New Regulations for Changes in School Ownership

Reauthorization produced good news! Students and schools are benefiting from regulatory changes published in the Institutional Eligibility Federal Register issued October 29, 1999. These regulations take effect on July 1, 2000. However, the Department of Education authorized schools to implement the provisions beginning October 29, 1999.

Among the good news is a change in the regulations dealing with eligibility for schools changing ownership. Schools will no longer automatically lose eligibility to participate in Title IV programs upon a change in ownership resulting in a change of control. If a school satisfies certain application requirements with the U.S. Department of Education (ED), the school will be able to continue participation in Title IV programs on a provisional basis. The regulatory changes will allow a smoother transition for schools and students affected by changes in ownership.

A change in ownership resulting in a change of control includes any change in which a person who has or acquires an ownership interest in the entity that owns the school or the parent corporation of that entity acquires or loses the ability to control the school.

Before the regulatory changes took effect, a school that underwent a change in ownership and control lost eligibility to participate in Title IV programs as soon as the change occured. The school did not regain eligibility until ED formally approved the change in ownership. This interruption in Title IV eligibility was often disruptive for schools and their students.

Application Requirements
Under the new regulations, a school that undergoes a change in ownership and control may continue uninterrupted participation in Title IV programs while applying for provisional extension of its certification. In order for a school to qualify for this extension, ED must receive from the school a materially complete application within ten business days after the ownership change occurs. To apply for provisional extension of participation, the school must submit the following information to ED:

• A completed "Application for Approval to Participate in Federal Student Financial Aid Programs,"
• A copy of the school's state license or equivalent document - as of the day before the ownership change - authorizing the school to provide a postsecondary educational program in the state in which it is located,
• A copy of the document from the school's accrediting agency - as of the day before the ownership change - approving the school and its programs,
• Audited financial statements of the school's two most recently completed fiscal years, and
• Audited financial statements of the school's new owner for the two most recently completed fiscal years or equivalent information acceptable to ED.

Provisional PPA
If the school's application is approved, ED will provide the school with a provisional Program Participation Agreement (PPA). The provisional PPA extends the terms and conditions of the PPA in effect before the school's change in ownership. The school's provisional PPA is granted for a period not to exceed three complete award years. The provisional PPA expires on the earlier of:

• The date on which ED signs a new PPA,
• The date on which ED notifies the school that its application is denied, or
• The last day of the month following the month in which the change of ownership occurred, unless the school satisfies certain additional requirements.

These additional requirements include the school's submission of a "same day" balance sheet for the school as of the date of the ownership change, as well as the approval of the ownership change from the state and accrediting agency (if not already provided to ED). Unless exempt, the school must also submit an acceptable default management plan to ED. The school must provide these documents to ED before the end of the month following the month in which the ownership change occurred.

TG Implementation
TG requires a participating school to notify TG's Compliance Administrative Operations within ten business days of a change in ownership and control. TG may require the school to submit a copy of ED's final approval and PPA with additional documentation. The school may also be required to complete TG's "School Eligibility Application" to continue participation.

Questions
For questions about TG's school eligibility process or reporting a change in ownership, contact Valerie Gonzalez, Compliance Specialist, at (800) 252-9743 ext. 4877.

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