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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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THURSDAY

FEBRUARY 15, 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
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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
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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
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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 (Time not given)

3 MS. CARUSO: Okay, good morning, 

4 everyone. We're going to get started, as we have 

5 a lot to get through today.

6 Okay, so the Department of Education 

7 has updated Issue Papers 1, 2, 3, 4, and 6. We 

8 are going to go in a little bit of a different order, 

9 just because of printing and the time that it takes 

10 to print, so Issue Papers 1 and 2 are being printed, 

11 right now, and there are a lot of changes there.

12 However, for Issue Papers 3, 4, and 6, 

13 specifically, Issue Paper 3, there are fewer 

14 changes, and so they can be viewed on the screen 

15 for everyone. So in the interest of being 

16 productive, remaining productive, we are going to 

17 start today with Issue Paper 3.

18 (Off the record comments.)

19 MS. CARUSO: Oh, I'm sorry, 4, okay.

20 (Off the record comments.)

21 MS. CARUSO: Four and then 3. And 

22 then, just make our way through it, as we can, and

23 as soon as Issue Papers 1 and 2 are printed, they 
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1 will be handed out and you will be given an 

2 opportunity to review those in their entirety, 

3 before we start to go through them.

4 So we'll build in that time for you to 

5 go off and review them. The Department of 

6 Education will remain here, to answer questions 

7 about them, before we reconvene and then begin our 

8 discussion.

9 But to get us started today, we were 

10 notified yesterday afternoon that there were three 

11 students, who wanted to provide public comment that 

12 would not be able to do so at the end of the day, 

13 so they asked permission to address you first thing 

14 this morning and that permission was granted.

15 So we are going to begin the day with 

16 three comments from students, at, at five minutes 

17 each. Great. Okay, can we have our first student, 

18 please?

19 PARTICIPANT: Hello. Good morning.

20 PARTICIPANT: Good morning.

21 PARTICIPANT: I'm just here to read 

22 another story. My name is Luvia (phonetic), I'm 

23 a student in higher ed. I'm going to read slower 
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1 this time, because I have my breath.

2 So good afternoon. This message is to 

3 shed light on EDMC and the Art Institutes, along 

4 with Navient and Sallie Mae and the situations that 

5 they have put me and all of my fellow classmates 

6 in, since attending the New England Institute of 

7 Art in 2007, the story goes, as such.

8 The application process to AI was 

9 simple, make a letter as to why you want to attend 

10 the school, tour the school, get told about their 

11 big issues, connections and apply for loans to go 

12 to school.

13 They only give you one option, Sallie 

14 Mae and Navient, saying that they are the most 

15 reputable and reasonable company to work with. 

16 They tell you, your payments will be affordable, 

17 loans don't gain interest, while in school, and 

18 you can consolidate. This was far from my reality.

19 Back in early 2011, my mother and I put 

20 in a, put in a request of loans to figure out my 

21 payments. Navient was asking for $1,400 a month, 

22 with no consolidation offered.

23 My mother, grandfather and I were 
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1 stunned that my initial college degree, which was 

2 projected at $90,000 had nearly doubled in size, 

3 while in school, becoming nearly $150,000 over two 

4 years.

5 Sallie Mae and Navient refused to 

6 consolidate, as well. Stunned by this and realized 

7 that there was no way to pay this, we came up with 

8 a solution to get Navient.

9 My grandfather had to take out a home 

10 equity loan on his home, in his name, so he could 

11 use the loan to pay off my loans. Yes, you heard 

12 that right, a loan, just to be able to pay off 

13 another loan, to get cheaper payments and make a 

14 much more manageable debt. That was our only way 

15 to escape the outrageous payments.

16 We confirmed with them multiple times, 

17 via phone, the total debt owed, which is nearly 

18 $143,000 in full. They asked us to send three 

19 separate checks, which were mailed from a total 

20 of $150,000 from us, in the summer of 2011 and 2012.

21 We told them to keep the extra money. 

22 After that, we didn't hear anything, until six 

23 months later, when they said we were delinquent 
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1 on our loans for another $13,000 on both me and 

2 my mother's sides for $26,000.

3 Navient pulled a sneaky one on us, with, 

4 by withholding paying our loans, deliberately, 

5 until our loans capitalized, now charging us for 

6 capitalized money, which was paid off in 2011, 

7 months before they had a chance.

8 They lied to us, told us to send 

9 payments for the full amount, then deliberately 

10 withheld crediting them to our account, months 

11 later, just to charge us an additional $13,000.

12 Currently, as of right now, my loan is 

13 looking like a double charge, but have been able 

14 to unsolved and due to Navient's refusal to work 

15 with us, no matter how much proof we have.

16 They kept lying to us, redirecting us, 

17 changing the department for five-plus years. We 

18 only received an answer, five years later, in 2016, 

19 only for them to tell us we still owed $65,000 from 

20 both my mother and me, because, in the six years 

21 we tried to fix the issue, the loan continued to 

22 capitalized, which Navient will not admit to and 

23 refuses to fix, hence the additional money we owe.
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1 When we kept, when we went to fight it, 

2 they kept lying to us, redirecting us and changing 

3 the department, for five years. We only received 

4 an answer, six years later, only for them to tell 

5 us we still owed $65,000.

6 We, effectively, gave them all the 

7 money months before capitalization happened and 

8 they deliberately did not inform us of withholding 

9 the money, or the upcoming capitalization.

10 They lied and we have proof. Their 

11 records and our records show when the payments were 

12 sent and the loans capitalized, after receiving 

13 the full payment.

14 They kept, they held the payments 

15 processing and lost one of three checks, then, plus 

16 continuously redirecting us, for years, so the 

17 loans would not be fully paid off and interest would 

18 keep accruing, while trying to solve their mistake.

19 Not only did they refuse to remedy the 

20 problem, after acknowledging the mistakes, more 

21 than a dozen times, we are in financial decay, still 

22 having nearly $1,000 of payments, per month, on 

23 the home equity loan we had to take out from the 
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1 separate bank loan that was taken out to help 

2 ourselves from being ruined. Now Navient still 

3 wishes --

4 MS. CARUSO: You've got minute 

5 remaining.

6 PARTICIPANT: -- to collect $325,000, 

7 I mean, $325 a month, from me, and is already 

8 collecting $300-plus from my mother, when the loan 

9 was already paid off.

10 No student should ever have to make a 

11 choice to get another loan, just to avoid getting 

12 ruined by another one, especially, when they are 

13 18 and 20 years old, before they even get a chance 

14 to get their life going.

15 This is not a matter of not wanting to 

16 pay. We did pay them and personally sacrificed 

17 a lot, family stability, just to get cheaper 

18 payments, only to still be punished for it, by 

19 Navient, in the long run.

20 We tried to, at least, get Navient off 

21 our backs, to deal with a much more forgiving 

22 company, and they still have us in a vice grip. 

23 Our family is slowly being tapped out. And with 
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1 how bad the job market has been, I've personally 

2 been forced to do anything I can and save anything 

3 I can do with this, only to become broke and 

4 struggling day-to-day.

5 Please understand, this has nothing to 

6 do with wanting free money, but everything to do 

7 with how dishonest and unfair this whole process 

8 has been to all students.

9 We have been scammed out of having any 

10 life at all. Thank you for hearing my story. 

11 Travis Williams, Photography Graduate of the New 

12 England --

13 MS. CARUSO: Thank you.

14 PARTICIPANT: -- Institute of Art. 

15 Thank you.

16 MS. CARUSO: Next, please.

17 MR. TAYLOR: Good morning. My name is 

18 Marquis Taylor, and I'll be reading, on behalf of 

19 Kim Bailey (phonetic). You do not know me, but 

20 you are determining my future.

21 In the fall of 2004, I was convinced 

22 my future was bright. I recently enrolled in the 

23 Art Institute of Pittsburgh Online Division 
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1 Interior Design Bachelor's Program, with assurance 

2 from my academic advisor, my high school transcript

3 qualified me to enroll, even though my high school 

4 transcripts were not much to be desired.

5 I was assured I would greatly benefit 

6 from grants and was contacted by Daniel, with Sally 

7 Mae, to secure my student loans.

8 I believed this school was reputable, 

9 had a network of employers, and would guide me to 

10 a lucrative and secure career. I trusted my 

11 mentors.

12 I spent six years chasing my tail in 

13 the systematic manipulation of the Art Institute. 

14 Realizing this statement may be boring the room, 

15 and knowing you all are quite well-aware of how 

16 students, like me, have been ripped off, I will 

17 keep my victim impact statement to the point.

18 I think of the person I was, when I was 

19 enrolled in the Art Institute. I was 39 years old, 

20 working mother of two teenage sons. I was 

21 ambitious, determined, hardworking, I was their 

22 role model.

23 I see the success that my sons have 
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1 achieved, since then. Community and State college 

2 degrees have served them well and I feel proud and 

3 embarrassed that my experience, at all, for the 

4 for-profit college has turned out drastically 

5 different. It is truly embarrassing.

6 I no longer feel ambitious. Hindsight 

7 is 20/20. At first, I blamed myself for being 

8 victimized, however, I started to meet more people 

9 with stories that described a very systematic 

10 failure. I grew angry.

11 I'm now 52 years old and know I will 

12 never recover and cannot start over. I will never 

13 be a college graduate and reap the benefits of a 

14 quality education. Lost opportunity does not have 

15 a price tag. I will never be made whole for the 

16 lost time, or mental anguish.

17 While you all haggle over it, whether 

18 knowingly should be a part of the verbiage, young 

19 people are contemplating suicide. Others are 

20 waiting tables and hiding tips, so they can pay 

21 for housing. More are moving out the country, 

22 leaving families behind, to start a life free from 

23 this nightmare.
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1 These students don't know how the 

2 bipartisan policies of this government has failed 

3 them. They are suffering in the shadows. Because 

4 of all students I have met, I've dedicated my free 

5 time to helping them, while I fight for our future.

6 I plead you with you, to recognize the 

7 suffering behind this failure. I plead with you, 

8 to ensure maximum forgiveness is given to victims, 

9 while you repair the systematic failures. 

10 Dragging this process out is preventing lives from 

11 moving forward. Victims have been stuck.

12 In closing, I will never forget the 

13 for-profit college failure is nothing less than 

14 tragic. Don't allow yourself to be desensitized 

15 to the suffering.

16 On the eve of the horrific shooting in 

17 Florida, recognize the impact that systematic fraud 

18 could have had on a person, being victimized, 

19 indebted and trapped is true a result of this 

20 failure.

21 As a taxpayer, I'm convinced it is your 

22 job to get it right and reduce the risk to our 

23 society. As a victim, I am pleading for maximum 
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1 forgiveness a.k.a. full refund. Yours truly, Kim 

2 Bailey.

3 MS. CARUSO: Thank you. Next.

4 MR. RODRIGUEZ: Hi. My name is Joelle 

5 Rodriguez (phonetic) and I ask that my words be 

6 heard and felt. I have two parents, both, who are 

7 disabled. You would think that would cause one 

8 to quit, although, I persisted.

9 Now, the only way for a man, like me, 

10 to get into college would be to take these loans. 

11 These loans, which are very high, because of the 

12 cost of education, these loans, which are, pretty 

13 much, predatory in nature, hold individuals back 

14 from living the life that they should be able to 

15 live, after education.

16 Now, with the loans, the loan payments 

17 that I make, I should be able to purchase a BMW. 

18 Although, I live the life of someone living in 

19 poverty, because I have to pay off these payments.

20 Now, I also want to be able to help out 

21 my parents. That is the reason why I went and got 

22 educated. That is the reason why I chase the 

23 American dream, the American dream that is promised 
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1 to so many, who are in poverty, so many who are 

2 fighting to become a man for them self and women, 

3 who can support themselves.

4 Now, because of these loans, I'm unable 

5 to purchase a car, I am unable to buy a house. 

6 Although, again, the amounts that I'm paying should 

7 allow me to do this.

8 Now, with the education that we 

9 receive, we should be able to live with a living 

10 wage, a way that we can support ourselves and live 

11 the life and the dreams that were promised to us, 

12 by these institutions and these universities, who 

13 promised these dreams and say that these are the 

14 lives that you will be able to lead. However, there 

15 are many predatory institutions, who do not 

16 delivery on these promises.

17 Now, in every industry there are safety 

18 nets. So if I purchase food that is not good and 

19 I purchase food that makes me sick, there are ways 

20 that I can be defended.

21 Now, if I am in the hospital and I get 

22 hurt and a doctor treats me, there are ways that 

23 I can be defended, there are malpractice laws. 
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1 If I buy a vehicle and this thing is brand new, 

2 I expect that it should work, and if it's not, I 

3 should get a refund.

4 With these institutions, these safety 

5 nets are being threatened and these safety nets 

6 are being weakened, so that those, who are not, 

7 who are not benefitting the way that they should, 

8 through their hard work, are being preyed upon.

9 Now, to this argument you will say, what 

10 about the institutions? So I'm asking that you 

11 defend these students, and many will ask that we 

12 defend the institutions. And I also agree. These 

13 institutions should be defended and these students 

14 should be defended, as well.

15 However, I asked that, the institutions 

16 that are defended, are the ones that deliver upon 

17 the promises that they give, the ones that give 

18 quality education, the ones who do what they will 

19 say they do, and the ones who are able to get those 

20 hired that they say they'll be able to get hired.

21 Now, these institutions have not 

22 delivered on these promises. And by, these 

23 institutions, I mean many of the for-profit 
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1 institutions, who have, like, used car salesmen, 

2 shined up their education and their institutions, 

3 although, they haven't been able to deliver on the 

4 promises that they said they would be able to.

5 Now, again, I think that these students 

6 should be defended in the same way that these 

7 institutions should. But why would we defend 

8 institutions, who are taking away from those in 

9 need?

10 MS. CARUSO: One minute remaining.

11 MR. RODRIGUEZ: Why would we defend 

12 these institutions, who, in their very nature, 

13 for-profit, their objective is not to get those 

14 educated, their objective is not to get those hired, 

15 their objectives are for-profit.

16 So again, I ask that we get fair laws 

17 for these students, we get fair laws for these 

18 institutions, but not the institutions that are 

19 predatory in nature, not the institutions that do 

20 not deliver, not the institutions that are giving 

21 us a broken car that we're unable to go anywhere 

22 with. Thank you.

23 MS. CARUSO: Thank you. Okay. So 
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1 before we get into our material for today, I think 

2 we've, if we could just take a minute to silence

3 our devices, so that we don't have any distractions, 

4 while we get through a lot that we have to get 

5 through today. Okay.

6 (Off the record comments.)

7 MS. CARUSO: Annmarie, if you can, 

8 begin to take us through the changes in Issue Paper 

9 4.

10 MS. WEISMAN: So I ask your patience, 

11 as we do not have paper copies, I, too, am working 

12 off of the screen and I'm going to try to attempt 

13 to do that, from here, as best I can.

14 Our changes that we're working off of, 

15 in this paper, will be highlighted in yellow. So 

16 looking at the language here, in romanette (ii), 

17 class action waiver, means any agreement, or part 

18 of agreement, regardless of its form, or structure, 

19 between a school, or party, acting on behalf of 

20 a school, and a student that relates to the 

21 educational services for which the student received 

22 Title IV funding and prevents an individual from 

23 filing, or participating, in a class action that 
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1 pertains to those services.

2 In romanette (iii), we've also added, 

3 relating to the educational services for which the 

4 student received the Title IV funding, at the end 

5 of that clause.

6 So romanette (iii), in its entirety, 

7 now reads, pre-dispute arbitration agreement 

8 means, any agreement, or part of an agreement, 

9 regardless of its form, or structure, between a 

10 school, or party acting on behalf of a school, and 

11 a student requiring arbitration of any future 

12 dispute between the parties, relating to the 

13 educational services for which the student received 

14 Title IV funding.

15 So those are the only changes to this 

16 Issue Paper. So at this point, if there are any 

17 questions, we can take those, and if not, then I'd 

18 request that we discuss, whether we have tentative 

19 agreement.

20 MS. CARUSO: Linda.

21 (Off the record comments.)

22 MS. RAWLES: I don't want to hold up 

23 discussion on this, but I just ask, if we do a 
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1 temperature check on this change, we do a 

2 temperature check on the elimination of Issue Paper 

3 4.

4 (Off the record comments.)

5 PARTICIPANT: Hello. So this 

6 particular change does not really change my 

7 concerns that I raised yesterday. One thing was 

8 brought to my attention that I wasn't aware of, 

9 because I have not really been following the gainful 

10 employment negotiator rulemaking, but my 

11 understanding is that that committee is being 

12 tasked with creating, or working on the actual 

13 disclosures and we're not, and I wonder if, maybe, 

14 the Department could speak to that and, and please 

15 correct me, if I'm wrong about that.

16 MS. WEISMAN: That rulemaking 

17 committee is working on some disclosures, but as 

18 they're still working, I'm not able to comment on 

19 what they all are.

20 MS. CARUSO: Kelli.

21 MS. HUDSON PERRY: So yesterday, I 

22 think there was some concern from a, a bunch around 

23 the table that, they didn't feel that the Department 
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1 had the ability to do something with this, as it 

2 relates to arbitration agreement.

3 So in light of what Linda just said, 

4 I think she said that, because she still believes 

5 that, so can you give us some insight on why the 

6 Department believes and why we're moving forward 

7 with this? Just because, I don't know that we're 

8 going to get past this, if people think that you 

9 can't do this, but you believe that you can.

10 MS. WEISMAN: So we have had legal 

11 analysis of the issue and we believe we have the 

12 strategy authority to act in this manner. We do 

13 not believe that we can regulate arbitration, so 

14 to speak, but we believe that we can request this 

15 information, that we can request disclosure of it, 

16 for example, to students in the, in the form that 

17 we've done so here. We, we heard the comment about 

18 pulling the Paper, and we feel that it belongs 

19 within this package.

20 MS. HUDSON PERRY: So I'm not really 

21 the right person to respond to that, because I, 

22 I don't know why other people were saying that they 

23 couldn't, but if there's other people around the 
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1 table that might add some comment, I think it would 

2 be helpful, because I -- I'm hoping that we can 

3 get past this, but I'm kind of sensing that, that 

4 might not be the case.

5 MS. CARUSO: Are there any other 

6 comments, before we take a temperature check? 

7 William.

8 MR. HUBBARD: I want to, again, thank 

9 the Department for their, their points about the, 

10 the ability to regulate how this is done, not 

11 whether or not it is done. I think that's a correct 

12 statutory read.

13 In terms of the, the opposite, so 

14 striking the paper, I mean, I think that presents, 

15 essentially, the statement that students should 

16 not be informed that a school has pre-dispute 

17 agreements. I mean, I'm just curious, kind of, 

18 what the defense of that is? Should we not be 

19 disclosing to students that may impact them?

20 MS. CARUSO: So, William, I want to 

21 hold off on that, just until we know if, if this 

22 is not going to help us achieve consensus. So 

23 what -- we'll definitely have that discussion.
25

1 MS. WEISMAN: So I just want to clarify 

2 that I'm not saying that we have the ability to 

3 regulate how it's being done, I'm saying, we believe 

4 we have the ability to have institutions inform 

5 students that it is being done, which I see a 

6 distinction there. We're not trying to regulate 

7 the activity.

8 PARTICIPANT: With respect to the 

9 Department, though, you are regulating the 

10 activity. You're saying that, if you exercise a 

11 right that you have, under another law, a law 

12 enacted by Congress in establishing a clear policy, 

13 then the federal government's going to make you 

14 undertake these disclosure requirements, 

15 regardless of whether or not I think those 

16 disclosure requirements are a good idea.

17 What we're saying is, an agreement 

18 between a third party, a student and an educational 

19 institution, in order for them to have the right 

20 to do something that Congress says they have the 

21 right to do, they have to do these other things. 

22 That's regulating in the space that Congress 

23 regulated in the statute.
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1 PARTICIPANT: So I, I respect, Kelli, 

2 your question, but I also want to say, this was 

3 an issue that was raised by John, also, other 

4 members at this table, as to positions against and, 

5 I believe, Abby and others have raised arguments, 

6 as to why they believe the Department has authority.

7 And I, I'll just point out, we're 

8 actually in the middle of active litigation on this 

9 specific issue, so we're kind of, in a -- so I mean, 

10 I think the more accurate position is that we, we 

11 don't have a position that we can state about this.

12 But, you know, please, suffice it to 

13 say that, by putting this proposal in here, as this 

14 language, we believe that we have the authority 

15 to do what is presented in this Issue Paper and 

16 we are asking people to decide, whether or not they 

17 can reach consensus on it.

18 Arguments about, whether or not the 

19 concept that's greater than this, I believe that's 

20 something that's been discussed by various parties, 

21 at this table, already, and, and other sessions, 

22 and at this one, as well.

23 MS. CARUSO: Aaron and then Linda.
27

1 MR. LACEY: I mean, I voiced yesterday, 

2 I agree with John that, I think there's, at least, 

3 a question here, and the Department seems to be 

4 acknowledging that there is a question, here, as 

5 well.

6 I'm not saying you're taking, you 

7 clearly have stated you take the position that you 

8 have the authority, but also, you've acknowledged 

9 that there's open litigation on the question. I, 

10 you know, I mean, I go beyond that, and back to

11 the points I made yesterday, and then I also to 

12 add, Will, to your, to your comment.

13 I mean, so, I mean, you don't have to 

14 take my word for this, check, check with the counsel 

15 you trust, but, it's, even apart from this, as a 

16 general matter, it is my personal legal view and 

17 understanding that, an arbitration agreement, a 

18 class action waiver, pre-dispute arbitration 

19 clause is much more likely to be enforced, if it 

20 is adequately disclosed.

21 So institutions and organizations that 

22 want to make sure that their arbitration clauses 

23 defeat any type of challenge in court, are going 
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1 to make sure that they are adequately disclosed. 

2 They don't have an insensitive to hide them from 

3 students. That's going to make it much more likely 

4 that they're going to be defeated.

5 What this does, is it puts a burden on 

6 good actors, right, you're dumping a lot more paper 

7 on students, and it makes it far more likely that 

8 a bad actor will be successful in enforcing their 

9 arbitration clause.

10 Because, if a student goes into court 

11 and says, I didn't know about it, and then the 

12 institution, the bad actor, says not only was it 

13 in the enrollment agreement, but I was forced, under 

14 federal law, and can show that I gave it to them 

15 in entrance counseling, I gave it to it at exit 

16 counseling, and did all this stuff in between, it's 

17 going to make it extremely difficult for a student, 

18 who may not even understand what thing was about, 

19 I understand sometimes that's a concern, but it's 

20 going to make it very hard for them to defeat that 

21 arbitration clause.

22 So the point I just want to make is, 

23 bad actors do not have an incentive to hide 
29

1 arbitration clauses, in waivers like this, from 

2 students, because that's going to undermine their 

3 ability to enforce the arbitration clause.

4 So my question is, setting aside the 

5 legal issue, are we really -- again, we're dumping 

6 more paper on students and we're creating a 

7 significantly increased burden for bad, for good 

8 actors, right, and we're probably strengthening 

9 the argument of bad actors and keeping them from, 

10 students from being able to defeat arbitration 

11 clause.

12 I don't think it's about wanting to hide 

13 that from, from students. So what I come back to 

14 is, what's the justification for doing this? I 

15 mean, what -- I've, I've outlined, we've got four 

16 negatives on the table, what are the positives for 

17 doing this?

18 MS. CARUSO: Linda, William, and then 

19 Joseline.

20 MS. RAWLES: Yes, I won't repeat what 

21 Aaron said, because he covered most of my points, 

22 but I'd add another negative. Quick background. 

23 My constituency isn't pushing against the 
30

1 disclosures, I mean, it's, it's another disclosure.

2 I think it's a burden on, on the 

3 schools, but that isn't the main issue to me. I, 

4 I've heard other people, all around this table, 

5 say that it's just throwing more, more paper at 

6 students, so I don't see what good it does.

7 And I'm like Aaron, I'm very puzzled, 

8 just more puzzled than anything, as to why, if we're 

9 in litigation on this, already, and no one is, is 

10 vociferously saying that this is going to be great 

11 for students and we all know it's going to be another 

12 burden to schools, I don't understand the 

13 motivation to put the entire process in jeopardy 

14 and embroil us in that litigation with this act, 

15 when there's no good that's going to come of it. 

16 So I'm mostly just not understanding why we're 

17 doing it.

18 MS. CARUSO: William.

19 MR. HUBBARD: I think I can, perhaps, 

20 help illuminate that point for you, Linda. The 

21 thing is, it's been stated several times that good 

22 schools don't use pre-arbitration agreements. 

23 I've been keeping a tally, it's, it's like over 
31

1 a dozen, at this point, over the series of these 

2 negotiations.

3 So good schools are not doing this, 

4 anyway. I don't, I'm not going to speak to your 

5 clients. I don't know if they do, or don't use 

6 it. I don't know that that's relevant.

7 But, the point is, ultimately, for 

8 students who are going to potentially go to a school 

9 that has this, the why is quite simple, informed 

10 decision making.

11 If a student wants to go to a school 

12 that uses pre-dispute agreements, they ought to 

13 know that, plain and simple. I don't think any 

14 number of lists and the, we've got five reasons 

15 here and five reasons here, I don't need five 

16 reasons, I have one informed decision making, 

17 period. That's, that's a sufficient reason for 

18 including these disclosures.

19 And, Aaron, I mean, I, I completely 

20 appreciate your point, about the fact that good 

21 schools will make that disclosure readily 

22 available.

23 I think, for nothing else, that 
32

1 demonstrates that it's not a burden that the good 

2 schools are going to do it anyway. So it's 

3 difficult for me to understand why there's, kind 

4 of, this, this balance of, this is too much for 

5 schools to do, the good ones are doing it anyway. 

6 It's a non-unique argument, it's already been 

7 done.

8 MS. CARUSO: Joseline.

9 MS. GARCIA: Also echoing what Will 

10 said, I wanted to add that, a student not having 

11 the information necessary to make this 

12 life-changing decision versus giving them a few 

13 more papers, I really don't think it's that big 

14 of a deal, or is so burdensome.

15 And also, yesterday, I laid out 

16 multiple different ways that students can get 

17 access to this information. It doesn't have to 

18 be through paperwork.

19 And I think that knowledge is power and, 

20 again, especially, with this really big decision, 

21 as some of the students who came up earlier to tell 

22 you about what that decision lead them to, I think 

23 it's important that they are very informed when 
33

1 making this, and I think just the amount of 

2 paperwork is not an argument to not do this.

3 MS. CARUSO: Bryan and then we are 

4 going to take our temperature checks.

5 (Off the record comments.)

6 MR. BLACK: So I, actually, like the 

7 version that the Department had before this, 

8 because what this seems to be saying is that, it 

9 has to relate to the educational services.

10 And as I, as I pointed out in Title IV 

11 funds, as I pointed out, yesterday, we have some 

12 peripheral situations, like what I sited yesterday, 

13 where our students wanted to be classified, as 

14 employees, under the Fair Labor Standards Act and 

15 filed lawsuits to that effect and we've spent over 

16 a million dollars in attorney fees.

17 So I like the version better yesterday, 

18 because that really seemed to encompass a 

19 disclosure, a fair and open and honest disclosure 

20 that, if you sign these agreements, it's not just 

21 the receipt of Title IV money, or that which relates 

22 to educational services, but would cover those.

23 Quite honestly, they were frivolous 
34

1 situations and most federal district courts threw 

2 these cases out, but at the same time, we spent 

3 over a million dollars in attorney fees, fighting 

4 a frivolous claim. So I, actually, liked your 

5 version better yesterday than what I'm seeing here 

6 this morning.

7 PARTICIPANT: Bryan, if I could just 

8 jump in, with a facilitator note, do you have a 

9 proposal that would address the concern that you 

10 are raising now, but also address Aaron's parking 

11 lot concern, for lack of a better scripture --

12 MR. BLACK: Well --

13 PARTICIPANT: -- which, I think, was 

14 the intent of this language, correct?

15 MR. BLACK: -- yes, I mean, --

16 MS. WEISMAN: Yes, the point of this 

17 was to, I believe, Aaron's phrase was to put a box 

18 around, kind of, what this would apply to, so that 

19 it wouldn't include the parking lot, or issues that 

20 were outside of, of the scope of what we were really 

21 seeking, which is related to the education.

22 MR. BLACK: Yes I --

23 (Off the record comments.)
35

1 MR. BLACK: I don't know, I just like 

2 the -- I don't like that language in there, for 

3 the reason that applied to our schools, so for me, 

4 I like the version better, yesterday, and taking 

5 out that language that you put in there today.

6 So to me, I think, if there's going to 

7 be a good disclosure and everybody knows going in 

8 that it's available, that's exactly what you want 

9 and courts are more likely to uphold that, so.

10 MS. CARUSO: So I'm going to get to the 

11 cards that are up, I would, I would just ask that,

12 if it's something that we've already heard, like, 

13 giving more paper to students, or informed decision 

14 making, then you reconsider your tent, given the 

15 amount of work that we have today, so I would just 

16 ask that. Valerie, Chris, Abby, and then Ashley 

17 Harrington.

18 MS. SHARP: My question is for the 

19 Department, on the, the statutory right to do this. 

20 I'm not concerned about having to do, schools 

21 having to disclosures, but I am concerned that 

22 there's real concern in the room about the statutory 

23 authority and making sure that we address that 
36

1 concern, before we take the vote.

2 Or, is the authority that the 

3 Department is looking at, just to require the 

4 disclosures, based on the contractual agreements 

5 that schools make, through their agreement on the 

6 PPA, so it's really more of a contractual agreement 

7 to participate in Title IV, you're willing to do 

8 these extra things?

9 I know that applies in some other areas 

10 of law that, schools aren't covered, necessarily, 

11 under a statute, but under the contract, we become, 

12 you know, liable for what the Department would like 

13 us to do. Because I, I don't know if that would 

14 help address some of those concerns, because then 

15 it's more contractual.

16 MR. LACEY: I'd like to request a 

17 private caucus of the institutional 

18 representatives and the AGs, if they are amenable, 

19 out in the hall for ten minutes, while the 

20 Department's chatting, is that okay?

21 (Off the record comments.)

22 MS. CARUSO: It's 9:46 a.m., we will 

23 be reconvening at 9:56 a.m.
37

1 (Whereupon, the above-entitled matter 

2 went off the record at 9:46 a.m., and resumed at 

3 9:56 a.m.)

4 MS. CARUSO: All right. Okay, getting 

5 started. May we have a report and/or request from 

6 Aaron?

7 MR. LACEY: Yes. So as an initial 

8 matter, I want to make clear that I'm only reporting 

9 on my observations. I don't speak for the group, 

10 I only speak for my constituency and, more 

11 specifically, for me.

12 So my concern was and, and in general 

13 terms, the discussion was around the idea that, 

14 as has been expressed, there are individuals, who 

15 have significant concerns with this idea, not just 

16 the particular language that we are word smithing, 

17 but in principle, whether this is an appropriate 

18 or legal thing for, for this Committee for the 

19 Department to attempt to regulate.

20 And, and the question in my mind became 

21 and what I was hoping to discuss with folks was 

22 the extent to whether, to which, there's a 

23 difference between changing your mind on that point 
38

1 and being willing to consider a compromise, still 

2 believing what you believe.

3 And, and, after we discussed, it became 

4 clear, in my mind at least that, whether or not 

5 folks could be willing to compromise their belief, 

6 or their position was going to depend very much 

7 on where some of the other more challenging aspects 

8 of this rulemaking, in my mind, very, I won't say 

9 more challenging, but challenging aspects play out.

10 So all of this is my way of saying, I 

11 don't think it's worthwhile trying to come to a 

12 conclusion on, on IV, I know that was the agenda. 

13 I also deeply appreciate that we can't just keep 

14 punting on everything, but I think, whether and 

15 to what extent, positions on this paper might move 

16 are going to be determined by how the negotiations 

17 around I and II, in particular, go.

18 So our request, recommendation is that 

19 we park IV, with the understanding of the comments 

20 that have been made, no promises as to what might 

21 happen, but, but the very clear belief, I think 

22 that, whether there could be movement on IV, one 

23 way or another, is going to, is going to depend 
39

1 on how things turn out with the other Issue Papers 

2 and it would be productive then to move on to the 

3 others.

4 MS. WEISMAN: So I think I heard Elmo.

5 MS. CARUSO: You did, indeed, 

6 Annmarie.

7 MS. WEISMAN: I'm fine with that, if 

8 the group is fine with that.

9 MS. CARUSO: Do we have any major 

10 concerns with moving on, as Aaron has suggested?

11 (No audible response.)

12 MS. CARUSO: Moving on. Oh that was 

13 from the --

14 (Off the record comments.)

15 MS. CARUSO: Yes. Okay.

16 (Off the record comments.)

17 MS. CARUSO: Still? Okay.

18 MS. SHAFROTH: Yes, and I'll be, I'll 

19 be really quick. I, I just wanted to say, briefly, 

20 my understanding now is that the Department is, 

21 either, has already, or would put in a severability 

22 provision, such that, if the arbitration provision 

23 that comes out of this process is, is struck down 
40

1 by a court of law that wouldn't impact the rest 

2 of the regulation.

3 In light of that fact that, that, to 

4 me, is even more reason that we shouldn't take half 

5 measures that we should, that the Department should 

6 go the full way and prevent institutions that want 

7 to access that participate in the Title IV program 

8 from, from using a forced arbitration and class 

9 action waivers, at all and, to me, that, that puts

10 that back on the table.

11 But if, if no one is, if the group is 

12 not willing to discuss that, right now, I 

13 understand, but I just wanted to put that position 

14 on the table.

15 MS. CARUSO: Ashley Harrington.

16 MS. HARRINGTON: I would be more than 

17 happy to discuss that, if other people would be 

18 willing to discuss it. And piggy-backing on what 

19 Valerie, the non-lawyer said, before the agreement, 

20 we're just reminding people that, every school 

21 signs a program participation agreement, which is

22 a series of requirements for participation in the 

23 federal funding program, which is not a right. 
41

1 It's not a right to participate, institutions 

2 choose to get access to Title IV money.

3 I think we should re-discuss this band, 

4 which I have not heard anything to dissuade me from 

5 the legal argument the Department has made, 

6 previously, about why they have authority to do 

7 this, and which, if they have authority do this, 

8 they have authority to do more. So I think that 

9 could be a worthwhile conversation.

10 MS. CARUSO: Thank you. Okay, moving 

11 on to Issue Paper Number 3, is that still the plan?

12 MS. WEISMAN: If there are no other 

13 comments, then yes, we can move on. But, if there 

14 are other comments about that topic, we can 

15 certainly address them now, if that's appropriate.

16 MS. CARUSO: William.

17 MR. HUBBARD: That also being the case, 

18 I mean, I think, fundamentally, I just want to make 

19 it clear that, the military and veteran community 

20 can't say more strongly, but oppose the fact that 

21 arbitration agreements are even included, as part 

22 of something that is foisted upon students in, in 

23 a tremendously unfair way.
42

1 But, I think, ultimately, the point 

2 stands that, if it will be used, it must be 

3 disclosed. I, I'm still having a hard time 

4 understanding what the fear of transparency is, 

5 it's as simple as that, really.

6 MS. CARUSO: If there are no other 

7 comments, moving on. If the understanding is still 

8 that, we are moving on to Issue Paper Number 3, 

9 are Issue Papers 1 and 2 printed, or --

10 MS. WEISMAN: Issue Paper Number 1 is 

11 ready, Issue Paper 2 is still being printed, so 

12 I think we should move on to do Issue Paper 3. 

13 When we have both of them available, we can 

14 distribute them, maybe, give a slightly longer 

15 break and allow some time to read.

16 MS. CARUSO: Okay.

17 MS. WEISMAN: But, I think, at this 

18 point, we should ask the members of the subcommittee 

19 to come back up and be available for any questions 

20 and move on to Issue Paper 3, so that we can still 

21 keep it moving.

22 MS. CARUSO: And can Issue Paper Number 

23 3 be --
43

1 (Off the record comments.)

2 MS. CARUSO: It is. Thank you, 

3 Barbara. Issue Paper 3 has been emailed to 

4 everyone.

5 (Pause.)

6 MS. WEISMAN: So I'm going to kick us 

7 off with the change to the text on the triggers 

8 and then I'll have a member of the subcommittee 

9 come up to discuss the more specific, I don't know 

10 if there's an equivalent term for legal ease to 

11 account ease, but I will have them address those 

12 items.

13 So we did change the triggers, to some 

14 extent. We adjusted language in romanette (iv) 

15 here, by saying the institution stock is de-listed 

16 from an exchange voluntarily, or involuntarily, 

17 for any reason.

18 And then, romanette, I'm sorry, Roman 

19 Numeral V, no, Arabic 5, is the institution is 

20 required to pay any debt, or incur any liability 

21 arising from a final judgment, or determination, 

22 in a judicial, or administrative, proceeding, 

23 related to making of a direct loan, or the provision 
44

1 of educational services.

2 So this is adding, for all 

3 institutions, it's another discretionary trigger, 

4 where the school would be required to notify the 

5 Department that the condition exists, and then the 

6 Department would use that information, evaluate 

7 it and determine, if they want to take additional 

8 steps.

9 MS. CARUSO: Are you going to, is that 

10 where you're going to pause?

11 (No audible response.)

12 MS. CARUSO: Okay. Aaron.

13 MR. LACEY: My concern is just, even 

14 with the box around the provision of educational 

15 services, there's an awful lot that gets in there 

16 and institutions that are going to want to be 

17 compliant, or, or, you know, want to avoid any 

18 potential non-compliance with the notice 

19 requirement, are going to take a conservative view 

20 anyway of what that means, and I just want to be 

21 clear.

22 I mean, if every time Ohio State gets 

23 sued by a student, right, and has any debt, or 
45

1 liability, 100,000 students, major state 

2 university, they're going to have to report it to 

3 the Department. I mean, I think this is going to 

4 require the reporting of thousands of claims a year.

5 There are all kinds of little lawsuits 

6 that occur and this is every institution, this isn't 

7 just publically-traded institutions, and every 

8 time that this doesn't have any sort of 

9 qualification for amount, there's nothing about 

10 how substantial it is, relative to the school's 

11 resources --

12 MS. WEISMAN: So do you have a 

13 threshold amount suggestion?

14 MR. LACEY: I would, I would take 

15 Number 5 out. I just, I think that's, I don't think 

16 that's administratively workable for the 

17 Department.

18 You know, I mean, I get the concern on 

19 the other side, we want the Department to know 

20 about, you know, anything that's material's going 

21 to be reported in your financials, every year, if, 

22 if the auditor thinks it's material to the 

23 institution.
46

1 I just do not think that's workable. 

2 I, it's not about, I, you know, it's not about 

3 knowledge, I don't have a -- I just don't think 

4 that's administratively workable. I don't think 

5 we're clear on the volume of stuff you're going 

6 to be getting, from every institution in the 

7 country, so I don't know, but I would strike it.

8 MS. WEISMAN: So could I suggest --

9 (Off the record comments.)

10 MS. WEISMAN: Oh, go ahead, Ted.

11 MR. BANTLE: So, Aaron, understanding 

12 your suggestion is removal of Number 5, I heard 

13 you use the qualifier material, which, with my 

14 limited understanding of accounting, does have 

15 significance. Would it address your concern, 

16 required to pay any material debt, or something 

17 of that nature, does that address your concern?

18 MR. LACEY: You know, we could add, I 

19 mean, this is a determination the institution would 

20 have to make, but you could add something like, 

21 any -- I mean, there's a couple of different 

22 concepts, there's, sort of, material adverse 

23 effect. There is (indiscernible) that are a 
47

1 current liability -- let's put it behind the 

2 liability, actually.

3 So the institution's required to pay 

4 any debt, or incurring any liability that would 

5 be material to -- I mean, the accountants can help 

6 me out, to the --

7 (Off the record comments.)

8 MS. WEISMAN: So I have a suggestion --

9 MR. LACEY: Well, yes, here we go. 

10 Help me, help me --

11 (Off the record comments.)

12 MS. WEISMAN: Oh, go ahead. Yes.

13 PARTICIPANT: Well, I guess, I'm a 

14 little confused, because this concept, so you're 

15 paying a debtor, incurring a liability, this is 

16 going to be part of your composite score 

17 calculation, because you're going to put it on the 

18 books, where these other things here, are not things 

19 that would be part of that composite score. So 

20 this is already captured in the other sections of 

21 this, I think.

22 MS. WEISMAN: So the idea here, of the 

23 triggers, is to give a more early warning system 
48

1 to the Department, so that it can act before a 

2 significant number of claims would be received, 

3 and determine if there's a reason to obtain the 

4 letter of credit, because they see substantial risk 

5 coming.

6 So if you think about the idea of a 

7 private non-profit institution, or a public 

8 institution, they have nine months, after the end 

9 of the fiscal year, to submit their financial 

10 statements, then we have some time for the staff 

11 member to work them.

12 So we're looking at a year, plus, before 

13 we ever really get that information. This would 

14 give us the information immediately, within ten 

15 days, so to speak, you know, whatever we determine 

16 that, that time frame would be for reporting, but 

17 it would give us a much earlier warning.

18 So then, to the second point, the idea 

19 of saying material concerns me, because I think 

20 people are going to want to qualify that, to some 

21 extent. So what I was thinking is, could we do 

22 something with a percentage of the Title IV(a) 

23 disbursed in the previous year?
49

1 MS. HUDSON PERRY: Well, so material, 

2 material doesn't really have anything to do with 

3 your, the amount of financial aid, material is based 

4 on your financial statements, as a whole.

5 And there is a very clear definition 

6 of material, when you're audited, from your 

7 financial statements. So every single accounting 

8 firm is going to calculate materiality, based on 

9 an individual's financial status. So each school 

10 has a different materiality level, based on their 

11 audit and financial statements.

12 But with this, it -- so assuming that 

13 this stays, which I, I'm not sure I agree with it, 

14 but do you also then, in the part where you're going 

15 to recalculate a score, include this? Because, 

16 it's the same real, it's really the same concept 

17 of the Department incurring a liability.

18 It is, from a financial statement 

19 perspective, it is, because, what this is saying 

20 is that, they have a final judgment that says they 

21 have a liability that they then have to pay, which 

22 is the same concept, as the Department saying you 

23 have a liability that you have to pay. So there 
50

1 should be a, if this stays, there should be also 

2 a recalculation of the score and how it effects 

3 that. It shouldn't just be based on the fact that 

4 there's a judgement, because it might not have an 

5 effect on a composite score that's already defined.

6 PARTICIPANT: I would strongly 

7 disagree with creating, yet, another requirement 

8 for the Department to try to take a, you know, a 

9 perspective liability, or, or, and, once again, 

10 recalculate some sort of interim composite score.

11 I understand philosophically that it 

12 would make sense, I already disagree with 

13 recalculating on the basis of the borrower defense.

14 MS. HUDSON PERRY: And I, and I totally 

15 agree with that.

16 PARTICIPANT: Yes.

17 MS. HUDSON PERRY: I'm just saying, if, 

18 if this language were to stay, I think that you 

19 need to recalculate. This alone should not be a 

20 trigger, for loss of a better word.

21 PARTICIPANT: It, I don't think it's 

22 a trigger, it's just a notice requirement, so the 

23 Department's aware of the judgment. And then, if 
51

1 they feel like that's worthy of some sort of further 

2 investigation, they can do it. I don't want to 

3 require an additional automatic -- right, but, but 

4 I think that the point, I totally agree with Kelli 

5 that it's got to be materiality relative to the 

6 operations and financial, overall financial health 

7 of the institution.

8 MS. HUDSON PERRY: So if we are going 

9 to add a materiality clause, I think it's 

10 materiality, as defined by your external audit 

11 firm, or materiality, as it relates to -- it's 

12 really your audit firm that's calculating that 

13 materiality. I don't know, Sue, if you have a 

14 recommendation on that?

15 PARTICIPANT: I agree. Unless you 

16 want to define materiality, based on a Title IV 

17 threshold. Because, an auditor could use that 

18 judgment for an institution.

19 PARTICIPANT: I would disagree with 

20 calculating the materiality threshold, based on 

21 financial aid. We all have independent audits, 

22 profit, as well as not-for-profits, and I have seen 

23 these thresholds range from $5,000 and then they, 
52

1 the essence of the University of Alabama, or the 

2 Ohio State, it's over a Million Dollars. So I think 

3 putting in just a, a statement, without defining 

4 how that statement is to be defined, is probably 

5 at right.

6 MS. CARUSO: Okay, we've got Suzanne, 

7 Abby, and Alissa, but does the Department, or the 

8 Working Group, want to respond further, at this 

9 point?

10 MR. KOLOTOS: This is John Kolotos. 

11 I just want to say a few things, before we get too 

12 much into this conversation. The reason for the 

13 recalculation is for the Department to determine --

14 PARTICIPANT: Could you speak into the 

15 mic?

16 MR. KOLOTOS: -- whether it's a 

17 material event. We can't, in this trigger, or in 

18 any other trigger, put limits on what the 

19 materiality is, because that defeats the purpose 

20 of what we're doing. Okay.

21 If you think about it, it's a 

22 $1-Million-Dollar liability material. It's 

23 material to us, if it drops the composite score 
53

1 below a 1.0. If it doesn't, it's not material to 

2 us.

3 We can't build that in, you can't 

4 pre-qualify this particular trigger. Now, what 

5 you might want to consider, is putting some limits 

6 around what the administrative and judicial 

7 judgments might be, for example, would they only 

8 stem from a state or federal agency action?

9 MR. LACEY: John, respectfully, I 

10 totally disagree. I, these are all, essentially, 

11 definitions of what you think represent 

12 materiality, right? When these events occur, the 

13 Department is taking the view that they're material 

14 events.

15 So for the Department to say you've got 

16 a notice obligation when this event occurs and 

17 including a materiality qualifier is totally 

18 workable. That kind of standard exists all the 

19 time.

20 And, if the institution fails and you 

21 subsequently fail to notify you and you 

22 subsequently determine that they failed, because 

23 of something, in your view, was material, then 
54

1 that's on the institution.

2 I mean, the burden is on them to make 

3 the determination, as to whether or not they think 

4 something is material, some liability, or judgment, 

5 is material to their overall operations.

6 But, look, without any kind of 

7 materiality concept included here, there's no way 

8 I could support this idea. I mean, I would also 

9 ask that we take a temperature check on striking 

10 it. I mean, that's a proposal. I just think that 

11 this is, without a materiality threshold, 

12 administratively unworkable.

13 MS. CARUSO: Okay, so before we do 

14 that, I, I want to give everyone else a chance to 

15 speak, they've been waiting. Suzanne.

16 MS. MARTINDALE: Just a couple quick

17 points. We're talking about final judgments, or 

18 resolutions, and this is also a discretionary 

19 trigger, so I think that's important to emphasize.

20 Another thing I wanted to mention is 

21 that, when I opened my Google Doc, there was 

22 language that said final judgment, or determination 

23 in a judicial, or administrative, proceeding, or 
55

1 a settlement, and I don't see that up there, so 

2 I just want to make sure that we're, we had the 

3 right, that we're talking about the right language. 

4 Did you intend to include settlement, because 

5 that's what was in what was emailed to me?

6 MS. WEISMAN: The language on the 

7 screen is the updated corrected language.

8 MS. MARTINDALE: I see. Okay. So 

9 final judgment, or determination. And is it, in 

10 your view, would a determination include things, 

11 like consent orders and other, other forms of 

12 publically-announced final resolutions of cases, 

13 not just judgments? And I appreciate the language, 

14 thank you.

15 MS. WEISMAN: So based on the comments 

16 that we heard at the table, yesterday, from our 

17 AG representatives that we believe that they would 

18 be consent judgments and that they would be 

19 publically available.

20 MS. CARUSO: Abby.

21 MS. SHAFROTH: I'm also supportive of 

22 this addition, I appreciate it, from the 

23 Department. I, I disagree with Aaron that we need 
56

1 to include a materiality provision here, 

2 especially, a sort of financial materiality 

3 provision.

4 In some ways, I think that would make 

5 it harder for institutions to comply with, because 

6 they'd have to do this assessment each time, rather 

7 than just immediately notifying the Department, 

8 if there is a final judgment against them that, 

9 that falls into this category of relating to the 

10 making of direct loan, or provision of educational 

11 services.

12 The other reason that I think a 

13 materiality provision is inappropriate is, you 

14 know, as Suzanne mentioned, this is a discretionary 

15 trigger for the Department.

16 It's just notifying the Department, so 

17 the Department can take a closer look and see, is 

18 this a signal that the institution is in trouble, 

19 that it might not be able to meet its financial 

20 responsibility and administrative capability 

21 anymore and that we need some sort of assurance, 

22 to protect tax payers and to protect the students.

23 In light of the, you know, there have 
57

1 been, there have been negotiators this week saying 

2 that, that the amount of, that, often, the amount 

3 of relief to a student, in a borrower defense claim, 

4 isn't, even if it's a small, a small financial 

5 amount that could still be devastating to a school, 

6 because of the reputational harm that, that -- and 

7 I imagine that same thing would hold for a judgment, 

8 if there was a final judgment against a school that 

9 the school committed fraud, then the Department 

10 should know about that, because, because that might 

11 mean that that institution is going to be in a lot 

12 of trouble, soon.

13 That might be that, students are going 

14 to withdraw. That students aren't going to enroll. 

15 That they're, that they, that they might lose their 

16 accreditation. That, that, that's an important 

17 signal that, that some that that institution, you 

18 know, may be, may be in a lot of trouble.

19 Sometimes it's not. You know, 

20 sometimes it might just be a small one-off thing 

21 and it's not going to, going to matter that much, 

22 but this is, that's why this is discretionary, the 

23 Department gets to look at it and gets to make that 
58

1 assessment. So I'm strongly in favor of including 

2 this provision and of not limiting it by some 

3 financial materiality standard.

4 MS. CARUSO: Alyssa.

5 MS. DOBSON: To the extent that this 

6 is supposed to apply to all institutions, I'm not 

7 certain that the amount of work that, a public 

8 institution would have to do with sending in these 

9 disclosures, would result in anything, if we've 

10 already kind of determined, and it's included in 

11 the language, that a letter of credit wouldn't be 

12 necessary since we are backed by the full faith 

13 and credit of our state, then I'm not really sure 

14 why the Department would want that kind of volume 

15 of communication from the public. So I just can't 

16 see the value in including public institutions in 

17 this requirement.

18 MS. CARUSO: Kelli.

19 MS. HUDSON PERRY: Abby, I can totally 

20 appreciate what you're saying. But, because of 

21 the fact that we're writing this for every 

22 institution across the country, we have to, I mean, 

23 we have to think about the fact that you could have, 
59

1 in this case, there could be a judgment that's 

2 $10,000 for a school that has a 

3 $500-Million-Dollar-Budget.

4 I mean, it creates a lot of additional 

5 reporting that, or could create a lot of additional 

6 reporting that just isn't going to warrant 

7 anything.

8 MS. CARUSO: Aaron.

9 MR. LACEY: Yes, and I'll point out, 

10 it's not just a final judgment, right, it's a 

11 determination in an administrative proceeding. 

12 That's the lowest threshold, the way you can read 

13 this language.

14 So if I go through a process, when I 

15 do my annual audit, with the Department, right, 

16 my final audit determination, that's a final 

17 judgment in an administrative proceeding, right, 

18 any kind of program review.

19 If I settle something with OSHA. If 

20 the state comes in and does a review. This isn't 

21 even limited to borrower defense claims, right, 

22 this is any administrative proceedings.

23 So you're talking about a major public 
60

1 university, with a, you know, 90,000 students and 

2 50,000 employees. Every time there is a state, 

3 or federal, or any kind of agency administrative 

4 proceeding and you have a determination in that 

5 administrative proceeding, for $5.95, I have to 

6 report it to the Department.

7 I'm telling you, this language is 

8 disastrous the way it's written. If you want to 

9 change it to arising from a final judgment, you 

10 know, in a state, or federal, court proceeding that 

11 the institution committed fraud, I have no problem 

12 with that, no problem.

13 I mean, if the concern is fraud, let's, 

14 let's get at that concern. But, as written, this 

15 is a disaster, respect, respectably.

16 And I'm assuming that just wasn't 

17 appreciated. It's not even borrower defense 

18 claims, it has nothing to do with fraud, or not 

19 fraud, it's any administrative proceeding. That 

20 would be a disaster for, for, for institutions, 

21 in terms of the reporting that's being required 

22 here.

23 So I would propose, arising from a final 
61

1 judgment in a state or federal court proceeding 

2 that determined the institution committed fraud. 

3 I don't have any issue with that, the Department 

4 should know that.

5 MS. CARUSO: Okay. Juliana. And, 

6 Abby, if you could, I'm having a problem 

7 distinguishing your tent from Juliana's, just 

8 because of the placement of the drinks in front 

9 of you. Thank you. Thank you.

10 MS. FREDMAN: So first, I think, there 

11 is a limiter on there, it's related to the provision 

12 of educational services, so I don't really see how 

13 an OSHA administrative proceeding would make it 

14 into that equation, because that is most certainly 

15 not related to the provision of educational 

16 services.

17 We would be opposed to having the fraud 

18 language, because it would leave out, for instance, 

19 State Unfair and Deceptive Practices Act lawsuits, 

20 which might be completely related to the kinds of 

21 issues Abby raised.

22 And, finally, to the extent that 

23 arbitration clauses are not banned, then an 
62

1 arbitration decision should be added to that 

2 judicial, administrative, or arbitral proceeding.

3 MS. CARUSO: Kelli.

4 MS. HUDSON PERRY: Well, this, then 

5 makes the definition of provision of educational 

6 services much more important. Because, if we don't 

7 have that box around it, in the other Issue Paper 

8 that we talked about, this could extend into things 

9 that it, it may not have anything to do with 

10 borrower.

11 MR. LACEY: And I'll just add, I mean, 

12 I've thrown out the fraud, because that was the 

13 example given. But I really don't think that makes 

14 sense.

15 I mean, what we're really talking about 

16 is financial responsibility and whether there's 

17 a consequence of whatever this judgment might be, 

18 there's some sort of potential harm, or risk of 

19 failure of the institution, which is why a 

20 materiality threshold, based on the financial 

21 wherewithal of the institution, as a whole, makes 

22 perfect sense, right.

23 I mean, that's what we're talking 
63

1 about, was there some sort of judgment? Who cares 

2 what it was about? Who cares? If, if it's 

3 threatening the financial stability of the 

4 institution?

5 That's really what it's about, is what 

6 the Department wants to know, which is why I go 

7 back to my point that, qualifying this with some 

8 sort of materiality threshold, which accountants 

9 in schools do all the time, relative to the overall 

10 financial health of the institution, is the 

11 sensible thing to do.

12 That's what the Department wants to 

13 know here, is, is there a threat to the financial, 

14 institution's financial health? And if the school 

15 screws it up, that's on the school.

16 They've got to -- and they're going to 

17 be conservative, because they're not going to want 

18 to fail the notice requirement, right, but make 

19 the school have to reach a determination, as to 

20 whether they think it's material, or not.

21 MS. CARUSO: Aaron, I, I could be 

22 wrong, I think I heard you say that you wanted to 

23 reclaim this fraud language, take it, take it out 
64

1 of that proposal?

2 MR. LACEY: Yes that's fine. I'm okay 

3 with it.

4 MS. CARUSO: Okay.

5 MR. LACEY: The most important thing 

6 to me --

7 MS. CARUSO: Knowing that it's 

8 probably not going to be accepted?

9 MR. LACEY: Yes, the most important 

10 thing to me is that, the whole idea here is that 

11 some event has occurred that is material to the 

12 institutions -- not Title IV, because that doesn't 

13 necessarily rate to the institution's overall 

14 financial health.

15 The question is whether or not the debt, 

16 or liability, is a threat to the institution's 

17 overall financial health. And I'm sure the 

18 accountants have a better way of qualifying that, 

19 than I do, but that's the key concept. 

20 MS. CARUSO: Okay, while they're doing 

21 that, Michael, and then Abby.

22 PARTICIPANT: Right, I mean, this 

23 section is about determining financial 
65

1 responsibility. It's not about determining, 

2 whether or not fraud has, has happened.

3 So I agree. First, I'm not, I don't 

4 really remember where this came from, because it 

5 wasn't in the original draft, but, or how it got 

6 added in, but that notwithstanding, I think that 

7 the materiality piece is the right way to go and 

8 that, it should be limited to, pay any liability, 

9 I don't know why it's a debt, or a liability, it's 

10 just a liability, from a final judgment that would 

11 be for them to -- that that liability is material 

12 to the institution's financial health, or 

13 soundness, and just -- that's the box.

14 It doesn't have to be about fraud, or 

15 any -- this is not about that, this is about 

16 financial responsibility, period, and when the 

17 Department's going to take a look at it.

18 And I totally agree with Annmarie, 

19 because, if creditors have the same problems in 

20 getting financial statements that are six or nine 

21 months after the fiscal year -- my agency has a 

22 similar requirement.

23 If there is a final judgment, then we 
66

1 want to know about it, regardless of when it, what 

2 set of financial statements it ends up on, you've 

3 got to notify us of that and then we will take a 

4 look at it.

5 So this is a mechanism. And I agree 

6 with the avenue and the opportunity, but we got 

7 to move on, folks. So materiality, let's give the 

8 Department a chance to look at it and, and, and, 

9 you know, move to the next issue here.

10 MS. WEISMAN: Michael, since you 

11 mentioned that, I'd just like to pose a question 

12 that might help to inform us, as well. Since you're 

13 saying your agency has a similarly requirement, 

14 can you give us a sense of the burden of reporting, 

15 how many of these you get in a year, for example, 

16 I mean, do you see this a lot, do you see it a little?

17 PARTICIPANT: So my agency accredits 

18 about 750 institutions, public, private, 

19 for-profit, non-profit, but predominantly, 

20 probably, for-profit, and I would say it is, and, 

21 for final, it's de minimis. It's not a large number 

22 of final judgments coming from court action.

23 Now, maybe, now administratively, 
67

1 administrative actions, however, that is the bulk 

2 of the, of the types of notifications we get. We 

3 get them from the Department, we get program 

4 reviews, we get final determinations on that, all 

5 the -- and they, as I said yesterday, they can be 

6 for $13.40, or they can be for several million, 

7 and letters of credit and everything else.

8 So, but I still think that, I don't find 

9 that to be such a burden that we shouldn't, that 

10 we choose not to do it. We get the information, 

11 if -- and I don't -- Aaron, to your point, if the 

12 Department is not saying that it is a burden, then 

13 I don't think it's our role to tell the Department 

14 what's going to be a burden on them.

15 If they're not objecting to, to this, 

16 that's up to them to, to make that determination, 

17 make that objection. That's not up to us to tell 

18 them what's a burden on the Department.

19 So if they're not objecting to this 

20 language, on those grounds, then I'm taking them 

21 at their, at their word that, that they're able 

22 to, to handle that and they're not, they're not 

23 objecting to it, so.
68

1 But, for the sake of moving this 

2 conversation along, I think that the right place 

3 to put this is about materiality and, and, and move 

4 on to the next thing.

5 MS. CARUSO: And, Michael, can you just 

6 say a bit more about the right place, to put it 

7 in this paragraph?

8 PARTICIPANT: So I would just, and 

9 Kelli could probably help with this, but the 

10 institution is required to pay any material 

11 liability, arising from a final judgment, or 

12 determination, in a judicial or administrative 

13 proceeding, related to the making of a direct loan 

14 or the provision of educational services.

15 That keeps out a number of other, of 

16 other kinds of material finds, but those will, those 

17 will show up on the financial statements, later 

18 on. It's not like we're never going to see them.

19 But what the Department is concerned 

20 about is, this is relating to the making of a direct 

21 loan of the provision of educational services.

22 MS. HUDSON PERRY: The only thing I 

23 would add is, any material, as defined by the 
69

1 institution's auditors, for financial statement 

2 purposes, because, then that puts somewhat of a 

3 box around material. Every institution has a 

4 materiality threshold, for financial statements.

5 MS. CARUSO: Okay, if you could, review 

6 that, and then, and then, I'd like to hear from 

7 Abby and Ashley Harrington.

8 MS. SHAFROTH: Thanks. So and, not 

9 being an accountant, I don't know whether material, 

10 as defined by an institution's auditors, for 

11 financial statement purposes, would get at the, 

12 the type of judgment I, concern I raised.

13 So a judgment that it might be, the, 

14 the financial liability for the judgment, itself, 

15 may be small, but it may be that, that the judgment 

16 is, you know, the judgment findings are, sort of, 

17 so inflammatory and damaging to the reputation of 

18 the institution that, that there's real risk that 

19 the institution is going to close.

20 I mean, that's what, what Mike Busada's 

21 been telling us, this week, that there's real, real 

22 threats to institutions being able to, that, that 

23 his, basically, he said that if there's a successful 
70

1 borrower defense against his school, his school 

2 would probably close.

3 And so that's what I'm trying to get 

4 at here, if, you know, even if the liability, 

5 itself, is, is fine, is, the monetary amount is 

6 small, that there might be a real risk and I'd like 

7 the Department to have the discretion to, to, you 

8 know, to take, to take steps to get protection, 

9 if that's the case and it's, you know, it's 

10 discretionary and, so just, yes, not being an 

11 accountant, I don't know whether this would, this 

12 language would get at that.

13 PARTICIPANT: And I understand that. 

14 But, this is not the mechanism, necessarily, for 

15 that to happen. There are other mechanisms, within 

16 the triad, for information sharing that will give 

17 the Department knowledge, either, through the 

18 relationship with their state -- I mean, this is 

19 a, this is a, what you're talking about, it's not 

20 just that, a liability was incurred, in relation 

21 to a determination, but you don't want, you don't 

22 want the amount to be, to be the issue, why they 

23 don't look at it.
71

1 But, again, they're looking at this for 

2 financial responsibility issues, there are other, 

3 other mechanisms for that to happen, without it 

4 having to live here.

5 MS. WEISMAN: Can I add, just add to 

6 that? Abby, typically, an institution that's 

7 going to be high risk, like, you know, Mike talking 

8 about the fact that, if one thing happened, it would 

9 close his school, those schools are typically going 

10 to have a lower, much lower materiality threshold, 

11 simply because of that fact.

12 So it's not like we're looking at 

13 something where somebody's going to have a high 

14 materiality threshold that, that could potentially

15 close their school.

16 MS. SHAFROTH: And I, Michael, I, I 

17 hear what you're saying. I wouldn't, but I, you 

18 know, I don't, I don't know all this area, I'm not 

19 an auditor.

20 And, to me, this section was saying 

21 these are, these are things on which the Department

22 can take a look and decide, if it needs some sort 

23 of financial protection, in case of, you know, in 
72

1 case the school, it might, might close, or it's 

2 otherwise, you know, these are, these are signs 

3 of potential financial distress, are there other 

4 -- what other, what other ways could the Department 

5 get that sort of financial security, based on the 

6 types of, the types of events I've just described? 

7 Maybe the Department can answer, maybe, I don't 

8 know.

9 PARTICIPANT: Well, I mean, I'm -- I'm 

10 sure the Department can answer that, but there are 

11 a variety of reasons why they can take an LST. 

12 That, that -- Limitation, Suspension and 

13 Termination Action that don't have to be tripped 

14 by, what John mentioned in the one. But that's 

15 one of several reasons why a letter of credit could 

16 be issued.

17 A letter of credit could be issued, 

18 because the creditor placed him on probation. We 

19 see that frequently. I mean, there are, there 

20 are -- I'm just suggesting that there are other 

21 mechanisms that don't, necessarily, have to do with 

22 this.

23 And, and, and, you know, if, if the 
73

1 issue here is just about, whether they're going 

2 to close, precipitously, I'm, I'm, I'm not even 

3 really sure whether, whether this gets to that, 

4 one way or another. But requiring it, in every 

5 single instance, I think, is a solution in search 

6 of a problem.

7 MS. SHAFROTH: I was just hoping to 

8 hear a little bit more from the Department. I mean, 

9 I -- you know, I raise these issues, in part, because 

10 of the, we have the Office of Inspector General's 

11 report saying that the existing triggers were 

12 insufficient to, to protect students and taxpayers 

13 against precipitous closures and other, and, and 

14 other events related to, to school misconduct, but, 

15 but other issues, as well, and the, that report, 

16 you know, it pointed to, pointed to some of the 

17 triggers that were advanced in the 2016 Rule, as, 

18 as triggers that would be helpful.

19 Those triggers have been, largely, left 

20 out of this proposal. And this was, you know, an 

21 attempt to try to, to try to bring something back 

22 in that would insure that the Department does have 

23 sufficient authority to protect borrowers and 
74

1 taxpayers.

2 So I'd love to hear from the Department, 

3 itself, as to, sort of, you know, you drafted this 

4 language, without a materiality, sort of, what you 

5 think, where, where you feel, whether you feel that 

6 you have, you know, sufficient authority to, and 

7 discretion to, to take the steps necessary to, to 

8 protect taxpayers.

9 MS. WEISMAN: So I think this gets us 

10 significantly more than what we had, before we 

11 started with this text. I think that, I'm, I'm 

12 hearing the balanced needs around the table.

13 I think that, you know, Aaron is right, 

14 we, we don't want every, you know, $5,000-claim. 

15 It's, it's generally not going to have a 

16 significant impact.

17 But, if the concern is, while for a 

18 smaller school, a smaller claim might, then using 

19 a materiality standard is something I would 

20 support.

21 Because, again, it balances out the 

22 needs of us getting the information that we need, 

23 when it's significant, but not getting every little 
75

1 thing that could trickle in.

2 I think that, balancing the needs of 

3 getting in information with not getting too much 

4 information, is important to the Department. And 

5 I think that the language that's proposed with the 

6 materiality standard makes a lot of sense. I'd 

7 like to take that back for review, with others of 

8 the Department.

9 But, I think, at this point, if we can, 

10 we really should continue on with Paper 3, because 

11 we would like to finish Paper 3, take a break, and 

12 give you Issue Papers 1 and 2 to review and have 

13 some time to read.

14 MS. CARUSO: So if we could hear from 

15 William and then, Michael, and then hopefully get 

16 a temperature check around, at least, this --

17 MR. HUBBARD: My comment --

18 MS. CARUSO: -- language in its current 

19 state.

20 MR. HUBBARD: My comment is very quick. 

21 I definitely appreciate Michael's point about the 

22 creditors providing additional levels of 

23 oversight. That's extremely important.
76

1 Unfortunately, not all creditors are 

2 as good as my friend, Michael, across the table, 

3 but I think their, the ability for the Department 

4 to also directly have that interface, is important, 

5 for that reason.

6 PARTICIPANT: My question is just for 

7 Kelli, really. Does the, as defined, go after 

8 material, or material liability, where is the 

9 definition? I think it, I think it, probably, goes 

10 after liability. The materiality, as defined, is 

11 it material as defined, or material liability as 

12 defined?

13 MS. HUDSON PERRY: It's material, as 

14 defined, the way --

15 PARTICIPANT: Okay.

16 MS. HUDSON PERRY: -- that it's 

17 written.

18 PARTICIPANT: All right.

19 MS. HUDSON PERRY: Because you're 

20 looking, you're not just looking at your 

21 liabilities, as being material, you're looking at 

22 the materiality of the institution, itself.

23 MS. CARUSO: Okay. The language, as 
77

1 written, in yellow. Let's see a show of thumbs. 

2 Alyssa.

3 MS. DOBSON: Can we add excluding 

4 public institutions to the language? I see it down 

5 there, as a suggestion, but I don't see it in the 

6 stuff that we're about to vote on.

7 Excluding public institutions.

8 Why? The -- The purpose is to protect 

9 the taxpayer and, as a trigger for a letter of 

10 credit. And we've already determined that public 

11 institutions, unless they're subject to past 

12 practice, wouldn't be required. So I don't see 

13 the, it just seems, sort of, contradictory to other 

14 things that are already in the Paper.

15 MS. WEISMAN: I think the Department, 

16 I think the Department would still want to know, 

17 though, in case it may spark us to take other action, 

18 to, to do other considerations. I think it would 

19 be helpful for us to know.

20 MS. CARUSO: Juliana and then, and 

21 then, we have got to move forward.

22 MS. FREDMAN: So I just want to, 

23 quickly, point out and, you know, our concern with 
78

1 the materiality provision, taking into account 

2 everything that's been said here, for example, with 

3 the Corinthian, which was a giant 

4 publically-traded-corporation, even if the school 

5 had, in a lawsuit, had a judgment where they had 

6 to return the entire $30,000 or $40,000 in tuition, 

7 it probably wouldn't have been material, in light 

8 of the total budget of that school.

9 And I think that's something that the 

10 Department might've wanted to know about, if it 

11 was related to the kinds of problems with the 

12 educational service that we saw.

13 MS. CARUSO: As written, in highlight, 

14 please provide a show of thumbs, whether you can 

15 live with this language in the context of a full 

16 agreement.

17 (Pause.)

18 MS. CARUSO: We have one thumb down. 

19 Can we please hear from you, Abby?

20 MS. SHAFROTH: Yes. I mean, I've, 

21 I've said my peace about material, but Juliana had, 

22 had made a proposal that we include the final, final 

23 judgments from arbitral proceedings, which, you 
79

1 know, seems important, to the extent the Department 

2 isn't going to ban use of mandatory arbitration 

3 by predatory institutions that the Department would 

4 want to know about those, as well, and we hadn't 

5 had any voter discussion of that.

6 I also take Alyssa's point that public 

7 institutions are backed by, backed by their state 

8 and so I, I would be supportive of putting an 

9 exclusion, so that this wouldn't apply to public 

10 institutions.

11 MS. CARUSO: Abby, does that get to 

12 what you just proposed, from arbitral proceedings?

13 (No audible response.)

14 MS. CARUSO: Okay, please review the 

15 language, highlight it in yellow, and provide a 

16 show of thumbs as to, whether you can live with 

17 this language, in the context of a full agreement.

18 PARTICIPANT: Is, is arbitral 

19 proceedings already included under administrative 

20 proceedings, or is it separate?

21 It's separate, okay, thank you.

22 MS. CARUSO: Thumbs, please.

23 (Pause.)
80

1 MS. CARUSO: Barmak, your thumb is 

2 down, can you please provide a proposal that 

3 would --

4 MR. NASSIRIAN: Exclude publics, 

5 please. This is either an attempt at, at a causal 

6 understanding of potential downstream financial 

7 consequences, or it is, as Michael described, an 

8 actual attempt at amending the Department's

9 understanding of the financial circumstances of 

10 the institution, for the purpose of requiring 

11 additional surety to protect the taxpayers.

12 It is my understanding, based on the 

13 conversation we had that the latter was allegedly 

14 the purpose here, in which case, the publics ought 

15 to be excluded, because it'll make no difference, 

16 with regard to their posting of any additional 

17 surety and it will inundate the Department with 

18 useless communication that, that will eat up 

19 resources that would be better deployed somewhere 

20 where they make a difference.

21 MS. CARUSO: Michael, please.

22 PARTICIPANT: I, I just don't think 

23 that all public institutions are the same. And 
81

1 I don't, I mean, there are several instances where 

2 budgets are being stretched very thin and my own 

3 agency has experience in accrediting public 

4 institutions that are very thinly resourced.

5 And so we have concerns and we don't 

6 treat them differently, we want to see their 

7 financial statements, even though they're backed 

8 by their state, because we have concerns that the 

9 state may choose to not fund that training center 

10 any longer and we want to know that and whether 

11 or not that's a budgetary consideration.

12 So I, I don't see the value and the 

13 Department's not asking for it, so I would not be 

14 supportive of, I'm not going to put my thumb down, 

15 but I'm not supportive of making distinctions, 

16 based upon ownership, or tax status, this should 

17 just apply to all institutions, period.

18 MS. CARUSO: Barmak, does that address 

19 your concern, at all?

20 (No audible response.)

21 MS. CARUSO: Kelli, can you address 

22 Barmak's concern?

23 (No audible response.)
82

1 MS. CARUSO: You got a gold star 

2 yesterday.

3 (Laughter.)

4 MS. HUDSON PERRY: Well, I think the 

5 concept, I think the question I was asked across 

6 the table was, can you determine materiality for 

7 a public institution, and, and you can, because 

8 they all have individual financial statements, even 

9 though it rolls up to, to the state, in most cases.

10 So with the materiality clause in 

11 there, I think you, I, well, I can't say, whether 

12 or not you can get there, but with the materiality 

13 clause in there, at least, it is not going to require 

14 public institutions to do every single, you know, 

15 judgment, or things arising.

16 PARTICIPANT: But they would still 

17 have to do an evaluation of whether or not it was 

18 material and, in the end, it really doesn't matter. 

19 I mean, Pennsylvania's going to pay, if the 

20 Department requests money, as is any other state.

21 MS. CARUSO: All right, let's have a 

22 show of thumbs on this and, one way or another, 

23 we're going to need to move on. As written, 
83

1 excluding public institutions, please provide a 

2 show of thumbs, as to whether you can live with 

3 this in the context of a full agreement.

4 (Pause.)

5 MS. CARUSO: All right, we have one 

6 thumbs down. We'd like to move on and then 

7 reevaluate, based on the entirety of Issue Paper 

8 3.

9 MS. WEISMAN: So this was a correction 

10 to language that we made yesterday. I believe, 

11 Kelli made some suggestions, to include the text 

12 related to non-profit institutions.

13 And what this does is, specifies the 

14 differences in terms that they would each have, 

15 that they would fall under, related to the changes 

16 in the composite score.

17 MS. CARUSO: Any issues with this?

18 (No audible response.)

19 MS. WEISMAN: Would it help if I read 

20 them? I know some people are not auditory 

21 learners, but I can certainly read them for you. 

22 So this starts in D, recalculate in the composite 

23 score.
84

1 It now reads, the Secretary recognizes 

2 that the actual amount of the debt, or liability, 

3 incurred by an institution, for borrower defense 

4 claims, under Paragraph C(1), or the amount the 

5 institution is required to pay, under Paragraph 

6 C(5), as an expense, and accounts for that expense 

7 by, and then, number one is for a proprietary 

8 institution.

9 Romanette (i) is for the primary 

10 reserve ratio increasing expenses and decreasing 

11 adjusted equity by that amount. Romanette (ii) 

12 is for the equity ratio, decreasing modified equity 

13 by that amount. And Romanette (iii) is for the 

14 net income ratio, decreasing income, before taxes, 

15 by that amount.

16 So then, for the non-profit 

17 institution, for the primary reserve ratio, 

18 increasing expenses and decreasing expendable net 

19 assets, by that amount.

20 Romanette (ii) is for the equity ratio, 

21 decreasing modified net assets by that amount. 

22 And Romanette (iii), for the net income ratio, 

23 decreasing change in net assets, without donor 
85

1 restrictions, by that amount.

2 (Pause.)

3 PARTICIPANT: That is correct. If 

4 we're going to be very technical, though, where 

5 it says in, under one, Roman numerette (i), increase 

6 expenses, under the proprietary institutions, it's 

7 increasing expenses and losses, by definition.

8 And then, down in the not-profit

9 section, it's increasing expenses without donor 

10 restrictions and losses without donor 

11 restrictions.

12 And then, the only other thing that I 

13 will say is that, I really still, truly, believe 

14 that it should be the amount of the liability 

15 incurred, not debt, or liability, because it --

16 and I know the Department has two different opinions 

17 on what that means, but I think as we're 

18 specifically talking about this calculation, it's 

19 a liability.

20 MS. CARUSO: Any other concerns?

21 (No audible response.)

22 MS. CARUSO: Can I see a show of thumbs 

23 on this section, as proposed in the context of a 
86

1 whole agreement.

2 (Pause.)

3 MS. CARUSO: No thumbs down. Thank 

4 you. Moving on.

5 MS. WEISMAN: So the next change we 

6 have is in Number 3 on Page 5, Romanette (i) says, 

7 in its notice to the Secretary, under this 

8 paragraph, or in its response to a preliminary 

9 determination, by the Secretary, that the 

10 institution is not financially responsible, 

11 because of an action, or event, under Paragraph 

12 C of this section. So the change here is to add 

13 the word preliminary.

14 MS. CARUSO: Any issues here?

15 (No audible response.)

16 MS. CARUSO: Can we see a show of thumbs 

17 on this section, as amended?

18 Oh, oh, I'm sorry.

19 MS. WEISMAN: So then we have, on 

20 Romanette (ii), the Secretary makes a final 

21 determination, after considering the information 

22 provided by the institution, under Paragraph 

23 C(3)(i) of this section.
87

1 So this is where institutions were 

2 asking for an opportunity to provide information 

3 and that, we have up above in B, for example, show 

4 that the action, or event, has been resolved.

5 This gives the institution that 

6 opportunity to do that and then the Secretary would 

7 make a final determination, after that information 

8 is considered.

9 Can we scroll down? And then, this is 

10 the issue, related to the change in the lease 

11 transition period, going from four years to six 

12 years. This then removes the zone alternative for 

13 three years, after that, so we're just going to 

14 a straight six-year period.

15 PARTICIPANT: Question about the 

16 exemption of withdrawals to pay taxes. Were your 

17 taxes treated differently, if it's a matter of 

18 financial circumstances of the institution, why, 

19 why would you exclude withdrawal of equity for 

20 payment of taxes from other kinds of withdrawals 

21 of equity?

22 Or, are you targeting, like, 

23 prop -- what I'm struggling with is, whether you 
88

1 are attempting to, sort of, capture the notion of 

2 somebody taking profits out, or are you making 

3 distinctions on different kinds of expenditures 

4 and privileging taxes?

5 For reasons I conceptually understand, 

6 but from the Department of Education's perspective, 

7 that's just resources that are -- don't you have 

8 exclusionary language up above on withdrawal of 

9 owner's equity to pay taxes?

10 MS. WEISMAN: Yes, we were only 

11 reviewing changes, though, right now, from text, 

12 from yesterday --

13 PARTICIPANT: Okay. Okay.

14 MS. WEISMAN: -- since we --

15 PARTICIPANT: Good.

16 MS. WEISMAN: -- discussed those in 

17 detail.

18 So our final change on this Issue Paper, 

19 relates to the idea of the offset, as an alternative 

20 form of surety, and we've added the text that we 

21 discussed yesterday.

22 In the last line, where, we've already 

23 talked about the idea of expanding it from six to 
89

1 12 months, we now say at the end, the Secretary 

2 uses the fund to satisfy the debts and liabilities, 

3 owed to the Secretary that are not, otherwise, paid 

4 directly by the institution. I see an extra space 

5 there.

6 And provides to the institution any 

7 funds not used for this purpose during the period 

8 covered by the agreement, or provides the 

9 institution any remaining funds, if the institution 

10 subsequently submits other financial protection 

11 for the amount originally required.

12 So essentially, if you agree to offset, 

13 and then you change your mind and say no, I don't 

14 want the offset anymore, I'd rather submit a letter 

15 of credit, we would allow you to do that.

16 MS. CARUSO: Is that -- good. Okay. 

17 Any concerns with the rest of the language, as 

18 proposed?

19 (No audible response.)

20 MS. CARUSO: Can we see a show of thumbs 

21 on this last section, in the context of a whole 

22 agreement?

23 (Pause.)
90

1 MS. CARUSO: No thumbs down. Are we 

2 at the end of Issue Paper --

3 (Simultaneous speaking.)

4 MS. CARUSO: No.

5 MS. WEISMAN: So we did have changes 

6 in, at least, one of the appendixes, related to 

7 some text that we had yesterday. Do we need to 

8 take a break, at this point, or do we want to finish 

9 with that --

10 MS. CARUSO: We'd like to finish and 

11 then --

12 MS. WEISMAN: Okay.

13 MS. CARUSO: -- and then break when we, 

14 we move over to Issue Papers 1 and 2, pass those 

15 out, and then --

16 MS. WEISMAN: Okay.

17 MS. CARUSO: -- have a break.

18 MS. WEISMAN: So the change that we are 

19 making is what we talked about deleting yesterday. 

20 So we'd already covered it, yesterday, but just 

21 to, kind of, re-enforce, on both Appendix A and 

22 B, we struck the language about long-term debt, 

23 and so that applies to both the for-profit and the 
91

1 not-for-profit institutions.

2 And then, also on Appendix B, Kelli had 

3 requested that we add parentheses around the words 

4 and it's under total revenue without donor 

5 restrictions in the first section.

6 It now would read, total revenue, begin 

7 the parentheses, including amounts related from 

8 restriction, plus total gains. Oh I see, I'm 

9 sorry. We scratched that, so it says, total 

10 revenue, including amounts released from 

11 restriction, plus total gains, and then the 

12 parenthesis begins where it says, investment 

13 returns are reported, as a net amount, interest 

14 dividends, unrealized and realized gains, and so 

15 on.

16 PARTICIPANT: I, I have a question and 

17 I also have, maybe, one additional thing that we 

18 could possibly add. With the debt, where we took 

19 out the debt, I'm fine with that, but in the, where 

20 it starts that definition, where it says, all debt 

21 obtained for long-term purposes, can we add, as 

22 defined by FASB?

23 MS. WEISMAN: So our feeling is that, 
92

1 that changes the way we're currently doing things 

2 and that we would feel less comfortable adding that 

3 in. We feel we've defined it, as we need to, here, 

4 and, and don't wish to qualify it further.

5 PARTICIPANT: How, how does that 

6 change the way that you're doing it? Because the 

7 concept behind this is that you're obtaining all 

8 long-term debt, so FASB defines long-term debt and 

9 all of these definitions are, in essence, defined 

10 by FASB.

11 MS. PEFFER: Rhonda Peffer (phonetic). 

12 Mainly, just because we don't go to FASB on the 

13 other ones, we, it's, we would need to, kind of, 

14 clarify that, on each aspect, where we're getting 

15 our definition from, if we start putting it on one. 

16 So for consistency, we don't think we should do 

17 it here, either.

18 PARTICIPANT: Okay. So that's not a 

19 hill I'm going to die on, but my second question 

20 is, in the supplemental schedule, and I just, I 

21 think I saw it, on what was emailed to us, but I 

22 just want to make sure that, the concept of 

23 long-term lines of credit is a line on the 
93

1 supplemental schedule, so that if people do have 

2 them, they can add them.

3 MS. PEFFER: Yes, we haven't got to the 

4 schedule, yet, but there's a couple of changes that 

5 was proposed that we did do.

6 PARTICIPANT: Okay.

7 MS. CARUSO: Any other concerns with 

8 the document, as amended? Yesterday.

9 MS. PEFFER: There's a couple more 

10 things, like Kelli was talking about that we did 

11 change on the Excel spreadsheet. There was the 

12 definition in the original one that came out that 

13 we read to you, the other day that said what the 

14 supplemental schedule would require. In the 

15 printed one you got now, it should have that text, 

16 so that you could see it, for both the proprietary 

17 and the non-profit schools.

18 And, in addition, we went through and 

19 changed the N/A, changed the zeros to N/A, and we 

20 also went through and changed from the original 

21 spreadsheet to this one, to include, all lines of 

22 credit that was for long-term purposes. So the 

23 line, in actual, now, has more than just the 
94

1 long-term, for long-term purposes.

2 We have the operating ones include, 

3 that if you look at the various lines, there should 

4 be red strikeout, where we struck it out and then 

5 put it in, at second one down that shows that we 

6 included the operating ones that are long-term, 

7 to be consistent with the change in the definition.

8 (Pause.)

9 MS. CARUSO: Is that all, Annmarie?

10 (No audible response.)

11 PARTICIPANT: Just one other question. 

12 Yesterday, I had mentioned the need for a 

13 definition of unsecured related parties, and I know 

14 the subcommittee had provided a definition, for 

15 it to be included in the appendix, as opposed to 

16 in the preamble, was there any consideration given 

17 to that?

18 MS. PEFFER: We did discuss it again 

19 and still decided that it was still preamble 

20 language and not, did not make a change to that.

21 MS. CARUSO: Any remaining concerns, 

22 before we take an, almost, final check on Issue 

23 Paper 3?
95

1 (No audible response.)

2 MS. CARUSO: Okay, so here is what we 

3 are doing now, because we do need to move on to 

4 Issue Papers 1 and 2, before lunch, we are taking 

5 a check, a temperature check, as to whether you 

6 can accept Issue Paper 3, temporarily setting aside 

7 the question of whether to exclude public 

8 institutions, all else in Issue Paper 3, in the 

9 context of a full agreement, please, show your 

10 thumbs.

11 (Pause.)

12 MS. CARUSO: No thumbs down. Thank 

13 you. Moving on, for now, to Issue Papers 1 and 

14 2, which will be passed out to the group, in printed 

15 form. It's, hopefully, happening now. Thank you, 

16 Barbara.

17 So thanking you, in advance, for your 

18 patience, we are going to take 20 minutes, to review 

19 Issue Papers 1 and 2, in conjunction with a restroom 

20 break and return at 11:30 a.m., to ask questions 

21 and provide comments and issues, so that the 

22 Department can consider them, which they very much 

23 want to do, during the lunch period.
96

1 Okay. Folks, before -- Can we settle 

2 down, so that we can get our instructions, please?

3 Thank you. We are going to take 20 

4 minutes to review Issue Papers 1 and 2, in 

5 conjunction with a restroom break and return at 

6 11:30 a.m., to provide comments and issues and 

7 additional proposals to the Department that they 

8 can then consider, during lunchtime --

9 Folks, silence, please. This is the 

10 last day. This is your last opportunity. 

11 Everyone, please.

12 We will return at 11:30 a.m., with 

13 comments, questions, and additional proposals for 

14 the Department to consider, during lunchtime, which 

15 we are told is a hard stop of Noon. Thank you.

16 (Whereupon, the above-entitled matter 

17 went off the record and resumed.)

18 MS. CARUSO: All right, everyone, 

19 we're ready to get started. And, just to kick this 

20 off, I believe, we have a couple of clarifications, 

21 from the Department, so I'll just kick it over to 

22 them, to get us started.

23 MS. WEISMAN: Thank you. On Page 3, 
97

1 as you know, we've been doing these very quickly, 

2 trying to get real-time edits and doing our shading, 

3 but we missed shading something in yellow that 

4 should be shaded, in about the middle of the page, 

5 it is under Number 2. On Page 3 -- of Issue Paper 

6 1. We struck the text three and we added in five, 

7 so that five-year word there, five should be shaded 

8 in yellow, to highlight that that is the new item.

9 And I'm going to play teacher and look 

10 for eyes on me, so I know when you've got that one 

11 and are ready for the next. Seeing most of the 

12 eyes, we're going to go on to the next one.

13 Right below that, on Number 3, we have 

14 two words that we needed to choose one or the other, 

15 so on the third line, where it says, addition to 

16 the application at a station provided by the 

17 borrower, we are going with application and we are 

18 deleting the word attestation. And, since that's 

19 a change that, also, would, technically, be 

20 highlighted in yellow. So we're, we're getting 

21 tight on time --

22 PARTICIPANT: Should the word of 

23 corroborating evidence, also be highlighted?
98

1 MS. WEISMAN: Yes. Yes, up above 

2 that, corroborating, which we struck that word that 

3 also should be in yellow.

4 PARTICIPANT: Just a question then, on 

5 4(i), made with reckless disregard for the truth 

6 is highlighted, but it is not a change, it was in 

7 the text, previously.

8 MS. WEISMAN: That is correct. That 

9 item is remaining from our prior discussion. That 

10 was highlighted, though, however, because it is 

11 a key item and we did want to make sure we called 

12 it to your attention, for discussion.

13 So our goal is that, we are trying to 

14 look at just information that has changed, so we 

15 can get through this fairly quickly. We gave you 

16 a little time to read, so that you could then come 

17 back with issues, relating to the items that you 

18 see, so I'd like to open it up to people for 

19 discussion of items that they have questions about, 

20 on Issue Paper 1, to get started.

21 MS. CARUSO: Linda.

22 MS. RAWLES: Since we're back to the 

23 original language of the Department of this 
99

1 session, for our evidentiary standard, is there, 

2 have I missed, or does the Department not have 

3 anything in this draft that would make sure that, 

4 even though you said orally that you consider that 

5 to be between preponderance and clear and 

6 convincing, is there anything in this draft that, 

7 that records that, for when we all, either, get 

8 hit by a bus, or win the lottery? Because, 

9 otherwise, I'd be very opposed to the evidentiary 

10 standard, as written.

11 MS. WEISMAN: We thought that the 

12 language we had was clear and do not have anything 

13 that, specifically, addresses that in the current 

14 regulatory draft. I, I didn't hear a proposal for 

15 additional language.

16 MS. RAWLES: My proposal would be that, 

17 if it's not clear that it's greater than 

18 preponderance of the evidence that we need some 

19 language that, either, one, says this is greater 

20 than preponderance of the evidence, or two, we go 

21 back to clear and convincing.

22 MS. CARUSO: Linda, are you, 

23 specifically, referring to your language, 
100

1 yesterday, that says it's more likely to be true 

2 than not true?

3 MS. RAWLES: That would be a good 

4 starting point, but I'd, certainly, have to see 

5 that it is, at least, at least, beyond the 

6 preponderance of the evidence.

7 It would be better to have some language 

8 that said it's midway between the preponderance 

9 of the evidence and clear and convincing, because 

10 that's what the Department said its intent was, 

11 but its intent is not reflected in this language, 

12 so.

13 MS. CARUSO: John and then, Ashley 

14 Harrington.

15 MR. KOLOTOS: So recognizing the rush 

16 and I had discussed this with the Department, 

17 previously, but we had provided some suggested 

18 language that I don't see here, regarding the 

19 preemption of state law, and I was wondering, if 

20 it would be appropriate, at this time, to propose 

21 that language for consideration?

22 MS. HONG: Certainly. If you could, 

23 read out loud, if you have language, and then we 
101

1 can have a short --

2 MR. KOLOTOS: All right.

3 MS. HONG: -- short discussion of that.

4 MR. KOLOTOS: I would propose that 

5 language be added, potentially, as a subsection 

6 C, nothing in this section shall be construed, or 

7 deemed, to preempt, inform, or otherwise modify 

8 any right, cause of action, relief, or remedy, 

9 arising under any state or federal law, available 

10 to the borrower, or to the Attorney General of any 

11 state.

12 MS. HONG: And zoom in, just a bit.

13 MR. KOLOTOS: Forgive me, if I just 

14 can't read it in the paper I'm a --

15 MS. HONG: You're forgiven, John.

16 Right, this is not in here. This is 

17 language that John, John is putting in, right now, 

18 orally.

19 MS. CARUSO: No, Caroline, it's 

20 written up there, already, on the -- it was already 

21 there. Okay.

22 PARTICIPANT: Okay, so it's not in the 

23 papers, in your handouts, but it, it is in the Paper, 
102

1 on the screen.

2 MS. HONG: Sorry, guys, drafting on the 

3 fly here.

4 MS. WEISMAN: So I think what people 

5 are looking for, is a clarification, if they're 

6 trying to follow their Paper, of where that text 

7 goes, here, what page that is and it's getting a 

8 little hard to follow.

9 PARTICIPANT: Yes.

10 MR. KOLOTOS: I would, I would suggest 

11 that it be inserted at the end of all the other 

12 text that, that's going to remain in the Rule.

13 MS. HONG: So I'm told, it's at the end 

14 of where 2-2-2 would end, on Page 6, so just, so 

15 that language is not in your printed copy, but it 

16 would be after -- after Paragraph 5, on Page 6.

17 MS. WEISMAN: That's correct, the 

18 original C was taken out, so this becomes the new 

19 C, and it would be at the bottom of Page 6.

20 MS. CARUSO: So it would be at the end 

21 of the document?

22 (No audible response.)

23 MS. CARUSO: Suzanne.
103

1 MS. MARTINDALE: I know we're going to 

2 have to jump around a little bit in the interest 

3 of time, so middle of Page 3, the changes to the 

4 statute of limitations, which is now five years 

5 from withdrawal, you know, with all due respect, 

6 to the Department and to the staff working so hard 

7 on this, on this issue, from a consumer advocacy 

8 perspective, it is, and I don't say this lightly, 

9 it is outrageous, it is utterly outrageous, to apply 

10 a statute of limitations to a borrower seeking to 

11 raise defenses to a debt that is still collectable.

12 And, while there is no federal statute 

13 of limitations on these loans, which it's not the 

14 public policy I would have, you know, gone with, 

15 but that is the case, you know, we're talking about 

16 people getting their social security offset, to 

17 repay these debts.

18 They can follow you to the grave. So 

19 long as the Department can collect against student 

20 borrowers, borrowers should be able to raise 

21 defenses to repayment.

22 MS. CARUSO: Aaron and then Abby.

23 MR. LACEY: Yes, at the risk of being 
104

1 hyper literal here, I was going to suggest that, 

2 substantial weight of the evidence demonstrates, 

3 and this follows on Linda, to be replaced with, 

4 if the weight of the evidence demonstrates, to a 

5 degree of certainty that is at the midpoint, between 

6 preponderance and clear and convincing.

7 I mean that's the express intent of the 

8 Department. I think the institutional folks 

9 started at clear and convincing. I've heard 

10 preponderance clearly articulated on the other side 

11 of the table. I don't see why we aren't just 

12 literal here.

13 PARTICIPANT: Aaron, can you repeat 

14 that?

15 MR. LACEY: You bet. Okay, so I'm 

16 crossing out everything from substantial weight 

17 of the evidence demonstrates that and I'm replacing 

18 it with, if the evidence demonstrates to a degree 

19 of certainty that is at the midpoint between a 

20 preponderance and clear and convincing.

21 Okay. Sorry, I'll do it again. 

22 That -- no, I'm just kidding. The evidence 

23 demonstrates to a degree of certainty that is at 
105

1 the midpoint between preponderance and clear and 

2 convincing. Maybe it's a preponderance and clear 

3 and convincing. Is that up there?

4 Yes we could say, at least, at the 

5 midpoint, yes. Fair, I apologize, fair enough.

6 Yes, if it's above the midpoint, it 

7 should qualify.

8 It has to be precisely at the midpoint.

9 (Laughter.)

10 PARTICIPANT: I have a feeling you 

11 would support that, but --

12 MR. LACEY: No, it's a good point. 

13 Yes, yes, it's a good point.

14 I had a couple of other comments, too, 

15 should I continue?

16 Okay. So we lost reasonably, the 

17 borrower reasonably relied, but we kept, under the 

18 circumstances. I still support reasonably.

19 I would also note that, under the 

20 circumstances, doesn't make sense in this sentence 

21 without the word, reasonably, because it, it's 

22 modifying that concept. I mean, if you just say --

23 MS. CARUSO: Where are you?
106

1 MR. LACEY: Yes, I'm sorry, in the next 

2 section (i), Roman numerette (i), right. So we 

3 say, the institution, which the barber enrolled, 

4 the barber, the borrower enrolled, made a 

5 misrepresentation, related to enrollment at the 

6 institution of the provision of educational 

7 services, upon which the borrower relied, under 

8 the circumstances.

9 Well, under the circumstances is 

10 modifying reasonably. Without the word, 

11 reasonably, I mean, it's always going to be the 

12 case that the borrower relied under the 

13 circumstances.

14 And I would support inclusion of 

15 reasonably. My understanding that, under the 

16 circumstances, was a compromise to accommodate the 

17 notion that not all borrowers are situated 

18 similarly. I support the statute of limitations 

19 here. I do not think it's outrageous.

20 I think that, I'm looking now, on the 

21 next page, at what currently is, sort of, a 

22 definition, or elucidation of substantial weight 

23 of the evidence. First of all that would need to 
107

1 be changed, to conform with the prior concept that 

2 I articulated, the midpoint concept, because we 

3 would no longer be using the substantial weight 

4 of the evidence standard, if we bought into the 

5 other one.

6 I had suggested, the Secretary may 

7 only, because, in my view, this is a, a floor. 

8 I'm not sure what we accomplish with may. I think, 

9 if the word, only, is not there, I'm just not sure 

10 what this, I think this phrase loses meaning.

11 What we're saying is at a minimum, 

12 right, to establish this evidentiary standard, you 

13 have to have this application, plus supporting 

14 evidence.

15 I also support the use of the word, 

16 corroborating, because I think it, it indicates 

17 that the idea is the evidence is supporting what 

18 is articulated in the application, it's not just 

19 something additional.

20 On the next page, let's see, I'm going 

21 all the way down to J, so I'm now in Roman numerette 

22 (i) all the way down to (j), I appreciate the 

23 Department's conforming language here.
108

1 I believe that it just borrowed text 

2 from L, from I, which is fine, but it included a 

3 clause that I think needs to be struck, this last 

4 clause that may include representations, regarding 

5 size, location, facilities.

6 I don't think that makes sense here, 

7 because here we're talking about representations 

8 concerning prerequisites for enrollment in a course 

9 or program.

10 Yes. On Page 5, let's see, I'm now at, 

11 it's on Page 5, it looks like it's Roman numerette 

12 (iii), it's the discussion of financial harm. The 

13 Department has excluded opportunity cost.

14 I have a question for the Department 

15 and that is, as a practical matter, how are you 

16 going to quantify -- I mean, how does the Department 

17 even conceive of understanding, or considering, 

18 or quantifying, whether there's been some sort of 

19 loss of opportunity cost?

20 Because, from my standpoint --

21 MS. CARUSO: Aaron, in the interest of 

22 time, I'm going to let them consider the 

23 question, --
109

1 MR. LACEY: Okay that's --

2 MS. CARUSO: -- over lunch, we've, --

3 MR. LACEY: Got it.

4 MS. CARUSO: -- we've got to get to it.

5 MR. LACEY: Understood. Understood. 

6 All right that's my last comment.

7 MS. CARUSO: Thank you. Abby.

8 MS. SHAFROTH: Okay, so let's see, what 

9 do we have here? On Page 3, Paragraph 2, this time 

10 limits. I strongly share Suzanne's concern and 

11 I believe this is a line in the sand, for me. That 

12 I cannot, I cannot, in good conscience, except a, 

13 except a rule that would allow the Department of 

14 Education to garnish a borrower's social security 

15 payments, if there is sufficient evidence that that 

16 borrower, that the debt was taken out, as the result 

17 of a fraudulent misrepresentation.

18 You know, there may be room for 

19 negotiation around imposing a time limit on the 

20 borrower's ability to get refunds of amounts 

21 already paid, but, but it would be devastating to, 

22 to my clients and to many borrowers. And I, I think 

23 it's unconscionable, to allow for, to, to require 
110

1 the Department to continue to collect in those 

2 circumstances.

3 So for specific language, and I also 

4 note there's a, as a technical matter, I think that 

5 in this paragraph the, the reference to Paragraph 

6 B1 should, probably, be a reference to Paragraph 

7 B1(i), because I assume that, the Department 

8 doesn't wish to a time limit borrower defenses that 

9 are in the basis of a final definitive judgment 

10 that may happen, after five years.

11 So this would make sure that this only, 

12 this, any time limit only applies to the 

13 misrepresentation prong, not the final judgment 

14 prong.

15 And I would, I would add to this, I would 

16 add to this provision that the, that a borrower 

17 may assert a borrower defense against collection 

18 of outstanding balances, so long as the loan remains 

19 otherwise collectable. Then, on Page 3, 

20 Paragraph --

21 MS. CARUSO: Hang on one second, Abby, 

22 so we can get the language, right here.

23 Go on, Abby.
111

1 MS. SHAFROTH: Okay. Same page, 

2 Paragraph 4, Roman numerette (i), the definition 

3 of misrepresentation, I see that this says, 

4 regarding material fact intention, or law, the 

5 language previously, when it was in a different 

6 paragraph, said material fact opinion, intention, 

7 or law, I would reinsert opinion.

8 You know, I, I, I would, I would also 

9 strike reckless, at, at minimum. I mean, I think 

10 I've, I've made clear that I, I would strike all 

11 of this, this (inaudible) language, but for the 

12 purposes of this discussion, let's strike reckless.

13 Let's see, then the discussion of 

14 financial harm, on Page 5, so that's paragraph, 

15 let's see, Roman numerette (iii), I think, is the 

16 beginning there. I, I appreciate and support the 

17 Department's striking of, or opportunity cost, so 

18 I just wanted to note support for that, that change.

19 In Paragraph B, below that, I think 

20 it's, yes, so C(b), but I think, I think it's 

21 supposed to be B, now, it says, after completing 

22 the program. I would, I would, either, strike that

23 language, or I would say, after completing or 
112

1 withdrawing from the program, because we know that 

2 that most borrowers, who attend predatory schools 

3 never actually complete the program, they withdraw.

4 And, I would add a paragraph, another, 

5 another indicia of, of, of financial harm, so we 

6 can make this Paragraph F, at the end of this list.

7 That would be something along the lines 

8 of, an insufficient increase in earning potential, 

9 to offset the cost the borrower expended to attend 

10 the institution.

11 So this is getting at the, the schools 

12 that, that failed to, failed to deliver sufficient 

13 value to the borrower, to actually be a worthwhile 

14 investment that, I think, is financial harm.

15 MS. CARUSO: Okay, Abby, we're going 

16 to come back --

17 MS. SHAFROTH: Oh, oh -- oh yes. Sure.

18 MS. CARUSO: We have -- all right. 

19 Michael.

20 PARTICIPANT: So I have two ideas. 

21 One, on the substantial weight of the evidence, 

22 I, I would suggest, maybe, to Aaron's suggestion, 

23 and I, I'm not speaking about the language that 
113

1 he proposed.

2 But, I might move that up into the 

3 introduction and say, for the purposes of this 

4 section, substantial weight of the evidence means, 

5 and then define it there, however the word, because 

6 it's used in more than one place, and, and so I 

7 might just suggest moving it into the section where 

8 you can define it.

9 It seems to me that the statute of 

10 limitations part of this, as Abby said, is a line 

11 in the sand issue that will likely scuttle the 

12 efforts, if, if some middle ground compromise is 

13 not, not achieved.

14 So it seems to me, then, that the issue, 

15 for some, is that the statute of limitations, a, 

16 either, should not be there, or it needs to be much 

17 longer, and for others is that, there's far too 

18 much liability attached to the opportunity to, to 

19 potentially have claims that go on for a very 

20 extended period of time.

21 What if we separated the two? And that 

22 is to say, okay, so there's no statute of 

23 limitations on when a borrower can bring a claim, 
114

1 but there is a limitation on when the Secretary 

2 can initiate recovery proceedings, so that, okay, 

3 if, if a claim is 20 years old, the likelihood of, 

4 of actually prevailing on that claim is quite small, 

5 anyway, but the opportunity would still exist, if 

6 they had that evidence.

7 So give those, those individuals the 

8 opportunity for their, their chance, if they have 

9 and can show, with all these other things, 

10 substantial weight of the evidence and reckless 

11 disregard, or intentionality, whatever it is, give 

12 them the opportunity, but for institutions, put 

13 a limitation on it.

14 Only those claims that have come within 

15 the last five years, are the ones, in which the 

16 Secretary can initiate a recovery action.

17 That way, you get to protecting the 

18 institutions and still providing the borrowers an 

19 opportunity to have that chance. And if, if that, 

20 that's the kind of compromise that I think, maybe, 

21 can move this forward.

22 I'm hoping both sides can see that, as 

23 an opportunity that you're not giving up too much 
115

1 and, actually, you're retaining quite a bit of what 

2 you want.

3 MS. CARUSO: Okay. At 12:01 p.m., I 

4 would point out, I've been instructed that we have 

5 a hard stop for lunch, is that the case?

6 (No audible response.)

7 MS. CARUSO: We will return to this

8 discussion at 1 o'clock. Can we -- Guys, let's --

9 MS. WEISMAN: We have a meeting with 

10 other Department staff members, so we have to go 

11 back and, kind of, reconnect with them on the 

12 progress that we've made so far, and any changes 

13 that are proposed, so unfortunately we cannot do 

14 a working lunch today.

15 MS. CARUSO: Is 1 o'clock fine for a 

16 return?

17 Okay. Thank you. Feel free to talk 

18 amongst yourselves, during lunch. I don't even 

19 know why I said that, it's so obvious.

20 PARTICIPANT: Thank you.

21 (Whereupon, the above-entitled matter 

22 went off the record.)

23 PARTICIPANT: Okay. Welcome back. 
116

1 Just a brief update from the Department, and then 

2 we will continue to get feedback on Issue Paper 

3 1.

4 MS. WEISMAN: So, just to kind of pick 

5 up where we left off, I think, because we were not 

6 finished hearing all of your feedback about Issue 

7 Paper 1, we'd like to hear the feedback on 1 in 

8 its entirety. We'll then move on to Issue Paper 

9 2, and then we can start to come back with some 

10 additional papers, some of which will be items 

11 presented to you on the screen, some of which will 

12 be actual paper.

13 I've been told that our color copier 

14 is no longer working, so I think we've, we've used 

15 it too much this week, so what we'll be doing this 

16 afternoon when we have what we think of as our final 

17 proposed language, we'll be giving you new clean 

18 copies to use that are paper, and then we'll have 

19 Aaron working with the computer, and projecting 

20 on the screen the edited copy so you can see where 

21 the highlighted changes still are in color.

22 I know it's a little hard to see some 

23 of the screens, but I think by having the clean 
117

1 copy on paper, we can work in conjunction and still 

2 make that all work out, so we'll play that by ear, 

3 but I think it can work, and if I need to read 

4 something if something is unclear or difficult to 

5 see on the screen, I can certainly do that, but 

6 for right now, I'd like to pick up with your 

7 additional comments on Issue Paper 1.

8 Our goal would be that we could get 

9 through 2 as well before our afternoon break, then 

10 take any comments that we need to collect feedback 

11 on from others of the Department, and then come 

12 back to after that with kind of that final proposed 

13 language.

14 PARTICIPANT: Yes. And just so for 

15 planning purposes, our afternoon break will be at 

16 three o'clock, okay.

17 So, I'm going to start to go through 

18 the name cards as I have them written both before 

19 and after the break, because I'm seeing some 

20 changes. Linda, Valerie, and then -- nope, no 

21 longer -- Linda, Valerie, and then Mike Busada, 

22 and then Aaron.

23 MS. RAWLES: Brief comment on one 
118

1 proposed change, and then an alternative change. 

2 On page three, romanette (i), I guess, that's --

3 I don't know if that's (4), (i), (1), whatever, 

4 bottom of three, misrepresentation definition.

5 There was a suggestion to take out 

6 "reckless." I want to point out that if we have 

7 intentionally false or misleading or disregard, 

8 then that, as I'm sure is known, takes away the 

9 intent standard, because you go to the lowest 

10 standard when you have a disjunctive word in there, 

11 or so it would become a disregard standard, which 

12 nobody would know what that means, so I 

13 alternatively propose instead of arguing over 

14 disregard or reckless disregard, that we strike 

15 out, "Or made with a reckless disregard for the 

16 truth."

17 PARTICIPANT: Valerie.

18 MS. SHARP: One of the questions that 

19 I had is we've added back into the financial 

20 harmless opportunity cost, and so, I'm trying to 

21 understand how -- I guess, this is creating a way 

22 for the Department to explore a borrower defense, 

23 but the opportunity costs don't fit in the, in the 
119

1 ability of the Department to consider, because the 

2 only thing that can be considered here is the amount 

3 of the direct loans, so I think that is the reason 

4 the Department gave in a prior session as to why 

5 those were included in this list, and now they're 

6 excluded, so it appears that the Department's 

7 position may have changed on why that should be 

8 included, so that is one of my items.

9 Another question that I have is at the 

10 bottom of five where we've added the language under 

11 B, the new B, that says, "Or wages that are lower 

12 than the borrower had prior to enrollment," there 

13 is concern with that language, because often there 

14 are people that choose to come back to college and 

15 take degrees that will secure a lower wage, maybe 

16 they have been a high-powered attorney, and now 

17 they decide they want to go into church work or 

18 something, and so they make that change, so we're 

19 opening up another door there I'm not sure we're 

20 intending to open, so I'm a little concerned about 

21 that wording.

22 I'm not sure -- if I had a suggestion, 

23 I don't know that I would include it. There may 
120

1 be other proposals to change that would make me 

2 more comfortable with that.

3 The other one is at the top of page six 

4 under the new D. There is -- that is -- the language 

5 in that is rough, it's repetitive, so we talk about 

6 the tuition and the nature of the tuition fees 

7 charged two different times in that paragraph.

8 And the way it reads now is, "A 

9 significant difference in the actual amount or 

10 nature of the tuition and fees charged by, or...," 

11 and there maybe should be a comma there that would 

12 make it read easier, "...or the amount or nature 

13 of financial assistance provided by the institution 

14 for which the Direct Loan was disbursed, and the 

15 amount or nature of the tuition and fees," so I 

16 think that language needs to be cleaned up.

17 PARTICIPANT: Annmarie, did you want 

18 to respond in whole or in part to --

19 MS. WEISMAN: So, for the first item 

20 you mentioned, the striking in romanette (iii) of 

21 opportunity costs, unfortunately, that was an error 

22 in editing and drafting. That should not be 

23 deleted, and should still be within the paper. 
121

1 I apologize for that.

2 The item that you listed in B, the idea 

3 of wages lower than the borrower had prior to 

4 enrollment, when we talk about looking at financial 

5 harm, these are items that can be considered, and 

6 I think that when reviewing each claim, there is 

7 the opportunity to consider, does that apply in 

8 this circumstance?

9 So, if you have somebody who, as you 

10 mentioned, was in a very high paying career, and 

11 then went to do what one might expect to be lower 

12 paying types, a type of occupation, that could be 

13 noted when reviewing that, so I don't know if it 

14 would help to say up above in romanette (iii), 

15 "Evidence of financial harm may include, but is 

16 not limited to," instead of includes.

17 So, again, that final sentence of 

18 romanette (iii) to say, "Evidence of financial harm 

19 may include, but is not limited to," so add the 

20 word, "may," and strike the "s" from the end of 

21 includes. I think that then would, that would show 

22 that it is more discretionary to look at these items 

23 and determine if it's applicable.
122

1 And, then regarding your other change 

2 on the next page in D on page six, first, I'll note 

3 that we have to renumber here, because we added 

4 back in D, we had crossed out E and F, and I think 

5 we need to go back to where they were. And I do 

6 think that inserting the comma may get us to where 

7 we need to go, but we can look at that language.

8 MS. SHARP: Yes, I think we need to 

9 insert the comma, and then delete where we talk 

10 about tuition and fees the second time, because 

11 it's repeated twice in the paragraph.

12 MS. WEISMAN: So, can we just spend a 

13 minute looking at that now since there seems to 

14 be some disagreement over whether we need to take 

15 a piece out or not?

16 So, what I was thinking might work is 

17 to put a comma before and after the gray text, so 

18 to say, "A significant difference in the actual 

19 amount or nature of the tuition and fees charged 

20 by, or the amount or nature of financial assistance 

21 provided by, the institution for which the Direct 

22 Loan was disbursed," and continuing on.

23 PARTICIPANT: I can see why there might 
123

1 be concern, because in the second line where you 

2 repeat nature of tuition and fees, you've added 

3 the sentence, or the statement that the tuition, 

4 institution represented. There might be a way to 

5 do that without repeating, "Nature of tuition and 

6 fees," because you'd also have that in nature of 

7 financial assistance in there, so you'd be 

8 repeating everything twice.

9 Let me see if I can find a suggestion.

10 MS. SHAFROTH: Why not separate the two 

11 and have a D, and then an E?

12 PARTICIPANT: Yes, that might work.

13 MS. WEISMAN: So, I think that would 

14 be cleaner is to make D the one that relates to 

15 tuition and fees, and to make E the one that relates 

16 to amount and nature of financial assistance, 

17 because I think trying to get them to agree and 

18 line up is going to be cumbersome, so let's try 

19 to split those out and see if the language then 

20 works.

21 MS. SHAFROTH: I think that what was 

22 separated were two different things, so I think 

23 the first one should read, "Significant difference 
124

1 in the actual amount or nature of the tuition fees 

2 represented to, or charged by, the institution," 

3 and take out, "Or the amount of nature." That --

4 what's highlighted in gray should go down below, 

5 and it should be, "A significant difference in the 

6 amount or nature of tuition and fees," or, I'm 

7 sorry, "The nature of financial assistance," so 

8 take out the highlighted, the red part. Take out 

9 "Tuition and fees."

10 So, the second one, "A significant 

11 difference in the amount or nature," take that out. 

12 There you go. "Significant difference in the 

13 amount or nature of financial assistance provided 

14 by the borrower -- provided to the borrower," and 

15 then take out the rest of -- and add, "For which 

16 the Direct Loan was."

17 MS. WEISMAN: So, we need to take out 

18 the word, "By," that's still shaded in gray. We 

19 need to renumber after or re-letter after that.

20 PARTICIPANT: Okay. Alyssa and Jay, 

21 are you trying to comment on this wording here 

22 precisely?

23 MR. O'CONNELL: Yes.
125

1 MS. DOBSON: Yes.

2 PARTICIPANT: Okay. Yes, go ahead.

3 MS. DOBSON: So, financial assistance 

4 provided by the school to the borrower really has 

5 nothing to do with the Direct Loan being disbursed, 

6 so I don't think that we need that phrase at the 

7 end. It seems -- it's just odd wording to have 

8 together.

9 PARTICIPANT: All of it?

10 MS. DOBSON: No, just the, just the 

11 last -- yes.

12 PARTICIPANT: Jay, did you have 

13 something to add?

14 PARTICIPANT: So, in D, it's saying, 

15 "Tuition and fees represented to the borrower or 

16 charged by the institution," I don't think we mean 

17 to say, "Represented to the institution."

18 MS. SHAFROTH: In E, did we want to also 

19 add, "The financial assistance represented to the 

20 borrower or provided by?" Yes.

21 MS. WEISMAN: This is where I really 

22 do wish I had eyes in the back of my head.

23 So, I'm going to read those two 
126

1 statements now that they've been redrafted. So, 

2 the new D is, "A significant difference in the 

3 actual amount or nature of the tuition and fees 

4 represented to the borrower and charged by the 

5 institution for which the Direct Loan was 

6 disbursed."

7 E then reads, "A significant difference 

8 in the amount or nature of financial assistance 

9 represented to the borrower and the amount or nature 

10 of financial assistance provided by the 

11 institution."

12 PARTICIPANT: Kim.

13 Maybe, "A significant difference in the 

14 actual amount or nature of the tuition and fees 

15 represented to the borrower and those actually 

16 charged by the institution for which the Direct 

17 Loan was disbursed."

18 Yes, it's in the prior -- sorry. I'm 

19 up at the prior one.

20 I think -- I don't even know if you need 

21 the "actual" in the first one. I think what we're 

22 saying is, "A significant difference in the amount 

23 or nature of the tuition and fees represented to 
127

1 the borrower and those actually charged by the 

2 institution for which the Direct Loan was," so I 

3 would take "actual" out of the first sentence, and 

4 then I would say, "And those actually charged." 

5 Yes, I think that's what we're trying to get at, 

6 because those represented would not be actual.

7 And, then let's see, "A significant 

8 difference in the amount or nature." And I think 

9 at the very end of the next of E, "In the amount 

10 or nature of financial assistance actually provided 

11 by the institution."

12 MS. WEISMAN: So, Aaron, if we could 

13 see final version instead of final showing markup, 

14 and I think I might be able to see it a little better 

15 to read it out. Okay.

16 So, D now reads, "A significant 

17 difference in the amount or nature of the tuition 

18 and fees represented to the borrower and those 

19 actually charged by the institution for which the 

20 Direct Loan was disbursed," so we have two commas 

21 to take out, but otherwise, that is the new D.

22 We would then have E that reads, "A 

23 significant difference in the amount or nature of 
128

1 financial assistance represented to the borrower 

2 and the amount or nature of financial assistance 

3 actually provided by the institution."

4 PARTICIPANT: Alyssa.

5 MS. DOBSON: I -- financial aid folks 

6 in the room were discussing, we don't necessarily 

7 know or feel that you need, or would want to have, 

8 "For which the Direct Loan was disbursed," on there. 

9 It's a little bit technical, but there are many 

10 instances where we are applying financial aid on 

11 a student-by-student basis where they may have a 

12 last dollar scholarship award that requires us to 

13 apply that award to tuition and fees. Therefore, 

14 the Direct Loan would actually be intended for room 

15 and board or for a different cost of attendance 

16 component. It just adds some strange linkage that 

17 we don't know should be there.

18 PARTICIPANT: Any further comments on 

19 D and E at this time?

20 (No audible response.)

21 PARTICIPANT: All right. In that 

22 case, I'm going to Mike Busada.

23 MR. BUSADA: And I just want to go back 
129

1 and add just a little bit different perspective, 

2 again, on the statute of limitations. I've talked 

3 about why just from a philosophical standpoint I 

4 think that, you know, over 2,000 years of 

5 jurisprudence using the statute of limitations 

6 there's a reason for it.

7 And I don't presume to know more than, 

8 than those over the last 2,000 years as to why that 

9 is so important, but from another standpoint, I've 

10 heard all week, and really all session, from people 

11 that have said -- and I understand this, but they've 

12 said, you know, "If you were a small school doing 

13 the right thing, then strong regulations shouldn't 

14 hurt you, they should help you," and I think that 

15 is a legitimate argument.

16 When I first started practicing law, 

17 that was something that I very much agreed to. 

18 It was an argument that I made. It wasn't until 

19 I got into business and working with the school 

20 that I realized that that is not necessarily true.

21 And I'll give you one example when it 

22 comes to statute of limitations. This morning, 

23 I got a call from two, two association presidents 
130

1 for small schools in states, and they heard that 

2 we were talking about going from a three-year to 

3 a ten-year, and just that, they were terrified, 

4 and so over the last two days when they saw this 

5 come out, they talked to their IT companies, and 

6 they talked to their insurance companies.

7 Just to expand statute of limitations 

8 from three years to ten years, they determined it 

9 would cost them on average an extra $10,000 for 

10 the document maintenance that they would have to 

11 contract out with their private IT company. They 

12 would then be responsible for -- the IT company 

13 said, "In the event that you are hacked --

14 PARTICIPANT: Please be brief. Be 

15 brief, Mike, please.

16 MR. BUSADA: Okay. All right.

17 "In the event that you are hacked, you 

18 now not only have to pay restitution to 300 students 

19 if you have a 100 a year, now you have an additional 

20 700."

21 The insurance company is not going to 

22 provide you insurance to cover that, and they're 

23 especially not going to provide you the insurance 
131

1 to cover something that is in perpetuity, and so 

2 if this happens, or if we extend it, keep in mind 

3 that every institution will have to purchase 

4 additional insurance, purchase additional space, 

5 additional IT resources whether you're a good 

6 school, a bad school, and for small schools, that 

7 is almost impossible, so it does affect us 

8 tremendously.

9 PARTICIPANT: Okay. All right.

10 Aaron.

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

12 on what Michael said the other day, and I wanted 

13 to propose a solution --

14 PARTICIPANT: This morning.

15 MR. LACEY: -- to the -- I'm sorry, this 

16 morning, to the statute of limitations issue. I 

17 mean, my, you know, in my mind, the challenge here 

18 is you've got, on the one hand, the understandable 

19 borrower interest if you've been wronged in being 

20 able to bring a claim without regard to when that 

21 happened, and on the other hand, you've got 

22 institutions, as Michael has said, they're very 

23 concerned about maintaining data over periods of 
132

1 time.

2 And in addition, I made the point 

3 yesterday, and it's important to note, you know, 

4 and are being directed by the federal government 

5 and others under privacy and related plans and 

6 regulations not to keep that data --

7 PARTICIPANT: Aaron, can we, can we get 

8 to your proposal, please?

9 MR. LACEY: Yes, sure.

10 So, the -- under the existing law, 

11 right, the Department bears some risk, okay, so 

12 the idea is borrowers can bring that claim, right, 

13 under the 95 Regulations, but after three years, 

14 the Department can no longer recover from 

15 institutions, right, so you solve that issue by 

16 limiting the institution's risk -- and by the way, 

17 that three years is explicitly tied to, to data 

18 maintenance requirements, right, so I believe that 

19 the Department should seriously consider -- and 

20 I understand the statement has previously been made 

21 that they are not necessarily interested in taking 

22 on any risk, but I think the Department should 

23 seriously consider whether or not, and to what 
133

1 extent it can accept some risk in this scenario, 

2 because if we could say, for example, borrowers 

3 can bring a claim for the life of the loan, but 

4 the Secretary is limited on recovery action five 

5 years from the date of graduation, withdrawal, 

6 etc., right, you've limited the institution's 

7 exposure, and confined the time period they have 

8 to retain records to defend themselves, etc., and 

9 you also have still created an outlet.

10 And in that space, that 5 to 20-year, 

11 the life of the loan, assuming the typical 20 years, 

12 there is some risk, it's going, it's going to be 

13 reduced as time goes on presumably, the Department 

14 also could limit its exposure in that period. You 

15 know, Abby, or someone, I apologize who it was 

16 suggested earlier, for example, to amounts not yet 

17 paid, I mean, if they wanted to further limit, but 

18 the point is there would be some mechanism for 

19 borrowers after the five years to continue to seek 

20 some sort of relief, while at the same time, 

21 institutions would be able to limit their exposure.

22 And I think that the exposure -- and 

23 I'm a taxpayer, but I think the exposure to the 
134

1 Department here would be within the limits of 

2 reason, so that's a specific proposal, and I would 

3 strongly encourage the Department to give it 

4 consideration.

5 PARTICIPANT: So, I just want to jump 

6 in as a facilitator. The Department can continue 

7 to confer, but this is our last day. In fact, this 

8 is our last afternoon, so the facilitators are going 

9 to be hard on you about making proposals, so you 

10 can go ahead and get upset with us now, but we have 

11 to get through this by five o'clock. Thank you.

12 PARTICIPANT: While we're waiting, 

13 Aaron, could you just give us a sense of what that 

14 would look like wording-wise?

15 MR. LACEY: There are two places. One 

16 for loans made prior to July 1, 2019, and one for 

17 loans made --

18 PARTICIPANT: I'm sorry. What?

19 MR. LACEY: There are two spots, and 

20 I'm not -- I don't have them right in front of me, 

21 so someone else feel free to jump in, where the 

22 Secretary is limited -- the Secretary's ability 

23 to three years following the resolution of the 
135

1 claim.

2 And what I would do is I would adjust 

3 those to say that the Secretary is limited to 

4 bringing recovery action against the school to five 

5 years from the date that the student graduated, 

6 withdrew, etc., and then I would change on page 

7 three to where we currently have the statute of 

8 limitations we've been discussing to say, "That 

9 a borrower must file a borrower defense claim under 

10 paragraph (b)(1) of this section, you know, prior 

11 to determination of the loan," or however the smart 

12 way to say that is, "Prior to the, you know, end 

13 of the life of the loan."

14 I mean, these are obviously a package 

15 deal from my perspective. And then I think that 

16 you -- I assume the Department might want to include 

17 some language that would -- well, I shouldn't 

18 assume, but they may want to include some language 

19 that would limit what they're willing to pay back 

20 in that 15-year period, or post 5-year period where 

21 the borrower would still have a potential to bring 

22 a claim.

23 PARTICIPANT: Can you restate the 
136

1 first part?

2 MR. LACEY: Yes. I don't know where 

3 those two spots are.

4 PARTICIPANT: One's in Issue Paper 2.

5 MR. LACEY: Are they both in Issue 

6 Paper 2?

7 PARTICIPANT: No, just 1.

8 MR. LACEY: Where's the first one?

9 PARTICIPANT: I don't know what other 

10 one you're talking about besides this.

11 MR. LACEY: It's in two places. Let 

12 me see.

13 PARTICIPANT: I only see it in --

14 PARTICIPANT: Caroline, can you --

15 Caroline, can you weigh in for us?

16 MS. HONG: Sure. I just have a thought 

17 since we have limited amounts of time. And when 

18 Annmarie stated that we have a hard stop at three, 

19 it's really because we do want to be able to take 

20 proposals back to talk about, and constructively 

21 bring them back to reach consensus, so maybe, 

22 especially, on the statute of limitation issue, 

23 because clearly language is going to be something 
137

1 worked out, but just the concept, I think, about 

2 --

3 MR. LACEY: Okay. You --

4 MS. HONG: -- the time frame, maybe if 

5 we could get more --

6 MR. LACEY: Yes, sure.

7 MS. HONG: -- talk about the concept, 

8 then not worry about the language specifically yet.

9 PARTICIPANT: All right. William.

10 MR. HUBBARD: I'd like to go back to 

11 the reckless disregard section, and make a proposal 

12 to strike reckless noting that there's been some 

13 concerns about getting rid of that quote changes 

14 the standard. I fully disagree with that.

15 Since reckless is a modifier of 

16 disregard, I don't agree that it changes any 

17 standard, and I think if there's been disregard 

18 for the truth that's, that's sufficient reason. 

19 I'd be hard-pressed to see anyone defend 

20 disregarding the truth as being acceptable, but 

21 I would leave that to the group.

22 Additionally, I propose striking 

23 opportunity cost as it was previously erroneously 
138

1 struck. I propose intentionally striking it.

2 PARTICIPANT: Juliana.

3 MS. FREDMAN: So, I have two proposals. 

4 One is about C where it talks about misrepresenting 

5 the transferability of credits, or the cost of 

6 obtaining nontransferable credits. One thing we 

7 saw a lot in some of the big college explosions 

8 was that the credits might be transferrable, but 

9 only to another for-profit, (inaudible) students 

10 could transfer, but only to ITT, so we would change 

11 that to the cost of obtaining credits that are not 

12 widely transferrable where the institution 

13 represented to the students that the credits would 

14 be widely transferrable, or something like that.

15 And I would propose an additional 

16 financial harm that is incurring a federal student 

17 loan to attend a school that the student would not 

18 have enrolled in, but for the school's 

19 misrepresentation to the student. That's a new 

20 one.

21 PARTICIPANT: Michael.

22 MS. FREDMAN: Okay, I can read it 

23 again.
139

1 PARTICIPANT: Like I said, could you 

2 restate your second --

3 MS. FREDMAN: So, that's a -- yes, the 

4 second one is a new factor, and it would be incurring 

5 a federal student loan for, to attend a school that 

6 the student would not have enrolled in, but for 

7 the, the school's misrepresentation to the student. 

8 You know, that's the essence. That may not be 

9 the exact wording, but --

10 PARTICIPANT: Thank you for being 

11 quick, Juliana, but --

12 MS. FREDMAN: I'm trying to be so fast. 

13 Okay.

14 Incurring a federal student loan to 

15 attend a school that the student would not have 

16 enrolled in, but for the misrepresentations by the 

17 school to the student. That one? Got it?

18 PARTICIPANT: By the school for the 

19 student?

20 MS. FREDMAN: To the student.

21 PARTICIPANT: To the student.

22 MS. FREDMAN: School to the student.

23 PARTICIPANT: We're good?
140

1 (No audible response.)

2 PARTICIPANT: Okay.

3 Michael.

4 MR. BOTTRILL: So, on the, on the 

5 statute of limitations thing just as you're 

6 thinking about the options, one of those options, 

7 I think, I heard was also if you're looking to align 

8 things, maybe part of that alignment is that they 

9 can bring the claim within the first five years 

10 for, for relief of both amounts paid and amounts 

11 unpaid, and then after five years, it would only 

12 apply to amounts unpaid.

13 Maybe that makes it more palatable to 

14 the taxpayers' angle, and then aligns with what 

15 Aaron had suggested in terms of the five years after 

16 that, the Secretary would not initiate an action, 

17 so there's some alignment amongst those things.

18 With regard to Valerie's concern, on 

19 page five about lower wages, I'm having a real 

20 struggle between A and B, and I understand why Abby 

21 asked for this, but I still think that you have 

22 to -- wage is lower than what, and I think that 

23 lots of folks go to school for lots of different 
141

1 reasons, and that doesn't always mean to increase 

2 their earning potential. It could just be to 

3 increase their happiness quotient.

4 So -- so, borrowing language from A, 

5 move that, move that down as well into B, "Or wages 

6 that are lower than the borrower had prior, had 

7 prior to enrollment, and which represent a 

8 significant difference from the earnings listed 

9 in the borrower's program, blah, blah, blah, as 

10 is, as is in A above."

11 Aaron, did you get that?

12 (No audible response.)

13 MR. BOTTRILL: Okay. Thank you.

14 And I don't agree that you need the 

15 modifier, "Widely transferrable." I just --

16 Juliana, my experience with that was they were not 

17 limited the way that you characterized that they 

18 were in many cases, so -- and I say that having 

19 helped transition lots of students through that 

20 process. I understand you may have a different 

21 experience, but -- so.

22 PARTICIPANT: Chris.

23 MR. DELUCA: So, I have a proposal, but 
142

1 then also, I must confess, I'm kind of confused 

2 with what's going on in the sense of this, because, 

3 so Will suggested that he wanted to strike 

4 "Opportunity costs and reckless," and now I get 

5 on here and I say, "I want to add opportunity costs 

6 and reckless," and then somebody else puts their 

7 comment, and says, "Well, I want to delete it," 

8 and somebody else puts their comment, and says, 

9 "I want to add it."

10 And, then, so, to what end at some point 

11 so eventually we stop, but is it just -- are we 

12 just on kind of like who stops at the end, and 

13 whoever was the last one to speak gets to get that, 

14 those words on the board, and then that's how we 

15 vote? Or, what's -- I'm not -- I'm confused.

16 MS. WEISMAN: Okay, then let me 

17 clarify.

18 PARTICIPANT: Sure.

19 MS. WEISMAN: If you want to clarify, 

20 you're welcome to.

21 PARTICIPANT: Maybe we can both 

22 clarify, Annmarie.

23 MS. WEISMAN: Okay.
143

1 PARTICIPANT: So, from our 

2 perspective, we are going to be taking our next 

3 consensus vote on this after the next round of edits 

4 provided by the Department, and the Department is 

5 hearing the preferences of the group at this time, 

6 not necessarily as a whole.

7 MS. WEISMAN: Okay, and so if I can add

8 to that?

9 MR. DELUCA: Okay.

10 MS WEISMAN: My goal at this point 

11 would be that we're not introducing a lot of new 

12 text, and sometimes I hear people kind of going 

13 with what that last round of changes look like, 

14 and then other times I hear people inserting a lot 

15 of new.

16 The clock is ticking, and we're running 

17 out of time to add new things, so ideally, we'd 

18 be commenting on things that we've already 

19 discussed that we had changes from the last session 

20 to this session, that as with usual, we don't need 

21 five people to weigh in the same way on the same 

22 issue, that's it's really if you feel differently 

23 than you've already heard expressed to give us some 
144

1 flavor of that, but, you know, we heard certain 

2 things.

3 The Department intends to keep 

4 reckless. The Department intends to keep the 

5 opportunity cost text in here. I mentioned that 

6 it was in advertently struck, and so we've added 

7 it back in, so that is our intent at this time.

8 We will bring you new paper. We'll 

9 have clean copies this afternoon for you in black 

10 and white, and then we'll have the shaded on the 

11 screen, and we'll go over it all, kind of one more 

12 time, and that's when we'll actually be voting, 

13 so this is just really to give us some last ditch 

14 information in terms of where people are, give us 

15 a chance to take language that is still kind of 

16 up in the air to a quick meeting that we have at 

17 three o'clock, which is why we have the hard stop 

18 for the break.

19 MR. DELUCA: So, then just so I'm clear 

20 on this, so then it's -- so, you know, we're 

21 commenting on what's here, you're going to take 

22 it back, then, you know, it doesn't matter if Will's 

23 the last person, or I'm last, or Aaron, or Michael.
145

1 MS. WEISMAN: The person who was last 

2 is insignificant, but what I will say at this point 

3 --

4 MR. DELUCA: That's fine. So --

5 MS. WEISMAN: -- is it's 1:50.

6 MR. DELUCA: That's not what they told 

7 me in church. They told in church, "Last will be 

8 first," but --

9 (Laughter.)

10 MS. WEISMAN: I haven't heard that, but 

11 what I will say is it's now 1:51, and we still have 

12 Issue Paper 2 that we've not touched, so I think 

13 we need to make sure we have any last comments on 

14 Issue Paper 1 that we have not already heard, and 

15 then move on.

16 PARTICIPANT: Okay. With that, I'm 

17 going to John, and then Abby.

18 PARTICIPANT: And I respect the hard 

19 work that's being done to reach a compromise on 

20 the statute of limitations, and it's not something 

21 that I've taken a stand on, but I would just note 

22 us taking explicit action to let the alleged 

23 wrongdoers off the hook while keeping the taxpayer 
146

1 on it gives me some pause. I'm not saying 

2 necessarily I would, I would actively oppose it, 

3 but that, that gives me a good deal of pause.

4 PARTICIPANT: Abby.

5 MS. SHAFROTH: Going back to the, the 

6 list of examples of misrepresentations, I think 

7 that there should be something in here regarding 

8 job placement or career services. That's a common 

9 misrepresentation that I hear about from borrowers 

10 that their school represented that they would, that 

11 they had a terrific job placement service's office 

12 that would work with them to ensure that they find 

13 good placement, and then they show up, and there's 

14 one person in the basement who's unwilling to take 

15 appointments.

16 MS. WEISMAN: Can you tell me what page 

17 you're on?

18 MS. SHAFROTH: Yes. So, this is -- it 

19 would be, you know, adding something to the list 

20 that ends on page four in what the version I'm 

21 looking at, so, so misrepresentation examples. 

22 We have in here, misrepresentation regarding 

23 educational resources, but those are that are 
147

1 necessary for completion of the student's 

2 educational program. This is a different type of 

3 resource that is relevant.

4 Go ahead.

5 PARTICIPANT: Well, Abby, I had made 

6 a note in the margin, because you had mentioned 

7 this before, and I didn't want to kind of confuse 

8 this, but under B where it says, "Actual employment 

9 rates," I think to Abby's point, it's --

10 MS. SHAFROTH: Or resources?

11 PARTICIPANT: -- or resources, or 

12 employment assistance resources, where you could 

13 just put it there, and that would get to your issue, 

14 because you had brought that up two sessions ago, 

15 so I think that --

16 MS. SHAFROTH: Thank you.

17 PARTICIPANT: -- that's where it goes 

18 is in B.

19 MS. SHAFROTH: Thank you for 

20 listening. I appreciate it.

21 I -- I just sort of put a question mark 

22 for myself by -- oh, okay, it looks like, it looks 

23 like maybe we fixed J.
148

1 And, then I don't have specific 

2 language for this, unfortunately, but, but just 

3 for the Department's consideration. Another, 

4 another issue that we commonly come across is, is 

5 a recruiter tells, tells the borrower that they 

6 have to make a decision to enroll sort of on the 

7 spot or within 24 hours.

8 Basically, they falsely represent 

9 that, that, that, that it's the last day to decide 

10 to enroll, or they're going to have to wait another 

11 year or something when that's not true, and it's 

12 just a way to put undue, undue pressure on the 

13 borrower to sign up before they've had a chance 

14 to really think things over. That's a really 

15 important one, so something regarding a 

16 representation regarding the urgency of enrollment 

17 or urgency of decision-making regarding 

18 enrollment, or taking out loans that is not, that 

19 is not supported by the circumstances.

20 And if we could scroll then to the 

21 examples of financial harm? I'm looking at the 

22 one regarding borrower's inability to secure 

23 employment, which is D on my list, but I think it's 
149

1 getting renumbered. I would -- I would strike the 

2 language, "For which the program expressly 

3 guaranteed employment."

4 I think the borrower suffered harm even 

5 if the institution didn't expressly guarantee 

6 employment, but, for example, represented that the, 

7 that it had 90 percent job placement rate. The 

8 borrower doesn't, doesn't get a job, they've still 

9 suffered harm as a result of that, so you could 

10 just say, "The borrower's inability to secure 

11 employment in the field of study, or in the field 

12 of study for which the program was designed to 

13 prepare students."

14 PARTICIPANT: Sorry. Could you say 

15 that?

16 MS. SHAFROTH: Yes. "For which the 

17 program was designed to prepare students," or some 

18 -- that can be wordsmithed I'm sure, but that gets, 

19 gets at the idea.

20 PARTICIPANT: Just a question on that 

21 to clarify to make sure I understand what you're 

22 saying. So, in other words, if your placement rate 

23 was 80 percent, you said it was 80 percent, the 
150

1 student came, everything turned out to be true, 

2 and then the student graduated and didn't get a 

3 job?

4 MS. SHAFROTH: No, because this is, 

5 this is not an example of misrepresentation. This 

6 is an example of financial harm, so if the 

7 institution made a misrepresentation, so the 

8 institution say falsely represented their job 

9 placement rate, said it was 80 percent, but really, 

10 it was 40 percent, --

11 PARTICIPANT: Right.

12 MS. SHAFROTH: -- the student, the 

13 student completes the program, and doesn't get a 

14 job, then they would -- they suffered harm as a 

15 result you would say.

16 PARTICIPANT: Okay. I mean, I 

17 understand. I thought that was covered, but maybe 

18 not.

19 PARTICIPANT: Okay.

20 MS. SHAFROTH: That's all for now.

21 PARTICIPANT: All right.

22 Annmarie.

23 MS. WEISMAN: So, my understanding is 
151

1 that these are all new items that we're introducing, 

2 and I think our goal here was that we were going 

3 to look at language that changed from the last 

4 session to this one, especially given the late hour, 

5 we really want to cover Issue Paper 2.

6 PARTICIPANT: Thank you.

7 Kelli.

8 MS. HUDSON PERRY: On the first page 

9 under (a)(1), we added, "As it relates to the making 

10 of a Direct Loan or the making of a loan that was 

11 repaid by a consolidated loan." That's not 

12 continued throughout this document, and I don't 

13 know if it should be, so when you get to the bottom 

14 of page two where under (b)(1), it talks about the 

15 borrower's obligation to repay a Direct Loan, 

16 should that say, "A Direct Loan or making of a 

17 loan."? Should that be carried out throughout the 

18 entire document? Or, why did we add it in the first 

19 part and not the rest?

20 MS. WEISMAN: So, the thinking was 

21 that, first of all, just to make it more 

22 streamlined, that we included it here, and kind 

23 of gave the overall tone of it, and then where we 
152

1 introduced the information about the consolidation

2 loan that that would cover it, but we can certainly 

3 look at that one more time.

4 MS. HUDSON PERRY: Yes, maybe it's just 

5 in the introduction, you put in parentheses 

6 something that you're going to refer to the 

7 combination throughout the entire document.

8 PARTICIPANT: Chris, and then Aaron.

9 MR. DELUCA: So, I want to make a 

10 comment on the language for the statute of 

11 limitations, and getting back to -- I mean, there's 

12 been a lot of back-and-forth on it, but just --

13 and I don't think this has been said today, I know 

14 I said it earlier, or earlier in the week, that 

15 I think that the language that was, as originally 

16 written, "That the borrower must file a borrower 

17 defense claim under paragraph (b)(1) of this 

18 section within three years of the date the borrower 

19 discovered, or reasonably should have discovered, 

20 the misrepresentation."

21 It's for all the reasons why we have 

22 statute of limitations that's important, but I also 

23 think that by having the qualifier where the, where 
153

1 the student or the borrower discovered, or 

2 reasonably should have discovered, gives an out, 

3 and I don't mean an out, but an option I should 

4 say, for a student who for good cause did not know 

5 that he or she had a claim, and so it's not a hard 

6 stop, you know, under special circumstances or 

7 certain circumstances for a student borrower to 

8 bring a claim, so we've got the benefit for most 

9 cases of having a statute of limitations, a 

10 recognition for those times where there are special 

11 circumstances where, you know, where it would not 

12 be justice to deny the student the claim, or the 

13 opportunity to at least bring the claim.

14 We don't have the issue that John raised 

15 there where, you know, we're creating a bifurcated 

16 system where the school might not, you know, the 

17 taxpayer might be on the hook for it, because of, 

18 you know, some limitation that the Secretary has 

19 of the time limit that she can collect, so I just 

20 want to -- again, as you're considering, consider 

21 what you had in here originally.

22 PARTICIPANT: Aaron.

23 MR. LACEY: Yes, a couple of comments. 
154

1 I noticed -- Abby, you introduced a concept about 

2 a false urgency, and I will start by saying, I have 

3 no problem with the notion that school should not 

4 be permitted to misrepresent the timing or 

5 availability of enrollment.

6 I mean, if you tell someone, "We've only 

7 got three slots left or you have to enroll by next 

8 week or you can't get a slot," and that's a 

9 misrepresentation, it should be -- I agree.

10 My concern is the language that was put 

11 up there was high pressure sales tactics, which 

12 is, I think, an unenforceable concept. I mean, 

13 I don't -- I have no -- that's way too broad, so, 

14 so --

15 (Off mic comments.)

16 MR. LACEY: Okay. Thank you, because 

17 I -- if we can get something concrete along those 

18 lines, I get it if it's measurable, but I would, 

19 I would be opposed to a vague statement like that.

20 The other question I had was you had 

21 added the financial harm, "The borrower's inability 

22 to secure employment." I mean, I have in D already 

23 under financial harm -- and maybe the numbering 
155

1 has been all changed up since what I had this 

2 morning. Let's see.

3 I mean, I have that standard almost 

4 already there. Let's see. Where's the financial 

5 harm section? What do you have for D under 

6 financial harm? Oh, I can't look at that while 

7 it's scrolling. A -- let's see. Is that the new 

8 list? Okay, well, that's not -- yes, it's not what 

9 I have in front of me, so --

10 PARTICIPANT: I know it's really hard 

11 to (simultaneously speaking) --

12 MR. LACEY: Well, the --

13 PARTICIPANT: -- what we're talking 

14 about.

15 MR. LACEY: Yes, so the prior standard 

16 that I have in my draft is, "The borrower's 

17 inability to secure employment in the field of study 

18 for which the institution expressly guaranteed 

19 employment." I would be comfortable with that. 

20 It's a higher standard in my view for financial 

21 harm, because this doesn't have any component of 

22 representation on the part of the institution.

23 PARTICIPANT: Okay.
156

1 MS. WEISMAN: So, are we ready to move 

2 on to Issue Paper 2?

3 PARTICIPANT: We are.

4 MS. SHAFROTH: I wanted to respond 

5 briefly too. If we scroll up a little bit, Michael 

6 had made a suggestion, I think, regarding concern 

7 that, you know, a borrower might choose a lower 

8 earning occupation, and that shouldn't count as 

9 financial harm.

10 My understanding is that we wouldn't 

11 need to put the language in the list there, because 

12 then -- because the, the paragraph defining 

13 financial harm says it has to be as a consequence 

14 of the misrepresentation, so if the student just 

15 chooses that they want to become a, you know, a 

16 public servant, and they're going to earn less 

17 money, that's not a -- they're not earning less 

18 as a consequence of the misrepresentation, so I 

19 don't -- so I would, I would oppose the additional 

20 language (simultaneous speaking) the list.

21 PARTICIPANT: Okay. Thank you.

22 Moving on to Issue Paper No. 2.

23 MS. WEISMAN: So, as we begin with 
157

1 Issue Paper No. 2, I'd like to bring you to page 

2 seven for some amended text that occurred after 

3 your copies were made.

4 So, in section A on page seven, where 

5 it says, "The borrower's financial harm as related 

6 to the cost of attendance to attend the school," 

7 on page seven --

8 PARTICIPANT: Midway down page seven?

9 MS. WEISMAN: Under -- under numeral 

10 seven relief section if that helps you to follow 

11 it.

12 A currently reads, "The borrower's 

13 financial harm as related to the cost of attendance 

14 to attend the school." A would stand as is.

15 B would be replaced by text that says, 

16 "The benefits to the borrower from the educational 

17 services provided by the school." We would then 

18 strike what says, "The value of the education the 

19 borrower received."

20 And the reason behind that is because 

21 the concern was that it would be very difficult 

22 to value the borrower's education. We had some 

23 significant discussion around that.
158

1 PARTICIPANT: Annmarie, can you just 

2 -- what was captured was, "The benefits to the 

3 borrower from the educational provided by the 

4 school." I think there's another word there.

5 MS. WEISMAN: Educational services 

6 provided by the school?

7 PARTICIPANT: Okay. Educational 

8 services, Aaron. Thank you.

9 MS. WEISMAN: So, it then reads A and 

10 B with the new B, and we strike the prior B, C, 

11 and D. Again, with the feedback we received, the 

12 concern was that it was very difficult to value 

13 these items, and that by just saying, "The value 

14 of," didn't really lead us anywhere.

15 I'll read it one more time. So, A is, 

16 "The borrower's financial harm as related to the 

17 cost of attendance to attend the school," and then 

18 the new B is, "The benefits to the borrower from 

19 the educational services provided by the school."

20 So, just as a reminder, these become 

21 the factors that the secretary would consider. 

22 And, again, that's not to say that there might not 

23 be other factors. We're saying they include, so 
159

1 we're striking the prior B, C, and D.

2 PARTICIPANT: Abby, is your tent still 

3 up or do you have something for Issue Paper 2?

4 (No audible response.)

5 PARTICIPANT: Thank you.

6 All right. Any additional proposals 

7 for the department to consider for Issue Paper 2?

8 Linda.

9 MS. RAWLES: I have two questions first 

10 just for clarification, and then one suggested 

11 change. First of all, on the top of page seven, 

12 "The secretary may reopen a claim when the evidence 

13 becomes available to support a previously denied 

14 claim." I may have missed this along the way, so 

15 I'll apologize in advance, but is there a limit 

16 on that? Am I missing something, or is that just 

17 open-ended forever?

18 MS. WEISMAN: That became an 

19 open-ended item. If we receive significant 

20 evidence later that gave merit to claims that we 

21 had previously denied, there was a request to allow 

22 for the secretary to reopen a claim.

23 MS. RAWLES: Would that be forever or 
160

1 within this original statute of limitations or 

2 forever, forever?

3 MS. WEISMAN: So, the statute of 

4 limitations relates to the borrower's ability to 

5 bring a claim. This would be the secretary's 

6 ability to revisit a previously initiated claim, 

7 so the borrower initiates the claim, we deny it, 

8 because there's no evidence, for example, and then 

9 later, the department receives significant 

10 evidence that shows something occurred.

11 I believe it was Joseline who had asked 

12 that we have the ability to go back in and reopen 

13 that, so this would not be the borrower reapplying. 

14 It would be the secretary having the ability to 

15 go back through those other claims.

16 MS. RAWLES: Okay. Then, I would like 

17 to propose that this is limited in some way. Once 

18 we decide the statute of limitations' issue, 

19 perhaps it can be limited by the statute of 

20 limitations, but I'll come back with some language 

21 on that, or one of us can.

22 PARTICIPANT: Could you explain why?

23 MS. RAWLES: Why? Because I don't 
161

1 think that the secretary should be able to reopen 

2 a claim 20 years later.

3 MS. WEISMAN: So, the school would 

4 still have the limitation on when we would recover 

5 under the language that we have right now, so we 

6 would not be saying that the ability to go after 

7 the school for recovery is unlimited.

8 MS. RAWLES: Okay. All right. Let me 

9 think about that one. That might change my mind, 

10 but --

11 PARTICIPANT: So, Annmarie, just a 

12 question on that then, because in the recovery 

13 language with the limitation, it says, "Once a final 

14 determination has been made," but if you've 

15 reopened the claim, there'll be a new date for a 

16 final determination that you'll have three years 

17 from that time to come back after the school, 

18 because there'll be a new final determination, so 

19 I think that's where the question is coming in, 

20 because the limitation on the school is from the 

21 final determination decision, not on whether the 

22 claim was the original one or the reopened one.

23 MS. RAWLES: Thank you.
162

1 PARTICIPANT: Maybe the way to resolve 

2 that is to just, in those provisions that, that 

3 place the statute of limitations on recovery 

4 actions to tie it to the initial adjudication of 

5 the claim, or the --

6 MS. WEISMAN: Perhaps if we cited this 

7 paragraph --

8 PARTICIPANT: Something like that.

9 MS. WEISMAN: -- where we talk about 

10 the decision that might get us there, but we'll 

11 take that back as well.

12 MS. RAWLES: Yes, if you take that 

13 back, then we could consider that when they come 

14 back, so --

15 MS. WEISMAN: There was one other item 

16 for this Issue Paper that we had mentioned before 

17 the break, but I think is important to actually 

18 bring to your attention again. It's a little 

19 difficult to read.

20 PARTICIPANT: There's been requests to 

21 remove the blue, change the color of the blue, so 

22 that --

23 PARTICIPANT: Just for reading.
163

1 MS. WEISMAN: So, we can -- we can try 

2 to do something with that shading, but the idea 

3 of the shading right now, and I know I'm struggling 

4 to read it as well, but it's really to show that 

5 the text in blue is to give an option where it's 

6 kind of like pick one of the two sections, so we 

7 want to make sure that there's still -- maybe we 

8 can italicize them or something for the purpose 

9 of reading them, but the idea, as I mentioned before 

10 the break, was to give the option of, if you're 

11 going to do the ADR process, that we wouldn't have 

12 a reconsideration.

13 MS. HONG: So, this is being presented 

14 as an either/or deal, so the yellow language or 

15 the blue language.

16 PARTICIPANT: Okay.

17 PARTICIPANT: Could we just --

18 understanding the either/or situation, could we 

19 just maybe make the blue just something that's 

20 higher contrast than the --

21 MS. HONG: Wait. I might have 

22 something. Give me one second.

23 PARTICIPANT: Should I pause?
164

1 (Laughter.)

2 MS. HONG: Sorry. So, Mike, this is 

3 an attempt -- we did this in an attempt to be more 

4 clear, but clearly, it's caused less clearness, 

5 if that's a thing, so -- so generally from the 

6 department's -- the department's intent here with 

7 the rainbow colors is to say that last, yesterday, 

8 there was a lot of discussion about exchange of 

9 evidence between the school and the borrower with 

10 the 45, 30, and 15-day periods, and you'll see that 

11 captured here in the language.

12 However, as was pointed out by, I 

13 believe, Abby yesterday, with reconsideration, we 

14 had conditioned this upon newly discovered 

15 evidence, and that's from the department's 

16 perspective. That's similar to what we had hoped 

17 would sort of allow for an exchange of evidence 

18 after -- if it was determined necessary or desired 

19 from the parties after a decision was made. So from 

20 our perspective, from an, for administrability, 

21 and the burden on the Department to move through 

22 these claims expeditiously, hopefully, for the 

23 borrower and for the school to get resolution.
165

1 Our thought is that we can keep the time 

2 frames, but then given that it gives multiple 

3 opportunities for the borrower and the school to 

4 exchange information in response to each other, 

5 then if we do that, then that decision is final. 

6 Otherwise, we would support going back to our 

7 original language where we have adjudication 

8 without the time frame listed here, but then have 

9 a reconsideration process.

10 That's probably as clear as mud, but, 

11 but that, that's, that's our intent.

12 PARTICIPANT: Is the and, not the or, 

13 correct?

14 MS. HONG: And something else that we 

15 inserted that was not there yesterday in response 

16 to what we heard around the table, but keeping in 

17 mind our issues with being able to commit resources 

18 at this time, we did include a provision. I don't 

19 know exactly where it is, but I will tell you that 

20 there is a provision in allowing for a voluntary 

21 resolution process.

22 PARTICIPANT: (Inaudible.)

23 MS. HONG: Page five for voluntary 
166

1 resolution process, so, that, that's separate from 

2 what I was just talking about, about from our 

3 perspective that we'd like to hear discussion about 

4 whether people prefer a reconsideration process 

5 versus a more fulsome evidentiary exchange in the 

6 initial process but have that be final, so we were 

7 thinking ADR, and then either the 30 -- no, 45, 

8 30, 15 time frame evidentiary process, the final 

9 decision resulting from that, or a AD -- sorry, 

10 a dispute resolution process, then, then going to 

11 a 45-day process by which the borrower to -- by 

12 which the school submits a response to the 

13 borrower's claim, a decision from that, but then 

14 consideration, reconsideration.

15 PARTICIPANT: So, are there thoughts 

16 on this?

17 Okay. Ashley Harrington.

18 MS. HARRINGTON: So, we would strike 

19 all the language about the voluntary resolution 

20 process. The fact that there's no department 

21 involvement, we think it's right for abuse process 

22 for students. This -- and it's basically what 

23 arbitration is anyway, so we would strike all 
167

1 language in reference to that, and we would want 

2 it that the process should be within the department 

3 and governed by the department and not going outside 

4 of that process, and we like the time frames as 

5 listed.

6 PARTICIPANT: Linda, I don't believe 

7 you were finished.

8 MS. RAWLES: I had one -- I have two 

9 more, but I would have to wait (inaudible).

10 PARTICIPANT: Okay.

11 PARTICIPANT: Other thoughts on this 

12 section?

13 Abby, and then Kelli, do you also?

14 PARTICIPANT: Wait, hang on. So, this 

15 was on the voluntary mediation?

16 PARTICIPANT: (Inaudible.)

17 PARTICIPANT: Okay. I just want to 

18 get back to Linda if she has other --

19 PARTICIPANT: Why don't we finish --

20 PARTICIPANT: Yes. Why don't we 

21 finish with Linda, and then, and then we're going 

22 to pick up with Abby?

23 MS. RAWLES: All right. One more 
168

1 quick question for the department, and then my 

2 proposal. On page eight, number ten, I certainly 

3 appreciate including a provisionally certified. 

4 If I had time to research this myself, I would, 

5 but when you say, "Provisionally certified," are 

6 you including month-to-month, temporary? Would 

7 those also be provisional?

8 MS. WEISMAN: Yes, if you're on 

9 month-to-month, you're on provisional.

10 MS. RAWLES: Okay. Thanks for that. 

11 Makes me satisfied on that.

12 The only change I had was on ten, 

13 recovery from the school. We had talked about 

14 putting the affirmative defenses back in. Unless 

15 I'm -- I call them affirmative defense. Unless 

16 I'm missing them, those did not come back in, I 

17 want to propose that again. Those were in Issue 

18 Paper 1 on page 6, 4, romanette (i) through (iv).

19 I know the department says that if we 

20 go with an intent standard, we don't need those 

21 affirmative defenses, but I'm not -- you know, we 

22 can agree here that the intent, we'd be looking 

23 at intent to the school, and not a rogue employee, 
169

1 but then when, you know, a few years down the line 

2 where we're going through this that may not hold, 

3 and so I think we have to have the protections for 

4 the schools of making sure that if they make every 

5 good faith effort to correct, etc., that that would 

6 be a bit of a safe harbor, so, again, on Issue Paper 

7 6, 4, romanette (i) through (iv) would go in under 

8 item number 10.

9 PARTICIPANT: Okay. Abby.

10 MS. SHAFROTH: I would -- I would join 

11 Ashley in striking the voluntary resolution process 

12 if the department isn't going to be involved in 

13 a mediation role. I think -- I think we've been 

14 -- our position has been that we're open to such 

15 a process, but the department must be involved in 

16 a mediation role to protect the interest of 

17 unrepresented students, so the department should 

18 correct me if I'm, if I'm misunderstanding the 

19 proposal, but it looks like they're saying they 

20 would not, not be involved.

21 The department asked for feedback on 

22 whether we prefer a reconsideration process versus 

23 a sort of back-and-forth exchange of information 
170

1 prior to the decision. I am, you know, I'm open 

2 to the, to the reconsideration process.

3 I think there is benefit to the borrower 

4 of seeing sort of what the secretary thinks is, 

5 or the decision-maker the department thinks is 

6 relevant, but, but if we do do the reconsideration 

7 process instead of the back-and-forth prior to 

8 decision, I would want to change the language about 

9 requiring the need for newly discovered, newly 

10 discovered evidence, and it has to be just 

11 additional evidence that the, you know, the 

12 borrower can say they didn't understand was 

13 relevant or wasn't previously available prior to 

14 the decision to get that concern.

15 PARTICIPANT: To clarify, so more like 

16 response of evidence?

17 MS. SHAFROTH: Yes. Yes. Yes, 

18 something along those lines.

19 And just to keep, keep ticking things 

20 off as quickly as I can in this lighting round, 

21 should I discuss something somewhere else?

22 (No audible response.)

23 MS. SHAFROTH: Okay. On page four, 
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1 this is about the minimum threshold for 

2 consideration of a borrower defense claim. It 

3 looks like the department has changed the language 

4 to say that, that the borrower's application will 

5 only meet the minimum threshold if the department 

6 has evidence that's supports the borrower defense 

7 claim.

8 I want to make sure that that -- get 

9 clarification from the department whether evidence 

10 would be inclusive of the, the borrower's 

11 statement. If the borrower's statement testimony 

12 under penalty of perjury would be sufficient 

13 evidence to get past this threshold, because if 

14 not, I would have significant concerns with that 

15 since at this point the department hasn't even 

16 gathered any information from the school that could 

17 potentially support the borrower's claim.

18 MS. WEISMAN: So, we've said that the 

19 evidence would -- that the application -- what we 

20 would need to meet the standard to get through this 

21 is that you would have an application plus some 

22 other evidence, so if we're going to say application 

23 plus, then any evidence that we have in our 
172

1 possession at that time would be considered, as 

2 well as anything that the borrower submits.

3 PARTICIPANT: Okay. Aaron, Kelli, 

4 and then Chris.

5 MR. LACEY: So, I, you know, I've said 

6 previously, I think the -- I call it "Voluntary 

7 claim resolution," is really an important concept, 

8 and I would like to note for the record that the 

9 proposal we provided for the department included 

10 engagement.

11 I mean, we understood that that was a 

12 critical point, and we think that's very important 

13 too. This seems to be a concern about cost and 

14 resources. I get that, but I continue to believe 

15 that this would be an incredibly important concept, 

16 and, for all parties, and I would have liked to 

17 have seen something much closer to the proposal 

18 that we provided with respect.

19 I also don't understand when you're 

20 talking about either/or. I mean, if we went with 

21 voluntary resolution, and then we included a 

22 voluntary claim resolution process, and then the 

23 parties declined, does that mean they get neither, 
173

1 right? So, let's say we don't include a 

2 reconsideration, and you include a voluntary claim 

3 resolution, and one of the parties says, "No, we 

4 don't want to do it," --

5 MS. WEISMAN: So, the choice was 

6 between the idea of the back-and-forth with 

7 evidence on the front end, and the idea of a 

8 reconsideration process. The concern that the 

9 department has is that those time frames, the 45, 

10 30, 15, all of that, when you add up the number 

11 of days that we would have an application, plus 

12 putting it on hold for a period of time while we 

13 potentially considered an ADR process, makes for 

14 a very long process, and then if you're going to 

15 have reconsideration as well on the back end, that 

16 just seems like a lot of time to process one 

17 application to leave it potentially open, so the 

18 feeling was we would have the ADR process available 

19 -- again, our plan is without department 

20 involvement, but we would have that available, but 

21 the other two are what you're choosing between. 

22 You're choosing between the idea of all that time 

23 frame up-front versus reconsideration on the back 
174

1 end.

2 MR. LACEY: Okay. I apologize. I 

3 misunderstood. Well, I would certainly prefer to 

4 have the built-in time frames up-front. I think 

5 that's very important leading up to the thinking 

6 you'd exchange the information before the decision 

7 is made.

8 The other -- I actually have the same 

9 note that Abby made from a slightly different 

10 perspective, but on page four, in C, regarding the 

11 department's note, I was going to suggest the 

12 clarification that the department has evidence in 

13 addition to the application that supports the 

14 borrower defense claim.

15 PARTICIPANT: Kelli.

16 MS. HUDSON PERRY: I actually like the 

17 way that this is worded with this ADR process, and 

18 then the ability to submit the evidence. The one 

19 thing that I would say, and I don't know if maybe 

20 this will help some of the students, because I can 

21 understand student group is where you're coming 

22 from is in B, and there's actually a lot of Bs at 

23 the top of this page, on page five, it says, "The 
175

1 secretary will place the borrower's claim 

2 application in advance for 60 days or until the 

3 secretary is informed by both the borrower and the 

4 school that the resolution process has concluded."

5 I would propose changing "and" to "or," 

6 because if the student says, "No, I don't want to 

7 do this," the school shouldn't have to agree with 

8 that. It should just be simply, "No, I don't want 

9 to do this."

10 And I can understand the concern for 

11 the number of days, so maybe we shrink this advance 

12 to 30 days as opposed to 60, because I think if 

13 you're offering this opportunity, which is in 

14 essence a letter that says, "You have the 

15 opportunity to do this."

16 If the student gets the letter and say, 

17 "No, I don't want to do this," they're going to 

18 know that immediately, so maybe it's an advance 

19 for 30 days or until notification has been received 

20 from the student or the school.

21 MS. WEISMAN: So, we actually made a 

22 change to this that did not get reflected in the 

23 paper that I think might clarify some of that. 
176

1 First of all, I thought I had made these edits 

2 before, but maybe I missed that.

3 We have borrowers claim application, 

4 and so we're deleting the word "claim," because 

5 otherwise it's redundant, but also at the end, we 

6 had whichever is less. The idea that we would put 

7 the application in advance for 60 days or until 

8 we get word back that the resolution process is 

9 over, but whichever is left, less, so it gives them 

10 basically up to 60 days.

11 Does that help with what you were 

12 suggesting?

13 MS. HUDSON PERRY: Yes. I still think 

14 I would change it to 30, and I definitely would 

15 make it an "or," because it shouldn't -- both of 

16 them shouldn't have to agree. It should be -- if 

17 somebody says they don't want to do it, they 

18 shouldn't have to do it.

19 PARTICIPANT: Chris, and then William.

20 MR. DELUCA: So, again, with the, with 

21 the voluntary dispute resolution process, I mean, 

22 I agree with Abby, and I agree with, with Ashley. 

23 The department has to be involved in some way with 
177

1 this, otherwise, it just -- it would never work.

2 My proposal from a language standpoint 

3 is, and I said this earlier on too, is just to have 

4 a placeholder for the concept, and recognize that 

5 the secretary is going to -- they need to develop 

6 a process here that works with the resources, you 

7 know, at the department, so my suggestion for A 

8 is simply under B, romanette (ii)(a), "The 

9 Secretary will develop procedures to govern the 

10 VDR process, for the voluntary dispute resolution 

11 process."

12 And let's just keep just the 

13 secretary's discretion to develop internal 

14 processes for how this is going to work, but the 

15 secretary -- it's -- realistically, it's not going 

16 to work, and I get that.

17 The other thing I think is important 

18 -- again, and this is part of the whole concept 

19 of this, the idea that this is a process that is 

20 going to streamline, and, hopefully, reduce 

21 resources is that under C, under the VDR process, 

22 we've got, "If the borrower and the school resolve 

23 the borrower defense claim through the resolution 
178

1 process, the borrower waives any right to further 

2 pursue the borrower defense claim."

3 I think we need to have an "and," and 

4 the school waives any right to contest 

5 reimbursement to the secretary. And the whole idea 

6 is that this is the way to resolve it, so if the 

7 parties have a resolution, then the borrower says, 

8 "I'm good," school says, "I'm good," and, you know, 

9 school shouldn't have an opportunity to then, you 

10 know, challenge the secretary on a, on a collection 

11 action. The whole idea is that this resolves it.

12 PARTICIPANT: Caroline, are you going 

13 to --

14 MS. HONG: Just to clarify, Chris. 

15 Our thought here was that if a claim is resolved, 

16 there just wouldn't be any liability to the school?

17 MS. DELUCA: Well, no. If the claim 

18 -- well, I guess my thought on this is the borrower 

19 defense claim, so if the student has got a claim 

20 that says, you know, "I took out $15,000 in loans," 

21 and in -- so the parties get together and say, "You 

22 know what, we agree that, you know, it's not 15,000 

23 worth of harm, it's 10,000 worth of harm," but the 
179

1 harm is that students got a $15,000 loan.

2 I mean, procedurally, isn't it going 

3 to be that the parties would agree that okay the 

4 student is going to accept reducing their loan from 

5 15 to -- or from 15 to 5, and with that reduction, 

6 the school is going to have to pony up the 10, so 

7 -- but that whole process is that the school, the 

8 school -- we've got a bifurcated system right now 

9 where there's -- where you're going after -- it's 

10 the student decision first, and then the secretary 

11 has the option, which she's going to exercise to 

12 go after the school to recover it, so all I'm saying 

13 is that if there's a resolution that -- I mean, 

14 that gets into the whole thing of why there needs 

15 to be just a placeholder for how this process works.

16 I mean, we're talking about NSLDS, 

17 we're talking about loans, we're talking about 

18 balances. I mean, there's details that we never 

19 had the time to get into over here.

20 The idea is just that rather than going 

21 through a process where you do this big 

22 investigation and going back-and-forth and all this 

23 to -- and that part of that too is, you know, you've 
180

1 got a determination of how much -- you know, you 

2 got partial relief too, so you've got the whole 

3 damages' phase of it too, right, if you want to 

4 put it in those terms.

5 This is just an idea of let's, you know, 

6 let's have an idea here and allow there to be a 

7 process where we can streamline that all, the 

8 parties, student and the borrower agree with the 

9 Department facilitating in some manner so that we 

10 get to a number and say, "Okay, so the discharge 

11 is going to be ten, and then what are the 

12 repercussions for that?"

13 PARTICIPANT: Thank you.

14 Okay. William.

15 MR. HUBBARD: Thanks, Moira.

16 Well, regarding six, the affirmative 

17 defense so to speak, I would propose maintaining 

18 this text as stricken, and applaud the department's 

19 thorough and well-reasoned interpretation of 

20 intent as it applies to the text being removed.

21 Rogue employees, this continued rogue 

22 employees' argument is a total strawman. Harm is 

23 still had in this case, and the avoidance of 
181

1 accountability in this case is simply stunning. 

2 Respectfully, I would strongly encourage school's 

3 concern about rogue employees to be more careful 

4 about who they hire.

5 PARTICIPANT: Joseline.

6 MS. GARCIA: Thank you. I'll make 

7 this brief. So, on page five, just echoing some 

8 of the comments that people made. I appreciate 

9 the efforts that Kelli and Chris have made. 

10 However, I'm going to have to back up Ashley.

11 Without the department's involvement, 

12 I don't think I can support that language.

13 And, Chris, again, I appreciate what 

14 you were saying. However, I don't know what that 

15 process is yet that you were talking about, so I 

16 don't know -- I don't feel comfortable voting for 

17 it.

18 And, then if we go to page seven, part 

19 four, I wanted to appreciate the department for 

20 including the language that I had recommended 

21 yesterday, "The secretary may reopen a claim when 

22 evidence..." I would suggest changing the word 

23 "may" to "shall." I think that it should be 
182

1 automatic that if you find new evidence later in 

2 the future, you should automatically open up these 

3 borrower defense claims that could be impacted by 

4 this new evidence that you found.

5 PARTICIPANT: Valerie.

6 MS. SHARP: Two questions. Number 

7 one, would it be possible to -- it's been mentioned 

8 that the language was different that was proposed 

9 on the voluntary dispute resolution than what we 

10 see. Would it be possible just to see what they 

11 submitted if that would allay any of the concerns?

12 MS. WEISMAN: We're going to see if we 

13 can email it out to the negotiators.

14 MS. SHARP: My other question was, so 

15 we have the either/or now on the up-front claims 

16 process or the reconsideration process, and when 

17 we started our discussion, there was a different 

18 time line, but it did afford for the exchange of 

19 information up-front and a reconsideration 

20 process, so does the committee have the option --

21 just for sake of understanding if, if we wanted 

22 to make this, do we now have to pick either the 

23 up-front exchange or the reconsideration or could 
183

1 we choose as a committee to go back to the original 

2 language proposed by the department that allowed 

3 for both of those processes to occur on a different 

4 time line?

5 Because the original wording from the 

6 department had the 45 days, I think, in the 45 days, 

7 and then had a reconsideration process, and then 

8 the committee kind of talked more about, "Let's 

9 change that up," so we changed your original 

10 wording, which did allow for both pieces of that 

11 process to occur.

12 MS. WEISMAN: So, it had, it had some 

13 of both, but it didn't have such a long 

14 back-and-forth on the front end.

15 MS. SHARP: Exactly. So, is that --

16 MS. WEISMAN: And the concern was that 

17 that just got too unworkable.

18 MS. SHARP: So, is there an option to 

19 go back where you have some on the front and some 

20 on the back versus having to pick front or back?

21 MS. WEISMAN: The offer right now on 

22 the table is that we would do one or the other.

23 MS. SHARP: One or the other, okay. 
184

1 So, we don't have the option to vote to go back?

2 (No audible response.)

3 MS. SHARP: You do? Okay.

4 MS. HONG: I'm sorry. So, the offer 

5 is to use the original language prior to our 

6 discussion yesterday, or to go with the discussion 

7 language yesterday without reconsideration, and 

8 I've been told that the language that Chris came 

9 up with with Aaron about the -- I'm sorry, my mind 

10 is fritzing, but about the mediation process was 

11 emailed to everyone, and is being resent.

12 PARTICIPANT: Ashley Harrington.

13 MS. HARRINGTON: Appreciate all of the 

14 suggestions for improving the voluntary process. 

15 None of those suggestions really alleviate my 

16 concerns just to put that out there. And while 

17 seeing the language would be helpful, it's not 

18 helpful in the, in the space where the department 

19 is telling us they're not going to be involved in 

20 the process, and they won't commit to it, and so 

21 if department is not committing to be a part of 

22 the process, we would not, we would prefer not have 

23 any of that language in here, and have that not 
185

1 be an option if there's no commitment from the 

2 department to manage it in some way.

3 But I also wanted to go back to, for, 

4 to the minimum threshold for consideration, C that 

5 Abby was talking about. Yesterday, it felt like, 

6 when we asked about this, you were saying the 

7 minimum threshold really was alleging a claim that 

8 reads as a misrepresentation as based on the 

9 standard that was articulated earlier.

10 Now, it seems you were saying that 

11 alleging a claim that would fall under this and 

12 alleging it correctly and showing that this, one 

13 of these things that has occurred, whatever, was 

14 not enough. There has to be some other evidence, 

15 so this creates another bar to entry for a claimant.

16 If you don't have -- if they don't have 

17 any evidence, and you don't have any evidence yet 

18 for them to even get their claim looked at, and 

19 so I'm concerned, because -- and, also, that just, 

20 that does not jive of what she said yesterday from 

21 my understanding.

22 PARTICIPANT: Caroline.

23 MS. HONG: So, just to respond to that. 
186

1 You brought up a really great point yesterday, 

2 Ashley, and so we took it back and thought of it, 

3 and really part of this minimum threshold 

4 consideration is, you know, as everyone has 

5 repeatedly reminded us, inside this process and 

6 outside this process, we have a large volume of 

7 claims that we need to work with.

8 We don't anticipate that going down, 

9 doing down into the future if everyone does their 

10 job of informing people about this, so our thought 

11 was that things that we're seeing in the initial 

12 intake of a claim really not -- I mean, it sounds 

13 trivial, but it really is a lot of claim where we 

14 just don't see the filling out completely of an 

15 application, but also that, you know, they just 

16 don't allege misrepresentation at all, and that, 

17 you know, based upon what we have -- and, 

18 admittedly, it's because right now a lot of the 

19 claims that we're looking at we have a lot of claims 

20 that pertain to the same situation, such as the 

21 Corinthian claims. 

22 We do have evidence in our possession 

23 that we're using to corroborate the claims, and 
187

1 we anticipate that situation continuing into the 

2 future for other claims, so our thought is that 

3 here, you know, borrowers can reapply, but then 

4 we will in the initial cut just for streamlining 

5 the process and making sure that all borrowers who 

6 submit a claim will not, you know, will be able 

7 to get considered, that there has to be something 

8 in addition to the application.

9 It can come from our records or not. 

10 And we do understand that we said that we set forth 

11 here that we're consider our records. The borrower 

12 is not going to know what's in our records, so as 

13 part of that, you know, taking note Joseline's 

14 requests that we have that the secretary may reopen 

15 a claim, that was part of the reason why we also 

16 included a section that we were referencing where 

17 the secretary can reopen a claim when evidence 

18 becomes available, or if when, when the evidence 

19 becomes available to support a previously denied 

20 claim, and that's to sort of accommodate that 

21 situation where we later on find that there is a 

22 number of claims that do support a claim under the 

23 intentional, intentional misrepresentation or 
188

1 reckless disregard standard that, that point, then 

2 we can, we can return to that.

3 MS. HARRINGTON: So, I understand what 

4 you're saying about the issue with incomplete 

5 applications. For us, C does not address that 

6 concern. You can still get an incomplete 

7 application.

8 I think you, you say, "A fully complete 

9 -- alleges -- is a fully complete application that 

10 alleges a misrepresentation that would state a 

11 claim under the standard." Having it based on 

12 other evidence that the borrower doesn't even know 

13 that they need yet seems a really high bar, as I 

14 said before, but also it makes, it makes the time 

15 period even longer for the borrower. It doesn't 

16 show concern for the borrower and the barrier to 

17 enter that the borrower has.

18 So, if you send them back a letter when 

19 they send a claim in that was fully complete, and 

20 you send them back a letter saying that you're not 

21 even going to consider their claim, why would they 

22 want to continue to engage in a process that they're 

23 already distress, they already are not getting 
189

1 access to when they did the part of completing the 

2 form, and now they just want you to consider it 

3 and let them submit evidence or find evidence.

4 It just seems like the problem that you 

5 are saying that you are trying to address is not 

6 being addressed by C, and it's also putting another 

7 burden on a borrower in a process that is already 

8 extremely burdensome given the high standard that 

9 you've articulated already.

10 PARTICIPANT: Okay. Abby.

11 MS. SHAFROTH: I don't want to belabor 

12 this point, but I agree with Ashley. This is a 

13 huge, huge problem for borrowers. If -- if a 

14 borrower statement under penalty of perjury 

15 explains in detail how they were defrauded by a 

16 school, the ways that it has harmed them, and 

17 satisfies, you know, like their testimony under 

18 penalty of perjury manages to meet, meet this high 

19 standard that the department is proposing that they 

20 would still get their application thrown back at 

21 them and told that the department won't even 

22 consider their claim and won't even go to the school 

23 to ask, to look for any evidence, that's -- that's 
190

1 deeply concerning to me.

2 I think it's going to hurt a lot of 

3 borrowers that are going to, you know, stop, stop 

4 having any faith in the process or even bothering 

5 to apply, so doing it, doing it in the name of 

6 speeding the application processing for borrowers, 

7 I don't, I don't think that is in the interest of 

8 borrowers.

9 Just as a quick example, you know, if 

10 a borrower's claim is that the, that the school 

11 falsely advertised job placement rates, but that 

12 borrower hasn't kept all of their records, they 

13 don't have the paper documentation showing, you 

14 know, that some school said 90 percent job placement 

15 rates, but they remember it, and they applied to 

16 the department and say that, you know, "I remember 

17 that this, that the school's recruiting materials 

18 said 90 percent job placement rates, but I didn't 

19 keep those papers, I threw them out after I 

20 enrolled."

21 To say the department wouldn't even go 

22 to the school then and say, "I would like to see, 

23 you know, your recruiting materials from two years 
191

1 ago," I don't know why we would want that. I mean, 

2 why -- that really stacks the deck against 

3 borrowers.

4 MS. WEISMAN: So, just to clarify. 

5 The point here was to weed out applications and 

6 reduce burden of asking for information when what 

7 we had was very vague. So, for example, a borrower 

8 who writes in and says, "My school lied to me, my 

9 school stinks," there's nothing -- there's not a 

10 there there, so they're not alleging anything, and 

11 the thought was rather than go back to the school 

12 and have everything, you know, in process, we could, 

13 we could stop that one right there and say, "There's 

14 nothing here."

15 MS. SHAFROTH: Can I respond really 

16 quickly? So, Annmarie, what you're describing to 

17 me sounds like a sort of dismissal for failure to 

18 state a claim standard that if the, that if the 

19 borrower's testimony under penalty of perjury by 

20 itself is insufficient to set forth the elements 

21 of the claim, then you would say, "No, sorry, you 

22 don't have a claim here."

23 That's -- I'm -- you know, I can -- I 
192

1 can understand that. I can appreciate where you're 

2 coming from on that.

3 What I can't understand is if their 

4 testimony is sufficient to, to state a claim to 

5 show that they meet those elements, but they just 

6 don't have additional evidence at this time beyond 

7 their testimony, why, why we would throw out their 

8 claim off the bat rather than having the department 

9 do some, do some inquiry and check whether the 

10 school has any of that evidence that could 

11 corroborate the claim.

12 PARTICIPANT: Juliana, and then Mike 

13 Busada.

14 MS. FREDMAN: So, switching gears a 

15 little bit back to the time lines. I kind of --

16 maybe I misunderstood this, but I thought the 

17 either/or provision was partly because of the 

18 insertion of the ADR process, which could then 

19 extend the time even longer.

20 And I wondering that if, if the 

21 department is not going to be involved in ADR and 

22 it's a non-runner for many people, and that part 

23 is stricken, you know, even the 45, 30, 15, that's 
193

1 90 days plus some time for determination, I mean, 

2 honestly, 90 to 120 days is typical slash short 

3 for determinations on closed school, TPD, false 

4 -- I mean, that's pretty standard, and those 

5 decisions all do have a period that you can have 

6 reconsideration based on evidence that wasn't 

7 considered, so I would ask the department to 

8 reconsider having both an exchange of information 

9 and a reconsideration period if there's no ADR 

10 process. I don't think it's that long given other, 

11 other federal discharges of student loans in my 

12 experience.

13 PARTICIPANT: Mike Busada.

14 MR. BUSADA: Not to belabor the issue, 

15 but I just -- I want to say that -- and just want 

16 to make sure it's very, very, very clear on the 

17 record, and I note there's not resources, there's 

18 not resources, but out of everything we've done 

19 in the last three months, again, this is one issue, 

20 one concept that, you know, everybody thought would 

21 be significantly helpful to the overall process, 

22 and so what I would ask, one, I'd ask that we, that 

23 we do keep it in, and the department is involved, 
194

1 but at the very least, I would just ask that we 

2 don't, we don't preclude that ability.

3 I think that it would be helpful if the 

4 department would have, take the opportunity, if 

5 possible, to look into it and do a full evaluation, 

6 because like Aaron, I really think that when you're 

7 talking about the process against the original, 

8 the first discharge process, and then the 

9 additional process that comes with going after the 

10 school for reclaiming, and you're talking about 

11 being able to get rid of all of that and fix all 

12 of that through a mediation process, I have to think 

13 that that would save resources, so I just ask again 

14 just for the record, and also since we're on a public 

15 forum, you know, impress upon Congress for funding 

16 to make sure that we have these type of programs.

17 PARTICIPANT: Aaron.

18 MR. LACEY: I was just going to -- Abby, 

19 thinking through, you know, the concerns with C 

20 and the department, what the department had to say. 

21 I mean, just from a practical standpoint, I was 

22 -- you know, it occurred to me that there could 

23 be value to the extent it was left this way, you 
195

1 know. C reads, "The department has supporting 

2 evidence that supports the borrower's defense 

3 claim."

4 So, if a borrower supplies a claim and 

5 just has their application, but no supporting 

6 evidence, in the process of certifying the claim, 

7 the department would still have to do a review of 

8 its own records and any other information it had 

9 to determine whether or not this criterion was 

10 satisfied, in which case, there is value -- I would 

11 think there could be value to the, to the borrower, 

12 or to whoever may be working with the borrower, 

13 because it prompts the department to tell you 

14 whether or not they have in their position 

15 possession, what I'll call corroborating, or other 

16 evidence that would support the claim.

17 And the other thing I would point out, 

18 I understand it's a two-step, but because there 

19 is no barrier to entry meaning, I mean, this is 

20 a matter of filling out an application, if the 

21 department didn't certify the claim and it came 

22 back, one, now you have the additional information 

23 that they don't have evidence that supports that 
196

1 claim, which is useful for the borrower to have 

2 as a data point, but also, I mean, correct me if 

3 I'm wrong, but the dismissal is without prejudice, 

4 so the borrower, knowing that -- I mean, it's not 

5 like they can never bring the claim again. The 

6 next day, they could just resubmit the application 

7 in theory, so I'm just sort of thinking about the

8 practical stakes here.

9 I mean, if they're sophisticated enough 

10 to submit the application the first time, upon 

11 receiving that feedback, it would be very easy for 

12 them to resupply it, and now they would know that 

13 the department at least has taken the view that 

14 it doesn't have any supporting evidence.

15 I just don't know that it's -- I 

16 understand your point, but as a practical matter, 

17 I think it could be a useful way to prompt feedback 

18 from the department, and I don't know that it 

19 creates a huge issue for the student, because they 

20 could literally 24 hours later just submit the same 

21 application again presumably over and over and over 

22 and over again.

23 PARTICIPANT: Ashley Harrington.
197

1 MS. HARRINGTON: So, I appreciate that 

2 to you this sounds reasonable, right, like, because 

3 we can sit here from nine to five and hash this 

4 out. We have time. Our jobs allow us to do this. 

5 Our family allows us to do this.

6 We were talking about most of the time 

7 low income borrowers with very little time who have 

8 already been drug around by the system struggling, 

9 and now they've taken the time, they've correctly 

10 completed the application, they've alleged a claim 

11 that meets this high intent standard and bar that 

12 is articulated earlier, and then they are told, 

13 "But this is not enough."

14 What you're saying about the department 

15 saying, "We do have this evidence," they should 

16 do that regardless if they get a claim that states 

17 a claim. They should -- they should say, "Okay, 

18 we have some evidence, that's fine," but to deny 

19 a claim that is properly alleged under penalty of 

20 perjury that meets all this other stuff just because 

21 they didn't provide anything else, and department 

22 maybe doesn't have anything yet, that's a 

23 non-starter.
198

1 PARTICIPANT: So, the time is 2:48.

2 Are there any other comments, 

3 proposals, suggestion on Issue Paper 2?

4 (No audible response.)

5 PARTICIPANT: Okay. Abby.

6 MS. SHAFROTH: Again, without 

7 belaboring the point, I just want to make clear 

8 on the record that I have strong opposition to a 

9 process that does not include a group discharge 

10 process. I raised the example in session two of 

11 the ACI students who were, who were scammed by their 

12 school, and who have been able to get relief in 

13 my state Massachusetts.

14 We're talking about low income 

15 vulnerable borrowers who are abused by the system, 

16 and they -- the granting of group discharge to these 

17 borrowers who probably otherwise would have gone 

18 into default and suffered enormous devastating 

19 consequences to their lives is hugely valuable and 

20 not, not allowing for that is part of this would 

21 be significantly weakening, weakening protection 

22 for students and hurting student borrowers as 

23 compared to both the 1994 regulation under which 
199

1 the department has said it has this authority, and 

2 the 2016 regulation that explicitly spelled out 

3 this authority.

4 PARTICIPANT: All right. There are no 

5 tags up. We are going to move towards our afternoon 

6 break. Can the department let us know how long 

7 we might need?

8 (No audible response.)

9 PARTICIPANT: Okay.

10 MS. WEISMAN: So, I'd like to request 

11 that we come back at 3:30, and at that point, our 

12 plan is to bring you new paper. Again, black and 

13 white will be the paper on the screen in color.

14 And I'd just like to thank everyone 

15 again for the hard work again today so far.

16 MS. HONG: I just -- I just want to echo 

17 Annmarie. Thank you guys so much. I understand 

18 this last rush is very difficult, but we appreciate 

19 you guys hanging in there. Thank you.

20 PARTICIPANT: Thank you.

21 Please come back at 3:30. We have 

22 requested for the temperature to be adjusted.

23 (Whereupon, the above-entitled matter 
200

1 went off the record for a break and resumed at 3:30 

2 p.m.)

3 MR. BANTLE: Okay. We'll turn it over 

4 to the Department.

5 MS. WEISMAN: So, our goal was to bring 

6 you back paper. But because we were still writing 

7 up paper, we didn't want to keep you waiting here.

8 We wanted to get started and present 

9 to you some of the concepts. We can follow up with 

10 language as soon as it's available. We'll end up 

11 doing that paper by paper.

12 There was one other thing I meant to 

13 mention earlier. There was a question earlier, 

14 and I believe it was Suzanne, but correct me if 

15 I'm wrong, who had asked a question about the GE 

16 disclosures.

17 And then I got another question about 

18 it. People were looking for more information about 

19 what was in those disclosures. What I was trying 

20 to communicate, and I may not have said as 

21 eloquently as I could have, their work is still 

22 in progress.

23 So yes, we do have the information 
201

1 available in terms of what their last proposal looks 

2 like. They are a little behind us. They're last 

3 session. Their session three occurs next month.

4 So, for the negotiators and the 

5 alternates, Barbara either already has or will be 

6 emailing you a copy of the GE disclosures as they 

7 stand now, with the information that is in their 

8 last proposal.

9 So, we again want to bring you the 

10 concept information back on Issue Paper One. So 

11 we have in our most recent proposal that we will 

12 be bringing to you shortly, a change in the standard 

13 in Issue Paper One to preponderance of the evidence.

14 And then keeping the idea of at a 

15 station plus. So the borrower would need to have 

16 a completed application with some additional 

17 evidence to go along with that.

18 For the statute of limitations, we are 

19 bringing to the table a proposal with five years 

20 for the borrower to file the application. And that 

21 would be a straight five years, not including 

22 discovery. Five years for that.

23 But to also include in there that it 
202

1 would be up to ten years if there is an affirmative 

2 defense. So basically if the borrower is in 

3 collection activity. If they're in default, if 

4 they're having wage garnishment. At that point 

5 that would be a ten-year period.

6 With that however, we would not be 

7 changing the amount of time that the secretary would 

8 have to go and pursue the school for recovery 

9 actions. So that would mean that the school would 

10 still be pursued for up to three years after the 

11 outcome of the borrower's case.

12 And then there is no change to the 

13 intent piece.

14 MR. BANTLE: Just yeah, I'm hearing 

15 some questions on the slide five and the ten years 

16 if affirmative defense. Could we kind of maybe 

17 circle back to that?

18 MS. WEISMAN: Yes. It would still 

19 keep the language from the date of graduation, 

20 termination, or withdrawal.

21 PARTICIPANT: Annmarie, I am so sorry. 

22 Could you explain again the affirmative defense 

23 piece? I'm not sure that I'm quite following it.
203

1 MS. WEISMAN: So if the borrower is 

2 being pursued by the Department with collection 

3 activity, if we are garnishing the borrower's 

4 wages, if the borrower is in default, they can make 

5 an affirmative defense within a ten-year period.

6 And again, that ten-year period, the 

7 clock would start ticking from the great date of 

8 graduation, termination, or withdrawal.

9 MR. BANTLE: Alyssa, a question?

10 MS. DOBSON: Statement. Can I make a 

11 statement? Is the Department concerned that that 

12 may perhaps incentivize students to fall delinquent 

13 or default?

14 PARTICIPANT: Not really. Because 

15 the consequences of default are quite severe. You 

16 have to really -- hum?

17 MS. DOBSON: I would think, trying to 

18 wear my student hat, the consequences of being

19 delinquent would not be as terrible as the prospect 

20 of perhaps getting my loans discharged.

21 PARTICIPANT: You have to remember, 

22 combined with the significant standard for getting 

23 your loans discharged here. Preponderance of the 
204

1 evidence, plus attestation, plus to get in the door 

2 that's a pretty significant standard to meet.

3 And we've found over the years that most 

4 -- while there's always been a concern about giving 

5 borrowers an incentive for going into default, 

6 while we've changed the program a lot over the many 

7 years I've been involved, it hasn't really -- that 

8 hasn't been a factor in the increase in the default 

9 rate.

10 It's not intentional default. It's 

11 changes in the economy or other factors. So we 

12 really haven't seen it.

13 I understand the concern. But you've 

14 got to -- you would have to assume that the borrower 

15 is very intentional about it.

16 And we just don't see that as a matter 

17 of practice.

18 MR. BANTLE: Noting the cards up. Are 

19 there other additional items on Issue Paper One?

20 MS. WEISMAN: That's all I have for 

21 One.

22 MR. BANTLE: Okay. Would the 

23 Department prefer to go through the other Issue 
205

1 Papers as well and discuss in total? Given the 

2 time left?

3 MS. WEISMAN: I think it's fine if 

4 people have comments about this information to 

5 start here. Again, we're still anticipating 

6 getting text soon.

7 MR. BANTLE: Oh, Wanda then Barmak.

8 MS. HALL: Yeah, just Alyssa, I think 

9 one of the things also for the borrowers if they 

10 start going delinquent, it's going to ruin their 

11 credit. I mean, in a lot of instances some of them 

12 may already have that happen because of other 

13 things.

14 But, credit, default, and because we 

15 have the IDR/IBR programs, I mean that, a lot of 

16 them qualify for those lower payments as well. 

17 We're able to work with them, so.

18 MR. NASSIRIAN: This is more of a 

19 question. Could you explain what the rationale 

20 is between this sort of bifurcated statute of 

21 limitations?

22 What's your thinking that -- what makes 

23 you think that an affirmative defense should have 
206

1 a longer shelf life then somebody who's not in 

2 default or in wage garnishment?

3 The assumption, I assume, if I may just 

4 sort of speculate, my assumption is that you're 

5 imagining a case where somebody has been paying 

6 for five years. So they must not have been a 

7 problem.

8 That the act of payment is a sort of 

9 a reaffirmation of the thing being legit. Is that 

10 your thinking?

11 Because I can also see somebody getting 

12 three years of deferment and three years of 

13 forbearance, and the first moment when they are 

14 confronted by an actual bill becomes the -- the 

15 light goes on that well, wait a second, this was 

16 repayable. Well, you know, I didn't quite 

17 understand and I was ripped off.

18 So, I'm trying to understand what the 

19 differential is, cause of it.

20 MS. WEISMAN: So, I don't think we saw 

21 the idea of paying on the debt as reaffirming the 

22 debt in that way. Certainly one might take it that 

23 way.
207

1 But that was not part of the discussion. 

2 I think that really the discussion bore out of 

3 the idea that we were hearing the case for a longer 

4 statute of limitations or no statute of 

5 limitations.

6 And we were trying to find a way to find 

7 a middle ground.

8 MR. NASSIRIAN: It can't just be 

9 random. It has to have some -- there has to be 

10 some logical explanation as to why you're 

11 staggering it that way.

12 You know, or maybe we could do other 

13 solutions, let's approve every other one. I mean, 

14 that's also a way of dividing the difference.

15 But that's not the way you adjudicate 

16 something on the basis of the merits. To, you know, 

17 don't want to be accused of quoting Anglo-Saxon 

18 law, but for as long as somebody taps you on the 

19 shoulder and says you owe me money, you should 

20 have the right to say no, I don't because.

21 Now you're breaking with that 

22 tradition. And if you want to break with that 

23 tradition, there has to be some basis.
208

1 Some sort of a policy justification. 

2 Some explanation that says there really isn't a 

3 problem here.

4 The claim just -- the claim doesn't even 

5 merit a review. That's what you're doing. So, 

6 I just want to know why that -- why that difference?

7 PARTICIPANT: We're balancing that 

8 tradition with the fact that we're relying in this 

9 case on records that a school will have to have.

10 And we're trying to find a period in 

11 which we're not overburdening the schools too much. 

12 While giving the borrower a longer period then 

13 we initially proposed to assert the claim as a 

14 defensive measure.

15 MR. NASSIRIAN: But you're not --

16 PARTICIPANT: Let me --

17 MR. NASSIRIAN: Um-hum.

18 PARTICIPANT: It maybe not be perfect. 

19 But, we're trying to balance those interests.

20 MR. NASSIRIAN: You are in the mode of 

21 thinking about recovery before you actually 

22 adjudicated the claim. If there are no records, 

23 that's the case that I suspect, it isn't going to 
209

1 go anywhere.

2 Right? The student can't really 

3 produce sufficient proof if there is really no 

4 evidence. Because the, you know, if the elixir 

5 of time has just sort of completely eradicated all 

6 evidence, and it happens, of course it happens.

7 But that's -- that would be the 

8 definition of an unsuccessful defense. So, we are 

9 talking about cases where the borrower actually 

10 is sort of putting forth a fairly compelling case 

11 that you don't want to hear because it's outside 

12 the window.

13 Because surely if it's a completely 

14 meritless claim with no evidence to back it up, 

15 there would be no trouble to look at it and say, 

16 you know what? You don't have enough here for me 

17 to act.

18 MS. WEISMAN: Can I get a minute to 

19 confer?

20 MS. MILLER: We're ready to move on. 

21 Okay. So Barmak, I think the Department has heard 

22 your concern and your question. So I'm going to 

23 move to Aaron.
210

1 MR. LACEY: So, I articulated in 

2 Session One and Session Two that one of my 

3 significant concerns with a bifurcated process was 

4 that we were not insulating these determinations 

5 to the extent we should be, or we should be striving 

6 to insulate them from the political processes.

7 By introducing a preponderance of the 

8 evidence standard, what we have done, is we have 

9 put decisions in the hands of staff who respectfully 

10 are going to be highly subject to the political 

11 whims of the day, whichever way they may be blowing.

12 And a preponderance of the evidence 

13 standard is a, what did you have for breakfast 

14 standard. It is a, what do you think when you look 

15 at what's in front of you?

16 Fifty-one percent. Fifty point zero 

17 one percent. It's a toss-up standard. Right?

18 The Department previously articulated 

19 that it felt a standard between preponderance and 

20 clear and convincing was appropriate.

21 We previously articulated, meaning the 

22 institutional side, that we liked clear and 

23 convincing. The preponderance was advocated by 
211

1 the other side of the house.

2 So we proposed a midpoint. Which is 

3 exactly the definition of compromise. And now we 

4 are seeing at four o'clock on the last day, 

5 preponderance of the evidence.

6 That's a major problem for me. I'm 

7 also concerned that the statute of limitations 

8 represents an erosion from the -- not only the 

9 initial proposal of three years, but what we 

10 proposed as a compromise of a fixed five years.

11 Compromise as I understand it, means 

12 you give a little and you take a little. I cannot 

13 entertain an erosion of both of these standards.

14 I am willing to entertain a discussion 

15 about the proposed statute of limitations if we 

16 get clear and convincing. It's a trade-off.

17 MS. MILLER: Abby?

18 MS. SHAFROTH: I want to respond to the 

19 characterization of preponderance as a toss-up 

20 standard. Preponderance of the evidence is the 

21 standard that is used in almost all civil 

22 litigation.

23 It is the normal standard when we're 
212

1 dealing with anything other than criminal cases. 

2 It is not a toss-up. It is looking at the evidence 

3 and deciding what the evidence most likely 

4 demonstrates.

5 Anything else is really putting the 

6 thumb on the scale in favor of institutions and 

7 against borrowers.

8 So, I'm appreciative that the 

9 Department seems to be working towards -- back

10 towards a preponderance of the evidence standard 

11 that we think is appropriate.

12 The Department is proposing 

13 preponderance plus corroborating evidence, which 

14 is above preponderance. It is harder to satisfy 

15 because it is saying that as a per se matter that 

16 a borrower's testimony is insufficient to be 

17 compelling in any case.

18 So, I still have some concerns about 

19 that. But, I did want to sort of recognize the 

20 Department for, you know, for trying to find 

21 something here.

22 I do share Barmak's concerns about the 

23 -- this ten year limit applicable to defenses to 
213

1 collections. Aaron is saying, you know, we need 

2 to find compromise on time limits.

3 I was putting forth a compromise and 

4 saying that I would be, you know, I don't believe 

5 that there should be any limitations period. But, 

6 that I'm open to a compromise on a limitations 

7 period applicable for refunds of amounts already 

8 paid so long as there are not limitations periods 

9 on outstanding balances.

10 That does represent very much a 

11 compromise. I'm also open to a compromise 

12 suggested by other negotiators at the table of a 

13 limit on how long the Department can go after the 

14 schools for recoupment versus when the Department 

15 should discharge.

16 So, I think that there are good faith 

17 efforts at compromise here from both sides. And 

18 we're trying to figure out what that is.

19 MR. MILLER: Mike Busada and then 

20 Linda.

21 MR. BUSADA: I just want to point out, 

22 and I think Abby kind of made the point that a lot 

23 of us are trying to make though. You're right. 
214

1 Preponderance of the evidence is what you use in 

2 a judicial setting.

3 This is not a judicial process. It 

4 does not have the checks and balances and the due 

5 process procedures that going to court would have.

6 If we had those things, I would say 

7 absolutely. But we don't have those things. This 

8 is an express lane to help ease the process.

9 It's an administrative express lane, 

10 which I think is good. But we don't have those 

11 things.

12 And so you can't say we want -- only 

13 want half of what a court system would give, but 

14 we don't want the other half of the protections. 

15 It's not a fair balance.

16 At the end of the day I just want to 

17 have a fair opportunity to make sure that we are 

18 heard. And that what we're trying to do is 

19 recognized.

20 Because at the end of the day, when we 

21 leave here, there will still be waiting lists at 

22 colleges and technical colleges and universities 

23 across the country because there's not enough 
215

1 seats.

2 And this is only going to help make it 

3 -- make fewer and fewer and fewer seats out there.

4 MS. MILLER: Thank you. So we've 

5 heard quite a bit about the preponderance of 

6 evidence from both sides. Linda and Joseline, do 

7 you have comments on the other concepts presented 

8 by the Department?

9 Okay. Linda and then Joseline.

10 MS. RAWLES: Well, as a prelude, I 

11 agree completely with what Aaron and Michael said. 

12 Especially Aaron's position on how these things 

13 would have to relate in a bargaining situation.

14 Also, I want to add that in other parts 

15 of the Federal government they've encouraged 

16 schools to go to clear and convincing as opposed 

17 to preponderance, such as in Title IX cases.

18 Last, I have two questions for the 

19 Department. I had heard you say before that you 

20 were trying to find a middle ground between 

21 preponderance and clear and convincing.

22 Did you not come back with that middle 

23 ground because you couldn't define it? Or because 
216

1 I'm really shocked that we didn't get that original 

2 middle ground back.

3 Not that I'm saying I support it, I 

4 still support clear and convincing. But, I was 

5 disappointed not to see that.

6 And I'm wondering why we didn't get it?

7 PARTICIPANT: Combination of two 

8 points. One, it's difficult to define. Second, 

9 we're trying to reach a compromise here between 

10 the borrowers and the advocates on the students' 

11 side who are concerned about the standard, the 

12 attestation plus standard, and the school side, 

13 which I understand wants the clear and convincing 

14 standard.

15 We're trying -- we were trying to make 

16 a proposal to try to find a middle ground. We 

17 understand people may not agree with it. But that 

18 was part of the intent.

19 Plus, as I said, it's hard to define 

20 the middle ground between preponderance and clear 

21 and convincing.

22 MR. RAWLES: Okay. Thank you. The 

23 middle ground between preponderance and clear and 
217

1 convincing isn't preponderance.

2 It's the thing we're having a hard time 

3 defining. But, just because it's hard doesn't mean 

4 we shouldn't do it.

5 My other question is because these 

6 things relate too much to Issue Paper Two, and I 

7 know we're not there yet, but how I feel about these 

8 things really depends on whether those affirmative 

9 defenses have come back.

10 So, could the Department tell me if 

11 they've come back while I'm thinking about Issue 

12 Paper One?

13 MS. WEISMAN: The list of the items 

14 that you had requested did not come back.

15 MR. RAWLES: Okay. Well, then I --

16 it's very hard to support these changes.

17 PARTICIPANT: Potentially it would be 

18 beneficial to at least get the concepts on Issue 

19 Paper Two. Knowing that we don't have the 

20 document.

21 MS. WEISMAN: We actually do have the 

22 document now. Issue Paper Two is on the screen 

23 behind me.
218

1 PARTICIPANT: Yes. I'm looking at it.

2 MS. WEISMAN: I have received a request 

3 if we could make the font size bigger. The view 

4 section, Aaron. Sure. We'll go with that.

5 We may struggle a little bit as we get 

6 into some of the changes. Especially with the 

7 shading. But, we'll try to work with this as best 

8 we can.

9 No, you don't have to do that.

10 So, for Issue Paper Two, the comments 

11 that we heard around the table were that if the 

12 Department was not going to have involvement in 

13 an ADR process, that people were not very satisfied 

14 with the idea of ADR.

15 There would be nothing in the 

16 regulations that would prohibit parties from 

17 engaging in ADR. But, we have removed the text 

18 that included references to ADR.

19 Including the idea of putting the 

20 application on hold while that process occurs. 

21 The Department is not able to commit to involvement 

22 in ADR at this time.

23 Also, with the initial screening, the 
219

1 idea of including evidence, because it is 

2 attestation plus, we would expect to see evidence 

3 attached to the application.

4 The other major change here is that we 

5 talked about the idea of what some of us referred 

6 to as the ping pong, the back and forth at the 

7 beginning with the 45/30/15 terms of the time frames 

8 for the application period.

9 With the collection of evidence, and 

10 then sending those copies to the other party on 

11 the front end. And the idea of reconsideration 

12 of the application on the back end.

13 So, we retained the time frame, the back 

14 and forth. The idea of the 45/30/15. And we 

15 removed the language that talked about 

16 reconsideration.

17 MS. MILLER: Joseline and then Kelly.

18 MS. GARCIA: Thank you. I have a 

19 question for the Department and also the 

20 facilitators. Considering the time restraint that 

21 we have, how do we make this hour productive?

22 Because I'm trying to think of how to 

23 frame my comments. And I don't really know what 
220

1 we're doing.

2 Like, are we still negotiating on these 

3 changes that you all proposed? Or are we voting?

4 Can I just get some more clarification 

5 as to what we're doing now?

6 MR. BANTLE: So, I will jump in as the 

7 facilitator here. And accepting all suggestions 

8 on how to best use this time. I'll start off with 

9 that.

10 I think what I am hearing is from many 

11 individuals at the table, regardless of 

12 constituency, disagreement with the documents as 

13 they have been presented here. Is that fair to 

14 say?

15 I've heard comments from people around 

16 the table that they felt some of the discussions 

17 we were having earlier may have gotten us -- maybe 

18 on a path to getting us or the group to where they 

19 needed to be. Not certainly that they were there 

20 at that stage.

21 I think what we need is some agreement 

22 from the group as a whole of what will work. We've 

23 identified numerous things that will not work.
221

1 So, obviously, you know, we are 

2 focusing on consensus. And Aaron had mentioned 

3 compromise. I think that's something we all, or 

4 you all, need to think about.

5 What gets us there? And obviously the 

6 Department is an important factor in that.

7 Annmarie?

8 MS. WEISMAN: Just a quick question. 

9 Did we find out if we have anybody who would like 

10 to make public comment this afternoon?

11 Because if we do have anybody, then that 

12 takes us only to 4:45. Giving us really, just over 

13 about 35 minutes left.

14 MR. BANTLE: Can we see a show of hands 

15 of anyone who intends to give a public comment? 

16 Okay. So that is two public comments.

17 MS. MILLER: You'll stay until 5:30?

18 MS. CARUSO: I heard emphatic noes 

19 about that.

20 MR. BANTLE: Okay. So --

21 MS. WEISMAN: I believe our concern 

22 with that would be that people have flights already

23 booked. And we want to make sure that everybody 
222

1 is still able to stick to the schedule that we have, 

2 because we did outline that it would be five 

3 o'clock.

4 So, to change it now could impact 

5 someone's ability to be here.

6 MR. BANTLE: Okay. So with that in 

7 mind, I think we have to look at our 4:45 traditional 

8 break point. Barmak?

9 MR. NASSIRIAN: I want to make a plea 

10 to everybody, including those of you who are sort 

11 of diametrically opposed to where I sit, to take 

12 a step back and think about how much you've 

13 accomplished here in terms of gaining protections 

14 that you did not have in the previous iteration 

15 of this regulation.

16 And understand that failure to come to 

17 consensus here leaves the Department to its own 

18 devices. That all of the stuff that you think may 

19 be in the bag could be lost.

20 And that it's in all of our collective 

21 interests to be as accommodating of things as 

22 possible. And walk away with something instead 

23 of nothing.
223

1 I am very dissatisfied with this rule. 

2 I think this rule significantly erodes protections 

3 for borrowers.

4 But I'm willing to say that we are sort 

5 of 90 percent of the way there. That I'd much 

6 rather take lots of specific black ink protections 

7 I see here rather then walk away from a deal and 

8 leave it to the Department and its devices.

9 And I'm not sure that it would be these 

10 nice folks who are going to make the final rational 

11 decision. It could be people that none of us have 

12 actually set eyes on.

13 So, we ought to be very careful here. 

14 And you know, if we need to work some more on issues 

15 that can accommodate each other, we should do that.

16 MS. MILLER: Kelli?

17 MS. HUDSON PERRY: One, I don't know 

18 if there was enough copies. Because it didn't make 

19 it all the way around. But, that wasn't my point. 

20 Okay.

21 If I could make a recommendation just 

22 because I -- I've been sitting here kind of watching 

23 the back and forth on all of these topics.
224

1 Can we use the screen maybe to just 

2 bullet point list what the real contentious points 

3 are? So that there actually can be some 

4 conversation on specific items of maybe compromise?

5 Because I feel we're -- like we're kind 

6 of jumping around where one person says I don't 

7 want this. The other person says, I don't want 

8 that.

9 And there's no real -- we're not 

10 compromising because the things that people have 

11 issue with, aren't listed up there.

12 MR. BANTLE: So, in that vein, I would 

13 suggest that we look at the concerns. I'm going 

14 to use that term kind of in the context Kelli did, 

15 in Issue Papers One and Two concurrently.

16 MS. WEISMAN: So, I can update you and 

17 let you know that they are copying Issue Paper One 

18 right now. So, you will have a copy of this 

19 shortly.

20 But, I think that if we can get started 

21 with this list, that might be very helpful. I am 

22 certainly willing if others are.

23 MR. BANTLE: And I think we are looking 
225

1 at your primary concerns. And I believe a number 

2 of -- you know, although we do have countervailing 

3 positions on them, they are similar issues that 

4 we're focusing on here.

5 So, accepting nominations from the 

6 group for our new list. If you -- if it's not on 

7 the list, we're assuming it's not a --

8 MS. HUDSON PERRY: I'll start just 

9 because I've heard them around the table. The 

10 intent -- or clear and convincing versus 

11 preponderance is one.

12 The statute of limitations is another. 

13 And then on and on. I don't -- I'm not sure what 

14 the other ones exactly are. But those are two 

15 definite ones that we've been talking about.

16 MR. NASSIRIAN: You trade those off 

17 right now and be done with those.

18 MS. HUDSON PERRY: No. Let's get the 

19 whole list. Because this whole concept of 

20 compromise, we need to see everything that's up 

21 there, I think.

22 Because there maybe one point that 

23 someone feels very strongly about that they're not 
226

1 going to get passed. But if there's something else 

2 that it may give on a different one, there may be 

3 some compromise there.

4 So, I think we need the whole list.

5 MR. BANTLE: One and two.

6 MS. HUDSON PERRY: Everything really. 

7 I mean, even, you know.

8 MS. MILLER: Okay. Aaron, your card 

9 was up. Are you ready to list your concerns? Or 

10 --

11 MR. LACEY: No. I probably shouldn't.

12 MR. MILLER: Linda, do you have 

13 concerns that you want to put up on the list? Yeah.

14 MS. RAWLES: If I forget to list it 

15 doesn't mean I'm waiving it. Just want to say that.

16 The two that Kelli said. I think that 

17 was the statute of limitations and the evidentiary 

18 standard. Also, on Issue Paper Two, it would be 

19 the lack of the affirmative defenses.

20 And also the point I mentioned before, 

21 on -- try to help me find, it's on page five now. 

22 When the Department can reopen.

23 It's the middle of page five now. The 
227

1 Secretary may reopen a claim when the evidence 

2 becomes available. That not having any time 

3 limitation.

4 So, to me those four as written are 

5 non-starters at least. And we still have Issue 

6 Paper Four and Six that there are issues with.

7 MR. BANTLE: So, --

8 MS. HUDSON PERRY: Well Linda, if 

9 there's issues with Four and Six, I think we need 

10 to put those up there was well. Because we're 

11 trying to come to consensus on this whole thing, 

12 so.

13 MS. RAWLES: Oh well you told me just 

14 One and Two. All right.

15 MS. HUDSON PERRY: I'm sorry. The 

16 whole thing.

17 MR. BANTLE: Yeah. My focus just as 

18 a facilitator note, was let's get -- so we're not 

19 jumping back and forth, let's -- we'll get out --

20 before we discuss, we'll have everything up there.

21 But, are there any other, for lack of 

22 a better term, non-starter issues on One and Two? 

23 In concept?
228

1 MS. MILLER: Joseline?

2 MS. GARCIA: I mean, Ashley went into 

3 this a lot. But for Issue Two, the minimum 

4 threshold for consideration, Part C, just like 

5 having to acquire more evidence with the borrower 

6 defense application.

7 MR. BANTLE: Okay.

8 MS. MILLER: Aaron, your concerns?

9 MR. LACEY: Yeah. Voluntary claim 

10 resolution process.

11 MS. MILLER: Abby?

12 MS. SHAFROTH: I'm concerned about 

13 intent standard. And I don't know where -- that 

14 I don't know where things landed on the list for 

15 the intent standard, or on the list of things that 

16 would demonstrate financial harm.

17 MS. MILLER: Other concerns for One and 

18 Two? John?

19 MR. ELLIS: Recognizing that we talked 

20 about language. And we haven't seen whether the 

21 language is there or not.

22 I continue to have concerns about 

23 whether or not the rule still allows an appropriate 
229

1 role for state law.

2 MR. BANTLE: Okay. Issue Papers Four 

3 and Six?

4 MS. MILLER: Linda, are you heading up?

5 MS. RAWLES: Oh, no.

6 MR. BANTLE: Just the general concerns 

7 from our earlier discussions.

8 MS. MILLER: Aaron?

9 MR. LACEY: Well, I had the concern 

10 with Six regarding the absence of a knowledge 

11 qualifier around false certification based on high 

12 school diploma.

13 MR. BANTLE: And this is understanding 

14 we do not have the latest documents. John?

15 MR. ELLIS: I still have the concern 

16 that the Department doesn't have authority to 

17 regulate in the area of Issue Paper Four.

18 MR. BANTLE: Okay. Abby?

19 MS. SHAFROTH: I still have a concern 

20 that the Department does have authority to bar from 

21 dispute application --

22 MR. BANTLE: Okay. Can we just make 

23 that authority to regulate on the issue? And it 
230

1 covers --

2 MS. SHAFROTH: I don't know if that 

3 covers. But, I firmly believe we -- that the 

4 Department should bar use of forced arbitration.

5 MR. BANTLE: At least I'm viewing these 

6 as just the topics. Not proposals on them. Is 

7 that --

8 MS. SHAFROTH: That's fair. But I do 

9 think it's a different --

10 MR. BANTLE: Okay.

11 MS. SHAFROTH: It's a different issue.

12 MR. BANTLE: Can we pause just on that 

13 one for a quick second. This is an example that 

14 I'd like to talk about with regard to negotiation.

15 So, Abby's saying that's a non-starter, 

16 right? That you definitely want that thrown out.

17 Is that correct or not? Am I 

18 misunderstanding?

19 MS. SHAFROTH: So, I think we're making 

20 a list of things that are highly important to us 

21 that there's a possibility that we might --

22 MR. BANTLE: Understood.

23 MS. SHAFROTH: Be willing to move on 
231

1 one thing if we get other things.

2 MR. BANTLE: Understood. Is that a 

3 non-starter for you, is what I'm trying to 

4 understand?

5 (Off mic comment)

6 MR. BANTLE: Sure. Is that a 

7 non-starter for you? I'm trying to understand 

8 that.

9 MS. SHAFROTH: Yeah. I don't have --

10 I don't think I'm in a position to identify, you 

11 know, I'm still in a place where if I got other 

12 things that I wanted -- if I got everything else 

13 that I wanted, then I would be willing to move 

14 forward with that, so.

15 MR. BANTLE: That's helpful. Thank 

16 you.

17 MS. MILLER: Other concerns or issues 

18 on all of the Papers? Linda? 

19 MS. RAWLES: We missed this one. I was 

20 going to bring it back up when we got to Issue Paper 

21 Four.

22 But I believe in Issue Paper Three we 

23 added, Abby can help me, she added the word 
232

1 arbitration. Does the arbitral -- yeah, which to 

2 me if we put that in Issue Paper Three, we've stepped 

3 on the same legal limitations as Issue Paper Four.

4 So, if we go back to Issue Paper Four 

5 about arbitration, we have to address arbitration 

6 now in Issue Paper Three.

7 MR. BANTLE: Okay. So we have a 

8 substantial list of items here.

9 Do -- does the group, or does anyone 

10 in the group have a proposal that touches upon these 

11 items that they think would be acceptable to the 

12 group?

13 And we're just talking in concept. We 

14 don't need language here. An overall proposal.

15 I think we need to look at these in not 

16 necessarily all subjects, but -- identifying some 

17 of the major concerns is how I'm saying it.

18 It doesn't need to address every single 

19 one of these.

20 MR. NASSIRIAN: Could we try to resolve 

21 some of them by trading them off for each other? 

22 Aaron mentioned that he was of the opinion that 

23 the first and the second, I understand you want 
233

1 both of them your way.

2 But, potentially one could see an 

3 arrangement where we take the lower threshold for 

4 the standard of evidence in exchange for accepting 

5 a limitation, a statute of limitation on claims.

6 MR. LACEY: No. The problem is the 

7 presumption there is that both of the proposals 

8 I previously made are the way that I want those 

9 things.

10 And those reviewed in my -- those were 

11 compromises that I was offering. Does that make 

12 sense?

13 And there have been other compromises 

14 throughout this process that we've already made.

15 MR. NASSIRIAN: All moved from where 

16 we start from. And we are where we are. So now 

17 this is what is in black ink on paper.

18 And I'm suggesting that -- because 

19 that's not where we would be either. Right?

20 I mean, we would be somewhere else. 

21 So, forget the past. Those are all some costs.

22 At the moment, can we trade those two 

23 off and think that's a reasonable walk away for 
234

1 both of -- for both sort of sides?

2 MR. LACEY: I would accept the 

3 Department's proposal on statute of limitations 

4 for a clear and convincing standard.

5 MS. MILLER: Okay. Let's think about 

6 --

7 MR. NASSIRIAN: How is that a 

8 compromise?

9 MS. MILLER: Hang on Barmak. Let's 

10 think about that for a minute. Valerie, you have 

11 a question. And then Linda. 

12 MS. SHARP: Okay. So, 

13 notwithstanding any discussion that's taking place 

14 that might have overridden what I just was going 

15 to ask, it sounded like earlier today that we had 

16 had a discussion on the statute of limitations that 

17 might be moving all of us in the same direction.

18 At least on that topic. And then the 

19 Department did not include that.

20 So, helping us understand what might 

21 be an option, is that something the Department just 

22 is not willing to consider where there is the 

23 extension for the student to forgive the loan, you 
235

1 know, as long as they owe it. But the school still 

2 has a statute that they can come back after them.

3 It seemed to be something that the two 

4 sides were really forming together. So, I -- and 

5 it's not in there.

6 So, I just wondered if that's because 

7 it's not acceptable to the Department?

8 MS. WEISMAN: That was not acceptable 

9 to the Department because of the concern about 

10 leaving the taxpayer on the hook for the amounts 

11 of money then that would be discharged.

12 MR. LACEY: Yeah. And so Barmak, just 

13 to answer your question, I mean, I -- so I had 

14 proposed a flat five on statute of limitations. 

15 That was my position.

16 So, I'm willing to go up to increase 

17 potential exposure for institutions to ten years 

18 in exchange for clear and convincing.

19 MR. NASSIRIAN: The problem with that 

20 is of course, that again, you're incremental. 

21 You're trying to drag us back positionally to where 

22 you started from.

23 We are all -- we are all past --
236

1 MR. LACEY: Wait a minute. Just a --

2 no we started with three years.

3 MR. NASSIRIAN: Understood. And we 

4 started with eternity. So that's --

5 (Laughter)

6 MR. BANTLE: Okay. Barmak, can you 

7 turn off your microphone just so we don't get 

8 feedback. And Kelli?

9 MS. HUDSON PERRY: So, since this was 

10 my idea, I'll tell you what the next step of the 

11 idea is.

12 (Laughter)

13 MS. HUDSON PERRY: The next step would 

14 be to take the issues and put them on sides. 

15 There's obviously things that the institutions 

16 want. There's things that the student groups and 

17 advocacies want.

18 And rank them in order of priority. 

19 What is the most important to you? To see if we 

20 can start to knock them off the list and compromise 

21 on the positions.

22 MS. MILLER: Linda? 

23 MS. RAWLES: You may yell. You may 
237

1 gnash your teeth. But I just have to make this 

2 statement. And I'm going to finish it.

3 This is no way to do a rule. We have 

4 a half an hour. These are hugely important issues 

5 for everybody at this table.

6 I don't think any of us should be 

7 pressured that we have to reach consensus when we 

8 have this list up here of extremely important parts 

9 of a regulation that are going to affect this entire 

10 industry and many, many students, and the taxpayer 

11 for potentially years to come.

12 So, you know, I have some faith in the 

13 Department to write a rule. If we get to the point 

14 where we are horse trading off our hip, to me, that's 

15 malpractice as an attorney.

16 And I will not participate in it. So, 

17 we need to calm down here a minute. And not feel 

18 like we have to reach consensus if we're going to 

19 reach consensus in this way.

20 MR. BANTLE: Michael?

21 MR. BUSADA: So, I appreciate the 

22 caution around not wanting to put the taxpayer on 

23 the hook for the idea that I floated before. So, 
238

1 I'll float another one.

2 And that is, number one, as part of that 

3 consideration, even though the Department may not 

4 pursue a -- or initiate a repayment claim, it does 

5 not mean that either any member of the triad could 

6 not pursue some enforcement action, the state, the 

7 accreditor, or the Department, for violation of 

8 any law or regulation related to that claim.

9 Just as a matter of point of clarity. 

10 But number two, I guess for me, if it's a one off, 

11 if it's de minimis, it's one student, it's two 

12 students ten years into their loan, I guess I'm 

13 not so concerned about those things as a taxpayer.

14 And I guess my community of interest 

15 now is my household. And you know, how I think 

16 about those things.

17 But, so what if we were to say if the 

18 amount of the borrower defense claim is -- or four 

19 amounts less than five percent, one percent of the 

20 total amount of Title IV distributed in the 

21 preceding year, you won't initiate claims.

22 So that gets to the point of, I don't 

23 have to worry about the one offs and the onesies, 
239

1 twosies, but I will initiate a claim for any big 

2 deal. For any large size. For any kind of 10, 

3 20, 30, 40 student kind of claim.

4 But the ones -- the onesies, twosies, 

5 we're not going to worry about. Is that anything 

6 that the Department would consider? Or anybody 

7 else in terms of that?

8 PARTICIPANT: That's the kind of 

9 prosecutorial discretion that the Department 

10 exercises. We've got to decide what to put our 

11 resources into.

12 But, we would not put that in the 

13 regulation.

14 MR. BANTLE: Joseline?

15 MS. GARCIA: Sorry. I was shuffling 

16 through papers. Could we add reckless disregard 

17 for the truth to the list to Issue Paper One and 

18 Two?

19 To the Department, could you all give 

20 us some guidance as to how we can move forward? 

21 Or -- because we do have limited time and yeah.

22 I'm just trying to make sure we're 

23 productive.
240

1 MR. BANTLE: Michael?

2 MS. MILLER: Mike? Okay.

3 MR. BUSADA: So, here's where I'm a bit 

4 stuck as well. With regard to the true definition 

5 of negotiation, let's use the three-year rule that 

6 was originally proposed in the work papers.

7 Is that correct? So, three years. 

8 That's the ball in the game. Three years.

9 So what Aaron is saying, is he's moving 

10 back and forth. Do we ask for less? Do we allow 

11 for more?

12 That's negotiation. Saying I don't 

13 want any of it, I want no statute of limitations, 

14 that's a whole new ball.

15 That's not the ball you're negotiating 

16 anymore. That's a completely different ball. 

17 We're never going to get there.

18 We've got to get back to the root of 

19 the original paper. For each of these topics, what 

20 was the proposal? And move back and forth on that 

21 proposal.

22 That's the ball.

23 MR. BANTLE: Aaron?
241

1 MR. LACEY: Since no one else is 

2 speaking, I will just say a couple of things. The 

3 first is, I very sincerely appreciate that 

4 everybody is here. And I mean that as seriously 

5 as I can say it.

6 It is hard and meaningful work. I know 

7 we don't always agree. But I would not want anyone 

8 to think otherwise.

9 Everyone is here to advocate on behalf 

10 of their constituencies. And I think everybody 

11 has done that to the best of their ability. So, 

12 I appreciate that.

13 The second thing I will say is, after 

14 the proposed rules are issued, there will be a 

15 period of commentary. The Department can take that 

16 into consideration whether we reach consensus or 

17 not, and think about revisions.

18 I want to strongly encourage the 

19 Department during that period to give serious 

20 consideration to a voluntary claim process. I 

21 think the Department should do a full sum cost 

22 analysis and try to determine whether or not a 

23 process as outlined in the proposal that was 
242

1 provided by Chris DeLuca, would make sense.

2 Because I think again, and I've said 

3 this before, of all the things that have been 

4 proposed, that concept, which incorporates the 

5 notion of a departmental representative assisting 

6 borrowers and institutions to find resolution prior 

7 to this entire thing, I think that is the most 

8 important concept.

9 So, I just want to go on the record as 

10 saying, please, please, please Department, include 

11 that in your takeaway. And give it its due 

12 consideration.

13 Because I really think at the end of 

14 the day, of all the things we have attempted to 

15 do here that is the most likely to help borrowers 

16 and institutions figure things out quickly.

17 PARTICIPANT: Since we're sort of 

18 moving into general statements, you know, I mean, 

19 you know, I was thinking the same thing that Linda 

20 said about, you know, I mean, I have worked on 

21 negotiated rulemaking committees before. I've 

22 never been at this point in the day on the last 

23 day, doing this.
243

1 So, when you don't have actual language 

2 that you're hashing out. So, you know, it feels 

3 like the sands of time are running out here.

4 You know, so just -- I appreciate what 

5 Aaron said. Share that view. You know, the goal 

6 is to achieve to negotiate in good faith, to achieve 

7 consensus if you can, while representing your 

8 communities of interest.

9 So that's what we're here to do. And 

10 that is the balancing act that we've all had to 

11 -- had to entertain throughout this process.

12 I would also say that, you know, 

13 whatever we walk away with today, I would urge the 

14 Department to remember that bad stuff really 

15 happens to students, and continues to happen. And 

16 it hits them every single day.

17 I hope that no one has ever felt that 

18 my comments were directed at any individual in this 

19 room. I know that there are educators in this room 

20 who believe in what they do and who care about their 

21 students.

22 Those of us who receive calls from 

23 borrowers are not -- now those aren't the schools 
244

1 that they went to, right? I mean, we're talking 

2 about almost a different species of school.

3 The harm is real. People have been 

4 waiting too long for their debts to be discharged.

5 The delay of the 2016 rule and all the 

6 uncertainty that continues going forward while 

7 we're doing this, this is -- I mean, this is costing 

8 people's health.

9 I mean, this is psychologically 

10 damaging, not just pocketbook damaging. It really 

11 is so serious.

12 And so many of the students' stories 

13 that we've heard throughout this process I think 

14 really bear that out. And absolutely deserve to 

15 be heard.

16 So, appreciate all of the work that the 

17 current career staff at the Department have been 

18 doing. We -- I can't tell you how much we 

19 appreciate what you do every single day.

20 We certainly hope that the leadership 

21 of this agency takes its job, you know, seriously. 

22 And really seeks to correct what is a very real, 

23 well-documented problem that was also, you know, 
245

1 reasonably discussed in the 2016 regulations.

2 So again, there's a real problem. 

3 Students can't wait any longer.

4 MR. BANTLE: Okay.

5 MR. NASSIRIAN: Am I correct in my 

6 understanding that because we obviously are headed 

7 for non-consensus and the Department will exercise 

8 its right to produce an MPRM that it will publish 

9 for comment.

10 But, am I correct in my understanding 

11 that there will be no ex parte communication with 

12 any interest group while that process is ongoing?

13 Do we have an assurance that there won't 

14 be any further conversations with a subset of 

15 affected interest until an MPRM is published?

16 PARTICIPANT: There are certain 

17 requirements that we are covered by when we are 

18 doing a regulation. Including making a record of 

19 any contact relating to that regulation.

20 We have complied with that rule in the 

21 past. And we will do so.

22 MR. BANTLE: Okay. I want to jump in 

23 here. We have eight minutes until our traditional 
246

1 public comment time.

2 Understanding the comments that have 

3 been made and the limited time we have left, are 

4 there any of -- any issues that are on the screen 

5 that the group thinks an agreement can be reached 

6 on?

7 Or that a proposal can be made on? That 

8 is, a proposal we have not heard thus far?

9 William?

10 MR. HUBBARD: I mean, this is not a new 

11 proposal, but in terms of reckless disregard for 

12 the truth, I think if we pull out reckless, I know 

13 there's been some intent on that.

14 But, given where things are at, perhaps 

15 sticking with disregard for the truth is something 

16 that folks can come to the table on.

17 MS. WEISMAN: That is something that 

18 the Department already discussed and declined to 

19 take.

20 MR. BANTLE: I would reaffirm my 

21 question. And we can look at any of the Issue 

22 Papers here. I know we do have other concerns on 

23 Issue Papers Three and Four. Or Three, Four, Six.
247

1 PARTICIPANT: I have a quick question. 

2 Should that one come off the list then if you're 

3 not inclined to change that?

4 (Off mic comments)

5 MS. WEISMAN: That's up to the group 

6 to determine if they'd like to remove it from the 

7 list. We also are not able to commit to an ADR 

8 process.

9 So again, if that's something that 

10 would be better to take from the list, you can 

11 certainly do that.

12 MR. BANTLE: I, you know, in the next 

13 statement it's -- I think probably the group can 

14 remember those two limitations.

15 We had discussion on kind of the 

16 combination of the evidence standard and the 

17 statute of limitations. We had numerous proposals 

18 kind of packaging those two.

19 Are there any additional proposals? 

20 New concepts that we can think about? On the 

21 package of those two.

22 Mike?

23 MR. BUSADA: Just an idea, and this 
248

1 will obviously take some more time, but just 

2 something to think about, going back to the early 

3 adjudication process and mediation process if you 

4 will.

5 And I understand the constraints that 

6 were discussed. I do think it would be 

7 advantageous to look at potentially whether or not 

8 it would make sense and it would be feasible and 

9 institutions would be willing to.

10 I think the biggest issue is you have 

11 to have a neutral party. I know that the fine 

12 gentlemen in their agency do that, you know, for 

13 other government agencies and private sector 

14 interests.

15 And so I think that at least from a small 

16 school standpoint, and I'm not committing to this, 

17 but to me just looking at it, it seems to me that 

18 for a small school that, you know, most of them 

19 don't have lawyers -- yeah.

20 Basically I'd rather pay, you know, 

21 their cost as an institution and have a mediation, 

22 then hire a high-priced lawyer and have to fight 

23 it out.
249

1 MS. WEISMAN: And I would just repeat 

2 that nothing would preclude you from offering to 

3 a borrower who filed a claim. You would certainly 

4 be able to do that.

5 PARTICIPANT: Another challenge is, 

6 you know, if I'm one of the student advocates, I 

7 mean, I'm not going to want somebody that the 

8 institution hired. I'm going to want the 

9 Department.

10 And I think what Mike is offering here

11 is that the Department should consider whether or 

12 not if they put a mechanism in place, and 

13 institutions were willing to fund it, but it would 

14 be representatives from the Department or some 

15 other neutral party.

16 I think Mike's point is, a lot of 

17 schools would prefer to spend a hundred dollars 

18 an hour or whatever, on someone to work on a 

19 voluntary resolution process then to have to hire 

20 an attorney at several hundred dollars an hour, 

21 and risk reputational harm.

22 So, if cost is the concern, we are 

23 suggesting that the Department should consider 
250

1 whether or not that riddle can be solved by placing 

2 the cost burden, potentially, at their, you know, 

3 at their discretion on institutions who would be 

4 willing to take that on.

5 MS. WEISMAN: Not in the least to sound 

6 critical, but it's like oh, a new idea at 4:42. 

7 I appreciate it.

8 (Off mic comments)

9 MS. WEISMAN: I do appreciate the 

10 suggestion. Thank you.

11 MR. BANTLE: Yes. And I am asking for 

12 new ideas at this point. William and then Linda. 

13 MR. HUBBARD: I have a new old idea. 

14 I would like to, certainly with all due respect 

15 to the Department, but formally propose that given 

16 the process that was carried out in 2016 with all 

17 folks at the table, would like to propose rolling 

18 back to the 2016 negotiated rule making rule.

19 MR. BANTLE: Linda? 

20 MR. RAWLES: Just a suggestion. If 

21 the Department does revisit the line of credit issue 

22 and the composite score, I would just encourage 

23 us to have that as a separate process and not do 
251

1 that through this rulemaking.

2 And then since I have become the poster 

3 child for the predatory schools, I want to tell 

4 all the folks on the other side that if you would 

5 like to talk about any of these issues, or visit 

6 any of my schools, or have any kind of chance to 

7 break the stereotypes and have a meeting of the 

8 minds, contact me.

9 MR. BANTLE: Okay. It is 4:45. As 

10 usual, this is the time we open the floor up to 

11 public comment.

12 I think the suggestion was from Will 

13 that he had two comments. Is that correct? One 

14 comment? Okay, two.

15 As usual, we will be limiting public 

16 -- do we have any additional individuals from the 

17 public that would like to make a comment?

18 Okay. That is two. I guess, Will, are 

19 you making the comments? Or --

20 WILL: Yes. And these are two. 

21 They'll each be less than a minute or two.

22 MR. BANTLE: Okay.

23 WILL: I'm reading these statements on 
252

1 behalf of two student veterans. The first one was 

2 a Brown Mackie, a college student from 2015. His 

3 statement reads as such:

4 I was misled by the recruiter about the 

5 accreditation of Brown Mackie's nursing program. 

6 I had been misled by a recruiter at ITT the year 

7 before.

8 I enrolled and I knew about -- I knew 

9 to ask about accreditation. But the recruiter just 

10 lied to me.

11 Six months after I enrolled, I found 

12 out that the school was under provisional 

13 accreditation with the state and was under review. 

14 Before each Board of Nursing accreditation visit, 

15 school officials would warn students that if they 

16 didn't pass the licensing exam, the school would 

17 lose its accreditation.

18 Students were afraid to be honest about 

19 problems at the school with the Board of Nursing 

20 officials for the fear that the program would be 

21 killed. Brown Mackie consistently changed 

22 academic standards in an attempt to save its nursing 

23 program.
253

1 But is now being taught out and shut 

2 down. Fortunately, I graduated before that 

3 happened.

4 When I enrolled, I asked about being 

5 able to work at places like the VA when I graduated. 

6 And they said, a license is a license.

7 I graduated in 2015 and applied to the 

8 VA. I was told that because Brown Mackie does not 

9 have a regional accreditation, I'm not eligible 

10 for work at the VA.

11 The school had promised to pay for my 

12 nursing licensure exams, and then just before I 

13 graduated, it changed its policy. It would only 

14 pay if we got a certain grade on our exit exam. 

15 Brown Mackie justified this change by citing a 

16 clause in the enrollment agreement.

17 The next statement is from a student 

18 at -- who attended Colorado Technical University 

19 from 2011 to 2014. And it reads as follows.

20 I enrolled at CTU to earn an Associate's 

21 Degree in business management. Over the next two 

22 years I kept asking why I wasn't taking more 

23 business courses.
254

1 I had also found that the teachers were 

2 hit and miss. Some were so unprepared that they 

3 just read from the textbook.

4 I was told that I could teach at CTU 

5 once I graduated. Really? This says something 

6 about the quality of the education they provide.

7 It turns out however, that CTU didn't 

8 have an Associate's program in business management 

9 after all. CTU had enrolled me in a general study's 

10 program with a focus on business.

11 This didn't cut it with two large 

12 employers who were interested in hiring me. They 

13 required degrees in business management. All I 

14 got from CTU was a sorry that I had been misinformed.

15 The following year I earned an 

16 Associate's Degree in accounting. But that didn't 

17 qualify me for jobs I wanted either.

18 So, CTU talked me into going for my BA 

19 in business administration with a concentration 

20 in finance. Which would give me my business 

21 management degree and move me further along in the 

22 accounting world.

23 They told me I still had enough left 
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1 on my GI Bill benefits to earn a BA. I was misled, 

2 because when I had one year more of classes left, 

3 my GI Bill benefits ran out.

4 I would never have enrolled in the BA 

5 program had I only known my benefits would run out 

6 before graduating. Now I have two Associate's 

7 Degrees that aren't in the field I wanted, and an 

8 unfinished BA degree, and no more GI Bill benefits, 

9 and 65 thousand dollars in federal student loans.

10 That concludes the statement.

11 MR. BANTLE: Annmarie?

12 MS. WEISMAN: Thank you. There's so 

13 much that I would like to say, and so little time. 

14 As I think we all feel.

15 We came together here to work as a 

16 committee. And we came together in good faith. 

17 I believe we each did that. And I would like to 

18 thank so many people.

19 We all worked really hard. And the 

20 lack of consensus as someone said to me earlier 

21 today, if we got there, to be mindful that it is 

22 not representative of failure.

23 So, we worked really hard here and made 
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1 some really good progress. You have given the 

2 Department a starting point as we move forward.

3 Because as you know, our work does not 

4 end today. But it's kind of like what you hear 

5 at graduation speeches. It's commencement. It's 

6 the beginning for us.

7 It's the beginning and we kind of hit 

8 the reset button again. And what we do is we move 

9 forward with writing more.

10 We still have our original goals in 

11 mind. We are here to support borrowers who were 

12 wronged, and seriously wronged.

13 We are mindful of those borrowers. And 

14 we first want to acknowledge that as our primary 

15 goal.

16 We also want to balance the needs of 

17 institutions as well as the taxpayer. And the 

18 Department commits to working toward that effort 

19 and supporting all of them.

20 So we continue our work in the best 

21 interest of all. And we'll work to provide 

22 regulations.

23 As was alluded to earlier, our next step 
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1 is that we will produce a notice of proposed 

2 rulemaking. We will have a public comment period.

3 And I expect that we'll be seeing 

4 comments from many of you in this room right now. 

5 And that you will be encouraging others to provide 

6 your comments in support of the things that you 

7 already brought to us today.

8 We expect to publish final regulations 

9 by November 1, 2018 to be effective on July 1, 2019.

10 So, I want to thank our facilitators, 

11 our negotiators and alternates. I want to thank 

12 the Ed officials who worked so hard with me, as 

13 well as others that we brought in to help to support 

14 us in this effort of having our rulemaking.

15 I want to thank all who made public 

16 comments or read public comments on behalf of people 

17 who could not be here with us today. And to the 

18 members of the public that stayed here as our 

19 audience.

20 Anyone else that I forgot, I just want 

21 to say thank you for being part of this and 

22 supporting us and the effort. It's been my 

23 pleasure to work with each of you.
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1 And I hope that we have the opportunity 

2 to do again the same someday on a different topic. 

3 But, most of all I just again I want to say thank 

4 you for everything.

5 And we certainly respect the 

6 conversations that we've had here. And we will 

7 be mindful of them as we continue our writing.

8 MR. BANTLE: Thank you Annmarie. 

9 Mike?

10 MR. BUSADA: And I think I can speak 

11 on behalf of all of us, or I hope so, in thanking 

12 you, Annmarie, for doing a phenomenal job in a very 

13 difficult situation. And all the Department of 

14 Ed staff, we really, really appreciate everything 

15 you all have done.

16 When we leave, you all are still 

17 working. And we appreciate that tremendously.

18 MS. WEISMAN: Well, we're working for 

19 you and for the students in this country. So, thank 

20 you.

21 MR. BANTLE: Not to delay more than 

22 necessary. I want to reaffirm the thanks that have 

23 been presented by everyone.
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1 Thank you for allowing federal 

2 mediation in. We know we're probably not --

3 actually, you all were probably not happy with us 

4 at certain times. And that's our jobs as 

5 facilitators.

6 But that being said, thank you very 

7 much. And for the last time, please pick up your 

8 garbage.

9 (Laughter)

10 MR. BANTLE: Thank you.

11 MS. MILLER: If you'd like it as a 

12 memento, you can take it. But, if you don't want 

13 them, just leave them on the table and we'll 

14 recycle. Thank you.

15 MR. BANTLE: Safe travels everyone. 

16 And thank you very much for your time and the passion 

17 you put into this.

18 (Whereupon, the above-entitled matter 

19 went off the record at 5:00 p.m.)

20

21

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