Sec. 497. Eligibility and certification procedures
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Section 498 ( 20 U.S.C. 1099c ) is amended— in subsection (a)— by striking For purposes of and inserting the following: For purposes of ; by inserting , subject to paragraph (2), after determine ; and by adding at the end the following: The determination of whether an institution of higher education is legally authorized to operate in a State under section 101(a)(2) shall be based solely on that State’s laws. ; in subsection (b)(5), by striking B or D and inserting E ; in subsection (c)— by redesignating paragraphs (4), (5), and
(6)as paragraphs (6), (7), and (8), respectively; by striking the subsection designation and all that follows through the end of paragraph
(3)and inserting the following: The Secretary shall determine whether an institution has the financial responsibility required by this title in accordance with paragraph (2). An institution shall be determined to be financially responsible by the Secretary, as required by this title, if the institution is able to provide the services described in its official publications and statements, is able to provide the administrative resources necessary to comply with the requirements of this title, and meets one of the following conditions: Such institution has its liabilities backed by the full faith and credit of a State, or its equivalent. Such institution has a bond credit quality rating of investment grade or higher from a recognized credit rating agency. Such institution has expendable net assets equal to not less than one-half of the annual potential liabilities of such institution to the Secretary for funds under this title, including loan obligations discharged pursuant to section 437, and to students for refunds of institutional charges, including funds under this title, as calculated by an independent certified public accountant in accordance with generally accepted auditing standards. Such institution establishes, with the support of a financial statement audited by an independent certified public accountant in accordance with generally accepted auditing standards, that the institution has sufficient resources to ensure against the precipitous closure of the institution, including the ability to meet all of its financial obligations (including refunds of institutional charges and repayments to the Secretary for liabilities and debts incurred in programs administered by the Secretary). Such institution has met criteria, prescribed by the Secretary by regulation in accordance with paragraph (3), that— establish ratios that demonstrate financial responsibility in accordance with generally accepted auditing standards as described in paragraph (7); incorporate the procedures described in paragraph (4); establish consequences for failure to meet the criteria described in paragraph (5); and take into account any differences in generally accepted accounting principles, and the financial statements required thereunder, that are applicable to for-profit, public, and nonprofit institutions. The criteria prescribed pursuant to paragraph (2)(E) shall provide that the Secretary shall— not later than 6 months after an institution that is subject to the requirements of paragraph (2)(E) has submitted its annual financial statement, provide to such institution a notification of its preliminary score under such paragraph; provide to each such institution a description of the method used, and complete copies of all the calculations performed, to determine the institution’s score, if such institution makes a request for such information within 45 days after receiving the notice under subparagraph (A); within 60 days of receipt by an institution of the information described in subparagraph (B)— allow the institution to correct or cure an administrative, accounting, or recordkeeping error if the error is not part of a pattern of errors and there is no evidence of fraud or misconduct related to the error; if the institution demonstrates that the Secretary has made errors in its determination of the initial score or has used non-standard accounting practices in reaching its determination, notify the institution that its composite score has been corrected; and take into consideration any subsequent change in the institution’s overall fiscal health that would raise the institution’s score; maintain and preserve at all times the confidentiality of any review until such score is determined to be final; and make a determination regarding whether the institution has met the standards of financial responsibility based on an audited and certified financial statement of the institution as described in paragraph (7). If the Secretary determines, after conducting an initial review, that the institution has not met at least one of the conditions described in subparagraphs
(A)through
(E)of paragraph
(2)but has otherwise met the requirements of such paragraph— the Secretary shall request information relating to such conditions for any affiliated or parent organization, company, or foundation owning or owned by the institution; and if such additional information demonstrates that an affiliated or parent organization, company, or foundation owning or owned by the institution meets at least one of the conditions describe in subparagraphs
(A)through
(E)of paragraph (2), the institution shall be determined to be financially responsible as required by this title. The Secretary shall establish policies and procedures to address an institution’s failure to meet the criteria of paragraph
(2)which shall include policies and procedures that— require an institution that fails to meet the criteria for three consecutive years to provide to the Secretary a financial plan; provide for additional oversight and cash monitoring restrictions, as appropriate; allow an institution to submit to the Secretary third-party financial guarantees that the Secretary determines are reasonable, such as performance bonds or letters of credit payable to the Secretary, except that an institution may not be required to obtain a letter of credit in order to be deemed financially responsible unless— the institution has been deemed not to be a going concern, as determined by an independent certified public accountant in accordance with generally accepted auditing standards; the institution is determined by the Secretary to be at risk of precipitous closure when the full financial resources of the institution, including the value of the institution’s expendable endowment, are considered; or the institution is determined by the Secretary to be at risk of not meeting all of its financial obligations, including refunds of institutional charges and repayments to the Secretary for liabilities and debts incurred in programs administered by the Secretary; and provide for the removal of all requirements related to the institution’s failure to meet the criteria once the criteria are met. ; and in paragraph (7), as so redesignated, by striking paragraphs
(2)and (3)(C) and inserting paragraph
(2); in subsection (g)(3)— by striking section 102(a)(1)(C) and inserting section 102(a)(1) ; and by striking part B and inserting part D or E ; in subsection (h)(2), by striking 18 and inserting 36 ; in subsection (i)(1), by striking section 102 (other than the requirements in subsections (b)(5) and (c)(3)) and inserting sections 101 (other than the requirements in subsections (b)(1)(A) and (b)(2)) and 102 ; in subsection (j)(1), by striking meet the requirements of sections 102(b)(1)(E) and 102(c)(1)(C) and inserting meet the requirements to be considered an institution of higher education under sections 101(b)(1)(A) and 101(b)(2) ; and in subsection (k)— in paragraph (1), by striking 487(f) and inserting 487(e) ; and in paragraph (2)(A), by striking meet the requirements of sections 102(b)(1)(E) and 102(c)(1)(C) and inserting meet the requirements to be considered an institution of higher education under sections 101(b)(1)(A) and 101(b)(2) . Section 498A ( 20 U.S.C. 1099c–1 ) is amended— in subsection (a)(2)— by striking part B of both places it appears; in subparagraph (A), by inserting before the semicolon at the end the following: , or after the transition period described in section 481B(e)(3), institutions in which 25 percent or more of the educational programs have a loan repayment rate (defined in section 481B(c)) for the most recent fiscal year of less than 50 percent ; in subparagraph (B), by inserting before the semicolon at the end the following: , except that this subparagraph shall not apply after the transition period described in section 481B(e)(3) ; and in subparagraph (C)— by inserting , Federal ONE Loan volume after Stafford/Ford Loan volume ; and by inserting , Federal ONE Loan program after Stafford/Ford Loan program ; in subsection (b)— by redesignating paragraphs
(3)through
(8)as paragraphs
(4)through (9), respectively; by inserting after paragraph
(2)the following new paragraph: as practicable, provide a written explanation to the institution of higher education detailing the Secretary’s reasons for initiating the program review which, if applicable, shall include references to specific criteria under subsection (a)(2); ; and in paragraph (9), as so redesignated— by striking paragraphs
(6)and
(7)and inserting paragraphs
(7)and
(8); and by striking paragraph
(5)and inserting paragraph
(6); and by adding at the end the following new subsection: In conducting, responding to, and concluding program review activities, the Secretary shall— provide to the institution the initial report finding not later than 90 days after concluding an initial site visit; upon each receipt of an institution’s response during a program review inquiry, respond in a substantive manner within 90 days; upon each receipt of an institution’s written response to a draft final program review report, provide the final program review report and accompanying enforcement actions, if any, within 90 days; and conclude the entire program review process not later than 2 years after the initiation of a program review, unless the Secretary determines that such a review is sufficiently complex and cannot reasonably be concluded before the expiration of such 2-year period, in which case the Secretary shall promptly notify the institution of the reasons for such delay and provide an anticipated date for conclusion of the review. . Section 498B(b) ( 20 U.S.C. 1099c–2(b) ) is amended by striking section 102(a)(1)(C) and inserting section 102(a)(1) .
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- 20 USC 1099c–1
- 20 USC 1099c–2(b)
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Sec. 497
Eligibility and certification procedures
Cite20 USC 1099c–1
Cite20 USC 1099c–2(b)
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