Nonprofit higher education institutions now must report to the U.S.
Department of Education the occurrence of certain "triggering" events that
bear on the institution's financial strength within 10 days of the
occurrence of the event.
These reporting requirements, part of the Obama-era borrower defense
regulations that stalled under the Trump administration, have implications
for any institution that participates in federal student aid programs. The
regulations are designed to protect the Department of Education should it
need to forgive student loans due to closure, fraud or misrepresentation by
The National Association of College and University Business Officers
Advisory Guidance 18-05, which details the new regulations and triggering events and recommends
certain steps business officers should take to ensure compliance with the
new reporting requirements.
The borrower defense regulations set forth two categories of triggering
events that will lead to the Department of Education re-evaluating an
institution's financial standing: "automatic" and "discretionary" events.
Previously, the Department of Education evaluated a school’s standing by
reviewing the institution's audited financial statements, which schools
provided within nine months of the end of the fiscal year. Now, the
Department of Education will re-evaluate an institution's financial
standing upon notice of a triggering event. An institution must provide
such notice initially within 10 days of the occurrence of the event.
Depending on the type of event, such as a lawsuit, an institution also may
be required to provide follow-up notices.
Automatic triggering events are: (1) debts stemming from judicial or
administrative proceedings or settlements, (2) borrower defense-related
lawsuits, (3) other (not specified) litigation, (4) accrediting actions
requiring a teach-out plan when closing (including closing a branch), and
(5) gainful employment programs that could become ineligible for federal
aid in the next award year.
Discretionary triggers are: (1) significant year-to-year fluctuation in the
amount of Pell Grant or direct loan funds the institution receives, (2)
citation by a state licensing agency for failing requirements, (3) failing
a (to be developed) stress test, (4) high annual dropout rates, (5)
accreditation issues, (6) financing document violations that allow a
creditor to increase collateral, and (7) pending borrower relief claims or
borrower defense lawsuits.
While the regulations do not provide detailed consequences for failing to
report, they do provide the consequences for failing to meet required
financial responsibility standards. These consequences include providing
the Department of Education with a surety or letter of credit, and
disclosing to students and prospective students the occurrence of a
Business officers should coordinate with internal and external team members
to put systems in place to ensure they are notified if a triggering event
occurs. Such reporting systems will help promote compliance with the 10-day