The Department of Education is reminding Title IV institutions in a ‘Dear Colleague Letter’ of their responsibility to comply with regulations pertaining to misrepresentations, including any made by third-party service providers that they utilize. The letter specifically focuses on three types of statements that qualify as misrepresentation: 1) Inaccurately identifying an individual employed by an external servicer provider as being employed by the eligible institution, 2) presenting a sales representative or recruiter employed by an eligible institution or an external service provider as an academic advisor, such as by referring to them as a “counselor, and 3) describing a program, or any of its components or resources, provided in substantial part by the external service provider as “the same as” a corollary residential or campus-based version of the program provided by the eligible institution. The electronic announcement also highlights that institutions will be held accountable for ensure accurate information is provided to students.
For more details, read the full letter below.
Publication Date: January 16, 2025
DCL ID: GEN-25-01
Subject: Notice of interpretation regarding misrepresentations by third-party service providers engaged by an institution of higher education
Summary: This letter reminds eligible Title IV institutions of their obligations under the Higher Education Act to comply with requirements under section 487(c)(3) and the Department’s regulations (subpart F of part 668) pertaining to misrepresentation.
Dear Colleague:
The U.S. Department of Education (Department) is sending this letter to remind eligible Title IV institutions (eligible institutions) of their obligations under the Higher Education Act (HEA) to comply with requirements under section 487(c)(3) of the HEA and the Department’s regulations (subpart F of part 668) pertaining to misrepresentation. These provisions prohibit an institution from providing false, misleading, or inaccurate information about the nature of its educational program(s), its financial charges, or the employability of its graduates. This letter reminds eligible institutions that such requirements apply with equal force to statements made by a third-party entity engaged by the eligible institution, including but not limited to an Online Program Manager (OPM), and their respective employees, contractors, or representatives (hereinafter “external service provider”); and that institutions may be responsible for the consequences of any misrepresentation committed by any external service provider that they engage. See 34 C.F.R. 668.71.
Consistent with the statutory and regulatory requirements related to misrepresentation, the Department highlights three types of statements that, if made by an eligible institution and/or any external service provider, under certain circumstances discussed further below, are likely to qualify as a misrepresentation:
- Inaccurately identifying an individual employed by an external servicer provider as being employed by the eligible institution,
- Inaccurately presenting a sales representative or recruiter employed by an eligible institution or an external service provider as an academic advisor, such as by referring to them as a “counselor,” and
- Describing a program, or any of its components or resources, provided in substantial part by the external service provider as “the same as” a corollary residential or campus-based version of the program provided by the eligible institution.
These three types of statements may result in a finding that an eligible institution has engaged in a substantial misrepresentation and may result in the Department imposing a fine or taking action to limit, suspend, or terminate an institution’s access to Title IV funds.
Although these examples do not constitute an exhaustive list, the Department is issuing this guidance because the Department has become aware of multiple instances in which eligible institutions or their external service providers have apparently engaged in making these types of statements to misrepresent, allow to be misrepresented, or facilitate the misrepresentation of, aspects of programs offered by the eligible institutions. The Department seeks to remind institutions and their external service providers of their obligations to provide accurate and complete information to prospective and enrolled students in accordance with law, and as further clarified by the examples in this letter.
Background
Section 487(c)(3) of the HEA authorizes the Secretary to suspend or terminate an institution’s or program’s eligibility for Title IV funds upon finding the institution substantially misrepresented the nature of the institution’s educational program, its financial charges, or the employability of its graduates. 20 U.S.C. 1094(c)(3). Subpart F of the Department’s Title IV regulations define misrepresentation as any “false, erroneous or misleading statement an eligible institution, organization, or person with whom the eligible institution has an agreement to provide education programs, or to provide marketing, advertising, recruiting or admissions services makes directly or indirectly to a student, prospective student or any member of the public[.]” 34 C.F.R. 668.71(c). Misrepresentation “includes any statement that omits information in such a way as to make the statement false, erroneous, or misleading.” Id. A “substantial misrepresentation” occurs if the misrepresentation is one “on which the person to whom it was made could reasonably be expected to rely, or has reasonably relied, to that person’s detriment.” Id.
The Department’s longstanding position has been that misrepresentation can occur through acts or omissions that falsely, inaccurately, or misleadingly identify the entity providing a good or service related to the institution’s educational program, its financial charges, or the employability of its graduates. For example, since 2010, the Department’s misrepresentation regulations have required institutions to provide accurate statements about the source of a program’s educational services and characteristics, including statements “made in any advertising, promotional materials, or in the marketing or sale of courses or programs of instruction offered by the institution.” See 34 C.F.R. 668.71(b); see also 34 C.F.R. 668.72-74. As another example of the Department reminding institutions of obligations to be accurate in their representations about the source of educational services and characteristics, in DCL GEN-22-07, the Department reminded eligible institutions that they are required by 34 C.F.R. 668.43(a)(12) to attribute accurately the portions of a program provided by the eligible institution itself, as distinct from the portions of a program provided on behalf of the eligible institution by written agreement, often by an external service provider not itself eligible for Title IV participation.
1. False or misleading attribution of employment, status, or role with eligible institution
Many eligible institutions arrange for an external service provider to exclusively manage functions of online programs, such as recruitment, advising, and clinical placements. A misrepresentation can occur when an employee of an external service provider inaccurately presents themselves as an employee of the eligible institution in their communications with prospective and enrolled students, including but not limited to circumstances where the external service provider’s employees use school-associated email addresses and/or email signatures that represent or imply that the individual is employed by the eligible institution. In addition, a misrepresentation may occur if an employee of an external service provider fails to inform students during phone conversations that they are not, in fact, directly employed by the institution.
Misrepresenting the role of an external service provider in these manners can be deceptive, and the Department is aware of numerous instances of this type of deception reportedly occurring. For example, the Department is aware of instances in which OPM employees, using titles such as “placement specialist,” “placement manager,” “student success advisor,” “student success manager,” “student support specialist,” “admissions counselor,” and “admissions manager,” have sent emails to prospective and enrolled students in OPM-provided programs offered by eligible institutions from email addresses that implied institutional employment (@[eligible institution].edu), and do not indicate clearly their affiliation with or employment by the OPM. Depending on the particular facts, the use of such titles or email addresses is likely to contribute to students misunderstanding these employees’ roles and relying on information provided by them as if they were institutional employees.
Misrepresenting the role of an external service provider can deprive prospective and enrolled students of the ability to make fully informed decisions about their education and can undermine the effectiveness of the Department’s existing regulations. Prospective and enrolled students report that they believe it is important to understand whether they are speaking to an employee of an external service provider rather than an employee of the institution. The status of the person they are talking with affects their evaluation of the services that the institution will provide, allowing students to make better-informed decisions about whether to undertake the significant cost of enrolling.
As another example of how such conduct can undermine the Department’s accountability requirements, eligible institutions are required to “make readily available” certain program information to enrolled and prospective students, including information about written arrangements the institution has entered into, to ensure students are aware of an external service provider’s particular role in providing the educational programs, the costs incurred, and other key aspects of the program. 20 U.S.C. § 1092(a)(1)(G); 1094(a)(7); 34 C.F.R. 668.43(a)(12). However, a student will not know to request this critical information if an eligible institution or its external service provider either fails to inform a student of the existence of a contracted external service provider or makes false, misleading, or inaccurate representations about the role of the external service provider.
The Department’s view that this type of conduct can be deceptive is consistent with other Federal and State consumer protection laws. For example, the Federal Trade Commission (FTC), in its guide for private vocational and distance education schools, 16 C.F.R. part 254, identifies as a deceptive act the misrepresentation that certain individuals are members of the institution or school, 16 C.F.R. 254.4(a)(7), and in its rule on impersonation, 16 C.F.R. Part 461, prohibits falsely posing as government or business entities or officials. In addition, the FTC has filed numerous enforcement actions involving false or unsubstantiated affiliation claims. Under the rules enforced by the FTC, representations are deceptive if necessary, qualifications are not made, if material facts are not disclosed, or if these disclosures or qualifications are confusing or inconspicuous. The touchstone is whether the overall net impression of the representation is deceptive, not its literal truth or falsity. See, e.g., FTC v. Cyberspace.com, L.L.C., 453 F.3d 1196, 1200 (9th Cir. 2006); see also FTC v. Med. Billers Network, Inc., 543 F. Supp. 2d 283, 304 (S.D.N.Y. 2008) (listing cases). “‘Deception may be made by innuendo rather than outright false statements,’…and statements can ‘create deceptive impression on purchasers even though they may be technically interpreted as true or partially true.’” FTC v. Bay Area Bus. Council, Inc., No. 02 C 5762, 2004 WL 769388, at *10 (N.D. Ill. Apr. 9, 2004), aff’d, 423 F.3d 627 (7th Cir. 2005) (quoting National Bankers Services, Inc. v. FTC, 329 F.2d 365, 367 (7th Cir.1964); L.G. Balfour Co. v. FTC, 442 F.2d 1, 17 (7th Cir.1971)).
These principles also apply to representations about the source of goods and services. For example, in Waltham Watch Co. v. FTC, 318 F.2d 28 (7th Cir. 1963), the Court held that a company’s advertisements were knowingly false and misleading where it claimed that its products were from a “famous 150-year-old company” without disclosing that the manufacturer of these products had nothing to do with the original company, which had authorized the use of its name under a licensing agreement. Id. at 31. See also Waltham Precision Instrument Co. v. FTC., 327 F.2d 427, 431 (7th Cir. 1964) (“Any right petitioners have to use the tradename ‘Waltham’ does not permit its use in a manner designed to deceive the public, and those who put into the hands of others the means by which they may mislead the public, are themselves guilty of a violation of Section 5 of the Federal Trade Commission Act.”) (cleaned up); Warner-Lambert Co. v. FTC, 562 F.2d 749, 761 (D.C. Cir. 1977) (where a product has built up a widespread reputation over a period of years, it is false and deceptive to continue advertising on the “strength of the impression” without disclosing material changes to the product.)
Additionally, the Department’s enforcement approach is consistent with a number of State rules related to misrepresentation. For example, California’s prohibition on unfair, deceptive, unlawful, and unconscionable commercial practices in connection with the sale of educational services to consumers specifically prohibits “passing off goods or services as those of another,” “misrepresenting the source…of goods and services,” and “misrepresenting the affiliation, connection, or association with another.” California Consumer Legal Remedies Act (CLRA), Civil Code 11/70 et seq. As another example, Texas’s prohibition on deceptive trade practices specifies that the term “false, misleading, or deceptive acts or practices” includes, but is not limited to “passing off goods or services as those of another,” “causing confusion or misunderstanding as to affiliation, connection, or association with, or certification of goods or services,” “causing confusion or misunderstanding as to affiliation, connection, or association with, or certification by, another,” and “representing that goods or services have sponsorship, approval, [or] characteristics…which they do not have or that a person has a sponsorship, approval, status, affiliation or connection which the person does not [have].” Tex. Bus. & Com. Code § 17.46. And the District of Columbia’s prohibition of unfair and deceptive trade practices prohibits “represent[ing] that the person has a sponsorship, approval, status, affiliation, certification, or connection that the person does not have” and “pass[ing] off goods or services as those of another.” District of Columbia Consumer Protection Procedures Act (CPPA), D.C. Code § 28-3904.
2. Deceptive or misleading statements about an individual’s role in student recruitment
The Department also notes that presenting a sales representative or recruiter as an “academic counselor” or similar position can be deceptive and misleading if it is not an accurate description of their position. For example, the Department is aware of circumstances in which individuals who have been awarded distinction based on their level of “sales” have reportedly described themselves as admission “counselors” of an eligible institution. Such practices create a high risk of misrepresentation since rewarding an individual based on sales indicates that individual’s role is not focused on impartially counseling prospective or enrolled students, but rather on securing a financial transaction. The Department’s interpretation is consistent with many States’ laws. See, e.g., NY Comp Codes R. & Regs, tit. 8, sec. 126.12(e) (BPPS regs) (“Agents shall not identify themselves or be identified as counselors or by other titles which mislead the prospective student”), MA CMR, tit. 940 sec. 31.06(10) (“It is an unfair or deceptive act or practice for a school to refer to salespersons or recruiters as ‘counselors’ or ‘advisors’ or to imply that a salesperson or recruiter is an academic adviser or counselor”). The FTC has also charged entities for deceptively claiming to be independent from the programs they advertise or not influenced by compensation received from those programs.
3. False or misleading statement creating equivalency or identity between an eligible institution’s program provided by an external service provider and a corollary campus-based or residential program
The Department is aware of instances in which the resources available to students enrolled in a program provided by an external service provider are entirely distinct and substantively different from those available to students in a corollary residential program. Such resources can include instructors, curriculum, advisors, placement coordinators, and registrars.
Absent specific evidence of actual parity with respect to each advertised aspect, it is highly likely to be misleading and deceptive to describe a program offered by the external service provider as the same as a campus-based program, or to otherwise imply an equivalent identity between the two if they are not equivalent in substantive ways. Such substantive items include differences in the degrees awarded (including the name of the school and college awarding the degree), the criteria for admissions, or the qualifications of faculty across both programs. Programs may not be equivalent if they have meaningful differences in rates of completion, job placement, earnings, or licensure. Stating that programs are equivalent when there are meaningful differences between them is highly likely to meet the statutory and regulatory definition of a misrepresentation. Institutions should also be clear if the credentials awarded in programs supported by an external servicer provider are different from the credentials students earn in the campus-based version of the program. For example, eligible institutions should be clear if the degree is awarded by an online division or campus of the institution that does or does not certify completion of the same curriculum taught by the same faculty as the campus-based degree.
In sum, eligible institutions and their external service providers are prohibited from providing false, misleading, or inaccurate information about the nature of their educational programs. See 20 U.S.C. 1094(c)(3); 34 CFR Part 668 Subpart F. This prohibition applies equally to circumstances where an institution has arranged for an external service provider to exclusively manage functions of online programs, such as recruitment, advising, and clinical placements. See 34 C.F.R. 668.71. As set forth in detail above, the Department’s interpretation is consistent with the applicable statute and regulations, as well as State consumer protection laws.
Conclusion
Based on the evidence and support described in this letter, the Department provides these examples to clarify the type of statements made by an eligible institution or its external service provider that are likely to qualify as a misrepresentation under existing law. The Department reminds eligible institutions that they are responsible for statements made by an external service provider that amount to substantial misrepresentation, and that eligible institutions could, as a result, be subject to remedial action such as imposing a fine or limiting the institution’s participation in the Title IV programs.
If you have any questions or comments, please submit through the Contact Customer Support form link in Federal Student Aid’s Help Center.
Sincerely,
Nasser Paydar, Ph.D.
Assistant Secretary for Postsecondary Education