The House Committee on Higher Education offers the following substitute to SB 400:
A BILL TO BE ENTITLED
AN ACT
To amend Part 1A of Article 7 of Chapter 3 of Title 20 of the Official Code of Georgia
Annotated, relating to nonpublic postsecondary educational institutions, so as to prohibit
unaccredited institutions from offering degrees; to authorize the use of irrevocable letters of
credit in lieu of surety bonds; to require denial of applications to operate in certain
circumstances; to clarify that grievance procedures for denials of authorization to operate do
not apply to denials of authorization to offer additional courses; to require certain
postsecondary educational institutions to provide academic records to the executive director
in certain circumstances; to require certain institutions to participate in the Tuition Guaranty
Trust Fund and to provide how such institutions may participate; to provide for
indemnification; to provide for definitions; to provide for related matters; to repeal
conflicting laws; and for other purposes.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF GEORGIA:
SECTION 1.
Part 1A of Article 7 of Chapter 3 of Title 20 of the Official Code of Georgia Annotated,
relating to nonpublic postsecondary educational institutions, is amended in Code Section
20-3-250.2, relating to definitions relative to nonpublic postsecondary educational
institutions, by revising paragraph (17) and adding a new paragraph to read as follows:
<ins>"(7.1) 'Distance education' means education or educational services that use one or more
technologies to deliver such education or educational services to students who are
separated from the instructor and to support regular and substantive interaction between
the students and the instructor, either synchronously or asynchronously."
</ins> "(17) 'Postsecondary activity' means:
(A) Awarding a postsecondary degree or certificate; <del>or
</del> (B) Conducting or offering study, experience, or testing for an individual related to a
field or profession associated with public health, public welfare, or public safety, as
determined by the commission in its sole discretion; <ins>or
(C) Offering distance education:
(i) To a person within this state; or
(ii) From within this state and operating a campus, branch, instructional facility, or
administrative office within this state."
</ins> SECTION 2.
Said part is further amended in Code Section 20-3-250.7, relating to prohibited activities
relative to nonpublic postsecondary educational institutions, by revising subsection (a) as
follows:
"(a) No person, group, or entity of whatever kind, alone or in concert with others, shall:
(1) Operate in this state a nonpublic postsecondary educational institution or conduct
postsecondary activities in this state unless issued a current certificate of valid
authorization by the executive director;
(2) Offer postsecondary instruction leading to a postsecondary degree or certificate to
Georgia residents from a location outside this state by correspondence or any
telecommunications or electronic media technology unless issued a current certificate of
valid authorization;
(3) Solicit prospective students without being authorized by the executive director to do
so and without being bonded if required to do so by Code Section 20-3-250.10;
(4) Make or cause to be made any statement or representation, oral, written, or visual,
in connection with the offering or publicizing of a course, if such person knows or
reasonably should have known the statement or representation to be false, deceptive,
substantially inaccurate, or misleading;
(5) Instruct or educate, or offer to instruct or educate, including advertising or soliciting
for such purpose, enroll or offer to enroll, contract or offer to contract with any person
for such purpose, or award any educational credential, or contract with any institution or
party to perform any such act, in this state, whether such person, group, or entity is
located within or outside this state, unless such person, group, or entity observes and is
in compliance with the minimum standards set forth in Code Section 20-3-250.6, the
criteria established by the commission pursuant to paragraph (2) of subsection (b) of
Code Section 20-3-250.5, and the rules and regulations adopted by the commission;
(6) Promise or guarantee employment utilizing information, training, or skill purported
to be provided or otherwise enhanced by a 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 specified period of time in a business or other
enterprise regularly conducted by him or her where such information, training, or skill
is a normal condition of employment;
(7) Do any act constituting part of the conduct or administration of a course or the
obtaining of students thereof, if such person knows or reasonably should know that any
phase or incident of the conduct or administration of the course is being carried on by the
use of fraud, deception, other misrepresentation, or by any person soliciting students
without a permit; <del>or
</del>
(8) Grant, or offer to grant, postsecondary degrees, diplomas, certificates, or honorary
or unearned degrees without authorization to do so from the commission; <ins>or
(9) Grant, or offer to grant, postsecondary degrees unless such person, group, or entity
is accredited or in the process of becoming accredited by an accrediting agency
recognized by the United States Department of Education or its successor."
</ins> SECTION 3.
Said part is further amended in Code Section 20-3-250.10, relating to surety bonds, filing,
release of surety, and suspension upon release of surety, by adding a new subsection to read
as follows:
<ins>"(e) The commission, by rule or regulation, shall authorize the executive director to accept
an irrevocable letter of credit issued by a bank or savings and loan association, as defined
in Code Section 7-1-4, in lieu of the surety bond otherwise required under this Code section
and subject to the same requirements and conditions provided for surety bonds in this Code
section."
</ins> SECTION 4.
Said part is further amended in Code Section 20-3-250.12, relating to denial of application,
by revising subsection (a) and adding a new subsection to read as follows:
"(a) If <del>the executive director,</del> upon review and consideration of an application for
authorization to operate or for renewal thereof, the executive director determines that the
applicant <ins>meets one or more of the factors considered pursuant to subsection (a.1) of this
Code section, the executive director shall deny the application and shall notify the applicant
setting forth the reason or reasons therefor.
(a.1) The review of an application for authorization to operate or for renewal thereof shall
include consideration of whether the applicant:
(1) Fails</ins> <del>fails</del> to meet the criteria established as provided in this part,;
<ins>(2) Has previously caused loss or damage to a student of a nonpublic postsecondary
educational institution as a result of any act or practice which is a violation of this part
or of the rules and regulations established by the commission for the administration of
this part or as a result of the commission of an offense provided for in Chapter 9 of Title
16 or a substantially similar offense in another jurisdiction;
(3) Has willfully failed to comply with the provisions of this part or the rules and
regulations established by the commission for the administration of this part or with the
laws applicable to nonpublic postsecondary educational institutions of another
jurisdiction;
(4) Is acting for or on behalf of a person who has caused loss or damage to a student of
a nonpublic postsecondary educational institution as a result of any act or practice which
is a violation of this part or of the rules and regulations established by the commission for
the administration of this part or as a result of the commission of an offense provided for
in Chapter 9 of Title 16 or a substantially similar offense in another jurisdiction; or
(5) Is acting for or on behalf of a person who has willfully failed to comply with the
provisions of this part or the rules and regulations established by the commission for the
administration of this part or with laws applicable to nonpublic postsecondary educational
institutions of another jurisdiction</ins> <del>the executive director shall so notify the applicant,
setting forth the reasons therefor in writing, and shall deny the application."
</del> SECTION 5.
Said part is further amended in Code Section 20-3-250.15, relating to hearing and review by
commission of denial of authorization to operate, by adding a new subsection to read as
follows:
<ins>"(f) This Code section shall not apply to denials of authorization of additional course
offerings pursuant to subsection (i) of Code Section 20-3-250.8."
</ins>
SECTION 6.
Said part is further amended by revising Code Section 20-3-250.17, relating to
discontinuation of operations of nonpublic postsecondary educational institution, as follows:
"20-3-250.17.
<ins>(a)</ins> In the event any nonpublic postsecondary educational institution, <ins>including
degree-granting institutions exempted from this part under paragraphs (7), (10), (11), (13),
and (14) of subsection (a) of Code Section 20-3-250.3,</ins> now or hereafter operating in this
state proposes to discontinue its operations, the chief administrative officer, by whatever
title designated, of such institution shall cause to be filed with the executive director the
original or legible true copies of all such academic records of such institution as may be
specified by the executive director. <ins>The commission shall be authorized to establish
requirements for the format of such records, including whether such records shall be filed
in a paper or digital format.</ins> Such records shall include, at a minimum, such information
as is customarily required by colleges or other postsecondary educational institutions when
considering students for transfer or advanced study and, as a separate document, the
academic record of each former student. In the event it appears to the executive director
that any such records of an institution discontinuing its operations are in danger of being
destroyed, secreted, mislaid, or otherwise made unavailable to the executive director, the
executive director may, with court order, seize and take possession of such records, subject
to the confidentiality accorded normal school records. The executive director shall
maintain or cause to be maintained a permanent file of such records coming into his or her
possession.
<ins>(b) In the event the executive director determines that any nonpublic postsecondary
educational institution, including degree-granting institutions exempted from this part
under paragraphs (7), (10), (11), (13), and (14) of subsection (a) of Code
Section 20-3-250.3, now or hereafter operating in this state is at risk of discontinuing
operations and that the academic records of such institution are at risk of being destroyed,
</ins>
<ins>secreted, mislaid, not properly maintained, not safeguarded, or otherwise made unavailable
to the executive director or the students of such institution, the executive director shall be
authorized to request that such institution file with the executive director copies of all such
academic records of such institution in a format required by the commission, subject to the
confidentiality accorded normal school records. If such institution fails to file such records,
the executive director shall be authorized to seek a court order to obtain such records or
copies of such records. The executive director shall maintain or cause to be maintained a
permanent file of such records coming into his or her possession."
</ins> SECTION 7.
Said part is further amended by revising Code Section 20-3-250.27, relating to Tuition
Guaranty Trust Fund, as follows:
"20-3-250.27.
(a) It is the purpose of this Code section to create a trust fund from participation fees from
postsecondary educational institutions to enable such institutions, collectively, to protect
students against financial loss when a postsecondary educational institution closes without
reimbursing its students and without completing its educational obligations to its students
and to provide consumer information, as necessary in the determination of the commission,
to prospective and currently enrolled students.
(b)(1) Effective on July 1, 1992, the Tuition Guaranty Trust Fund is created. The
participation fees received by the commission from postsecondary educational
institutions pursuant to the provisions of subsections (c) and (d) of this Code section shall
be deposited in a special account designated 'Tuition Guaranty Trust Fund' and shall be
held in trust by the board of trustees provided for in paragraph (2) of this subsection for
the purpose of carrying out the provisions of this Code section. The money in the fund
may be invested by said board of trustees in any bonds and other securities of agencies
of the government of the United States and bonds and other securities of state and local
governments. The earnings from such investments shall be deposited to the credit of the
Tuition Guaranty Trust Fund and shall be available for the same purposes as other money
deposited in the fund.
(2) The fund shall be administered by the Board of Trustees of the Tuition Guaranty
Trust Fund. The board of trustees shall consist of five members of the commission
designated by majority vote of the commission, where at least two members, by June 30,
2020, shall represent postsecondary educational institutions. The five members of the
commission who are so designated shall serve for such terms of office as members of the
board as the commission shall establish by rule or regulation. The commission shall
appoint one of the members so designated as chairman of the board. The executive
director shall also serve as executive director and secretary of the board. Three members
of the board must vote in agreement in order for the board to take official action. The
commission may by rule or regulation provide for another member of the commission to
serve in the place of a member of the board who is absent from a meeting of the board.
(c)(1) <del>All</del> <ins>Except as expressly provided otherwise in this Code section, all</ins> postsecondary
educational institutions operating <ins>or conducting postsecondary activity</ins> in this state,
except those which are exempt from the provisions of this Code section pursuant to Code
Section 20-3-250.3, shall participate in the tuition guaranty fund. Those postsecondary
educational institutions specified in <del>paragraphs (10) and (14)</del> <ins>paragraph (4)</ins> of subsection
(a) of Code Section 20-3-250.3 and in subsection (c) of Code Section 20-3-250.3 shall
<ins>not be required to</ins> participate in the tuition guaranty fund <ins>regardless of whether such
institution has received authorization to operate.
</ins> (2) Postsecondary educational institutions which were authorized to operate in this state
prior to July 1, 1990, and which have maintained continuous authorization in this state
since July 1, 1990, and institutions which have been continuously licensed since July 1,
1990, pursuant to the provisions of Title 43 and were authorized by the commission prior
to July 1, 2022, shall participate in the fund and shall not be required to provide surety
bonds as provided in Code Section 20-3-250.10; provided, however, that any surety bond
provided by an institution before July 1, 2021, shall remain in effect for one full year after
the effective date of such surety bond.
(3) <del>Postsecondary educational institutions which are currently authorized to operate in
this state and which were first authorized to operate in this state on or after July 1, 1990,
shall participate in the fund for seven years of authorized operation; provided, however,
that no postsecondary educational institution first authorized to operate in this state on
or after July 1, 1990, which fully participated in the fund for five years on or before
January 1, 2022, shall be required to participate in the fund for seven years as otherwise
provided in this paragraph.</del> <ins>A postsecondary educational institution specified in
paragraph (14) of subsection (a) of Code Section 20-3-250.3 shall not be required to
participate in the fund if such institution fully participated in the fund on or before
January 1, 2026.
</ins> <del>(4) Following a change of ownership, as provided for in subsection (f) of Code Section
20-3-250.8, a postsecondary educational institution may be required to participate in the
fund for a period of up to seven years as determined by the executive director in his or
her sole discretion.
</del> (d)(1)(A) In addition to any other fees required by this part, the commission shall by
regulation establish fees <del>to</del> <ins>which shall</ins> be paid annually by postsecondary educational
institutions for participation in the tuition guaranty fund, <ins>except as otherwise provided
in this subsection.</ins> The fees shall be based on gross tuition collected during a year by
each postsecondary educational institution. If an institution has not operated for a full
year, its participation fee shall be based initially on its projected gross tuition for the
first full year of operation. At the conclusion of the first year, the fee for that year shall
be adjusted to reflect actual gross tuition. The annual fee established by the
commission shall be sufficient, when added to the earnings of the fund, to create a
balance in the fund of at least $10 million by July 1, 2040.
<ins>(B) Each postsecondary educational institution required to participate in the fund,
excluding an institution that has filed a surety bond with the commission pursuant to
Code Section 20-3-250.10, shall be authorized to participate in the fund by securing and
maintaining a surety bond or irrevocable letter of credit in lieu of paying the annual fee
established pursuant to subparagraph (A) of this paragraph. The commission shall, by
rule or regulation, establish conditions for such bonds and letters of credit to ensure that
such bonds and letters of credit include provisions to indemnify the Tuition Guaranty
Trust Fund and students of the institution in the event the institution ceases operations
without fulfilling its educational obligations to its students or without reimbursing its
students.
(2)(A)</ins> The board of trustees shall notify the commission when the fund balance
exceeds $10 million, and, <del>except as otherwise provided in paragraph (2) of this
subsection,</del> upon receiving such notification, the commission shall cease collection of
participation fees from postsecondary educational institutions which have contributed
to the fund for at least five years.
<ins>(B) Except as otherwise provided in subparagraph (C) of this paragraph, the
commission shall cease collection of participation fees from a postsecondary
educational institution which is currently authorized to operate in this state and which
was first authorized to operate in this state on or before January 1, 2026, after the total
amount of the participation fees collected from such postsecondary educational
institution reaches 5 percent of the fund balance specified in subparagraph (A) of this
paragraph, regardless of the current balance of the fund.
(C)</ins> The commission, upon notification from the board of trustees, shall reestablish
collection of participation fees from <del>such</del> <ins>the</ins> participating postsecondary educational
institutions <ins>provided for in subparagraphs (A) and (B) of this paragraph</ins> at any time the
fund balance is less than $4 million. At such time <ins>and until the fund balance reaches
$10 million,</ins> fees shall be collected from such participating institutions according to a
schedule adopted by the commission based on gross tuition in amounts sufficient to
raise the fund balance to $10 million.
<del>(2) Each postsecondary educational institution which is first authorized to operate in this
state after July 1, 1992, and is required to participate in the fund for seven years of
authorized operation under the provisions of paragraph (3) of subsection (c) of this Code
section shall be required to pay participation fees for such period of time notwithstanding
the amount in the tuition guaranty fund. If the balance in the fund exceeds $10 million,
participation fees shall be collected from each such institution according to the fee
schedule adopted by the commission pursuant to paragraph (1) of this subsection. No
postsecondary educational institution first authorized to operate in this state on or after
July 1, 1992, which fully participated in the fund for five years on or before January 1,
2022, shall be required to participate in the fund for seven years as otherwise provided
in this paragraph.
</del> (e) The annual cost incurred by the commission and by the board of trustees in
administering the Tuition Guaranty Trust Fund and providing consumer information as
necessary for prospective and currently enrolled students, including expenses incurred in
collecting from defaulting postsecondary educational institutions the amounts paid from
the fund to or on behalf of students pursuant to the provisions of subsection (g) of this Code
section, shall be paid from the fund; provided, however, that such annual administrative
costs shall not exceed 2.5 percent of the fund during the fiscal year. The commission shall
issue a report annually to each postsecondary educational institution participating in the
fund. The report shall provide an evaluation of the financial condition of the fund and a
summary of claims paid or other expenditures from the fund during the immediately
preceding fiscal year.
(f) The commission shall establish by regulation a late payment fee for the failure of a
postsecondary educational institution to pay its participation fee at the time established by
regulation of the commission for the payment of such fees. An application for
authorization to operate or for the renewal thereof may be denied under Code Section
20-3-250.12 for failure to pay participation fees. Late payment fees shall be paid into the
fund. Any authorization to operate may be revoked, suspended, or made conditional under
Code Section 20-3-250.13 for failure to pay participation fees.
(g)(1) In the event a postsecondary educational institution participating in the fund
ceases operations without fulfilling its educational obligations to its students or without
reimbursing its students, the board of trustees may reimburse from the fund valid and
documented claims of students for tuition and fees paid to that institution as well as costs
incurred as a result of such cessation of operations in accordance with guidelines and
procedures adopted by the commission; <ins>provided, however, that in the event of a
precipitous closure, no student of the institution which is the subject of such closure shall
be reimbursed from the fund unless such institution was participating in the fund at the
time of such closure.</ins> Payments from the fund shall be made by warrant of the state
treasurer on the order of the board of trustees.
<ins>(1.1) No student who is not a resident of this state shall be reimbursed from the fund if
he or she is eligible for reimbursement for such tuition and fees from a similar fund in his
or her state of residence.
</ins> (2) The maximum amount that may be paid from the fund in claims on behalf of the
students of any single defaulting postsecondary educational institution shall be
determined by the commission, but shall not exceed 10 percent of the total fund,
regardless of the fact that total claims may exceed that amount, unless a higher
percentage is authorized by a two-thirds' majority vote of the commission in the event of
a significant precipitous closure.
(3) As an alternative to paying claims to or on behalf of students of a defaulting
postsecondary educational institution, the board of trustees may arrange for another
postsecondary educational institution to complete the educational obligations to the
students of the defaulting postsecondary educational institution, provided that the
program offered by the other institution is substantially equivalent to the program for
which the students had paid tuition; and provided, further, that attendance at the other
institution does not cause unreasonable hardship or inconvenience to the students. The
commission shall have the authority to adopt rules or regulations which shall govern the
board of trustees in the administration of the provisions of this paragraph. As a part of
any such program, the board of trustees may reimburse the other postsecondary
educational institution from the fund for expenses incurred by the institution in providing
educational services for the students of the defaulting postsecondary educational
institution. The Tuition Guaranty Trust Fund shall have an independent claim for
recovery against the defaulting postsecondary educational institution and any surety
issuing a bond pursuant to Code Section 20-3-250.10 to the extent that the fund has
reimbursed a postsecondary educational institution from the fund for expenses pursuant
to this paragraph and without the necessity of any further act by any party.
(4) It shall not be necessary to claim a loss or damage pursuant to the provisions of Code
Section 20-3-250.14 in order for the board of trustees to pay claims to or on behalf of
students pursuant to the provisions of this Code section. Procedures and requirements for
filing claims under this Code section shall be as provided by rules or regulations adopted
for that purpose by the commission.
(5) Any person aggrieved by a decision of the board of trustees to pay or deny a claim
pursuant to the provisions of this Code section may appeal to the commission. A decision
of the board of trustees shall be in writing and shall be sent by certified mail or statutory
overnight delivery to the claimant and to the owner of the defaulting postsecondary
educational institution. If the whereabouts of the owner of the defaulting postsecondary
educational institution is not known and cannot reasonably be ascertained by the board
of trustees, a notice of the decision shall be published in the legal organ of the county
where the student claimant attended the defaulting postsecondary educational institution
or a facility of such institution. The appeal to the commission shall be commenced by
filing a written notice of such appeal to the commission within 30 days after receiving the
written decision of the board of trustees. Within 30 days after receiving a notice of
appeal, the commission shall affirm the decision of the board of trustees, modify and
affirm the decision of the board of trustees, or overrule the decision of the board of
trustees. Any person aggrieved by the action of the commission shall have the right to
judicial review pursuant to the provisions of Code Section 20-3-250.16. The commission
shall adopt rules or regulations providing procedures for the conduct of appeals from the
board of trustees, but such rules or regulations shall be consistent with the provisions of
this paragraph.
(h) The board of trustees shall issue a biennial report to the Governor and members of the
General Assembly providing a summary of the financial condition of the fund and claims
experience during the preceding biennium. Such reports shall be issued during the regular
session of the General Assembly held during each even-numbered year beginning in 1994.
(i) The tuition guaranty fund shall be exempt from all license fees or income, franchise,
privilege, occupation, or other taxes levied or assessed by the state or by any county,
municipality, or other political subdivision of the state. Any payment of claims or refund
of participation fees from the tuition guaranty fund shall not be exempt from taxation
unless such payment or refund is exempt from taxation pursuant to the provisions of law
independent of the provisions of this part.
(j) Authorization for a postsecondary educational institution to operate shall be suspended
upon written notice by the executive director when such institution fails to participate in
the fund as required under this Code section.
<ins>(k) The Tuition Guaranty Trust Fund shall have an independent claim for recovery against
a defaulting postsecondary educational institution and any surety issuing a bond pursuant
to Code Section 20-3-250.10 for reimbursements of valid and documented claims of
students paid from the fund pursuant to paragraph (1) of subsection (g) of this Code section
and without the necessity of any further act by any party."
</ins>
SECTION 8.
All laws and parts of laws in conflict with this Act are repealed.