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.
