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Understanding GLBA for Universities & Colleges

Did you know that if your institution handles Title IV financial aid data, you’re required to meet new cybersecurity regulations under the FTC’s Safeguards Rule?

So, if your institution handles student loans or manages tuition payments, the Gramm-Leach-Bliley Act (GLBA) applies to you. This federal law isn’t just for banks — it also covers schools that handle student financial records.

But why is that?

Because the education sector is a growing target for cybercrime.

Moreover, according to a 2023 report by Sophos, 80% of higher education institutions experienced cyberattacks in the past year.

This makes financial data security more important than ever.

What Is the Gramm-Leach-Bliley Act (GLBA)?

Graphic: what does glba stand for?

At first glance, the Gramm-Leach-Bliley Act (GLBA) might seem like it only applies to banks, credit unions, or other financial institutions. But that’s not the case.

If a college or university collects and processes financial information from students, it’s also required to follow GLBA regulations.

Many higher education institutions handle:

  • Federal student loans and private education loans
  • Tuition billing and payment plans
  • Financial aid applications and disbursements
  • Banking information for refunds and direct deposits

 

Because of this, the U.S. Department of Education has confirmed that schools participating in federal student aid programs are considered financial institutions under GLBA. That means they must comply with the law’s rules to protect sensitive financial data.

GLBA is especially important for colleges and universities because it includes strict privacy requirements and rules for financial data security. If these are not followed, schools risk data breaches, financial penalties, and even losing access to federal funding.

In short, if your institution deals with student financial information in any way, GLBA compliance is not optional — it’s a legal requirement.

Why GLBA Applies to Colleges and Universities

GLBA
Source: Kiteworks

Many people assume that GLBA only applies to banks and financial firms. But in reality, colleges and universities are also covered under this law, especially those that handle student financial aid, loans, and tuition payments.

According to reports, only 75% of educational institutions have identified a cyber attack on their infrastructure in the last 12 months or so.

 

Colleges are Considered Financial institutions

According to the U.S. Department of Education, any institution that participates in Title IV federal student financial aid programs is legally considered a financial institution under GLBA.

This means that colleges and universities must follow specific GLBA regulations to protect the personal financial information of students, staff, and sometimes even parents.

 

Why Higher Ed Is Included Under GLBA

Educational institutions often collect and manage the same types of financial data as traditional financial institutions. This includes:

  • Student loan applications and processing
  • Tuition and fee billing systems
  • Direct deposit information for refunds and stipends
  • Federal financial aid and scholarship records
  • Bank account and payment plan details

 

What Happens If a School Doesn’t Comply?

If a college or university fails to meet the GLBA privacy requirements, it can result in:

  • Loss of access to Title IV federal funding
  • Financial penalties and administrative actions
  • Reputational damage after a breach or compliance failure
  • Legal consequences under federal data protection laws

Key Components of GLBA Compliance

To stay compliant with GLBA, colleges and universities must follow three key rules. These rules focus on protecting student financial information through policies, privacy protections, and training.

Together, they form the foundation of GLBA privacy requirements and help strengthen financial data security across the institution.

1. The Safeguards Rule

The Safeguards Rule requires institutions to create a written information security program to protect student financial data from unauthorized access and misuse.

Key requirements include:

  • Designating a qualified individual to manage the security program.
  • Conducting regular risk assessments.
  • Implementing safeguards (like encryption and firewalls).
  • Monitoring and testing the effectiveness of security measures.
  • Ensuring third-party vendors also comply with security standards.

Why it matters: This rule helps colleges build a strong system to protect financial data at every stage — from collection to storage.

2. The Privacy Rule

The Privacy Rule is about giving students the right to know how their financial information is collected, used, and shared. It also requires institutions to explain their privacy policies clearly and regularly. From EDUCAUSE, “Colleges and universities are deemed to be in compliance with the GLBA Privacy Rule if they are in compliance with the Family Educational Rights and Privacy Act (FERPA).”

This is why, colleges must:

  • Deliver a privacy notice to students when they first enroll.
  • Update and share the notice each year if information-sharing practices change.
  • Give students the right to “opt out” if their information is being shared with certain third parties.

Why it matters: This rule ensures transparency and builds trust with students by keeping them informed about how their personal and financial data is used.

3. The Pretexting Rule

The Pretexting Rule is designed to stop people from gaining access to private information using social engineering, like pretending to be someone they’re not.

To comply, schools should:

  • Train employees to recognize phishing and impersonation scams
  • Limit the sharing of sensitive information over the phone or email
  • Use verification steps before giving access to financial records

Why it matters: This rule reduces the risk of fraud and identity theft — especially since cybercriminals often target educational institutions.

What Schools Must Do to Stay Compliant

To meet GLBA regulations, colleges and universities must take clear, practical steps to protect student financial data.

Compliance isn’t just about checking boxes — it’s about building a secure environment that meets GLBA privacy requirements and ensures financial data security at every level of the institution.

Below are key actions every institution must take:

1. Appoint a Qualified Data Security Officer

GLBA requires each institution to designate a responsible individual to oversee the information security program. This person is in charge of planning, implementing, and regularly reviewing your school’s safeguards.

  • The individual must have the authority and resources to enforce security practices across departments.
  • They will also coordinate responses to data breaches, risk assessments, and vendor oversight.

Pro Tip: In many schools, this role is filled by the Chief Information Security Officer (CISO) or a senior IT administrator.

2. Conduct Regular Risk Assessments

Risk assessments are critical to identify where your systems may be vulnerable. Under the Safeguards Rule, you must:

  • Evaluate how financial data is collected, stored, and shared.
  • Identify internal and external risks (e.g., phishing, weak passwords, poor vendor security).
  • Re-assess systems when major changes are implemented that could compromise the integrity of the data or cause unwanted exposures.
  • Document and prioritize those risks to create an action plan.

According to the 2023 EDUCAUSE Cybersecurity Almanac, only 37% of the respondents from different positions reported having responsibility for both cybersecurity and privacy issues.

This shows that there’s still a big gap in proactive planning against cyber threats.

3. Train Staff and Faculty on Data Security

Even the best security systems can fail if people don’t know how to use them properly. GLBA requires institutions to:

  • Conduct regular training on identifying phishing attacks, password safety, and safe data handling.
  • Include new hires in orientation sessions.
  • Offer refresher training at least once per year.

Why it matters:A study by IBM shows that 95% of cybersecurity breaches involve human error — making staff training one of the easiest and most effective ways to stay secure.

4. Monitor Third-Party Service Providers

Many schools use outside vendors for student information systems, ERP, payment processing, IT services, or financial aid management. GLBA requires institutions to:

  • Assess the vendor’s data security practices before signing contracts
  • Include data protection clauses in agreements
  • Review third-party performance regularly to manage third-party risks

 

The U.S. Department of Education’s GLBA Audit Guide stresses that institutions must hold vendors to the same data protection standards they follow internally.

5. Maintain Written Policies and Documentation

GLBA also expects institutions to document their entire security program, including:

  • The roles and responsibilities of staff
  • The results of risk assessments
  • Policies on access control, encryption, and incident response
  • Vendor contracts and monitoring logs

 

Documentation not only shows compliance but also helps during Department of Education audits or inquiries.

Bonus: Encrypt Data and Update Systems

Although not explicitly mentioned in GLBA, encrypting sensitive data and keeping systems up-to-date are best practices that help meet financial data security standards.

  • Use multi-factor authentication (MFA) for systems storing financial records
  • Encrypt data both at rest and in transit
  • Regularly apply security patches and updates

Common GLBA Violations in Higher Education

Despite good intentions, many colleges and universities fall short when it comes to GLBA compliance. These missteps can lead to serious consequences, ranging from data breaches and legal action to the loss of federal funding.

Here are some of the most common GLBA violations in higher education and what institutions can do to avoid them:

1. Lack of Data Encryption

Failing to encrypt sensitive financial data is one of the biggest red flags during GLBA audits. Without encryption, student financial records are vulnerable to unauthorized access — especially during transmission or when stored on unsecured devices.

✅ Fix: Encrypt all financial data — both in storage (at rest) and when being sent over networks (in transit). Use modern, secure encryption standards like AES-256.

2. Poor Vendor Oversight

Third-party service providers often manage financial aid systems, payment portals, file transfers or student accounts. However, not monitoring these vendors properly is a major violation.

Many schools fail to:

  • Verify the vendor’s own security practices
  • Include required data protection clauses in contracts
  • Review vendor compliance annually and review any SLAs related to remediation timelines

✅ Fix: Create a checklist to assess vendor risk. Ensure all contracts include GLBA-related privacy and security requirements.

FortifyData can help with continuous third-party cyber risk intelligence, and questionnaire assessments like HECVAT or your own institutional questionnaires.

Higher Education institutions can now access live vulnerability data of third parties based on direct assessments in addition to assigning questionnaires, like HECVAT, for completion.

Gain visibility into third-party cyber risks with continuous assessments of their external assets. FortifyData integrates our technology assessment findings to our embedded questionnairess to perform auto-validation that saves time in reviewing responses. Get the full picture of external vulnerabilities at your third parties with our auto-validated questionnaires that leverage the live assessment data conducted on their environment. This provides you with the answers you need more quickly (in the time to run an assessment) than a manual questionnaire process.

3. Incomplete or Outdated Risk Assessments

A risk assessment is not a one-time task. GLBA expects institutions to regularly review and update their risk assessments to reflect new systems, technologies, and threats.

Common mistakes include:

  • Not updating assessments after system changes
  • Ignoring physical security or outdated software risks
  • Failing to document known risks

✅ Fix: Schedule annual risk assessments and update them anytime there is a major change in IT infrastructure or data handling practices.

In our experience, we have many clients that leverage continuous monitoring or continuous vulnerabllity scanning that helps identify – new assets that are externally available to the internet, monitor patching cadence SLAs and keep abreast of new 0day exploits or new KVEs that may also be linked to ransomware campaigns.

4. Lack of Staff Training

GLBA requires employee training on data privacy and security. However, many schools:

  • Skip training for faculty and part-time staff
  • Offer generic training not tailored to financial data
  • Don’t track completion rates

✅ Fix: Implement a mandatory, trackable training program that includes scenarios specific to financial data security.

5. Weak or Missing Written Policies

GLBA requires a documented information security program, but many institutions either don’t have one or fail to update it. Missing documentation during an audit is seen as non-compliance — even if protections are in place.

✅ Fix: Maintain a centralized and regularly reviewed security policy document. Include roles, procedures, risk management, and vendor controls.

The Risks of Non-Compliance

Failing to meet GLBA privacy requirements or maintain financial data security can result in:

  • Loss of Title IV federal aid eligibility
  • Hefty fines and enforcement actions by the Department of Education or FTC
  • Reputational damage and loss of student trust
  • Costly data breaches and legal liability

Recent Updates to GLBA Requirements (Post-2022)

In recent years, the Federal Trade Commission (FTC) and the Department of Education (DOE) have made important changes that directly affect colleges and universities. Learn how FortifyData can help higher education institutions meet some of the GLBA Safeguards Rule requirements with automation.

Key GLBA Updates for Higher Ed

As of June 9, 2023, the FTC’s revised Safeguards Rule requires institutions to implement stricter data security controls, including:

  • Encryption of all financial data
  • Multi-factor authentication
  • Regular penetration testing and monitoring
  • Incident response planning

FTC Safeguards Rule Summary

The DOE’s FSA Handbook (2022–23) also emphasized that GLBA compliance will be reviewed during annual audits for institutions participating in Title IV programs.

These updates reflect how seriously regulators are now taking GLBA privacy requirements and enforcement in higher education.

Final Thoughts: Taking GLBA Seriously in Higher Education

With student financial data at risk more than ever, GLBA compliance is no longer optional — it’s essential.

Higher education institutions must treat financial data security with the same level of importance as academics or enrollment. One breach can affect funding, reputation, and most importantly, student trust.

The best way you can do it is by using a unified cyber risk management platform that can monitor the Institution’s attack surface assets as well as incorporate Third-Party Risk Management findings into the risk prioritization and management process. By using it, you can easily, and better, protect student financial information.

FAQ

Yes, if a department or student organization processes financial data (e.g., accepting payments or managing scholarship funds), it may fall under your institution’s broader GLBA compliance responsibilities. We’ve had an instance of identifying a completely separate email service that a campus radio station procured and setup without any awareness or involvement from the Institution’s IT department.

GLBA protects financial information, while FERPA covers educational records. Some data (like billing statements) may fall under both laws, requiring institutions to comply with both sets of rules.

No. GLBA compliance must involve collaboration between IT, financial aid, legal, and administrative departments. A cross-functional team ensures all areas are covered, especially vendor management and staff training.

While GLBA itself doesn’t specify a retention period, most schools retain risk assessments, training records, and policies for at least 6 years. This practice aligns with the federal audit and documentation best practices.

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