The U.S. Department of Education’s latest package of new rules provides a slew of new tools for policing misconduct by colleges and significant new safeguards that strengthen protections for students and taxpayers.
Fact 1: The rule package provides new tools for monitoring and policing schools that pose risks to students.
The rule package includes a number of new tools to help the Department of Education effectively monitor, limit, and expel schools from the federal aid program when a school poses a risk to students, either because of the schools’ misconduct or due to the school’s financial instability and risk of precipitous closure.
For schools that engage in misconduct—such as deceptive recruiting practices—the rule package amends the Certification Procedures rule, the rule governing schools’ eligibility for financial aid. The amendments strengthen the department’s oversight tools by adding new grounds for placing problem schools into a probationary status called “provisional certification.” Expanding the criteria for provisional status enables the department to impose conditions on problem schools to protect students and taxpayers from investing time and money in risky programs. For example, the department can impose conditions such as limiting provisionally certified schools’ ability to enroll new students or add new programs. The rule also sets out a non-exhaustive list of conditions that the department may impose on provisionally certified institutions. These conditions are essential tools that the department can use to protect students and safeguard the integrity of federal financial aid funds.
The new rule also includes an important new provision that requires that, when a for-profit or private nonprofit school enters into a contract with the Department of Education, called a Program Participation Agreement (PPA), a representative of any separate entity that has ownership and control over the school must sign the PPA. While the department has statutory authority, and in some cases, a statutory obligation, to pursue redress for liabilities from institutions and controlling individuals even without a representative’s signature on a PPA, this signature requirement for entities with ownership and control over an institution will serve as a reminder to institutions, their parent companies, and their principals that the department has the authority to recover unpaid liabilities from controlling entities and individuals. This reminder may serve as a critical deterrent to misconduct.
The new rule package also includes a number of amendments that strengthen the Financial Responsibility rule, the rule that establishes financial stability standards for schools that receive federal aid. The new amendments add new mandatory and discretionary triggers for the imposition of financial protection requirements. These protections are sorely needed. From 2013 to 2022, the department incurred $1.6 billion in liabilities as a result of school closures, and recovered only $344 million of these losses during that period. The addition of these new triggers for requiring financial protection measures will help prevent future losses.
Fact 2: The rule package includes new requirements that protect students from enrolling in career training programs that do not lead to professional licensure.
The new rule package also amends the Certification Procedures rule to add new protections that will help prevent students and taxpayers from investing in programs that provide little benefit to students. The amendments include a provision that requires institutions to determine that, for each career training program that prepares students for professions that require licensure, the program satisfies the prerequisites for professional licensure for all students who enroll. This provision will help prevent students and taxpayers from investing in career training programs that purport to prepare students for professions that require licensure, but do not satisfy the prerequisites for licensure in the student’s state.
Fact 3: The rule package includes new protections for online students.
The rule package includes some important new protections for online students, including a provision that partially addresses one of the consumer protection gaps in the State Authorization Reciprocity Agreement (SARA), the agreement that member states joined to govern online college programs. The amendments to the Certification Procedures rule require institutions that operate in multiple states pursuant to a reciprocity agreement to determine that each program complies with state consumer protection laws related to closure in each state where the program is offered.
This change partially addresses a major flaw in SARA, which prohibits states with strong consumer protection laws from enforcing education-specific or sector-specific state laws to protect students in their state who are enrolled online at out-of-state SARA member schools. In lieu of these strong state laws, SARA provides only a set of minimum standards that schools must meet in order to participate, leaving some online students inadequately protected. The rule partially addresses this issue by requiring institutions authorized pursuant to a reciprocity agreement to comply with state laws related to school closures.
The amendments in this rule package requires schools that offer online programs in multiple states to comply with state laws that protect students from the harms of precipitous closures, such as state law that create tuition reimbursement funds, surety requirements, record retention requirements, or teach-out agreements for schools that close. This is a significant new protection for online students.
Fact 4: The rule package includes new requirements for schools to provide basic information to prospective students on financial aid and college costs.
The new rule amends the Administrative Capability rule to require schools to disclose key information in financial aid communications provided to students, including the cost of attendance and the sources and types of financial aid available to them. The revisions also add a provision that excludes schools from participating in federal financial aid if the school engages in substantial misrepresentations or deceptive or aggressive recruiting practices. This provision strengthens the Department of Education’s ability to protect students from predatory conduct.
Fact 5: The rule package includes new prohibitions on withholding students’ transcripts for periods during which all school charges have been paid.
Many colleges withhold transcripts from students as a debt collection tool, and this practice can prevent students from continuing their education or interfere with their efforts to secure employment. The new rule package will for the first time prohibit colleges from withholding transcripts for periods during which the students’ credits were funded through federal financial aid and all the institutional charges have been paid. That means that if a student owes money to the school to cover a charge in their last semester, for example, the school would be required to provide transcripts for the prior semesters only, not the semester where there are outstanding charges. This is a significant improvement over the status quo in most states, where a school can withhold a transcript for the students’ entire college career over a small outstanding balance.