Changes to the Cash Management Regulations
Diminishing Students’ Choice Over How to Obtain Their Textbooks and How Much to Spend
The cost of college textbooks is an often-overlooked barrier in higher education. Students frequently use federal student aid to cover these costs, a scenario that has become increasingly complex and opaque as federal policy has changed the way institutions can charge students for textbooks. Although textbooks are included in an institution’s “cost of attendance,” as defined by statute, they are considered a separate cost from tuition. In 2016 the U.S. Department of Education (“Department”) amended the Cash Management regulation—which directs schools on disbursement and maintenance of federal student aid— to permit schools to automatically charge students for books as part of tuition and fees, without any student authorization, and even when the materials can be obtained from a source other than the institution.
The amended regulation explicitly permits schools to charge students in this manner, so long as 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. Yet neither the Higher Education Act (“HEA”) nor the Cash Management regulation define “below competitive market rates.” Nor do they require institutions to disclose to students the methodology behind advertised discounts, or even where to find less expensive (or free) materials elsewhere. This makes it difficult for students to assess whether their school is in fact offering them the most affordable deal. Equally problematic, the Cash Management regulation doesn’t prescribe any parameters to institutions’ opt-out policies. As a result, the choice to opt out is often illusory where institutions and publishers bundle essential online homework with digital textbooks and restrict students from opting out for less than all of their courses.
While the introduction of digital textbooks has driven down textbook costs in recent years, the 2016 regulatory changes have effectively eliminated competing textbook markets for many college students, particularly where institutions engage in exclusive contracts with publishers and third-party retailers. Such partnerships are widespread, with institutions across all sectors adopting automated textbook billing, referred to as “inclusive access” programs. These partnerships prevent students from saving significant amounts by using free, openly licensed books, library collections, purchasing used materials, or in some cases, borrowing digital textbooks.
In this report, we outline regulatory and legislative changes that could bring competition and accountability to the higher education textbook market.
