This Policy Guideline sets forth minimum standards for enrollment agreements that propose to include a deferred tuition arrangement as a method of payment of student tuition, and clarifies the conditions under which these arrangements may be used.
A deferred tuition arrangement is a method of payment under 8 NYCRR § 126.7(b)(9), whereby a student agrees to enroll in a course of instruction at a licensed private career school and to pay tuition only upon graduation (generally speaking) after finding a job, instead of paying tuition more traditionally in advance of instruction or in increments, by loan or otherwise, while the student’s education is in progress. Typically, the job that the student will find is anticipated to be in the field in which the student was trained, and the tuition that the student will pay will be expected to directly relate to the student’s anticipated earnings for a definite period.
Deferred tuition arrangements (sometimes referred to as “income sharing agreements”) are conceptually similar to traditional post-graduation installment payment plans, except that schools using them may or may not decide, as a means of incentivizing enrollment, to forgive student tuition in whole or in part if the student either cannot obtain employment within the period of time after graduation that is specified in the enrollment agreement, or cannot successfully pay his or her full tuition within a similar period of time after employment is obtained. By offering a deferred tuition arrangement having one or more of these features, licensed private career schools are opting to incur the financial risk, based on an analysis of the job market to which they anticipate supplying their students, of having to relinquish part or all of tuition that, under a more traditional tuition payment format, they would not risk losing. The public policy sought to be served by the deferred tuition arrangement is to make private career school education more accessible to would-be students who otherwise would not attend such schools because they could not afford to pay tuition while taking classes.
For example, a student enrolling at a licensed private career school which teaches computer coding may agree, and the school may accept, upon the student’s enrollment, that the student will pay tuition only after obtaining employment as a software developer within the first year after the student’s graduation, during which period the student will attempt in good faith, with or without the school’s assistance, to find such employment. The student and the school may also agree (or not) that the student will be excused from paying part or all of the tuition specified in the enrollment agreement if the student does not find a job within that time, or even if the student finds employment if he or she cannot pay the full tuition within the defined period of time after employment is obtained (or after graduation). There are many possible variations of this example.
Additionally, licensed private career schools, to protect themselves against possible tuition loss, may seek to have their enrollment agreements specify a given amount of the school’s involvement in, or oversight over, the student’s post-graduation attempts to find employment, or the school may wish to impose certain restrictions on the student after graduation, such as a residency requirement, or a requirement that a student find only a certain type of job at a given minimum salary.
8 NYCRR § 126.7(a) of the Commissioner’s regulations provides that “all conditions for enrollment in or completion of a curriculum or course shall be set forth in an enrollment agreement[.]”
8 NYCRR § 126.7(b)(6), § 126.7(b)(8), and § 126.7(b)(9) of the Commissioner’s regulations require that an enrollment agreement of a licensed private career school specify, respectively, “the amount of the tuition fee” that a student must pay, “the total cost of the course of instruction”, and “the method or methods of payment” by which students will pay tuition.
8 NYCRR § 126.7(b)(12) of the Commissioner’s regulations further permits licensed private career schools to include in their enrollment agreements “such reasonable rules, regulations and conditions as the school may desire to set forth in the agreement[.]”
In conjunction, 8 NYCRR § 126.7(b)(12) of the Commissioner’s regulations requires that, when a student of a licensed private career school signs an enrollment agreement, the student must also execute a “separately signed acknowledgment . . . that he or she has received the disclosure material, as required by section 5005 of the Education Law[.]” In turn, Education Law § 5005(a)(3) requires that this disclosure material include “a schedule of tuition payments, fees and all other charges and expenses necessary for completion of the course or program[.]”
Finally, 8 NYCRR § 126.2(b) of the Commissioner’s regulations provides that a licensed private career school shall “charge the same tuition rates and other fees or charges to all student [sic] or groups of students in like circumstances, unless otherwise approved by the Commissioner.”
BPSS will review deferred tuition arrangements for approval as methods of payment under 8 NYCRR § 126.7(b)(9) of the Commissioner’s regulations provided that (1) such arrangements satisfy the criterion of imposing reasonable rules, regulations, or conditions under 8 NYCRR § 126.7(b)(12) of the Commissioner’s regulations, and (2) the arrangements are (a) adequately conveyed by the school in its disclosure form required by Education Law § 5005 (and 8 NYCRR § 126.15), and (b) through its private school agent verbally in advance of enrollment.
BPSS will further review proposed deferred tuition arrangements for approval by assessing whether they satisfy the following fundamental criteria to an appropriate extent. If the arrangement (or whatever part of it) does not, at a minimum, sufficiently conform to these criteria, it will be rejected as unreasonable.
- Deferred tuition arrangements (allowing for the use of partial or full tuition forgiveness if tuition cannot be paid within a period) must result in students being charged the same tuition. This means that they may not use a “percentage of earnings” formula to calculate the total amount of tuition that a student must pay. For example, a school may not charge a student 10% or 15% of his or her prospective earnings as a base tuition calculation, independently of a definite amount of tuition, e.g., $4,000, because this will result in students earning less paying less tuition and thus would violate 8 NYCRR § 126.2(b) of the Commissioner’s regulations (see above). A school, however, during the designated period in which a student is supposed to be paying tuition, may allow a student to pay a percentage of his or her earnings toward satisfaction of a definite amount of tuition, e.g., $4,000, that the school had fixed as its tuition in advance without reference to the student’s prospective earnings.
- Any condition or restriction that a school may seek to impose on the student during the period after graduation, in which the student will be expected to find and/or hold employment and pay tuition, including but not limited to any residency requirements, limits on the type of job, industry, or geographic area in which the student may be employed, a minimum required salary, a requirement of prior approval by the school of the job the student would obtain, a requirement that a student may not be employed less than full time, or a requirement that the student must remain employed for a given amount of time, must not unreasonably burden or restrict the student’s ability to become or remain employed as he or she would seek to become or remain employed in the absence of the condition or restriction. A geographic area, for instance, that is too circumscribed, a minimum salary requirement that prevents a student from working who otherwise could, or a requirement that a student remain employed anywhere for any amount of time after payment of tuition has been made in full will be rejected.
- There must be a reasonable period after graduation specified in the enrollment agreement within which the student must either pay tuition in full or have the part of tuition that is unpaid “written off” or forgiven. This period cannot extend indefinitely or unreasonably into the future after graduation, and must encompass both a “job search” period, and a maximum payment period (including any deferments encompassing periods when the student may be between jobs or not working), whether or not the student is employed. The school must also clearly and affirmatively state whether tuition will be expected to be paid in full regardless of the post-graduation period’s expiration, or whether it may be forgiven and, if so, in what amount, and under what conditions.
- The deferred tuition arrangement must specifically address what happens where a student who has obtained employment that is satisfactory under the terms of the deferred tuition arrangement finds that employment interrupted for a period of time, whether due to dismissal, resignation, or otherwise, during any post-graduation tuition-payment period that has not yet expired. A deferred tuition arrangement may not increase the amount of time that was originally covered by any post-graduation tuition-payment period where any interruptions of employment were not due to the student’s own misconduct.
- Any documentation that a school may wish to demand of its students paying deferred tuition as proof of earnings, e.g., paystubs, tax returns, upon which to base a post-graduation payment calculation must be reasonably specified, must be the subject of sufficient notice to the student, and must be the least onerous documentation available for the student to produce and reasonable for the school to require to calculate the tuition payment. Moreover, the frequency with which a student must produce such documentation must not be excessive and must be explicit. For example, if the period of time after graduation in which a student is expected to pay tuition is one year, the student’s tax returns, if any, that the school may wish to review, and the frequency with which a student must produce them to the school, must be regular, predictable, and not greater than the frequency at which the student must produce the same returns to the relevant taxing authorities, e.g., the IRS, the New York State Department of Taxation and Finance.
- If any personally identifiable information of a student paying by deferred tuition is obtained by a school after graduation (which relates to the student’s production of documentation toward calculating tuition), then that information must be maintained and/or destroyed in accordance with all applicable privacy laws and regulations.
- The school may not assign to itself the sole prerogative of determining whether the student has fulfilled the terms and conditions of the deferred tuition arrangement. Jurisdiction of such disputes is accorded to BPSS by Education Law § 5003, and such disputes will otherwise be subject to whatever other claims arising out of the arrangement that the school or student could assert against the other under any applicable law or regulation, e.g., Education Law § 5003(8).
- The school may only assert the same claim of entitlement to tuition, which the student agreed to pay as part of his or her deferred tuition arrangement, that the school could claim if the student had not agreed to pay by deferred tuition arrangement but by ordinary or traditional means. The school, for example, may not purport to assert any kind of lien on the student’s earnings, or purport to garnish them by a similar mechanism to that of a governmental agency, except as may be provided by any applicable law or regulation.
- Students under deferred tuition arrangements must have the option of paying tuition in full at any time, even if the time that the student was allotted to pay tuition after graduation has not yet expired, and students attending schools offering deferred tuition arrangements must be able to choose not to pay tuition by deferred tuition arrangement but rather by more traditional means.
As stated above, disclosure is crucial. The more comprehensively a reasonable prospective student understands what is required when entering into the school’s deferred tuition arrangement, and the more fully informed such a student is about what will be required to carry out the student’s obligations under the arrangement, the more likely it is that the arrangement will be reasonable. Deferred tuition arrangements should be phrased as simply as possible and, where feasible, should be no lengthier than necessary to convey to a prospective student what his or her obligations under the arrangement will be.