Committee Meetings - 02/17/22 1 

DEPARTMENT OF EDUCATION

OFFICE OF POSTSECONDARY EDUCATION

INSTITUTIONAL AND PROGRAMMATIC

ELIGIBILITY COMMITTEE

SESSION 2, DAY 4, MORNING

February 17, 2022

On the 17th day of February, 2022, the following 

meeting was held virtually, from 10:00 a.m. to 12:00 p.m., 

before Jamie Young, Shorthand Reporter in the state of 

New Jersey. 
Committee Meetings - 02/17/22 2 

1 PROCEEDINGS

2 MR. ROBERTS: Good morning, everyone, welcome to day 

3 four of week two of this negotiated rulemaking session. My 

4 name is Brady Roberts. I'll be facilitating in the morning. We 

5 intend to have a packed agenda today to spend about an hour or 

6 more on issue paper number 4, moving right into certification. 

7 We know there was a bit of a numbering error on your schedule, 

8 but we are going to move into certification in the morning 

9 session around 11 o'clock. Just to remind the committee, 

10 before we jump into roll call, we may have an opportunity to 

11 return to topics that you want to speak more on Friday,

12 tomorrow, if we have more time. But we do have we do want to 

13 get a chance to speak to all the issue papers for your 

14 consideration this week. So with that, let's jump right into 

15 roll call. Representing accrediting agencies, we are joined by 

16 Jamie Studley.

17 MS. STUDLEY: Good morning.

18 MR. ROBERTS: Good morning, Jamie. We are also joined 

19 by her alternate, Dr. Laura Rasar King.

20 DR. KING: Good morning.

21 MR. ROBERTS: Morning. Representing civil rights 

22 organizations and consumer advocacy organizations, we are 

23 joined by Carolyn Fast.

24 MS. FAST: Good morning.

25 MR. ROBERTS: And her alternate, Mr. Jaylon Herbin.
Committee Meetings - 02/17/22 3 

1 MR. HERBIN: Good Morning.

2 MR. ROBERTS: Representing civil rights 

3 organizations, we are joined by Amanda Martinez.

4 MS. AMANDA MARTINEZ: Good morning.

5 MR. ROBERTS: Morning, Amanda. Representing financial 

6 aid administrators at postsecondary institutions, we are 

7 joined by Samantha Veeder.

8 MS. VEEDER: Good morning.

9 MR. ROBERTS: Morning, Sam. We are also joined by her 

10 alternate, Mr. David Peterson.

11 MR. PETERSON: Good morning.

12 MR. ROBERTS: Representing four-year public 

13 institutions, we are joined by Marvin Smith.

14 MR. SMITH: Hey, good morning.

15 MR. ROBERTS: And his alternate, Deborah Stanley.

16 MS. STANLEY: Morning.

17 MR. ROBERTS: Good morning. Representing legal aid 

18 organizations, we are joined by Johnson Tyler.

19 MR. TYLER: Hi, good morning.

20 MR. ROBERTS: Good morning, Johnson. And his 

21 alternate, Ms. Jessica Ranucci.

22 MS. RANUCCI: Morning.
Committee Meetings - 02/17/22 4 

1 MR. ROBERTS: Representing minority serving 

2 institutions, we are joined by Dr. Beverly Hogan.

3 DR. HOGAN: Good morning, everyone.

4 MR. ROBERTS: Morning, Beverly. And we were joined by 

5 her alternate, Ms. Ashley Schofield.

6 MS. SCHOFIELD: Morning, everyone.

7 MR. ROBERTS: Morning Ashley. Glad you could join us. 

8 Representing private nonprofit institutions of higher 

9 education, we are joined by Kelli Perry.

10 MS. PERRY: Morning.

11 MR. ROBERTS: And her alternate, Emmanual Guillory.

12 MR. GUILLORY: Good morning.

13 MR. ROBERTS: Representing proprietary institutions 

14 of higher education, we are joined by Bradley Adams.

15 MR. ADAMS: Good morning.

16 MR. ROBERTS: Morning. And we are joined by his 

17 alternate, Mr. Michael Lanouette.

18 DR. LANOUETTE: Good morning.

19 MR. ROBERTS: Representing state attorneys general, 

20 we are joined by Mr. Adam Welle.

21 MR. WELLE: Morning.
Committee Meetings - 02/17/22 5 

1 MR. ROBERTS: And we were joined by his alternate, 

2 Ms. Yael Shavit. Yael might join us later, I'll let everyone 

3 know, oh she's joining right now, but I'll come back to her. 

4 Winning the award for longest constituency name, we are joined 

5 by Debbie Cochrane, representing state higher education 

6 executive officers, state authorizing agencies and/or state 

7 regulators of higher education and/or loan services, morning, 

8 Debbie.

9 MS. COCHRANE: Good morning. I'm honored by the 

10 prize.

11 MR. ROBERTS: There will be, your trophy is in the 

12 mail. And her alternate, Mr. David Socolow.

13 MR. SOCOLOW: Good morning.

14 MR. ROBERTS: Morning. Representing students and 

15 student loan borrowers, we are joined by Mr. Ernest Ezeugo.

16 MR. EZEUGO: Morning, everyone.

17 MR. ROBERTS: Morning, Ernest. And his alternate, Mr. 

18 Carney King.

19 MR. KING: Good morning.

20 MR. ROBERTS: Representing two-year public 

21 institutions of higher education, we are joined by Dr. Anne 

22 Kress.

23 DR. KRESS: Good morning.

24 MR. ROBERTS: And her alternate, Mr. Will Durden.
Committee Meetings - 02/17/22 6 

1 MR. DURDEN: Morning, everyone.

2 MR. ROBERTS: Morning. Representing U.S. military 

3 service members, veterans or groups representing them, we are 

4 joined by Mr. Travis Horr.

5 MR. HORR: Good morning.

6 MR. ROBERTS: And we are joined by his alternate, Mr. 

7 Barmak Nassirian.

8 MR. NASSIRIAN: Good morning.

9 MR. ROBERTS: Good morning. I'm not going to forget 

10 you guys this time we are joined by our two expert advisors 

11 that help out the committee as they navigate these topics. Our 

12 compliance auditor with experience auditing institutions that 

13 participate in Title IV HEA programs, Mr. David McClintock.

14 MR. MCCLINTOCK: Morning.

15 MR. ROBERTS: And our labor economist with experience 

16 and policy research, accountability and analysis of higher 

17 education data, Dr. Adams Looney. Looks like Adam will be 

18 joining us a little bit later. I'll let everyone know when 

19 they've joined. I do want to just briefly say good morning to 

20 Yael Shavit, our alternative for state attorneys general. So 

21 good morning, Yael.

22 MS. SHAVIT: Morning.

23 MR. ROBERTS: Morning. On behalf of the Department of 

24 Education's Office of General Counsel, we are joined by Mr. 

25 Steve Finley.
Committee Meetings - 02/17/22 7 

1 MR. FINLEY: Good morning.

2 MR. ROBERTS: Good morning, Steve. And of course, 

3 we're joined by our federal negotiator, Mr. Gregory Martin.

4 MR. MARTIN: Good morning, everyone.

5 MR. ROBERTS: Good morning. Alright. Greg, do you 

6 want to have Vanessa briefly just tee up, I think we were on 

7 that last section on issue paper number 4, 668.176. Correct me 

8 if I'm wrong.

9 MR. MARTIN: That's correct.

10 MR. ROBERTS: Okay. Did you want to re-go over it or 

11 do you want to jump right into discussion with the committee?

12 MR. MARTIN: We hadn't even discussed that yet, so 

13 we'll start with 176, change of ownership. Okay, great, I see 

14 it up on the screen. So, the first place that we have made any 

15 changes here would be in (b)(3) so I'll direct everyone down 

16 to (b)(3), where the institution must meet financial 

17 responsibility requirements. And in general, the Secretary 

18 considers the institution to be financially responsible only 

19 if it's and then we go into the text there. So changes here in 

20 both A and in both A and B. We have specified that 

21 institutions must meet all 3 of our financial responsibility 

22 tests in order to be considered financially responsible. And 

23 as negotiators pointed out in the last session, we don't 

24 believe that any one test is entirely adequate to cover the 

25 range of financial circumstances that we may see for 

26 institution, which is undergoing a change in ownership. So we 

27 agree and are with the points made by the negotiators and 
Committee Meetings - 02/17/22 8 

1 we're expanding the requirement accordingly. And we've also 

2 clarified that the institution, in the case of either a for3 profit or nonprofit institution, must be evaluated at the 

4 level of ownership determined by the Secretary. So you can see 

5 there that we have for a for-profit institution evaluated at 

6 the level required by the Secretary. So that change is 

7 reflected there. And then you see the, has not had operating 

8 losses in neither in either or both of its latest two fiscal 

9 years that in some result a decrease in tangible net worth in 

10 excess of 10 percent of the institution's tangible net worth. 

11 And then 2, has for its most recent fiscal years, a positive, 

12 tangible net worth. And then you'll see that the “or” was to 

13 changed to “and” to reflect all 3, has a passing composite

14 score that meets the other financial requirements in 34 CFR 

15 668 subpart L for the most recently completed fiscal year. And 

16 you can see here and B, we have made similar changes, but 

17 another thing I want to point out here is that we've updated 

18 this language to reflect a common parlance for nonprofit 

19 institutions, which is consistent with what was requested by 

20 negotiators at our last meeting. One second here. And I'll 

21 just go over that. So for a nonprofit institution evaluated at 

22 the ownership level required by the Secretary, you see, the 

23 change reflected there in 2 has not had an excess of net 

24 worth, of net assets without donor restrictions. Expenditures 

25 over, you see that we struck out the language there and have 

26 net assets without donor restrictions to reflect the language 

27 more appropriate to not for profit institutions. And moving 

28 down to, let's go down to C, yes, down under C, we've added 

29 some language there in C, for a public institution has its 

30 liabilities backed by the full faith and credit of a state or 
Committee Meetings - 02/17/22 9 

1 by an equivalent governmental entity. And we've added some 

2 text here. This language addresses the negotiators’ concerns 

3 that an institution may undergo a change of ownership using 

4 expensive financing models that do raise concerns about the 

5 school's financial responsibility so we can take a look at 

6 that text there. Notwithstanding the foregoing, the Secretary 

7 may determine that the institution is not financially 

8 responsible following the change in ownership. If the amount 

9 of debt assumed to complete the change in ownership requires 

10 payments either periodic or balloon that are inconsistent with 

11 available cash to service those payments based on enrollments 

12 for the prior period, for the period prior to when the payment 

13 is or will be due. So that represents a change we made there 

14 and then I'll stop there before we get to C, terms of the 

15 extension and ask if I turn the floor over to negotiators for 

16 comment or discussion.

17 MR. ROBERTS: Thank you. I just want to note that 

18 Barmak is in on behalf of veterans groups, and with that 

19 Barmak, please take us away.

20 MR. NASSIRIAN: I hate to do this to you, but it's 

21 relevant I wanted to go back to 175 D, zone alternative. There 

22 was some discussion of this during the first session. Can you 

23 clarify to me whether the Department, what is the basis of 

24 continuing renewal of provisional certification beyond the 3 

25 years? This seems to be a blanket statement here that actually 

26 comports with the underlying statute. But it appears that the 

27 Department extends the 3 years beyond that, and I just don't 

28 understand what the basis for that is and whether that's 

29 actually something that that the Department intends to 
Committee Meetings - 02/17/22 10

1 continue. And then I have other questions but I'll get back in 

2 line. Thank you.

3 MR. MARTIN: So you want to go back to, I'm sorry, 

4 Barak.

5 MR. NASSIRIAN: 175 D, zone alternative, where you 

6 have a mention of, again, I don't disagree with the statement 

7 here. The statement here comports with the underlying statute 

8 that basically says 3 years is the maximum length of time that 

9 you could be on provisional. But I understand, and I think the 

10 Department said as much, that you extend provisional 

11 certification on a month-to-month basis after that. And I just 

12 don't understand what the basis for that is and how to 

13 understand that.

14 MR. FINLEY: Greg, I can respond to that if you want?

15 MR. MARTIN: Yeah, go ahead, Steve.

16 MR. FINLEY: So Barmak, I mean, there's two things 

17 here. The Higher Education Act sets a maximum time limit on 

18 provisional certification PPAs for 3 years. We do have a 

19 provision that provides for a month-to-month extensions if 

20 there's a pending renewal application. So you could raise the 

21 question as to whether those month-to-month extensions are 

22 appropriate, but that is that's been existing practice for 

23 over 2 decades now. We do not view a, granting a new PPA as 

24 being subject to any prior 3 year restriction, right? So as we 

25 said, when we did the Financial Responsibility Regulations in 

26 the mid-nineties, if an institution is provisional because of 

27 financial responsibility issues, it can get a new provisional 

28 PPA, that is also then subject to the same 3 year limitation.
Committee Meetings - 02/17/22 11

1 MR. NASSIRIAN: I'm not going to debate it because 

2 I'm not an attorney, but I did submit, for the record, a legal 

3 analysis that strongly suggests that there is really no 

4 statutory authority for the regulation that allows the 

5 Department to do this A, and B, you know, if we keep talking 

6 about accountability, it's almost it's unfortunate that we 

7 don't have the same level of scrutiny directed at the 

8 Department itself and the level of its accountability, given 

9 the catastrophic failures and the massive amounts of taxpayers 

10 money that have been misappropriated under its watch. And 

11 again in the NSLDN memo that I submitted, for the record, you 

12 have examples of the bitter fruit of this practice in terms of 

13 impact on students and on taxpayers. That's for the record, 

14 the Department can do what it wants to do, but it's both ill15 advised from a practical point of view in terms of impact and 

16 it is, I suspect, without statutory authority. But I'll stop 

17 there. I take the point.

18 MR. ROBERTS: Okay, thank you. Brad, you're up.

19 MR. ADAMS: Hi, good morning. I would like to start 

20 off today by responding to Ernest's comments that ended our 

21 session yesterday, and then I'll get back in line for 668.176. 

22 I want to thank him for reminding me and others why we are 

23 here. To summarize, in my words, essentially said we are 

24 spending most of our time arguing over a very specific legal 

25 and financial terms. He wanted to remind us and not forget why 

26 we're here, which is to protect students. Notice he did not 

27 say we should only protect students in one segment of higher 

28 education, but in all segments of higher education. I've 

29 thought about that last night and I wanted to share a little 
Committee Meetings - 02/17/22 12

1 story of what that means to me. At South College, I had the 

2 opportunity to be involved at two teach outs of former faith3 based nonprofit institutions. One was Hiwassee College, a 

4 Methodist based school that closed on May 10, 2019. The other 

5 was Aquinas College in Nashville, Tennessee, a Catholic-based 

6 organization which closed its large bachelor's nursing program 

7 on March 13, 2017. In both instances, little notices were 

8 given to students, and they were left with very few 

9 institutions to transfer into. South College stepped in to 

10 help those students who are interested in continuing in their 

11 programs. Why? Because it was the right thing to do. We 

12 carried the administrative burden to get approvals through the 

13 state of Tennessee through CCNE, our nursing accreditor, SACS, 

14 etcetera. It was a burdensome process to go through a 

15 healthcare cohort based transfer teach out process. The 

16 regional accreditors like SACS require have guardrails in 

17 place that require institutions to teach at least 25 percent 

18 of their program at their institution in order to confer a 

19 degree. Which makes sense but in scenarios when students have 

20 a semester left to graduate, it's very difficult on those 

21 students. So South College allowed those students to retake 

22 those classes in order to meet our regionally accredited 

23 graduation requirements for free. Why do we do it? Because it 

24 was the right thing to do. In both instances, we lost money, 

25 but it was the right thing to do to help those students. As a 

26 member of this committee, we should start focusing on doing 

27 the right thing for all students and keep our politics checked 

28 at the door. Yesterday, I made a basic reference to protecting 

29 all students by adding a simple debt to earnings mathematical 

30 formula to 668.43 a gainful employment paper that would have 
Committee Meetings - 02/17/22 13

1 protected all students and all segments of higher education. 

2 And the silence from the committee was troubling. If we would 

3 have polled the committee at that time, I probably would have 

4 been the only thumbs up. But I guarantee you, if you took 

5 politics off the table and just generally polled people in 

6 your local communities with the simple question should we 

7 protect all students and all segments of higher education? The 

8 answer would be a quick yes, of course. In closing, let's do 

9 the right thing on this committee and keep all students and 

10 all segments of higher education in mind as we negotiate. 

11 Thank you.

12 MR. ROBERTS: Thank you, Brad. Ernest, I see your 

13 hand next, please.

14 MR. EZEUGO: Yeah, thank you. I just want to, I'll be 

15 very quick here and Brad I appreciate your sentiment here, and 

16 I appreciate everyone's commitment to speaking on behalf and 

17 doing their best work for students. I want to kind of clarify 

18 my position respective to your comment,response, specifically 

19 just to say that I don't think there's any question, or at 

20 least there shouldn't be, that members of this committee are 

21 engaged in this work to protect students. I want to clarify 

22 that I don't think the technical nature of the issues at hand 

23 and the issue papers we’re dealing with necessarily lend 

24 themselves to a sentiment of arguing and bickering. Rather, I 

25 think it's actually really important that we [inaudible] on 

26 the issues even though they may be technical and in the weeds. 

27 And to that end, as a final point, I would argue that while of 

28 course, as the primary student representative here and as one 

29 of, I think, two students on this committee generally right 
Committee Meetings - 02/17/22 14

1 now, of course, it is my intention to see all students 

2 protected in their pursuit of higher education. After all, we 

3 know the shift of higher education that kind of requires and 

4 asks students to take on more risk to take on riskier options 

5 all in pursuit of economic stability. I would highlight the 

6 importance of protecting students who attend the programs that 

7 the issues that we are talking about currently discussed and 

8 presently discussed the programs listed in statute should be 

9 affected by issues in these issue papers, specifically around 

10 gainful employment. That is both of professional importance to 

11 me and personal importance to me. My mother, who attended a 

12 small for-profit college while I was in school to finish her 

13 education, to try to provide for my family is a significant 

14 reason that I considered sitting on this panel after getting 

15 the acceptance. And her story actually is a mantra for me and 

16 I would hope that it can be one for you as we discuss these 

17 issues. She has attended a small for-profit that succinctly 

18 put, misled her about the quality of the credential that she 

19 was going to earn, misled her about the partnerships that they 

20 had with hospitals in her region. And the end result actually 

21 was really devastating for her life. She worked low quality 

22 jobs in nursing homes that were known for abusive practices 

23 towards workers because those are the jobs that her 

24 credentials afforded her. Her institution did not help her 

25 secure gainful employment.

26 MR. WAGNER: Ernest, you have 30 seconds remaining.

27 MR. EZEUGO: Thank you. I appreciate that. I'll try 

28 to wrap up quickly here. As I think there is no questioning 

29 the connection between those employers that she had, 
Committee Meetings - 02/17/22 15

1 employment that she had and her deteriorating health 

2 consequences leading through and up to 2018, where she passed 

3 away at an employer that refused to acknowledge life insurance 

4 and refused to acknowledge even PTO for her to receive cancer 

5 treatments. Again, that is why I uplift the important need to 

6 focus on these issues, and I focus on these programs because 

7 people attend them in search of gainful employment.

8 MR. WAGNER: Ernest, your 3 minutes is completed.

9 MR. EZEUGO: Thank you. Appreciate that.

10 MR. ROBERTS: Thank you, Ernest. I appreciate that 

11 perspective. Do we want to, I'm happy to continue on this vein 

12 right here. I see Barmak and Brad, your hands are up. Feel 

13 free to call if you want to speak on this piece more 

14 otherwise, feel free to speak on the section was just 

15 presented 176. But Barmak, I see your hand first.

16 MR. NASSIRIAN: So 176 subsection C, public 

17 institutions. I appreciate the addition of this, this 

18 provision, but I'm wondering what do we do when, if the goal 

19 is to prevent manipulation of this process through financial 

20 engineering, the Department has to factor in revenue sharing 

21 as well as any debt service. You know, the obligations that 

22 you are concerned about may not always be configured as credit 

23 transactions. They may be, the institution may take on no 

24 additional liability in terms of debt service but it may in 

25 fact end up being forced to share revenue. So I would suggest 

26 you consider that as you, as you look at this section. And 

27 once again, I said this yesterday and again, I don't expect a 

28 response, but I really want to syncopate the expectation that 
Committee Meetings - 02/17/22 16

1 public institutions be normal public institutions would be 

2 non-controversial today. To tell the world of public higher 

3 education that a public institution is one that is subject to 

4 sunshine laws that is subject to public governance, that is 

5 just a normal public entity would not elicit any opposition 

6 today. But if we go down the path that we're on, you know, 5 

7 years from now when we may get another chance to revisit this 

8 same provision, you will have a lot of publics with little 

9 hidden predatory side hustles that could pose a very 

10 significant political roadblock to doing what needs to be done 

11 to prevent the corruption that is beginning to seep in within 

12 the public sector itself. So I really encourage the Department 

13 to think about this stuff ahead of time before it hits us. I'm 

14 going to put in the chat, the report that came from the 

15 Harvard Project on predatory debt just to demonstrate the kind 

16 of racketeering that the Department of Education has been 

17 unable to keep up with. This is an opportunity to get ahead of 

18 the next wave of fraud, and I really encourage the Department 

19 to think about this. Thank you so much.

20 MR. ROBERTS: Okay. Thank you, Barmak. Brad, you're 

21 up next, please.

22 MR. ADAMS: Yeah so, I just want to start one 

23 sentence, but I just want to thank you for sharing your story. 

24 That was very compelling. I'm sorry you experienced something 

25 like that and glad you're on this committee. On section 

26 668.176 3, it's really in A and B. There is a statement that's 

27 been added, “evaluated at the ownership level required by the 

28 Secretary.” What does that mean?

29 MR. ROBERTS: Greg or Steve?
Committee Meetings - 02/17/22 17

1 MR. MARTIN: Oh, you're talking about I'm sorry, I 

2 was on mute.

3 MR. ROBERTS: It's added in both A and B. 3 romanette 

4 1, I guess that's romanette 1.

5 MR. MARTIN: Where we have, “meet the financial 

6 responsibility requirements in general. The Secretary 

7 considers an institution to be financially responsible if for8 profit institutions are evaluated at the ownership level 

9 required by the Secretary.”

10 MR. ROBERTS: Yes, just the addition in A and B for 

11 it says, “evaluate at the ownership level required by the 

12 Secretary.” So it's both for for-profit and nonprofit. Does 

13 that just mean open ended?

14 MR. MARTIN: It allows us, and I can ask Steve if he 

15 wants to expand on this, but it allows us to look at when 

16 we're looking at the complexities involved increasingly 

17 involved in the ownership control of schools. So for us to 

18 evaluate that at the appropriate to get to the appropriate 

19 ownership level and evaluating the value of the institution.

20 MR. FINLEY: Yeah. I mean, I will add a little bit to 

21 that, if you don't mind, Greg. We do have corporate structures 

22 where multiple institutions are owned by the same, a common 

23 entity and the financial responsibility for all those 

24 institutions is actually evaluated using the financial 

25 statement for the higher level entity that owns them. So this 

26 is kind of just acknowledging that the financial the financial 

27 responsibility of the entity being examined may not be at the 
Committee Meetings - 02/17/22 18

1 lower corporate level where each institution is owned, but 

2 it's rolled up to one of common ownership.

3 MR. ADAMS: I'm not sure that fully answers my 

4 question, but let me ask it a different way, so as you 

5 probably know, there's a big consolidation going in on their 

6 industry, primarily due to the significant growth by online, 

7 nonprofit, and public institutions. So many companies are 

8 struggling financially and they need to be consolidated. And 

9 so I read this this the Department may not approve 

10 transactions that they need to approve, going even a step 

11 further if it's limitless. Are you suggesting an institution 

12 owned by a faith-based entity to sold to another entity that 

13 we want to look at the financials of that faith-based entity 

14 like the Catholic Church?

15 MR. FINLEY: I know there have been transactions in 

16 the past where we have gone up several layers of corporate 

17 ownership to get to the entity where we were evaluating the 

18 financial responsibility of the institution, right? It doesn't 

19 necessarily mean that that always goes up to the absolute 

20 highest level, but it does, it depends on the number of 

21 institutions being evaluated. And as you point out, a 

22 consolidation could be bringing multiple institutions in that 

23 are maintaining separate program participation agreements. But 

24 we're still looking at a common level of financial statements 

25 for those entities, or they could be merged and creating just 

26 larger entities that have a smaller number of PPAs, right? 

27 There's a lot of variation here, and this is just trying to 

28 capture that notion. The Financial Responsibility Regulations 

29 also tie into the audit regulations, which have provided for 
Committee Meetings - 02/17/22 19

1 years that the Department can always ask for higher level 

2 financial statements from entities in the corporate chain to 

3 facilitate this type of analysis.

4 MR. ROBERTS: Okay, thank you. Jessica, I just want 

5 to let everyone know is here on behalf of the legal aid 

6 community. You are up next, please.

7 MS. RANUCCI: Thank you. Just briefly, I agree with 

8 Barmak's concern about the public [inaudible] but setting that 

9 aside, it seems to me like the concern here for the Department 

10 would be only for identifying the nonprofits, not identifying 

11 the for-profits. I don't think anyone, maybe I'm wrong, has a 

12 concern about for-profit entities being considered to be non13 profits, so I wonder if maybe A should be the default and B 

14 should be a category that you're only in if the secretary 

15 determines that you're that the correct analysis is a 

16 nonprofit. Just a suggestion.

17 MR. MARTIN: Thank you.

18 MR. ROBERTS: Dave, our advisor, please.

19 MR. MCCLINTOCK: Yeah, I guess just following up on 

20 some of these questions. And with the “evaluated at the 

21 ownership level required by the Secretary,” so from the point, 

22 let's say, two schools merge, at that point, they could easily 

23 have financial statements to submit to the Department. But 

24 let's say there's a struggling school and we've seen it more 

25 recently some of the nonprofits that a school steps in to help 

26 them, so they each have standalone statements prior to the 

27 merger. So what would be submitted? Do they have to prepare 

28 new statements? Are you getting them together and adding it? 
Committee Meetings - 02/17/22 20

1 How are you evaluating the two years prior? Is it just the 

2 institution that is merging in? Is that what you're evaluating 

3 with this language?

4 MR. ROBERTS: Oh, Steve, I think you're on mute right 

5 now, but I see you responding.

6 MR. FINLEY: Yeah, thank you. I was just going to say 

7 if I can respond to that, so. So what's amazing here is the 

8 variety of the ways these transactions can be structured, 

9 right? Even with mergers, sometimes we have two institutions 

10 merging and there's a brand-new entity created to operate both 

11 of them either as one institution where one becomes a part of 

12 the other or as two or as two separate institutions, or are 

13 more commonly one will be just assimilated by the other. And 

14 if the surviving entity is the main institution that's treated 

15 more as an application to add an additional location and 

16 assume the financial responsibilities of the prior institution 

17 that's being acquired. So it really depends on the 

18 transaction. I mean, mergers, actually, the way the Department 

19 analyzes the financial impact of a merger is based on how the 

20 entity is being merged or structured and how they want to be 

21 operated post-merger.

22 MR. MCCLINTOCK: Okay, maybe I'll follow up in the 

23 chat, I guess my other question would be if it fails and 

24 there's a 10 percent letter of credit requirement that's based 

25 on the newly merged entity, or the one that was being merged 

26 into the new one that was not financially responsible?

27 MR. FINLEY: If there's one entity post-merger, it's 

28 going to be 10 percent of the combined size of that merged 
Committee Meetings - 02/17/22 21

1 entity. If there's two separate entities the letters of credit 

2 will probably be based on each individual entity.

3 MR. MCCLINTOCK: Okay. Thank you.

4 MR. FINLEY: Thank you.

5 MR. ROBERTS: A few hands went up there. Jamie, 

6 you're up first.

7 MS. STUDLEY: I'll let Barmak go first.

8 MR. ROBERTS: Okay. Barmak, please.

9 MR. NASSIRIAN: I'm happy to go first if, I'll do it 

10 for the sake of time. I am confused about this because it's 

11 hopefully we're dealing with two distinct set of issues here. 

12 One of them is just a regular change of ownership and ensuring 

13 that the change is on the up and up within each sector. The 

14 other and the more concerning one is conversions at the same 

15 time as a change of ownership is taking place from one type of 

16 institution to another. That's the one that concerns me. And 

17 I'm just trying to understand, you could have two entities 

18 with positive net worth, a very profitable, gigantic size for19 profit, a tiny little nonprofit that is also in the black. And 

20 then you could have a transaction in which the for-profit, the 

21 little fish ends up swallowing the big fish. The little non22 profit absorbs the big, profitable for-profit and the 

23 transaction is financed with debt. How does that, how does 

24 that work here? Do you calculate that debt into the composite 

25 score of the acquiring nonprofit? Would that nonprofit if it's 

26 that heavily leveraged, would that fail the test on this 
Committee Meetings - 02/17/22 22

1 basis? Would you just look back and say, well, these were both 

2 profitable in their previous form, so we're good to go?

3 MR. FINLEY: I believe the analysis is going forward, 

4 so if you've got a, what's in essence, a leveraged buyout, 

5 right, where debt is created to finance the acquisition of the 

6 school, that debt is probably going to drive failing financial 

7 responsibility scores, you know, far into the future until 

8 it's paid off or restructured or otherwise satisfied. And let 

9 me just note, there are separate, these are related questions 

10 to some change of ownership issues that come up when we get to 

11 that part of the of the discussion this week. So you may want 

12 to keep those in mind and raise them then as well.

13 MR. NASSIRIAN: Thank you.

14 MR. ROBERTS: Jamie, your hands up next, but I just 

15 wanted to point, I saw Dave, our advisor’s hand is up. David, 

16 did you want to speak on this point?

17 MR. MCCLINTOCK: Yeah, I would just point out it's a 

18 little bit different from the composite score. But as of the 

19 change of ownership, there's a first day balance sheet and in 

20 that leverage transaction, the entity would have trouble 

21 passing the tangible net worth. That's what often happens with 

22 those transactions, and that's how the Department identifies 

23 oversight required as of that change of ownership date.

24 MR. ROBERTS: Okay, thank you. Jamie, you are now up.

25 MS. STUDLEY: Sure. Like Steve, I see the importance 

26 of being any regulator, in this case the Department, being 

27 able to look at the finances of an institution that is 
Committee Meetings - 02/17/22 23

1 controlled by controlling or on whose resources the 

2 institution depends. It can't be tethered to a narrow picture 

3 of the finances it can look at. At the time of the Corinthian 

4 collapse, WASC accredited Heald a small, historically 

5 different element of the Corinthian system. And after that 

6 institutional failure WASC changed its rules to allow us to 

7 look more broadly at the financial picture of the entities 

8 with which it was connectedbecause that small aperture didn't 

9 allow us to understand the potential consequences for the 

10 institution we accredited, which looked fine both financially 

11 and programmatically, academically, and institutionally. 

12 There's a lesson there that we can all take. The accreditation 

13 standard and looking at a change of control standard is no 

14 adverse impact on the accredited institution. I think we'll go 

15 back to that, Barmak, when we look at changes of control. But 

16 suffice it to say, accreditation has figured out how to deal 

17 with the issues that Brad raises, they're good questions. When 

18 is an institution so dependent on the finances of a system, a 

19 church, a partner of any kind, an individual donor who 

20 promises I'll keep funding you forever? And if that's 

21 essential to understanding whether the institution is 

22 financially healthy and will be into the future, remember, 

23 financial responsibility is a backward look to make a forward 

24 determination, then the Department should have the information 

25 it needs to make those judgments.

26 MR. ROBERTS: Thank you, Jamie. Kelli, I see you 

27 next.

28 MS. PERRY: Just a quick question, based on the 

29 examples that were just given, assuming that you had 2 
Committee Meetings - 02/17/22 24

1 nonprofits and they were to merge because one needed to be 

2 absorbed by the other. This wouldn't apply, correct, because 

3 it's not technically a change of ownership if you're looking 

4 at the institution that's assuming the other or bringing in 

5 the other institution, or am I, I guess that's my question. 

6 Would this apply?

7 MR. FINLEY: Let me make sure I'm not muted. The 

8 answer, oddly enough, and perhaps not surprisingly enough, is 

9 it depends. I mean, mergers are technically covered under the 

10 Higher Education Act as a form of change of ownership, 

11 resulting in a change of control, they’re acknowledged. But it 

12 really depends on what the final structure is going to look 

13 like as to whether one entity, the entity that assimilates the 

14 other, if that's the entity that has the institution that 

15 survives and the entity that loses its unique identity becomes 

16 an additional location, that's not a change of ownership, 

17 resulting in change of control. Not necessarily. And again, if 

18 when this comes up during if it comes up during the change of 

19 ownership discussion later, you may want to raise it again in 

20 case that context provides a clearer answer for you.

21 MS. PERRY: Okay, thank you.

22 MR. ROBERTS: I'm not seeing any additional hands. 

23 Let me know, do you, does the Department have what it needs or 

24 do you want to take a temperature check?

25 MR. MARTIN: Before we take a temperature check, I 

26 just want to point out that this was for B. A was just simply 

27 the purpose. So we're doing essentially B here. So, yes.
Committee Meetings - 02/17/22 25

1 MR. ROBERTS: But I do see Barmak, before we do that, 

2 please.

3 MR. NASSIRIAN: This is a typo. Unfortunately, it's 

4 now called the U.S. Government Accountability Office, not the 

5 General Accounting Office, which is its old name.

6 MR. ROBERTS: Much different purpose?

7 MR. MARTIN: I thought we changed the terminology 

8 there. Did we not?

9 MR. NASSIRIAN: We changed the accountability, 

10 accounting to accountability. But the general has also changed 

11 to government, I think.

12 MR. MARTIN: Okay, so the government is, okay, 

13 alright. We'll take that, we'll make a note about that. 

14 Thanks, Barmak.

15 MR. ROBERTS: Okay, if I could see the committee's 

16 thumbs on the section that we just discussed, A and B. I 

17 believe, feel free to correct me if I'm wrong, but I'm seeing 

18 no thumbs down on this section. So thank you for that, and 

19 then, Greg, I will turn it back over to you to run us through, 

20 I suppose, the remainder of the document.

21 MR. MARTIN: Yes. I want to thank our counsel, Steve, 

22 for his excellent explanation. Let's move on to C, terms of an 

23 extension. And again, back to Barmak's point at the bottom 

24 here in (c)(1) romanette (1)(b), we have the terminology has 

25 been changed. Published by U.S. General Accountability Office 

26 and we'll take a look at that. Just wanted to point that out. 
Committee Meetings - 02/17/22 26

1 And we have in romanette (2)(4), a change, a nonprofit 

2 institution’s submission must have positive net assets without 

3 donor restriction the day after the change of ownership. The 

4 calculation of net assets without donor restriction must 

5 exclude all related party accounts, receivables and other 

6 assets and all assets classified as intangible in accordance 

7 with the composite score. And as above, we just updated this 

8 language here to bring in,to apply common parlance of 

9 nonprofit institutional accounting. And that is it for the 

10 paper, 167, except for severability. So it's not much here 

11 that we've done with C, but I will see if there were any 

12 comments and if not, we can take a temperature check and move 

13 on to the next issue paper.

14 MR. ROBERTS: Great. I'll turn it over to the 

15 committee. Any comments on section C? Barmak.

16 MR. NASSIRIAN: Yeah, I'm kind of struggling to 

17 understand this, it's not so much any issue with the new 

18 language, but I'm just trying to understand the effect of this 

19 again, particularly in cases of a nonprofit that absorbs a big 

20 operation. I understand the asset test ratio is the current 

21 operating ratio is current assets, current liabilities, I 

22 assume?

23 MR. MCCLINTOCK: It's just cash in AR, so it doesn't 

24 include all assets, yep.

25 MR. NASSIRIAN: Okay. Why are we then satisfied with, 

26 why doesn't this require the composite score to be a passing 

27 composite score? Why would, so a dollar's worth of positive 

28 net assets is enough to satisfy the provision? I just don't 
Committee Meetings - 02/17/22 27

1 understand why. If we're hanging our hats on the composite 

2 score being the proper proxy for financial viability, why is 

3 that not a requirement? And if that is a requirement, why do 

4 we need the positive net asset?

5 MR. MARTIN: I'll let Steve address that.

6 MR. FINLEY: Why thanks, Greg.

7 MR. MARTIN: Any time. I am not an accountant. So.

8 MR. FINLEY: So, this provision is a carryover of the 

9 analysis from 668.15 and it's applied to the audited same day 

10 balance sheet. There are proposals in front of you in this 

11 session for doing a composite score calculation on the 

12 financial statements of the new ownership. And I'm going to 

13 ask you that to hold those questions for when that provision 

14 comes up for discussion, if that's okay?

15 MR. NASSIRIAN: It's okay with me, I just don't, 

16 again, I just don't understand whether this adds anything, is 

17 it a substitute for a more robust test? It doesn't strike me 

18 as particularly meaningful, quite frankly. If it's the only 

19 thing we're hanging our hat on, it's worthless. And if it is 

20 not, then it's redundant and should be eliminated because the 

21 composite score will have taken care of it. But we can talk 

22 about it at the appropriate time provided that we make 

23 conforming changes.

24 MR. FINLEY: So just to try to respond. My 

25 understanding is this is the appropriate analysis to do on an 

26 audited same day balance sheet when it is done in conjunction 
Committee Meetings - 02/17/22 28

1 with a more detailed analysis of the other information that's 

2 under review.

3 MR. MCCLINTOCK: Depending on the entities involved 

4 the composite score includes the balance sheet and the income 

5 statement. So if it's a newly formed company and there's 

6 things in place about the years of financial statements being 

7 provided at all part of that evaluation. So if you if you 

8 don't have merged activity with audited results, the composite 

9 score doesn't function, I would say, what I mentioned before, 

10 there's the asset test and the second one that will get to 

11 about the tangible net worth, which I think addresses, that 

12 becomes the issue even in the transaction you're talking 

13 about, if a company, a nonprofit, a for-profit, borrows a 

14 significant amount of money to acquire another school. They 

15 bring it all that cash and pay it out. They don't have any, 

16 they don't have tangible net worth in the entity, and so that 

17 becomes the second measure, it's both the asset test and the 

18 tangible net worth measure as of the first day balance sheet.

19 MR. ROBERTS: Barmak, you're muted, but go right 

20 ahead.

21 MR. NASSIRIAN: Just again to understand, I 

22 appreciate that, but it sounds to me like then you don't want 

23 just the positive net asset. You want net assets sufficient to 

24 cover potential liabilities. Positive means that I have a 

25 dollar extra left over. That's hardly enough in my book to 

26 justify the potential volume of liability that is already on 

27 the horizon. So it seems to me like you want to be a little 

28 more robust than just a positive net asset requirement. I also 

29 have a question, if I may, on subsection 6, again, it's not 
Committee Meetings - 02/17/22 29

1 new language. I want to understand, what the Department views

2 as an equivalent governmental entity? I know it's a 

3 catchphrase to deal with all the various forms of public 

4 institutions, but can one public institution serve as an 

5 equivalent governmental entity and extending full faith and 

6 credit to another entity?

7 MR. MARTIN: No, we would not accept that.

8 MR. NASSIRIAN: But you have accepted it, right?

9 MR. MARTIN: This is another governmental entity. I 

10 assume that's for Steve, that that could be a tribal entity, a 

11 tribal governance.

12 MR. FINLEY: So Barmak, Greg's correct here. This is 

13 referring to public institutions that are owned by tribes, 

14 tribal entities. There are some lower-level municipal 

15 districts that are clearly public that own institutions. And 

16 so it's just you can't just refer to a state and have it 

17 encompass everyone, so.

18 MR. NASSIRIAN: Yeah, I have no objection to that. I 

19 appreciate the diversity of governmental formats in this 

20 country, and you need to have that catchphrase. I just want to 

21 be clear that a participating public institution is not itself 

22 able to function as an equivalent governmental entity under 

23 this provision.

24 MR. FINLEY: So if you provide that as a comment to 

25 us, we'll take it back and.
Committee Meetings - 02/17/22 30

1 MR. NASSIRIAN: I did, but you didn't take it. I want 

2 to emphasize this. It strikes me as a slippery slope and a 

3 very dangerous thing to do to allow one board of trustees, one 

4 board of visitors, from one public institution to essentially 

5 mint coin by extending what the state has extended to it to 

6 any subsidiaries it acquires. And the only remedy here would 

7 be to explicitly exclude participating institutions from being 

8 considered equivalent governmental entities. Thank you.

9 MR. ROBERTS: Okay, thank you. Anything else on this 

10 topic for the remainder of the section 176? Alright, not 

11 seeing anything. Greg, do you want a temperature check on the 

12 remainder of the document?

13 MR. MARTIN: Sure, thank you.

14 MR. ROBERTS: Okay, great. So again, if I could see 

15 the committee's thumbs front and center of their screen. 

16 Ernest, I can't see your thumb right now, I apologize. I'm not 

17 seeing any thumbs down. Feel free to come off mute and correct 

18 me if I'm not seeing something accurately but not seeing 

19 thumbs down on section C of 176. I think with that, we've 

20 concluded the discussion, today at least, for issue paper 

21 number 4. Greg, if the Department is ready, I think we're 

22 going to jump to issue paper number 6, certification. Again, 

23 acknowledging the numbering error in the public schedule. Just 

24 follow the naming conventions in the schedule. So we're 

25 jumping to issue paper 6, certification procedures.

26 MR. MARTIN: Thank you, Brady. Yeah, we'll, yes move 

27 on to certification procedures and see it pulled up there. 

28 Just as a review, we have the statutory cites with regulatory 
Committee Meetings - 02/17/22 31

1 citations here and we'll be looking first at 668.13. And we're 

2 going to go to C, is our first contains our first changes that 

3 is provisional certification. And if you look down at and a 

4 couple of strikes here with reference to the numbering, so 

5 where at (c)(1) romanette two. An institution certification 

6 becomes provisional upon notification from the Secretary, if, 

7 and there we, you can see that we have we do not believe that 

8 automatic language is needed here, so we've struck it for 

9 brevity. Oh, and I do want to point out also that's above that 

10 in romanette 1 (F), after discussing, negotiators suggestions 

11 for further to further clarify the language for this event, we 

12 would automatically require provisional certification. We have 

13 proposed to instead make it an event that the Secretary may 

14 cite for provisional certification. This will allow the 

15 Department to assess and utilize the provision when the 

16 findings that when findings of noncompliance are particularly 

17 significant and there is little evidence that the situation is 

18 has improved. So that's in (F), the institution has received 

19 the same finding of noncompliance on more than one review or 

20 audit. And moving over to. We're still in romanette 2 moving 

21 into (B), some changes there, after reviewing negotiators’ 

22 questions about this provision, we have suggested some 

23 clarifications regarding the ownership of the school, as well 

24 as what we include in liabilities that would require 

25 provisional certification. So in (B), if you change any owner 

26 or interest holder of the institution with control over that 

27 institution as defined in 34 CFR 600.31, also owns another 

28 institution with fines or liabilities owed to the Department, 

29 and it is not making payments in accordance with the agreement 
Committee Meetings - 02/17/22 32

1 to repay that liability. So that's the entirety of (C). I'll 

2 open it up for discussion.

3 MR. ROBERTS: Okay. Comments and discussion with the 

4 Department on C. Carolyn, I have your up first.

5 MS. FAST: I just had a slight concern about the 

6 movement of the provision, about finding of noncompliance in 

7 more than one program review from section 2 to section 1. 

8 Because I was concerned that the Department doesn't want to 

9 create any unnecessary restrictions on the Department's own 

10 discretion to provide a provisional certification when 

11 necessary. So the way it's written now, it's as the 

12 institution has received the same finding of noncompliance on 

13 more than one program review, in which case the Secretary may 

14 provisionally certify them. It sounds like if they if the 

15 Department found one noncompliance that was significant, they 

16 couldn't put them on provisional certification, which I don't 

17 think is what the Department's authority is or what the 

18 Department would want to do. I mean, I think that if there is 

19 a significant, serious problem with meeting standards, the 

20 Department has the ability and should certainly make it clear 

21 that they continue to have the ability to require provisional 

22 status.

23 MR. MARTIN: Well, as I said, the intent here was to 

24 clarify for, you know, what would automatically require 

25 provisional certification, and we proposed this event, this to 

26 make it clear that we may cite this for provisional. The 

27 Department's not precluded from provisionally certifying 

28 institution based on a single finding that might be a serious 

29 finding if we choose to do so or if we deem that that's 
Committee Meetings - 02/17/22 33

1 necessary, I should say. Here, this is just the idea of a what 

2 we would call a repeat finding and taking same finding of 

3 noncompliance. And those may vary from relatively 

4 insignificant findings to those which are which are which are 

5 quite significant. So I think this takes into it gives the 

6 Secretary that discretion with respect to the nature of the 

7 findings because they, a repeat finding may be indicative of 

8 some serious problems for the institution or not. So I think 

9 that's what this does, but it doesn't preclude us from taking 

10 action to provisionally certify an institution based on a, you 

11 talking about a single finding, if that rose to the level 

12 where we thought that was necessary.

13 MS. FAST: Okay, I just think that creates a little 

14 confusion because the way it's written, it says Department may 

15 provisionally certify an institution if and then one of them 

16 is if they found same finding of noncompliance. It just it 

17 suggests that the Department couldn't do it if there was one 

18 finding, and I don't think that's a good idea.

19 MR. MARTIN: Okay, we'll take that back. But it 

20 certainly was not our intention to circumscribe the Department 

21 in that way.

22 MR. ROBERTS: Thank you. Brad, your hand is up next.

23 MR. ADAMS: Great. Thank you. Same exact point or at 

24 least referencing the inclusion right there, I guess it's now 

25 (F), that Carolyn just discussed. I wanted to state I'm glad 

26 now that this is a discretionary issue instead of a mandatory 

27 trigger like it was proposed during the first session. But 

28 I've still got some issues. When for-profit colleges are 
Committee Meetings - 02/17/22 34

1 audited, our auditors have to cite any and report any findings 

2 of noncompliance, no matter how minor. When doing an audit for 

3 a public or nonprofit, auditors only report material issues of 

4 noncompliance, which is typically 10 percent of Title IV 

5 funds. Dave can correct me if I'm missing something here, 

6 since he's the audit expert, but my concern here is one of the 

7 degree. If a for-profit institution has minor errors in 

8 calculating Pell for a few students in consecutive years, it 

9 could violate this provision. A $200 error in multiple years 

10 could have an institutional wide consequence. And the way the 

11 audits work, our audits occur after a fiscal year. So if you 

12 have an issue in a fiscal year, audit comes out 90 days later, 

13 finds that issue, say maybe 120 days later, you have 120 days 

14 of your next fiscal year where that same error could have been 

15 occurring. And so I believe this provision should be deleted 

16 in its entirety. But the financial aid administrators did 

17 submit some language that I can put in the chat that did 

18 extend out the findings for more than two institutional fiscal 

19 years, which covers that risk. But I also think we need to add 

20 the word material noncompliance. Because again, for-profits, 

21 if we're a dollar off on a return to Title IV that's a 

22 finding. You have a dollar off two years in a row, that's two 

23 findings, you failed. That's not appropriate. And the 

24 nonprofits have a 10 percent level of findings. So I think it 

25 should at least match. If we're going to talk about that, 

26 let's make it match for all students at all institutions and 

27 have a 10 percent threshold as a materiality piece to this. 

28 Thank you.

29 MR. MARTIN: Thank you, we'll take that back.
Committee Meetings - 02/17/22 35

1 MR. ROBERTS: Okay. Anne, you're up.

2 DR. KRESS: Sure. And I'll be brief, I just wanted to 

3 come back to that notion of materiality, we had discussed that 

4 in week one as something that's significant that really should 

5 be in this provision. And my guess is Sam raised her hand to 

6 talk about the financial aid administrators’ proposal. And I 

7 also want a plus one that because I think you're really 

8 talking to the folks who do deal with this on a day-to-day 

9 basis. And so I think their thoughts should really be given a 

10 lot of weight here.

11 MR. MARTIN: Thank you.

12 MR. ROBERTS: Thank you, Anne. Sam, please.

13 MS. VEEDER: Alright, yeah, thank you. Wait, did I 

14 unmute myself? Yes. And I did just put it in the chat, but I, 

15 we proposed something slightly different when we submitted it. 

16 And I put it in the chat, we took out the word “automatically” 

17 and we said the institution has received the same material 

18 finding of noncompliance on a program review or audit for more 

19 than two consecutive years without demonstrating corrective 

20 action. You can't see the red line and what I put in the 

21 comments, but we did take out the word “automatically”, it's 

22 in the red lining.

23 MR. MARTIN: You're talking about in, okay.

24 MR. ROBERTS: No, no, I see the, and Anne, if you 

25 also just want to if you want to email us a red line copy. If 

26 you if you just want to make the adjustment clear, that would 

27 be appreciated as well.
Committee Meetings - 02/17/22 36

1 MS. VEEDER: The red line copy was submitted.

2 MR. ROBERTS: Oh I see, okay, understood.

3 MS. VEEDER: Do you want me to submit it again?

4 MR. ROBERTS: Sure, if you wouldn't mind? Thank you. 

5 And then, Brad, I see your hand next.

6 MR. ADAMS: I just want a say, I agree with Sam's 

7 inclusion. I would just add one word to it and it's “material 

8 finding” of non-compliant of more than.

9 MS. VEEDER: That's in there, Brad. Same finding of, 

10 yep.

11 MR. ADAMS: Can you just restate it? Thanks, I missed 

12 where, material. Can you restate what it is?

13 MS. VEEDER: Sure. It's the institution has received 

14 the same material finding of noncompliance on a program review 

15 our audit for more than two consecutive years without 

16 demonstrating corrective action.

17 MR. ADAMS: I support that language. Thank you, Sam.

18 MR. ROBERTS: Thank you. Barmak, your hand is next.

19 MR. NASSIRIAN: Just because I'm always worried about 

20 recidivism, why must it be consecutive? It's actually worse, 

21 right, if there is a material finding they cure it, then they 

22 go right back to what they were doing the following year. Why 

23 should it be consecutive years that disqualifies? I would 

24 suggest dropping “consecutive”. Twice and you're out.
Committee Meetings - 02/17/22 37

1 MR. ROBERTS: Okay. Thank you, Barmak. Jessica.

2 MS. RANUCCI: Yeah, just to respond briefly on the 

3 materiality point. My understanding is that, setting audits 

4 aside, at least the program review piece of this, there could 

5 be really serious findings that would really impact a 

6 college's ability to effectively run its school that would not 

7 appropriately be measured by the volume of Title IV funds. You 

8 can imagine, Ability to Benefit fraud that affected 8 percent 

9 of the students but was very serious [inaudible] very serious 

10 governance issues. So I want to make sure that we're sort of 

11 separating what's appropriate for audits and program reviews 

12 may be different.

13 MR. ROBERTS: Okay, thank you. Dave, I wanted to give 

14 you an opportunity to respond on the exchange that just 

15 occurred if you wanted to weigh in.

16 MR. MCCLINTOCK: There's a couple of different 

17 things, and maybe I can, I'll address the last point first, 

18 Jessica. I agree, program reviews and audits are going to be 

19 mainly different from my perspective from the consecutive 

20 nature. The audits happen every year, program reviews are much 

21 less frequent. So a repeat program review could be more 

22 impactful if the Department determined to do another one the 

23 following year. In that analysis, the program reviewers 

24 consider the magnitude of any finding that they discover. Also 

25 related to audits, as part of the review, the Department 

26 often, so the school submits their, for proprietary schools 

27 Title IV compliance audit, the Department responds, usually 

28 initially with the preliminary audit determination letter with 

29 their reaction to all of the findings that are identified 
Committee Meetings - 02/17/22 38

1 within the report. Considering the magnitude, the number of 

2 instances, the number of students impacted, how widespread it 

3 is. They could do things such as request a full file review. 

4 So if a school is systemically awarding Pell incorrectly, the 

5 Department will come back to the school potentially and say, 

6 You need to provide us with a schedule of every student who 

7 received Pell in the award year and evaluate whether or not 

8 they were awarded correctly and we will determine if anything 

9 is owed to you. The distinction here is if there's any finding 

10 I would say that I have some concern, it looks like it's been 

11 more stock language in some of the final determination letters 

12 we've seen schools receive. So I have an example, one of our 

13 clients in the past audit and Sam and Dave and other financial 

14 aid administrators, I think will appreciate this. So it's a 

15 larger school, we tested a full 120 student files, and I 

16 assure you, it's a very rigorous process, and the only issue 

17 that we discovered is they paid a single student for three 

18 quarter time, Pell, who was actually enrolled full time. And 

19 that's something that happens often at school. Students are 

20 adding and changing classes, and the registrar doesn't always 

21 remember to let financial aid know. And in the final 

22 determination letter the school received, that they have had a 

23 Pell finding for four years, but it was 1 out of 80, 1 out of 

24 106, 5 out of 89 and 1 out of 96. I would not deem this to be 

25 a systemic issue. It's actually excellent job of processing 

26 Title IV. It's a very difficult process. And they received the 

27 letter that you could lose Title IV eligibility if you fail to 

28 show that you can correct this issue. And it's just 

29 differentiating between something like this, that it's just 

30 the nature of a financial aid department versus something 
Committee Meetings - 02/17/22 39

1 that's a lot more material impact in a larger group of 

2 students. And then just lastly, the consecutive nature, Brad 

3 did touch on this a little bit, and a good example might be, 

4 July 1st of 2021, several new financial aid requirements came 

5 out determining how you calculate R2T4s, looking how programs

6 are delivered, how you pay the aid based on those programs. 

7 And schools work really hard to update everything correctly, 

8 but it doesn't always happen. So if you're 12/31 year end, it 

9 will be submitting audits for 2021. But the auditors might not 

10 be performing the testing until March or April, right? So if 

11 they did something incorrectly, they would have 6 months of 

12 R2T4s that were done incorrectly. They would start doing them 

13 the same way in 2022, the auditor tells them, they fix it, 

14 they take the corrective action. Now it would be included in 

15 both of those audit reports. I do think it's important in the 

16 financial aid language about without any corrective action 

17 being taken. So in the report, you might be able to say okay 

18 once they discovered it and implemented the new procedures, 

19 were there R2T4 calculations that were incorrect after they 

20 took the action to correct it upon becoming aware of the 

21 issue. I think that is an important component of this 

22 consideration that's being and that's why it says more than 

23 two consecutive years. Because you can have an issue that 

24 would only cover 8 months of time that would be included in 

25 two different audit reports.

26 MR. ROBERTS: Okay. Thanks, Dave. Sam, you're up 

27 next, please.
Committee Meetings - 02/17/22 40

1 MS. VEEDER: I was just going to address the 

2 consecutive, the use of consecutive. I think Dave did a good 

3 job on that.

4 MR. ROBERTS: Gotcha, understood. Appreciate it. 

5 Adam, I see your hand next.

6 MR. WELLE: I just wanted to address issue around the 

7 material noncompliance. I guess this, I guess this point was 

8 made before, but we're talking about provisional certification 

9 that appears to me to be discretionary on the part of the 

10 Secretary. So to the extent there's de minimis issues in 

11 audits, I think that's something that the Department could 

12 take into consideration and apply these provisions in a 

13 reasonable way. So I think that adding those requirements that 

14 have been proposed, I think just is overly restrictive and 

15 unnecessary. Thank you.

16 MR. ROBERTS: Thank you. Debbie.

17 MS. COCHRANE: My point was fairly similar to Adam’s, 

18 but I will take it one step forward, I think if you want to, 

19 if you really want to kind of craft the language such that it 

20 restricts any sort of consideration of minor findings, then I 

21 think it needs to move back to be an automatic trigger, not a 

22 discretionary one.

23 MR. ROBERTS: Okay. Thank you, Debbie. Carolyn. Oh, 

24 sorry, Greg, I see your hand, did you want to respond to that? 

25 I apologize.

26 MR. MARTIN: Yeah, I think a good point was made 

27 there about this. I want to go back to the discretion involved 
Committee Meetings - 02/17/22 41

1 here and that is involved with us provisionally certifying an 

2 institution. And I think it works to both sides just on the 

3 one consideration that where it talks about it has received 

4 what we would call a repeat finding that, you know, I want to 

5 point out that that's not necessary for the Department to take 

6 action. I want to go where we say here, the Secretary may 

7 provisionally certified an institution if with the existing 

8 language, the Secretary determines that this wasn't 

9 jeopardized its ability to perform its financial 

10 responsibilities, but not meeting the factors of financial 

11 responsibility and also administrative capability. So we 

12 already have the authority in the case of, but we don't, I 

13 want to point out, we don't need a repeat finding for that. 

14 What we have here in F is, you know, an acknowledgment of the 

15 fact that a repeat finding, you know, may be indicative of 

16 problems at the institution. And of course, they might not be, 

17 those repeat findings that's been pointed out, might not be 

18 material in nature. They may well be. And we also had it 

19 pointed out that the nature of the finding could be serious, 

20 but not easily tied to a financial liability as such. So 

21 there's also that consideration when it comes to attaching any 

22 type of a percentage or dollar figure to a materiality test. 

23 And I think the point is well taken that this is a 

24 discretionary thing on the part of the Secretary. And we would 

25 certainly look at the nature of the finding and the 

26 seriousness of it, of the repeat finding before considering 

27 any action to provisionally certified an institution based on 

28 that.

29 MR. ROBERTS: Okay, thank you, Carolyn, sorry about 

30 that, but please go ahead.
Committee Meetings - 02/17/22 42

1 MS. FAST: No. Thank you, that was actually helpful 

2 that that Greg went before me because I think that I just, I 

3 don't want to be repetitive. I very much agree with what 

4 Debbie and Adam just said. And I kind of feel like either this 

5 makes sense to have included in the automatic section with, as 

6 Debbie said, considerations of materiality or maybe coming out 

7 altogether, because I'm not sure how helpful it is to include 

8 in the discretionary part, if the Department already has this 

9 discretion to take action and as it should for whatever 

10 findings they consider material that it doesn't seem to me, it 

11 seems that this is, as I said before, a potentially limiting 

12 cases, at least the impression that there's less discretion 

13 than there is. And I don't think it's helpful here.

14 MR. ROBERTS: Okay, thank you. Brad, you are up next.

15 MR. ADAMS: And, you know, I understand Debbie, 

16 Adam's, Greg's, and Carolyn's point here that this is 

17 discretionary. But I want to be critical here, that discretion 

18 is not always applied evenly. And my concern here, as I 

19 pointed out earlier, is the materiality level of what a 

20 finding is in a financial a financial aid audit. And I've 

21 lived through these every day. They are a pain. They are 

22 substantially different at a for-profit than a nonprofit. If 

23 the rules were the same and everyone had the same 10 percent 

24 threshold like nonprofits, we'd never have a finding. And a 

25 dollar difference is a finding. And so again, I understand the 

26 point on discretionary, but we need a materiality threshold 

27 given compliance audits, finding levels are substantially 

28 different between a for-profit and a nonprofit. If they were 

29 the same level, if everyone was at 10 percent, I would 100 
Committee Meetings - 02/17/22 43

1 percent agree with Debbie and Adam on this point. And as an 

2 operator, until you go through a financial aid audit, you 

3 don't know how detailed they really are there. They are the 

4 most detailed audit I have ever been through, and I've audited 

5 financials my entire career. Thank you.

6 MR. MARTIN: That's a nod to how thorough you are, 

7 David, when you audit institutions, I suppose.

8 MR. MCCLINTOCK: The biggest smile is always when we 

9 leave, so I've gotten used to that. And you know, I know I 

10 can't, just provide comfort. I can't imagine an audit that 

11 we've performed, that there was a systemic issue that would 

12 not be identified as a material finding in the audit report. I 

13 mean, they're pretty close to synonyms. And I do appreciate 

14 the clarification that Kelli put in the chat that might help 

15 some people about systemic is systematically doing everything, 

16 incorrectly, every single student. A lot of these findings for 

17 the for-profits could be, hey, somebody made a mistake one day 

18 in what they did, and it's just trying to avoid those kind of 

19 issues rising to a level of being a trigger, I think is what's 

20 happening here.

21 MR. ROBERTS: Thanks, Dave. I did see one hand go up 

22 and then go back down. I don't want to cut anyone off. But for 

23 now, I'm not seeing any hands. Greg, does the Department want 

24 to take a check on section C?

25 MR. MARTIN: Yes, but before I do, I just want to 

26 thank everybody for the discussion. I think it was very good 

27 and we have a lot of things to consider. So thank you very 

28 much. And yeah, we can move on with that.
Committee Meetings - 02/17/22 44

1 MR. ROBERTS: Well, before we do that, Brad, I do see 

2 your hand.

3 MR. ADAMS: Yeah. I just want to ask one question. I 

4 think it is section C, it's all the way down at the bottom 

5 about making payments in accordance with an agreement to repay 

6 that liability. I think it's now romanette F romanette (2)(b), 

7 I believe. The comment, I agree, I'm comfortable with the 

8 language. I'm also always overly skeptical, so I just want to 

9 ask a basic question. So please hear me out here. Is making 

10 payments in accordance with the agreement to repay that 

11 liability, if you were a day late on that payment, are you out 

12 of compliance with this as it reads?

13 MR. MARTIN: You know, I think there has to be some, 

14 come to this has to be a reasonable a reasonable person test. 

15 I don't want to speak for the entity of the Department that 

16 collects payments that are due on liability. I would, I mean, 

17 yeah, I mean, technically speaking, if you're a day late on a 

18 payment, you're late. It does say here, though, is not making 

19 payments in accordance with. So I think that the spirit of 

20 this is that and Steve can kick me under the virtual table if 

21 I'm going too far here, I think the spirit here is that that 

22 you're not complying with the agreement to make repayments to 

23 make repayments that would not be one payment a day late, you 

24 know, consistent late payments on made payments. But I think 

25 that's what we're saying here. And obviously, I wouldn't want 

26 to get to the level, you can get to any level you wanted to of 

27 granularity in regulations to the point where it could become 

28 absurd. And you know, we could say, except for one payment 

29 made any time within five days after the due date, you know, 
Committee Meetings - 02/17/22 45

1 every 12 months or something like that. So I don't think we

2 want to go there, but I think at some point there has to be a 

3 test of reasonableness in some that the Department is not 

4 ,this is not meant to be a gotcha on the part of the 

5 Department, it's meant to be something to look at. Is the 

6 institution actually complying with the agreement to repay the 

7 liability? Steve do you want to say anything to that? To give 

8 you an opportunity to.

9 MR. FINLEY: I mean, I think Greg's response was 

10 right. I mean, these are these are usually identified when 

11 there's a periodic check on the pending and recertification 

12 application, or it's part of an annual Financial 

13 Responsibility Review. And but I mean, there's nothing in 

14 place where the Department, the Federal Student Aid staff 

15 automatically get an alert if somebody's one day late on a 

16 payment. It's these are these are checks that are made with 

17 within the Department when there's another review going on in 

18 an institution, but I don't know how you could build that kind 

19 of padding into the question of just whether the institution's 

20 timely making the payment.

21 MR. ADAMS: I think I can live with it in spirit. I'm 

22 still not crazy that there's no leeway or discretion 

23 whatsoever if there a day past due. But I don't know, maybe 

24 you add the discretionary piece, but I'll live with it if 

25 everybody else is okay with it.

26 MR. ROBERTS: Okay, thank you. Jessica, please.

27 MS. RANUCCI: Yeah, I just wanted to speak in favor 

28 of this provision if I'm understanding it correctly, which is 
Committee Meetings - 02/17/22 46

1 that someone runs an institution, gets a bunch of government 

2 money, has to pay some of that money back, wants to continue 

3 to run another institution, continue to get government money, 

4 decides not to pay that back on time, and all this is doing is 

5 saying, hey, we're not even stopping your flow of government 

6 money, you just might be subject to these additional 

7 conditions. That actually seems to me like a completely 

8 reasonable and prudent use of government funds. And I think 

9 that like I know, we can get in the weeds here, but just 

10 stepping back, I think that the government should be using 

11 provisional PPAs in circumstances under which there are 

12 concerns about where that money is flowing, and I think that 

13 this is an appropriate circumstance for that concern.

14 MR. MARTIN: Thank you.

15 MR. ROBERTS: Barmak.

16 MR. NASSIRIAN: Yeah, I understand that the 

17 Department may impose additional conditions in granting 

18 provisional certification. To the extent that it has that 

19 authority and has exercised that authority, I would suggest it 

20 has done a particularly good job of protecting students. So I 

21 would suggest and I realize the Secretary doesn't want to 

22 regulate himself, but it would be helpful to ensure some of 

23 the real gaps we've seen in the system be addressed. So I 

24 would suggest that there has to be a preservation of records 

25 requirement, both with regard to academic records lest the 

26 entity go under, as well as financial records. Just for 

27 purposes of figuring out who gets what, to whom, when. So 

28 under 4, it just sort of strikes me as open ended. Given the 

29 performance of the Department with regard to past 
Committee Meetings - 02/17/22 47

1 provisionally certified institutions, it seems to me it would 

2 be wise to at least articulate that institutions, once they're 

3 provisionally certified, have to make arrangements for 

4 retention of records, both academic and financial.

5 MR. MARTIN: Thank you. We'll take that back.

6 MR. ROBERTS: Thank you. Anything else on section C? 

7 Great. Okay. If I could see the committee's thumbs on 

8 subsection C. I see one thumbs down. Two thumbs down, I 

9 apologize. Kelli, or Brad, feel free to come off of mute if 

10 you'd like to add anything new for the Department's 

11 consideration on subsection C.

12 MR. ADAMS: I just want to say the only reason why I 

13 voted no is just because the language that was proposed by Sam 

14 is not included. And if it was included, I would vote yes.

15 MR. ROBERTS: Understood. Kelli, anything you'd like 

16 to add to that?

17 MS. PERRY: No, same comment. The language that Sam 

18 submitted.

19 MR. ROBERTS: Okay, great. Greg, I'm looking at the 

20 document and I think section D the only change was removing 

21 the references to faxing, so unless we have the fax 

22 constituency group that wants to speak on that. Do you want to 

23 skip ahead to 668.14?

24 MR. MARTIN: Yeah, I think we can do that. I was 

25 unless I want to speak in defense of the facsimile machine, 
Committee Meetings - 02/17/22 48

1 how much I miss it. No, not really. Those of us can recall how 

2 the paper always jammed up.

3 MR. ROBERTS: Very briefly, does anyone is there any 

4 interest in speaking on that that section?

5 MR. MARTIN: I'll give people the opportunity to talk 

6 about it if they want to since we covered it,

7 MR. ROBERTS: Not seeing any hands. So I think we're 

8 okay to move ahead without temperature checks, checking the 

9 fax machine.

10 MR. MARTIN: So we're going to move to 668.14, 

11 program participation agreement. Thanks, Brad. And thanks for 

12 making that suggestion to get us that always made me laugh 

13 when I look at the facsimile and it reminds me of that scene 

14 from Office Space when they had that machine it's kind of a 

15 fax copier whatever, but they take out and destroy in the 

16 field. But that's a, I digress. But it just reminds me that 

17 whenever I see the term facsimile machine. Let's go on to 

18 668.14 and we can move down to the first place where we have a 

19 change over what we had before is in 668.14 (b), where it says 

20 by entering into a program participation agreement, an 

21 institution agrees that. And here we have the item in the 

22 current regulations refers to a provision that we have 

23 proposed to preserve and that namely is 668.15. So that has 

24 been changed to which we have removed and are proposing to 

25 remove and reserve here. And all the appropriate provisions 

26 have been moved to subpart L and that's reflected there. So we 

27 can move on to 17, B 17. At negotiators’ suggestions, we have 

28 updated this section to reflect to reflect inclusion of all 
Committee Meetings - 02/17/22 49

1 the federal agencies with an interest in Title IV eligibility 

2 or of fraud and abuse issues, and to further specify that 

3 other violations of law are included within the fraud abuse 

4 purposes of this information sharing. So you can see that 

5 reflected there. The Secretary, guarantee agencies, and 

6 lenders as defined in 34 CFR part 62 nationally recognized 

7 accreditation accrediting agencies, federal agencies. So we 

8 previously just referred to the Secretary of Veterans Affairs. 

9 So now federal agencies and also at the conclusion of that 

10 paragraph, have the authority to share with each other 

11 information pertaining to the institution's eligibility for 

12 participation in the Title IV HEA programs or any information 

13 on fraud or other violations of law. So we made that a little 

14 more encompassing there. Moving down to 26. We appreciate the 

15 negotiators’ feedback on these requirements, we have proposed 

16 language here that would limit Title IV eligibility to 

17 programs that are not longer than the lesser of the number of 

18 hours required for the occupation in the institution’s state 

19 or the national median of hours required for the occupation in 

20 all states that license the occupation, if at least half of 

21 those states license the occupation. So you can see that 

22 reflected in 26, demonstrating a reasonable relationship 

23 between the length of the program and entry level requirements 

24 for the recognized occupation for which the program prepares 

25 the students effective 1 year from the effective date of these 

26 regulations. The Secretary considers the relationship to be 

27 reasonable if the number of hours, we have also eliminated 

28 clock hours there, just the number of hours provided in the 

29 program does not exceed the lesser of the minimum number of 

30 clock hours required for training in the recognized occupation 
Committee Meetings - 02/17/22 50

1 for which the program prepares a student as established by the 

2 state in which the institution is located. If the state is 

3 established such a requirement or is established by a federal 

4 agency or at least half the states license the recognized 

5 occupation for which the program prepares students, if rather 

6 they do that, the national median of the minimum number of 

7 hours required for training as established in those states as 

8 determined by the Secretary and published in a notice in the 

9 Federal Register. Moving down to, you know, what I want to do 

10 there, because that's kind of a major one there, so I want to, 

11 we won't take a temperature check, but I do want to stop here 

12 and open it up for discussion at this point.

13 MR. ROBERTS: I think it's a good suggestion. A 

14 number of hands are up, so Brad, feel free to kick us off.

15 MR. ADAMS: I agree with that suggestion, and I will 

16 have a comment on 26, but I need to go back to number 3. I 

17 know nothing has changed from the first week session’s red 

18 line, but I still have concerns with 3 as written. That would 

19 be (a)(3), I apologize. But I'm concerned again that the 

20 Department appears to be using this PPA to impose personal 

21 guarantees on owners that are operating institutions that are 

22 following all of the rules. I don't think the Department 

23 stands on good, strong legal footing here. During the last 

24 session, Steve Finley said that the Department doesn't believe 

25 that Title 20 U.S.C. section 1099 C subsection C paragraph 4, 

26 restricts its ability to impose personal guarantees on 

27 corporate entities. Or at least that's what I think I heard. 

28 But the proposal here is not limited to corporate owners and 

29 was to extend to natural persons that own institutions. So my 
Committee Meetings - 02/17/22 51

1 question here is if an institution is following all the rules 

2 here under Title 20 U.S.C. section 1099 C subsection C 

3 paragraph 4, are the owners still going to be asked to provide

4 a personal guarantee by signing a PPA? You can drop some 

5 language in the chat that I think might address this issue, 

6 but I'd love to get Mr. Finley and Mr. Martin to respond to my 

7 question.

8 MR. MARTIN: I'll be generous and let Steve go first.

9 MR. FINLEY: Brad, I would like to see your comments 

10 on this. I mean, I'm reading this and it says the entity, it 

11 says an authorized representative of the institution.

12 MR. ADAMS: Could that mean a natural owner?

13 MR. FINLEY: Well, are you talking about the phrase 

14 authorized representative?

15 MR. ADAMS: Yeah.

16 MR. FINLEY: The authorized representative is binding 

17 the institution.

18 MR. ADAMS: Right, so are they personally 

19 guaranteeing.

20 MR. FINLEY: They're guaranteeing the, that's the 

21 institution’s guarantee to the Department.

22 MR. ADAMS: Okay, so there will not be a personal 

23 guarantee on an owner if they're following all the rules?

24 MR. ADAMS: If they're signing as an authorized 

25 representative of the institution, they're binding the 
Committee Meetings - 02/17/22 52

1 institution. And I don't see I don't see this provision is as 

2 touching any individual. There may be situations where 

3 individuals offer to assume personal responsibility, but 

4 that's not what this section is addressing.

5 MR. MARTIN: It's not our intention here to, we're 

6 not including individual owners in this language.

7 MR. ADAMS: Okay, well, let me just read my comment 

8 because the folks on the video can't see it. But I basically 

9 am proposing that the Department must notify a person whether 

10 the owner is a natural person or a corporate entity prior to 

11 requesting such person sign a program participation agreement, 

12 including a provisional or temporary provisional program 

13 participation agreement if the Department intends to impose a 

14 personal financial guarantee on the person for performance of 

15 the institution's responsibilities. But in no event shall the 

16 Department require any person to personally guarantee 

17 financial performance where that person is a natural person or 

18 corporate entity, if the institution meets the criteria under 

19 Title 20 U.S.C. section 1099 C subsection (c)(4). Thoughts on 

20 how that's written, Mr. Finley?

21 MR. FINLEY: That's at odds with the proposal in 

22 front of you, which deals with corporate entities being 

23 required to sign PPA under certain conditions. So we'll take 

24 your comment under advisement. But there is a distinction 

25 being drawn here between personal, individual responsibility 

26 and entity level responsibility.

27 MR. ADAMS: Great, and I'd recommend, I think, 

28 several of the hands went up for states on 26 and I think 
Committee Meetings - 02/17/22 53

1 several have come up since I commented. I'd recommend maybe 

2 finishing 3 before we go to 26, but that's just my two cents.

3 MR. ROBERTS: Okay, I appreciate the suggestion. If 

4 folks do want to speak specifically on 3 feel free to, I know 

5 you all raise their hands but feel free to come off of mute 

6 now if you want to specifically speak to that piece.

7 Otherwise, I'll defer to the queue as I see it, which is Anne.

8 DR. KRESS: So I am on 26, that's the one I want to 

9 talk about. On behalf of the two-year colleges, we've got some 

10 concerns here. One is just with the change from greater to 

11 lesser is as I read this, if I'm in a state at this point 

12 where the number of clock hours required for training and a 

13 recognized occupation that leads to a license authorized by 

14 the state is higher than the average of 50, at least half of, 

15 so 25 of the other states, then essentially my students are at 

16 a disadvantage. These are state licensed professions, and I'm 

17 concerned that at this point, the Department sort of starting 

18 to creep into determining program length, which is, I don't 

19 believe, within the scope of the authority here. I completely 

20 get that we want to make sure that these are being offered in 

21 the most expeditious way possible. But these are state 

22 licensed professions and my institution doesn't set the 

23 program length and my state may or may not care how long it 

24 takes other states to or how long other states think these 

25 programs should take. So we just have a lot of concerns with 

26 26.

27 MR. MARTIN: Thank you. We'll take that back.
Committee Meetings - 02/17/22 54

1 MR. ROBERTS: Thank you. Debbie, you are next in 

2 queue on my screen.

3 MS. COCHRANE: Thank you. You know, I do also share 

4 Anne's concerns around, my comments are also on 26, I do share 

5 Anne's concerns on 26 romanette (i)(b) and I would urge the 

6 Department to go back to the language it had before, which is 

7 just the minimum number of clock hours in the state or also in 

8 the state from which students are enrolled. So considering the 

9 MSA, that was something that came up in the last discussions 

10 that I would encourage the Department to adopt. I would also 

11 just a very technical point on A in that section because 

12 states are frequently changing their licensing requirements. 

13 That point of change, a student can get caught in the middle. 

14 So would recommend language around kind of referencing the 

15 point at which the student was enrolled. So if a student is 

16 enrolled in a 15-hour program, the rules change in the state 

17 down to a thousand. Those people who are already enrolled and 

18 need to finish out their programs shouldn't kind of get caught 

19 in the crosshairs.

20 MR. MARTIN: Thank you.

21 MR. ROBERTS: Thank you. Barmak. And I just want to 

22 say that Johnson is speaking after Barmak, and he's at the 

23 table on behalf of legal aid and I missed that announcement 

24 originally. But Barmak, please.

25 MR. NASSIRIAN: Yes, I endorse Debbie and Anne's 

26 point. This just puts at least half of the states potentially 

27 in a no-win situation where they can't even satisfy licensure 

28 in their own state, which doesn't make any sense to me. But I 
Committee Meetings - 02/17/22 55

1 want to go back to 3 and to just kind of wrap my head around 

2 what we were talking about here. So far as I know, there are 

3 no disgorgement or clawback provisions. There is no liability 

4 attached to the entity signing the PPA. The signing the PPA is 

5 essentially an attestation that the institution will abide by 

6 the agreement, and the worst that can happen is that the 

7 institution loses eligibility based on noncompliance. Am I 

8 right? Is that correct? Or does signing the PPA create any 

9 consequence for the signatories?

10 MR. MARTIN: I think I'll have Steve correct me if 

11 I'm wrong here, I think that. Did you have your hand up, 

12 Steve? No, okay. It holds the entity when the person signs for 

13 the entity, it holds that entity accountable for any 

14 liabilities that result from failure to administer the 

15 programs properly. Is that what you're asking, Barmak?

16 MR. NASSIRIAN: That's what I'm struggling with.

17 MR. MARTIN: Not at the individual, again, we don't 

18 it at the individual level. But I'm not sure if that helps. Is 

19 that what you're asking?

20 MR. NASSIRIAN: I just can't. I don't, what I'm 

21 attempting to figure out is what is the additional financial 

22 advantage the Department may get from having 10 people sign 

23 the PPA versus one person signing the PPA? Does it, is it just 

24 epistemological? Is it that you have more people attesting 

25 promising that the rules or are 10 people on the hook now for 

26 the signature that they placed at the bottom of that contract? 

27 It's just and if the latter, which would be somewhat 

28 reassuring, then I don't see the difference between, I mean, 
Committee Meetings - 02/17/22 56

1 who would then sign it as a person? Everybody would set up a 

2 fake corporate front to avoid personal liability. So I just 

3 don't understand how additional signatures fortify anything.

4 MR. FINLEY: So, Greg, I will respond to that if you 

5 don't mind. One of the things that = comes from this clarity 

6 in the proposal is that you're getting higher level corporate 

7 entities to sign, right? So it's very common that you'll see a 

8 multilevel corporation where the individual is owned at the 

9 lowest level. A lot of the assets of that larger corporation 

10 are not available if you're limited to going after the 

11 corporate entity at the lowest level, right? So when we're 

12 doing a financial responsibility determination at a higher 

13 level, this clarifies that we can make it really clear that, 

14 it's whatever corporation is providing the financial strength 

15 for that institution's composite score, that legal entity is 

16 also going to be signing the PPA. So those resources in theory 

17 are available if there's an action taken against that legal 

18 entity to recover the institution's liabilities.

19 MR. NASSIRIAN: But would that entity be under the 

20 Department's control or the control only extends to the 

21 participating institution?

22 MR. FINLEY: It extends to the entities that signed 

23 the PPA. Not necessarily control, but financial legal 

24 responsibility for the liabilities of the institution flow 

25 upward to the level of the corporations that signed the PPA. 

26 So they're reachable.
Committee Meetings - 02/17/22 57

1 MR. ROBERTS: Just to stay on the topic of question 

2 three for a little bit, I see Adam your hand, I see Johnson 

3 and Adam's hand up. Johnson was yours on 3 or on 26?

4 MR. TYLER: Yeah, you should stick with the other 

5 people who want to talk about 3,

6 MR. ROBERTS: Adam, I have you as being next.

7 MR. WELLE: Sure. And I think that answer just now 

8 got clarified, but it was my understanding that this provision 

9 was intended to give greater accountability and make sure that 

10 if an institution went insolvent, that others who were 

11 responsible and the Department of Education, students weren't 

12 left holding the bag. So I guess and I think Carolyn suggested 

13 that on behalf of her constituency and myself and Yael, that 

14 would have added individuals to this definition. And I guess 

15 I'm not sure, given the purpose of that vision, why we would 

16 exempt an individual owner as opposed to a corporate entity 

17 owner from being accountable to sign the PPA.

18 MR. MARTIN: We can take that back. There are some in 

19 the HEA does include some restrictions with respect to the 

20 Department requiring an individual owner to assume liability, 

21 so we do have some statutory considerations there.

22 MR. WELLE: Yeah, and I think Brad mentioned that in 

23 the chat and you know, if it's if it would be redundant with 

24 something already exists that holds individual owners 

25 accountable, I guess that'd be fine. But otherwise, I'm not 

26 sure why we wouldn't include the broader dash here. Thanks.

27 MR. MARTIN: Thank you.
Committee Meetings - 02/17/22 58

1 MR. ROBERTS: Brad, I see your hand next.

2 MR. ADAMS: Yeah, I do have one final comment on 3 

3 and then I'll stay in line for 26. You know, and I mentioned 

4 in the chat, you know, the Department is, there has been and 

5 is, asking owners to sign an appendix stating they are jointly 

6 and severally liable for performance. So I'd just like, Steve 

7 is that exactly what it reads there's no limit of personal 

8 guarantee there is that how I should read that?

9 MR. FINLEY: So, you know, obviously the extent of 

10 the liability would be the extent of the institution's debts 

11 if someone had signed a personal guarantee or if there were 

12 language in the personal guarantee that capped their exposure.

13 MR. ADAMS: We're talking about a PPA, though, not a 

14 personal guarantee. I'm just talking about the statement we're 

15 signing there in the appendix of the PPA.

16 MR. FINLEY: For the entity. I'm not aware of 

17 individuals having to sign PPAs in their individual 

18 capacities. I'm not, perhaps that's happened, but I'm not 

19 aware of it. I am aware of multiple corporate entities having 

20 to cosign PPAs. And they are assuming liability to the same 

21 extent is the institution's liability.

22 MR. ADAMS: Okay. And the second point on the 

23 corporate veil. You know, that's something that is normally 

24 done or that's not, piercing the corporate veil is something 

25 that's not normally done in court, so I want to just follow 

26 back up on that again. That was a comment I think Barmak may 

27 have made reference to. Did we answer whether or not you 

28 pierce the corporate veil, I guess, is my question? And I'm 
Committee Meetings - 02/17/22 59

1 referring to publicly traded companies here. I guess these 

2 would not they would fall, yeah, that would be proprietary.

3 MR. FINLEY: Is that a question? I'm sorry, is the 

4 question addressed to Barmak?

5 MR. ADAMS: Can you appear as a publicly traded 

6 companies corporate structure? I guess as clear as I can make 

7 that question, so yes, sir. Barmak, you can ask it maybe

8 better if you want?

9 MR. NASSIRIAN: I got my answer on that one.

10 MR. ADAMS: Okay, so the answer is? I missed that, 

11 that's why I'm trying to ask it again. What's the answer?

12 MR. NASSIRIAN: It was an emphatic no. The Department 

13 does not intend to pierce the corporate veil, perhaps much to 

14 my chagrin, but that was the answer they gave I thought.

15 MR. ADAMS: That's why, I'm sorry I missed that, and 

16 that's why I'm asking you. Thank you.

17 MR. ROBERTS: Thank you. Alright, Kelli. Sorry, go 

18 ahead, Kelli.

19 MS. PERRY: Thanks. In romanette two, I'm struggling 

20 with the insertion of private nonprofits into this. So I mean, 

21 presidents are typically signing the Program Participation 

22 Agreement at private nonprofits. So what's the intent of 

23 adding us into this part here because the presidents don't 

24 have direct or indirect ownership, you know, the organizations 

25 are controlled by a board of trustees. So is the expectation 
Committee Meetings - 02/17/22 60

1 that presidents will still sign or are you looking for some 

2 other signature from someone else?

3 MR. MARTIN: No. Traditionally, presidents would 

4 sign. We, for reading the language, for proprietary or private 

5 nonprofit institution, an authorized representative of the 

6 entity. So again, back to the idea of it being yes, individual 

7 signs, but that individual signs as an authorized 

8 representative of the entity. And so what we're doing here is 

9 recognizing the fact that there are increasingly complex 

10 ownership and/or in in the case of not-for-profit institutions 

11 control structures out there. And what we're saying here is 

12 that with direct or indirect ownership if that entity has the 

13 power to exercise control over the institution. So this this 

14 takes into account all those other entities that do exercise 

15 significant control over the institution.

16 MS. PERRY: Okay, so the expectation is that for a 

17 regular private nonprofit institution, that's not going to 

18 change the president signing, right?

19 MR. MARTIN: No, generally not. And if none of these 

20 other things apply here, there is no other entity that has the 

21 power to exercise control of the institution, then it would 

22 just remain the way it always has been, with the president 

23 signing on behalf of their institution.

24 MR. ROBERTS: Okay. Thank you. Barmak, did you want 

25 to speak on question 3? Otherwise, I'll go back to you, 

26 Johnson.

27 MR. NASSIRIAN: Yeah, unfortunately, we're still on 

28 question 3. Based on the explanation that that Steve provided, 
Committee Meetings - 02/17/22 61

1 it seems to me like romanette (ii)(d), should suffice. I mean, 

2 if the idea is to ensure that any that corporate parents whose 

3 finances were factored into a determination of financial 

4 responsibility are on the hook it seems to me that D should 

5 take care of it. I kind of worry about the addition, for 

6 example, of A where 50 percent control is explicitly 

7 articulated. You know, you could easily see a situation when 

8 there are three parties, each with a third of the equity 

9 shares of the company, none of whom would then be specifically 

10 flagged there. I just don't understand how this is adding, how 

11 a A,B,C are adding anything to the D. If the only goal is to 

12 ensure that the parent corporation, to the extent that its 

13 resources were factored into a determination of financial 

14 responsibility, are held accountable, it seems to me that D 

15 would take care of it. I'm not sure what the rest of this does 

16 as an additive.

17 MR. FINLEY: Greg, do you mind if I respond?

18 MR. MARTIN: Go ahead, Steve.

19 MR. FINLEY: Okay, so D is financial statements come 

20 at a level where there is unfractured ownership of the 

21 institution, right? That's going to be 100 percent. It may be 

22 three levels up from the lowest level of the corporation, but 

23 it's going to be the parent company that owns 100 percent of 

24 an institution. Changes of ownership are triggered when enough 

25 of an institution changes ownership, that it triggers a change 

26 of control. And that could be somebody acquiring 75 percent of 

27 the institution that's going to be that could be a corporate 

28 entity, one level above the unfractured ownership of the 

29 institution. Under this proposal, that entity is also, could 
Committee Meetings - 02/17/22 62

1 be subject to signing the PPA. So it's an additional level of 

2 potential liability protection by going after the corporate 

3 entity that has the control over the lower-level entity where 

4 there's unfractured ownership. Does that help? It's 

5 recognizing that control is often held by companies that are 

6 higher than a level of the unfractured ownership.

7 MR. NASSIRIAN: Yeah, I mean, I guess it helps. But 

8 it seems to me that the only case where that would matter 

9 would be the case of a very financially solid subsidiary that 

10 happens to now have an additional tier of corporate ownership. 

11 That additional tier of corporate ownership didn't really 

12 factor into your assessment of its composite score. Right?

13 MR. MARTIN: I would argue, though, that that is 

14 true, but it's not just about financial responsibility here, 

15 it's also about being able to hold those other entities as 

16 Steve pointed out earlier up the ladder accountable for any 

17 liabilities that might result, which those could occur at a 

18 very financially stable institution as well.

19 MR. NASSIRIAN: That's fine. Then let me just also 

20 flag an area of concern here, which is again an emerging topic 

21 of alarm for some of us, and that is entities that are 

22 technically ineligible but are significant beneficiaries of 

23 revenues through revenue sharing contracts. I mean, while I 

24 appreciate the explanation that was just given, to me, that's 

25 sort of looks like a fairly meaningless additive because I 

26 feel like the cases that you're worried about are cases that 

27 I'm not worried about. But I am worried about arrangements 

28 where and otherwise ineligible entities actually significantly 

29 benefiting from the flow of Title IV funds and is in no way 
Committee Meetings - 02/17/22 63

1 implicated in in compliance with your requirements. I'm 

2 specifically talking about OPMs, right? Because an interest 

3 holder...

4 MR. MARTIN: The program managers and tuition share 

5 agreements, is that what you're referencing, Barmak?

6 MR. NASSIRIAN: Right, right. They're not interest 

7 holders, they're not secured parties under this definition, 

8 but there are certainly benefits, could be significant 

9 beneficiaries of Title IV revenues without being subject to 

10 any of its strictures on the entire liabilities is on the 

11 institution as opposed to the party that is deriving all kinds 

12 of financial benefit from Title IV.

13 MR. MARTIN: I think you're right to point out that 

14 those entities could be deriving some significant financial 

15 benefit from that relationship. I think that's, which is not 

16 to say the Department doesn't have concerns about those 

17 issues. We're aware of tuition share agreements and OPMs and 

18 some of the possible issues there. But I don't think that that 

19 is what's being addressed here. This is = with respect to an 

20 entity having the power to exercise control over the 

21 institution. And I don't know that we can get to that 

22 particular issue in these in these regulations, but I'll let 

23 Steve comment there.

24 MR. FINLEY: Yeah, I don't know that I have anything 

25 to add to that, I think Barmak's concerns are being shared 

26 with us through other comments he's providing, right?

27 MR. ROBERTS: Okay, thank you. Jamie, I'll turn to

28 you.
Committee Meetings - 02/17/22 64

1 MS. STUDLEY: This is, I'll add a quick comment on 3, 

2 I thought I was here for 26. I think it's worth remembering 

3 that the key requirement here is the first sentence, requires 

4 entities in that category to sign the agreement if they have 

5 the power to exercise control. A through D are only examples 

6 and examples are sometimes helpful so that people know what to 

7 expect, or the Department can point to those examples, but 

8 they're not exclusive. In the land of great creativity the 

9 Department is able to say there are other new ways in which we 

10 think these circumstances have arisen, so I don't think we 

11 have to, these indicate the neighborhood, but we don't have to 

12 try to encompass every possible variation here because the 

13 government's authority is in the first sentence. Then they 

14 have to figure out what examples are taking place that fit.

15 MR. MARTIN: Thank you.

16 MR. ROBERTS: Okay. I think we're ready to pick back 

17 up with 26 and Brad, I see your hand first.

18 MR. ADAMS: Jamie, I think also has something on 26.

19 MR. ROBERTS: Jamie, actually if you just want to 

20 pick back up if that's okay with you on 26?

21 MS. STUDLEY: Yeah. Going back to 26, I thought Anne 

22 had some good comments on that one. I'm wondering whether this 

23 is meant to be a safe harbor, an indication that the 

24 Department consider these to be reasonable, but are they 

25 rebuttable by an institution to say, for example, we're doing 

26 a better job and it takes 115 percent of what our state 

27 requires but here's what else we're doing. I realize that 

28 could be cumbersome for the Department and the school, but at 
Committee Meetings - 02/17/22 65

1 least it would be logical. Without that, the danger of 

2 cramping institutions that want or see other reasons besides 

3 state requirements for licensing to do something that is well 

4 supported, well planned by the institution and for students’ 

5 benefit is it could be constrained. Same thing would happen if 

6 it's a new field and not many states are involved in it. So I 

7 respect that there is a problem in some institutions going 

8 overboard. But it comes from a variety of sources and this 

9 seems a difficult way to try and get a handle on the problem. 

10 So the question was, is this a safe harbor that that 

11 institution can say no on its face you thought it wasn't 

12 reasonable, but let me show you that it is or is it a hard 

13 limiting at a bar?

14 MR. MARTIN: It's a hard limiting, the way it's 

15 presented here, is a limit on the length of the program as 

16 stated.

17 MR. ROBERTS: Thank you. Brad, please.

18 MR. ADAMS: I just want to state on the record that 

19 it's unfortunate Michael Harmon was not nominated or confirmed 

20 he was nominated to this committee because he would bring so 

21 much more than I'm able to bring. I've never been at or ever 

22 run a cosmetology school, but I'm here representing about 

23 1,200 institutions, which is 50 percent of our industry. And 

24 that's unfortunate, frankly, because I don't really know what 

25 I'm talking about here, but I do support what Deb and Anne 

26 spoke to because that makes sense to me. Leave it as it was. 

27 Why the Department would not fund states that choose to 

28 require more clock hours to, hopefully, I don't know, be a 

29 better cosmetologist. I don't know if there's any 
Committee Meetings - 02/17/22 66

1 documentation on that. I don't know. But I mean, I understand 

2 State of Oregon has 2,300 clock hours for training. That seems 

3 like a state issue, not the Department of Ed issue. And so I 

4 back Debbie and Anne's comments there that and I think we 

5 should have put Michael on this committee. Thank you.

6 MR. ROBERTS: Thanks, Brad. Johnson, I know your hand 

7 was raised and now we moved to 26 did you want to make the 

8 comment or pose the question? I want to make sure we didn't 

9 lose you.

10 MR. TYLER: I was going to talk about transcript 

11 withholding and we're about to break for lunch. I think it's 

12 more appropriate to get more feedback on it after the break.

13 MR. ROBERTS: Okay, understood. Appreciate it. Any, I 

14 know that we're about four minutes from lunch and I loathe 

15 keep people from that. But is there any final comment anyone 

16 would want to make on question 26 prior to our hour break? 

17 Because if not, we can temperature check up to 26 and then 

18 start at the top of the hour with 32 and we can return to 

19 Johnson.

20 MR. MARTIN: I'd like to ask one question of the 

21 group, Brady. I've heard we've heard a lot of criticism and 

22 push back by people with some issues about 26. Is there any, I 

23 wanted to gauge, is there any support for keeping it as it's 

24 written or any other views than those that certainly people of 

25 eloquently expressed their concerns with it? I just wanted to 

26 gauge if there's any, what the support level is for the way 

27 it's written or maybe another interpretation. If I may ask 

28 that?
Committee Meetings - 02/17/22 67

1 MR. ROBERTS: Great, thanks. Johnson. We can check 

2 that I'm seeing some immediate reactions, but I wanted to give 

3 the committee a chance to respond orally to the Department's 

4 question. But Johnson, go ahead.

5 MR. ADAMS: What are we voting on? I'm sorry.

6 MR. ROBERTS: I don't think we're voting on anything 

7 right now.

8 MR. MARTIN: We're not voting on anything. I just 

9 asked. I just wanted to ask if there was, if there was what 

10 the level of support for 26 as it's written.

11 MR. TYLER: And I want to just respond to Brad's 

12 comment and the concern about the clock hours and how states 

13 are doing this. I put earlier on a chat about Iowa's clock 

14 hours for beauty school. I mean, it's phenomenal the number of 

15 hours they want you to participate in and it really is a 

16 prescription of entering the field. It seems to, it doesn't, 

17 but with aid being so easy to get as long as you're in a 

18 qualified program, people can spend a huge amount of time in a 

19 field of study that's just not going to pay off that debt. And 

20 you know, I think I tried to say, you know, the lawyers do the 

21 same thing. We don't want other people coming into our states 

22 and lobbies say we're not going to recognize Connecticut and 

23 New Jersey and New York and so forth. And I think that's part 

24 of what's going on in some of these really high clock hours. 

25 And that's for the states to figure out. But it's unfair to 

26 penalize the students who are trying to enter a field that 

27 they don't know that much about and take out a huge amount of 

28 debt that they may never be able to pay off.
Committee Meetings - 02/17/22 68

1 MR. MARTIN: Thank you, Johnson.

2 MR. ROBERTS: Thank you. Debbie.

3 MS. COCHRANE: You know, I just I would agree, I know 

4 I've already I've already spoken on this topic. I do just want 

5 to say I do agree that there is a problem here at the state 

6 level, but I think it's also for states to fix and sort out. 

7 And just point out that the language of the requirement is on 

8 the institution of the institution must demonstrate a 

9 reasonable relationship between the length of the program and 

10 the entry level requirements for the occupation. And I don't 

11 know if there is a clearer, reasonable relationship between 

12 the length of the program and entry level requirements and 

13 what's required for licensure. I just don't know how we can 

14 use that entry to the language that would provide for a 

15 median. And I also think it undercuts both the federal 

16 investment in those students’ educations and jeopardizes their 

17 ability to get gainful employment because they'll be cut off 

18 my program.

19 MR. MARTIN: Thanks.

20 MR. ROBERTS: Thank you. Jamie. You'll be our final 

21 comment prior to our lunch break, so take it away.

22 MS. STUDLEY: I'm glad I relocated myself after 

23 Debbie. I will just agree with her wholeheartedly.

24 MR. ROBERTS: Excellent. In doing so, you've given 

25 the committee a full extra minute to take a step away from 

26 their computer. So thank you for that. Thank you very much for 

27 the discussion this morning. I know it was jam packed. We will 
Committee Meetings - 02/17/22 69

1 resume right at 1:00 p.m. Eastern. And look forward to 

2 continuing the discussion then. So thank you and see you in an 

3 hour.
Committee Meetings - 02/17/22 70

1 Department of Education, Office of Postsecondary 

2 Education

3 Zoom Chat Transcript

4 Institutional and Programmatic Eligibility Committee

5 Session 2, Day 4, Morning, February 17, 2022

6 From Yael Shavit State AG (A) to Everyone:

7 My audio wasn't working, good morning everyone

8 From Brad Adams (P - Proprietary Institutions) to

9 Everyone:

10 +1 barmak comments

11 From Jessica Ranucci (A)- Legal Aid to Everyone:

12 +1 to Barmak. We strongly encourage the Department 

13 to reconsider its legal authority to continuously allow 

14 schools with expired PPPAs to receive Title IV funds.

15 From Carolyn Fast (P) Consumer advocates/Civil 

16 Rights to Everyone:

17 +1 to Barmak's concerns.

18 From Jessica Ranucci (A)- Legal Aid to Everyone:

19 +1 Ernest. Thank you.

20 From Marvin Smith (P) 4 Year Publics to Everyone:

21 Thanks for sharing Ernest!

22 From Amanda Martinez (P-Civil Rights) to Everyone:
Committee Meetings - 02/17/22 71

1 Thank you for sharing Ernest!

2 From Emmanual Guillory (A-PNPs) to Everyone:

3 Ernest, thank you for sharing your story.

4 From Yael Shavit State AG (A) to Everyone:

5 Ernest, thank you for sharing your mother's story.

6 From Brad Adams (P - Proprietary Institutions) to

7 Everyone:

8 +1 Ernest. Yes thank you for sharing your story

9 From David Socolow (A) State agencies to Everyone:

10 Thank you for your compelling personal story, Ernest

11 From Johnson (P) Legal Aid to Everyone:

12 Thank you Ernest. A very compelling statement.

13 From Sam Veeder (P) Fin Aid Admins to Everyone:

14 Yes, thank you for sharing Ernest.

15 From Anne Kress (P) Comm College to Everyone:

16 Thank you for sharing your mother’s story, Ernest.

17 From Jaylon Herbin (A) Consumer and Civil Rights to

18 Everyone:

19 Thank you for sharing Ernest!

20 From Barmak Nassirian (A) Servicemembers & Vets to

21 Everyone:
Committee Meetings - 02/17/22 72

1 https://predatorystudentlending.org/wp2 content/uploads/2022/02/ITT-Report.pdf

3 From Ernest Ezeugo (P) Students and Loan Borrowers

4 to Everyone:

5 Thanks, all. I would just finish by saying that's 

6 why these issues are important. These programs affect real 

7 people, beyond those individuals to their families. 

8 Unscrupulous ones and even some well-meaning but poorly 

9 performing ones need to be held accountable for the outcomes 

10 of their students, especially when issues at the system level 

11 exacerbate conditions that already complicate the ability of 

12 people of color, who these institutions are known to recruit, 

13 to be gainfully employed.

14 From Debbie Cochrane (P), State agencies to

15 Everyone:

16 +1 to Ernest's point in the chat. Thank you, Ernest.

17 From Emmanual Guillory (A-PNPs) to Everyone:

18 +1 Ernest

19 From Adam Welle, State AGs (P) to Everyone:

20 +1 to Ernest

21 From Kelli Perry - (P) Private Non-Profit 

22 Institutions to Everyone:

23 thank you Ernest for sharing your story and comments
Committee Meetings - 02/17/22 73

1 From Barmak Nassirian (A) Servicemembers & Vets to

2 Everyone:

3 +1 to Ernest. I am glad to have the authentic voice 

4 of students affected by the dysfunctions of the current system 

5 represented on this Committee.

6 From Beverly Hogan Primary/MSI to Everyone:

7 +1 to Ernest. I share your concern. I had heard 

8 similar stories. Glad you are at the table. How do we

9 effectively weed out the "bad actors" without tearing up the 

10 garden of "good actors"?

11 From Brad Adams (P - Proprietary Institutions) to

12 Everyone:

13 +1 good question dave

14 From Amanda Martinez (P-Civil Rights) to Everyone:

15 +1 to Ernest and I would say that in these 

16 negotiations we are talking about a share of students who 

17 attend a subset of the higher ed sector, that being--gainful 

18 employment programs. Those students tend to be Pell grant 

19 recipients, Black and Latino. Advancing racial equity requires 

20 a set of targeted policies that protect a targeted set of 

21 students. The gainful employment rule is an example of 

22 targeted universalism that will prohibit institutions from 

23 engaging in structural and historical targeting of low-income, 

24 veteran and communities of color.

25 From Barmak Nassirian (A) Servicemembers & Vets to

26 Everyone:
Committee Meetings - 02/17/22 74

1 I would encourage colleagues, particularly ED 

2 officials, to read this infuriating report on ITT and the 

3 organized fraud that it managed to sustain under the watchful 

4 eyes of its authorizer, its accreditor and the Department

5 From Barmak Nassirian (A) Servicemembers & Vets to

6 Everyone:

7 https://predatorystudentlending.org/wp8 content/uploads/2022/02/ITT-Report.pdf

9 From Beverly Hogan Primary/MSI to Everyone:

10 +1 to Amanda's comment. Yet some among my community 

11 of institutions oppose GE in principle due to the perceived 

12 accountability measurement flaws.

13 From Brad Adams (P - Proprietary Institutions) to

14 Everyone:

15 +1 Jamienne

16 From Anne Kress (P) Comm College to Everyone:

17 +1 Jamie

18 From Ernest Ezeugo (P) Students and Loan Borrowers

19 to Everyone:

20 +1 Amanda's comment in chat.

21 From Brad Adams (P - Proprietary Institutions) to

22 Everyone:

23 +1 Barmak
Committee Meetings - 02/17/22 75

1 From Jessica Ranucci (A)- Legal Aid to Everyone:

2 Page 18 has more explicit language on this: “backed 

3 by the full faith and credit of the State, local, or municipal 

4 government entity, Tribal authority, or other government 

5 entity"

6 From Brad Adams (P - Proprietary Institutions) to

7 Everyone:

8 +1 Barmak

9 From Carolyn Fast (P) Consumer advocates/Civil 

10 Rights to Everyone:

11 +1 to Barmak

12 From Ernest Ezeugo (P) Students and Loan Borrowers

13 to Everyone:

14 + 1 Barmak

15 From Jessica Ranucci (A)- Legal Aid to Everyone:

16 +1 to Carolyn

17 From Sam Veeder (P) Fin Aid Admins to Everyone:

18 This is the language that the FA administrators 

19 proposed: (ii) An institution’s certification automatically 

20 becomes provisional upon notification from the Secretary if – 

21 (B) The institution has received the same material finding of 

22 noncompliance on a program review or audit for more than two 

23 consecutive years without demonstrating corrective action; or

24 From Marvin Smith (P) 4 Year Publics to Everyone:
Committee Meetings - 02/17/22 76

1 +1 Sam

2 From Anne Kress (P) Comm College to Everyone:

3 +1 Sam

4 From Brad Adams (P - Proprietary Institutions) to

5 Everyone:

6 I agree with Sam's comment, but I want to add in the 

7 word The institution has received the same finding of material 

8 noncompliance on more than one program review or audit in more 

9 than two institutional fiscal years. Materiality should be 

10 defined at more than 10% of title IV funds.

11 From Kelli Perry - (P) Private Non-Profit 

12 Institutions to Everyone:

13 +1 Sam

14 From Brad Adams (P - Proprietary Institutions) to

15 Everyone:

16 add in the word materiality

17 From Beverly Hogan Primary/MSI to Everyone:

18 +1 to Sam

19 From Brad Adams (P - Proprietary Institutions) to

20 Everyone:

21 +1 Sam

22 From Brad Adams (P - Proprietary Institutions) to

23 Everyone:
Committee Meetings - 02/17/22 77

1 Dave should respond

2 From Brady FMCS Facilitator to Everyone:

3 Yep- Dave and Sam I will turn to you next

4 From Brad Adams (P - Proprietary Institutions) to

5 Everyone:

6 +1 Dave

7 From Brad Adams (P - Proprietary Institutions) to

8 Everyone:

9 +1 Sam

10 From Jessica Ranucci (A)- Legal Aid to Everyone:

11 +1 to Adam and Debbie

12 From Kelli Perry - (P) Private Non-Profit 

13 Institutions to Everyone:

14 Another way to explain the concept of a material 

15 finding that we are talking about is to look at it as a 

16 systemic problem, not a one off that an individual made a 

17 mistake on and it was caught by the auditors.

18 From Anne Kress (P) Comm College to Everyone:

19 +1 Kelli

20 From Sam Veeder (P) Fin Aid Admins to Everyone:

21 +1 Kelli

22 From Adam Welle, State AGs (P) to Everyone:
Committee Meetings - 02/17/22 78

1 +1 to Carolyn

2 From Jessica Ranucci (A)- Legal Aid to Everyone:

3 +1 to Carolyn

4 From Debbie Cochrane (P), State agencies to

5 Everyone:

6 If systemic problems are found, it should be an 

7 automatic trigger. The Department should have the discretion 

8 to ignore one-off mistakes, but not systemic problems.

9 From Yael Shavit State AG (A) to Everyone:

10 +1 to Debbie

11 From Jessica Ranucci (A)- Legal Aid to Everyone:

12 +1 to Debbie

13 From Carolyn Fast (P) Consumer advocates/Civil 

14 Rights to Everyone:

15 +1 to Debbie

16 From Ernest Ezeugo (P) Students and Loan Borrowers

17 to Everyone:

18 +1 Debbie

19 From Adam Welle, State AGs (P) to Everyone:

20 +1 to Jessica

21 From Brad Adams (P - Proprietary Institutions) to

22 Everyone:
Committee Meetings - 02/17/22 79

1 i agree Jessica. it seems reasonable to me as well

2 From Carolyn Fast (P) Consumer advocates/Civil 

3 Rights to Everyone:

4 +1 to Jessica

5 From Ernest Ezeugo (P) Students and Loan Borrowers

6 to Everyone:

7 Agreed, Jessica.

8 From Brad Adams (P - Proprietary Institutions) to

9 Everyone:

10 lets temperature check the fax

11 From Ernest Ezeugo (P) Students and Loan Borrowers

12 to Everyone:

13 Agreed Brad, lol.

14 From Brad Adams (P - Proprietary Institutions) to

15 Everyone:

16 i want an all thumbs up vote

17 From Brad Adams (P - Proprietary Institutions) to

18 Everyone:

19 (4) The Department must notify a person (whether the 

20 owner is a natural person or a corporate entity) prior to 

21 requesting that such person sign any program participation 

22 agreement (including provisional or temporary provisional 

23 program participation agreements) if the Department intends to 

24 impose a personal financial guarantee on the person for 
Committee Meetings - 02/17/22 80

1 performance of the institution’s responsibilities, but in no 

2 event shall the Department require any person to personally 

3 guarantee financial performance (whether the person is a 

4 natural person or a corporate entity) if the institution meets 

5 the criteria under 20 U.S.C. §1099c(e)(4).

6 From Jessica Ranucci (A)- Legal Aid to Everyone:

7 Johnson is coming to the table to make a comment

8 From Barmak Nassirian (A) Servicemembers & Vets to

9 Everyone:

10 +1 on Anne

11 From Brad Adams (P - Proprietary Institutions) to

12 Everyone:

13 +1 Anne

14 From Marvin Smith (P) 4 Year Publics to Everyone:

15 +1 Anne and high five

16 From Sam Veeder (P) Fin Aid Admins to Everyone:

17 +1 Anne!

18 From Kelli Perry - (P) Private Non-Profit 

19 Institutions to Everyone:

20 +1 Anne

21 From Beverly Hogan Primary/MSI to Everyone:

22 +1 to Anne and Debbie
Committee Meetings - 02/17/22 81

1 From Brad Adams (P - Proprietary Institutions) to

2 Everyone:

3 good question barmak

4 From Brad Adams (P - Proprietary Institutions) to

5 Everyone:

6 may i respond

7 From Brad Adams (P - Proprietary Institutions) to

8 Everyone:

9 The Department has been asking owners to sign an 

10 appendix saying they are jointly and severally liable for 

11 performance

12 From Kelli Perry - (P) Private Non-Profit 

13 Institutions to Everyone:

14 I has a question regarding (3) as well not sure if 

15 all hands are for (3)

16 From Brady FMCS Facilitator to Everyone:

17 Johnson, Adam, and Jamie- if it is okay with you, I 

18 will jump around on Question 3

19 From Brady FMCS Facilitator to Everyone:

20 Feel free to chime in on 3 or we will return to the 

21 queue shortly

22 From Brad Adams (P - Proprietary Institutions) to

23 Everyone:
Committee Meetings - 02/17/22 82

1 i recommend holding all comments on 26 until we 

2 finish on 3

3 From Jamienne Studley to Everyone:

4 My comment is about (26) specifically. Manage as you 

5 see fit.

6 From Adam Welle, State AGs (P) to Everyone:

7 I was going to comment on 3

8 From Beverly Hogan Primary/MSI to Everyone:

9 Sorry. I got disconnected. We are under a tornado 

10 threat.

11 From Ernest Ezeugo (P) Students and Loan Borrowers

12 to Everyone:

13 That's terrifying, Beverly. Stay safe!

14 From Jamienne Studley to Everyone:

15 Good luck, Beverly. Hope you're safe.

16 From Amanda Martinez (P-Civil Rights) to Everyone:

17 Yes, stay safe Beverly! Thank you for even being on!

18 From Brad Adams (P - Proprietary Institutions) to

19 Everyone:

20 I hope you stay safe Beverly and that it will safely 

21 pass so you can join again

22 From Emmanual Guillory (A-PNPs) to Everyone:
Committee Meetings - 02/17/22 83

1 stay safe Dr. Hogan! Glad you are back.

2 From Beverly Hogan Primary/MSI to Everyone:

3 Safe so far and taking precautions as much as 

4 possible.

5 From Kelli Perry - (P) Private Non-Profit 

6 Institutions to Everyone:

7 Stay safe Beverly

8 From Jamienne Studley to Everyone:

9 i would now like to speak to 3

10 From Brad Adams (P - Proprietary Institutions) to

11 Everyone:

12 should we vote on 3 before 26 given the commentary

13 From Brad Adams (P - Proprietary Institutions) to

14 Everyone: 

15 lets do 3 and 26 separately

16 From Brad Adams (P - Proprietary Institutions) to

17 Everyone:

18 +1 debbie

19 From Beverly Hogan Primary/MSI to Everyone:

20 +1 to Debbie

21 From Anne Kress (P) Comm College to Everyone:
Committee Meetings - 02/17/22 84

1 +1 Debbie