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Region vii viii Pccs conference federal update: 90

90/10 -- The Basics. New 90/10 regulations effective November 1, 2009.Requirements are now set forth in sections 668.13(c)(1)(ii), 668.14(b)(16), 668.23(d)(4) and 668.28 and no longer in the definition of a proprietary institution of higher education. Should less than 10% of a school's revenue der

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Region vii viii Pccs conference federal update: 90

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    1. Region vii & viii Pccs conference federal update: 90/10 Peter S. Leyton Esq., Ritzert & Leyton, P.C. Kansas City, MO January 26, 2010 1/26/2010 Ritzert & Leyton, P.C.

    2. 90/10 -- The Basics New 90/10 regulations effective November 1, 2009. Requirements are now set forth in sections 668.13(c)(1)(ii), 668.14(b)(16), 668.23(d)(4) and 668.28 and no longer in the definition of a proprietary institution of higher education. Should less than 10% of a school’s revenue derive from sources other than Title IV for 1 fiscal year, the school’s certification automatically becomes provisional for the two fiscal years after the fiscal year it failed. 1/26/2010 Ritzert & Leyton, P.C.

    3. 90/10 – The Basics Should the school fail the 90/10 revenue requirement for 2 consecutive fiscal years, it loses its eligibility to participate in Title IV for at least 2 fiscal years. To regain eligibility, it must demonstrate compliance with state and accreditation requirements and DOE financial responsibility requirements for at least 2 fiscal years after the fiscal year it became ineligible. Financial statement audit must disclose the percentage of Title IV revenue as well as dollar amount of numerator and denominator and individual revenue amounts identified in a new Section 2 of Appendix C (attached) in a footnote. Simplifies presentation and facilitates DOE review. 1/26/2010 Ritzert & Leyton, P.C.

    4. 90/10 – The Basics 45 Day notice to DOE requirement. (DOE believes school knows it will be close and should plan for the audit in time to meet this deadline.) DOE required to publicly disclose identity of schools that fail to meet Rule on College Navigator Website and extent to which school failed. DOE required to submit to Congress a report by July 1 of each year that identifies for each proprietary institution the amount and percentage of the school’s revenues from Title IV and non-Title IV sources. 1/26/2010 Ritzert & Leyton, P.C.

    5. 90/10 – The Basics Cash basis accounting except institutional loans. Any Title IV funds that are disbursed or delivered to or on behalf of a student are presumed to pay for the student’s tuition, fees and institutional charges regardless of whether the school credits a student’s account or pays the funds directly to the student unless they are satisfied by: 1/26/2010 Ritzert & Leyton, P.C.

    6. 90/10 – The Basics Grant funds from non-federal public agencies or private sources independent of the school, Funds provided under a contractual arrangement with a government agency for the purpose of providing job training to low income individuals in need of training, All tax savings plans qualified under IRC, or Institutional scholarships. 1/26/2010 Ritzert & Leyton, P.C.

    7. 90/10- What Is Revenue? The school must consider as revenue only those funds it generates (new Appendix C attached) from: Tuition, fees and other institutional charges for students enrolled in eligible programs; Activities conducted by the school that are necessary for the education and training provided, they are conducted on campus or on a facility under the school’s control, performed under the supervision of a member of the faculty, and required to be performed by all students in a specific educational program. 1/26/2010 Ritzert & Leyton, P.C.

    8. 90/10-Revenue Funds paid by a student or on behalf of a student by a party other than the institution for an education or training program that is not eligible for Title IV if the program Is approved or licensed by the appropriate state agency, Is accredited by an agency recognized by DOE, Provides an industry recognized credential or certification or prepares students to take an exam for an industry recognized credential or certification issued by an independent third party, 1/26/2010 Ritzert & Leyton, P.C.

    9. 90/10-Revenue Provides training for students needed to maintain state licensing requirements, When does revenue from a course qualify and when does it not for the same course? or Provides training for students to meet additional licensing requirements for specialized training for practitioners that already meet the general licensing requirements in the field. Documentation critical. 1/26/2010 Ritzert & Leyton, P.C.

    10. 90/10-Revenue Institutional loans: Loans made to students from July 1, 2008 to June 30, 2012 include as revenue the net present value during the fiscal year made if the loans are bona fide as evidenced by: Standalone repayment agreements that are enforceable promissory notes, Issued at intervals related to enrollment periods, 1/26/2010 Ritzert & Leyton, P.C.

    11. 90/10-Revenue Are subject to regular loan repayments and collections by the institution, and Are separate from the enrollment agreements. Installment sales contracts under which students make regular payments in cash are not institutional loans and do not need to meet NPV requirements. 1/26/2010 Ritzert & Leyton, P.C.

    12. 90/10-Revenue If a school purchases a third party loan made to a student can it keep the benefit of third party payment to the school for tuition or does it treat the loan as if it made it and therefore need to calculate the NPV? If a school sells an institutional loan within a year of when made it must treat as if a loan made by the third party and can count only what the third party pays the school less any recourse amount when actually paid. 1/26/2010 Ritzert & Leyton, P.C.

    13. TILA for Private Educational Lenders HEOA amended TILA to add specific disclosures for private education loans. The Federal Reserve Board final regulations governing disclosures under the amendment effective February 14, 2010. Private education loans with a term of 90 days or less or loans with no interest rate and a term of one year or less are exempt from the new regulations even if the credit is payable in more than four installments. 1/26/2010 Ritzert & Leyton, P.C.

    14. TILA Private education loans with more than four installments may nevertheless be subject to pre-existing Reg Z (TILA), Reg B (Equal Credit Opportunity Act, Reg E (Electronic Funds Transfer Act) and Reg V (Fair Credit Reporting Act). As a result, institutions that offer payment plans may need to, among other things: Provide TILA disclosures as appropriate Treat and disclose certain fees as finance charges Incorporate retail installment language into payment plans Retain disclosures and notices as appropriate. 1/26/2010 Ritzert & Leyton, P.C.

    15. 90/10-Revenue Scholarships whether awarded in monetary aid or tuition discount, and based on academic achievement or financial need include as revenue the amount disbursed during the fiscal year provided the funds are from established restricted account, and only to the extent the funds in the account represent designated funds from an outside source or income earned on those funds. Defeats presumption. 1/26/2010 Ritzert & Leyton, P.C.

    16. 90/10-Revenue To the extent proceeds of Unsubsidized FFEL or Direct loan exceed what the student would have been eligible for in that payment period, under loan limit in effect on May 6, 2008, the day before enactment of the Ensuring Continued Access to Student Loans Act of 2008 (ECASLA), up to $2,000, excess that is used for tuition, fees or institutional charges is treated as non Title IV revenue (cash), after other Title IV revenue is applied (does not overcome Title IV presumption). 1/26/2010 Ritzert & Leyton, P.C.

    17. 90/10-Revenue This provision applies to loans received by students on or after July 1, 2008 but before July 1, 2011 1/26/2010 Ritzert & Leyton, P.C.

    18. 90/10 - Exclusions Excluded from revenues in the calculation: Federal Work Study paid directly to student unless school credits the student’s account used for institutional charges, Funds received from a state under LEAP, SLEAP or GAP, Institutional matching funds under Title IV programs, 1/26/2010 Ritzert & Leyton, P.C.

    19. 90/10 - Exclusions Refunded or returned Title IV funds and if any of the funds in the loan disbursement used in the calculation were counted as non-Title IV revenue under the unsub provision, the amount of Title IV funds returned is considered to consist of pre unsub loan amounts and loan amounts in excess of the loan limits in the same proportion to the loan disbursement (e.g. if loan disbursement for payment period is $3,000 and $1,000 represents excess unsub, the proportional breakdown of the funds returned is 2/3 pre ECASLA and 1/3 post ECASLA, or 1/26/2010 Ritzert & Leyton, P.C.

    20. 90/10 - Exclusions The amount charged for books, supplies and equipment unless the school includes the amount as tuition, fees or other institutional charges. 1/26/2010 Ritzert & Leyton, P.C.

    21. 90/10-Net Present Value Formula to calculate NPV: NPV = S R t (1 + i) t “i” is discount rate (most recent annual inflation rate), “t” is time or period of cash flow in years “Rt” is net cash flow at time, And grouping loans by substantially the same repayment period. 1/26/2010 Ritzert & Leyton, P.C.

    22. 90/10-Net Present Value OR, in the alternative, the institution may treat 50% of the total amount of loans that the institution made during the fiscal year as non-Title IV revenue, however, none of the loans may be sold until they have been in repayment for at least 2 years. One reason for this rule is to allow DOE sufficient time to monitor whether the loans are subjected to routine collection efforts. 1/26/2010 Ritzert & Leyton, P.C.

    23. 90/10 Revenue Calc. – Appendix C

    24. 90/10 Revenue Calc. – Appendix C

    25. 90/10 Revenue Calc. – Appendix C

    26. Self-Certification Form (draft 10/2/09) p. 2 1/26/2010 Ritzert & Leyton, P.C.

    27. Application & Solicitation Model Form p. 1 1/26/2010 Ritzert & Leyton, P.C.

    28. Application & Solicitation Model Form p. 2 1/26/2010 Ritzert & Leyton, P.C.

    29. Approval Model Form p. 1 1/26/2010 Ritzert & Leyton, P.C.

    30. Approval Model Form p. 2 1/26/2010 Ritzert & Leyton, P.C.

    31. Final Disclosure Form p. 1 1/26/2010 Ritzert & Leyton, P.C.

    32. Final Model Disclosure p. 2 1/26/2010 Ritzert & Leyton, P.C.

    33. Application & Solicitation Sample p. 1 1/26/2010 Ritzert & Leyton, P.C.

    34. Application & Solicitation Sample p. 2 1/26/2010 Ritzert & Leyton, P.C.

    35. Approval Sample p. 1 1/26/2010 Ritzert & Leyton, P.C.

    36. Approval Sample p. 2 1/26/2010 Ritzert & Leyton, P.C.

    37. Final Disclosure Sample p. 1 1/26/2010 Ritzert & Leyton, P.C.

    38. Final Disclosure Sample p. 2 1/26/2010 Ritzert & Leyton, P.C.

    39. Peter S. Leyton, Esquire Ritzert & Leyton, P.C. 703.934.9826 (direct) 703.424.0726 (cell) pleyton@ritzert-leyton.com 11350 Random Hills Rd., Suite 400, Fairfax, VA 22030 1/26/2010 Ritzert & Leyton, P.C.

    40. PETER S. LEYTON, ESQ. Peter is a founder, president and shareholder in the Washington, D.C. area law firm of Ritzert & Leyton, P.C. (R&L). Since 1980, Peter has represented many institutions of higher education including for-profit, private non-profit institutions and publicly traded companies, as well as private investment groups and several associations of schools with respect to mergers and acquisitions and regulatory compliance in the areas of Title IV, accreditation and state licensure. R&L provides in-depth expertise with respect to resolving issues related to eligibility, program reviews, audits, OIG investigations and audits, fines, limitations, suspensions, and terminations, false claims act proceedings, changes of ownership, as well as adverse actions by other administrative agencies such as accrediting agencies. Peter received his law degree from the Catholic University Columbus School of Law in 1980, a master’s degree in public administration from American University in 1974, and a bachelor’s degree in political science from Antioch College in 1971. He is an active member of the District of Columbia and Virginia bars and writes and speaks frequently on issues affecting post-secondary and proprietary institutions of higher education. 1/26/2010 Ritzert & Leyton, P.C.

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