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Fact Sheet: Proposed Rules to Protect Students by Strengthening Department of Education Oversight

and Monitoring of Colleges and Universities

Today, the Department of Education (Department) released proposed rules to significantly strengthen 

our ability to conduct robust monitoring and oversight of institutions of higher education (institutions). 

These proposals would allow the Department to more easily secure financial protection from 

institutions when they start to exhibit signs of financial struggle and allow us to add conditions to risky 

institutions’ participation in the Federal financial aid programs to ensure greater oversight. The 

regulations also would provide a more streamlined process for States to approve postsecondary 

opportunities for students without a high school diploma or its equivalent. 

These proposed changes are part of a package of rules that would reinstate and strengthen the gainful 

employment regulation that holds career training programs accountable for their outcomes and 

expands transparency for all types of programs. A separate fact sheet covering those other components 

of the regulatory package related to gainful employment and increased transparency into the financial 

value of postsecondary programs can be found here. 

Financial Responsibility

Monitoring institutions’ financial health is a key responsibility for the Department. Financially risky 

institutions may be in danger of sudden closures or engage in behavior that prioritizes economic 

solvency over of what is best for students. Studies by the State Higher Education Executive Officers 

Association and the U.S. Government Accountability Office have shown that institutional closures are 

disruptive for students, often putting an end to their educational journeys, and that closures often 

involve insufficient notice to and protections for students. Closures also frequently result in significant 

losses of taxpayer funds to cover the cost of loan discharges that are not reimbursed by the institution. 

Existing regulations limit the Department’s ability to respond swiftly and flexibly when problems arise 

and are insufficient to protect against closures and other behaviors that harm students. The proposed 

rules would mitigate these risks by creating new mandatory triggering conditions that would alert the 

Department of a risk. These triggers would allow us to immediately seek financial protection or 

recalculate the institution’s financial responsibility score to determine whether their financial condition 

has materially weakened. The proposed rule would also establish new discretionary triggers that would 

result in the Department conducting a case-by-case analysis to see if additional protection is needed. In 

both cases, the financial protection would most likely take the form of a letter of credit or funds set 

aside to reimburse students and taxpayers in the event of closure. 

The proposed mandatory triggers would be applied to institutions that are: 

• Required to pay a debt or other liability that, when added into their financial responsibility score

calculation, results in a failure. 

• Subject to lawsuits by Federal or State actors or qui tam lawsuits where the potential liability, 

when added into their financial responsibility score, results in a failure.

• At risk of losing access to Federal aid due to having high cohort default rates, failing the 90/10 

revenue requirement, or having a significant share of aid in failing gainful employment 

programs.

• Inflating their financial responsibility scores by making a contribution to the school that results 

in a passing score followed by a distribution after the fiscal year ends. 
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• Discouraging Department oversight actions by entering into debt covenants that could cause 

adverse conditions if the Department places limitations on their access to Federal financial aid.

• Declaring financial exigency or entering a receivership.

The discretionary triggers would be applied to institutions that are: 

• Subject to adverse accreditor actions, such as show cause or probation.

• Experiencing significant fluctuations in Federal aid volume.

• Closing programs or locations that enroll significant shares of students.

• Subject to adverse actions by States and other Federal agencies.

Administrative Capability

The proposed rules also would strengthen how the Department administers existing statutory 

requirements that institutions must demonstrate that they are capable of administering the Title IV 

programs. Institutions that are found not to be administratively capable may be required to provide 

financial protection or have their participation in the aid programs limited, suspended, or terminated. 

The proposed regulations would:

• Require that institutions provide adequate financial aid counseling and financial aid 

communications to students, including information on the cost of attendance and the sources 

and types of financial aid available to them.

• Limit an institution from having a principal or affiliate whose misconduct or institutional closure 

contributed to significant liabilities to the Federal government.

• Strengthen requirements that institutions develop and follow adequate procedures to evaluate 

the validity of a student’s high school diploma.

• Require institutions to provide adequate career services and, where required for completion of 

a credential or licensure, accessible clinical or externship opportunities.

• Prohibit institutions from engaging in misrepresentations or aggressive and deceptive 

recruitment.

Certification Procedures

The proposed certification procedures regulations would strengthen the Department’s ability to

increase scrutiny of institutions that exhibit concerning signs and allow us to impose conditions to 

mitigate the risk posed to students and taxpayers. These proposed changes would require that:

• Institutions at risk of closure submit an acceptable teach-out plan or agreement.

• Entities with direct or indirect ownership of a proprietary or private nonprofit institution sign 

the institution’s Program Participation Agreement. This expands on guidance issued by the 

Department last year to seek these signatures on a case-by-case basis.

• Institutions may not employ, affiliate with, or contract with any individual or entity if the 

individual or entity has been found to have committed fraud or misconduct involving 

government funds, or was affiliated with another institution that owes a Title IV liability that is 

not being repaid.

• Institutions show that their programs meet any required programmatic accreditation and State 

licensure requirements so that students can obtain employment. And institutions comply with 
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all State consumer protection laws related to closure, recruitment, and misrepresentations for 

all States in which they enroll students.

• Institutions do not withhold transcripts or take other adverse actions against a student related 

to a balance resulting from an error or fraud in the administration of Federal financial aid 

programs or a balance owed due to the Return of Title IV funds requirements.

Ability to Benefit

The Higher Education Act establishes several “ability to benefit” (ATB) options that a student without a 

high school diploma may pursue in order to gain eligibility to access Federal financial aid, including

participating in a State process approved by the Department. ATB students are required to enroll in an 

eligible career pathway program to access Federal student aid.

The proposed ATB regulations would establish safeguards to ensure State processes are adequate, 

establish documentation requirements for institutions that wish to enroll ATB students, and establish a 

verification process to ensure regulatory compliance. The regulations also define an eligible career 

pathway program. The Department achieved consensus in negotiating these changes and the proposed 

regulations reflect the consensus language.