The Department has made it clear that it expects public colleges and universities to report these events even though such reporting will not generally affect whether the school is financially responsible under the Department’s regulations.

This is the fourth in our series of Alerts focused on the U.S. Department of Education’s 2016 Borrower Defense to Repayment (BDR) Rule, promulgated by the Obama administration. Read the previous Alerts from March 21, April 9 and May 8.

On June 3, 2019, the U.S. Department of Education issued a Q&A document regarding compliance with the BDR Rule that confirmed that the reporting requirements for certain “triggering” events will be enforced at all institutions, including public colleges and universities. This information supplements the Department’s March 15, 2019, guidance regarding the 2016 BDR Rule.

The Department’s Q&A makes clear that public institutions are required to report, pursuant to 34 C.F.R. 668.171(h), the following events within the stated time periods:

• Borrower-defense-related lawsuits brought by a federal or state authority: within 10 days after the institution is served with the complaint and then again within 10 days after the suit has been pending for 120 days.
• All other lawsuits: within 10 days after the institution is served with a complaint, then again within 10 days after the court sets certain deadlines relating to motions for summary judgment (MSJ) or disposition, and then a third time within 10 days after certain events relating to an MSJ or dispositive motion occur.
• Any debt or liability arising from a final judgment in a judicial or administrative proceeding: within 10 days after a payment was required or the liability was incurred.
• Any settlement, including settlements reached prior to the initiation of a formal legal proceeding: within 10 days after a payment was required or a liability was incurred.
• An action by an accrediting agency placing the institution on probation or issuing a show cause order (or similar accreditation status that poses an equal or greater risk to the institution’s accreditation) for failing to meet one or more of the agency standards: within 10 days of such notice to the institution.
• An accrediting agency requires an institution to submit a teach-out plan covering the closure of the institution or its branch or additional location and following certain events: within 10 days after the agency notifies the institution that it must submit such a plan.
• A state agency citation against the institution for a violating state or agency requirements: within 10 days of such citation.
• The occurrence of a loan violation, a creditor waiver of a loan violation, or a creditor imposing sanctions or penalties in exchange for or as the result of a waiver: all within 10 days of such event.

Institutions that have experienced one or more of these events on or after July 1, 2017, should consult with counsel regarding their specific reporting obligations. 

The Department has made it clear that it expects public colleges and universities to report these events even though such reporting will not generally affect whether the school is financially responsible under the Department’s regulations. In addition, the Department can take administrative action against a public institution for failure to report these events, and therefore timely reporting is important. 

The institution may, and should, submit evidence demonstrating that the action or event no longer exists or has been resolved or that the institution has insurance that will cover all or part of the debts or liabilities that arose or will arise.

In addition, all institutions (public, nonprofit and proprietary) will be subject to the newly effective borrower defense to repayment claims processes. Duane Morris will continue to follow these developments and issue future Alerts regarding this process.

For Further Information

If you have any questions related to this Alert, please contact Edward Cramp, Katherine D. Brodie, Brandi A. Taylor, any of the attorneys in the Higher Education Practice Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.