Sec. 13b.01.01.18. Guaranty Student Tuition Fund

A. In this regulation, the following terms have the meanings indicated:

(1) “Adjusted gross tuition” means all fees received on a cash or accrual accounting method basis for all instructional programs or courses, except the registration, application, and enrollment fees and charges for materials, supplies, and books which have been purchased by, and are the property of, the student, less refunds paid to students.

(2) "Assessment year" means a 12-month period from July 1 to June 30.

(3) "Fund" means Guaranty Student Tuition Fund.

(4) "Lender" means:

(a) A national or state-chartered bank, a mutual savings bank, a savings and loan association, or a credit union that is subject to examination and supervision in its capacity as a lender by an agency of the United States or of the state in which its principal place of operation is established;

(b) A pension fund that is subject to examination and supervision by an agency of the United States or a state;

(c) An insurance company that is subject to examination and supervision by an agency of the United States or a state;

(d) In any state, a single agency of the state or a single private nonprofit agency designated by the state; or

(e) For purposes only of purchasing and holding loans made by other lenders, the Student Loan Marketing Association or an agency of any state functioning as a secondary market.

B. The Commission shall create and provide for a Guaranty Student Tuition Fund.

C. The purpose of the Fund is to:

(1) Reimburse a student who is entitled to a refund of tuition and fees because the institution has failed to:

(a) Perform faithfully an agreement or contract with the student, or

(b) Comply with any provision of Education Article, Title 11, Annotated Code of Maryland, or COMAR Title 13B; or

(2) Perform any other function directly related to the original purpose of the Fund considered appropriate by the Secretary.

D. Each private career school approved to operate by the Secretary shall pay into the Fund the amount required by this regulation.

E. Payment into the Fund.

(1) An applicant school receiving initial approval shall make an initial payment of $2,500 into the Fund before a certificate of approval is issued.

(2) Approved Schools.

(a) Except as provided in §E(4) of this regulation, an approved school in operation during an assessment year shall make a payment into the Fund following the end of the assessment year in the amount of:

(i) .12 percent of the school’s adjusted gross tuition, beginning with the assessment year that begins on July 1, 2011;

(ii) .165 percent of the school’s adjusted gross tuition, beginning with the assessment year that begins on July 1, 2012;

(iii) .21 percent of the school’s adjusted gross tuition, beginning with the assessment year that begins on July 1, 2013; and

(iv) .25 percent of the school’s adjusted gross tuition, beginning with the assessment year that begins on July 1, 2014, and for each assessment year that follows.

(b) The minimum amount of the annual payment into the Fund is $250, to be paid by a school whether or not the school charges tuition.

(c) The payment shall be made to the Commission with the school’s annual report for that year.

(3) If the Secretary authorizes the operation of a school upon a change in ownership, the school shall make a payment into the Fund without regard to payments previously made by the school or its predecessor, under the following conditions:

(a) If a school has been operating for less than 1 assessment year, under its new ownership, the school shall make a payment into the Fund as an applicant school under §E(2) of this regulation; and

(b) If a school has been operating for at least 1 assessment year, under its new ownership, the school shall pay into the Fund as an approved school under §E(2) of this regulation for the last assessment year of operation under the old ownership, and the payment shall be due before approval to operate under new ownership is granted.

(4) An accounting shall be made at the end of each assessment year. If at the end of any assessment year, the accounting indicates that the Fund contains $2,000,000 or more, then during the next assessment year an assessment may not be made against the schools.

(5) If the moneys in the Fund are insufficient to satisfy duly authorized claims, the Secretary may reassess the approved schools as necessary, in addition to the annual assessment, and the approved schools shall pay the additional amounts assessed.

(6) The Secretary may not issue a certificate of approval to, and may revoke any certificate of approval previously issued to, a school that fails to pay an annual fee or reassessment to the Fund.

F. The Secretary has the authority to determine whether a claim merits reimbursement from the Fund and if so, the:

(1) Amount of the reimbursement;

(2) Time, place, and manner of its payment;

(3) Conditions upon which payment shall be made; and

(4) Order in which payments shall be made.

G. A claimant or other person does not have any right in the Fund as beneficiary or otherwise.

H. Claims against the Fund may be paid in whole or in part, taking into consideration the:

(1) Amounts available and likely to become available to the Fund for payments of claims;

(2) Size and number of claims likely to be presented in the future;

(3) Size and number of claims caused by the cessation of operation of a school;

(4) Amounts of reimbursement of claims in the past;

(5) Availability to the claimant of a transfer program.

I. Claims shall be filed with the Secretary on forms prescribed by the Secretary within 3 years of the Secretary's determination of a school's failure to perform faithfully any agreement or contract with the students or to comply with any provision of these regulations or of Education Article, Title 11, Annotated Code of Maryland. Claims filed after that are not considered, unless the Secretary determines that there are extenuating circumstances which justify or excuse the late filing.The Secretary may cause to be made such investigation of a claim as the Secretary deems appropriate. The Secretary's determination, without further investigation, may be based upon information contained in the records of the Commission.

J. The Secretary's determination concerning payment of a claim shall be in writing and mailed to the student and shall become final 30 days after the date of the Secretary's determination unless the student, within the 30-day period, files with the Secretary a written request for reconsideration. The written request shall contain all the evidence which supports the request for reconsideration. Evidence furnished in support of a request for reconsideration shall be subject to the authority of the Secretary to exclude irrelevant or other inappropriate evidence. The decision of the Secretary is final.

K. The Secretary shall administer the Fund upon the following basis:

(1) Payment into the Fund shall be made in the form of a check made payable to the Guaranty Student Tuition Fund;

(2) Payments into the Fund shall be maintained by the State Comptroller who shall deposit and invest the assets of the Fund, and all interest or other return on the Fund shall be credited to the Fund;

(3) A penalty assessed against a private career school shall be deposited into the Fund;

(4) The assets of the Fund may not be expended for any purpose other than those specified under §C of this regulation;

(5) In the case of a student who was a recipient of a loan to attend a school which closes, payment from the Fund shall first be made to the lender of financial aid funds to that student, to repay the student's indebtedness to the lender for that portion of the indebtedness that pertains to tuition and fees.

L. The Commission is subrogated to and may enforce the claim of any student to the extent of any actual or authorized reimbursement from the Fund.

M. When a claim is allowed, the Secretary, as agent for the Fund, shall be subrogated in writing to the amount of the claim, and the Secretary is authorized to take all steps necessary to perfect the subrogation rights before payment of the claim. If payment of a school’s obligation is made from the Fund, the Secretary shall seek repayment of the sums from the school or such other persons or entities as may be responsible for the school’s obligations. This provision is enforced through the Office of the Attorney General.

N. Advisory Council.

(1) The Secretary shall appoint an advisory council to whom the Secretary may refer matters pertaining to the Guaranty Student Tuition Fund.

(2) The advisory council shall meet periodically for the purpose of reviewing matters pertaining to the Fund that are referred by the Secretary for the council's consideration and advice.