(GENERAL-22-16) Updated Program Participation Agreement Signature Requirements for Entities Exercising Substantial Control Over Non-Public Institutions of Higher Education

Author
Federal Student Aid
Electronic Announcement ID
GENERAL-22-16
Subject
Updated Program Participation Agreement Signature Requirements for Entities Exercising Substantial Control Over Non-Public Institutions of Higher Education

This Electronic Announcement outlines the general circumstances in which entity owners of eligible institutions of higher education (institutions) will be required to sign Program Participation Agreements. 

Current PPA Signature Requirements

A Program Participation Agreement (PPA) conditions the initial and continued participation of an eligible institution in any Title IV, HEA program upon compliance with the provisions of 34 CFR 668.14, Title IV, HEA program regulations, and any additional conditions specified in the PPA that the Secretary requires the institution to meet.

Currently, a PPA must be signed by the official at the institution who has the authority to sign on behalf of the institution. That individual is typically the institution’s chief executive officer, president, chancellor, or other designated official. In appropriate cases, FSA also requires authorized representatives of owner entities or individuals to sign the PPA. These requirements remain in effect.

Updated PPA Signature Requirements

To better ensure that taxpayers are protected in the event of school closure, approved borrower defense claims, or when other liabilities are owed to the U.S. Department of Education (Department) and to provide more accountability, consistent with 34 CFR 668.14, the Department may require additional signatures on an institution’s PPA when an institution seeks initial certification or recertification, or when it undergoes a change of ownership under 34 CFR § 600.31(a).

By entering into a PPA, an institution agrees that it will comply with the provisions of § 668.15 relating to factors of financial responsibility and that it will comply with the provisions of § 668.16 relating to standards of administrative capability. Thus, to ensure financial responsibility, the Department may in certain cases require signatures from corporations or other legal entities that have, or could have, a direct or indirect effect on the institution’s financial responsibility. The Department uses a rebuttable presumption that the following entities have or could have a direct or indirect effect on the institution’s administrative capability or financial responsibility if they:

  • Are the sole member of, or hold a 100 percent direct or indirect equity or voting interest in the institution;

  • Hold less than a 100 percent interest but otherwise exercise (either directly or indirectly) substantial control over the institution; or

  • Provide the audited financial statements or other financial submissions on behalf of the institution.

Substantial control is generally presumed to be any direct or indirect equity, membership, or voting interest of 50 percent or more in the institution, including in combination with other interest holders, whether by affiliation, contract, proxy, or other arrangement.

These entity signatures, to the extent required, will be a condition of a non-public institution’s initial or continuing Title IV participation. No additional signatures are required for public institutions that are backed by the full faith and credit of the state.

Examples of situations for which there is a rebuttable presumption that the Department will require an additional signature(s) include, but are not limited to, the following:

  • If the institution has had a financial responsibility composite score below 1.5 since its last certification (initial or recertification);

  • If the institution is on provisional certification status by the Department;

  • If the institution is on HCM2;

  • If the institution goes through a change of ownership;

  • If the Department has approved a significant number of borrower defense or false certification claims for the institution, or if there are a substantial number of these types of claims under review that, if approved, would result in the potential for significant liability;

  • If the Department has recently identified systemic or significant audit or program review findings, or has unpaid liabilities resulting from an audit or program review; or

  • If the institution or any of its principals or interest holders has consented to or has a judgment of fraud or misrepresentation entered against it by a federal or state court, foreign tribunal, or arbitration body.

At the institution’s next recertification, the Department will determine whether the entities can be relieved from the signature requirement. By co-signing the PPA, the entities (but not the individuals who sign as authorized representatives of the entities) agree to assume liability for financial losses to the federal government related to the institution’s administration of the Title IV programs.

Alternatives to PPA Signatures

As part of this analysis, the Secretary may determine, on an individualized basis, that an entity is not required to sign the PPA for reasons including if the Secretary determines that alternative protections, such as a letter of credit or other acceptable financial protections, minimize the risk of financial losses.

Effective Date

The signature policy described in this announcement may be applied to:

  • PPAs issued on or after July 1, 2022, resulting from recertification applications;

  • PPAs issued prior to the date of this Electronic Announcement and for which a signature requirement has previously been communicated to the institution; and

  • All other applicable PPAs, such as those issued for changes in ownership, initial certifications, and reinstatements, issued on or after the date of this Electronic Announcement.

If you have questions about this announcement, please contact your School Participation Division using the contact information on Federal Student Aid’s Partner Connect website.