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DCL ID: GEN-23-08
SUBJECT: Update to Third-Party Servicer Guidance in GEN-23-03
SUMMARY: This letter removes the effective date of third-party servicer guidance in Dear Colleague Letter GEN-23-03, which will not go into effect, and removes the prohibition on contracts between institutions and foreign-owned or operated third-party servicers.

Dear Colleague:

Earlier this year, the Department released Dear Colleague Letter GEN-23-03 to ensure oversight of additional entities that have been performing aspects of institutions’ participation in the Title IV aid programs. These functions cover contractors who work closely with institutions of higher education, particularly in the critical areas of recruiting, retention, and the provision of educational content and instruction. The Dear Colleague Letter identified which services we would consider to be activities of third-party servicers—a designation that offers additional transparency into the work of these servicers. The list included categories of activities identified in previous guidance and several new categories of services that the Department has determined constitute aspects of an institution’s participation in the Federal student aid programs. Enhanced transparency helps all entities engaged in the administration of the Federal student aid programs to comply with applicable Federal laws and regulations.

We set an effective date of May 1, 2023, in DCL GEN-23-03, which we extended to September 1, 2023. We also provided a 30-day comment period, which we extended to March 30, 2023. We received significant helpful feedback on the letter in the form of more than 1,000 comments.

We are aware that many institutions and companies have already begun to analyze their contracts in anticipation of reporting and compliance deadlines, and we understand the concerns that can cause. Therefore, we are providing additional time for institutions and companies to come into compliance, and the September 1, 2023, date is no longer in effect. Specifically, we plan to issue a final revised DCL with an effective date at least six months after its publication to allow institutions and third-party servicers covered by the final guidance to meet any reporting requirements. Deadlines for audit and contractual requirements will follow, starting with the institution’s first fiscal year that begins after the effective date for the reporting requirements.

We also received many comments regarding the Department’s prohibition on contracts between colleges and foreign-owned or operated third-party servicers, which was established in guidance published in 2016 (Dear Colleague Letter GEN-16-15). These comments revealed that the number of servicers with some level of foreign ownership has expanded substantially since we issued the 2016 guidance, and the guidance does not clearly define foreign ownership. For those reasons, we are rescinding our 2023 and prior guidance (DCL GEN-16-15 and the March 8, 2017 Electronic Announcement Updated Third-Party Servicer Questions and Answers) prohibiting contracts between colleges and foreign-owned or operated servicers. That issue may be addressed in the future through negotiated rulemaking.

We appreciate the robust public engagement on this topic, and we continue to review the feedback received.


Annmarie Weisman
Deputy Assistant Secretary For Policy, Planning, and Innovation
Office of Postsecondary Education