Washington Update: Title IX, Student Debt, NC-SARA, and Debt Ceiling Negotiations:

Changing Higher Education Podcast 158 with Host Dr. Drumm McNaughton and Guest Tom Netting

Welcome to Changing Higher Ed, a podcast dedicated to helping higher education leaders improve their institutions, with your host, Dr. Drumm McNaughton, CEO of the Change Leader, a consultancy that helps higher ed leaders holistically transform their institutions. Learn more at changinghighered.com. And now, here’s your host, Drumm McNaughton.

Drumm McNaughton 

Our podcast today welcomes back one of our favorite guests, Tom Netting, president of TEN Government Strategies. Tom has worked in the public policy arena for over 28 years, advocating before Congress, federal agencies, and state governments on behalf of private institutions of higher education and post-secondary education companies. 

Tom is a leader in strategic policy development and advocacy in the areas of higher education and workforce development, health care, veteran affairs policies, and the procurement of federal appropriations. He joins us today to give us an update on what’s going on in Washington and at the Department.

Tom, welcome to the show.

Tom Netting  01:17

Welcome, welcome! I’m happy to be back with you, Drumm.

Drumm McNaughton   01:20

It has been a while. I’ve missed having you on the show.

Tom Netting  01:24

I missed having the opportunity to share time with you and your audience, too.

Drumm McNaughton  01:29

Well, there is so much going on up the Hill. Normally, I tell the guest, “Hey, tell us a little bit about you.” But, Tom, we already know all about you. For better or for worse.  No, wait a minute. We’re not married. Close. But no.

There’s so much going on up there, everything from the debt ceiling to the Congressional Review Act and the Supreme Court. So let’s take these topics one at a time, starting with the Hill.

Tom Netting  02:02

Sure. It has been a very, very busy time. In fact, last week, not only were we watching both the House and the Senate working their way toward a debt ceiling bill to prevent our nation from going into default, but there was also legislation moving that has gone through the House and Senate that I’ll talk about. But starting with the debt ceiling bill, there are a couple of key facets of that legislation that are important to the higher ed community.

Number one, the codification of the resumption of repayment for students. We’ve had the pandemic and the limitation on—and actually, the prohibition on—actual student loan debt repayment unless individuals wanted to avoid any accrued interest or collections activity for now over three years, Drumm. Well, Congress and the President have recognized that the pandemic is over. So we need to have individuals start the process of preparing and then returning to repayment.

Included in the McCarthy-Biden compromise is a proposal stating that 60 days after June 30—so on or around September 1, the timeline that the administration was looking at anyway—the student loan repayment process begins anew. What that will include is not only the requirement for interest to start accruing, for collection agencies to start connecting, and for servicers to start reconnecting with the borrowers, but the hope is that they will do well before that.

Given the next couple of months, the Department is once again starting to reach out to the [loan] servicers and discuss how to implement contact with the borrowers to reeducate and refresh their memory of these responsibilities. The transition won’t begin right on September 1. There’ll be some lag time for borrowers to get back into the transition. But the reality is, that’s a major change that was brought about and included in the compromise.

In the broader context of the bill, one of the things you hear a lot of people talking about is the two-year cap on overall spending at the discretionary level—or discretionary spending. That will put a considerable downward influence on spending across all forms of discretionary spending, and it will include higher ed policy. It has potentially very strong issues related to Pell Grants. 

You have the Biden administration, which has been seeking to double the Federal Pell Grant within the next eight to 10 years, and with this limitation, the ability to expand Pell Grants will be very hard to do and will result in the reductions of other spending programs. So we need to watch and be very careful about how things play out with regard to the debt ceiling bill and student loan repayment.

Drumm McNaughton  05:02

That will have some major impacts at the Department as far as being able to move things through, will it not?

Tom Netting   05:10

It will. It will touch upon everything, from not only the student side with the loans but also from the Department itself. You may recall from some of our prior discussions, we know that the Department had asked for money in the fiscal year 2023 appropriations process to provide more staffing, which would help them with implementing the whole revision to the student loan system, meaning the system infrastructure staff would help them do more in terms of FSA (the Federal Student Aid division) and on enforcement. 

They did not receive that in the current fiscal year appropriations bill. And with these downward caps, the ability to have more individuals doesn’t seem like it’s going to come anytime soon.

Drumm McNaughton  06:05  

That’s a shame because there’s so much that is important, especially the revision of the student payments.

Tom Netting  06:13

It puts such a strain on all these processes, Drumm. You have the pending NPRM (Notice of Public Rule Making), the next round of negotiated regulations, Title IX, and third-party servicers, with only so many individuals and bandwidth within the Department to address them all. So that’s one of the reasons why some of these are going to take longer to become final rules than maybe they would have if there were more individuals.

Before we get into those regulations, though, I do want to talk about another major issue in Congress over the last three to four weeks of May and into the first week of June. There were efforts in the House and the Senate to pass a Congressional resolution seeking to nullify the Biden administration’s call for student debt cancellation, income-driven repayment changes being proposed at the regulatory level, and the return to the repayment. 

The negotiations already have seen fit to put into law the changes with regard to repayment. But over the course of May and into June, both the House and the Senate voted in favor of disapproving the Biden administration’s proposal. That took 218 votes to 203 in the House, a very narrow margin, and 52 to 46 in the Senate, with Kyrsten Sinema, an Independent, and John Tester and Joe Manchin, two Democrats, siding with the Republicans to move that forward.

Now, we all know that the Biden administration will not walk away from this very, very strong campaign commitment that they made to student borrowers and the efforts they announced back in August of last year. So it will be vetoed, and there won’t be enough votes to override the veto because you would need a two-thirds majority in both the House and Senate. 

So it won’t go anywhere, and the Biden administration will continue to pursue these endeavors as we wait for the Supreme Court to also weigh in on this process and the two pieces of litigation that were heard before the Supreme Court back on February 28. We anticipate that the courts will rule sometime this month.

So we are seeing a lot of action around student loans, student loan debt, student loan cancellation, and a return to repayment in the future up on Capitol Hill.

Drumm McNaughton  09:00

What’s interesting to me about this is that the Lumina Foundation just came out with a study they do every year with Gallup about the importance of student debt forgiveness. Other guests we’ve had on this podcast from the Georgetown Center for Workforce and Education have talked about how important it is to forgive student debt so people can start investing in their futures, homes, etc. Why is it that people are opposed to forgiving student debt?

Tom Netting  09:36

An argument and concern of those in opposition is that eliminating this debt puts pressure on the overall fiscal budget and forces taxpayers, who were not responsible for signing on to attain the debt or attain the actual resources, to be responsible for the repayment of those loans. 

Another concern is that individuals who either had loans and repaid them, those who never chose to take out loans and went a different direction, or others would all be responsible for covering the debt of those who chose to borrow to attend the institution. 

There are also other concerns about the fact that this is a one-time student loan relief and that you are choosing a single cohort of individuals in order to receive this benefit and relief. They acknowledge that it’s post-pandemic, but they are concerned about whether or not this would be something that then becomes a year-to-year or several-year issue.

And let’s be honest, the cost of this program is rather extensive. The write-off of these loans will be in the hundreds of billions of dollars. And, again, that is a fiscal issue at a time when we’re talking about the debt ceiling, caps, and we’re talking about limits on spending in a number of places.

Drumm McNaughton  11:21

You’re absolutely right about that. But it’s also interesting because the Lumina Foundation found that 70% of the 40% of people who have stopped out said that if they could get their student loans forgiven, they would go back to college. Right there, that takes care of the enrollment issues in higher ed. So it’s going to be interesting to see the way that one plays out.

Tom Netting  11:48

To that point, there’s the Fresh Start initiative that the Biden administration has brought forward so that all individuals that were previously in default are now going to be in repayment status once again. 

That gives them the opportunity to once again meet their obligations and even have access to additional federal resources to complete their programs. Many of those same individuals that have defaulted in the past, Drumm, are potentially the individuals who need the opportunity in order to return to school to have new loans.

The other side of that argument is that you’re taking individuals who have, unfortunately, not fulfilled their commitment in the past, and giving them access to even more funds, potentially, at the risk of them falling back into old patterns that we don’t want to see of default.

Drumm McNaughton  12:44

It would be so simple if we looked at higher education as the public good and we financed it all. But that’s a whole different discussion.

Tom Netting  12:51

Yeah. If you can find the key to unlock that one, especially on Capitol Hill, you will have pulled off a miracle, sir.

Drumm McNaughton  13:00

When I look at countries like Finland, whose taxes are higher than ours, but their undergraduate degree is completely paid for, I know it can be done. But let’s not go there.

The other thing before the Supreme Court is race equality and admissions. We’re going to have a decision on that this month. Rumor has it that it’s going to throw that out the window. We’ll see. I suspect that’s going to be the case. There are a lot of universities that have already embraced these principles and done very well.

Tom Netting  13:36

Correct. Again, both of those are things that everybody here in Washington is assuming and monitoring very closely. We think they will come out this month. You’re absolutely correct.

Drumm McNaughton  13:47

So moving right along. NPRM—or Notice of Public Rulemaking. So gainful employment. Is that back on the table again, or did it never leave the table?

Tom Netting  13:58

Well, I don’t think it ever really left. It’s gone through various iterations of postponements or attempts to eliminate it. But it has always come back under Democratic administrations with their desire to address concerns of—and you hear this more and more—financial value in terms of the programs that receive federal aid.

The Biden administration put forth a Notice of Proposed Rulemaking that addresses five major topic areas, gainful employment being the one that has garnered the most attention. But there is also administrative capability, financial responsibility, certification procedures, and the ability to benefit. Gainful employment has, like I said, obviously been the one that has caught the most attention and probably rightfully so given its potential impact, and the toing and froing that has happened.

For that, we’re seeing the Department come up with a new metric, which they’re calling an Earnings Premium Test or Earnings Premium Metric. This attempts to assess the earnings potential of individuals shortly after their graduation from programs below the associate’s degree level at public, private nonprofit institutions, or in any program at a proprietary for-profit institution, going all the way up to their associate’s, baccalaureate and master’s degree offerings to determine whether or not the earnings potential is comparable to or literally in excess of the average of individuals aged 24 to 35.

Coming out of high school, the soundbite sounds relatively straightforward. But there are a number of facets that go into those cohorts and those timeframes. Schools are going to have their eligibility for their programs based on this metric as well as the prior borrower defense to repayment metrics. From the school’s perspective, the ability for a cohort going all the way to individuals that are age 34 versus an individual two to three years after their graduation doesn’t seem to be a direct corollary. So there is a great deal of concern over a potential apples-to-oranges comparison.

There are a number of other issues that will be subject to eligibility regarding the lack of appeals rights, the lack of the ability to challenge or even have a great deal of discussion around the calculation as it is being developed, and the administrative burden on the back end to not only report to students the potential risk of a second year of failing a metric but also verify that the student has received the receipt before any additional financial aid can be provided.

So there are a number of issues and deep-dive issues that are literally the basis of several hour-long webinars that I don’t think we can go into here. 

What’s important to note, however, is that that same assessment of both the earnings potential as well as the debt to earnings will now be what is being called a Financial Value Transparency List, which means that all programs at all institutions will start to see publicly provided information on how their programs fare under both of these metrics. It will only impact the eligibility of those that are subject to the short-term program cap, meaning less than an associate’s degree or state colleges, universities, and others, but all proprietary programs.

Drumm McNaughton  18:01

So say, the University of North Carolina Chapel Hill. Would this apply to them or not apply to them?

Tom Netting  18:10

This would apply to them as a consumer information assessment tool and presentation of data. It would likely come through another version of or in addition to the current college scorecard. Keep in mind, the Department even already acknowledged that they now have four years’ worth of both earnings and debt data for all institutions and their programs. So this is an attempt to provide the consumer with more information.

There are those that query whether or not you have all this information, why not apply the eligibility criterion, even with some carve-outs, to all programs at all institutions and not limit it more predominantly to the proprietary and certificate diploma programs at other institutions? But we’re not there yet. T

he Department, this administration, and prior administrations have said that the way in which the definitions of an institution of higher education are structured in the law doesn’t suggest that that’s the intent of Congress.

Drumm McNaughton  19:15

The chance of getting another NEA through Congress, at least in the next two years, maybe in the next 10, isn’t great.

Tom Netting  19:22

The HEA and individual issues will make it through. But even though Dr. Fox says that, on the House side, they hope to do the Workforce Investment Act, the Workforce Innovation and Opportunity Act—formally WIA and now WEIOA—and also higher ed over the course of this year and next, the ability to get that through the Senate and certainly to the finish line would be a tall task.

Drumm McNaughton  19:54

I think so. If Lamar Alexander wasn’t able to do it, we’ll just leave it at that.

Tom Netting  20:00

Right. GE is an important issue, especially the financial value and consumer transparency I alluded to. It’s something that ACE (the American Council on Education) and all traditional academia are looking at as well. 

Without some of the carve-outs or recognition of unique characteristics of programs across the entire spectrum, Drumm, some things could be labeled as failing or not achieving the desired outcome, even though, based on the socioeconomic circumstances, demographic information, or a number of other variables, they could be doing just well on other metrics. 

I’m sorry about the cliche, but you don’t necessarily want to throw the programs or the babies out with the bathwater if, in fact, they are meeting other types of important educational goals.

Consider social workers, teachers, and other occupations we know. Unfortunately, our teachers are not paid anywhere near what we probably value them. But their indebtedness, in relation to their earnings, makes it hard for a lot of those people to repay their loans.

Drumm McNaughton  21:18

Yeah, most definitely. We also have the Second Forum on NC-SARA coming up.

Tom Netting  21:24

Yep, it’s two days away. It’s another important issue. NC-SARA is in the process of doing their own internal review over the course of a full year on their standards. They’re doing a policy revision—“policy modification processes” are their words—of their entire set of standards. Early in January and into the first couple of months of this year, they provided the opportunity for the communities to give recommendations. 

There were about 60 that were provided. They are now in forum two and phase two, where groups have the opportunity to respond to the 60-some odd proposals that were put out there, either in favor, with the desire to tweak, or in opposition to those and the verbal comments, along with the written comments. The deadline for that has already passed on Wednesday.

So the ability for people to talk about changes to distance education and not only the enrollment criteria, but other standards of assessment are very much an issue du jour right now. There is a lot of talk around these issues. You still have individuals who believe that the standards that NC-SARA developed with everybody but California are not substantial enough to protect all students and consumers. 

These individuals want to see either assurances that the state’s attorney general or state criteria are still all met, which would undermine the premise of the compacts and the policies. Meanwhile, you have NC-SARA and all of the governors and 49 states, and the compacts that say we worked so hard over three-plus years to develop what we think and truly believe is a good compromise between the high tides and the low tides of the policies across all states to come up with at least a baseline. So we’ll have to see how that continues to play out. It is NC-SARA’s goal to have their policy revisions completed by the end of this year to go into effect next year.

This is also something that the Department is taking a look at. They questioned NC-SARA and the utilization of those standards in relation to the misrepresentation and aggressive recruiting, advertising, and marketing changes to the regulations that go into effect July 1 of this year, part of the final rules of last year, and whether or not that significant revisions need to be done to NC-SARA or have it dismantled. 

They didn’t put that in the NPRM. That is before us right now. But the next round of Neg Reg looks like it will talk more about state authorization and the role of the states. We could see it come up again there.

Drumm McNaughton  24:25

Yeah. And speaking of the upcoming Neg Reg, I suspect that’s going to get pushed out till the fall, maybe even after November. What do you think?

Tom Netting  24:36

If you look at the timeline, Drumm, I think you’re absolutely right. Going back to our prior conversation of a limited number of staff, the reality is that the Department is going to be under considerable pressure after June 20 to review what will likely be a very, very large number of comments on these five policy issues, make revisions as they see fit, and complete prior to the master calendar deadline of November 1 of this year for them to go into effect July 1 of next year.

Look at the limited bandwidth of the number of individuals they have and the fact that they’ve got these NPRM aims to deal with, Title IX, issues around the definition of third-party services that the Department put out and have kind of walked back from. They have a lot to deal with. 

So I think you’re right. I think that what you will see—and this is just my guesstimate—is that the Department will likely put out in August a request for nominees to participate in the next round of negotiations. We’ll probably look to begin those negotiations with one or more committees probably into the winter, around November, December, and the beginning of 2024. And that’s simply because of the bandwidth and the capacity of the other things on their collective plates.

Drumm McNaughton  26:08

That makes perfect sense to me. The Department, like you said, it’s not staffed at the level they need. They didn’t get the extra staffing with the debt ceiling bill. They’re not going to get the extra staffing they need to be smart about getting things done.

Tom Netting  26:25

They bit off a lot. Keep in mind, scheduled to go into effect literally less than a month from now are the significant changes to borrower defense to repayment, the changes to close school clinical discharge and other discharges, the changes to total and permanent disability, and so many other issues that were part of the 21-22 Neg Reg. 

We’re seeing the second block of those that the Department is focused on right now. And, again, that’s dealing with significant revisions to all of Title IX, the broader bill of Title IX, not the athletic portion about LBGTQ+ and competition in sports, which is delayed as well. I’m sure we’ll talk about that here in a minute. There’s just a lot there. What’s the old adage? The way you eat an elephant is one bite at a time. They have a very big elephant that they’re trying to bite off, one bite at a time.

Drumm McNaughton  27:20

Exactly. I thank you for the segue to Title IX. What’s going on?

Tom Netting  27:26

Over the last couple of months, that has, again, been something that has taken a great deal of focus up on Capitol Hill. You have the concerns around athletes and in particular, their eligibility and participation in sports. We thought we were going to see further advancement of those regulations, given all the dialogue and all the discussion, but those have been delayed.

I still do anticipate seeing additional commentary and follow up on those regulatory issues from the Department in the not too distant future. Again, it was so prominent and prevalent in not only the media but state legislation and federal legislation. I’m sure the schools are well aware of this, but what also hangs in the balance is the broader, comprehensive retooling and recasting of the regulations around Title IX. 

We’re talking about all of the VAWA regulations, all of the issues related to sexual discrimination as well as so many other issues in the broader context and the significant revisions likely coming from the Biden administration yet again to undo the changes done by the Trump administration. 

The responsibilities of the institutions, the back and forth of where the new regulations will land with regard to not only protecting the rights and the concerns of the accuser, but also of the accused, and again, making sure that there are more than adequate support services for those individuals that unfortunately are harmed in these circumstances are all things we’ve got to wait and see how they play out as well.

Drumm McNaughton  29:17

It sounds to me like a national ping-pong game.

Tom Netting  29:21

Welcome to Congress in 2023. Let’s be honest. I don’t mean to be that flippant. But this has been the way politics has always been. The pendulum does move from one side to the other, and we’ve had to adapt. And that certainly has become more polarized, unfortunately, in the last decade or so. We are seeing less than less compromise in the middle. But when we see it, that’s a good thing. 

I wish there were more of those days, and certainly in higher ed. It used to be much more bipartisan than it is in this day and age. But, again, we still have to chart our way through all of this and try and come up with the things that are beneficial for the students, institutions, and ultimately the workforce when it comes to a lot of higher ed policies.

Drumm McNaughton  30:15

Well, we see that scale of justice with Lady Liberty. I don’t think she has enough arms to balance everything.

Tom Netting  30:25

Those arms are probably getting real heavy these days. Yeah.

Drumm McNaughton  30:29

No kidding. Tom, this has been fabulous.

What are the takeaways you have for presidents and boards at this point other than to hang on to their hats?

Tom Netting  30:40

Be aware of changes coming on a number of different levels and be ready to adapt to those changes. Another case in point is, on June 9, literally four days away from now, at the end of this week, another set of regulatory changes that I don’t think any portion of the higher education community is fully prepared for. I’m talking about the safeguard rules under the Federal Trade Commission and the protection of personally identifiable information, cybersecurity, and the like. 

We all know about the Gramm-Leach-Bliley Act, the requirements for institutions to have an IT coordinator and certain things in place. But the new safeguard rules require much more substantive assessment routinely on an annual basis. It requires the development of plans and the development of more than just an individual responsible for this. 

It looks to integrate this into the very culture and core of all institutions that have any type of relation to federal dollars, including all institutions of higher education. As you and I have talked about briefly before, this is still just a stepping stone to what the Department of Education ultimately wants to do, which is get to NIST 800-171, which is JBLM on steroids.

So, again, IT infrastructure on top of the regulatory issues, on top of potential changes to standards on distance education, and on top of the changes to all of your regulatory issues with financial responsibility and your requirements of discretionary versus mandatory triggers. In the review of all institutions under financial responsibility, there’s a lot to be reviewing and a lot to have your various staff members trying to stay on top of.

Drumm McNaughton  32:40

Well, it’s not only your staff members. But you, as a board, need to look at this from a risk management perspective.

Tom Netting  32:47

Precisely.

Drumm McNaughton  32:49

So, what’s next for you, my friend?

Tom Netting  32:50

Again, for the next 15 days, I’m focused on working with various communities from different facets of the community on a response to all of those regulations, taking a deep breath after that and probably looking at all of the responses to glean over not only what the communities have put forward, but the nuanced differences and what people are looking for as an outcome, as we all then start to discuss what the potential outcome may be in November.

There is also other legislation that is ripe for consideration. There’s one bill in particular we’ve talked about it before, which is short-term Pell eligibility and the opportunity for individuals in a lot of workforce, blue collar infrastructure-type certificate and diploma programs to potentially have access to Pell Grants in order to meet the demand for skilled workers to fulfill the infrastructure bill, and how that all plays out, again, with components to that, both on the eligibility of which sectors of higher education and/or which delivery mechanisms.

You’ll recall that some of those bills prohibited online education from being a player in that process. I don’t see how that’s a good thing, personally. It also limited the eligibility and some of the bills for proprietary education to be included. Again, given the large portion of that community that’s involved in those workforce programs, I think that the parameters, guardrails, and—the term you hear used a lot around—the Pell Bill are there for all types of institutions to participate. So I think that even the Democrats are getting to the point where they realize that they have to move forward on that legislation.

Other things that I’m tracking that, again, I think are important for schools are the July 1 implementation dates of the existing final rules going into effect, the misrepresentation and the issues surrounding enrollment and recruitment, and the whole new set of regulations that are there are for all institutions. And all institutions need to take a look at the way in which their processes for marketing, recruiting, and enrolling students are taking place. I think there are some things that all people need to be more mindful of than they are right now.

One more thing real quick. When we talk about third-party servicers, the definition of a third-party servicer is something that Department is taking a very strong look at. They proposed a Dear Colleague letter with changes to those regulations earlier in the year and then walked back to different timelines for implementation. I think they’re taking a longer look at the real-world implications of their prior proposal. They have some concerns and believe them to be strong concerns with OEMs. 

But the way in which they attempted to define the third-party servicer may have gotten too liberal and included too many entities they really didn’t intend, like the externship facilities for any one of a manner of apprenticeships or experiential learning in any forms of the disciplines. The recognition that there were probably more than even they appreciated, entities that are international third-party services, including book providers and the like and medium curriculum advisors and the like, that needed to be part of the system that they had at one time, at least consider precluding. So there’s always something, my friend. There’s always something.

Drumm McNaughton  36:37

Well, this is why we can’t have you on the program enough.

Tom Netting  36:42

Well, thank you. I hope this gives people at least, if nothing else, some things to think about. There truly is a lot going on right now.

Drumm McNaughton  36:50

There is. In the years I’ve been doing this, this seems a crazier time than I’ve ever seen before, politics aside.

Tom Netting  37:00

And we still have others that we didn’t touch on that hopefully we can do the next time.

Drumm McNaughton  37:04

Absolutely. We will cycle back in another three months and have you back on the show.

Tom Netting  37:09

It would be my honor. And again, thank you, as always, Drumm, for letting me participate.

Drumm McNaughton  37:14

Tom, it’s always my pleasure. Take care of my friend.

Tom Netting  37:16

You too.

Drumm McNaughton  37:19  

Thanks for listening this week. I’d like to give a special thank you to this week’s special guest, Tom Netting, with his Washington update.  It’s always a pleasure having you on the show, Tom, and I look forward to the next time.       

Join us next week when we speak with Courtney Brown, vice president for impact and planning for the Lumina Foundation, about their recent report, the 2023 State of Higher Education. Courtney will unpack the data and talk about the untapped opportunity for 40 million Americans to earn a degree or credential and vastly improve their career and earning potential. Oh, and by the way, there’s an opportunity there for enrolling more students at our colleges and universities. Until next time.

Changing Higher Ed is a production of the Change Leader, a consultancy committed to transforming higher ed institutions. Find more information about this topic and show notes on this episode at changinghighered.com. If you’ve enjoyed this podcast, please subscribe to the show. We would also value your honest rating and review. Email any questions, comments, or recommendations for topics or guests to podcast@changinghighered.com. Changing Higher Ed is produced and hosted by Dr. Drumm McNaughton. Post-production is by David L. White.