# 90 FR 35993: Waiver or Recovery of Overpayments

> Federal · Regulations · In force

URL: https://www.frixlaw.com/law-library/statutes/FR_PRORULE_2025-14487

## Section

- **Citation:** 90 FR 35993
- **Heading:** Waiver or Recovery of Overpayments
- **Jurisdiction:** Federal
- **Kind:** Regulations
- **Status:** In force
- **Text as of:** August 14, 2026
- **Source:** Compiled text
- **Location:** Federal Register / Vol. 90 / 90 FR 35993

## Text

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 § 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
With the enactment of section 1019 of Public Law 116-315 and new 38 U.S.C
iability 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
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 paid directly to the school 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 paid directly to the school on behalf of an eligible individual
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 § 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 § 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 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
ary 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 www.regulations.gov.
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
be found as a supporting document at www.regulations.gov.
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
esponsibilities 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
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
nt 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
egate, 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

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.
2. Amend § 21.4009 by:
a
mend 38 CFR part 21 as set forth below:
PART 21—VETERAN READINESS AND EMPLOYMENT AND EDUCATION
Subpart D—Administration of Educational Assistance Programs

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.
2. Amend § 21.4009 by:
a. Revising paragraphs (a)(1) and ((2); and
b. Adding an authority citation at the end of paragraph (a)(6).
The revisions and addition read as follows:
§ 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

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
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.
4. Amend § 21.9695 by:
a. Revising paragraphs (b)(1) and (b)(2);
b. Removing paragraph (b)(3); and
c. Redesignating paragraph (b)(4) as paragraph (b)(3).
The revisions read as follows:
§ 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—

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Source: Frix Law Library, https://www.frixlaw.com/law-library/statutes/FR_PRORULE_2025-14487. Check the current official text before relying on it. Not legal advice.