An institution must exercise caution in selecting third-party servicers, financial aid consulting services, financial aid management systems (software), and/or the electronic data storage systems it utilizes to assist in the administration of the Title IV programs. Regardless of whether an entity is considered a third-party servicer for Title IV purposes, the institution has a fiduciary responsibility to ensure the policies, procedures, products, and systems that the servicer utilizes are compliant with applicable laws and regulations. This includes the requirement that an institution be able to access all records (paper or electronic) created or maintained by a third-party servicer and make those records readily available to the Department for review. The institution must also implement appropriate safeguards to protect student records and ensure any information shared from education records is only used for the purpose(s) for which the information was disclosed. The institution will be held responsible for any liability incurred as a result of software deficiencies, incorrect consulting advice, lost or damaged records, and/or third-party servicer violations. D&E-Q7: Are third-party servicers subject to the ban on incentive compensation? Yes. Third-party servicers are subject to the same incentive D&E-A7: compensation prohibitions as institutions. Neither persons nor entities may receive direct or indirect payments of incentive compensation for securing enrollment (recruitment) or securing financial aid for students. D&E-Q8: If an institution hires an individual from a temporary staffing agency to perform Title IV functions, is the staffing agency considered a servicer? D&E-A8: Temporary staffing agencies that do not specialize in, or have a significant presence in, staffing of higher education or in the administration of the Title IV student assistance programs are not considered third-party servicers. As a result, the institution is solely responsible for any liabilities that may result from errors or compliance violations caused by the use of temporary staff provided by this type of agency.
An institution must exercise caution in selecting third-party servicers, financial aid consulting services, financial aid management systems (software), and/or the electronic data storage systems it utilizes to assist in the administration of the Title IV programs. Regardless of whether an entity is considered a third-party servicer for Title IV purposes, the institution has a fiduciary responsibility to ensure the policies, procedures, products, and systems that the servicer utilizes are compliant with applicable laws and regulations. This includes the requirement that an institution be able to access all records (paper or electronic) created or maintained by a third-party servicer and make those records readily available to the Department for review. The institution must also implement appropriate safeguards to protect student records and ensure any information shared from education records is only used for the purpose(s) for which the information was disclosed. The institution will be held responsible for any liability incurred as a result of software deficiencies, incorrect consulting advice, lost or damaged records, and/or third-party servicer violations. D&E-Q7: Are third-party servicers subject to the ban on incentive compensation? D&E-A7: Yes. Third-party servicers are subject to the same incentive compensation prohibitions as institutions. Neither persons nor entities may receive direct or indirect payments of incentive compensation for securing enrollment (recruitment) or securing financial aid for students. D&E-Q8: If an institution hires an individual from a temporary staffing agency to perform Title IV functions, is the staffing agency considered a servicer? D&E-A8: Temporary staffing agencies that do not specialize in, or have a significant presence in, staffing of higher education or in the administration of the Title IV student assistance programs are not considered third-party servicers. As a result, the institution is solely responsible for any liabilities that may result from errors or compliance violations caused by the use of temporary staff provided by this type of agency.
UpdatedThirdPartyServicerQuestionsandAnswersATTACH.docx