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DRAFT for discussion at 2nd session 

3/25/2009 

Issue 2 

Proposed Regulatory Language 

 Team II – School-based Loan Issues 

Origin: HEOA section 493(e) 

 

Issue: PPA: Code of Conduct 

Statutory cites: HEA section 487(a)(25) and (e)

Regulatory cites: New §668.14(b)(27) 

DCL GEN-08-12 cite: Page 69 

Summary of issue: The HEOA adds to the Program 

Participation Agreement (PPA) a requirement that an 

institution participating in a Title IV loan program must 

develop, publish, administer, and enforce a code of 

conduct. 

The code of conduct applies to the officers, employees, and 

agents of the institution and must include the following: 

• a ban on revenue-sharing arrangements with any 

lender. The HEOA defines “revenue-sharing arrangement” as 

any arrangement between an institution and a lender under 

which the lender makes Title IV loans to students attending 

the institution (or to the families of those students), the 

institution recommends the lender or the loan products of 

the lender and, in exchange, the lender pays a fee or 

provides other material benefits, including revenue or 
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DRAFT for discussion at 2nd session 

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profit-sharing, to the institution or to its officers, 

employees, or agents; 

• a ban on employees of the financial aid office 

receiving gifts from a lender, guaranty agency or loan 

servicer. No officer or employee of an institution’s 

financial aid office (or an employee or agent who otherwise 

has responsibilities with respect to educational loans) may 

solicit or accept any gift from a lender, guarantor, or 

servicer of education loans. A “gift” is defined as any 

gratuity, favor, discount, entertainment, hospitality, 

loan, or other item having monetary value of more than a de 

minimus amount. 

However, a gift does not include (1) standard material, 

activities or programs on issues relating to a loan, 

default aversion, or financial literacy, such as a 

brochure, workshop or training; (2) food, refreshments, 

training, or informational material provided as part of a 

training session designed to improve the service of a 

lender, guarantor, or servicer if the training contributes 

to the professional development of the institution’s 

officer, employee or agent; (3) favorable terms and 

benefits on an education loan provided to a student 

employed by the institution if those terms and benefits are 

comparable to those provided to all students at the 

institution; (4) entrance and exit counseling services 

provided to borrowers as long as the institution’s staff 

are in control of the counseling and the counseling does 

not promote the services of a specific lender; (5) 

philanthropic contributions from a lender, guarantor, or 
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DRAFT for discussion at 2nd session 

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servicer that are unrelated to education loans or any 

contribution that is not made in exchange for any advantage 

related to education loans, and; (6) State education 

grants, scholarships, or financial aid funds administered 

by or on behalf of a State; 

• a ban on contracting arrangements. No officer or 

employee of an institution who is employed in the financial 

aid office of the institution (or an employee or agent who 

otherwise has responsibilities with respect to education 

loans) may accept from a lender, or an affiliate of any 

lender, any fee, payment, or other financial benefit as 

compensation for any type of consulting arrangement or 

contract to provide services to or on behalf of a lender 

relating to education loans; 

• a prohibition against steering borrowers to 

particular lenders or delaying loan certifications. For any 

first-time borrower, an institution may not assign, through 

the award packaging or other methods, the borrower’s loan 

to a particular lender. In addition, the institution may 

not refuse to certify, or delay the certification, of any 

loan based on the borrower’s selection of a particular 

lender or guaranty agency; 

• a prohibition on offers of funds for private loans. 

An institution may not request or accept from any lender 

any offer of funds for private loans, including funds for 

an opportunity pool loan, to students in exchange for 

providing concessions or promises to the lender for a 

specific number of Title IV loans made, insured, or 
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DRAFT for discussion at 2nd session 

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guaranteed, a specified loan volume, or a preferred lender 

arrangement. An “opportunity pool loan” is defined as a 

private education loan made by a lender to a student (or 

the student’s family) that involves a payment by the 

institution to the lender for extending credit to the 

student; 

• a ban on staffing assistance. An institution may not 

request or accept from any lender any assistance with call 

center staffing or financial aid office staffing. However, 

a lender may provide professional development training, 

educational counseling materials (as long as the materials 

identify the lender that assisted in preparing the 

materials), or staffing services on a short-term, 

nonrecurring basis during emergencies or disasters; and 

• a ban on advisory board compensation. An employee of an 

institution’s financial aid office (or employee who 

otherwise has responsibilities with respect to education 

loans or financial aid) who serves on an advisory board, 

commission, or group established by a lender or guarantor 

(or a group of lenders or guarantors) is prohibited from 

receiving anything of value from the lender, guarantor, or 

group, except for reimbursement for reasonable expenses 

incurred by the employee for serving on the board. 

Regulatory language: 

§ 668.14 Program participation agreement. 

(a)(1) An institution may participate in any Title IV, 

HEA program, other than the LEAP and NEISP GAP programs, 
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DRAFT for discussion at 2nd session 

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only if the institution enters into a written program 

participation agreement with the Secretary, on a form 

approved by the Secretary. A program participation 

agreement conditions the initial and continued 

participation of an eligible institution in any Title IV, 

HEA program upon compliance with the provisions of this 

part, the individual program regulations, and any 

additional conditions specified in the program 

participation agreement that the Secretary requires the 

institution to meet. 

(2) An institution's program participation agreement 

applies to each branch campus and other location of the 

institution that meets the applicable requirements of this 

part unless otherwise specified by the Secretary. 

(b) By entering into a program participation 

agreement, an institution agrees that—

* * * * * 

 (27) In the case of an institution participating 

in a Title IV, HEA loan program, the institution-- 

(i) Will develop, publish, administer, and enforce a 

code of conduct with respect to loans made, insured or 

guaranteed under the Title IV, HEA loan program in 

accordance with 34 CFR 601.22; and 

 (ii) Must inform its officers, employees, and agents 

with responsibilities with respect to loans made, insured 

or guaranteed under the Title IV, HEA loan program annually 

of the provisions of the code required under paragraph 

(b)(27) of this section.