Department of Education Guidance Expands Possible Liability for Private Companies That Contract With Higher Education Institutions
February 21, 2023
On Feb. 15, 2023, the U.S. Department of Education issued guidance that significantly expands the definition of “third-party servicer” to include services completed by many online program managers (OPMs) and entities providing other services that historically have not been considered third-party servicers. Institutions and entities considered third-party servicers under the new guidance are subject to mandatory reporting requirements by May 1, 2023.
New Guidance – Who Is a Third-Party Servicer?
On Feb. 15, 2023, the Department released a Dear Colleague Letter, GEN-23-03, that significantly alters the definition of a third-party servicer in Title IV of the Higher Education Act of 1965, as amended, and its implementing regulation, 34 C.F.R. § 668.2. Historically, third-party servicers were limited to entities that helped with financial aid, such as by making sure funds are administered appropriately. The Department’s new third-party servicer definition will include many OPMs and other entities not previously considered a third-party servicer.
