PROGRAM PARTICIPATION AGREEMENTS.

SEC. 493. PROGRAM PARTICIPATION AGREEMENTS.(a) Program Participation Agreement Requirements.—(1) Voter registration; 90-10 rule; code of conduct; disciplinary proceedings; preferred lender lists; private education loan certification; copyrighted material.—(A) Amendment.—Section 487(a) (20 U.S.C. 1094(a)) is amended—(i) in paragraph (23)—(I) by moving subparagraph (C) two ems to the left; and(II) by adding at the end the following:“(D) The institution shall be considered in compliance with the requirements of subparagraph (A) for each student to whom the institution electronically transmits a message containing a voter registration form acceptable for use in the State in which the institution is located, or an Internet address where such a form can be downloaded, if such information is in an electronic message devoted exclusively to voter registration.”; and(ii) by adding at the end the following:“(24) In the case of a proprietary institution of higher education (as defined in section 102(b)), such institution will derive not less than ten percent of such institution’s revenues from sources other than funds provided under this title, as calculated in accordance with subsection (d)(1), or will be subject to the sanctions described in subsection (d)(2).“(25) In the case of an institution that participates in a loan program under this title, the institution will—“(A) develop a code of conduct with respect to such loans with which the institution’s officers, employees, and agents shall comply, that—“(i) prohibits a conflict of interest with the responsibilities of an officer, employee, or agent of an institution with respect to such loans; and“(ii) at a minimum, includes the provisions described in subsection (e);“(B) publish such code of conduct prominently on the institution’s website; and“(C) administer and enforce such code by, at a minimum, requiring that all of the institution’s officers, employees, and agents with responsibilities with respect to such loans be annually informed of the provisions of the code of conduct.“(26) The institution will, upon written request, disclose to the alleged victim of any crime of violence (as that term is defined in section 16 of title 18, United States Code), or 122 STAT. 3309 a nonforcible sex offense, the report on the results of any disciplinary proceeding conducted by such institution against a student who is the alleged perpetrator of such crime or offense with respect to such crime or offense. If the alleged victim of such crime or offense is deceased as a result of such crime or offense, the next of kin of such victim shall be treated as the alleged victim for purposes of this paragraph.“(27) In the case of an institution that has entered into a preferred lender arrangement, the institution will at least annually compile, maintain, and make available for students attending the institution, and the families of such students, a list, in print or other medium, of the specific lenders for loans made, insured, or guaranteed under this title or private education loans that the institution recommends, promotes, or endorses in accordance with such preferred lender arrangement. In making such list, the institution shall comply with the requirements of subsection (h).“(28)(A) The institution will, upon the request of an applicant for a private education loan, provide to the applicant the form required under section 128(e)(3) of the Truth in Lending Act (15 U.S.C. 1638(e)(3)), and the information required to complete such form, to the extent the institution possesses such information.“(B) For purposes of this paragraph, the term ‘private education loan’ has the meaning given such term in section 140 of the Truth in Lending Act.“(29) The institution certifies that the institution—“(A) has developed plans to effectively combat the unauthorized distribution of copyrighted material, including through the use of a variety of technology-based deterrents; and“(B) will, to the extent practicable, offer alternatives to illegal downloading or peer-to-peer distribution of intellectual property, as determined by the institution in consultation with the chief technology officer or other designated officer of the institution.”.(B) Effective date.—The amendment made by subparagraph (A) with respect to section 487(a)(26) of the Higher Education Act of 1965 (as added by subparagraph (A)) shall apply with respect to any disciplinary proceeding conducted by an institution on or after the day that is one year after the date of enactment of this Act.(b) Audits; Financial Responsibility; Enforcement of Standards.—Section 487(c)(1)(A)(i) (20 U.S.C. 1094(c)(1)(A)(i)) is amended by inserting before the semicolon at the end the following: “, except that the Secretary may modify the requirements of this clause with respect to institutions of higher education that are foreign institutions, and may waive such requirements with respect to a foreign institution whose students receives less than $500,000 in loans under this title during the award year preceding the audit period”.(c) Implementation of Non-Title IV Revenue Requirement; Code of Conduct; Institutional Requirements for Teach-Outs; Inspector General Report on Gift Ban Violations; Preferred Lender List Requirements.—Section 487 (20 U.S.C. 1094) is further amended—122 STAT. 3310(1) by redesignating subsections (d) and (e) as subsections (i) and (j), respectively; and(2) by inserting after subsection (c) the following:“(d) Implementation of Non-Title IV Revenue Requirement.—“(1) Calculation.—In making calculations under subsection (a)(24), a proprietary institution of higher education shall—“(A) use the cash basis of accounting, except in the case of loans described in subparagraph (D)(i) that are made by the proprietary institution of higher education;“(B) consider as revenue only those funds generated by the institution from—“(i) tuition, fees, and other institutional charges for students enrolled in programs eligible for assistance under this title;“(ii) activities conducted by the institution that are necessary for the education and training of the institution’s students, if such activities are—“(I) conducted on campus or at a facility under the control of the institution;“(II) performed under the supervision of a member of the institution’s faculty; and“(III) required to be performed by all students in a specific educational program at the institution; and“(iii) funds paid by a student, or on behalf of a student by a party other than the institution, for an education or training program that is not eligible for funds under this title, if the program—“(I) is approved or licensed by the appropriate State agency;“(II) is accredited by an accrediting agency recognized by the Secretary; or“(III) provides an industry-recognized credential or certification;“(C) presume that any funds for a program under this title that are disbursed or delivered to or on behalf of a student will be used to pay the student’s tuition, fees, or other institutional charges, regardless of whether the institution credits those funds to the student’s account or pays those funds directly to the student, except to the extent that the student’s tuition, fees, or other institutional charges are satisfied by—“(i) grant funds provided by non-Federal public agencies or private sources independent of the institution;“(ii) funds provided under a contractual arrangement with a Federal, State, or local government agency for the purpose of providing job training to low-income individuals who are in need of that training;“(iii) funds used by a student from savings plans for educational expenses established by or on behalf of the student and which qualify for special tax treatment under the Internal Revenue Code of 1986; or“(iv) institutional scholarships described in subparagraph (D)(iii);122 STAT. 3311“(D) include institutional aid as revenue to the school only as follows:“(i) in the case of loans made by a proprietary institution of higher education on or after July 1, 2008 and prior to July 1, 2012, the net present value of such loans made by the institution during the applicable institutional fiscal year accounted for on an accrual basis and estimated in accordance with generally accepted accounting principles and related standards and guidance, if the loans—“(I) are bona fide as evidenced by enforceable promissory notes;“(II) are issued at intervals related to the institution’s enrollment periods; and“(III) are subject to regular loan repayments and collections;“(ii) in the case of loans made by a proprietary institution of higher education on or after July 1, 2012, only the amount of loan repayments received during the applicable institutional fiscal year, excluding repayments on loans made and accounted for as specified in clause (i); and“(iii) in the case of scholarships provided by a proprietary institution of higher education, only those scholarships provided by the institution in the form of monetary aid or tuition discounts based upon the academic achievements or financial need of students, disbursed during each fiscal year from an established restricted account, and only to the extent that funds in that account represent designated funds from an outside source or from income earned on those funds;“(E) in the case of each student who receives a loan on or after July 1, 2008, and prior to July 1, 2011, that is authorized under section 428H or that is a Federal Direct Unsubsidized Stafford Loan, treat as revenue received by the institution from sources other than funds received under this title, the amount by which the disbursement of such loan received by the institution exceeds the limit on such loan in effect on the day before the date of enactment of the Ensuring Continued Access to Student Loans Act of 2008; and“(F) exclude from revenues—“(i) the amount of funds the institution received under part C, unless the institution used those funds to pay a student’s institutional charges;“(ii) the amount of funds the institution received under subpart 4 of part A;“(iii) the amount of funds provided by the institution as matching funds for a program under this title;“(iv) the amount of funds provided by the institution for a program under this title that are required to be refunded or returned; and“(v) the amount charged for books, supplies, and equipment, unless the institution includes that amount as tuition, fees, or other institutional charges.“(2) Sanctions.—122 STAT. 3312“(A) Ineligibility.—A proprietary institution of higher education that fails to meet a requirement of subsection (a)(24) for two consecutive institutional fiscal years shall be ineligible to participate in the programs authorized by this title for a period of not less than two institutional fiscal years. To regain eligibility to participate in the programs authorized by this title, a proprietary institution of higher education shall demonstrate compliance with all eligibility and certification requirements under section 498 for a minimum of two institutional fiscal years after the institutional fiscal year in which the institution became ineligible.“(B) Additional enforcement.—In addition to such other means of enforcing the requirements of this title as may be available to the Secretary, if a proprietary institution of higher education fails to meet a requirement of subsection (a)(24) for any institutional fiscal year, then the institution’s eligibility to participate in the programs authorized by this title becomes provisional for the two institutional fiscal years after the institutional fiscal year in which the institution failed to meet the requirement of subsection (a)(24), except that such provisional eligibility shall terminate—“(i) on the expiration date of the institution’s program participation agreement under this subsection that is in effect on the date the Secretary determines that the institution failed to meet the requirement of subsection (a)(24); or“(ii) in the case that the Secretary determines that the institution failed to meet a requirement of subsection (a)(24) for two consecutive institutional fiscal years, on the date the institution is determined ineligible in accordance with subparagraph (A).“(3) Publication on college navigator website.—The Secretary shall publicly disclose on the College Navigator website—“(A) the identity of any proprietary institution of higher education that fails to meet a requirement of subsection (a)(24); and“(B) the extent to which the institution failed to meet such requirement.“(4) Report to congress.—Not later than July 1, 2009, and July 1 of each succeeding year, the Secretary shall submit to the authorizing committees a report that contains, for each proprietary institution of higher education that receives assistance under this title, as provided in the audited financial statements submitted to the Secretary by each institution pursuant to the requirements of subsection (a)(24)—“(A) the amount and percentage of such institution’s revenues received from sources under this title; and“(B) the amount and percentage of such institution’s revenues received from other sources.“(e) Code of Conduct Requirements.—An institution of higher education’s code of conduct, as required under subsection (a)(25), shall include the following requirements:“(1) Ban on revenue-sharing arrangements.—122 STAT. 3313“(A) Prohibition.—The institution shall not enter into any revenue-sharing arrangement with any lender.“(B) Definition.—For purposes of this paragraph, the term ‘revenue-sharing arrangement’ means an arrangement between an institution and a lender under which—“(i) a lender provides or issues a loan that is made, insured, or guaranteed under this title to students attending the institution or to the families of such students; and“(ii) the institution recommends the lender or the loan products of the lender and in exchange, the lender pays a fee or provides other material benefits, including revenue or profit sharing, to the institution, an officer or employee of the institution, or an agent.“(2) Gift ban.—“(A) Prohibition.—No officer or employee of the institution who is employed in the financial aid office of the institution or who otherwise has responsibilities with respect to education loans, or agent who has responsibilities with respect to education loans, shall solicit or accept any gift from a lender, guarantor, or servicer of education loans.“(B) Definition of gift.—“(i) In general.—In this paragraph, the term ‘gift’ means any gratuity, favor, discount, entertainment, hospitality, loan, or other item having a monetary value of more than a de minimus amount. The term includes a gift of services, transportation, lodging, or meals, whether provided in kind, by purchase of a ticket, payment in advance, or reimbursement after the expense has been incurred.“(ii) Exceptions.—The term ‘gift’ shall not include any of the following:“(I) Standard material, activities, or programs on issues related to a loan, default aversion, default prevention, or financial literacy, such as a brochure, a workshop, or training.“(II) Food, refreshments, training, or informational material furnished to an officer or employee of an institution, or to an agent, as an integral part of a training session that is designed to improve the service of a lender, guarantor, or servicer of education loans to the institution, if such training contributes to the professional development of the officer, employee, or agent.“(III) Favorable terms, conditions, and borrower benefits on an education loan provided to a student employed by the institution if such terms, conditions, or benefits are comparable to those provided to all students of the institution.“(IV) Entrance and exit counseling services provided to borrowers to meet the institution’s responsibilities for entrance and exit counseling as required by subsections (b) and (l) of section 485, as long as—“(aa) the institution’s staff are in control of the counseling, (whether in person or via electronic capabilities); and122 STAT. 3314“(bb) such counseling does not promote the products or services of any specific lender.“(V) Philanthropic contributions to an institution from a lender, servicer, or guarantor of education loans that are unrelated to education loans or any contribution from any lender, guarantor, or servicer that is not made in exchange for any advantage related to education loans.“(VI) State education grants, scholarships, or financial aid funds administered by or on behalf of a State.“(iii) Rule for gifts to family members.—For purposes of this paragraph, a gift to a family member of an officer or employee of an institution, to a family member of an agent, or to any other individual based on that individual’s relationship with the officer, employee, or agent, shall be considered a gift to the officer, employee, or agent if—“(I) the gift is given with the knowledge and acquiescence of the officer, employee, or agent; and“(II) the officer, employee, or agent has reason to believe the gift was given because of the official position of the officer, employee, or agent.“(3) Contracting arrangements prohibited.—“(A) Prohibition.—An officer or employee who is employed in the financial aid office of the institution or who otherwise has responsibilities with respect to education loans, or an agent who has responsibilities with respect to education loans, shall not accept from any lender or affiliate of any lender any fee, payment, or other financial benefit (including the opportunity to purchase stock) as compensation for any type of consulting arrangement or other contract to provide services to a lender or on behalf of a lender relating to education loans.“(B) Exceptions.—Nothing in this subsection shall be construed as prohibiting—“(i) an officer or employee of an institution who is not employed in the institution’s financial aid office and who does not otherwise have responsibilities with respect to education loans, or an agent who does not have responsibilities with respect to education loans, from performing paid or unpaid service on a board of directors of a lender, guarantor, or servicer of education loans;“(ii) an officer or employee of the institution who is not employed in the institution’s financial aid office but who has responsibility with respect to education loans as a result of a position held at the institution, or an agent who has responsibility with respect to education loans, from performing paid or unpaid service on a board of directors of a lender, guarantor, or servicer of education loans, if the institution has a written conflict of interest policy that clearly sets forth that officers, employees, or agents must recuse themselves from participating in any decision of the board regarding education loans at the institution; or122 STAT. 3315“(iii) an officer, employee, or contractor of a lender, guarantor, or servicer of education loans from serving on a board of directors, or serving as a trustee, of an institution, if the institution has a written conflict of interest policy that the board member or trustee must recuse themselves from any decision regarding education loans at the institution.“(4) Interaction with borrowers.—The institution shall not—“(A) for any first-time borrower, assign, through award packaging or other methods, the borrower’s loan to a particular lender; or“(B) refuse to certify, or delay certification of, any loan based on the borrower’s selection of a particular lender or guaranty agency.“(5) Prohibition on offers of funds for private loans.—“(A) Prohibition.—The institution shall not request or accept from any lender any offer of funds to be used for private education loans (as defined in section 140 of the Truth in Lending Act), including funds for an opportunity pool loan, to students in exchange for the institution providing concessions or promises regarding providing the lender with—“(i) a specified number of loans made, insured, or guaranteed under this title;“(ii) a specified loan volume of such loans; or“(iii) a preferred lender arrangement for such loans.“(B) Definition of opportunity pool loan.—In this paragraph, the term ‘opportunity pool loan’ means a private education loan made by a lender to a student attending the institution or the family member of such a student that involves a payment, directly or indirectly, by such institution of points, premiums, additional interest, or financial support to such lender for the purpose of such lender extending credit to the student or the family.“(6) Ban on staffing assistance.—“(A) Prohibition.—The institution shall not request or accept from any lender any assistance with call center staffing or financial aid office staffing.“(B) Certain assistance permitted.—Nothing in paragraph (1) shall be construed to prohibit the institution from requesting or accepting assistance from a lender related to—“(i) professional development training for financial aid administrators;“(ii) providing educational counseling materials, financial literacy materials, or debt management materials to borrowers, provided that such materials disclose to borrowers the identification of any lender that assisted in preparing or providing such materials; or“(iii) staffing services on a short-term, nonrecurring basis to assist the institution with financial aid-related functions during emergencies, including State-declared or federally declared natural disasters, 122 STAT. 3316 federally declared national disasters, and other localized disasters and emergencies identified by the Secretary.“(7) Advisory board compensation.—Any employee who is employed in the financial aid office of the institution, or who otherwise has responsibilities with respect to education loans or other student financial aid of the institution, and who serves on an advisory board, commission, or group established by a lender, guarantor, or group of lenders or guarantors, shall be prohibited from receiving anything of value from the lender, guarantor, or group of lenders or guarantors, except that the employee may be reimbursed for reasonable expenses incurred in serving on such advisory board, commission, or group.“(f) Institutional Requirements for Teach-Outs.—“(1) In general.—In the event the Secretary initiates the limitation, suspension, or termination of the participation of an institution of higher education in any program under this title under the authority of subsection (c)(1)(F) or initiates an emergency action under the authority of subsection (c)(1)(G) and its prescribed regulations, the Secretary shall require that institution to prepare a teach-out plan for submission to the institution’s accrediting agency or association in compliance with section 496(c)(4), the Secretary’s regulations on teach-out plans, and the standards of the institution’s accrediting agency or association.“(2) Teach-out plan defined.—In this subsection, the term ‘teach-out plan’ means a written plan that provides for the equitable treatment of students if an institution of higher education ceases to operate before all students have completed their program of study, and may include, if required by the institution’s accrediting agency or association, an agreement between institutions for such a teach-out plan.“(g) Inspector General Report on Gift Ban Violations.—The Inspector General of the Department shall—“(1) submit an annual report to the authorizing committees identifying all violations of an institution’s code of conduct that the Inspector General has substantiated during the preceding year relating to the gift ban provisions described in subsection (f)(2); and“(2) make the report available to the public through the Department’s website.“(h) Preferred Lender List Requirements.—“(1) In general.—In compiling, maintaining, and making available a preferred lender list as required under subsection (a)(27), the institution will—“(A) clearly and fully disclose on such preferred lender list—“(i) not less than the information required to be disclosed under section 153(a)(2)(A);“(ii) why the institution has entered into a preferred lender arrangement with each lender on the preferred lender list, particularly with respect to terms and conditions or provisions favorable to the borrower; and122 STAT. 3317“(iii) that the students attending the institution, or the families of such students, do not have to borrow from a lender on the preferred lender list;“(B) ensure, through the use of the list of lender affiliates provided by the Secretary under paragraph (2), that—“(i) there are not less than three lenders of loans made under part B that are not affiliates of each other included on the preferred lender list and, if the institution recommends, promotes, or endorses private education loans, there are not less than two lenders of private education loans that are not affiliates of each other included on the preferred lender list; and“(ii) the preferred lender list under this paragraph—“(I) specifically indicates, for each listed lender, whether the lender is or is not an affiliate of each other lender on the preferred lender list; and“(II) if a lender is an affiliate of another lender on the preferred lender list, describes the details of such affiliation;“(C) prominently disclose the method and criteria used by the institution in selecting lenders with which to enter into preferred lender arrangements to ensure that such lenders are selected on the basis of the best interests of the borrowers, including—“(i) payment of origination or other fees on behalf of the borrower;“(ii) highly competitive interest rates, or other terms and conditions or provisions of loans under this title or private education loans;“(iii) high-quality servicing for such loans; or“(iv) additional benefits beyond the standard terms and conditions or provisions for such loans;“(D) exercise a duty of care and a duty of loyalty to compile the preferred lender list under this paragraph without prejudice and for the sole benefit of the students attending the institution, or the families of such students;“(E) not deny or otherwise impede the borrower’s choice of a lender or cause unnecessary delay in loan certification under this title for those borrowers who choose a lender that is not included on the preferred lender list; and“(F) comply with such other requirements as the Secretary may prescribe by regulation.“(2) Lender affiliates list.—“(A) In general.—The Secretary shall maintain and regularly update a list of lender affiliates of all eligible lenders, and shall provide such list to institutions for use in carrying out paragraph (1)(B).“(B) Use of most recent list.—An institution shall use the most recent list of lender affiliates provided by the Secretary under subparagraph (A) in carrying out paragraph (1)(B).”.(d) Definitions.—Section 487(i) (as redesignated by subsection (c)(1)) (20 U.S.C. 1087(i)) is further amended—(1) by striking “(i) Definition of Eligible Institution.—For the purpose of this section, the” and inserting the following:122 STAT. 3318 “(i) Definitions.—For the purpose of this section:“(1) Agent.—The term ‘agent’ has the meaning given the term in section 151.“(2) Affiliate.—The term ‘affiliate’ means a person that controls, is controlled by, or is under common control with another person. A person controls, is controlled by, or is under common control with another person if—“(A) the person directly or indirectly, or acting through one or more others, owns, controls, or has the power to vote five percent or more of any class of voting securities of such other person;“(B) the person controls, in any manner, the election of a majority of the directors or trustees of such other person; or“(C) the Secretary determines (after notice and opportunity for a hearing) that the person directly or indirectly exercises a controlling interest over the management or policies of such other person’s education loans.“(3) Education loan.—The term ‘education loan’ has the meaning given the term in section 151.“(4) Eligible institution.—The”; and(2) by adding at the end the following new paragraph:“(5) Officer.—The term ‘officer’ has the meaning given the term in section 151.“(6) Preferred lender arrangement.—The term ‘preferred lender arrangement’ has the meaning given the term in section 151.”.