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Selected Sections of the Education Law Relating to Education Corporations (Sections 5001-5009)

Disclaimer: Sections from the Education Law are presented here for general informational purposes as a public service.  Although reasonable efforts have been made to ensure that these sections are current, complete and accurate, the State Education Department does not warrant or represent that this information is current, complete and accurate.  The statutes are subject to change on a regular basis.  Readers are advised to consult  McKinney's Consolidated Laws of New York (West Publishing Corporation) for the official exposition of the text of these statutes, as well as for amendments and any subsequent changes or revisions thereto.  

§5001. Licensed private schools and registered business schools

  1. Schools required to be licensed or registered. No private school which charges tuition or fees for instruction and which is not exempted hereunder shall be operated for any person or persons, firm, corporation, or private organization for the purpose of teaching or giving instruction in any subject or subjects, unless it is licensed or registered by the education department. As used in this article, the following terms shall have the following meanings:

a. “Licensed private school” shall mean any entity offering to instruct or teach any subject by any plan or method including written, visual or audio-visual methods;

b. “Registered business school” shall mean a school in which a curriculum primarily provides a sequence of courses that may include accounting or bookkeeping, marketing, business arithmetic, business law, business English, shorthand, typing, computer business applications/programming, or substantially all said courses, for the purpose of preparing an individual to pursue a business occupation; provided, however, that a registered business school program may include instruction in English as a second language at a beginning or basic level, provided such instruction shall not constitute more than fifty percent of such program. Such authorization shall apply to all students who commence instruction in a registered business school program prior to July first, nineteen hundred ninety-one. A business school registered under this section shall employ only teachers licensed by the department, whose qualifications are substantially equivalent to those required of teachers of equivalent subjects in public secondary schools.

  1. Exempt schools. The following schools are exempted from the licensing requirement of this section:

a. institutions authorized to confer degrees in this state;

b. schools, other than correspondence schools, providing kindergarten, nursery, elementary or secondary education, except schools conducted for profit which provide instruction in English as a second language or preparation for high school equivalency examinations to out-of-school youth or adults;

c. schools operated by governmental agencies or authorities;

d. schools which engage exclusively in training of students with disabilities as defined in section forty-four hundred one of this chapter;

e. schools conducted on a not-for-profit basis by firms or organizations for the training of their own employees only, provided that such instruction is offered at no charge to such employees, or by a fraternal society or benevolent order for its members or their immediate relatives only;

f. schools which provide instruction in the following subjects only: religion, dancing, music, painting, drawing, sculpture, poetry, dramatic art, languages, reading comprehension, mathematics, recreation and athletics;

g. schools in which the course of instruction is licensed, registered or approved under any other section of this chapter or by any other department or agency of the state;

h. such other schools as the commissioner may by regulation in his discretion determine.

  1. Exempt programs. Programs offered to a private business for its employees where there is no tuition liability to the employee shall be exempt from the requirements of this article, provided that the school discloses, in a manner prescribed by the commissioner, that such program is not subject to the requirements of this article.
  2. Application, renewal application and application fees. a. Application and renewal application for a license as a private school or registration as a business school required by the commissioner shall be filed on forms prescribed and provided by the department. Except as provided in subparagraph (iii) of paragraph e of this subdivision, each renewal application for a private business school registered pursuant to this section or for a private school licensed pursuant to this section shall include an audited financial statement audited according to generally accepted auditing standards by an independent certified public accountant or an independent public accountant and statistical reports certified by the owner or operator of the school, as required by the commissioner; provided, however, that the commissioner shall accept a copy of a current financial statement previously filed by a school with any other governmental agency in compliance with the provisions of any federal or state laws, or rules or regulations if such statement contains all of the information required under this subdivision and conforms to this subdivision’s requirements of auditing, review and certification. Any required audit of the financial statement shall be a condition of licensure or registration and shall be paid for by the school, and the results of the audit shall be forwarded to the commissioner. Applications not accompanied by the audits and reports required pursuant to this subdivision shall not be considered for approval by the commissioner. Initial applications shall be accompanied by financial reports as required by the commissioner. The commissioner shall act on an initial application for a license or registration within one hundred twenty days of receipt of a complete application. The applicant shall receive a written approval or denial together with the reasons for a denial of such application.

b. A license or registration issued pursuant to the provisions of this article shall be valid for a period of two years.

c. An application for renewal of any license or registration shall be submitted at least one hundred twenty days prior to the expiration date of the current authorization to operate accompanied by the nonrefundable application fee and such certified statistical reports and annual financial statements required pursuant to this subdivision.

d. When complete and timely application has been made for renewal of any license or registration, the school shall receive a written approval or denial, together with the reasons for denial of renewal, from the commissioner no less than thirty days prior to the date such license or registration expires.

e. Financial statements and statistical reports. (i) Licensed private schools and registered business schools shall submit such certified statistical reports and annual financial statements as required by the commissioner. The commissioner may require audited statistical reports upon a determination that a school has provided false or inaccurate certified statistical reports. The financial statements shall be based on the fiscal year of the school and shall also include an itemized account of tuition refunds due and owing to past or presently enrolled students. Statistical reports shall include, but not be limited to, enrollment, completion and placement data. The commissioner shall use such financial statements and statistical reports submitted for the purposes of licensure and registration of schools, establishing fees or assessments pursuant to this article and determining standards pursuant to paragraph b of subdivision five of section five thousand two of this article. The attorney general, the comptroller and the president of the higher education services corporation shall have access to this information when it is necessary to perform their duties as required by state law.

(ii) Any school which received in excess of two hundred fifty thousand dollars in gross tuition in a school fiscal year shall be required to submit an annual audited financial statement to the commissioner for that fiscal year. In addition, any school which has a gross tuition of two hundred fifty thousand dollars or less in a school fiscal year but whose combined state and federal student financial aid in such year exceeds one hundred thousand dollars shall also submit an annual audited financial statement to the commissioner for that fiscal year.

(iii) Schools whose gross tuition is two hundred fifty thousand dollars or less in a school fiscal year and which receive less than one hundred thousand dollars in state and federal student financial aid in a school fiscal year shall file with the commissioner an unaudited financial statement in a format prescribed by the commissioner, provided, however, that any such school with gross tuition in excess of fifty thousand dollars shall have filed at least one audited financial statement after the first year of its operation. The statement shall be signed by the president or chief executive officer and the chief fiscal officer of the school who shall certify that the statements are true and accurate. Upon a determination by the commissioner that a school has submitted false or inaccurate statements or that a significant, unsubstantiated decline in gross tuition has occurred, the commissioner may require any such school to file an audited financial statement pursuant to this paragraph.

f. Alternate licensing provision. The commissioner shall issue regulations which define alternate licensing requirements for the following:

(1) correspondence schools in which all approved programs and courses are under three hundred hours;

(2) schools which are eligible for exemption under this section but which elect to be licensed;

(3) non-profit schools exempt from taxation under section 501(c)(3) of the internal revenue code whose programs are funded entirely through donations from individuals or philanthropic organizations, or endowments, and interest accrued thereon; and

(4) [Eff. Aug. 1, 1994] language schools conducted for-profit which provide instruction in English as a second language and which accept no public funds.

g. Application fee. Every applicant and renewal applicant shall pay to the department a nonrefundable, nontransferable fee based on gross annual tuition income as determined by the annual financial statements required in paragraph a of this subdivision for the most recent school fiscal year, according to the following schedule:

GROSS ANNUAL TUITION

  INCOME FEE

0- 199,999  $ 250.00

$200,000- 499,999

$ 500.00

$500,000- $999,999

$ 750.00

$1,000,000-$4,999,999

$1,500.00

$5,000,000-$9,999,999

$3,000.00

$10,000,000 or above

$6,000.00

Such fees shall accrue to the credit of the proprietary vocational school supervision account. If the evaluation of a particular course or facility requires the services of an expert not employed by the department, the department shall retain such expert and the school shall reimburse the department for the reasonable cost of such services.

  1. Required disclosure for licensure. a. The commissioner shall require that each applicant for a license for the operation of a private vocational or business school disclose the following information:

(1) Whether the applicant, or any corporation, partnership, association or organization or person holding an ownership or control interest in such school, or any employee responsible in a supervisory capacity for the administration of student funds or governmental funds, has been convicted of a crime defined in this article, or any other crime involving the operation of any educational or training program, or, in connection with the operation of any such program, a crime involving the unlawful acquisition, use, payment or expenditure of educational or training program funds; and

(2) Whether the applicant, or any corporation, partnership, association or organization or person holding an ownership or control interest in such school, or any employee responsible in a supervisory capacity for the administration of student funds or governmental funds has been convicted:

(A) in this state of any of the following felonies defined in the penal law: bribery involving public servants; commercial bribery; perjury in the second degree; rewarding official misconduct; larceny, in connection with the provision of services or involving the theft of governmental funds; offering a false instrument for filing; falsifying business records; tampering with public records; criminal usury; scheme to defraud; or defrauding the government; or

(B) in any other jurisdiction of an offense which is substantially similar to any of the felonies defined in clause (A) of this subparagraph and for which a sentence to a term of imprisonment in excess of one year was authorized and is authorized in this state regardless of whether such sentence was imposed; and

(3) Whether the applicant, or any corporation, partnership, association or organization or person holding an ownership or control interest in such school, or any employee responsible in a supervisory capacity for the administration of student funds or governmental funds, has been finally determined in any administrative or civil proceeding to have committed a violation of any provision of this article or any rules and regulations promulgated pursuant thereto, or any related order or determination of the commissioner, or of any similar statute, rule, regulation, order or determination of another jurisdiction pertaining to the licensure and operation of any educational or training program; and

(4) Whether any school owned or operated by the applicant closed or ceased operation and, if so, whether at the time of the closing the applicant was subject to a pending disciplinary action, disallowance, fine or other penalty and whether it owed refunds to any government agency or students.

b. No application for any license pursuant to this article shall be denied by reason of disclosure pursuant to this subdivision of the applicant, or any corporation, partnership, association or organization or person holding an ownership or control interest in such school, or any employee responsible in a supervisory capacity for the administration of student funds or governmental funds unless the commissioner makes a written determination that there is a direct relationship between one or more of such previous offenses and the license sought, or that issuance of the license would create an unreasonable risk to property or to the safety, education or welfare of specific individuals or the general public. In making such determination, the commissioner shall be guided by the factors set forth in section seven hundred fifty-three of the correction law. For purposes of this subdivision, “ownership or control interest” means: with respect to a school that is organized as or owned by a corporation, a position as an officer or director of such corporation; or, with respect to a school that is organized as or owned by a partnership, a position as a partner; or any other interest totaling ten percent or more, whether direct or indirect, in the total equity or assets of such school.

c. The commissioner may deny, suspend, revoke or decline to renew any license (1) if the significance of the convictions or administrative violations warrant such action or (2) if the commissioner determines that a school did not make any disclosure required by this subdivision.

  1. If, during the two year period for which a license or registration is granted, the commissioner determines that a school’s financial condition may result in the interruption or cessation of instruction or jeopardize student tuition funds, the commissioner may, upon notice to the school, place the school on probation for a period of no more than thirty days, during which time the school and the department must make efforts to resolve the problems at the school. If no resolution can be attained, a hearing, pursuant to subdivisions two and three of section five thousand three of this article will be scheduled. Such probation may include additional monitoring, inspections, limitations on enrollment, teaching out some or all of a school’s present students or temporary cessation of instruction.
  2. No license or registration granted under this section shall be transferable or assignable without the approval of the commissioner. Any transfer or assignment of any interest totaling ten percent or more, whether direct or indirect, in the total equity or assets of a school shall be deemed a transfer of such school’s license or registration. The commissioner shall approve or deny a transfer or assignment based on the requirements set forth in subdivisions three and four of this section. Such approval or denial, together with the reasons for denial, shall be transmitted in writing within ninety days of the receipt of the complete application by the commissioner. Upon a showing of good cause as to why the applicant could not obtain the commissioner’s approval prior to a transfer or assignment, the commissioner shall temporarily approve the transfer or assignment for a period not to exceed forty-five days and for such additional periods as the commissioner may deem appropriate.
  3. No licensed or registered school shall discontinue operation or surrender its license or registration unless thirty days written notice of its intention to do so and a plan for maintenance of safe keeping of the records of the school is provided to the commissioner. However, upon good cause shown, the commissioner may waive the thirty days notice requirement.
  4. Annual supervision fund and tuition reimbursement fund assessment. a. The commissioner shall annually assess each school a total percentage of that school’s gross tuition pursuant to subdivision three of section five thousand two of this article, as determined by the annual financial statement or annual audited financial statement required by this article. This assessment shall be based upon each school’s gross tuition from the previous year, and shall be payable to the commissioner in equal quarterly installments which shall be due on June first, September first, December first and March first.

b. (i) Beginning April first, nineteen hundred ninety-one, such annualized assessment shall be one percent.

(ii) Beginning July first, nineteen hundred ninety-four, such annualized assessment shall be nine-tenths of one percent.

(iii) Beginning April first, nineteen hundred ninety-five, and in each succeeding year, such annualized assessment shall be eight-tenths of one percent.

c. (i) Of the total assessment provided for herein, three-tenths of one percent shall accrue to the credit of the tuition reimbursement fund pursuant to section five thousand seven of this article.

(ii) The balance of the total assessment provided for herein shall be dedicated to fund the department’s supervision and regulation of licensed private schools and registered business schools pursuant to an annual appropriation and an annual plan of expenditure prepared by the commissioner and approved by the director of the budget. Following the close of each fiscal year, the commissioner, in consultation with the director of the budget, shall determine if the balance in the proprietary vocational school supervision fund for such fiscal year exceeded the amount required for the support of the department’s supervisory activities taking into account projected revenues and expenditures for the subsequent fiscal year. To the extent that a surplus is identified, the commissioner, with the approval of the director of the budget, shall direct the transfer of such surplus to the tuition reimbursement fund.

d. Payments made within thirty days following the due date shall be subject to interest at one percent above the prevailing prime rate. Thereafter, late payments may result in suspension of licensure by the commissioner. Payments required by this subdivision shall be considered a condition of licensure or registration.

  1. Proprietary vocational school supervision account. a. There is hereby established an account within the state special revenue fund to be known as the “proprietary vocational school supervision account”.

b. Notwithstanding any other provision of law, the commissioner is hereby authorized and directed to receive for deposit by the comptroller to the credit of the proprietary vocational school supervision account any revenues available pursuant to this article and regulations of the commissioner.

c. The comptroller is further authorized and directed to lend money to this account from the general fund or any other fund, which loans shall be limited to the amounts immediately required to meet disbursements, made in pursuance of an appropriation by law and authorized by a certificate of approval issued by the director of the budget with copies thereof filed with the comptroller and the chairpersons of the senate finance committee and the assembly ways and means committee. The director of the budget shall have determined that the amounts to be so loaned are receivable on account or are otherwise readily available for payment. When making loans, the comptroller shall establish appropriate accounts and if the loan is not repaid by the end of the month, provide on or before the fifteenth day of the following month to the director of the budget, and the chairpersons of the senate finance committee and the assembly ways and means committee, an accurate accounting and reporting of the financial resources of each such fund at the end of such month. Within ten days of receipt of such accounting and reporting, the director of the budget shall provide to the chairpersons of the senate finance committee and the assembly ways and means committee an expected schedule of repayment by fund and by source for each outstanding loan. Repayment shall be made by the comptroller by transfer of the first cash receipts of this fund.

d. The comptroller is also hereby authorized and directed to permit interest earnings on any account balances to accrue to the benefit of this account.

e. Monies shall be payable from the fund on the audit and warrant of the comptroller on vouchers approved by the commissioner or by an officer or employee of the commissioner designated by the commissioner.

§5002. Standards for licensed private schools and registered business schools

Any school licensed or registered pursuant to section five thousand one of this article shall be organized and conducted only as a school and shall be subject to the jurisdiction of the department exclusively, or in conjunction with such other state agency or department or district attorney upon which jurisdiction has also been conferred by law. Such schools shall be subject to and comply with the provisions of this section.

  1. Standards. a. No program of such schools shall be conducted in a factory or commercial establishment, except where the use of facilities or equipment of such factory or commercial establishment is permitted for necessary or desirable educational purposes and objectives.

b. For every such school, the commissioner shall set forth in regulation standards governing all of the following:

(1) criteria for admission, which shall provide that students at least possess a high school diploma or its equivalent or demonstrate the ability to benefit from the instruction, except that in the case of students who do not possess a high school diploma or its equivalent, certification of the students’ ability to benefit from instruction shall be provided to the commissioner as provided in paragraph c of this subdivision;

(2) the standards and the methods of instruction;

(3) the equipment available for instruction with the maximum enrollment that such equipment and physical plant will accommodate;

(4) the qualifications and experience of teaching and management personnel;

(5) the form and content of the student enrollment agreement or contract, provided that such agreement or contract shall be written in the same language as that principally used in the sales presentation;

(6) the methods of collecting tuition;

(7) eligibility criteria for programs that will require licensure;

(8) the sufficiency and suitability of the resources available for the support of such school; and

(9) counseling provided to students.

c. Notwithstanding any other provisions of this article to the contrary, the commissioner shall define alternative educational and curriculum standards for any program of less than forty hours designed exclusively for non-occupational, personal enrichment purposes.

d. Admission of students under the ability to benefit provision.

(1) Certification. Each school admitting students who do not possess at least a high school diploma or its equivalent shall certify to the satisfaction of the commissioner that such prospective students have been administered and passed an examination which has been approved by the commissioner to determine their ability to benefit from the chosen curriculum prior to admission to the curriculum or course of study. Such examination shall, whenever possible, be a nationally recognized test appropriate for the course of instruction which has been approved by the commissioner. The examination results of each such student who is admitted shall be made available to the commissioner at a time prescribed by the commissioner and, together with the student’s original answer sheet, shall be maintained by the school in the student’s permanent record. For any student failing to achieve the necessary score on such examination for enrollment, the school shall be required to provide such student with a listing of appropriate counseling and educational opportunities available to the student at no cost, as determined by the commissioner.

(2) Counseling. Each school admitting students who do not possess a high school diploma or its equivalent shall develop a plan to be approved by the commissioner for the counseling of such students on an individual basis on matters including but not limited to the student’s ability to progress in the curriculum, the student’s financial aid rights and responsibilities, the availability of programs to earn a high school equivalency diploma, including programs provided at no cost to the student, and the potential of the training to prepare the student for available employment opportunities within the region.

(3) Compliance. (A) The commissioner shall monitor compliance with this paragraph and verify the examination and counseling process and student examination scores. Such procedures may include but not be limited to an annual, statistically significant, random sampling of the examinations taken by prospective students of each school administering such examinations.

(B) Such procedures shall provide that the examinations of each school be inspected on site at least once annually.

(C) In the event that the commissioner determines that the school is out of compliance with the examination process and counseling, the commissioner shall require that examinations and counseling for students admitted under the ability to benefit provision and the counseling required by subparagraph two of this paragraph be conducted off the premises of the school by an entity approved by the commissioner for such period of time as the commissioner deems appropriate, the cost of which shall be incurred by the school.

  1. Inspections. a. Every school licensed pursuant to this article shall maintain adequate and accurate records for a period of not less than six years at its principal place of business within this state. Such records shall be maintained in a manner and form prescribed by the commissioner and shall be made available to the department and the higher education services corporation upon request.

b. In addition to other requirements in this article, the information to be made a part of the record shall include, but not be limited to:

(1) names and addresses of each enrolled student;

(2) the course of study offered by the institution;

(3) the name and address of its faculty, together with a record of the educational qualifications of each;

(4) the graduation date of each student; and

(5) for each student who fails to complete his or her program, the student’s last date of attendance and, if applicable, the amount of any refund paid to, or on behalf of, the student and the date the refund was made.

c. The commissioner shall conduct periodic unscheduled inspections of licensed private schools and registered business schools to monitor compliance with the provisions of this article or the rules or regulations promulgated thereunder or any final order or decision of the commissioner made pursuant to this article. The department shall conduct an inspection of each school at least once every two years. The department shall annually inspect schools: (1) having a high percentage of students admitted under ability to benefit criteria as determined by the commissioner; (2) having a high student loan default rate as determined by the commissioner in a manner consistent with federal standards; or (3) which are the subject of a high volume of complaints by students or other parties. All schools shall provide upon request of the department, any and all records necessary to review compliance with the provisions of this article.

d. Student permanent records, as defined in the regulations of the commissioner, shall be maintained for a period of twenty years.

  1. Tuition liability. a. The tuition charge for programs approved for participation in student financial aid general award programs pursuant to articles thirteen and fourteen of this chapter shall be apportioned on the basis of terms, quarters or semesters. For the purposes of this section, the terms “term”, “quarter” and “semester” shall be defined in regulations by the commissioner.

b. The tuition refund policy for the first term or quarter of any program at schools licensed or registered pursuant to section five thousand one of this article shall be as follows:

(1) For programs which are divided into quarters of up to fourteen weeks, the school shall evenly divide the total tuition charges among the number of quarters. After instruction is begun in a school, if a student withdraws or is discontinued, the school may retain no more than:

(i) zero percent of the quarter’s tuition if the termination is during the first week of instruction; or

(ii) twenty-five percent of the quarter’s tuition if the termination is during the second week of instruction; or

(iii) fifty percent of the quarter’s tuition if the termination is during the third week of instruction; or

(iv) seventy-five percent of the quarter’s tuition if the termination is during the fourth week of instruction; or

(v) one hundred percent of the quarter’s tuition if the termination occurs after the fourth week of instruction.

(2) For programs organized by terms of fifteen, sixteen, seventeen or eighteen weeks apiece, the school shall evenly divide the total tuition charges among the number of terms. After instruction is begun in a school, if a student withdraws or is discontinued, the school may retain no more than:

(i) zero percent of the term’s tuition if the termination is during the first week of instruction; or

(ii) twenty percent of the term’s tuition if the termination is during the second week of instruction; or

(iii) thirty-five percent of the term’s tuition if the termination is during the third week of instruction; or

(iv) fifty percent of the term’s tuition if the termination is during the fourth week of instruction; or

(v) seventy percent of the term’s tuition if the termination is during the fifth week of instruction; or

(vi) one hundred percent of the term’s tuition if the termination occurs after the completion of the fifth week of instruction.

c. (1) The tuition refund policy for the second term or quarter of any program at schools licensed or registered pursuant to section five thousand one of this article shall be as follows:

(A) For programs which are divided into quarters of up to fourteen weeks, the school shall evenly divide the total tuition charges among the number of quarters. After instruction is begun in a school, if a student withdraws or is discontinued, the school may retain no more than:

(i) twenty-five percent of the quarter’s tuition if the termination is during the first week of instruction; or

(ii) fifty percent of the quarter’s tuition if the termination is during the second week of instruction; or

(iii) seventy-five percent of the quarter’s tuition if the termination is during the third week of instruction; or

(iv) one hundred percent of the quarter’s tuition if the termination occurs after the third week of instruction.

(B) For programs organized by terms of fifteen, sixteen, seventeen or eighteen weeks apiece, the school shall evenly divide the total tuition charges among the number of terms. After instruction is begun in a school, if a student withdraws or is discontinued, the school may retain no more than:

(i) twenty percent of the term’s tuition if the termination is during the first week of instruction; or

(ii) thirty-five percent of the term’s tuition if the termination is during the second week of instruction; or

(iii) fifty percent of the term’s tuition if the termination is during the third week of instruction; or

(iv) seventy percent of the term’s tuition if the termination is during the fourth week of instruction; or

(v) one hundred percent of the term’s tuition if the termination occurs after the completion of the fourth week of instruction.

(2) Notwithstanding the provisions of subparagraph one of this paragraph, the tuition refund policy set forth in paragraph b of this subdivision shall apply unless the school demonstrates that there are no significant educational changes in the educational program of the student, such changes as defined in regulations of the commissioner.

d. The tuition refund policy for the third and any subsequent term or quarter of any program licensed or registered pursuant to section five thousand one of this article shall be the policy set forth in subparagraph one of paragraph c of this subdivision.

e. No program shall have a term in excess of eighteen weeks.

f. The amount of the refund shall be calculated based on the last day of student attendance.

g. (1) Any refund due to a student shall be paid by the school within forty-five days of the date on which the student withdraws from the program. For the purposes of this article, such date shall be the earliest of (i) the date on which the student gives written notice to the school or (ii) the date on which the student is deemed to have withdrawn pursuant to subparagraph two of this paragraph.

(2) If a student has failed to attend classes for a period of thirty calendar days, the school shall send by regular mail a notice to the student that the student shall be deemed to have withdrawn from the program if the student does not notify the school to the contrary within twelve days from the date on which the letter is sent. If the student fails to respond within such twelve-day period, the student shall be deemed to have withdrawn and the school shall notify the higher education services corporation that the student has withdrawn and the date of the withdrawal.

h. Upon payment of a refund to a lender, the school shall forthwith send a notice to a person designated by the president of the higher education services corporation upon a form approved by the president that such refund was made.

i. If the higher education services corporation fails to receive the notice required by paragraph h of this subdivision, it shall forthwith notify the student of his or her right to a refund and the commissioner of such failure. Upon receipt of such notification, the commissioner shall take appropriate action against the school.

  1. Curriculum approval. a. An application shall be made for the initial approval of a curriculum or course and shall include such information as the commissioner may require by regulation. Approval shall be valid for a period not to exceed three years.

b. In approving curriculum, the commissioner shall take into consideration the following:

(1) that the entrance requirements demonstrate that students possess the skills, competencies and prerequisite knowledge needed to progress in the curriculum;

(2) that the content will enable the student to develop those skills and competencies required for employment in the occupational area for which the curriculum was developed;

(3) that the school will utilize appropriate instructional methods; and

(4) that the instructional equipment used within the curriculum is comparable to the equipment currently used by business or industry in the occupational area for which the curriculum was developed.

c. (1) If the evaluation of a particular course or facility requires the services of an expert not employed by the department, the department shall retain such expert and the school shall reimburse the department for the reasonable cost of such services.

(2) If, in the interest of expediting the approvals, a school requests the department to employ an outside consultant, the school shall reimburse the department for the reasonable cost of such services.

d. The commissioner shall act on applications for approval of a course or curriculum within one hundred twenty days of receipt of a complete application and, in the case of a denial, shall set forth in writing the reasons for such denial.

  1. Application for reapproval. a. An application shall be made for reapproval of a curriculum or course. Such application shall be considered timely if submitted at least one hundred twenty days prior to the expiration of the current approval.

b. Curriculum reapproval standards. (1) The commissioner shall prescribe by regulation, standards for reapproval after the first year of licensure, of any curriculum or course based upon factors including but not limited to the following, as appropriate:

(i) for each curriculum or course, the percentage of students who have dropped out;

(ii) the acquisition of a specified minimum level of skills by the students; and

(iii) for each curriculum or course, the percentage of students placed in occupations related to the instruction, where applicable.

(2) Such standards shall be consistent with those applied to all non-degree career education programs.

c. Reapproval contingency. Reapproval of a curriculum or course shall be contingent upon a determination by the applicant that the curriculum or course has met the curriculum reapproval standards set forth in this subdivision. Except as otherwise provided in paragraph d of this subdivision, no such curriculum or course or substantially similar curriculum or course may be given without reapproval by the commissioner.

d. When timely and complete application is made for the reapproval of a curriculum or course, and no written denial is made thirty days prior to the date of expiration of the existing approval, the curriculum or course shall be deemed to be approved for the period of the curriculum. If the application is denied, the commissioner shall set forth in writing the reasons for such denial.

e. The commissioner may provide in regulations for reapproval procedures, consistent with this subdivision, for applications submitted less than one hundred twenty days from the expiration date.

f. The commissioner shall act upon enrollment agreements and catalogs within ninety days of receipt, and, in the case of denial, shall set forth in writing the reasons for such denial. If the commissioner fails to act within ninety days, a catalog shall be deemed approved for one year and an enrollment agreement shall be deemed approved until the commissioner acts upon it.

  1. a. Teachers and directors. No person shall be employed by a private school as a director or teacher who is not licensed in such capacity by the department pursuant to regulations of the commissioner, which shall take into consideration such factors as moral character, educational qualifications and practical experience. The application shall include a statement, signed by the president or chief executive officer of the school, certifying that to the best of his or her knowledge, the applicant is able to meet the educational qualifications and practical experience set forth in the commissioner’s regulations. Such application shall be considered timely if mailed to the commissioner and postmarked four days prior to employment at the school and must be completed within twenty days thereafter; provided, however, that the commissioner may, for good cause shown, extend the time within which to complete the application. When a complete application is made, the commissioner shall act upon such application within thirty days. If no written denial is made within the thirty days, the application shall be deemed to be approved until the commissioner acts upon it or until the end of the term or semester, whichever occurs first. If a written denial is made after the thirty day period, the commissioner may allow the applicant to teach at the school for the remainder of the term or semester if the commissioner determines that the removal of the teacher would not be in the best educational interest of the students. This subdivision shall not apply to directors or teachers employed on or before July first, nineteen hundred seventy-two. Teachers’ licenses issued on or after January first, nineteen hundred eighty-seven shall be valid at all registered business schools for the courses, curricula, or occupations indicated on the license.

b. A school director shall have access to all student and school records which shall be maintained in accordance with this article and the regulations of the commissioner and shall make such records available to the commissioner or the commissioner’s designee upon request during an on-site school inspection.

  1. Advertising. The commissioner is authorized to commence a disciplinary proceeding pursuant to this article for false, misleading, deceptive or fraudulent advertising pursuant to regulations promulgated by the commissioner which shall be consistent with article twenty-two-A of the general business law. The department shall issue guidelines as to appropriate advertising content. In developing such guidelines, the department shall consider advertising for similar programs offered by various educational institutions. In a disciplinary action or other proceeding, such guidelines shall not be presumptive evidence that particular advertising is appropriate.
  2. The higher education services corporation shall adopt rules and regulations to effectuate the cessation of collection activities by lenders or by the corporation in cases in which a licensed private vocational school or a registered business school at which the student enrolled has closed or ceased its teaching activities during the academic period for which the loan was made or guaranteed.

§5003. Disciplinary actions, hearings and penalties

  1. Disciplinary action. a. The commissioner for good cause, after affording a school an opportunity for a hearing, may take disciplinary action as hereinafter provided against any school authorized to operate under this article.

b. Good cause shall include, but not be limited to, any of the following:

(1) fraudulent statements or representations to the department, the public or any student in connection with any activity of the school;

(2) violation of any provision of this article or regulation of the commissioner;

(3) conviction or a plea of no contest on the part of any owner, operator, director or teacher:

(A) of any of the following felonies defined in the penal law: bribery involving public servants; commercial bribery; perjury in the second degree; rewarding official misconduct; larceny, in connection with the provision of services or involving the theft of governmental funds; offering a false instrument for filing; falsifying business records; tampering with public records; criminal usury; scheme to defraud; or defrauding the government; or

(B) in any other jurisdiction of an offense which is substantially similar to any of the felonies defined in clause (A) of this subparagraph and for which a sentence to a term of imprisonment in excess of one year was authorized and is authorized in this state regardless of whether such sentence was imposed; or

(4) incompetence of any owner or operator to operate a school.

c. (1) Any person who believes he or she has been aggrieved by a violation of this section shall have the right to file a written complaint within: (A) two years of the alleged violation; or (B) one year of receiving notification from the higher education services corporation or any other guarantee agency that the student has defaulted on a student loan payment; provided, however, that no complaint may be filed after three years from the date of the alleged violation. The commissioner shall maintain a written record of each complaint that is made. The commissioner shall also send to the complainant a form acknowledging the complaint and requesting further information if necessary and shall advise the director of the school that a complaint has been made and, where appropriate, the nature of the complaint.

(2) The commissioner shall within twenty days of receipt of such written complaint commence an investigation of the alleged violation and shall within ninety days of the receipt of such written complaint issue a written finding. The commissioner shall furnish such findings to the person who filed the complaint and to the chief operating officer of the school cited in the complaint. If the commissioner finds that there has been a violation of this section, the commissioner shall take appropriate action.

(3) The commissioner may initiate an investigation without a complaint.

  1. Hearing procedures. a. Upon a finding that there is good cause to believe that a school, or an officer, agent, employee, partner or teacher, has committed a violation of this article, the commissioner shall initiate proceedings by serving a notice of hearing upon each and every such party subject to the administrative action. The school or such party shall be given reasonable notice of hearing, including the time, place, and nature of the hearing and a statement sufficiently particular to give notice of the transactions or occurrences intended to be proved, the material elements of each cause of action and the civil penalties and/or administrative sanctions sought.

b. Opportunity shall be afforded to the party to respond and present evidence and argument on the issues involved in the hearing including the right of cross examination. In a hearing, the school or such party shall be accorded the right to have its representative appear in person or by or with counsel or other representative. Disposition may be made in any hearing by stipulation, agreed settlement, consent order, default or other informal method.

c. (1) The commissioner shall designate an impartial hearing officer to conduct the hearing, who shall be empowered to:

(A) administer oaths and affirmations; and

(B) regulate the course of the hearings, set the time and place for continued hearings, and fix the time for filing of briefs and other documents; and

(C) direct the school or such party to appear and confer to consider the simplification of the issues by consent; and

(D) grant a request for an adjournment of the hearing only upon good cause shown.

(2) The strict legal rules of evidence shall not apply, but the decision shall be supported by substantial evidence in the record.

  1. Decision after hearing. The hearing officer shall make written findings of fact and conclusions of law, and shall also recommend in writing to the commissioner a final decision including penalties. The hearing officer shall mail a copy of his findings of fact, conclusions of law and recommended penalty to the party and his or her attorney, or representative. The commissioner shall make the final decision, which shall be based exclusively on evidence and other materials introduced at the hearing. If it is determined that a party has committed a violation, the commissioner shall issue a final order and shall impose penalties in accordance with this section. The commissioner shall send by certified mail, return receipt requested, a copy of the final order to the party and his or her attorney, or representative. The commissioner shall, at the request of the school or such party, furnish a copy of the transcript or any part thereof upon payment of the cost thereof.
  2. Judicial review. Any order imposed under this section shall be subject to judicial review under article seventy-eight of the civil practice law and rules, but no such determination shall be stayed or enjoined except upon application to the court after notice to the commissioner.
  3. Enforcement proceedings. The attorney general, in his or her own capacity, or at the request of the commissioner, may bring an appropriate action or proceeding in any court of competent jurisdiction to recover a fine or otherwise enforce any provision of this article.
  4. Civil penalties and administrative sanctions. a. A hearing officer may recommend, and the commissioner may impose, a civil penalty not to exceed two thousand five hundred dollars for any violation of this article. In the case of a second or further violation committed within the previous five years, the liability shall be a civil penalty not to exceed five thousand dollars for each such violation.

b. Notwithstanding the provisions of paragraph a of this subdivision, a hearing officer may recommend, and the commissioner may impose, a civil penalty not to exceed twenty-five thousand dollars for any of the following violations: (1) operation of a school without a license in violation of section five thousand one of this article; (2) operation of a school knowing that the school’s license has been suspended or revoked; (3) use of false, misleading, deceptive or fraudulent advertising; (4) employment of recruiters on the basis of a commission, bonus or quota, except as authorized by the commissioner; (5) directing or authorizing recruiters to offer guarantees of jobs upon completion of a course; (6) failure to make a tuition refund when such failure is part of a pattern of misconduct; (7) the offering of a course or program that has not been approved by the commissioner; (8) admitting students, who subsequently drop out, who were admitted in violation of the admission standards established by the commissioner, where such admissions constitute a pattern of misconduct and where the drop out resulted at least in part from such violation; (9) failure to provide the notice of discontinuance and the plan required by subdivision seven of section five thousand one of this article; or (10) violation of any other provision of this article, or any rule or regulation promulgated pursuant thereto, when such violation constitutes part of a pattern of misconduct which significantly impairs the educational quality of the program or programs being offered by the school. For each enumerated offense, a second or further violation committed within the previous five years, shall be subject to a civil penalty not to exceed fifty thousand dollars for each such violation.

c. In addition to the penalties authorized in paragraphs a and b of this subdivision, a hearing officer may recommend and the commissioner may impose any of the following administrative sanctions: (1) a cease and desist order; (2) a mandatory direction; (3) a suspension or revocation of a license; (4) a probation order; or (5) an order of restitution.

d. Penalty factors. In the recommendation of any penalty, a hearing officer shall, at a minimum, give due consideration, where applicable, to the good faith of the violator; the performance of the school with respect to student placement and retention rates, and students’ acquisition of skills; the gravity of the violation; and the harm caused to the student.

e. The commissioner may suspend a license or registration upon the failure of a school to pay any fee, fine, penalty, settlement or assessment as required by this article unless such failure is determined by the commissioner to be for good cause.

f. All civil penalties, fines and settlements received after April first, nineteen hundred ninety shall accrue to the credit of the tuition reimbursement fund established pursuant to section ninety-seven-hh of the state finance law.

  1. Criminal penalties. In addition to any other penalties elsewhere prescribed:

a. Any person who knowingly violates any of the provisions of this article shall be guilty of a class B misdemeanor punishable in accordance with the penal law. If the conviction is for a second offense committed within five years of the first conviction under this paragraph, such person shall be guilty of a class A misdemeanor punishable in accordance with the penal law.

b. Any person who knowingly (1) falsifies or destroys school or other business records relating to the operation of the school with intent to defraud; (2) fails to make a tuition refund as required by section five thousand two of this article with the intent to defraud more than one person; or (3) operates a school without a valid license required by section five thousand one of this article shall be guilty of a class A misdemeanor punishable in accordance with the penal law.

c. Any person who, having been convicted within the past five years of failing to make a tuition refund in violation of subparagraph two of paragraph b of this subdivision, knowingly and intentionally engages in a scheme constituting a systematic ongoing course of conduct involving the wrongful withholding of refunds in violation of section five thousand two of this article with the intent to defraud ten or more persons, and so withholds tuition refunds in excess of one thousand dollars, shall be guilty of a class E felony punishable in accordance with the penal law.

d. Upon a determination that there exist reasonable grounds to believe that a violation of this article has been committed, or that any other crime has been committed in connection with the operation of a school required to be licensed pursuant to this article, the commissioner shall refer such determination, and the information upon which it is based, to the attorney general or to the appropriate district attorney. The attorney general or a district attorney may bring an action on his or her own initiative.

  1. 8. Private right of action. A student injured by a violation of this article may bring an action against the owner or operator of a licensed private school or registered business school for actual damages or one hundred dollars, whichever is greater. A court may, in its discretion, award reasonable attorney’s fees to a prevailing plaintiff.

§5004. Private school agent’s certificate

  1. a. No party may, for a consideration or remuneration procure, solicit or enroll any student for instruction in or given by any school within or without the state of New York, unless (i) the party is a salaried employee of the school and (ii) the party shall have secured a private school agent’s certificate from the department pursuant to regulations of the commissioner.

b. Upon submission of a complete new application for licensure, an applicant may procure, solicit or enroll any student for instruction; provided, however, that such applicant be in possession at all times during the procurement, solicitation or enrollment processes of a temporary approval certificate which the commissioner shall issue within five days of receipt by mail or on the same day at designated offices. A school shall submit such application for licensure on or before the first day of employment of such individual.

c. No consideration or remuneration shall be paid in the form of a fee per student enrolled by a private school agent except pursuant to the following limitations:

(1) a school may pay twenty-five percent of the consideration or remuneration after the student has completed three weeks of the program;

(2) a school may pay the remainder of the consideration or remuneration after the student has completed eight weeks of the program;

(3) the total amount of the consideration or remuneration paid per student may not exceed one percent of the annual salary paid to the agent.

d. In promulgating regulations in relation to the issuance of such certificates and the conduct of the holders of such certificates, the commissioner shall give consideration to:

(1) good moral character of the candidate for such certificate;

(2) the use of ethical and fair practices in the presentation of the school’s offerings; and

(3) whether the prospective agent has within five years of the date of the application violated any provision of this article or the regulations of the commissioner adopted pursuant to this article.

  1. Instruction, as contemplated by this section, shall be any plan or method for teaching any subject or subjects in any form or manner, including correspondence or home study.
  2. Exempted from the requirements of this section are persons acting solely for schools which are not required to be licensed or are specifically exempted from the licensing or registration requirements of this article. Persons who are paid to procure, solicit or enroll students on the premises of schools required to be licensed or registered shall not be exempt from the provisions of this section. The certification requirements of this section shall not apply to persons receiving gifts or other non-monetary considerations valued at not more than twenty-five dollars from a school from which they have graduated or are currently enrolled for each student referred for enrollment at the school.
  3. Application and renewal application for a private school agent’s certificate shall be filed on forms to be prescribed and provided by the commissioner. Said certificate shall be valid for two years from the date of issuance. Certificates which have been renewed shall be valid for a period of two years from the expiration date of the certificate which has been renewed. Every applicant and renewal applicant shall pay to the department a fee of one hundred dollars.
  4. No recovery shall be had against any student or enrollee and full recovery shall be made on an contract for or in connection with any instruction if the student or enrollee was procured, solicited or enrolled outside or on the school premises by a person paid to procure, solicit or enroll students but not having a valid private school agent’s certificate pursuant to the provisions of this section at the time that the contract was negotiated or executed or the sale of the instruction was made, or by a person who holds such a certificate but has made fraudulent or improper claims. Each enrollment agreement shall include, where applicable, the name of the agent responsible for procuring, soliciting or enrolling the student or enrollee.
  5. The issuance of such a private school agent’s certificate shall not be deemed to constitute approval of any course or of the person or institution offering, conducting or administering the same.
  6. The commissioner, after giving to the certificate holder due notice and opportunity to be heard, may fine a private school agent, suspend or revoke a private school agent’s certificate at any time for failure to comply with the provisions of the law or the regulations of the commissioner or for any other good cause.
  7. No employer of a private school agent other than a school may indemnify, save harmless or otherwise reimburse any agent for the amount of any fines imposed pursuant to this section. If a person fined pursuant to this section can demonstrate to the satisfaction of the commissioner that the action for which the fine was imposed was undertaken pursuant to explicit instructions from the employer, the employer shall indemnify, save harmless, and reimburse that person for the fine and shall pay to the commissioner an additional fine of an equal amount.

§5005. Disclosure to students

The school shall disseminate to all prospective and enrolled students through an enrollment contract or agreement or other appropriate publications or documents, and in appropriate languages as required by the commissioner in regulation:

a. information concerning the school, including but not limited to:

(1) a description of the courses offered;

(2) program objectives and the length of the program;

(3) a schedule of tuition payments, fees and all other charges and expenses necessary for completion of the course or program;

(4) the tuition refund and contract cancellation policies;

(5) a description of the faculty and other instructional personnel and their qualifications;

(6) the names of associates, agencies or governmental bodies which accredit, approve or license the school;

(7) a description of any special facilities and services available to handicapped students; and

(8) any other items identified by the commissioner in regulation following consultation with the advisory council;

b. if the school advertises job placement rates as means of attracting students to enroll in the school, the most recent available data on employment and graduation statistics for students who have attended that school;

c. information concerning any student financial assistance, including a description of the procedures and forms, student eligibility requirements and the rights and responsibilities of students receiving financial aid;

d. the pass rate of graduates of the program for the most recent calendar year on any licensure or certification examination required by the state for employment in the particular vocational, trade, or career field;

e. the process for obtaining a tuition refund from the tuition reimbursement fund and the availability of loan forgiveness in the event the school closes while the student is in attendance;

f. a sample enrollment contract, a sample cancellation form developed by the department in consultation with the advisory council and a tuition reimbursement fund claim form; and

g. a description of the complaint procedures established pursuant to this article.

§5006. Teachout plans

  1. A school may submit a teachout plan to the commissioner for approval pursuant to regulations established by the commissioner. A teachout plan shall consist of a contract between a registered business or licensed private school, with another school, hereinafter called the teachout school, so that in the event that the registered business or licensed private school ceases instruction, the teachout school will provide the necessary instruction specified in a student’s original enrollment agreement with the school ceasing instruction. A teachout plan may employ more than one teachout school to provide instruction to students in the school ceasing instruction. Schools under common ownership but having separate licenses or registrations may, subject to the approval of the commissioner, enter into teachout agreements.
  2. A teachout plan shall include the following provisions: (a) the teachout school must offer courses of study that are substantially similar to those offered in the school ceasing instruction;

(b) teachout schools must be located in the geographic area in which the school ceasing instruction was located;

(c) all provisions for a teachout plan must be included in the enrollment agreement signed by the student; and

(d) the teachout school shall agree to fulfill the enrollment agreement signed by the student at the school ceasing instruction.

  1. The registered business or licensed school shall provide to the teachout school and to the department immediately upon closure the following information:

(a) Copies of the academic and financial records for all students in attendance at the school at the projected time of closure;

(b) A listing of all such students presently in attendance including their names, addresses, social security numbers, curriculum that each student is enrolled in and the number of hours the students will have completed at the time of the school closure.

  1. The department will provide to the teachout school, immediately upon notification of a school closing, a copy of each approved curriculum that the closing school is presently offering.
  2. The commissioner shall require all teachout schools to address the following issues:

(a) Integration of students into a curriculum which may be different from the curriculum in which they are currently receiving instruction;

(b) Assessments of students’ progress so that they may be placed into an appropriate course;

(c) Provision of remedial instruction to students who are found to be deficient in one or more course areas upon their initial assessment;

(d) Provision by the teachout school to adhere to the required student/teacher ratios and room capacities; and

(e) Compliance with statutory and regulatory requirements during the teachout.

  1. The student shall not be subject to any costs beyond the total costs identified in the original enrollment agreement.
  2. A student may decline to pursue instruction at the teachout school and may instead seek a refund pursuant to section five thousand seven of this article.

§5007. Tuition reimbursement fund

  1. Except as otherwise provided in subdivision six of this section, the portion of the annual assessment of schools registered and licensed pursuant to section five thousand one of this article as prescribed in subdivision eight of such section and all fines, penalties and settlements received pursuant to this article shall be transferred upon receipt into the tuition reimbursement fund, which is to be managed by the commissioner.
  2. The comptroller is hereby authorized and directed to permit interest earnings on any account balance to accrue to the benefit of this account.
  3. a. The commissioner shall develop a complaint form and provide such form to students. In order to claim a refund, a student shall apply to the fund with a complaint form pursuant to the requirements of section five thousand three of this article. Except as otherwise provided in this article, the commissioner shall compute the refund, if any, using the refund formula established by subdivision three of section five thousand two of this article.

b. Claimants who had been enrolled in schools which have not closed or ceased operation shall be required to show in a manner determined by the commissioner that:

(1) the student is eligible for a refund;

(2) the student has made a request to the school for a refund; and

(3) the school has failed to make the refund within the time period required by this article.

c. The commissioner shall act on each refund request within thirty business days of such request.

  1. Students may be eligible for refunds under this section as follows:

a. A student who is offered a teachout plan for the curriculum in which the student was enrolled at the time the school closed or ceased operation, which has been approved by the department, may elect to continue instruction pursuant to the teachout plan or may decline to continue instruction and may instead apply for a full refund under this section. The option to apply for a refund shall extend to the end of the first week of instruction at the teachout school.

b. A student who was enrolled in a school which has not closed or ceased operation is entitled to a refund computed in accordance with the refund policy established by subdivision three of section five thousand two of this article.

c. A student who was enrolled in a school at the time the school closes or ceases operation is entitled to a refund of the full amount of prepaid tuition. In addition, commencing September first, nineteen hundred ninety-three, a student who drops out of a school, where such school closes within fourteen days of the student’s termination and prior to completion of such student’s program as specified in the enrollment agreement, shall be entitled to a refund of the full amount of prepaid tuition.

d. A student who was enrolled in a school which has not closed or ceased operation, and who has dropped out, is entitled to a full refund of all tuition, fees and other required costs paid by the student if the student has submitted a complaint form to the commissioner and the commissioner has determined that a violation of this article has occurred which warrants a refund. The commissioner shall promulgate regulations identifying those violations that warrant a refund.

e. Commencing September first, nineteen hundred ninety-three, a student who drops out of a school, which subsequently closes, and who is owed a refund for the failure of such school to follow the provisions enumerated in subdivision three of section five thousand two of this article shall be eligible for a refund from the tuition reimbursement fund according to the provisions of subdivision three of section five thousand two of this article.

f. Commencing September first, nineteen hundred ninety-three, any student enrolled in a school based upon an ability to benefit examination shall be eligible for a full refund, regardless of whether the student is currently enrolled, graduated or dropped out, if the school enrolled the student contrary to the provisions of the approved entrance requirements and the student complies with the requirements of subdivision one of section five thousand three of this article.

  1. a. For a student who had been enrolled in a school that has not closed or ceased operation, the refund shall be paid as follows:

(1) guaranteed student loans, if any, in which case the commissioner shall notify the student of such payment and shall be paid directly to the lender or guarantee agency where appropriate;

(2) actual personal tuition expenditures, if any; and

(3) tuition assistance program awards and other governmental aid.

b. For schools that have closed or ceased operation, the commissioner shall refund actual personal tuition expenditures to the student. The repayment of any loans incurred by the student as part of the actual personal tuition expenditures shall be paid directly to the lender or the guarantee agency where appropriate.

  1. a. Where a claim is paid to a student of an operating school, the commissioner shall immediately notify the school.

b. Within ten days of the receipt of the notice, the school shall either request a hearing to challenge the commissioner’s determination that a refund was owed to the student or reimburse the fund the amount paid to the claimant plus a penalty up to two times such amount. This payment shall also incur interest for each day it remains unpaid at an annual interest rate of one percent above the prime rate. The commissioner may promulgate streamlined procedures for conducting hearings pursuant to this paragraph. Any penalty assessed under this paragraph shall be in addition to any other penalties assessed pursuant to this article. Notwithstanding any other provision of law, penalties and interest paid pursuant to this paragraph shall accrue to the credit of the proprietary vocational school supervision account to support the costs associated with the hearings authorized in this subdivision.

  1. Notwithstanding the notice procedures described in subdivision three of this section, in the event of a school closing, the commissioner on his or her own initiative may take appropriate action in accordance with this section to process refund claims on behalf of all of the students of the closed school.
  2. Assignment of rights. Persons and entities receiving refunds under this section shall be deemed to have assigned or subrogated their tuition reimbursement rights to the commissioner on behalf of the tuition reimbursement fund only for the amount refunded by the tuition reimbursement fund. Within thirty days of any refund made pursuant to this section, the commissioner or the attorney general shall take appropriate action to recover the total amount of the refunds made, plus administrative costs, from the school.
  3. a. A student whose loan liability is exempted pursuant to section six hundred eighty-three of this chapter and is entitled to or owed a refund shall transfer to the higher education services corporation the right to claim the refund owed and due from the tuition reimbursement fund. In such event, the corporation shall be entitled to receive a refund for that portion of the claim not paid to the corporation by the United States Secretary of Education pursuant to the federal guaranteed loan program.

b. Any amounts remaining in the tuition reimbursement fund as of June first, nineteen hundred ninety-three and on every March thirty-first thereafter, shall be made available to the higher education services corporation for payment of student loans on which collection activity has ceased pursuant to the provisions of subdivision six of section six hundred eighty-three of this chapter. No amounts shall be paid to the higher education services corporation for loans on which collection activity has ceased because of the operation of section 437 of the Higher Education Act of 1965, as amended.

  1. Fund management.

a. As used in this subdivision, net balance is defined as the actual cash balance of the fund as determined by the commissioner on June thirtieth, nineteen hundred ninety-three and every three months thereafter. For the purpose of calculating the net balance, the commissioner shall not take into consideration any refunds made from the fund pursuant to paragraphs d and f of subdivision four of this section for the year immediately preceding the date on which the calculation is made.

b. In the event that the fund has accumulated a net balance in excess of one million eight hundred thousand dollars, the commissioner shall, with the approval of the director of the budget, waive an amount not to exceed the amount due for the next quarterly assessment pursuant to this section and subdivision nine of section five thousand one of this article. In such event, payment of future quarterly assessments shall be suspended until the net balance of the fund falls below one million three hundred thousand dollars.

c. In the event the net balance of the fund falls below one million three hundred thousand dollars, if the quarterly assessment has been suspended pursuant to paragraph b of this subdivision, it shall be reinstated for the next quarterly assessment and all subsequent quarterly assessments until the fund has accumulated a net balance in excess of one million eight hundred thousand dollars.

  1. Fund audit. The state comptroller shall annually audit or cause to be audited the tuition reimbursement fund and produce an annual financial statement according to generally accepted accounting principles.
  2. New schools. Within the first six months that a school begins operation, the commissioner shall assess such school an amount to be deposited into the fund in an amount to be determined by the commissioner.

§5008. Trust accounts

  1. If the commissioner determines that a school has demonstrated a pattern or practice of failing to make tuition refunds in a timely manner consistent with this article, the commissioner shall require a school to establish a trust account in a form or manner which the commissioner, after consultation with the advisory council, shall prescribe in regulations. The assets or funds contained in the trust account shall be maintained for the sole and exclusive benefit of the students.
  2. In making this determination, the commissioner shall consider the following factors: the number of refunds not paid by the school in a timely manner; the number of claims made to, or paid by, the tuition reimbursement fund; and a pattern of misconduct which substantially affects the financial interests of students or the state.

§5009. Reporting requirements

  1. The commissioner shall submit a report to the governor, the temporary president of the senate, the speaker of the assembly, the minority leader of the senate and the minority leader of the assembly beginning the fifteenth day of January after this section shall have become effective, and annually thereafter on that date, on the implementation and enforcement of this article, which shall include but not be limited to (i) curriculum approval and reapproval standards, (ii) student complaints, (iii) the resolution of disciplinary actions brought by the department or other appropriate state agency, (iv) the audited financial statements submitted by the schools, (v) tuition reimbursement fund activity, (vi) data regarding retention and completion rates for students enrolled in nondegree, appropriate degree or certificate programs of two years or less at registered business schools, licensed private schools, proprietary degree-granting schools and independent and public colleges, (vii) the extent to which the department has met the timelines mandated by this article, (viii) entrance standards, (ix) the number of schools inspected annually, and (x) the number of trust accounts imposed.
  2. The commissioner shall also submit a report no later than January fifteenth, nineteen hundred ninety-two, containing recommendations for further legislative action to strengthen the provisions of this article and shall additionally report on the adequacy of the tuition reimbursement fund.