[Federal Register Volume 59, Number 82 (Friday, April 29, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-10206]


[[Page Unknown]]

[Federal Register: April 29, 1994]


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Part V





Department of Education





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34 CFR Part 667




State Postsecondary Review Program; Final Rule
DEPARTMENT OF EDUCATION

34 CFR Part 667

RIN 1840-AB89

 
State Postsecondary Review Program

AGENCY: Department of Education.

ACTION: Final regulations.

-----------------------------------------------------------------------

SUMMARY: The Secretary publishes final regulations to implement the 
State Postsecondary Review Program (SPRP) authorized under title IV, 
part H, subpart 1 of the Higher Education Act of 1965, as amended 
(HEA). Under the SPRP, the Secretary enters into an agreement with a 
State under which the State designates a State postsecondary review 
entry (SPRE) to be responsible for conducting or coordinating reviews 
of institutions of higher education referred to the State by the 
Secretary under specific statutory provisions. The purpose of the SPRE 
reviews is to determine whether those institutions should continue to 
participate in the student financial assistance programs authorized 
under Title IV of the HEA (Title IV, HEA programs). The SPRE reviews 
institutions on the basis of State standards developed in consultation 
with institutions located in the State. The Secretary reimburses SPREs 
for costs they incur under the SPRP from appropriated funds.

EFFECTIVE DATE: These regulations take effect July 1, 1994, with the 
exception of Secs. 667.3, 667.4, 667.8, 667.12, 667.15, 667.21, 667.22, 
and 667.26. Sections 667.3, 667.4, 667.8, 667.12, 667.15, 667.21, 
667.22, and 667.26 will become effective after the information 
collection requirements contained in those sections have been submitted 
by the Department of Education and approved by the Office of Management 
and Budget under the Paperwork Reduction Act of 1980. If you want to 
know the effective date of these regulations, call or write the 
Department of Education contact person. A document announcing the 
effective date will be published in the Federal Register.

FOR FURTHER INFORMATION CONTACT:
John Kolotos, U.S. Department of Education, 400 Maryland Avenue SW., 
room 4318, ROB-3, Washington, DC 20202-5244. Telephone: (202) 708-7888. 
Individuals who use a telecommunications device for the deaf (TDD) may 
call the Federal Information Relay Service (FIRS) at 1-800-877-8339 
between 8 a.m. and 8 p.m., Eastern time, Monday through Friday.

SUPPLEMENTARY INFORMATION: These regulations implement the changes made 
to the HEA by the Higher Education Amendments of 1992 (Pub. L. 102-325) 
and the Higher Education Technical Amendments of 1993 (Pub. L. 103-
208).
    On January 24, 1994 the Secretary published a notice of proposed 
rulemaking (NPRM) for this program in the Federal Register (59 FR 
3604). The NPRM included a discussion of the major issues surrounding 
the proposed changes that will not be repeated here. The following list 
summarizes those issues and identifies the pages of the preamble to the 
NPRM on which a discussion of those issues may be found:
    Statement of the scope and purpose of the SPRP (page 3606);
    Definitions of terms used in this part, including education and 
general expenditures, professional program, and vocational program 
(page 3606);
    Elements contained in the agreement between a State and the 
Secretary (pages 3607-3608);
    Criteria the Secretary uses to refer institutions to a SPRE for 
review (page 3608);
    SPRE selection of institutions for review (pages 3608-3609);
    Notice to SPRE of Federal actions (page 3609);
    Situations in which an institution has locations in more than one 
State (page 3609);
    Allotment formula to determine each State's annual allotment of 
funds (page 3609);
    Procedures under which a State applies for funds (pages 3609-3610);
    Procedures under which the Secretary approves a State's application 
for funds (pages 3610-3611);
    Allowable costs and activities reimbursable under the SPRP (page 
3611);
    State review standards for referred institutions (pages 3611-3613);
    Procedures for the disapproval by the Secretary of State review 
standards (pages 3613-3614);
    Procedures regarding SPRE reviews of referred institutions (page 
3614);
    Peer reviews of institutions (pages 3614-3615);
    Procedures that a SPRE must follow to effect the termination of an 
institution's participation in the Title IV, HEA programs (page 3615); 
and
    Due process requirements (page 3615).
    In order to approve a postsecondary education institution to 
participate in the Title IV, HEA programs and many other Federal 
programs, the Secretary must determine, in part, that the institution 
satisfies the statutory definition of an ``institution of higher 
education.'' Under the HEA, one element of that definition requires an 
eligible institution of higher education to be accredited or 
preaccredited by an accrediting agency recognized by the Secretary as a 
reliable authority as to the quality of the education or training 
provided by the institution. Another element requires an eligible 
institution to be legally authorized to provide an education program 
beyond the secondary level in the State in which it is located. In 
addition, to participate in the Title IV, HEA programs, the institution 
must be certified by the Secretary as administratively capable and 
financially responsible. Thus, the HEA provides the framework for a 
shared responsibility among accrediting agencies, States, and the 
Federal government to ensure that the ``gate'' to Title IV, HEA 
programs is opened only to those institutions that provide students 
with quality education or training worth the time, energy, and money 
they invest in it. The three ``gatekeepers'' sharing this 
responsibility have traditionally been referred to as ``the triad.''
    While the concept of a triad of entities responsible for 
gatekeeping has had a long history, originating in 1952, the Higher 
Education Amendments of 1992, Pub. L. 102-325, significantly increased 
the gatekeeping responsibilities of each member of the triad. 
Specifically, Congress amended the HEA to provide for a new part H of 
Title IV entitled ``Program Integrity Triad.'' Under the new part H, 
the requirements that accrediting bodies must meet if they are to be 
recognized by the Secretary as ``gatekeepers'' for Title IV are 
specified in detail. Part H also provides a new oversight 
responsibility for States: the State Postsecondary Review Program. 
Altogether, part H establishes a set of responsibilities for 
accrediting agencies, States, and the Secretary that creates a stronger 
and more coordinated evaluation of institutions that participate, or 
wish to participate, in the Title IV, HEA programs.
    The Secretary recognizes that the approach to significantly 
increased gatekeeping activity outlined in the statute for the three 
members of the triad is a new one. This approach will require 
leadership in both implementation and evaluation if it is to achieve 
the effectiveness that Congress intended. The Secretary will take steps 
to assure that the various responsibilities of the triad members are 
carried out in a manner that, in fact, results in the identification of 
institutions that should not be eligible to participate in the Title 
IV, HEA programs, on the basis of either the quality of education they 
offer or their inability to handle program funds. At the same time, the 
Secretary is committed to carrying out the responsibility for 
coordinating the activities of the triad members that are inherent in 
the statute in a manner that causes the least burden to institutions 
participating in the Title IV, HEA programs.
    To these ends, the Secretary is committed to effective management 
of the gatekeeping function. The Secretary will review carefully the 
applications on accrediting bodies and the standards and operating 
plans proposed by State Postsecondary Review Entities (SPREs) under the 
State Postsecondary Review Program to insure that they meet the 
requirements of the statute and these regulations and will enable these 
triad agencies to fulfill their statutory purposes. The Secretary will 
also place a priority on the completion of the ``Postsecondary 
Education Participation System,'' the Department's new integrated data 
base, which will contain the information that the Secretary generates 
in the course of the Secretary's oversight of institutions 
participating in Title IV, HEA programs. The Secretary will use the 
data base to inform accrediting bodies and SPREs of actions taken by 
the Secretary so that they may in turn carry out their 
responsibilities. This expanded data base is also critical to the 
Secretary's effective selection of institutions for program review.
    Monitoring the results of the gatekeeping process is a very 
important key to effective management. The Secretary will evaluate the 
activities of accrediting agencies, SPREs, and the Department to 
determine their effectiveness in improving the integrity of 
institutions participating in Title IV programs and will take such 
steps as may be indicated to improve the results. Finally, as provided 
in the statute, the Secretary will seek the advice and counsel of the 
National Advisory Committee on Institutional Quality and Integrity in 
evaluating the effectiveness of the triad.
    The Secretary believes that the approach best suited to achieving 
the objectives of the statute is a complementary one, with each member 
of the triad focusing its evaluation on its obligations within the 
context of the HEA. Thus, the focus for accrediting agencies is the 
quality of education or training provided by the institutions or 
programs they accredit. States, in addition to providing the legal 
authority to operate within the state required for participation in the 
Title IV, HEA programs, will review institutions that meet certain 
statutory review criteria related to institutional performance in the 
Title IV, HEA programs. The focus of the Secretary's evaluation of 
institutions is on the administrative and financial capacity of those 
institutions to participate in the Title IV, HEA programs.
    While the functions and responsibilities of each of the triad 
members are generally different, the statute does require, in some 
instances, that all members of the triad evaluate similar areas. For 
the most part, the principle of complementary functions will lead to 
the members evaluating those same areas from different perspectives for 
different purposes. For example, all three of the triad members are 
required to examine the finances of an institution. If each looks at 
financial strength from a perspective complementary to that of the 
others, accrediting agencies would focus principally on the capacity of 
the institution to continue to offer programs at a level of quality 
sufficient to meet accrediting agency standards and to fulfill the 
institution's mission over a 5-10 year period of accreditation. The 
emphasis of a review by a SPRE would be on whether or not the 
institution possesses the full range of resources needed to serve 
students currently attending the institution. The Secretary's 
responsibilities focus on the institution's finance in light of its 
ability to provide the services described in its official publications 
and statements, to provide the administrative resources necessary to 
comply with its Title IV, HEA program responsibilities, and to meet all 
of its financial obligations, including, but not limited to, refunds of 
institutional charges and repayments to the Secretary for liabilities 
and debts incurred in programs administered by the Secretary.
    Despite the Secretary's efforts to encourage complementary 
functions for each of the triad members, it is theoretically possible 
that, in some instances, an institution could be subject to three 
different standards regulating the same area of operation. For this 
reason, where a Title IV standard has been promulgated at the Federal 
level, the Secretary expects accrediting agencies and States to take 
this into account in establishing their own standards to insure that 
varying standards do not pose an unnecessary burden on institutions. It 
is also important that accrediting agencies and States not impose any 
standard that is weaker than a comparable Title IV, HEA program 
standard. The Secretary believes coordination of this is a federal 
responsibility.
    In view of the complementary approach to the functions of the triad 
members, the Secretary believes, for example, that institutions should 
not have to develop different methodologies to provide data that the 
three members of the triad may require. The Secretary also believes 
that, to the extent feasible, any other requests for data about the 
institution, its students, or its graduates should rely on information 
already in the institution's possession. To that end, the Secretary 
expects accrediting agencies and States either to accept student data 
based on the methodology that will be specified in the regulations 
governing ``Student Right to Know,'' also mandated by the Higher 
Education Amendments of 1992, or, where the institution may have other 
methodologies for calculating data, such as a system designed to 
provide data to a State higher education commission or other State 
agency, to accept data in the format already being used by the 
institution. Similarly, the Secretary expects accrediting agencies and 
SPREs to use the audited financial statements institutions are now 
required to provide to the Secretary on an annual basis to the extent 
those statements are compatible with the nature of the reviews 
conducted under their respective standards.
    The Secretary also recognizes that other Federal agencies, such as 
the Department of Labor and the Veterans Administration, also regulate 
institutions in some areas that are similar to those included in part 
H. The suggestion has been made that the Secretary should promulgate 
Federal standards in the areas of overlap so that institutions would 
not be subject to varying standards developed by other Federal agencies 
and the triad members. However, the Secretary interprets part H as 
permitting States and accrediting agencies to establish their own 
standards, as opposed to using a Federal standard, and also believes 
that this is the most effective approach. In addition, it is not clear 
how the requirements of the different agencies are capatible with the 
requirements of part H. The purposes of these programs administered by 
other agencies may be very different. As a result, the Secretary has 
not pursued this alternative. The Secretary does believe that it would 
be useful to explore how the varying requirements of other Federal 
agencies that are similar to those of part H might be coordinated to 
reduce any burden on institutions and will initiate such exploration.
    The Secretary believes that, where possible, data developed at the 
national level should be made available to institutions, as well as to 
States and accrediting agencies to assist them in carrying out their 
responsibilities under part H. In particular, data concerning labor 
markets and compensation for specific fields and information concerning 
graduation and withdrawal rates at various types of institutions may be 
helpful to both triad members and institutions. The Secretary will 
facilitate the development of this type of information and, where 
possible under the auspices of the Department, will coordinate the 
development of data that will be helpful to institutions and the triad.
    Finally, as part of the commitment to providing leadership to the 
triad, the Secretary will convene representatives of the triad members 
and institutions to exchange information about the gatekeeping process 
and to discuss how the triad is functioning, both in identifying 
institutions whose performance is questionable and in reporting 
requirements that have proven to be unreasonably burdensome. The 
Secretary invites comments concerning the functioning of the triad, as 
it is implemented through these and other regulations governed by part 
H. The Secretary will seek improvement, where possible, within existing 
regulations and will propose modifications to regulations and to the 
statute itself if experience indicates those changes are both necessary 
to achieve effective gatekeeping, with minimal burden, and compatible 
with the need to maintain, and assure the public of, the integrity of 
the Title IV, HEA programs.
    The following is a summary of the significant changes from the 
NPRM:
    Section 667.1  Scope and purpose. Section 667.1(a)(1) has been 
revised to clarify that the purpose of the SPRP is to reduce fraud and 
abuse in the Title IV, HEA programs. This section also has been revised 
to clarify that under the SPRP a State's standards apply only to 
referred institutions and a State may review only referred institutions 
under those standards.
    Section 667.2  Definitions. The proposed definition of professional 
program has been revised to maintain a clear distinction between the 
terms vocational program and professional program in view of the 
changes made to the definition of vocational program. A professional 
program is therefore an undergraduate or graduate educational program 
that prepares individuals for an occupation, if that occupation (1) is 
listed in a Federal classification manual, (2) requires at least a 
bachelor's degree to qualify for entry; (3) involves the independent 
practice or application of a defined or organized body of competencies 
that is unique to the occupation; and (4) is formally recognized and 
regulated under a national or State licensure, accreditation, or permit 
system. Also, the definition is expanded to allow a SPRE to use its 
State's statutory definition of the term ``professional program.''
    The proposed definition of vocational program has been revised to 
be consistent with that used in IPEDS. A vocational program is 
therefore defined as an educational program that is below the 
bachelor's level and is designed to prepare individuals with skills and 
training for employment in a specific trade, occupation, or profession 
related to that educational program.
    Section 667.3  State agreement. Paragraph (b)(3) of this section 
has been revised to clarify the type of records that a SPRE must keep 
or have access to, and the type of information that must be provided to 
the Secretary. Thus, paragraph (b)(3)(iii) has been revised to indicate 
that a SPRE must keep or have access to records of referred 
institutions, related to activities under this part, and must provide 
requested information to the Secretary for financial or compliance 
audits of referred institutions. Paragraph (b)(3)(iv) has been added to 
indicate that the SPRE must keep or have access to records relating to 
its activities under this part, and must provide such information to 
the Secretary upon request when the Secretary evaluates the SPRE's 
performance under the SPRP.
    Section 667.4  State postsecondary review entity. This section has 
been revised to make clear that the SPRP does not authorize a SPRE to 
(1) grant State authorization to provide postsecondary education to an 
institution, or (2) require nonreferred institutions to comply with the 
standards established under Sec. 667.21.
    Section 667.5  Criteria the Secretary uses to refer institutions to 
a SPRE for review. The criterion in paragraph (b)(11) of this section 
has been revised to limit complaints the Secretary considers in 
determining whether to refer an institution to a SPRE for review to 
student complaints. This section has also been revised to allow an 
institution an opportunity to challenge the accuracy of the information 
that the Department uses to refer the institution to a SPRE for review 
before the Department refers that institution to a SPRE.
    Section 667.6  SPRE selection of institutions for review. This 
section has been revised to allow an institution that has not been 
referred by the Secretary an opportunity to challenge the accuracy of 
the information that a SPRE uses to select the institution for review.
    Section 667.8  Notice to nationally recognized accrediting agencies 
of SPRE actions. A new section is added to these final regulations to 
require a SPRE to notify the appropriate nationally recognized 
accrediting agency before the SPRE conducts a review of an institution 
the agency accredits. The SPRE is also required to notify that 
accrediting agency of significant and relevant decisions, reports, or 
actions taken as a result of the review.
    Section 667.21  State review standards. The standard requiring a 
State to evaluate whether the tuition and fees that are charged a 
student for an educational program are reasonable given the expected 
amount of money that the student can earn upon completion of the 
program is revised to apply only to vocational programs.
    Section 667.23  SPRE reviews of referred institutions. Paragraph 
(d)(2) has been added to allow a SPRE, if an institution presents 
compelling evidence that its failure to satisfy a SPRE standard does 
not warrant further SPRE action, to forego any further action.
    This section has been revised to require a SPRE to make available 
information regarding its priority system for selecting institutions to 
review.
    Section 667.24  Peer reviews of institutions. This section has been 
revised to require a State to apply minimum, specified criteria to 
determine whether a peer review system other than a nationally 
recognized accrediting agency has demonstrated competence in assessing 
educational programs.
    Section 667.26  Due process requirements. This section has been 
revised to require a State's due process procedures to specify a 
minimum time within which an institution may appeal an adverse action, 
and to designate an impartial hearing official to consider certain 
appeals by institutions.

Analysis of Comments and Changes

    In response to the Secretary's invitation in the NPRM, 
approximately 1500 parties submitted comments on the proposed 
regulations. An analysis of the comments and of the changes in the 
regulations since publication of the NPRM is published as an appendix 
to these final regulations. Substantive issues are discussed under the 
section of the regulations to which they pertain.
    Technical and other minor changes--and suggested changes the 
Secretary is not legally authorized to make under the applicable 
statutory authority--are not addressed.

Executive Order 12866

    These final regulations have been reviewed in accordance with 
Executive Order 12866. Under the terms of the order the Secretary has 
assessed the potential costs and benefits of this regulatory action.
    The potential costs associated with the final regulations are those 
resulting from statutory requirements and those determined by the 
Secretary to be necessary for administering this program effectively 
and efficiently. Burdens specifically associated with information 
collection requirements, if any, were identified in the preamble to the 
NPRM under the heading

Paperwork Reduction Act of 1980.

    Sections 667.3, 667.4, 667.8, 667.12, 667.15, 667.21, 667.22, and 
667.26 contain information collection requirements. As required by the 
Paperwork Reduction Act of 1980, the Department of Education will 
submit a copy of these sections to the Office of Management and Budget 
(OMB) for its review. (44 U.S.C. 3504(h)). These regulations contain 
records that will affect States and State postsecondary review 
entities. An estimate of the total annual reporting and recordkeeping 
burden that will result from the collection of the information is 2000 
hours per response for 57 respondents for a total burden of 114,000 
burden hours for this package.
    Organizations and individuals desiring to submit comments on the 
information collection requirements should direct them to the Office of 
Information and Regulatory Affairs, OMB, room 3002, New Executive 
Office Building, Washington, DC 20503; Attention: Daniel J. Chenok. 
Comments on this burden estimate should be submitted by May 31, 1994.

Assessment of Educational Impact

    In the notice of proposed rulemaking, the Secretary requested 
comments on whether the proposed regulations would require transmission 
of information that is being gathered by or is available from any other 
agency or authority of the United States.
    Based on the response to the proposed rules and on its own review, 
the Department has determined that the regulations in this document do 
not require transmission of information that is being gathered by or is 
available from any other agency or authority of the United States.

List of Subjects in 34 CFR Part 667

    Administrative practice and procedure, Colleges and universities, 
Education, Grant programs--education, Loan programs--education, 
Reporting and recordkeeping requirements, States, Student aid.

(Catalog of Federal Domestic Assistance Number: 84.267, State 
Postsecondary Review Program)

    Dated: April 20, 1994.
Richard W. Riley,
Secretary of Education.
    The Secretary amends title 34 of the Code of Federal Regulations by 
adding a new part 667 to read as follows:

PART 667--STATE POSTSECONDARY REVIEW PROGRAM

Subpart A--General

Sec.
667.1  Scope and purpose.
667.2  Definitions.
667.3  State agreement.
667.4  State postsecondary review entity.
667.5  Criteria the Secretary uses to refer institutions to a SPRE 
for review.
667.6  SPRE selection of institutions for review.
667.7  Notice to SPRE and nationally recognized accrediting agency 
of Federal actions.
667.8  Notice to nationally recognized accrediting agency of SPRE 
actions.
667.9  Institutions with locations in more than one State.

Subpart B--Allotment Formula and Funding Procedures

667.11  Allotment formula.
667.12  Application for funds.
667.13  Approval of funding application.
667.14  Allowable costs and activities.
667.15  Fiscal procedures and records.
667.16  Supplement, not supplant, requirement.
Subpart C--State Review Standards, SPRE Reviews, and Termination of 
Institutional Participation
667.21  State review standards.
667.22  Disapproval of State review standards.
667.23  SPRE reviews of referred institutions.
667.24  Peer reviews of institutions.
667.25  Termination of an institution's participation in the title 
IV, HEA programs.
667.26  Due process requirements.

    Authority: 20 U.S.C. 1099a through 1099a-3, unless otherwise 
noted.

Subpart A--General


Sec. 667.1  Scope and purpose.

    (a)(1) This part establishes the rules and procedures that govern 
the State Postsecondary Review Program, which is authorized by title 
IV, part H, subpart 1 of the Higher Education Act of 1965, as amended 
(HEA). The purpose of the program is to reduce fraud and abuse in the 
title IV, HEA programs through development of State standards for, and 
State oversight and review under those standards of, institutions 
referred by the Secretary under Sec. 667.5 or selected by a State 
postsecondary review entity under Sec. 667.6.
    (2) Under this part, if a State finds that an institution it 
reviews does not satisfy the State standards, the State may--
    (i) Require the institution to take prompt actions to bring itself 
into compliance with the State's standards; or
    (ii) Determine that the institution should no longer participate in 
a title IV, HEA program.
    (b) A State must carry out activities under this part only to the 
extent that the costs of those activities will be reimbursed by Federal 
funds.
    (c) As used in this part, ``an institution'' includes--
    (1) An institution of higher education as defined in 34 CFR 600.4;
    (2) A proprietary institution of higher education as defined in 34 
CFR 600.5; and
    (3) A postsecondary vocational institution as defined in 34 CFR 
600.6.
    (d)(1) The provisions in the Education Department General 
Administrative Regulations, 34 CFR parts 76 and 80, do not apply to 
this part except for the provisions in--
    (i) 34 CFR 76.2, and 76.50 of subpart A;
    (ii) 34 CFR 76.500 through 76.534, 76.560, 76.561, 76.563, and 
76.580 through 76.592 of subpart F;
    (iii) 34 CFR 76.701, 76.702, 76.703, 76.707, 76.720, 76.730, 
76.731, 76.734, 76.760, and 76.761 of subpart G;
    (iv) 34 CFR 80.22 of subpart A;
    (v) 34 CFR 80.43 and 80.44 of subpart C; and
    (vi) 34 CFR 80.50 through 80.52 of subpart D.
    (2) For purposes of this part, the term ``grantee,'' as defined and 
used in 34 CFR parts 76 and 80, refers only to a State Postsecondary 
Review Entity.

(Authority: 20 U.S.C. 1099a-1099a-3)


Sec. 667.2  Definitions.

    (a) The following terms used in this part are defined in the 
regulations governing Institutional Eligibility under the Higher 
Education Act of 1965, as amended, 34 CFR part 600:

Branch campus
Educational program
Federal Family Education Loan (FFEL) programs
Nationally recognized accrediting agency
Recognized occupation
Regular student
Secretary
State

    (b) The following terms used in this part are defined in the 
Student Assistance General Provisions regulations, 34 CFR part 668:

Award year
Clock hour
Eligible program
Enrolled
Federal Direct Student Loan Program
Federal Pell Grant Program
Federal Perkins Loan Program
Federal PLUS Program
Federal Stafford Loan Program Federal Supplemental Loans for 
Students (SLS) Program
Federal Supplemental Educational Opportunity Grant (FSEOG) Program
Federal Work-Study (FWS) Program
National Early Intervention Scholarship and Partnership (NEISP) 
Program
State Student Incentive Grant (SSIG) Program

    (c) The following definitions apply to terms used in this part:
    Classification of Instructional Programs (CIP): A manual published 
by the U.S. Department of Education, National Center for Education 
Statistics, that lists the codes, titles, and descriptions of 
educational programs used by institutions and States for reporting and 
analyzing education data at the national level. (This manual can be 
obtained at the United States Department of Education, Outreach 
Division, OERI, 55 New Jersey Ave., NW., room 300, Washington, DC 
20208.)
    Education and general expenditures: The total amount expended by an 
institution for institution for instruction, research, public service, 
academic support (including library expenditures), student services, 
institutional support, scholarships and fellowships, operation and 
maintenance expenditures for the physical plant, and any mandatory 
transfers which the institution is required to pay by law.
    National Occupational Information Coordinating Committee (NOICC): 
An agency jointly sponsored by the U.S. Departments of Education and 
Labor to facilitate comparisons between educational programs and 
related occupations and to provide information to State employment 
counseling services.
    NOICC Master Crosswalk: A computerized database that shows the 
relationships among major occupational and educational systems used by 
the Federal government. (This database can be obtained from the 
National Crosswalk Service Center, Iowa SOICC, 200 East Grand Ave., Des 
Moines, IA 50309. Telephone: (515) 242-4881.)
    Professional program: An undergraduate or graduate educational 
program that--
    (1)(i) Is listed in the CIP; and
    (ii) Prepares individuals for an occupation, if that occupation--
    (A) Requires at least a bachelor's degree to qualify for entry;
    (B) Involves the independent practice or application of a defined 
or organized body of competencies that is unique to the occupation; and
    (C) Is formally recognized and regulated under a national or State 
licensure, accreditation, or permit system; or
    (2) Satisfies a State's statutory definition of the term 
professional program.
    Referred institution: An institution that a SPRE reviews as a 
result of--
    (1) A referral by the Secretary under Sec. 667.5; or
    (2) State selection under Sec. 667.6.
    State Postsecondary Review Entity (SPRE): The entity described in 
Sec. 667.4.
    Title IV, HEA program: One of the programs identified in 34 CFR 
668.1.
    Vocational program: An educational program, below the bachelor's 
level, designed to prepare individuals with the skills and training 
required for employment in a specific trade, occupation, or profession 
related to the educational program.

(Authority: 20 U.S.C. 1099a-1099a-3)


Sec. 667.3  State agreement.

    (a) To participate in the State Postsecondary Review Program, a 
State must enter into an agreement with the Secretary.
    (b) In the agreement, the State--
    (1) Designates a SPRE;
    (2) Describes the organizational structure of the SPRE;
    (3) Assures that the SPRE--
    (i) Has the legal authority under State law to carry out the 
functions required of it under this part;
    (ii) Will perform the functions required of it under this part;
    (iii) Will keep records or have access to records of referred 
institutions that relate to activities under this part and will provide 
information to the Secretary as may be requested by the Secretary for 
financial and compliance audits of referred institutions;
    (iv) Will keep records or have access to records that relate to its 
activities under this part, and will provide information to the 
Secretary as may be requested by the Secretary for program evaluations 
of the manner in which the SPRE carries out its responsibilities under 
this part; and
    (v) Will review referred institutions on a schedule that coincides 
with the Secretary's schedule for recertifying those institutions to 
participate in the title IV, HEA programs;
    (4) Describes the relationship between the SPRE, the State 
approving agency for Veterans Affairs, the State guaranty agency under 
the FFEL programs, the State agency responsible for administering the 
SSIG Program, any State entity that provides a license to institutions 
to operate in the State or otherwise legally authorizes institutions to 
provide postsecondary education in the State, any State-level entity 
that approves service providers under the Job Training Partnership Act, 
and any State-level entity that certifies vocational education;
    (5) Indicates that the SPRE--
    (i) Shall contract with a nationally recognized accrediting agency 
or a peer review system for purposes of Sec. 667.24; and
    (ii) May contract with a private agency, nationally recognized 
accrediting agency, or peer review system for assistance in performing 
the SPRE's functions; and
    (6) Includes the SPRE's plan for performing the functions described 
in Sec. 667.12.
    (c) The agreement between the State and the Secretary goes into 
effect when it is signed by the Secretary and remains in effect until 
it is terminated by the Secretary or the State. The Secretary or the 
State terminates an agreement under the provisions of that agreement.
    (d) The sanctions set forth in paragraph (e) of this section follow 
if the State--
    (1) Does not enter into an agreement with the Secretary;
    (2) Fails to comply with the terms of the agreement and the 
Secretary terminates that agreement;
    (3) Terminates the agreement with the Secretary; or
    (4)(i) Does not submit to the Secretary by December 31, 1995, State 
review standards under Sec. 667.21, that are approvable by the 
Secretary under Sec. 667.22, if the State received Fiscal Year 1993 
funds to carry out activities under the State Postsecondary Review 
Program; or
    (ii) Does not submit to the Secretary by December 31, 1996, State 
review standards under Sec. 667.21, that are approvable by the 
Secretary under Sec. 667.22, if the State did not receive Fiscal Year 
1993 funds to carry out activities under the State Postsecondary Review 
Program.
    (e) If any of the events listed in paragraph (d) of this section 
occurs--
    (1) The State is ineligible to receive--
    (i) Any funds appropriated to carry out this program;
    (ii) Its allotment of any funds appropriated under the SSIG 
Program; and
    (iii) Any funds appropriated to carry out the NEISP Program; and
    (2) The Secretary--
    (i) Does not designate as eligible for participation in a title IV, 
HEA program any institution in the State seeking initial participation 
in that program, any branch campus in the State for which an 
institution seeks an initial designation of eligibility under 34 CFR 
part 600, or any institution in the State that has undergone a change 
in ownership that results in a change in control as determined in 34 
CFR part 600;
    (ii) Grants only provisional certification, as determined in 34 CFR 
part 668, to an institution or a branch campus in that State not 
described in paragraph (e)(2)(i) of this section; and
    (iii) May--
    (A) Establish the review standards for that State described in 
Sec. 667.21; and
    (B) Carry out, or arrange to carry out, the State's other 
responsibilities and requirements under this part.

(Authority: 20 U.S.C. 1099a-1)


Sec. 667.4  State postsecondary review entity.

    (a) The SPRE is the entity designated by the State in the agreement 
between the State and the Secretary under Sec. 667.3, to--
    (1) Represent all existing State entities that are, and all future 
State entities that will be, responsible for--
    (i) Granting State authorization to provide postsecondary education 
in that State; and
    (ii) Ensuring that all institutions in the State that participate 
in a title IV, HEA program remain in compliance with the State review 
standards established under Sec. 667.21;
    (2) Keep records or have access to records of referred institutions 
that relate to activities under this part and provide information to 
the Secretary as may be requested by the Secretary for financial and 
compliance audits of referred institutions; and
    (3) Keep records or have access to records that relate to its 
activities under this part, and provide information to the Secretary as 
may be requested by the Secretary for program evaluations of the manner 
in which the SPRE carries out its responsibilities under this part.
    (b) Under this part, a SPRE is not authorized to--
    (1) Grant State authorization to provide postsecondary education in 
that State; or
    (2) Require an institution in the State that is not referred to the 
State by the Secretary under Sec. 667.5 or selected by the State under 
Sec. 667.6 to comply with State review standards established under 
Sec. 667.21.

(Authority: 20 U.S.C. 1099a-1099a-3)


Sec. 667.5  Criteria the Secretary uses to refer institutions to a SPRE 
for review.

    (a)(1) The Secretary refers an institution that participates in a 
title IV, HEA program to a SPRE for review if the institution meets one 
or more of the criteria contained in paragraph (b) of this section.
    (2) In determining whether an institution meets one or more of the 
criteria contained in paragraph (b) of this section, the Secretary uses 
the most recently available data.
    (b) Except as provided in paragraph (c) of this section, the 
Secretary refers an institution to a SPRE if--
    (1) The institution has a cohort default rate (defined in 34 CFR 
668.17) equal to or greater than 25 percent;
    (2)(i) The institution has a cohort default rate (defined in 34 CFR 
668.17) equal to or greater than 20 percent; and
    (ii) During the latest completed award year for which data are 
available--
    (A) More than two-thirds of the institution's regular undergraduate 
students who were enrolled as at least half-time students received 
assistance under any title IV, HEA program, excluding assistance 
received from the SSIG, NEISP, and Federal PLUS programs; or
    (B) The amount that the institution's students received under the 
title IV, HEA programs, excluding funds from the SSIG, NEISP, and 
Federal PLUS programs, is equal to or greater than two-thirds of the 
institution's education and general expenditures;
    (3) The amount that the institution's students received under the 
Federal Pell Grant Program is equal to or greater than two-thirds of 
the institution's education and general expenditures;
    (4) The Secretary initiated a limitation, suspension, or 
termination action against the institution under 34 CFR part 668, 
subpart G, within the preceding 5 years;
    (5) An audit finding in the institution's 2 most recent audits 
under 34 CFR 668.23 resulted in a required repayment by the institution 
of an amount greater than 5 percent of the funds the institution 
received under the title IV, HEA programs for any 1 award year covered 
by those audits;
    (6) The Secretary cited the institution for its failure to submit 
an acceptable audit report by the deadlines established under 34 CFR 
668.23;
    (7)(i) The amount that the institution's students received under 
the Federal Pell Grant Program during any award year differed by more 
than 25 percent from the amount that the institution's students 
received under that program in the preceding award year, unless the 
differences can be accounted for by changes in that program;
    (ii) The amount that the institution's students received under the 
Federal Stafford Loan Program during any award year differs by more 
than 25 percent from the amount that the institution's students 
received under that program in the preceding award year, unless the 
differences can be accounted for by changes in that program; or
    (iii) The amount that the institution's students received under the 
Federal SLS Program during any award year differs by more than 25 
percent from the amount that the institution's students received under 
that program in the preceding award year, unless the differences can be 
accounted for by changes in that program;
    (8) The institution failed to meet the factors of financial 
responsibility in 34 CFR part 668, subpart B;
    (9) The institution underwent a change in ownership that resulted 
in a change of control as defined in 34 CFR 600.31;
    (10) Except with regard to any public institution affiliated with a 
State system of higher education, the institution has participated for 
less than 5 years in--
    (i) The Federal Pell Grant Program;
    (ii) The FFEL Program;
    (iii) The FSEOG Program;
    (iv) The FWS Program;
    (v) The Federal Perkins Loan Program; or
    (11) The institution has been subject to a pattern of complaints 
from students related to its management or conduct of the title IV, HEA 
programs or to misleading or inappropriate advertising and promotion of 
the institution's educational programs that, in the Secretary's 
judgment, based on information available to the Secretary, including 
information provided to the Secretary by the SPRE, is sufficient to 
warrant review.
    (c)(1) Before the Secretary refers an institution to a SPRE for 
meeting one or more of the referral criteria contained in paragraph (b) 
of this section, the Secretary notifies the institution of that 
intended referral and the reasons for the referral.
    (2) The Secretary delays the referral if the Secretary receives 
from the institution a notice of its intent to challenge the accuracy 
of the information upon which the referral was based no later than 
seven days after the institution receives the notice from the 
Secretary.
    (3)(i) If an institution challenges the accuracy of the information 
on which its referral was based, the institution has the burden of 
proving that the information was inaccurate.
    (ii) For purposes of paragraph (c)(3)(i) of this section, the 
Secretary presumes that records maintained in the normal course of 
business by the U.S. Department of Education, a guaranty agency under 
the FFEL Program, a SPRE, a State licensing agency, or another State 
agency are accurate.
    (4)(i) If an institution challenges the accuracy of the information 
on which its referral was based, other than the accuracy of its cohort 
default rate for a particular year, the Secretary must receive the 
institution's submission, along with any supporting document or record, 
no later than 30 days after the institution receives the notice 
described in paragraph (c)(1) of this section.
    (ii) If an institution challenges the accuracy of its cohort 
default rate for a particular year under 34 CFR 668.17(d)(1)(i) (A) and 
(B), it must file a timely appeal of that rate under those provisions.
    (d) If the institution timely challenges its referral under 
paragraph (c) of this section, the Secretary refers the institution to 
a SPRE for review unless the institution convinces the Secretary that 
its referral was based upon inaccurate information for all of the 
referral criteria.
    (e)(1) Documents referenced in this section may be hand-delivered 
or mailed. If documents are mailed, they must be mailed certified mail, 
return receipt requested, or by next-day mail service.
    (2) If documents are mailed, proof of receipt shall be evidenced by 
the delivery date indicated on the United States Postal Service return 
receipt card (green card), or the pickup date indicated on the next day 
mail service's bill.
    (3) For purposes of paragraph (e)(2) of this section, if any 
submission is sent by next-day mail service, the Secretary presumes 
that the document was delivered the day after the date on which it was 
picked up for delivery.

(Authority: 20 U.S.C. 1099a-3)


Sec. 667.6  SPRE selection of institutions for review.

    (a) A SPRE may review an institution under this part that was not 
referred by the Secretary if--
    (1) The SPRE--
    (i)(A) Determines that the institution meets a referral criterion 
in Sec. 667.5 based on more recent data available to the SPRE; or
    (B) Has reason to believe the institution is engaged in fraudulent 
practices; and
    (ii) Requests the Secretary to approve its review of that 
institution; and
    (2) The Secretary--
    (i) Approves that request; or
    (ii) Does not respond to the SPRE's request within 21 days after 
the date the Secretary receives that request; and
    (b) If, under paragraph (a)(1)(i)(A) of this section, a State 
selects an institution for review, before the SPRE may request the 
Secretary to approve that review, the SPRE must--
    (1) Notify the institution of the selection and provide the 
institution with the reasons for its selection;
    (2) Delay its review request to the Secretary if the State receives 
a notice from the institution no later than seven days after the 
institution receives the notice from the State challenging the accuracy 
of the information on which the selection was based.
    (3)(i) If an institution challenges the accuracy of the information 
on which its selection was based, the institution has the burden of 
proving that the information was inaccurate.
    (ii) For purposes of paragraph (c)(3)(i) of this section, the State 
shall presume that records maintained in the normal course of business 
by the U.S. Department of Education, a guaranty agency under the FFEL 
programs, a SPRE, a State licensing agency, or another State agency are 
accurate.
    (4) To challenge the accuracy of the information on which its 
referral was based, the State must receive no later than 30 days after 
the institution receives the notice described in paragraph (c)(1) of 
this section the institution's submission, along with any supporting 
document or record.
    (c) If the institution timely challenges its referral under 
paragraph (b) of this section, the State requests a review of the 
institution from the Secretary unless the institution convinces the 
State that its selection was based upon inaccurate information.
    (d)(1) Documents referenced in this section may be hand-delivered 
or mailed. If documents are mailed, they must be mailed certified mail, 
return receipt requested, or by next-day mail service.
    (2) If documents are mailed, proof of receipt shall be evidenced by 
the delivery date indicated on the United States Postal Service return 
receipt card (green card), or the pick up date indicated on the next 
day mail service's bill.
    (3) For purposes of paragraph (e)(2) of this section, if any 
submission is sent by next-day mail service, the State shall presume 
that the document was delivered the day after the date on which it was 
picked up for delivery.

(Authority: 20 U.S.C. 1099a-3)


Sec. 667.7  Notice to SPRE and nationally recognized accrediting agency 
of Federal actions.

    (a)(1) If the Secretary takes an action against an institution, the 
Secretary notifies the SPRE of the State in which the institution is 
located, and the appropriate nationally recognized accrediting agency, 
within 10 days of taking that action.
    (2) For purposes of this part, an action taken by the Secretary 
includes, but is not limited to, the actions described in 34 CFR part 
668, subpart G.
    (b) If the Secretary is informed that another Federal agency is 
taking an action against an institution, the Secretary notifies the 
SPRE of the State in which the institution is located, and the 
appropriate nationally recognized accrediting agency, as soon as 
possible but not later than 10 days after learning of that action.

(Authority: 20 U.S.C. 1099a-3)


Sec. 667.8  Notice to nationally recognized accrediting agency of SPRE 
actions.

    (a) A SPRE shall notify a nationally recognized accrediting agency 
when it plans to conduct a review of an institution accredited or 
preaccredited by that agency; and
    (b) After conducting a review of the institution, the SPRE shall 
notify the accrediting agency of its findings and the actions the SPRE 
takes, or plans to take, as a result of those findings.

(Authority: 20 U.S.C. 1099a-3)


Sec. 667.9  Institutions with locations in more than one State.

    (a) If an institution that is subject to a referral has locations 
in more than one State, the Secretary refers the institution to the 
SPRE in each State in which the institution is located and informs each 
SPRE of the other States in which the institution is located.
    (b) The SPRE of the State in which the main campus of the 
institution is located has the principal responsibility for reviewing 
that institution.
    (c) If a branch campus or additional location of an institution is 
in a State other than the State in which the institution's main campus 
is located, the SPRE of the State in which that branch campus or 
additional location is located--
    (1) May review that branch campus or additional location before a 
SPRE review is conducted of the main campus of that institution;
    (2) May delay its review of that branch campus or additional 
location until a SPRE review is conducted of the main campus of that 
institution; or
    (3) May choose not to review that branch campus or additional 
location if--
    (i) The SPRE of the State in which the main campus of that 
institution is located reviews that institution and makes no 
significant findings; and
    (ii) The allotment of the State in which the branch campus or 
additional location is located is insufficient to allow the SPRE to 
review all referred institutions.
    (d) An institution and its branch campuses and additional locations 
are subject to the review standards of the State in which they are 
located, respectively.
    (e) Notwithstanding paragraphs (b) and (c) of this section, to 
review a referred institution that has locations in more than one 
State, the SPREs of those States may enter into an agreement under 
which the SPREs may alter the review responsibilities set forth in 
paragraphs (b) and (c) of this section.

(Authority: 20 U.S.C. 1099a-3)

Subpart B--Allotment Formula and Funding Procedures


Sec. 667.11  Allotment formula.

    (a) For each fiscal year for which funds are appropriated to carry 
out this part, the Secretary--
    (1) Allots $30,000 to Guam, $30,000 to American Samoa, $30,000 to 
the Northern Mariana Islands, $30,000 to the Virgin Islands, and 
$30,000 to the Trust Territory of the Pacific Islands;
    (2) Calculates each remaining State's allotment of the remaining 
funds under paragraph (b)(2) of this section; and
    (3) Notifies each State of its allotment.
    (b) Except for the funds allotted under paragraph (a)(1) of this 
section to Guam, American Samoa, the Northern Mariana Islands, the 
Virgin Islands, and the Trust Territory of the Pacific Islands, the 
Secretary allots to a State those remaining funds appropriated to carry 
out this part by--
    (1) Determining the percentage of institutions participating in a 
title IV, HEA program that are in each State by dividing the number of 
institutions located in that State that are certified to participate in 
a title IV, HEA program by the total number of institutions that are 
certified to participate in all States;
    (2) For the latest award year for which information is available, 
determining the percentage of title IV, HEA program funds by dividing 
the total amount of title IV, HEA program funds that were made 
available to students who enrolled in the institutions in that State 
that participate in a title IV, HEA program, or to those students' 
parents, by the total amount of title IV, HEA program funds that were 
made available to students, or to those student's parents, who enrolled 
in institutions that participate in a title IV, HEA program in all 
States;
    (3) Averaging the two percentages determined in paragraph (b) (1) 
and (2) of this section;
    (4) Calculating an ``initial distribution'' by multiplying the 
average percentage determined in paragraph (b)(3) of this section by 
the amount appropriated to carry out this part, less the total amount 
allotted to Guam, American Samoa, the Northern Mariana Islands, the 
Virgin Islands, and the Trust Territory of the Pacific Islands;
    (5)(i) Determining which States receive less than $75,000 under the 
initial distribution;
    (ii) Providing each of those States with $75,000; and
    (iii) Calculating the difference between the $75,000 provided to 
each of those States and those States' initial distribution;
    (6)(i) Determining which States receive more than $75,000 under the 
initial distribution; and
    (ii) Calculating the difference between each of those States' 
initial distribution and $75,000;
    (7) Calculating a ``reduction percentage'' by dividing the total 
amount obtained in paragraph (b)(5)(iii) of this section by the total 
amount obtained in paragraph (b)(6)(ii) of this section; and
    (8) Reducing the initial distribution of each State in paragraph 
(b)(6)(i) of this section by the product of the amount obtained in 
paragraph (b)(6)(ii) of this section and the reduction percentage in 
paragraph (b)(7) of this section.
    (c) If the Secretary determines that a SPRE will not spend its 
entire allotment during the period for which those funds are made 
available, or if a SPRE does not spend its allotment by the end of the 
period for which those funds are made available, the Secretary reallots 
those funds to other SPREs--
    (1) For unanticipated and extraordinary legal expenses; or
    (2) In a manner the Secretary determines best carries out the 
purposes of the State Postsecondary Review Program.
    (d) Federal and State matching funds under the SSIG and NEISP 
programs are excluded from the calculations in this section.

(Authority: 20 U.S.C. 1099a-1099a-3)


Sec. 667.12  Application for funds.

    (a)(1) General. For each fiscal year for which funds are 
appropriated to carry out this part, a State that has entered into an 
agreement with the Secretary under Sec. 667.3 shall apply to the 
Secretary to receive its allotment. The State's application must 
contain the information required in paragraph (b), (c), or (d) of this 
section, as appropriate. The Secretary publishes in the Federal 
Register the date by which a State must submit its application.
    (2) Established review standards. A State has established review 
standards if those standards met the requirements in Sec. 667.21 and 
the Secretary did not disapprove those standards under Sec. 667.22.
    (b) Application before standards are established. (1) If a State 
has not established review standards, to receive its allotment, the 
State--
    (i) Must submit a plan to develop--
    (A) The review standards described in Sec. 667.21, in consultation 
with the institutions in that State. The plan must describe the manner 
in which consultation will take place; and
    (B) The procedures for receiving and responding to complaints from 
students, faculty, and others regarding institutions in the State, in 
consultation with institutions in that State. The plan must describe 
the manner in which consultation will take place;
    (ii) May submit a plan to--
    (A) Identify information maintained by institutions and State 
agencies, other than the information institutions are required to 
maintain under the Student Right-to-Know and Campus Security Act, that 
is relevant to developing the State review standards;
    (B) Identify systems in which the information described in 
paragraph (b)(1)(ii)(A) of this section is maintained; and
    (C) Provide estimates of the costs of coordinating the 
institutions' and State's information systems with an information 
system developed by the SPRE; and
    (iii) Must submit a budget for developing the standards and the 
complaint procedures and, if relevant, for providing cost estimates for 
the SPRE's information system. The budget cannot exceed the State's 
allotment.
    (2) If the State's allotment is less than the State's anticipated 
cost of carrying out the activities described in paragraph (b)(1) (i) 
and (ii) of this section, the State shall first use its allotment to 
develop the review standards. If a portion of the allotment remains 
after the State develops its review standards, the State may develop 
procedures for receiving and responding to complaints from students, 
faculty, and others regarding institutions in the State. The State may 
use any remaining portion of its allotment to provide cost estimates 
for the SPRE's information system only after it has completed 
developing its review standards and complaint procedures.
    (c) Application after standards are established. (1) If the 
Secretary has not disapproved the State's review standards under 
Sec. 667.22, to receive its allotment, the State must submit to the 
Secretary--
    (i) Its plan to review referred institutions; and
    (ii) A budget for those reviews that does not exceed the State's 
allotment calculated under Sec. 667.11, less any amount expended by the 
SPRE in carrying out the activities under paragraph (b) of this 
section.
    (2)(i) If a SPRE anticipates that the cost of reviewing all the 
referred institutions will exceed the State's allotment, the SPRE 
shall, as part of its plan, submit a priority system for selecting 
institutions to review from among the referred institutions; and
    (ii) The SPRE shall have discretion in developing its priority 
system, except that the SPRE must make its top priority for review, 
referred institutions that the Secretary has scheduled for 
recertification under 34 CFR part 668, subpart B.
    (iii) A SPRE may establish the lowest reveiw priority for an 
institution if--
    (A) The institution is referred to the SPRE for a reason described 
in Sec. 667.5(b)(6) concerning the timely submission of an audit report 
or Sec. 667.5(b)(9) concerning a change of ownership that results in a 
change of control; and
    (B) The SPRE previously conducted a review of the institution as a 
result of a referral for the same reason in Sec. 667.5(b)(6) or (b)(9), 
respectively, and found no significant violations of the State's 
standards.
    (d) Timely submission. A State may submit to the Secretary the 
information required in paragraph (c) of this section at the same time 
that it submits to the Secretary the information and documentation 
required under paragraph (b) of this section.

(Authority: 20 U.S.C. 1099a-1099a-3)


Sec. 667.13  Approval of funding application.

    (a) Before standards are established. The Secretary approves a 
State's plan and budget submitted before the State establishes review 
standards if--
    (1) The plan provides a reasonable basis, and adequate budget 
justification, for carrying out the activities described in 
Sec. 667.12(b)(1);
    (2) If applicable, the plan includes a priority system for using 
the State's allotment as described in Sec. 667.12(b)(2); and
    (3) The budget includes only reasonable allowable costs within the 
State's allotment.
    (b) After standards are established. After the State establishes 
review standards, the Secretary approves a State's plan and budget for 
the allowable activities described in Sec. 667.14 if--
    (1) The plan provides adequate budget justification for those 
activities;
    (2) The plan provides for a reasonable scheme for reviewing 
referred institutions;
    (3) The plan includes a priority system for review of institutions 
as described in Sec. 667.12(c)(2);
    (4) The proposed contracts with private agencies, nationally 
recognized accrediting agencies, or peer review systems to carry out 
SPRE functions included in the plan are reasonable and appropriate; and
    (5) The budget includes only reasonable allowable costs within the 
State's allotment.
    (c) Failure to submit an acceptable application. If a State does 
not submit an application for funds under Sec. 667.12 or its 
application is not approved under this section--
    (1) The State is ineligible to receive--
    (i) Any funds appropriated to carry out this program;
    (ii) Its allotment of any funds appropriated under the SSIG 
Program; and
    (iii) Any funds appropriated to carry out the NEISP Program; and
    (2) The Secretary--
    (i) Does not designate as eligible for participation in a title IV, 
HEA program any institution located in that State seeking initial 
participation in that program, any branch campus located in that State 
for which an institution seeks an initial designation of eligibility 
under 34 CFR part 600, or any institution located in that State that 
has undergone a change in ownership that results in a change in control 
as determined in 34 CFR part 600; and
    (ii) Grants only provisional certification, as determined in 34 CFR 
part 668, to an institution in that State not described in paragraph 
(c)(2)(i) of this section.

(Authority: 20 U.S.C. 1099a-1099a-3)


Sec. 667.14  Allowable costs and activities.

    (a) If included in a State's approved plan, the Secretary pays, by 
reimbursement, direct costs as described in paragraph (c) of this 
section and in Office of Management and Budget (OMB) Circular A-87, and 
indirect costs as determined in paragraph (b) of this section, of--
    (1) Establishing State review standards in consultation with 
institutions in the State, publicizing the State review standards, and 
providing initial and continuing training to State and other personnel 
in the State, including personnel at the institution subject to review;
    (2) Establishing and implementing, in consultation with 
institutions in that State, the procedures for receiving and responding 
to complaints from students, faculty, and others regarding institutions 
in the State;
    (3) Reviewing referred institutions; and
    (4) Developing and maintaining an information system for SPRE 
review activities.
    (b) If a State seeks reimbursement for indirect costs, the State 
shall--
    (1) Use the restricted indirect cost rate, computed under 34 CFR 
75.564 and approved by the Secretary under 34 CFR 75.561; and
    (2) Not charge as a direct cost any cost that qualifies as an 
indirect cost.
    (c) The direct costs of carrying out the activities described in 
paragraph (a) of this section include, but are not limited to--
    (1) The salary of State employees engaged in allowable activities;
    (2) Travel costs incurred--
    (i) Consulting with institutions in developing standards and 
complaint procedures; and
    (ii) Reviewing referred institutions;
    (3) Training for--
    (i) State employees to perform reviews of referred institutions; 
and
    (ii) Institutional and other personnel regarding the State review 
standards;
    (4) Contracting with private organizations, nationally recognized 
accrediting agencies, and peer review systems to carry out required 
activities;
    (5) Costs incurred by the State for administrative actions and 
legal proceedings; and
    (6) Costs incurred by the SPRE in that State in sharing information 
with other SPREs, the Secretary, other State agencies, nationally 
recognized accrediting agencies, institutions, private organizations, 
and others.

(Authority: 20 U.S.C. 1099a-1099a-3)


Sec. 667.15  Fiscal procedures and records.

    (a) A state must account for the funds it receives under this part 
in accordance with the procedures it uses to account for the 
expenditure of its own funds and must keep fiscal and accounting 
records that support, on audit, its expenditure of funds under this 
part.
    (b)(1) Except as provided in paragraph (b)(2) of this section, the 
State must keep intact and accessible records relating to its 
activities under this part for five years after the end of the period 
for which funds were provided.
    (2) The State shall keep records on any claim or expenditure 
questioned on audit until any audit question is resolved.
    (c) A State must have an audit performed of the SPRE's activities 
under this part at least once every two years and must submit the 
report of that audit to the Secretary. An audit conducted under the 
Single Audit Act satisfies this requirement.

(Authority: 20 U.S.C. 1099a-1099a-3)


Sec. 667.16  Supplement, not supplant, requirement.

    The Secretary reimburses a State for the costs of necessary SPRE 
activities which supplement, but do not supplant, existing licensing or 
review functions conducted by the State.

(Authority: 20 U.S.C. 1099a-2)

Subpart C--State Review Standards, SPRE Reviews, and Termination of 
Institutional Participation


Sec. 667.21  State review standards.

    (a) Each State participating under this part must develop 
standards, in consultation with institutions in the State, under which 
the SPRE reviews referred institutions. The State-developed review 
standards must evaluate, with regard to a referred institution--
    (1) The extent to which the institution makes available to its 
students and prospective students its catalogs, admission requirements, 
course outlines, tuition-and-fee schedules, refund policy, course 
cancellation policy, rules and regulations, and enrollment agreement, 
if appropriate;
    (2) Whether the institution's descriptions of its courses and 
educational programs are accurate;
    (3) Whether the institution has a method to assess that a student 
has the ability to complete successfully the educational program for 
which he or she applies;
    (4) Whether the institution maintains and enforces standards 
relating to satisfactory academic progress;
    (5) Whether the institution maintains adequate student and other 
records;
    (6) Whether the institution complies with relevant safety, and 
health standards, such as fire, building, and sanitation codes;
    (7) The extent to which the institution's financial and 
administrative capacity is appropriate to its scale of operations, and 
whether the institution maintains adequate financial and other 
information to determine the adequacy of its financial and 
administrative capacity;
    (8) For an institution that the SPRE determines is at financial 
risk, the adequacy of the institution's plans to provide for, if the 
institution closes--
    (i) Instruction to enrolled students; and
    (ii) Retention of and access to academic and financial aid records;
    (9) If an institution provides a vocational program--
    (i) Whether the tuition and fees charged for that vocational 
program are excessive given the amount of money that a student who 
successfully completes the program may reasonably be expected to earn; 
and
    (ii) Whether the vocational program provides students with quality 
training that leads to useful employment in an occupation recognized in 
that State. In making this evaluation, one of the factors the SPRE 
shall consider is the appropriateness of the length of the vocational 
program in terms of both the number of days of instruction and the 
number of credit or clock hours the program offers;
    (10) The extent to which the institution provides to its students 
relevant information regarding--
    (i) Market and job availability for students in its occupational, 
professional, and vocational programs; and
    (ii) The relationship between the institution's educational 
programs and State licensing standards for specific occupations;
    (11) The appropriateness of the number of semester, trimester, or 
quarter credit or clock hours required for the completion of an 
educational program;
    (12) The appropriateness of the length of 600-clock-hour 
educational programs;
    (13) Whether, and the extent to which, the actions of any owner or 
shareholder of the institution, or any person exercising control over 
the institution may adversely affect its participation in a title IV, 
HEA program;
    (14) The extent to which the institution's procedures for 
investigating and resolving student complaints are adequate;
    (15) The extent to which the institution's advertising promotion, 
and student recruiting practices are appropriate;
    (16) Whether the institution has a fair and equitable refund 
policy; and
    (17) The extent to which the institution's educational programs are 
successful as measured by--
    (i) The completion and graduation rates of the students enrolled in 
those programs, taking into account the length of the programs and the 
selectivity of the institution's admission policy (for the purpose of 
this provision, a completion rate is the same as a graduation rate);
    (ii) The institution's withdrawal rate;
    (iii) With respect to the institution's vocational and professional 
programs, the placement rate of the institution's graduates in 
occupations related to their educational programs, with related 
programs and occupations determined by reference to the NOICC Master 
Crosswalk;
    (iv) Where appropriate, the rate at which the institution's 
graduates pass licensure examinations; and
    (v) The success of the institution's students who express other 
completion goals, such as transferring to another institution, 
obtaining full-time employment in their field of study, or qualifying 
for military service, in meeting those goals.
    (b) In developing the review standards in paragraph (a) of this 
section, a State--
    (1) May establish different standards for different types or 
categories of institutions or educational programs;
    (2)(i) Shall specify the records and information that a referred 
institution would need to maintain to demonstrate to a SPRE the 
institution's compliance with those standards; and
    (ii) If a referred institution was not, before the institution was 
referred, otherwise required to keep records relating to its compliance 
with State review standards, and did not keep those records, must allow 
the institution a reasonable period of time to obtain those records to 
enable the institution to demonstrate its compliance with the State 
standards;
    (3) Except for standards regarding prospective students in 
paragraph (a)(1) of this section, shall establish standards that apply 
at least to all regular students;
    (4) Shall quantify the standards described in paragraph (a)(9)(i) 
and (a)(17)(i), (ii), (iii), and (iv) of this section by establishing--
    (i) Criteria under which a SPRE determines if the tuition and fees 
charged by an institution for a vocational program are excessive 
compared to the amount of money that a student who successfully 
completes that program may reasonably be expected to earn;
    (ii) Acceptable completion and graduation rates of students 
enrolled in educational programs offered by an institution;
    (iii) An acceptable withdrawal rate of students at an institution;
    (iv) With respect to an institution's vocational and professional 
programs, an acceptable placement rate of the institution's graduates 
in occupations related to their educational programs; and
    (v) An acceptable rate or rates at which the institution's 
graduates pass licensure examinations; and
    (5) Shall determine the extent to which it is appropriate to base a 
State review standard on a related title IV, HEA program standard or 
requirement or establish as the State's review standard the comparable 
title IV, HEA program standard or requirement.

(Authority: 20 U.S.C. 1099a-3)


Sec. 667.22  Disapproval of State review standards.

    (a)(1) Each State shall submit to the Secretary for evaluation the 
review standards that the State developed under Sec. 667.21.
    (2) The State shall also submit to the Secretary an explanation of 
how each standard was established, including--
    (i) An explanation of the relationship between each of the State's 
review standards and the related or comparable title IV, HEA standards 
and requirements;
    (ii) If applicable, an explanation of the reasons for establishing 
different review standards for different types of institutions or 
educational programs; and
    (iii) A description of the manner in which institutions were 
consulted in developing the review standards.
    (b) The Secretary disapproves a State's review standards if--
    (1) The State does not comply with, or provide adequate information 
regarding, the provisions in paragraph (a) of this section;
    (2) The State does not assure the Secretary that the State's review 
standards are consistent with the laws and constitution of that State;
    (3) The State does not submit evidence that the State's review 
standards were developed in consultation with the institutions in that 
State;
    (4) The State's review standards do not meet or exceed all of the 
requirements and cover all the areas described in Sec. 667.21; or
    (5) The standards developed under Sec. 667.21(b)(4)--
    (i) Do not specify the methods and procedures that an institution 
must use to calculate the graduation or completion rates, withdrawal 
rate, placement rates, and licensure examination pass rates of the 
institution's students or graduates;
    (ii) Do not specify statistically valid methods and procedures that 
an institution must use if that institution conducts surveys of its 
graduates to obtain data regarding the type of employment and placement 
of the institution's graduates; and
    (iii) Do not specify the methods and data, and the source of that 
data, that a SPRE uses to determine if the tuition and fees charged by 
an institution for a vocational program are excessive compared to the 
amount of money that a student who successfully completes that program 
may reasonably be expected to earn.
    (c) If the Secretary disapproves a State's review standards, the 
Secretary gives the State the reasons for that disapproval and gives 
the State an opportunity to--
    (1) Demonstrate why the Secretary's disapproval was incorrect; or
    (2) Submit revised review standards that address the reasons for 
the Secretary's disapproval.

(Authority: 20 U.S.C. 1099a-3)


Sec. 667.23  SPRE reviews of referred institutions.

    (a)(1) Except as provided in paragraph (a)(2) of this section, if 
the Secretary refers an institution to a SPRE for review under 
Sec. 667.5 or the SPRE selects an institution for review under 
Sec. 667.6, the SPRE reviews, or arranges for the review of that 
institution, to determine whether the institution is in compliance with 
the State review standards described in Sec. 667.21.
    (2) The Secretary may determine that a SPRE need not review an 
institution that is referred only because it meets the conditions of 
Sec. 667.5(b)(10) if the SPRE previously conducted a review of that 
institution and found no violations of the State's standards.
    (b)(1) The SPRE shall provide written notice to all institutions in 
the State that participate in a title IV, HEA program of the review 
standards approved by the Secretary under Sec. 667.22 before it may 
conduct reviews of referred institutions.
    (2) Each year the SPRE shall make available information regarding 
its review priority system after its plan is approved by the Secretary 
under Sec. 667.13 and before conducting reviews of referred 
institutions under that plan and priority system.
    (c) After a SPRE completes its review of a referred institution, 
the SPRE must issue an initial report of the SPRE's findings and 
provide it to the institution no later than 45 days after the SPRE 
completes its review. If the SPRE finds that the institution is in 
violation of a standard, for each finding, the SPRE must--
    (1)(i) Cite the standard violated and the nature of the violation; 
and
    (ii) Except as provided in paragraph (d)(2) of this section, 
prescribe a course of action the institution must follow to correct the 
violation. The SPRE has sole discretion to determine an appropriate 
period for the institution to correct the violation and bring itself 
into compliance with the State's review standards; or
    (2) Initiate a proceeding under Sec. 667.25 to affect the 
termination of the institution's participation in the title IV, HEA 
programs.
    (d)(1) The SPRE must give the institution an opportunity to respond 
to its findings and required actions; and
    (2) The SPRE may determine, based on compelling evidence provided 
by the institution, that the institution's failure to satisfy a State 
standard does not warrant any further action by the SPRE.
    (e) If the institution chooses to respond to the SPRE's report 
within the time permitted by the SPRE, the SPRE must evaluate the 
institution's response and issue a final report to the institution that 
includes its findings and required action.
    (f)(1)(i) The SPRE must provide to the Secretary a copy of its 
final report to an institution within 30 days of its issuance to the 
institution; or
    (ii) If the institution did not respond to the SPRE's initial 
report by the date permitted by the SPRE, the SPRE must provide to the 
Secretary a copy of its initial report. The SPRE's initial report 
becomes its final report on the day after the date provided to the 
institution for responding to that report; and
    (2) If the SPRE did not prescribe a course of action the 
institution must follow to correct a violation of the State's standards 
under paragraph (d)(2) of this section, the SPRE must include in its 
report to the Secretary an explanation of why no action was prescribed.
    (g) In addition to the reasons for initiating a proceeding to 
effect the termination an institution's participation in a title IV, 
HEA program under paragraph (c) of this section, the SPRE may determine 
that the institution should no longer participate in that title IV, HEA 
program if that institution--
    (1) Does not respond to the SPRE's findings or comply with the 
SPRE's required actions within the time permitted by the SPRE, and the 
SPRE's findings show violations of the State's standards;
    (2) Does not allow SPRE personnel at the institution; or
    (3) Fails to provide SPRE officials with prompt access to its 
documents and records.

(Authority: 20 U.S.C. 1099a-3)


Sec. 667.24  Peer reviews of institutions.

    (a)(1) To carry out a review of a referred institution, the SPRE 
must contract with a nationally recognized accrediting agency or other 
peer review system the SPRE determines demonstrates competence in 
assessing educational programs.
    (2) In determining whether a peer review system is competent in 
assessing educational programs, the SPRE must, at a minimum, determine 
that the system has--
    (i) An established basis for evaluating educational quality;
    (ii) Review procedures that include the selection of peer reviewers 
who have experience in evaluating the types of programs offered by the 
institution; and
    (iii) Established policies and procedures that guard against bias 
in conducting reviews of institutions.
    (b)(1) Under the contract described in paragraph (a) of this 
section, the nationally recognized accrediting agency or peer review 
system shall carry out a review or provide information from its 
previous grant of accreditation or preaccreditation or previous review 
to the SPRE regarding the agency's or system's assessment of the 
quality and content of the institution's educational programs in 
relation to achieving the stated objectives for which the programs were 
offered.
    (2) In making its assessment under paragraph (b)(1) of this 
section, for each educational program, the agency or system shall take 
into account the adequacy of the space, equipment, instructional 
materials, staff, and student support services, including student 
orientation and counseling provided for each program, and any other 
areas specified in the agency's contract with the SPRE.

(Authority: 20 U.S.C. 1099a-3)


Sec. 667.25  Termination of an institution's participation in the title 
IV, HEA programs.

    (a)(1) If a SPRE determines that a referred institution should no 
longer participate in a title IV, HEA program, based upon its review, 
because the institution is in violation of State standards, or based 
upon a report or review of that institution by a nationally recognized 
accrediting agency or peer review system under Sec. 667.24, or has not 
complied with the SPRE requirements such as those listed in 
Sec. 667.23(g), the SPRE must provide the institution with the 
opportunity to contest that determination in accordance with procedures 
the Secretary has approved for that purpose under Sec. 667.26.
    (2) If the SPRE still concludes, after affording the institution 
the opportunity to challenge the SPRE's initial determination under 
paragraph (a)(1) of this section, that the institution should no longer 
continue to participate in a title IV, HEA program, the SPRE notifies 
the Secretary of those findings and that determination.
    (b)(1) Upon notice by the SPRE that the institution should no 
longer participate in a title IV, HEA program, the Secretary 
immediately terminates that institution's participation in that program 
and notifies the institution, the SPRE, and the appropriate accrediting 
agency of the effective date of that termination.
    (2) If an institution's participation in a title IV, HEA program is 
terminated under this section--
    (i) The institution may not appeal that termination to the 
Secretary; and
    (ii) The institution may not reapply to the Secretary to 
participate in that program until 18 months have expired from the 
effective date of its termination.

(Authority: 20 U.S.C. 1099a-3)


Sec. 667.26  Due process requirements.

    (a) Each State shall submit to the Secretary for approval the 
procedures it uses to allow an institution to challenge a SPRE's 
finding that the institution is in violation of the State's review 
standards and should no longer continue to participate in a title IV, 
HEA program.
    (b) The Secretary approves a States' procedures described in 
paragraph (a) of this section if--
    (1) The State review standards are in writing; and
    (2) The procedures require the SPRE to--
    (i) Notify an institution of any required action and the bases for 
that action;
    (ii) Permit the institution the opportunity to challenge that 
adverse action before an impartial official designated by the State for 
this purpose, in writing or in a hearing, within a specified time;
    (iii) Notify the institution in writing of the result of its 
challenge, and the basis for that result; and
    (iv) Follow other applicable procedural requirements of State law.

(Authority: 20 U.S.C. 1099a-3)

Appendix--Analysis of Comments and Changes

(Note: This appendix will not be codified in the Code of Federal 
Regulations.)

General Comments

    The Secretary received numerous comments about the overall impact 
of the proposed regulations. In general, commenters opposed to the 
proposed reguations believed that the NPRM did not achieve the 
coordinated balance of responsibilities among the triad members that it 
sought to achieve, and that it provided for extensive and duplicative 
data collection and reporting requirements that created a costly and 
unnecessary burden on the entire higher education community. Further, 
they believed that the regulations did not regulate ``narrowly to the 
law,'' as they purported to do. In general, these commenters suggested 
that the Secretary should review each requirement in the proposed 
regulations to determine if it was required by the statute and should 
further ensure that all requirements that meet this test and are 
included in the final regulations are implemented in the most 
reasonable and cost effective manner. This, they believed, would ensure 
the Department's compliance with Executive Order 12866.
    Specifically, many commenters were concerned that:
    (1) The proposed regulations will force institutions to engage in 
excessive and duplicative information gathering and reporting, at 
considerable cost, with no net increase in the quantity or quality of 
information available to the public, and will result in the diversion 
of institutions' already scarce resources away from their primary 
mission of providing a quality education; and
    (2) The proposed regulations threaten the diversity of American 
higher education and fail to focus oversight properly on vocational 
institutions.
    In addition, the Secretary received suggestions from several 
commenters that the Department should strongly encourage all triad 
members to work together and adopt the same or similar language for the 
various standards, should collect the necessary data through a common 
source such as readily available public information or IPEDS, and 
should use common methodologies for various calculations such as 
completion or withdrawal rates.
    Discussion: As suggested by several commenters, the Secretary has 
carefully reviewed each requirement in the proposed regulations in 
light of statutory intent. The Secretary has also carefully considered 
both the burden of the proposed regulations on institutions and SPREs, 
in terms of cost, duplication of effort, and the added recordkeeping 
and reporting requirements. Similarly, the Secretary has considered the 
benefits of the proposed regulations, not just to institutions and 
SPREs but to students and the general public as well. A particular 
concern of the Secretary has been how to ensure that the regulations 
hold the three members of the triad accountable for the manner in which 
they fulfill their responsibilities under the HEA yet still provide 
each member of the triad the flexibility to determine the appropriate 
means to carry out those responsibilities.
    The Secretary acknowledges that there is a potential risk with this 
strategy, however. By giving SPREs maximum flexibility in these 
regulations, by giving accrediting agencies corresponding flexibility 
in the regulations for Secretary's Procedures and Criteria for 
Recognition of Accrediting Agencies, and by retaining authority for the 
Secretary to set specific requirements implementing the certification 
process, the danger exists that institutions will be burdened with 
reporting requirements that are similar, but not identical, thus 
increasing not only the reporting requirement but the recordkeeping 
requirement and cost as well. For this reason, the Secretary strongly 
urges a coordinated approach to any reporting requirement that may be 
imposed on institutions by the regulations implementing the Program 
Integrity Triad. Specifically with respect to States, the Secretary 
urges SPREs to impose reporting requirements on referred institutions 
only after they carefully examine any publicly available information 
related to those requirements, any similar reporting requirements 
imposed on institutions by either the Department or accrediting 
agencies under the regulations governing the Secretary's Procedures and 
Criteria for Recognition of Accrediting Agencies, and any methodologies 
currently used, or mandated for use, by institutions in calculating the 
required information. The Secretary hopes that by bringing this 
potential risk of increased burden on institutions to the attention of 
the entire higher education community--without specifically addressing 
it in regulation--the community can work together to prevent undue 
burden at the same time it ensures proper accountability. The Secretary 
expects to take a leadership role in implementing a coordinated 
strategy to manage the triad with the goal of maximizing effectiveness 
while minimizing burden, duplication, and inconsistencies among SPREs, 
accrediting agencies, and the Department.
    The discussion that follows addresses the commenters concerns and 
the Secretary's response to those concerns.

Section 667.1  Scope and Purpose

    Comments: Many commenters interpreted this section as applying 
State oversight to all institutions in a State. As a result, these 
commenters believed that the Secretary expanded the SPRP beyond that 
authorized in the statute. The commenters believed that the NPRM's 
stated purpose of the program, ``to strengthen State oversight of 
institutions participating in the title IV, HEA programs through 
development of State standards for those institutions,'' was inaccurate 
and ``unduly alarming'' because it suggested that a SPRE was authorized 
to establish review standards for all institutions in a State. Many of 
these commenters believed the primary purpose of the program was to 
reduce fraud and abuse in the title IV, HEA programs through State 
oversight of selected institutions. Many other commenters believed that 
Congress intended the program to focus exclusively on ``problem 
institutions'' identified by the Secretary, i.e., those institutions 
that have serious academic or financial problems or those institutions 
that have otherwise failed to fulfill their fiduciary responsibilities 
in administering the title IV, HEA programs.
    Discussion: The Secretary notes that Sec. 667.1, as proposed, was 
not intended to apply to all institutions in a State but only to 
institutions in a State that were participating in the title IV, HEA 
programs. The Secretary agrees that a SPRE only has authority to review 
``referred institutions'' under the standards it develops under this 
program, and therefore agrees that the provisions of Sec. 667.1(a) 
could be viewed as overbroad. The Secretary also agrees that a primary 
purpose of the SPRP is to reduce fraud and abuse in the title IV, HEA 
programs.
    Changes: Section 667.1(a)(1) has been revised to clarify the 
purpose of the SPRP, and to clarify that under the SPRP a State's 
standards apply only to referred institutions and that a State may 
review only referred institutions under those standards.
    Comments: One commenter urged the Secretary to indicate that a SPRE 
could take an action against an entire institution or one of the 
institution's branch campuses, additional locations, or educational 
programs. The commenter believed there would be instances where a SPRE 
could determine that a branch campus or an additional location of the 
institution, but not the entire institution, should be terminated from 
the title IV, HEA programs. The commenter also noted that several of 
the State's standards apply only to specific educational programs and 
argued that it could be inappropriate for a SPRE to take an adverse 
action against the entire institution if the basis for that action was 
a finding directly related to a specific educational program offered by 
that institution.
    Discussion: The Secretary agrees that a SPRE has flexibility under 
the SPRP to craft a remedy along the lines suggested by the commenter. 
Thus, the SPRE can require an institution to stop offering a particular 
program or stop offering programs at particular locations or branch 
campuses. However, the Secretary believes that the authority of a SPRE 
under section 494C(h) of the HEA to determine that an institution 
should no longer participate in the title IV, HEA programs relates to 
terminating the institution as a whole, not to particular parts of the 
institution.
    Changes: None.

Section 667.2  Definitions

Education and General Expenditures
    Comments: One commenter recommended that instead of using the 
statutory definition of education and general expenditures, used for 
purposes of Title III of the HEA, which governs the Strengthening 
Institutions Program, the Secretary adopt the definition used by the 
American Institute of Certified Public Accountants. In addition, the 
commenter noted that two financial-standard-making bodies have issued 
or have under consideration changes that will modify the current 
accounting and reporting standards. The commenter suggested that the 
final regulations refer only to current generally accepted accounting 
principles and financial reporting requirements by source rather than 
provide a specific definition of education and general expenditures.
    Discussion: The Secretary believes that it is most appropriate to 
use a definition of education and general expenditures for this program 
that is already included in the HEA.
    Changes: None.
Professional Program
    Comments: Several commenters agreed with the proposed definition of 
professional program.
    Several other commenters argued that professional education is 
placed in the same category as occupational and vocational education 
with regard to the standards described in sections 494C (d)(8) and 
(d)(14)(C) of the HEA. The commenters contended that the use of 
professional education in this context implies a limited use of the 
term; namely, one that is closely related to vocational education. 
These commenters suggested that the proposed definition of professional 
program be modified to include only programs at or below the associate 
degree level.
    Several commenters suggested adopting the Integrated Postsecondary 
Education Data System (IPEDS) definition of first professional degree 
to ensure compatibility with data collected at the Federal level.
    One commenter writing on behalf of a SPRE noted that professional 
programs are defined and governed under the State's education and 
judiciary Laws. The commenter urged that the definition of professional 
program recognize a State's statutory definition as provided under 
section 494C(d) of the HEA. (That section of the HEA requires a State 
to develop standards that are consistent with the constitution and laws 
of the State.)
    Discussion: Secretary disagrees with those commenters that suggest 
that the term professional program be limited to programs at or below 
the associate degree level. The term professional program is commonly 
accepted as encompassing programs at higher degree levels.
    The Secretary agrees with the commenter that the proposed 
definition of professional program be modified to recognize State law.
    The Secretary believes that the IPEDS definition of first 
professional degree is too narrow. Under that definition, the term 
profession program would encompass only 10 fields of study. However, 
the Secretary also agrees that the proposed definition was overly broad 
in that it permitted overlap between what constitutes professional 
education and what constitutes vocational education. The final 
regulations need to make the distinctions between both types of 
education clear. See also the discussion of vocational program.
    Changes: The Secretary has revised the second element of the 
proposed definition to maintain a clear distinction between the terms 
vocational program and professional program. Thus, a professional 
program is an educational program that prepares individuals for an 
occupation, if that occupation requires, in part, at least a bachelor's 
degree to qualify for entry. Also, the definition is expanded to allow 
a SPRE to use a State's statutory definition of the term professional 
program.
Vocational Program
    Comments: All commenters agreed that the definition of the term 
vocational program under the SPRP be the same as the definition of 
vocational education under the Accreditation regulations, 34 CFR part 
602. Several commenters agreed with the proposed definition of a 
vocational program. Most of these commenters preferred the SPRP 
definition to that proposed in the accreditation NPRM.
    Many commenters writing on behalf of community colleges and 
universities believed the proposed definition of vocational program was 
too broad. Many of these commenters believed strongly that proprietary 
institutions were primarily responsible for abuses in the title IV, HEA 
programs, and it was unfair to classify associate degree programs as 
vocational programs or to include any degree programs offered by 
community colleges or universities within the scope and meaning of the 
term vocational program.
    Many commenters writing on behalf of proprietary and vocational 
institutions believed strongly that the proposed definition was too 
narrow. These commenters noted that most postsecondary educational 
programs are employment or career oriented and that students who enroll 
in those programs should be treated equally, regardless of the 
institution they chose to attend. These commenters believe that the 
term vocational program should include all undergraduate programs.
    One commenter agreed with the propositions that the commenter 
claimed were presented in the accreditation NPRM that (1) every 
postsecondary educational program is technically vocational, and (2) 
while all programs may be vocational in nature, not all programs are 
academic. This commenter suggested that a better case be made for 
classifying programs as ``academic'' or ``nonacademic.'' Under this 
approach, the term vocational program would be replaced by the term 
nonacademic program and the term academic program would be defined to 
include any program described under proposed 34 CFR 668.8(c) (1) and 
(2), that (1) a program of at least two academic years in length that 
provides an associate degree, a bachelor's degree, a professional 
degree, or an equivalent degree as determined by the Secretary, or (2) 
a program in which each course is acceptable for full credit toward 
that institution's associate degree, bachelor's degree, professional 
degree, or equivalent degree as determined by the Secretary, provided 
that the institution's degree requires at least two academic years of 
study.
    Many commenters believed that the proposed definition was too 
vague. Several of these commenters suggested adopting the definition of 
an ``occupationally specific program,'' as that term is defined in the 
CIP and used under IPEDS. These commenters noted that the National 
Center for Education Statistics and other Federal agencies use this 
definition to obtain data from institutions through IPEDS for research 
and other purposes.
    Discussion: The Secretary agrees with the commenters that the 
definition of vocational program in this part should be the same as the 
definition of vocational education in the accreditation regulations, 34 
CFR part 602.
    The Secretary further agrees with those commenters that suggested 
that the IPEDS/CIP definition, with minor modifications, is the most 
appropriate definition to use in this part and in the accreditation 
regulations because under that definition, educational programs are 
classified in a manner that is congruent with various SPRP statutory 
provisions that require a clear identification and reporting of 
educational programs offered by an institution that are occupationally 
specific and employment related. See, for example, the standards 
described under section 494C(d)(7) of the HEA, ``If the stated 
objectives of the courses or programs of the institution are to prepare 
students for employment * * *;'' section 494C(d)(8) of the HEA, 
``Availability to students of relevant information by institutions of 
higher education, including * * * information related to market and job 
availability for students in occupational, professional, and vocational 
programs; and * * * information regarding the relationship of courses 
to specific standards necessary for State licensure in specific 
occupations;'' and section 494C(d)(14)(C) of the HEA, ``The success of 
the program at the institution, including * * * with respect to 
vocational and professional programs, the rates of placement of the 
institution's graduates in occupations related to their course of 
study.''
    The Secretary disagrees with the commenter who suggested 
classifying programs as ``academic'' and ``nonacademic,'' because the 
Secretary disagrees with the commenter's premise that all vocational 
programs are ``nonacademic'' programs.
    The Secretary disagrees with those commenters who suggest that the 
term vocational program excludes in some manner degree programs offered 
by colleges and universities. The statute does not exempt types of 
institutions; rather, as noted above, the statute clearly speaks in 
terms of vocational programs offered at institutions.
    Changes: A vocational program is defined as ``an educational 
program, below the bachelor's level, designed to prepare individuals 
with skills and training required for employment in a specific trade, 
occupation, or profession related to the educational program.'' The 
Secretary notes that this definition is operationally consistent with 
the IPEDS/CIP definition of an ``occupationally specific program.''

Section 667.3  State Agreement

    Comments: Several commenters suggested that the Secretary specify 
more clearly when sanctions would be imposed on a State that failed to 
establish review standards. These commenters recommended that the 
Secretary impose sanctions on a State that failed to establish review 
standards by the end of the second year. However, these commenters 
suggested different time periods for measuring the end of that second 
year. These suggestions included using the Federal fiscal year, the 
State fiscal year, the calendar year, and the planning year.
    Discussion: The Secretary agrees to be more specific in these 
regulations with regard to when sanctions will fall on a State that 
fails to establish review standards. Because the Secretary encourages 
all States to participate in the program, the Secretary has chosen a 
deadline date for sanctions that should enable all States to avoid that 
sanction.
    Changes: Section 667.3(d)(4) has been revised to provide that a 
State will have until December 31, 1995 to submit State review 
standards that are subsequently approved by the Secretary if the State 
received fiscal year 1993 funds to carry out SPRP activities, and until 
December 31, 1996 to submit those standards if the State that did not 
receive fiscal year 1993 funds to carry out SPRP activities. The 
deadline date for imposing sanctions has been changed from the date on 
which standards are approved to the date on which approvable standards 
are submitted to the Secretary for approval.
    Comments: Several commenters writing on behalf of SPREs argued that 
the Secretary should not impose sanctions on a State that failed to 
establish review standards within two years if the reason for exceeding 
the proposed two-year limit was due to (1) a State requirement to 
codify those standards in State regulations, or (2) a condition beyond 
the control of the SPRE.
    Discussion: The Secretary disagrees that codifying standards in 
State regulations is a valid reason for not imposing sanctions on a 
State that fails to establish review standards. Under 
Sec. 667.12(a)(2), a State establishes review standards if those 
standards meet the requirements in Sec. 667.21 and the Secretary does 
not approve those standards under Sec. 667.22. This process of 
establishing standards is distinct from the process a SPRE may need to 
follow to codify standards in State regulations. Accordingly, a SPRE 
may submit the State's standards to the Secretary for evaluation while 
simultaneously beginning the process to codify those standards in State 
regulations as long as the State coordinates the two processes.
    Moreover, as noted above, the Secretary has extended the deadline 
date for submitting approved standards to the Secretary. Therefore, the 
Secretary believes that no State codification process should prevent a 
State from submitting its standards in a timely manner. Similarly the 
Secretary believes that a State should be able to meet that deadline 
regardless of conditions outside its control.
    Changes: None.
    Comments: Several commenters were concerned that the provision in 
proposed Sec. 667.3(b)(3)(iii) that stated that ``the SPRE will keep 
records or have access to records * * *'' implied that the SPRE had the 
authority to (1) require nonreferred institutions to submit financial 
and standards-related information to the SPRE, and (2) gain access to 
the records of nonreferred institutions without first obtaining 
authorization from those institutions for that access.
    Discussion: It is not the Secretary's intention that a SPRE 
generally have records or access to records of nonreferred 
institutions, and the Secretary agrees to clarify this point.
    Changes: Section 667.3(b)(3)(iii) is revised to require State 
assurance that a SPRE will keep records or have access to records of 
referred institutions, and will provide requested information to the 
Secretary for purposes of financial and compliance audits of referred 
institutions. A new Sec. 667.3(b)(3)(iv) is added to require State 
assurance that SPRE will keep records or have access to records, 
related to its activities under this part, and will provide requested 
information to the Secretary, for purposes of program evaluations of 
the manner in which the SPRE carries out its SPRP responsibilities.
    Comments; A few commenters suggested that the proposal to include 
in the State's agreement with the Secretary a description of the SPRE's 
relationship with State-level entities be removed on the grounds that 
it would unnecessarily divert SPRE resources.
    Discussion: The Secretary disagrees that such relationships would 
unnecessarily divert SPRE resources. To the contrary, the Secretary 
believes strongly that to carry out effectively the purposes of this 
part, a SPRE must avail itself of relevant information regarding the 
actions that any State agency takes or plans to take with regard to a 
referred institution in the State.
    Changes: None.
    Comments: Many commenters acknowledged that the statute requires a 
SPRE to review referred institutions on a schedule that coincides with 
the Secretary's schedule for recertifying institutions. Several 
commenters urged the Secretary to require a SPRE to review only those 
institutions that represent the highest risk for fraud and abuse. A 
number of other commenters suggested that the SPRE develop additional 
priorities for the review of this set of institutions that would be 
compatible with the Secretary's schedule for recertifying these 
institutions.
    Discussion: The Secretary acknowledges that a SPRE's allotment of 
funds may be inadequate to review all referred institutions on a 
schedule that coincides with the Secretary's schedule for recertifying 
institutions. For that reason, the Secretary proposed in Sec. 667.12(c) 
and restates in that same section in these regulations, to allow a 
State to establish review priorities, giving States discretion to 
establish their own priorities, subject to the requirement for 
coordinating with the Secretary's schedule for recertification of 
institutions. The Secretary expects that, to the extent possible, 
States will select ``high-risk'' institutions for review.
    Changes: None.

Section 667.4  State Postsecondary Review Entity

    Comments: Many commenters believed strongly that this section of 
the regulations be amended to reflect unambiguously the NPRM preamble 
discussion that a SPRE merely represents certain State entities.
    Discussion: Under section 494A(b)(1) of the HEA, the SPRE must 
represent any State entity that is responsible for (1) providing the 
legal authorizations to institutions to operate in the State, for the 
purposes of 1201 of the HEA, and (2) ensuring that each institution in 
the State remains in compliance with the State's review standards 
developed pursuant to section 494C of the HEA. The Secretary simply 
repeated these statutory provisions in proposed Sec. 667.4. In the NPRM 
preamble, the Secretary indicated that these statutory provisions did 
not give a SPRE itself authority under this part to provide licenses to 
or legally authorize institutions to operate in a State, or ensure that 
all institutions in the State remain in compliance with the State's 
standards. The Secretary agrees to accommodate the commenters by 
including these statements in the regulations.
    Changes: Section 667.4(b) has been revised to indicate that under 
the SPRP, a SPRE is not authorized by the SPRP to (1) grant State 
authorization to provide postsecondary education in that State, or (2) 
require a nonreferred institution to comply with State review standards 
established under Sec. 667.21.

Section 667.5  Criteria the Secretary Uses To Refer Institutions to a 
SPRE for Review

    Comments: Many commenters objected strongly to the proposed 
procedures regarding the confirmation of the data used by the Secretary 
to refer an institution to a SPRE for review. These commenters urged 
the Secretary to discard those procedures and establish new procedures 
under which a referred institution would be provided an opportunity to 
challenge the referral data before the Secretary referred that 
institution to a SPRE. Under the suggested procedures, the Secretary 
would not refer an institution to a SPRE if that institution challenged 
the referral data within the time permitted by the Secretary. The 
Secretary would only refer an institution to a SPRE if the institution 
did not challenge the referral data or the Secretary confirmed the 
challenged referral data.
    Discussion: Based on public comment and further review, the 
Secretary agrees with the commenters that an institution should be 
given an opportunity to challenge the accuracy of referral data before 
the Secretary refers that institution to a SPRE for review. Similarly, 
the Secretary agrees with the commenters that an institution should be 
given an opportunity to challenge the accuracy of referral data before 
a State notifies the Secretary that it wishes to review an institution 
on the basis of having more current information that the institution 
satisfies one or more of the referral criteria.
    If an institution challenges the information on which the Secretary 
or the State based its referral, the Secretary and the State presume 
that records maintained in the normal course of business by ED, a 
guaranty agency under the FFEL programs, a SPRE, a State licensing 
agency, or another State agency are accurate unless the institution 
proves to the Secretary's satisfaction that the records are not 
properly maintained or are inaccurate. Thus, unless an institution can 
prove that the information on which its referral is based is 
inaccurate, the institution will be referred for SPRE review.
    Changes: Section 667.5 has been revised to allow an institution to 
challenge the accuracy of referral data before the Secretary refers 
that institution to a SPRE.
    Comments: With respect to the Sec. 667.5(b)(11), under which the 
Secretary refers an institution that has been subject to a pattern of 
complaints, several commenters urged the Secretary to remove references 
to complaints from faculty, or persons other than students. These 
commenters argued that the statute requires the Secretary to consider 
only complaints from students. In addition, some commenters contended 
that statute does not authorize the Secretary to use complaint 
information collected by the SPRE for referral purposes.
    Discussion: The Secretary agrees with the commenters regarding 
references to complaints from ``faculty, or others.'' Under section 
494C(b)(11) of the HEA, the referral criterion makes specific reference 
to the complaint system a State is to develop.
    The Secretary believes that the most appropriate entity to provide 
to the Secretary information about a pattern of the complaints is the 
SPRE.
    Changes: The Secretary has limited consideration of a pattern of 
complaints as a basis for referrals under Sec. 667.5(b)(11) to a 
pattern of student complaints.
    Comments: A number of commenters agreed that it would be wasteful 
continually to refer an institution to a SPRE for review for an event 
that happened once. In the NPRM, the Secretary proposed to reserve for 
future consideration whether to refer an institution to a SPRE for 
review under three criteria if on the basis of an earlier referral, the 
SPRE conducted a review of the institution and made no significant 
findings. These criteria were those relating to late audits, changes of 
ownership, and the first five years of participating in a title IV, HEA 
program. These commenters also suggested that this consideration ought 
to be given to more or all of the referral criteria.
    Discussion: The Secretary attempted to resolve this problem by 
proposing remedies through legislation. However, in the Higher 
Education Technical Amendments of 1993, Public Law 103-208, only one of 
the three subject criteria, the criterion set forth in 
Sec. 667.5(b)(10) was addressed. With regard to that criterion, an 
institution participating for less than five years in a title IV, HEA 
program must be referred to a SPRE, but the Secretary may determine 
that the SPRE need not review the institution if the institution was 
referred solely under Sec. 667.5(b)(10), and the SPRE previously 
conducted a review of that institution and found no violations of the 
State's standards. For the other two criteria, the Secretary believes 
that section 494C(b) of the HEA requires the Secretary to refer 
institutions that meet those other two requirements. However, to avoid 
wasting a SPRE's time and effort, the Secretary will allow a SPRE to 
place institutions on the lowest review priority if the institutions 
were referred because of a late audit or a change in ownership and a 
previous SPRE review found no significant violations of State 
standards.
    Changes: Section 667.23(a)(2) is changed to provide that the 
Secretary may determine that a SPRE need not review an institution that 
was referred only because it meets Sec. 667.5(b)(10), if the SPRE 
previously conducted a review of that institution and found no 
violations of the State's standards. In addition, a new 
Sec. 667.12(c)(3)(ii) is added to permit a SPRE to place an institution 
in the lowest priority for review if the institution was referred 
because of a late audit or a change in ownership and a previous SPRE 
found no significant violations of State standards.
    Comments: A few commenters noted that the Secretary did not have 
complete data pertaining to several of the referral criteria and were 
concerned that the Secretary would nevertheless refer institutions to a 
SPRE based on this incomplete data or on assumptions regarding this 
data.
    Discussion: The Secretary acknowledges that complete data for all 
the referral criteria are not available. However the Secretary assures 
commenters that no referral will be made based on assumptions or 
incomplete data.
    Changes: None.
    Comments: Several commenters noted that the Secretary sometimes 
withdraws an action to limit, suspend, or terminate an institution's 
participation in a title IV, HEA program because the Secretary 
concludes retrospectively that such an action was not warranted. 
Therefore, these commenters argued that the proposed language for this 
referral criterion be modified to reflect that the Secretary would not 
refer an institution subject to limitation, suspension, or termination 
until the Secretary completes that action.
    Discussion: If the Secretary withdraws a limitation, suspension, or 
termination action solely because the Secretary determines that there 
was no factual basis for that action, the Secretary will not consider 
that action as triggering a referral. However, if the Secretary 
withdraws a limitation, suspension, or termination action against an 
institution because of an action on the part of the institution, or the 
promise of some current or future action on the part of the 
institution, the initiation of the Secretary's action will trigger a 
referral.
    Changes: None.

Section 667.6  SPRE Selection of Institutions for Review

    Comments: Many commenters were concerned about the SPRE's authority 
under the statute to select an institution for review if the SPRE had 
``reason to believe'' that the institution was engaged in fraudulent 
practices. Some of these commenters believed that SPREs would abuse 
this authority by using it as the basis to review any institution. A 
number of commenters believed strongly that the regulations should 
clarify what is meant by the phrase ``reason to believe'' and define 
the term ``fraud.''
    Discussion: The Secretary disagrees with the commenters that SPREs 
would abuse the statutory authority that allows SPREs to review 
institutions that they have reason to believe are engaged in fraudulent 
practices.
    With regard to a definition of fraud, in general, fraud involves 
intentional misconduct to obtain a benefit.
    Changes: None.
    Comments: Many commenters believed that an institution selected by 
the SPRE on the basis of ``more recent data'' should be afforded the 
opportunity to challenge that data before the SPRE may conduct a review 
of that institution. In addition, several commenters urged that 
institutions selected by the State for review under proposed Sec. 667.6 
should be afforded the opportunity to challenge the State's data. A few 
of these commenters believed that the confirmation procedures should be 
waived in cases where the State has reason to believe that institutions 
were engaged in fraudulent practices.
    Discussion: The Secretary agrees based on the reasons in the 
discussion under Sec. 667.5.
    Changes: A change has been made similar to the change in 
Sec. 667.5.

Section 667.7  Notice to SPRE of Federal Actions; and Sec. 667.8 Notice 
to Nationally Recognized Accrediting Agency of SPRE Actions

    Comments: A number of commenters believed that the Secretary should 
shorten the time period proposed in the NPRM for notifying SPREs of 
Federal actions. Several of these commenters suggested shortening the 
time period to 5 days, while others suggested notification within 48 
hours in cases where the Secretary intended to terminate an 
institution's participation in a title IV, HEA program.
    A few commenters suggested that the Secretary notify the SPRE in 
writing of the applicable action.
    Several commenters suggested that the Secretary make clear that an 
action includes a limitation, suspension, or termination proceeding.
    A number of commenters urged the Secretary to (1) provide to 
accrediting agencies the same information provided to SPREs, and (2) 
require States to provide to accrediting agencies information regarding 
SPRE reviews of referred institutions.
    Discussion: The Secretary proposed 10 days in the NPRM because in 
some instances the Secretary may need to confirm information before 
providing it to a SPRE. The Secretary agrees that accrediting agencies 
should also be notified by the Secretary and by SPREs. Accordingly, the 
Secretary (1) intends to notify SPREs and accrediting agencies of 
Federal actions as soon as possible and provide this notification 
orally in writing, and (2) will require States to notify accrediting 
agencies of SPRE actions. The Secretary further agrees to include as 
Federal actions those identified by the commenters.
    Changes: Section 667.7 is revised to describe an action taken by 
the Secretary against an institution as one that includes a limitation, 
suspension, or termination proceeding. A new Sec. 667.8 is added to 
require SPREs to notify appropriate accrediting agencies of SPRE 
reviews of referred institutions and SPRE findings and planned and 
actual corrective actions. This section is also revised to provide that 
the Secretary notifies the appropriate nationally recognized 
accrediting agency of actions taken by the Secretary or another Federal 
agency against an institution.

Section 667.9  Institutions With Locations in More Than One State

    Comments: Many commenters objected to the proposed requirement that 
an institution's branch campuses or additional locations be subject to 
the standards of the State in which those branch campuses or additional 
locations are located. These commenters believed strongly that an 
institution's branch campuses and additional locations be subject only 
to the standards of the State in which the main campus of that 
institution is located. The commenters argued that it is unreasonable 
and burdensome to require an institution's branch campuses and 
locations to comply with different State standards.
    Discussion: The Secretary disagrees with the commenters. This 
provision is consistent with the requirements that an institution must 
satisfy to obtain institutional eligibility under the HEA for locations 
or branch campuses in States different from the main campus. For 
institutional eligibility purposes, the institution must obtain a 
license or other legal authority to provide postsecondary education at 
the branch campus or additional location from the State in which the 
branch campus or other location is physically located, not the Senate 
in which the main location is physically located.
    Changes: None.

Section 667.11  Allotment Formula

    Comments: Two commenters writing on behalf of States that would 
receive the minimum allotment under the proposed formula believed 
strongly that a SPRE could not conduct reviews of referred institutions 
and carry out its other responsibilities under this part within that 
allotment. One of these commenters suggested the minimum allotment be 
increased from $50,000 to $75,000. The other commenter contended that a 
SPRE's actual costs in carrying out its responsibilities would be five 
to ten times the proposed minimum amount.
    A few commenters writing on behalf of States were concerned that 
unanticipated and extraordinary expenses a SPRE could incur as a result 
of a legal challenge from a referred institution to the SPRE's 
determination that the institution should no longer participate in the 
title IV, HEA programs, could prevent the SPRE from carrying out its 
planned activities under this part. These commenters suggested that the 
final regulations provide for an appeal to the Secretary by the SPRE 
for additional funds to meet those legal costs and unanticipated and 
extraordinary expenses.
    Discussion: The Secretary agrees with the commenters that the 
proposed minimum allotments were too low and has raised that minimum, 
as suggested by one of the commenters, from $50,000 to $75,000. The 
Secretary also raised the minimum allotment from $20,000 to $30,000 for 
Guam, American Samoa, the Northern Mariana Islands, the Virgin Islands, 
and the Trust Territory of the Pacific Islands.
    The Secretary also agrees with the commenters that a SPRE should be 
allowed to petition the Secretary for additional funds for 
unanticipated and extraordinary legal expenses. The Secretary use funds 
available for reallotment for this purpose.
    Changes: The formula in Sec. 667 is revised to provide an allotment 
of $30,000 each to Guam, American Samoa, the Northern Mariana Islands, 
the Virgin Islands, and the Trust Territory of the Pacific Islands, and 
to provide a minimum allotment of $75,000 to each of the other States. 
This section has also been revised to provide that funds available for 
reallotment may be used to pay for a SPRE's unanticipated and 
extraordinary legal expenses.
    Comments: Several commenters writing on behalf of States disagreed 
with the proposed provision under which the Secretary would reallot, to 
other SPREs, funds not spent by a SPRE by the end of the period for 
which those funds were made available. These commenters suggested that 
a SPRE be allowed to carry over to the next allotment period any 
unspent funds from the current allotment period if the SPRE could 
demonstrate that it was making progress in carrying out allowable 
activities.
    Discussion: The Secretary believes that funds allotted to a State 
for a specific period be spent by the SPRE during that period. If a 
SPRE cannot spend its allotment for that period, the Secretary believes 
that those funds are best used by carrying out SPRP activities during 
that period through reallotment to other States.
    Changes: None.

Section 667.12  Application for Funds

    Comments: A few commenters writing on behalf of States noted that 
it would be wasteful to require a SPRE to prepare and submit on two 
different occasions plans and budgets to receive its entire allotment 
for a fiscal year if the SPRE was unable to complete the development of 
review standards during the previous fiscal year for which it received 
an allotment.
    Discussion: The Secretary agrees with the comments but points out 
that while this procedure can be modified, under Sec. 667.3 a State 
must have submitted by December 31, 1995 or, in some instances, 
December 31, 1996, standards that can be approved by the Secretary.
    Changes: Proposed Sec. 667.12(d) is revised to allow any SPRE that 
did not complete development of review standards to submit 
simultaneously in its application for funds a plan and budget to 
complete developing review standards and a plan and budget to review 
referred institutions.
    Comments: A commenter writing on behalf of a number of associations 
suggested that each State should be required to submit a plan, not only 
to develop the review standards and complaint procedures, but also to 
identify information maintained by institutions and State agencies that 
is relevant to the development the State review standards. 
Additionally, the commenter suggested that the plan should also include 
the costs of coordinating information systems and should identify 
information not currently collected that is needed to demonstrate 
compliance with review standards. The commenter recommended that the 
proposed regulations be revised to require a State to provide the 
estimated total cost to develop the SPRE's information system if the 
total cost exceeds the State's fiscal year 1993 allotment. The 
commenter also suggested that a State be required to provide the total 
estimated cost to review all referred institutions even if the total 
estimated cost of reviews exceeds the State's allotment. The commenter 
believes these costs are among those that President Clinton's Executive 
Order 12866 requires the Secretary to identify and consider in 
determining, when developing regulations, the costs and benefits of 
collecting and maintaining regulatory information.
    Discussion: The Secretary disagrees with the commenter. The statute 
governing the SPRP does not require a SPRE to perform the activities 
suggested by the commenter, and the Secretary believes that SPREs 
should not be forced to engage in those activities.
    The Secretary considers these regulations to satisfy section 
1(b)(6) of Executive Order 12866 that requires each agency to assess 
both the costs and benefits of the intended regulations. The Secretary 
further believes that it is unnecessary to require a State to provide 
the estimated costs to carry out any functions of the SPRP that exceed 
the State's allotment since the SPRE is not required to perform 
functions in excess of that allotment.
    Changes: None.
    Comments: One commenter was concerned that a student or other party 
may try to hold a SPRE liable for alleged harm based on his or her 
reliance on an institution's continued eligibility for title IV, HEA 
program funds in a case where the institution is referred to a SPRE 
because the SPRE did not have sufficient funds to conduct that review. 
The commenter suggested that a provision preventing any liability from 
falling on the SPRE for failing to review an institution because of 
inadequate funding be added to the regulations.
    Discussion: While nothing can prevent a person from suing a SPRE 
for the reasons cited by the commenter, in the Secretary's view, there 
would be no legal basis for charging a SPRE with any liability under 
the facts described by the commenter.
    Changes: None.
    Comments: Most commenters agreed with the Secretary that the SPRE's 
review priorities should reflect the objectives of protecting students, 
saving tax dollars, and promoting educational quality, but differed on 
the methods to best accomplish those objectives. Many of these 
commenters agreed strongly with the proposal in the NPRM that a SPRE be 
provided maximum flexibility in selecting institutions to review, 
except as provided by the statute; i.e., under section 494A(b) of the 
HEA, a SPRE must review referred institutions on a schedule that 
coincides with the Secretary's schedule for recertifying those 
institutions. Several of these commenters suggested that the SPRE be 
required to publicize its review priority system to assure consistent 
selection of referred institutions under that system.
    Many commenters believed strongly that a SPRE should first review 
referred institutions that meet multiple referral criteria. Many other 
commenters believed strongly that a SPRE should consider, in addition 
to the referral criteria, other factors, such as data measuring student 
outcomes (for instance, graduation and placement rates), and other 
information a State might have that would indicate that a referred 
institution was not properly providing its educational programs. 
Several commenters suggested that the Secretary set the review 
priorities to ensure that all SPREs select institutions on the same 
basis. A number of commenters contended that an overwhelming number of 
institutions scheduled by the Secretary for recertification would also 
meet a referral criterion. Those commenters feared that this pool of 
institutions would be so great that a SPRE would never be able to 
select institutions under the State's review priority system. To 
alleviate this problem, the commenters recommended that the NPRM be 
revised to allow a SPRE to select institutions for review under the 
State's priority system from among the pool of referred institutions 
the Secretary scheduled for recertification.
    Discussion: If a State's allotment is less than will be needed to 
review all referred institutions, the Secretary believes that a SPRE is 
in a better position than the Secretary to determine which institutions 
to select for review from among all the referred institutions. The 
Secretary also believes that any of the review priorities suggested by 
the commenters could be effective in selecting ``problem institutions'' 
for review under this program, provided that those priorities reflect 
the objectives of protecting students, saving tax dollars, and 
promoting educational quality. Therefore, the Secretary will not 
require a SPRE to adopt any of the commenters priority suggestions for 
establishing priorities.
    The Secretary agrees with the commenter who noted that for some 
States for some years, the number of institutions scheduled for 
recertification by the Secretary may exceed the money allotted to the 
State for reviews. Under that circumstance, the SPRE will use its 
priority criteria to select for review only institutions scheduled for 
recertification by the Secretary.
    The Secretary agrees with the commenters who recommended that a 
SPRE should make known its review priorities.
    Changes: Section 667.(23)(b) is revised to require a SPRE to make 
available information regarding its review priority system after its 
plan submitted under Sec. 667.12 is approved by the Secretary and prior 
to conducting reviews of referred institutions. Also, in response to 
comments regarding review priorities under Sec. 667.5, a new 
Sec. 667.12(c)(3)(ii) is added to permit a SPRE to place an institution 
in the lowest priority for review if the institution was referred 
because of a late audit or a change in ownership and a previous SPRE 
review found no significant violations of State standards.
    Comments: Several commenters suggested that the final regulations 
contain procedures, in addition to the reallotment procedures, under 
which a State could request a supplemental allotment to carry out the 
requirements of the State Postsecondary Review Program.
    Discussion: The Secretary disagrees with the commenters. If a State 
needs additional funds and those funds are available through 
reallotment, the Secretary will allow States to apply for those funds. 
Funds for the program's purposes are provided through annual, 
discretionary appropriations from Congress. The program is not an 
entitlement. The Secretary does not have the authority to award 
``supplemental allotments'' beyond reallotment through these 
regulations.
    Changes: None.

Section 667.14  Allowable Costs and Activities

    Comments: Several commenters suggested that information sharing be 
added to the list of allowable activities.
    Discussion: The Secretary agrees.
    Changes: Section 667.14(c) is revised to include as an allowable 
direct cost sharing of information by a SPRE with other SPREs, the 
Secretary, other State agencies, accrediting agencies, institutions, 
private organizations, and others.
    Comments: Several commenters suggested that the training of 
employees of private organizations, nationally recognized accrediting 
agencies, and peer review systems by considered allowable activities 
when the training is necessary for those employees to perform required 
activities contracted by a SPRE.
    Discussion: The Secretary believes that in establishing a contract 
with a private organization, nationally recognized accrediting agency, 
or peer review system, the SPRE may include in the contract any 
training that is required for the contracted organization to carry out 
required activities, and the SPRE may pay for that training with SPRP 
funds.
    Changes: None.

Section 667.15  Fiscal Procedures and Records

    Comments: One commenter recommended that an audit of a SPRE's 
activities be performed annually instead of at least once every two 
years as proposed in the NPRM. The commenter indicated that annual 
audits are needed to protect Department and taxpayer interests in light 
of the fact that the SPRP is a new program.
    The commenter also stated that annual audits would ensure that SPRE 
funds supplement, not supplant, existing licensing or review functions 
conducted by the State. The commenter further argued that SPREs should 
have annual audits because the HEA now requires institutions and others 
to have audits performed annually.
    Discussion: The Secretary disagrees. The Secretary believes that 
more frequent audits are not necessary to monitor adequately the 
activities of a SPRE. The Secretary believes that requiring a SPRE to 
have an annual audit would divert funds away from performing reviews or 
referred institutions. Also, in the case of States that receive the 
minimum allotment, the cost of an audit would represent a significant 
portion of the allotment.
    Changes: None.

Section 667.16  Supplement, Not Supplant, Requirement

    Comments: A few commenters recommended that the Secretary review 
compliance with this requirement on a case-by-case basis. Several 
commenters suggested that a State document its activities and functions 
that are in place prior to the implementation of the program and be 
able to demonstrate to the Secretary that SPRE activities did not 
replace those activities or functions. A few commenters recommended 
that the Secretary monitor the allocation of general State funds to 
ensure that those funds either matched or exceeded the State's 
expenditure levels before the establishment of the SPRE.
    Discussion: The Secretary believes that a State should maintain 
adequate documentation to show, on audit, that the funds spent for SPRE 
activities supplemented, but did not supplant, existing State licensing 
or review functions.
    Changes: None.

Section 667.21  State Review Standards

    The Secretary received many comments regarding the framework, 
proposed in Sec. 667.21(b), under which a State develops review 
standards. In proposing the framework, the Secretary intended to 
achieve the following objectives:
    (1) To recognize and account for the diversity of institutions that 
would be subject to the standards by allowing States to establish 
different standards for those institutions;
    (2) To facilitate effective enforcement of State standards by 
requiring States to quantify certain standards, and by requiring States 
to specify the records and information an institution would need to 
maintain for those standards;
    (3) To limit the scope of the quantitative standards by allowing a 
State to apply those standards only to regular students, i.e., students 
enrolled at an institution for the purpose of obtaining a degree, 
certificate, or other recognized credential offered by the institution; 
and
    (4) To introduce a level of rigor in the standards by requiring a 
State to determine whether a comparable title IV, HEA program standard 
would be an acceptable State standard.

Quantified Standards

    Comments: Many commenters writing on behalf of institutions and 
several accrediting bodies objected to the requirement proposed in the 
NPRM that a State quantify certain review standards by establishing 
``acceptable percentages'' for those standards. Many of these 
commenters believed strongly that this requirement constitutes an 
``enforcement mechanism'' and thus violates section 494C(k) of the HEA. 
A number of commenters acknowledged that the statute allows a State to 
establish quantitative standards but did not believe that the Secretary 
has the authority under the statute to require a State to develop 
quantitative standards. A number of commenters believed that 
quantitative standards were too restrictive and feared that States 
would develop such standards without regard to the mission of 
institutions. Several commenters believed that enforcement of 
quantified standards would impinge on institutional autonomy and force 
institutions to shift their missions away from serving high-risk 
students. A number of commenters believed that standards reduced to 
``acceptable percentages'' would either by arbitrary, and probably 
without legal defense, or statistical, and would, be definition, place 
a number of institutions below the acceptable levels, regardless of 
whether the performance of those institutions is otherwise outstanding. 
Still other commenters argued that standards based on minimum 
``acceptable percentages'' would create a safe harbor for institutions 
that might otherwise be judged to be substandard. By achieving the 
numerical minimum, such institutions would be able to tie the SPREs' 
hands and escape adverse action that might otherwise be warranted 
because, under the NPRM, the SPRE must consider those institutions to 
be in compliance with the review standard.
    Commenters writing on behalf of States and student legal services 
organizations agreed with the proposal. These commenters believed 
strongly that objective, quantified standards are essential for 
meaningful enforcement and regulatory review.
    Discussion: The Secretary disagrees strongly with the commenters 
who contend that the proposed requirement that a State quantify certain 
review standards by establishing acceptable percentages for those 
standards, constitutes an ``enforcement mechanism'' in violation of 
section 494C(k) of the HEA. That section of the HEA states, ``Nothing 
in this subpart shall restrict the authority of the States to establish 
mechanisms to enforce the standards established under subsection (d) or 
require the States to establish specific mechanisms recommended by the 
Secretary.''
    The restriction on the enforcement of standards in section 494C(k) 
is based upon the establishment of standards under section 494C(d). 
Therefore, the restriction on the enforcement of standards has no 
bearing on the establishment of those standards.
    The Secretary disagrees with those commenters who indicated that 
the Secretary is without authority to require States to develop 
quantitative standards. The nature of the standards imposed by statute 
is such that without quantifiable measures, the standards would be 
meaningless.
    While the Secretary understands the concerns of some of the 
commenters that States might develop standards without regard to 
institutional mission or that enforcement of quantified standards could 
either force institutions away from serving high-risk students, or 
allow some institutions that would otherwise be judged to be 
substandard under other measures to escape State oversight, the 
Secretary believes that quantitative student outcome standards are an 
extremely valuable measure of the success of an institution. Quite the 
contrary to the views of the commenters, the Secretary believes that 
the imposition of quantifiable standards will have the effect of 
improving institutional quality and will protect high-risk students 
from unscrupulous substandard institutions. Further, quantifiable 
standards will assist prospective students and their parents in making 
choices about attendance at institutions. The Secretary further notes 
there is nothing in this part that would preclude a State from taking 
into account the fact that an institution serves high-risk students.
    Changes: No changes were made regarding the quantifiable standards 
in Sec. 667.21(a)(17). However, the reader is referred to the 
discussion under the heading ``Relationship between tuition-and-fee 
charges and remuneration'' for information regarding changes made to 
the standard described in Sec. 667.21(a)(9).

Different Standards for Different Types of Institutions

    Comments: Many commenters writing on behalf of proprietary 
institutions objected strongly to the proposal to allow a State to 
develop different standards for different types or categories of 
institutions. These commenters argued that Congress intended that all 
institutions be judged under the same standards, except as explicitly 
provided in the statute.
    Many other commenters agreed strongly with the proposal. A number 
of these commenters urged the Secretary to require, not simply allow, 
States to develop different standards for different types of 
institutions to ensure that all SPREs take into consideration the 
nature and mission of institutions.
    Several comments urged the Secretary to allow States to develop 
different standards only for different categories of institutions to 
protect institutions from being placed in arbitrary categories by 
States and to promote nationwide consistency in identifying categories. 
The commenters recommended that institutions be categorized according 
to (1) their for- or not-for-profit status, (2) whether they grant 
degrees, and (3) the levels and types of degrees or educational 
programs they offer.
    Discussion: The Secretary believes that State standards should 
reflect the mission of institutions and that enforcement of such 
standards will allow SPREs to accomplish most effectively the purpose 
of the SPRP. The fact that the SPRP is a program designed to strengthen 
the State role in the program integrity triad means that the program is 
intended to foster the flexibility that inevitably results from 
differences among the States. The Secretary reiterates that States are 
provided flexibility in developing standards. Thus, a State may 
categorize institutions or educational programs in a manner that the 
State deems appropriate.
    Changes: None.

Regular Students

    Comments: Commenters generally agreed that a State's standards 
should be applied only to regular students at institutions. A few 
commenters opined that quantified standards would be misleading and 
irrelevant to institutions that offer open admissions because many 
students who attend those institutions do not aspire to attain a 
certificate or a degree, yet have a specific educational goal.
    Discussion: The Secretary believes that in evaluating student 
outcomes of an institution, and most particularly with regard to 
institutions offering open enrollment, the evaluation should be based 
on regular students because they are the ones who can qualify for title 
IV, HEA funds, the protection of which is one of the primary purposes 
of SPRP.
    Changes: None.

Comparable Title IV, HEA Program Standard as an Acceptable State 
Standard

    Comments: Several commenters objected to the proposal to require a 
SPRE to consider the relevance of a title IV, HEA program standard as a 
requirement in establishing the State's standards. The commenters 
believed that acceptance of Federal standards, and application of those 
standards, by a SPRE would have an adverse effect on institutions at 
which a small percentage of students receive assistance under the title 
IV, HEA programs.
    Several other commenters believed the proposal is a reasonable 
approach because institutions that participate in the title IV, HEA 
programs already have to comply with these standards.
    Several other commenters believed that this provisions should be 
expanded to require a SPRE to adopt comparable State licensure 
standards if those standards are more rigorous than comparable title 
IV, HEA program standards. The commenters argued that if a SPRE adopts 
review standards that are less rigorous than the State licensing 
standards, institutions might later argue persuasively to the State 
legislature to reduce the State licensing standards to the level of 
lower SPRE standards on the grounds that varying standards would be 
onerous and confusing. At the very least, these commenters suggested 
that the Secretary require States to establish standards that are at 
least as rigorous as the comparable title IV, HEA program standards.
    Discussion: The Secretary is giving SPREs latitude to develop 
standards and expects States to take into account comparable title IV, 
HEA program standards as they develop their own standards. The 
Secretary does not agree that this program will have an adverse impact 
on institutions at which only a few students receive title IV, HEA 
program assistance (1) because the SPRP only requires a SPRE to 
establish standards for referred institutions, and (2) because any 
standard that a SPRE establishes that is comparable to a title IV, HEA 
program requirement already applies to those institutions as title IV, 
HEA program participants. The Secretary agrees, however, with the 
commenters who noted that it does not make sense for a State to adopt 
standards under the SPRP that are weaker than its State licensing 
standards. Nevertheless, this is a matter that must be resolved among 
the appropriate State authorities.
    Changes: None

Records and Information an Institution Must maintain to Demonstrate to 
SPRE its Compliance With the State's Standards

    Comments: Many commenters strongly urged the Secretary to make 
clear in the final regulations that a SPRE may not require an 
institution that has not been referred by the Secretary to the SPRE for 
review to maintain these records and information. A number of these 
commenters suggested if that institution is later referred by the 
Secretary to the SPRE for review, the SPRE should be required to assist 
the institution in generating the required information, or that the 
SPRE should be required to allow the institution a reasonable time to 
comply with the State's standards and recordkeeping requirements.
    Discussion: If an institution is referred to a State for review 
under the SPRP, the institution must satisfy the State's standards. If 
the institution was not otherwise required to keep records relating to 
its compliance with State Standards, and it did not keep those records, 
the Secretary agrees that the State should allow an institution a 
reasonable period of time to obtain records and information to enable 
the institution to demonstrate its compliance with the State's 
standards.
    Changes: Section 667.21(b) is revised to require that if a referred 
institution was not otherwise required to keep records relating to its 
compliance with State standards, and it did not keep those records, the 
SPRE allow the institution a reasonable period of time to obtain those 
records to enable it to demonstrate its compliance with the State's 
standards.

Relationship Between Tuition-and-Fee Charges and Remuneration

    Comments: Many commenters objected to the proposal that a State 
establish an acceptable percentage for the relationship between the 
tuition and fees charged by an institution for an educational program 
and the amount of money that a student who successfully completes that 
program actually earns. A number of commenters believed strongly that 
this approach would be administratively unmanageable for comprehensive 
institutions that offer a broad spectrum of programs, including 
programs in liberal arts, sciences, teacher education, engineering, and 
nursing.
    Many commenters believed that the Secretary does not have the 
authority under the statute to require a SPRE to make a judgment 
regarding the reasonableness of the tuition and fees charged by an 
institution. Many of these commenters contended that the standard, as 
proposed in the NPRM, was tantamount to price-fixing. The commenters 
argued that this standard, as articulated in the statute, simply 
requires an institution to disclose to students and prospective 
students information on program costs and on earnings that a graduate 
of that program could reasonably be expected to make in an occupation 
related to that program.
    Other commenters asserted that relating the amount of tuition and 
fees to the amount of money a graduate of an educational program earns 
assumes incorrectly that (1) the institution alone is responsible for a 
student's education and employment, and (2) salary is the only reason 
for education. The commenters pointed out that a student is also 
responsible for his or her education and that the student may choose a 
job that is rewarding in ways other than money.
    A few commenters pointed out that States sometimes establish the 
tuition and fees for certain programs at public institutions. The 
commenters urged the Secretary to exempt these programs from this 
standard.
    Many commenters contended that States do not have adequate data on 
wages and salaries either to establish an acceptable percentage or 
determine that an institution met that percentage. These commenters 
were concerned that the results of surveys conducted by an institution 
of its graduates' earnings would not be reliable. Finally, many 
commenters argued that any formula governing the relationship between 
tuition and remuneration consider State subsidies provided to public 
institutions to ensure a fair comparison of tuition and fees between 
like programs offered by all types of institutions.
    A number of commenters agreed with the proposal.
    Discussion: The Secretary notes that this requirement only applies 
to vocational programs and therefore does not apply to programs such as 
liberal arts programs.
    The Secretary acknowledges that commenters are correct when they 
note that many variables influence whether a person obtains a 
particular job. However, the Secretary believes that one of the most 
important factors is the job training of that individual. Further, 
institutions that purport to offer education to prepare students for 
occupations ought to be able to substantiate that the education they 
provide does just that. In addition, for students who receive loans for 
their education, it is reasonable to expect that they will qualify for 
positions that will enable them to repay those loans. For these 
reasons, the Secretary disagrees with the commenters who categorized 
this standard merely as a student consumer information disclosure 
requirement or that it is tantamount to price fixing. More 
appropriately, under this standard, a SPRE must determine whether an 
institution's tuition and fees are too high, given the remuneration 
that its graduates can reasonably expect to receive.
    Finally, based on public comment and further review, the Secretary 
has decided that an institution should not be required to survey its 
graduates to obtain employment and wage data; rather, a SPRE may rely 
on local, State, or Federal employment and wage data to determine the 
institution's compliance with this standard.
    Changes: Section 667.21(b)(4)(i) is revised to require a State to 
quantify this standard by establishing criteria (rather than just a 
percentage, as in proposed Sec. 667.21(b)(4)(i)) under which a SPRE 
determines if the tuition and fees charged by an institution for a 
vocational program are excessive compared to the amount of money that a 
student who successfully completes that program may reasonably be 
expected to earn. Section 667.21(a)(9)(i) is changed to clarify that 
this is the purpose of the standard. In addition, Sec. 667.22(b)(5) is 
revised to require a State to specify the methods and data used by the 
SPRE to determine if the tuition and fees charged by an institution for 
a vocational program are excessive.

Assessing a Student's Ability to Complete the Program

    Comments: Many commenters objected to the proposal that a SPRE 
judge the effectiveness of an institution's method to assess that a 
student has the ability to complete successfully the educational 
program for which he or she applied. Many commenters argued that there 
is no correlation between an institution's assessment method and the 
graduation rate of students in an educational program. The commenters 
cited many reasons that a student might fail to complete a program that 
is unrelated to the student's academic ability, including motivation, 
personal finances, family obligations, a change in employement, and 
others, and suggested that the proposed requirement be removed. Many 
other commenters contended that the Secretary exceeded statutory 
authority in proposing this requirement. A number of these commenters 
argued that requiring a SPRE to judge the effectiveness of an 
institution's assessment method could lead to the use of mandatory, 
standardized tests, or other methods that require profiles of program 
completers, for determining a student's admission into a program. These 
commenters believed the use of these methods would lead institutions 
whose mission is to serve high-risk students to change their mission.
    Several other commenters suggested that the proposed standard be 
expanded to (1) include other positive outcome measures, or (2) allow a 
SPRE to consider the rigor, fairness, and consistent application of an 
institution's assessment method in judging that method.
    A number of commenters agreed with the proposal but suggested that 
an SPRE's judgment regarding the effectiveness of an institution's 
assessment method should be limited to vocational programs. Like many 
other commenters, these commenters contended that there is little 
direct correlation between student success and admissions standards for 
degree programs. One of these commenters argued that there is a much 
stronger correlation between student success and admissions criteria in 
vocational programs than in degree programs because of the shorter 
length and more narrow focus of vocational programs. The commenter 
believed there is a greater need to assess the adequacy of the 
admission standards for vocational programs because the population 
served by those programs tends to be less prepared for postsecondary 
education than students in degree programs. Another commenter believed 
strongly that an extraordinarily high student drop-out rate (1) may 
indicate other serious problems with an educational program, including 
the poor quality of its teachers or the lack of necessary equipment, 
and (2) invariably indicates enrollment of students unable to 
understand or handle course material.
    A few other commenters believed that the ``ability-to-benefit'' 
provision in the title IV, HEA program regulations satisfies the 
statutory requirement under this part that an institution have a method 
to assess a student's ability to complete successfully an educational 
program.
    Discussion: The Secretary is convinced that many points made by the 
commenters are valid, and that other standards adequately accomplish 
the Secretary's originally stated objectives in proposing this 
standard. The Secretary clarifies, however, that the standard described 
in Sec. 667.21(a)(3) applies to all regular students at an institution, 
not just those students who qualify to receive financial assistance 
under the title IV ability-to-benefit provisions.
    Changes: Proposed Sec. 667.21(a)(4) is removed.

Suggestion to Augment the Standard Proposed in Sec. 667.21(a)(7) 
Concerning Compliance With Health and Safety Standards

    Comments: Most commenters objected to the suggestion in the 
preamble to the NPRM for views on whether a SPRE, as part of its 
review, should determine an institution's compliance with statutes and 
regulations governing access to disabled individuals. They considered 
the proposal to be beyond the scope and purpose of the SPRP.
    Discussion: Based on comments and further review, the Secretary 
agrees not to include this provision. Disabled individuals are 
protected under applicable statutes without the additional provision 
for a SPRE review in that area.
    Changes: None.

Standard in Proposed Sec. 667.21(a)(9) Governing Institutional Plans 
for Closure

    Comments: A number of commenters, including several commenters 
writing on behalf of States, urged the Secretary to define the term 
``financially at risk'' as that term applies to the standard under 
which a SPRE would require an institution to provide for the 
instruction of students and the retention of records in the event the 
institution closes.
    Discussion: The Secretary believes that a SPRE may view an 
institution to be financially at risk if it does not satisfy the 
factors of financial responsibility in Sec. 668.15 of the Student 
Assistance General Provisions regulations, 34 CFR part 668.
    Changes: None.

Standard in Proposed Sec. 667.21(a)(14)

    Comments: A number of commenters suggested specific methods for 
establishing acceptable percentages for student completion and 
graduation rates, placement rates, withdrawal rates, and licensure 
examination pass rates.
    One commenter opined that it was critical that quantitative 
measures be consistent within and among all States and believed that 
the Student-Right-to-Know regulations, when published, will provide a 
uniform basis for calculating student graduation rates. The commenter 
recommended a coordinated study by the research community to develop 
acceptable percentages for the quantified standards and suggested that 
the implementation of those standards should be delayed for 12 to 18 
months pending the results of that study.
    Several commenters urged the Secretary to remove the proposed 
references to the NOICC Master Crosswalk in the standard regarding the 
placement rate of an institution's graduates in occupations related to 
their educational program. The commenters believed that any method 
under which the  NOICC Master Crosswalk could be used to code 
employment status would be extremely complex and likely to yield false 
precision at great cost.
    Discussion: The Secretary agrees that the Student-Right-to-Know 
methodology will provide a uniform basis for calculating student 
graduation rates, and encourages States to develop consistent methods 
for calculating student withdrawal rates, placement rates, and 
licensure examination pass rates to reduce burden on institutions. The 
Secretary acknowledges, however, that some States have developed robust 
student information systems, and does not intend to force those States 
to use specific methodologies for computing rates to measure student 
outcomes. Therefore, the Secretary disagrees with the commenters who 
suggest (1) that it is critical that all States adopt the same 
quantitative measures, or (2) a delay in implementing those measures is 
warranted.
    Finally, the Secretary disagrees that using the  NOICC Master 
Crosswalk (Crosswalk) to code employment status would either be complex 
or costly. The Secretary intends that institutions and SPREs use the 
Crosswalk as it is currently used by State agencies--as a reference 
source and guide to evaluate the relationship between an educational 
program and a job.
    Changes: None.

Standard in Proposed Sec. 667.21(a)(11) Governing Market, Job 
Availability, and Licensing Standards

    Comments: A few commenters suggested that the Secretary should 
expand this standard. The commenters were concerned that the standard 
does not specify the geographical scope of the labor market information 
to be provided, nor does it specify that average entry-level earnings 
should be provided. In addition, the commenters believed that the 
proposed provision regarding the disclosure of State licensing 
requirements should be more specific. According to the commenters, some 
of the most egregious title IV, HEA program abuses have involved 
institutions that, by enrolling a student in a program that required a 
State license, implied that the program met, and the student would 
meet, the State's licensing requirements when in fact the institution 
failed to provide adequate training to meet those requirements. The 
commenters suggested that the standard be revised to require an 
institution to describe in clear and specific terms how its educational 
program meets, and a student in the program would be able to meet, the 
relevant State licensing requirements.
    Discussion: The Secretary believes that a SPRE's standards in this 
area will only be acceptable if they are applied in a meaningful manner 
that meets the demands of these last commenters, but the criterion in 
these regulations does not have need to be revised to accomplish this 
purpose. With regard to the comments concerning the geographical scope 
of labor market information on the determination of entry-level 
earnings based on averages, the Secretary does not disagree that these 
might be relevant and valid considerations. The Secretary does not 
believe, however, that these regulations need to specify all the 
factors that contribute to making disclosures meaningful. Instead, 
these factors are best considered when a SPRE consults with the 
institutions in its State to develop the standard for applying this 
provision.
    Changes: None.

Section 667.22  Disapproval of State Review Standards

    Comments: A number of commenters opined that the NPRM would empower 
the Secretary to exercise control over an institution in a manner that 
is contrary to section 103(b) of the Department of Education's 
Organization Act (Pub. L. 98-88). The commenters believed that the 
Secretary would exercise control over the direction, supervision, or 
curriculum, program of instruction, administration, or personnel or an 
institution through the evaluation of State review standards. According 
to the commenters, given the influence of States over institutions by 
virtue of State review standards, evaluation of those standards by the 
Secretary enables the Secretary to exercise the direction, supervision, 
and control over institutions that is prohibited by law.
    Discussion: The Secretary disagrees with the commenters. First, 
section 494C(d) of the HEA provides that the standards shall be subject 
to the Secretary's disapproval. Second, under the same statutory 
provision, these standards must be developed by the SPRE in 
consultation with institutions in the SPRE's State, and these 
regulations provide in Sec. 667.22(a) for the Secretary to take that 
consultation into consideration in determining whether the standards 
may be disapproved. The Secretary believes that institutional 
participation in the development of standards does not constitute 
interference in institutional areas protected by the Department of 
Education Organization Act.
    Changes: None.
    Comments: A few commenters writing in response to the request in 
the NPRM for additional criteria the Secretary should use to evaluate a 
State's review standards, suggested the following criteria:
    (1) An explanation by the State of the rationale for each standard;
    (2) If applicable, an explanation of the reasons for deviating from 
applicable provisions in State law;
    (3) Information that is necessary to demonstrate compliance with 
the review standards, including information not already collected by 
institutions or other State agencies; and
    (4) A provision that would allow an institution to provide directly 
to the Secretary comments of third parties regarding the State's review 
standards within a specified time.
    Several commenters requested that the Secretary clarify the 
proposed criterion regarding the use of statistically valid methods and 
procedures to obtain employment-related data through the conduct of 
surveys of an institution graduates. A few commenters suggested that 
the Secretary substitute for that requirement a provision to use 
``representative sampling.'' The commenters contended that 
representative sampling would be a less onerous requirement, especially 
for smaller institutions.
    Discussion: The Secretary thanks the commenters for their 
suggestions for additional criteria for reviewing standards. The 
Secretary has decided not to accept the first one because it imposes an 
unnecessary burden on a State to include a rationale for a standard 
where the rationale would be self-evident from the standard. However, 
the Secretary will use the commenters' suggestion as a useful guideline 
for determining whether to disapprove a particular standard.
    The Secretary has decided not to adopt the second suggestion 
because a State could not adopt a standard that was in violation of its 
State law. The Secretary has decided not to adopt the third suggestion 
because that information is not necessary to determining whether a 
standard is not acceptable. It is left to a SPRE to establish how an 
institution complies specifically with a standard. Finally, the 
Secretary did not adopt the fourth suggestion because it is the 
responsibility of a State in consulting with institutions in the 
development of those standards, to obtain and consider all relevant 
comments.
    The Secretary considers ``representative sampling'' to be a valid 
statistical method for conducting surveys.
    Changes: None.
    Comments: One commenter writing on behalf of an accrediting 
commission, urged the Secretary to make a State's review standards 
subject to third party review. The commenter also recommended this 
treatment for a SPRE's plan and budget for carrying out the activities 
under this part. The commenter believed that the statute and the 
proposed regulations require the Secretary to exercise informed 
judgment on whether a number of broad standards have been met. Third-
party comment would provide valuable input to the Secretary's exercise 
of informed judgment. In addition, the commenter offered the view that 
if the Secretary's key goal for the Program Integrity Triad is to 
reduce redundancy and promote complimentary input from interested 
parties, notably other members of the triad and affected institutions, 
would help the Secretary determine whether State plans, budgets, and 
standards are in fact complementary to the efforts of the Department 
and nationally recognized accrediting agencies and not unduly 
burdensome to institutions. Finally, in the commenters opinion, input 
from third parties would also help prevent the Secretary from mistake 
or embarrassment. For example, if the consultative process in a State 
has been inadequate, it is highly unlikely that the State will reveal 
the inadequacies in its submission to the Secretary. Institutions that 
have been adversely affected, however, could point out those 
deficiencies before Federal funds are wasted on SPRE efforts to apply 
standards that may later legitimately be challenged. Similarly, 
nationally recognized accrediting agencies may provide useful 
information to the Secretary about proposed contracts with other ``peer 
review systems'' that are inadequate to the tasks that they would be 
given. The commenter maintained that according to interested parties 
the right to review and comment need not be burdensome or time-
consuming, and recommended procedures under which the Secretary would 
provide for and receive third-party comment on a State's review 
standards, and the SPRE's plans and budgets, before determining whether 
to approve those standards and plans.
    Discussion: The Secretary disagrees strongly that the suggested 
procedures for third-party comment would not be burdensome or time-
consuming. Under the suggested procedures, the Secretary would need to 
publish in the Federal Register each State's application for funds and 
each State's review standards, and allow a 30 day comment period and 
consider that comment, before determining whether to approve a State's 
application or disapprove a State's standards. These procedures would 
delay unnecessarily decisions the Secretary must make to ensure proper 
and timely administration of the SPRE. Moreover, the Secretary believes 
that inadequate consultation with all affected parties will likely be 
revealed in deficient standards, which the Secretary will have the 
authority to review and disapprove.
    Changes: None.
    Comments: A number of commenters believed that SPREs, not 
institutions, should be required to calculate student completion rates, 
withdrawal rates, placement rates, and licensure examination pass 
rates, and other related data. The commenters contended that the 
statute does not require or imply that institutions should be required 
to collect or maintain this information. Other commenters suggested 
that an institution be required to generate data regarding these rates 
only when the institution is reviewed by a SPRE.
    Discussion: The Secretary disagrees with the commenters. It is 
clear under the SPRE that referred institutions must satisfy SPRE 
standards, and must be able to demonstrate that they satisfy those 
standards.
    Changes: None.

Section 676.23  SPRE Reviews of Referred Institutions

    Comments: A few commenters believed that a SPRE should be able to 
conduct an unannounced review of a referred institution if the SPRE has 
reason to believe that the institution is engaged in fraudulent 
practices.
    Other commenters suggested that, except where fraud is suspected, 
the Secretary require a SPRE to provide notice to a referred 
institution before conducting a review of that institution. The 
commenters argued that advance notice of a SPRE review would enable the 
institution to prepare adequately for the review, including having 
required records and personnel at the institution during the review.
    Discussion: In general, the Secretary believes strongly that a SPRE 
is in the best position to determine the actions it should take in 
carrying out its review responsibilities. If the SPRE determines that 
an unannounced review of any referred institution is necessary, the 
SPRE may conduct that review.
    Change: None.
    Comments: Several commenters suggested that a SPRE be allowed to 
determine, based on the referral criteria or based on a preliminary 
review of the institution, whether to conduct a comprehensive review of 
the institution under all of the State's standards or conduct a more 
limited review designed to identify and correct certain problems at the 
institution. The commenters argued that this would provide for 
efficient use of SPRE resources and reduce the burden on referred 
institutions.
    Discussion: Section 494C(d) of the HEA requires a SPRE, in 
conducting its review of a referred institution, to determine the 
institution's compliance with all of the State's standards. The 
Secretary believes, however, that a SPRE may devise review procedures 
under which the SPRE decides the manner or level of review required to 
determine an institution's compliance with each of the State's 
standards.
    Changes: None.
    Comments: A few commenters suggested a change in the amount of time 
a SPRE should have to issue an initial report of its findings to an 
institution. Some commenters suggested increasing the time from 45 days 
to 60 days; other commenters suggested decreasing the time to 30 days. 
Another commenter asked the Secretary to clarify what constitutes the 
completion of a review and recommended that a SPRE issue its initial 
report no later than 45 days after it has completed its review of the 
institutions under all of the State's standards and has received a 
report from the relevant accrediting agency or peer review system.
    Discussion: The Secretary believes that 45 days provides a SPRE 
with sufficient time to prepare a report of findings. The Secretary 
considers the 45-day period to begin at the time a SPRE has completed 
its review of all of the documentation and information it needs in 
order to prepare the report, including information provided by an 
accrediting agency or peer review system. The Secretary notes, however, 
that this does not preclude a SPRE from issuing a partial report of its 
findings to an institution, if, for example, the SPRE determines that 
the institution must, or should, take immediate actions in response to 
the SPRE's findings.
    Changes: None.
    Comments: Several commenters took issue with the proposal that a 
SPRE may prescribe a course of action a referred institution must 
follow to correct a violation of the State's standards. One of the 
commenters believed that a SPRE should be allowed to recommend, but not 
prescribe, the course by which an institution brings itself into 
compliance with State standards. The commenter argued that allowing a 
SPRE to prescribe a course of action would constitute an inappropriate 
interference with normal institutional governance and management.
    Some commenters were concerned that the Secretary set the wrong 
tone in the NPRM by suggesting that a SPRE take actions to effect the 
termination of an institution only when the SPRE finds that the 
institution ``continuously or egregiously violated the State's 
standards.'' The commenters believed that SPREs will not be the 
overzealous terminators that institutions and many others fear; more 
likely, SPREs will generally be disinclined to take forceful actions 
against institutions in their State for fear of litigation and other 
repercussions that would result from those actions. The commenters 
urged the Secretary to change the regulations to make clear that in all 
cases where a referred institution fails to meet a State standard, the 
SPRE would be required to prescribe a course of action the institution 
would need follow to correct the violation. The commenters further 
believed that a SPRE should be required to initiate a proceeding under 
Sec. 667.25 to effect the termination of an institution, if the 
institution did not bring itself into compliance with the State 
standards within a time specified in regulations unless the SPRE 
extended that time for good cause.
    Discussion: The Secretary disagrees strongly with the first series 
of comments because a SPRE would not be able to enforce the State's 
standards if it could not require an institution to take the corrective 
action it determined the institution needed to take to bring the 
institution into compliance with its standards.
    While the Secretary agrees strongly with the commenters that SPREs 
take consistent and appropriate actions against institutions that fail 
to comply with the State's standards, the Secretary does not believe 
that it is necessary or prudent to require a SPRE, on an absolute 
basis, to prescribe a course of action an institution must follow to 
correct a violation and bring itself into compliance with State 
standards, particularly with the State's quantified standards. An 
institution's compliance with acceptable percentages established for 
those standards is not inviolate; the acceptable percentage reflects, 
or should reflect, whether the institution is successfully providing 
its educational programs, rather than whether the institution should be 
terminated because it failed to satisfy that percentage. In the NPRM, 
the Secretary acknowledged that developing such standards will be 
difficult, and in fairness to institutions, proposed that a SPRE 
provide an institution the opportunity to present compelling evidence 
that would demonstrate to the SPRE that its failure to meet a State 
standard would not warrant any further action by the SPRE. Thus, in 
Sec. 667.23(c), the Secretary permits the SPRE to determine whether to 
prescribe a course of action and the nature of that action.
    Changes: Section 667.23(d) is revised to make clear that a SPRE 
must provide an institution the opportunity to present compelling 
evidence that its failure to satisfy a State standard does not warrant 
any further action by the SPRE.
    Comments: One commenter suggested that the Secretary initiate an 
emergency action proceeding against an institution based on a SPRE's 
report of serious problems at an institution.
    Discussion: Certainly, the Secretary will examine the findings 
contained in the SPRE's report and may investigate the matter further 
to determine whether an emergency action is warranted. If the Secretary 
determines that an emergency action is warranted, the Secretary 
initiates that action under 34 CFR part 668, subpart G.
    Changes: None.
    Comments: Numerous commenters recommended that a SPRE be required 
to give an institution a minimum number of days to respond to the 
findings and required actions contained in the SPRE's report to the 
institution. The commenters recommended that the minimum number be set 
at 30, 40, 45, 60, or 90 days, or be set by the Secretary in 
regulations. Most of the commenters argued that the setting of a 
minimum number of days was needed because the regulations did not 
provide for an appeal by an institution of the SPRE's findings to the 
Secretary.
    Discussion: The Secretary understands the commenters' concerns that 
a SPRE could take a precipitous action against an institution by not 
allowing the institution sufficient time to respond to its report. As 
stated previously, however, the Secretary believes strongly that a SPRE 
is in the best position to determine the actions it should take in 
carrying out its review responsibilities, and, in view of the change 
made to Sec. 667.23(d), the Secretary has no reason to believe that a 
SPRE would not afford an institution a reasonable time to respond to 
its report.
    Changes: None.
    Comments: Several commenters were concerned that a SPRE might 
punish an institution by initiating a proceeding to effect the 
termination of the institution's participation in a title IV, HEA 
program if the institution did not respond ``quickly enough'' to the 
SPRE's request for information, access to the institution, or access to 
personnel at the institution. The commenters agreed, in principle, that 
an institution should not be able to thwart the efforts of a SPRE to 
obtain necessary information by refusing to provide to the SPRE 
information or access to the institution, but believed that the NPRM 
provided the SPRE too much authority. The commenters recommended 
removing two parts of the provision and modifying the third part so 
that a SPRE would take an action if ``* * * the institution exhibits a 
documented pattern of failure to allow SPRE personnel at the 
institution or repeated failure to provide SPRE officials with access 
to documents or records.''
    A number of commenters believed that, although the proposed 
provisions were appropriate, some changes should be made. A few 
commenters argued that a SPRE should view all violations of the State's 
standards as serious violations and recommended that the term 
``serious'' be removed from the phrase ``* * * the SPRE's findings show 
serious violations of the State's standards.''
    Discussion: The Secretary does not agree that a SPRE must request 
repeatedly, and be denied repeatedly, information or access by an 
institution before taking an action. The Secretary agrees to remove the 
term ``serious,'' but in doing so does not intend that a SPRE take an 
action under these provisions for because of a technical violation by 
an institution.
    Changes: Proposed Sec. 667.23(g) is revised to remove the word 
``serious.''
    Comments: A number of commenters responded to the request in the 
NPRM regarding specific areas where SPRE performance standards should 
be established and how that performance should be evaluated.
    Several commenters suggested that the Secretary should consider a 
SPRE's performance to be seriously deficient if the SPRE exhibits a 
pattern of (1) allowing reviewed institutions an excessive time to 
correct violations, or (2) not initiating termination proceedings 
against institutions for serious violations of the State's standards.
    Other commenters suggested that the Secretary evaluate a SPRE's 
performance based on the SPRE's success in completing its objectives 
under the plan the SPRE submits annually to the Secretary, and on other 
areas related to the SPRE compliance with statutory requirements.
    Discussion: The Secretary appreciates the commenters suggestions. 
Based on these suggestions, and upon further review, the Secretary has 
decided not to promulgate specific SPRE performance criteria because 
the Secretary already has, or will have, access to all of the 
information or records pertaining to the suggested criteria. In 
addition, the Secretary intends that on occasion Department of 
Education officials and representatives will accompany SPRE personnel 
in conducting reviews of referred institutions.
    Changes: None.

Section 667.24  Peer Review of Institutions

    One commenter, writing on behalf of an accrediting commission, 
objected strongly to the regulations and views expressed in the NPRM. 
The commenter argued that if States wish to use peer review systems 
other than recognized accrediting agencies, those peer review systems 
should be subject to an approval process established and administered 
by the Secretary along the lines of the proposal noted in the NPRM 
preamble. The commenter submitted that ceding the choice of peer review 
systems to the States would be an abdication of the Secretary's 
responsibilities and an invitation to abuse. According to the 
commenter, the goals of Congress for ensuring integrity in the title 
IV, HEA programs will not be met if, in the future, instances come to 
light where the quality reviews performed by ``peer review systems'' on 
behalf of SPREs have been found to be inadequate, politicized, or 
abused. In addition, the commenter believed that it could not be 
assumed that every SPRE would appropriately choose or create peer 
review systems that will be competent to assess institutions and 
programs. For these reasons, the commenter urged the Secretary to 
define in final regulations a ``peer review system'' and the process by 
which such systems are to have shown ``demonstrated competence in 
assessing programs.'' Many commenters echoed this commenter's views.
    Several commenters suggested that the Secretary permit a SPRE the 
use of a ``peer review system'' only in cases where there is 
substantial reason to doubt the reliability of the accrediting agency's 
evaluation of an institution.
    A number of commenters agreed that a SPRE should determine the 
competence of a peer review system and agreed that the criteria listed 
in the NPRM preamble are appropriate for making that determination. 
Some of these commenters suggested the following additional criteria:
    (1) The system has clear and effective controls against conflicts 
of interest or the appearance of conflicts of interest; and
    (2) The system is independent administratively and financially of 
the SPRE, and is able to make decisions and recommendations free from 
undue influence by the SPRE.
    Several commenters believed that a SPRE should have the flexibility 
to determine, on a case-by-case basis, whether to sue the services of 
an accrediting agency or a peer review system. The commenters offered, 
however that a SPRE should have defensible procedures in place for 
selecting a peer review system, and suggested that final regulations 
require a SPRE to publicize and submit to the Secretary the criteria 
and procedures it uses to select an appropriate accrediting body or 
peer review system.
    Another commenter suggested that a SPRE should be required to 
develop its own mechanism to assure that a peer review system meets the 
same level of quality as a recognized accrediting agency.
    Still other commenters believed that a peer system should have the 
same qualifications and meet the same criteria required of nationally 
recognized accrediting agencies.
    Discussion: The Secretary disagrees with the comments of the first 
commenter because the Secretary believes SPREs will select competent 
peer review systems. Moreover, the Secretary disagrees with the 
suggestion of the second set of commenters because section 494C(d)(15) 
of the HEA does not contain that limitation.
    Based upon the suggestions of the other commenters and further 
review, the Secretary believes that a peer review system (1) must have 
an established basis for evaluating educational quality, (2) must have 
review procedures that include the selection of peer reviewers who have 
experience in evaluating the types of programs offered by the 
institution, and (3) must have established policies and procedures that 
guard against bias in conducting reviews of institutions.
    Changes: Proposed Sec. 667.24(a) is revised to require a SPRE to 
evaluate a peer review system using these criteria described in the 
discussion above.

Section 667.25  Termination of an Institution's Participation in the 
Title IV, HEA Programs

    Comment: A few commenters were concerned that providing termination 
authority to a SPRE represented a potential conflict with title VI of 
the Civil Rights Act of 1964 and perhaps with the equal protection 
clause of the Constitution of the Untied States.
    Discussion: The Secretary disagrees. If the SPRE took an action 
against a referred institution because the institution violated a SPRE 
standard and treated that institution in the same manner as it treated 
other institutions that had the same or similar violations, the SPRE's 
action would not violate title VI of the Civil Rights Act nor the equal 
protection clause of the Constitution.
    Change: None.
    Comment: One commenter questioned whether a SPRE could provide 
notice to the Secretary to terminate an institution's participation in 
a title IV, HEA program based solely on findings resulting from a 
review conducted by a nationally recognized accrediting agency or other 
peer review system.
    Discussion: It depends. First, it depends on whether the 
institution was a referred institution. Second, it depends on the 
nature of those accrediting agency or peer review findings. Moreover, 
before it could recommend termination, the SPRE would have to give the 
institution a hearing at which the institution could challenge the 
findings of the accrediting agency or peer review.
    Changes: None.
    Comments: Many commenters believed strongly that the Secretary 
should allow an institution to appeal to the Secretary a SPRE's 
determination that the institution should no longer participate in the 
title IV, HEA programs. A number of these commenters recommended that 
the Secretary establish procedures under which the Secretary would 
review cases where a SPRE's decision was clearly biased.
    Discussion: As the Secretary indicated in the NPRM, it is the 
Secretary's view that section 494C(h)(1) of the HEA does not allow an 
appeal to the Secretary of the SPRE's termination determination.
    Changes: None.

Section 667.26  Due Process Requirements

    Comments: Many commenters believed that a State could develop due 
process procedures that met the minimum requirements outlined in the 
NPRM, but those procedures would not be adequate or provide for a 
meaningful appeal. The commenters suggested that final regulations (1) 
specify the time within which an institution could challenge an adverse 
action taken by a SPRE, and (2) require a State to provide an 
institution the opportunity to present its case in a hearing before a 
third party or impartial hearing official.
    Discussion: The Secretary agrees with the commenters' suggestions.
    Changes: Section 667.26 is revised to require a State to (1) 
identify a minimum time within which it will allow an institution to 
challenge its actions, and (2) provide for a hearing before an 
impartial official.

[FR Doc. 94-10206 Filed 4-28-94; 8:45 am]
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