President Bush signed the Higher Education Opportunity Act of 2008 ("HEOA" or the "Act") into law on August 14, 2008. The Act imposes a substantial number of new reporting and disclosure obligations on institutions, including colleges and universities that participate in Title IV federal student financial aid programs. Although the Secretary is expected to provide future guidance on some of the new requirements, the responsibility for compliance with many of the new requirements began on August 14, 2008. Below is a summary of some of these reporting and disclosure requirements.
The U.S. Secretary of Education (the "Secretary") is expected to provide guidance regarding compliance with some of the new requirements. However, unless otherwise indicated below, the obligation to comply with most of the reporting and disclosure requirements began on August 14, 2008.
The Secretary is authorized to impose fines against institutions that do not comply with HEOA's requirements. Additionally, the Secretary may limit or terminate a non-complying institution's participation in Title IV financial aid programs.
Some new requirements imposed in the Act include:
1) General Reporting and Disclosure Requirements for Colleges and Universities
- Drug and Alcohol Abuse Prevention - Effective August 14, 2008, institutions must now report in their biennial review the number and type of drug and alcohol-related violations and fatalities that occur on campus or as part of the institution's activities and sanctions imposed for them.
- Costs and Consumer Information Disclosures - The Secretary is required by August 14, 2009, to develop two cost calculators that must be posted on institutions' websites two years after their development. These calculators will allow prospective students to calculate the costs of attending the institution and compare those costs with the costs of other institutions.
- Beginning on July 1, 2011, the Secretary will publish lists of the five percent of institutions with the highest tuition and fees, the five percent with the highest net price and the five percent with the largest increase in tuition and fees during the three most recent academic years. Additionally, the Secretary will publish lists of the 10 percent of institutions with the lowest tuition and fees and the 10 percent of institutions with the lowest net price. Institutions' lists with the highest net increases in tuition or the highest net price will be subject to additional reporting requirements.
- Textbook Information - As of July 1, 2010, institutions receiving Title IV funds will be required, where practicable, to disclose the International Standard Book Number and retail price for required and recommended textbooks and supplemental materials for each course on their Internet and written course schedule.
- Teacher Preparation Program Disclosures - Effective August 14, 2008, any institution that has a teacher preparation program must provide annual reports to the Secretary that include, for example, information on the institution's ability to increase the number of teachers in shortage areas, the institution's ability to provide training that responds to local needs and classroom realities, student results on the state teacher licensing examination, and whether the students used a traditional or alternative means for obtaining the training necessary to take that examination.
- General Institutional Disclosures to Students - As of August 14, 2008, any institution subject to the Act must provide a series of general institutional disclosures to students, including the institution's plans for improving its academic programs; its policies and sanctions concerning copyright infringement; the percentage of men, women, Pell Grant recipients and self-identified racial and ethnic minorities enrolled at the institution; retention, graduation and placement data; policies regarding campus safety, missing students; drug violations and fire safety information.
2) Student Lending Reporting and Disclosure Requirements
The Act includes numerous new reporting and disclosure requirements that relate to student lending, including disclosures related to the Federal Family Education Loan ("FFEL") program, private loans and an institution's preferred lender relationships.
- Disclosures of Preferred Lender Arrangements - Effective August 14, 2008, each institution that has a preferred lender arrangement is required to make a number of disclosures on its website and in any marketing materials it sends to students regarding financial aid options. Institutions that offer private loans must disclose in simple and understandable terms that federal Title IV assistance is available and that the terms of a federal loan may be more favorable than the terms of the private loan. The HEOA also requires the Secretary to develop within 18 months additional minimum disclosures institutions and lenders must make to borrowers.
- Code of Conduct for Institutions with Preferred Lender Arrangements - For an institution with a preferred lender list to continue to be eligible for Title IV funding, as of August 14, 2008, it must develop, publish on its website and comply with a code of conduct for its financial aid personnel. The code of conduct must contain provisions prohibiting conflicts of interest; revenue-sharing arrangements; the solicitation or acceptance of gifts; receipt of fees, payments or other financial benefits for consulting services by anyone in the institution with responsibilities for student loans; and the acceptance of funds to be used for private loans in exchange for providing concessions to a private lender.
- Disclosures to Students Borrowing FFEL Loans - Effective August 14, 2008, institutions must make a number of specific disclosures to students borrowing FFEL loans, including the maximum amount of federal grant and loan aid available under Title IV; the interest rate, terms, charges and conditions of the loan; the annual and aggregate maximum amounts that can be borrowed under the FFEL program; the amount of interest that may accrue on the student's loan and the consequences of default on the loan.
Disclosures Required of Institutions that Are Eligible Lenders - Effective August 14, 2008, when any institution acting as a lender approves a loan, the institution must provide notification summarizing the rights and responsibilities of the borrower and the consequences of default in simple, understandable terms. Before providing loan funds, the institution must provide a prominent statement that the loan must be repaid and that sets forth the loan principal; charges associated with the loan; the interest rate; information regarding the payment of interest while the borrower is in school, if applicable; and information regarding the various avenues of repayment. Effective July 1, 2009, institutions acting as a lender must, during any repayment period, provide each borrower with a bill for each payment that sets forth, among other items, the original principal of the loan, the current balance, the total amount the borrower has paid in interest, the aggregate amount the borrower has paid on the loan and a description of each fee the borrower was charged during the preceding payment period.
- School as Lender Audit - Effective August 14, 2008, the Act requires institutions serving as eligible lenders to submit an annual compliance audit to the Secretary to determine whether the institution is using all special allowance payments, interest subsidies, interest payments and proceeds from the sale of loans for need-based grant programs. The compliance audit must also identify whether a reasonable portion of these proceeds are being used for administrative expenses, and whether the institution is using the proceeds to supplement other funds it receives for need-based financial aid.
- Title X Requirements for Private Student Loan Lenders - Effective August 14, 2008, Title X of the Act amends the Truth in Lending Act to provide that it applies to all private student loans and to prohibit any private educational lender from offering or providing any gift to institutions or their personnel in exchange for any advantage related to loan activities and to prohibit educational lenders from engaging in revenue sharing with institutions.
As of August 14, 2008, Title X prohibits a private student loan lender from offering gifts to an institution or any of its employees or agents in exchange for any advantage afforded to the lender for providing private loans to the institution's students. In addition, private lenders may not penalize borrowers for prepayment of their loans. A private lender with a preferred lender arrangement with an institution must provide an annual report to that institution. Effective in February 2010, a private lender may not use an institution's name, logo, mascot or any other representation of the institution to market its loans.
What This Means for Colleges and Universities:
This Alert is a general overview that does not include every aspect of the HEOA and institutions should review the Act to determine the effect of its requirements on their specific activities. Colleges and universities should consider working with legal counsel to become familiar with the new requirements and to develop systems for compliance. Since the Secretary can impose fines or limit or terminate a non-complying institution's participation in the Title IV financial aid programs, there is risk of potential penalties for non-compliance.