Regulations Governing the Recognition of Accrediting Agencies, Institutional Eligibility, and Arbitration

Last week, Nasser H. Paydar, Assistant Secretary of the Office of Postsecondary Education, published a Dear Colleague letter regarding the regulations governing the recognition of accrediting agencies, institutional eligibility, and arbitration. The full letter is posted below.

PUBLICATION DATE: November 03, 2023
DCL ID: GEN-23-14
SUBJECT: Regulations Governing the Recognition of Accrediting Agencies, Institutional Eligibility, and Arbitration

SUMMARY:  This letter provides guidance on 34 C.F.R. §§ 600.4(c), 600.5(d), 600.6(d), and 602.20(e), which require that adverse actions taken by accrediting agencies are subject to initial arbitration. The purpose of this letter is to reiterate the statutory and regulatory requirements and clarify that all recognized institutional accrediting agencies should establish a policy on arbitration.

Dear Colleague:

The Department reminds all recognized institutional accrediting agencies that all adverse actions under 34 C.F.R. Part 602, Subpart B, the Criteria for Recognition, are subject to the arbitration requirements of the Higher Education Act of 1965, as amended, (“HEA”), at Section 496(e), 20 U.S.C. § 1099b(e). The Department also reminds all institutions that the Secretary does not recognize the accreditation or preaccreditation of an institution unless the institution agrees to submit any dispute involving an adverse action to arbitration before initiating any other legal action (34 C.F.R. §§ 600.4(c), 600.5(d), and 600.6(d)). Initial arbitration could help encourage accrediting agencies to take swift actions where necessary, absent the threat of immediate litigation.

This guidance relates to arbitration between two sophisticated parties, accrediting agencies and accredited institutions, and the guidance is intended to help ensure fairness and prompt resolution to both parties. Accrediting agencies should use this guidance when submitting information to the Department, as outlined in the Accreditation Handbook – 2/22.

As part of Title IV eligibility, all institutions must agree to submit any dispute involving an adverse action by an accrediting agency to arbitration prior to initiating other legal action. As a result of the requirement of initial arbitration, all recognized institutional accrediting agencies should establish and implement policies and procedures on arbitration of adverse actions that include a process for initial arbitration of disputes between them and the institutions they accredit prior to pursuing other legal action. To determine whether agencies’ arbitration policies and procedures and their application meet the regulatory requirements, including the requirements of 34 C.F.R. § 602.20(e) and the due process considerations of 34 C.F.R. § 602.25, we may consider factors, such as whether the policy and procedures:

1. Sufficiently describe and provide notice to institutions of the arbitration process, such as: the process by which an institution may submit an arbitration demand; whether there is a single arbitrator or an arbitration panel; how the arbitrator or arbitration panel is selected; the required qualifications of arbitrators; whether and under what circumstances the rules of outside arbitration bodies, such as the American Arbitration Association (“AAA”) or JAMS (formerly known as “Judicial Arbitration and Mediation Services, Inc.”), may be used; and the process by which an institution may legally challenge an arbitration decision.
2. Specify that the arbitration requirement applies to all adverse actions, as that term is defined in 34 C.F.R. § 602.3, including the denial, withdrawal, suspension, revocation, or termination of accreditation or preaccreditation, or any comparable accrediting action an agency may take against an institution or program.
3. Provide due process in all aspects of the arbitration.
4. Avoid giving an agency an advantage over an institution in any aspect of the arbitration process. For example, the arbitration procedures should not prevent the arbitrator/arbitration panel from reviewing the underlying merits of an agency appeal panel’s decision de novo and should not give the agency the benefit of a deferential standard of review.
5. Provide for equal input from the agency and the institution in selecting and approving the arbitrator or arbitration panel.
6. Include effective controls to prevent conflicts of interest between the arbitrator or arbitration panel and the agency or institution.
7. State that the arbitrator or arbitration panel is not a decision-making body of the agency.
8. Specify that the arbitration is initial and non-binding.
9. Provide for a transparent and reasonable timeframe for the resolution of the arbitration.

As part of your consideration of the above factors, please note the following:

• These factors are not necessarily determinative of an agency’s compliance with § 602.20(e); that is, there may be other factors considered by the Department when determining whether agencies’ arbitration policies and procedures and their application meet the regulatory requirements.
• Every review of an accrediting agency’s compliance with § 602.20(e) will be a unique, fact-specific evaluation, based on all relevant facts and circumstances available to the Department.

We hope that this letter assists institutions and accrediting agencies in complying with the regulatory requirements. Please contact your assigned FSA institutional eligibility analyst or Accreditation Group analyst if you have any questions about this letter.

Thank you for your continued support of the Title IV programs.

Sincerely,

Nasser H. Paydar
Assistant Secretary
Office of Postsecondary Education

SOURCE: (GEN-23-14) Regulations Governing the Recognition of Accrediting Agencies, Institutional Eligibility, and Arbitration