

20 determined. 

21 And I think that the preference 

22 certainly of risk managers at institutions would 

23 be to have some certainty as to how that's going 
135

1 to be determined so that we could talk about it, 

2 and not to just leave it open-ended.

3 PARTICIPANT: Are there any other 

4 examples of language? Michale McComis.

5 MR. MCCOMIS: So on that same one B I 

6 might suggest taking and breaking out the cost of 

7 obtaining non-transferrable credit from the wage 

8 piece.

9 And I think that -- there are all kinds 

10 of reasons why credits don't transfer, and they're 

11 all not nefarious. There are lots of terminal 

12 degrees and lots of terminal credentials and lots 

13 of credits that just don't -- they're for the sole 

14 purpose of teaching somebody how to weld. And so 

15 they're not transferrable.

16 That should not be a determinant of 

17 financial harm.

18 However, if the institution told them 

19 that they would transfer. So I think there needs 

20 to be a qualifier here that -- and I'm even okay 

21 with opportunity cost. I'll kind of take the 

22 temperature on that.

23 As a separate item the cost of obtaining 
136

1 non-transferrable credits when the institution 

2 told the students that the credits would transfer 

3 would be my addition to that one.

4 And like you say breaking that out and 

5 making that the new C.

6 And I agree with Aaron that lower is 

7 covered sufficiently in A.

8 PARTICIPANT: Any other thoughts on 

9 this particular piece before we go back to Valerie?

10 PARTICIPANT: So we're sort of looking 

11 at A, B and new C.

12 PARTICIPANT: Okay, Valerie.

13 MS. SHARP: Okay, my question on 

14 current C, I guess might be new D on the significant 

15 difference in the actual amount or nature of tuition 

16 and fees.

17 And my question is when the department 

18 shared this with us, going over the paper in general 

19 this is where the concern that the financial aid 

20 folks at the table had. Alyssa submitted a 

21 proposal. Also there was another proposal in case 

22 that one didn't work.

23 And those were addressed here in C. 
137

1 However, C is more in relation to tuition and fees. 

2 And actually our proposals were submitted in 

3 regards to F on the prior page, on page 4 in the 

4 list of the misrepresentation items.

5 There it talks about a representation 

6 regarding the availability, amount, or nature of 

7 any financial assistance available to students from 

8 the institution.

9 And so the proposals that we had 

10 submitted for suggested wording were actually for 

11 F. And those concerns have been addressed where 

12 it's talking about tuition and fees in C.

13 So my question is then we don't have 

14 those concerns addressed in F where when we send 

15 out corrected award letters, et cetera, we are 

16 talking about the amount of financial assistance, 

17 or the nature of that assistance.

18 I don't want to belabor the point if 

19 we think we're covered, but I am concerned that 

20 our proposals to kind of cover that section F were 

21 actually addressed on a different topic in section 

22 C.

23 I just want to make sure that if schools 
138

1 are sending students new award letters with a change 

2 in financial aid because new information has come 

3 to our attention. It can be as simple as NSLDS 

4 wasn't updated at the time we did the original 

5 letter, or something else has changed the UFC 

6 (phonetic) due to verification or something. 

7 That that is covered in the rule and 

8 schools wouldn't be held liable because we had to 

9 change something we had told the student 

10 originally. Because our concerns are not 

11 addressed in F but a change has been made to C.

12 So I don't know if we need to consider 

13 another change to F or if we feel comfortable. 

14 I'm a little concerned but maybe I shouldn't be.

15 MS. WEISMAN: So would you be 

16 comfortable with adding the text from the prior 

17 page, something to the extent of where it says on 

18 5 it says a significant difference in the actual 

19 amount or nature of the tuition and fees, or the 

20 nature or amount of financial assistance. Adding 

21 that text in there as well. Would that satisfy 

22 your concern?

23 MS. SHARP: I think so. I think that 
139

1 most schools are going to make sure the student 

2 knows. It's to our advantage that the student 

3 knows well in advance that there's been a change.

4 But that we don't feel like oh great, 

5 we found this out and now we're going to be in 

6 trouble because we had to make a change. Because 

7 often it's not really changes that we're just 

8 randomly making. There's a valid reason and in 

9 most cases students will have very clear notice. 

10 It won't be hidden in some multipage document or 

11 something. 

12 MS. WEISMAN: So just to recap then, 

13 what we're looking at is in what is now C after 

14 we say tuition and fees we would add in or the amount 

15 or nature of financial assistance. So we would 

16 do the insert after we say of the tuition and fees 

17 charged by or the nature -- I want to make it 

18 parallel -- the amount or nature of financial 

19 assistance provided by the institution.

20 PARTICIPANT: Comments from the group. 

21 Kelli on this paragraph? 

22 MS. PERRY: I still have the same 

23 concerns I think that Valerie has under 
140

1 misrepresentation letter F.

2 Because here we're talking about 

3 financial harm to the borrower and it's falling 

4 under that category.

5 Under misrepresentation where it talks 

6 about that it's regarding the availability, amount 

7 and nature of the financial assistance. That could 

8 change.

9 So I think we need to be very clear, 

10 and I think Alyssa did provide language to address 

11 F that if an award letter does change that that 

12 isn't considered a misrepresentation.

13 PARTICIPANT: And that is now on the 

14 screen. What would need to be added to F?

15 MS. SHARP: It could be similar to what 

16 we're adding in C.

17 MS. WEISMAN: So I think that it would 

18 -- again I'm trying to go with what you're 

19 intending. On the issue paper is on page 4 is F. 

20 And so where we have a representation regarding 

21 the availability, amount, or nature of any 

22 financial assistance.

23 PARTICIPANT: Can you just add actual 
141

1 in front of amount and then you added that the 

2 institution represented to to alleviate our concern 

3 about award letters changing. So can that phrase 

4 be added to F?

5 So I think it should read -- this is 

6 for F -- a representation regarding the 

7 availability, actual amount, or nature of any 

8 financial assistance available to students that 

9 the institution represented. I don't know where 

10 exactly that needs to be.

11 PARTICIPANT: The other option would 

12 be to take out the word amount and just talk about 

13 the representation of the availability and nature 

14 of the aid. 

15 Because the amount is really what's in 

16 question. That's what potentially will change. 

17 And I think the idea behind this one was that schools 

18 would be misrepresenting the fact that financial 

19 aid is available.

20 MS. WEISMAN: I think the concern when 

21 we were drafting what we were thinking though was 

22 that also the concern of somebody saying oh, don't 

23 worry, we've got you covered, you're going to get 
142

1 a grant for $10,000 and really the grant is for 

2 $2,000 and the rest is made up of loans. So amount 

3 was important in that context.

4 PARTICIPANT: Alyssa I saw your tag go 

5 up and then Mike it seems like you have a suggestion.

6 PARTICIPANT: Well, I was just going 

7 to -- isn't that covered under availability and 

8 nature. Amount makes me nervous just because of 

9 what they're bringing up.

10 But I feel like your example is clearly 

11 covered under availability and nature.

12 PARTICIPANT: I have concerns with the 

13 phrase "or any other entity." I think that's 

14 difficult to control from a school's perspective. 

15 And I think -- it's been a month or so, 

16 but I think the language that I suggested said any 

17 other entity influenced or controlled by the 

18 institution.

19 MS. WEISMAN: So I think the concern 

20 with that is that people would represent that there 

21 were scholarships available from certain 

22 organizations that again it could be at all or 

23 within the amount.
143

1 But that if the institution is 

2 providing information for example on an award 

3 letter. Yes, an award can change and I think we're 

4 trying to cover for the situations where it changes 

5 versus someone telling somebody, trying to entice 

6 them to enroll that something that exists and really 

7 it does not.

8 PARTICIPANT: Yes, I agree and I can 

9 definitely see that being an issue. But I also 

10 don't want to create verbiage that provides a 

11 loophole.

12 I see daily, well maybe not daily, 

13 weekly where a student is disgruntled because of 

14 some agency outside of our school either changing 

15 their award, or informing them that they're no 

16 longer eligible for some reason and we have nothing 

17 to do with that.

18 So I think just adding that small 

19 change.

20 PARTICIPANT: Does source matter? 

21 Why would it matter? Just stop after students. 

22 It doesn't matter whether it's from the entity or 

23 from the institution or from other controlled. 
144

1 It's just the nature, availability of available 

2 students. And just don't misrepresent those 

3 things.

4 PARTICIPANT: I think the concern is 

5 that the school could be held accountable for 

6 misrepresentation when we didn't misrepresent 

7 anything. Another outside entity promised them 

8 something they didn't follow through with. So you 

9 can't say the school misrepresented that because 

10 we didn't.

11 And if you're going to have the school 

12 pay back the loan and it's because an outside entity 

13 misrepresented something then the wrong person is 

14 being held accountable for it. Because this is 

15 under misrepresentation. 

16 PARTICIPANT: But that's not what that 

17 says. It's a misrepresentation occurs when a 

18 representation is made regarding those things. 

19 If another entity makes a 

20 representation then the school did not make that 

21 representation.

22 PARTICIPANT: But it will be in most 

23 cases showing from the institution on that award 
145

1 letter because we have to know about it and record 

2 it.

3 PARTICIPANT: But I think though we're 

4 getting caught up in the idea of a change versus 

5 something that truly never existed.

6 So if you have something from voc rehab 

7 that says student, you're going to get this much 

8 money and it comes through the institution and then 

9 you get something else that says no, there's been 

10 a change there's been a change. I mean there's 

11 no misrepresentation there.

12 I think a change is something that I 

13 felt that we had covered here. The issue is when 

14 you say you're getting this, you're covered, don't 

15 worry, enroll, we've got you taken care of and they 

16 really do not.

17 And so the borrower enrolls thinking 

18 that he or she is getting grants and ends up with 

19 loans, or they get a little grant but almost nothing 

20 and the rest of it is loans, or they have no ability 

21 to pay, or then they're brought into a private loan 

22 that the institution offers.

23 There's all kinds of things that we've 
146

1 seen that I think give us pause.

2 PARTICIPANT: Further, sorry. The 

3 way the misrepresentation language is written now 

4 requires an intentional or reckless disregard 

5 standard. 

6 So if for example you wrote a letter 

7 saying that whatever foundation has X amount of 

8 dollars available and that changes later on your 

9 representation would not have been intentional and 

10 it wouldn't have been reckless disregard because 

11 at the time you made it it was probably true. It 

12 was true.

13 PARTICIPANT: Right, but in that 

14 instance you're going to ask the institution to 

15 prove that they have evidence that that was the 

16 original amount. Which in some cases they will 

17 but in others they may not.

18 If the student basically tells them 

19 that I've been offered $10,000 from XYZ that could 

20 potentially go on the award.

21 PARTICIPANT: I will say I do not 

22 remember what we proposed last time. I actually 

23 wrote it with a few of the other school 
147

1 representatives. I wrote it in paper and handed 

2 it in.

3 But it was something very simple and 

4 minimal that just spoke to the fact that to pay 

5 the cost of attendance if it was not fulfilled 

6 following the enrollment of the borrower, something 

7 to the effect that and the borrower is not notified 

8 of the change or something. 

9 So that the coverage would be if the 

10 school notified the borrower obviously they had 

11 good intentions which most schools would do.

12 And in some cases we don't know if a 

13 scholarship is not going to be paid until the 

14 outside scholarship company doesn't pay it, but 

15 that's a different situation.

16 But it was very just a simple thing. 

17 And I think we added at the end just covering if 

18 we had taken the effort it would also hold 

19 accountable those schools who don't bother to tell 

20 students when there's changes because that should 

21 be happening.

22 Not subsequently updated. Something. 

23 It was quite short and sweet. I apologize, I 
148

1 didn't keep a copy of it.

2 PARTICIPANT: Ashley Reich, your tent 

3 is still up.

4 MS. REICH: I just have a question 

5 about going back to page 5. So in A we indicate 

6 very clearly that this is for the borrower's program 

7 of study. 

8 And we sort of allude to field of study 

9 in D. 

10 My question is I would assume that the 

11 list that we have on 5 are for the program of study. 

12 And I don't know if to make it more concrete that 

13 in I think it's (iii) if we just indicate somehow 

14 that this is for the borrower's program of study 

15 and that way all of that list would represent that.

16 Is that the intention there? Because 

17 I know we call it out in only a few of them, but 

18 I do think like especially for C I would imagine 

19 the tuition and fees would also be for the 

20 borrower's program of study and things of that 

21 nature.

22 So I don't know if we could put it in 

23 the leading paragraph where maybe evidence of 
149

1 financial harm related to the borrower's program 

2 of study includes but is not limited to or something 

3 like that.

4 I'm not sure if that makes it worse or 

5 not. I was just trying to think for consistency's 

6 sake if it's meant to be for the program of study 

7 that we be consistent.

8 PARTICIPANT: Okay, so Michale, did 

9 you want to respond to that?

10 MR. MCCOMIS: Yes. So Ashley, would 

11 it go -- the second to last sentence, financial 

12 harm is such monetary loss that is due to related 

13 to the student's program of study and not 

14 predominantly due to intervening local, regional, 

15 or national. Is that where you would put it?

16 MS. REICH: I was thinking either the 

17 last sentence or the one before. So either/or. 

18 I'm not really married to where it goes, but I think 

19 in that paragraph is where it belongs.

20 PARTICIPANT: Okay, so we have three 

21 tents still up and we do want to finish that, but 

22 the time is 12:35. So do we keep going or do we 

23 want to break for lunch now? We'll just finish 
150

1 it out. So Walter, Abby and then Kelli.

2 MR. OCHINKO: So I had a comment and 

3 then I had a question for the department.

4 I just wanted to point out that 

5 transferability of credits or non-transferable 

6 credits is a big issue for veterans. And that the 

7 Forever GI bill which was passed and signed into 

8 law in August does have provisions that credits 

9 that are not transferable can be restored to the 

10 veteran.

11 My question has to do with what I see 

12 as sort of a conflict between I guess it's 4(i) 

13 which at the very end of that long paragraph says 

14 which may include representations regarding the 

15 institution's size, location, facilities, training 

16 equipment, or the number, availability, or 

17 qualifications of its personnel.

18 And on page 5 number F which says that 

19 claims about the general quality of the student's 

20 education or the reasonableness of an educator's 

21 conduct in providing educational services.

22 I think this came up in the last session 

23 but it seems to me that those two are somewhat in 
151

1 conflict because it seems to me that you're saying 

2 that an educator's conduct in providing educational 

3 services is off the books, but yet you're saying 

4 in (i) that if there's misrepresentations regarding 

5 the number, availability, or qualifications of its 

6 personnel that is -- I mean it seems to me that's 

7 quality. 

8 And yet you're saying that quality 

9 isn't applicable.

10 MS. WEISMAN: So over on page 4 in (i) 

11 we list out some very specific items kind of in 

12 that list of we're willing to go there.

13 Over on page 5 the discussion is about 

14 general quality or reasonableness of conduct.

15 And I think the feeling was that those 

16 items were much more vague and would not lead to 

17 a claim.

18 Additionally, the idea of quality of 

19 education is something that is more within the 

20 purview of the state and accrediting agencies than 

21 the department. 

22 MR. OCHINKO: So basically you don't 

23 see those in conflict because you're talking about 
152

1 general versus specific.

2 MS. WEISMAN: Correct.

3 MR. OCHINKO: Okay. I get it. Thank 

4 you.

5 PARTICIPANT: And just also where we 

6 talked about the specific items one of the changes 

7 that were made was to say that they have to be 

8 necessary for the completion of the student's 

9 educational program.

10 So basically this makes it more 

11 specific than just sort of general claims about 

12 the quality of a program.

13 MR. OCHINKO: Thank you.

14 PARTICIPANT: Abby.

15 MS. SHAFROTH: So I also wanted to 

16 comment on that provision and I will also have a 

17 comment on financial harm.

18 The first comment on this provision, 

19 so provision F which says that students can't bring 

20 claims based on the quality of the education or 

21 reasonableness of educator's conduct in providing 

22 educational services.

23 We were just chatting about this as the 
153

1 rule that basically a school can be absolutely 

2 terrible, it just can't tell you that it's good. 

3 If it tells you it's good and it's absolutely 

4 terrible then you have a claim, but if it is 

5 absolutely terrible but it hasn't said anything 

6 about its quality prior to enrolling then you 

7 specifically don't have a claim here.

8 I would offer that if a school is 

9 absolutely terrible you should be able to have a 

10 claim regardless of what the school told you before. 

11 We had public testimony yesterday from 

12 a former ITT student who said that he had for one 

13 of his core classes he had a teacher who didn't 

14 know anything about the course and was reading from 

15 the book and couldn't answer questions. That's 

16 not really a sufficient education.

17 And I take the department's point that 

18 they see states and accrediting agencies as being 

19 the gatekeepers for the quality of education. 

20 But I'm concerned that this rule would 

21 preclude those sorts of claims in all instances, 

22 even where say maybe an accrediting agency later 

23 makes findings that that institution did not meet 
154

1 standards but they have to complete a review period 

2 before they're able to make those findings.

3 This seems unnecessary to really carve 

4 out and bar that type of relief. And this is again 

5 an example of why I would like there to be something 

6 beyond misrepresentation as a standard on which 

7 a borrower could get relief such as including sort 

8 of unfair or abusive or state law claims because 

9 it might be considered unfair to offer a course

10 of program of education where you only offer 

11 instructors who don't know the material. 

12 It might be that a borrower is not going 

13 to win on that claim very often. It's going to 

14 take -- it will be harder for them to really meet 

15 a threshold, but I think that should be available.

16 The second comment is on financial 

17 harm. We had a discussion in session two about 

18 the fact that just taking out a loan and being on 

19 the hook for thousands or tens of thousands of 

20 dollars that you wouldn't have taken out but for 

21 a material misrepresentation, that itself is 

22 clearly financial harm.

23 And so I don't know why we are -- the 
155

1 proposed rule seems to say that that's not 

2 sufficient and that opportunity cost. All that 

3 time that someone could have been working and 

4 earning money instead of getting a worthless 

5 degree, that that's not considered financial harm. 

6 I think that is considered financial harm.

7 So I would absolutely strike the 

8 carve-out for opportunity cost. I would say that 

9 opportunity cost specifically is an example of 

10 financial harm as is taking out a loan that if the 

11 borrower says they would otherwise not have taken 

12 out, that that can be an example of financial harm.

13 This set of examples for what financial 

14 harm includes, I'm also concerned that to the extent 

15 that these are trying to be illustrative of what 

16 types of evidence the department will consider it 

17 leaves out some big things such as just the fact 

18 that none of these get at the fact that a borrower 

19 might have taken out a lot more loans and paid a 

20 lot more to go to a school based on 

21 misrepresentations when they could have gone to 

22 a much cheaper program that was available.

23 And they chose to go to the much more 
156

1 expensive school because of the 

2 misrepresentations. So this doesn't get at -- they 

3 might still get a job. They might still get a job 

4 in the field. They might still have sort of average 

5 earnings, but they wouldn't have paid so much if 

6 they'd known the truth about the school. They 

7 would have gone to a cheaper alternative.

8 Also, the idea that if a borrower is 

9 able to secure employment in the field of study 

10 that that and maybe typical wages are enough.

11 That might not be enough especially if 

12 we're forcing a borrower to bring their claim within 

13 a three- or five-year period of when they graduated.

14 Because maybe that borrower hustled and 

15 they have a family friend who was able to get them 

16 a job in the field. But if the school lied about 

17 their job placement rates and in fact that school 

18 has a terrible reputation in the field they might 

19 not be able to ever leave that job. 

20 They might not be able to get a job with 

21 any other employer. 

22 What I'm getting at is we're trying to 

23 define that financial harm only exists in these 
157

1 various circumstances, but there's a lot more harm 

2 out there. There's a lot that this doesn't 

3 capture.

4 And so I'm really worried of putting 

5 this additional burden on borrowers.

6 PARTICIPANT: Caroline.

7 MS. HONG: I just want to respond 

8 briefly.

9 So first of all, with regard to the 

10 quality of education I certainly understand your 

11 point. But I think the attempt here in creating 

12 examples was so that someone couldn't just say look, 

13 this is a terrible program. And then someone at 

14 the department couldn't just -- I mean how do we 

15 evaluate that.

16 So if there are specific instances that 

17 you think need to be added to flesh out this list 

18 so that someone evaluating the claim can have more 

19 specific guidance then I think as opposed to just 

20 saying something is terrible then that would help 

21 us a lot.

22 Second of all, with regard to what 

23 you're talking about opportunity costs, I certainly 
158

1 appreciate that. And definitely a lot has been 

2 said at the table these past few days and last year 

3 and just consistently about what kind of harm these 

4 students can face.

5 However, our ability to provide relief 

6 in these circumstances are related to the direct 

7 loan program and also with regard to the 

8 circumstances of how a direct loan was made.

9 What a student could have taken out 

10 otherwise, that's not necessarily within the 

11 purview of the direct loan program. 

12 So I would urge you that if you have 

13 specific things that you think should be added to 

14 this list and that's something concrete that we 

15 can talk about and examine. And so that's my 

16 comment. Thank you.

17 PARTICIPANT: Kelli.

18 MS. PERRY: Going back to page 3, 

19 letter C at the bottom there was reference there 

20 to within a reasonable period of time. And I think 

21 last time we talked about potentially quantifying 

22 that.

23 It looks from my notes that someone made 
159

1 a recommendation of seven days possibly, but I think 

2 that that probably should be clarified so that there 

3 is no interpretation of what a reasonable period 

4 of time is.

5 PARTICIPANT: Is seven days your 

6 suggestion, Kelli? Seven days. Seven years.

7 PARTICIPANT: Where are we?

8 MS. PERRY: The bottom of page 3, 

9 letter C.

10 PARTICIPANT: Or the failure to remove 

11 within a reasonable period of time, is that where 

12 you are?

13 MS. WEISMAN: Just to clarify our 

14 thinking, we did not add in a time period because 

15 our feeling was that what is reasonable for some 

16 institutions may not be reasonable for others. 

17 A much larger school may have more 

18 resources. For example, they may have a dedicated 

19 webmaster whereas if you're at a smaller school 

20 the webmaster may be the person who does five other 

21 things.

22 So it's not that we didn't consider 

23 that. We specifically did not qualify it within 
160

1 a period of time.

2 If the group feels that it's important 

3 to do that we can certainly have that discussion 

4 again. But there was a reason for not including 

5 something that was more concrete.

6 PARTICIPANT: So does the group think 

7 that a period of time needs to be specified here? 

8 Is that a no? Okay.

9 Any other comments on I guess the rest 

10 of issue paper two. Because it is 12:47. Issue 

11 paper one. I have high hopes. Mike Busada. 

12 MR. BUSADA: I just want to say too, 

13 and this may not be any consolation, but just I 

14 think it's important that we do make it very clear 

15 that this is only one piece of an opportunity to 

16 attain redress.

17 A student that does have their loan 

18 discharged does still have the opportunity and if 

19 there's legitimate issues should go and then pursue 

20 these additional actions against the school in a 

21 full legal proceeding.

22 So this is just one piece to try and 

23 help the student. There are still all the other 
161

1 remedies available as well.

2 PARTICIPANT: Okay. So with that I 

3 think this is a good place to go to lunch. So let's 

4 return at 1:50. Have a good lunch.

5 (Whereupon, the above-entitled matter 

6 went off the record.)

7 PARTICIPANT: So before we begin our 

8 afternoon session I do want to say building off 

9 of what Moira talked about, the facilitators are 

10 going to operate in the vein that you want to reach 

11 consensus.

12 We're also going to operate in the vein 

13 that you want to get through your issue papers with 

14 the days that you have left. So we're going to 

15 open up with issue two.

16 We're also going to be harder on you

17 about hearing what you have to say, but moving on 

18 and making sure that we get everyone's voice heard. 

19 We don't want to cut anyone off, but we will if 

20 we have to. And that's not an interest in not 

21 hearing what you want to say but that's to get to 

22 you moving along.

23 So we're going to move on with issue 
162

1 two. Tomorrow we want to start with issue paper 

2 three because we will hear a report out from the 

3 subcommittee. And then we'd like to get through 

4 issue papers three through eight and then come back 

5 to any more issues that we have, especially in issue 

6 papers one and two. Does that sound like a plan?

7 So with that I will turn it over to the 

8 department to open up issue paper two.

9 MS. WEISMAN: Issue paper two is what 

10 we think of as our process issue paper, looking 

11 at the process of submitting and evaluating a 

12 borrower defense to repayment claim.

13 So we've made a few editorial changes 

14 in this issue paper. Anywhere we had BD previously 

15 we've spelled that out and now list borrower 

16 defense.

17 We also have adjusted some language 

18 again here. Keep in mind that the language that 

19 is shaded in gray is our language that has changed 

20 from the prior session to this one.

21 So on page 1 the only adjustment we've 

22 made is to instead of just saying related to a loan 

23 it's a loan or loans.
163

1 Moving over to page 2 we have no changes 

2 from the prior session.

3 On page 3 under (iv) we have a 

4 renumbering item.

5 Changing some clarifying language. 

6 Dropping down to 3 in the middle of the page on 

7 page 3 we've added in accordance with 34 CFR 668 

8 subpart G to the area where we talk about initiating 

9 an appropriate proceeding.

10 So again that's using the process that 

11 we already have in place.

12 We then continue on to say that the 

13 Secretary will not initiate such a proceeding more 

14 than three years after the date of the final 

15 determination of the borrower's defense against 

16 repayment claim.

17 In D we have updated our regulatory 

18 citation and added words under penalty of perjury 

19 on a form. That language is already contained in 

20 the form, it's just we felt it important to stress 

21 in the regulation that that was the case.

22 In (ii) still under 3 we struck the word 

23 documentation, providing documentation, and it now 
164

1 reads providing evidence that supports the borrower 

2 defense claim.

3 And I think although most of that is 

4 fairly minor I'd like to break it there and take 

5 comments on the paper up to that point.

6 Unless everyone just wants to agree and 

7 that would be fine too.

8 PARTICIPANT: Comments? Thoughts? 

9 I was going to say I feel like a temperature check. 

10 Do we like it as is up to (ii)? Show of thumbs. 

11 I don't see any thumbs down. Let's move on. 

12 There's chocolate going around, but there is no 

13 thumbs down. That's not from us.

14 PARTICIPANT: AnnMarie, since it is 

15 Mardi Gras can I toss this candy to everybody?

16 PARTICIPANT: Valerie does have a 

17 question. Valerie.

18 MS. SHARP: Just a question on item 3 

19 on page 3. It says that then the Secretary may 

20 initiate appropriate proceeding in accordance with 

21 34 CFR 668 subpart G. 

22 So we've talked a bit, Linda's asked 

23 some questions about how does this impact 
165

1 provisionally certified institutions. So is there 

2 going to be a different standard than this applied 

3 to those provisionally certified. 

4 There's no clarification as to if they 

5 don't fall under subpart G what might apply to them.

6 MS. WEISMAN: Do you have a suggestion 

7 for what we might add instead of leaving it as is?

8 MS. SHARP: I would think that you'd 

9 want this to apply to all institutions, not just 

10 those that are fully certified. Of course all 

11 institutions should be held accountable and 

12 probably the statute would make sense for all due 

13 to the statute on retention of documents.

14 So do we have to say in accordance with

15 34 CFR 668 subpart G, or could we say something 

16 about -- isn't it part of our agreement on our PPA 

17 that we can be held liable.

18 Is there another item that applies to 

19 all institutions that we could refer to that would 

20 hold both fully and provisionally certified 

21 institutions to the same standard.

22 PARTICIPANT: Mike Busada, can you 

23 help with that?
166

1 MR. BUSADA: Just as a purely legal 

2 suggestion, trying to get to where Valerie's 

3 talking about, we could put after subpart G for 

4 purposes of this part, and we could even spell out 

5 borrower defense, provisionally certified 

6 institutions that otherwise would not be afforded 

7 -- or would be governed for these purposes under 

8 subpart G.

9 So I mean we could basically just carve 

10 it out in here and say that they would be able to

11 utilize it.

12 PARTICIPANT: Can you look to see that 

13 language there? Would be governed.

14 MR. BUSADA: It might be better if you 

15 say this provision would be applicable for 

16 provisionally certified institutions that 

17 otherwise would not be governed by 34 668 subpart 

18 G.

19 PARTICIPANT: Linda.

20 MS. RAWLES: I gave some language on 

21 this between the last session and now. If you had 

22 that handy too we could look at that. It was 

23 similar to Mike's.
167

1 PARTICIPANT: Okay, so Mike, does this 

2 look like.

3 MR. BUSADA: Yes. Put governed by. 

4 Yes, I think from a legal standpoint that should 

5 do it.

6 PARTICIPANT: Okay, Valerie.

7 MS. SHARP: I'm not the legal wording 

8 expert here so if Mike and Linda think that is the 

9 right legal wording to protect those provisionally 

10 certified I support it.

11 PARTICIPANT: John.

12 PARTICIPANT: I have to beg the 

13 committee's indulgence here because this may have 

14 been covered in the last meeting because this is 

15 not really new language, but I just had a question

16 for the department.

17 In subpart D here where we're 

18 incorporating in a form approved by the Secretary 

19 I'm correct in assuming, right, that changes to 

20 that form in the future wouldn't be subject to 

21 notice and comment or anything like that?

22 PARTICIPANT: So any new form, or any 

23 replaced form or edits in a form do need to go 
168

1 through a notice and comment period through OMB, 

2 Office of Management and Budget. So we would 

3 definitely be getting comments.

4 And we would absolutely need to adjust 

5 the form to conform with these regulations.

6 PARTICIPANT: Thank you.

7 PARTICIPANT: Linda, are you -- okay, 

8 Linda.

9 MS. RAWLES: I know it's always tough 

10 to do this on the fly, but I like that language 

11 but I just want to make sure that we're not just 

12 pulling provision schools in for purposes of 

13 pursuing them for reimbursement of the loan, but 

14 that they also get the due process that's in subpart 

15 G.

16 PARTICIPANT: Okay. Chris.

17 PARTICIPANT: If anyone wants the 

18 candy bowl just wave at me and I'll bring it over.

19 PARTICIPANT: Linda, could you restate 

20 your question now that we have the text higher where 

21 everyone can see it on the screen? Thank you.

22 MS. RAWLES: I just want to make sure 

23 we interpret the added language that provision 
169

1 schools are not only pursued under subpart G but 

2 they get the due process provisions of subpart G. 

3 If we have that understanding then I like the 

4 language. If we don't then we need to tweak the 

5 language. 

6 PARTICIPANT: Do we have that -- Aaron?

7 MR. LACEY: What if we said the 

8 Secretary may only initiate an appropriate 

9 proceeding to require the school whose act or 

10 omission resulted in a borrower's successful 

11 defense against repayment of the direct loan to 

12 pay to the Secretary the amount of the loan which 

13 applies in accordance with 34 CFR 668 subpart G, 

14 including institutions that are provisionally 

15 certified at the time the recovery proceeding is 

16 initiated. Does that get there?

17 Well, I think under that language 

18 certainly my intent is that what we're saying is 

19 if the Secretary is going to initiate a recovery 

20 action against an institution it must be done with 

21 consistent with subpart G, including provisionally 

22 certified institutions. So it would have to go 

23 through subpart G.
170

1 What we're saying is the only way you 

2 can initiate a recovery action, even if the school 

3 is under provisional certification is pursuant to 

4 subpart G. That's the intent. But if folks think 

5 it's not getting there let me know.

6 MS. RAWLES: I agree with Aaron's 

7 language, but I'd just like the confirmation the 

8 department interprets it the same way and then I'd 

9 be happy.

10 MS. WEISMAN: I'd like to take that 

11 back for discussion. I hear what you're saying 

12 and I apologize to Linda. She did submit language. 

13 We received it. We looked at it, but we didn't 

14 have the conversation with everyone who needed to 

15 be included. So I'd like to do that before I can 

16 make that confirmation.

17 PARTICIPANT: So I know we took a 

18 temperature check on this before, but I want to 

19 get another one now that we have all our negotiators 

20 here and that the candy is not distracting us.

21 Given that AnnMarie's going to take 

22 this back for that same understanding about the 

23 due process for provisional institutions can I get 
171

1 a show of thumbs if it's okay to move on to the 

2 next section of issue paper two. So no thumbs down.

3 So now I believe we're on page 3, (iii). 

4 Is that correct? 

5 MS. WEISMAN: So I believe we finished 

6 on page 3. (iii) is language that had existed from 

7 the last session. So we're moving over to page 

8 4 under 2(b).

9 It says suspends collection activity, 

10 it used to say on a defaulted loan until the 

11 Secretary issues a decision on the borrower's 

12 claim.

13 What we've now done is broken that out 

14 into two. We now say suspends collection activity 

15 on a defaulted loan and then under (ii) we say if 

16 a borrower's claim is denied the Secretary ends 

17 the forbearance or resumes collection 90 days after 

18 the date of the denial -- 60, I'm sorry, 60 days 

19 unless a request for reconsideration under 

20 paragraph D(5) of this section is accepted.

21 We have then renumbered and the new 

22 number 4 includes some new text that now it reads 

23 if the borrower's claim is denied the forbearance 
172

1 or suspension of collection activity will be 

2 reinstated. And that also is -- we list out unless 

3 it will be reinstated for reconsideration if a 

4 reconsideration claim is made that meets the 

5 eligibility criteria in paragraph D(5) of this 

6 section.

7 We then go on to 3 talking about the 

8 adjudication of a claim. (i) if the Secretary 

9 determines that the borrower's claim does not meet 

10 the minimum threshold for consideration of a 

11 borrower defense claim the Secretary provides a 

12 written notification to the borrower denying the 

13 claim.

14 The new (ii) talks about what that 

15 minimum threshold is for reconsideration. A 

16 states that the borrower's application provides 

17 the information specified in paragraph D(1) of this 

18 section. B states that the claim alleges a 

19 misrepresentation on the part of the school as 

20 described in 685.222 and talks about establishing 

21 that the borrower has obtained a judgment and 

22 provides minimum supporting evidence to 

23 corroborate the borrower defense claim.
173

1 So I'd like to break it there and get 

2 some feedback.

3 PARTICIPANT: Aaron and then Ashley 

4 Reich.

5 MR. LACEY: My opening comment on this 

6 section regards something that is not here unless 

7 I've missed it and that is an early dispute 

8 resolution concept.

9 My impression from session two was that 

10 while there may not have been unanimous agreement 

11 to that there was a lot of positive conversation 

12 around it.

13 It struck me that one of the great 

14 concerns that the borrowers have on their side is 

15 that you've got individuals who may not understand 

16 the process, or there may be a lack of 

17 sophistication, and that having a voluntary 

18 non-binding but like the Office of Civil Rights 

19 has an early resolution process where someone from 

20 the department would be able to work with both 

21 parties, help facilitate the exchange of 

22 information, help them understand what the 

23 potential process and outcomes are could be 
174

1 extraordinarily beneficial one, for the borrower 

2 in helping inform them, but also for institutions.

3 We've had multiple conversations among 

4 institutional folks that most of the institutions 

5 that we know of and work with if presented with 

6 an opportunity to do something right and to fix 

7 something with the student would much prefer to 

8 do that in an informal process than to engage in 

9 a lengthy or more expensive process.

10 The other thing is you have the 

11 potential to resolve issues quickly.

12 The only real objection that I heard 

13 last time from the department that I can think of 

14 was cost, and that that cost had not been built 

15 in.

16 I just want to -- and it may be that 

17 the timing was so tight between rounds two and three 

18 that there wasn't time to do a fulsome cost 

19 analysis, and I certainly appreciate that.

20 But it is hard for me to believe that 

21 it is less expensive to put, for example, 90,000 

22 claims in front of a staffer at the department and 

23 then subsequently in front of an attorney for the 
175

1 department and an administrative law judge than 

2 it would be to engage in some sort of early dispute 

3 resolution mechanism, particularly if it was 

4 streamlined.

5 I think there's great opportunity 

6 there. It is my personal opinion that that is 

7 probably the best idea that has been floated in 

8 this entire process that wasn't sort of on the table 

9 at some point or presented by the department.

10 And I just want to say that I strongly 

11 encourage the department to do a fulsome cost 

12 analysis and consider whether there are really any 

13 impediments to embedding some sort of voluntary 

14 resolution process on the front end that would allow 

15 students and borrowers and schools the opportunity 

16 to try to resolve the issues, non-binding, not 

17 compulsory, but just some sort of way to try to 

18 resolve things prior to going through all the 

19 machinations that we've been dealing with here.

20 PARTICIPANT: Did the department want 

21 to respond?

22 MS. WEISMAN: So I think there are a 

23 couple of issues related to the idea of a voluntary 
176

1 process that was -- multiple ideas were floated. 

2 We talked about it extensively at the last session. 

3 As you noted it did not appear in the language 

4 here.

5 One of those reasons was cost and the 

6 concern about not just the actual monetary cost 

7 but the time that it would take to do such an action, 

8 the possible delay that the borrower then would 

9 experience in waiting for that type of a process 

10 to occur.

11 There is nothing in the regulations 

12 that would stop the two parties from having that 

13 kind of a conversation.

14 We did have concerns that we did not 

15 want borrowers to feel pressured or required to 

16 participate in such a process, especially when 

17 again they do not have the same resources that an 

18 institution would have.

19 And the department did not want to be 

20 in the position of I would say mediating between 

21 the two parties.

22 We did not feel that in this case that 

23 was really our role as an agency in this purpose. 
177

1 We have a very different role here than 

2 would OCR for example, Office of Civil Rights. 

3 And I think that it was important to us that we 

4 try to stay true to our role.

5 That said if people feel very committed 

6 to that idea we could certainly entertain language 

7 that would open up the idea of doing it. But 

8 without the department really having an active role 

9 there, that it would be something if you felt better 

10 about having a statement that the two parties could 

11 voluntarily come to some agreement I don't think 

12 we would oppose that.

13 I'm not sure what it would add though 

14 because from our perspective that's not something 

15 we would typically regulate. Parties can always 

16 have that kind of a discussion if they wish.

17 PARTICIPANT: And just to clarify, I 

18 think something that's been lost in this 

19 conversation is just with the standard we're 

20 talking about a borrower bringing a claim that's 

21 basically charging the taxpayer. That's separate 

22 from our claim against the institution for 

23 recovery.
178

1 And so a mediation with the 

2 department's active involvement would be 

3 definitely a departure from the way the department 

4 views this process. 

5 PARTICIPANT: Abby, I saw your tag go 

6 up. Is this on the notion of an early dispute 

7 resolution process? Go ahead, please.

8 MS. SHAFROTH: I just wanted to chime 

9 in that I would be, as I expressed earlier, 

10 especially to the extent it would allay some of 

11 the concerns of schools that schools that made a 

12 mistake or had one-off problems, that they have 

13 these reputational concerns about borrower 

14 defenses. If this would help address them to have 

15 a mediation process that that's something that I'm 

16 happy to have discussion of and I think could be 

17 potentially a valuable area to help us reach 

18 compromise.

19 If the department is saying that they 

20 would be willing to entertain voluntary dispute 

21 resolution but not with the department mediating 

22 then that's harder for me to get behind because 

23 what made it seem acceptable from a student 
179

1 perspective is having some protection from a 

2 neutral department mediator to help ensure that 

3 an unrepresented student doesn't get taken 

4 advantage of through the process.

5 So I echo Aaron's interest in hearing 

6 from the department about the willingness to do 

7 this, but if the department would not be willing 

8 to be involved in a sort of mediation type role 

9 then I think that that unfortunately might not work 

10 from my perspective.

11 PARTICIPANT: Chris DeLuca and then 

12 Aaron.

13 MR. DELUCA: So, the thought process 

14 is looking at the number of cases that are currently 

15 backlogged. And I realize this is a rule going 

16 forward so in light of what we've experienced though 

17 with all those backlog of cases what can we do better 

18 in the future with respect to this.

19 And again the idea of early dispute 

20 resolution. And again, it's not just OCR that uses 

21 early dispute resolution. To my knowledge every 

22 court system in the country, state and federal 

23 court, the idea is to use a mediation process 
180

1 because I assume that these hundreds if not 

2 thousands of tribunals out there use early dispute 

3 resolution because they think they can get a 

4 resolution quicker.

5 It seems to me even just looking at it 

6 purely from the standpoint of in this instance the 

7 department is being asked to adjudicate a claim. 

8 Does the borrower have a defense to repayment.

9 And so what's the most efficient way 

10 to do this. And that's why the proposal was brought 

11 up to begin with.

12 And I recognize that there is the 

13 particulars of how that works. And the proposal 

14 that was put out last time we were together was 

15 to use the OCR as an example.

16 But I recognize there are different 

17 considerations and things. From my perspective 

18 I would be happy with a placeholder to say that 

19 under rules to be determined by the Secretary.

20 I assume that whoever gets hired at the 

21 Department of Education to process these claims, 

22 there's going to be training. There's going to 

23 be training manuals, there's going to be handbooks, 
181

1 there's going to be this is how we process a claim.

2 The regulations aren't going to go into 

3 the nitty-gritty. And if the nitty-gritty ends 

4 up being in a handbook. That's what the OCR policy 

5 I took from was in their handbook. It wasn't from 

6 the regulations, it was in a handbook that they 

7 use.

8 So I don't feel like the process needs 

9 to be, you know, we need to tie the Secretary's 

10 hands in the regulations, but I do think from 

11 whoever's perspective you're looking at I think 

12 it's going to be quicker. There's going to be an 

13 opportunity for quicker resolution. There's going 

14 to be an opportunity for it to be -- and again from 

15 the department's standpoint even if it's just 

16 purely a standpoint of looking at we just need to 

17 resolve these cases quicker. Our job is just to 

18 decide these cases.

19 My gut tells me, my experience tells 

20 me, I firmly believe that you'll be able to process 

21 claims quicker if you have this built into your 

22 process. Again recognizing it needs to be fully 

23 vetted by the folks at the department.
182

1 Again, I'm strongly encouraging that 

2 we have that concept in the regulation. 

3 PARTICIPANT: Aaron.

4 MR. LACEY: Just two or three things. 

5 The first is I agree with Abby. I have no interest 

6 in bad actors being able to capture students or 

7 force students into something. I think it is 

8 critical the idea here is that there's a 

9 representative from the department facilitating 

10 the exchange of information and helping to inform 

11 the parties.

12 And this doesn't have to be extensive 

13 or lengthy or over a period of many days. This 

14 can be a pretty brief thing.

15 But helping people understand the 

16 process, their opportunities in that process and 

17 what the opportunities might be to reach a 

18 resolution.

19 And I agree that's a critical component 

20 here. It doesn't help to force students to deal 

21 with bad actors. It doesn't even help to have two 

22 good actors if they don't really understand how 

23 the process works and no one is helping to 
183

1 facilitate. So I think that is a critical 

2 component.

3 And again I think the cost savings on 

4 the back end, it just seems impossible to me that 

5 it could be more expensive or for that matter a 

6 quicker resolution for the borrower.

7 And speaking to the issue of timing, 

8 you can just set a fixed time period. You can just 

9 give the parties 60 days to resolve the issue.

10 But if you're thinking about when does 

11 the taxpayer actually get the money back from the 

12 department I mean gosh, a subpart G proceeding could 

13 take months. So the taxpayers could be out for 

14 a much longer period of time.

15 And even a borrower defense claim. Who 

16 knows how backlogged those would be.

17 I just, I don't see the timing or the 

18 cost as necessarily dispositive issues here.

19 The other point I'll make is, and I 

20 appreciate in some sense structurally how this is 

21 different from say a Title 9 claim and dealing with 

22 OCR. But as a practical matter it's not.

23 The department claims an absolute right 
184

1 to recover these monies if they're discharged from 

2 the institutions. From day one when the claim is 

3 made really what the department is doing to Chris's 

4 point and as I think our AG friends have pointed 

5 out and others if I can characterize you as AG 

6 friends, I hope that's okay -- as has been pointed 

7 out by the AGs, look, you've got a misrepresentation 

8 or a fraud style claim and you guys are adjudicating 

9 that claim. Right? So that's what this is.

10 It's just like any other claim like that 

11 in a sense between two parties. And as Chris has 

12 eloquently pointed out in many, many, almost all 

13 cases elsewhere you have an idea of voluntary early 

14 dispute resolution, however the best way to say 

15 it is.

16 But again, I think the hurdles can be 

17 overcome.

18 PARTICIPANT: So just to jump in here 

19 as a facilitator, I am not sensing much disagreement 

20 from the table on this issue. Perhaps some of the 

21 individuals that have spoken and advanced the issue 

22 would be willing to maybe put together an idea in 

23 concept of what it would look like.
185

1 But I think just at this time probably 

2 we'll move on to the other comments. I had Ashley 

3 Reich next on the list and we will keep moving. 

4 Thank you. 

5 MS. REICH: I have a question and then 

6 a suggested wording based on how you guys are 

7 processing. 

8 So on page 4, 3(i) when you are denying 

9 a claim do you inform the borrower the reason or 

10 the reasons as to why the claim was denied? And 

11 if so I would suggest adding some text there to 

12 say a written notification to the borrower with 

13 the reason or reasons denying the claim. Just to 

14 clarify that.

15 And that would help the borrower and 

16 I think give us some assurance that the student 

17 or borrower would know why their claim was denied 

18 if they didn't meet that minimum threshold.

19 MS. WEISMAN: So I think anything we 

20 want to do here related to process we need to specify 

21 here more than worry about what's been done on the 

22 previous applications.

23 MS. REICH: I just wanted to be sure 
186

1 that that was what the department would be doing 

2 or you all could agree to that. And I think that's 

3 very important that we indicate the reason or 

4 reasons.

5 PARTICIPANT: Walter.

6 MR. OCHINKO: So I had a question 

7 related to that, but I'm not sure I'm following 

8 Ashley's question.

9 My question was basically the same but 

10 it really applies to section 3 where you have it 

11 has to meet a minimum threshold. And it says you 

12 provide a written notification, but I don't see 

13 that there's any language there about providing 

14 the reason for the decision.

15 Whereas if you look on an application 

16 that you accept the written decision on page 5, 

17 4(ii) providing the reasons for the decision.

18 I just wondered if you couldn't 

19 incorporate that language into 3, section 3.

20 PARTICIPANT: So Walter -- one second. 

21 So Ashley, is the blue addition on there in line 

22 with what you were suggesting?

23 MS. REICH: I think Walter and I are 
187

1 -- I think we're saying the same thing, that we 

2 need to know the reason or reasons as to why the 

3 claim was denied. Is that what you're saying? 

4 Yes, then we're in agreement with that.

5 PARTICIPANT: Okay. Any additional 

6 comments on the inclusion of that language in 3(i)?

7 MS. REICH: You could also if it's 

8 easier, I don't know from like a wordsmithing 

9 perspective if you say with the reason and then 

10 the S in the parentheses. I don't know if that 

11 makes a difference. 

12 PARTICIPANT: Is it covered under 4, 

13 written decision and then it says providing the 

14 reasons for the decision? That's different? 

15 PARTICIPANT: That's different 

16 because that's after a final decision whereas the 

17 other one in 3 is looking at the initial 

18 determination. So really just looking to see do 

19 we have enough to process a claim. Do you have 

20 the basis for a claim.

21 Not evaluating all of the evidence but 

22 do you have some evidence, for example. Do you 

23 have a fully completed application that includes 
188

1 what we need to go forward.

2 PARTICIPANT: Dan, I saw your card up. 

3 Was it on this item or is it a separate item? 

4 Okay, so I'll put you on the list.

5 Abby, is your card for this item or a 

6 separate item? Okay. Your comment on this item 

7 and then I'll add your name to the list as well.

8 MS. SHAFROTH: I wanted to voice 

9 support for notifying the borrower of the reasons 

10 denying the claim. It also hadn't been clear to 

11 me to what extent the written decision provision 

12 number 4 on the next page would apply here.

13 It sounds like you're saying it's not, 

14 that that's only if there's a decision after the 

15 initial review.

16 But given that then I would like some 

17 clarification from the department if the borrower's 

18 claim is thrown out at this initial review period, 

19 if it's denied then does the borrower have an 

20 opportunity to ever submit a claim again.

21 MS. WEISMAN: Yes. Yes, the borrower 

22 could always send in a new claim to say that well, 

23 now I have the evidence, or they've included it 
189

1 if they didn't include it previously.

2 PARTICIPANT: So before we jump back 

3 into our queue here just a quick show of thumbs 

4 on this language here that was added and suggested 

5 by Ashley Reich and supported by Walter with the 

6 reason/reasons. No thumbs down. There is one 

7 question from Juliana.

8 MS. FREDMAN: For the initial 

9 threshold determination will the department look 

10 to information in its own possession related to 

11 the claim for evidence, or is it only what the 

12 borrower attaches to their application? When 

13 determining whether the claim should be processed 

14 at all.

15 MS. WEISMAN: So to clarify, it's kind 

16 of what I thought but I wanted to make sure before 

17 I spoke.

18 What we intended to do probably isn't 

19 worded as best we could do it here so we may want 

20 to wordsmith a little bit.

21 The intent is that we would look for 

22 a completed application and they're at a station 

23 would be the initial evidence. So it wouldn't have 
190

1 to contain more than that, but it would need to 

2 be a fully completed application and have their 

3 signed statement attached. Their under penalty 

4 of perjury they sign this application form.

5 As I read it though where we've adjusted 

6 the language based on what we talked about at the 

7 last session we edited that to say providing 

8 evidence that supports the borrower defense claim.

9 MS. FREDMAN: So the evidence is before 

10 or after the minimum kind of threshold 

11 determination about whether to review the claim 

12 is determined. 

13 In other words if a borrower submits 

14 an attestation signed under penalty of perjury and 

15 doesn't attach documents but the department has 

16 documentation that might support that claim will 

17 it get processed.

18 MS. WEISMAN: Yes. Because again our 

19 initial review is not evaluating evidence but just 

20 looking at is there something there.

21 So if in their form they say the

22 department made a finding against X school well 

23 then we have that information, we're aware of that. 
191

1 We've got the completed form so it meets that 

2 initial screening and we keep processing.

3 MS. HONG: And just to provide some 

4 context, we've heard from people that review these 

5 claims that oftentimes people will submit 

6 incomplete applications. So this is just an 

7 initial screen just to sort of ameliorate that 

8 issue.

9 PARTICIPANT: Michale, do you have a 

10 quick comment on this?

11 MR. MCCOMIS: So if that's the case and 

12 because we cross reference with 685.222. This is 

13 on page 4, number 3, arabic 3, and we use the word 

14 qualifying borrower defense claim I think that's 

15 where the confusion might lead.

16 Because what I think that you're saying 

17 is presented a complete borrower defense 

18 application period. Like you don't even need to 

19 cross reference to 685 because 685 sets forth the 

20 qualification for the claim itself as well 

21 qualitatively. 

22 So if Caroline, what you just said is 

23 what we're really looking for is a complete 
192

1 application then why don't we say that.

2 MS. WEISMAN: Yes, I mean I think it's 

3 a completed application but they have to allege 

4 something that makes the basis of a claim. So I 

5 think we do still want that cross reference in there 

6 because -- and I think what Caroline was alluding 

7 to is we get applications in that say things like 

8 my school was terrible. Okay, they signed it and 

9 dated it. Well, that would be a completed 

10 application but it doesn't allege anything. It 

11 doesn't yield anything.

12 So we're looking for a completed 

13 application that states something that would be 

14 grounds for a claim. And so for that reason we 

15 feel it's important to outline the idea of the 

16 standards in 685.222. We want to refer them back 

17 to something so they know what those contents would 

18 need to include.

19 PARTICIPANT: Ashley Harrington, did 

20 you have suggestions or comments on this?

21 MS. HARRINGTON: So, appreciate the 

22 explanation. If it is just that you want a 

23 completed form then do we even need C at all? C 
193

1 provides minimum supporting evidence to 

2 corroborate the borrower defense claim.

3 Or is the attestation that 

4 corroborating evidence. But it seems redundant 

5 then to B.

6 MS. WEISMAN: So I think that we're 

7 talking about two different things. We're talking 

8 about the idea of having the completed form that 

9 alleges something. 

10 And so we would want there to be some 

11 evidence. Now the signed statement is some 

12 evidence, but here once we get to adjudicating the 

13 claim we're looking for a little more.

14 So there's the initial screening and 

15 then there's the actual processing.

16 MS. HARRINGTON: Right. So I'm 

17 talking about for the initial screening. It seems 

18 like C provides minimum supporting evidence is 

19 under your initial screening process.

20 MS. WEISMAN: Right, and there the 

21 initial what we would call minimum supporting 

22 evidence could be the attestation or the signed 

23 application.
194

1 MS. HARRINGTON: Right, which would be 

2 the claim alleging a misrepresentation as in B. 

3 Why do you need C spelled out in this way is what 

4 I'm asking.

5 MS. HONG: So this was written in 

6 tandem with issue paper one where we set forth that 

7 it has to be found that there's substantial weight 

8 of the evidence.

9 So the way that standard was written 

10 at the time, that also said attestation plus 

11 corroborating evidence. So they kind of work 

12 together.

13 So if there's changes to be made then 

14 this is certainly language that would move an 

15 adjustment to that.

16 MS. HARRINGTON: Then that doesn't go 

17 with what you're saying because this is the first 

18 step, just the minimum step to even get your claim 

19 evaluated based on whatever evidence standard we 

20 come up with.

21 And if you're saying you're just 

22 looking for a completed form C could be confusing 

23 to borrowers as in the completed form that details 
195

1 what happened is not enough to get their claim even 

2 considered. 

3 PARTICIPANT: So looking for 

4 suggestions on how we can improve this. Abby, you 

5 had your card up. Michale, I see your hand up. 

6 A suggestion on how we can improve this?

7 MR. MCCOMIS: I have several.

8 PARTICIPANT: Okay.

9 MR. MCCOMIS: So you use under (i) and 

10 (ii) you use the phrase minimum threshold for 

11 consideration. So if that's -- maybe you move that 

12 into 3, whether the borrower has presented an 

13 application that meets the minimum threshold for 

14 consideration and you can keep your cross reference 

15 in there.

16 And then under C to Ashley's point --

17 the form will have a checklist. Did you submit 

18 a claim, did you -- and one of the things that you'll 

19 check off is is there evidence. Maybe the word 

20 minimum is not because that's a qualitative, an 

21 assessment kind of term.

22 So provides supporting evidence that 

23 the borrower believes to corroborate the borrower 
196

1 defense claim. 

2 That way you're not making any kind of 

3 affirmative judgment at that point, you're just 

4 saying does the application contain evidence that 

5 the borrower believes supports his or her claim.

6 PARTICIPANT: Kelli.

7 MS. PERRY: Just another thought 

8 because I feel like we're doing two things in one 

9 here where we're evaluating a minimum threshold 

10 and then we're getting into the adjudication of 

11 the borrower defense claim once it's either 

12 approved or denied.

13 So where we have number 3 adjudication 

14 of borrower defense claim maybe 3 becomes minimum 

15 threshold for consideration. And then you list 

16 1 and 2, the denial and the minimum threshold.

17 And then the adjudication of the claim 

18 becomes number 4. And you go on to list the 

19 additional evidence. And then the school, what's

20 in (iii) and so forth.

21 MS. WEISMAN: So can we have just a few 

22 minutes to confer?

23 PARTICIPANT: Why don't we just take 
197

1 a 10-minute break. So be back at 2:54.

2 (Whereupon, the above-entitled matter 

3 briefly went off the record.)

4 PARTICIPANT: Okay. Brian, are you 

5 filling in for Caroline? Okay.

6 So we took a break to give the 

7 department some time to confer on what was asked 

8 of them right before the break. So do we want a 

9 report out or keep moving?

10 MS. WEISMAN: For right now I think we 

11 need to keep moving through. We will get some 

12 answers for this and some other questions later.

13 But I appreciate the conversation. 

14 I'd like to move on to (iii). (iii) at the bottom 

15 of page 4 now reads if the Secretary determines 

16 that the borrower meets the minimum threshold for 

17 consideration of a borrower defense claim as 

18 described in paragraph D(3)(ii) of this section 

19 the Secretary provides written notification of the 

20 determination to the borrower and the school.

21 The notification to the school provides 

22 the school with a copy of the borrower's application 

23 and any supporting evidence submitted with the 
198

1 application.

2 The school may submit a response to the 

3 borrower's claim as described in D(3) and I can't 

4 see if there's a strikethrough. I believe it's 

5 (v)(c) of this section.

6 Moving on to page 5, the new (iv) is 

7 the borrower and the school may provide the 

8 Secretary any additional relevant evidence within 

9 45 days of the date of the notification specified 

10 in paragraph D(3)(iii) of this section.

11 And then we've renumbered in (v)(b). 

12 We've changed documentation to evidence.

13 Renumbered again. We also added that 

14 the response or information submitted by the school 

15 we've listed out that it would also be able to 

16 request additional relevant information from the 

17 borrower or the school.

18 And then we want to close out this 

19 section in (vii) upon request the Secretary 

20 provides the borrower any information submitted 

21 by the school and provides the school any additional 

22 information provided by the borrower. 

23 The Secretary further provides the 
199

1 borrower and the school with any other relevant 

2 information obtained by the Secretary in resolving 

3 the borrower defense claim.

4 And I think I'd like to break it at that 

5 point.

6 PARTICIPANT: Okay. So Valerie and 

7 Dan, your tags were up before we went to the break. 

8 So we'll go Valerie, Dan and then Walter.

9 MS. SHARP: I just have two quick 

10 comments. 

11 One of them is just a wording point. 

12 I noticed that in this issue paper we've switched 

13 from institution to school. Then we switch back 

14 in the following issue papers to institution.

15 I think probably for the sake of just 

16 being consistent throughout the issue papers that 

17 in the wording we might want to use just 

18 institution. I mean it would be just in multiple 

19 places. It almost looked like maybe this was 

20 written by a different person because they always 

21 refer to the school and the other papers refer to 

22 the institution. There may be a couple of other 

23 places where school is mentioned. So just a point 
200

1 there.

2 My other point was since you may be 

3 working on this portion of our request on the 

4 subpart G for provisionally certified, that is 

5 mentioned again, and I know we're not there yet, 

6 but in case they're looking at it right now on page 

7 7 in numeral 9 it refers to subpart G again.

8 So if we're going to consider wording 

9 for the beginning there could we also consider it 

10 here at the same time. So I apologize for jumping 

11 ahead, but in case they're working on that at this 

12 moment I wanted to skip ahead.

13 PARTICIPANT: Dan.

14 MR. MADZELAN: I had a comment or a 

15 suggestion or a question on D(1), (2), (3) up 

16 through (i) and (ii). But if the department is 

17 -- they indicated they were thinking about that 

18 and would come back I'm willing to hold off until 

19 they come back with something. Or I can ask now.

20 PARTICIPANT: I'd say make the comment 

21 or question now just so while they're considering 

22 it they have that.

23 MR. MADZELAN: Okay. I guess, well 
201

1 Ashley stole my thunder on C, the minimum supporting 

2 evidence.

3 But I guess, let me see if I have this 

4 sequencing right. It looks like under D(1) there's 

5 an application. And the application doesn't have 

6 to be complete because in D(2) as long as there's 

7 an application in hand a forbearance is available.

8 However, even though that application 

9 is not complete at that point and there is 

10 forbearance available now you come to arabic 3 where 

11 there's an evaluation of the quality or 

12 completeness of that application.

13 And depending on thumbs up, thumbs 

14 down, some things happen. 

15 So first of all, do I have that right. 

16 And if there is an instance, assuming I'm right, 

17 that there's an initial application that even if 

18 it's incomplete a forbearance can be triggered then 

19 once an evaluation is made of the quality of that 

20 or completeness of that application then is there 

21 a further review or dismissal of the forbearance 

22 if it's an unqualified application.

23 So again, first question is is the first 
202

1 check of any sort of an application there because 

2 any sort of an application can trigger a forbearance 

3 even if it's not a quality application.

4 MS. WEISMAN: We can discuss whether 

5 it might be appropriate to move the forbearance 

6 until the point -- after the point that the initial 

7 determination is made.

8 PARTICIPANT: Walter.

9 MR. OCHINKO: So I had a comment 

10 similar to the one that Valerie just made. They 

11 say consistency is the hobgoblin of little minds.

12 But I noticed in C on page 4 -- I'm sorry, 

13 (v) up to this point you use the word evidence pretty 

14 consistently. All of a sudden this section bottom 

15 of page 4 you say response or information. 

16 On the next page, A, considering the 

17 relevant information. B, request additional 

18 relevant information.

19 I wondered if there was any reason for 

20 not using the word evidence.

21 And frankly I like the word 

22 information. I think it's a lot more neutral than 

23 the word evidence. Evidence sounds like you're 
203

1 in a court.

2 So I would propose too that you might 

3 consider changing the word evidence previously and 

4 using the word information instead.

5 PARTICIPANT: Alyssa.

6 MS. DOBSON: It says upon request that 

7 the Secretary will provide any further information. 

8 I'm just curious as to how either a student or 

9 school is supposed to know that more information 

10 was even submitted in order to request it.

11 Either party can submit things within 

12 the 45-day period. So if you're only going to give 

13 us any subsequent information upon request would 

14 you like me to email you daily.

15 MS. WEISMAN: Can you clarify where in 

16 the paper you are?

17 MS. DOBSON: It's (vii) middle of page 

18 5. I can't imagine a case where either party 

19 wouldn't want the information that was submitted. 

20 Yet how would we know it was submitted to request 

21 it.

22 PARTICIPANT: Do you have a 

23 suggestion, Alyssa, of language?
204

1 MS. DOBSON: Striking upon request. 

2 PARTICIPANT: Striking upon request. 

3 Any other suggestions? Ashley --

4 MS. REICH: I would just say I agree, 

5 strike upon request and say the Secretary will 

6 provide the borrower. 

7 PARTICIPANT: Chris.

8 MR. DELUCA: Similar with that (vii) 

9 I think it's out of place. I think because we've 

10 got (iv) says the borrower and the school may 

11 provide the Secretary with additional relevant 

12 evidence within 45 days.

13 And then you've got in resolving the 

14 borrower defense the Secretary will consider and 

15 then in resolving the borrower defense claim under 

16 6.

17 It seems like this section should go 

18 to become the new 5. It should move up. So the 

19 borrower and the school may provide the Secretary 

20 with additional relevant information within 45 

21 days, and then it seems like the next step, and 

22 maybe this gets to your point, Alyssa, as far as 

23 when that is, is okay, you've had 45 days to submit 
205

1 any relevant additional information. After that 

2 then the Secretary will provide the parties with 

3 the information and then that kind of ties into 

4 -- we want to think some more about where to put 

5 in the early dispute resolution pieces of it.

6 But again that seems to be okay. The 

7 school gets all the information from the student 

8 and then the student gets all the information from 

9 the school.

10 Then they have all the relevant 

11 information and then they can have an opportunity 

12 to say okay, do we want to go through with the formal 

13 full-blown proceeding or is this the right time 

14 to take a deep breath and say okay, is there a way 

15 that we can resolve this now that we know where 

16 everybody is coming from.

17 PARTICIPANT: Michale.

18 MR. MCCOMIS: So, trying to achieve 

19 some parallel-ativity.

20 In 685.222(b)(3) we say that the 

21 Secretary will find substantial weight of the 

22 evidence either by -- that's provided by the 

23 borrower or otherwise in the possession of the 
206

1 Secretary.

2 And then in this section under 6(A) 

3 consider other relevant information obtained by 

4 the Secretary. 

5 In order to make those align I might 

6 suggest either using parallel words, or changing 

7 it to consider other relevant information in the 

8 possession of or obtained by the Secretary. Or 

9 just making it match and say consider other relevant 

10 information in the possession of the Secretary. 

11 PARTICIPANT: Juliana.

12 MS. FREDMAN: So I think some of what 

13 I might have to say may be an echo, but the way 

14 it's structured now the school automatically gets

15 a copy of everything the borrower submits and then 

16 upon request the borrower can get copies -- both 

17 parties can get copies of additional information.

18 So the school has a chance to look at 

19 what the borrower submitted and submit evidence 

20 based on that, and the borrower should have the 

21 same opportunity. Whether it's upon request with 

22 some kind of explicit notification or automatically 

23 as Alyssa suggested there should be a time frame 
207

1 after that for them to submit additional 

2 information once they have whatever the school 

3 submitted.

4 So maybe Chris's suggestion of flipping 

5 the 45 days to before that would do the trick.

6 PARTICIPANT: Aaron, you say you have 

7 language?

8 MR. LACEY: Yes, actually I had the 

9 same point. I think there's several things that 

10 can be improved here so let me make some suggestions 

11 and I think they address that concern.

12 So I would go up to (iii) and I'm going 

13 to have sort of a package of suggestions here.

14 So the first thing I would do is insofar 

15 as you're making edits. So where it says, you go 

16 down to the last sentence of that (iii) starts with, 

17 "the school." 

18 The first thing I would ask you to do 

19 is to break apart these paragraphs. And then I 

20 would suggest a placeholder because this is where 

21 we will provide language tonight before close of 

22 business for an ADR concept.

23 Because the idea -- I think that would 
208

1 be the right place. Claim has been certified and 

2 then at the time the notification goes out 

3 essentially at that same point is when the parties 

4 would both be supplied with an opportunity if they 

5 wanted to participate in ADR. So I would put 

6 brackets and a placeholder.

7 And then the next paragraph starts, 

8 right now it says the school may submit a response 

9 to the borrower's claim. What I would propose is 

10 first of all the school has 45 days to submit a 

11 response to the borrower's claim as described in 

12 whatever from the date it receives notification 

13 of the claim.

14 Now if we add in an ADR we'll say and 

15 provided the parties determine not to pursue ADR 

16 or whatever.

17 And then right after that we would say 

18 at the end of that period the department supplies 

19 the borrower with any response that the school has 

20 provided.

21 And then I would say (iv) needs to be 

22 revised to say the borrower and the school may 

23 provide the Secretary any additional relevant 
209

1 evidence within 45 days of the date of the 

2 notification specified -- but instead we would say 

3 within 45 days of the date the borrower receives 

4 the copy of the school's response.

5 So that way you've got the school is 

6 notified, the school has 45 days to respond. Then 

7 the department has to supply the borrower with the 

8 response. And from the date the borrower receives 

9 the response both parties then have 45 days to 

10 provide any additional relevant information.

11 And the department still has an 

12 obligation without request to provide the borrower 

13 and the school any information submitted by the 

14 other.

15 So there would still be a point 

16 following the end of that 45 days when the 

17 department would need to provide any additional 

18 evidence that had been supplied to both parties.

19 So, that way the borrower has a chance 

20 to respond to the school's reply. The school is 

21 getting provided any additional information that 

22 comes in and can also provide any additional 

23 information, et cetera. 
210

1 PARTICIPANT: Wanda.

2 MS. HALL: So in this instance I'll use 

3 the word tentative. It's tentatively approved is 

4 not the right word for the borrower. School has 

5 45 days to respond.

6 School responds with some type of 

7 information. Then they send that information to 

8 the borrower so we're talking another 45 days or 

9 whatever for the borrower to then come back.

10 PARTICIPANT: And the school and the 

11 borrower have 45 days from the date the school 

12 receives a copy -- let me restate this.

13 The school and the borrower have 45 days 

14 from the date the borrower receives a copy of the 

15 school's response to provide any additional 

16 information.

17 MS. HALL: And the school had 45 days 

18 to provide that information. 

19 PARTICIPANT: Previously. Correct.

20 MS. HALL: And if the school doesn't 

21 respond then you move to the written decision step.

22 PARTICIPANT: Well, the school has 45 

23 days to respond. If it didn't there would just 
211

1 be no --

2 MS. HALL: So then you'd go to the 

3 written -- because I was mapping out the forbearance 

4 period.

5 PARTICIPANT: Understood.

6 MS. HALL: And so you're 45 days, 45 

7 days. That helps because I was trying -- that's 

8 why I was up and down. I was trying to map out 

9 the process. 

10 PARTICIPANT: Caroline.

11 MS. HONG: Just a clarification. So, 

12 since you have a placeholder for ADR do you mean 

13 all the information exchange, like the initial 

14 45-day window would be triggered after the ADR?

15 PARTICIPANT: I apologize. I may have 

16 suggested breaking those at the wrong point.

17 What I would suggest is after the 

18 department certifies a claim that it would send 

19 a notification to both parties that the claim had 

20 been filed and it would provide them information 

21 about the opportunity to engage in ADR over a set 

22 period of time. We'll say 60 days.

23 And then it would say if you don't elect 
212

1 to participate or if some sort of resolution is 

2 not achieved in 60 days then we will provide you 

3 a subsequent notice that will detail the borrower 

4 defense process.

5 And so the first 45-day period for the 

6 institution to provide a response would be 

7 triggered by the receipt of that official notice 

8 that the borrower defense process was beginning. 

9 Does that make sense?

10 So that first correspondence from the 

11 department would not represent the official notice 

12 that a borrower defense proceeding was being 

13 engaged.

14 Rather it would represent a 

15 notification that a claim had been filed and here 

16 are the parameters for ADR if you choose to engage 

17 in that. 

18 And you have a fixed amount of time to 

19 do that. And if you either choose not to, either 

20 party, or you don't reach resolution then at the 

21 end of the 60-day period we will send you an official 

22 notification like a briefing schedule. We'll send 

23 you an official notification and that will start 
213

1 the 45, 45-day process.

2 PARTICIPANT: So Chris had proposed 

3 starting an ADR process after the exchange of 

4 replies and information. But you're saying to 

5 start it before.

6 PARTICIPANT: Well, we can talk about 

7 it.

8 PARTICIPANT: We can talk about it. 

9 I think it's just a question of obviously an ADR 

10 process is going to include an exchange of 

11 information. That's going to be part of it. 

12 So just questioning and thinking 

13 through how to facilitate that, if there's an 

14 exchange of information that's built into the ADR 

15 process then obviously that's information the 

16 department's going to have and ultimately is going 

17 to be used as part of the ultimate resolution.

18 So I think thinking through the 

19 mechanics I think the idea is that somewhere in 

20 that there's a notification, there's an opportunity 

21 for the parties to choose if they want to try to 

22 resolve it informally.

23 Whether they choose to or not there's 
214

1 going to be an exchange of information and then 

2 if there's not a resolution through ADR then the 

3 department's going to make a decision. 

4 But we need some time to think through 

5 the particulars of when, what makes the most sense 

6 in trying to make it efficient for all three parties 

7 involved, the department, the student and the 

8 schools.

9 PARTICIPANT: We'll talk about it. 

10 But my thinking is typically after you have a 

11 complaint filed in court or -- the complaint is 

12 filed and then you have the ADR process. And that 

13 would preempt a formal response from the 

14 respondent. So I was trying to insert sort of 

15 consistently that ADR process. 

16 We're going to come up with language 

17 and we're going to get it to you guys.

18 PARTICIPANT: So just to check in here, 

19 and understanding the language is pending. So if 

20 we extract the ADR bullet point from this thoughts 

21 and comments from the group on the other changes 

22 suggested. 

23 Any thoughts, questions, concerns, 
215

1 additional modifications? Will, was that a hand 

2 up? Can we scroll down to (vii). I was mainly 

3 looking at the paragraph that's on the screen. 

4 The school has 45 days from the date received. 

5 And then that would scroll down to (vii) which is 

6 now on the screen.

7 Again, we're not doing a temperature 

8 check here. We're taking additional comments. 

9 PARTICIPANT: Will, did you still have 

10 a comment on this?

11 MR. HUBBARD: I did, just a small one. 

12 In terms of (vii) I'm curious what the department 

13 intends to -- sort of the vehicle for this 

14 communication. We're talking a letter, this is 

15 online sending an email.

16 MS. WEISMAN: That's still to be 

17 determined.

18 MR. HUBBARD: Is that something that 

19 we would look to determine here potentially?

20 MS. WEISMAN: I think that level of 

21 process we would expect we would do outside of the 

22 regulation. Similarly to how when we say something 

23 needs to be done in writing it could include an 
216

1 email. I think we would kind of reserve that same 

2 discretion for us.

3 There are some things that maybe 

4 because of personally identifiable information we 

5 might want to choose not to send in an email versus 

6 other things that we might prefer to send by email 

7 because of the volume of it.

8 I think those kinds of processes we'd 

9 need to work out later.

10 The reason that we put in upon request, 

11 for example, was because we were concerned about 

12 the amount of communication going back and forth, 

13 and that in some cases especially if a school feels 

14 that oh yes, I know that case.

15 Just as what we hear about when we 

16 contact schools about student complaints sometimes 

17 schools will say I was expecting this call. I knew 

18 you'd be calling me about that.

19 I think our feeling was that sometimes 

20 a school might not want to receive the information, 

21 that they wouldn't necessarily feel the need to 

22 see it. But I do hear the concern that was 

23 expressed.
217

1 But again to get back to your concern 

2 I think that we can take care of that administrative 

3 piece outside of this.

4 PARTICIPANT: Ashley Reich.

5 MS. REICH: My question is on page 5. 

6 It would be (v) and then the list of A, B, C.

7 I think we've had some discussion that 

8 not all of those items would be present necessarily 

9 when you're looking to resolve the borrower defense 

10 claim.

11 So was this list meant to be like all 

12 of those items had to be present? Because right 

13 now there's an and statement there. So I don't 

14 know if we need to make it an or statement. Because 

15 I know you said you want the application for sure, 

16 but some of that evidence could also be department 

17 records as supporting evidence.

18 So I'm not sure if that needs to be an 

19 or.

20 MS. WEISMAN: So I think we felt the 

21 need to keep the and because we were saying we would 

22 look at all of these items. Now they may not all 

23 be present, but that in resolving the claim we'll 
218

1 consider all evidence we have which would include 

2 these things.

3 In some cases it might be all of them. 

4 In some cases it might be one of them.

5 PARTICIPANT: Michale McComis.

6 MR. MCCOMIS: Also in (vii) we've got 

7 another obtained word in the very last sentence, 

8 information obtained by the Secretary. 

9 And I wonder, not really sure -- because 

10 Chris had mentioned moving that up I'm not sure 

11 where this is going to fit in, but either maybe 

12 for consideration by the Secretary would be a better 

13 way, or consideration by. Or to be considered. 

14 Or something along those lines.

15 How far down are we going? 

16 MS. WEISMAN: My plan was that we would 

17 stop at that item. So at (vii) in the middle of 

18 page 5.

19 MR. MCCOMIS: I will reserve my other 

20 comments. 

21 PARTICIPANT: Valerie.

22 MS. SHARP: I'm going back to the 

23 facilitator request for comments on the 45 days 
219

1 changes in (iii). 

2 I think that is good. Forty-five days 

3 is a normal response time for the schools to respond 

4 to the Department of Education so I think it is 

5 good to set a time frame on that so that schools

6 are responding in a timely manner.

7 And I fully support the opportunity 

8 then that that is supplied to the student and 

9 another 45 days is provided for the parties to 

10 respond because the student should have the 

11 opportunity to respond after they see what the 

12 school has submitted. So I think those are good 

13 changes. 

14 I also think that it probably is a good 

15 change to move (vii) up so that there is that 

16 information provided to both parties. That means 

17 the department's not sending every time they get 

18 one item sending something to both parties, but 

19 they can collect it all and then submit back to 

20 the parties at the end of that process.

21 PARTICIPANT: Chris and then Wanda. 

22 Okay, Chris.

23 MR. DELUCA: Valerie made the comment 
220

1 that I was going to make as far as I still think 

2 we need to move (vii) up to between what's now (iv) 

3 and (v). 

4 Again the idea that the borrower and 

5 the school may provide the Secretary any additional 

6 relevant evidence or information within 45 days, 

7 and then once that's collected then the Secretary 

8 will provide that information to the borrower and 

9 to the school.

10 That seems like a much more natural flow 

11 of how the process would work.

12 PARTICIPANT: Abby.

13 MS. SHAFROTH: So I'm a little confused 

14 the way we've layered these 45 days on now. So 

15 the borrower submits their application and 

16 evidence, the Secretary certifies it, notifies the 

17 school, gives the school a copy of all the 

18 borrower's evidence. 

19 The school has 45 days then to submit 

20 its evidence at which point that evidence is shared 

21 with the borrower. But then there's another 45 

22 days -- as currently drafted there's an additional 

23 45 days for the borrower and the school to submit 
221

1 evidence.

2 And so as drafted I'm not sure that this 

3 puts any incentive on the school to submit its --

4 to really submit its response and evidence within 

5 the 45 days and give the borrower an opportunity 

6 to respond to it.

7 As written it seems like the schools 

8 could not really do much during the first 45 days 

9 and then wait until that -- wait until the second 

10 45-day period and sort of ambush the student at 

11 that point.

12 Obviously I don't think that most 

13 people around the table would be doing that, but 

14 I want to make sure that the rules as written make 

15 sense and prevent that from happening.

16 I think our idea was that in the normal 

17 course of procedure a plaintiff, in this case a 

18 borrower submits their case. The defendant or the 

19 school has an opportunity to respond and then once 

20 the borrower or plaintiff sees that response they 

21 get a quick reply. So that's the way things would 

22 be set out normally.

23 To bring that to a proposal I would in 
222

1 (iv) here I would say the borrower may provide the 

2 Secretary any additional relevant evidence within 

3 45 days of when they see the school's response. 

4 I would strike and the school. 

5 And I'd be open to discussion of 

6 something if what the borrower submits triggers 

7 some newly discovered evidence for the school, but 

8 otherwise I'm worried that the borrower might not 

9 have an opportunity to really see the school's 

10 response and respond to it before there's a 

11 decision.

12 PARTICIPANT: Valerie, did you want to 

13 respond to Abby's concern?

14 MS. SHARP: I did want to say that it 

15 would be very unwise and would not behoove the 

16 school to withhold anything they have in that 45-day 

17 period.

18 When the department requests 

19 information from a school and sets a 45-day deadline 

20 it is a very strict deadline usually with some 

21 strong language and penalty attached if you don't 

22 respond within the time frame.

23 So schools would be very, very careful 
223

1 about making sure that they provided everything 

2 they possibly could. 

3 And the only thing that would be 

4 provided after that deadline would be like you said 

5 something newly discovered or something that came 

6 up.

7 Just from past history of working with 

8 the department schools are usually very careful 

9 to meet those deadlines because they are pretty 

10 strict with us on those.

11 PARTICIPANT: Chris.

12 MR. DELUCA: And Abby I understand your 

13 point but that certainly cuts both ways. So a 

14 borrower could submit a bare bones claim with 

15 additional information holding back that the school 

16 doesn't know of until they send their response in. 

17

18 That could go either way. So I think 

19 whatever the process is here. And again we're 

20 thinking in terms of open and honest, and again 

21 I'm looking at it from the standpoint of 

22 representing small schools who are just trying to 

23 quite frankly resolve it as quickly as possible 
224

1 and move on because they don't have the resources 

2 to have a long, drawn out process involving the 

3 U.S. Department of Education. They want to get 

4 to resolution.

5 But having said that making sure that 

6 there's protections for both sides and whether 

7 that's -- what that looks like. If you've got 

8 suggestions. 

9 Under your suggestion there with (iv) 

10 but do you have any suggestion as far as what 

11 language would go ahead of that from the school 

12 standpoint or making it incumbent upon the student 

13 to say okay, you're going to make your claim, 

14 present all your evidence with your claim. We 

15 don't you sandbagging and holding back and saying 

16 oh, I sent you 3 affidavits but now I've got 20 

17 affidavits that I'm going to send in after the 

18 school has responded and the school can't make any 

19 more response then.

20 PARTICIPANT: Any other thoughts or 

21 proposals on this section? Comments? Abby.

22 MS. SHAFROTH: So I appreciate those 

23 points and it was helpful hearing from Valerie that 
225

1 there is generally pressure on schools to respond 

2 by a deadline.

3 My concern was that there are sort of 

4 two deadlines here and a school could technically 

5 satisfy them by really just meeting the second.

6 So maybe what you described is the 

7 school would want to provide all the evidence they 

8 have by the first 45 days and provide their 

9 response, and they would mostly only want to provide 

10 newly discovered evidence or evidence that they 

11 discover is responsive to new information submitted 

12 by the student after.

13 So maybe just making that explicit in 

14 the rule that the school can provide additional 

15 evidence in the second 45-day period that is newly 

16 discovered or responsive to new evidence submitted 

17 by the student. That would I think hopefully 

18 satisfy both of our concerns.

19 PARTICIPANT: Chris, Valerie. 

20 Thoughts on that suggestion? And Abby, was your 

21 proposal an or between newly discovered evidence 

22 or information in response to?

23 MS. SHAFROTH: Just making sure that 
226

1 the school does have -- if new evidence comes out 

2 that is relevant sure, school can submit it.

3 Or if the school sees this evidence from 

4 the borrower and says oh, now that I see you're 

5 saying that I need to provide this evidence I now 

6 understand is relevant that's fine with me.

7 PARTICIPANT: So it would be newly 

8 discovered evidence or evidence in response. And 

9 I just want to take this note to say thank you for 

10 typing. I know that's an extremely difficult job. 

11 PARTICIPANT: Any other comments or 

12 suggestions, modifications? Aaron.

13 MR. LACEY: I mean I get it, just the 

14 immediate issue that pops up is what if a borrower 

15 with totally good intentions, no ill will, but if 

16 they provide the additional information on day 44, 

17 what is the time frame in which the school has to 

18 respond. The problem is we're going to keep 

19 getting into this back and forth and back and forth.

20 Abby, I totally get all your points. 

21 I also get Chris's point. It cuts both ways. 

22 Both parties could have the opportunity to sandbag. 

23 You have this post decision process in 
227

1 which the parties have the opportunity -- first 

2 of all here's hoping they resolve it through 

3 alternative dispute resolution.

4 But both of them have the opportunity 

5 after the written decision to introduce or request 

6 reconsideration.

7 I don't know that there's an answer to 

8 this. I think my preference would still be that 

9 we give both parties 45 days. They get to look 

10 at the notification. Then both parties have a 

11 45-day period to respond.

12 And if a school has sandbagged and wait 

13 until the last minute if you have a bad actor I 

14 appreciate it's not the best circumstance but 

15 either way. If a borrower sandbagged and so the 

16 school's response was not -- because what could 

17 happen is theoretically a borrower could sandbag, 

18 the school responds to one or two things, and then 

19 on day 44 the borrower introduces a bunch of 

20 additional stuff.

21 Same thing. A school could in its 

22 response sandbag and then on day 44 of this mutual 

23 period submit a bunch of additional stuff.
228

1 The risk is really the same. If we've 

2 got bad actors in either one of those camps and 

3 they want to take advantage of the system they can. 

4 But the idea is if they do that in both 

5 cases there should be an opportunity post written 

6 decision to seek a reconsideration. In number 5.

7 And we should talk about whether or not 

8 number 5, you're talking about newly discovered 

9 or responsive evidence or something there should 

10 be tweaked.

11 The problem I have here is we're going 

12 to just keep adding time periods. So I would 

13 advocate -- understanding all the issues, but 

14 understanding both sides bear some risk here that 

15 a bad actor could try to manipulate this setup I 

16 still think it's probably to go you do 45 days, 

17 you do 45 days and then you have the decision.

18 And if somebody took advantage then 

19 that's dealt with post decision in the 

20 reconsideration provision. That would be my 

21 suggestion.

22 PARTICIPANT: Just a thought and a 

23 question. Do all of these time periods have to 
229

1 be 45 days? And are there any other examples that 

2 you might look towards for -- there are other 

3 processes like these out there. So I'm not sure 

4 how much you've looked.

5 There might be something to do after 

6 the end of the day in considering what you want 

7 to propose.

8 PARTICIPANT: What is the department 

9 for OHA the briefing schedules are what, 45, 45, 

10 15?

11 MS. WEISMAN: I believe that's 

12 correct.

13 PARTICIPANT: Yes, so if we're afraid 

14 that this is taking too long we could shorten it 

15 so the school has 45 days to submit a response. 

16 After that time period the borrower say has 30 days 

17 seeing what the school argues to consider if they 

18 have any additional evidence they want to put 

19 forward that they now realize is relevant to 

20 rebutting the school's response.

21 And then the school could have maybe 

22 15 days if the borrower does submit new evidence 

23 or argument to try to rebut that. That would be 
230

1 providing I think the school lots of opportunity 

2 to defend themselves, probably more than is 

3 standard in civil procedure but it would keep the 

4 time frame short and it would satisfy my core 

5 concern of making sure that the student doesn't 

6 get sandbagged and has an opportunity to respond 

7 to the school's story.

8 PARTICIPANT: I think those suggested 

9 modifications were made. Thoughts from the group? 

10 Something you all want to think about as homework 

11 or would you like to move forward? 

12 PARTICIPANT: Chris.

13 MR. DELUCA: In thinking through this 

14 process and kind of the back and forth, and again 

15 I went to the OHA process and thinking through the 

16 briefing schedule. So the parties submit a brief, 

17 there's a response and then there's a 15-day 

18 response back.

19 But the challenge there is after that 

20 there's an opportunity for a hearing. So there's 

21 not a hearing process in here. So we've got this, 

22 it's all based on documents going back and forth.

23 It certainly doesn't benefit anybody 
231

1 to get into back and forth responses that take two 

2 years because there's additional information all 

3 there.

4 If the process is the borrower makes 

5 a claim and submits all the evidence that they have. 

6 And then the school has an opportunity to respond 

7 with everything they've got in response to that.

8 And then if there's something with 

9 that, sort of like a reply brief concept to say 

10 limited to whatever's in there, but there's not 

11 an opportunity to bring new claims, or new evidence.

12 The challenge is that there's a whole 

13 body of law as far as what's relevant and how those 

14 processes work. And we're trying to boil that all 

15 down into three paragraphs. 

16 It's something from a homework 

17 standpoint I think it's absolutely worth thinking 

18 about how to do that. But again I think it's a 

19 challenge, particularly when we're trying to have 

20 a streamlined process.

21 But there's significant consequences 

22 for all the parties involved here and we want to 

23 make sure we're doing it fair.
232

1 PARTICIPANT: So understanding that, 

2 and I do see Alyssa, Bryan and Ashley have their 

3 cards up. I'm just thinking for the sense of time 

4 I'm not sensing disagreement in intent between the 

5 negotiators that have made comments. 

6 So I think if we could efficiently run 

7 through the next three comments we'll continue to 

8 move on. If anyone comes up with any ideas on this 

9 we have the proposals recorded that we've 

10 discussed. If anyone comes up with things feel 

11 free to share them. But we'll continue moving 

12 through issue paper two.

13 PARTICIPANT: So Alyssa, Ashley Reich 

14 and then Bryan.

15 MS. DOBSON: So I'm definitely for 

16 shortening subsequent time frames, but I would 

17 caution against too short. I think 15 days is 

18 reasonable for those of you who are going to work 

19 on perhaps changing some of that.

20 And then I don't want to speak on behalf 

21 of the department but it might help to ease some 

22 people's hesitation. It would seem like it would 

23 be pretty obvious to me and therefore to the 
233

1 department if a school were quote unquote 

2 "sandbagging" students in this process.

3 And wouldn't you take some other stern 

4 language approach with those institutions. I just 

5 don't think it would be a problem because you would 

6 stop it. But I don't want to speak for you. That's 

7 all. Maybe you could speak to that end.

8 MS. WEISMAN: So are you saying that 

9 if we gave a time frame and we felt that people 

10 were going, waiting until the end to comply or 

11 holding things back in the first round.

12 I think that certainly if we saw a trend 

13 or a pattern we could address certain conduct. 

14 I don't know in particular what we might do in those 

15 cases, but I think our ability to just -- sometimes 

16 people seem to have the impression that the 

17 department, anything they don't like they can just 

18 fix it. Well, the department can just do 

19 something.

20 And yes, we have various tools in the 

21 toolbox as we like to say, but again I think we 

22 do have to think about the idea that we can't send 

23 everyone out for a program review every time we 
234

1 see conduct we don't like.

2 Our ability to take action is limited 

3 to what we have in the statute and in the 

4 regulations. And while I will say that yes, there 

5 is the potential for us to do something the idea 

6 that we would notice the trend and be able to act 

7 in each case may or may not occur.

8 MS. DOBSON: But I think just from an 

9 institutional standpoint knowing that that ability 

10 is there there's a disincentive right off the bat 

11 to behave in that manner.

12 PARTICIPANT: Ashley Reich.

13 MS. REICH: Just in regards to the time 

14 frames. I'm also in support of looking at 

15 different time frames. However, I would caution 

16 the group that if we go 45 days in one avenue, then 

17 30 days, and then down to 15 it gets really confusing 

18 not only for the borrower but also for the 

19 department and the institution to understand where 

20 am I at in this process and how many days do I have 

21 and did the days already go by.

22 So I would be more in favor of trying 

23 to keep it somewhat consistent if we can between 
235

1 those time frames. Maybe something the department 

2 like was suggested has already established 45, 45, 

3 15, or whatever. Just so that it doesn't -- we 

4 don't have three different time frames throughout 

5 all of this. That's just my suggestion.

6 PARTICIPANT: Bryan.

7 MR. BLACK: Actually I understand what 

8 Ashley is saying and that does make sense. 

9 However, if the fear is gamesmanship that is going 

10 to be played with the idea that this is a process 

11 you can always put a provision in there. I 

12 scribbled out a little note to myself that would 

13 go along these lines, that both sides shall 

14 initially exercise a good faith disclosure of all 

15 pertinent information within the time frame 

16 specified.

17 Nobody wants to come to the Department 

18 of Education with the feeling that gamesmanship 

19 has been played. So I would suggest we either do 

20 a thumb check on the 45, 30, 15, or just put a 

21 provision in there that's kind of a catch-all that 

22 there's a good faith obligation to put forth your 

23 best evidence and not play any gamesmanship. Just 
236

1 an alternative. 

2 PARTICIPANT: Mike Busada.

3 MR. BUSADA: Speaking of good faith, 

4 maybe because it's late, maybe because it is Mardi 

5 Gras, laissez les bon temps roulez everyone.

6 In the spirit of good faith and 

7 compromise I appreciate the comments that Abby made 

8 in support of mediation earlier and as a result 

9 I want to move to the center.

10 I think that what she has proposed in 

11 terms of the time periods and the 15 days to me, 

12 that's something that I think is reasonable.

13 PARTICIPANT: So do we want to do a 

14 temperature check on the time period as proposed? 

15 Aaron.

16 MR. LACEY: And I'll just add one 

17 comment to address Ashley.

18 Typically in any kind of proceeding 

19 like this, certainly in court when the department 

20 and OHA, at the beginning of the process you would 

21 get in that notice something describing the timing. 

22 The timetables would run from when each document 

23 or whatever the prior filing was received. So 
237

1 hopefully that would be fairly clear to the parties.

2 Although that's something that 

3 certainly could be explained in further detail 

4 during the alternative dispute resolution process.

5 PARTICIPANT: And I agree, I just --

6 I think I get concerned as we -- even though it 

7 will be explained it's like we have 45 days for 

8 this section. We have 30 days for this section. 

9 We have 15 days for this section.

10 I think that can somewhat get confusing 

11 even in current regulation. There are certain time 

12 frames for gainful employment, for example. We've 

13 got X amount of time for this and a totally different 

14 time frame for this. So it can get very, very 

15 confusing even though it is outlined fairly 

16 clearly, the time frames that we have.

17 I just get concerned about just 

18 multiple different time frames. That's all I'm 

19 saying.

20 PARTICIPANT: Okay. So let me see a 

21 show of thumbs for the time frames that are proposed 

22 on this screen which I am reading as 45, 30, 15. 

23 Is that correct? Kelli has a question.
238

1 MS. PERRY: Just one clarifying thing. 

2 So the end with the 15 it says the school must 

3 submit newly discovered evidence or evidence in 

4 response to the borrower's additional relevant 

5 evidence within 15 days.

6 I think we need to say within 15 days 

7 of receipt of that evidence. Because the 

8 department then has to provide that additional 

9 evidence to the school. So if we can just clarify 

10 that it's within receipt.

11 PARTICIPANT: I would suggest that the 

12 thumb check just be on the time frames and not the 

13 specific language. Because there's certainly some 

14 tidying up I think that would need to happen.

15 PARTICIPANT: I was just on the time 

16 frame piece of it. So 45, 30, 15. Show of thumbs. 

17 No thumbs down. Okay. Does that mean that we're 

18 ready to move on to the next section? AnnMarie.

19 MS. WEISMAN: So picking up on page 5 

20 in the middle with number 4 written decision. The 

21 Secretary issues a written decision. We changed 

22 some language in (iii) where we've added -- we said 

23 previously informing the borrower. We've now 
239

1 added and the school of the relief, if any, that 

2 the borrower will receive consistent with paragraph 

3 D(6) of this section.

4 Keep in mind D(6) is over on the next 

5 page on page 6.

6 Also in number 5 reconsideration of 

7 denials. We have replaced some text here now 

8 saying in (i) the borrower or the school may request 

9 reconsideration from the Secretary by submitting 

10 newly discovered evidence within 60 days of the 

11 date of the written decision in paragraph D(4) of 

12 this section which is located earlier in this page.

13 So the comment here was made about 

14 reminding me about the change from school to 

15 institution. We can certainly take a look at that, 

16 but what I would caution you of is that we are in 

17 the direct loan regulations as well as some other 

18 regulations throughout this process.

19 And throughout our regulations we have 

20 somewhat used those terms interchangeably. So 

21 that even if we fix it in these sections and make 

22 it consistent with everything we do here that will 

23 leave some other places where some places it says 
240

1 school, some places it says institution.

2 So we can certainly look at that for 

3 these papers, but know that there will be other 

4 places within the text of the larger regulations 

5 that will not necessarily include that.

6 Picking up on the next page on page 6 

7 we have collapsed some of our phrasing into one. 

8 We previously talked about what the borrower would 

9 do, what happened if the borrower requested 

10 reconsideration, what happened if the school did.

11 We have collapsed that language into 

12 one. And we just say now if -- well, what we have 

13 up above in the renumbered I believe it's 2 if the 

14 Secretary accepts request for reconsideration the 

15 Secretary follows procedures in D(2).

16 We then move down to 3 with newly

17 discovered evidence. The only change there I 

18 believe is to really make it more active voice. 

19 The Secretary did not rely upon in determination 

20 of a borrower defense. 

21 Then looking at relief, number 6, we 

22 added a statement that says in determining the 

23 appropriate amount of relief to be provided by the 
241

1 borrower the factors the Secretary will consider 

2 in a practicable manner include but are not limited 

3 to, and then we begin our list.

4 We begin with (a) which is the value 

5 of the education that the borrower received from 

6 the school, and (b) the borrower's earning 

7 potential. 

8 We then renumbered (ii) and then began 

9 the list again with A, B and C which were existing 

10 items from the last session.

11 I'd like to break it at that point. 

12 So what we're talking about now would then include 

13 items 4, 5 and 6 on pages 5 and 6.

14 PARTICIPANT: Abby. Oh, Juliana.

15 MS. FREDMAN: I had a process 

16 clarification which is we were going to come back 

17 to the first section with minimum thresholds once 

18 you guys figure some stuff out. Okay, that's all.

19 PARTICIPANT: Ashley Reich.

20 MS. REICH: Okay. So my question is 

21 again on another time frame. So now we have a 

22 fourth time frame of evidence within 60 days of 

23 the date. 
242

1 I believe if I'm following correctly 

2 we went back to 45 days. So is there interest from 

3 the group to changing the 60 to 45 to be consistent 

4 with that and not have a fourth time frame?

5 PARTICIPANT: Thoughts on that. So 

6 Ashley Reich has expressed her concern about 

7 multiple time frames so she was wondering and Ashley 

8 you can say it.

9 MS. REICH: On page 5 number 5 the 

10 reconsideration of denials. We now -- this is 

11 basically if I'm understanding correctly this is 

12 almost -- once a denial happens they have another 

13 opportunity, the borrower or the school has another 

14 opportunity. 

15 So now we're saying that they have 60 

16 days to provide newly discovered evidence. But 

17 in the prior section we've updated it to be 45 days.

18 I don't know where the other -- I think 

19 there's only one other reference to 60 days, but 

20 I don't think it relates to that process. Unless 

21 I'm not following. There's a lot of time frames. 

22 I'm trying to make sure I understand where we're 

23 at. That was my original point was we're now having 
243

1 multiple time frames.

2 PARTICIPANT: So is your proposal to 

3 make the 60 and 5 -- 45.

4 MS. REICH: I think to be consistent 

5 based on what we just did, if this is just another 

6 opportunity to submit newly discovered evidence 

7 I think we changed it to 45 from the original. 

8 Is that correct? Or added 45.

9 PARTICIPANT: Wanda.

10 MS. HALL: Can I just make a 

11 suggestion? I'm thinking about the department and 

12 here's all these circles are going around. Can 

13 we just say 45 days and then 30, 30, 30 or something 

14 like that?

15 I mean, I think about when we get a 

16 program review letter we have 30 days to provide 

17 a response from the date of the letter.

18 And there's inconsistency here because 

19 in a lot of these we're saying from the date the 

20 borrower or the school receives it, and then on 

21 this one is days within 60 days of the written 

22 decision which to me is the date that's on the 

23 letter.
244

1 And so it's easier for you to determine 

2 when something is due if it's based upon the date 

3 you sent the date of the letter.

4 And if 45 days isn't that much because 

5 you don't know how long it's going to take to get 

6 in the mail then add 5 more days. I don't know. 

7 It's just to go 60, 45, 30, 15, 45, it 

8 just is crazy in my opinion. 

9 MS. REICH: And I want to be fair to 

10 allow both parties enough time. I don't want to 

11 just shorten it to shorten it. I'm just trying 

12 to be consistent based on some of the other edits 

13 that we've done.

14 But I agree I think we need to find some 

15 consistency there.

16 MS. HALL: And when you get here, 

17 everyone's had how many bites of the apple to try 

18 to provide stuff.

19 PARTICIPANT: So if I'm hearing this 

20 discussion correctly there's two items, two 

21 concerns. The days and consistency in mixing up 

22 how many days, and also the start date, whether 

23 it is the date on the letter or the date of receipt. 
245

1 So I think we should probably approach those 

2 individually.

3 MS. HALL: I would look for 

4 consistency. I'm not the one processing it.

5 PARTICIPANT: I'm happy to speak to 

6 both of those and then I have a separate.

7 Those are all great questions and 

8 observations. I think just offering some thoughts 

9 based on my experience that it is typical that --

10 and I don't know about we have this 45 and then 

11 30.

12 Typically the reason you start to 

13 winnow down those time frames is the idea, and it 

14 sort of gets to the point Abby was making earlier 

15 that folks have already had some opportunity to 

16 provide information.

17 So it's pretty common when you have 

18 briefing schedules and things like that that the 

19 windows will be reduced as time goes by. So I think 

20 that is pretty common and there is a public policy 

21 reason for that.

22 But it's important that briefing 

23 schedules and things be clear.
246

1 I think that in my experience when I 

2 work with schools and they've received program 

3 reviews or things from the department it is from 

4 the date of receipt. And that is precisely to avoid 

5 the issues that arise from delays in mail and things 

6 like that.

7 It may be different but I was just 

8 dealing with this recently. And actually where 

9 this has become ambiguous is because the department 

10 will email you something then also mail it to you. 

11 And then the question becomes what is the date 

12 of receipt. Side note.

13 But that's precisely why it's from the 

14 date of receipt. I agree with consistency. I 

15 would say date of receipt throughout. I think all 

16 those time frames should be.

17 And it's -- the obligation is on the 

18 parties then to be able to substantiate the day 

19 they received thing. So keep your mail or 

20 whatever, get it certified mail or what have you.

21 I agree with the idea of consistency 

22 but I think it's more fair to both borrowers and 

23 students to date it from the date of receipt so 
247

1 that they're not penalized if something went wrong 

2 with the mail.

3 The last question -- but those are all 

4 up for discussion. The last question I have for

5 the department is so under this framework if someone 

6 requests reconsideration within the applicable 

7 time frame what happens next? 

8 I don't see any process here for whether 

9 that information is shared, whether there's a time 

10 frame, if either party requests reconsideration 

11 and provides new information is that provided to 

12 the other party and do they have an opportunity 

13 to respond.

14 There's no separate process and there's 

15 no cross reference to a previous process. It looks 

16 like it just stops. So you submit a request for 

17 reconsideration. 

18 You've got the deferral piece so it says 

19 we follow the procedures in D(2) for forbearance 

20 and suspending collection activity. And then it 

21 says what newly discovered evidence is. But 

22 there's no process after that for the parties.

23 So I think we need that. I think folks 
248

1 need to know if the Secretary grants a request for 

2 reconsideration what happens next.

3 PARTICIPANT: Wanda. Okay. 

4 Joseline. I'm sorry? Okay.

5 PARTICIPANT: Sorry, I thought there 

6 were more cards. So I had a clarifying question 

7 on page 5 big letter A consider other relevant 

8 information obtained by the Secretary.

9 What would happen in the scenario where 

10 years later after the claim was let's say denied 

11 and there's this huge investigation and the 

12 Secretary gets relevant information that could have 

13 possibly given the student relief years prior. 

14 But because again that information was 

15 not found until years later. Would those claims 

16 that had been originally rejected be automatically 

17 reconsidered?

18 And if not could the department archive 

19 these old claims so that they are automatically 

20 reconsidered in a situation like that.

21 MS. WEISMAN: I think we have to take 

22 that back for discussion as well.

23 PARTICIPANT: I had another question. 
249

1 For big B request addition of relevant information 

2 from the borrower or the school since we were 

3 talking about time frames, and this is just for 

4 clarification, when that request is made would the 

5 department give a time frame to the institution 

6 and the student, and if for any reason they cannot 

7 meet that time frame can they request for an 

8 extension?

9 MS. WEISMAN: I'd like to also take 

10 that item back for discussion as well. I think 

11 that we may have the ability to do that. We did 

12 not specifically build that in here. But since 

13 we're taking back other items from this paper I 

14 think that's one worth taking back as well.

15 PARTICIPANT: Thank you.

16 PARTICIPANT: Abby, your tag's up.

17 MS. SHAFROTH: Yes. So I had a similar 

18 concern about newly discovered evidence that may 

19 occur after 60 days.

20 The department clarified previously 

21 that if a borrower doesn't satisfy the minimum 

22 threshold for consideration they'll receive notice 

23 that their claim is denied but that's basically 
250

1 without prejudice to allow them to file again.

2 If a borrower goes through this full 

3 process and they meet the minimum qualification 

4 but the department ultimately denies their claim 

5 and then sometime after 60 days there is newly 

6 discovered evidence such as a state AG makes some 

7 finding that really changes the game and makes clear 

8 that the student would have a valid claim would 

9 they be able to file a subsequent claim or somehow 

10 have another opportunity to get relief after that 

11 60-day reconsideration period has expired?

12 MS. WEISMAN: Because it's not 

13 something we specifically listed here again I'm 

14 going to need to take that back for discussion. 

15 I think it closely aligns with Joseline's question 

16 and I think that that's part of one discussion that 

17 I'd like to have.

18 PARTICIPANT: Okay. With that can we 

19 take a look through arabic 4 on page 5 through up 

20 to but not including arabic 7 on page 6. Any 

21 additional comments before we move on?

22 PARTICIPANT: Aaron. And then --

23 they're still thinking so go ahead, Aaron.
251

1 MR. LACEY: We're on 6, that's right? 

2 Can I speak to 6?

3 PARTICIPANT: Yes.

4 MR. LACEY: I just have very serious 

5 concerns about 6(a). One of the concerns I 

6 expressed at the outset of this whole process and 

7 one of the reasons I argued for a single process 

8 in front of an ALJ is I think it's dangerous to 

9 expose this process to political winds with all 

10 due respect to the department and its staff.

11 Things can change dramatically from one 

12 administration to the next and the views as we have 

13 seen. And one administration to the next can have 

14 very different views regarding the value of 

15 different kinds of education.

16 And I'm not just talking about 

17 for-profit or non-profit. I mean, you can talk 

18 about liberal arts, you can talk about technical 

19 STEM, lots of different ways higher education can 

20 be cut. It's extremely diverse.

21 And I have real concerns about somehow 

22 trying to -- having a staffer at the department, 

23 I'm not talking about an administrative law judge, 
252

1 I'm talking about just a staffer at the department 

2 making some sort of determination regarding the 

3 value of the education that an institution has 

4 offered.

5 Historically the department has not 

6 gotten into the business of valuing education. 

7 That's something that the accreditors do. I think 

8 there's argument even that there are statutory 

9 provisions that potentially limit the department 

10 from getting into the area of making value 

11 determinations on curriculum and the quality of 

12 academic offerings, et cetera.

13 I just think that should be struck. 

14 I think it's highly problematic for all parties. 

15 I just think it's very problematic. So I would 

16 recommend that that be struck.

17 PARTICIPANT: So you're talking about 

18 6(a) the value of the education the borrower 

19 received from the school should be struck.

20 MR. LACEY: Yes. And look, we've 

21 still got a lead-in that says this is not an 

22 exhaustive list. So there's still discretion on 

23 the part of the Secretary and I get that that still 
253

1 leaves a lot to political whim.

2 But it makes me very uncomfortable 

3 specifying that the value of the education provided 

4 is something that the U.S. Department of Education 

5 and specifically the staff member evaluating this 

6 claim is -- I mean this is signaling to that person, 

7 whoever that may be, you get to make a call on the 

8 value of this education.

9 I think it could also be highly 

10 inconsistent from one staff member to the next even 

11 in the same administration. I just don't think 

12 it's, with respect, the business of the Department 

13 of Education to make a call on the value of different 

14 kinds of education. My opinion but I think that's 

15 highly problematic and I would strike it.

16 Understanding that the Secretary still 

17 has discretion to try to come up with some sort 

18 of relief.

19 PARTICIPANT: Thank you. Any other 

20 thoughts on this section? Abby.

21 MS. SHAFROTH: So coming at it also 

22 from the other perspective, the perspective of 

23 borrowers we're also concerned about -- not 
254

1 specifically about (a) as opposed to (b) but just 

2 about providing the Secretary with really expansive 

3 discretion to decide to give the borrower only 

4 partial relief and decide how much relief to give 

5 the borrower.

6 It seems to me that if the borrower has 

7 demonstrated that the evidence supports that the 

8 school engaged in misrepresentation of material 

9 facts that the borrower reasonably relied upon to 

10 their financial harm that that should be enough 

11 for the borrower to get relief, to get full relief, 

12 and not to get some maybe relief, maybe relief left 

13 to the discretion of the department.

14 I'm also concerned that this doesn't 

15 make clear what relief the borrower would be 

16 entitled to if they had a meritorious defense.

17 My suggestion has been that the 

18 borrower would get full relief. A compromise 

19 position would be a presumption of full relief and 

20 the department would have to state clearly a basis 

21 for why full relief isn't appropriate in a given 

22 circumstance. 

23 But the presumption should be I think 
255

1 full relief.

2 PARTICIPANT: AnnMarie.

3 MS. WEISMAN: So I believe I stated in 

4 the last session and I will restate again the 

5 department comes from the position that we do not 

6 presume full relief and have not at any time.

7 So I think we're pretty committed to 

8 the idea that partial relief will exist. Right 

9 now we have outlined here in (a) and (b) two items. 

10 It is a list that says included but not limited 

11 to, but we only have two. So if we don't like one 

12 of them.

13 And you're already aware that we are 

14 pretty committed to going in with partial relief. 

15 It would behoove you to make some suggestions on 

16 something that you do like. Otherwise we will.

17 PARTICIPANT: John, do you have a 

18 suggestion? Okay, John.

19 PARTICIPANT: Just out of sheer need 

20 to understand was the department's intention in 

21 that language to allow a calculation to offset for 

22 instance the damages based on the idea that some 

23 benefit's been conferred on the department --
256

1 MS. WEISMAN: Yes.

2 PARTICIPANT: -- consistent with what 

3 would normally happen in damages law?

4 MS. WEISMAN: Yes, that is correct. 

5 PARTICIPANT: Other suggestions. 

6 Walter.

7 MR. OCHINKO: This isn't so much a 

8 suggestion as a comment on Aaron's suggestion that 

9 we strike (a).

10 There's considerable research about a 

11 graduate's ability to get a job and to actually 

12 get a job interview. 

13 A lot of that research suggests that 

14 if you had attended a for-profit school, especially 

15 one of the large publicly traded for-profit schools 

16 that individuals often don't get a callback.

17 I've heard from numerous veterans that 

18 they attended a school. They applied for multiple 

19 jobs. This is particularly true with ITT and 

20 Corinthian. And they occasionally will hear from 

21 an employer oh, we never hire graduates from that 

22 school. They're just not prepared.

23 So I think this is a relevant data point 
257

1 and one in which there is information available. 

2 And I think that it would be an opportunity for 

3 a student to supply that kind of information to 

4 the department.

5 PARTICIPANT: Valerie.

6 MS. SHARP: I have a question, Walter. 

7 The value of the education is kind of really broad. 

8 Is there some other language that would be more 

9 specific to the outcomes, the employability, 

10 whatever -- what terms that the students are looking 

11 for that would set.

12 You know, value can be very subjective. 

13 But there are very specific outcomes for graduates 

14 that are more specific that are not as subjective 

15 that are very -- you can't find employment. 

16 So is there another -- is there 

17 different terminology that could replace this that 

18 isn't as ambiguous as just the general value 

19 subjective call that's very specific as to the 

20 outcomes from that education that created the value 

21 or not that you could propose.

22 I'm just sitting here in my mind trying 

23 to think is there a different way to say that that's 
258

1 not so ambiguous. I haven't come up with a great 

2 suggestion yet. But that's a valid point. There 

3 has to be something that we could think of that 

4 could be an option to replace it that's not.

5 MR. OCHINKO: One option would be to 

6 leave the value of the education and then to provide 

7 some examples, example, including ability to get 

8 callbacks for job applications. I'm not sure if 

9 there are others.

10 I hear your point value of the education 

11 is pretty broad, but when I read this one of the 

12 things that popped into my mind is that well, we've 

13 certainly heard from a lot of veterans that have 

14 attended publicly traded for-profit schools that 

15 the employers do not value their education.

16 And it's not uncommon. If you go to 

17 some of these schools' websites you'll see that 

18 they have employer endorsements. We hire 

19 graduates from this program because we really think 

20 they have a great education. 

21 It's easy for a school to say that, but 

22 I think the reality may be different when someone 

23 actually tries to use that degree to apply for a 
259

1 job.

2 PARTICIPANT: So returning to 

3 AnnMarie's suggestion of coming up with ideas and 

4 I guess Valerie's question about other ways to maybe 

5 reframe the ideas we have. Kelli, then Ashley.

6 MS. PERRY: This isn't going to address 

7 the whole thing but maybe the value of the credits 

8 transferred to another institution for the same 

9 program, or the value of those credits that another 

10 institution would not accept. Because I think that 

11 kind of -- if somebody is earning credits at a school 

12 and there's not another school that's willing to 

13 accept those credits and the student can show that 

14 then that's something that potentially would be 

15 considered.

16 PARTICIPANT: The problem there is 

17 going back to the comment Michale made earlier, 

18 McComis. There are lots of credits at lots of 

19 schools for non-nefarious reasons to use his I think 

20 was the term that aren't transferable. They're 

21 not designed to be transferable.

22 And so you don't want to penalize an 

23 institution that has credits that aren't 
260

1 transferable and may have disclosed look, you know, 

2 you come get a welding credit at our school it's 

3 not going to be accepted for transfer at most places 

4 or what have you.

5 I just think it's problematic. It's 

6 one thing if you're deceiving people about the 

7 transferability of credits. That's not what I'm 

8 talking about.

9 But penalizing a school because it 

10 offers programming that is not easily transferable 

11 or designed to be transferable. You understand 

12 the dilemma.

13 MS. PERRY: I do, but those weren't the 

14 credits I was talking about. That's what I meant 

15 this is not all-inclusive, this comment. This is 

16 one piece of maybe addressing this. And the fact 

17 that there are certain credits that would transfer 

18 to the same program at a different school 

19 potentially.

20 PARTICIPANT: Am I actually in order 

21 next? Well, I was actually going to offer 

22 something along those lines.

23 The first thing I want to point out is 
261

1 again these are just illustrative. These are 

2 points that the Secretary can take into 

3 consideration. They are not dispositive in any 

4 way. The Secretary doesn't have to consider them, 

5 et cetera.

6 But my concern is, and actually the idea 

7 of employers assigning very different value to 

8 different schools' credits I think illustrates my 

9 concern and discomfort with value of the education 

10 received.

11 You're right, different employers may 

12 view credits from -- I mean in Louisiana credits 

13 from the University of Alabama are not looked at 

14 the same way as credits from Louisiana State 

15 University. I'm a little silly.

16 But the point is different employers, 

17 different states for lots of different reasons, 

18 I think that's problematic. And now you've got 

19 someone at the department.

20 What I was going to suggest was the 

21 economic value of the credits conferred on the 

22 borrower by the school.

23 Now, this is a data point so again I 
262

1 want to emphasize because I understand I'm not 

2 suggesting that that is the way that the damage 

3 should be calculated. 

4 I'm only suggesting that if we're going 

5 to use a criteria it should be one that is somehow 

6 tied to an economic amount.

7 My feeling is if credits were conferred 

8 then there's economic value that can be quantified. 

9 I mean you know exactly what that is or you should.

10 And so that should be the data point. 

11 The Secretary may determine that that is not a 

12 valuable data point, but it at least is a 

13 quantifiable data point as opposed to the value 

14 of the education which I think is vague.

15 And I just worry about the 

16 transferability piece. So rather than linking it 

17 to transferability I would just say look, this is 

18 a commercial exchange at some level. What was the 

19 value of the product received. 

20 And the Secretary can still say I'm not 

21 going to take that into consideration because I 

22 have evidence that this particular product isn't 

23 worth much, or whatever.
263

1 But if we're going to give some sort 

2 of means of trying to quantify things I would do 

3 it with something that's quantifiable.

4 PARTICIPANT: AnnMarie.

5 MS. WEISMAN: Can I just hear a little 

6 more about then how you would quantify that? How 

7 do you determine -- you're saying you feel that 

8 it is something you can quantify. How would you 

9 quality the idea of market value?

10 PARTICIPANT: I'd look at the 

11 commercial exchange. If a student paid $80,000 

12 for 32 credits and graduated and got all 32 credits 

13 then they received -- you talk about the value of 

14 the credits conferred.

15 Because the loan has been acquired to 

16 finance that acquisition of that product. So I 

17 think that when you're trying to quantify what the 

18 student got it's a commercial exchange.

19 You're saying well how much of the 

20 product did the student receive.

21 People can argue whether or not they 

22 think those credits and that education was actually 

23 -- the Secretary could elect not to take that into 
264

1 account. But my point is the value of education 

2 is a nebulous concept. That could be anything. 

3 Someone could just say it's zero. At least here 

4 you have some sort of economic amount that you're 

5 talking about.

6 So the student graduated completely. 

7 It was $80,000 to graduate from the school. All 

8 32 credits were conferred on the student and that 

9 by their agreement is an $80,000 product that they 

10 received. Take that into consideration.

11 But again I'm happy to cut that 

12 altogether and just leave it to the Secretary's 

13 discretion.

14 What I'm not comfortable with is 

15 signaling that the Secretary can just value of 

16 education is just something you're pulling out of 

17 thin air. I mean it's not tied to any kind of 

18 economic concept at all. And that's problematic 

19 for me.

20 I'm happy for that not to be accepted, 

21 but I'm just trying to offer -- the request was 

22 made for ways you can quantify. This is a 

23 commercial exchange. You've got a product, you've 
265

1 got an amount paid and you've got an amount that 

2 financed it.

3 PARTICIPANT: Ashley Reich.

4 MS. REICH: Okay. I have a possible 

5 suggestion. I hate to go back to issue paper one. 

6 However.

7 So we've got a listing here on page 6 

8 in issue paper two, we've got the value of education 

9 and the borrower's earning potential. And I know 

10 this is not -- it's including but not limited to.

11 But on page 5 of issue paper one we talk 

12 about financial harm that's been given to the 

13 borrower and we list a lot of what's being 

14 discussed.

15 We've got Walter talking about securing 

16 employment, we've got people talking about 

17 borrower's earnings, there's a calculation already 

18 provided there that would somehow provide some 

19 clarity maybe on the education provided to the 

20 borrower.

21 My question is I feel like in this issue 

22 paper two we've now added another layer that the 

23 department is considering that's not addressed in 
266

1 the financial harm category.

2 So my suggestion is could we just not 

3 reference the fact that in determining the 

4 appropriate amount of relief to be provided some 

5 sort of financial harm had to come to the borrower 

6 which we've listed there.

7 I don't know if I'm just mixing the 

8 issues or if that would help. I'm just confused 

9 as to why we're adding another layer here and then 

10 we somehow allude to the fact that we're talking 

11 about the borrower's earning potential but not some 

12 of the other items that we've already talked about.

13 I don't know if that's clear or not.

14 PARTICIPANT: So your suggestion is to 

15 at least reference back or take the elements from 

16 issue paper one that we outlined or will potentially 

17 outline for financial harm and use those as a 

18 replacement for (a) and (b)?

19 MS. REICH: Yes, I think so. If I'm 

20 understanding the way this is supposed to work. 

21 I just don't -- we just don't reference the value 

22 of education in the financial harm necessarily when 

23 we talk about when something has happened to the 
267

1 borrower.

2 And so I don't know -- this is almost 

3 like adding another item to that.

4 MS. WEISMAN: So I think this is meant 

5 to almost be the flip of it, the reverse of it. 

6 So you had the financial harm over in the standards 

7 piece and now this is kind of what's left. Is there 

8 a difference between what you paid, what you spent 

9 on your loan, take out the financial harm, is there 

10 a piece that's left over and that's the piece that 

11 we would say you're not getting relief for.

12 MS. REICH: Then why are we addressing 

13 earnings potential again? Because I feel like 

14 that's already addressed in the financial harm 

15 category.

16 If that's the goal I feel like we're 

17 being redundant because that piece -- that wouldn't 

18 be what's left. We've already talked about that. 

19 Does that make sense? 

20 So I think that's what I'm trying to 

21 get at is I feel like it's just two random pieces 

22 and one's addressed but another one's not. 

23 So I was trying to get at a list of items. 
268

1 I don't know if we can. Those just seem strange 

2 to me.

3 PARTICIPANT: Will.

4 MR. HUBBARD: Thank you. I like the 

5 fact that Aaron is trying to go for the economic 

6 piece. I think that makes sense. Quantify it I 

7 think makes sense.

8 I would go perhaps in consideration for 

9 maybe saying return on investment as being a little 

10 bit more specific than just economic value is kind 

11 of broad.

12 Return on investment I think there's 

13 some potential to demonstrate a clear and accepted 

14 algorithm that I think that Aaron was kind of 

15 alluding to.

16 I have a challenge in the fact that 

17 saying economic value per the degree or the credits 

18 were granted that inherently establishes some value 

19 of those credits.

20 I'm not saying any of these schools are 

21 not valued, but in our economy of the four or five 

22 thousand universities and colleges out there there 

23 are some that are just not valued, period.
269

1 And so I think to ascribe the fact that 

2 money was spent on a thing inherently makes it worth 

3 something is not true. I could offer up $10 million 

4 for my water bottle. Doesn't mean it's worth $10 

5 million.

6 And so I think there's some potential 

7 concern with that.

8 If we were to go with a return on 

9 investment type approach it might say something 

10 like return on investment of a related program 

11 including the default rate, initial earnings, or 

12 potential employability. There's probably a 

13 little bit more needed to refine that, but that 

14 might be at least a start to that.

15 And I think Ashley's point about 

16 including some of the other items that are listed 

17 out initially, financial harm, et cetera. I think 

18 there's value in that as well to bring that into 

19 the category as well.

20 PARTICIPANT: Jay.

21 MS. O'CONNELL: So this isn't an area 

22 of expertise for me but just wondering if there 

23 are metrics, a college score card, graduation 
270

1 rates, continuation rates. There's a lot of data 

2 out there and could you derive a return on 

3 investment. 

4 Some mathematical calculation looking 

5 at kind of the key metrics for a school. And I 

6 would not be the person to do that for you, but 

7 perhaps.

8 We have a lot of information about our 

9 schools that we could rely on.

10 PARTICIPANT: Ashley Harrington. 

11 Suzanne.

12 MS. MARTINDALE: I think my brain made 

13 the same journey that Ashley's did while Aaron was 

14 talking.

15 A little bit confusing because the 

16 borrower has to demonstrate financial harm. We 

17 already had that discussion about how that's 

18 established. 

19 And then now we're adding in 

20 determining the amount of relief that there would 

21 be potentially an evaluation of the value of an 

22 education.

23 And with all due respect to folks who 
271

1 are in good faith trying to suggest language and 

2 metrics that are quantifiable I've never heard a 

3 student talk about getting an education as a product 

4 for purchase, they're seeking return on their 

5 investment.

6 I think people are seeking to get an 

7 education to better their lives and they're going 

8 into debt to do it. And as has been previously 

9 pointed out going into debt, spending time at a 

10 school, there are costs already involved in that. 

11 There's already a built-in financial 

12 harm for a student who is now seeking relief.

13 And also I'll add that part of why I 

14 find this confusing as well is the language that 

15 excludes discussions around the quality of 

16 education. So quality of education versus the 

17 value of an education. 

18 This section just feels really 

19 problematic and unnecessary to me.

20 PARTICIPANT: Michale.

21 MR. MCCOMIS: So to Ashley's point 

22 issue paper one uses the phrase with regard to 

23 financial harm as demonstrated by evidence before 
272

1 the Secretary. I don't remember if we kept that 

2 in there or not, but that's what was in the issue 

3 paper.

4 And so I'm wondering if as a solution 

5 or maybe a way to make it a little more simple is 

6 to just don't recreate that list, just reference 

7 that.

8 So in determining the appropriate 

9 amount of relief to be provided to the borrower 

10 the factors the Secretary will consider -- or take 

11 out the factors. The Secretary will consider the 

12 financial harm demonstrated in the borrower defense 

13 claim.

14 PARTICIPANT: Alyssa.

15 MS. DOBSON: I just think it may be 

16 problematic to tie things such as a cohort default 

17 rate or retention rate to an individual's amount 

18 of loan forgiveness.

19 These are very large aggregate figures 

20 that represent an entire institution whereas an 

21 individual's claim is probably only going to be 

22 for one, maybe two programs that can look very 

23 different.
273

1 And additionally those measurements 

2 can sometimes reflect the virtue of the student 

3 that the institution is serving and not necessarily 

4 reflect the quality of the institution as a whole. 

5

6 So I would have concerns using those 

7 measures to evaluate individual quality. 

8 PARTICIPANT: Can we go back up to 

9 Michale's comment there? I think the word 

10 determine, the second determine should be consider. 

11 The end of that first line. Michale, can you 

12 confirm that?

13 MR. MCCOMIS: Yes, I think that's 

14 right. 

15 PARTICIPANT: Can we have some 

16 thoughts from the group on the Michale/Ashley sort 

17 of combination.

18 PARTICIPANT: That is exactly what I 

19 was hoping that we would do is that we would 

20 reference that. So thank you for wordsmithing that 

21 better than I could.

22 PARTICIPANT: Kelli.

23 MS. PERRY: I agree with Michale's 
274

1 comment. If you think about this in general a 

2 student who is trying to get relief for something, 

3 they either have credits that they're going to use 

4 someplace else, or they have credits that are 

5 worthless, or they have a job because that's the 

6 outcome that they're looking for. And it's either 

7 a job that is comparable to what they should be 

8 earning from credits with another institution or 

9 it's a job that's not.

10 So I'm not sure that either one of those 

11 -- with the exception of the credits that are 

12 actually transferred to another institution and 

13 are used in the same program of study the rest of 

14 that is not really quantifiable very easily.

15 So I support what Michale just said.

16 PARTICIPANT: So just a facilitator 

17 check-in. Is this conversation kind of centering 

18 on, and correct me if I'm wrong, eliminating the 

19 other options and just keeping the reference back 

20 to financial harm?

21 Okay, could we just make maybe a quick 

22 strikethrough. The department is going to confer. 

23 And think if you have concerns with that, comments 
275

1 you need to make while they're conferring.

2 PARTICIPANT: Aaron.

3 MR. LACEY: What I would suggest is in 

4 determining the appropriate amount of relief to 

5 provide to the borrower I would just say the 

6 Secretary will consider the amount of financial 

7 harm demonstrated in the borrower defense claim. 

8 So I would cut out factors and just say that's 

9 what will be considered. 

10 PARTICIPANT: AnnMarie.

11 MS. WEISMAN: So I know we're getting 

12 tight on time, but I think the point that I was 

13 trying to make earlier is that while I think that's 

14 helpful and I appreciate the work that people are 

15 doing to come up with other ideas we need to have 

16 something that somewhat reflects the flip side.

17 As I mentioned we're here to consider 

18 the interest of the taxpayers in addition to the 

19 borrowers and the institutions and so we have to 

20 have some way of coming up with if we were to use 

21 partial relief what would that look like.

22 And so if you have something on this 

23 side that you say gave you harm what I'm trying 
276

1 to find is a way to quantify that piece of what 

2 I'll call the leftover. 

3 If there is some benefit received we're 

4 trying to place a value on that. And I'm not sure 

5 that the way this is phrased right now gets us to 

6 exactly where we need to be.

7 PARTICIPANT: Michale.

8 PARTICIPANT: Can I just ask a question 

9 to the department? So this is -- we're referencing 

10 back and we're saying this is -- maybe it was taken 

11 out, included but not limited to.

12 I guess I'm confused as to what is left 

13 over. Like what would you be looking for that would 

14 be left over.

15 MS. WEISMAN: So we'll look at (a) as 

16 an example which I realize people weren't in favor 

17 of. But the value of the education that the 

18 borrower received from the school.

19 So the borrower gets a degree, or a 

20 diploma, or a certificate. They get some 

21 credential. For whatever reason we've determined 

22 that they are going to get a partial borrower 

23 defense claim and they will get partial relief.
277

1 So if we're going to go with the concept 

2 of partial relief how do you determine what the 

3 portion is. What factors are you going to look 

4 at to make that determination.

5 And yes, while we're going to look at 

6 the same ones as harm are there any other factors 

7 that we might use to say how do you put a value 

8 on the good part.

9 PARTICIPANT: Michale.

10 MR. MCCOMIS: Subtract the bad part. 

11 I don't know how -- you just have to look at kind 

12 of the inverse and try to come up with an algorithm 

13 or some kind of calculus that says okay, to your 

14 example in (a).

15 There's a significant difference 

16 between my actual earnings after completing the 

17 program and what they told me. And so you can 

18 quantify that and you can figure out what the 

19 difference is between those two things and 

20 extrapolate that to not only the harm but also the 

21 benefit that they received.

22 I believe when Under Secretary Manning 

23 was here I think he talked about that as being part 
278

1 -- I'm not suggesting whether that was right or 

2 wrong, I'm just suggesting that he seemed to 

3 describe that calculus that was being used in that 

4 particular way in the current BD claims that the 

5 department was processing.

6 And so it seems to me that that kind 

7 of calculus has already at least been discussed 

8 within the department and maybe used in some way.

9 MS. WEISMAN: It has. As I mentioned 

10 after Mr. Manning spoke though we had information 

11 on those claims that we wouldn't necessarily have 

12 available to us at all times.

13 So I think we were looking at other 

14 ideas of going forward as people from a budgetary 

15 standpoint look at this and try to score, for 

16 example, how much the regulation will cost. 

17 They're going to want details of how 

18 will you calculate this. And to just say the 

19 absence of those factors, my concern is they're 

20 going to come back and say well, that's not enough, 

21 we need more because we aren't always going to have 

22 that same information available to us.

23 So I was trying to get at if there are 
279

1 any other pieces of information that people could 

2 think of that we might have that we could include 

3 them in this list. Again knowing it's not an 

4 exhaustive list that we may not have everything 

5 at every time, but that if we had items we could 

6 add that we wanted to get them on the list.

7 PARTICIPANT: Caroline. But before 

8 Caroline speaks I do want to say that it is 4:40 

9 and we need to stop at 4:50 for public comment.

10 MS. HONG: I think I just want to 

11 piggyback off what AnnMarie and what Michale was 

12 just saying regarding what Acting Under Secretary 

13 Manning was saying.

14 The concept in here about the value of 

15 education, I think we're concerned that the 

16 language that's being proposed is going away from 

17 the idea that the -- going away from the 

18 department's current approach which we're trying 

19 to make more concrete and also just solicit more 

20 information and suggestions from people here.

21 If there's something that's more 

22 preferable. It's to think that yes, there is 

23 financial harm, but there's possible that there's 
280

1 a benefit that was also received and whether or 

2 not that offsets the amount of relief that needs 

3 to be going to the borrower for the financial harm 

4 that they received because they did get a benefit.

5 And so I think obviously we struggled. 

6 This is a two-item list so obviously we struggled 

7 with how to get at benefit. 

8 And the parts that Under Secretary 

9 Manning mentioned was about earnings. We have that 

10 here. So if you guys have better ideas that would 

11 be great. Thanks.

12 PARTICIPANT: Kelli, did you have a 

13 question?

14 MS. PERRY: Just with the two that 

15 you've listed how did you think you were going to 

16 interpret them, or how were you going to actually 

17 evaluate the ones that you have listed here?

18 PARTICIPANT: Valerie.

19 MS. SHARP: So I kind of when I put my 

20 card up was thinking along the same lines as Michale 

21 because you are going to be using the financial 

22 harm to determine what the inverse side is of what 

23 they might have gained. So that will be a part 
281

1 of your consideration.

2 So I don't know if we add, and I can't 

3 think of good language for it off the top of my 

4 head, but if you say you're going to consider the 

5 amount of financial harm demonstrated versus any 

6 benefit the borrower received from the education. 

7 I don't know what the right word is or 

8 how to put that in there, but you are going to be 

9 basing it on the financial harm to the borrower, 

10 but then you're also looking at did they gain 

11 anything from the education. Was there any 

12 benefit.

13 I know that Will used the wording return 

14 on investment and that's probably not also the best 

15 wording in this context, but that's really what 

16 you're trying to gain from your decision. 

17 So is there wording that we could add 

18 that's different, better than benefit, better than 

19 return on investment that shows that difference 

20 that you're looking for but is not like this list. 

21 It still gives you that ability to make that

22 calculation that you need to make.

23 I don't know if any of the other 
282

1 committee members have a suggested word or words 

2 that might better fulfill that to satisfy your 

3 concerns about the language that's been proposed.

4 PARTICIPANT: Caroline. Joseline.

5 MS. GARCIA: Thank you. So I just have 

6 a quick comment. I wanted to echo something that 

7 Abby mentioned earlier in regards to partial versus 

8 full relief.

9 And throughout this conversation I've 

10 been hearing us talk about the value of education 

11 and how to determine how much relief is given to 

12 a student.

13 And I think it's important that I just 

14 emphasize that partial relief is not enough to give 

15 students the resources and give them a place in 

16 society where they can get themselves back on their 

17 feet.

18 So I heard what the department had to 

19 say, but again I really want to echo full relief 

20 is what I'm in favor of and I think we need to 

21 continue pushing for that.

22 I'll read something that a student sent 

23 me so you all can think of the position that students 
283

1 find themselves in. So I quote.

2 "Do me a favor and let me know how your 

3 health fares by hanging a bowling ball a few feet 

4 above your head and know that if you ever miss a 

5 payment that thing will stave in your skull. 

6 That's what it feels like every hour of every day 

7 of every year for the past 10 years."

8 Like can you imagine what it feels to 

9 live like that? It's horrendous. So again, I 

10 don't think partial relief is enough and I'm going 

11 to keep pushing for full relief throughout this 

12 process and even after.

13 PARTICIPANT: So final comments from 

14 Will and Michale and then we're going to -- how 

15 many do we have for public comment at this time? 

16 Can I see a show of hands for public comment? 

17 Okay. So we have Michale, Will, Ashley, Abby and 

18 then Walter. So you all have less than a minute 

19 each. So, Michale.

20 MR. MCCOMIS: I get what the difficulty 

21 is. Trying to as you say come at it from an angle 

22 of full relief not in every single case. In some 

23 cases full relief will be an easy determinant to 
284

1 make. In other cases not so much.

2 So I don't know if this is in any way 

3 helpful, probably not because it's really just more 

4 words, but it would be the Secretary -- and let 

5 me just say up front I'm good with that by itself. 

6 But you're asking for more.

7 The financial harm less any benefit 

8 received. Caroline asked for the inverse in 

9 looking at that language. That's the best I can 

10 come up with in terms of -- if you're looking to 

11 say here the presumption is not full relief in all 

12 cases then you're going to take out the benefit. 

13 That's what you're going to consider and that's 

14 really what you're talking about.

15 PARTICIPANT: Will.

16 MR. HUBBARD: I feel compelled to also 

17 just highlight that on January 4 the military 

18 connected negotiator submitted a data request. 

19 Obviously noting the department shared early as 

20 we started this session that no additional data 

21 was available.

22 But I think certainly in the context 

23 of the discussions regarding partial relief it 
285

1 would be particularly pertinent to have some of 

2 these data points at our disposal.

3 So in the absence of these data points 

4 obviously we're having this discussion nonetheless 

5 but just want to reemphasize that having that data 

6 available as soon as possible would be tremendously 

7 appreciated.

8 PARTICIPANT: Ashley Harrington.

9 MS. HARRINGTON: I just want to say it 

10 seems -- I understand the department's position 

11 is that they want a process for partial relief. 

12 But you have a whole bunch of smart people at this 

13 table who can't tell you how to quantify partial 

14 relief in a way that makes sense. 

15 So that seems like it leads you to think 

16 that you should have presumptive relief.

17 And if part of the process is also to 

18 deter bad actors, if they know that only certain 

19 relief will be gained if the misrepresentation is 

20 so egregious and the program is that bad or 

21 something this serious has happened then the person 

22 can still get partial relief how does that deter 

23 bad actors.
286

1 How does that protect students. How 

2 does that protect taxpayers because that means the 

3 schools will continue to function and we'll 

4 continue like we are.

5 It just seems impractical. And you 

6 can't even tell us right now how you would have 

7 done it with the two things that you had in the 

8 list.

9 PARTICIPANT: Abby.

10 MS. SHAFROTH: I share Ashley's 

11 concern. I also wanted to comment that I don't 

12 think the math would necessarily be financial harm 

13 less any benefit received because I think the 

14 financial harm already takes into account within

15 the concept of financial harm is -- the benefit 

16 received is already considered. So I think we're 

17 sort of double counting any benefit if we structured 

18 the equation that way.

19 There was also, I wanted to reference 

20 this Brookings Institute study report came out just 

21 yesterday saying that on average for-profit 

22 certificate students do not generate enough 

23 earnings gains to offset the debt they incur.
287

1 So that suggests that -- that's another 

2 reason that I would think it's appropriate to have 

3 a presumption of full relief and to have -- require 

4 there to be some reasons for giving less than full 

5 relief.

6 Because we see in so many of these cases 

7 in the types of programs that have been the subject 

8 of borrower defense claims that they're not 

9 generating any value for their students.

10 Economists have looked at that and 

11 determined that.

12 And then I just wanted to put a quick 

13 flag that I assume we're going to have to move on 

14 to issue paper three at some point but we haven't 

15 today I don't think discussed the availability of 

16 some group discharge process which is something 

17 I've raised in the past two sessions and that 

18 remains an issue of significant importance to the 

19 constituency that I represent.

20 PARTICIPANT: Okay. So at this time 

21 it is now 4:51. We're going to open the floor up 

22 to public comment. So public comment. Joseline.

23 MS. GARCIA: Thank you. So I'm going 
288

1 to read a statement from a student that was sent 

2 over to me. 

3 My name is Jonna and I've been waiting 

4 for my defense to repayment to be processed for 

5 over two years now. 

6 Also I'd appreciate if all the 

7 negotiators pay attention.

8 I enrolled into the Art Institute of 

9 California San Francisco with the promise of a 

10 better future fueled by the lies and promises of 

11 the recruiters of the college.

12 They lied about job placement rates. 

13 They lied about the quality of the education that 

14 provided. They didn't even review portfolios 

15 before allowing students to enroll and attend which 

16 is absolutely horrible for an art college.

17 And they lied about being able to 

18 prepare students for the industry to which they 

19 supposedly had expertise in.

20 Essentially I graduated with a mountain 

21 of debt, no job prospects, no job skills that 

22 related to the industry that I had hoped to enter, 

23 and no idea about the reality of the actual industry 
289

1 in which I was supposed to have been trained to 

2 enter.

3 I got a worthless piece of paper. The 

4 Art Institute of California San Francisco did

5 everything in their power to get me enrolled into 

6 the school, having me signed up the very day I went 

7 in for a portfolio review.

8 They pressured my mother and me to 

9 enroll as I was already a very dedicated individual. 

10 By that time I had attended the California State 

11 summer school for the arts two years in a row and 

12 I had taken college classes while in high school 

13 and taken AP classes while in high school.

14 They told me I was a perfect candidate 

15 for their program and had my mother cosign my 

16 promissory notes as at the time I was too young 

17 to have a credit history. I was fresh out of high 

18 school. 

19 The recruiters used high pressure sales 

20 tactics on myself and my mother, saying that I'd 

21 easily be able to pay off my loans with five or 

22 so years that I'd be making a great amount of money 

23 directly out of college.
290

1 Looking back now I realize that alarm 

2 bells should have been ringing in my skull as the 

3 Art Institute basically took anyone and everyone 

4 off the streets they could find regardless of talent 

5 or skill.

6 I know now that the Art Institute's 

7 primary income comes from loans made with the 

8 federal government and that their primary spending 

9 is not on the student and improving the quality 

10 of education but on enrollment and advertising to 

11 lure hopeful art students into a lifetime of debt 

12 or the CEOs taking large sums of money for 

13 themselves as bonuses.

14 This has shown in attachment titled 

15 education management corporation which was an 

16 investigation done by the United States Senate 

17 committee.

18 What bothers me is that the school 

19 claims to prepare you for the industry and that 

20 is what I find to be the biggest lie.

21 The courses offered by the Art 

22 Institute of California San Francisco don't prepare 

23 you for that. It's too short and too costly.
291

1 The industry can't sustain having 

2 students churned out by Expressions Art College, 

3 the Academy of Art University, California College 

4 of the Arts and the Art Institute of California 

5 San Francisco all within less than a 20 mile radius 

6 from each other.

7 Only one student out of every hundred 

8 that graduate are going to have enough skill to 

9 get into the industry if that. Jobs are cyclical 

10 in our industry. It's based on the needs of the 

11 project.

12 Think about how many students right now 

13 are graduating without any prospects. 

14 And the reason I know this is because 

15 I'm the one that would be hiring them. Part of 

16 my job as art manager is to review the portfolios 

17 of these students for current openings at our art 

18 studio and their prospects are bleak not only 

19 because they weren't trained properly but because 

20 industry jobs are scarce.

21 When there are jobs they are filled by 

22 those who are either already professionals with 

23 many years of experience, or they are filled by 
292

1 someone with true talent. 

2 It honestly doesn't matter if they have 

3 a bachelor's degree or not.

4 I remember having to wait in the 

5 stairwell of the school to get the classes I needed 

6 for the next quarter during registration. I got 

7 up around 5:30 a.m. so I get into the city and wait

8 in line. If I had not done that I ran a serious 

9 risk of not getting the classes I needed and that 

10 was dangerous as some class prereq would only be 

11 taught every six months or so.

12 If I couldn't get the class I needed 

13 I'd have been forced to drop school for half a year 

14 because I'd been blocked. Luckily it never 

15 happened to me but it did happen to students.

16 The department head struggled to get 

17 students the classes they needed in the right order 

18 and sometimes they'd bump students ahead and it 

19 created all sorts of problems, the root being that 

20 the classes weren't offered every quarter and some 

21 only offered one or two times a year supposedly 

22 because they didn't have either the faculty or 

23 enough students to reach a critical threshold to 
293

1 run the class.

2 I understand all is a business, but if 

3 that's the case then they're going to be held 

4 accountable for their actions like every other 

5 business.

6 When I looked into the accreditation 

7 in 2010 the federal government made a standard of 

8 60 to 75 percent student retention rate from the 

9 first year to the second mandatory for 

10 accreditation specifically for SCICS.

11 All (phonetic) currently has 55 percent 

12 with WASC. Before that SCICS they had 43 percent. 

13 At columns (phonetic) you get the figure. In 

14 point of fact the requirements for schools to become 

15 accredited is laughable.

16 In 2007 when I graduated with my 

17 undergrad 43 percent retention rate for an 

18 accredited school was acceptable. That school 

19 spent more money on painting the walls and buying 

20 new monitors to show off to prospective new students 

21 than it did for new computers and machines for its 

22 current students.

23 They count working on FedEx Kinko's as 
294

1 an actual job placement. In fine print they 

2 consider it to be an industry related job because 

3 having knowledge of jpeg, bitmap, and png formats 

4 is clearly something you need a bachelor's degree 

5 for.

6 And with no real hope of paying off a 

7 $120,000 debt with 6 to 8 percent interest at --

8 PARTICIPANT: One minute.

9 MS. GARCIA: -- 12 bucks an hour. In 

10 short the damage has been done and no restitution 

11 has been made to the defrauded.

12 I can assure you that you need to act 

13 and act now. Waiting till 2019 to start 

14 discharging fraudulent debt is unacceptable 

15 especially considering the Department of Education 

16 completely stepping outside the bounds of its 

17 mission statement which is the very reason for its 

18 existence.

19 You have a responsibility to all 

20 students and you have better follow through. The 

21 department's position that no actual damage is 

22 being done to students is so far from reality that 

23 I question your ability to do your jobs.
295

1 Sincerely angry, Jonna. Thank you.

2 PARTICIPANT: Thank you. Okay at this 

3 time I think it's 4:57 so we'll conclude for today. 

4 We will start tomorrow with issue paper three. 

5 And please campsite rules, take your 

6 trash with you on your way out. We'll see you 

7 tomorrow. Thank you. 

8 (Whereupon, the above-entitled matter 

9 went off the record.)

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