Senate File 444 - Reprinted SENATE FILE 444 BY COMMITTEE ON EDUCATION (SUCCESSOR TO SSB 1106) (As Amended and Passed by the Senate March 23, 2011 ) 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 and making penalties applicable. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 SF 444 (4) 84 je/sc

S.F. 444 Section 1. Section 714.17, Code 2011, is amended to read as 1 follows: 2 714.17 Unlawful advertising and selling of educational 3 courses of instruction . 4 It shall be unlawful for any person, firm, association, 5 or corporation maintaining, advertising, or conducting in 6 Iowa any educational course of instruction for profit, or 7 for tuition charge, whether by classroom instructions , or by 8 correspondence, or by other delivery method to: 9 1. Falsely advertise or represent to any person any matter 10 material to such an educational course of instruction . All 11 advertising of such courses of instruction shall adhere to and 12 comply with the rules and regulations of the federal trade 13 commission as of July 4, 1965 July 1, 2010 . 14 2. Collect tuition or other charges in excess of one hundred 15 fifty dollars in the case of educational courses offered by 16 correspondence courses of study , in advance of the receipt and 17 approval by the pupil of the first assignment or lesson of such 18 course. Any contract providing for advance payment of more 19 than one hundred fifty dollars shall be voidable on the part of 20 the pupil or any person liable for the tuition provided for in 21 the contract. 22 3. Promise or guarantee employment utilizing information, 23 training, or skill purported to be provided or otherwise 24 enhanced by a an educational course, unless the promisor or 25 guarantor offers the student or prospective student a bona 26 fide contract of employment agreeing to employ said student 27 or prospective student for a period of not less than one 28 hundred twenty days in a business or other enterprise regularly 29 conducted by the promisor or guarantor and in which such 30 information, training, or skill is a normal condition of 31 employment. 32 Sec. 2. Section 714.18, subsection 1, Code 2011, is amended 33 to read as follows: 34 1. Except as otherwise provided in subsection 2 , every 35 -1- SF 444 (4) 84 je/sc 1/ 10

S.F. 444 person, firm, association, or corporation maintaining or 1 conducting in Iowa any such educational course of instruction 2 by classroom instruction or by correspondence or by other 3 distance delivery method, or soliciting in Iowa the sale of 4 such course, shall file with the college student aid commission 5 all of the following: 6 a. A continuous corporate surety bond to the state of 7 Iowa in the sum of fifty thousand dollars conditioned for 8 on the faithful performance of all contracts and agreements 9 with students made by such person, firm, association, or 10 corporation, or their salespersons; but the aggregate liability 11 of the surety for all breaches of the conditions of the bond 12 shall not exceed the sum of the bond. The surety on the bond 13 may cancel the bond upon giving thirty days’ written notice 14 to the college student aid commission and thereafter shall be 15 relieved of liability for any breach of condition occurring 16 after the effective date of the cancellation. 17 b. A statement designating a resident agent for the purpose 18 of receiving service in civil actions. In the absence of such 19 designation, service may be had upon the secretary of state if 20 service cannot otherwise be made in this state. 21 c. A copy of any catalog, prospectus, brochure, or other 22 advertising material intended for distribution in Iowa. 23 Such material shall state the cost of the educational course 24 offered, the schedule of tuition refunds for portions of the 25 educational course not completed, and if no refunds are to 26 be paid, the material shall so state. Any contract induced 27 by advertising materials not previously filed as provided in 28 this chapter shall be voidable on the part of the pupil or any 29 person liable for the tuition provided for in the contract. 30 Sec. 3. Section 714.18, subsection 2, paragraph a, 31 subparagraphs (1) and (4), Code 2011, are amended to read as 32 follows: 33 (1) A continuous corporate surety bond to the state of 34 Iowa in the sum of fifty thousand dollars or ten percent 35 -2- SF 444 (4) 84 je/sc 2/ 10

S.F. 444 of the total annual tuition collected, whichever is less, 1 conditioned for on the faithful performance of all contracts 2 and agreements with students made by such school. A school 3 desiring to file a surety bond based on a percentage of annual 4 tuition shall provide to the college student aid commission, in 5 the form prescribed by the commission, a notarized statement 6 attesting to the total amount of tuition collected in the 7 preceding twelve-month period. The commission shall determine 8 the sufficiency of the statement and the amount of the bond. 9 Tuition information submitted pursuant to this subparagraph 10 shall be kept confidential. 11 (4) The college student aid commission may accept a letter 12 of credit from issued by a bank in lieu of and for the amount 13 of the corporate surety bond required by this paragraph “a” 14 subparagraphs (1) through (3), as applicable . 15 Sec. 4. Section 714.19, subsections 6 through 8, Code 2011, 16 are amended to read as follows: 17 6. Schools and educational programs conducted by firms, 18 corporations, or persons for the training of their own 19 employees, for which no fee is charged. 20 7. Seminars, refresher courses , and schools of instruction 21 sponsored conducted by professional, business, or farming 22 organizations or associations for the members and employees of 23 members of such organizations or associations. A person who 24 provides instruction under this subsection who is not a member 25 or an employee of a member of the organization or association 26 shall not be eligible for this exemption. 27 8. Private business schools accredited by the accrediting 28 commission for business schools or an acknowledged accrediting 29 agency recognized by the United States department of education 30 or the council for higher education accreditation . 31 Sec. 5. Section 714.19, Code 2011, is amended by adding the 32 following new subsection: 33 NEW SUBSECTION . 10. Private, nonprofit schools that are 34 eligible for state student financial aid programs authorized 35 -3- SF 444 (4) 84 je/sc 3/ 10

S.F. 444 under chapter 261. 1 Sec. 6. Section 714.22, Code 2011, is amended to read as 2 follows: 3 714.22 Trade and vocational schools —— exemption —— 4 conditions. 5 1. For the purposes of this section, a “trade or vocational 6 school” means one which provides a postsecondary educational 7 course that prepares a student for employment in a recognized 8 occupation. 9 2. a. The provisions of sections 714.17 714.18 through 10 714.21 shall not apply to trade or vocational schools if they 11 meet either of the following conditions: 12 1. (1) File a bond or a bond is filed on their behalf by 13 a parent corporation with the college student aid commission 14 as required by section 714.18 . 15 2. (2) File an annual sworn statement, or such statement is 16 filed on their behalf by a parent corporation, certified by a 17 certified public accountant, showing all assets and liabilities 18 of the trade or vocational school and the assets of any parent 19 corporation. The statement shall show the trade or vocational 20 school’s net worth, or the net worth of the school’s parent 21 corporation, to be is not less than five times the amount of 22 the bond required by section 714.18 . The trade or vocational 23 school shall file with the college student aid commission an 24 annual sworn statement, or such statement shall be filed on 25 the school’s behalf by a parent corporation, certified by a 26 certified public accountant, showing all assets and liabilities 27 of the trade or vocational school and the assets of any parent 28 corporation. If a parent corporation files the statement or 29 its net worth is included in the statement to comply with this 30 subsection , the parent corporation shall appoint a registered 31 agent and otherwise is subject to section 714.18, subsection 32 1 , paragraph “b” , and is liable for the breach of any contract 33 or agreement with students as well as liable for any fraud in 34 connection with the contract or agreement or for any violation 35 -4- SF 444 (4) 84 je/sc 4/ 10

S.F. 444 of section 714.16 by the trade or vocational school or any of 1 its agents or salespersons. 2 b. For the purposes of this subsection, the net worth of a 3 trade or vocational school or the school’s parent corporation, 4 as applicable, shall be determined by the amount the school’s 5 or parent corporation’s assets exceed its liabilities as shown 6 in the sworn statement required to be filed pursuant to this 7 subsection. 8 Sec. 7. Section 714.23, Code 2011, is amended by adding the 9 following new subsection: 10 NEW SUBSECTION . 0A. a. For the purposes of this section 11 and section 714.25, “postsecondary educational program” means 12 a series of postsecondary educational courses that lead to 13 a recognized educational credential such as an academic or 14 professional degree, diploma, or license. 15 b. For the purposes of this section, “school period” means 16 the course, term, payment period, postsecondary educational 17 program, or other period for which the school assessed tuition 18 charges to the student. A school that assesses tuition charges 19 to the student at the beginning of each course, term, payment 20 period, or other period that is shorter than the postsecondary 21 educational program’s length shall base its tuition refund on 22 the amount of tuition costs the school charged for the course, 23 term, or other period in which the student terminated. A 24 school shall not base its tuition refund calculation on any 25 portion of a postsecondary educational program that remains 26 after a student terminates unless the student was charged for 27 that remaining portion of the postsecondary educational program 28 before the student’s termination. 29 Sec. 8. Section 714.23, subsections 1 through 5, Code 2011, 30 are amended to read as follows: 31 1. A person offering a course of instruction at the 32 postsecondary level postsecondary educational program , for 33 profit, that is more than four months in length and leads 34 to a degree, diploma, or license recognized educational 35 -5- SF 444 (4) 84 je/sc 5/ 10

S.F. 444 credential , shall make a pro rata refund of no less than 1 ninety percent of the tuition for charges to a terminating 2 student to the appropriate agency based upon in an amount 3 that is not less than ninety percent of the amount of tuition 4 charged to the student multiplied by the ratio of completed 5 number of scheduled school days to the number of calendar days 6 remaining in the school period until the date equivalent to the 7 completion of sixty percent of the scheduled school calendar 8 days of in the school term or course period to the total number 9 of calendar days in the school period until the date equivalent 10 to the completion of sixty percent of the calendar days in the 11 school period . 12 2. Notwithstanding the provisions of subsection 1 , the 13 following tuition refund policy shall apply: 14 a. If a terminating student has completed sixty percent or 15 more of a school term or course that is more than four months in 16 length period , the person offering the course of instruction a 17 postsecondary educational program that is more than four months 18 in length is not required to refund tuition for charges to the 19 student. However, if, at any time, a student terminates a 20 school term or course postsecondary educational program that is 21 more than four months in length due to the student’s physical 22 incapacity or due to the transfer of the student’s spouse’s 23 employment to another city, the terminating student shall 24 receive a refund of tuition charges in an amount which that 25 equals the amount of tuition charged to the student multiplied 26 by the ratio of the remaining number of school calendar days in 27 the school period to the total school number of calendar days 28 of in the school term or course period . 29 b. A refund of ninety percent of the tuition for a 30 terminating student shall be paid to the appropriate agency 31 based upon the ratio of completed number of school days to the 32 total school days of the school term or course. A school shall 33 provide to a terminating student a refund of tuition charges 34 in an amount that is not less than ninety percent of the amount 35 -6- SF 444 (4) 84 je/sc 6/ 10

S.F. 444 of tuition charged to the student multiplied by the ratio of 1 the remaining number of calendar days in the school period 2 to the total number of calendar days in the school period. 3 This paragraph “b” applies to those persons offering courses 4 of instruction at the postsecondary level a postsecondary 5 educational program of more than four months in length , for 6 profit, whose cohort default rate for students under the 7 Stafford loan program as defined reported by the United States 8 department of education for the most recent federal fiscal year 9 is more than one hundred ten percent of the national average 10 cohort default rate for that program for that period the same 11 federal fiscal year or six percent, whichever is higher. 12 c. If a terminating student is a member, or the spouse 13 of a member if the member has a dependent child, of the Iowa 14 national guard or reserve forces of the United States and 15 is ordered to state military service or federal service or 16 duty, a person offering a postsecondary educational program 17 that is more than four months in length shall provide to the 18 terminating student a full refund of tuition and mandatory 19 fees. 20 3. If the financial obligations of a student are for three 21 or fewer months duration, this section does not apply. In the 22 case of a program in which student progress is measured only in 23 clock hours, all occurrences of calendar days in subsections 1 24 and 2 shall be replaced with scheduled clock hours. 25 4. Refunds A refund of tuition charges shall be paid 26 provided to the appropriate agency student within thirty days 27 following the student’s termination from a postsecondary 28 educational program . 29 5. A student who terminates a course of instruction or 30 term postsecondary educational program shall not be charged 31 any fee or other monetary penalty for terminating a course of 32 instruction or term the postsecondary educational program, 33 other than a reduction in tuition refund as specified in this 34 section . 35 -7- SF 444 (4) 84 je/sc 7/ 10

S.F. 444 Sec. 9. NEW SECTION . 714.24 Additional requirements. 1 1. A required filing of evidence of financial 2 responsibility pursuant to section 714.18 or 714.22 must be 3 completed at least once every two years. 4 2. A filing of a claim for an exemption pursuant to section 5 714.19 must be completed at least once every two years. 6 3. An entity that claims an exemption under section 714.19 7 must file evidence of financial responsibility pursuant to 8 section 714.18 or 714.22 within two business days following 9 the date upon which conditions that qualify the entity for an 10 exemption under section 714.19 no longer exist. 11 4. An entity that is required to file evidence of financial 12 responsibility under section 714.18 or 714.22, or an entity 13 that files a claim of exemption under section 714.19, shall 14 utilize required forms approved and supplied by the commission. 15 5. The commission and the attorney general may, 16 individually or jointly, adopt rules pursuant to chapter 17A 17 for the implementation of sections 714.18 through 714.25. 18 Sec. 10. Section 714.25, Code 2011, is amended to read as 19 follows: 20 714.25 Disclosure. 21 1. For purposes of this chapter section , unless the 22 context otherwise requires, “proprietary school” means a person 23 offering a course of instruction at the postsecondary level 24 postsecondary educational program , for profit, that is more 25 than four months in length and leads to a degree, diploma, or 26 license recognized educational credential, such as an academic 27 or professional degree, diploma, or license . 28 2. A proprietary school shall, prior to the time a student 29 is obligated for payment of any moneys, inform the student, the 30 college student aid commission, and in the case of a school 31 licensed under section 157.8 , the board of cosmetology arts 32 and sciences or in the case of a school licensed under section 33 158.7 , the board of barbering, of all of the following: 34 a. The total cost of the course of instruction postsecondary 35 -8- SF 444 (4) 84 je/sc 8/ 10

S.F. 444 educational program as charged by the proprietary school. 1 b. An estimate of any fees which may be charged the 2 student by others which would be required if the student is 3 to successfully complete the course postsecondary educational 4 program and , if applicable, obtain a degree, diploma, or 5 license recognized educational credential . 6 c. The percentage of students who successfully complete 7 the course postsecondary educational program , the percentage 8 who terminate prior to completing the course postsecondary 9 educational program , and the period of time upon which the 10 proprietary school has based these percentages. The reporting 11 period shall not be less than one year in length and shall not 12 extend more than five years into the past. 13 d. If claims are made by the proprietary school as to 14 successful placement of students in jobs upon completion of the 15 course of study proprietary school’s postsecondary educational 16 programs , the proprietary school shall provide the student with 17 all of the following: 18 (1) The percentage of graduating students who were placed 19 in jobs in fields related to the course of instruction 20 postsecondary educational programs . 21 (2) The percentage of graduating students who went on to 22 further education immediately upon graduation. 23 (3) The percentage of students who, ninety days after 24 graduation, were without a job and had not gone on to further 25 education. 26 (4) The period of time upon which the reports required by 27 paragraphs “a” through “c” were based. The reporting period 28 shall not be less than one year in length and shall not extend 29 more than five years into the past. 30 e. If claims are made by the proprietary school as to income 31 levels of students who have graduated and are working in fields 32 related to the proprietary school’s course of instruction 33 postsecondary educational programs , the proprietary school 34 shall inform the student of the method used to derive such 35 -9- SF 444 (4) 84 je/sc 9/ 10