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 student aid commission regarding certain restrictions and requirements for schools offering postsecondary educational programs, establishing a fund, providing for fees, and making penalties applicable.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

   Section 1.  Section 261B.8, subsection 3, Code 2011, is amended to read as follows:
   3.
  a.  A postsecondary registration fund is created in the state treasury under the control of the commission. Fees collected under this section shall be deposited in the general postsecondary registration fund of the state and are appropriated to the commission for purposes of administering this chapter.
   b.  The moneys credited to the postsecondary registration fund are not subject to section 8.33, and moneys in the fund shall not be transferred, used, obligated, appropriated, or otherwise encumbered except as provided by law. Notwithstanding section 12C.7, subsection 2, interest or earnings on moneys deposited in the postsecondary registration fund shall be credited to the fund.
   Sec. 2.  Section 714.17, Code 2011, is amended to read as follows:
   714.17  Unlawful advertising and selling of educational courses of instruction.
   It shall be unlawful for any person, firm, association, or corporation maintaining, advertising, or conducting in Iowa any educational course of instruction for profit, or for tuition charge, whether by classroom instructions,or by correspondence, or by other delivery method to:
   1.  Falsely advertise or represent to any person any matter material to such an educational course of instruction. All advertising of such coursesof instruction shall adhere to and comply with the rules and regulations of the federal trade commission as of July 4, 1965 July 1, 2010.
   2.  Collect tuition or other charges in excess of one hundred fifty dollars in the case of educational courses offered by correspondence courses of study, in advance of the receipt and approval by the pupil of the first assignment or lesson of such course. Any contract providing for advance payment of more than one hundred fifty dollars shall be voidable on the part of the pupil or any person liable for the tuition provided for in the contract.
   3.  Promise or guarantee employment utilizing information, training, or skill purported to be provided or otherwise enhanced by a an educational course, unless the promisor or guarantor offers the student or prospective student a bona fide contract of employment agreeing to employ said student or prospective student for a period of not less than one hundred twenty days in a business or other enterprise regularly conducted by the promisor or guarantor and in which such information, training, or skill is a normal condition of employment.
   Sec. 3.  Section 714.18, subsection 1, Code 2011, is amended to read as follows:
   1.  Except as otherwise provided in subsection 2, every person, firm, association, or corporation maintaining or conducting in Iowa any such educational course of instruction by classroom instruction or by correspondence or by other distance delivery method, or soliciting in Iowa the sale of such course, shall file with the college student aid commission all of the following:
   a.  A continuous corporate surety bond to the state of Iowa in the sum of fifty thousand dollars conditioned for on the faithful performance of all contracts and agreements with students made by such person, firm, association, or corporation, or their salespersons; but the aggregate liability of the surety for all breaches of the conditions of the bond shall not exceed the sum of the bond. The surety on the bond may cancel the bond upon giving thirty days’ written notice to the college student aid commission and thereafter shall be relieved of liability for any breach of condition occurring after the effective date of the cancellation.
   b.  A statement designating a resident agent for the purpose of receiving service in civil actions. In the absence of such designation, service may be had upon the secretary of state if service cannot otherwise be made in this state.
   c.  A copy of any catalog, prospectus, brochure, or other advertising material intended for distribution in Iowa. Such material shall state the cost of the educational course offered, the schedule of tuition refunds for portions of the educational course not completed, and if no refunds are to be paid, the material shall so state. Any contract induced by advertising materials not previously filed as provided in this chapter shall be voidable on the part of the pupil or any person liable for the tuition provided for in the contract.
   Sec. 4.  Section 714.18, subsection 2, paragraph a, subparagraphs (1) and (4), Code 2011, are amended to read as follows:
   (1)  A continuous corporate surety bond to the state of Iowa in the sum of fifty thousand dollars or ten percent of the total annual tuition collected, whichever is less, conditioned for on the faithful performance of all contracts and agreements with students made by such school. A school desiring to file a surety bond based on a percentage of annual tuition shall provide to the college student aid commission, in the form prescribed by the commission, a notarized statement attesting to the total amount of tuition collected in the preceding twelve-month period. The commission shall determine the sufficiency of the statement and the amount of the bond. Tuition information submitted pursuant to this subparagraph shall be kept confidential.
   (4)  The college student aid commission may accept a letter of credit from issued by a bank in lieu of and for the amount of the corporate surety bond required by this paragraph “a” subparagraphs (1) through (3), as applicable.
   Sec. 5.  Section 714.19, subsections 6 through 8, Code 2011, are amended to read as follows:
   6.  Schools and educational programs conducted by firms, corporations, or personsfor the training of their own employees, for which no fee is charged.
   7.  Seminars, refresher courses, and schools of instruction sponsored conducted by professional, business, or farming organizations or associations for the members and employees of members of such organizations or associations.  A person who provides instruction under this subsection who is not a member or an employee of a member of the organization or association shall not be eligible for this exemption.
   8.  Private business schools accredited bythe accrediting commission for business schools or anacknowledged accrediting agency recognized by the United States department of education or the council for higher education accreditation.
   Sec. 6.  Section 714.19, Code 2011, is amended by adding the following new subsection:
   NEW SUBSECTION.  10.  Private, nonprofit schools that are eligible for state student financial aid programs authorized under chapter 261.
   Sec. 7.  Section 714.22, Code 2011, is amended to read as follows:
   714.22  Trade and vocational schools —— exemption —— conditions.
   1.  For the purposes of this section, a“trade or vocational school” means one which provides a postsecondary educational course that prepares a student for employment in a recognized occupation.
   2.
  a.  The provisions of sections 714.17 714.18 through 714.21 shall not apply to trade or vocational schools if they meet either of the following conditions:
   1.  (1)  File a bond or a bond is filed on their behalf by a parent corporation with the college student aid commission as required by section 714.18.
   2.  (2)  File an annual sworn statement, or such statement is filed on their behalf by a parent corporation, certified by a certified public accountant, showing all assets and liabilities of the trade or vocational school and the assets of any parent corporation. Thestatement shall show the trade or vocational school’s net worth, or the net worth of the school’s parent corporation, to be is not less than five times the amount of the bond required by section 714.18.  The trade or vocational school shall file with the college student aid commission an annual sworn statement, or such statement shall be filed on the school’s behalf by a parent corporation, certified by a certified public accountant, showing all assets and liabilities of the trade or vocational school and the assets of any parent corporation. If a parent corporation files the statement or its net worth is included in the statement to comply with this subsection, the parent corporation shall appoint a registered agent and otherwise is subject to section 714.18, subsection 1, paragraph “b”, and is liable for the breach of any contract or agreement with students as well as liable for any fraud in connection with the contract or agreement or for any violation of section 714.16 by the trade or vocational school or any of its agents or salespersons.
   b.  For the purposes of this subsection, the net worth of a trade or vocational school or the school’s parent corporation, as applicable, shall be determined by the amount the school’s or parent corporation’s assets exceed its liabilities as shown in the sworn statement required to be filed pursuant to this subsection.
   Sec. 8.  Section 714.23, Code 2011, is amended by adding the following new subsection:
   NEW SUBSECTION.  0A.
  a.  For the purposes of this section and section 714.25,“postsecondary educational program” means a series of postsecondary educational courses that lead to a recognized educational credential such as an academic or professional degree, diploma, or license.
   b.  For the purposes of this section,“school period” means the course, term, payment period, postsecondary educational program, or other period for which the school assessed tuition charges to the student. A school that assesses tuition charges to the student at the beginning of each course, term, payment period, or other period that is shorter than the postsecondary educational program’s length shall base its tuition refund on the amount of tuition costs the school charged for the course, term, or other period in which the student terminated. A school shall not base its tuition refund calculation on any portion of a postsecondary educational program that remains after a student terminates unless the student was charged for that remaining portion of the postsecondary educational program before the student’s termination.
   Sec. 9.  Section 714.23, subsections 1 through 5, Code 2011, are amended to read as follows:
   1.  A person offering a course of instruction at the postsecondary level postsecondary educational program, for profit, that is more than four months in length and leads to a degree, diploma, or license recognized educational credential, shall make a pro rata refund ofno less than ninety percent of the tuition for charges to a terminating student to the appropriate agency based upon in an amount that is not less than ninety percent of the amount of tuition charged to the student multiplied by the ratio of completed number of scheduled school days to the number of calendar days remaining in the school period until the date equivalent to the completion of sixty percent of the scheduled school calendar days of in the school term or course period.
   2.  Notwithstanding the provisions of subsection 1, the following tuition refund policy shall apply:
   a.  If a terminating student has completed sixty percent or more of a school term or course that is more than four months in length period, the person offering the course of instruction a postsecondary educational program that is more than four months in length is not required to refund tuition for charges to the student. However, if, at any time, a student terminates a school term or course postsecondary educational program that is more than four months in length due to the student’s physical incapacity or due to the transfer of the student’s spouse’s employment to another city, the terminating student shall receive a refund of tuition charges in an amount which that equals the amount of tuition charged to the student multiplied by the ratio of the remaining number of school calendar days in the school period to the total school number of calendar days of in the school term or course period.
   b.  A refund of ninety percent of the tuition for a terminating student shall be paid to the appropriate agency based upon the ratio of completed number of school days to the total school days of the school term or course.  A school shall provide to a terminating student a refund of tuition charges in an amount that is not less than ninety percent of the amount of tuition charged to the student multiplied by the ratio of the remaining number of calendar days in the school period to the total number of calendar days in the school period. This paragraph “b” applies to those persons offering courses of instruction at the postsecondary level a postsecondary educational program of more than four months in length, for profit, whose cohort default rate for students under the Stafford loan program as defined reported by the United States department of education for the most recent federal fiscal year is more than one hundred ten percent of the national average cohort default rate for that program for that period the same federal fiscal year or six percent, whichever is higher.
   3.  If the financial obligations of a student are for three or fewer months duration, this section does not apply.  In the case of a program in which student progress is measured only in clock hours, all occurrences of calendar days in subsections 1 and 2 shall be replaced with scheduled clock hours.
   4.  Refunds A refund of tuition charges shall be paid provided to the appropriate agency student within thirty days following the student’s termination from a postsecondary educational program.
   5.  A student who terminates a course of instruction or term postsecondary educational program shall not be charged any fee or other monetary penalty for terminating a course of instruction or term the postsecondary educational program, other than a reduction in tuition refund as specified in this section.
   Sec. 10.  NEW SECTION.  714.24  Additional requirements.
   1.  A required filing of evidence of financial responsibility pursuant to section 714.18 or 714.22 must be completed at least once every two years.
   2.  A filing of a claim for an exemption pursuant to section 714.19 must be completed at least once every two years.
   3.  An entity that claims an exemption under section 714.19 must file evidence of financial responsibility pursuant to section 714.18 or 714.22 within two business days following the date upon which conditions that qualify the entity for an exemption under section 714.19 no longer exist.
   4.  An entity that is required to file evidence of financial responsibility under section 714.18 or 714.22, or an entity that files a claim of exemption under section 714.19, shall utilize required forms approved and supplied by the commission.
   5.
  a.  The commission shall set by rule and collect a nonrefundable fee from each entity that files with the commission under section 714.18, 714.19, or 714.22.
   b.  Fees collected under paragraph“a” shall be deposited into the postsecondary registration fund created under chapter 261B and are appropriated to the commission for purposes of administering sections 714.18 through 714.25.
   6.  The commission and the attorney general may, individually or jointly, adopt rules pursuant to chapter 17A for the implementation of sections 714.18 through 714.25.
   Sec. 11.  Section 714.25, Code 2011, is amended to read as follows:
   714.25  Disclosure.
   1.  For purposes of this chapter section,unless the context otherwise requires,“proprietary school” means a person offering a course of instruction at the postsecondary level postsecondary educational program, for profit, that is more than four months in length and leads to a degree, diploma, or license recognized educational credential, such as an academic or professional degree, diploma, or license.
   2.  A proprietary school shall, prior to the time a student is obligated for payment of any moneys, inform the student, the college student aid commission, and in the case of a school licensed under section 157.8, the board of cosmetology arts and sciences or in the case of a school licensed under section 158.7, the board of barbering, of all of the following:
   a.  The total cost of the course of instruction postsecondary educational program as charged by the proprietary school.
   b.  An estimate of any fees which may be charged the student by others which would be required if the student is to successfully complete the course postsecondary educational program and, if applicable, obtain a degree, diploma, or license recognized educational credential.
   c.  The percentage of students who successfully complete the course postsecondary educational program, the percentage who terminate prior to completing the course postsecondary educational program, and the period of time upon which the proprietary school has based these percentages. The reporting period shall not be less than one year in length and shall not extend more than five years into the past.
   d.  If claims are made by the proprietary school as to successful placement of students in jobs upon completion of the course of study proprietary school’s postsecondary educational programs, the proprietary school shall provide the student with all of the following:
   (1)  The percentage of graduating students who were placed in jobs in fields related to the course of instruction postsecondary educational programs.
   (2)  The percentage of graduating students who went on to further education immediately upon graduation.
   (3)  The percentage of students who, ninety days after graduation, were without a job and had not gone on to further education.
   (4)  The period of time upon which the reports required by paragraphs“a” through“c” were based. The reporting period shall not be less than one year in length and shall not extend more than five years into the past.
   e.  If claims are made by the proprietary school as to income levels of students who have graduated and are working in fields related to the proprietary school’s course of instruction postsecondary educational programs, the proprietary school shall inform the student of the method used to derive such information.
   Sec. 12.  Section 714.25, Code 2011, is amended by adding the following new subsection:
   NEW SUBSECTION.  3.  The requirements of subsection 2 shall not apply to a proprietary school that is eligible for federal student financial aid under Tit. IV of the federal Higher Education Act of 1965, as amended.
EXPLANATION
   This bill makes various changes relating to the college student aid commission’s oversight functions over the advertising, financial responsibility, tuition refund, and disclosure requirements and restrictions governing certain educational programs and courses, creates a fund, and provides for fees.
   The bill establishes a postsecondary registration fund comprised of the filing fees collected by the college student aid commission. The moneys in the fund are appropriated to the commission for purposes of administering Code chapter 261B, relating to postsecondary school registration.
   The bill amends Code section 714.19, relating to the nonapplicability of Code sections 714.17 to 714.22, governing business and financial practices of sellers of educational courses, to provide that instructors for courses conducted by professional, business, or farming organizations or associations for the members and employees of members of such entities who are not members or employees of members themselves are ineligible for exemption from Code sections 714.17 to 714.22. The bill specifies accreditation standards for private business schools exempt from Code sections 714.17 to 714.22. The bill creates a new exemption from Code sections 714.17 to 714.22 for private, nonprofit schools eligible for state student financial aid programs authorized under Code chapter 261.
   The bill amends Code section 714.23 to remove the exemption for students with financial obligations of three or fewer months’ duration from standards regarding tuition refund policies. The bill provides for the inclusion of educational programs in which student progress is measured only in clock hours under standards regarding tuition refund policies. The bill also provides that certain tuition refunds must be paid directly to students. A violation of Code section 714.23 is a simple misdemeanor, which is punishable by confinement for not more than 30 days or a fine of at least $65 but not more than $625 or by both.
   The bill provides that the commission may collect nonrefundable fees for the filing of evidence of financial responsibility and claims for exemption relating to the commission’s oversight functions under Code chapter 714. The bill specifies that such fees must be deposited into the postsecondary registration fund created under Code chapter 261B and are appropriated to the commission for purposes of administering the commission’s oversight functions under Code chapter 714.
   The bill amends Code section 714.25 to exempt from certain disclosure requirements proprietary schools, as defined in the bill, that are eligible for federal student financial aid under Tit. IV of the Higher Education Act of 1965.
   The bill provides that the commission and the attorney general may, individually or jointly, adopt rules pursuant to Code chapter 17A to carry out the commission’s oversight functions under Code chapter 714.
   Finally, the bill makes changes to terminology, demonstration of compliance, and exemptions relating to the commission’s oversight functions under Code chapter 714.