U.S. Department of Education Issues New Certification Procedures for Federal Financial Aid

The U.S. Department of Education (Department) issued final rules on Oct. 24, 2023, imposing new conditions that higher education institutions must satisfy to participate in federal student aid programs under Title IV of the Higher Education Act. Supplemental certification requirements are intended to strengthen the Department's ability to evaluate institutions at risk of closure and mitigate the resultant risks posed to students and taxpayers. The regulations take effect on July 1, 2024.

This Holland & Knight alert is the final in a three-part series discussing the new regulations and their implications. (See Holland & Knight's previous alerts, "New Financial Responsibility Requirements from the U.S. Department of Education," Nov. 2, 2023, and "New Administrative Capability Requirements Announced for Colleges and Universities," Nov. 7, 2023.)

Certification Requirements

The new regulations add conditions to the Department's Program Participation Agreements (PPAs). A PPA is the operative agreement between the Department and an institution of higher education that governs the institution's initial and continued participation in Title IV programs. In signing a PPA, an institution certifies its compliance with all conditions imposed by the Department.

The new conditions:

• allow the Department to request teach-out plans and agreements from provisionally certified institutions that are at risk of closure
• require institutions with initial PPAs (as of July 1, 2024) to limit career training programs to no more than 100 percent of the length mandated by applicable state laws for certification or licensure; this condition excludes fully online programs and does not apply to state requirements for degree programs
• require institutions with initial PPAs (as of July 1, 2024) to confirm that all of their programs meet the applicable programmatic accreditation and state licensure requirements necessary for graduates to obtain employment, including programs that lead to provisional licensure or licensure through reciprocity agreements; institutions have the option to show that they meet requirements in a state where a student attests they intend to move
• require distance education providers to comply with state laws related to closure in any state where they serve students, including those laws related to teach-outs, record retention, tuition recovery funds and surety bonds
• prevent institutions from withholding student transcripts for credits financed with Title IV student loan funds
• expand the categories of entities that must sign a PPA when they own a proprietary or private nonprofit institution (guidance issued in 2022 imposed this requirement only on a case-by-case basis)

Importantly, provisionally certified institutions with "major consumer protection issues" – as adjudged by the Department – must now seek recertification every three years or until those issues are resolved. The Department stressed that this new provision does not mean an institution will automatically become ineligible at the expiration of the three-year period. Rather, it was designed so the Department can look more frequently at institutions that are considered financially at risk.

Other Key Takeaways

These certification requirements give the Department more power over PPA enforcement, while simultaneously increasing the scope of the entities to which the regulations apply and imposing additional obligations on PPA institutions. For example, an institution's certification as a Title IV participant will no longer be automatically renewed if the Department fails to make a recertification decision in 12 months.

Compliance with the Department's new financial responsibility and accountability regulations will be necessary to obtain and maintain participation in Title IV financial aid programs.  Because the changes are substantial and complex, compliance planning and implementation will take significant time and effort. Institutions are well advised to seek assistance from legal counsel.

For more information about compliance with the new administrative certification procedures, please contact the authors or a member of Holland & Knight's Education Team.

Earlier in This Series

• New Financial Responsibility Requirements from the U.S. Department of Education, Nov. 2, 2023
• New Administrative Capability Requirements Announced for Colleges and Universities, Nov. 7, 2023

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.