On January 16, 2026, the U.S. Department of Education issued new guidance (Electronic Announcement (GEN) 26-04) explaining that it will limit its enforcement of the regulatory provision that requires controlling entities to sign the participation agreement entered into between an institution of higher education and the Department. Although some in higher education have cheered the announcement, questions remain about how the Department will apply this guidance. 

The Department’s shift on entity signatures stems from litigation involving Hannibal-LaGrange University, a nonprofit university with a sole corporate member. As part of its settlement of that litigation, the Department has limited, but not eliminated, the requirement that an entity controlling an institution co-sign the institution’s participation agreement. The January 16 guidance broadly states that in its settlement of the litigation, the secretary “has agreed not to enforce the entity-owner signature requirement.” But the guidance also makes it clear that the Department reserves the right on a “case-by-case basis” to require an entity-owner to co-sign an institution’s participation agreement. 

One of the factors the Department will consider is whether the owner has “sufficient” assets so that obtaining a co-signature promotes the financial interest of the United States. The guidance does not clarify what constitutes “sufficient” assets. But it does state that a co-signature will not be required when the owner has “no or de minimis assets,” as in the case of the Missouri Baptist Convention, the sole corporate member of Hannibal-LaGrange University, which had been previously requested to co-sign Hannibal-LaGrange University’s participation agreement. There is no explanation about how the Department might make the “no or de minimis assets” determination in future cases, or any detail about what it reviewed in settling the Hannibal-LaGrange litigation. 

The Department signaled that it will look to 20 U.S.C. § 1099c(e) to inform its decision-making on the co-signature issue. This provision focuses on individuals (as opposed to entities) and authorizes the Department to require an individual who exercises substantial control over an institution to assume liability for Title IV losses. That authority is limited, however, and can only be exercised if the institution has been subject to a limitation, suspension or termination action by the Department, has failed to meet the Department’s financial responsibility standards, its repayment thresholds, or deadlines for audit submissions. 20 U.S.C. § 1099c(e)(4)(A)-(D).

If any of these statutory triggers are present—such as a failing composite score—the guidance suggests that the Department would assess the entity-owner’s assets to determine whether such assets are “sufficient” to require a signature. Left unsaid is whether the Department will consider other factors before imposing a co-signature requirement. It may be that the Department will rely on its March 1, 2023, guidance on individual signatures (Electronic Announcement (GEN) 23-11), which includes factors such as the level of Title IV funding; repeated composite scores below 1.0; approved borrower defense claims; actions involving fraud or dishonesty; and negative actions by states or accrediting agencies.  

The January 16 guidance also notes that rulemaking on 34 C.F.R. § 668.14(a)(3)(ii) is coming, “consistent with the settlement agreement.” We expect a decrease in the number of requests for owners or controlling entities to co-sign participation agreements.