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**Comments Received From:** National Council of Higher Education Resources (NCHER) American Student Assistance (ASA) Donald Gry

bas Sherwin Hibbets, FAME

**Comment Submitted By**  **Department’s Response**

(1) Both NCHER and ASA support the appropriate use of the proposed form; however, both continue to have serious concerns that the form includes certain content that does not comport with the requirements of the FFELP regulatory schema and the Department’s longstanding interpretation of a “third

party servicer.” Both suggest that the latest draft includes an expanded list of services that exceeds current regulatory

authorit y.

ASA expressed confusion as to whether the expanded list of activities under item number 16 should be considered as a “ de facto expansion of past regulatory

guidance on required activities for Title IV schools and the understood definition of a third part y servicer to these schools. ”

NCHER and ASA recommended that the Department not proceed with the revised form until the pending Dear Colleague guidance has been published along with the updated compliance audit guide to ensure there are no unintended negative consequences to schools

– and the students and borrowers they serve who
may wish to obtain supplemental student support services, includ ing but not limited to counseling, delinquency

, and default aversion, and that all documents promulgated by the Department as guidance or authority are in alignment. NCHER ASA Comment 1 : As discussed in detail in the

Department’s response to the comments submitted in November 2014, the Department disagrees with commenters’ assessment that entities that provide default management related services (such as counseling, delinquency , and default aversion) are not considered a “third

- part y servicer” under the current regulatory definition of the term.

A thi rd

- part y servicer is defined as, “An individual or a State, or a private, profit or nonprofit organization that enters into a contract with an eligible institution to administer, through either manual or automated processing, any aspect of the institution’s participation in

any Title IV, HEA program .”

While the definition goes on to outline a number of functions that the Department considers as administration of an aspect of the institution’s participation in the Title I V programs, t he regulation clearl y indicates that the li st is not exhausti ve and does not exclude functions or services ( such as counseling, delinquency , and default aversion) implemented by

an institution to lower or maintain loan cohort default rates

. See 34 C

. F

. R

. § 668.2(b)

. In regards to commenters’ conc ern that “the form includes certain content that does not comport with the requirements of the FFELP regulatory

schema”, the Department**Docket: ED**

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wishes to clarify that the only

entities or individuals that will be required to complete the proposed form are those th at enter into an agreement or contract with an eligible institution of higher education to administer/perform a Title IV related function on behalf of that institution. Entities that perform Title IV related services such as default aversion on behalf of the Department as a Direct Loan Servicer, or to perform required functions under the prior FFEL provisions, are not required to complete this form unless the entity or individual also contracts with an eligible institution to perform Title IV related servi ces on behalf of the institution. Entity /individuals required to complete this form will only

indicate the functions/services in item number 16 of the form that are performed on behalf of the institutions of higher education that the entity /individual ent ers into a contract or agreement with.

As noted in the Department’s response to the comments submitted in November 2014,
the Department reviewed each question on the form and updated information to address the concerns noted b y commenters and to provide additional clarit y. These revisions included expanding the current list of activities under item number 16 to provide additional clarification and examples of Title I V related functions that third party service rs are performing on behalf of eligible institutions of higher education. It is important to note that more than 593 eligible institutions of higher education have reported entities known to perform default management functions to the Department as a thir d part y servicer on the institution’s Application for Approval to Participate in the Federal Student Financial Aid Programs (E

- App).

The pending Dear Colleague guidance referenced b y commenters w as published on**Docket: ED**

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January 09 , 2015. The proposed form is in alignment with this guidance.

The Department rejects commenters’ recommendation that the Department not proceed with the revised form until the compliance audit guide is updated. The last published version of the compliance audit guide was January

2000. Page I

- 2 of the guide clearl y states that the “ guide is not inten ded to be a complete manual of procedures, nor is it intended to supplant the IPA's judgment of the work required. Suggested procedures described may not cover all circumstances or conditions encountered at a particular institution. The IPA should use prof

essional judgment and due care to tailor the procedures so that the financial statement audit and compliance attestation engagement objectives are achieved.”

Finally , the Department is unclear what if
any “unintended negative consequences to schools

– and/or the students and borrowers they serve” could exist by

requiring entities/individuals that perform Title IV related services on behalf of institutions of education to complete the proposed form. As discussed in the Supporting Statement For Paperwork Reduction Act Submission, the Department has determined through data anal ys is, research, program reviews, and audits that a significant number of higher education institutions have failed to report, update, and/or have incorrectl y reported third party

se rvicer information on the E

App. As a result, information contained in the Department’s databases regarding third party servicer contacts, demographics, client lists, and/or the services provided to higher education institutions is inconsistent and inaccurate.

The information collected through the proposed form will allow the Department to correct inaccurate information maintained in**Docket: ED**

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the Department’s database regarding entities and individuals that perform Title I V related services to institutions of hi gher education.

The proposed form does not prohibit or restrict an entit y or individual from entering into a contract or agreement with an institution of higher education from performing an y function, “including but not limited to counseling, delinquency

, and default aversion”

. Revisions made to proposed form based on
comments submitted : None

(2) The commenter described the complex nature and diversity

of the services performed b y organizations that assist institutions with its responsibilities of administering federal student financial aid programs. The commenter indicates that while administrati ve oversight is necessary

to ensure that federal aid programs are being administered in accordance with the provisions of Departmental regulations and policy

, such oversight is already in place with current annual audit requirements and with examinations

c onducted b y Departmental staff through periodic program reviews.

The commenter indicates that initiation of a new process of collecting data, with the ultimate goal of being effective oversight of third party service organizations, will result in an inequitable treatment of colleges and universities regarding administrative compliance.

Commenter states that such additional oversight and potential increased regulatory

burden regarding third party servicers would result in a greater degree of oversight and a higher standard of care being applied to Don Gry bas As discussed above and in the Supporting

Statement For Paperwork Reduction Act Submission, the Department has determined through data anal ys is, research, program reviews, and audits that a significant number of higher education institutions have failed to report, update, and/or have incorrectl y

r eported third part y servicer information on the E

- App. As a result, information contained in the Department’s databases regarding third part y servicer contacts, demographics, client lists, and/or the services provided to higher education institutions is i nconsistent and inaccurate.

The information collected through the proposed form will allow the Department to correct inaccurate information maintained in the Department’s database regarding entities and individuals that perform Title I V related services to institutions of higher education.

The additional information collected on the proposed form will ensure the Department has the appropriate contact information to correspond with the owners and/or officers of the entities/individuals performing work on behalf of eligible higher education institutions, as well as to ensure the Department properl y identifies compliance audits that are submitted under a legal name or doing business as name or for a location**Docket: ED**

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institutions who elect to employ a third party service agency

as opposed to those who handle its administration through on

- campus employ ees.

The commenter believes “the pursuit of data collection leading to additional oversight upon third party servicers is selective, inequitable, and redundant and would not improve the alread y high qualit y of the services alread y provided to institutions by such agencies.” that differs from the information reported b y h igher education institutions.

The Title IV regulations authorize the Department to provide oversight of higher education institutions and the third part y servicers performing Title IV related functions on behalf of the institutions. The information the D epartment is seeking to collect through the proposed form is required to validate and correct the information reported to the Department by higher education institutions. This i nformation is necessary

for effective oversight.

Revisions made to proposed form based on comments submitted: None

(3) Commenter supports the Department’s appropriate use of data collection for authorized oversight purposes in a way that does not jeopardize private entities’ proprietary

information and business continuity

. Commenter suggests the Department consider distinguishing between Federal Perkins Loan Servicer and Federal Perkins Loan Collection Agency for the options listed under question 16 of the proposed form to simplify management of the data by the Department.

Commenter expressed concern regarding the Department’s requirement that the submitting entity attach a cop y of the entity’s organizational chart with employ ee names and titles. Commenter indicates that this requirement would be excessive for entities that employ ee hundreds of individuals. Commenter also expressed concern about the confidentiality

of the data since the Department makes no pledge about the Sherwin Hibbets, FAME The Department agrees with the

commenter’s suggestion and revised the options listed under question 16 of the form to distinguish between Federal Perkins L oan Servicer and Federal Perkins L oan Collection Agency

. The Department revised the requirement that the submitting entity attach a cop y of the entity ’s organization chart with names and titles of all employ ees to reduce the administrative burden of those entities that employ ee large numbers of individuals. The revised form now requires the submitting

e ntity to attach a cop y of the entity’s organization chart that provides the name and title of those individuals that serve in a management/supervisory role. The Department does not agree that the collection of emplo yee names and titles jeopardizes an enti ty ’s proprietary information or business continuity

. The Department revised the proposed form to include a footnote that defines a
compan y/ organization as “an individual or a State, or a private, profit, or non

- profit organization that enters into a contr act or**Docket: ED**

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confidentiality

of the data in its response to question 10 of the Supporting Statement For Paperwork R eduction Act Submission.

Commenter indicates it is a “breach of trust if the Department can collect competitive information about executive and management names and responsibilities and be able to share that information with educational institutions and other Third Party Servicers and perhaps other ty pes of entities.

Commenter suggests using an organizational chart without the names of employ ees. Commenter points out that the proposed form seeks to collect numerous contacts per entity

.

Commenter als o expressed concern regarding the descriptors used to identify a Third Part y Servicer on the proposed form. Commenter recommended that all questions on the proposed form should be modified to “Entity /Person” to prevent individuals such as consultants oper ating as sole proprietors from legally

avoiding completion of the form if the form does not address the person(s) operating solel y as individuals, and not as corporations or other forms of legal entities. agreement with an eligible institution to administer an y aspect of the institution’s participation in the Title IV programs to address the commenter’s concern that some individuals may

attempt to legally

avoid completing the form based on the descri ptor used to define an entity

. Revisions made to proposed form based on comments submitted:

1) Added additional check box to distinguish between Federal Perkins Loan Servicer and Federal Perkins L oan Collection Agency

2) Added a footnote to define the descriptor “compan y/ organization”.

3) Revised the requirement that the submitting entity

“attach a copy

of the entity ’s organization chart with names and titles of all employ ees” to “attach a copy of the entity ’s organization chart that provides the name and title of those individuals that serve in a management/supervisory role”.