Summary
The U.S. Department of Education completed a process known as negotiated rulemaking to update a variety of higher education regulations, including guidance related to how institutions handle federal financial aid funds also known as “Cash Management.” As part of this process, the Department proposed to eliminate a provision that allows institutions to automatically bill students for books and supplies and, instead, require that institutions get authorization from students before applying their financial aid to such charges. The proposed regulation would also require that institutions disclose the cost of a books and supplies charge before seeking student authorization and offer the materials at below competitive market rates.
SPARC supports the Department’s proposed changes as it would shift what is now an “opt-out” model that automatically bill students for textbooks to an “opt-in” model where students get to choose if their financial aid is used on these materials or not.
Background
Federal regulations previously required that institutions get authorization from a student before applying their federal financial aid funds to items such as books and supplies on their tuition bill. In 2016, the Department changed this rule to permit institutions to count books and supplies as part of tuition and fees enabling financial aid to cover such costs without a student authorizing it first. The 2016 rule (34 CFR § 668.164(c)(2)) allowed institutions to do this as long as they had an agreement with a third party to offer materials at “below competitive market rates,” provided access within 7 days of the start of the term, and had a policy allowing students to opt out of the charge.
While this rule was initially intended to help reduce textbook costs for students, instead, it enabled a shift in sales models for textbooks that opened the door for “Inclusive Access.” Inclusive Access is a textbook sales model that adds the cost of digital course content into students’ tuition and fees. Under existing regulation, these models operate as opt-out programs versus opt-in, making it harder for students to choose affordable alternatives like used and rented books. The savings claimed by these programs are frequently exaggerated, often based on the sticker price of a print book, even though students may get similar or better savings in the competitive market. For more information, visit InclusiveAccess.org.
About the New Proposal and Process
The Department’s proposed change would no longer permit institutions to include the cost of books and supplies in tuition and fees. Instead, it would require institutions to obtain a student’s (or parent’s) authorization before using their federal financial aid to pay for books and supplies charges. Automatic billing would only be allowed if the student is confined or incarcerated. It would further require that institutions disclose the costs of such materials prior to any authorization being given and offer the materials at below competitive market rates. Under the change, inclusive access would be able to continue but students would have to opt-in and authorize the institution’s use of their financial aid to pay for these programs.
Final meetings of the negotiators took place March 4-7, 20224. They did not reach consensus on the proposed changes, leaving the decision of what to propose to the Department. The next step is for the Department to formally propose changes through publication in the Federal Register with a public comment period. Transcripts and recordings of the meetings and public comment periods are available on the Department’s website.
Support for the Proposal
The White House signaled support for the Department’s proposed changes in a fact sheet on junk fees in higher education. The fact sheet states that stopping automatic billing for textbooks will “provide students with real choice and the ability to use the best textbooks at the most affordable price.”
In a letter to the U.S. Secretary of Education, 54 student organizations and more than 350 individual students urged the Department to continue its efforts to curb automatic textbook billing, including changing the Cash Management rule to make “Inclusive Access” programs “opt-in” for students.
Negotiators representing students, consumers, veterans, and civil rights organizations submitted a memorandum to the negotiated rulemaking committee providing information about automatic textbook billing and expressing support for the Department’s proposed change. The negotiators stated: “Students should have the right to choose how their Title IV aid is used and where they will purchase their course materials, period.”
A second memorandum was submitted by negotiators debunking the “savings” claims from automatic textbook billing programs. The negotiators state that the current regulations permitting automatic textbook billing are “susceptible to gaming by vendors” and go on to explain how “claims that students are actually receiving cheaper course materials are overstated or even false in many cases.”
Proposed Language Changes
Updated Proposal
From Session 3 Issue Paper: Cash Management V3 (March 2024)
Note: Only the portions relevant to books and supplies are below.
§ 668.164(c)(1) and (2) – Crediting a student’s ledger account
(1) An institution may credit a student’s ledger account with title IV, HEA program funds to pay for allowable charges associated with the current payment period. Allowable charges are
(i) The amount of tuition, fees, and institutionally provided food and housing room and board assessed the student for the payment period or, as provided in paragraph (c)(5) of this section, the prorated amount of those charges if the institution debits the student’s ledger account for more than the charges associated with the payment period;
(A) An institution may only include costs of books and supplies as a part of tuition and fees if the student is a confined or incarcerated individual as
defined under 34 CFR 600.2.
. . .
(ii) The amount incurred by the student for the payment period for purchasing books, supplies, and other educationally related goods and services provided by the institution for which the institution obtains the student’s or parent’s authorization under § 668.165(b), provided that –
(A) For each payment period, the institution individually discloses the cost of such books, supplies, and other educationally related goods and services to the student prior to any authorization being signed and the student or parent chooses to purchase those materials provided by the institution; and
(B) The institution makes those books or supplies available to students at or below competitive market rates.
. . .
Initial Proposal
From Session 1 Issue Paper: Cash Management (January 2024)
§ 668.164(c)(2) – Crediting a student’s ledger account
An institution may include the costs of books and supplies as part of tuition and fees under paragraph (c)(1)(i) of this section if –
(i) The institution documents on a current basis that the books or supplies, including digital or electronic materials, are not available elsewhere or accessible by students enrolled in that program from sources other than those provided or authorized by the institution; or
(ii) The institution demonstrates there is a compelling health or safety reason.
(A) Has an arrangement with a book publisher or other entity that enables it to make those books or supplies available to students below market competitive rates;
(B) Provides a way for a student to obtain those books and supplies by the seventh day of a payment period; and
(C) Has a policy under which the student may opt out of the way the institution provides for the student to obtain books and supplies under paragraph (c)(2). A student who opts out under this paragraph (c)(2) is considered to also opt out under paragraph (m)(3) of this section
(ii) The institution documents on a current basis that the books or supplies, including digital or electronic materials, are not available elsewhere or accessible by students enrolled in that program from sources other than those provided or authorized by the institution; or
(iii) The institution demonstrated there is a compelling health of safety reason.
Relevant Media Coverage
The Hill (Opinion): Biden can limit colleges’ scheme to tack textbook costs onto tuition
USA Today: Colleges charge tons of junk fees for food and books. Biden may force them to scale back.
The Chronicle of Higher Education: Courseware Can Be Integral to a Course. Why, Then, Are Students Footing the Bill for It?
Inside Higher Ed: New Course Materials Models: Who Benefits?