Some people make plans to read more. Others buy a gym membership with earnest (if not exactly honest) intention to go a couple times a week. At McClintock & Associates, our New Year’s resolution each year is one we know we can keep: help clients navigate the murky waters of compliance with student financial aid regulations.
We’re holding to that mission in 2020 — and offering some suggestions for institutions pondering their own resolutions. This past year was a busy one in terms of changing regulations, with seemingly not a month going by without a significant rule change, so it’s possible to have overlooked or incorrectly applied one of these changes.
Fortunately, a new year is a good time for a fresh start. Here are some resolutions for financial aid administrators to make that happen.
1) Prepare for the new borrower defense to repayment (BDTR) regulations.
This fall, the Department of Education (ED) revamped the BDTR rule, which allows borrowers to seek loan forgiveness if an institution misled them or engaged in illegal misconduct. The sweeping — and complicated — changes attempt to clarify existing pieces of the rule and overhaul other facets. While a large portion of ED’s final rule has more legal ramifications, a number of areas center on accounting and regulatory issues, including triggering events, financial ratios, and financial protection and institutional liability.
With the regulations going into effect July 1, 2020, there is still time to plan for their implementation — just not much of it. Preparation must begin now, including best practices such as ensuring an understanding of triggering events, educating other departments at your institution about the types of events that require notification of financial aid and maintaining records to document any event that occur. We’re ready to help provide guidance regarding these important rules and assist with their application.
2) Prepare to implement the modified Master Promissory Note (MPN) confirmation processes.
In a move that could have significant operational impact on institutions in the relatively near future, ED announced a modification to approved MPN confirmation processes. An additional “Informed Borrowing Confirmation” process will require student and parent borrowers to view how much they currently owe in federal student loans, and to acknowledge they have seen this amount before an institution can make the first disbursement of the first Direct Loan a borrower receives for each new award year.
ED’s announcement suggested some early operational changes institutions may need to consider, including modifications to websites and paper materials that provide information about Direct Loan requirements, as well as updating internal processes and procedures. There are also changes coming to the Common Origination and Disbursement (COD) System.
These modifications are set to be implemented for the 2020-2021 award year, meaning there is little time to prepare. Institutions must begin to identify these operational changes now.
3) Evaluate your programs after ED’s guidance on term lengths.
Consenting to institutions’ requests for increased flexibility in setting term lengths, ED recently revised its “standard term” policy. The updated policy provides greater flexibility for programs to meet the standard term requirements. The previous standard term lengths were defined by a narrower range, so ED believes the change will allow institutions to offer more unique and innovative programs that are eligible for Title IV aid.
The new policy says standard term semesters and trimesters can be between 14 and 21 weeks of instruction, quarters can be between nine and 13 weeks, and standard terms are no longer required to be substantially equal.
With this change, institutions should revisit their programs’ term lengths. Not only to see if they can now process aid following the standard term and/or Pell formula 1 standards, but it’s possible a program’s term may have been shortened or lengthened, to its detriment, to fit the previous requirements. Redesigning term lengths may provide a better educational experience.
4) Prepare for new audit steps to tests for Gramm-Leach-Bliley Act (GLBA) compliance.
GLBA requires that institutions participating in Title IV must comply with standards for safeguarding student information, which is defined as any record containing nonpublic personal information whether in paper, electronic or other form that is handled by you or your affiliates, with the rules for protecting it outlined in 16 CFR Part 314. The Act has existed since 1999, but there was no guidance on auditing a school’s compliance with it until recently.
The U.S. Department of Education Office of Inspector General has added three specific audit steps related to GLBA. First, the new guidance specifies that an auditor should determine whether an institution designated someone to coordinate a student information security program. Second, did the institution perform a risk assessment that addresses the three areas noted in 16 CFR 314.4(b), which are 1) Employee training and management; 2) Information systems, including network and software design, as well as information processing, storage, transmission and disposal; and 3) Detecting, preventing and responding to attacks, intrusions or other system failures. Third, auditors must verify that the institution documented a safeguard for each risk identified in their risk assessment.
These requirements are not very in-depth, but they require us to request new documentation from institutions, so they should be reviewing current GLBA documentation and verifying it meets the standards of 16 CFR 314.
And one more for the road: Have a Happy New Year.
There were more regulatory and procedural changes announced in 2019 than those listed here — and surely there are more to come in 2020. However, making these resolutions and following through on them will give institutions a good start on staying in compliance. As always, McClintock & Associates is available to help institutions understand and implement these changes, guiding them into a Happy New Year and beyond.
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