Committee Meetings - 02/16/22 1 

DEPARTMENT OF EDUCATION

OFFICE OF POSTSECONDARY EDUCATION

INSTITUTIONAL AND PROGRAMMATIC

ELIGIBILITY COMMITTEE

SESSION 2, DAY 3, AFTERNOON

February 16, 2022

On the 16th day of February, 2022, the following 

meeting was held virtually, from 1:00 p.m. to 4:00 p.m., 

before Jamie Young, Shorthand Reporter in the state of 

New Jersey. 
Committee Meetings - 02/16/22 2 

1 PROCEEDINGS

2 MS. JEFFRIES: Good afternoon and welcome back, 

3 everyone from the lunch break. I'm Commissioner Cindy 

4 Jeffries, I will facilitate the discussions this afternoon. 

5 And with that, we will move directly into the financial 

6 responsibility, issue paper number four. Greg, do you want to 

7 walk us through that?

8 MR. MARTIN: Of course, we'll just go through as we 

9 recall from our discussions in January, the Department has 

10 removed and reserved 668.15 and moved the relevant parts of it 

11 into the financial responsibility. Excuse me, the rules under 

12 subpart L. So let's go and pass all that. And [inaudible] 

13 those strikes, and we take it over to on page eight, we see 

14 we'll start with compliance audits and financial statements at 

15 the bottom of that page. So let's start there. It's 668.23. 

16 I'll wait for Vanessa to get there. There we go. Fantastic. 

17 Okay, so we're going to begin at 668.23, compliance audits and 

18 audited financial statements and pointing out here that you 

19 see under (a)(4), that in response to questions from 

20 negotiators about timing, we have revised, we have revised the 

21 language to clarify that audit reports must be submitted by 

22 the earlier of six months after the end of the institution's 

23 fiscal year, or 30 days after the later of the reports on 

24 compliance audits and audited financial statements. So you see 

25 that reflected there in the language in 4 and submission 

26 deadline, except as provided by the Single Audit Act, an 

27 institution must submit annually to the Secretary, its 

28 compliance audit and its audited financial statements by the 
Committee Meetings - 02/16/22 3 

1 date that is, the earlier of six months after the last date of 

2 the institution's fiscal year, or 30 days after the date. The 

3 date of the later auditor’s report with respect to the 

4 compliance audit and audited financial statements. So just 

5 want to make that clear and we'll move down, discuss all of 

6 these as one section because it's not very big. So let's move 

7 down to audited financial statements in (d). See here in 

8 subparagraph one, we have added a sentence requiring 

9 disclosure of audited financial statements to attest that 

10 there are no related party transactions. If that is the case, 

11 this will provide more clarity and greater assurance to the 

12 Department that the statements were comprehensive. We also 

13 propose additional edits to address challenges the Department 

14 may have in obtaining adequate and comparable information 

15 about institutions that are owned by foreign entities or 

16 individuals. This change requires the submission of the date 

17 of the organization, certificate of good standing and author 

18 and authorizing statute for the entity status, as well as 

19 other information the Secretary may require translated into 

20 English. So you could see the reference to third party related 

21 party transactions, rather at the bottom of a (d)(1) there. So 

22 just to where it says if there are no related party 

23 transactions, then a footnote must be added to disclose this 

24 fact. And then the other point you see in 2, romanette 2, for 

25 domestic, for domestic or foreign institution that is owned 

26 directly or indirectly by any foreign entity or individual 

27 holding at least 50 percent voting or equity interest in the 

28 institution, the institution must provide documentation of the 

29 entity status under the law of the jurisdiction under which 

30 the entity is organized to include, at a minimum, the date of 
Committee Meetings - 02/16/22 4 

1 organization, a current certificate of good standing and a 

2 copy of the authorizing statute for such entity status. 

3 Secretary may also require the submission of additional 

4 documents related to the entity's status under the foreign 

5 jurisdiction as needed to assess the entity's financial 

6 status. Documents must be translated into English, so that is 

7 everything for 23. We’ll open it up for discussion on those. 

8 MS. JEFFRIES: Okay, I need to make a couple of notes 

9 here. David Socolow is at the table for the state higher ed 

10 executive officer officers and agencies and Adam Welle is back 

11 in for state attorneys general. So with that, Jamie, you have 

12 you have the floor. You're on mute.

13 MS. STUDLEY: I apologize, that's a holdover.

14 MS. JEFFRIES: Oh, okay. Emmanual, I see a note that 

15 you have a question taking us back to gainful employment, is 

16 it possible that you could submit that for the Department so 

17 that we can move forward with this rather than reopening 

18 discussion on gainful employment?

19 MR. GUILLORY: Sure. I think I moreso had a comment 

20 because I felt like we weren't completely done with that 

21 before lunch, but I can always share it later.

22 MS. JEFFRIES: I'd appreciate it so that we can try 

23 to get as much of this coverage so the negotiators can get 

24 their perspectives out to the Department on the issues, but 

25 just feel free to send it to me and I will send it immediately 

26 to the Department, okay? Thank you for that. Other discussion 

27 on 668.23 in financial responsibilities. Okay, I'm not seeing 
Committee Meetings - 02/16/22 5 

1 any hands. Greg, do you want a temperature check on these 

2 changes?

3 MR. MARTIN: Oh, sure.

4 MS. JEFFRIES: Okay. If I could please see your show 

5 of thumbs, that'd be great. Beverly, I can't see yours. There 

6 you are. Alright, I'm not seeing any thumbs down.

7 MR. MARTIN: Okay, given that, we'll move into a 

8 discussion of moving into subpart L and we're moving into 

9 section 668.171 General. And it's up there on the screen, 

10 thank you, Vanessa. And so we’re moving down to (b)(3). I want 

11 to point out here that we there were some comments about in 

12 (b)(3), where the institution is able to meet all of its 

13 financial obligations and provide the administrative resources 

14 necessary to comply with Title IV HEA program requirements in 

15 this institution is not deemed able to meet its financial or 

16 administrative obligations if and one of those was, it fails 

17 to make in, I should say, in romanette 3, it fails to make a 

18 payment in accordance with an existing, undisputed financial 

19 obligation. So there were some questions about that we want to 

20 address here just to say we believe this event already 

21 includes failure to pay state payroll taxes, as that was 

22 brought up at the previous session, and we appreciate the 

23 partnership of our state regulators. However, we do not think, 

24 we should imply the provision might be narrower than it is by 

25 mentioning only one such example in the regulation. I just 

26 wanted to point that out and also in romanette 4 we've 

27 slightly tweaked the language here to further clarify our 

28 meaning. But don't consider this to be a substantive change, 

29 so take a look at what we did in (iv), just itfails to satisfy 
Committee Meetings - 02/16/22 6 

1 payroll obligations in accordance with its published payroll 

2 schedule and moving over to (4), there's no change there, and 

3 we did have a suggestion to include past ownership as an as an 

4 executive or officer of an institution whose closure resulted 

5 in the school in the closed school discharge of at least 10 

6 percent. While we appreciate the suggestion, we note that the 

7 outstanding liabilities already covered in the regulations if 

8 closed school liabilities have been repaid. However, we are 

9 not persuaded that the circumstance applies under financial 

10 responsibility. So it's a very short section there, (b), but 

11 in the interests of trying to go by paragraph and stick with 

12 that, I will open it up for discussion for that and then take 

13 a temperature check.

14 MS. JEFFRIES: Okay. Brad, go ahead, please.

15 MR. ADAMS: Just really quick and I mentioned this 

16 week one, but just for the record, I strongly encourage the 

17 Department to relook at the composite score. It is set up to 

18 encourage institutions to do financially dumb things that are 

19 hurting students and costing more in tuition. So to have 

20 financial responsibility with no composite score review is 

21 unfortunate, and we really need to take a look at that very 

22 soon. Thank you.

23 MR. MARTIN: Thank you.

24 MS. JEFFRIES: Thank you, Brad. Other comments from 

25 the negotiators? Okay, I want to note that Kelli Perry is back 

26 at the table. Welcome back, Kelli. Barmak.

27 MR. NASSIRIAN: Yeah. My only comment is that in 

28 enumerating specific markers of failure, that you know, one 
Committee Meetings - 02/16/22 7 

1 could conjure up all kinds of other equally as troubling 

2 things, right? I mean, an institution would not be financially 

3 responsible if it were to take on massive debt that it doesn't 

4 have adequate resources to take on. I understand the 

5 construct, but it just worries me that you're enumerating a 

6 subset of specifics without being particularly comprehensive 

7 or setting up a broad, universal rule of which these would be 

8 illustrations.

9 MR. MARTIN: Thank you. If you have other suggested 

10 text, Barmak, you're welcome to submit it.

11 MS. JEFFRIES: Thanks, Barmak. Anyone else? Before we 

12 do the temperature check on 668.171(b)? Okay. Seeing none. Can 

13 we go ahead and see your thumbs on that 668.171(b)? My screen 

14 switched there. I'm not seeing Kelli. Okay, I'm not seeing any 

15 thumbs down. Oh, Johnson, you have your hand up.

16 MR. TYLER: Yeah, I'm sorry, I'm joining late, I just 

17 got off of an airplane, I apologize for [inaudible]. So I was, 

18 you know, I one concern I've have had and this has to do with 

19 transcript withholding is I've essentially seen this as a tool 

20 to keep people enrolled in schools, which I think obviously 

21 the schools need seats filled. But I had suggested earlier in 

22 our submissions that that be a sign of a lack of financial 

23 responsibility when that is being done to keep students at 

24 school. So I just wanted to, you know, bring that issue up 

25 again. I think it occurs here. The Consumer Protection Bureau 

26 criticized ITT in a suit for keeping students at the school 

27 by, you know, using their inability to move elsewhere with 

28 transcript withholding on relatively small debts. So I 
Committee Meetings - 02/16/22 8 

1 suggested that earlier on, and I just want to note that for 

2 the record here.

3 MS. JEFFRIES: Okay, thank you for that Johnson and 

4 please drive safely from the airport. So since Johnson joined 

5 and didn't have a chance to weigh in on the temperature check, 

6 let's rerun that one more time. And that's on 668.171(b) only. 

7 Okay, so we have one thumbs down. And Johnson, just confirm if 

8 that was for the reasons you just stated.

9 MR. TYLER: Yeah, absolutely.

10 MS. JEFFRIES: Okay. Alright, great. Then we can go 

11 ahead and move on. Appreciate it. So Greg, you want to take us 

12 into paragraph C?

13 MR. MARTIN: Sure. Let's- there we are, paragraph C, 

14 so we're moving into the mandatory triggering events. And just 

15 to set this up, an institution is not able to meet its 

16 financial or administrative obligations under paragraph B3 

17 romanette 5 of this section if, and these are mandatory 

18 triggers and a couple of things to discuss here in response to 

19 concerns from negotiators about the administrative burden 

20 associated with the trigger here first, after looking under 

21 romanette (i)(A). After the end of the fiscal year in which 

22 the Secretary has most recently calculated the institution's 

23 composite score, if the institution's composite score was less 

24 than 1.5 or anything described this subsection, the 

25 institution is required to pay a debt and we're not going to 

26 read through all of that, but in response to concerns about 

27 the events from negotiators about the administrative burden 

28 associated with this trigger, we have narrowed it only to 
Committee Meetings - 02/16/22 9 

1 institutions with a failing or zone composite score or 

2 institutions that see an outcome of one of the events in 

3 subparagraph B related to state, federal or certain qui tam 

4 lawsuits. Also and then we'll move down to (B), if the 

5 institution or any entity whose financial statements were 

6 submitted in the prior fiscal year to meet the requirements of 

7 668.23 or in the year following a change in ownership, the 

8 entity following a change in ownership, the entity whose 

9 financial statements were submitted to meet the requirements 

10 in 600.20 (g) or (h) is sued for financial relief or in an 

11 action brought on or after July 1, 2023 by a federal estate 

12 authority through a qui tam lawsuit, or in which the federal 

13 government has intervened and the suit has been pending for 

14 120 days. So here we are, further clarifying the language to 

15 reflect it includes the institution or any owner whose 

16 financial statements were relied upon to meet the financial 

17 responsibility requirements, including for a change of

18 ownership. And we added a comma there, where at the bottom 

19 where it says or through the qui Tam lawsuit with the federal 

20 government has intervened, (comma) and the suit has been 

21 pending for 120 days, so just want to just want to point that 

22 out. And then moving down to romanette 2, withdraw of owners’ 

23 equity, we have slightly tweaked the wording in this section, 

24 the leading the words from the institution which are 

25 unnecessary and adding general partnership to clarify the 

26 application of the exception. We also clarified this refers to 

27 the institution or its owner. So there you can see that 

28 reflected withdrawal of owner's equity for proprietary 

29 institution whose component, whose composite score rather, is 

30 less than 1.5. There is a withdrawal of owner's equity by any 
Committee Meetings - 02/16/22 10

1 means, including by declaring a dividend, unless the 

2 withdrawal is a transfer to an entity included in the 

3 affiliated entity group on whose basis the institution's 

4 composite score was calculated or the equivalent of wages and 

5 a sole proprietorship or general proprietorship or a required 

6 dividend or return of capital. And then we're going to move 

7 down to changes with respect to gainful employment, so that's 

8 romanette 3. We have proposed a new trigger that requires 

9 institutions to post a letter of credit if they have a failing 

10 GE program with Title IV volume or, I should say, failing 

11 programs with Title IV volume that totals at least 10 percent 

12 of the total Title IV volume since the failure of those 

13 programs and the subsequent loss of Title IV eligibility to 

14 the program could lead to a significant financial loss for the 

15 college. And next move down to (iv), which is teach-out plans. 

16 At the suggestion of negotiators, we have added an additional 

17 condition or we've added additional conditions in which the 

18 accreditors are required to obtain the teach-out plan in the 

19 regulations. We believe these are major events that warrant 

20 financial protection to students, so you can see that 

21 reflected in (iv) of the institution, romanette 4, the 

22 institution is required to submit teach out plan and/or 

23 agreement for a reason described in 34 CFR 602.24(c)(1) and 

24 (c)(2) romanette 2 through 5 if that if that covers the 

25 closing of the institution or any branches of the institution. 

26 And going to look at (v) romanette 5 state actions. The 

27 institution decided by a state licensing or authorizing agency 

28 for failing to meet state requirement to meet a state agency 

29 requirements, and the agency provides notice of a withdrawal 

30 or terminate the institution's licensure or authorization if 
Committee Meetings - 02/16/22 11

1 the institution does not take steps necessary to comply with 

2 that requirement. And I will, I don't want to take I'm not 

3 going to take a temperature check here, but I want to stop 

4 here because we've gone over quite a few of these and I want 

5 to give people an opportunity to comment while they're still 

6 fresh in folk's minds. And then then we can move on to the 

7 remainder of the mandatory triggers.

8 MS. JEFFRIES: Okay, with that, we open it up for 

9 discussion. I believe we're on paragraph A of, well, A under 

10 paragraph C of the document up to, did you end at11 MR. MARTIN: I ended at romanette 5.

12 MS. JEFFRIES: Yeah, that's what I thought.

13 MR. MARTIN: State actions, so we'll take it through 

14 there and then we'll continue with it, but I just want to give 

15 people an opportunity to.

16 MS. JEFFRIES: Sure. No, I think that makes sense and 

17 there is actually some requests to break it down a little bit 

18 more like this for discussion. So I appreciate that. Dave, you 

19 are up first.

20 MR. MCCLINTOCK: Yeah, I have some just logistic kind 

21 of clarification questions as an auditor, how this would work. 

22 Greg, I can share those now if you want or wait until the 

23 negotiators share their questions. Either way works for me.

24 MR. MARTIN: You may bring those up and also please 

25 put them in the comments. I mean, put them in the chat.
Committee Meetings - 02/16/22 12

1 MR. MCCLINTOCK: Okay. Yeah, so under romanette (i) 

2 about the recalculation of the composite score, just as an 

3 auditor, raise this questions. So I don't know, the composite 

4 score gets calculated based on audited financial statements 

5 that get submitted to the Department. So would a recalculation 

6 also require a new audit in order to be submitted or how would 

7 that function?

8 MR. MARTIN: I will take that back to our accounting 

9 people, David, so. 

10 MR. MCCLINTOCK: Okay.

11 MR. MARTIN: If you put that in that, put that in the 

12 remarks and I'll make sure I get a response to that. I just 

13 want to make sure we run it by people who have been 

14 appropriately trained. [Interposing]

15 MR. FINLEY: I want to try and answer that one for 

16 Mr. McClintock. It does not trigger a new audited financial 

17 statement. It would be a calculation where that adjustment was 

18 applied to the prior most recently completed audited financial 

19 statement, is my understanding.

20 MR. MCCLINTOCK: Okay, and then if it's getting 

21 applied to that financial statement, we'll need clarification 

22 about how that would flow through everything, so are you just 

23 adjusting equity or the unrestricted net assets?

24 MR. FINLEY: See, when you go more than one question 

25 deep, then I have to take it back.
Committee Meetings - 02/16/22 13

1 MR. MCCLINTOCK: I'll put it the chat. So obviously, 

2 the composite score incorporates the entire activity of a 

3 school for the year ending on that date. So a single event 

4 after, it's just saying to recalculate? Doesn't really provide 

5 instructions for how that would be done. And then the other, 

6 just clarification question I think that I have for now is 

7 further down under section B about the institution to 

8 recalculate composite score or in the year following a change 

9 in ownership and in particular for the year following a change 

10 in ownership. And the change of ownership the financial 

11 responsibility is measured based on the opening balance sheet 

12 ratios, and so the entity would not have a composite score to 

13 recalculate. So there will just need to be some clarifications 

14 so I can put both of those in the chat.

15 MS. JEFFRIES: Greg.

16 MR. MARTIN: Thank you. Thank you.

17 MS. JEFFRIES: Thank you. Alright, thanks, Dave. Just 

18 a couple of changes at the table. Samantha Veeder is back at 

19 the table for financial aid and Yael Shavit is now in for 

20 state attorneys general. And with that, Yael, you are up next.

21 MS. SHAVIT: Thank you. Apologies. I'm going to ask 

22 you to walk me through something slowly. Can you walk me 

23 through the significance of the change to the romanette 

24 (i)(B)?

25 MR. MARTIN: Which one? I, I- 
Committee Meetings - 02/16/22 14

1 MS. SHAVIT: It's the submission of financial 

2 statements with respect to the use of filing of a state 

3 enforcement action as a triggering event.

4 MR. MARTIN: Let's see if I can. You're talking about 

5 the institution or any entity whose financial statements were 

6 submitted that7 MS. SHAVIT: Yes.

8 MR. MARTIN: Okay. Alright. So you're talking about 

9 here where we have added clarified language to reflect it's 

10 the institutional owner whose financial statements were relied 

11 upon to meet the financial responsibility requirements, 

12 including the change in ownership. So just to review the 

13 institution or any entity whose financial statements were 

14 submitted in the prior fiscal year to meet the requirements of 

15 668.23 or in the year following a change in ownership, the 

16 entity whose financial statements were submitted to meet the 

17 requirements is being sued for financial relief in an action 

18 brought on or after July 21, 2023 by a federal state agency or 

19 authority, rather or through a qui tam lawsuit. This just does 

20 as a specific I mean, this would be to account for there is an 

21 action on the part of any state or federal authority or where 

22 there's a qui tam lawsuit that it would it would be a 

23 mandatory triggering event.

24 MS. SHAVIT: Sorry, you just the language that you 

25 added, I thought I'd heard you say that it was intended to be 

26 limiting language to address concerns about administrative 

27 burden, and so I was wondering how that actually functions.
Committee Meetings - 02/16/22 15

1 MR. MARTIN: For this one here. I don't know if this 

2 was, I don't believe this was a burden issue. This was just to 

3 clarify that to reflect that it includes the institution or 

4 the owner whose financial statement was relied upon.

5 MS. SHAVIT: Understood. That's helpful. 

6 MR. MARTIN: That's all we're doing here.

7 MS. SHAVIT: Thank you. No, no. I appreciate it. 

8 Thank you.

9 MS. JEFFRIES: Kelli, you are up next.

10 MS. PERRY: Thank you. Greg, I was hoping you could 

11 help me understand (i)(A). I just I've read it like six times 

12 and I'm really struggling. So I think what I'm reading is that 

13 for institutions whose composite scores were less than 1.5 and 

14 they're required to pay a debt as it relates to B or C. It's 

15 then recalculated and it's less than one, then it's a 

16 mandatory trigger?

17 MR. MARTIN: So [inaudible] after the end of the 

18 fiscal year for which the Secretary has most recently 

19 calculated an institution's composite score, if the 

20 institution's composite score was less than 1.5 or the 

21 institution described in subparagraph B or C of this section 

22 is required to pay any debt or incurs any liability from a 

23 settlement or final judgment determination arising from an 

24 administrative proceeding as described and as a result of the 

25 debts, liabilities or losses that have stemmed from these 

26 actions or events. The institution’s recalculated composite 

27 scores less than 1.0 as determined by the Secretary. So this 
Committee Meetings - 02/16/22 16

1 would be if the way I, and Steve can step in here, if the if 

2 the institution's score was less than 1.5 and these 

3 proceedings, would as a result of these debts, they would go 

4 below it would go to less than 1.0., it triggers the event, 

5 but I'll let Steve comment on that.

6 MR. FINLEY: And that's my understanding, too, Kelli.

7 MS. PERRY: So, so it's only for institutions that 

8 already have, that are in the zone or family that would then 

9 push them below a one. That would be the trigger. 

10 MR. FINLEY: Right. 

11 MR. MARTIN: Correct. 

12 MS. JEFFRIES: Steve, I noticed you had your hand up 

13 before Greg. 

14 MR. FINLEY: I'm going to take- I just wanted to get 

15 in line. You know, I don't want to disrupt anyone ahead of me.

16 MS. JEFFRIES: Okay, great. Thank you. Brad, you're 

17 up next. There you are.

18 MR. ADAMS: I just am baffled here as the accountant 

19 on this committee, how this is going to work, it's similar to 

20 Dave's question, but I mean, at the end of the day, how are 

21 you going to go back in time and run something through your 

22 P&L to calculate the equity reserve and throw something on 

23 your balance sheet that occurred after the fact? You're not 

24 going to submit a new financial statement in the easy audit. I 

25 just think the Department throughout this thing is setting 

26 themselves up for a train wreck on submitting these items as 
Committee Meetings - 02/16/22 17

1 they occur. And then who's responsible for calculating this? 

2 You're going to have CFOs certify, you know, the Department 

3 isn't going to have all the information of the new financial 

4 statements in the easy audit until the next year's audit is 

5 done. So I just I think administratively this is not going to 

6 work. And so but I did want to comment on 1A, I appreciate the 

7 language that was incorporated. I still think and throughout 

8 this document, I still think there's a materiality threshold. 

9 I'll submit that in the chat. But I think using a threshold 

10 that we've used throughout at around 5 percent of Title IV is 

11 a good mark to insert, probably in all of these comments. So 

12 I'll stop there and get back in line and come back with my B 

13 comment. But you're setting yourselves up for an interesting 

14 process in the Department over the next few years. Thanks.

15 MS. JEFFRIES: Thank you, Brad, for that. Barmak.

16 MR. NASSIRIAN: Yeah, I just put in the chat to 

17 question about C1 romanette 1A, Kelli's, the topic of Kelli's 

18 interest. I don't understand why this should be limited only 

19 to those institutions that happen to be in the zone. The 

20 institution could have a spectacular composite score if it 

21 drops below 1.0. That sounds to me like that's trouble. So 

22 that's one. The second question I had has to do with romanette 

23 2, withdrawal of owner's equity. If I understand the cap A and 

24 cap B provisions, they work in tandem with each other and it 

25 sounds like if you allow the payment of equivalent to wages or 

26 required dividends or returns of capital to exempt the 

27 institution from the provision of A that you would allow those 

28 payments to drop an institution below 1.0. Am I correct? Just 

29 because you know, setting up required dividends is not that 
Committee Meetings - 02/16/22 18

1 hard, right? You just draft the contract on the front end and 

2 then don't worry about your composite score because you can 

3 drop below 1.0 and it was required payments. So,you're off the 

4 hook.

5 MS. JEFFRIES: Okay. Thank you, Barmak, and thank you 

6 for putting this in the chat. Steve, you are up next.

7 MR. FINLEY: Okay, thank you. I was just going to I 

8 had gotten some additional information that responded to the 

9 question that Mr. McClintock was raising, which is part of the 

10 proposals in this package will result in a composite score 

11 being calculated based on the new owner when there's a change 

12 of ownership so that score would be recalculated under these 

13 provisions. And I understand the comments have already been 

14 made about the difficulty of taking a subsequent event and 

15 using it to recalculate a score, but mechanically, that's how 

16 this would fit together.

17 MS. JEFFRIES: Thanks, Steve. Go ahead, Dave.

18 MR. MCCLINTOCK: Well, I'll put it the chat, I think 

19 it's a little bit different. I would need to know the 

20 logistics for how do you recalculate if the school operated 

21 and submitted a year's worth of financial statements to 

22 recalculate the composite score. Schools that undergo a change 

23 of ownership might be a new company right that bought a 

24 school, so they don't they don't have a composite score 

25 necessarily from the prior year. The Department does say, 

26 okay, on the date of ownership you have to submit a first day 

27 balance sheet and there's two with the asset test and the 

28 tangible net worth test to determine the financial strength of 
Committee Meetings - 02/16/22 19

1 that institution at that point in time, but there is not a 

2 composite score to recalculate, so I'll put it in the chat. 

3 That's the question for that.

4 MS. JEFFRIES: Thanks, Dave. Carolyn.

5 MS. FAST: I am- share Barmak's question about 

6 restricting romanette 1A to institutions with a composite 

7 score of less than 1.5. It seems to me that that that 

8 limitation doesn't make sense because we're talking about 

9 schools that because of this change would have a score of less 

10 than one. So to me, it seems like excluding schools, it 

11 started off in a good position and ended up in a failing 

12 position doesn't make sense if the goal of the regulation is 

13 to identify schools that are not financially viable, that the 

14 outcome is important, not where they started. I would strongly 

15 suggest that be changed to get rid of the 1.5 requirement.

16 MR. MARTIN: Thank you. We'll take that back.

17 MS. JEFFRIES: Thank you, Carolyn. Brad.

18 MR. ADAMS: Yes, I submitted in this and my previous 

19 comments, but and I guess what was B under romanette 1 on the 

20 entities that have a lawsuit filed? You know, I again. I think 

21 it should be struck. I have a significant problem with every 

22 time a lawsuit is filed that potentially being a mandatory 

23 trigger when the event and the judgment has not occurred yet 

24 and whether or not it is even material is not even defined in 

25 this section. So you're saying that if an institution gets 

26 sued for one hundred dollars and they have a composite score 

27 of less than 1.5, that that could be a mandatory trigger 

28 requiring a letter of credit? Is that what I'm reading here?
Committee Meetings - 02/16/22 20

1 MR. MARTIN: Well, I would point out that in that 

2 section that we talked about a, and let me just find that 

3 again, us, student for financial relief bought on or after 

4 July 1, 2023 by a federal or state authority, which is 

5 generally concerning. We're not talking about, you know, 

6 garden-variety students for $100 here. We're talking about a 

7 federal, state authority bringing a suit against an 

8 institution or a qui tam lawsuit, the nature of which is also 

9 concerning to us because of how broad a qui tam lawsuit is. So 

10 I don't think that we are looking at it in terms of every 

11 small claims suit or something somebody might make. But I'll 

12 ask Steve to elaborate on that since he's here, he's our 

13 attorney.

14 MR. ADAMS: I'll just add to that question then I 

15 guess. As written, not Greg's opinion, as written, if you're 

16 sued, regardless of the amount that you're sued for, it's a 

17 mandatory triggering event.

18 MR. MARTIN: It's again, I say it's not Greg's 

19 opinion, it's how it's written. I mean, so it's by a federal 

20 state authority or through a qui tam lawsuit. So I think there 

21 are there are qualifiers there around that. It doesn't say by, 

22 it doesn't say in this instance any lawsuit. I suppose it 

23 would be possible for a federal or state authorities to sue an 

24 institution over something very minor. I don't think that 

25 would be the norm or that federal or state or any state AGs 

26 would or authorities would use their resources for something 

27 insignificant and minor. Though I don't want to speak for 

28 those entities, but I since this is a legal matter, I'll turn 

29 it over to Steve.
Committee Meetings - 02/16/22 21

1 MR. FINLEY: I think we've got other people at the 

2 table that can speak to that.

3 MR. MARTIN: Okay, well, then we can let them let 

4 them speak as well, but I don't really have much else to say 

5 on that on that topic.

6 MR. ADAMS: But my recommendation is to just add a 

7 materiality threshold. So I'll add that to the chat.

8 MS. JEFFRIES: Thank you, Brad, Greg, and Steve. 

9 Yael, you are next.

10 MS. SHAVIT: Yeah, I, Greg, share your skepticism, I 

11 am not aware of a hundred-dollar lawsuit brought by a state 

12 AG's office or federal enforcement body. And more than that, I 

13 will note that the injunctive terms that go along with the 

14 types of lawsuits that we bring against for-profit schools 

15 have significant financial significance to those institutions 

16 as well. But it's just not, I mean, it's not based in reality, 

17 right? When you look at the history of state AG actions 

18 against proprietary schools, what you end up seeing are 

19 lawsuits that will drag out for a long time, despite the fact 

20 that the financial risk is present from the moment of the 

21 lawsuit and what typically happens is that after we are 

22 ultimately successful, the school will declare bankruptcy like 

23 the next day, right? And it's just not realistic to prevent 

24 the harms associated with those financial obligations to wait 

25 until the moment that there's a judgment in those lawsuits. 

26 It's just also not consistent with the care with which state 

27 enforcement bodies and federal enforcement authorities enter 

28 these types of lawsuits, right? I think that the moment that 
Committee Meetings - 02/16/22 22

1 the actions are filed is the moment when the risk becomes 

2 evident and it's completely appropriate at that moment to look 

3 into the required institution to take actions to ensure its 

4 financial its financial obligations.

5 MS. JEFFRIES: Okay. Thank you, Yael. Kelli, you're 

6 next.

7 MS. PERRY: Thank you. Under the debt liabilities and 

8 losses, if we're making the assumption that B and C by 

9 themselves are mandatory triggers, I'm not sure why we need A. 

10 Because it's basically saying that liabilities that come from 

11 B and C. And if B and C are already a trigger, why do the debt 

12 and liabilities have anything to do with it? Another way to 

13 look at it in response to Brad's question about materiality is 

14 you could look at A as the materiality threshold for B because 

15 you're saying if you're going to recalculate the score and 

16 it's less than 1.0, that's the trigger. But then B alone can't 

17 be a mandatory trigger itself. I just feel like we're kind of 

18 in a circular reference here.

19 MR. MARTIN: I do want to point out that in A we 

20 have, if the institution's composite score is less than 1.5 

21 described in this section is required to pay any debt, or 

22 incurs any liability from a settlement. So this is all23 inclusive of any of any liability or settlement, whereas so 

24 that has to have been incurred. Whereas in in B, for instance, 

25 where we were just discussing, it is the trigger, as has been 

26 sued by or had an action brought by the federal state 

27 authority or qui tam lawsuit.
Committee Meetings - 02/16/22 23

1 MS. PERRY: But I thought you said before that the 

2 debt and liabilities in A had, you narrowed it to be only from 

3 B and C? So B is already a trigger. Why do we need A?

4 MR. MARTIN: Well, again, it's because as the result 

5 of the debts or liabilities that have that have stemmed from 

6 these actions, so I view I view A as being a, speaking to the 

7 liabilities debts that have been that have resulted from a 

8 result of these actions. Whereas in B, the action itself is, 

9 is a trigger. Well, I don't know if, Steve, do you want to 

10 elaborate on that or?

11 MR. FINLEY: Yeah. I think Kelli's suggestion is that 

12 this is circular, and I think we need to take a look at it.

13 MR. MARTIN: Yeah, we'll certainly go back and take, 

14 Kelli, if you'd like to make, you know, put that in writing, 

15 that would be helpful for us to take a look at.

16 MS. JEFFRIES: Thank you, Kelli. Brad, you’re next.

17 MR. ADAMS: You know, I'd just like to point out in 

18 response to Yael's comment that, you know that every year in 

19 our audit, we have to do legal letters and we actually assess 

20 the likelihood and materiality of all lawsuits and book those 

21 as accruals on our balance sheet. And those are a part of our 

22 composite score every single year in our audits. And it's not 

23 like states have never lost a lawsuit before. So let's 

24 remember that. On gainful employment, you know. Wow, this was 

25 added. Where is the 10 percent coming from? And just a simple 

26 answer, Greg, is 10 percent, that's the first time I've 

27 actually seen a number in financial responsibility. What would 
Committee Meetings - 02/16/22 24

1 a school normally do if they lost 10 percent of their 

2 revenues?

3 MR. MARTIN: I'm not sure I understand the question, 

4 Brad. What would a school do-? 

5 MR. ADAMS: I was just asking where the 10 percent 

6 number came from.

7 MR. MARTIN: Oh, where the the8 MR. ADAMS: On romanette 3B.

9 MR. MARTIN: Let me just look at that again.

10 MR. ADAMS: Yeah, if that's the materiality threshold 

11 we want to use, then let's use it throughout this document.

12 MR. MARTIN: Yeah. Well.

13 MR. ADAMS: It is interesting that we now put a 

14 materiality threshold in one particular section.

15 MR. MARTIN: I I'll get some clarification on the 10 

16 percent. I'm not 100 percent certain at this point what 

17 exactly we base the 10 percent on, but I will get that for 

18 you. 

19 MR. ADAMS: Well, I'd like to propose that if that's 

20 the threshold, we use it throughout this mandatory triggering 

21 event section in every single comment. But I'll tell you, as a 

22 financially responsible CFO, if you lost 10 percent of your 

23 revenue, you'd cut 10 percent or more of your expenses to 

24 cover that loss. And so I would look at income here and not 
Committee Meetings - 02/16/22 25

1 revenue, but again, 10 percent is fine for me to use 

2 throughout this document, I propose five. 

3 MS. JEFFRIES: Okay. Jessica, you are up next.

4 MS. RANUCCI: Thanks. I just wanted to briefly 

5 respond to Kelli and what I see as the importance of A, B, and 

6 C under number 1. Again, if I'm understanding incorrectly, 

7 which may, you know, the Department should feel free to 

8 correct me is that we're talking about three different kinds 

9 of claims, all of which you know we see in my office. One is 

10 an individual claim or group claim by any private person out 

11 there against an institution. And for that in A I think that 

12 only is a financial trigger under pretty limited 

13 circumstances, which is a liability has been incurred, but the 

14 case has gone to judgment or to settlement, and that it would 

15 have a material impact on the composite score. I think that B 

16 and C address situations that are separate from that, which is 

17 either that a state or federal authority brings an enforcement 

18 proceeding or the Borrower Defense claims in C. And I guess I 

19 just want to support all of those as being important financial 

20 triggers. I think the first one is really clear that if the 

21 school has incurred the liability and that liability would 

22 have an impact on the composite score, then like there's a 

23 really clear connection there. But I do think that B and C are 

24 also very important. I think they're both direct, as Yael 

25 said, an indirect implication for a school's financial status 

26 if they're sued by state or federal regulator or have a high 

27 volume of Borrower Defense claims. And I think, you know, 

28 those are sometimes overlapping categories like we sometimes 

29 bring claims that the New York Attorney General will bring at 
Committee Meetings - 02/16/22 26

1 the same time, but they're often distinct, and I think it 

2 makes sense that the Department should treat them differently. 

3 MR. MARTIN: Thank you. 

4 MS. JEFFRIES: Okay, thank you. Brad.

5 MR. ADAMS: Yeah, I've got another question here, so 

6 these mandatory events that occur after your fiscal year end, 

7 the composite score is as of the last day of your fiscal year 

8 and schools, whether you like it or not, across all industries 

9 and make sure they have enough in their equity accounts to 

10 cover the financial score at the end of the year. And so my 

11 question is if an event occurs subsequent to the fiscal year, 

12 are you then going to allow schools to do a contribution into 

13 equity to make sure they're still covering that score? I just 

14 am not following how this is going to work.

15 MS. JEFFRIES: Okay. Thanks, Brad. Any other comments 

16 going up through romanette 5? If not, Greg had indicated he 

17 was not stopping for a temperature check. He's just trying to 

18 break this down in smaller chunks for discussion. So Greg, you 

19 want to pick back up?

20 MR. MARTIN: Yes, we'll pick up with romanette 6 

21 publicly traded entities. You know, there we have it, that's 

22 good. So we've clarified the language here in this section to 

23 refer to both institutions and their owners. We also added a 

24 reference to foreign exchanges to account for institutions 

25 listed on the foreign exchanges that may face similar actions, 

26 and you see that reflected publicly, publicly listed entities 

27 and institution that is directly or indirectly owned at least 

28 50 percent by an entity that is listed on a domestic or 
Committee Meetings - 02/16/22 27

1 foreign exchange if subject to one or more of the following 

2 events. So just making that clarification there. And the next 

3 one we have changes to if we moved down to (ix), the loss of 

4 eligibility. In nine, loss of eligibility is romanette nine. 

5 The institution has lost eligibility to participate in another 

6 federal educational assistance program due to administrative 

7 action against the school and this is at the suggestion of 

8 negotiators during the last session, we have added this 

9 mandatory trigger for cases where an institution's eligibility 

10 for another federal education program, such as VA programs, is 

11 terminated. When we further clarified this trigger to reflect 

12 it and sorry about that, wrong thing, so let's That was in 

13 (ix) and then down to (x), institute contributions and 

14 distributions. An institution's financial statements required 

15 to be submitted under 668.23 reflect a contribution in the 

16 last quarter of the fiscal year, and the institution then made 

17 a distribution during the first two quarters of the next 

18 fiscal year. And the removal of such contribution up to the 

19 amount of the distribution results in the recalculated 

20 composite score of less than 1.0 as determined by the 

21 Secretary. We have further clarified in this trigger to 

22 reflect that to include rather contributions that are in an 

23 institution's financial statement. And then moving down to 

24 romanette 11. This is creditor events, we have added an 

25 additional trigger to address major creditor actions such as a 

26 default or another condition as a result of an action taken by 

27 the Department and the termination, withdrawal, litigation, or 

28 suspension of a financing arrangement with the institution. So 

29 that's under creditor events. I'll read that, as a result of 

30 an action taken by the Department, the institution, or any 
Committee Meetings - 02/16/22 28

1 entity included in the financial statements submitted under 

2 668.23 is subject to a default or other condition under a line 

3 of credit, loan agreement, security agreement, or other 

4 financing agreement or any creditor terminates withdrawals, 

5 limits, or suspends any line of credit, loan agreement, or 

6 other financial statement. And then we're moving down to (2), 

7 the bottom of the page. Here, we have proposed language to 

8 clarify the timing and application of this requirement, which 

9 exists in current regulations that financial responsibility 

10 discretionary triggers become mandatory if two or more hit. So 

11 in this, in two, we'll see here that in the fiscal year 

12 following the year in which the Secretary has most recently 

13 calculated the institution's composite score, if the 

14 institution becomes subject to two or more unresolved 

15 discretionary triggering events as defined in paragraph (d) of 

16 this section, which we'll get to shortly. These events become 

17 mandatory triggering events 60 days following the second 

18 triggering event if both triggering events remain unresolved. 

19 All further discretionary triggering events during the fiscal 

20 year become mandatory triggering events even if both of the 

21 original triggering events are resolved. And that takes us 

22 through the end of mandatory triggering events under C. So 

23 opening up for discussion on the ones from six through the end 

24 through 11 and also two, and then we'll take a temperature 

25 check.

26 MS. JEFFRIES: Okay, great. Thank you, Greg. Jamie, 

27 you're up. 

28 MS. STUDLEY: Thank you. I'm returning to this 

29 fascinating subject of two discretionary triggers becoming 
Committee Meetings - 02/16/22 29

1 mandatory, and it feels almost like this provision has become 

2 more complicated and harder to understand. If you could 

3 explain what “resolved” means and if that's something the 

4 Secretary always gets to on a consistent and quick basis, or 

5 whether the time could run, they're not resolved and they 

6 become mandatory even if they are harmless or irrelevant. So 

7 recognizing Barmak's suggestion that we not think of the 

8 infinite out outlier possibilities. I'm picturing an 

9 institution where Katrina or a typhoon has affected 

10 enrollment, but no indication that it's financial and/or a 

11 quote a planned, intentional, wise closure of a number of 

12 programs, both of which are discretionary triggers. But 

13 forcing the Secretary to have to go through all that list or 

14 the institution, in fine shape, is suddenly in mandatory 

15 trigger land seems unreasonable. So is there a problem about 

16 discretionary triggers that the Department has seen that it's 

17 trying to solve with this? Or is there a chance for unintended 

18 consequences or mischief that could be handled in a simpler 

19 way to address the need that you actually have. I'm just not 

20 understanding why two harmless or innocent things need to be 

21 made mandatory triggers. But if the Department needs that 

22 authority, maybe we can do it in a more tailored way.

23 MR. MARTIN: Yeah, I mean, as written here. Yes, 

24 you're correct that the two discretionary events become, you 

25 know, makes it mandatory even if they're resolved. And what 

26 we're looking at here is, you know, our concern that if even 

27 if triggers are discretionary, if they're coming up, that's an 

28 indication that there could be an issue at the institution. I 

29 do take your point that they could be relatively minor. You 

30 know, you pointed out relatively minor in scope and you know 
Committee Meetings - 02/16/22 30

1 that could trigger the mandatory event, your concerns over 

2 that. So we'll definitely take that back. If you have any 

3 suggested language to clarify this or to make it, which I 

4 think would preclude that situation from happening, would be 

5 happy to take a look at it.

6 MS. STUDLEY: If I could just follow up. If the 

7 Department could explain what the risk is that it sees, I'd be 

8 happy to work with you on language. If it's a discretionary 

9 trigger, the Department always has the ability to say, ah, 

10 it's discretionary, we looked, it's troubling, you're 

11 triggered. So the same amount of time to decide whether it's 

12 resolved or not, it can spend to say, ah, Katrina wasn't your 

13 fault, but we are looking at the expenses that were generated. 

14 We have to look at financial responsibility, so we are 

15 triggering whatever the next steps are. The Department has the 

16 ability to say there's a problem. So I don't understand why it 

17 needs this provision this way. Happy to work with you offline.

18 MR. MARTIN: Okay, sure, we'd be happy to take that 

19 back.

20 MS. JEFFRIES: Thank you, Jamie. Brad.

21 MR. ADAMS: Alright. It's the contribution 

22 distribution. It looks like it's 16, romanette 16, but I 

23 can't, my eyes right on that, it's right after loss of 

24 eligibility, right after number nine. 

25 MR. MARTIN: Oh, that's romanette 10, that's 

26 romanette 10, Brad. There's so strikeouts and everything, it 

27 becomes like the Is and Js and Ls, yeah, they all appear to be 

28 the same.
Committee Meetings - 02/16/22 31

1 MR. ADAMS: Thank you. I'm just trying to figure out 

2 if this metric here, if because it's A and B together and I'm 

3 trying to understand, is it a [inaudible] just use a round 

4 number. If you contribute a million dollars in the last 

5 quarter of the fiscal year and then you take out three million 

6 later to pay your taxes, is it just the million that subject 

7 to this? I'm trying to figure out why the contribution is even 

8 listed if really the goal is just to say any removal of equity 

9 that brings you below 1.0 is the issue. So help me on the 

10 contribution side of that statement what that means.

11 MR. MARTIN: Well, the trigger is intended to account 

12 for a lot of situations we've seen where institutions make 

13 these contributions in the last quarter, simply to shore up 

14 their financial position and then immediately go in and remove 

15 that amount of money, and that's why the removal of such 

16 contribution up to the amount of the distribution results in 

17 the composite score being one point or less or being of less 

18 than 1.0 because we're looking at where they put the money in 

19 and just went and took the money out. So I mean, that's what 

20 it's meant to account for. And this is a practice we see you 

21 know quite frequently, they'd be making a contribution simply 

22 for the purpose of meeting the meeting the composite score 

23 requirement. That's why it's in here for the last quarter and 

24 then so, you know, so made that distribution and then made it 

25 so financial statements reflect the contributions made in the 

26 last quarter of the year, and the institution then made a 

27 distribution during the first two quarters of next year. So 

28 clearly it's tied together those things, right? And that's to 

29 try to control for a very real problem we see with gaming of 

30 the statements.
Committee Meetings - 02/16/22 32

1 MR. ADAMS: I'm good if it's tied together, so I 

2 think you answered my question. Creditor events, the next one 

3 down, I guess that's 11. I'm struggling with this one and why 

4 it's mandatory. I mean, banks can pull a line of credit for 

5 really anything. I mean, a line of credit is, especially one 

6 that's unfunded is really nothing. If you don't fund a line of 

7 credit, if you don't withdraw money in a line of credit, a lot 

8 of creditors, they just pull from you because they're losing 

9 money if you just got an open line of credit with no actual 

10 debt pulled out of that line of credit. So why would we be 

11 concerned that if a bank takes an unfunded line of credit away 

12 from a school, why would be concerned is a mandatory event 

13 that required a letter of credit? Is that right?

14 MR. MARTIN: The event, again here we have the I 

15 think it's important to point out in in romanette 11 (A) this 

16 is as the result of an action taken by the Department. So 

17 where the Department, for instance you know, would take some 

18 action relative to the schools, such as perhaps placing the 

19 institution on HCM1 or HCM2. And as a result of that, they're 

20 subject to a default condition on the line of credit or that 

21 that line of credit is pulled. That could certainly affect the 

22 financial institution.

23 MR. ADAMS: What does it say or between (A) and (B) 

24 then? I take that as B stands alone. Am I reading that wrong?

25 MR. MARTIN: No, (A) is as a result of the Department 

26 that that is that as a result of Department action an 

27 institution or any entity included in the financial statement 

28 or subject to a default and B is separate from that. Any 
Committee Meetings - 02/16/22 33

1 creditor terminates, oh you're asking, does it all stem back 

2 to as a result of the3 MR. ADAMS: Right.

4 MR. MARTIN: -the Department's taking action against 

5 the institution?

6 MR. ADAMS: Right. The question, is (A) and (B) tied 

7 together or is (B) standalone? It reads like it stands alone 

8 and terminating a line of credit should not be an issue. That 

9 happens every day.

10 MR. MARTIN: I will. I'll take that for 

11 clarification. Steve, do you know the answer to the definition 

12 of that or should we get clarification?

13 MR. FINLEY: Yeah, we'll take that back for 

14 clarification, Brad. The instances I'm aware of have been 

15 predicated on actions the Department has taken that's caused 

16 banks to shut down access to funds, and they have triggered 

17 very precipitous actions by some institutions.

18 MR. ADAMS: I just recommend taking out the “or” and 

19 put in an “and”. I think that would be appropriate.

20 MS. JEFFRIES: Okay, thank you. Kelli, you're up.

21 MS. PERRY: Okay. A couple of things. One, I agree 

22 with what Jamie was talking about as it relates to the 

23 triggering event, even if resolved will trigger a mandatory. 

24 So I would be more than happy to work on language if I can 

25 understand, like Jamie indicated, what you're trying to 

26 accomplish here. In the contributions and distribution 
Committee Meetings - 02/16/22 34

1 section, and I brought this up last time. With all the 

2 conversations that happen that are happening, it sounds like 

3 this relates more to proprietary institutions than it would 

4 private nonprofits. But a couple of questions. One, you know, 

5 it talks about the institution's financial statements 

6 submitted reflect a contribution in the last quarter of the 

7 fiscal year. I guess the first question would be how are you 

8 going to determine that it's in the last quarter of the fiscal 

9 year? Because the financials don't break down information on a 

10 quarterly basis. And two, as it specifically relates to 

11 private nonprofits, the terminology of contributions and 

12 distributions could be extrapolated to mean contributions from 

13 donors and distributions of what, I guess, so I just feel 

14 there needs to be some more clarity around this if it's 

15 specifically meant to cover contributions of equity and then 

16 the debt distribution of out. And then the third thing is, I 

17 know I passed a section, but the insert of the gainful 

18 employment trigger. I just want to say that depending upon 

19 where that lands, this could be of concern if there's not a, 

20 you know, appeal for making sure that the data that it's being 

21 evaluated on is correct.

22 MR. MARTIN: Thank you. We'll take back your concerns 

23 on, on the contributions and see if we can provide some 

24 clarifying language there.

25 MS. JEFFRIES: Thank you, Kelli. I want to note, Adam 

26 Welle is coming back to the table for state attorneys general. 

27 With that, Barmak, you are up next.

28 MR. NASSIRIAN: So several comments. First one on 

29 romanette 6 publicly listed entities. I see what you're 
Committee Meetings - 02/16/22 35

1 attempting to do here, but what if the institution itself is 

2 listed? I realize that there are holding companies that may be 

3 publicly traded, but there are also institutions that are 

4 publicly traded. So you may want to modify that. Regardless of 

5 what you do there, under Cap A SEC actions, it's a nice 

6 sentiment, but you're closing the barn door after the horse 

7 has bolted by the time that kind of axe comes down. So you may 

8 want to be more expansive in terms of adverse SEC actions that 

9 could trigger something. The exchange action is okay. The SEC 

10 reports are okay. What is missing, which actually is quite 

11 relevant to past history, is significant and precipitous drops 

12 in market cap. Now, if we had the composite score under 

13 consideration, that might be answerable there. But since that 

14 is not there and now, we're in the unfortunate position of 

15 enumerating bad outcomes, a significant and precipitous drop 

16 in market cap is probably a better indication of trouble than 

17 all of this stuff that you've listed here. So that's one. I've 

18 already referred to this on loss of eligibility, romanette 9, 

19 institutions. The Department of Education is the only agency 

20 where the entire institution is either in or out. The VA 

21 allows programs in or out, so loss of eligibility should be 

22 more fine- because this will be meaningless as is drafted. It 

23 should be if the if one of the institution's programs has lost 

24 eligibility to participate. If one or more have lost 

25 eligibility programs have lost eligibility, that just makes it 

26 more meaningful. And finally, to creditor events, first of 

27 all, I actually agree with Brad that, you know, termination of 

28 credit in itself is not a sign of trouble, right? But my 

29 problem is with cap A as a result of an action taken by the 

30 Department. Well, you know what, if they defaulted without 
Committee Meetings - 02/16/22 36

1 your action. That's okay? It seems to me like you only drop 

2 you don't want that as a conditional there. It shouldn't be as 

3 a result of anything you do. It should be in general, if an 

4 entity defaults or, you know, violates the terms of a line of 

5 credit or a covenant, that should be a trigger. And one last 

6 comment. Once again, because we don't have the composite score 

7 itself under consideration, this, too, is closing the barn 

8 door typically, when the horse has bolted because it's really 

9 at the point where debt is taken on, where unmanageable debt 

10 is taken on, not when they begin to default on that, that a 

11 decent creditor would you know say hang on a second, you know, 

12 we had a covenant that you shouldn't be leveraged beyond a 

13 certain level. I don't know what we can do about that, but if 

14 we're not going to open up the composite score, at the very 

15 least, you may want to have some coverage ratios [interposing] 

16 statement here. Thank you.

17 MR. MARTIN: Thank you.

18 MS. JEFFRIES: Thank you, Brady. Brad, you're next.

19 MR. ADAMS: I was going to let Beverly go in front of 

20 me. She's been trying to raise her hand on the video and I 

21 think she was before me if that's okay.

22 MS. JEFFRIES: Beverly, do you not have the raised 

23 hand function on your screen?

24 DR. HOGAN: I didn't see, I just raised my hand. I 

25 didn't. I overlooked it. No problem, though, you going first.

26 MS. JEFFRIES: Okay, well, the only thing is we don't 

27 want to overlook you. You know?
Committee Meetings - 02/16/22 37

1 DR. HOGAN: No problem. No problem.

2 MS. JEFFRIES: Our eyes are trained to look for those 

3 little hands up in the corner. And I might miss you. So please 

4 feel free to interject.

5 DR. HOGAN: I apologize. That's why I said it's not a 

6 problem and7 MS. JEFFRIES: No worries.

8 DR. HOGAN: I just wanted to say I agree with 

9 comments made by Jamie and Kelli, as well as Barmak, but I 

10 want to speak briefly, ask a question briefly, about this 

11 accrediting agency actions. I don't think anyone has raised 

12 that. What's the intent here? Is this something that the 

13 Department would do before a final decision by the accrediting 

14 agency? Because generally speaking, having a show-cause 

15 probation or warning sanctions don't, the institutions are 

16 not, institutions can correct that. They're given an 

17 opportunity to respond and within a two-year, three-year 

18 period sometime. And I wanted to just, I'm not sure about the 

19 intent there, but it may not be a problem, but it could be 

20 problematic.

21 MS. JEFFRIES: Okay, thank you.

22 MR. MARTIN: I will take that back and get it 

23 [inaudible].

24 MS. JEFFRIES: Okay Brad, you're up.

25 MR. ADAMS: On the two discretionary becoming a 

26 mandatory I believe that whole section needs to be struck. I 
Committee Meetings - 02/16/22 38

1 just, I know we haven't got to discretionary triggers and 

2 we'll hash through those here in just a minute. But the fact 

3 that many of them are still undefined, you can then require a 

4 discretionary trigger? I just think that is a letter of credit 

5 tied to some of the ways these discretionary triggers are 

6 written just would be completely wrong. And I'm also curious, 

7 how did 60 days come about? Like, what is that? I'm in number 

8 two there on the two triggers discretionary becoming 

9 mandatory. Where does is 60 days come from?

10 MR. MARTIN: It's, you know, a reasonable period of 

11 time following the triggering events. I don't think it's key 

12 to a specific reference, but I will check. It's a reasonable 

13 amount of time.

14 MR. ADAMS: So it's, if I'm reading this right, so 

15 you have one and then 60 days later, you have a second? That's 

16 what triggers it, but if it occurred within 60 days, it 

17 doesn't? Am I reading that- just try to help me out.

18 MR. MARTIN: We can read through it again, so it's if 

19 the institution becomes subject to two or more unresolved 

20 discretionary triggering events as defined in paragraph D of 

21 this section, those events become mandatory triggering events 

22 60 days following the second triggering event if both 

23 triggering events remain unresolved, so that just means a 60 

24 days following the second triggering event they would become, 

25 it gives time for the resolution.

26 MR. ADAMS: So the first one could be 360 days 

27 unresolved then if I'm correct on that? The trigger- 
Committee Meetings - 02/16/22 39

1 MR. MARTIN: It's the second triggering. It's the 

2 second [inaudible] those events become mandatory events 60 

3 days following the second. So the first triggering, the second 

4 triggering event, if both, so you have two of those 

5 discretionary triggering events, and then we have the first 

6 one occurs and then the second triggering event occurs and 

7 then they become mandatory 60 days following the second 

8 triggering event if both triggering events remain unresolved.

9 MR. ADAMS: So how do you un-resolve high annual 

10 dropout rates?

11 MR. MARTIN: I'm not certain as to how one would do 

12 that, that occurred. That's correct.

13 MR. ADAMS: So that's forever if it's occurring. 

14 Well, I just think it needs to be struck. Thank you.

15 MS. JEFFRIES: Thank you, Brad. David, the adviser, 

16 Dave McClintock, you have something to add?

17 MR. MCCLINTOCK: I just have a question I think that 

18 might have been raised as a consideration. I want to make sure 

19 I understand. Barmak was saying if a school borrows a large 

20 amount of money, that it's going to be considered a trigger. 

21 And just, I mean schools, all kinds of schools, borrow money, 

22 and I guess at some level, if you're borrowing money, the 

23 lender has determined that you're likely to be financially 

24 responsible to do it. There's already some issues with the 

25 composite score related to refinancing debt when it happens, 

26 and it seems like it could fall into that same issue here. So 

27 just maybe I misunderstood. I don't know.
Committee Meetings - 02/16/22 40

1 MR. MARTIN: I'm sorry, is there a reference to a 

2 particular to a particular paragraph here, David?

3 MR. MCCLINTOCK: It was it was a statement by Barmak. 

4 To consider if they borrow, if there's a large new loan, that 

5 it would be potentially a trigger. But that would be a 

6 significant amount of triggers, I would think. Sorry, I was 

7 just sitting here thinking about that.

8 MR. MARTIN: Thank you.

9 MS. JEFFRIES: Okay. Thank you. Barmak.

10 MR. NASSIRIAN: Just wanted to quickly respond that 

11 prudential oversight does not mean you wait until people 

12 default on existing debt before you decide as a regulator to 

13 step in to say, hey, what's going on here? Prudential 

14 oversight also means that you keep an eye on the regulated 

15 entities to ensure that they don't get overleveraged. That is 

16 not a, there’s no language. I was just suggesting that setting 

17 the triggers, if you're setting up a tripwire that far out, 

18 you're not going to catch anybody. What you're going to catch 

19 is another ITT, another Corinthian, you holding the bag. So 

20 some- now the proper way to deal with it would be in 

21 construction of a reasonable composite score. But that's 

22 beyond our reach. So I was merely suggesting that that's that 

23 if you're going to begin enumerating terrible things that 

24 should trigger a Departmental review, overleveraging would be 

25 one of them before people default, not after.

26 MR. MCCLINTOCK: And I understand the intent to catch 

27 it earlier.
Committee Meetings - 02/16/22 41

1 MS. JEFFRIES: Okay, thank you. Alright, I'm not 

2 seeing any other hands on this section, so let's go ahead and 

3 take our temperature check on 668.171 on the entire paragraph 

4 C of that document. Jamie, I can't see your hand, your thumb. 

5 Amanda, can I see your thumb, please? Okay, I see one thumbs 

6 down. Thank you. Brad, anything you want to add?

7 MR. ADAMS: No, nothing extra. I'm sorry, was Anne's 

8 sideways? I thought it was down, but I was definitely down.

9 MS. JEFFRIES: Anne was sideways, yeah. 

10 MR. ADAMS: I missed that. Sorry.

11 MS. JEFFRIES: Thank you, though, for checking. I 

12 appreciate that. It's sometimes hard to see. It's like those 

13 little romanettes, right? Alright, so Greg, you want to take 

14 us into the next paragraph, please?

15 MR. MARTIN: Sure, I can do that, and I'm beginning 

16 to see romanettes in my sleep, so I understand where all of 

17 you are coming from. Alright, we are at discretionary 

18 triggering events. The Secretary may determine that the 

19 institution is not able to meet its financial or 

20 administrative obligations under B3 romanette 6 of this 

21 section, if any of the following events is likely to have 

22 material adverse effect on the financial condition of the 

23 institution. The first one here deals with accrediting agency 

24 actions, and I don't know if it was Beverly that brought this 

25 up or somebody brought it up previously. The accrediting 

26 action agency actions, which are under the discretionary 

27 triggering event, so better to address that now than under the 

28 mandatory provision. So we do have that here in in (d)(1). Our 
Committee Meetings - 02/16/22 42

1 proposed language changes here seek to provide more clarity 

2 about the accrediting agency actions that may trigger 

3 financial protection so we can look at those at those changes, 

4 accrediting agency actions. The institutions. Accrediting 

5 agency has placed the institution on probation or issued a 

6 show-cause order or placed the institution on an accrediting 

7 and accreditation status that poses an equivalent or greater 

8 risk to its accreditation. So we made some clarifications 

9 there with respect to accreditation, the accrediting agency 

10 actions, and remind everybody again that we are now under the 

11 discretionary triggers. Under two, creditor events, this item 

12 was previously violation of a loan agreement. We've retitled 

13 this item for clarity and accuracy. We have also reworked the 

14 trigger for additional clarity as to what we intend without 

15 changing the substance of the trigger. This reflects events in 

16 which an institution or its owner is subject to a default or 

17 other condition in a financial arrangement, which permits the 

18 creditor to attain certain conditions to attach rather certain 

19 conditions to the institution. And moving down to (3) 

20 fluctuations in Title IV volume, we want to point out here 

21 again that this is a significant fluctuation between 

22 consecutive award years or a period of award years in which 

23 the amount of Direct Loan or Pell Grant funds or a combination 

24 of those funds by the institution that cannot be accounted for 

25 by changes in the program. So we just want to clarify here 

26 that we are concerned not only with declines, but with rapid 

27 increases as well because of concerns about the capacity of 

28 the institution. So we have elected to maintain fluctuations 

29 as opposed to just declines. Let's move to (5). Made some 

30 changes here, this is interim reporting, and we have added 
Committee Meetings - 02/16/22 43

1 some language here to this trigger at the suggestion of some 

2 of the negotiators between sessions one and two. So interim 

3 reporting here for institution required to provide additional 

4 financial reporting to the Department due to a failure to meet 

5 the financial responsibility standards of subpart L or due to 

6 a change in ownership. There are negative cash flows, failure 

7 of other liquidation ratios, cash flows that significantly 

8 miss the projections submitted to the Department, withdrawal 

9 rates that increase significantly, or indicators of material 

10 change in the financial condition of the institution. And if 

11 we move down to, I think we have nine, state citations. At the 

12 suggestion of negotiators, we have added a discretionary 

13 trigger here to encompass significant state actions that may 

14 not rise to the level, including the mandatory triggers. This 

15 will allow the Department to assess the importance of each. So 

16 you see under nine, state actions, the institution is cited by 

17 a state licensing or authorizing agency for failing to meet 

18 state agency requirements. And that is it for the 

19 discretionary triggers, so I will open it up for discussion.

20 MS. JEFFRIES: Okay, thank you, Greg. Before we open 

21 that up, I need to make a clarification due to some questions 

22 in the chat. We are following the posted agenda as far as the 

23 order of the documents. I understand there is some mismatching 

24 of numbers, but after financial responsibility for the agenda, 

25 we will be going to certification procedures and then from 

26 there and we'll move to change of ownership and or control. So 

27 I hope that clarifies everything. I apologize for the numbers 

28 not matching up, but we will follow the posted agenda. Thanks. 

29 Jamie, you are up first on this one.
Committee Meetings - 02/16/22 44

1 MS. STUDLEY: Okay. Brad's appearing on the screen 

2 ahead of me, I'll defer if you like.

3 MS. JEFFRIES: He's not on my screen ahead of you, so 

4 if you still want to defer.

5 MS. STUDLEY: Okay, yeah, no, that's fine. I'll 

6 accept the invitation to speak to the accreditation provision 

7 that some of my colleagues have flagged. We have a concern 

8 that hasn't been placed, and then I'll speak to the broader 

9 issue so I don't forget the first one. The wording “placed” or 

10 “places” doesn't have a time issue. So while I don't think the 

11 Department meant a 10-year-old accreditation status that has 

12 since been resolved and come into full compliance, it's odd 

13 and should perhaps be contained. I think it's probably just 

14 grammatical, but just we don't want a historic placement. It 

15 shouldn't be a discretionary trigger; that would be a waste of 

16 the Department's time. More important, it does seem reasonable 

17 for the Department to look at the reasons for or the possible 

18 effects of an accrediting agency action in determining whether 

19 there's a material adverse effect on the financial condition 

20 of the institution. Even though a sanction is not fine, and 

21 that's what these are, I apologize that we use different 

22 terminology, but these are all at the sanction level, 

23 something serious is going on. And it is reasonable for the 

24 Department to look into whether it suggests either news of 

25 financial fragility or concerns or trends that should be 

26 worrisome to the Department that may not have been apparent to 

27 them yet, or that the effect of being in that status may by 

28 itself or in combination with other discretionary triggers or 

29 information be problematic. So this seems like a serious 
Committee Meetings - 02/16/22 45

1 enough action by accreditors that it's appropriate to be on 

2 the discretionary list. And it's also appropriate that it's 

3 discretionary because there could be some other reasons for an 

4 accrediting action of this kind that do not affect, 

5 materially, the financial position of the institution, and the 

6 Department would have to make that distinction. If Beverly or 

7 Kelli have other, I think those are the two, have other 

8 questions about that, I'd be happy to try and be helpful.

9 MS. JEFFRIES: Thank you so much for that, Jamie. I 

10 show Kelli as next and then Brad.

11 MS. PERRY: Thank you. Just the number 10, the short12 term borrowing. It's basically the same comment that I had 

13 raised before where it talks about the institutions required. 

14 I'm sorry, the line of credit or borrowing in the last quarter 

15 of the fiscal year and then replace the loan. Again, the 

16 financial statements are not quarterly financial statements, 

17 so I think you just need to think about how that would be 

18 measured.

19 MR. MARTIN: I will take that back to our accounting 

20 people and get clarification on that.

21 MS. JEFFRIES: Okay, thank you. Okay, Brad, you are 

22 up.

23 MR. ADAMS: Well, just as soon as she brought up 10, 

24 I'll just piggyback on it. I mean, this is penalizing a school 

25 for repaying a line of credit. It's not tying it to a 

26 composite score here number 10. So it's not because of end of 

27 year. So you're saying that you can't repay the loan in the 

28 first two quarters of year, well you're paying interest on it.
Committee Meetings - 02/16/22 46

1 I mean that you're giving banks free money if you're not 

2 allowing them to repay a line of credit. But back to week one, 

3 you know, if there's a theme for this issue paper, it really, 

4 this section of discretionary really is maximum discretion to 

5 the Department with no guidance to institutions. I struggle 

6 immensely with this proposal. So, Greg, help me out here. What 

7 is a high annual dropout rate?

8 MR. MARTIN: Again, these are discretionary triggers 

9 the Department looks at to see whether or not these are 

10 indicative of problems at the institution, It does need, a 

11 Department a certain amount of discretion and as you point 

12 out, as is pointed out with the short term borrowing as well, 

13 but they are all here to address situations we see in 

14 institutions where the Department needs discretion to 

15 determine whether or not the event rises to the level of 

16 something that we think imperils the institution's financial 

17 position that impairment accrues to students. So, we can 

18 obviously have disagreements about the level of discretion 

19 that the Department ought to have here, but every one of these 

20 discretionary triggers addresses areas, where there are 

21 problems that ultimately result in serious consequences for an 

22 institution. And it's not the Department's intention to give 

23 itself undue amounts of discretion. But we also are held 

24 accountable for situations where institutions precipitously 

25 close, the effect that has on students. So we are looking at 

26 ways to identify problems in advance, and this is part of 

27 that. I mean, I'm certainly open to any suggestions people 

28 have if to the language here. But I would reiterate, as the 

29 Department does believe it needs to have these discretionary 

30 triggers and the obvious discretion that results from them.
Committee Meetings - 02/16/22 47

1 MR. ADAMS: Okay and what about significant 

2 fluctuation? I mean, are we 90 percent or 10 percent like, I 

3 need a little help here. I just don't get it. I mean4 MR. MARTIN: I don't think it would be, you know, I'm 

5 not sure how instructive it would be to put in 20 percent or 

6 30 percent fluctuation it. It is again a discretionary trigger 

7 to allow us to look at an institution that has huge 

8 fluctuations in its volume, which may be indicative of a 

9 problem at the institution, it may not be. Maybe the 

10 institutions just has expanded and has bigger programs or

11 very, very popular programs that have led to many more 

12 students coming into the institution, or the institution has 

13 downsized to concentrate on a few programs. That could result 

14 in lower volume as well. So it's not necessarily indicative of 

15 a problem. However, it could be indicative of a problem, and 

16 that's why it's here under a discretionary trigger.

17 MR. ADAMS: Two discretionary equals one mandatory. 

18 We just went over that. So if I had a pharmacy school, that's 

19 a significant increase in Title IV funding. So again, I'm not 

20 following this and then pending Borrower Defense claims. And 

21 not actual outcomes.

22 MR. MARTIN: Well, I want to point out that a change 

23 in Title IV volume wouldn't in and of itself be the 

24 discretionary trigger. The Department would have to determine 

25 that it is a discretionary trigger. So you know I do want to 

26 point that out. And I I get the point that there is discretion 

27 involved here, and there will be a divergence of opinion on 

28 how much of that discretion the Department ought to or should 

29 have. We believe that we need this level of discretion to look 
Committee Meetings - 02/16/22 48

1 at possible indicators of there being trouble at the 

2 institution. And certainly, we've heard the concerns about the 

3 two discretionary triggers triggering the mandatory trigger, 

4 and I will definitely take back those concerns.

5 MR. ADAMS: And then last one on interim report 

6 material change, at least the materials there, but it's wide 

7 open to be anything, any other indicator that's material. So 

8 if you can't even define it on whether or not it's going to 

9 make it mandatory, I really struggle with it. And I've asked 

10 you on week one and I've asked you again, and I submitted text 

11 proposing. But again, we've got to define some of these 

12 things. Thank you.

13 MS. JEFFRIES: Thank you, Brad. We have Amanda, 

14 Carolyn, and Beverly showing with their hands up, and then at 

15 that point, perhaps we'll be able to take the temperature 

16 check and then a quick few minute’s break and pick right back 

17 up. Amanda.

18 MS. AMANDA MARTINEZ: Yeah, sure. Actually, I think 

19 we can hopefully my proposal, I know it came in late, but 

20 hopefully the Education Department could review and 

21 potentially solve the specificity needed in high annual 

22 dropout rates. We think the discretionary research has 

23 recently shown that higher, you know, or actually not higher 

24 dropout rates, but if there's low completion rates of students 

25 that that's tied to, that's correlated to, or it's highly 

26 correlated to an institution's financial instability, so in 

27 our proposal, while it came in late, hopefully it suggests 

28 more specificity here. So whether the Education Department 

29 wants to look at it, we do suggest a change here for low 
Committee Meetings - 02/16/22 49

1 completion rates since that is backed by research as showing 

2 an indicator of, it's directly related to this financial 

3 responsibility. And we ask that if you do look at low 

4 completion rates, that that would be disaggregated by Pell 

5 recipient status, by major racial and ethnic subgroups to show 

6 the different risk factors there in different completion 

7 rates. And then also, we would, you know, on the specificity 

8 of a percentage, we also do suggest. And it could be helpful 

9 here in looking at the bottom 10 percent of those who perform 

10 and providing the worst completion rates, so looking at those 

11 10 percent of institutions who end up providing really low 

12 completion rates as a way to be more specific in this part. 

13 And then, so that's the reasoning there. I think completion 

14 rate is extremely important. We want to strive for one, 

15 avoiding any type of financial instability to access for 

16 students to ensuring that they are completing that they are at 

17 institutions that have the ability to support them in their 

18 education and are not financially unstable. And then the 

19 second suggestion I'll make and I can make this in the chat is 

20 related to number three, the triggering or event number three 

21 of fluctuations in Title IV. I also know that the research 

22 that I23 MR. WAGNER: You have 30 seconds remaining.

24 MS. AMANDA MARTINEZ: Oh okay. I'll just put that in 

25 a chat.

26 MS. JEFFRIES: Thank you, Amanda. Appreciate it. 

27 Carolyn, you're up next.
Committee Meetings - 02/16/22 50

1 MS. FAST: Hey, I wanted to first say that I'm 

2 supportive of Amanda's suggestion and joined in her proposal 

3 related to the low annual completion rate language. We also 

4 would be, you know, supportive of keeping it at high annual 

5 dropout rates. But we think that either way, whether it's 

6 looking at it from the perspective of low annual completion 

7 rates or high annual dropout rates, it would be useful to 

8 break it out, disaggregate the data as we had suggested, so 

9 that all of those subgroups, including students receiving Pell 

10 Grants, are considered. And then the second part of our 

11 proposal was on the interim reporting discretionary trigger, 

12 which is five here. We appreciate the Department's change from 

13 the last proposal, adding the other indicators of material 

14 change, which I think is very important. But what one concern 

15 we had was we wanted to ensure that it's clear that the 

16 Department doesn't have to wait until after a school has 

17 already failed to have the trigger be useful. So it seems the 

18 way it's written currently is that when an institution is 

19 required to provide additional financial reporting to the 

20 Department due to a failure to meet responsibility standards 

21 or due to a change or ownership. So it's very narrow. That's 

22 after they've already failed or if they had a change of 

23 ownership, but this really would be useful and is necessary to 

24 make it a little broader than that. So we suggested adding “or 

25 in response to a request from the Department for additional 

26 financial reporting,” to make it clear that the Department can 

27 get additional reporting and act on it.

28 MS. JEFFRIES: Thank you. Thank you very much, 

29 Carolyn. Beverly.
Committee Meetings - 02/16/22 51

1 DR. HOGAN: Yes. Alright. Let me apologize for 

2 getting ahead. I had difficulty reading from the screen and I 

3 was looking at my papers and got a little bit ahead of the 

4 accrediting agencies actions. I do agree with what Jamie said 

5 in part. Many of our HBCUs, are in the SACSCOC area. And there 

6 are sanctions offer warning sanctions and show-cause 

7 probation, show cause, and the institutions are given ample 

8 time to look at and make their status, make corrections and 

9 report back before they lose their accreditation. And I guess 

10 my concern is whether how the Education Department of 

11 Education plans to utilize this. What's your intent? How will 

12 you be working in concert with the accrediting agencies before 

13 the withdrawal or revocation of institution's participation 

14 and Title IV programs are affected?

15 MR. MARTIN: Yeah. Again, this and you can certainly 

16 be forgiven for jumping ahead, I think all of us have at one 

17 point or another have tried to jump ahead. But yeah, this is a 

18 discretionary trigger, I want to point out that even were this 

19 to become a mandatory trigger, we're not talking about the 

20 Department necessarily entering into an action to terminate an 

21 institution as a result of it. These discretionary triggers 

22 are looking at, you know, areas of areas that might indicate 

23 there's a problem and I think it's legitimate to discuss the 

24 extent to which the Department's discretion should be 

25 exercised, but I think it would have to pretty much be 

26 accepted that all of these are possible indications of a 

27 problem. And I understand with accrediting agencies that a 

28 show-cause can be a number of things and perhaps not be 

29 something severe, and the school still has plenty of recourse 

30 and that type of thing. But it would be something where the 
Committee Meetings - 02/16/22 52

1 Department would look at it to see what the circumstance is, 

2 and we haven't defined exactly how we'll go through that 

3 process in this regulation. I think you get to the point where 

4 you just have so many regulations that would be impossible to 

5 look at, but it is something that gives us the opportunity to 

6 look at these situations and determine whether or not we feel 

7 they pose a threat to the institution's financial stability or 

8 continued existence. So we do have a very strong accreditation 

9 unit in our Department that works with accreditors and is very 

10 good at getting to what's going on, you know, with respect to 

11 accrediting actions, and we'd certainly utilize that. This is 

12 certainly not a no desire on the part of other part of the 

13 Department, just to simply say, oh, show-cause order therefore 

14 the school has got severe problems. That's not what this is 

15 meant to do. But again, it's a possible indication.

16 DR. HOGAN: But any clarity that you could bring to 

17 the language would be very helpful.

18 MR. MARTIN: We'll take it back and see what we can 

19 if there's something [interposing] Yes, we tried to clarify 

20 this time around, but if certainly Beverly if you have any 

21 suggestions, you know, please put those in the in the chat or 

22 get those to the facilitators and we will consider those. 

23 Thank you.

24 DR. HOGAN: Thank you.

25 MS. JEFFRIES: Thank you. So, Greg, you have walked 

26 through the entirety of paragraph D, correct?

27 MR. MARTIN: Yes. So we could take a temperature 

28 check on that.
Committee Meetings - 02/16/22 53

1 MS. JEFFRIES: Alright. So let's see your thumbs on 

2 66.17 paragraph D. Okay, I see one thumbs down. Brad, do you 

3 have anything additional you want to add? Okay, thanks. The 

4 public, in case you couldn't see, was shaking his head. So I 

5 appreciate that. So we want to take a quick five-minute break 

6 to stretch and do that and then come back and pick right back 

7 up with paragraph (e).

8 MR. MARTIN: Sounds good.

9 MS. JEFFRIES: Alright, great. So I have 2:43. Let's 

10 call it 2:50. Be back and we'll go from there. Okay. Okay, 

11 welcome back. I know it was short, but hope it was refreshing 

12 break for you. Just a quick note before we move into paragraph 

13 (e), Debbie Cochrane is back at the table for state higher 

14 education executive officers in state agencies. So with that, 

15 Greg, you want to take us into paragraph (e)?

16 MR. MARTIN: Right, we're moving into paragraph (e).

17 So this is recalculating the composite score, and we do note 

18 here that throughout this section, we have adjusted the 

19 language to address both institutions and their owners. And so 

20 you'll see that occurring throughout here. And just as a 

21 review about this, the recalculating composite score the 

22 Secretary recalculates the institution's most recent composite 

23 score by recognizing the actual amount of the liability or 

24 cumulative liabilities incurred by an institution under 

25 paragraph C one romanette (i)(A) of the section as an expense 

26 or accounting for the actual withdrawal or cumulative 

27 withdrawals of the owner's equity under C1 romanette 2 of this 

28 section as a reduction of equity and accounts for that expense 

29 or withdrawal, and then it so those are discussed here below 
Committee Meetings - 02/16/22 54

1 in one and two. So just again, yes, we revised that language 

2 to all the language to reference the institution and the 

3 owner. And also that's in one, two, and we've also done that 

4 in three. So those are the only changes we've made under (e), 

5 recalculate the composite score. So open the floor up for any 

6 discussion on that before we move on.

7 MS. JEFFRIES: Okay, great. Thank you. Negotiators, 

8 any comments on that? Okay, I'm not seeing any. Oh, there you 

9 go, Brad.

10 MR. ADAMS: Yes. On three, I'm assuming it's 

11 proprietary only because it's referencing withdrawal of equity 

12 as the qualifier there, but again, I'm still struggling. We 

13 went back and forth on this in last session. If you're an S14 Corp and you're paying your IRS tax obligation, that's an 

15 equity distribution, and I do think it needs to be caveated 

16 here. I believe I submitted that comment. But can someone 

17 explain to me why we don't want to pay the IRS our bills 

18 because it has to come through equity in order to do that for 

19 an escort.

20 MR. MARTIN: We're not suggesting that, you know, an 

21 institution not pay its tax liability, but here again, you 

22 know, if we read the withdrawal of equity for the 

23 recalculation, this just deals with the withdrawal of equity 

24 that's been put in for the sole purpose of meeting of meeting 

25 the financial composite score. So this is the withdrawal of 

26 equity in the entity's financial statements were submitted for 

27 the prior fiscal year to meet the requirements of 23. Or in 

28 the following year, changes in ownership. The entity whose 

29 financial statements were submitted to meet the requirements 
Committee Meetings - 02/16/22 55

1 of 600.20 will be adjusted by that amount. I understand that, 

2 you know, it can be withdrawn to pay for taxes, but again, our 

3 concern here is with quite frankly, the gaming situation that 

4 we discussed earlier in the mandatory triggers. But we will 

5 take back that that concern,

6 MR. ADAMS: Yeah, again, a composite score is a point 

7 in time calculation and a tax obligation, you're paying 

8 estimated taxes in the year you're in. So you could have a 

9 9/30-year end and pay an estimated tax obligation for the year 

10 you're in in November. And that's after that fiscal year end 

11 and that happens all the time. So I think that needs to be 

12 clarified. And I'm trying to figure out one and three, why 

13 that asset for point two on the equity ratio is not included. 

14 Because that's a big component of that ratio.

15 MR. MARTIN: I'm sorry, what did you what did you 

16 want to see done, Brad?

17 MR. ADAMS: Well, it's there for the equity ratio, 

18 decreasing modified equity by that amount. Says it twice 

19 there. Trying to think about the asset side of that thing is 

20 it's a big maybe Dave can help me out here. I'm struggling 

21 with why assets are not there, so I'll defer to Dave. He's an 

22 accountant.

23 MR. MARTIN: If there is a situation that you want to 

24 write up with you know the problem is we can certainly take a 

25 look at it. As I said before, I'm not an accountant either, so 

26 I would want to check that with our people who are.

27 MR. MCCLINTOCK: We could submit a consideration just 

28 they had an obligation if they would have paid it prior to 
Committee Meetings - 02/16/22 56

1 year end, it could have reduced the assets as part of the 

2 calculation. Also, we can submit3 MR. MARTIN: Okay.

4 MR. MCCLINTOCK: [Interposing] something.

5 MR. ADAMS: Thank you.

6 MS. JEFFRIES: Thank you. Seeing no other hands 

7 raised at this point. Let's go ahead and take the temperature 

8 check on 668.171 paragraph (e). If I could see your thumbs. 

9 Kelli, I can't decipher yours. Thank you. Alright. I've seen 

10 no thumbs down. I believe it's correct. Thank you. Okay, Greg, 

11 you want to take us into paragraph (g) or I'm sorry12 MR. MARTIN: (f).

13 MS. JEFFRIES: (f). 

14 MR. MARTIN: Yeah, trying to skip ahead, right? 

15 That's okay.

16 MS. JEFFRIES: I'm trying to remember my alphabet.

17 MR. MARTIN: After a while, you forget the ones, 

18 twos, and threes, Js, Ls. One thing flows into another. Yeah. 

19 So we're looking at F here under reporting requirements. And 

20 we have made several changes throughout this section to 

21 accurately reflect that these requirements apply to both 

22 institutions and their owners, and we have made several other 

23 clarifications as well, including requiring that the updates 

24 to state, federal, and qui tam lawsuits be provided to the 

25 Department, adding reporting requirements for short term 
Committee Meetings - 02/16/22 57

1 borrowing, adding a reporting requirement for institutions 

2 that are publicly listed on a foreign exchange, adding a 

3 reporting requirement for certain creditor events and adding a 

4 requirement for the loss of eligibility for non Title IV 

5 federal educational assistance programs, and also adding 

6 reporting requirements to align with the requirement to meet 

7 financial obligations in 668.171(b)(3). And here again, we've 

8 revised language to refer to both the institution and its 

9 owner. And we've also revised language to require updates to 

10 lawsuit information. So see here in in (f) (1) romanette 2 for 

11 a lawsuit under paragraph C one romanette 1B of this section 

12 not later than 10 days is a reporting requirements again, not 

13 later than 10 days after the institution or entity is served 

14 with the complaint. And an updated notice must be provided 10 

15 days after the suit has been pending for 120 days. In moving 

16 down to one romanette 4. We have added a reporting requirement 

17 for the short-term borrowing discretionary trigger that we 

18 added, so if we look at romanette 4 for a contribution and 

19 distribution under paragraph (c)(1), romanette 10 and the 

20 short term borrowing provision in paragraph D6, not later than 

21 10 days following each transaction. And moving on to five. We 

22 have revised this language to refer both to institution and 

23 its owner in the interest of brevity. We have struck out the 

24 language that repeats what was in the trigger and instead 

25 added a reference to that section. So you can see that 

26 language has been stricken. And we now say for the provisions 

27 related to a publicly traded entity under paragraph C one 

28 romanette 6 of this section no later than 10 days after the 

29 date the event described under paragraph C one romanette 6, 

30 occurs. Then moving down to romanette 6, we've up, just 
Committee Meetings - 02/16/22 58

1 updating the cross sections here. For the actions you can see, 

2 so. Under romanette 7, we have added a reporting requirement 

3 for the mandatory trigger related to the accreditor or events. 

4 So for accreditor events described in C romanette 11, not 

5 later than 10 days after the date on which the institution is 

6 notified by its accreditor. And under (viii), romanette 8, 

7 we've updated the header for the accreditor and events 

8 discretionary trigger and updated the timing for the reporting 

9 requirement, as well as added needed updates. So there that's 

10 under (viii) for the events, described in paragraph (d)(2) of 

11 this section not later than 10 days after the event occurs 

12 without update, not later than 10 days after the accreditor 

13 waives the violation, or the accreditor imposes sanctions or 

14 penalties, including sanctions or penalties imposed in 

15 exchange or as a result of granting the waiver. In romanette 

16 10, we have added this reporting requirement to refer to 

17 federal educational assistance funds since the 90/10 rule will 

18 no longer be limited to Title IV funds, and you can just see 

19 Title IV revenue replaced with Federal educational assistance 

20 funds. And for yeah, okay, so I want to go down to (xii), we 

21 have added this reporting requirement to address the 

22 requirements to meet financial obligations under 668.171(b), 

23 so for a failure to meet any of the standards in paragraph B 

24 of this section not later than ten days after the institution 

25 ceases to meet the standards. And moving on to (I). Here we 

26 mistakenly failed to remove this language in the first session 

27 as intended. It would otherwise allow institutional owners to 

28 withdraw equity for the purpose of meeting tax liabilities, 

29 which we did not intend to exclude from the trigger. And that 
Committee Meetings - 02/16/22 59

1 is everything for reporting under (f). So I'll open that up 

2 for comments.

3 MS. JEFFRIES: Okay. Thank you, Vanessa. Thank you, 

4 Vanessa. Appreciate it. Open it up to the negotiators for 

5 comments or questions. Brad.

6 MR. ADAMS: So removing of A under I romanette 1 I 

7 guess, they did a tax piece that you just mentioned. It can 

8 you say again, why is that being removed? Is it saying you 

9 don't want to know that? Help me. Or did you say it was 

10 mistakenly removed or? Sorry, I'm not following that.

11 MR. MARTIN: No, here we mistakenly failed to remove 

12 this language from the first session. This is we have 

13 mistakenly failed to remove this language in the first session 

14 as intended, it would otherwise allow institutional owners to 

15 withdraw the equity for the purpose of meeting tax 

16 liabilities, which we did not intend to exclude from the 

17 trigger. [Interposing] Right. We're just stating here that 

18 we're not indicating that an institution could do that.

19 MR. ADAMS: So again, we don't have to notify or we 

20 do? I'm sorry. This is- it reads so funny to me. Does the 

21 Department want to know that we're paying our taxes? That's 

22 what I'm trying to figure it out. Greg, I'm sorry. It just 

23 doesn't24 MR. MARTIN: No, no, not in this case that's been 

25 removed. This requirements been removed because we didn't 

26 intend for it to be a something that would excuse an 

27 institution from the trigger.
Committee Meetings - 02/16/22 60

1 MR. ADAMS: Okay, thank you.

2 MR. FINLEY: So let me try to clarify that as well. 

3 Let me clarify Greg's clarification. The notice still has to 

4 be provided to the Department, but the institution can no 

5 longer present information showing that the withdrawal that 

6 triggered the notice was because the funds were used to pay 

7 taxes.

8 MR. ADAMS: I'm more confused.

9 MR. FINLEY: I know I understand, it's-. 

10 MR. ADAMS: So does the Department want to know that 

11 we paid taxes, do we have to notify them? That's what I'm 

12 trying to determine here.

13 MR. FINLEY: It's the withdrawal of the funds that 

14 triggers the notice. That's the reference.

15 MR. MARTIN: Which is not mitigated by the need to 

16 pay taxes.

17 MR. ADAMS: I'm trying to think of another way to say 

18 it, I'm still not clear, I'm sorry. Do we have to notify the 

19 Department if we withdraw money as an S-Corp through equity to 

20 pay our taxes?

21 MR. FINLEY: If the withdrawal is caught within this 

22 timing structure of being money taken out after equity was put 

23 in within the timeframes and the regulation, you have to 

24 provide notice even if that withdrawal was used to pay taxes.
Committee Meetings - 02/16/22 61

1 MR. ADAMS: And remind me of the notice timeframe 

2 again? It's buried in (2)? What's the timeframe? I'm sorry.

3 MR. FINLEY: Yeah. 

4 MR. MARTIN: Let me go back and look.

5 MR. ADAMS: I'm really just trying to understand the 

6 rule.

7 MR. NASSIRIAN: Ten days.

8 MR. ADAMS: Thank you. 

9 MR. MARTIN: Ten days. 

10 MR. ADAMS: So within ten days of the fiscal year and 

11 we have to notify you. Anything outside of that, we don't. 

12 MR. MARTIN: No, the triggering requirement goes from 

13 into the first, what's it Steve the first quarter of the next?

14 MR. FINLEY: It's the equity the equity put into the 

15 institution within the last quarter that's withdrawn within 

16 the following two quarters after the change in the fiscal 

17 year.

18 MR. MARTIN: And when that happens, when that 

19 happens, you have 10 days to notify us.

20 MR. ADAMS: Even if it's to pay taxes? 

21 MR. FINLEY: Correct?

22 MR. MARTIN: Yes, even if it's pay taxes, that's why 

23 that was taken out.
Committee Meetings - 02/16/22 62

1 MR. ADAMS: Okay. I don't understand why that's in 

2 there. It's the same comment, I guess I had earlier. Thank 

3 you.

4 MS. JEFFRIES: Thank you, Brad. Kelli, you’re next 

5 and thank you very much for your ten-day visual, and Barmak 

6 for your audio piece of that. Appreciate it. Kelli, go ahead.

7 MS. PERRY: Yeah, I suppose I could've just come off 

8 of mute. Anyways, for in (f)(3), I would just like the 

9 Department to consider the language that I sent over for the 

10 next round. I know I was late, but my other job kind of got in 

11 the way. I apologize.

12 MS. JEFFRIES: Okay. Thank you. Thank you, Kelli. 

13 Barmak.

14 MR. NASSIRIAN: Yeah, I'm still struggling with 

15 Brad's concern about the taxes. I think the Department is 

16 interested in whether the institution is losing money, is 

17 withdrawing funds, whether to buy a yacht, or to pay taxes is 

18 really not relevant. At the end of the day, the Department's 

19 interest is in the soundness of the institution of the entity. 

20 So, you know, acting as if it's just a payment of taxes that's 

21 causing a concern is sort of like privileging one particularly 

22 noteworthy and laudable thing, as if the Department is 

23 stopping the payment of taxes. It's just the issue is are you 

24 withdrawing funds to the point that the institution begins to 

25 become destabilized?

26 MS. JEFFRIES: Okay. I think the I think the 

27 Department needs some time to digest and react to that if 

28 that's okay.
Committee Meetings - 02/16/22 63

1 MR. MARTIN: I will say, I mean, you know, again, 

2 this goes back to our concerns over an institution 

3 contributing equity and then withdrawing it right away because 

4 we have seen instances where that is done clearly to help an 

5 institution meet deposit score requirements and then that 

6 money is withdrawn, so it's not indicative of anything other 

7 than that, and of course, yes, an institution could withdraw 

8 money for any number of purposes and taxes are one of those, 

9 but it doesn't change the fact that the event occurred and 

10 that it could indicate an institution's desire to try to 

11 manipulate the composite score.

12 MS. JEFFRIES: Thank you, Greg. Brad.

13 MR. ADAMS: You know, just to respond to that, I 

14 completely understand the manipulation of the composite score 

15 piece and I understand why that's of concern. I do struggle 

16 with the way equity works and the fact that you know certain 

17 months of the year may be more income. Certain months of the 

18 year you may have a loss and how that all flows through equity 

19 and then you've got to pay taxes. And I disagree with Barmak's 

20 comment. There is a difference if you're taking out equity to 

21 buy a yacht versus paying the IRS, and S-Corps have 

22 significant amount of distributions to pay taxes. That is 

23 where the federal taxes are paid, so they're not paid to the 

24 bottom line of the school. They're paid through the owner's 

25 personal income statement. And that's the way an S-Corp works. 

26 And so I think that's got to be figured out. Maybe that's the 

27 difference. Maybe you put an exclusion for S-Corps and you 

28 leave C-Corps as is, but.
Committee Meetings - 02/16/22 64

1 MS. JEFFRIES: Okay. I see no further hands. Let's go 

2 ahead and take a temperature check on 668.176 paragraph (f) 

3 reporting requirements. Sam, I can't see your thumb. There you 

4 go. Thank you. Okay, I'm seeing Ernest, Carol- okay, I'm 

5 seeing one thumb down unless someone sees anything else. 

6 Kelli, is there anything else you want to add?

7 MS. PERRY: No, I would just like them to look at 

8 that proposed language so that we can discuss it.

9 MS. JEFFRIES: Okay, thank you.

10 MR. MARTIN: We'll do that.

11 MS. JEFFRIES: Alright, Greg, let's move on to (g) 

12 now. Okay, I think I got my alphabet straightened out.

13 MR. MARTIN: I think we're I think we're good to go. 

14 Yeah, (g), we're at public institutions. And looking at 

15 specifically here, (g) one romanette 1B, we've updated 

16 language to mirror what we require for foreign institutions 

17 and align it with the requirements in new 668.176 public 

18 institutions. So here you can see Secretary considers a 

19 domestic public institution to be financially responsible if

20 the institution notifies the Secretary, is a designated public 

21 institution by the state, local, municipal government entity, 

22 tribal authority, or other government entity and has legal 

23 authority to make, that has legal authority to make that 

24 determination and provides a letter from the official or the 

25 state or government entity confirming that the institution is 

26 a public institution and is backed by the full faith and 

27 credit of the state, local or municipal government entity, 
Committee Meetings - 02/16/22 65

1 tribal authority or other government entity. Moving on to and 

2 that is everything actually for H. So that's very brief.

3 MS. JEFFRIES: It would be yeah, that would be (g) 

4 everything.

5 MR. MARTIN: You know what? Let me just take, I'm 

6 sorry for (g) rather. So let me just take (g) and we'll do (h) 

7 and do (g) and (h) together. And that way we'll be at the end 

8 of the, we'll be at the end of 173. So let's move on to where 

9 we also have made some changes to (h). And we note that we 

10 have made these edits to further clarify how the Department 

11 may agree to treat other opinions, including if the editor 

12 believes that the concern has been alleviated. So. And you can 

13 see that those changes reflected there, even if an institution 

14 satisfies all the general standards of financial 

15 responsibility under paragraph B of this section, the 

16 Secretary does not consider the institution to be financially 

17 responsible if the institution’s audited financial statements 

18 opinion expressed by the auditor that was adverse, qualified, 

19 or disclaimed or includes or includes a disclosure about the 

20 institution's ability to continue operating. Or its ability to 

21 continue as a going concern unless the Secretary determines 

22 that a qualified or disclaimed opinion does not have a 

23 significant bearing on the institution's financial condition, 

24 or that the diminished liquidity, ability to continue 

25 operations, or ability to continue as a going concern has been 

26 alleviated. The Secretary may conclude that diminished 

27 liquidity ability to continue operations or ability to 

28 continue as a going concern has not been alleviated, even if 

29 the auditor states those concerns have been alleviated. So 
Committee Meetings - 02/16/22 66

1 those are the changes for both (g) and (h). I'll open it up 

2 for discussion.

3 MS. JEFFRIES: Okay, thank you, Greg. Alright. Open. 

4 Open it up to the negotiators. Barmak. 

5 MR. NASSIRIAN: To go back to (g). You know, we are 

6 attempting to write regulations that may stay in place for 

7 decades, and we should be smart enough to kind of anticipate 

8 where the next wave of waste, fraud, and abuse may pop up. We 

9 have historically had the assurance that the public sector has 

10 been beyond reproach when it comes to outright fraud. I humbly 

11 suggest, and this is not intended or targeting anybody 

12 participating in this on behalf of public institutions, it is 

13 just the concern I have with sort of leading indicators of 

14 problems down the road with some publics. So it seems to me 

15 that failing to address what is a public institution beyond 

16 the sort of a historical remnant may prove quite problematic. 

17 It seems to me that we are already and I won't name names, but 

18 we have already seen examples of public institutions 

19 attempting to stand up proto-publics, hiding behind the fact 

20 that the parent entity is a brand name while offering nothing 

21 but fairly abusive, predatory products. So I would really urge 

22 the Department to go back and think this through. This may be 

23 our last bite of the apple before 20 years. We need to focus 

24 on what being a public institution really means in terms of 

25 governance, in terms of conformity with state sunshine laws. 

26 It is insufficient to allow this just the board of directors 

27 of one public institution to dub another entity public by fiat 

28 So, and I submitted some language to that effect, but I really 

29 want to urge the Department to go. I don't need any response 
Committee Meetings - 02/16/22 67

1 here, but I want to tell you if you don't do something with 

2 this here. Be prepared to see a rip off global campus attached 

3 to every marquee name in public higher education in this 

4 country. Publics are under duress. They're being privatized. 

5 They're being disinvested from, and consequently they're out 

6 there looking for funding. And sadly, a few of them have 

7 discovered that the only way they can balance the books is by 

8 running a predatory side business from the proceeds of which 

9 they then subsidize their traditional students. So it's a real 

10 problem. I hope the Department takes it seriously. 

11 MS. JEFFRIES: Thank you, Barmak. Debbie.

12 MS. COCHRANE: Thank you. My comment was actually on 

13 the same clause with a specific suggestion to add a 

14 requirement that the institution be subject to the same 

15 financial oversight and public records laws as in the state or 

16 local government, where the institution is based. So I'll put 

17 the language in the chat.

18 MR. MARTIN: Thank you.

19 MS. JEFFRIES: Thank you. Okay, I'm not seeing any 

20 other hands. So let's go ahead and go with the temperature 

21 check on paragraphs (g) and (h). You want those separate Greg, 

22 or both together?

23 MR. MARTIN: Combined is fine.

24 MS. JEFFRIES: Okay. Alright.

25 MS. STUDLEY: Could you put them back up on the 

26 screen?
Committee Meetings - 02/16/22 68

1 MS. JEFFRIES: Well, then I have difficulty seeing 

2 the actual thumbs if we do that.

3 MS. STUDLEY: Can we see it for a second before we do 

4 the temperature check?

5 MR. MARTIN: Sure. Go ahead, Vanessa. Throw it back 

6 up. You can. I don't think you can search (g) and (h) at the 

7 same time, but you can scroll right to (g) and scroll down to 

8 (h). Normally, I don't like to put them together, but in the 

9 interest of time and getting to the next, to the next10 MS. STUDLEY: Yeah, sorry to hold you up.

11 MR. MARTIN: Oh, that's okay. 

12 MS. STUDLEY: Thank you, at least for me.

13 MS. JEFFRIES: Okay, thank you, Jamie. Vanessa, if 

14 you could take that down, please. Thanks. If we could see the 

15 thumbs, I'd appreciate it. I am not seeing any thumbs down. 

16 Thank you. We have approximately nine minutes before public 

17 comment. So Greg, do you want to move right into the next 

18 section and at least get it started?

19 MR. MARTIN: Yes, this is pretty brief. We are going 

20 into 174, which is past performance. And Vanessa has that up, 

21 thank you, Vanessa. And we're looking at not many changes 

22 here. We've simply corrected a cross reference here in (a), 

23 I'm sorry, no, not in (a), we corrected a cross reference in 

24 (b)(2)romanette I, so that's what we did in (b) and then 

25 moving down to (c) ownership interest for simplicity. We have 

26 eliminated this this definition and cross-referenced it and 
Committee Meetings - 02/16/22 69

1 cross referenced to 600.31. And that is in ownership interest, 

2 (c), and that is and so the way that reads, I should go over 

3 that again just for clarity. You have ownership interests and 

4 ownership interest is instead of all that text defined in 

5 600.30 and 600.31 B, and that is it for 74, for 174.

6 MS. JEFFRIES: Thank you. So we can open it up for 

7 discussion. Any comments or questions? Okay, I'm not seeing 

8 any. Let's go ahead and do a temperature check on 668.174 past 

9 performance. Alright. No thumbs down. Thank you. Greg, back to 

10 you. Something happen to Greg?

11 MR. FINLEY: Greg, you’re muted, I believe.

12 MR. MARTIN: I'm very sorry.

13 MS. JEFFRIES: There you are.

14 MR. MARTIN: My mistake. So look, I think in the time 

15 we have left, we've got looks to be like seven minutes, six 

16 minutes. We can try to address 175 here. There aren't many 

17 changes and then we'll be ready for 176, which will definitely 

18 have to take up tomorrow. So in 175, go to 175 (c). We've made 

19 some minor edits here to address misalignment that negotiators 

20 had noted between this language and the updated language in 

21 the audits and the audit opinions of section of the rule. 

22 We've also made another update to include going concern 

23 consistent with the edits that we that we made above. And in 

24 this paper and in the other papers where we refer to surety, 

25 we have now changed that language to use the broader term 

26 financial protection. So you see that referenced here in (c) 

27 participating institutions, that is not famously responsible 

28 either, because it does not satisfy one or more of the 
Committee Meetings - 02/16/22 70

1 standards of financial responsibility and 668.171 (b), (c), or 

2 (d), or because of an audit, opinion or disclosure about the 

3 institution's liquidity, ability to continue operations or 

4 ability to continue as a going concern. And then below that, 

5 you see that we have changed surety to financial protection. 

6 And that, I believe, is, we want to go over to I'm sorry. We 

7 want to come over to, in (d), which is the zone alternative. 

8 I'm sorry, no (e), (f). And if we go over into (f) under 

9 (f)(2), (f)(2) And this is provide the Secretary with 

10 irrevocable letter of credit. We are still considering whether 

11 this is a manageable standard, but our concern that the 

12 Department will struggle to confirm what amount would ensure a 

13 certain sound harmless, and we welcome any feedback as to 

14 whether another amount makes sense. And we note that the 

15 Department retains the ability to require a larger letter of 

16 credit than 10 percent if we deem that is necessary. So that 

17 was just a reference to the 10 percent letter of credit 

18 requirements, and that is it for 175. So we only have a few 

19 minutes left, but maybe we can take a comment or two before 

20 public comments.

21 MS. JEFFRIES: Brad, I'm sorry. Brad, go ahead.

22 MR. ADAMS: Yeah, I put it in the chat, but I would 

23 like to add the words “take reasonable steps” to both (c) and 

24 (F)(2). And so you'll have that language in the chat. Thank 

25 you.

26 MS. JEFFRIES: Thank you. Ernest.

27 MR. EZEUGO: Yeah. Yeah, I just want to make a quick 

28 note before public comment. You know, obviously the past 
Committee Meetings - 02/16/22 71

1 couple of days of this session negotiated rulemaking have been 

2 extremely technical, particularly some of the discussions 

3 around financial responsibility. I want to zoom out for just a 

4 moment. First, the committee, the center students and kind of 

5 remind the committee that places institutions like Corinthian 

6 and ITT Tech that have closed and lasting harm to hundreds of 

7 thousands of people. A new report by the Project on Predatory 

8 Student Lending came out today that actually highlights some 

9 of the misdeeds that happened to ITT in particular that I 

10 think are pertinent to the committee, and I would be happy to 

11 share those in the chat. But for me, just kind of refreshes 

12 the need for these conversations or discussions, but also 

13 strong regulation. So I just want to applaud the direction of 

14 both this regulation and financial responsibility and gainful 

15 employment are kind of moving in, which of course, is that of 

16 protecting students. Just want to say that before public 

17 comment. Thank you.

18 MS. JEFFRIES: Thank you. Kelli.

19 MS. PERRY: So my comment is general to financial 

20 responsibility. This seems like the right Section to talk 

21 about it real quickly, and it's, I don't have proposed 

22 language, but I'd like the Department to consider a couple of 

23 things. Based on the fact that we're not opening the composite 

24 score calculation and the fact that we know that there's 

25 potential issues with it and the fact that there's no appeal 

26 process to it. I would, there's private or private nonprofits 

27 in the financial statements. There's a new footnote disclosure 

28 which is meant to show available resources. And that footnote 

29 disclosure will show the resources that the institution has on 
Committee Meetings - 02/16/22 72

1 hand in order to continue operations and such. So as I think 

2 about schools in the [inaudible] alternative if they ended up 

3 there, potentially by mistake because they calc- because of an 

4 error in calculation or because the calculation isn't really 

5 showing that they're going to close, that may be that 

6 liquidity disclosure or available resources disclosure could 

7 be used by the Department to look at whether or not that 

8 institution is financially responsible. It's an audited 

9 footnote by auditors, and it does give some insight into where 

10 the institution is financially as far as, you know, being able 

11 to pay its bills and whether or not it's going to be able to 

12 continue operations. Just a thought.

13 MS. JEFFRIES: Thank you, Kelli. Seeing no additional 

14 hands, let's go ahead and move into the temperature check on 

15 668.175 alternative standards and requirements, and then we 

16 will move directly to public comment. Barmak, do you have a 

17 quick comment? You're on mute.

18 MR. NASSIRIAN: I don't know that we can address 

19 this, I submitted it, I'll put this in the chat, but I would 

20 like to have a conversation about this. I submitted a memo, 

21 for the record that questions the Department's statutory 

22 authority to configure the sureties it demands by tying it to 

23 Title IV volume as opposed to total institutional liabilities. 

24 I think that's a big deal. I don't know that we can really 

25 sidestep the issue. I'd like to hear from the Department some 

26 kind of a response.

27 MR. MARTIN: Can't do that today, but I'll see if we 

28 can address that tomorrow.
Committee Meetings - 02/16/22 73

1 MS. JEFFRIES: Carolyn.

2 MS. FAST: Yes, I think that I just wanted to add on 

3 to Barmak's comment, I think that his comment is relevant to 

4 this section, which talks about the 10 percent figure for 

5 Title IV and I support his suggestion not just in the context 

6 of whether or not the Department has a statutory requirement 

7 to do things differently, which is one question, but also even 

8 if that were not the case, that just to suggest that it would 

9 be a good idea for a letter of credit to consider the total 

10 liabilities that the school could owe, as opposed to just 

11 looking at the previous year's Title IV.

12 MS. JEFFRIES: Alright. Thank you for that. I think 

13 now that we are past the time for public comment, we will, I 

14 think, Greg, if you're okay, we'll defer this temperature 

15 check till first thing in the morning.

16 MR. MARTIN: That's fine.

17 MS. JEFFRIES: Okay. Alright. Thank you. Brady, can 

18 you tell me who's up first for public comment?

19 MR. ROBERTS: Yes, ma'am. I just admitted Laura Rau, 

20 who is here representing themselves.

21 MS. JEFFRIES: Okay, thank you. Hi, Laura, can you 

22 hear me?

23 MS. RAU: Yes, I can.

24 MS. JEFFRIES: Wonderful. You have three minutes to 

25 speak and that time will start whenever you're ready.
Committee Meetings - 02/16/22 74

1 MS. RAU: I thank you very much. I'm ready.

2 MS. JEFFRIES: Okay, go ahead.

3 MS. RAU: It's nice to meet you, thank you very much 

4 for listening to me today. My name is Laura Rau. I have an MBA 

5 from the University of Phoenix. It was the second MBA program 

6 I started. I started with Chapman College right out of my 

7 undergrad bachelor's with econ. I wanted to speak about the 

8 University of Phoenix very flexible program I attended at 

9 night and studied on weekends. The MBA allowed me to get the 

10 controller job I was speaking for, I was searching for to get 

11 the salary I needed. I had one small child at home. My husband 

12 and I both attended their MBA program and it allowed us to 

13 make the career changes that we wanted. As a result, I worked 

14 30 years in finance as a leader, controller, and CFO executive 

15 positions, and now I help people start businesses. The having 

16 attended two MBA programs, I feel it gives me kind of a unique 

17 point of view. The education that I received at University of 

18 Phoenix was more real life, pragmatic and flexible, and it 

19 allowed for me to manage my family. It was tough, but I made 

20 it. So I believe a quality education is one that helps people 

21 be more successful, effective at work. And for that, the 

22 University of Phoenix MBA program did it for me. If you have 

23 any questions, I'd be happy to answer them. I would just like 

24 to thank you for listening.

25 MS. JEFFRIES: We thank you for that, Laura, we 

26 appreciate your time and comments. Brady, who do we have next?

27 MR. ROBERTS: I am admitting Mr. Jeff Weiss, who's 

28 here representing himself.
Committee Meetings - 02/16/22 75

1 MS. JEFFRIES: Okay, thank you. Good afternoon, Jeff, 

2 how are you?

3 MR. WEISS: I am doing well, thank you.

4 MS. JEFFRIES: Wonderful. You have three minutes to 

5 present your comment before the committee and your time will 

6 start when you begin to speak. Thank you.

7 MR. WEISS: Perfect. Thank you for the opportunity to 

8 speak with you all today. My name is Jeff Weiss. I'd like to 

9 share my experience attending college as a working adult. I've 

10 tried both brick and mortar and online schooling options, but 

11 I can say that I needed what some would call a nontraditional 

12 school program in order to complete my college degree and 

13 ultimately further my career. When I entered the workforce in 

14 1996, I knew that I would eventually need a degree to further 

15 my career. I got to the point where I finally had the 

16 financial freedom to pursue a degree, but I cannot quit my job 

17 to go to school full-time or attend classes in person. My work 

18 hours were very erratic and there weren't many college options 

19 for me. Luckily, I knew of the University of Phoenix from a 

20 friend and the options that they had for people with busy 

21 schedules like mine. I was able to enroll their complete one 

22 course every five weeks and earn my degree on my own time. I 

23 had the opportunity to work with people from all over the 

24 world and experience a richly diverse learning group, which 

25 was very important to me. I believe that this gave me a great 

26 advantage in my career as a human resources professional. I 

27 know that you're discussing how to measure a good return on 

28 investment for those pursuing a degree, and I hope you 

29 consider what that means for working adults. If it weren't for 
Committee Meetings - 02/16/22 76

1 the University of Phoenix programs, I don't know that I'd have 

2 a degree today or how it would have affected my ultimate 

3 career choices. Not only did I get to work and gain experience 

4 while completing my degree, but I also learned the business 

5 skills needed to advance my career after graduating. My 

6 experience at Phoenix means a great deal to me, and I would 

7 call it a career focused and quality program. Please consider 

8 my story and take care that you do not limit the options for 

9 adult students who pursue career focused programs. Thank you.

10 MS. JEFFRIES: Thank you, Jeff. Appreciate it. Brady, 

11 who do we have next?

12 MR. ROBERTS: Cindy, I just admitted Dawn Tremaglio, 

13 who's here representing themselves.

14 MS. JEFFRIES: Hi, Dawn, can you hear me? Dawn?

15 MR. ROBERTS: They turned away from their computer, 

16 haven't enabled their audio, do you want me to message them 

17 and let in the next speaker?

18 MS. JEFFRIES: Yes, please.

19 MR. ROBERTS: Alright. I have just admitted Robert 

20 White, who is the corporate medical director of Medical.

21 MS. JEFFRIES: Is she on camera? Mr. White. Mr. 

22 White, can you hear me? Here he comes. There he is. Okay. 

23 Alright, Mr. White, you have three minutes, thank you for 

24 joining us, three minutes to speak today and that time that 

25 time begins when you're ready to start speaking. Thank you.

26 MR. WHITE: Can you all hear me okay?
Committee Meetings - 02/16/22 77

1 MS. JEFFRIES: Yes, we can, appreciate it.

2 MR. WHITE: My name is Robert White. I'm a physician 

3 assistant as well as a retired Army flight surgeon from 

4 Knoxville, Tennessee. In 2017, I was given the opportunity to 

5 apply for the physician assistant program at South College in 

6 Knoxville. And I was accepted into South College's inaugural 

7 class 2009. While I was in the program, I was elected as the 

8 class president and I worked very closely with South College 

9 PA staff. And I also had the dean of the program as my 

10 personal mentor. Over my military career, I've had four 

11 conflict deployments that ranged from Somalia in 1993 to Taji, 

12 Iraq in 2011 2012, where I helped lead a traumatic center and 

13 was the assistant brigade flight surgeon and the battalion 

14 surgeon after twenty-three years of combined military service. 

15 I finished my military career and retired as a captain flight 

16 surgeon in the 63rd aviation brigade. In my civilian career, 

17 I've worked in emergency medicine, family medicine, 

18 pediatrics, occupational medicine, geriatric psychiatry, and 

19 I'm also currently the corporate medical director for a 

20 nationwide heavy civil construction company headquartered in 

21 Knoxville, Tennessee. I'm also the owner of a CEO, a CEO of a 

22 rural health care practice that cares for individuals and 

23 families that cannot afford health care insurance. I've been 

24 on the board of the member of Tennessee Academy of Physician 

25 Assistants, still very active in the Government Affairs 

26 Committee. Last year I was appointed, appointed by Governor 

27 Lee to the Board of Physician Assistants, and I've been 

28 appointed to the Controlled Substance Monitoring Database 

29 Committee as well for Tennessee. As you can see, I worked very 

30 hard to be of service to my country, my state, my profession, 
Committee Meetings - 02/16/22 78

1 and to my community, in saying that South College is giving me 

2 the education and training to practice medicine at the top of 

3 my abilities in the scope of my practice, as well as 

4 encouraging me to be an advocate for the physician assistant 

5 profession and to help me to understand how to be a lifelong 

6 learner and a generous contributor to my community. I can say 

7 without a doubt that South College has forever changed my life 

8 and allowed myself and my family to have opportunities that I 

9 would have never been able to have without being accepted into 

10 the South College PA Program. I want to thank you all for your 

11 time and thank you for hearing my testimony.

12 MS. JEFFRIES: Thank you, Robert, we appreciate it. 

13 Dawn, if you want to go ahead and unmute yourself.

14 MS. TREMAGLIO: Okay.

15 MS. JEFFRIES: Okay, hi, welcome Dawn. You have three 

16 minutes to address the committee with your comments and your 

17 time will begin when you're ready to speak.

18 MS. TREMAGLIO: Okay, thank you. Hi, everyone. My 

19 name is Dawn Tremaglio. Thank you for allowing me the time to 

20 speak publicly to the Department of Education, who was setting 

21 the rulemaking process to ensure transparency across all 

22 higher education. I'm here to share my story. I understand 

23 that you're deciding on how to determine if a degree program 

24 is a good investment, and I believe that there are many 

25 factors contributing to this. In my case, flexibility was key. 

26 I'm a two-time graduate from the University of Phoenix with an 

27 associate's degree and a bachelor's degree. When I first 

28 enrolled, I did not care about the tax status of the 
Committee Meetings - 02/16/22 79

1 university. I simply knew that I wanted a complete education 

2 on my own schedule, and University of Phoenix allowed me to do 

3 that. As a full-time I.T. consultant for nationwide insurance, 

4 I needed a flexible program. And I was thrilled when my 

5 company even helped me pay for my college education. However, 

6 it took me many years to complete my degree program because I 

7 had to fit the work into my professional work schedule, and I 

8 was also working through some health issues at the time in my 

9 personal life. I was grateful that the flexible and quality 

10 program at Phoenix enabled me to eventually graduate with my 

11 bachelor's degree, which would not have been possible at a 

12 public university. Today, I ask that you please consider how 

13 you measure the degree programs and whether that be through 

14 new gainful employment rules or otherwise, and I ask that you 

15 do not proceed with bias. It's unfair to target specific 

16 schools or institutions because of their tax status when they 

17 offer quality and flexibility to accommodate schedules for 

18 students. Please use your broad authority to apply the rules 

19 and regulations to all institutions with the same fervor and 

20 standards. And please continue to work to protect and 

21 prioritize education for working adults such as me. Thank you 

22 for your time today. I appreciate it.

23 MS. JEFFRIES: Okay thank you, Dawn. Brady, who is 

24 next?

25 MR. ROBERTS: Cindy, I am now admitting Lisa 

26 Giordano, who is here representing the Association of Young 

27 Americans.

28 MS. JEFFRIES: Lisa, can you hear me?
Committee Meetings - 02/16/22 80

1 MS. GIORDANO: Can you hear me alright? 

2 MS. JEFFRIES: Yes, we can. You have three minutes to 

3 address the committee and that will begin whenever you're 

4 ready to start speaking.

5 MS. GIORDANO: Great. Thank you. Hi, all. Thank you 

6 for having me here today. My name is Lisa Giordano. I'm the 

7 executive director of the Association of Young Americans, also 

8 known as AYA. We are a nonprofit, nonpartisan membership 

9 organization representing over 23,000 young people across all 

10 50 states. We advocate on behalf of our membership at the 

11 federal level on the issues most important to them. Among the 

12 most critical is student debt and higher education reform. So 

13 again, thanks for having me here today. I am honored and 

14 grateful for the opportunity to speak on behalf of AYA's 

15 members, about 70 percent of which are student debt holders 

16 and some of which have attended for-profit institutions, 

17 higher education institutions. Many members have shared with 

18 me their largely adverse experiences with these for-profit 

19 institutions, and I'd like to share some of those with you all 

20 now and also to speak on the importance of the gainful 

21 employment rule and the importance of reinstating this rule to 

22 protect students and borrowers. So the story that stuck out to 

23 me more than any other among our members is from a member 

24 located in Boulder, Colorado, who currently has over $400,000 

25 in student loans to his name. He was defrauded by a for-profit 

26 law school that lost its accreditation from the American Bar 

27 Association. So we all know the value of a law degree and how 

28 much debt people go into to pursue a career in law expected to 

29 be high earners after graduation. This member was obviously 
Committee Meetings - 02/16/22 81

1 operating under the same assumption, only to be left with 

2 hundreds of thousands of dollars in debt for a degree that 

3 didn't work. No institution should get to the point of losing 

4 its accreditation. The Department of Education should have 

5 accountability measures and standards in place to make sure 

6 institutions are delivering to their students, especially 

7 these high-cost institutions promising high earning degrees. 

8 So reinstating the gainful employment rule is critical and 

9 ensuring these situations don't present themselves. The 

10 Department can successfully protect students from taking on 

11 debts they're unlikely to be able to repay and ensure that 

12 career programs are able to better prepare students for 

13 gainful employment following graduation. Another story from 

14 another member that attended a for-profit institution. This 

15 member is in Sunnyvale, California. After the first few years 

16 of paying her debt off, she owed more than she did at the 

17 beginning due to low wages in her new job and high interest on 

18 her loans. A direct quote, "It made me feel like college was 

19 the dumbest decision I've ever made." I think we can all agree 

20 that no one should feel that way. Upon dishing out thousands, 

21 sometimes hundreds of thousands to pay for a college degree 

22 that should be one of the best investments we make yet23 MR. WAGNER: You have 30 seconds remaining.

24 MS. GIORDANO: Oh, I'm sorry. I'm going to just skip 

25 to the end. Young people have borne the brunt of the student 

26 debt crisis, and we have had our voices largely silenced and 

27 hardship unrecognized as we struggle with our debt loads and 

28 dysfunctional degrees. For-profit students have had it the 

29 worst. We know that students at for-profit schools are less 
Committee Meetings - 02/16/22 82

1 likely to graduate, more likely to borrow, are deeper in debt 

2 and less able to pay off their debt. So again, reinstating the 

3 gainful employment rule is a critical opportunity the 

4 Department has to successfully protect students from taking on 

5 debts if they're unlikely to be able to repay and ensure that 

6 we're able to find gainful employment after graduation. Thank 

7 you very much for having me.

8 MS. JEFFRIES: Thank you, Lisa. Brady, who is next?

9 MR. ROBERTS: Cindy, I'm admitting Kari Kennedy, 

10 who's the institute director of the Institute of Beauty and 

11 Wellness.

12 MS. JEFFRIES: Hi, Kari, can you hear me? You are you 

13 need to unmute yourself, please. Thank you. Hi. Great. Kari, 

14 you have three minutes to address the committee today and that 

15 three minutes will start whenever you're ready to begin 

16 speaking.

17 MS. KENNEDY: Alright, thank you. Good afternoon, my 

18 name is Kari Kennedy, and I'm the director of the Institute of 

19 Beauty and Wellness, located in Milwaukee, Wisconsin. I'm also 

20 representing our sister school, Aveda Institute Madison. Our 

21 school provides education in the fields of cosmetology, 

22 barbering, ethesiology, massage therapy, and manicuring. 

23 Cosmetology schools are a unique subset of Title IV 

24 participating schools, and unfortunately, cosmetology schools 

25 do not have meaningful representation in these negotiations. 

26 This is reflected in the conversation during the first 

27 session. For this reason, I feel compelled to provide public 

28 comment and provide some context to our schools and our 
Committee Meetings - 02/16/22 83

1 programs. First, I would like to invite each of you to come 

2 and visit our schools and learn about our programs, our 

3 students, and our graduates. There is truly no substitute for 

4 learning about our schools and programs than firsthand. Most 

5 of our students are women and nearly half are Pell eligible. 

6 Our graduation rate at our Milwaukee campus was 79 percent and 

7 at 83 percent at our Madison campus. Our median loan debt for 

8 both campuses is approximately $6,333 dollars. Our graduates’ 

9 monthly payments are approximately $63 dollars a month. I 

10 share your concern about high student debt and debilitating 

11 loan payments, but it'd be hard to argue that payments of $63 

12 dollars a month are debilitating. Our median earn for both 

13 campuses are is $34,885 dollars. Despite these successful 

14 outcomes, the regulations you're writing would force schools 

15 like mine to close programs. It is well recognized that 

16 cosmetology industry has a high prevalence of under-reported 

17 and unreported income, which results in inaccurate earnings 

18 data from cosmetology graduates. As drafted, the gainful 

19 employment rule fails to adequately account for earnings of 

20 cosmetology school graduates. I would propose three simple 

21 solutions. Consider utilizing the alternative earnings data 

22 source for programs in certain CIP codes. Create a mechanism 

23 within earning calculation that allows plus up on reported 

24 earnings to adequately capture underreporting. The Department 

25 of Education is armed with the 2014 GE survey and could 

26 provide an appropriate algorithm, and reinstate the appeals 

27 process to allow institutions the opportunity to correctly or 

28 correct inaccurate earnings. In drafting this rule, I would 

29 ask you to think about our students, particularly our students 

30 at my school [30 seconds remaining]. Alexia, who is from our 
Committee Meetings - 02/16/22 84

1 2008 SCL graduate, who has returned to take a cosmetology 

2 program in 2021 so she can work alongside her licensed barber 

3 that is her husband. Their passion is to provide education in 

4 the community, or Brady, who graduated in January, who helped 

5 to start a new service at our salon specialty, sorry, 

6 specializing in supporting beauty needs for transitioning 

7 guests. These students are the core of our mission, and I hope 

8 that you'll recognize their faces and their stories when you 

9 discuss gainful employment. Thank you for your time.

10 MS. JEFFRIES: Thank you, Kari. Three minutes goes 

11 fast, I know you.

12 MS. KENNEDY: Alright, thanks, guys.

13 MS. JEFFRIES: Brady, who is next?

14 MR. ROBERTS: Cindy, I just admitted John Roberts, 

15 who is a veteran representing themselves. It looks like 

16 they're in the meeting. They just got to enable audio.

17 MS. JEFFRIES: Waiting on his audio to connect. Looks 

18 like there's some difficulty there ready Brady. While you try 

19 to help him, do you want to admit someone else?

20 MR. ROBERTS: Sure, I'll admit Neal Heller, who is 

21 here representing the Hollywood Institute and Cortiva 

22 Institute.

23 MS. JEFFRIES: Good afternoon, Neal, how are you?

24 MR. HELLER: Good, how are you?
Committee Meetings - 02/16/22 85

1 MS. JEFFRIES: Wonderful. You have three minutes to 

2 address the committee today with your comments and that three 

3 minutes will start whenever you're ready to start talking.

4 MR. HELLER: Okay, let's go. Okay. Good afternoon, 

5 everybody. My name is Neal Heller. I'm the government 

6 relations chair and a member of the board of directors for the 

7 American Association of Cosmetology Schools, representing over 

8 600 beauty schools across the country. I'm also a school 

9 owner. As a former negotiator in the last round of negotiated 

10 rulemaking, it's especially disappointing that the Department 

11 of Education failed to understand the importance and relevance 

12 to these proceedings to have a representative from our sector 

13 of higher education. Our schools offer degree granting 

14 programs for state licensure and cosmetology and other beauty, 

15 health, and wellness related career fields. We do not offer a 

16 degree granting programs. We are not them. The rules this 

17 panel are discussing are particularly relevant to our schools 

18 and, more importantly, our students. The gainful employment 

19 rule is directly related to the misconception that our 

20 graduates incur high debt with little career opportunity. This 

21 couldn't be further from the truth. Over 90 percent of those 

22 working in the multibillion-dollar beauty industry are 

23 graduates of our schools. Graduation and placement rates far 

24 exceed those of community colleges that offer the same 

25 programs. Our grads have less than $10,000 of student loan 

26 debt, roughly $1,000 per year in repayment. We are not the 

27 reason for today's student debt crisis. That responsibility 

28 belongs with traditional colleges and universities. An in29 depth, extensive analysis by The Wall Street Journal clearly 

30 demonstrates this. Underreported or unreported income is a 
Committee Meetings - 02/16/22 86

1 real issue for our schools as it pertains to gainful 

2 employment. To say anything else is simply a false narrative. 

3 A U.S. District Court clearly stating in a lawsuit brought by 

4 our association that the earnings data used by the Department 

5 in the 2014 version of gainful employment was flawed. The 

6 judge called the appeals process arbitrary and capricious, and 

7 ordered the Department to fix it. The Department in its own 

8 words in 2014 acknowledged that there was specifically an 

9 earnings problem in the cosmetology industry. Apparently, this 

10 problem's answer to the District Court is to continue down the 

11 same path the 2014 rule and go even further by eliminating the 

12 appeals process altogether. We can't wait to hear Judge 

13 contractions reaction to this incredible position. Although 

14 the 90/10 rule has been resolved on a bipartisan basis in 

15 Congress, this panel wants to supersede Congress's agreement 

16 by further defining federal aid, although every single state 

17 has its own hours requirement for licensure. This panel is 

18 discussing a cap on federal aid for cosmetology students, 

19 which would result in disenfranchising tens of thousands of 

20 students from pursuing their chosen career path. [You have 30 

21 seconds remaining]. I would love to go deeper into these and 

22 the other subjects being discussed over the course of these 

23 sessions. However, I have been limited to a paltry three 

24 minutes to address these critical areas of concern. If the 

25 expertise needed to be part of these discussions have been 

26 allowed in the first place an effective outcome and consensus 

27 might have prevailed. Or perhaps that was the plan all along. 

28 Thank you.

29 MS. JEFFRIES: Thank you very much, Neal.
Committee Meetings - 02/16/22 87

1 MR. HELLER: Alright, thank you.

2 MS. JEFFRIES: Brady, who's next?

3 MR. ROBERTS: We have John in the chat right now. 

4 John, if you just want to come off of mute. I think we're 

5 ready to go.

6 MS. JEFFRIES: Thank you. Hi, John. Hi, how are you?

7 MS. JEFFRIES: Good. You have three minutes to 

8 address the committee this afternoon, and that starts whenever 

9 you're ready to start talking.

10 MR. JOHN ROBERTS: Thank you for having me. Good 

11 afternoon. My name is John Roberts and I am an Army veteran. I 

12 was trained to fly helicopters in the army, and when I 

13 retired, I wanted to earn my certification to fly airplanes. 

14 Liberty University was the only school that offered a program 

15 covered by the G.I. Bill, specifically geared towards 

16 transitioning students from flying helicopters to airplanes. 

17 The program seemed perfect for me, but it turned out to be too 

18 good to be true. Liberty recruiters promised me the program to 

19 lure me to their school, but when I registered for courses, 

20 the flight program was no longer available. I first learned 

21 about Liberty's rotary wing transition program in 2020. 

22 Liberty seemed to be marketing it specifically toward military 

23 personnel. At that time, the landing page, the welcome page 

24 featured photos of Blackhawk helicopter and Army helicopter 

25 pilots surrounding it. I didn't enroll then, but in late 2021, 

26 Liberty directed its flight training affiliates to reach out 

27 to formally interested students like myself. I was contacted 

28 about applying for that training program. I received frequent 
Committee Meetings - 02/16/22 88

1 texts and calls and always firmly stated that I would not 

2 attend unless I was enrolled in the flight training program. I 

3 applied and was accepted to that program. However, when I was 

4 trying to complete the registration online, I encountered an 

5 issue. I registered for my three semester hour credit aviation 

6 course, as well as seven credits of online coursework in other 

7 topics such as Bible study in order to fulfill Liberty's 

8 degree requirements. When I went through the financial check9 in for that registration process, I was charged for all 10 

10 credits. Everything seemed to be up and up, but when I clicked 

11 to confirm everything, the next page showed that I was only 

12 registered for seven credits and no flight training. After 

13 unsuccessfully seeking help, I withdrew from the other courses 

14 because I had no interest in taking general education courses 

15 at Liberty. I already have a bachelor's degree. I went to 

16 Liberty specifically for this transitional flight training

17 program because of my age. I only have a few years before in 

18 order to work in a commercial aviation industry the only thing 

19 I'll be able to do is teach. [30 seconds remaining]. Thank 

20 you, and Liberty was wasting my time. In addition, I incurred 

21 expenses in reliance on my acceptance to Liberty's flight 

22 training program, including buying an iPad, materials to 

23 complete an initial check ride, and reserving hotels for my 

24 flight training, which would take place a few hours away from 

25 home. I feel that Liberty marketed its program to veterans 

26 with a promise of a tailor-made program before pulling a bait 

27 and switch. I'm here today to ask the Department of Education 

28 to continue to regulate schools like Liberty that are 

29 recruiting veterans and failing to fulfill their promises. 

30 Schools should not be allowed to entice us to enroll with the 
Committee Meetings - 02/16/22 89

1 promise of a program and then fail to offer that program while 

2 keeping us enrolled and charging [inaudible]. 

3 MR. WAGNER: Your three minutes is completed.

4 MR. JOHN ROBERTS: Thank you. Thank you for having 

5 me.

6 MS. JEFFRIES: Thank you very much, John. Brady, we 

7 have time for one more.

8 MR. ROBERTS: I'm admitting our final speaker, Sandra 

9 Bruce, who's here representing Milady where they are the vice 

10 president and general manager.

11 MS. JEFFRIES: Okay. Is she, there she comes. Hi, 

12 Sandra, can you hear me?

13 MS. BRUCE: Hello, Cindy, hi, how are you?

14 MS. JEFFRIES: I am wonderful, and yourself?

15 MS. BRUCE: Good. Thank you.

16 MS. JEFFRIES: Okay. Sandra, you will have three 

17 minutes to address the committee this afternoon and that three 

18 minutes will start whenever you begin to speak.

19 MS. BRUCE: Okay, very good, and is that happening 

20 now or what time?

21 MS. JEFFRIES: Okay, right now. Yeah, you're ready to 

22 go.

23 MS. BRUCE: Very good. Thank you. Thank you for 

24 allowing me the opportunity to speak today. I am Sandra Bruce, 
Committee Meetings - 02/16/22 90

1 senior vice president at Cengage Group and general manager of 

2 its Milady business. I've been with Cengage for more than 26 

3 years. Cengage is the largest U.S. based education publisher 

4 with 100 years’ experience serving learners from kindergarten 

5 through higher education. Milady is a beauty education 

6 provider with 95 years of creating content for learners 

7 pursuing occupations in the beauty industry as a participant 

8 in the higher education landscape. We are keenly interested in 

9 promoting strong student results and strong student outcomes. 

10 Our mission is to drive career success by inspiring the 

11 pursuit of knowledge through innovative solutions. Since 1927, 

12 we have worked to meet the needs of learners, educators, and 

13 employers by developing coursework that maintains pace with 

14 industry changes. We pride ourselves on providing students 

15 cutting edge resources. Today, there are more than 185,000 

16 learners a year using Milady textbooks or digital course ware. 

17 Those learners are educated in high schools, in votechs, 

18 community colleges, correctional facilities, career colleges 

19 and for-profit beauty schools. Students pursuing careers in 

20 beauty occupations have a rigorous curriculum, including 

21 anatomy and physiology, chemistry, electricity, financial 

22 literacy, as well as practical training for procedures related 

23 to their field of specialty. They learn professionalism and 

24 communication skills as the foundation for a successful 

25 career. Most students pursuing a career in the health and 

26 beauty industry, in fact, nearly two-thirds of students do so 

27 at for-profit beauty school. The vast majority of these beauty 

28 schools are small businesses, with an average of 25-50 

29 students a year. They are accredited, state-authorized and 

30 approved by the Department of Education to offer Title IV. The 
Committee Meetings - 02/16/22 91

1 average student in a beauty related program is a creative, and 

2 not typically a traditional learner. 38 percent of the 

3 students are under 25 years old, 73 percent are under 35 years 

4 old. These students are seeking a focused education that will 

5 lead them to the marketplace with lifelong skills in a career 

6 they love. Student outcomes for graduation, licensure, and job 

7 placement are not only state mandated as beauty schools must 

8 be licensed to operate in their state. They are also mandated 

9 by accrediting bodies for the school to qualify to offer Title 

10 IV funding to prospective students. [30 seconds remaining]. 

11 Occupations in beauty, such as cosmetologist, barber, nail 

12 technician and esthetician are licensed occupations regulated 

13 by each state. My concern shared by beauty schools and beauty 

14 professionals, is that a rewrite of the gainful employment 

15 rule will fail to properly account for unreported tip and 

16 self-employment earnings and as a result will force programs 

17 with low graduate debt and low graduate default rates to 

18 close. The earnings measure also does not account for part19 time workers or for the earnings increases that accrue over a 

20 career as a licensed professional builds a client base. For 

21 this reason, I emphasize my request that any gainful 

22 employment rule properly account for the earnings issues that 

23 are present in this industry. I also request that regulations 

24 are applied equitably25 MR. WAGNER: Your time is completed.

26 MS. JEFFRIES: Sandra, thank you very much for 

27 joining this afternoon. Okay with that, that concludes today's 

28 session, it is 4:03 p.m. Tomorrow's agenda will be aggressive, 

29 hopefully that you wrap up financial responsibility, move 
Committee Meetings - 02/16/22 92

1 directly into certification procedures and depending on how 

2 all that goes. Maybe even open the tip of the iceberg on the 

3 change of ownership control. So with that, have a great 

4 Department of Education, Office of Postsecondary

5 Education

6 Zoom Chat Transcript

7 Institutional and Programmatic Eligibility Committee

8 Session 2, Day 3, Afternoon, February 16, 2022

9 From Sam Veeder (she/her/hers) to Everyone:

10 I am back at the table for FA Administrators

11 From Anne Kress (P) Comm College to Everyone:

12 I am back at the table for Two Year Colleges.

13 From Kelli Perry - (P) Private Non-Profit 

14 Institutions to Everyone:

15 I will be returning to the table for Private, Non16 Profits after Emmanual asks a final question he has regarding 

17 Gainful Employment

18 From David Socolow (A) State agencies to Everyone:

19 I am at the table for State agencies

20 From Adam Welle, MN AGO to Everyone:

21 I am back at the table for state AGs
Committee Meetings - 02/16/22 93

1 From Jamienne Studley (P) Accrediting Agencies to

2 Everyone:

3 I also have comments about issues in Paper #3 and 

4 noted the comment from the facilitators that if we have time 

5 tomorrow after other subjects we could return to Paper #3.

6 From Jamienne Studley (P) Accrediting Agencies to

7 Everyone:

8 Sorry: on Friday!

9 From Brad Adams (P - Proprietary Institutions) to

10 Everyone:

11 funny that massive debt helps your composite score

12 From Brad Adams (P - Proprietary Institutions) to

13 Everyone:

14 can we go by paragraph as we go through comments on 

15 this section. This is a lot to cover all mandatory triggers at 

16 once

17 From Adam Welle, MN AGO to Everyone:

18 Yael is going to come to the table for discussion of 

19 this issue for state AGs.

20 From Barmak Nassirian (A) Servicemembers & Vets to

21 Everyone:

22 Why doesn't (c)(1)(i)(A) apply to all institutions 

23 (including those with composite scores higher than 1.5) when 

24 their score drops below 1.0?
Committee Meetings - 02/16/22 94

1 From Dave McClintock (Advisor) Auditor to Everyone:

2 section 668.171 section about Debts, liabilities and 

3 losses, please provide clarification regarding, "the 

4 institution's recalculated composite score is less than 1.0".

5 1) does recalculation need to be based on updated audited 

6 financials; 2) what are the specifics of the 'recalculation'?

7 From Brad Adams (P - Proprietary Institutions) to

8 Everyone:

9 is the recalculation of the score as of the date of 

10 the event or the impact on the prior year financial 

11 statements?

12 From Johnson Tyler, Brooklyn Legal Services to

13 Everyone:

14 120 day pending provision is a safety valve that 

15 addresses Brad's concern. If its a small issue it can be 

16 worked out quickly.

17 From Dave McClintock (Advisor) Auditor to Everyone:

18 further down in 668.171 (ii)(B), "or in the year 

19 following a change in ownership, the recalculated composite 

20 score for the entity...." An institution that goes through a 

21 change of ownership does not have a composite score until they 

22 complete their first fiscal period (might be a full year but 

23 it might not). Their Financial Responsibility is measured 

24 based on First Day or Opening Balance Sheet using the Acid 

25 Test and Tangible Net Worth. Can clarification be provided?

26 From David Socolow (A) State agencies to Everyone:
Committee Meetings - 02/16/22 95

1 +1 to Yael

2 From Kelli Perry - (P) Private Non-Profit 

3 Institutions to Everyone:

4 I would ask the department to look at 668.171 

5 (c)(1)(i) and whether (A), (B) and (C) are circular. It seems 

6 to me that if (B) and (C) are mandatory triggers then the 

7 debts referenced in (A) don't matter because the trigger has 

8 already occured in (B) and (C).

9 From Brad Adams (P - Proprietary Institutions) to

10 Everyone:

11 where did we stop on mandatory triggers. I do not 

12 want to get ahead

13 From Cindy FMCS Facilitator to Everyone:

14 He stopped after (v)

15 From Barmak Nassirian (A) Servicemembers & Vets to

16 Everyone:

17 The mandatory triggers tied to the composite score 

18 are presumably only intended to factor potential liabilities 

19 into institutions' composite score, and to render them not 

20 financially responsible when the score drops below 1.0. But it 

21 seems like 667.171(c)(1)(ii)(A) allows a loophole where 

22 payment of required dividends or "wages" could cause the 

23 school to drop below 1.0 and remain financial responsible.

24 From Brad Adams (P - Proprietary Institutions) to

25 Everyone:
Committee Meetings - 02/16/22 96

1 i formatlly proposed using the department's 

2 recommended 10% revenue threshold as the materiality threshold 

3 for all mandatory events.

4 From Barmak Nassirian (A) Servicemembers & Vets to

5 Everyone:

6 Brad is right, it doesn't matter what the prior 

7 contribution was, the more universal rule should focus on 

8 distributions that drop the score below 1.0, regardless of 

9 whether a prior contribution was made or not. The way this 

10 drafted, it actually limits the trigger.

11 From Anne Kress (P) Comm College to Everyone:

12 + 1 Barmak

13 From Anne Kress (P) Comm College to Everyone:

14 The focus should be on “below 1.0”—think this also 

15 goes to Jamie’s point on overly complicating the trigger.

16 From Yael Shavit to Everyone:

17 Adam is coming back in for State AGs

18 From Brad Adams (P - Proprietary Institutions) to

19 Everyone:

20 Beverly is trying to ask a question by raising her 

21 hand on the video. she can go before me as she has been trying 

22 for a while

23 From Anne Kress (P) Comm College to Everyone:
Committee Meetings - 02/16/22 97

1 +1 on Beverly’s accreditation point—language seems 

2 to run counter to actual accreditation process v/v accreditor 

3 actions

4 From David Socolow (A) State agencies to Everyone:

5 State higher education 

6 authorizing/licensing/regulatory agencies applaud the 

7 Department's proposed addition of the discretionary trigger in 

8 668.171(d)(9), related to institutions being cited for failure 

9 to meet State requirements.

10 From Jessica Ranucci (A)- Legal Aid to Everyone:

11 I think it’s important to remember that all of these 

12 discretionary triggers are cabined by the language in the 

13 intro to (d): “if any of the following events is likely to 

14 have a material adverse effect on the financial condition of 

15 the institution.”

16 From Beverly Hogan Primary/MSI to Everyone:

17 I agree with comments made by Jamie. I would still 

18 raise the question regarding intent. I realize the Department 

19 actions can trigger actions by accrediting agencies. 

20 Accrediting agencies allow a period of time for institutions 

21 to comply. I might be having problems with the rie hand. i 

22 have pressed but not sure it is showing as raised hand.

23 From Ernest Ezeugo (P) Student & Loan Borrowers to

24 Everyone:

25 +1 Jessica's comment in the chat. It's my view that 

26 this level of discretion, with the intro in (d) as a guiding 
Committee Meetings - 02/16/22 98

1 principle, is important for protecting students where 

2 traditional mandatory triggers may not catch issues before 

3 they occur.

4 From Adam Welle, State AGs (P) to Everyone:

5 + 1 to Jessica’s comment above. I believe this was 

6 said in the first week, but I think it’s important that the 

7 Department have tools to use its discretion to detect unstable 

8 institutions early and prevent calamitous closures and harms 

9 to students. These criteria are signs of problems and I’m 

10 generally supportive of these provisions.

11 From Ernest Ezeugo (P) Student & Loan Borrowers to

12 Everyone:

13 + 1 Amanda and Carolyn re: low completion rates and 

14 disaggregation of associated data

15 From Brad Adams (P - Proprietary Institutions) to

16 Everyone:

17 sorry. i froze and was offline for a minute or two

18 From Amanda Martinez (P-Civil Rights) to Everyone:

19 Suggestion for ED in (d)(3) to change "Title IV" to 

20 "federal education assistance funds." It makes sense for the 

21 regulations to require proper stewardship over all Federal 

22 funding sources instead of just Title IV.

23 From Debbie Cochrane (P), State agencies to

24 Everyone:

25 I am coming back to the table for state agencies.
Committee Meetings - 02/16/22 99

1 From Beverly Hogan Primary/MSI to Everyone:

2 Is it possible to enlarge the text?

3 From Brad Adams (P - Proprietary Institutions) to

4 Everyone:

5 i did not vote no, but i will in week 3 if we are 

6 unable to add in allowable equity distributions to cover tax 

7 obligations

8 From Kelli Perry - (P) Private Non-Profit 

9 Institutions to Everyone:

10 With regard to the reporting section f(3) I would 

11 ask the department to consider the proposed language that I 

12 sent regarding the ability to appeal composite score 

13 calculations

14 From Brad Adams (P - Proprietary Institutions) to

15 Everyone:

16 i am sideways, but again want to figure out how S17 corps pay their federal and state tax obligations given they 

18 flow through the owners personal balance sheets

19 From Brad Adams (P - Proprietary Institutions) to

20 Everyone:

21 +1 barmak

22 From Brad Adams (P - Proprietary Institutions) to

23 Everyone:
Committee Meetings - 02/16/22 100

1 it is the power 5 grab. two sec schools are going 

2 down this path.

3 From Carolyn Fast (P) Consumer advocates/Civil 

4 Rights to Everyone:

5 +1 to Barmak and Debbie's comments on public 

6 institutions

7 From Debbie Cochrane (P), State agencies to

8 Everyone:

9 Suggestion for (g)(1)(I): add requirement for 

10 institution to be subject to the same financial oversight and 

11 open public records laws as the state or local government, in 

12 the state or local government jurisdiction where the 

13 institution is formed.

14 From Brad Adams (P - Proprietary Institutions) to

15 Everyone:

16 in c and f2 i would like to propose to add in words 

17 takes reasonable steps see proposal below: (c) ...For purposes 

18 of a failure under § 668.171(b), the institution must also 

19 take reasonable steps to remedy the issue(s) that gave rise to 

20 the failure f2 (ii)...(ii) Take reasonable steps to remedy 

21 the issue(s) that gave rise to its failure under § 668.171(b);

22 From Adam Welle, State AGs (P) to Everyone:

23 +1 to Ernest's comment.

24 From Barmak Nassirian (A) Servicemembers & Vets to

25 Everyone:
Committee Meetings - 02/16/22 101

1 I submitted a legal memo from NSLDN on the question 

2 of statutory authority to index the amount of any surety or 

3 legal protection to the previous year's Title IV volume as 

4 opposed to total institutional liabilities. I'd like to have 

5 ED address the question tomorrow.

6 From Ernest Ezeugo (P) Student & Loan Borrowers to

7 Everyone:

8 https://predatorystudentlending.org/news/press9 releases/new-report-details-massive-scale-of-fraud-and-abuse10 at-notorious-for-profit-college-itt-tech-press-release/

11 From Jessica Ranucci (A)- Legal Aid to Everyone:

12 +1 to Ernest. These are important rules to protect 

13 students. I also wanted to highlight today’s news from the 

14 Department about $415 million new borrower defense relief: 

15 https://www.ed.gov/news/press-releases/education-department16 approves-415-million-borrower-defense-claims-including-former17 devry-university-students

18 From Brad Adams (P - Proprietary Institutions) to

19 Everyone:

20 +1 to Ernest's comment that stated "all students"

21 From Ernest Ezeugo (P) Student & Loan Borrowers to

22 Everyone:

23 Thanks, Brad. Importantly, though, students 

24 attending or considering attending the programs these regs 

25 focus on.