New PPA Guidance Still Carries Concerns for Independent Higher Education

In guidance issued last week, the Department of Education revised and clarified its approach to Program Participation Agreement (PPA) signature requirements. The new guidance covers occurrences when individuals associated with an institution may be required to sign a PPA and potentially bear personal financial liability for Title IV losses.

While the new guidance narrows the immediate risk and liability for private, nonprofit institutions and leaders, it does not fully eliminate institutional or governance concerns.

Background

In 2023, the Department issued guidance indicating it could require individuals who “own or exercise substantial control” over an institution to sign the PPA in certain circumstances. Although the policy was primarily designed for large, complex for-profit institutions, NAICU sent a letter with 67 other signatories to the Department warning that agency’s definitions could extend to private, nonprofit presidents, trustees, or other senior leaders, and raised concerns about personal financial exposure, board recruitment, and fiduciary obligations.

Fundamentally, the letter argued that applying “owner” or “guarantor” concepts to nonprofit governance structures was inconsistent with congressional intent and risked destabilizing institutional leadership.

Updated Guidance

On January 16, 2026, Federal Student Aid issued updated guidance stating that the Department will not enforce the owner-entity signature requirement as written in regulation, following litigation and settlement. However, the Department emphasized that it retains discretion to require additional signatures on a case-by-case basis when it determines such action is necessary to protect the financial interests of the federal government.

Key elements of the update include:

• Signature requirements will not be applied categorically, but individually.
• ED may consider whether an owner-entity holds sufficient assets to justify a financial guarantee.
• ED may accept alternative protections, such as letters of credit, in lieu of individual signatures.
• The policy applies prospectively to PPAs issued on or after January 16, 2026; ED will not remove existing signatures from current PPAs.

Lingering Concerns

While this guidance is net positive, it does preserve significant departmental discretion. The Department has not renounced the underlying authority to require individual signatures, nor has it provided a definitive list of triggering conditions. As a result:

• Institutions remain subject to individualized judgments tied to ED’s assessment of risk.
• Nonprofit governance structures continue to fit imperfectly within ED’s “ownership” framework.
• Institutions with prior compliance issues or weaker financial indicators may face heightened scrutiny.
• Existing PPAs may reflect legacy requirements that institutions with newer agreements do not face, creating uneven treatment.

While the immediate risk of widespread personal liability is reduced, presidents should ensure institutional leadership understands:

• Who ED could plausibly view as exercising “substantial control;”
• What financial or compliance factors might prompt closer review; and
• Whether alternative protections could mitigate potential exposure.

For most private, nonprofit institutions, this update represents a positive change that lowers the likelihood of personal liability being imposed on leaders, but it does not eliminate uncertainty. Continued monitoring, internal governance review, and engagement through the regulatory process remain prudent.

For more information, please contact:
Justin Monk