Enrollment Agreements, The Electronic Process And The Truth In Lending Act: ‘Tis the Season For Updates
[November 20, 2013] Although it may seem like the new school year has only just begun, it is not too soon to think about compliance for the 2014-2015 academic year! Whether to help manage parental comportment issues, tuition disputes or the use of student media, and whether executed via ink and paper or through an on-line portal, the enrollment agreement establishes the contractual basis for an independent school’s relationship with its students and families. It is therefore crucial that the enrollment agreement be well-crafted in order to minimize legal risks to the school. Depending upon the types of tuition payment plans offered, an independent school may also be required to comply with the Truth In Lending Act.
Earlier in 2013, a federal court allowed a lawsuit to proceed on the question of whether an independent school breached its contract with a student by failing to follow the policies outlined in the school’s student handbook, which was also referenced in the school’s enrollment contract. The court stated, “we have long recognized that in the context of private education, there is a contractual relationship between the school and student.” Private schools across the country incorporate a similar framework (enrollment contracts combined with student handbooks) in order to establish expectations around the school/family partnership, and it is important that the fine print be crystal clear.
We recommend that enrollment agreements, at a minimum, reference student handbooks, outline clear behavioral expectations of students, parents, and others associated with the student who may interface with the school, refrain from including promissory language regarding educational outcomes, require the school to be kept informed of custody arrangements for students living in dual households, and, of course, outline tuition payment expectations. While courts across the country differ in interpreting the contractual nature of student handbooks, there is no question that an enrollment agreement is a contract; as such, this document is the school’s best opportunity to establish and enforce its expectations of students and families. Able legal counsel can help to ensure the enforceability of the enrollment agreement should a dispute arise.
The Electronic Process
While the substantive content of the underlying enrollment agreement does not change when executed electronically, the on-line process must comply with state and federal laws in order for signatures and thus the contract itself to be valid. Schools considering transitioning to an on-line process should allow enough time to implement the change so that the process runs smoothly—few things are more frustrating than using technology that is too complicated or that does not function properly! As importantly, log-in and signature processes must be secure, as these are important aspects of complying with applicable laws. Whether a school is updating its electronic process or implementing it for the first time, be sure to carefully review each step for legal compliance.
The Truth In Lending Act
There continues to be a great deal of confusion among independent schools as to whether the Truth In Lending Act (TILA) applies to the tuition payment process. Depending upon the types of tuition plans offered by a school, it may be required to comply with TILA and thus provide certain disclosures to families regarding the terms of the payment plans. We recommend assessing whether TILA applies, as part of the annual enrollment agreement review.
The Firm has many resources, from our Education Blog, to our Checklists, to working with one of our attorneys, to assist with a review and update of the enrollment agreement and process. Before the holiday season and winter vacation is upon us, we recommend that schools:
- evaluate existing enrollment agreements to determine if the school is capturing all of the necessary and recommended terms and conditions that define the school/family relationship;
- consider converting to an on-line enrollment system, make a plan to do so, and/or review any existing electronic process to ensure it is smoothly implemented, legally valid and secure; and
- determine whether TILA applies to the school and, if so, work with counsel to draft the appropriate disclosures.
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