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S.F. No. 3683 - Office of Higher Education Policy (Second Engrossment)
Author: Senator Paul T. Anderson
Prepared By: Joan White, Senate Counsel (651/296-3814)
Date: May 14, 2020


Article 1 - Office of Higher Education

Section 1 (124D.09, subd. 10a) requires  the Office of Higher Education and the Department of Education to collaborate in order to provide annual statewide evaluative information on concurrent enrollment programs to the Legislature.  The report is due December 1, 2021, and each year thereafter.

Section 2 (135A.15, subd. 1a) amends the postsecondary education chapter of law, specifically the statute dealing with sexual harassment and violence policy. This section defines the term “incident.” The term is used in existing law and is currently not a defined term.

Section 3 (136A.01, subd. 1) clarifies that the Office of Higher Education (OHE) may also be known as the Minnesota Office of Higher Education.

Section 4 (136A.031, subd. 3) modifies the Student Advisory Council by adding to the council a student who is enrolled in a Minnesota tribal college, to be elected by student enrolled in the Minnesota tribal college.  This section also strikes an association that is no longer in existence, and requires the commissioner to appoint a private career school or tribal college representative if a student is not elected.

Section 5 (136A.032) is a new section of law for community and commissioner participating in postsecondary education of American Indians. Requires the commissioner to seek consultation with The Tribal Nations Education Committee, established thought tribal directive, on matters related to educating Minnesota’s American Indian postsecondary students. The commissioner is required to provide involvement of the committee and others, and seek consultation with the committee regarding programs, policies and all other matters related to the postsecondary education of Minnesota’s American Indian students. Nothing in this section prevents the commissioner from seeking consultation with individual tribal nations.

Section 6 (136A.096) directs OHE and Minnesota Department of Education (MDE) and the Minnesota Association of Secondary School Principals to set an annual goal for the percentage of Minnesota high school seniors completing the FAFSA.

Section 7 (136A.121, subd. 21) prohibits an institution receiving financial aid under the state grant program from suspending or withdrawing a student from class due to an unpaid balance after expiration of the institution’s 100 percent refund policy.

Section 8 (136A.125, subd. 3) expands the definition of the term eligible institution for purposes of the postsecondary institution child care grants, to include a postsecondary institution offering only graduate or professional degrees.

Section 9 (136A.1275, subd. 1) updates a reference to the Professional Educator Licensing and Standards Board (PELSB) and updates a cross-reference to the teacher supply and demand report.

Section 10 (136A.1701, subd. 4) amends the SELF loan program. Clarifies that loan limits are defined based on the type of program enrollment, which includes a certificate, associate’s degree, bachelor's degree, or a graduate program, and removes the loan maximums in statute.

Sections 11 and 12 (136A.1791, subd. 1; 136A.1791, subd. 3) modify the teacher shortage loan forgiveness program by updating references to PELSB and adding a cross-reference to the teacher supply and demand report in section 11.

Section 13 (136A.1795, subd. 4) amends the large animal veterinarian loan forgiveness program. Current law limits the applicants to five per year.  The amendment to this section removes the five applicant cap.

Section 14 (136A.65, subd. 8) modifies paragraph (a) by restructuring the paragraph for clarity. Changes to paragraph (b) add to the list of reasons the office may revoke or suspend a school’s registration.

Section 15 to 17 and 20 (136A.657, subd. 1; 136A.657, subd. 2; 136A.657, subd. 3; 136A.834, subd. 1) clarify the exempt status of religious programs and schools.  The changes to these sections are primarily to restructure the program for clarity, and to correct an erroneous cross-reference.

Section 18 (136A.827, subd. 4) modifies the career school statute.  Current law requires a student to give “written” notice of cancellation. The amendment to this section strikes written, and adds a requirement that the school confirm the student’s cancellation in writing, and include in the letter that the school has withdrawn the student and if this action is not the student’s intent, the student must contact the school.

Section 19 (136A.829, subd. 1) amends the statute related to private career schools to expand the list of infractions for which the office may refuse to renew, revoke, or suspend a license.

Article 2 - Minnesota 529 College Savings Plan

Article 2 modifies chapter 136G to conform to changes made to college savings plans governed under section 529 of the Internal Revenue Code (IRC) in the Tax Cuts and Jobs Act (TCJA) in 2017 and the Setting Every Community Up for Retirement Enhancement Act (SECURE) in 2019, and makes corresponding updates to administrative provisions of Minnesota’s 529 college savings plan.

The TCJA also allowed funds to be rolled over from a designated beneficiary’s 529 plan to an ABLE account for the same beneficiary or a family member. ABLE (Achieving a Better Life Experience) accounts benefit individuals who become disabled before age 26 to assist those individuals and their families in saving and paying for disability-related expenses, and receive similar tax treatment to section 529 college savings accounts.

The 2019 SECURE Act further expanded the definition of “qualified higher education expenses” to include distributions for a beneficiary’s expenses for a qualifying apprenticeship program, and up to $10,000 in distributions for a beneficiary’s qualifying student loan payments, including up to $10,000 in payments on behalf of a beneficiary’s sibling.

Section 1 modifies title of the Minnesota college savings plan chapter to include a reference to section 529 of the Internal Revenue Code.

Section 2 modifies the definition of “contribution” to include recontributions made to a qualified tuition program as a result of a beneficiary receiving a refund of qualified higher education expenses.

Section 3 strikes unnecessary language in the definition of “distribution.”

Section 4 updates terminology to reflect modern forms of correspondence.

Section 5 updates a cross-reference.

Section 6 updates the term “rollover distribution” to “qualified rollover distribution” to have the same meaning as given in the IRC.

Section 7 creates a new definition of “taxable distribution” to reflect distributions that are not qualified distributions and therefore subject to income tax and/or a tax penalty.

Section 8 strikes language no longer necessary to the definition of “accounts-type plan.”

Section 9 updates terminology for purposes of the matching grant clawback to reflect the new definition of “taxable distribution.”

Section 10 updates terminology.

Section 11 strikes language to reflect the new term “taxable distribution.”

Section 12 strikes obsolete language.

Section 13 makes a conforming change related to a third party.

Section 14 updates the requirements for forfeiting matching grants by providing a reference to the IRC. Under the IRC, a 10% additional penalty applies for certain nonqualified distributions. The penalty does not apply, however, for distributions: made on or after the beneficiary’s death; attributable to the beneficiary being disabled; made due to a scholarship or other allowance received by the beneficiary to the extent the distribution does not exceed the amount of scholarship or allowance; or made on account of attendance in a military academy, to the extent that the amount of the distribution does not exceed the cost of attendance at the institution. Under this section, matching grants would not be forfeited if any of the above exceptions apply and cover 100% of the beneficiary’s qualified higher education expenses, unless the account owner requests matching grants be used to make a qualified education loan repayment.

Section 15 updates requirements for the methods of qualified distributions. Allows matching grants to be used as all or part of a qualified distribution. Updates terms to reflect the new definition of “taxable distribution” created earlier in the Article. Strikes obsolete language pertaining to distributions due to death or disability of, scholarship to, or attendance at a military academy by a beneficiary. Requires plans to notify beneficiaries of their obligation to retain sufficient documentation to substantiate a distribution in case of the beneficiary’s death or disability, receipt of a scholarship, or attendance at a military academy.

Section 16 requires that, for distributions to minor trust accounts, a distribution that qualifies under the IRC exceptions (death or disability, receipt of a scholarship, or attendance at a military academy) must be used for the benefit of the beneficiary. Allows 529 plan funds in minor trust accounts to be rolled over to an ABLE account.

Section 17 repeals the definitions of “adjusted gross income” and “nonqualified distribution”, which are no longer necessary under chapter 136G. Also repeals the three-year holding period for withdrawal of matching grants.

Article 3 - Institutional Approval Provisions

Section 1 (136A.103) modifies the statute establishing the eligibility requirements for state student aid programs. This section also allows the Office of Higher Education (office) to terminate eligibility for state student aid programs effective the date the institution loses eligibility for the federal Pell Grant program.  Eligibility may also be terminated if the institution has violated laws or regulations governing student aid programs, and as a result, is terminated from participating in federal financial aid programs.

Section 2 (136A.64, subd. 1) relates to the registration requirements for private degree granting schools. New language requires schools to provide to the office compliance audits and audited financial statements that meet the requirements in federal law.

Section 3 (136A.646) makes a technical change; the term “schools” is replaced with “institutions.”

Section 4 (136A.65, subd. 4) adds to the list of requirements for a school applying for registration, that the school must have a process to receive and act on student complaints.

Section 5 (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 6 (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 the last two years or failing to have any enrollment within two years of a program’s approval, except for programs that require an extensive approval process.

Sections 7 and 8 (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 any publications or advertisements that give false, fraudulent, deceptive, inaccurate or misleading impressions about the school or its programs, personnel, services, or occupational opportunities. Denied exemptions may be appealed, and the denial is not effective until there is a final determination on appeal, unless the court orders an immediate action.

Section 9 (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 10 (136A.69, subd. 1) increases the annual registration fee from $1,200 to $1,500.

Sections 11 and 12 (136A.69, subd. 4; 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 the applicable state law.  Section 11 applies to registered schools and section 12 applies to licensed schools.

Section 13 (136A.829, subd. 1) authorizes the office to refuse to renew, revoke, or suspend a license if a school uses fraudulent or coercive practices, whether in the course of business in this state or elsewhere.

Sections 14 (136A.833, subd. 1) modifies the application for a licensure exemption for a school or a program by prohibiting the office from granting an exemption to a school that uses advertisements that are false, fraudulent, deceptive, inaccurate or misleading. Denied exemptions may be appealed, and the denial is not effective until there is a final determination on appeal, unless the court orders immediate action.

Section 15 (136A.834, subd. 2) modifies religious exemptions to clarify that an exemption does not extend to any private career school or “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. Denied exemptions may be appealed, and the denial is not effective until there is a final determination on appeal, unless the court orders immediate action.

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