NEGOTIATED RULEMAKING & AUTOMATIC TEXTBOOK BILLING

Liliana Diaz Solodukhin

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April 25, 2024

What is negotiated rulemaking?

About Negotiated Rulemaking

• “Neg reg” is a process that the Department of Education (ED) is required to complete before updating certain federal regulations, including those that pertain to Federal financial aid (Title IV, HEA) programs.
• ED convenes a committee of stakeholder representatives (“negotiators”) for a series of meetings to discuss and seek consensus on proposed regulatory text.
• ED is generally bound to use any consensus text in formal rulemaking, but may proceed with its own proposal if consensus is not reached.

Where the Process Stands

• ED announced the Program Integrity and Institutional Quality negotiated rulemaking last April, then convened the committee in early January.
• The committee met for three sessions ending in March to discuss a set of “issue papers,” which included the books and supplies provision.
• There was significant debate between institutions and publishers (opposed) vs. ED and student/consumer advocates (supportive).
• The committee did not ultimately reach consensus, which leaves ED free to proceed with their version of the proposed regulations.

What is the proposed change?

Terminology

• Title IV Aid: Federal financial aid (Pell grants, federal student loans, etc.)
• Cash Management: The section of federal regulations concerning how institutions manage students’ federal financial aid dollars.
• Authorization: A student or parent’s permission for the institution to use their financial aid to pay for certain charges.

34 CFR § 668.164

Disbursing Funds

Summary: Current Regulations

Institutions can automatically bill students for books and supplies without a student’s authorization if they:

1. Have a third party agreement to offer materials at below competitive market rates
2. Provide access within 7 days of the start of the term
3. Have an opt-out policy

* Automatic billing is also allowed in cases where an institution documents that materials are “not available elsewhere” or demonstrates a “compelling health or safety reason,” but those are less commonly used for Inclusive Access programs.

Summary: Session 3 Proposal

Institutions can automatically bill students for books and supplies only if they obtain a student’s authorization if they:

1. Disclose prices before student gives authorization each term and student chooses to purchase materials from the institution (i.e., the student “opts in”)
2. Offer materials at or below competitive market rates

* The proposed text permits institutions to automatically bill students without authorization if they are confined or incarcerated, but eliminates all other exceptions.

What Would This Mean?

• Institutions could still have “Inclusive Access” and “Equitable Access” programs, the default policy would just need to be “opt in” rather than “opt out.”
• Existing programs would need to make changes to their policies and vendor agreements to be in compliance with the final rule.
• Importantly, students would still be able to use their financial aid to pay for books and supplies voluntarily as usual.

How likely is the “opt in” rule to be adopted?

WHERE THE PROCESS STANDS

• The next step is for ED to publish a notice of proposed rulemaking (NPRM) in the Federal Register.
• There will be a period to submit public comments (typically 30 days). ED will review these comments before publishing a final rule.
• Final rules published by November 1 take effect July 1 of the next year, so earliest any rule takes effect is July 1, 2025.
• There are many factors that could impact the timing, so it is hard to predict if/when we see an NPRM or what it will say.