(GENERAL-24-115 ) FSA Enforcement Bulletin, September 2024 – Conduct that creates a risk of engaging in substantial misrepresentations

Author
Federal Student Aid
Electronic Announcement ID
GENERAL-24-115
Subject
FSA Enforcement Bulletin, September 2024 – Conduct that creates a risk of engaging in substantial misrepresentations

The U.S. Department of Education (Department) administers the requirements of the Higher Education Act of 1965 (HEA). Under the regulations implementing the HEA, the Secretary may take administrative action against an institution if he or she determines that the institution has made a substantial misrepresentation about the nature of its educational program, its financial charges, or the employability of its graduates. 34 C.F.R. § 668.71. The purpose of this bulletin is to inform Title IV-eligible institutions and third-party servicers of examples of conduct that creates a risk of engaging in a substantial misrepresentation.

A misrepresentation is defined as “[a]ny false, erroneous or misleading statement,” that an institution or its representative makes “directly or indirectly to a student, prospective student or any member of the public, or to an accrediting agency, to a State agency, or to the Secretary.” 34 C.F.R. § 668.71(c). A “misleading statement” includes “any statement that has the likelihood or tendency to mislead under the circumstances.” Id. “Misrepresentation includes any statement that omits information in such a way as to make the statement false, erroneous, or misleading.” Id. A misrepresentation rises to the level of a “substantial misrepresentation” if the misrepresentation is one “on which the person to whom it was made could reasonably be expected to rely, or has reasonably relied, to that person's detriment.” Id. The Department considers the “totality of the circumstances in which a statement occurred, to determine whether it constitutes a substantial misrepresentation.” 81 Fed. Reg. 75926-01, at *75945 (Nov. 1, 2016).

In the course of its oversight activities, the Department has observed conduct that, under certain circumstances, could rise to the level of an actionable substantial misrepresentation. FSA is issuing this bulletin to inform schools of this risk, and to aid them in their compliance efforts.

The following are examples of instances observed by FSA in its oversight activities that could result in non-compliance. This is not an exhaustive list and other conduct not included may constitute actionable substantial misrepresentations.

  • Schools, or their agents or vendors, have published salary information that is based upon broadly applicable data (including from the Bureau of Labor and Statistics) but presents that information as data reflecting salaries earned by the schools’ own graduates.

  • Schools have compared their job placement rates to that of peer institutions without sufficient and demonstrable substantiation.

  • Schools have stated or implied that their degrees or certificates will help students become licensed in a field that does not require licensure.

  • Schools have made unsubstantiated claims about their “ranking” compared to other schools, for example by claiming without any basis that they are the number one liberal arts college in the country.

  • Schools have marketed certain characteristics of their faculty that are inaccurate or unrepresentative.

  • Schools have made statements that may mislead prospective students into thinking they are a public school or a non-profit school.

  • Schools have advertised or published documents stating a program’s cost of attendance or net price that are inaccurate or pertain only to a minority of students.

Institutions may not make misrepresentations to prospective students to induce them to enroll. If the Secretary determines that an institution engaged in a substantial misrepresentation, the Secretary may take action including, but not limited to, imposing a fine or limiting the institution’s participation in the Title IV program.

The Department is monitoring complaints, tips, lawsuits, and borrower defense to repayment applications from students, faculty, and staff who allege that institutions and their representatives may have made substantial misrepresentations. Where warranted, the Department will hold institutions accountable.

Reporting Misconduct or Fraud

FSA’s Office of Enforcement welcomes and encourages information from current and former employees, vendors, and contractors of postsecondary institutions, third-party servicers, third party lead generators, students, or any other relevant individual about potential violations of Title IV programs. Knowledgeable sources with information about potential violations may submit relevant tips and information by visiting https://www.Ed.gov/FSATips or emailing FSATips@ed.gov.