The Department of Education’s regulations regarding misrepresentation apply to marketing,
advertising, and recruiting activities, including activities undertaken by an institution’s
representatives or vendors. Specifically, an institution is deemed to have engaged in substantial
misrepresentation when the institution itself, one of its representatives, or any institution,
organization, or person with whom the institution has an agreement to provide educational
programs, marketing, advertising, recruiting or admissions services, makes a substantial
misrepresentation about the nature of its educational program, its financial charges, or the
employability of its graduates.
The penalties for violating these regulations can be severe. In 2015, ED issued a $30 million fine
to Corinthian Colleges on the basis of substantial misrepresentation allegations. In that case, ED
“determined that Heald’s inaccurate or incomplete placement rate disclosures were misleading
or false; that they overstated the employment prospects of graduates of Heald’s programs; and
that current and prospective graduates of Heald could reasonably have been expected to rely to
their detriment upon the information in Heald’s placement rate disclosures.”
In addition to direct penalties arising from misrepresentation, student borrowers may assert a
defense to repayment of their federal student loans based on misrepresentation by the
institution or its employees, agents, or vendors engaged in advertising, marketing, recruiting, or
enrollment activities. Institutions may be liable to compensate the federal government for all
Most accrediting agencies have general standards requiring marketing and recruiting activities
to be ethical and conducted with integrity. The standards promulgated by the Accrediting
Commission of Career Schools and Colleges (ACCSC) are similar to those enacted by other
agencies, although some provide more detail than others. ACCSC requires institutions to
“describe themselves fully and accurately to prospective students and permit prospective
students to make well-informed and considered enrollment decisions without undue pressure.”
Institutions must ensure that “[a]ll advertising, promotional materials, statements, and claims
are truthful and accurate and avoid leaving any false, misleading, misrepresenting, or
exaggerated impressions with respect to the school, its location, its name, its personnel, its
training, its services, or its accredited status.”
34 C.F.R. § 668.71(b).
Detailed borrower defense regulations were promulgated by the Obama Administration on November 1, 2016, that apply to
loans first disbursed between July 1, 2017, and June 30, 2020. 34 C.F.R. § 685.222 (2019). Revised regulations
promulgated by the Trump Administration apply to loans first disbursed on or after July 1, 2020. 34 C.F.R. § 685.206(e), as
published at 84 Fed. Reg. 49788, 49926 (Sept. 23, 2019).
ACCSC Standards of Accreditation, Chapter 2, Section IV (July 1, 2020).
Id. at Chapter 2, Section IV(B)(1).
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