Significant Concerns Exist Around U.S. Department of Education’s Announcement on Program Participation Agreement Signature Requirements
Arlington, VA – Earlier today, the U.S. Department of Education issued a press release and an Electronic Announcement creating a new policy regarding who must sign a program participation agreement (PPA) at non-public institutions. The PPA is an agreement between a higher education institution and the Department that lists the terms and conditions an institution must meet to participate in the federal Title IV programs like Pell Grants and Direct Loans. The Department’s new policy will affect corporations or other legal entities that exercise substantial control over non-public institutions or could have a direct or indirect effect on the institution’s financial responsibility. The Department has made clear that the purpose of these additional PPA signature requirements is so that it can pursue the assets of corporate parents in the event the institution does not pay all outstanding liabilities.
“Determining whether to pierce the corporate veil should be a fact-specific inquiry,” said CECU’s President and CEO, Dr. Jason Altmire. “When corporate parents intentionally withdraw equity or become the alter ego of the institutional subsidiary, piercing the veil may be appropriate. However, courts have long recognized that piercing the veil is not appropriate in the case of ordinary business decisions. The U.S. Department of Education should take into account all circumstances surrounding an institutional closure before taking the extraordinary step of piercing the corporate veil to reach the assets of the corporate parent.”
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Career Education Colleges and Universities (CECU) is the national association serving the proprietary higher education sector.
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