New Regulations Affect Transcript Withholding, State Licensure, and More
The Department of Education released a second set of final accountability regulations that cover a broad range of functions on college campuses. Among other things, the new rules contain provisions that will effectively ban transcript withholding, mandate that institutions provide adequate career services and financial aid counseling and disclosures, require compliance with state laws governing licensure requirements and institutional closures, and add a string of new requirements for institutions to pass financial responsibility standards and avoid provisional certification.
The regulations will go into effect on July 1, 2024. NAICU has prepared an analysis of the regulations, and the Department released a fact sheet summarizing the major regulatory provisions.
These are the second set of regulations to emerge from the negotiated rulemaking on Institutional and Programmatic Eligibility that concluded in March 2022. The regulations are intended to address the Department’s concerns over institutional accountability and consumer protection, particularly with respect to institutions that close without warning.
Key provisions of the regulations include new requirements pertaining to the following issues:
Transcript Withholding. In a surprise, last-minute move, the Department added a new requirement related to transcript withholding. Under the final rules, institutions must, upon request, provide an official transcript that shows all the credits for payment periods in which the student received Title IV funds and for which all institutional charges were paid (or included in an agreement to pay) at the time the request was made. As specified in the proposed regulations, institutions are also banned from withholding transcripts if they are at risk of closure or if the balance owed resulted from an error in administering a Title IV program or any fraud or misrepresentation by the institution or its personnel.
Career Services. Institutions will now be required to provide adequate career services to students. To determine whether an institution is in compliance, the Department will review the number and distribution of staff, the services the institution has promised to its students, and the presence of partnerships with recruiters and employers who regularly hire graduates.
Financial Aid Counseling and Disclosures. Institutions must ensure that students and families accept the most beneficial types of aid available to them and provide information on cost of attendance, net price, and the type of aid offered, among other things.
State Licensure Laws. The regulations impose new provisions requiring institutions to comply with state laws governing professional licensure or certification. For all programs eligible for Title IV, institutions are required to meet state licensing requirements in: 1) the states where the institution is located; 2) the states where each student is located upon initial enrollment; or 3) the states where students attest that they intend to seek employment. Previously, institutions were required only to disclose whether or not their programs met such licensure rules.
State Laws Related to Closure. Institutions must ensure that distance education programs comply with all state laws related to closure. Laws related to closure are defined as those related to record retention, teach-out plans or agreements, and tuition recovery funds or surety bonds. This provision is an improvement from the proposed rules that would have required institutions to meet all state consumer protection laws where distance education is offered, regardless of their participation in NC-SARA.
Review of Completion and Licensure Pass Rates. During the recertification process, the Secretary may consider program or institutional withdrawal rates of students within 100 percent or 150 percent of the published program length and licensure pass rates.
Discontinuation of Programs. If an institution discontinues academic programs, or closes locations, that affect more than 25 percent of its enrolled Title IV students, the Department has the discretion to seek financial protection.
Expenditures on Academic Services v. Marketing and Recruitment. During the certification or recertification process, the Secretary may consider educational and pre-enrollment expenditures. The expenditures requirement compares the amounts an institution spent on instruction, instructional activities, academic support, and support services to the amounts spent on recruiting, advertising, and other pre-enrollment expenditures. In a change from the NPRM, the Department has removed the performance measures related to debt-to-earnings rates and earning premium measures for programs, as well as the requirement for institutions to include an audit disclosure on total expenditures related to marketing and recruitment.
Financial Responsibility Standards. Institutions must comply with a longer list of requirements to demonstrate compliance with the Department’s financial responsibility standards. For institutions that fail, a form of financial protection will be required by the Department, which is typically a letter of credit of 10 percent of the prior fiscal year’s total Title IV funds. In general, the new triggers allow the Department much greater latitude to identify high-risk events and more easily obtain financial protection to offset the cost of loan discharges when an institution closes or engages in behavior that leads to approved borrower defense to repayment claims.
Contact: Jody Feder
Contact: Justin Monk