The U.S. Department of Education announced it will formally rescind the 2023 Dear Colleague Letter (DCL) on Third-Party Servicers (GEN-23-03) by Nov. 18, 2024. As explained in our prior Feb. 21, 2023, and April 12, 2023, alerts, the 2023 DCL created much confusion in the education sector, as it may have caused many online program managers and other edtech companies to be deemed third-party servicers.
The Department announced this forthcoming rescission in its Oct. 21, 2024, Joint Status Report in response to a lawsuit challenging the 2023 DCL. The Department confirmed that previous Dear Colleague Letters GEN 12-08, GEN 15-01 and GEN 16-15 (as modified by the March 8, 2017, electronic announcement) and GEN-23-08 will remain in effect.
The Department specifically noted in GEN-23-08 that it may address the definition of third-party servicers and contracts between colleges and foreign-owned or operated third-party servicers through future negotiated rulemaking. Any forthcoming regulations must be based on the statutory definition of a third-party servicer as outlined in 20 U.S.C. § 1088(c):
[T]he term “third party servicer” means any individual, any State, or any private, for-profit or nonprofit organization, which enters into a contract with –
(1) any eligible institution of higher education to administer, through either manual or automated processing, any aspect of such institution’s student assistance programs under this subchapter and part C of subchapter I of chapter 34 of Title 42; or
(2) any guaranty agency, or any eligible lender, to administer, through either manual or automated processing, any aspect of such guaranty agency’s or lender’s student loan programs under part B of this subchapter, including originating, guaranteeing, monitoring, processing, servicing, or collecting loans.
