Waiver or Recovery of Overpayments

DEPARTMENT OF VETERANS AFFAIRS <CFR>38 CFR Part 21</CFR> <RIN>RIN 2900-AS36</RIN> <SUBJECT>Waiver or Recovery of Overpayments</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Department of Veterans Affairs. <HD SOURCE="HED">ACTION:</HD> Proposed rule. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The Department of Veterans Affairs (VA) proposes to amend the Veteran Readiness and Employment and Education regulations to implement section 1019 of the Johnny Isakson and David P. Roe, M.D. Veterans Health Care and Benefits Improvement Act of 2020 (Isakson Roe Act), which was effective January 5, 2021. These proposed amendments would update regulations governing the waiver or recovery of overpayments to address the assignment of financial responsibility for benefits paid directly to an educational institution on behalf of the student. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> Comments must be received on or before September 29, 2025. </EFFDATE> <HD SOURCE="HED">ADDRESSES:</HD> You may submit comments through <E T="03">www.regulations.gov</E> under RIN 2900-AS36. That website includes a plain-language summary of this rulemaking. Instructions for accessing agency documents, submitting comments, and viewing the rulemaking docket are available on <E T="03">www.regulations.gov</E> under “FAQ.” <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Cheryl Amitay, Veterans Benefits Administration, (202) 461-9800. </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> When an educational institution (also referred to as a school) voluntarily applies and is approved to participate in GI Bill programs, that institution assumes responsibility to provide accurate and timely enrollment information to VA for benefit processing. See 38 U.S.C. 3684(a). Prior to the enactment of section 1019 of the Isakson Roe Act (Pub. L. 116-315) on January 5, 2021, 38 U.S.C. 3685(a) and (b) technically indicated that, in cases in which an overpayment is made to a veteran or eligible person but is a result of willful or negligent conduct by the school, the overpayment could be considered a liability of both the school and the veteran or eligible person. In 38 CFR 21.9695(b)(3), VA interpreted 38 U.S.C. 3685(b) as referring to both an overpayment made to a veteran or eligible person and an overpayment made to a school on behalf of a veteran or eligible person. When a school failed to provide accurate and timely information regarding a student's enrollment, VA's implementing regulations provided for, and continue to provide for, an administrative review at the regional office level of the circumstances surrounding any overpayment (known as the School Liability Process) to determine if the school was liable for such overpayment, <E T="03">i.e.,</E> to determine if the overpayment resulted from the school's own willful or negligent failure to report accurate or timely enrollment information or from willful or negligent false certifications. 38 CFR 21.9695(b)(3), 21.4009. When VA determined school liability existed, the amount of the school liability equaled the amount of debt that resulted from the school's willful or negligent reporting failure or false certification. Further, pursuant to § 21.4009(h), the school had the right to appeal findings of school liability to a dedicated School Liability Appeals Board located in VA's Central Office. Additionally, § 21.9695(b)(2) states that an overpayment made to the school would be a liability of the school in cases where the student never attended the school term. Section 21.9695 of Title 38 U.S.C., however, does not clearly state whether the student would be liable for the debt as well. With the enactment of section 1019 of Public Law 116-315 and new 38 U.S.C. 3685(b)(2), schools can be held liable for benefits paid directly to them for tuition and fees, Yellow Ribbon program matching contributions, and other advance payments of educational assistance to veteran students, without consideration of whether the overpayment was the result of willful or negligent conduct. Amended section 3685(b)(2) states simply that payments made to a school on behalf of an eligible veteran pursuant to specified provisions (38 U.S.C. 3313(h), 3317, 3680(d), 3320(d)) shall constitute a liability of the school. The statute does not require any VA findings, specifically findings of willful or negligent conduct, before considering the listed payments (tuition and fees, Yellow Ribbon program matching contributions, other advance payments) as liabilities of the school. To be consistent with 38 U.S.C. 3685(b)(2), VA proposes to remove the current regulatory provision in 38 CFR 21.9695(b)(3) that requires VA to provide the School Liability Process under § 21.4009 to determine whether an overpayment is the result of willful or negligent conduct before holding a school liable for an overpayment <E T="03">paid directly to the school</E> on behalf of an eligible individual. We also propose to add language in revised § 21.9695(b)(2) to make clear that a school would be held liable, without going through the School Liability Process, for certain chapter 33 benefits <E T="03">paid directly to the school</E> on behalf of an eligible individual. We would accordingly remove the language in current § 21.9695(b)(2) indicating that a school is liable for an overpayment made for a term, quarter, or semester if a student never attended that term, quarter, or semester because such scenario would be covered under revised § 21.9695(b)(2). In addition, we propose adding language in revised § 21.9695(b)(2) to make clear that VA would apply the procedures in 38 CFR 1.911a when collecting overpayments of chapter 33 benefits that were paid to the school on behalf of the eligible individual, which would be consistent with 38 U.S.C. 3685(c). VA also proposes to amend 38 U.S.C. 21.9695(b)(1) to be consistent with 38 U.S.C. 3685(b)(1) and make it clear that a school would be held liable for overpayments <E T="03">paid to an eligible individual</E> if VA determines through the School Liability Process that the school engaged in willful or negligent conduct. Furthermore, even after the enactment of section 1019 of Public Law 116-315, 38 U.S.C. 3685(a) and (b)(1) technically indicates that an overpayment made to a veteran that was the result of willful or negligent conduct by a school could be considered a liability of both the veteran and the school. While we can arguably hold both the school and the veteran liable under current 38 CFR 21.9695(b)(1) and (3) for an overpayment made to a veteran if we find it is the result of willful or negligent conduct by the school, we have never held the veteran liable in this circumstance. Consistent with our interpretation of current 38 U.S.C. 3685(a) and (b)(1) and our historical practice, and because we presume Congress did not intend to allow for potential double recovery of an overpayment, we are proposing to make it clear in our regulation at 38 CFR 21.9695(b)(1)(iii) that, if we determine that an overpayment made to a veteran is the result of a school's willful or negligent conduct, we would hold only the school and not the veteran liable for the overpayment. Additionally, VA proposes to amend 38 CFR 21.4009(a)(2) to make clear that a school would be held liable for overpayments paid to an eligible veteran or person only if VA determines in the School Liability Process set out in this section that the school engaged in willful or negligent conduct. VA also proposes to amend § 21.4009(a)(1) to clarify that paragraph (a)(1) is subject to paragraph (a)(2) and amend § 21.4009(a)(2) to clarify that VA would make negligence determinations pursuant to the procedures in this section. Implementing these amendments would align VA's regulations governing school liability with current statutory requirements. Finally, we would apply the changes proposed in this rulemaking to all debts established on or after January 5, 2021. As stated, these changes implement the statutory amendments in Public Law 116-315, sec. 1019, which added new subsection (b)(2) to 38 U.S.C. 3685, specifying scenarios that result in automatic school liability without requiring the School Liability Process. Congress enacted Public Law 116-315 on January 5, 2021, and set no separate effective date or applicability date for section 1019. Accordingly, the amendment took effect on the date of enactment of the law, and we propose to apply the regulatory changes to all debts established on or after the effective date of the authorizing law. <HD SOURCE="HD1">Executive Orders 12866, 13563, and 14192</HD> VA examined the impact of this rulemaking as required by Executive Orders 12866 (Sept. 30, 1993) and 13563 (Jan. 18, 2011), which direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits. The Office of Information and Regulatory Affairs has determined that this rulemaking is not a significant regulatory action under Executive Order 12866, as supplemented by Executive Order 13563. The Office of Information and Regulatory Affairs has determined that this rulemaking is not a significant regulatory action under Executive Order 12866. This proposed rule is expected to be a deregulatory action under Executive Order 14192. The Regulatory Impact Analysis associated with this rulemaking can be found as a supporting document at <E T="03">www.regulations.gov.</E> <HD SOURCE="HD1">Regulatory Flexibility Act</HD> The Secretary hereby certifies that this proposed rule would not have a significant economic impact on a substantial number of small entities as they are defined in the Regulatory Flexibility Act (RFA) (5 U.S.C. 601-612). This rulemaking would update existing regulations to include the requirement in 38 U.S.C. 3685(b)(2) that schools are liable for ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 21k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━