House Education and the Workforce Subcommittee on Higher Education and Workforce Development Holds Hearing in Conjunction with the Release of Two GAO Reports on Failed Rollout of the 2024-2025 FAFSA
On September 24, 2024, the House Education and the Workforce Subcommittee on Higher Education and Workforce Development held a hearing on ED’s failed rollout of the 2024-2025 FAFSA. The hearing was in conjunction with the release of two reports by the Government Accountability Office (GAO) on the botched rollout of the 2024-2025 FAFSA. Both the Subcommittee Chairman Burgess Owens (R-UT) and the Ranking Member Frederica Wilson (D-FL) expressed their frustration with the avoidable mistakes made by ED and the lack of responsiveness and communication by ED during the rollout.
The GAO produced two separate reports, one titled “Preliminary Results Show Strong Leadership Needed to Address Serious Student Aid System Weaknesses,” (GAO-24-107783) by the GAO team on Information Technology and Cybersecurity, and the other titled, “Education Needs to Improve Communications and Support around the Free Application for Federal Student Aid,” (GAO-24-107407) by the GAO team on Education, Workforce, and Income Security.
GAO-24-107783 report found that the February 2021 launch of the 2024-2025 FAFSA resulted in continuing delays and errors that had “troubling impacts on students, parents, and schools, including their ability to plan for the upcoming year.” GAO’s preliminary results indicated that FSA identified and reportedly addressed significant defects prior to deploying the new FAFSA Processing System (FPS). However, ED also identified numerous defects after deploying the system. The GAO cited the fact that based on the documentation compiled on March 6, 2024, ED identified 55 defects, including seven that were unresolved and categorized as “critical.” According to the GAO report, the existence of unresolved defects after FPS deployment can be traced to FSA not ensuring disciplined systems acquisition practices were applied.
The GAO report also said that the lack of consistent leadership contributed to the difficulties encountered with the FPS acquisition. The GAO report said that ED’s Chief Information Officer (CIO), who had a significant role in the governance and oversight processes for IT, did not follow the established processes for FPS. To date, ED does not have a permanent CIO and has had six CIOs since the FPS project was initiated in February 2021. Until these weaknesses are addressed, the 2025-2026 FAFSA cycle will be at risk.
GAO-24-107407 report found that ED’s rollout of the new simplified FAFSA was delayed by 3 months from the traditional October launch and hampered by a series of technical problems that blocked some students from completing the application. The report concluded that this contributed to about 9 percent fewer high school seniors and other first-time applicants submitting a FAFSA, with the largest declines among lower-income students, according to ED data as of August 25, 2024. The new process also created additional barriers, including an inefficient process for students’ parents or spouses who lacked a Social Security number to verify identities, which prevented some families from even accessing the FAFSA. The GAO concluded that rather than simplifying access to student financial aid, one of ED’s strategic goals, the FAFSA rollout created roadblocks for some students and their families.
The GAO report found that ED did not consistently provide students with timely and sufficient information or support to complete the new FAFSA. ED also did not provide timely information to students about processing delays. ED did not provide colleges with reliable timeframes or communicate changes to colleges in a timely manner. As a result, colleges were uncertain when they could send aid offers to students as well as when they could disburse student funds. The GAO concluded that ED still has an opportunity to learn from its recent struggles for the next FAFSA application cycle beginning by December 2024.
A copy of the first report, GAO-24-107783, is found at:
https://www.gao.gov/products/gao-24-107783.
A copy of the second report, GAO-24-107407, is found at:
https://www.gao.gov/products/gao-24-107407.
House Education and the Workforce Committee Sends Letter to Secretary Cardona Accusing Him of Obstructing Investigation into Federal Student Loan Forgiveness
On September 20, 2024, House Education and the Workforce Committee Chairwoman Virginia Foxx (R-NC) sent a letter to Secretary of Education Miguel Cardona accusing the Department of Education of obstructing the Committee’s oversight efforts regarding the proposed rule creating a new federal student loan forgiveness program. According to the letter, the Committee issued subpoenas to five federal student loan servicers to receive documents and communications related to the agency’s plans to finalize the proposed rule on student loan forgiveness. The letter makes the case that the Department has no legal authority to review and approve any loan servicers’ materials before they can be submitted to the Committee.
Chairman Foxx said in the letter: “The letter [from Lisa Brown, ED’s General Counsel] cited a term in the loan servicers’ contracts with the Department as its legal authority to review and approve all responses prior to submission to Congress. However, a contract term does not override Article I of the U.S. Constitution, nor does a contract provide legal authority to interfere with or otherwise delay a third party’s mandatory response to a lawfully issued congressional subpoena. Under threats being leveled by the Department, the loan servicers did provide responsive documents to the Department for its review prior to the subpoena deadline of September 5, 2024, but none of these documents were ‘approved’ by the subpoena deadline. Now, fully 15 days later, still only a minimal number of documents or data have received ‘approval’ by the Department for the servicers’ submission to the Committee. This is unacceptable and contrary to General Counsel Brown’s commitment to ‘expedite responses to the subpoenas.’”
A copy of the press release, which includes the text of the letter, is found at:
https://edworkforce.house.gov/news/documentsingle.aspx?DocumentID=411960.
FSA Reminds Institutions to Update the Annual Certificate for FTI-SAIG Software
On October 8, 2024, in an Electronic Announcement (GENERAL-24-123), Federal Student Aid (FSA) reminded institutions to update their annual certificate for FTI-SAIG software (EDconnect, TDClient) to be able to receive Institutional Student Information Records (ISIRs). The runtime certificate expires annually, and a new certificate will be assigned to the institutions’ account 30 days before the current one expires. Instructions are provided in a link to an application-specific user guide.
A copy of the Electronic Announcement is found at:
FSA Issues Electronic Announcement to Help Institutions Located in Federally Declared Disaster Areas due to Tropical Storm Helene or Hurricane Helene
On October 3, 2024, Federal Student Aid (FSA) issued an Electronic Announcement (GENERAL-24-122) to help institutions of higher education located in federally declared disaster areas due to Tropical Storm Helene or Hurricane Helene. The Electronic Announcement reminds institutions that are located in federally declared disaster areas of the regulatory relief provided to them in Dear Colleague Letter GEN-17-08: Guidance for Helping Title IV Participants Affected by a Major Disaster, which includes the effects on Direct Loan or Federal Family Education Loan Program borrowers affected by a disaster, verification requirements for families whose verification records were lost or destroyed because of a disaster, changes to an institution’s academic calendar due to a disaster, allowances for leaves of absence for students affected by disaster, and other matters.
A copy of the Electronic Announcement is found at:
A copy of the Dear Colleague Letter is found at:
ED’s On-Ramp and Fresh Start Programs End on September 30th
When federal student loan payments resumed last year after a three-plus year pandemic-era pause, the Department of Education (ED) provided an “on-ramp period” through September 30, 2024. During the 12-month period, student loan servicers were not required to report missed, late, or partial payments to the three national credit bureaus.
The Fresh Start initiative offered special benefits for borrowers with defaulted federal student loans. Borrowers that enrolled in the temporary program were enrolled in an Income-Driven Repayment plan and regained eligibility for and made progress toward loan forgiveness programs. Their default record was removed from their credit report, they avoided wage garnishment and withholding from tax refunds or Social Security benefits, and they requalified for federal student aid.
FSA Issues Electronic Announcement on Launch of 2025-2026 FAFSA Beta 1 Testing and Implications for Institutions and State Agencies
On September 30, 2024, Federal Student Aid (FSA) issued an Electronic Announcement (GENERAL-24-119) on the launch of the 2025-2026 FAFSA first beta testing and on the implications for higher education institutions and state agencies. The Electronic Announcement stated that the 2025-2026 FAFSA form was released on October 1st for the first phase of beta testing to a small number of students, recruited by six college access community-based organizations (CBOs), who will be able to submit the FAFSA form. FSA will begin processing Institutional Student Information Records (ISIRs) shortly. Because students participating in the FAFSA beta testing will be filling out their real FAFSA form and because they can include up to 20 institutions’ school codes on the FAFSA form, any institution and state agency may start receiving a small number of ISIRs via the FTI-Student Aid Internet Gateway. However, FSA states that there is no need to do anything with the ISIRs yet.
The Department also announced additional participants in the 2025-2026 FAFSA beta testing that will start later this year. For beta testing groups 2-4, ED selected 20 CBOs and governmental entities that support students in submitting the FAFSA form, 10 high schools or school districts, and 48 institutions of higher education.
A copy of the Electronic Announcement is found at:
FSA Details New Problems with the 2024-2025 FAFSA Processing
On September 27, 2024, Federal Student Aid (FSA) issued an Electronic Announcement (GENERAL-24-116) indicating it was aware of two issues impacting institutions, state higher education agencies, and designated scholarship organizations that receive Institutional Student Information Records (ISIRs) and use these records to determine eligibility for student aid programs for the 2024-2025 award year. The first issue involves conflicting information that is created when Federal Tax Information and Manual Input are present on the same ISIR, which was previously announced in a June 17, 2024, Electronic Announcement. The second issue occurs when assets for the student (or their contributors) are both collected on the FAFSA form and subsequently used in the Student Aid Index calculation even when they meet criteria under the law for an exemption from reporting assets. While institutions may opt to wait for the Department to reprocess impacted records, colleges and universities that choose to proceed with awarding and disbursing aid before the impacted records are reprocessed must use the subsequent reprocessed record if it results in greater eligibility for the student.
A copy of the Electronic Announcement is found at:
Education Under Secretary Kvaal Writes Blog Post on PSLF Program
On September 25, 2024, Education Under Secretary James Kvaal posted a blog post announcing that borrowers can now see their payment counts under the Public Service Loan Forgiveness (PSLF) Program, including how many payments they have left until they are eligible for loan forgiveness. The payment counts are updated through the summer. Under Secretary Kvaal said that this year, the Office of Federal Student Aid (FSA) implemented a new strategy to service federal student loans to help borrowers access the benefits of federal loans, improve customer service, avoid delinquency and default, and strengthen accountability for ED’s contractors. The new system allows borrowers to manage their participation in programs like PSLF through studentaid.gov and avoids the disruptions and errors that may result when accounts are transferred among servicers. In the coming weeks, FSA will show the final updates of the payment count adjustment, an administrative fix that ensures borrowers get credit they have earned toward the income-driven repayment (IDR) forgiveness and PSLF.
A copy of the blog post is found at:
https://blog.ed.gov/2024/09/updates-for-pslf-borrowers-payment-count-availability/.
FSA Releases FSA Enforcement Bulletin, September 2024 – Conduct that Creates a Risk of Engaging in Substantial Misrepresentations
On September 25, 2024, Federal Student Aid (FSA) released an FSA Enforcement Bulletin, September 2024 – Conduct that Creates a Risk of Engaging in Substantial Misrepresentations (GENERAL-24-115), which is to inform Title IV-eligible institutions and third-party servicers of examples of conduct that creates a risk of engaging in a substantial misrepresentation.
The FSA Enforcement Bulletin describes the definition of misrepresentation: “A misrepresentation is defined as “[a]ny false, erroneous or misleading statement,” that an institution or its representative makes “directly or indirectly to a student, prospective student or any member of the public, or to an accrediting agency, to a State agency, or to the Secretary.” 34 C.F.R. § 668.71(c). A “misleading statement” includes “any statement that has the likelihood or tendency to mislead under the circumstances.” Id. “Misrepresentation includes any statement that omits information in such a way as to make the statement false, erroneous, or misleading.” Id. A misrepresentation rises to the level of a “substantial misrepresentation” if the misrepresentation is one “on which the person to whom it was made could reasonably be expected to rely, or has reasonably relied, to that person’s detriment.” Id. The Department considers the “totality of the circumstances in which a statement occurred, to determine whether it constitutes a substantial misrepresentation.” 81 Fed. Reg. 75926-01, at *75945 (Nov. 1, 2016).”
The Electronic Announcement said that ED has observed conduct in the course of oversight activities that, under certain circumstances, could rise to the level of an actionable substantial misrepresentation. FSA is issuing this bulletin to inform schools of this risk, and to aid them in their compliance efforts. A non-exhaustive list of instances that may constitute actionable substantial misrepresentations is included in the Bulletin. Since institutions may not make misrepresentations to prospective students to induce them to enroll, if the Secretary determines that an institution engaged in a substantial misrepresentation, the Secretary may take action, which may include imposing a fine or limiting the institution’s participation in the Title IV programs.
A copy of the FSA Enforcement Bulletin is found at:
FSA Issues National Default Rate Briefing for FY 2023 Official Cohort Default Rates
On September 25, 2024, Federal Student Aid (FSA) issued an Electronic Announcement (LOANS-24-09) providing a national default rate briefing for FY 2021 official cohort default rates. The FY 2021 cohort default rates were calculated using the cohort default of student borrowers who entered repayment on their Williams D. Ford Federal Direct Loans or Federal Family Education Loans (FFEL) between October 1, 2020 and September 30, 2021, and who defaulted between October 1, 2020 and September 30, 2023.
As expected, FY 2021 cohort default rates were impacted by the pause on federal student loan payments that began March 13, 2020, and ended on September 30, 2023. The official national rate for FY 2021 is 0.0%, the same as for FY 2020. The official cohort default rate across all sectors remains at 0.0%, the same as for FY 2020.
A copy of the Electronic Announcement is found at:
Secretary of Education Sends Letter to Institutions Providing Update on FAFSA
On September 23, 2024, Secretary of Education Miguel Cardona sent a letter and fact sheet titled, “Focus on Improving the FAFSA Experience: Updates, Actions, and a Path Forward for the 2025-2026 Cycle” to institutions of higher education providing an update on ED’s rollout of the 2025-2026 FAFSA, which he hopes to be operational on December 1, 2024. Secretary Cardona said he understood the frustrations expressed after the launch of the 2024-2025 FAFSA form, which faced delays and technical difficulties.
“We have put all hands on deck at the Department to make sure we release the 2025-2026 FAFSA in a way that reflects industry-standard best practices around technological transformation and responds to the frank feedback and recommendations of our partners. I am proud of the progress we have made over the last few months.”
A copy of the letter, which includes the fact sheet, is found at:
ED Publishes Notice for the 2024-2025 Award Year Deadlines for the Title IV Programs
On September 19, 2024, ED published a Notice in the Federal Register announcing the 2024-2025 award year deadline dates for the receipt of documents and other information from applicants and institutions participating in certain Federal student aid programs authorized under Title IV of the Higher Education Act of 1965, as amended (HEA). The Federal student aid programs covered by this deadline date notice are the Pell Grant, Direct Loan, TEACH Grant, and Campus-Based (FSEOG and FWS) programs. Table A provides the deadline dates for the 2024-2025 award year by which a student must submit the FAFSA, by which the institution must receive the student’s Institutional Student Information Record (ISIR) or FAFSA submission summary, and by which the institution must submit verification outcomes for certain students. Table B provides the deadline dates for the 2024-2025 award year by which an institution must submit disbursement information for the Pell Grant, Direct Loan, and TEACH Grant programs.
A copy of the Federal Register Notice is found at:
FSA Announces Documentation Requirements for Mandatory and Discretionary Trigger Reporting Under Financial Responsibility
On September 17, 2024, Federal Student Aid (FSA) released Electronic Announcement (GENERAL-24-112) providing information on the suggested documentation that institutions may provide to fulfill the reporting requirements that went into effect on July 1, 2024, regarding the mandatory and discretionary triggers under financial responsibility.
Institutions are required to report triggers for conditions that exist as of July 1, 2024, regardless of when the circumstance first occurred. For example, if an institution first declared financial exigency in September 2023, but remains in that condition as of July 1, 2024, the institution must report the condition to the Department. FSA said that ED will treat triggers that would otherwise be mandatory as discretionary triggers under 34 C.F.R. § 668.171(d)(14) if the relevant circumstances began prior to July 1, 2024 and is still in effect, and will determine on a case-by-case basis whether in those circumstances the institution is able to meet its financial or administrative obligations.
FSA states that ED is clarifying in this announcement that institutions must report triggers that first began prior to July 1, 2024, but that were still in effect as of July 1st. Institutions have 21 days from the date of this announcement to report such triggers.
Mandatory triggers are certain external events – financial circumstances and events that are not yet reported in the institution’s audited financial statements, but may be reported in a future annual submission. The mandatory triggers also include events that may never be reported in the audited financial statements. The Electronic Announcement includes a list of mandatory triggers for which reporting is required. Schools must also notify ED once the circumstances that caused the trigger has been resolved.
A copy of the Electronic Announcement is found at:
CFPB Releases Annual Report Detailing Financial Concerns Facing Servicemembers, Veterans, and Military Families
On September 24, 2024, the Consumer Financial Protection Bureau (CFPB) released its “Office of Servicemember Affairs Annual Report for January-December 2023,” which details the top financial concerns facing servicemembers, veterans, and military families. The report stated that both active duty and veteran students face financial challenges, including getting assistance from loan servicers and transcript withholding by colleges and universities as a means to collect a debt or disputed fees. The military community also faced problems with other financial products, such as an increase in reports of scams targeting older veterans. The report indicated that more than 407,000 consumer complaints have been submitted to the CFPB since 2011. In 2023, almost 84,600 complaints were submitted to the CFPB, a 27 percent increase from 2022 and a 98 percent increase from 2021.
A copy of the report is found at:
ED Continues to be in Significant Breach of Borrower Defense Settlement
On September 26, 2024, the Project on Predatory Student Lending (PPSL) announced in a press release that at a hearing regarding the Plaintiffs’ motion to enforce implementation of the settlement relief in the lawsuit Sweet v. Cardona, Judge William Alsup heard updates regarding ongoing issues with the “gross mishandling of settlement relief in the $6 billion borrower defense settlement and frustration that the Department is now in material breach of the settlement for a second time.” PPSL represents the borrowers.
According to the press release, this was the fourth status hearing that Judge Alsup ordered as part of a schedule of accountability measures to ensure that overdue relief is delivered as soon as possible, after the Department failed to meet the original settlement deadline of January 28, 2024, for the “automatic relief group.” August 31, 2024, was the extended deadline. ED sought to implement a new procedure for members of Decision Groups 1 and 2, which was denied by Judge Alsup.
A copy of the press release is found at:
District Court Blocks ED from Implementing Federal Student Loan Forgiveness Program
On October 3, 2024, U.S. District Court for the Eastern District of Missouri Judge Matthew Schelp issued a decision granting a preliminary injunction to block the Department of Education’s Notice of Proposed Rulemaking (NPRM) on federal student loan forgiveness. Judge Schelp’s action followed a decision issued by the U.S. District Court for the Southern District of Georgia Judge Randal Hall to transfer the underlying case to Missouri after concluding that the State of Georgia lacked standing and the venue challenging the proposed final rule was improper. Judge Schelp said that his court would pick up where the Southern District of Georgia left off and that he had reviewed the record in the case. Judge Schelp said that the preliminary injunction would prevent the U.S. Court of Appeals for the Eighth Circuit and the U.S. Supreme Court from reviewing the matter on the backend.
The motion enjoins the Department of Education from implementing the NPRM, from mass cancelling of federal student loans, from forgiving any principal or interest, from not charging borrowers accrued interest, from further implementing any other actions under the rule, or from instructing federal contractors to take such actions.
Student Defense Argues UMGC Violated the D.C. Consumer Protection Procedures Act Because of Failure to Disclose the Incentive-Based Compensation to Students
On September 17, 2024, Student Defense, a legal advocacy group, argued in a lawsuit filed in D.C. Superior Court that the University of Maryland Global Campus (UMGC) violated the D.C. Consumer Protection Procedures Act because the institution did not disclose to students the incentive-based compensation paid to Coursera. UMGC’s agreement with Coursera, the online program provider, pays Coursera “service fees” based on the number of students who enroll in cybersecurity degree programs, which is allowed under Department of Education 2011 guidance.
Consumer advocates have been calling on the Department of Education to rescind its 2011 guidance that exempts colleges from the federal ban on paying bonuses or commission related to securing enrollment or financial aid if the third-parties offer bundled services to a college or university. According to the lawsuit, Coursera provides marketing services for UMGC and develops content for degree programs, which exempts it from the ban.
A copy of the complaint is found at:
https://defendstudents.org/news/body/SD-v-UMGC-Complaint.pdf.