School Eligibility and Operations

This volume of the Federal Student Aid Handbook comprises topics pertaining to colleges’ general obligations in administering the Title IV student aid programs: institutional and program eligibility, administrative requirements, audits, record keeping, program reviews, and providing information to the public are all explained.

Throughout the Handbook we use “college,” “school,” and “institution” interchangeably unless some more specific use is given. Similarly, “student,” “applicant,” and “aid recipient” are synonyms. “Parents” in this volume refers to the parents of dependent students, and “you” refers to the primary audience of the Handbook: financial aid administrators at colleges. “We” indicates the United States Department of Education (Department, ED), and “federal student aid” and “Title IV aid” are synonymous terms for the financial aid offered by the Department.

We appreciate any comments that you have regarding the Federal Student Aid Handbook. We revise and clarify the text in response to questions and feedback from the financial aid community, so please contact us at fsaschoolspubs@ed.gov to let us know how to improve the Handbook so that it is always clear and informative.

This introduction only summarizes the changes and clarifications presented in more detail in the chapters. For more complete guidance, refer to the text in the chapters cited and the pertinent regulations and statutes.

Important Note: This volume does not contain guidance on the special provisions pertaining to the Coronavirus pandemic. For that information, schools should refer to the Department’s COVID-19 Resources for Schools, Students, and Families website.

Throughout Volume 2 we moved the text of the margin notes to the body of the page in preparation for converting the FSA Handbook to an HTML version.

The Gainful Employment (GE) regulations under 34 CFR 668 subparts Q and R were rescinded effective July 1, 2020. As a result of this rescission, GE guidance in chapters 2, 4, and 6 has been deleted and is noted below. Requirements located outside of those subparts, such as the requirement for institutions to add new GE programs to their ECAR, remain in effect

In Chapter 1, under the “Authorization to operate postsecondary educational programs” section, we removed the definition of religious institution because the regulations no longer limit the definition of that term as it applies to state authorization requirements.

Pursuant to recent regulatory changes, we updated the paragraph in Chapter 1 under the “Authorization to operate postsecondary education programs” section about state authorization requirements for distance education.

Similarly in Chapter 1, we revised the second paragraph under “State complaint process” to reflect changes regarding distance education and the complaint process. Also in Chapter 1 under the “Determining student location” section, we added the paragraph about schools determining the state where their students are located so as to be able to comply with state authorization requirements, and we added the definition of a state authorization reciprocity agreement.

We amended the last bullet under “General terms and conditions” in in the “Program Participation Agreement” section of Chapter 1 to reflect recent regulatory changes. The general phrase “adverse action” now appears with “final denial, withdrawal, or termination of accreditation” as examples. Previously only those examples appeared. We also changed the text under “Loss of accreditation” in the “Changes in Accreditation” section of Chapter 5 to reflect this. And we also made a similar change – as it applied to accrediting agencies – to the third bullet on the right side of the “Accrediting Agency Role” chart under the “Department obligations” section in Chapter 8.

In Chapter 2 under the “Programs leading to Gainful Employment” section, we updated the definitions of programs leading to a baccalaureate degree in the liberal arts. The regulation change removed from the first part of the definition the text about such programs being determined by a school’s recognized regional accrediting agency to be in the liberal arts, the humanities, or the general curriculum.

In Chapter 2 we removed the section on certification requirements for GE programs because the governing regulations were rescinded.

In Chapter 3 under the “Administrative Requirements For the Financial Aid Office” section, we added a section on fraud rings that have been operating in distance education programs, and we linked to a recent electronic announcement that updates guidance pertaining to that.

We added two paragraphs in Chapter 2 under the “Required Electronic Processes” section. The first explains that the Department will make available COD testing in 2021 to allow schools, third-party servicers, and software developers the chance to test their business processes and software before submitting actual data to the production environment. The next paragraph explains that the Department will be upgrading the SAIG and that schools will need to install new software by June 5, 2021, to comply with the upgrade.

In Chapter 3 under the “Required Electronic Processes” section we added and updated links to the IFAP website to reflect changes to it in the previous year. The FSA Download site and the Financial Partners Portal were incorporated into the IFAP site. See the announcement of February 10, 2020, for more information, including an extensive crosswalk between old and new URLs for IFAP content.

At the beginning of Chapter 4, we rewrote the text to improve clarity and to reflect that OMB Circular A-133 was superseded by the Compliance Supplement for the purpose of audits of public and private nonprofit schools.

“In Chapter 4 under the “Audits For Third-Party Servicers” section, we added a paragraph announcing that the eZ-Audit web-based process will now be used for entities other than domestic schools—foreign schools, third-party servicers, Federal Family Education Loan (FFEL) Program lenders, FFEL lender servicers, guaranty agencies (GAs), and GA servicers—when they submit audited financial statements and compliance audits. Hard copies will no longer be submitted.

In Chapter 4 under the “Financial Responsibility” section, we added a reference to the electronic announcement of April 9, 2020, (updated in August), which has a 20-page attachment of FAQs about financial responsibility and eZ-Audit requirements.

In Chapter 4 under the “Financial Responsibility” section, we revised the text for clarity and because of regulatory changes, and we gave it the subheading “General standards of financial responsibility.”

In Chapter 4 under the “Financial Responsibility” section, because of new regulations, we added the sections “Mandatory and discretionary triggers,” “Recalculating the composite score,” and “Alleviating a triggering event.”

In Chapter 4 under the Financial Ratios and Composite Scores” section, we amended the paragraph and added the section, respectively, about the treatment of long-term debt and operating leases in the composite score methodology. This treatment was changed by the 2019 regulations.

We deleted the section “Current in debt payments” in Chapter 4 under the “Financial Responsibility” section, because it represented outdated regulatory guidance.

“In Chapter 4 under the “Alternatives To The General Financial Standards” section, we added the section “Financial protection,” which is new to the regulations.

In Chapter 4 under the “Alternatives To The General Financial Standards” section, we revised the sections “Zone alternative” and “Provisional certfication alternative” for better clarity.

At the end of Chapter 4, we removed the guidance on debt-toearnings rates for gainful employment (GE) programs because the governing regulations were repealed. For the same reason we also removed the text in Chapter 6 about GE program disclosures and the Disclosure Template.

Under “Change in Ownership” in Chapter 5, we modified the text for clarity and to account for minor regulatory changes to the definition of closely held corporation and other terms.

In Chapter 5 under the “Change In Ownership” section, we added the paragraph and two bullets pertaining to other entities, and we added the sentence about when a nonprofit institution changes ownership.

In Chapter 5 under the “Changes to Location, Branch, or Campus” section, we modified the text about the circumstance in which an additional location does not need to satisfy the two-year requirement when there is no commonality of ownership or management between the acquiring school and the additional location. This too was due to a regulatory change.

Also in that section, we changed the first paragraph under “Teach-outs at closed or closing school locations” to reflect recent regulatory updates.

In Chapter 5 under the “Changes to Location, Branch or Campus” section, we added that last paragraph under the section “Reporting a new location.” We explain that 1) additional locations can be counted as such only if students receive instruction there and 2) only one location, main or additional, of a school can exist at a single address.

In Chapter 5 under the “Changes in Accreditation” section, we added the two bullets and subsequent paragraph immediately under the heading “Changes in Accreditation” to account for updated regulations about schools changing accrediting agencies.

In the second paragraph of Chapter 6 we updated the Federal Register reference and the civil fine pertaining to the Title IV violations by schools

We added the last bullet, consisting of two paragraphs, under “Academic programs” in the “General Student Disclosures” section of Chapter 6 about schools disclosing information when programs are intended to meet the educational requirements for licensure or certification for an occupation. This was a recent addition to the regulations.

In Chapter 6 under the “General Student Disclosures” section, we added a section about the disclosure schools must make when they condition enrollment on arbitration agreements or class action waivers.

Also in that section, we added the definitions of class action, class action waiver, and pre-dispute arbitration agreement.

We also added the third bullet under “Transfer of credit policies” about criteria for evaluating prior learning experience. Also on that page, we included the bulleted items about teach-out plans and enforcement actions because they were added to the institutional information regulations under 34 CFR 668.43(a)(19) and (20).

We also noted that the College Financing Plan will include, new for 2021–2022, separate forms for undergraduate and graduate/ professional students.

In Chapter 6 under the “Completion, Graduation, Transfer, Retention, and Placement Rates” section, we added the last sentence in the bullet about retention rates, and we amended the guidance about the disclosure of placement rates to account for regulatory changes in 34 CFR 668.41 and 43.

In Chapter 6 we made several changes to the section “Campus Crime and Safety Information:

In Chapter 6 under the “Loan Counseling” section, we added the first three full paragraphs to account for new and revised instructions in the regulations.

We also added a section explaining the new annual student loan acknowledgement process that will begin in 2021 with loans associated with the 2021–2022 award year.

We also added information to the “DL Entrance Counseling – Required Elements” chart which are new to the regulations. These explain new information similar to that referred to in Chapter 6 under the “General Student Disclosures” section, about arbitration agreements and class action waivers that schools must disclose to student borrowers as part of entrance counseling.

We also added a sentence in the first paragraph under “Exit counseling” explaining that instead of mailing or emailing exit counseling materials to students who leave school without completing exit counseling, a school can send them a direct link to the counseling materials online. Note that the link must take students directly to those materials and not to another page or related document. We added a similar statement under “TEACH Grant counseling.”

Under the “Private Education Loans” section, we added the definitions of covered institution and preferred lender arrangement.

Under the “Misrepresentation” section under “Sanctions” we added text explaining that a proceeding initiated by the Department against a school found to have engaged in misrepresentation could require the school to repay the amount of a loan that was cancelled due to a successful borrower defense to repayment claim based on the misrepresentation. This was a result of regulations that became effective July 1, 2020. We also explained what a borrower defense claim is.

We also rewrote the section on foreign gift reporting to comport with the June 22, 2020, announcement of the new reporting system and the revised data that are to be reported.

We also added the section on First Amendment violations pursuant to recent regulatory changes.

In Chapter 7 under “The E-Sign Act and Information Security” section, we updated the email address for questions related to cybersecurity issues that is included at the end of “Protecting student information"

We also rewrote the section about the National Institute of Standards and Technology document, Controlled Unclassified Information in Nonfederal Systems, because it has been revised and to explain that the Department intends to collaborate with schools in 2021 to help them comply with that document and other cybersecurity requirements.

In Chapter 8 under the “Closeout Procedures (When FSA Participation Ends)” section, we added a section about the 120-day transition allowable under recent regulations for schools that lose their Title IV eligibility due to a ruling by their accrediting agency or state authorizing entity or by the Department.