Institutional Eligibility to Participate in Federal Student Aid Programs

"Institutional Eligibility to Participate in Federal Student Aid Programs" submitted by SchoolGrantsfor Editorial Team and last updated on Friday 22nd July 2011

Title IV of the Higher Education Act (HEA; P.L. 89-329, as amended by P.L. 105-244) authorizes programs that provide federal student financial aid to support student attendance at institutions of higher education meeting Title IV eligibility requirements. To participate in these programs, proprietary (for-profit) institutions must meet requirements included in Section 102 of the HEA, including requirements that proprietary institutions have been in existence for at least two years and derive at least 10% of school revenue from non-Title IV funds. This latter requirement forms the basis for the 90/10 rule.

According to the Department, more than two-thirds of the nation’s 9,400 institutions of post-secondary education participate in the Higher Education Act programs. About 4,000 of these schools are traditional colleges and universities; the remainder are trade schools.

A school that wishes to participate in the FSA programs must demonstrate that it is eligible to participate before it can be certified for participation. A school must apply to and receive approval from the Department of its eligibility to participate. Some schools apply only for a designation as an eligible institution (they do not seek to participate) so that students attending the school may receive deferments on FSA program loans, or be eligible for the HOPE/Lifetime Learning Scholarship tax credits or other non-FSA programs that require that the school be FSA-eligible. The same application is used to apply for both eligibility and certification for participation.

Schools must clear three hurdles, collectively known as “the triad,” before their students can receive federal student aid. First, an institution must be accredited by an accrediting agency determined to be a reputable judge of academic quality by the Secretary of Education. National or regional accreditation provides the assurance that an institution offers an academically sound education. By relying on nongovernmental accreditors to evaluate and report on the academic quality of schools, the government avoids steps that could lead to federal control of curricula or national academic standards.

Second, a college or university must be licensed or approved to do business in the state where it is located. And third, the Department must determine that the institution has both the administrative capability to manage the federal program funds, and the financial responsibility to ensure that it is financially stable and will not suddenly close, to the detriment of students or taxpayers.

Institutions that want to participate must abide by the Department’s Program Participation Agreement, which spells out the terms and conditions of the federal student aid programs. Some of these requirements are general, such as, “The institution will establish and maintain such administrative and fiscal procedures and records as may be necessary to ensure proper and efficient administration of funds.” Other requirements are highly detailed, such as the reporting requirements for intercollegiate athletics revenues and expenses.

Institutions are prohibited from providing (or contracting with any entity that provides) any commission, bonus or other incentive payment based directly or indirectly on success in securing enrollments or financial aid to any person engaged in any student recruitment, admissions, or financial aid awarding activities. Must not knowingly employ in financial aid office – or in other positions involving Title IV funds administration – any individual previously convicted of fraud involving federal or other public funds.

In addition, the Higher Education Act requires that colleges participating in the federal student aid programs provide a substantial amount of information to students regarding such diverse topics as campus crime, special facilities available to students with disabilities, refund policies, and graduation rates. Schools that fail to meet the terms of the Program Participation Agreement may be fined or have their eligibility to participate revoked.

The Three Definitions of eligible institutions:
The regulations governing institutional eligibility define three types of eligible institutions —institutions of higher education, proprietary institutions of higher education, and postsecondary vocational institutions. Under the three definitions, a school is eligible to participate in all the FSA programs provided the school offers the appropriate type of eligible program. Full details about 3 Definitions (institutions of higher education, proprietary institutions of higher education, and postsecondary vocational institutions):

Consumer Information requirements concerning institutional information:

If the school suspects that a student, employee, or other individual has misreported information and/or altered documentation to increase student aid eligibility or to fraudulently obtain federal funds, it must report those suspicions and provide any evidence to ED’s Office of Inspector General (OIG). The OIG allows the school to:

The OIG Web site at

Also you may check: Institutional Eligibility and the Higher Education Act: