Earlier this year, the Department of Education amended regulations for mandatory and discretionary trigger reporting that went into effect on July 1 for institutions receiving Title IV funding. The electronic announcement below provides a summary of suggested documentation that schools can submit to meet the federal government based on a list of possible scenarios.
Posted Date September 17, 2024
Author Federal Student Aid
Electronic Announcement ID GENERAL-24-112
Subject Documentation requirements for Mandatory and Discretionary Trigger Reporting Under Financial Responsibility
On October 31, 2023, the Department published a final rule in the Federal Register [88 FR 74568] amending the regulations related to financial responsibility pertaining to the student financial assistance programs under Title IV of the Higher Education Act of 1965, as amended (Title IV, HEA programs). On June 27, 2024, we published Electronic Announcement GENERAL-24-80 that provided guidance on how to report the mandatory and discretionary triggers under financial responsibility. This Electronic Announcement provides information on the suggested documentation that institutions may provide to fulfill the reporting requirements that went into effect on July 1, 2024. Institutions may be required to provide additional information upon request by the Department regarding financial responsibility triggers. Regulatory authority to examine program and fiscal records may be found at 34 C.F.R. § 668.24.
Institutions are required to report triggers for conditions that exist as of July 1, 2024, regardless of when the circumstance first occurred. For example, if an institution first declared financial exigency in September 2023, but remains in that condition as of July 1, 2024, the institution must report that condition to the Department. The Department will treat triggers that would otherwise be mandatory as discretionary triggers under 34 CFR 668.171(d)(14) if the relevant circumstance began prior to July 1, 2024 and is still in effect, and will determine on a case-by-case basis whether in those circumstances the institution is able to meet its financial or administrative obligations. For example, a school that declared financial exigency on April 1, 2024 and is still in a state of financial exigency as of the date of this publication, would be required to report that trigger to the Department. However, the Department will treat that trigger as discretionary, rather than mandatory, and consider whether financial protection and other protections may be required.
The Department is clarifying in this announcement that institutions must report triggers that first began prior to July 1, 2024, but that were still in effect as of July 1. Institutions have 21 days from the date of this announcement to report such triggers.
Mandatory Triggers
Mandatory triggers (668.171(c)) are certain external events – financial circumstances and events that are not yet reported in the institution’s audited financial statements, but may be reported in a future annual submission. The mandatory triggers also include events that may never be reported in the audited financial statements. The following is a list of mandatory triggers for which reporting is required. We have provided a non-exhaustive list of documents which should be provided to the Department when the institution reports the triggering event or circumstances.
Schools should notify the Department once the circumstance that caused the trigger has been resolved. The Department will work with the school to determine the appropriate documentation to submit to confirm that the trigger has been resolved.
Legal and Administrative Actions
This trigger encompasses four different subsections (A)-(D).
Final Monetary Judgment, Award, or Settlement 668.171(c)(2)(i)(A) – suggested documentation (whether the settlement or award has been paid is not relevant):
- A copy of the final judgment or award, including an award in arbitration;
- A copy of the settlement agreement;
- Proof of acceptance by an insurance carrier of coverage for the full or partial amount of the judgment, award or settlement.
Federal or State Authority or Qui Tam Action 668.171(c)(2)(i)(B) – suggested documentation:
- A copy of the complaint or action by a Federal or State authority to impose an injunction, establish fines or penalties, or to obtain financial relief;
- A copy of a qui tam action in which the United States has intervened;
- Proof of acceptance by an insurance carrier of coverage for the full or partial amount of the judgment, award or settlement.
Borrower Defense Recovery 668.171(c)(2)(i)(C) – the Department tracks these actions and no notification documentation from the institution is necessary.
Final Monetary Judgment or Settlement with Change in Ownership 668.171(c)(2)(i)(D) – suggested documentation (whether the judgment, award, settlement, or monetary determination has been paid is not relevant):
- A copy of the final monetary judgment or award, including in an arbitration or an administrative proceeding;
- A copy of the settlement agreement;
- Proof of acceptance by an insurance carrier of coverage for the full or partial amount of the judgment, award or settlement.
Withdrawal of Owner’s Equity
- Suggested documentation for 668.171(c)(2)(ii):
- Notice of a declaration of a dividend;
- Evidence of payment of a dividend or other withdrawal of equity.
Gainful Employment
Suggested documentation for 668.171(c)(2)(iii):
- Institutions will not need to separately report to the Department for this trigger.
- Information on implementing this mandatory trigger is described in Electronic Announcement GENERAL-24-74.
Institutional Teach-Out Plans or Agreements
- Suggested documentation for 668.171(c)(2)(iv):
- Notification from the institution’s accrediting agency or other oversight body;
- The institution’s response to the requirement, if anything other than full compliance;
- A copy of the teach-out plan;
- A copy of any teach-out agreement(s).
Publicly Listed Entities
Suggested documentation for 668.171(c)(2)(vi):
- SEC revocation or suspension action;
- Complaint or petition filed by the SEC in federal court;
- SEC order instituting proceeding pursuant to section 12(j) of the Exchange Act;
- Exchange notification of noncompliance;
- Exchange notification of delisting;
- Notification from the entity acknowledging that it failed to file a required annual or quarterly report;
- Notification from the SEC relating to a failure to file a required annual or quarterly report;
- Notification from a foreign exchange or oversight authority similar to the above.
Non-Federal Education Assistance Funds
668.171(c)(2)(vii) – 90/10 reporting is described in 34 CFR 668.28(c)(4). Institutions will not need to separately report to the Department for this mandatory trigger.
Cohort Default Rates
668.171(c)(2)(viii) – Institutions will not need to separately report to the Department for this mandatory trigger.
Contributions and Distributions
Suggested documentation for 668.171(c)(2)(x)
- Detailed general ledger printout that shows all contributions and distributions made in the last quarter of the last fiscal year and first two quarters in the current fiscal year, and each time a distribution was made in the current year.
Financing Arrangement Where the Institution or Entity is Subject to Default or Other Adverse Condition Based on Action Taken by the Department
Suggested documentation for 668.171(c)(2)(xi)
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Line of credit, loan agreement, security agreement, or other financing agreement which subjects the institution or default or other adverse action based on Department action. For additional information, please see Financial Responsibility Regulations – Questions and Answers (ed.gov) question FR-Q21.
Declaration of Financial Exigency
Suggested documentation for 668.171(c)(2)(xii)
- Notification that the institution declared a state of financial exigency to a Federal, State, Tribal, or foreign governmental agency or its accrediting agency.
- Any additional correspondence with the Federal, State, Tribal or foreign governmental agency or its accrediting agency.
Receivership (or Equivalent Status Under Foreign Law)
Suggested documentation for 668.171(c)(2)(xiii)
- The petition instituting the receivership or similar proceeding;
- Order appointing the receiver or similar official under foreign law;
Discretionary Triggers
The discretionary triggers at 34 CFR 668.171(d) reflect the set of conditions that may, at the discretion of the Department, require an institution to post financial protection. These discretionary triggers are external events or financial circumstances that may not appear in the institution’s annual financial statements and are not yet reflected in the institution’s calculated composite score. The following is a summary of suggested items for institutions to report to the Department for each discretionary trigger if the institution meets the criteria for the trigger.
Accrediting Agency and Governmental Agency Action
Suggested documentation for 668.171(d)(1)
- Accrediting agency documents demonstrating probation, show-cause, or comparable statuses;
- Federal, State, local, or Tribal authority documents demonstrating probation, show-cause, or comparable statuses;
- Any correspondence with the accrediting agency relating to the probation, show-cause, or comparable statutes;
- Any correspondence with Federal, State, local or Tribal authority relating to the probation, show-cause or comparable statutes.
Other Defaults, Delinquencies, Creditor Events, and Judgments
This trigger encompasses five different romanettes (i)-(v) from 668.171(d)(2)
Default or Other Adverse Condition in a Financing Agreement 668.171(d)(2)(i)– suggested documentation:
- Copy of the line of credit, loan agreement, security agreement, or other financing agreement containing the default or adverse condition
Default, Delinquency, or Other Event Occurs that Allows Change in Financing Terms 668.171(d)(2)(ii) – suggested documentation:
- Copies of notices and/or correspondence from the creditor imposing an increase in collateral, a change in contractual obligations, an increase in interest rates or payments, or other sanctions, penalties, or fees.
Creditor Takes Action to Terminate, Withdraw, Limit, or Suspend a Financing Arrangement 668.171(d)(2)(iii) – suggested documentation:
- Copies of notices and/or correspondence from the creditor terminating, withdrawing, limiting, or suspending a loan agreement or other financing arrangement or calling due a balance on a line of credit with an outstanding balance.
- Copy of any correspondence with the creditor regarding an action or pending action.
Financing Arrangement Where the Institution or Entity may be Subject to Default or Other Adverse Condition Based on any Action Taken by the Department 668.171(d)(2)(iv) – suggested documentation:
- Copy of the line of credit, loan agreement, security agreement, or other financing arrangement containing the default condition or provision. For additional information, please see Financial Responsibility Regulations – Questions and Answers (ed.gov) question FR-Q23.
Non-Final Judgment Awarding Monetary Relief (Appealable or Under Appeal) 668.171(d)(2)(v) – suggested documentation:
- Copies of the judgment awarding monetary relief
Fluctuations in Title IV Volume
Institutions will not need to report anything to the Department for this discretionary trigger 668.171(d)(3).
- In the final rule, the Department explained that a single standard would be inappropriate, as the percentage or dollar amount of a fluctuation would look very different depending upon the size of the institution. The Department concluded that an approach relying upon “discussions with the institution” is more appropriate.
High Annual Dropout Rates
Institutions will not need to report anything to the Department for this discretionary trigger 668.171(d)(4).
Regarding what constitutes a “high annual dropout rate,” the Department did not define the terminology. Instead, the Department opted for a case-by-case approach to determine whether there are indications of financial concern. In the final rule, the Department stated that it would assess the size of the institution, the number of students who drop out, and the cost associated with recruiting new students to replace those who drop out.
Interim Reporting
668.171(d)(5) – In some instances, institutions will be required to provide additional financial reporting, documentation demonstrating negative cash flows, failure of other financial ratios, cash flows that significantly miss the projections submitted to the Department, withdrawal rates that increase significantly, or other indicators of a significant change in the financial condition of the institution.Suggested documentation:
- The Department will inform institutions about the specific documentation required when this requirement applies.
Pending Borrower Defense Claims
Institutions will not need to report anything to the Department for this discretionary trigger 668.171(d)(6).
Discontinuation of Programs
Suggested documentation for 668.171(d)(7):
- Documentation demonstrating what programs were discontinued, when the programs were discontinued, and that they met the 25% threshold.
- Documentation explaining whether current students in those programs are allowed to finish and, if so, the length of time for those students to move through the programs. The institution will also need to provide numbers of students that are left in the program each year until completion, along with projected income from those students.
Closure of Locations
Suggested documentation for 668.171(d)(8)
- Documentation demonstrating what locations were closed, when the locations were closed, and that the institution meets the 25% threshold.
State Actions and Citations
Suggested documentation for 668.171(d)(9):
- Documentation demonstrating that a State licensing or authorizing agency cited the institution for failing to meet their requirements, which would include documentation demonstrating that the agency will withdraw or terminate the institution’s licensure or authorization if the institution does not take the steps necessary to come into compliance with that requirement.
- Any correspondence with the State licensing or authorizing agency relating to the citation
Loss of Institutional or Program Eligibility
Suggested documentation for 668.171(d)(10):
- Documentation from the Federal agency demonstrating that one or more of its programs has lost eligibility to participate in that agency’s Federal educational assistance program due to an administrative action against the institution or its programs.
- Documentation demonstrating the amount of funds received by the institution from that agency for its most recently completed fiscal year.
Exchange Disclosures
Suggested documentation for 668.171(d)(11):
The public filing demonstrating that the institution is under investigation for possible violations of State, Federal, or foreign law.
Actions by Another Federal Agency
Suggested documentation for 668.171(d)(12):
- Documentation from the Federal agency demonstrating that the institution may lose its eligibility to participate in that agency’s Federal educational assistance program if it does not comply with the agency’s requirements; and
- Documentation demonstrating the amount of funds received by the institution from that agency for its most recently completed fiscal year.
Other Teach-Out Plans or Agreements
668.171(d)(13) In concert with the Institutional Teach-Out Plans or Agreements mandatory trigger, this discretionary trigger covers circumstances where an institution is required to submit a teach-out plan or agreement, including programmatic teach-outs, by a State, the Department or another Federal agency, an accrediting agency, or other oversight body. Unlike the Institutional Teach-Out Plans or Agreements mandatory trigger, this discretionary trigger does not condition the notification on the demand that it is related, in whole or in part, due to financial concerns. Suggested documentation:
- Documentation demonstrating the institution has submitted a notification of a teach-out plan or agreement, including programmatic teach-outs, by a State, the Department or another Federal agency, an accrediting agency, or other oversight body.
An Event or Condition that the Department Learns About and Determines is Likely to Have a Significant Adverse Effect on the Institution’s Financial Condition
Suggested documentation for 668.171(d)(14):
- Depending on the event or condition, the Department will notify the institution about the required documentation.
Contact
For questions concerning reporting of mandatory and discretionary triggers, please contact the Department’s Financial Analysis division at FSAFinancialAnalysisDivision@ed.go