[Federal Register Volume 82, Number 115 (Friday, June 16, 2017)]
[Rules and Regulations]
[Pages 27621-27622]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-12562]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF EDUCATION

34 CFR Parts 668, 674, 682, and 685

RIN 1840-AD19
[Docket ID ED-2015-OPE-0103]


Student Assistance General Provisions, Federal Perkins Loan 
Program, Federal Family Education Loan Program, William D. Ford Federal 
Direct Loan Program, and Teacher Education Assistance for College and 
Higher Education Grant Program

AGENCY: Office of Postsecondary Education, Department of Education.

ACTION: Final rule; notification of partial delay of effective dates.

-----------------------------------------------------------------------

SUMMARY: On November 1, 2016, the Department of Education published 
final regulations entitled Student Assistance General Provisions, 
Federal Perkins Loan Program, Federal Family Education Loan (FFEL) 
Program, William D. Ford Federal Direct Loan Program, and Teacher 
Education Assistance for College and Higher Education Grant Program 
(the final regulations) in the Federal Register. On May 24, 2017, the 
California Association of Private Postsecondary Schools (CAPPS) filed a 
Complaint and Prayer for Declaratory and Injunctive Relief in the 
United States District Court for the District of Columbia (Court). In 
light of the existence and potential consequences of the pending 
litigation, the Department has concluded that justice requires it to 
postpone certain provisions of the final regulations pursuant to the 
Administrative Procedure Act (APA), pending judicial review. The 
provisions to be postponed are listed in detail in the SUPPLEMENTARY 
INFORMATION section of this document.

DATES: As of June 16, 2017, the effective date for the amendments to or 
additions of: Sec. Sec.  668.14; 668.41; 668.71; 668.90; 668.93; 
668.171; 668.175 (c) and (d) and (f) and (h); Appendix C to Subpart L 
of Part 668; 674.33; 682.202; 682.211; 682.402(d)(3), (d)(6)(ii)(B)(1) 
and (2), (d)(6)(ii)(F) introductory text, (d)(6)(ii)(F)(5), 
(d)(6)(ii)(G), (d)(6)(ii)(H) through (K), (d)(7)(ii) and (iii), (d)(8), 
and (e)(6)(iii); 682.405(b)(4)(ii); 682.410; 685.200; 685.205; 685.206; 
685,212(k); 685.214; 685.215; 685.222; Appendix A to Subpart B of Part 
685; and 685.308, published November 1, 2016, at 81 FR 75926, is 
delayed until further notice.

FOR FURTHER INFORMATION CONTACT: Barbara Hoblitzell, U.S. Department of 
Education, 400 Maryland Ave. SW., Room 6W252, Washington, DC 20202. 
Telephone: (202) 453-7583 or by email at: [email protected].
    If you use a telecommunications device for the deaf (TDD) or a text 
telephone (TTY), call the Federal Relay Service (FRS), toll free, at 1-
800-877-8339.

SUPPLEMENTARY INFORMATION: On November 1, 2016, the Department 
published the final regulations in the Federal Register (81 FR 75296), 
and the final regulations are scheduled to take effect on July 1, 2017. 
The final regulations made several changes to the Department's student 
financial assistance regulations. Those changes include a new Federal 
standard and process for determining whether a borrower has a defense 
to repayment on a loan based on an act or omission of a school. The 
final regulations also prohibit schools from using certain contractual 
provisions regarding dispute resolution processes in their agreements 
with students, including predispute arbitration provisions and class 
action waivers. The final regulations further impose new financial 
responsibility standards and require proprietary schools to make 
certain disclosures regarding the student loan repayment rates of their 
graduates.
    On May 24, 2017, CAPPS filed its complaint with the Court 
challenging the final regulations (California Association of Private 
Postsecondary Schools v. DeVos, No. 1:17-cv-00999 (D.D.C. May 24, 
2017)), in particular those provisions of the regulations pertaining to 
the standard and process for the Department to adjudicate borrower 
defense claims, requirements pertaining to financial responsibility 
standards, provisions requiring proprietary institutions to provide 
warnings about their students' loan repayment rates, and prohibitions 
against institutions including arbitration or class action waivers in 
their agreements with students. CAPPS has also filed a motion for 
preliminary injunction asking the Court to restrain the Department from 
implementing or enforcing the arbitration and class action waiver 
prohibitions.
    Under section 705 of the APA, ``[w]hen an agency finds that justice 
so requires, it may postpone the effective date of action taken by it, 
pending judicial review.'' 5 U.S.C. 705. In light of the pending 
litigation, and for the following reasons, the Department has concluded 
that justice requires it to postpone the effectiveness of certain 
provisions of the final regulations until the judicial challenges to 
the final regulations are resolved.
    First, the postponement will preserve the regulatory status quo 
while the litigation is pending and the Court decides whether to uphold 
the final regulations. The plaintiffs have raised serious questions 
concerning the validity of certain provisions of the final regulations 
and have identified substantial injuries that could result if the final 
regulations go into effect before those questions are resolved. Given 
the legal uncertainty, maintaining the status quo is critical. For 
instance, if the final regulations are not postponed, institutions 
participating in the programs under title IV of the Higher Education 
Act of 1965, as amended (HEA), would be required, as of July 1, 2017, 
to modify their contracts in accordance with the arbitration and class 
action waiver regulations, which may be contrary to their interests. 
Postponing the final regulations will avoid the cost that institutions 
would incur in making these changes while the regulation is subject to 
judicial review. Additionally, if the final regulations are not 
postponed, institutions would be subject to financial responsibility 
trigger provisions that could impose substantial costs. Meanwhile, the 
postponement of the final regulations will not prevent student 
borrowers from obtaining relief because the Department will continue to 
process borrower defense claims under existing regulations that will 
remain in effect during the postponement.
    Second, the United States will suffer no significant harm from 
postponing the effectiveness of the final regulations while the 
litigation is pending. As the Department stated in the Net Budget 
Impacts section of the Regulatory Impact Analysis of the final 
regulations, the provisions with the greatest impact on the net budget 
impact of the final regulations are those related to the discharge of 
borrowers' loans, especially the changes to borrower defense and closed 
school discharges. The final regulations were estimated to have a net 
budget impact in costs over the 2016-2026 loan cohorts of $16.6 billion 
in the primary estimate scenario, including a cost of $381 million for 
cohorts 2014-2016 attributable to the regulations providing for a 
three-year automatic

[[Page 27622]]

closed school discharge. Postponing the effectiveness of the final 
regulations will help to avoid these significant costs to the Federal 
government and ultimately the Federal taxpayer.
    Separately, the Department is announcing its plan to review and 
revise the regulations through the negotiated rulemaking process 
required under section 492 of the HEA. The postponement will allow the 
Department to consider and conduct a rulemaking process to review and 
revise the final regulations and ensures regulated parties will not 
incur costs that could be eliminated under any future regulations the 
Department promulgates on these matters.
    Based upon the foregoing, the Department has determined that it is 
necessary to postpone the effectiveness of the revisions to or 
additions of the following provisions of the final regulations:
     Sec.  668.14(b)(30), (31), and (32) Program participation 
agreement.
     Sec.  668.41(h) and (i) Reporting and disclosure of 
information.
     Sec.  668.71(c) Scope and special definitions.
     Sec.  668.90(a)(3) Initial and final decisions.
     Sec.  668.93(h), (i), and (j) Limitation.
     Sec.  668.171 General.
     Sec.  668.175(c), (d), (f), and (h) Alternative standards 
and requirements.
     Part 668 subpart L, Appendix C.
     Sec.  674.33(g)(3) and (g)(8) Repayment.
     Sec.  682.202(b)(1) Permissible charges by lenders to 
borrowers.
     Sec.  682.211(i)(7) Forbearance.
     Sec.  682.402(d)(3), (d)(6)(ii)(B)(1) and (2), 
(d)(6)(ii)(F) introductory text, (d)(6)(ii)(F)(5), (d)(6)(ii)(G), 
(d)(6)(ii)(H) through (K), (d)(7)(ii) and (iii), (d)(8), and 
(e)(6)(iii) Death, disability, closed school, false certification, 
unpaid refunds, and bankruptcy payments.
     Sec.  682.405(b)(4)(ii) Loan rehabilitation agreement.
     Sec.  682.410(b)(4) and (b)(6)(viii) Fiscal, 
administrative, and enforcement requirements.
     Sec.  685.200(f)(3)(v) and (f)(4)(iii) Borrower 
eligibility.
     Sec.  685.205(b)(6) Forbearance.
     Sec.  685.206(c) Borrower responsibilities and defenses.
     Sec.  685.212(k) Discharge of a loan obligation.
     Sec.  685.214(c)(2), (f)(4) through (7) Closed school 
discharge.
     Sec.  685.215(a)(1), (c)(1) through (c)(8), and (d) 
Discharge for false certification of student eligibility or 
unauthorized payment.
     Sec.  685.222 Borrower defenses.
     Part 685 subpart B, Appendix A Examples of borrower 
relief.
     Sec.  685.300(b)(11), (b)(12), and (d) through (i) 
Agreements between an eligible school and the Secretary for 
participation in the Direct Loan Program.
     Sec.  685.308(a) Remedial actions.
    We do not intend to postpone the effectiveness of the regulatory 
provisions published in 81 FR 75926 which: (1) Expand the types of 
documentation that may be used for the granting of a discharge based on 
the death of the borrower; (2) amend the regulations governing the 
consolidation of Nursing Student Loans and Nurse Faculty Loans so that 
they align with the statutory requirements of section 428C(a)(4)(E) of 
the HEA; (3) address severability; and (4) make technical corrections. 
As established in 81 FR 75926, Sec. Sec.  682.211(i)(7) and 
682.410(b)(6)(viii) remain designated for early implementation, at the 
discretion of each lender or guaranty agency.
    In sum, in light of the existence and potential consequences of the 
pending litigation, and given the potentially significant harm that 
could result if the status quo is altered by the implementation of the 
final regulations on July 1, 2017, the Department has determined that 
the public interest and justice require postponing the effectiveness of 
the sections of the final regulations specified herein until the 
matters raised in the litigation are resolved.
    In order to accomplish a postponement of certain sections of the 
final regulations under section 705 of the APA, the Department is 
delaying the effective date of the sections specified in the DATES and 
SUPPLEMENTARY INFORMATION sections of this document pursuant to the 
Federal Register Act and its implementing regulations.
    Accessible Format: Individuals with disabilities may obtain this 
document in an accessible format (e.g., Braille, large print, 
audiotape, or compact disc) on request to the contact person listed 
under FOR FURTHER INFORMATION CONTACT.
    Electronic Access to this Document: The official version of this 
document is the document published in the Federal Register. Free 
internet access to the official edition of the Federal Register and the 
Code of Federal Regulations is available via the Federal Digital System 
at: www.gpo.gov/fdsys. At this site, you can view this document, as 
well as all other documents of this Department published in the Federal 
Register, in text or PDF. To use PDF, you must have Adobe Acrobat 
Reader, which is available free at the site.
    You may also access documents of the Department published in the 
Federal Register by using the article search feature at: www.Federal 
Register.gov. Specifically, through the advanced search feature at this 
site, you can limit your search to documents published by the 
Department.

List of Subjects

34 CFR Part 668

    Administrative practice and procedure; Colleges and universities; 
Consumer protection; Grant programs--education; Loan programs--
education; Reporting and recordkeeping requirements; Selective Service 
System; Student aid; Vocational education.

34 CFR Part 674

    Loan programs--education; Reporting and recordkeeping; Student aid.

34 CFR Parts 682 and 685

    Administrative practice and procedure; Colleges and universities; 
Loan programs--education; Reporting and recordkeeping requirements; 
Student aid; Vocational education.

    Dated: June 13, 2017.
Betsy DeVos,
Secretary of Education.
[FR Doc. 2017-12562 Filed 6-14-17; 11:15 am]
 BILLING CODE 4000-01-P