ESTABLISHMENT OF NEW PART H.

SEC. 499. ESTABLISHMENT OF NEW PART H. Title IV of the Act is amended by adding at the end the following new part: 106 STAT. 635 “PART H— PROGRAM INTEGRITY TRIAD “Subpart 1— State Postsecondary Review Program “Sec. 494. STATE POSTSECONDARY REVIEW PROGRAM. “(a) Purpose.— It is the purpose of this section to authorize the Secretary to enter into agreements that— “(1) designate one State postsecondary review entity in each State to be responsible for the conduct or coordination of the review under section 494C(d) of institutions of higher education, reported to the State by the Secretary pursuant to section 494C(a), for the purposes of determining eligibility under this title; and “(2) provide Federal funds to each State postsecondary review entity for performing the functions required by such agreements with the Secretary. “(b) Program Authority.— The Secretary shall, in accordance with the provisions of this subpart, enter into agreements with each of the States to carry out the purposes of this subpart. If any State declines to enter into an agreement with the Secretary for the purposes of this subpart, the provisions of this subpart which refer to the State, with respect to such State, shall refer to the Secretary, who may make appropriate arrangements with agencies or organizations of demonstrated competence in reviewing institutions of higher education. “(c) Failure To Comply With Agreement.— If a State fails to enter into an agreement under this section or fails to meet the requirements of its agreement with the Secretary under this subpart— “(1) the Secretary— “(A) may not designate as eligible for participation in any program under this title any new institution (including new branch campuses) or any institution that has changed ownership, pursuant to section 481 and subpart 3 of this part; and “(B) may grant only provisional certification for all institutions in the State pursuant to subpart 3 of this part; and “(2) the State shall be ineligible to receive funds under section 494B of this subpart, subpart 4 of part A of this title, and chapter 2 of subpart 2 of part A of this title. “SEC. 494A STATE POSTSECONDARY REVIEW ENTITY AGREEMENTS. “(a) State Organization Structures.— (1) Each agreement under this subpart shall describe a State organizational structure responsible for carrying out the review under section 494C(d) of institutions reported to the State by the Secretary pursuant to section 4940(a). Each such entity’s action in reviewing such institutions shall, for purposes of this subpart, be considered to be the action of the State. “(2) For the purposes of this subpart, the designation of a State postsecondary review entity for the purpose of entering into an agreement with the Secretary shall be in accordance with the State law of each individual State with respect to the authority to make legal agreements between the State and the Federal Government. 106 STAT. 636 “(3) Except as provided in paragraph (6), nothing in this subpart shall be construed to authorize the Secretary to require any State to adopt, as a condition for entering into an agreement, a specific State organizational structure. “(4) Except as provided in paragraph (6), nothing in this subpart shall be construed— “(A) as a limitation on the authority of any State to adopt a State organization structure for postsecondary education agencies, or programs, or institutions of higher education as appropriate to the needs, traditions, and circumstances of that State: “(B) as a limitation on the authority of a State entering into an agreement pursuant to this subpart to modify the State organizational structure at any time subsequent to entering into such agreement; “(C) as a limitation on the authority of any State to enter into an agreement for purposes of this subpart as a member of a consortium of States; “(D) as an authorization for the Secretary to withhold funds from any State or postsecondary institution on the basis of compliance with a State’s constitution or laws; “(E) as an authorization for any State postsecondary review entity to exercise planning, policy, coordinating, supervisory, budgeting, or administrative powers over any postsecondary institution; or “(F) as a limitation on the use of State audits for the purpose of compliance with applicable standards under section 494C(d). “(5) Nothing in this subpart shall be construed to limit the authority or activities of any State loan insurance program established under section 428(b) of this title or of any relevant State licensing authority which grants approval for institutions of higher education to operate within a State or their authority to contact the Secretary directly. “(6) Notwithstanding the provisions of paragraphs (2), (3), and (4) of this subsection, the Secretary may require each State to designate an entity responsible for the conduct or coordination of the review of institutions under this title. “(b) Contents of Agreements.— Agreements between each State and the Secretary shall contain the following elements: “(1) A designation of a single State postsecondary review entity, which represents all entities of that State which are responsible for— “(A) granting State authorization to each institution of higher education in that State for the purposes of this title, and “(B) ensuring that each institution of higher education in that State remains in compliance with the standards developed pursuant to section 494C. “(2) Assurances that the State will review institutions of higher education for the purpose of determining eligibility under this title on a schedule to coincide with the dates set by the Secretary to certify or recertify such institutions of higher education as provided in section 481 and subpart 3 of this part. “(3) Assurances that the appropriate State postsecondary review entity will perform the functions authorized by this subpart and will keep such records and provide such informa-106 STAT. 637tion to the Secretary as may be requested for financial and compliance audits and program evaluation, consistent with the responsibilities of the Secretary. “(4) A description of the relationship between the State postsecondary review entity designated for the purposes of this subpart and (A) the agency or agencies designated for the purposes of chapter 36 of title 38 of the United States Code. (B) the loan insurance program established under section 428(b) of this title for that State, and (C) the grant agency established under section 415C of this title. “(5) A plan for performing the functions described in section 494C of this subpart. “(c) Federal Responsibility.— Notwithstanding any other provision of law, no State shall be required to enter into an agreement with the Secretary under this subpart for performing the review functions required by such agreement unless the Congress appropriates funds for this subpart. “SEC. 494B. FEDERAL REIMBURSEMENT OF STATE POSTSECONDARY REVIEW COSTS. “(a) Payments.— Subject to subsection (b), the Secretary shall reimburse the States for the costs of performing the functions required by agreements with the Secretary authorized under this subpart. Such costs shall include expenses for providing initial and continuing training to State personnel and other personnel in the State, including personnel at institutions of higher education subject to review, to serve the purposes of this subpart. Reimbursement shall be provided for necessary activities which supplement, but do not supplant, existing licensing or review functions conducted by the State. The Secretary shall also reimburse such entities for work performed by their subcontractors and consultants where such work has a direct relationship to the requirements of agreements with the Secretary under this subpart. “(b) Authorization of Appropriations.— For the purpose of enabling the Secretary to make payments to States which have made agreements with the Secretary under this subpart, there is authorized to be appropriated $75,000,000 for fiscal year 1993, and such sums as may be necessary for each of the 4 succeeding fiscal years. “SEC. 4S4C. FUNCTIONS OF STATE REVIEW ENTITIES. “(a) Initial Review.— The Secretary shall review all institutions of higher education in a State which are eligible or which desire to become eligible under this title to determine if such institutions meet any of the criteria provided in subsection (b). With respect to those institutions of higher education that meet one or more of the criteria provided in subsection (b), the Secretary shall inform the State in which such institutions are located that the institutions have met such criteria, and these institutions shall be reviewed by the State pursuant to the standards provided in subsection (a). The Secretary shall supply the State with a copy of the institutional audits, required pursuant to section 487(c), for the institutions which shall be reviewed by the State. In addition to those institutions identified by the Secretary, the State may, subject to approval by the Secretary, review additional institutions which meet one or more of the criteria provided in subsection (b), based on more recent data available to the State, or which the State has reason to believe are engaged in fraudulent practices. If the 106 STAT. 638Secretary fails to approve or disapprove a State request to review additional institutions within 21 days, the State may proceed to review such additional institutions as if approved by the Secretary. “(b) Review Criteria.— The criteria for the initial review of institutions of higher education are as follows: “(1) A cohort default rate (as defined in section 435(m)) equal to or greater than 25 percent. “(2) A cohort default rate (as defined in such section) equal to or greater than 20 percent and either— “(A) more than two-thirds of the institution’s total undergraduates who are enrolled on at least a half-time basis receive assistance under this title (except subparts 4 and 6 of part A); or “(B) two-thirds or more of the institution’s education and general expenditures are derived from funds provided to students enrolled at the institution from the programs established under this title (except subparts 4 and 6 of part A and section 428B). “(3) Two-thirds or more of the institution’s education and general expenditures are derived from funds provided to students enrolled at the institution pursuant to subpart 1 of part A of this title. “(4) A limitation, suspension, or termination action by the Secretary against the institution pursuant to section 487 during the preceding 5 years. “(5) An audit finding during the 2 most recent audits of an institution of higher education’s conduct of the programs established by this title that resulted in the repayment by the institution of amounts greater than 5 percent of the funds such institution received from the programs assisted under this title for any one year. “(6) A citation of an institution by the Secretary for failure to submit audits required by this title in a timely fashion. “(7) A year-to-year fluctuation of more than 25 percent in the amounts received by students enrolled at the institution from either Federal Pell Grant, Federal Stafford Loan, or Federal Supplemental Loans to Students programs, which are not accounted for by changes in these programs. “(8) Failure to meet financial responsibility standards pursuant to subpart 3 of this part. “(9) A change of ownership of the institution that results in a change of control which includes (but is not limited to)— “(A) the sale of the institution or the majority of its assets; “(B) the division of 1 or more institutions into 2 or more institutions; “(C) the transfer of the controlling interest in stock of the institution or its parent corporation; “(D) the transfer of the controlling interest of stock of the institution to its parent corporation; or “(E) the transfer of the liabilities of the institution to its parent corporation. “(10) Except with regard to any public institution that is affiliated with a State system of higher education, participation in any of the programs established pursuant to subparts 1 and 3 of part A, part B, part C, and part E of this title for less than 5 years. 106 STAT. 639 “(11) A pattern of student complaints pursuant to subsection (j) related to the management or conduct of the programs established by this title or relating to misleading or inappropriate advertising and promotion of the institution’s program, which in the judgment of the Secretary are sufficient to justify review of the institution. “(c) Use of Recent Data.— The criteria provided for in subsection (b) shall be measured on the basis of the most recent data available to the Secretary. Institutions may request verification of the data used by the Secretary. “(d) Review Standards.— Institutions which meet 1 or more of the criteria in subsection (b) shall be reviewed by the appropriate State entity in accordance with published State standards that are consistent with the constitution and laws of the State, developed in consultation with the institutions in the State, and subject to disapproval by the Secretary. Such review shall determine the following: “(1) The availability to students and prospective students of catalogs, admissions requirements, course outlines, schedules of tuition and fees, policies regarding course cancellations, and the rules and regulations of the institution relating to students and the accuracy of such catalogs and course outlines in reflecting the courses and programs offered by the institution. “(2) Assurance that the institution has a method to assess a student’s ability to successfully complete the course of study for which he or she has applied. “(3) Assurance that the institution maintains and enforces standards relating to academic progress and maintains adequate student and other records. “(4) Compliance by the institution with relevant safety and health standards, such as fire, building, and sanitation codes. “(5) The financial and administrative capacity of the institution as appropriate to a specified scale of operations and the maintenance of adequate financial and other information necessary to determine the financial and administrative capacity of the institution. “(6) For institutions financially at risk, the adequacy of provisions to provide for the instruction of students and to provide for the retention and accessibility of academic and financial aid records of students in the event the institution closes. “(7) If the stated objectives of the courses or programs of the institution are to prepare students for employment, the relationship of the tuition and fees to the remuneration that can be reasonably expected by students who complete the course or program and the relationship of the courses or programs (including the appropriateness of the length of such courses) to providing the student with quality training and useful employment in recognized occupations in the State. “(8) Availability to students of relevant information by institutions of higher education, including— “(A) information relating to market and job availability for students in occupational, professional, and vocational programs; and “(B) information regarding the relationship of courses to specific standards necessary for State licensure in specific occupations. 106 STAT. 640 “(9) The appropriateness of the number of credit or clock hours required for the completion of programs or of the length of 600-hour courses. “(10) Assessing the actions of any owner, shareholder, or person exercising control over the educational institution which may adversely affect eligibility for programs under this title. “(11) The adequacy of procedures for investigation and resolution of student complaints. “(12) The appropriateness of advertising and promotion and student recruitment practices. “(13) That the institution has a fair and equitable refund policy to protect students. “(14) The success of the program at the institution, including— “(A) the rates of the institution’s students’ program completion and graduation, taking into account the length of the program at the institution and the selectivity of the institution’s admissions policies; “(B) the withdrawal rates of the institution’s students; “(C) with respect to vocational and professional programs, the rates of placement of the institution’s graduates in occupations related to their course of study; “(D) where appropriate, the rate at which the institution’s graduates pass licensure examinations; and “(E) the variety of student completion goals, including transfer to another institution of higher education, full-time employment in the field of study, and military service. “(15) With respect to an institution which meets 1 or more of the criteria in subsection (b), the State shall contract with the appropriate approved accrediting agency or association (described in subpart 2 of this part) or another peer review system with demonstrated competence in assessing programs (pursuant to the authority contained in subsection (f)) to carry out a review or provide information regarding such agency’s or association’s assessment of the following: The quality and content of the institution’s courses or programs of instruction, training, or study in relation to achieving the stated objectives for which the courses or programs are offered, including the adequacy of the space, equipment, instructional materials, staff, and student support services (including student orientation, counseling, and advisement) for providing education and training that meets such stated objectives. “(e) Substitutions Prohibited.— The appropriate State postsecondary review entity may not substitute either (1) accreditation by a private accrediting agency or body, or (2) compliance audits performed by a State guaranty agency established under section 428(b) of this title, for State review of compliance with the standards in subsection (d). “(f) State Contracts.— If the appropriate State postsecondary review entity contracts with a private agency or body or an accreditation body or peer review system for assistance in performing State postsecondary review entity functions, such contract shall be provided for in the agreement with the Secretary required by section 494A “(g) Prohibition on Unrelated Requirements.— Notwithstanding any of the provisions of this subpart, the Secretary shall not require a State to establish standards that are unrelated 106 STAT. 641to ensuring institutional or program integrity or that violate the provisions of a State’s constitution or laws. “(h) Institutional Eligibility.— A State postsecondary review entity may determine that an institution of higher education shall not be eligible to participate in programs under this title based on its own findings or the findings of a Federal entity in accordance with the following procedures: “(1) State findings.— If the appropriate State postsecondary review entity finds that an institution of higher education does not meet one or more of the standards in subsection (d) of this section, such State postsecondary review entity shall notify the Secretary of its findings and the actions that such entity is taking, or has taken, in response to such findings within a time period prescribed by the Secretary by regulation. If a State postsecondary review entity determines an institution of higher education shall not be eligible for participation in programs under this title, such State postsecondary review entity shall so notify the Secretary. Upon receipt of such notification of ineligibility, the Secretary shall immediately terminate the participation of such institutions in the programs authorized by this title. “(2) Secretary’s findings.— If the Secretary or any other Federal entity takes, or plans to take, any action against any institution of higher education (including any actions taken under section 487), the Secretary shall notify the appropriate State postsecondary review entity (or entities, in the case of multi-State institutions) of such action within a time period prescribed in the Secretary’s regulations. “(3) Procedural protections for disapproval.— The Secretary shall, by regulation, prescribe minimum procedural standards for the disapproval of institutions of higher education by the appropriate State postsecondary review entity or entities for purposes of this title. “(i) Limit on State Postsecondary Review Agency Functions.— The functions of State postsecondary review entity shall not include performing financial and compliance audits as may be required under sections 428 or 487 of this Act. “(j) Consumer Complaints.— A State, in consultation with the institutions of higher education in the State, shall establish and publicize the availability of procedures for receiving and responding to complaints from students, faculty, and others about institutions of higher education and shall keep records of such complaints in order to determine their frequency and nature for specific institutions of higher education. “(k) Enforcement Mechanisms.— Nothing in this subpart shall restrict the authority of the States to establish mechanisms to enforce the standards established under subsection (d) or require the States to establish specific mechanisms recommended by the Secretary. “Subpart 2— Accrediting Agency Approval “SEC. 496. APPROVAL OF ACCREDITING AGENCY OR ASSOCIATION. “(a) Standards Required.— No accrediting agency or association may be determined by the Secretary to be a reliable authority as to the quality of education or training offered for the purposes of this Act or for other Federal purposes, unless the agency or 106 STAT. 642association meets standards established by the Secretary pursuant to this section. The Secretary shall, after notice and opportunity for a hearing, establish standards for such determinations. Such standards shall include an appropriate measure or measures of student achievement. Such standards shall require that— “(1) the accrediting agency or association shall be a State, regional, or national agency or association and shall demonstrate the ability and the experience to operate as an accrediting agency or association within the State, region, or nationally, as appropriate; “(2) such agency or association— “(A) (i) for the purpose of participation in programs under this Act, has a voluntary membership and has as a principal purpose the accrediting of institutions of higher education; or “(ii) for the purpose of participation in other programs administered by the Department of Education or other Federal agencies, has a voluntary membership and has as its principal purpose the accrediting of institutions of higher education or programs; “(B) is a State agency approved by the Secretary for the purpose described in subparagraph (A); or “(C) is an agency or association that, for the purpose of determining eligibility for student assistance under this title, conducts accreditation through (i) a voluntary membership organization of individuals participating in a profession, or (ii) an agency or association which has as its principal purpose the accreditation of programs within institutions, which institutions are accredited by another agency or association recognized by the Secretary; “(3) if such agency or association is an agency or association described in— “(A) subparagraph (A) of paragraph (2), then such agency or association is separate and independent, both administratively and financially of any related, associated, or affiliated trade association or membership organization; “(B) subparagraph (B) of paragraph (2), then such agency or association has been recognized by the Secretary on or before October 1, 1991; or “(C) subparagraph (C) of paragraph (2) and such agency or association has been recognized by the Secretary on or before October 1, 1991, then the Secretary may waive the requirement that such agency or association is separate and independent, both administratively and financially of any related, associated, or affiliated trade association or membership organization upon a demonstration that the existing relationship has not served to compromise the independence of its accreditation process; “(4) such agency or association consistently applies and enforces standards that ensure that the courses or programs of instruction, training, or study at the institution of higher education are of sufficient quality to achieve, for the duration of the accreditation period, the stated objective for which the courses or the programs are offered; “(5) the standards of accreditation of the agency or association assess the institution’s— “(A) curricula; 106 STAT. 643 “(B) faculty; “(C) facilities, equipment, and supplies; “(D) fiscal and administrative capacity as appropriate to the specified scale of operations; “(E) student support services; “(F) recruiting and admissions practices, academic calendars, catalogs, publications, grading and advertising; “(G) program length and tuition and fees in relation to the subject matters taught and the objectives of the degrees or credentials offered; “(H) measures of program length in clock hours or credit hours; “(I) success with respect to student achievement in relation to its mission, including, as appropriate, consideration of course completion, State licensing examination, and job placement rates; “(J) default rates in the student loan programs under title IV of this Act, based on the most recent data provided by the Secretary; “(K) record of student complaints received by, or available to, the agency or association; and “(L) compliance with its program responsibilities under title IV of this Act, including any results of financial or compliance audits, program reviews, and such other information as the Secretary may provide to the agency or association. “(6) such agency or association shall apply procedures throughout the accrediting process, including evaluation and withdrawal proceedings, that comply with due process, including— “(A) adequate specification of requirements and deficiencies at the institution of higher education or program being examined; “(B) notice of an opportunity for a hearing by any such institution; “(C) the right to appeal any adverse action against any such institution; and “(D) the right to representation by counsel for any such institution; “(7) such agency or association shall notify the Secretary and the appropriate State postsecondary review entity within 30 days of the accreditation of an institution or any final denial, withdrawal, suspension, or termination of accreditation or placement on probation of an institution, together with any other adverse action taken with respect to an institution; and “(8) such agency or association shall make available to the public, upon request, and to the Secretary, and the State postsecondary review entity of the State in which the institution of higher education is located a summary of any review resulting in a final accrediting decision involving denial, termination, or suspension of accreditation, together with the comments of the affected institution. “(b) Separate and Independent Defined.— For the purpose of subsection (a)(3), the term ‘separate and independent’ means that— “(1) the members of the postsecondary education governing body of the accrediting agency or association are not elected or selected by the board or chief executive officer of any related, 106 STAT. 644associated, or affiliated trade association or membership organization; “(2) among the membership of the board of the accrediting agency or association there shall be one public member (who is not a member of any related trade or membership organization) for each six members of the board, with a minimum of one such public member, and guidelines are established for such members to avoid conflicts of interest; “(3) dues to the accrediting agency or association are paid separately from any dues paid to any related, associated, or affiliated trade association or membership organization; and “(4) the budget of the accrediting agency or association is developed and determined by the accrediting agency or association without review or resort to consultation with any other entity or organization. “(c) Operating Procedures Required.— No accrediting agency or association may be approved by the Secretary for the purpose of this title, unless the agency or association— “(1) performs at regularly established, intervals, on-site inspections and reviews of institutions of higher education (at least one of which inspections at each institution that provides vocational education and training shall be unannounced), with particular focus on educational quality and program effectiveness, and ensures that accreditation team members are well-trained and knowledgeable with respect to their responsibilities; “(2) requires that any institution of higher education subject to its jurisdiction which plans to establish a branch campus submit a business plan, including projected revenues and expenditures, prior to opening the branch campus; “(3) agrees to conduct, as soon as practicable, but within a period of not more than 6 months of the establishment of a new branch campus or a change of ownership of an institution of higher education, an on-site visit of that branch campus or of the institution after a change of ownership; “(4) requires that teach-out agreements among institutions are subject to approval by the accrediting agency or association consistent with standards promulgated by such agency or association; “(5) maintains and makes publicly available written materials regarding standards and procedures for accreditation, appeal procedures, and the accreditation status of each institution subject to its jurisdiction; and “(6) discloses publicly whenever an institution of higher education subject to its jurisdiction is being considered for accreditation or reaccreditation. “(d) Length of Approval.— No accrediting agency or association may be approved by the Secretary for the purpose of this Act for a period of more than 5 years. “(e) Initial Arbitration Rule.— The Secretary may not recognize the accreditation of any institution of higher education unless the institution of higher education agrees to submit any dispute involving the final denial, withdrawal, or termination of accreditation to initial arbitration prior to any other legal action. “(f) Jurisdiction.— Notwithstanding any other provision of law, any civil action brought by an institution of higher education seeking accreditation from, or accredited by, an accrediting agency or association approved by the Secretary for the purpose of this title 106 STAT. 645and involving the denial, withdrawal, or termination of accreditation of the institution of higher education, shall be brought in the appropriate United States district court. “(g) Limitation on Scope of Standards.—Nothing in this Act shall be construed to permit the Secretary to establish standards for accrediting agencies or associations that are not required by this section. Nothing in this Act shall be construed to prohibit or limit any accrediting agency or association from adopting additional standards not provided for in this section. “(h) Change of Accrediting Agency.— The Secretary shall not recognize the accreditation of any otherwise eligible institution of higher education if the institution of higher education is in the process of changing its accrediting agency or association, unless the eligible institution submits to the Secretary all materials relating to the prior accreditation, including materials demonstrating reasonable cause for changing the accrediting agency or association. “(i) Dual Accreditation Rule.— The Secretary shall not recognize the accreditation of any otherwise eligible institution of higher education if the institution of higher education is accredited, as an institution, by more than one accrediting agency or association, unless the institution submits to each such agency and association and to the Secretary the reasons for accreditation by more than one such agency or association and demonstrates to the Secretary reasonable cause for its accreditation by more than one agency or association. If the institution is accredited, as an institution, by more than one accrediting agency or association, the institution shall designate which agency’s accreditation shall be utilized in determining the institution’s eligibility for programs under this Act. “(j) Impact of Loss of Accreditation.— An institution may not be certified or recertified as an institution of higher education under section 481 and subpart 3 of this part or participate in any of the other programs authorized by this Act if such institution— “(1) is not currently accredited by any agency or association recognized by the Secretary; “(2) has had its accreditation withdrawn, revoked, or otherwise terminated for cause during the preceding 24 months, unless such withdrawal, revocation, or termination has been rescinded by the same accrediting agency; or “(3) has withdrawn from accreditation voluntarily under a show cause or suspension order during the preceding 24 months, unless such order has been rescinded by the same accrediting agency. “(k) Religious Institution Rule.— Notwithstanding subsection (j), the Secretary shall allow an institution that has had its accreditation withdrawn, revoked, or otherwise terminated, or has voluntarily withdrawn from an accreditation agency, to remain certified as an institution of higher education under section 481 and subpart 3 of this part for a period sufficient to allow such institution to obtain alternative accreditation, if the Secretary determines that the reason for the withdrawal, revocation, or termination— “(1) is related to the religious mission or affiliation of the institution; and “(2) is not related to the accreditation standards provided for in this section. 106 STAT. 646 “(l) Limitation, Suspension or Termination of Approval.— (1) The Secretary shall limit, suspend, or terminate the approval of an accrediting agency or association if the Secretary determines, after notice and opportunity for a hearing, that the accrediting agency or association has failed to apply effectively the standards or operate according to the procedures provided in this section. “(2) The Secretary may determine that an accrediting agency or association has failed to apply effectively the standards provided in this section if an institution of higher education seeks and receives accreditation from the accrediting agency or association during any period in which the institution is the subject of any interim action by another accrediting agency or association leading to the suspension, revocation, or termination of accreditation or the institution has been notified of the threatened loss of accreditation, and the due process procedures required by such suspension, revocation, termination, or threatened loss have not been completed. “(m) Limitation on the Secretary’s Authority.— The Secretary may only recognize accrediting agencies or associations which accredit institutions of higher education for the purpose of enabling such institutions to establish eligibility to participate in the programs under this Act or which accredit institutions of higher education or higher education programs for the purpose of enabling them to establish eligibility to participate in other programs administered by the Department of Education or other Federal agencies. “(n) Independent Evaluation.— (1) The Secretary shall conduct a comprehensive review and evaluation of the performance of all accrediting agencies or associations which seek recognition by the Secretary in order to determine whether such accrediting agencies or associations meet the standards established by this section. The Secretary shall conduct an independent evaluation of the information provided by such agency or association. Such evaluation shall include— “(A) the solicitation of third-party information concerning the performance of the accrediting agency or association; and “(B) site visits at both the accrediting agency or association and member institutions, including unannounced visits where appropriate. “(2) The Secretary shall place a priority for review of accrediting agencies or associations on those agencies or associations that accredit institutions of higher education that participate most extensively in the programs authorized by this title and on those agencies or associations which have been the subject of the most complaints or legal actions. “(3) The Secretary shall consider all available relevant information concerning the compliance of the accrediting agency or association with the standards provided for in this section, including any complaints or legal actions against such agency or association. In cases where deficiencies in the performance of an accreditation agency or association with respect to the requirements of this section are noted, the Secretary shall take these deficiencies into account in the approval process. The Secretary shall not, under any circumstances, base decisions on the approval or disapproval of accreditation agencies or associations on standards other than those contained in this section. “(4) The Secretary shall maintain sufficient documentation to support the conclusions reached in the approval process, and, upon 106 STAT. 647disapproval of any accreditation agency or association, shall make publicly available the reason for such disapproval, including reference to the specific standards under this section which have not been fulfilled. “(o) Regulations.— The Secretary shall by regulation provide procedures for the recognition of accrediting agencies or associations and for the appeal of the Secretary’s decisions. “Subpart 3— Eligibility and Certification Procedures “SEC. 488. ELIGIBILITY AND CERTIFICATION PROCEDURES. “(a) General Requirement.— For purposes of qualifying institutions of higher education for participation in programs under this title, the Secretary shall determine the legal authority to operate within a State, the accreditation status, and the administrative capability and financial responsibility of an institution of higher education in accordance with the requirements of this section. “(b) Single Application Form.— The Secretary shall prepare and prescribe a single application form which— “(1) requires sufficient information and documentation to determine that the requirements of eligibility, accreditation, and capability of the institution of higher education are met; “(2) requires a specific description of the relationship between a main campus of an institution of higher education and all of its branches, including a description of the student aid processing that is performed by the main campus and that which is performed at its branches; “(3) requires a description of third party servicers of an institution of higher education, together with a copy of any contract with the institution of higher education and a financial aid service provider or loan servicer; and “(4) requires such other information as the Secretary determines will ensure compliance with the requirements of this title with respect to eligibility, accreditation, administrative capability and financial responsibility. “(c) Financial Responsibility Standards.— (1) The Secretary shall determine whether an institution has the financial responsibility required by this title on the basis of whether the institution is able— “(A) to provide the services described in its official publications and statements; “(B) to provide the administrative resources necessary to comply with the requirements of this title; and “(C) to meet all of its financial obligations, including (but not limited to) refunds of institutional charges and repayments to the Secretary for liabilities and debts incurred in programs administered by the Secretary. “(2) Notwithstanding paragraph (1), if an institution fails to meet criteria prescribed by the Secretary with respect to operating losses, net worth, asset-to-liabilities ratios, or operating fund deficits then the institution shall provide the Secretary with satisfactory evidence of its financial responsibility in accordance with paragraph (3). “(3) The Secretary may determine an institution to be financially responsible, notwithstanding the institution’s failure to meet the criteria under paragraphs (1) and (2), if— 106 STAT. 648 “(A) such institution submits to the Secretary third-party financial guarantees, such as performance bonds or letters of credit payable to the Secretary, which third-party financial guarantees shall equal not less than one-half of the annual potential liabilities of such institution to the Secretary for funds under this title, including loan obligations discharged pursuant to section 437, and to students for refunds of institutional charges, including funds under this title; “(B) such institution has its liabilities backed by the full faith and credit of a State, or its equivalent; “(C) such institution establishes to the satisfaction of the Secretary, with the support of a report of an independent certified public accountant prepared under generally accepted accounting principles, that the institution is a going concern capable of meeting all of its financial obligations, including (but not limited to) refunds of institutional charges and repayments to the Secretary for liabilities and debts incurred in programs administered by the Secretary; or “(D) such institution has met standards of financial responsibility, prescribed by the Secretary by regulation, that indicate a level of financial strength not less than those required in paragraph (2). “(4) The determination as to whether an institution has met the standards of financial responsibility provided for in paragraphs (2) and (3)(C) shall be based on an audited and certified financial statement of the institution. Such audit shall be conducted by a qualified independent organization or person in accordance with standards established by the American Institute of Certified Public Accountants. Such statement shall be submitted to the Secretary at the time such institution is considered for certification or recertification under this section. If the institution is permitted to be certified (provisionally or otherwise) and such audit does not establish compliance with paragraph (2), the Secretary may require that additional audits be submitted. “(5) (A) The Secretary shall establish requirements for the maintenance by an institution of higher education of sufficient cash reserves to ensure repayment of any required refunds. “(B) The Secretary shall provide for a process under which the Secretary shall exempt an institution of higher education from the requirements described in subparagraph (A) if the Secretary determines that the institution— “(i) is located in a State that has a tuition recovery fund that ensures that the institution meets the requirements of subparagraph (A); “(ii) contributes to the fund; and “(iii) otherwise has legal authority to operate within the State. “(d) Administrative Capacity Standard.— The Secretary is authorized— “(1) to establish procedures and requirements relating to the administrative capacities of institutions of higher education, including— “(A) consideration of past performance of institutions or persons in control of such institutions with respect to student aid programs; and “(B) maintenance of records; 106 STAT. 649 “(2) to establish such other reasonable procedures as the Secretary determines will contribute to ensuring that the institution of higher education will comply with administrative capability required by this title. “(e) Financial Guarantees From Owners.— (1) Notwithstanding any other provision of law, the Secretary may, to the extent necessary to protect the financial interest of the United States, require— “(A) financial guarantees from an institution participating, or seeking to participate, in a program under this title, or from one or more individuals who the Secretary determines, in accordance with paragraph (2), exercise substantial control over such institution, or both, in an amount determined by the Secretary to be sufficient to satisfy the institution’s potential liability to the Federal Government, student assistance recipients, and other program participants for funds under this title; and “(B) the assumption of personal liability, by one or more individuals who exercise substantial control over such institution, as determined by the Secretary in accordance with paragraph (2), for financial losses to the Federal Government, student assistance recipients, and other program participants for funds under this title, and civil and criminal monetary penalties authorized under this title. “(2) (A) The Secretary may determine that an individual exercises substantial control over one or more institutions participating in a program under this title if the Secretary determines that— “(i) the individual directly or indirectly controls a substantial ownership interest in the institution; “(ii) the individual, either alone or together with other individuals, represents, under a voting trust, power of attorney, proxy, or similar agreement, one or more persons who have, individually or in combination with the other persons represented or the individual representing them, a substantial ownership interest in the institution; or “(iii) the individual is a member of the board of directors, the chief executive officer, or other executive officer of the institution or of an entity that holds a substantial ownership interest in the institution. “(B) The Secretary may determine that an entity exercises substantial control over one or more institutions participating in a program under this title if the Secretary determines that the entity directly or indirectly holds a substantial ownership interest in the institution. “(3) For purposes of this subsection, an ownership interest is defined as a share of the legal or beneficial ownership or control of, or a right to share in the proceeds of the operation of, an institution or institution’s parent corporation. An ownership interest may include, but is not limited to— “(A) a sole proprietorship; “(B) an interest as a tenant-in-common, joint tenant, or tenant by the entireties; “(C) a partnership; or “(D) an interest in a trust. “(4) The Secretary shall not impose the requirements described in subparagraphs (A) and (B) of paragraph (1) on an institution that— 106 STAT. 650 “(A) has not been subjected to a limitation, suspension, or termination action by the Secretary or a guaranty agency within the preceding 5 years; “(B) has not had, during its 2 most recent audits of the institutions conduct of programs under this title, an audit finding that resulted in the institution being required to repay an amount greater than 5 percent of the funds the institution received from programs under this title for any year; “(C) meets and has met, for the preceding 5 years, the financial responsibility standards under subsection (c); and “(D) has not been cited during the preceding 5 years for failure to submit audits required under this title in a timely fashion. “(5) For purposes of section 487(c)(1)(G), this section shall also apply to individuals or organizations that contract with an institution to administer any aspect of an institution’s student assistance program under this title. “(f) Actions on Applications; Site Visits and Fees.— The Secretary shall ensure that prompt action is taken by the Department on any application required under subsection (b). The personnel of the Department of Education shall conduct a site visit at each institution before certifying or recertifying its eligibility for purposes of any program under this title. The Secretary may charge reasonable fees to cover the expenses of certification and site visits and, to the extent permitted by appropriations Acts, may retain such fees to cover such expenses. “(g) Time Limitations on, and Renewal of, Eligibility.— (1) The eligibility for the purposes of any program authorized under this title of any institution that is participating in any such program on the date of enactment of the Higher Education Amendments of 1992 shall expire in accordance with the schedule prescribed by the Secretary in accordance with paragraph (2), but not later than 5 years after such date of enactment. “(2) The Secretary shall establish a schedule for the expiration of the eligibility for purposes of any such program of all institutions of higher education within the 5-year period specified in paragraph (1). Such schedule shall place a priority for the expiration of the certification of institutions on those that meet the following criteria: “(A) institutions subject to review by a State postsecondary review entity pursuant to subpart 1 of part H; or “(B) other categories of institutions which the Secretary deems necessary. “(3) After the expiration of the certification of any institution under the schedule prescribed under this subsection, or upon request for initial certification from an institution not previously certified, the Secretary may certify the eligibility for the purposes of any program authorized under this title of each such institution for a period not to exceed 4 years. “(h) Provisional Certification of Institutional Eligibility.— (1) Notwithstanding subsections (d) and (g), the Secretary may provisionally certify an institution’s eligibility to participate in programs under this title— “(A) for not more than one complete award year in the case of an institution of higher education seeking an initial certification; and “(B) for not more than 3 complete award years if— 106 STAT. 651 “(i) the institution’s administrative capability and financial responsibility is being determined for the first time; “(ii) there is a complete or partial change of ownership, as defined under subsection (i), of an eligible institution; or “(iii) the Secretary determines that the institution is, in the judgment of the Secretary, in an administrative or financial condition that may jeopardize its ability to perform its responsibilities under its program participation agreement. “(2) Whenever the Secretary withdraws the approval of any accrediting agency, an institution of higher education which meets the requirements of accreditation, eligibility, and certification on the day prior to such withdrawal, the Secretary may, not-withstanding the withdrawal, continue the eligibility of the institution of higher education to participate in the programs authorized by this title for a period not to exceed 18 months from the date of the withdrawal or approval. “(3) If, prior to the end of a period of provisional certification under this subsection, the Secretary determines that the institution is unable to meet its responsibilities under its program participation agreement, the Secretary may terminate the institution’s participation in programs under this title. “(i) Treatment of Changes of Ownership.— (1) For the purpose of certifying the eligibility of an institution, an eligible institution of higher education that has a change in ownership resulting in a change in control shall not be considered to be the same institution (except as provided in paragraph (3)) and shall be considered a new institution for the purpose of establishing eligibility, except that such institution shall not be required (under section 481(b)(5) or 481(c)(3)) to be in existence for 2 years prior to seeking such certification unless such institution was in existence as a branch for less than 2 years. “(2) An action resulting in a change in control may include (but is not limited to)— “(A) the sale of the institution or the majority of its assets; “(B) the transfer of the controlling interest of stock of the institution or its parent corporation; “(C) the merger of two or more eligible institutions; “(D) the division of one or more institutions into two or more institutions; “(E) the transfer of the controlling interest of stock of the institutions to its parent corporation; or “(F) the transfer of the liabilities of the institution to its parent corporation. “(3) An action that may be treated as not resulting in a change in control includes (but is not limited to)— “(A) the death of an owner of an institution, when the owner’s interest is sold or transferred to either a family member or a current stockholder of the corporation; or “(B) another action determined by the Secretary to be a routine business practice. “(j) Treatment of Branches.— (1) For the purposes of this title, a branch of an eligible institution, as defined pursuant to regulations of the Secretary, is a separate institution of higher education and shall separately meet all the requirements of this title, except that such institution shall not be required (under section 481(b)(5) 106 STAT. 652or 481(c)(3)) to be in existence for 2 years prior to seeking such certification unless such institution was in existence as a branch for less than 2 years. “(2) The Secretary may waive the requirement of section 1201(a)(2) for a branch that (A) is not located in a State, (B) is affiliated with an eligible institution, and (C) was participating in one or more programs under this title on or before January 1, 1992. “SEC. 498A. PROGRAM REVIEW AND DATA. “(a) General Authority.— In order to strengthen the administrative capability and financial responsibility provisions of this title, the Secretary— “(1) shall provide for the conduct of program reviews on a systematic basis designed to include all institutions of higher education participating in programs authorized by this title; “(2) may give priority for program review to institutions of higher education that are— “(A) institutions with a cohort default rate for loans under part B of this title in excess of 25 percent or which places such institutions in the highest 25 percent of such institutions; “(B) institutions with a default rate in dollar volume for loans under part B of this title which places the institutions in the highest 25 percent of such institutions; “(C) institutions with a significant fluctuation in Federal Stafford Loan volume or Federal Pell Grant awards, or both, in the year for which the determination is made compared to the year prior to such year; “(D) institutions reported to have deficiencies or financial aid problems by the appropriate State postsecondary review entity designated under subpart 1 of this part or by the appropriate accrediting agency or association; “(E) institutions with high annual dropout rates; “(F) any institution which is required to be reviewed by a State postsecondary review entity pursuant to subpart 1 of part H under section 494C(b); and “(G) such other institutions as the Secretary deems necessary; and “(3) shall establish and operate a central data base of information on institutional accreditation, eligibility, and certification that includes— “(A) all information available to the Department; “(B) all relevant information made available by the Secretary of Veterans Affairs; “(C) all relevant information from accrediting agencies or associations; “(D) all relevant information available from a guaranty agency; and “(E) all relevant information available from States under subpart 1. “(b) Special Administrative Rules.— (1) In carrying out paragraphs (1) and (2) of subsection (a), the Secretary shall establish guidelines designed to ensure uniformity of practice in the conduct of program reviews of institutions of higher education. 106 STAT. 653 “(2) The Secretary shall review the regulations of the Department and the application of such regulations to ensure the uniformity of interpretation and application of the regulations. “(c) Data Collection Rules.— The Secretary shall develop and carry out a plan for the data collection responsibilities described in paragraph (3) of subsection (a). The Secretary shall make the information obtained under such paragraph (3) readily available to all institutions of higher education, guaranty agencies, States, and other organizations participating in the programs authorized by this title. “(d) Training.— The Secretary shall provide training to personnel of the Department, including criminal investigative training, designed to improve the quality of financial and compliance audits and program reviews conducted under this title. “(e) Special Rule.— The provisions of section 103(b) of the Department of Education Organization Act, shall not apply to Secretarial determinations made regarding the appropriate length of instruction for programs measured in clock hours.”.