The Department of Education’s new definition of third-party services won’t go into effect until September

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Acknowledging widespread concern from colleges, contractors, and associations, the US Department of Education pushed back four months — to September — the start date for an expanded definition of an organization that is a third-party service provider under the federal financial assistance program.

A third-party steward is the entity that administers any part of the college’s Title IV federal financial aid program. Defined as a third party service provider with additional regulatory requirements, such as a compliance audit. Third party service providers are also jointly responsible for violations of federal student aid regulations.

Guide February 15th from the Ministry of Education expanded the types of organizations covered by the regulator’s definition of third-party service providers. A letter outlining the new guidelines partially framed it around online program managers, or OPMs, whose ability to make money through revenue-sharing agreements with colleges was the subject of a separate regulatory review announced the same day.

But the department also wrote that for third-party stewards, “the vast majority of activities and functions performed by outside entities on behalf of the institution are intrinsically linked” to Title IV programs. It revises the guidelines to state that parties involved in student recruitment, retention, software for Title IV administration, educational content and instruction are considered third-party services and must therefore comply with regulatory requirements.

The changes sparked a lot of questions about how broad the new guidelines really are – and how quickly they are implemented.

Observers suggest the new definition could include as a third-party service provider company that provides learning management system or maybe textbook publisher. Also potentially included are organizations such as police departments that compile crime statistics for colleges, hospitals that offer clinical experiences, and college online extensions that work with campuses, based on American Council on Education, the college sector’s top lobbying organization.

D2L, even the company that sells the popular Brightspace learning management system issue a statement reassuring customers that they do not perceive them as third party service providers under the new definition.

“The Department’s announcement is ambiguous, and whether the guidance fits the TPS definition set out below [Higher Education Act] and the Department’s own regulations are, to say the least, debatable,” he said. “However, D2L believes that the learning management system it provides to US institutions is not covered by the new guidance.”

Initially, the Department of Education said colleges would need to report new third-party service relationships covered by May 1. They also asked them to submit comments on changes by mid-March.

But on Tuesday, the department said the new guidance and reporting requirements would not take effect until September 1. This extended the comment period to the end of March.

“The department wants to ensure that qualified institutions and third party service providers have a clear understanding of the requirements of third party service providers and a reasonable amount of time to fulfill those requirements,” updated guide word.

Why do colleges want more time

The new guidelines are widespread. The notice includes more than 8,000 words, including a Q&A and a table outlining the services a contractor can qualify under the new definition.

In addition, an organization that meets the definition of a third-party service provider for one institution may not meet it for another.

“The department has observed that providers often offer multiple versions of a product or service and often customize products or services based on an institution’s unique needs,” the letter said. “It is possible for an entity to be considered a TPS in relation to one institution and not to another, depending on the specific service or function that the entity performs for each institution.”