[Federal Register Volume 81, Number 157 (Monday, August 15, 2016)]
[Notices]
[Pages 54052-54056]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-19297]
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DEPARTMENT OF EDUCATION
Notice Inviting Postsecondary Educational Institutions To
Participate in Experiments Under the Experimental Sites Initiative;
Federal Student Financial Assistance Programs Under Title IV of the
Higher Education Act of 1965, as Amended
AGENCY: Office of Postsecondary Education, Department of Education.
ACTION: Notice.
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SUMMARY: The Secretary invites institutions of higher education
(institutions) that participate in the Federal student financial
assistance programs authorized under title IV of the Higher Education
Act of 1965, as amended (HEA), to apply to participate in a new
institutional experiment under the Experimental Sites Initiative (ESI).
Under the ESI, the Secretary has authority to grant waivers of
certain title IV, HEA statutory or regulatory requirements to allow a
limited number of institutions to participate in experiments to test
alternative methods of administering the title IV, HEA programs. The
alternative methods of title IV, HEA administration that the Secretary
is permitting under this ESI experiment are designed to facilitate
efforts by institutions to evaluate certain innovative loan counseling
practices that can prepare students to manage their college finances,
inform them about their student loan repayment options, and ensure
students are well-prepared to repay their loans on time.
Under this experiment, participating institutions will have the
flexibility to require additional loan counseling for student borrowers
beyond the statutorily required one-time entrance and one-time exit
counseling as a condition for the students to receive Direct Loan
funds, and to customize counseling based on students' needs.
DATES: Letters of Interest to participate in the experiment described
in this notice must be received by the Department no later than
September 29, 2016 to ensure that the Department considers the
institution for participation in the experiment. Letters received after
September 29, 2016 may, at the discretion of the Secretary, be
considered for participation.
ADDRESSES: Letters of Interest must be submitted by electronic mail to
the following email address: [email protected]. For format and
other required information, see ``Instructions for Submitting Letters
of Interest'' under SUPPLEMENTARY INFORMATION.
FOR FURTHER INFORMATION CONTACT: Warren Farr, U.S. Department of
Education, Federal Student Aid, 830 First Street NE., Washington, DC
20002. Telephone: (202) 377-4380 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: Instructions for Submitting Letters of
Interest: Letters of Interest should be in an Adobe Portable Document
Format (PDF) attachment to an email message sent to the email address
provided in the ADDRESSES section of this notice. The subject line of
the email should read ``ESI 2016--Additional Loan Counseling.'' The
text of the email should include the name and address of the
institution. The Letter of Interest should be on institutional
letterhead and be signed by the institution's financial aid
administrator. The Letter of Interest must include the institution's
official name and its Office of Postsecondary Education Identification
(OPEID) number, and the name of a contact person at the institution,
along with a mailing address, email address, FAX number, and telephone
number of a person at the institution. The letter should also include
the information described in the ``Application and Selection'' section
in this notice. Upon receipt of a Letter of Interest, the Department
will notify the institution by email that its Letter of Interest was
received. This notification should be kept in the institution's
records.
Background
Accurate and timely loan information is crucial for students to
make informed decisions about borrowing and to understand their
repayment obligations
[[Page 54053]]
and options. However, there is limited research on the effectiveness of
loan counseling, including which types of content and modes of delivery
of loan counseling are most effective in helping students to understand
and manage their debt, as well as when and how often counseling should
occur to be most effective.
Since the start of his Administration, President Obama has outlined
an ambitious agenda to make college more affordable for American
families and promote student success. In his June 9, 2014, Presidential
Memorandum for the Secretary of Treasury and the Secretary of
Education, the President directed the agencies to focus their efforts
on providing initiatives that help Federal student loan borrowers
manage their debt.
In support of the President's agenda, the Secretary, under the
Experimental Sites authority in section 487A(b) of the HEA, is offering
institutions the opportunity to participate in the experiment described
in this notice. The experiment will provide institutions the
flexibility to require, as a condition for a student to receive Direct
Loan funds, loan counseling that is in addition to the entrance and
exit counseling currently required under statute.
Section 485(l)(1)(A) of the HEA requires that each institution
ensure that first-time borrowers receive comprehensive information on
the terms and conditions of the loan and of the responsibilities the
borrower has with respect to the loan. This information must be
provided in a simple and understandable format.
The Department's regulations at 34 CFR 685.304(a) require
institutions to ensure that entrance counseling is conducted with each
Direct Subsidized Loan or Direct Unsubsidized Loan student borrower
prior to making the first disbursement of the proceeds of a loan to the
borrower, unless the borrower has previously completed entrance
counseling at that institution or at another institution, regardless of
when that counseling occurred. These regulations do not allow
institutions to require counseling as a condition of disbursement
beyond the required first-time entrance counseling and required exit
counseling, though the institution may offer such counseling to
students on a voluntary basis.
The purpose of this experiment is to test the effectiveness of
requiring additional loan counseling beyond the counseling that is
statutorily required. The additional loan counseling is expected to
help borrowers better understand their repayment options and
obligations and make more informed decisions about their debt. The
experiment may also identify the types of borrowers who have benefitted
most from additional loan counseling. The Department hopes to learn if
the additional loan counseling:
Positively influences students' decision-making about
borrowing;
Promotes successful repayment of student loans, including
reducing delinquencies and defaults; and
Has an impact on students' academic performance (e.g.,
grades and time-to-completion).
We also seek to learn whether different types of content and modes
of delivery of loan counseling are more or less effective in promoting
the above outcomes. This experiment can inform any future policy
changes around loan counseling and efforts to inform borrowers about
repayment plans and progress.
Details of this experiment are provided in the section titled ``The
Experiment'' below.
The Experiment
Description
Under the experiment, an institution will require all of its
eligible Direct Loan borrowers who have previously completed first-time
entrance counseling to participate in the experiment (or for some large
institutions, a subset of those borrowers), with approximately half of
those borrowers randomly assigned by the Department to complete
additional required counseling beyond the entrance counseling normally
provided to first-time borrowers as a condition of receiving their
Direct Loan funds.
Institutions with particularly large numbers of borrowers who would
be eligible for the experiment may request to include in the experiment
a subset of those borrowers each year. The size of the subset will be
determined by the Department in consultation with the institution and
will take into consideration the overall number of students needed to
estimate impacts for groups of institutions using similar counseling
models. Once the size of the subset is determined, students will be
randomly selected by the Department from the larger group of borrowers
to be included in the subset and to participate in the experiment,
either in the treatment group or in the control group.
The Department will assign all borrowers who have been determined
to be participants in the experiment to either the treatment group or
to the control group. Borrowers assigned to the treatment group will be
required to participate in additional loan counseling beyond the
entrance counseling they completed as first-time borrowers, as a
condition of receiving a Direct Loan. Borrowers assigned to the control
group cannot be required to complete, but may do so voluntarily, any
additional loan counseling beyond the already-completed entrance
counseling and the statutorily required exit counseling.
Under the experiment, institutions cannot require additional
counseling more than once for each of the student's Direct Loan loan
periods (generally once for each academic year). Therefore, students
who are already required to participate in entrance counseling in any
year (i.e., a first-time borrower at any institution) will not be
included in the experiment for that year. Only students who completed
their loan counseling during a prior year (whether for enrollment at
the participating institution or at a different institution) will be
included in the experiment for subsequent years.
If an institution participating in the experiment currently offers
voluntary additional loan counseling to students, it may continue to do
so during its participation in the experiment. If an institution does
not provide voluntary additional loan counseling, it may not begin to
do so during its participation in the experiment. To the extent
possible, the Department will require institutions to provide
information regarding the students in the control group who utilize the
institution's voluntary additional loan counseling.
Institutional Flexibilities
An institution participating in the experiment will have
flexibility in the content and modes of delivery of its additional loan
counseling (e.g., online, individual in-person, group in-person,
student-to-student). The institution will be allowed to choose the
counseling approach it will use for the required additional counseling
by choosing one of the following: The Department's Financial Awareness
Counseling Tool (FACT); a third-party counseling product or third-party
servicer; or institutionally developed alternative counseling.
The additional required counseling provided to borrowers by
participating institutions may vary based on the students' expected
remaining time to complete their program. That counseling may also vary
for different groups of students depending on their prior borrowing.
The institution may include, as part of its additional counseling,
a test or other evaluation to assess the student's knowledge of the
information presented
[[Page 54054]]
as long as the test or evaluation is presented in a format accessible
to students with disabilities, including students with visual or
hearing impairments, and is in a language understandable by students
with limited English proficiency. This may require the use of
interpreters for oral or written communications with such students, as
well as translations of written materials provided to such students.
However, any such evaluation may not impede a student's ability to
borrow, for example, by establishing a passing score for the test or
evaluation before the student can receive Direct Loan funds.
Institutional Requirements
Institutions participating in this experiment will be required to:
Work with the Department to establish the number of its
Direct Loan borrowers who will be included as participants in the
experiment.
Track and provide data to the Department for its borrowers
who were assigned by the Department to the treatment group and its
borrowers who were assigned to the control group.
Ensure that the additional counseling required of the
borrowers in the treatment group is reasonable as to time and effort,
and is relevant to the student's borrowing decisions; and that the
additional counseling is not biased or restricted based on students'
religion, national origin, race, color, sex, socioeconomic status
(including income), disability, place of residence, physical location
where the student will be enrolled, or educational program.
Ensure that the additional loan counseling does not
discourage students from taking on debt needed to successfully complete
their studies, while not over-borrowing taking into account anticipated
earnings.
Make loan counseling reasonable and not so burdensome that
it becomes a barrier to receiving Direct Loan funds.
Ensure that for each particular year, Direct Loan
borrowers already required to receive loan entrance counseling at that
institution (i.e., first-time borrowers) are not subject to required
additional counseling for that year. These students would be eligible
to participate in this experiment in subsequent years.
Disclose to all borrowers included in the experiment (both
those in the treatment group and those in the control group) that the
institution is participating in an experiment related to loan
counseling and that some of the students in the experiment may be
required to participate in additional loan counseling as a condition of
receiving Direct Loan funds.
Inform students who have been selected to receive
additional counseling that their Direct Loan disbursements are
conditional upon completion of that counseling.
Ensure that the institution's policy for providing
counseling under the experiment remains consistent throughout the
institution's participation in the experiment. A participating
institution is also expected to ensure that its delivery of counseling
does not change significantly during the institution's participation in
the experiment.
The Department will perform ongoing monitoring during the
experiment to ensure that participating institutions meet these
requirements throughout their participation in the experiment.
All counseling provided to borrowers must deliver information that,
at a minimum, includes the total amount of the borrowers' student loan
indebtedness. The institution may customize the counseling based on the
borrower's needs. However, the Department encourages participating
institutions to include in its additional counseling the following
information, where relevant, to assist students in making more informed
borrowing decisions:
Comprehensive information on the terms and conditions of
Federal student loans, including information about annual and aggregate
limits, interest rates, how interest accrues, loan fees for Federal
student loans, and the responsibilities the borrower has with respect
to such loans.
A reminder that students will be required to repay their
loans even if they do not complete the academic program.
Information that indicates that completing an academic
program will increase the students' ability to successfully repay their
loans.
Information about the requirement to complete additional
counseling and to complete exit counseling upon leaving the
institution.
A statement that, when determining whether and how much to
borrow, students should consider how much they can reasonably expect to
earn after leaving their academic program of study. As part of this
statement, the institution may provide other relevant information, such
as earnings data, Gainful Employment disclosures required under 34 CFR
668.412(a), and cohort default rate, if available and/or applicable.
Comprehensive information about the different terms and
features of Direct Loan repayment options and forgiveness benefits,
including information about income-driven repayment plans, Public
Service Loan Forgiveness, and Teacher Loan Forgiveness, and information
about student loan deferments and forbearances.
A reminder that information and assistance with Federal
student loans, such as loan consolidation, rehabilitation, and
participation in income-driven repayment plans, are provided by the
Department at no charge and that the borrower does not need to pay
someone for help.
Information about establishing a relationship with a loan
servicer, including, among other things, keeping address and contact
information up-to-date and learning who to contact and how to ask
questions.
Information about the Department's Federal Student Aid
Ombudsman Group, including a description of the services it provides
and contact information.
Information about the Department's Federal Student Aid
Feedback System (see Electronic Announcement published July 1, 2016,
``Federal Student Aid Launches Online Feedback System,'' located on the
Information for Financial Aid Professionals (IFAP) Web site).
Waivers
Institutions selected for this experiment will be granted
flexibility in implementing their Direct Loan counseling program.
Section 485(l)(1)(A) of the HEA and 34 CFR 685.304(a)(1) and (a)(2)
provide that an institution must ensure that entrance counseling is
conducted with each Direct Loan student borrower prior to making the
first disbursement of the loan, unless the borrower has received a
prior Direct Loan or a Federal Family Education Loan.
However, institutions participating in this experiment will require
additional counseling for their Direct Loan borrowers included in the
treatment group. The additional counseling approaches to be used (i.e.,
the Department's FACT product; a third-party counseling product or
third-party servicer; or institutionally developed alternative
counseling) must be identified by the institution in its Letter of
Interest. If the institution enters into an agreement with a third
party to provide the additional counseling, that agreement is subject
to the third-party servicer requirements of the regulations in 34 CFR
668.25. As is required for all third-party servicers, such third
parties must protect all student information they receive from the
institution.
[[Page 54055]]
All other provisions and regulations of the title IV, HEA student
assistance programs will remain in effect.
Reporting and Evaluation
The Department is interested in assessing the impact of requiring
additional loan counseling for students attending different types of
institutions. The evaluation will allow the Department to examine the
effectiveness of requiring additional counseling across all of the
institutions and students participating in the experiment, as well as
for groups of institutions using similar types of content and modes of
delivery of loan counseling for groups of borrowers.
To support an evaluation of the impact of a policy change similar
to the one tested in this experiment, the design of the evaluation
requires data from both a treatment group of students required to
participate in additional loan counseling and a control group of
students who received their student aid under existing rules.
Participating institutions will, on a regular basis, provide to the
Department a list containing identifying information for each of the
institution's Direct Loan student borrowers who had previously received
entrance counseling from the institution or from a different
institution. Those borrowers will be considered for inclusion in the
experiment for the subsequent year.
The Department will assign each eligible borrower to either the
treatment group, which will receive the additional loan counseling, or
to the control group, for which the institution may not require any
additional loan counseling.
Once a borrower is placed into the treatment or control group, the
borrower must remain in that group throughout the borrower's enrollment
at the institution during the institution's participation in the
experiment.
To obtain some key outcome measures (e.g., receipt and amount of
loan funds, academic progression, completion or withdrawal), the
Department will draw on information contained in the Department's
systems.
In addition, each institution will be required to provide to the
Department existing school records for all students participating in
the experiment (whether assigned to the treatment or control group) for
the purpose of assessing the impacts of the additional loan counseling
intervention. The records will likely include the borrower's academic
information (e.g., credits taken, credits earned, grade point average,
completion information, and credentials earned) as well as financial
information (e.g., cost of attendance, State and institutional aid
received, non-Federal loans received, and other information relating to
financial aid received by the borrower).
Finally, on an annual basis, institutions participating in the
experiment will be required to provide information about the method and
content of the loan counseling and of their experiences with the
experiment. The Department will collect from each participating
institution the details and components of the additional counseling
that the institution requires, including the content and method of
delivery (e.g., individual in-person counseling, group counseling, Web-
based counseling) for each cohort of students. Institutions will
receive more specific information about evaluation and reporting
requirements prior to the start of the experiment.
Institutions participating in this experiment will be required to
submit a narrative description and self-assessment of their
implementation of the experiment. At a minimum, the narrative should
include any unforeseen challenges and unexpected benefits.
Application and Selection
Institutions are invited to apply to participate in the experiment
described in this notice. The Department is interested in information
such as: (1) An estimate of the number of the institution's Direct Loan
borrowers who, for an award year, have previously completed entrance
counseling and, if the institution believes it does not have the
capacity to include all of those borrowers in the experiment, an
estimate of the number of borrowers it wishes to include in the
experiment (both in the control and treatment groups) for each award
year; (2) how the additional counseling will be provided, e.g., through
the Department's FACT product, a third-party counseling product or a
third-party servicer, or an institutionally developed alternative; (3)
a brief description of the additional counseling that the institution
proposes to use in the experiment, including its content and mode of
delivery; and (4) how the institution's proposed approach to additional
loan counseling is supported by relevant and available research or
evidence (if applicable) and the source of such research or evidence.
We understand that the actual number of students who will be
included in the experiment may be different than the estimate provided
in the Letter of Interest, as may the proposed counseling method.
From the institutions that apply, the Secretary will select a
limited number that represent a diverse cross-section of title IV
participating institutions to participate in this experiment. In
choosing participants, the Secretary will consider, among other
institutional characteristics, the institution's history of compliance
with the Department's regulatory and statutory requirements for
participation in the title IV, HEA programs; the institution's
administrative capability and financial responsibility; and whether the
institution has adequately described in its Letter of Interest how it
will comply with the requirements of the experiment outlined in this
notice.
In addition to the above items, when selecting institutions to
participate in the experiment, the Secretary will consider all
available information, including, but not limited to: Institutional
type and control, the institution's geographic location, the
institution's cohort default rate, the median amount of Direct Loan
funds borrowed by the institution's students, student outcomes (e.g.,
retention and completion rates and loan repayment rates), and the type
of counseling the institution intends to offer (i.e., FACT, third-party
product or third-party servicer, or institutionally developed
counseling).
The Secretary's selection of institutions will be guided by the
purpose of the experiment, which is to evaluate alternative delivery
modes, content, and timing to current counseling requirements, and to
inform policymakers about any recommended changes to those
requirements. The ESI does not provide broad regulatory relief or
general exceptions to the Department's statutory and regulatory
requirements.
If a selected institution consists of more than one location (e.g.,
campus), the Secretary may limit the experiment to a single location,
unless the institution provides the Secretary with a rationale for
expanding the experiment to one or more of the institution's other
locations.
The Secretary will consult with those institutions that have been
invited to participate in the experiment on the final design of the
experiment through Webinars or other outreach activities.
Institutions selected for participation in an experiment will have
their Program Participation Agreement (PPA) with the Secretary amended
to reflect the specific statutory or regulatory provisions that the
Secretary has waived for participants in the experiment at the
institution. The institution must acknowledge its commitment to
adequately establish the procedures necessary to successfully
administer the experiment. The amended PPA will also
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document the agreement between the Secretary and the institution about
how the experiment will be conducted and will specify the evaluation
and reporting requirements for the experiment.
Accessible Format: Individuals with disabilities can 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.federalregister.gov. Specifically, through the advanced search
feature at this site, you can limit your search to documents published
by the Department.
Program Authority: 20 U.S.C. 1094a(b).
Dated: August 9, 2016.
Lynn Mahaffie,
Deputy Assistant Secretary for Policy, Planning and Innovation,
Delegated the Duties of Assistant Secretary for Postsecondary
Education.
[FR Doc. 2016-19297 Filed 8-12-16; 8:45 am]
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