Don't Expect Revised TPS Guidance Before the Election

Whether from a change of heart or the clock running out, this guidance is no more

Author

Phil Hill
October 23, 2023

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Mr. Praline: I'll tell you what's wrong with it, my lad. 'E's dead, that's what's wrong with it!

Owner: No, no, 'e's uh,...he's restin’.

Mr. Praline: Look, matey, I know a dead parrot when I see one, and I'm looking at one right now.

Let’s get to the point before the context and rationale. The US Department of Education (ED) will not release new third-party servicer (TPS) guidance this year, and I believe ED will not release it next year, either, due to the election. In short, TPS expansion at the federal level is no more.

Context

I gave an abbreviated history in yesterday’s premium post.

For new readers, in February the US Department of Education (ED) released new guidance to dramatically expand the definition of a TPS entity to essentially capture most all of EdTech. Higher Ed Institutions (HEIs) have to report all TPS contracts, and TPS entities must be audited and have additional limitations. That TPS guidance (through a Dear Colleague Letter, or DCL) would have dramatically expanded the bureaucratic burden for HEIs, most likely put many EdTech vendors out of business, and in essence federalized the EdTech industry.

This move stirred the hornet’s nest, and nearly all of the higher ed community not only protested the guidance but also pointed out that it would not solve any real problems. Fewer than 1% of public comments supported the TPS expansion, and the majority of those supporting the move were think tanks / activist groups sharing a common funding source of the Arnold Ventures, a coalition deeply integrated with ED.

TPS was put on hold, and the higher ed community has been waiting for a re-release or some type of clarity.

Fast forward to July, when I referenced that Melanie Storey, director of Policy, Implementation, and Oversight at ED told attendees of the NASFAA conference to expect updates. My summary:

Well, I have good news for you. I’ve heard from two independent sources (including this mention) recently that the revised TPS guidance to likely to come out in August or early September. [snip]

That revised guidance is likely to occur this summer, meaning that it (in whatever form it comes) will be effective as soon as March 2024. I would expect the new guidance to have a similar approach but focus on recruitment and marketing services.

It’s late October, and we’ve had no updates. I speculated on this delay in a September post.

We are past early September and that guidance has not been released. I strongly suspect that we’re seeing the problem that several members of the Arnold Ventures-funded coalition pointed out, that by continuing its quest towards mass forgiveness of student loans despite the Supreme Court ruling, the US Department of Education (ED) is biting off much more than it can chew.

This waiting period and lack of clarity is important, as many schools are spending time and money with legal staff doing significant contract reviews in case the TPS expansion comes about.

What We Now Know

There are two new pieces of information on the subject. The first I covered yesterday, about a regional accreditor (Middle States, or MSCHE) proposing their own TPS-style policy changes despite being on the record against ED’s TPS guidance last spring. My hunch from that post:

Send us everything, we approve everything. And this comes from a group on record protesting ED’s similar proposals. Something changed since the spring, and it would be shocking if that something was not ED and the Arnold Ventures-funded coalition looking for a policy vehicle with a greater chance of success. To be clear, I do not have evidence of this involvement by ED and AV (yet), but I cannot think of any other explanation right now. [snip]

Let’s call this MSCHE move for what it really appears to be. Venue shopping.

The second comes from the 2U lawsuit against ED and Secretary Cardona, which I described in early April as worth watching. In a joint status report ordered by the judge in that case, ED on Friday described how revised TPS guidance will not come out this calendar year.

5. The Department is currently engaging in the monthslong process of carefully reviewing the more than 1,000 comments it received from the community on the 2023 DCL and developing new guidance. The Department does not anticipate issuing a revised guidance in the next 60 days.

It takes a lot of time and staff hours to review comments and provide responses, and ED should provide an update in the next status report at the end of the year.

What I Think We Know

Moving the earliest possible release into 2025, along with a timeline of not making the new guidance effective for at least six months after issuance, means that any new TPS expansion guidance would hit in the middle of a hotly-contest national election. And TPS is very, very unpopular if you are not receiving Arnold Ventures funding. Importantly, TPS expansion guidance is more specifically unpopular with the higher education community - institutions and associations representing these institutions - that are key to Democrat prospects.

I believe, and I have heard from one reliable source, that ED cannot and will not release TPS expansion guidance in this timeframe, and therefore it is dead next year as well. This guidance will only revive at the federal level in 2025, if the Democrats win the election.

The Arnold Ventures-funded coalition and ED activists understand this situation, which is why I believe they are venue shopping with MSCHE and perhaps other accreditors. Remember the emerging rift that I described in late August.

Last week, Arnold Ventures’ president and CEO Kelli Rhee wrote an op-ed at CNN titled “There’s a better way to tackle America’s student debt crisis.” The op-ed reads like a rebuke of the Biden Administration’s zeal to focus on debt relief, which might put other work in jeopardy.

I won’t do an extended quote on that one, but the point is that activists are worried that student loan debt relief will prevent wins on TPS and other regulatory actions. ED released the final Gainful Employment & Financial Value Transparency rules, so ED did not put everything on the back burner, but I think that Rhee was right - other actions will suffer.

I also believe ED’s statement in the lawsuit about the extensive review of comments. Perhaps there is a faction in ED that truly has been impacted by all of the TPS feedback and is reconsidering the approach. The think tanks and another ED faction appear to still be all-in on TPS expansion and seeking alternate approaches, but someone or some faction seems to be doing serious re-evaluation.

In other words, these changes in plan for TPS expansion are due either to a change of heart from ED leadership, or from the clock running out, or from both.

The right thing to do would be for ED to officially make a public statement on this subject, at least on the information in the lawsuit status report. Colleges and universities need clarity.

Looking Forward

Not that any schools would do this, but I am not arguing for colleges and universities to change plans based on this post. My information is solid based on what I know and what I’ve heard from reliable sources, but there is some speculation involved. Push ED for clarity.

The 2U lawsuit has been important in forcing ED to come clean on plans, and I continue to believe that it is worth tracking.

We’ll provide updates as we hear more, including corrections if any the logic is wrong.

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