The Biden-Harris Administration on Oct. 24, 2023, issued final rules detailing important obligations for higher education institutions that receive federal funding. (Codified at 34 C.F.R. § 668 et seq.) The final regulations change the standards colleges and universities must meet to remain eligible for federal student financial assistance under Title IV of the Higher Education Act. The U.S. Department of Education (Department) intends for the regulations to increase transparency in how institutions communicate with students about their financial aid awards, a "common source of confusion and error." The regulations take effect on July 1, 2024.

This Holland & Knight alert is the second in a three-part series discussing the new regulations and their implications. (See Holland & Knight's previous alert, "New Financial Responsibility Requirements from the U.S. Department of Education," Nov. 2, 2023.)

Administrative Capability Requirements

The administrative capability regulations mandate that colleges and universities meet specified thresholds to confirm they have sufficient resources and procedures in place to administer federal student aid programs. Noncompliant institutions could face penalties imposing conditions on their continued receipt of Title IV funds, limits on the amount of funds or termination of funding altogether.

To remain eligible for federal student aid programs, colleges and universities must:

• provide adequate financial aid counseling and communications to students that includes the total cost of attendance, the net price students must actually pay, the sources and types of financial aid available, and the applicable deadlines for accepting, declining or adjusting award amounts
• provide students "geographically accessible" clinical or externship opportunities required for completion of a program within 45 days of the student's completion of other required coursework (success determined on a case-by-case basis); this requirement does not apply to post-graduate clinical experiences, such as medical residencies
• provide adequate career services support; the Department will defer to colleges and universities as to the types of services that are most appropriate; accordingly, institutions have to decide how they want to devote their resources among career services and other functions supporting student success
• have adequate procedures to evaluate the validity of a student's high school diploma and outline criteria they will use to identify an invalid high school diploma
• not have any principal or affiliate whose misconduct or institutional closure contributed to significant liabilities to the federal government

These steps are intended to help ensure that institutions have the administrative capability to administer federal student aid programs effectively. If your program does not currently meet these requirements, these will be important changes to implement before July 2024.

Next Steps and Open Questions

To comply with these new administrative capability regulations, higher education institutions will need to ensure their financial aid and career services programs are adequately staffed and funded to serve their student bodies.

The rigor of the enforcement climate with respect to these new regulations remains to be seen. The Department has not clarified what level of noncompliance will call for the imposition of a particular penalty.