U.S. Will Withdraw Controversial Outsourcing Guidance
Katherine Knott
October 23, 2024
The guidance, first issued in February 2023, was aimed at regulating online program managers—but higher ed groups warned of unintended consequences.
The Education Department is officially planning to rescind its controversial guidance on outside contractors—which never actually took effect—within the next four weeks.
This latest step, announced in a court filing Monday, is largely a formality after the department said in July that it would go through its lengthy rule-making process to change the regulations that govern third-party servicers—entities that colleges and universities contract with to administer or manage financial aid and other programs—rather than issue new guidance.
The department had sought to expand the definition of companies and nonprofit entities that are considered third-party servicers—a designation that would have subjected them to regular audits and the agency’s oversight authority. Under the guidance issued in February 2023, companies involved with student recruiting and retention, as well as those who provided educational content and instruction, would have become third-party servicers. Historically, third-party servicers were those involved with the student loan process and financial aid.
