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Education Law Update: New Legal Requirements for Colleges and Universities

November 12, 2008 | Alert

AN OVERVIEW OF THE HIGHER EDUCATION OPPORTUNITY ACT AND THE IDENTITY THEFT RED FLAG RULES

Two recently-enacted laws—the Higher Education Opportunity Act and amendments to the Fair and Accurate Credit Transactions Act—impose various new legal requirements on colleges and universities. Institutions that have not done so already should begin planning for and implementing the new policies, procedures, and disclosures required by the new laws. 

I.          Higher Education Opportunity Act

On August 14, 2008, the President signed into law the Higher Education Opportunity Act (“HEOA”). This new law reauthorizes and amends the Higher Education Act of 1965, and imposes numerous new requirements on colleges and universities that participate in Title IV federal financial aid programs. The new requirements cover a broad range issues, such as campus safety, peer-to-peer file sharing, student lending, and textbook costs.  The HEOA itself is over 400 pages long, so is advisable for institutions to consult with legal counsel to ensure compliance with all of the new requirements.

This summary is intended to be a general overview of the new law. It does not include a complete description of all of the legal requirements and it omits many details regarding compliance.  However, institutions should be generally aware of the new requirements in the following areas:

A.        Student Lending Practices 

Institutions Must Publish A Code of Conduct for Financial Aid Personnel

The code of conduct must prohibit conflicts of interest with regard to loans. The HEOA  requires the code of conduct to address several minimal requirements. For example, the code must:  (1) prohibit revenue sharing arrangements; (2) prohibit most lender gifts to employees of the financial aid office and their family members with certain minimal exceptions; (3) prohibit employees from receiving fees or other compensation for consulting with lenders; (4) prohibit the institution from using award packaging or other methods to assign a first-time borrower’s loans to a particular lender and prohibit the institution from delaying or refusing to certify any loan based on the borrower’s choice of a particular lender; (5) prohibit the request or acceptance of any funds for private education loans in exchange for benefits to the lender, such as a preferred lender arrangement; (6) prohibit the institution from requesting or accepting assistance from any lender for call-center staffing or financial aid office staffing; and (7) prohibit financial aid employees who serve on an advisory board for any lender from receiving any compensation or financial benefit for such service, other than reimbursement of reasonable expenses. The Code of Conduct must be published on the institution’s website, and the institution must annually notify employees who have responsibilities related to financial aid of the Code of Conduct.     

Institutions Must Make Certain Disclosures Regarding Student Lending

The HEOA requires the Department of Education to adopt regulations regarding minimum disclosures with regard to preferred lender arrangements along with a model form disclosure. Although institutions need to wait for these regulations to learn of all the required disclosures, the HEOA also requires that institutions begin making certain disclosures with regard to student lending right away. For example, institutions are required to make disclosures on institutional websites and in any informational materials related to financial aid options regarding the availability and amounts of Title IV grant and loan aid. Institutions must also disclose that they are required to process the documents required for students to obtain a loan from any private lender the student selects. 

Institutions that Serve as Lenders Must Complete Annual Compliance Audits

Institutions that serve as eligible lenders must now annually submit a compliance audit to the Department of Education so that the Department can determine whether the institution is complying with legal requirements related to institutions acting as a lender.

B.        Campus Health and Safety Requirements

Drug and Alcohol Use

Institutions must include certain new information in their biennial review of their drug and alcohol prevention programs, including the number of drug and alcohol-related violations and fatalities and the sanctions imposed as a result of such violations and fatalities. Institutions must also provide written notice to students upon enrollment about how a drug law violation will impact their federal financial aid. If a student loses eligibility for aid because of a drug violation, the institution must advise the student in writing of the ways the student can regain eligibility for such aid.

Fire Safety

The HEOA requires institutions to publish an annual fire safety report, which includes, among other things, the institution’s fire safety policies and procedures, planned fire safety improvements, and statistics regarding the number and causes of all fires in on-campus student housing. Institutions are also required to keep a log of fires that occur in student housing that includes specific required information related to such fires.  

Missing Students

The HEOA requires institutions that provide on-campus housing to develop a missing student notification policy. Among other things, the policy must allow students to designate a confidential contact to be notified if they are determined to be missing for more than 24 hours. Institutions must also develop certain procedures for reporting missing students.

Hate Crimes

The HEOA amends the Clery Act to add four crimes to the list of crimes that must be reported if the crimes are hate crimes. The new crimes that must be reported are: larceny-theft, simple assault, intimidation, and destruction, damage and vandalism of property.

Emergency Response Procedure

Institutions must include certain information in their annual campus safety reports regarding immediate emergency response and evacuation procedures, including policies to immediately notify the campus community of a confirmed emergency.

Disclosures to Victims of Violence

The HEOA requires institutions that receive Title IV funds to disclose to any victim of violence or non-forcible sexual offense the results of any disciplinary proceeding against the student who is alleged to have perpetrated the offense. 

C.        Copyright Infringement 

Disclosures to Students

Institutions must annually and explicitly inform students that unauthorized distribution of copyrighted material, including unauthorized peer-to-peer file sharing, may subject the students to civil and criminal liabilities. This disclosure must include a summary of the penalties for violation of Federal copyright laws and a description of the institution’s policies with respect to unauthorized peer-to-peer file sharing, including disciplinary actions that are taken against students who engage in unauthorized distribution of copyrighted materials using the institution’s information technology system. 

Policies to Combat Copyright Infringement

As a condition of receiving Title IV funds, institutions must develop (and certify that they have developed) plans to effectively combat the unauthorized distribution of copyrighted material. Such plans should include the use of technology-based deterrents.  They should also include policies with regard to unauthorized peer-to-peer file sharing.

D.        Textbooks

The HEOA includes several requirements related to disclosure of textbook information in an effort to encourage publishers, institutions, faculty, staff, and students to work together to reduce textbook costs. The HEOA requires publishers to give certain textbook information to faculty and staff, including prices of books and most recent copyright dates. The HEOA also requires institutions, to the “maximum extent practicable,” to make available on its internet course schedule used for pre-registration purposes accurate required and recommended textbook information, including ISBN and retail price. If ISBN is not available, the author, title, publisher, and copyright date should be available.  If written course schedules are used, a link to the on-line schedule should be included along with a notice that the on-line schedule includes information related to textbooks and supplemental materials. The HEOA also requires institutions to provide certain course and textbook information to college book stores as soon as practicable.

E.         College Costs

The HEOA requires the Department of Education to annually publish the following lists:

(1) a list of the 5% of institutions with highest tuition and fees;

(2) a list of the 5% of institutions with highest net price;

(3) a list of the 5% of institutions with largest increase in tuition and fees over the 3 most recent academic years;

(4) a list of the 5% of institutions with the largest increase in net price over the 3 most recent academic years;

(5) a list of the 10% of institutions with lowest tuition and fees; and

(6) a list of the 10% of institutions with lowest net price. 

Separate lists will be published for public, private non-profit, and private for-profit institutions and such lists are further divided based on whether the institution is a four-year institution, a two-year institution, or a less than two-year institution. Institutions that are included in the lists for categories (3) and (4) (largest increases in tuition and fees or net price), will be required to submit a report to the Department of Education regarding the reasons for the cost increases and steps the institution is taking to reduce costs. Institutions that appear on the list more than one year in a row will be required to report on their progress in reducing costs.

The Department of Education will develop a net price calculator to use in developing these lists. After the Department of Education has developed this calculator, institutions will be required to include the calculator (or a similar calculator) on their websites so that current and prospective students can estimate the costs of attending a particular institution. 

F.         Conclusion

The descriptions above are a general overview of some of the most significant requirements imposed upon institutions by the HEOA. Institutions are required to begin compliance efforts with certain provisions immediately. Institutions that have not yet done so should consult with legal counsel or take other measures to begin implementing the new required policies, procedures, and disclosures. If Gray Plant Mooty can be of any assistance, please contact Carl Crosby Lehmann.

II.        Identity Theft “Red Flag Rules”

In addition to the new requirements of the HEOA, recent amendments to the Fair and Accurate Credit Transactions Act (FACTA) will also impact colleges and universities. FACTA has been amended to require financial institutions and certain creditors to develop and adopt an “Identity Theft Prevention Program” to reduce the effects of identity theft. Many colleges and universities may be subject to these “Red Flag Rules” because they permit deferred payments for tuition payments, bookstore sales, or other goods or services, or because they participate in the federal Perkins loan program or other loan programs.

Each institution will need to review the Rule and determine which activities involve “covered accounts” under the Rule. For these covered accounts, the institution will need to identify relevant “red flags” that might suggest a false identity is being presented. The Rule includes 26 example red flags, such as name or address discrepancies, presentation of suspicious documents, personal information inconsistent with information already on file, unusual use or suspicious activity, and notice from law enforcement or others of unusual activity related to that covered account. In addition to adopting a written program to reduce and mitigate the effects of identity theft, the institution must also train its staff to identify and respond to red flags.  The FTC recently announced a delay in enforcement of the Red Flag Rules until May 1, 2009.

If you would like legal assistance in complying with the new Red Flag Rules, please contact Jennifer Debrow.

This article is provided for general informational purposes only and should not be construed as legal advice or legal opinion on any specific facts or circumstances. You are urged to consult a lawyer concerning any specific legal questions you may have.

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