ED issues significant third-party servicer guidance and launches review of Incentive Compensation Rule
Christopher Murray, Scott Goldschmidt, Aaron Lacey
February 22, 2023
Last week, the U.S. Department of Education made important announcements regarding oversight of “third-party servicers” and enforcement of its incentive compensation rule. In this post, we consider each of these announcements and their likely impact on the regulated community.
Updated third-party servicer guidance
First, the Department introduced significant changes to its third-party servicer (TPS) guidance in the form of a newly published Dear Colleague Letter (GEN-23-03).
Pursuant to statute, a TPS is an entity or individual that administers any aspect of an institution’s participation in the Title IV programs (see 20 U.S.C. §1088(c) and 34 CFR 668.2). Any provider deemed a TPS must comply with a range of requirements, discussed below.
In 2012, 2015, 2016, and 2017, the Department released Dear Colleague Letters and Q&As to provide additional guidance for institutions and entities regarding what type of activities might cause a provider to be deemed a TPS. Last week’s Dear Colleague Letter rescinds this previous TPS guidance and replaces it with a new, meaningfully revised framework.
