ED Removes Effective Date for Previously Released Third-Party Servicer Guidance

On May 16, the U.S. Department of Education (ED) issued a "Dear Colleague Letter" (DCL) (GEN-23-08) officially removing the effective date of its third-party servicer (TPS) guidance. While ED had previously announced the change in an April 11 blog post, the May 16 DCL is notable because it confirms the previous announcement through ED's normal channel for guidance adjustments.^Footnote1

In the April 11 blog post, ED announced that it would withdraw the effective date of the original guidance letter on the "Requirements and Responsibilities for Third-Party Servicers and Institutions" (GEN-23-03).^Footnote2 The blog post noted that the department would conduct a "careful review" of the more than one thousand public comments submitted in response to the guidance and issue a revised guidance letter after completing its review. The post stated that the original guidance effective date of September 1, 2023, is no longer in effect, and a new effective date would be at least six months after the publication of the revised guidance letter. ED also committed to vacating the prohibition on contracts between institutions and foreign-owned or operated TPSs and included additional points of clarification.

The May 16 DCL did not include any new information and largely mirrored the information contained in the April blog post. Like the April blog post, the latest DCL did not provide a timeframe for when ED would issue a revised TPS guidance letter. EDUCAUSE provided information about the original guidance letter in March, including the broad impact it would have had across the institutional and EDUCAUSE membership communities. We also shared these concerns with ED via official comments.^Footnote3

Those comments urged ED to withdraw the original guidance letter and revise it based on the input of affected stakeholders, such as higher education IT leaders and professionals. An official confirmation regarding the removal of the effective date is welcome news, but EDUCAUSE will be monitoring activity on TPS issues closely, particularly in the context of ED's forthcoming negotiated rulemaking. The Policy Team will keep members apprised of ongoing developments related to that process and the potential for a revised guidance letter.

Notes

1. James Kvaal, "Update on the Department of Education’s Third-Party Servicer Guidance," Homeroom (blog), U.S. Department of Education, April 11, 2023; Annmarie Weisman, (GEN-23-08) Update to Third-Party Servicer Guidance in GEN-23-03, U.S. Department of Education Office of Federal Student Aid, May 16, 2023. Jump back to footnote 1 in the text.↩
2. For more information, see Bailey Graves, "ED Delays Effective Date of Third-Party Servicer Guidance," EDUCAUSE Review, May 2, 2023. Jump back to footnote 2 in the text.↩
3. Jarret Cummings, "EDUCAUSE and Third-Party Servicer Guidance," EDUCAUSE Review, March 16, 2023. Jump back to footnote 3 in the text.↩

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Kathryn Branson is a Partner at Ulman Public Policy.