In response to a legal challenge, the Department of Education revised the requirements for an authorized representative of an institution to sign the agreement to participate in federal financial aid programs.
In a January 16 Electronic Announcement, the Department of Education addressed the situations in which an owner-entity of an eligible higher education institution will be required to sign a Program Participation Agreement (PPA). For a proprietary or private nonprofit institution, the PPA must be signed by an authorized representative with direct or indirect ownership under the current regulations.
The legality of the regulations was challenged in court and the Secretary agreed not to enforce the owner-entity signature requirements as specified in 34 C.F.R. § 668.14(a)(3)(ii). The complaint and the settlement agreement are included as attachments to the announcement.
In the announcement, the Department said the Secretary reserves the right to require an authorized representative of an entity that directly or indirectly holds a substantial ownership interest to sign the PPA on a case-by-case basis. This would be when the Secretary determines the signatures are necessary to protect the financial interest of the United States.
The Secretary may, on a case-by-case basis, determine that an entity isn’t required to sign the PPA for other reasons such as when it is determined that alternative protections are sufficient to minimize the risk of financial losses. This could include a letter of credit or other acceptable financial protections.
The policy outlined in the Electronic Announcement will be applicable to a PPA issued on or after the date of the announcement. The Department will not consider a request to remove an owner-entity signature for an existing PPA.
In the future, the Department plans to revise 34 C.F.R. § 668.14(a)(3)(ii) to be consistent with the settlement agreement.
Questions can be directed to the School Eligibility and Oversight Services Branch via email at CaseTeams@ed.gov.
