Department of Education Tackles Textbook Billing in Negotiated Rulemaking
As part of the Biden Administration’s push for colleges to adopt more consumer-friendly policies, the Department of Education is revisiting federal regulations regarding textbook charges. The Department’s 2024 Negotiated Rulemaking agenda proposes to eliminate a provision that allows institutions to include the cost of books and supplies in students’ tuition and fees, a practice that has led to unwanted charges through the textbook sales model known as “Inclusive Access.”
Historically, financial aid regulations have prevented colleges from automatically charging students for books and supplies, recognizing the importance of letting students shop around for the lowest prices. In 2016, a new rule took effect letting institutions bill textbooks to a student’s financial aid without authorization, provided that the college: 1) has a third-party agreement to offer materials at “below competitive market rates,” 2) has an opt-out policy, and 3) provides access by the seventh day of the term. The textbook industry used this rule to design a new business model called “Inclusive Access,” which charges students for digital content by automatically adding it to their tuition and fee bill.
Since starting to gain popularity, Inclusive Access billing programs have raised concerns among various higher education stakeholders. While proponents claim that automatically charging students can save them money, affordability advocates point out that the advertised savings are often based on the sticker price of print books, which students often avoid paying, and difficult opt-out processes can block students from cheaper used books or online rentals. The Department of Education is “concerned that lack of disclosure and transparency limits students' ability to find less expensive materials or assess if their school is offering the most affordable arrangement.“
The newly proposed change aims to make federal regulations more student-friendly by requiring colleges to obtain a student’s authorization before billing for books and supplies as part of their tuition and fees. In essence, it would mean that Inclusive Access programs need to use an “opt-in” model, where students can choose to accept the charge, rather than an “opt-out” model, where the charge is imposed automatically by default. The idea is to increase student agency over financial aid and make it easier to price shop—and, if Inclusive Access programs truly offer the deals they advertise, then plenty of students will opt-in.
While the proposed change addresses the most significant concerns with automatic billing, it stops short of eliminating the practice entirely. Institutions would still be allowed to automatically charge for books and supplies under two conditions: 1) if the material is unavailable outside the institution, and 2) if there is a compelling health or safety reason. Six negotiators who support the proposal have called for the Department to go further by eliminating these two exceptions, in order to avoid potential abuse by the textbook industry. “Students should have the right to choose how their Title IV aid is used and where they will purchase their course materials, period,” they say.
The federal regulation in question can be found at 34 CFR 668.164(c)(2). The proposed change is at the start of a long regulatory journey that is expected to play out over multiple months. More information about the Negotiated Rulemaking process can be found on the Department of Education’s website.
Update: On March 7, 2024, the Department of Education concluded negotiated rulemaking without reaching consensus on the Cash Management issue. This leaves the Department free to move forward with its proposed language to the next stage of the rulemaking process. The latest draft of the regulatory text requires student authorization for all books and supplies charges (removing the two exceptions mentioned above) and further adds provisions to ensure transparency and that materials are offered at below market rates (see page 3). A March 15, 2024 fact sheet issued by the White House lists the potential rule as one of four new actions the Biden-Harris Administration is taking to curb unwanted and surprise fees in higher education. “Competitive markets provide consumers choice and value, but automatic charges for textbooks and course materials leave students with little ability to meaningfully shop around for better prices or to utilize free and open-source textbooks,” the fact sheet says.
From Department of Education Issue Paper 1:
Eliminate the provision allowing institutions to include the cost of books and supplies as part of tuition and fees (§ 668.164(c) and (m)). Current regulations permit schools to automatically charge students for books and supplies as part of tuition and fees, without student authorization, even when the materials can be obtained from a source other than the institution. The regulations permit these charges if the school has a contract with a third-party publisher or retailer, offers the books “below competitive market rates,” and gives students a way to opt out, so long as the student can obtain the books and supplies by the seventh day of the payment period. The Department is concerned that lack of disclosure and transparency limits students' ability to find less expensive materials or assess if their school is offering the most affordable arrangement. Under the proposal, we would maintain the allowance for including books and supplies in tuition and fees when institutions demonstrate there is a compelling health or safety reason, or if the institution is the only option for students to access the books or supplies.
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