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(GEN-99-38) (GEN-99-38) Secretary Riley has asked me to bring to your attention certain matters concerning a recently enacted amendment to the Y2K Act (P.L. 106-37) and to remind you of the importance of testing your student aid data exchanges with the Department's

DCLPublicationDate: 12/1/99
DCLID: GEN-99-38
AwardYear:
Summary: Secretary Riley has asked me to bring to your attention certain matters concerning a recently enacted amendment to the Y2K Act (P.L. 106-37) and to remind you of the importance of testing your student aid data exchanges with the Department's systems.


December 6, 1999

GEN-99-38


Dear Partner:

Secretary Riley has asked me to bring to your attention certain matters concerning a recently enacted amendment to the Y2K Act (P.L. 106-37) and to remind you of the importance of testing your student aid data exchanges with the Department's systems. Section 311 of the Department of Education's fiscal year 2000 appropriations act (P.L. 106-113) amends the Y2K Act to preclude the award of punitive damages in a Y2K action against an institution of higher education (IHE) relating to a computer-based student financial aid system under certain conditions. In particular, you should know that the prohibition against the award of punitive damages applies only to IHEs that have either “passed Y2K data exchange testing with the Department of Education,” or were “in the process of performing data exchange testing at the time the Department terminates such testing.”

The Department has offered IHEs the opportunity to conduct student aid data exchange testing since April 1999. The four systems involved and the closing dates for testing are as follows:

National Student Loan Data System (December 17);
Central Processing System (December 17);
Direct Loan Origination System (December 21); and
Pell Grant System (December 17).

As of November 26, 1,160 IHEs had successfully tested one or more of their student aid data exchanges. Many IHEs have tested one but not other systems. In order to help ensure that your institution qualifies for the prohibition against punitive damages, we strongly recommend that it test all of the data exchanges it uses in its current student aid operations. Information about the Department's student aid data exchange testing procedures is available on our web site at
http://www.ed.gov/about/offices/list/ocio/index.html?src=mr, and any questions on this subject may be addressed to the Office of Student Financial Assistance Customer Service Hotline, 1-800-433-7327. You may also e-mail ope_y2k@ed.gov with questions about Y2K issues regarding OSFA programs and systems.

If your institution has not tested these systems with the Department as appropriate, we recommend that you do so immediately. If your institution has tested with the Department for a particular data exchange but not passed the test, we strongly recommend that you try again.

The Office of Student Financial Assistance has expanded its electronic mailbox facilities to accommodate larger demand for data exchange testing during the remaining weeks and will provide additional customer support staff as needed to facilitate this important testing procedure.

Attached is a copy of section 311, along with a set of questions and answers related to the Department's student aid data exchange testing and this new statutory provision. Please note that the answers provided represent the Department's interpretation of section 311. However, because the Y2K Act does not govern a program administered by this Department, we have no authority to issue regulations or otherwise provide definitive guidance.

NOTE: At the time this letter was prepared, it was unclear whether the appropriation bill approved by the President contained a technical drafting error in section 5(d)(2)(A) of the Y2K Act, which was added by section 311 of the appropriation act. Specifically, it was unclear whether the prohibition against punitive damages in section 5(d)(2)(A) applied to IHEs that had, or had not, passed data exchange testing with the Department of Education. Plainly, it would be illogical to permit punitive damages against IHEs that had passed data exchange testing with the Department. In addition, conversations with congressional staff confirm that this was not the intent of section 5(d)(2)(A). Accordingly, we are providing this guidance based on our understanding of the legislative intent. If it becomes clear that the appropriation act, P.L. 106-113, does, in fact, include a drafting error, we intend to submit legislation to Congress that would resolve the problem, retroactive to November 29, 1999, just as soon as Congress returns next year.

Thank you very much for your attention to this important matter.


Yours sincerely,


Greg Woods
Chief Operating Officer,
Office of Student Financial Assistance.



LIMITATION ON PUNITIVE DAMAGES AWARDED AGAINST
INSTITUTIONS OF HIGHER EDUCATION

SEC. 311. Section 5 of the Y2K Act (15 U.S.C. 6604) is amended by adding at the end the following:

`(d) INSTITUTIONS OF HIGHER EDUCATION-

`(1) IN GENERAL- Subject to paragraph (2), punitive damages in a Y2K action may not be awarded against an institution of higher education as defined in section 101(a) of the Higher Education Act of 1965 (20 U.S.C. 1001(a)).

`(2) EXCEPTION- Paragraph (1) shall not apply to an institution of higher education if the Y2K failure in the Y2K action occurred in a computer-based student financial aid system of that institution of higher education, and the institution--

`(A) has [not ] passed Y2K data exchange testing with the Department of Education; or

`(B) is not or was not in the process of performing data exchange testing with the Department of Education at the time the Department terminates such testing.'.


NOTE: The “not” included in brackets above may have been omitted in the final legislation. If so, the Department of Education intends to submit to Congress corrective legislation, retroactive to November 29, 1999 (the date the President signed the legislation), as soon as Congress returns next year.



Y2K Liability Provision

Questions and Answers


Question: Does this legislative provision apply to both public (state-supported) and private institutions of higher education?

Answer: The Department believes that the answer is yes. The provision does not distinguish between public and private institutions.

Question: To qualify for liability protection, must institutions conduct data exchange testing with all four Department student aid systems? Do they qualify by testing only one of the four?

Answer: While section 311 is not clear on this point, the Department strongly recommends that institutions conduct data exchange testing with each of the Department systems with which they currently exchange data in their regular student aid operations. Courts may consider the relationship between the tests that were conducted and the damages at issue in a lawsuit before deciding whether the Y2K liability protection would apply.

Question: Exactly when will the Department “terminate such testing”?

Answer: The Department intends to close the testing windows for NSLDS, CPS, and Pell Grant system testing at midnight (Eastern Standard Time) on December 17. Similarly, the Department intends to close the window for Direct Loans Origination system testing at midnight (EST) on December 21. Please refer to the Department's Web page for testing requirements. Schools testing with NSLDS should contact NSLDS by December 10 to facilitate the electronic delivery of test data to the school. Similarly, schools testing with Pell Grant RFMS and Direct Loan Origination should begin the testing procedure no later than December 15 and December 20, respectively. The Department will not process test cases unless they are submitted in accordance with the testing instructions and are submitted before the testing windows close.

Question
: How will an institution know whether it has passed the data exchange tests?

Answer: There are three ways an institution will know it has passed the tests.The first notice comes when an institution receives an electronic acknowledgement or rejection from the Department.This happens within 24 hours of each data exchange submission. Second, the Office of Student Financial Assistance sends the President of an institution a letter confirming positive test results for each system exchange tested. Finally, the Department places institutions that have passed particular tests on its student aid data exchange Honor Roll for that particular test. Please note that the second and third steps mentioned above may take a week or more from the test date to be completed.

Question: What is the Department's interpretation of the phrase “in the process of performing data exchange testing?”

Answer: While section 311 is not clear on this point, the Department believes that an institution is “in the process” with respect to a particular system if it has submitted test cases to the Department for a data exchange, in the defined schedule, by the appropriate closing date. The Department encourages institutions to re-submit test cases if the institution has previously attempted, but failed to pass that particular test. Such a resubmission would demonstrate the institution is “in the process”.

Question: If my institution employs a third-party servicing agent in the handling of student aid data exchanges with the Department and that servicer has already tested with the Department on behalf of another institution, does my institution need to test separately?

Answer: The Department believes that the answer is yes. If your institution uses a third-party servicer, you should ask it to specifically test the appropriate data exchanges on your behalf. Just as in other contexts, institutions are responsible for ensuring that their servicing agents perform on their behalf.

However, there is one exception. If an institution normally uses the National Student Loan Clearinghouse for submission of Student Status Confirmation Reports (SSCRs) to the Department, the institution should not have to perform the SSCR aspect of the NSLDS data exchange testing in order to qualify for this protection from Y2K liability. This is because, as part of the Department of Education's End-to-End testing process, the National Student Loan Clearinghouse SSCR process was tested satisfactorily with the Department. This test was performed to validate the data exchange between the Department and the Clearinghouse. This exchange test did not validate the data exchange between the institution and the Clearinghouse.

Question: If I use the EDExpress software or a commercial vendor's software, should I test?

Answer: The Department encourages all institutions to test, including those using EDExpress software or any commercial vendor's software. While the Department certifies EDExpress software compliant, see the IFAP for certification letters, this alone does not ensure Y2K preparedness of your computer hardware and operating systems used with the EDExpress applications.

Last Modified: 12/05/1999