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S.F. No. 4497 - Office of Higher Education School Closure
Author: Senator Paul T. Anderson
Prepared By: Joan White, Senate Counsel (651/296-3814)
Date: May 5, 2020


Section 1 (136A.103) modifies the statute establishing the eligibility requirements for state student aid programs. The new language requires a private institution to meet additional security requirements under Minnesota Statutes, section 136A.646 (section 5).  This section also allows the Office of Higher Education (office) to terminate eligibility for state student aid programs for a variety of reasons listed in paragraphs (d), (e), and (f).  

Section 2 (136A.1041) requires the office to provide written notice of the intent to terminate an institution’s eligibility to participate in financial aid programs, which is effective 90 days after the date of the written notice. 

Section 3 (136A.1042) allows an institution to request a hearing under Minnesota Statutes, chapter 14, with regard to the termination of eligibility to participate in financial aid programs.

Section 4 (136A.64, subd. 1) relates to the registration requirements for private degree granting schools. New language requires schools to provide compliance audits and audited financial statements that meet the requirements in federal law. This section also requires the school to provide to the office information to calculate the financial and nonfinancial metrics under section 136A.675 (section 13) but it is unclear what those metrics are.  

Section 5 (136A.646) modifies the statute related to additional security for registered institutions that do not meet federal financial standards.  Current law, under paragraph (b), requires a surety bond not less than $10,000 and not more than $250,000. The surety bond requirement is changed to a sum equal to 10% of the net tuition revenue from tuition and fees from the previous year.

Paragraph (c) authorizes the office, if the office determines that the institution does not meet the financial resource criteria or determines the institution is vulnerable to a precipitous closure, to require an increased surety bond, prohibit the registered institution from accepting tuition and fee payments made by cash, alternative loans, or the equivalent prior to the add/drop period of the current period of instruction, or prohibit a registered institution from enrolling new students.

Paragraph (f) provides that, in the event of a school closure, the additional security funds must be disbursed in priority order according to the list in this paragraph, and the new language in this paragraph modifies and adds to the list for which the funds must be spent.

New paragraph (g) authorizes the office to grant conditional approval in the event an institution is unable to meet the additional surety requirement, subject to restrictions on their access to state financial aid and restrictions on the enrollment of new or prospective students.  

Section 6 (136A.65, subd. 4) adds to the list of requirements for a school applying for registration, to include that the school may not require mandatory predispute arbitration clauses with students, the school has a process to receive and act on student complaints, and the school has cooperated in the screening, inquiry, monitoring, and contingency planning and notification process in section 136A.675. (section 13) 

Section 7 (136A.65, subd. 7) provides under current law that the office may grant new schools a one-year conditional approval to allow the school to apply for accreditation. New language requires that the new schools have a physical location in Minnesota in order for the office to grant conditional approval.  

Section 8 (136A.65, subd. 8) authorizes the office to refuse to renew, revoke, or suspend a registration due to the school failing to have enrollment within last two years at the school, failing to have any enrollment within two years of a program’s approval, or if the office determines that the school is vulnerable to closure under section 136A.675 (section 13) (*Page 10, line 20, references section 136A.657, however the correct cross-reference is section 136A.675). 

Sections 9 and 11 (136A.653, subd. 1; 136A.657, subd. 2) relate to registered schools that apply to the office for exemptions, including religious exemptions. New language prohibits an exemption to be granted to a school that uses false, fraudulent, deceptive, inaccurate or misleading impressions of the school or its programs, personnel, services, or occupational opportunities.

Section 10 (136A.657, subd. 1) makes technical changes to structure of the subdivision.  

Section 12 (136A.658) relates to State Authorization Reciprocity Agreements (SARA). This section adds language requiring the office to collect reasonable fees from institutions sufficient to cover the costs to administer the interstate reciprocity agreement.  The fee ranges from $750 to $7,500, depending on the enrollment at the institution.  

Section 13 (136A.675) modifies the statute that establishes the process to determine if a school is at risk of closure.  Under paragraph (a), a school may be vulnerable to a precipitous closure if the school is unable to meet the standards in statute, which is existing law, or if the office determines, through the systematic evaluation process in paragraph (d), that the failure to meet one or more of the standards represents risk of precipitous closure. 

Paragraph (b) is modified to require that in the development of financial standards, the office use industry standards as guidance to develop financial and nonfinancial indicators.

New paragraph ( c ) requires a school to notify the office within five business days if any of the seven factors listed under this paragraph occur, which include default on a debt payment or the school’s institutional accreditor loses federal recognition, to name a couple.

New paragraph (d) provides that if the office receives a notification from a school under paragraph (c) or the office determines that a school is at risk of a precipitous closure, the office is required to collect sufficient data to make a determination. If the office determines that the school is vulnerable to a precipitous closure, the office shall provide the determination analysis to the school and request additional information. If the school fails to respond, the office may revoke, suspend, or refuse to renew registration and require additional surety or require more information.  The office may use the reevaluated determination to revoke, suspend, or refuse to renew registration and other impose other sanctions.  

New paragraph (e) authorizes the office to impose any of the requirements under this paragraph on the school if the office determines that the school is at risk or a precipitous closure, which include periodic monitoring and submission of reports, contingency plans, additional surety, or submission of school closure information.

Under paragraph (f), the office must specify the measures, instead of metrics and standards, used for analyzing whether a school is vulnerable to closure, and annually provide a copy to each registered institution.

New language in paragraph (g) requires the office to post a list of reviewed indicators and measures on the office’s website.  

Section 14 (136A.69, subd. 1) increases the annual registration fee from $1,200 to $2,000.  

Sections 15 and 17 (136A.69, subd. 4 and 136A.824, subd. 4) expand an existing fee to include expenses associated with an investigation done by OHE or an outside consultant to investigate an institution for noncompliance with state law.  Section 15 applies to registered schools and section 17 applies to licensed schools.  

Sections 16 and 18 (136A.69, subd. 4a and 136A.824, subd. 10) impose a new fee to reimburse the office when the office reviews or investigates a student complaint at a school that is registered or licensed, respectively, that has more than five student complaints per annual registration period.  There is a flat $500 fee, plus $300 for each on-site visit day, and reimbursement for the cost of meals, lodging, and related travel expenses.  

Section 19 (136A.829, subd. 1) authorizes the office to refuse to renew, revoke, or suspend a license if a school uses fraudulent, coercive, or dishonest practices, or demonstrates gross mismanagement, whether in the course of business in this state or elsewhere.

Section 20 (136A.833, subd. 1) modifies licensure exemptions by prohibiting the office from granting an exemption to a school that uses advertisements that are false, fraudulent, deceptive, inaccurate or misleading.

Section 21 (136A.834, subd. 2) modifies religious exemptions to clarify that an exemption does not extend to any private career school “program” under certain circumstances, and prohibits an exemption to be granted to a school that uses advertisements that are false, fraudulent, deceptive, inaccurate or misleading.

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