UNITED STATES DEPARTMENT OF EDUCATION

OFFICE OF POSTSECONDARY EDUCATION

Proposed Regulatory Text for Issue #9: Predispute Arbitration and Class Action Waivers

Session Three: December 6-10, 2021

§668.41 Reporting and Disclosure of Information.

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(c) Notice to enrolled students. (1) An institution annually must distribute to all enrolled 

students a notice of the availability of the information required to be disclosed pursuant to paragraphs 

(d), (e), and (g) of this section, and pursuant to 34 CFR 99.7 (§99.7 sets forth the notification 

requirements of the Family Educational Rights and Privacy Act of 1974). The notice must list and briefly 

describe the information and tell the student how to obtain the information.

(2) An institution that discloses information to enrolled students as required under paragraph 

(d), (e), or (g), or (h) of this section by posting the information on an Internet website or an Intranet 

website must include in the notice described in paragraph (c)(1) of this section—

* * *

(g) Enrolled students, prospective students, and the public—report on athletic program 

participation rates and financial support data. (1)(i) An institution of higher education subject to §668.47 

must, not later than October 15 of each year, make available to enrolled students, prospective students, 

and the public, the report produced pursuant to §668.47(c). The institution must make the report easily 

accessible to students, prospective students, and the public and must provide the report promptly to 

anyone who requests it.

(ii) The institution must provide notice to all enrolled students, pursuant to paragraph (c)(1) of 

this section, and prospective students of their right to request the report described in paragraph (g)(1) 

of this section. If the institution chooses to make the report available by posting the disclosure on an 

Internet website or an Intranet website, it must provide in the notice the exact electronic address at 

which the report is posted, a brief description of the report, and a statement that the institution will 

provide a paper copy of the report on request. For prospective students, the institution may not use an 

Intranet website for this purpose.

(2) An institution must submit the report described in paragraph (g)(1)(i) of this section to the 

Secretary within 15 days of making it available to students, prospective students, and the public.

(h) Enrolled students, prospective students, and the public—disclosure of an institution's use of 

pre-dispute arbitration agreements and/or class action waivers as a condition of enrollment for students 

receiving title IV Federal student aid. (1)(i) An institution of higher education that requires students 

receiving title IV Federal student aid to accept or agree to a pre-dispute arbitration agreement and/or a 

class action waiver as a condition of enrollment must make available to enrolled students, prospective 

students, and the public, a written (electronic) plain language disclosure of those conditions of 

Commented [A1]: For negotiators:

Technical Change from Session 2 to Session 3:

With the reinstatement of the 2016 regulations, the 

Department will not need 668.41(h).
Predispute arbitration proposed reg text session three 2

enrollment. This plain language disclosure also must state that: The school cannot require the borrower 

to participate in arbitration or any internal dispute resolution process offered by the institution prior to 

filing a borrower defense to repayment application with the Department pursuant to §685.206(e); the 

school cannot, in any way, require students to limit, relinquish, or waive their ability to pursue filing a 

borrower defense claim, pursuant to §685.206(e) at any time; and any arbitration, required by a predispute arbitration agreement, tolls the limitations period for filing a borrower defense to repayment 

application pursuant to §685.206(e)(6)(ii).

(ii) All statements in the plain language disclosure must be in 12-point font on the institution's 

admissions information web page and in the admissions section of the institution's catalogue. The 

institution may not rely solely on an intranet website for the purpose of providing this notice to 

prospective students or the public.

(2) For the purposes of this paragraph (h), the following definitions apply:

(i) Class action means a lawsuit or an arbitration proceeding in which one or more parties seeks 

class treatment pursuant to Federal Rule of Civil Procedure 23 or any State process analogous to Federal 

Rule of Civil Procedure 23. 

(ii) Class action waiver means any agreement or part of an agreement, regardless of its form or 

structure, between a school, or a party acting on behalf of a school, and a student that relates to the 

making of a Direct Loan or the provision of educational services for which the student received title IV 

funding and prevents an individual from filing or participating in a class action that pertains to those 

services.

(iii) Pre-dispute arbitration agreement means any agreement or part of an agreement, 

regardless of its form or structure, between a school, or a party acting on behalf of a school, and a 

student requiring arbitration of any future dispute between the parties relating to the making of a Direct 

Loan or provision of educational services for which the student received title IV funding.
Predispute arbitration proposed reg text session three 3

§685.300 Agreements between an eligible school and the Secretary for participation in the Direct 

Loan Program.

(a) General. Participation of a school in the Direct Loan Program means that eligible students at 

the school may receive Direct Loans. To participate in the Direct Loan Program, a school must—

(1) Demonstrate to the satisfaction of the Secretary that the school meets the requirements for 

eligibility under the Act and applicable regulations; and

(2) Enter into a written program participation agreement with the Secretary.

(b) Program participation agreement. In the program participation agreement, the school must 

promise to comply with the Act and applicable regulations and must agree to—

(1) Identify eligible students who seek student financial assistance at the institution in 

accordance with section 484 of the Act;

(2) Estimate the need of each of these students as required by part F of the Act for an academic 

year. For purposes of estimating need, a Direct Unsubsidized Loan, a Direct PLUS Loan, or any loan 

obtained under any State-sponsored or private loan program may be used to offset the expected family 

contribution of the student for that year;

(3) Certify that the amount of the loan for any student under part D of the Act is not in excess of 

the annual limit applicable for that loan program and that the amount of the loan, in combination with 

previous loans received by the borrower, is not in excess of the aggregate limit for that loan program;

(4) Set forth a schedule for disbursement of the proceeds of the loan in installments, consistent 

with the requirements of section 428G of the Act;

(5) On a monthly basis, reconcile institutional records with Direct Loan funds received from the 

Secretary and Direct Loan disbursement records submitted to and accepted by the Secretary;

(6) Provide timely and accurate information to the Secretary for the servicing and collecting of 

loans—

(i) Concerning the status of student borrowers (and students on whose behalf parents borrow) 

while these students are in attendance at the school;

(ii) Upon request by the Secretary, concerning any new information of which the school 

becomes aware for these students (or their parents) after the student leaves the school; and

(iii) Concerning student eligibility and need, for the alternative origination of loans to eligible 

students and parents in accordance with part D of the Act;

(7) Provide assurances that the school will comply with loan information requirements 

established by the Secretary relating to student loan information with respect to loans made under the 

Direct Loan Program;

(8) Accept responsibility and financial liability stemming from its failure to perform its functions 

pursuant to the agreement;
Predispute arbitration proposed reg text session three 4

(9) Provide for the implementation of a quality assurance system, as established by the 

Secretary and developed in consultation with the school, to ensure that the school is complying with 

program requirements and meeting program objectives;

(10) Provide that the school will not charge any fees of any kind, however described, to student 

or parent borrowers for origination activities or for the provision of any information necessary for a 

student or parent to receive a loan under part D of the Act or for any benefits associated with such a 

loan;

(11) Comply with the provisions of paragraphs (d) through (i) of this section regarding student 

claims and disputes; 

(1112) Comply with other provisions that the Secretary determines are necessary to protect the 

interests of the United States and to promote the purposes of part D of the Act; and

(1213) Accept responsibility and financial liability stemming from losses incurred by the 

Secretary for repayment of amounts discharged by the Secretary pursuant to §§ 685.206, 685.214, 

685.215, 685.216, and 685.222.

(c) Origination. A school that originates loans in the Direct Loan Program must originate loans to 

eligible students and parents in accordance with part D of the Act. The note or evidence of the 

borrower's obligation on the loan originated by the school is the property of the Secretary.

(d) Borrower defense claims in an internal dispute process. The school will not compel any 

student to pursue a complaint based on allegations that would provide a basis for a borrower defense 

claim through an internal dispute process before the student presents the complaint to an accrediting 

agency or government agency authorized to hear the complaint. 

(e) Class action bans. 

(1) The school will not seek to rely in any way on a predispute arbitration agreement or on any 

other predispute agreement with a student who has obtained or benefited from a Direct Loan, with 

respect to any aspect of a class action that is related to a borrower defense claim, including to seek a 

stay or dismissal of particular claims or the entire action, unless and until the presiding court has ruled 

that the case may not proceed as a class action and, if that ruling may be subject to appellate review on 

an interlocutory basis, the time to seek such review has elapsed or the review has been resolved. 

(2) Reliance on a predispute arbitration agreement, or on any other predispute agreement, with 

a student, with respect to any aspect of a class action includes, but is not limited to, any of the following: 

(i) Seeking dismissal, deferral, or stay of any aspect of a class action;

(ii) Seeking to exclude a person or persons from a class in a class action;

(iii) Objecting to or seeking a protective order intended to avoid responding to discovery in a 

class action;

(iv) Filing a claim in arbitration against a student who has filed a claim on the same issue in a 

class action;
Predispute arbitration proposed reg text session three 5

(v) Filing a claim in arbitration against a student who has filed a claim on the same issue in a 

class action after the trial court has denied a motion to certify the class but before an appellate court 

has ruled on an interlocutory appeal of that motion, if the time to seek such an appeal has not elapsed 

or the appeal has not been resolved; and

(vi) Filing a claim in arbitration against a student who has filed a claim on the same issue in a 

class action after the trial court in that class action has granted a motion to dismiss the claim and, in 

doing so, the court noted that the consumer has leave to refile the claim on a class basis, if the time to 

refile the claim has not elapsed. 

(3) Required provisions and notices: 

(i) After the effective date of this regulation, tThe school must include the following provision in 

any agreements with a student recipient of a Direct Loan for attendance at the school, or , with respect 

to a Parent PLUS Loan, a student for whom the PLUS loan was obtained, that include any agreement 

regarding predispute arbitration or any other predispute agreement addressing class actions and that 

are entered into after the effective date of this regulation: “We agree that neither we nor anyone else 

will use this agreement cannot be used to stop you from being part of a class action lawsuit in court. You 

may file a class action lawsuit in court or you may be a member of a class action lawsuit even if you do 

not file it. This provision applies only to class action claims concerning our acts or omissions regarding 

the making of the Direct Loan or ourthe provision by us of educational services for which the Direct Loan 

was obtained. We agree that only the court has exclusive jurisdictionis to decide whether a claim 

asserted in the lawsuit is a claim regarding the making of the Federal Direct Loan or the provision of 

educational services for which the loan was obtained.” 

(ii) When a predispute arbitration agreement or any other predispute agreement addressing 

class actions has been entered into before the effective date of this regulation and does not contain 

thea provision described in paragraph (e)(3)(i) of this section, the school must either ensure the 

agreement is amended to contain thate provision specified in paragraph (e)(3)(iii)(A) of this section or 

provide the student to whom the agreement applies with the written notice of that provisionspecified in 

paragraph (e)(3)(iii)(B) of this section. 

(iii) The school must ensure the agreement described in paragraph (e)(3)(ii) of this section is 

amended to contain the provision set forth in paragraph (e)(3)(i) specified in paragraph (e)(3)(iii)(A) of 

this section or must provide the notice to students specified in that paragraph (e)(3)(iii)(B) of this section

to students no later than by the exit counseling required under § 685.304(b), or the date on which the 

school files its initial response to a demand for arbitration or service of a complaint from a student who 

has not already been sent a notice or amendment, whichever is earlier. 

(A) Agreement provision. “We agree that neither we nor anyone else who later becomes a party 

to this agreement will use it to stop you from being part of a class action lawsuit in court. You may file a 

class action lawsuit in court or you may be a member of a class action lawsuit in court even if you do not 

file it. This provision applies only to class action claims concerning our acts or omissions regarding the 

making of the Federal Direct Loan or the provision by us of educational services for which the Federal 

Direct Loan was obtained. We agree that only the court has exclusive jurisdictionis to decide whether a 

claim asserted in the lawsuit is a claim regarding the making of the Federal Direct Loan or the provision 

of educational services for which the loan was obtained.” 
Predispute arbitration proposed reg text session three 6

(B) Notice provision. “We agree not to use any predispute agreement to stop you from being 

part of a class action lawsuit in court. You may file a class action lawsuit in court or you may be a 

member of a class action lawsuit even if you do not file it. This provision applies only to class action 

claims concerning our acts or omissions regarding the making of the Federal Direct Loan or the provision 

by us of educational services for which the Federal Direct Loan was obtained. We agree that only the 

court has exclusive jurisdictionis to decide whether a claim asserted in the lawsuit is a claim regarding 

the making of the Federal Direct Loan or the provision of educational services for which the loan was 

obtained.”

(f) Predispute arbitration agreements. 

(1) 

(i) The school will not enter into a predispute agreement to arbitrate a borrower defense claim, 

or rely in any way on a predispute arbitration agreement with respect to any aspect of a borrower 

defense claim. 

(ii) A student may enter into a voluntary post-dispute arbitration agreement with a school to 

arbitrate a borrower defense claim. 

(2) Reliance on a predispute arbitration agreement with a student with respect to any aspect of 

a borrower defense claim includes, but is not limited to, any of the following: 

(i) Seeking dismissal, deferral, or stay of any aspect of a judicial action filed by the student, 

including joinder with others in an action; 

(ii) Objecting to or seeking a protective order intended to avoid responding to discovery in a 

judicial action filed by the student; and 

(iii) Filing a claim in arbitration against a student who has filed a suit on the same claim. 

(3) Required provisions and notices: 

(i) The school must include the following provision in any predispute arbitration agreements 

with a student recipient of a Direct Loan for attendance at the school, or, with respect to a Parent PLUS 

Loan, a student for whom the PLUS loan was obtained, that include any agreement regarding arbitration 

and that are entered into after the effective date of this regulation: “We agree that neither we nor 

anyone else will use this agreement to stop you from bringing a lawsuit concerning our acts or omissions 

regarding the making of the Federal Direct Loan or the provision by us of educational services for which 

the Federal Direct Loan was obtained. You may file a lawsuit for such a claim or you may be a member of 

a class action lawsuit for such a claim even if you do not file it. This provision does not apply to lawsuits 

concerning other claims. We agree that only the court is to decide whether a claim asserted in the 

lawsuit is a claim regarding the making of the Federal Direct Loan or the provision of educational 

services for which the loan was obtained.” 

(ii) When a predispute arbitration agreement has been entered into before the effective date of 

this regulation that did not contain the provision specified in paragraph (f)(3)(i) of this section, the 

school must either ensure the agreement is amended to contain the provision specified in paragraph 
Predispute arbitration proposed reg text session three 7

(f)(3)(iii)(A) of this section or provide the student to whom the agreement applies with the written 

notice specified in paragraph (f)(3)(iii)(B) of this section. 

(iii) The school must ensure the agreement described in paragraph (f)(3)(ii) of this section is 

amended to contain the provision specified in paragraph (f)(3)(iii)(A) of this section or must provide the 

notice specified in paragraph (f)(3)(iii)(B) of this section to students no later than by the exit counseling 

required under § 685.304(b), or the date on which the school files its initial response to a demand for 

arbitration or service of a complaint from a student who has not already been sent a notice or 

amendment, whichever is earlier. 

(A) Agreement provision. “We agree that neither we nor anyone else who later becomes a party 

to this predispute arbitration agreement will use it to stop you from bringing a lawsuit concerning our 

acts or omissions regarding the making of the Federal Direct Loan or the provision by us of educational 

services for which the Federal Direct Loan was obtained. You may file a lawsuit for such a claim or you 

may be a member of a class action lawsuit for such a claim even if you do not file it. This provision does 

not apply to other claims. We agree that only the court is to decide whether a claim asserted in the 

lawsuit is a claim regarding the making of the Federal Direct Loan or the provision of educational 

services for which the loan was obtained.” 

(B) Notice provision. “We agree not to use any predispute arbitration agreement to stop you 

from bringing a lawsuit concerning our acts or omissions regarding the making of the Federal Direct 

Loan or the provision by us of educational services for which the Federal Direct Loan was obtained. You 

may file a lawsuit regarding such a claim or you may be a member of a class action lawsuit regarding 

such a claim even if you do not file it. This provision does not apply to any other claims. We agree that 

only the court is to decide whether a claim asserted in the lawsuit is a claim regarding the making of the 

Direct Loan or the provision of educational services for which the loan was obtained.”

(g) Submission of arbitral records. 

(1) A school must submit a copy of the following records to the Secretary, in the form and 

manner specified by the Secretary, in connection with any borrower defense claim filed in arbitration by 

or against the school concerning a borrower defense claim: 

(i) The initial claim and any counterclaim;.

(ii) The arbitration agreement filed with the arbitrator or arbitration administrator;.

(iii) The judgment or award, if any, issued by the arbitrator or arbitration administrator;.

(iv) If an arbitrator or arbitration administrator refuses to administer or dismisses a claim due to 

the school's failure to pay required filing or administrative fees, any communication the school receives 

from the arbitrator or arbitration administrator related to such a refusal;. and

(v) Any communication the school receives from an arbitrator or an arbitration administrator 

related to a determination that a predispute arbitration agreement regarding educational services 

provided by the school does not comply with the administrator's fairness principles, rules, or similar 

requirements, if such a determination occurs;.
Predispute arbitration proposed reg text session three 8

(2) A school must submit any record required pursuant to paragraph (g)(1) of this section within 

60 days of filing by the school of any such record with the arbitrator or arbitration administrator and 

within 60 days of receipt by the school of any such record filed or sent by someone other than the 

school, such as the arbitrator, the arbitration administrator, or the student.

(3) The Secretary shall publish the records submitted by schools in paragraph (g)(1) in a 

centralized database accessible to the public.

(h) Submission of judicial records. 

(1) A school must submit a copy of the following records to the Secretary, in the form and 

manner specified by the Secretary, in connection with any borrower defense claim concerning a 

borrower defense claim filed in a lawsuit by the school against the student or by any party, including a 

government agency, against the school: 

(i) The complaint and any counterclaim;

(ii) Any dispositive motion filed by a party to the suit; and 

(iii) The ruling on any dispositive motion and the judgment issued by the court;.

(2) A school must submit any record required pursuant to paragraph (h)(1) of this section within 

30 days of filing or receipt, as applicable, of the complaint, answer, or dispositive motion, and within 30 

days of receipt of any ruling on a dispositive motion or a final judgment;

(3) The Secretary shall publish the records submitted by schools in paragraph (h)(1) in a 

centralized database accessible to the public.

(i) Definitions. For the purposes of paragraphs (d) through (h) of this section, the term -

(1) “Borrower defense claim” means an act or omission claim that is or could be asserted as a 

borrower defense as defined in:

(i) 34 C.F.R. § 685.206(c)(1);

(ii) 34 C.F.R. § 685.222(a)(5);

(iii) 34 C.F.R. § 685.206(e)(1)(iii); or

(iv) 34 C.F.R. § 685.401(a)(2);§ 685.222(a)(5), including a claim other than one based on § 

685.222(c) or (d) that may be asserted under § 685.222(b) if reduced to judgment;

(2) “Class action” means a lawsuit in which one or more parties seek class treatment pursuant to 

Federal Rule of Civil Procedure 23 or any State process analogous to Federal Rule of Civil Procedure 23; 

(3) “Dispositive motion” means a motion asking for a court order that entirely disposes of one or 

more claims in favor of the party who files the motion without need for further court proceedings; 

(4) “Predispute arbitration agreement” means any agreement, regardless of its form or 

structure, between a school or a party acting on behalf of a school and a student that providesing for 

arbitration of any future dispute between the parties.
Predispute arbitration proposed reg text session three 9

§685.304 Counseling borrowers.

(a) * * * * *

(6) Entrance counseling for Direct Subsidized Loan and Direct Unsubsidized Loan borrowers 

must -

(i) Explain the use of a Master Promissory Note (MPN); 

(ii) Emphasize to the borrower the seriousness and importance of the repayment obligation the 

student borrower is assuming; 

(iii) Describe the likely consequences of default, including adverse credit reports, delinquent 

debt collection procedures under Federal law, and litigation; 

(iv) Emphasize that the student borrower is obligated to repay the full amount of the loan even 

if the student borrower does not complete the program, does not complete the program within the 

regular time for program completion, is unable to obtain employment upon completion, or is otherwise 

dissatisfied with or does not receive the educational or other services that the student borrower 

purchased from the school; 

(v) Inform the student borrower of sample monthly repayment amounts based on -

(A) A range of student levels of indebtedness of Direct Subsidized Loan and Direct Unsubsidized 

Loan borrowers, or student borrowers with Direct Subsidized, Direct Unsubsidized, and Direct PLUS 

Loans depending on the types of loans the borrower has obtained; or 

(B) The average indebtedness of other borrowers in the same program at the same school as the 

borrower; 

(vi) To the extent practicable, explain the effect of accepting the loan to be disbursed on the 

eligibility of the borrower for other forms of student financial assistance; 

(vii) Provide information on how interest accrues and is capitalized during periods when the 

interest is not paid by either the borrower or the Secretary; 

(viii) Inform the borrower of the option to pay the interest on a Direct Unsubsidized Loan while 

the borrower is in school; 

(ix) Explain the definition of half-time enrollment at the school, during regular terms and 

summer school, if applicable, and the consequences of not maintaining half-time enrollment; 

(x) Explain the importance of contacting the appropriate offices at the school if the borrower 

withdraws prior to completing the borrower's program of study so that the school can provide exit 

counseling, including information regarding the borrower's repayment options and loan consolidation; 

(xi) Provide information on the National Student Loan Data System and how the borrower can 

access the borrower's records; and,
Predispute arbitration proposed reg text session three 10

(xii) Provide the name of and contact information for the individual the borrower may contact if 

the borrower has any questions about the borrower's rights and responsibilities or the terms and

conditions of the loan; .

(xiii) For loans first disbursed on or after July 1, 2020, if, as a condition of enrollment, the school 

requires borrowers to enter into a pre-dispute arbitration agreement, as defined in § 668.41(h)(2)(iii) of 

this chapter, or to sign a class action waiver, as defined in § 668.41(h)(2)(i) and (ii) of this chapter, the 

school must provide a written description of the school's dispute resolution process that the borrower 

has agreed to pursue, including the name and contact information for the individual or office at the 

school that the borrower may contact if the borrower has a dispute relating to the borrower's loans or 

to the provision of educational services for which the loans were provided; 

(xiv) For loans first disbursed on or after July 1, 2020, if, as a condition of enrollment, the school 

requires borrowers to enter into a pre-dispute arbitration agreement, as defined in § 668.41(h)(2)(iii) of 

this chapter, the school must provide a written description of how and when the agreement applies, 

how the borrower enters into the arbitration process, and who to contact if the borrower has any 

questions; and 

(xv) For loans first disbursed on or after July 1, 2020, if, as a condition of enrollment, the school 

requires borrowers to sign a class-action waiver, as defined in § 668.41(h)(2)(i) and (ii) of this chapter, 

the school must explain how and when the waiver applies, alternative processes the borrower may 

pursue to seek redress, and who to contact if the borrower has any questions.

* * * * *

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Last updated 11/29/2021

Commented [A2]: For negotiators:

Technical Change from Session 2 to Session 3:

With the reinstatement of the 2016 regulations, the 

Department will not need 668.41(h). Subparagraphs (xiii) 

through (xv) of 685.304 cross reference 668.41(h) which are 

no longer needed.