Department of Education Issues Third-Party Servicer Guidance

The Department of Education extended the timeline for implementation of its February 15, 2023, Dear Colleague Letter on February 28, 2023. The letter substantially expanded the third-party servicer definition under the Title IV regulations.

According to the Department of Education (DOE), the new effective date is September 1, 2023. Additionally, the comment period was extended, and now closes on March 30, 2023.

The updated guidance clarifies when organizations that contract with institutions to administer any aspect of the institution’s participation in the student assistance programs authorized under Title IV of the Higher Education Act of 1965, as amended, are considered third-party servicers. In particular, the guidance clarifies when companies and others who provide recruitment services for colleges and universities will fall into this category.

The updated guidance is intended to ensure the DOE has full transparency into and more data on the companies that work with institutions of higher education in areas that relate to federal financial aid. It also ensures the DOE and auditors will have the ability to review these companies' compliance with federal rules and regulations.

Institutions will have until September 1, 2023, to:

  • Report any arrangements with third-party servicers that haven’t been reported to the Department
  • Detail in its contracts with third-party servicers the services the entity performs on behalf of the institution
  • Disclose the timeframe of the agreement

Entities or individuals that meet the definition of a third-party servicer as clarified by the Dear Colleague Letter are required to submit the Third-Party Servicer Data Form to the DOE or update their existing form by September 1, 2023.

Any audits required of third-party servicers wouldn’t be needed for at least six months, with most servicers having significantly longer than that.

At the same time, the DOE will accept public comment on the guidance through the website on Docket ID ED-2022-OPE-0103 through March 30, 2023. The Department will consider those comments and publish any relevant changes based upon that feedback at a later date.

We’re Here to Help

Institutions and entities serving higher education institutions in any capacity administering Title IV student assistance programs should review the DOE’s Dear Colleague Letter and assess what steps you may need to take to remain compliant. You can also contact your Moss Adams professional or visit our Higher Education Practice to learn more.

Contact Us with Questions

Enter security code:
 Security code