More About the Third-Party Service Dear Colleague Letter

As more commentary surfaced about the recent Department of Education Dear Colleague letter about Third-Party Servicers, it was not surprising to read that the Department delayed the effective date of reporting under the expanded definition of a TPS to September 1, 2023.

EdTech consultant and blogger Phil Hill posted another article that eviscerates the Department’s expanded guidance and the advocacy groups “that inspired it.” He cites several Tweets from the advocacy group representatives that explain “there’s not much new from a 2016 Dear Colleague Letter (DCL).”

Mr. Hill cites phrases from the relevant Title IV regulations about Third-Party Servicers and explains how those definitions specifically related to “administering any aspect of a Title IV program” prior to February 15, 2023, when the latest DCL was issued. In his post, Mr. Hill provides a list of specific items that further outline activities that relate to “administering any aspect of a Title IV program.” It’s clear to him (and to me) that all these activities relate to “handling federal financial aid or direct reporting of that financial aid.”

As it turns out, Mr. Hill obtained the list of activities that he published from the form that the Department of Education asks vendors to submit under the new guidance. As he writes, “the one that ED never thought to update based on the new guidance.” Clearly, the tweets and other arguments espoused by the advocacy groups were incorrect in stating that previous DCLs issued guidance very similar to this letter. Otherwise, the form would have reflected the February 15 guidance.

Phil Hill points out that there was a bullet in the recent guidance that is “enormous in its implications.” The bullet reads as follows: “To provide Title IV-eligible education programs.” Clearly the Department has stretched significantly the TPS definition from an entity that provides assistance for federal financial aid programs to one that assists with academic programs. This is the overreach that everyone is discussing.

I have been directly employed or involved with higher education since 2002. In the early years of online higher education, institutions worked directly and indirectly with the Department to assure that some of the guardrails related to online education rules and regulations were specific to the issues and not vague regulations designed to put up roadblocks and “gotchas” for institutions offering online degrees and their partners. I remember attending a regulatory conference where an attorney from a prominent law firm pointed out that as long as the institutions offering the online courses and degrees were responsible for teaching those courses and degrees that probably every other service could be outsourced. A senior career official from the Department was on the panel with him and did not dispute the attorney’s assertion.

The party controlling the Executive Branch in 2011 (Democrat) issued the DCL providing OPMs an exemption from the prohibitions on revenue share agreements for marketing Title IV programs. That Dear Colleague Letter, the “gainful employment” regulations, the borrower demand to repayment regulations, and College Scorecard were political initiatives and not initiatives from the career employees of the Department. Why? Because the last year that Congress reauthorized the Higher Education Act (HEA) was 2008. Since its expiration in 2013, it’s been extended by Congress but not reauthorized as it was every five years prior. Democrats have controlled the Executive Branch during all but four years of the 15 years elapsed since the last reauthorization.

I had lunch with a senior federal judge recently and voiced my frustration at the lack of cooperation and bipartisanship in regulating education. He noted that Article One of the Constitution grants all legislative power to Congress. He added that legislation passed by Congress over the past few decades frequently references the authority of the Secretary (referring to an Executive Branch Department like the Department of Education) to further define rules and regulations related to the bill they just passed. He stated that it shouldn’t surprise anyone that a new administration (meaning from a different political party) works to reverse rules and regulations passed by the previous administration particularly those enacted through executive orders. Until Congress goes back to legislating, rules and regulations will be issued through the Executive Branch.

In the case of the OPM DCL, the tightening vise of regulations related to OPMs appears to be led by the influence of advocacy groups aligned with the Democratic party. It’s my assumption that these groups were not consulted when the Obama administration issued the 2011 OPM DCL. Given that some of these organizations have a significant political presence in California, the broad expansion to ed tech is not surprising either. After all, California is the only state that has failed to ratify the State Authorization Reciprocity Agreement (NC-SARA).

NC-SARA is an initiative designed to cut through the red tape of state regulations so that any licensed and accredited college can offer its online courses across state lines without registering to do business in the state where the student lived. NC-SARA has saved hundreds if not thousands of colleges time and money registering for approvals by 49 states and the District of Columbia. Its passage theoretically provided students with lower cost online courses and programs since the additional licensing costs were not incurred by the colleges teaching from another state. If your advocacy goal is to protect traditional higher ed from low cost online alternatives, expanding the definition of a Third-Party Servicer will increase roadblocks in the form of regulation and will add costs that increase tuition. We will see if common sense prevails, and the expanded definition is cut back. I’m not optimistic that it will return to its original definition.

Subjects of Interest


Higher Education

Independent Schools


Student Persistence