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Memorandum

To: U.S. Department of Education

From: Carolyn Fast, Jaylon Herbin, Adam Welle, Yael Shavit, and Deborah Cochrane

Date: February 1, 2022 

Re: Issue Paper 6: Certification Procedures - Proposed Language

The above-listed negotiators submit this proposed language for your review: 

§ 668.14 Program Participation Agreement 

(3) An institution’s program participation agreement must be signed by—

(i) An authorized representative of the institution; and

(ii) For a proprietary or private nonprofit institution, by an authorized representative of an entity 

with direct or indirect ownership of the institution if that entity has the power to exercise control 

over the institution. The Secretary considers the following as examples of circumstances in 

which an entity has such power–

(A) If the entity has at least 50 25 percent control over the institution through direct or indirect 

ownership, by voting rights, or by its right to appoint board members to the institution or any 

other entity, whether by itself or in combination with other entities or natural persons with which 

it is affiliated or related, or pursuant to a proxy or voting or similar agreement;

(B) If the entity has the power to block significant actions;

(C) If the entity is the 100 percent direct or indirect interest holder of the institution; or

(D) If the entity provides or will provide the financial statements to meet any of the requirements 

of 34 CFR 600.20(g), (h), or Subpart L of this part.

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(17) The Secretary, guaranty agencies and lenders as defined in 34 CFR part 682, nationally 

recognized accrediting agencies, the Secretary of Veterans Affairs, State agencies recognized 

under 34 CFR part 603 for the approval of public postsecondary vocational education, and State 

Commented [1]: The 25% suggested language is consistent 

with 34 CFR part 600.21(a)(6)(i), which establishes reporting 

requirements for title IV eligible institution where there is a 

change in "a person's ability to affect substantially the actions 

of the institution if that person did not previously have that 

ability." The provision provides that the Secretary considers a 

person to have the "ability to affect substantially the actions of 

the institution" if that person holds at least a 25 percent 

ownership interest in the institution. 

Similarly, 600.31(c)(2), the provision that addresses change of

control for a publicly traded entity, sets a threshold at 

ownership of 25% of voting stock where the entity also owns 

"more shares of voting stock than any other shareholder."
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agencies that legally authorize institutions and branch campuses or other locations of institutions 

to provide postsecondary education, the Federal Trade Commission, the Consumer Financial 

Protection Bureau, and State attorneys general have the authority to share with each other any 

information pertaining to the institution's eligibility for or participation in the Title IV, HEA 

programs or any information on fraud and abuse;

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(22) It will not use transcript issuance as a tool for debt collection by, inter alia

 

(i) Refusing to provide a transcript for a current or former student on the grounds that the 

student owes a debt to the institution or any other party;

(ii) Conditioning the provision of a transcript on the payment of a debt to the institution 

or any other party, other than a fee charged to provide the transcript; or

(iii) Charging a higher fee for obtaining a transcript, or providing less favorable 

treatment of a transcript request because a student owes a debt to the institution or any other 

party.

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(26) If an educational program offered by the institution is required to prepare a student for 

gainful employment in a recognized occupation, the institution must -

(i) Demonstrate a reasonable relationship between the length of the program and entry level 

requirements for the recognized occupation for which the program prepares the student. The 

Secretary considers the relationship to be reasonable if the number of clock hours provided in the 

program does not exceed the greater of -

(A) TOne hundred and fifty percent of Tthe minimum number of clock hours required for 

training in the recognized occupation for which the program prepares the student, as 

established by the State in which the institution is located at the point of the student’s 

enrollment, if the State has established such a requirement, or as established by any 

Federal agency; or 

(B) The minimum number of clock hours required for training in the recognized 

occupation for which the program prepares the student as established in a State in the 

same metropolitan statistical area (MSA) as the institution adjacent to the State in which 

the institution is located; and 

Commented [2]: The AG representatives propose this 

change to address the abusive practice of withholding or 

threatening to withhold students’ transcripts as a debt 

collection practice. Schools have an extreme level of leverage 

over students when they can threaten to withhold transcripts 

that show proof of prior completed coursework. And when 

transcripts are withheld in this manner, students are left 

unable to benefit from credits they have already earned and 

paid. Taxpayers are also robbed of the Title IV investment 

they have made when schools can refuse to provide proof of 

completed coursework. While this practice is abusive across 

the board, it disproportionately impacts low-income students 

and students of color. Law enforcement agencies have also 

found the practice to be a component of unfair lending activity 

in violation of state and federal law. See, e.g. CFPB v. ITT 

Educ. Servs., Inc., 219 F. Supp. 3d 878, 915 (S.D. Ind. 2015) 

("[T]he threat of withholding vital educational assets like 

transcripts and class credit . . . appears calculated to produce 

considerable leverage over ITT students, and that under 

certain circumstances the deployment of such leverage could 

fairly be termed coercive."). The practice is also illegal under 

certain states' laws. See Cal. Civ. Code § 1788.90-.93; Minn. 

Stat. § 136A.65, subd. 4(10). 

The AG representatives are additionally concerned that the 

Department’s addition of subsection (e)(1)(iii) below, which 

prohibits a school at risk of closure from withholding 

transcripts for de minimis debts may be cited as tacit 

permission of this abusive and damaging practice in all other 

contexts. We ask the Department to add proposed subsection 

(22) to clarify that withholding transcripts is never acceptable 

as a method of institutional debt collection. When the 

Department invests in a student's education, the school has 

an obligation to provide the student with proof of that 

education so they can use it in the job market.
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(ii) Establish the need for the training for the student to obtain employment in the recognized 

occupation for which the program prepares the student;

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(32) In each State in which the institution is located or in which students reside at the time of 

enrollment, the institution is otherwise required to obtain State approval under 34 CFR 600.9, the 

institution must - 

(i) Ensure that each program is programmatically accredited, if such accreditation is 

required by a Federal governmental entity or by a governmental entity in the State(s); and

(ii) Ensure that each program satisfies the applicable educational prerequisites for 

professional licensure or certification requirements in the State(s) so that a student who 

completes the program and seeks employment in theat State(s) qualifies to take any 

licensure or certification exam that is needed for the student to practice or find 

employment in an occupation that the program prepares students to enter; and 

(iii) comply with all state consumer protection laws, including both generally-applicable 

state laws and those specific to educational institutions, except for state requirements for 

obtaining state authorization that are inapplicable pursuant to a state authorization 

reciprocity agreement.

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(e) If an institution is provisionally certified, the Secretary may apply such conditions as are 

determined to be appropriate to the institution, including –

(1) For an institution that the Secretary determines may be at risk of closure—

(i) Submission of a teach-out plan or agreement to the Department and to the institution’s 

recognized accrediting agency; 

(2) (ii) Submission of a records retention plan to the Department of a plan for the 

collection and storage of records related to students’ enrollment, payments, and academic 

progress, including student rosters containing program information and enrollment dates, ledgers 

documenting payments received, and transcripts; and

(3) (iii) The release of holds on student transcripts over a de minimis amount, and the 

release of all holds on student transcripts in the event of a closure; 

(24) Restrictions on the addition of new programs or locations; 

Commented [c3]: Not all states require state authorization 

for online programs offered in their state by an institution 

located outside of the state. Accordingly, linking the 

professional licensure requirement to the state authorization 

regulation would leave some distance education students 

unprotected. The proposed revision would address this 

problem and ensure that all online students are afforded this 

critical protection.

Commented [4]: This language is proposed to address 

concerns that NC-SARA, the state authorization 

reciprocity agreement, currently requires member states to 

waive enforcement of education-sector-specific consumer 

protection laws with respect to participating schools that only 

offer distance education in their state. Examples of state 

education-sector specific consumer protection laws include: 

cancellation and refund provisions and student tuition 

recovery funds. NC-SARA distinguishes these laws from 

"generally-applicable" state laws, such as laws prohibiting 

fraud and deceptive practices.

NC-SARA's requirement that states waive enforcement of 

education-sector specific consumer protection laws creates a 

two-tiered system that leaves distance education students 

with fewer protections than brick-and-mortar students. It also 

undermines states' ability to protect students in their state. 

The proposed language would address this problem by 

requiring schools that offer programs in multiple states to 

comply with all state consumer protection laws in each state 

where the school enrolls students. Schools would be exempt 

from compliance with state authorization requirements, such 

as requirements to submit an application to state authorizing 

agencies or pay a fee to a state authorizing agency. This 

would permit reciprocity agreements to fulfill their purpose of 

reducing the cost and burden on schools to obtain 

authorization to operate in multiple states, while ensuring that 

distance education students are afforded the same protections 

as brick-and-mortar students.

Commented [5]: We propose omitting this provision 

because we have added a provision on transcript withholding 

at section 22 above.
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(35) Restrictions on the rate of growth in enrollment of students or of Title IV volume; 

(46) Restrictions on the institution providing a teach-out on behalf of another institution;

(57) Restrictions on the acquisition of another participating institution, which may include the 

posting of financial surety in an amount determined by the Secretary but not less than 10 percent 

of the acquired institution’s Title IV volume for the prior fiscal year. This surety is in addition to 

any other required surety;

(68) Additional reporting requirements, which may include, but are not limited to, cash 

balances,; an actual and protected cash flow statement,; student rosters; student outcome 

information including but not limited to retention and graduation rates; notification of adverse 

actions taken against the institution by accrediting agency, state authorizing agency, or other 

federal agency; notification of investigations by government agencies; student complaints 

relating to Title IV eligibility or administration, student support and career advising, or the 

quality of education received at the institution; and interim unaudited financial statements; 

(9) Limitations on the institution entering into a written arrangement with another eligible 

institution or an ineligible institution or organization for that other eligible institution or 

ineligible institution or organization to provide between 25 and 50 percent of the institution’s 

educational program under 34 CFR §668.5(a) or (c); 

(810) For an institution alleged or found to have engaged in misrepresentations to students, 

engaged in aggressive recruiting practices, or violated incentive compensation rules, 

requirements to submit marketing and other recruiting materials for the review and approval of 

the Secretary; 

(11) Requirements to demonstrate compliance with standards of administrative capability set 

forth in part 668.15, including but not limited to:

(a) Provision of adequate financial aid counseling; career services; and opportunities for 

clinical or externship opportunities; 

(b) timely disbursement of funds; and

(c) compliance with prohibitions on misrepresentations and aggressive marketing. 

(9) Such other conditions as the Secretary deems necessary or appropriate.
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(f) If a proprietary institution seeks to convert to nonprofit status or public status following a 

change in ownership, the following conditions will apply to the institution following the change 

in ownership, in addition to any other conditions that the Secretary may deem appropriate—

(1) The institution must continue to meet the requirements under §668.28(a) and 

§668.28(b) until the Department has accepted, reviewed and approved the institution's financial 

statements and compliance audits that cover two complete consecutive fiscal years with passing 

90/10 reporting under its new ownership, or until the Department approves the institution’s 

request to convert to nonprofit status, whichever is later;

(2) The institution must continue to meet the gainful employment requirements of 

Subpart Q of this part until the Department has accepted, reviewed, and approved the institution's 

financial statements and compliance audits that cover two complete consecutive fiscal years 

under its new ownership, or until the Department approves the institution’s request to convert to 

nonprofit status, whichever is later; 

(3) The institution will be prohibited from identifying itself as a nonprofit or public 

institution in its marketing and recruiting until the Department approves the institution’s request 

to convert to nonprofit or public status; and

(34) The institution will be required to submit regular and timely reports on agreements 

entered into with its former for-profit owner or affiliated or related persons or entities, so long as 

the institution participates as a nonprofit or public institution.

(g) If an institution is initially certified as a nonprofit institution or a public institution, or if it has 

undergone a change of ownership and seeks to convert to nonprofit status or public status, the 

following conditions will apply to the institution upon initial certification or following the 

change in ownership, in addition to any other conditions that the Secretary may deem 

appropriate:

(1) The institution will be required to submit regular and timely reports on accreditor and state 

authorization agency actions and any new servicing agreements within 14 days of the action or

agreement until the Department has accepted, reviewed and approved the institution's financial 

statements and compliance audits that cover two complete consecutive fiscal years following 

initial certification, or two complete fiscal years under its new ownership or until the Department 

approves the institution’s request to convert to nonprofit status, whichever is later; and

(2) The institution will be required to submit regular and timely reports on communications from 

the Internal Revenue Service or any state or foreign country related to tax-exempt or nonprofit 

status within 14 days of the communication so long as the institution participates as a nonprofit 

institution.

Commented [6]: Changed "regular and timely" to "within 14 

days of the action or agreement"

Commented [7]: Changed "regular and timely" to "within 14 

days of the communication"
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(he)

(1) A program participation agreement becomes effective on the date that the Secretary signs the 

agreement. 

(2) A new program participation agreement supersedes any prior program participation 

agreement between the Secretary and the institution. 

(if) 

(1) Except as provided in paragraphs (g) and (h) of this section, the Secretary terminates a 

program participation agreement through the proceedings in subpart G of this part. 

(2) An institution may terminate a program participation agreement. 

(3) If the Secretary or the institution terminates a program participation agreement under 

paragraph (f) of this section, the Secretary establishes the termination date. 

(jg) An institution's program participation agreement automatically expires on the date that -

(1) The institution changes ownership that results in a change in control as determined by the 

Secretary under 34 CFR part 600; or 

(2) The institution's participation ends under the provisions of § 668.26(a) (1), (2), (4), or (7). 

(kh) An institution's program participation agreement no longer applies to or covers a location of 

the institution as of the date on which that location ceases to be a part of the participating 

institution. 

§ 668.43 Institutional information. 

(a) Institutional information that the institution must make readily available to enrolled and 

prospective students under this subpart includes, but is not limited to -

* * * 

(5) The academic program of the institution, including -
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(i) The current degree programs and other educational and training programs; 

Certification Procedures 11 

(ii) The instructional, laboratory, and other physical facilities which relate to the 

academic program; 

(iii) The institution's faculty and other instructional personnel; and 

(iv) Any plans by the institution for improving the academic program of the institution, 

upon a determination by the institution that such a plan exists.; and 

(v) If an educational program is designed to meet educational requirements for a specific 

professional license or certification that is required for employment in an occupation, or is 

advertised as meeting such requirements, information regarding whether completion of that 

program would be sufficient to meet licensure requirements in a State for that occupation, 

including -

(A) A list of all States for which the institution has determined that its curriculum 

meets the State educational requirements for licensure or certification; 

(B) A list of all States for which the institution has determined that its curriculum 

does not meet the State educational requirements for licensure or certification; and 

(C) A list of all States for which the institution has not made a determination that 

its curriculum meets the State educational requirements for licensure or certification.

(vi) If an educational program is designed to meet educational requirements for a specific 

profession for which there are program-specific or graduate-specific certifications that are 

not required for employment but increase employability in the field, whether the program 

meets the educational requirements for such certifications and if not, any limitations that 

arise from the lack of certifications.

Commented [8]: The Department proposed to eliminate 

disclosures concerning professional licensure because of 

proposed language in 668.14(32) which would require schools 

ensure that a program meets requirements for professional 

licensure in all states where it enrolls students. However, 

students may intend to seek employment in states other than 

the state where they are residents. Accordingly, it is important 

to disclose whether a program meets requirements in each 

state.