On April 23, 2025, the Administration issued an Executive Order entitled “Transparency Regarding Foreign Influence at American Universities,” along with an accompanying fact sheet.

The Executive Order instructs the Secretary of Education to employ robust enforcement of Section 117 of the Higher Education Act of 1965, through both the reversal and rescindment of certain actions taken by the prior administration and through audits and investigations into institutions of higher education. Additionally, the Secretary of Education is tasked with ensuring timely and complete disclosures of foreign funding by institutions of higher education. The Executive Order represents a continuation of the Administration’s focus on higher education and, in particular, its focus on foreign influence, national security, and academic integrity. 

The Executive Order does not change the relevant law–Section 117 of the Higher Education Act. Section 117 requires, among other things, that institutions of higher education receiving federal financial assistance report any gifts received from, or contracts entered into with, foreign sources, where the value of those gifts or contracts is $250,000 or more. Additional disclosure requirements are imposed for restricted or conditional gifts or contracts. The ultimate penalty for failing to comply with Section 117 is that colleges and universities can lose their access to federal student aid dollars for their students.

The teeth of the Executive Order are in its third section, in which the Secretary of Education and heads of other agencies are instructed not to provide federal grant funds to institutions of higher education found to be non-compliant with the strictures of Section 117 and other applicable foreign funding disclosure requirements. However, Section 117 specifically enumerates its own methods of enforcement, which involves civil litigation by the Attorney General prior to the rescission of funding. Nothing in the text of Section 117 allows the Secretary of Education, or another agency head, to suspend or eliminate federal funding.

In response to the Executive Order, the Secretary of Education, Linda McMahon, announced on April 25 that the U.S. Department of Education’s Office of General Counsel would re-assume enforcement of Section 117, replacing the Office of Federal Student Aid. In addition, the U.S. Department of Education initiated a Notice of Investigation and Records Request into the University of California, Berkeley’s compliance with Section 117. The investigation appears to stem from a 2023 media report that Berkeley failed to properly disclose hundreds of millions of dollars in funding from a foreign government. The Department of Education stated that “Berkeley’s responses revealed a fundamental misunderstanding” regarding its reporting obligations. The U.S. Department of Education has also recently initiated an investigation into Harvard University on April 17 and initiated an investigation into the University of Pennsylvania on May 8 to review both institutions’ compliance with Section 117. The full list of open and closed investigations of Section 117 compliance are available from the U.S. Department of Education’s website.

This Executive Order is not the only effort being taken by the federal government to scrutinize foreign financial contributions to educational institutions. On March 27, 2025, the House of Representatives passed the Defending Education Transparency and Ending Rogue Regimes Engaging in Nefarious Transactions Act (the “DETERRENT Act”) by a vote of 241-169, with bipartisan support. The DETERRENT Act would, among things, lower the present reporting trigger of Section 117 from $250,000 to $50,000. Additionally, the Act would require institutions of higher education to disclose gifts of any amount received from a foreign country or entity of concern, where foreign country of concern means, for present purposes, China, Russia, Iran, and North Korea. And the Act would prohibit institutions of higher education from entering into contracts with foreign countries or entities of concern, absent a waiver.

While it is unclear whether the Administration has the power to withhold federal funding from institutions that fail to comply with the reporting obligations of Section 117, the DETERRENT Act would allow for the imposition of substantial fines, including mandatory fines against institutions against whom a civil action has been brought and who have been compelled to comply with the requirements of Section 117. For a first-time, knowing or willful violation of the newly-updated Section 117, the resulting fine would be the greater of $50,000 or the monetary value of the gift or contract that is the subject of the institution’s failure to comply. A first-time violation of the newly-proposed Section 117A–prohibiting institutions from entering into contracts with foreign countries or entities of concern without a waiver–would result in a fine in an amount that is not less than 5 percent and not more than 10 percent of the total amount of federal funds received by the institution under the Higher Education Act for the most recent fiscal year.

These fines could amount to millions of dollars, and are a far cry from current penalties for non-compliance. The DETERRENT ACT is currently pending in committee in the Senate.

Institutions of higher education should keep apprised of the DETERRENT Act’s progress through the Senate, and the Department of Education’s pending investigations into institutions’ compliance with Section 117.

Most importantly, institutions of higher education should maintain their ongoing compliance with reporting obligations under Section 117, which remain unchanged. The U.S. Department of Education reminded institutions of their reporting obligations (the next Section 117 reporting deadline is July 31, 2025) and the Department’s “priority to enforce Section 117 reporting requirements” in a June 27 electronic announcement.

Originally published on July 23, 2025, online with eCampus News. Reprinted with permission. Further duplication without permission is prohibited. All rights reserved.