Education Department Clarifies Some For-Profit Rules

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The U.S. Department of Education has issued a letter that clarifies new rules covering activities of for-profit colleges that go into effect in July.  The rules, under the department’s Program Integrity Regulations, address for-profit schools having to be authorized by states to operate, including in states where they are not located but have students, prohibiting payments to recruiters based on the number of student they recruit and what actions can be taken for misrepresentations.

The rule clarifications are contained in a Dear Colleague letter issued late Thursday.  The regulations on these matters were issued in October, but have continued to generate controversy.

According to the letter, the department has always required for-profit colleges to obtain approval from all states in which their distance learners (mostly those taking online courses) reside, if the states require such approval. The colleges have complained specifically about this regulation. The department’s letter states that if schools can show they have sought approval from their affected states, they will have a one-year grace period to gain the approvals.  The letter advises that the department understands that states might not be able to process all the applications before July 1.

Each for-profit must show there is an independent body in each state where they have students that would be able to handle any student complaints.  The complaint agency can be a state agency or another agency, including the school’s own board of directors, if a school can show that the board is completely independent of the school’s officials.

The new regulations reinforce prohibitions on schools making payments to recruiters or student aid officials on the basis on the number of students they enroll or help to obtain financial aid. The letter spells out exactly who is covered by the regulation and what it considers to be direct payments and indirect payments. 

The final section of the letter clarifies the appeal rights of a school that is charged by the department with make misrepresentations to students.  If such misrepresentation allegations are substantiated, a school can be suspended or terminated from participating in the federal financial aid programs, or fined.