Department of Education Delays Guidance on TPS Expansion

On the off chance that you’re just getting introduced to the topic at hand (potential change in rules on OPM markets and notification of change in rules on most of the EdTech market), read my initial coverage, follow-up post, commentary on the politics of the matter, and description of the emerging pushback.

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On to the update. [full-page audio link]

This morning the US Department of Education (ED) revised Dear Colleague Letter 23-03 (DCL 23-03) to both extend the period for public commenting and more importantly to delay the effective date. This delays the vast expansion of which organizations will be considered third-party servicers (TPSs) and potentially will allow ED a way out of this mess.

The original release on February 15, 2023 of DCL 23-03 was effective immediately, but with the revisions to DCL 23-03 the guidance will be effective September 1, 2023.

The specific language from ED’s revised guidance this morning:

On Feb. 28, 2023, we updated this letter to extend the public comment period, establish a future effective date for the guidance, and extend the reporting deadline for institutions and third-party servicers.

This is an important victory for the EdTech community (and I include higher education institutions, vendors, investors, students in this), but it is a partial victory. Further down in the guidance:

The Department wishes to ensure that eligible institutions and third-party servicers have a clear understanding of the requirements for third-party servicers and a reasonable amount of time to comply with those requirements. Therefore, the guidance in this Dear Colleague Letter will not become effective until September 1, 2023. Reporting requirements will also go into effect on that date.

On the effective date, the guidance in this letter will update and replace past guidance provided in Dear Colleague Letters GEN 12-08, GEN 15-01, and GEN 16-15 (as amended by our March 8, 2017 electronic announcement), and those documents will be rescinded.

Most importantly, this means that schools no longer have to report what they consider contracts with TPSs by May 1, 2023. Schools now have until September 1, 2023. This should give time for public comment and debate to occur before schools need to commit to their reports. Regarding the public comment period, it no longer closes March 17, 2023; it now closes in 30 days, on March 30, 2023.

An earlier version of this letter invited the community to submit comments on the guidance in this letter so that we would have an opportunity to hear from the field about areas that are unclear or could be improved. We recognize that this has created some uncertainty around exactly what requirements and reporting deadlines will apply. Therefore, as noted above, we are adjusting the effective date of the guidance to September 1, 2023. Institutions will be required to report any arrangements with third-party servicers that have not been reported to the Department, and entities meeting the definition of a third-party servicer will be required to submit the Third-Party Servicer Data Form to the Department. Additionally, because we are announcing these changes during a comment period, we have elected to adjust the comment period so that it closes 30 days from the date of this update.

The community is invited to submit comments regarding the guidance presented in this Dear Colleague Letter within 30 days of this update to this letter via the Federal eRulemaking Portal at Regulations.gov, under Docket ID ED-2022-OPE-0103. Information on using Regulations.gov, including instructions for finding a rule on the site and submitting comments, is available on the site under “FAQ.” We are especially interested in comments on the impact of continuing the existing limitation on institutions contracting with third-party servicers operating outside the United States or owned or operated by individuals who are not U.S. citizens, nationals, or permanent residents, including how to address the Department’s concerns about the ability to hold such servicers liable if necessary.

This guidance using the original process (DCL effective immediately with no public comment period, no notice, no negotiated rulemaking) should never have happened for exactly the reasons stated in the DCL revisions. The guidance remains – which would upend the majority of the EdTech market – but there is a chance now for improvements or recision before DCL goes into effect.

Stay tuned . . .