Proposed Rule2025-14487
Waiver or Recovery of Overpayments
Primary source
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Published
July 31, 2025
Issuing agencies
Veterans Affairs Department
Abstract
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.
Full Text
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<title>Federal Register, Volume 90 Issue 145 (Thursday, July 31, 2025)</title>
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[Federal Register Volume 90, Number 145 (Thursday, July 31, 2025)]
[Proposed Rules]
[Pages 35993-35996]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-14487]
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DEPARTMENT OF VETERANS AFFAIRS
38 CFR Part 21
RIN 2900-AS36
Waiver or Recovery of Overpayments
AGENCY: Department of Veterans Affairs.
ACTION: Proposed rule.
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SUMMARY: 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.
DATES: Comments must be received on or before September 29, 2025.
ADDRESSES: You may submit comments through <a href="http://www.regulations.gov">www.regulations.gov</a> 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
<a href="http://www.regulations.gov">www.regulations.gov</a> under ``FAQ.''
FOR FURTHER INFORMATION CONTACT: Cheryl Amitay, Veterans Benefits
Administration, (202) 461-9800.
SUPPLEMENTARY INFORMATION: 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, i.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 Sec. 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, Sec. 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
[[Page 35994]]
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 Sec. 21.4009 to
determine whether an overpayment is the result of willful or negligent
conduct before holding a school liable for an overpayment paid directly
to the school on behalf of an eligible individual. We also propose to
add language in revised Sec. 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 paid directly to the school on
behalf of an eligible individual. We would accordingly remove the
language in current Sec. 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 Sec. 21.9695(b)(2). In
addition, we propose adding language in revised Sec. 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 paid to an
eligible individual 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 Sec.
21.4009(a)(1) to clarify that paragraph (a)(1) is subject to paragraph
(a)(2) and amend Sec. 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.
Executive Orders 12866, 13563, and 14192
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
<a href="http://www.regulations.gov">www.regulations.gov</a>.
Regulatory Flexibility Act
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 overpayments of benefits (tuition and fees, Yellow Ribbon program
matching contributions, and other advance payments of educational
assistance) paid directly to the schools on behalf of veteran students,
without consideration of whether the overpayment was the result of the
school's willful or negligent conduct. The rulemaking would also remove
as inconsistent with statute the current regulatory requirement in 38
CFR 21.9695(b)(3) that VA go through the School Liability Process (SLP)
to determine whether a school should be held liable for overpayments of
benefits paid directly to the school if the overpayments were the
result of the school's willful or negligent conduct. The proposed
revised regulations would, for the most part, simply explain the
requirements of 38 U.S.C. 3685 and remind parties of their legal rights
and responsibilities as set forth in statute, but they would also
clarify the requirement in section 3685(c) that overpayments ``may be
recovered . . . in the same manner as any other debt due the United
States'' by specifying the procedures under 38 CFR 1.911a that VA uses
to collect debts. The small entities 38 U.S.C. 3685(c) regulates are
educational institutions that are approved for GI Bill benefits.
Although there are many educational institutions approved for GI
Bill benefits
[[Page 35995]]
that may be considered small entities under the RFA to which this rule
would apply, this rule would not have an impact on a substantial number
of these small entities. This rule would affect only institutions of
higher learning (IHL) and non-college degree granting programs (NCD)
(including vocational flight schools) that do not provide accurate and
timely enrollment information or that provide false certifications to
VA, resulting in an overpayment in the school's account. Prior to the
enactment of Public Law 116-315, VA regulations provided for the SLP to
determine if a school was liable for any overpayment created when a
school failed to provide accurate and timely information regarding a
student's enrollment or when it provided false certifications. During
the three years prior to the enactment of Public Law 116-315, of the
approximately 13,000 IHLs and NCDs that are approved for GI Bill
benefits each year, only 17 schools in total, or less than six schools
per year, were referred to the SLP for adjudication.
Using a standard based on an educational institution's enrollment,
the Department of Education (ED) recently determined that 61 percent of
institutions of higher education (IHE) subject to regulations they
proposed in July 2024 governing participation in the student financial
assistance programs authorized under title IV of the Higher Education
Act of 1965, as amended (HEA), are small entities for purposes of an
RFA analysis. Program Integrity and Institutional Quality: Distance
Education, Return of Title IV, HEA Funds, and Federal TRIO Programs, 89
FR 60256, 60280 (July 24, 2024). While IHLs and IHEs are each defined
to include similar entities, there are likely to be IHLs that
participate in GI Bill programs that do not fall within ED's definition
of IHEs, and there may be some IHEs that participate in ED's programs
that do not fall within VA's definition of IHLs. Compare 38 U.S.C.
3452(f) (defining IHLs to include institutions offering post-secondary
education, whether public, nonprofit, or private) with 20 U.S.C.
1001(a) (defining IHEs to include institutions offering post-secondary
education, but only public or nonprofit institutions). Nonetheless, we
believe IHLs and IHEs are sufficiently similar, and we can reasonably
use ED's calculation of small entities for VA's purposes. And even
though not all of the schools that are approved for GI Bill benefits
are IHLs, with just over half being NCDs, we believe ED's standard for
determining the percentage of schools that are small entities for its
purposes can reasonably be applied here because it is likely there
would be a similar or greater percentage of NCDs that would be
considered small entities.
Comparing IHEs subject to ED's July 2024 proposed rule to
educational institutions that would be subject to the regulations
regarding school liability and the SLP that VA is proposing to amend in
this rulemaking (i.e., all educational institutions approved for GI
Bill benefits), we believe it is reasonable to estimate that
approximately 61 percent of educational institutions subject to these
VA regulations would be considered small entities. Sixty-one percent of
the estimated 13,000 total schools that would be subject to these
proposed VA regulations in a given year is 7,930 small entities. Thus,
the estimated average of six schools that went through the SLP per
year, even assuming they were all small entities, is only 0.08 percent
(6/7930) of the small entities that would be subject to the
regulations. In other words, less than 1 percent of the small entities
subject to the regulations would be impacted by this rulemaking. And
regardless of the actual percentage of NCDs that may be considered
small entities for GI Bill purposes, the number of small entities
impacted by this rulemaking would remain insubstantial. Therefore,
pursuant to 5 U.S.C. 603(a), the initial and final regulatory
flexibility analysis requirements of 5 U.S.C. 603 and 604 do not apply.
Unfunded Mandates
The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C.
1532, that agencies prepare an assessment of anticipated costs and
benefits before issuing any rule that may result in the expenditure by
state, local, and tribal governments, in the aggregate, or by the
private sector, of $100 million or more (adjusted annually for
inflation) in any one year. This proposed rule would have no such
effect on state, local, and tribal governments, or on the private
sector.
Paperwork Reduction Act (PRA)
This proposed rule contains no provisions constituting a collection
of information under the Paperwork Reduction Act of 1995 (44 U.S.C.
3501-3521).
Assistance Listing
The Assistance Listing numbers and titles for the programs affected
by this document are 64.027, Post 9/11 Veterans Educational Assistance;
64.028, Post-9/11 Veterans Educational Assistance; 64.032, Montgomery
GI Bill Selected Reserve; Reserve Educational Assistance Program;
64.117, Survivors and Dependents Educational Assistance; 64.120, Post-
Vietnam Era Veterans' Educational Assistance; 64.124, All-Volunteer
Force Educational Assistance.
List of Subjects in 38 CFR Part 21
Administrative practice and procedure, Armed Forces, Claims,
Colleges and universities, Education, Employment, Reporting and
recordkeeping requirements, Schools, Veterans, Vocational education,
Vocational rehabilitation.
Signing Authority
Douglas A. Collins, Secretary of Veterans Affairs, approved this
document on July 24, 2025, and authorized the undersigned to sign and
submit the document to the Office of the Federal Register for
publication electronically as an official document of the Department of
Veterans Affairs.
Taylor N. Mattson,
Alternate Federal Register Liaison Officer, Department of Veterans
Affairs.
For the reasons stated in the preamble, the Department of Veterans
Affairs proposes to amend 38 CFR part 21 as set forth below:
PART 21--VETERAN READINESS AND EMPLOYMENT AND EDUCATION
Subpart D--Administration of Educational Assistance Programs
0
1. The authority citation for part 21, subpart D, continues to read as
follows:
Authority : 10 U.S.C. 2141 note, ch. 1606; 38 U.S.C. 501(a),
chs. 30, 32, 33, 34, 35, 36, and as noted in specific sections.
0
2. Amend Sec. 21.4009 by:
0
a. Revising paragraphs (a)(1) and ((2); and
0
b. Adding an authority citation at the end of paragraph (a)(6).
The revisions and addition read as follows:
Sec. 21.4009 Waiver or recovery of overpayments.
* * * * *
(a) * * *
(1) Subject to paragraph (2), the amount of the overpayment of
educational assistance allowance or special training allowance paid to
a veteran or eligible person constitutes a liability of that veteran or
eligible person.
(2) The amount of the overpayment of educational assistance
allowance or special training allowance paid to a veteran or eligible
person constitutes a liability of the educational institution if
[[Page 35996]]
the Department of Veterans Affairs determines, pursuant to procedures
in this section, that the overpayment was made as the result of willful
or negligent:
* * * * *
(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 512(a), 3034(a), 3241(a),
3323(a), 3685)
Subpart P--Post-9/11 GI Bill
0
3. The authority citation for part 21, subpart P, continues to read as
follows:
Authority: 38 U.S.C. 501(a), 512, chs. 33, 36 and as noted in
specific sections.
0
4. Amend Sec. 21.9695 by:
0
a. Revising paragraphs (b)(1) and (b)(2);
0
b. Removing paragraph (b)(3); and
0
c. Redesignating paragraph (b)(4) as paragraph (b)(3).
The revisions read as follows:
Sec. 21.9695 Overpayments.
* * * * *
(b) Liability for overpayments.
(1) An overpayment of educational assistance paid to an eligible
individual constitutes a liability of that individual unless--
(i) The overpayment was waived as provided in Sec. Sec. 1.957 and
1.962 of this chapter,
(ii) The overpayment results from an administrative error or an
error in judgment (see Sec. 21.9635(r)), or
(iii) VA determines that the overpayment is the result of willful
or negligent--
(A) False certification by the educational institution; or
(B) Failure to certify excessive absences from a course,
discontinuance of a course, or interruption of a course by the eligible
individual.
(iv) In determining whether an overpayment resulting from the
actions listed in paragraphs (b)(1)(iii)(A) and (B) of this section
should be recovered from an educational institution, VA will apply the
provisions of Sec. 21.4009 (except paragraph (a)(1)) to overpayments
of educational assistance under 38 U.S.C. chapter 33.
(2) An overpayment of educational assistance paid to the
educational institution on behalf of an eligible individual pursuant to
the following authorities constitutes a liability of the educational
institution and will be collected pursuant to the procedures in Sec.
1.911a of this title:
(i) 38 U.S.C. 3313(h);
(ii) 38 U.S.C. 3317;
(iii) 38 U.S.C. 3680(d); or
(iv) 38 U.S.C. 3320(d).
(Authority: 38 U.S.C. 3034(a), 3323(a), 3685)
* * * * *
[FR Doc. 2025-14487 Filed 7-30-25; 8:45 am]
BILLING CODE 8320-01-P
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</html>Indexed from Federal Register on July 31, 2025.
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