Updates on TPS and Other Regulatory Actions

TPS guidance delayed (again) while three other rules are submitted for review

Author

Phil Hill
June 18, 2024

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Two of the biggest questions in US EdTech center around the plans for the US Department of Education (ED) and whether / when it will release revised guidance on two items targeting the Online Program Management (OPM) market.

  • The third-party servicer (TPS) guidance released in February 2023 was created to rein in OPM companies but was written in a way to pull in most of EdTech in the US. Given the increasingly global nature of EdTech, that action generated massive pushback that led to ED pulling back the guidance. When will it release revised guidance?

  • The bundled services exception was released in 2011 and underpins OPM tuition revenue-sharing models. ED has stated that it is reviewing that guidance and considering whether to rescind it. If done, that action would blow up the OPM market and cause hundreds of contracts to be rewritten, and a redefinition of the market itself.

Well, TSP guidance has been delayed again by ED and is all but dead at the federal level this year, as I had assumed last October.

Update from June 17th

On Monday in a joint status report based on the 2U lawsuit against the Department of Education (ED), we learned that ED again is pushing out the date for the earliest release of revised third-party servicer (TPS) guidance.

court documents where ED delays TPS

5. The Department is still engaged in the process of carefully reviewing the more than 1,000 comments it received from the community on the 2023 DCL [Dear Colleague Letter] and developing new guidance. The Department does not anticipate issuing revised guidance in the next 90 days.

6. The parties will file another joint status report in 90 days.

That explanation is BS. ED went through 7,500 comments for Financial Value Transparency / Gainful Employment and released final rules in just three months, and ED has now had more than a year to review the 1,000 TPS comments. ED might be reviewing comments, but that is absolutely not why it won’t release new guidance in the next three months.

90 days from this notice is September 15, 2024. If ED were going to release updated TPS guidance this year, June was likely the last chance, as late September gives no realistic chance for a public comment period and final issuance that close to the election and the end of the year. Could ED put out revised guidance in late September without a public comment period? Technically yes, but that action would not only trigger the 2U lawsuit to kick in again but also would make it much more likely for an injunction to be placed. Long and short, let’s say there’s less than a 5% chance of September TPS guidance and more than a 95% chance of no new TPS guidance this year.

Need for Clarity

Here is an overview of the entire TPS guidelines saga since its introduction last year.

timeline of TPS expansion guidelines

This process is ridiculous - an ever-changing story without any clear expectations for institutions and vendors that would have to comply with the rules, when and if they become effective. This lack of clarity is part of the problem.

Updates from recent negreg sessions

There are several other regulatory actions that likely fall in the same the clock is running out category. Today also provided some insight into what is in process. ED officially submitted three rules that were related to the January - March 2024 negotiated rulemaking process.

  • Distance Education - primarily the creation of a virtual location to better track fully-online programs as well as removing the allowance for clock-hour measured programs through asynchronous online

  • Return of Title IV, HEA Funds - known as R2T4, primarily clarifying definitions of student withdrawal and general R2T4 process along with requiring fully-online programs and courses to take attendance

  • Federal TRIO Programs - primarily to expand participation in federal outreach and student support programs

notice of submission of rules

What this means is that ED has written its proposed rules on these three items and submitted them to the Office of Management and Budget (OMB) for review. The TRIO item reached consensus, so we know the submitted rules, but the first two items are unknown in language. But they are not unknown in intent, as ED was consistent throughout the process in what it wanted.

But what is notable is what has not been submitted, at least yet, to OMB for review.

  • The gutting of State Authorization Reciprocity

  • The gutting or elimination of Inclusive Access programs

  • New requirements on accrediting agencies

Unlike TPS expansion, those three items along with review of the bundled services exception do not have the 90-day notice window required by the court, but ED is running out of time. This, along with low expectations for continuity post election, is why I believe a lot of the regulatory activism is moving to non-federal levels. Middle States Commission policy on TPS, Minnesota’s new law banning OPM revenue-sharing, the University of California system audit recommending a ban on OPM revenue sharing, etc.

Trust me - the ED / Arnold Ventures coalition is not giving up on these items, but they are likely finding other venues and approaches.

Yes, It’s Good News

There is a lot of criticism of ED in this post, but I will note that this is good news for the most part. Don’t expect TPS expansion guidance at the federal level this year, and if the Biden Administration loses, don’t expect it this decade. And expect several other regulatory actions to also not get implemented due to calendar constraints.

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