General Eligibility and Participation Requirements

This chapter describes the general requirements a foreign institution must meet to be eligible to participate in the Direct Loan Program.

Institutions must apply to, and receive approval from, the U.S. Department of Education to be eligible to participate in the Federal Student Aid (FSA) programs before they can be certified for participation. A foreign institution is eligible to apply to participate in the William D. Ford Federal Direct Loan (Direct Loan) Program, the only FSA program in which a foreign institution may participate, if it is comparable to an eligible institution of higher education located in the United States.

The criteria for demonstrating comparability, as well as other criteria required for eligibility, are found in 34 CFR 600, subpart E. A foreign institution must comply with all other FSA program regulations for eligible and participating institutions except as noted. To be approved as a “Participant” or “Eligibility Only” institution, a foreign school must satisfy the basic eligibility criteria stated in the Code of Federal Regulations under Title 34, Parts 600, 668, and 685, which includes, but is not limited to providing:

Institutions must apply to be eligible to participate using the Application for Approval to Participate in the Federal Student Financial Aid Programs (E-App). Prior to submitting an E-App, schools must apply for an Office of Postsecondary Education identification number (OPEID) at: https://eligcert.ed.gov/ows-doc/initialApp.html. The E-App, as well as information on the application process, can be found at https://eligcert.ed.gov . Additional information for foreign institutions that are applying to participate in the Direct Loan Programs for the first time, is available on the Foreign School Information website under the Application Process link in the Eligibility section, and in the Department’s New School Guide.

When the Department determines that an institution has met all the requirements for participation in the Direct Loan Program, it will certify the institution to participate through the signing of a Program Participation Agreement (PPA). The PPA is signed by the school’s president, chief executive officer, or chancellor and an authorized representative of the Secretary of Education. (See Volume 2, Chapter 1, of the FSA Handbook.)

The Department will certify a foreign institution to participate for a period of not longer than six years. In the case of a for-profit foreign graduate medical school, for-profit foreign veterinary school, or for-profit foreign nursing school, the Department will certify the school for a period of not longer than three years. Based on the application and circumstances of the institution’s prior participation, the certification period granted may be significantly less.

When an institution’s certification expires, the institution must apply to be recertified. An institution’s PPA expires on the date that:

If a foreign institution loses its eligibility, an otherwise eligible student continuously enrolled at the institution before the loss of eligibility may receive a loan under the Direct Loan Program for attendance at that institution through the end of the academic year succeeding the academic year in which that institution lost its eligibility, if the student actually received a Direct Loan for attendance at the institution for a period during which the institution was eligible.

For title IV purposes, a foreign institution is one that:

If an educational enterprise enrolls students both within the United States and outside the United States, and the number of students who would be eligible to receive title IV, HEA program funds attending locations outside the United States is at least twice the number of students enrolled within the United States, the locations outside the United States must apply to participate as one or more foreign institutions and must meet all requirements of the definition of a foreign institution, and the other requirements applicable to foreign institutions. For purposes of this requirement, an educational enterprise consists of two or more locations offering all or part of an educational program that are directly or indirectly under common ownership.

Proof that a foreign institution has the appropriate legal authorization may be provided to the Department by a legal authorization from the appropriate education ministry, council, or equivalent agency:

A foreign institution is considered to be a nonprofit institution if 1) the institution is owned and operated by only one or more nonprofit corporations or associations, and 2) if the Department or a recognized tax authority in the foreign institution’s home country, which is recognized by the Department for this purpose, determines that the foreign institution is a non-profit educational institution.

If a recognized tax authority of a foreign institution’s home country is recognized by the Department to determine an institution’s nonprofit status for FSA program purposes, the Department accepts that tax authority’s determination of nonprofit educational status for any institution located in that country. In making this determination, the Department uses criteria that are similar to those used by the U.S. IRS.

If the tax authority is not recognized by the Department to determine an institution’s nonprofit status, the foreign institution must demonstrate to the satisfaction of the Department that it is a nonprofit educational institution.

A foreign institution is considered to be comparable to an eligible institution of higher education in the United States and eligible to apply to participate in the Direct Loan Program if the foreign institution:

The regulations designate the following provisions for an institution of higher education or a proprietary institution of higher education as inapplicable to foreign institutions:

To be comparable to an eligible institution of higher education in the United States and eligible to apply to participate in the Direct Loan Program, a foreign institution must provide an eligible education program:

An institution must demonstrate to the satisfaction of the Department that the amount of academic work required by a program that it believes meets the requirements for at least a one-academic year training program is equivalent to at least the FSA program definition of an academic year. For more information on gainful employment programs, see Programs leading to gainful employment.

The Department makes a comparison to determine whether postsecondary programs offered by a foreign school are properly considered undergraduate or graduate for purposes of the Direct Loan Program. This determination affects the amount of Direct Loan funds a student attending an eligible program may borrow.

Programs that lead to gainful employment in a recognized occupation are subject to the Department’s regulations. All programs at for-profit foreign medical schools, veterinary schools, and nursing schools are considered gainful employment programs. Some programs at public and nonprofit institutions are gainful employment programs (see Volume 2, Chapter 2, of the FSA Handbook for more information).

There are some programs that are never eligible for Direct Loan Program participation when offered by a foreign institution:

In recognition that distance education technologies are frequently used in conjunction with classroom instruction, foreign institutions may use distance education technologies to supplement and support instruction offered in a classroom located in the foreign country where the students and instructor are physically present.

A program that permits Direct Loan borrowers to take an ineligible course for credit, regardless of whether the course is optional or required, is considered ineligible for Direct Loan funds. However, it is permissible for a foreign institution to offer two separate versions of a program, one of which does not permit students who are Direct Loan recipients to enroll in the ineligible courses for credit toward completion of the program (i.e., the ineligible course yields credit toward completion of the program or otherwise fulfills a requirement for graduation from that program). In that case, the version of the program that does not permit Direct Loan recipients to enroll in ineligible courses would not contain any ineligible courses, and would, therefore, be an eligible program if the program otherwise met the FSA eligible program requirements.

A foreign institution is ultimately responsible for ensuring that Direct Loan funds are not disbursed to students who enroll in any Direct Loan ineligible courses as a part of their program and should ensure that any students who may be applying for Direct Loan funds are aware of the restrictions on enrollment.

An institution must provide to students information on the academic program of the institution. If a foreign institution chooses to offer a Direct Loan-eligible version of a program for Direct Loan recipients, this information must make clear that a student will not be eligible for Direct Loan funds if the student enrolls in the ineligible version. The institution is required to make this information readily available to enrolled and prospective students through appropriate publications, mailings or electronic media. In addition, a brief description of this information must be included in the notice that an institution must provide to enrolled students listing the categories of information required to be made available to them, together with an explanation of how to obtain the information.

The Department does not restrict an institution’s discretion to award credit for courses completed at other institutions, but Direct Loan funds may not be provided for the transferred credits. If a student independently completes a Direct Loan-ineligible course at an unaffiliated institution, those credits may be transferred into the student’s program at the eligible foreign institution provided that the student does not receive Direct Loan funds for those credits. However, this guidance does not apply if there is an arrangement between the institutions for transfer of credits. In that circumstance, the limitations of the requirements for written arrangements in 34 CFR 668.5 apply, no matter how informal the arrangement may be.

Besides the exception discussed below, programs offered in whole or in part in the United States by a foreign institution—either at a U.S. location of the foreign institution, through an arrangement with a U.S. institution, or otherwise— are not eligible for participation in the Direct Loan Program. Specifically, for the purposes of students who receive Direct Loan Program funds, a foreign institution is an institution that, except with respect to clinical training that is part of a medical, veterinary, or nursing program offered by the institution:

Written arrangements between two Direct Loan-eligible foreign institutions are subject to the regulations under 34 CFR 668.5. There is no limitation on the amount of the program that may be offered by the other eligible foreign institution except that the home institution must provide the degree or recognized credential and offer at least some portion of the program. As mentioned later in this section, if the host institution meets the requirements of the definition of a foreign institution under 34 CFR 600.52, but is not Direct Loan-eligible, the host institution may offer no more than 25% of the home institution’s eligible program under 34 CFR 600.54(c).

There are two different sets of requirements for written arrangements between a foreign institution and a U.S institution depending upon where the student enrolls. If a student enrolls in an eligible program offered by a foreign institution and the foreign institution enters into a written arrangement for a portion of the program to be completed at a U.S. institution, the amount of coursework that can be completed at the U.S. institution is capped at 25 percent. On the other hand, if a student enrolls in an eligible program offered by a U.S. institution, and the U.S. institution enters into a written arrangement for a portion of the program to be completed at a foreign institution, the amount of coursework that can be completed at the foreign institution is capped at either 25 percent or less than 50 percent (see 34 CFR 668.5(c)(3)). Foreign institutions may enter into written arrangements with eligible educational institutions, or in the case of internships or externships ineligible organizations, located in the United States for those institutions or organizations to provide no more than 25 percent of the program’s courses. A foreign institution that enters into a written arrangement with a U.S. institution is the one in which the student is enrolled and would be considered the home institution. Students attending are limited to Direct Loan funds and do not qualify for other types of Title IV aid. However, if any such program offered by the foreign institution exceeds the 25 percent threshold it is not recognized for Direct Loan Program purposes. As a result, students attending that program may not receive Direct Loan Program funds for any part of the program.

A U.S. institution that is eligible to participate in the FSA programs may have written arrangements with a foreign institution or organization acting on behalf of a foreign institution whereby the foreign institution provides part of an educational program so that the students enrolled in that program may receive FSA program funds.

However, in this case the arrangement between a U.S. institution and a foreign institution or organization acting on behalf of a foreign institution is always considered to be one between an eligible U.S. institution where the student enrolls, and an ineligible foreign institution, even if the foreign institution is otherwise eligible to participate in the Direct Loan Program. As a result, the provisions of 34 CFR 668.5 regarding written arrangements between an eligible institution and an ineligible institution or organization are applicable. The following paragraphs summarize the requirements when a U.S. institution enters into a written arrangement with a foreign institution.

For a program offered through a written arrangement between an eligible institution and an ineligible institution or organization (commonly referred to as a contractual agreement), the eligible institution is always the “home” institution for FSA program purposes. This means that a student must be continuously enrolled at the eligible institution, in this case, the U.S. institution, as a regular student--i.e., enrolled for purposes of obtaining a degree, certificate, or other recognized educational credential offered by the eligible U.S. institution, and the U.S. institution must perform all the functions related to the delivery of FSA program funds. For example, the U.S. institution must determine the student’s eligibility for FSA program funds and must calculate and disburse the funds to the student, taking into account all the hours in which the student enrolls at each institution or organization that apply to the student’s degree or certificate when determining the student’s enrollment status and cost of attendance. The U.S. institution is also responsible for maintaining all records necessary to document student eligibility and receipt of FSA program funds.

Upon completion of the program, the student must receive a degree from the eligible U.S. institution, although he or she may receive a credential from the foreign institution as well.

In addition, there is a limit on the portion of the program that can be offered by the ineligible institution or organization through a contractual agreement. If both the eligible U.S. institution and the ineligible institution are owned or controlled by the same individual, partnership, or corporation, the ineligible institution or organization may provide no more than 25 percent of the program. If there is no common ownership or control, the ineligible institution or organization must provide less than 50 percent of the program.

However, in the case of separately owned or controlled institutions, if the ineligible institution or organization provides more than 25 percent of the program, the eligible institution’s accrediting agency or state agency (in the case of a public postsecondary vocational institution) must specifically determine that the institution’s arrangement meets the agency’s standards for the contracting out of educational services. Of course, the program must otherwise satisfy the FSA program requirements for an eligible program.

Notwithstanding the information contained in 34 CFR 668.5, written arrangements between an eligible foreign institution and an ineligible entity are limited to those under which the ineligible entity is an institution that meets the definition of “foreign institution” in 34 CFR 600.52. In addition, the ineligible foreign institution can only provide 25 percent or less of the educational program. Written arrangements do not include affiliation agreements for the provision of clinical training for foreign medical, veterinary, and nursing schools.

An eligible institution must provide to enrolled and prospective students a description of the written arrangements the institution has entered into, including, but not limited to, information on:

Other factors may also prevent an ineligible institution from providing a portion of a program under a written arrangement with an eligible institution. A program offered through a contractual agreement is not eligible to participate in the FSA programs if the ineligible institution or organization:

In addition, a program offered through a contractual agreement is not eligible for FSA program participation if the ineligible institution or organization has had its certification to participate in the FSA programs revoked by the Department, or had its application for certification or recertification to participate in the FSA programs denied by the Department.

Internships and externships are usually provided by organizations that are not eligible for participation in the FSA Programs. A foreign institution may permit students to complete up to 25 percent of a program by participating in an internship or externship provided by an ineligible organization. However, the internship or externship portion of the program must be governed by the standards of an outside oversight entity, such as an accrediting agency or government entity, that require the oversight and supervision of the institution, where the institution is responsible for the internship or externship and students are monitored by qualified institutional personnel (and the institution must comply with these standards). The following chart provides information to assist foreign schools with understanding the requirements for written arrangements:

U.S. institutions that participate in the FSA programs are required to verify the information provided by at least some of their students on the application for FSA program assistance, the FAFSA. Foreign institutions are exempt from performing verification.

Foreign schools are reminded that, although they are exempt from verification, all schools have a responsibility to resolve conflicting or suspicious information. See Volume 2, Chapter 3, of the FSA Handbook, under “Consistency of information” and “Conflicting information.”

Students from the U.S. who attend foreign institutions must provide documentation of the estimated direct loans they will receive when they submit their student visa applications. While dependent on each country’s requirements, a student may need documentation of his or her estimated Direct Loan funding before a foreign institution begins processing Direct Loans via the Department’s systems.

The Department has developed a sample letter that institutions may use and adapt per their country’s student visa requirements. In addition, the Department has developed a version of the sample letter that has been approved by the United Kingdom Border Agency for use with U.S. students who will attend school in the United Kingdom. Both sample letters are included at the end of this chapter and can also be found on the Foreign School Information website.

If an institution is unsure how to handle a visa documentation request, it should contact its Direct Loan enrollment team specialist (Point of Contact) or the team at foreignschooldlenrollment_fsa@ed.gov for assistance.

Unless a foreign institution has entered into an enrollment agreement with a student to provide a program or a portion of a program for a set amount expressed in U.S. dollars, the foreign institution may adjust the cost of attendance to reflect changes in exchange rates. Say, for example, that in June, an institution’s yearly cost of attendance of 30,000 British pounds is the equivalent of 45,000 U.S. dollars based on an exchange rate of 1.5 U.S. dollars to 1 British pound. However, when the student arrives in September, the exchange rate is 2 U.S. dollars to 1 British pound for a cost of attendance of 60,000 U.S. dollars. Provided the institution did not enter into an enrollment agreement with the student for $45,000 U.S. dollars, the institution may use $60,000 U.S. dollars for the student’s cost of attendance.

If recalculations of costs of attendance on this basis are to be performed, the institution should have a policy it applies consistently, resulting in both upward and downward adjustments, with respect to all Direct Loan borrowers.

The recalculation should not include costs incurred in a different payment period. In the recalculation, the general rules as to costs of attendance continue to apply (e.g., costs of attendance for tuition and fees should include only those normally assessed a student carrying the same academic workload as determined by the institution and can include costs for rental or purchase of any equipment, materials, or supplies required of all students in the same course of study). These recalculations are not an exercise of professional judgment but instead reflect changes in costs as expressed in U.S. dollars resulting from fluctuations in currency exchange rates.

Direct Loan Program funds are provided to students by the foreign institution they attend. Volume 4 of the FSA Handbook provides guidance on how an institution requests, disburses, manages, and reports on the use of FSA Program funds, generally referred to as the “cash management requirements.” For information on the process for a foreign institution to originate, draw down, disburse, and return Direct Loan funds, see the Direct Loan Processing section of the Foreign School Information website.

With a few differences, foreign schools are subject to the same cash management requirements as domestic schools.

All foreign schools must maintain a depository account into which the Department transfers, or the school deposits, FSA program funds. The depository account must be insured by the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Administration (NCUA) or by an equivalent agency of the government of the country in which the institution is located. If there is no equivalent agency, the Department may approve a depository account designated by the foreign school. Unlike domestic institutions, the depository account that a foreign school maintains need not be an interest-bearing account. In addition, the foreign school’s depository account does not need to be identified with the phrase “Federal Funds,” nor is the school required to file a UCC-1 Statement associated with the depository account.

Foreign schools are not subject to the student choice menu that would require schools to provide students a choice of the way they receive FSA program credit balances.

The cash management regulations identify two types of agreements between schools and financial service providers—Tier 1 (T1) and Tier 2 (T2) Arrangements. T1 and T2 arrangements do not apply to foreign schools.

Whenever an institution disburses Direct Loan Program funds by crediting a student’s account and the total amount of all Direct Loan Program funds credited exceeds the amount of tuition and fees, room and board, and other authorized charges the institution assessed the student, the institution must pay the resulting credit balance directly to the student, or parent for a Parent PLUS Loan, as soon as possible, but no later than:

In most cases, foreign institutions pay Direct Loan Program credit balances to students or parents in the local currency. However, a foreign institution may pay a Direct Loan Program credit balance in U.S. dollars if it chooses to do so, either to accommodate a request from a U.S. student or otherwise. For more information on Title IV credit balances, see Volume 4, Chapter 2, of the FSA Handbook.

There are times when a foreign institution will be required to return Direct Loan Program funds to the Department, for example, when a return of unearned funds is due under the Return of Title IV Funds requirements, or when a student, or parent, for a Parent PLUS Loan, cancels all or a portion of their loan. When Direct Loan funds are returned to the Department, the institution must return the original U.S. dollar amount of the loan funds, even if the institution incurs additional costs due to fluctuating exchange rates and/or exchange fees.

The way a foreign institution will refund Direct Loan funds will differ depending on whether the institution has a foreign bank account or a U.S. bank account. With a foreign bank account, an institution will begin the process of a refund in G5, and complete a wire form that is generated containing the Department’s bank information so that non-US banks can wire the funds to the Department. With a U.S. bank account, an institution can return funds electronically via the Department’s G5 website.

See instructions for foreign schools to send refunds via international electronic funds transfers posted under Section 7 – Funding Direct Loans: Refunding Unused Funds located on the Foreign School Information page.

Institutions that participate in the FSA programs must provide information about topics such as financial aid, their campus and facilities, student athletes, and gainful employment programs, as well as information to promote campus safety and prevent drug and alcohol abuse.

There are also consumer information requirements that apply only to foreign graduate medical schools. For more information on these requirements, see the Collection and submission of data section in Chapter 3.