Senate Study Bill 1106 - Introduced SENATE/HOUSE FILE _____ BY (PROPOSED DEPARTMENT OF EDUCATION/COLLEGE STUDENT AID COMMISSION BILL) A BILL FOR An Act relating to oversight functions performed by the college 1 student aid commission regarding certain restrictions and 2 requirements for schools offering postsecondary educational 3 programs, establishing a fund, providing for fees, and 4 making penalties applicable. 5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 6 TLSB 1344DP (8) 84 je/sc

S.F. _____ H.F. _____ Section 1. Section 261B.8, subsection 3, Code 2011, is 1 amended to read as follows: 2 3. a. A postsecondary registration fund is created in 3 the state treasury under the control of the commission. Fees 4 collected under this section shall be deposited in the 5 general postsecondary registration fund of the state and are 6 appropriated to the commission for purposes of administering 7 this chapter . 8 b. The moneys credited to the postsecondary registration 9 fund are not subject to section 8.33, and moneys in the fund 10 shall not be transferred, used, obligated, appropriated, 11 or otherwise encumbered except as provided by law. 12 Notwithstanding section 12C.7, subsection 2, interest or 13 earnings on moneys deposited in the postsecondary registration 14 fund shall be credited to the fund. 15 Sec. 2. Section 714.17, Code 2011, is amended to read as 16 follows: 17 714.17 Unlawful advertising and selling of educational 18 courses of instruction . 19 It shall be unlawful for any person, firm, association, 20 or corporation maintaining, advertising, or conducting in 21 Iowa any educational course of instruction for profit, or 22 for tuition charge, whether by classroom instructions , or by 23 correspondence, or by other delivery method to: 24 1. Falsely advertise or represent to any person any matter 25 material to such an educational course of instruction . All 26 advertising of such courses of instruction shall adhere to and 27 comply with the rules and regulations of the federal trade 28 commission as of July 4, 1965 July 1, 2010 . 29 2. Collect tuition or other charges in excess of one hundred 30 fifty dollars in the case of educational courses offered by 31 correspondence courses of study , in advance of the receipt and 32 approval by the pupil of the first assignment or lesson of such 33 course. Any contract providing for advance payment of more 34 than one hundred fifty dollars shall be voidable on the part of 35 -1- LSB 1344DP (8) 84 je/sc 1/ 12

S.F. _____ H.F. _____ the pupil or any person liable for the tuition provided for in 1 the contract. 2 3. Promise or guarantee employment utilizing information, 3 training, or skill purported to be provided or otherwise 4 enhanced by a an educational course, unless the promisor or 5 guarantor offers the student or prospective student a bona 6 fide contract of employment agreeing to employ said student 7 or prospective student for a period of not less than one 8 hundred twenty days in a business or other enterprise regularly 9 conducted by the promisor or guarantor and in which such 10 information, training, or skill is a normal condition of 11 employment. 12 Sec. 3. Section 714.18, subsection 1, Code 2011, is amended 13 to read as follows: 14 1. Except as otherwise provided in subsection 2 , every 15 person, firm, association, or corporation maintaining or 16 conducting in Iowa any such educational course of instruction 17 by classroom instruction or by correspondence or by other 18 distance delivery method, or soliciting in Iowa the sale of 19 such course, shall file with the college student aid commission 20 all of the following: 21 a. A continuous corporate surety bond to the state of 22 Iowa in the sum of fifty thousand dollars conditioned for 23 on the faithful performance of all contracts and agreements 24 with students made by such person, firm, association, or 25 corporation, or their salespersons; but the aggregate liability 26 of the surety for all breaches of the conditions of the bond 27 shall not exceed the sum of the bond. The surety on the bond 28 may cancel the bond upon giving thirty days’ written notice 29 to the college student aid commission and thereafter shall be 30 relieved of liability for any breach of condition occurring 31 after the effective date of the cancellation. 32 b. A statement designating a resident agent for the purpose 33 of receiving service in civil actions. In the absence of such 34 designation, service may be had upon the secretary of state if 35 -2- LSB 1344DP (8) 84 je/sc 2/ 12

S.F. _____ H.F. _____ service cannot otherwise be made in this state. 1 c. A copy of any catalog, prospectus, brochure, or other 2 advertising material intended for distribution in Iowa. 3 Such material shall state the cost of the educational course 4 offered, the schedule of tuition refunds for portions of the 5 educational course not completed, and if no refunds are to 6 be paid, the material shall so state. Any contract induced 7 by advertising materials not previously filed as provided in 8 this chapter shall be voidable on the part of the pupil or any 9 person liable for the tuition provided for in the contract. 10 Sec. 4. Section 714.18, subsection 2, paragraph a, 11 subparagraphs (1) and (4), Code 2011, are amended to read as 12 follows: 13 (1) A continuous corporate surety bond to the state of 14 Iowa in the sum of fifty thousand dollars or ten percent 15 of the total annual tuition collected, whichever is less, 16 conditioned for on the faithful performance of all contracts 17 and agreements with students made by such school. A school 18 desiring to file a surety bond based on a percentage of annual 19 tuition shall provide to the college student aid commission, in 20 the form prescribed by the commission, a notarized statement 21 attesting to the total amount of tuition collected in the 22 preceding twelve-month period. The commission shall determine 23 the sufficiency of the statement and the amount of the bond. 24 Tuition information submitted pursuant to this subparagraph 25 shall be kept confidential. 26 (4) The college student aid commission may accept a letter 27 of credit from issued by a bank in lieu of and for the amount 28 of the corporate surety bond required by this paragraph 29 “a” subparagraphs (1) through (3), as applicable . 30 Sec. 5. Section 714.19, subsections 6 through 8, Code 2011, 31 are amended to read as follows: 32 6. Schools and educational programs conducted by firms, 33 corporations, or persons for the training of their own 34 employees, for which no fee is charged. 35 -3- LSB 1344DP (8) 84 je/sc 3/ 12

S.F. _____ H.F. _____ 7. Seminars, refresher courses , and schools of instruction 1 sponsored conducted by professional, business, or farming 2 organizations or associations for the members and employees of 3 members of such organizations or associations. A person who 4 provides instruction under this subsection who is not a member 5 or an employee of a member of the organization or association 6 shall not be eligible for this exemption. 7 8. Private business schools accredited by the accrediting 8 commission for business schools or an acknowledged accrediting 9 agency recognized by the United States department of education 10 or the council for higher education accreditation . 11 Sec. 6. Section 714.19, Code 2011, is amended by adding the 12 following new subsection: 13 NEW SUBSECTION . 10. Private, nonprofit schools that are 14 eligible for state student financial aid programs authorized 15 under chapter 261. 16 Sec. 7. Section 714.22, Code 2011, is amended to read as 17 follows: 18 714.22 Trade and vocational schools —— exemption —— 19 conditions. 20 1. For the purposes of this section, a “trade or vocational 21 school” means one which provides a postsecondary educational 22 course that prepares a student for employment in a recognized 23 occupation. 24 2. a. The provisions of sections 714.17 714.18 through 25 714.21 shall not apply to trade or vocational schools if they 26 meet either of the following conditions: 27 1. (1) File a bond or a bond is filed on their behalf by 28 a parent corporation with the college student aid commission 29 as required by section 714.18 . 30 2. (2) File an annual sworn statement, or such statement is 31 filed on their behalf by a parent corporation, certified by a 32 certified public accountant, showing all assets and liabilities 33 of the trade or vocational school and the assets of any parent 34 corporation. The statement shall show the trade or vocational 35 -4- LSB 1344DP (8) 84 je/sc 4/ 12

S.F. _____ H.F. _____ school’s net worth, or the net worth of the school’s parent 1 corporation, to be is not less than five times the amount of 2 the bond required by section 714.18 . The trade or vocational 3 school shall file with the college student aid commission an 4 annual sworn statement, or such statement shall be filed on 5 the school’s behalf by a parent corporation, certified by a 6 certified public accountant, showing all assets and liabilities 7 of the trade or vocational school and the assets of any parent 8 corporation. If a parent corporation files the statement or 9 its net worth is included in the statement to comply with this 10 subsection , the parent corporation shall appoint a registered 11 agent and otherwise is subject to section 714.18, subsection 12 1 , paragraph “b” , and is liable for the breach of any contract 13 or agreement with students as well as liable for any fraud in 14 connection with the contract or agreement or for any violation 15 of section 714.16 by the trade or vocational school or any of 16 its agents or salespersons. 17 b. For the purposes of this subsection, the net worth of a 18 trade or vocational school or the school’s parent corporation, 19 as applicable, shall be determined by the amount the school’s 20 or parent corporation’s assets exceed its liabilities as shown 21 in the sworn statement required to be filed pursuant to this 22 subsection. 23 Sec. 8. Section 714.23, Code 2011, is amended by adding the 24 following new subsection: 25 NEW SUBSECTION . 0A. a. For the purposes of this section 26 and section 714.25, “postsecondary educational program” means 27 a series of postsecondary educational courses that lead to 28 a recognized educational credential such as an academic or 29 professional degree, diploma, or license. 30 b. For the purposes of this section, “school period” means 31 the course, term, payment period, postsecondary educational 32 program, or other period for which the school assessed tuition 33 charges to the student. A school that assesses tuition charges 34 to the student at the beginning of each course, term, payment 35 -5- LSB 1344DP (8) 84 je/sc 5/ 12

S.F. _____ H.F. _____ period, or other period that is shorter than the postsecondary 1 educational program’s length shall base its tuition refund on 2 the amount of tuition costs the school charged for the course, 3 term, or other period in which the student terminated. A 4 school shall not base its tuition refund calculation on any 5 portion of a postsecondary educational program that remains 6 after a student terminates unless the student was charged for 7 that remaining portion of the postsecondary educational program 8 before the student’s termination. 9 Sec. 9. Section 714.23, subsections 1 through 5, Code 2011, 10 are amended to read as follows: 11 1. A person offering a course of instruction at the 12 postsecondary level postsecondary educational program , for 13 profit, that is more than four months in length and leads 14 to a degree, diploma, or license recognized educational 15 credential , shall make a pro rata refund of no less than 16 ninety percent of the tuition for charges to a terminating 17 student to the appropriate agency based upon in an amount 18 that is not less than ninety percent of the amount of tuition 19 charged to the student multiplied by the ratio of completed 20 number of scheduled school days to the number of calendar days 21 remaining in the school period until the date equivalent to the 22 completion of sixty percent of the scheduled school calendar 23 days of in the school term or course period . 24 2. Notwithstanding the provisions of subsection 1 , the 25 following tuition refund policy shall apply: 26 a. If a terminating student has completed sixty percent or 27 more of a school term or course that is more than four months in 28 length period , the person offering the course of instruction a 29 postsecondary educational program that is more than four months 30 in length is not required to refund tuition for charges to the 31 student. However, if, at any time, a student terminates a 32 school term or course postsecondary educational program that is 33 more than four months in length due to the student’s physical 34 incapacity or due to the transfer of the student’s spouse’s 35 -6- LSB 1344DP (8) 84 je/sc 6/ 12

S.F. _____ H.F. _____ employment to another city, the terminating student shall 1 receive a refund of tuition charges in an amount which that 2 equals the amount of tuition charged to the student multiplied 3 by the ratio of the remaining number of school calendar days in 4 the school period to the total school number of calendar days 5 of in the school term or course period . 6 b. A refund of ninety percent of the tuition for a 7 terminating student shall be paid to the appropriate agency 8 based upon the ratio of completed number of school days to the 9 total school days of the school term or course. A school shall 10 provide to a terminating student a refund of tuition charges 11 in an amount that is not less than ninety percent of the amount 12 of tuition charged to the student multiplied by the ratio of 13 the remaining number of calendar days in the school period 14 to the total number of calendar days in the school period. 15 This paragraph “b” applies to those persons offering courses 16 of instruction at the postsecondary level a postsecondary 17 educational program of more than four months in length , for 18 profit, whose cohort default rate for students under the 19 Stafford loan program as defined reported by the United States 20 department of education for the most recent federal fiscal year 21 is more than one hundred ten percent of the national average 22 cohort default rate for that program for that period the same 23 federal fiscal year or six percent, whichever is higher. 24 3. If the financial obligations of a student are for three 25 or fewer months duration, this section does not apply. In the 26 case of a program in which student progress is measured only in 27 clock hours, all occurrences of calendar days in subsections 1 28 and 2 shall be replaced with scheduled clock hours. 29 4. Refunds A refund of tuition charges shall be paid 30 provided to the appropriate agency student within thirty days 31 following the student’s termination from a postsecondary 32 educational program . 33 5. A student who terminates a course of instruction or 34 term postsecondary educational program shall not be charged 35 -7- LSB 1344DP (8) 84 je/sc 7/ 12

S.F. _____ H.F. _____ any fee or other monetary penalty for terminating a course of 1 instruction or term the postsecondary educational program, 2 other than a reduction in tuition refund as specified in this 3 section . 4 Sec. 10. NEW SECTION . 714.24 Additional requirements. 5 1. A required filing of evidence of financial 6 responsibility pursuant to section 714.18 or 714.22 must be 7 completed at least once every two years. 8 2. A filing of a claim for an exemption pursuant to section 9 714.19 must be completed at least once every two years. 10 3. An entity that claims an exemption under section 714.19 11 must file evidence of financial responsibility pursuant to 12 section 714.18 or 714.22 within two business days following 13 the date upon which conditions that qualify the entity for an 14 exemption under section 714.19 no longer exist. 15 4. An entity that is required to file evidence of financial 16 responsibility under section 714.18 or 714.22, or an entity 17 that files a claim of exemption under section 714.19, shall 18 utilize required forms approved and supplied by the commission. 19 5. a. The commission shall set by rule and collect 20 a nonrefundable fee from each entity that files with the 21 commission under section 714.18, 714.19, or 714.22. 22 b. Fees collected under paragraph “a” shall be deposited 23 into the postsecondary registration fund created under chapter 24 261B and are appropriated to the commission for purposes of 25 administering sections 714.18 through 714.25. 26 6. The commission and the attorney general may, 27 individually or jointly, adopt rules pursuant to chapter 17A 28 for the implementation of sections 714.18 through 714.25. 29 Sec. 11. Section 714.25, Code 2011, is amended to read as 30 follows: 31 714.25 Disclosure. 32 1. For purposes of this chapter section , unless the 33 context otherwise requires, “proprietary school” means a person 34 offering a course of instruction at the postsecondary level 35 -8- LSB 1344DP (8) 84 je/sc 8/ 12

S.F. _____ H.F. _____ postsecondary educational program , for profit, that is more 1 than four months in length and leads to a degree, diploma, or 2 license recognized educational credential, such as an academic 3 or professional degree, diploma, or license . 4 2. A proprietary school shall, prior to the time a student 5 is obligated for payment of any moneys, inform the student, the 6 college student aid commission, and in the case of a school 7 licensed under section 157.8 , the board of cosmetology arts 8 and sciences or in the case of a school licensed under section 9 158.7 , the board of barbering, of all of the following: 10 a. The total cost of the course of instruction postsecondary 11 educational program as charged by the proprietary school. 12 b. An estimate of any fees which may be charged the 13 student by others which would be required if the student is 14 to successfully complete the course postsecondary educational 15 program and , if applicable, obtain a degree, diploma, or 16 license recognized educational credential . 17 c. The percentage of students who successfully complete 18 the course postsecondary educational program , the percentage 19 who terminate prior to completing the course postsecondary 20 educational program , and the period of time upon which the 21 proprietary school has based these percentages. The reporting 22 period shall not be less than one year in length and shall not 23 extend more than five years into the past. 24 d. If claims are made by the proprietary school as to 25 successful placement of students in jobs upon completion of the 26 course of study proprietary school’s postsecondary educational 27 programs , the proprietary school shall provide the student with 28 all of the following: 29 (1) The percentage of graduating students who were placed 30 in jobs in fields related to the course of instruction 31 postsecondary educational programs . 32 (2) The percentage of graduating students who went on to 33 further education immediately upon graduation. 34 (3) The percentage of students who, ninety days after 35 -9- LSB 1344DP (8) 84 je/sc 9/ 12

S.F. _____ H.F. _____ graduation, were without a job and had not gone on to further 1 education. 2 (4) The period of time upon which the reports required by 3 paragraphs “a” through “c” were based. The reporting period 4 shall not be less than one year in length and shall not extend 5 more than five years into the past. 6 e. If claims are made by the proprietary school as to income 7 levels of students who have graduated and are working in fields 8 related to the proprietary school’s course of instruction 9 postsecondary educational programs , the proprietary school 10 shall inform the student of the method used to derive such 11 information. 12 Sec. 12. Section 714.25, Code 2011, is amended by adding the 13 following new subsection: 14 NEW SUBSECTION . 3. The requirements of subsection 2 shall 15 not apply to a proprietary school that is eligible for federal 16 student financial aid under Tit. IV of the federal Higher 17 Education Act of 1965, as amended. 18 EXPLANATION 19 This bill makes various changes relating to the college 20 student aid commission’s oversight functions over the 21 advertising, financial responsibility, tuition refund, and 22 disclosure requirements and restrictions governing certain 23 educational programs and courses, creates a fund, and provides 24 for fees. 25 The bill establishes a postsecondary registration fund 26 comprised of the filing fees collected by the college student 27 aid commission. The moneys in the fund are appropriated to the 28 commission for purposes of administering Code chapter 261B, 29 relating to postsecondary school registration. 30 The bill amends Code section 714.19, relating to the 31 nonapplicability of Code sections 714.17 to 714.22, governing 32 business and financial practices of sellers of educational 33 courses, to provide that instructors for courses conducted 34 by professional, business, or farming organizations or 35 -10- LSB 1344DP (8) 84 je/sc 10/ 12

S.F. _____ H.F. _____ associations for the members and employees of members of such 1 entities who are not members or employees of members themselves 2 are ineligible for exemption from Code sections 714.17 to 3 714.22. The bill specifies accreditation standards for private 4 business schools exempt from Code sections 714.17 to 714.22. 5 The bill creates a new exemption from Code sections 714.17 6 to 714.22 for private, nonprofit schools eligible for state 7 student financial aid programs authorized under Code chapter 8 261. 9 The bill amends Code section 714.23 to remove the exemption 10 for students with financial obligations of three or fewer 11 months’ duration from standards regarding tuition refund 12 policies. The bill provides for the inclusion of educational 13 programs in which student progress is measured only in clock 14 hours under standards regarding tuition refund policies. The 15 bill also provides that certain tuition refunds must be paid 16 directly to students. A violation of Code section 714.23 is a 17 simple misdemeanor, which is punishable by confinement for not 18 more than 30 days or a fine of at least $65 but not more than 19 $625 or by both. 20 The bill provides that the commission may collect 21 nonrefundable fees for the filing of evidence of financial 22 responsibility and claims for exemption relating to the 23 commission’s oversight functions under Code chapter 714. The 24 bill specifies that such fees must be deposited into the 25 postsecondary registration fund created under Code chapter 26 261B and are appropriated to the commission for purposes of 27 administering the commission’s oversight functions under Code 28 chapter 714. 29 The bill amends Code section 714.25 to exempt from certain 30 disclosure requirements proprietary schools, as defined in the 31 bill, that are eligible for federal student financial aid under 32 Tit. IV of the Higher Education Act of 1965. 33 The bill provides that the commission and the attorney 34 general may, individually or jointly, adopt rules pursuant 35 -11- LSB 1344DP (8) 84 je/sc 11/ 12