March 15, 2023

New Education Dept. Rule Applies to Broad Range of Vendors

2 min

On March 9, 2023, Craig Gilley published "New Education Dept. Rule Applies to Broad Range of Vendors" in Law360.  The following is an excerpt:

On Feb. 15, the U.S. Department of Education issued a so-called Dear Colleague letter announcing a revised interpretation of the definition of "third-party servicer," a designation that subjects a vendor to certain Department of Education rules and giving the department increased oversight over the vendor's contract with higher education institutions.

The new definition, effective immediately, will now fully capture vendors providing student loan, recruiting and retention services, as well as certain software products and services related to student aid administration.

The new definition unfortunately also includes an incredibly broad catchall provision that captures vendors that "perform any other aspect of the administration of the Title IV programs or comply with the statutory and regulatory requirements associated with those programs." While the likely intent of the new definition is only to capture vendors truly providing student loan, recruiting and retention services, the language is so broad it could be used to additionally capture content and instructional vendor services with only tangential relationships to the targeted activities.

These new rules will leave higher education institutions with no choice but to carefully evaluate all of their technology vendor relationships, assess whether each of their vendors and any services provided are subject to the expanded definition, whether and how agreements need to be modified, and what compliance and reporting steps now need to be undertaken. This is no small task.

Click here to access the article.