Despite all the attention the congressional debate over the debt ceiling received this summer, a section of the Budget Control Act of 2011 — the controversial August 1st law that raised the ceiling at the last moment — also contains a little-known but interesting administrative procedure quirk. It exempts certain Department of Education policies from a procedure known as negotiated rulemaking. Title V of the legislation purports to save the government money by removing the interest rate subsidy for all federal government originated or guaranteed graduate-level student loans and eliminating the discretion of the Secretary of Education to establish incentives for the timely repayment of all federal student loans. The Congressional Budget Office estimates these changes will save $21.6 million over 10 years. Interestingly, the final section of Title V expressly exempts implementation of these student loan changes from negotiated rulemaking. The exemption is from a mandate, imposed on the Department of Education under 1998 amendments to the Higher Education Act, that ordinarily requires rules about federal student loans to be established using negotiated rulemaking. When an agency follows the negotiated rulemaking process — or what is also known as "reg neg" — its proposed rule is developed through negotiation with affected parties, after which the agency proceeds with the ordinary notice-and-comment process. Reg neg procedures are highly touted as a more efficient and less adversarial way to craft administrative rules because representatives of interested groups are invited to negotiate with each other before the agency announces its proposal. Research by Professor Cary Coglianese at the Penn Program on Regulation has shown that reg neg procedures consume considerable time and resources and do not reduce litigation over administrative rulemaking. "In the debt ceiling legislation, Congress appears to have implicitly acknowledged negotiated rulemaking's disadvantages," he said.
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