[Federal Register Volume 65, Number 22 (Wednesday, February 2, 2000)]
[Proposed Rules]
[Pages 4914-4918]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-2211]


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DEPARTMENT OF DEFENSE
DEPARTMENT OF TRANSPORTATION

Coast Guard

DEPARTMENT OF VETERANS AFFAIRS

38 CFR PART 21

RIN 2900-AI67


New Criteria for Approving Courses for VA Educational Assistance 
Programs

AGENCIES:  Department of Defense, Department of Transportation, Coast 
Guard, and Department of Veterans Affairs.

ACTION:  Proposed rule.

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[[Page 4915]]

SUMMARY:  This document proposes to amend the Department of Veterans 
Affairs (VA) educational assistance and educational benefit regulations 
by adding new criteria for VA to use in approving enrollments in 
courses under the educational programs VA administers. The intended 
effect of these proposed changes is to implement provisions of the 
Veterans' Benefits Improvements Act of 1996 and the Veterans' Benefits 
Act of 1997. This document also would amend the regulations to conform 
to statutory provisions and would make changes for the purpose of 
clarification.

DATES:  Comments must be received on or before April 3, 2000.

ADDRESSES:  Mail or hand-deliver written comments to: Director, Office 
of Regulations Management (02D), Department of Veterans Affairs, 810 
Vermont Ave., NW, Room 1154, Washington, DC 20420. Comments should 
indicate that they are submitted in response to ``RIN 2900-AI67.'' All 
written comments will be available for public inspection at the above 
address in the Office of Regulations Management, Room 1158, between the 
hours of 8:00 a.m. and 4:30 p.m., Monday through Friday (except 
holidays).

FOR FURTHER INFORMATION CONTACT:  William G. Susling, Jr., Education 
Advisor, Education Service, Veterans Benefits Administration, 202-273-
7187.

SUPPLEMENTARY INFORMATION:  This document proposes to amend the VA 
educational assistance and educational benefit regulations in 38 CFR 
part 21, subparts D, K, and L to conform with the Veterans' Benefits 
Improvement Act of 1996 (Pub. L. 104-275).
    The provisions of the 1996 Act, with certain exceptions noted 
below, mandate that VA cannot approve an enrollment for VA training in 
a course not leading to a standard college degree offered by a 
proprietary profit or proprietary nonprofit educational institution if 
(1) the institution has been operating for less than two years, (2) the 
institution offers the course at a branch or extension and the branch 
or extension has been operating for less than two years, or (3) the 
institution offering the course completely moved outside its original 
general locality or has changed ownership and, in either event, does 
not retain substantially the same faculty, student body, and courses as 
before the change in ownership or move, unless the institution has 
operated for two years following the change in ownership or move. 
However, if the course were offered under a contract with the 
Department of Defense (DOD) or the Department of Transportation (Coast 
Guard) and were given on or immediately adjacent to a military base, 
Coast Guard station, National Guard facility or facility of the 
Selected Reserve, these restrictions do not apply. The regulations 
would be amended to reflect these statutory changes.
    VA proposes to define ``proprietary educational institution'' 
(including a proprietary profit or proprietary nonprofit educational 
institution) as an educational institution that: (1) Is not a public 
educational institution, (2) is in a State, and (3) is legally 
authorized to offer a program of education in the State where the 
educational institution is physically located. VA believes that this 
definition accords with the common understanding of ``proprietary 
educational institution.''
    VA proposes to recognize that a proprietary educational institution 
has been ``in operation'' for at least two years if it has been 
offering courses for 24 consecutive months, inclusive of normal 
vacation periods or holidays or periods when the educational 
institution is closed due to a natural disaster. VA believes that this 
interpretation of the two-year operation requirement is in accordance 
with the common meaning of the term ``in operation'' as it relates to 
educational institutions, and, in our view, reflects the statutory 
intent.
    VA proposes to provide that a move by a proprietary educational 
institution outside the same general locality is a move beyond normal 
commuting distance which VA regulations have long recognized as being 
more than 55 miles (see 38 CFR 21.4200). This seems to be an 
appropriate interpretation of the statutory language.
    As noted above, VA cannot approve an enrollment for VA training in 
a course not leading to a standard college degree offered by a 
proprietary profit or nonprofit educational institution if the 
institution offering the course completely moved outside its original 
general locality or has changed ownership and, in either event, does 
not retain substantially the same faculty, student body, and courses as 
before the change in ownership or move, unless the institution has 
operated for two years following the change in ownership or move. In 
this regard, it is proposed to set forth provisions indicating what VA 
considers to constitute ``change in ownership.''
    A ``change in ownership'' would occur when a person acquires, or 
ceases to have, operational management and/or control of the 
proprietary institution and its educational activities. ``Control'' is 
proposed to be defined as the possession, direct or indirect, by a 
``person'' or ``persons'', of the power to direct or cause the 
direction of the management and policies of the institution whether 
through the ownership of voting securities, by contract or otherwise. 
``Person'' is proposed to be defined as a legal person (corporation) or 
an individual or individuals. Transactions causing a change of 
ownership would include, but not be limited to, the following: (1) The 
sale of the educational institution; (2) the transfer of the 
controlling interest of stock of the educational institution or its 
parent corporation; (3) the merger of two or more educational 
institutions; or (4) the division of one educational institution into 
two or more educational institutions. A ``change of ownership'' would 
not include transfer of ownership or control of the institution, upon 
the retirement or death of the owner, (1) to the owner's parent, 
sibling, spouse, child, spouse's parent or sibling, or sibling's or 
child's spouse or (2) to an individual with an ownership interest in 
the institution who has been involved in management of the institution 
for at least two years preceding the transfer.
    These provisions appear to reflect adequately the kinds of 
institutional changes that could constitute a ``change in ownership.''
    As regards the requirement that the educational institution 
``retain substantially the same faculty, student body, and courses'' 
following change in ownership or move outside the same general 
locality, it is proposed that VA will consider that a proprietary 
educational institution has ``substantially the same faculty, student 
body, and courses'' both before and after the move or ownership change 
when:
     Faculty members who teach a majority of the courses after 
the move or change in ownership were employed by the educational 
institution before the move or change in ownership.
     Faculty use the same instructional methods after the move 
or change in ownership as were used before the move or change in 
ownership,
     The courses offered after the move or change in ownership 
lead to the same educational objectives as did the courses offered 
before the move or change in ownership, and
     Except for those who graduate, all, or a majority of the 
students enrolled in the educational institution on the last day of 
classes before the move or change in ownership are also enrolled in the 
educational institution immediately after the move or change in 
ownership.
    The preceding criteria appear to assure adequately the 
institutional

[[Page 4916]]

continuity contemplated by the statutory scheme.
    It also is proposed to amend Sec. 21.4233 by adding new paragraphs 
(d)(6), (d)(7), and (d)(8) to reflect statutory provisions set forth in 
38 U.S.C. 3675(b)(3) regarding criteria for determining whether 
accredited courses should be approved for VA training.
    Further, it is proposed to amend 38 CFR 21.4252 by adding new 
paragraph (m) to reflect amendments made by the Veterans' Benefits Act 
of 1997 (Pub. Law 105-114) and set forth in 38 U.S.C. 3680A(f) and (g) 
regarding approval of courses under contract.
    Other nonsubstantive changes are made to conform the regulations to 
the statutory changes.
    The Department of Defense (DOD), the Department of Transportation 
(Coast Guard), and VA are jointly issuing this final rule insofar as it 
relates to the Montgomery GI Bill--Selected Reserve. This program is 
funded by DOD and the Coast Guard, and is administered by VA. The 
remainder of this final rule is issued solely by VA.

Executive Order 12866

    This proposed rule has been reviewed by the Office of Management 
and Budget under Executive Order 12866.
    The Secretary of Defense, Commandant of the Coast Guard, and the 
Secretary of Veterans Affairs hereby certify that this proposed rule 
would not have a significant economic impact on a substantial number of 
small entities as they are defined in the Regulatory Flexibility Act, 5 
U.S.C. 601-612. This proposed rule would not cause educational 
institutions to make changes in their activities and would have 
minuscule monetary effects, if any. Pursuant to 5 U.S.C. 605(b), this 
proposed rule, therefore, is exempt from the initial and final 
regulatory flexibility analyses requirements of sections 603 and 604.

    The Catalog of Federal Domestic Assistance number for the 
programs affected by this proposed rule are 64.117, 64.120, and 
64.124. This proposed rule will affect the Montgomery GI Bill--
Selected Reserve which has no Catalog of Federal Domestic Assistance 
number.

List of Subjects in 38 CFR Part 21

    Administrative practice and procedure, Armed forces, Civil rights, 
Claims, Colleges and universities, Conflict of interests, Defense 
Department, Education, Employment, Grant programs-education, Grant 
programs-veterans, Health care, Loan programs--education, Loan 
programs--veterans, Manpower training programs, Reporting and 
recordkeeping requirements, Educational institutions, Travel and 
transportation expenses, Veterans, Vocational education, Vocational 
rehabilitation.

    Approved: March 10, 1999.
Togo D. West, Jr.,
Secretary of Veterans Affairs.
    Approved: April 29, 1999.
Curtis B. Taylor,
Colonel, U.S. Army, Principal Director (Military Personnel Policy), 
Department of Defense.
    Approved: October 18, 1999.
F.L. Ames,
Rear Admiral, U.S. Coast Guard, Assistant Commandant for Human 
Resources.
    For the reasons set forth in the preamble, 38 CFR part 21 (subparts 
D, K, and L) is amended as set forth below.

PART 21--VOCATIONAL REHABILITATION AND EDUCATION

Subpart D--Administration of Educational Assistance Programs

    1. The authority for part 21, subpart D is revised to read as 
follows:

    Authority: 10 U.S.C. 2141 note, ch. 1606; 38 U.S.C. 501(a), chs. 
30, 32, 34, 35, 36, unless otherwise noted.
    2. In Sec. 21.4200, paragraph (z) is added to read as follows:


Sec. 21.4200  Definitions.

* * * * *
    (z) Proprietary educational institution. The term proprietary 
educational institution (including a proprietary profit or proprietary 
nonprofit educational institution) means an educational institution 
that:
    (1) Is not a public educational institution;
    (2) Is in a State; and
    (3) Is legally authorized to offer a program of education in the 
State where the educational institution is physically located.

    (Authority: 38 U.S.C. 3680A(e))

    3. Section 21.4251 is revised to read as follows:


Sec. 21.4251  Minimum period of operation requirement for educational 
institutions.

    (a) Definitions. The following definitions apply to the terms used 
in this section. The definitions in Sec. 21.4200 apply to the extent 
that no definition is included in this paragraph.
    (1) Control. The term control (including the term controlling) 
means the possession, direct or indirect, of the power to direct or 
cause the direction of the management and policies of a person, whether 
through the ownership of voting securities, by contract, or otherwise.
    (2) Person. The term person includes a legal person (corporation or 
partnership) or an individual.

    (Authority: 38 U.S.C. 3680A(e))


    (b) Some educational institutions must be in operation for two 
years. Except as provided in paragraph (c) of this section, when a 
proprietary educational institution offers a course not leading to a 
standard college degree, VA may not approve an enrollment in that 
course if the proprietary educational institution--
    (1) Has been operating for less than two years;
    (2) Offers the course at a branch or extension and the branch or 
extension has been operating for less than two years; or
    (3) Offers the course following either a change in ownership or a 
complete move outside its original general locality, and the 
educational institution does not retain substantially the same faculty, 
student body, and courses as before the change in ownership or the move 
outside the general locality unless the educational institution 
following such change or move has been in operation for at least two 
years.

(Authority: 38 U.S.C. 3680A(e) and (g))

    (c) Exception to the two-year operation requirement. 
Notwithstanding the provisions of paragraph (b) of this section, VA may 
approve the enrollment of a veteran, servicemember, reservist, or 
eligible person in a course not leading to a standard college degree 
approved under this subpart if it is offered by a proprietary 
educational institution that--
    (1) Offers the course under a contract with the Department of 
Defense or the Department of Transportation; and
    (2) Gives the course on or immediately adjacent to a military base, 
Coast Guard station, National Guard facility, or facility of the 
Selected Reserve.

(Authority: 38 U.S.C. 3680A(e) and (g))

    (d) Operation for two years. VA will consider, for the purposes of 
paragraph (b) of this section, that a proprietary educational 
institution (or a branch or extension of such an educational 
institution) will be deemed to have been operating for two years when 
the educational institution (or a branch or extension of such an 
educational institution)--
    (1) Has been operating as an educational institution for 24 
continuous months pursuant to the laws of the State(s) in which it is 
approved to operate and in which it is offering the training; and

[[Page 4917]]

    (2) Has offered courses continuously for at least 24 months 
inclusive of normal vacation or holiday periods, or periods when the 
institution is closed temporarily due to a natural disaster that 
directly affected the institution or the institution's students.

(Authority: 38 U.S.C. 3680A(e) and (g))

    (e) Move outside the same general locality. A proprietary 
educational institution (or a branch or extension thereof) will be 
deemed to have moved to a location outside the same general locality of 
the original location when the new location is beyond normal commuting 
distance of the original location, i.e., 55 miles or more from the 
original location.
(Authority: 38 U.S.C. 3680A(e))

    (f) Change of ownership. (1) A change of ownership of a proprietary 
educational institution occurs when--
    (i) A person acquires operational management and/or control of the 
proprietary educational institution and its educational activities; or
    (ii) A person ceases to have operational management and/or control 
of the proprietary educational institution and its educational 
activities.
    (2) Transactions that may cause a change of ownership include, but 
are not limited to the following:
    (i) The sale of the educational institution;
    (ii) The transfer of the controlling interest of stock of the 
educational institution or its parent corporation;
    (iii) The merger of two or more educational institutions;
    (iv) The division of one educational institution into two or more 
educational institutions;
    (3) VA considers that a change in ownership of an educational 
institution does not include a transfer of ownership or control of the 
institution, upon the retirement or death of the owner, to:
    (i) The owner's parent, sibling, spouse, child, spouse's parent or 
sibling, or sibling's or child's spouse; or
    (ii) An individual with an ownership interest in the institution 
who has been involved in management of the institution for at least two 
years preceding the transfer.

(Authority: 38 U.S.C. 3680A(e))

    (g) Substantially the same faculty, student body, and courses. VA 
will determine whether a proprietary educational institution has 
substantially the same faculty, student body, and courses following a 
change of ownership or move outside the same general locality by 
applying the provisions of this paragraph.
    (1) VA will consider that the faculty remains substantially the 
same in an educational institution when faculty members who teach a 
majority of the courses after the move or change in ownership were so 
employed by the educational institution before the move or change in 
ownership.
    (2) VA will consider that the courses remain substantially the same 
at an educational institution when:
    (i) Faculty use the same instructional methods during the term, 
quarter, or semester after the move or change in ownership as were used 
before the move or change in ownership; and
    (ii) The courses offered after the move or change in ownership lead 
to the same educational objectives as did the courses offered before 
the move or change in ownership.
    (3) VA considers that the student body remains substantially the 
same at an educational institution when, except for those students who 
have graduated, all, or a majority of the students enrolled in the 
educational institution on the last day of classes before the move or 
change in ownership are also enrolled in the educational institution 
immediately after the move or change in ownership.

(Authority: 38 U.S.C. 3680A(e) and (f)(1))

    4. In Sec. 21.4252, paragraph (m) is added to read as follows:


Sec. 21.4252  Courses precluded.

* * * * *
    (m) Courses offered under contract. VA may not approve the 
enrollment of a veteran, servicemember, reservist, or eligible person 
in a course as a part of a program of education offered by any 
educational institution if the educational institution or entity 
providing the course under contract has not obtained a separate 
approval for the course in the same manner as for any other course as 
required by Secs. 21.4253, 21.4254, 21.4256, 21.4257, 21.4260, 21.4261, 
21.4263, 21.4264, 21.4265, 21.4266, or 21.4267, as appropriate.

(Authority: 38 U.S.C. 3680A(f) and (g))

    5. In Sec. 21.4253, paragraphs (d)(6), (d)(7), and (d)(8) are added 
to read as follows:


Sec. 21.4253  Accredited courses.

* * * * *
    (d) * * *
    (6) The accredited courses, the curriculum of which they form a 
part, and the instruction connected with those courses are consistent 
in quality, content, and length with similar courses in public 
educational institutions and other private educational institutions in 
the State with recognized accepted standards.
    (7) There is in the educational institution offering the course 
adequate space, equipment, instructional material, and instructor 
personnel to provide training of good quality.
    (8) The educational and experience qualifications of directors, and 
administrators of the educational institution offering the courses, and 
instructors teaching the courses for which approval is sought, are 
adequate.

(Authority: 38 U.S.C. 3675(b), 3676(c)(1), (2), (3))
* * * * *

Subpart K--All Volunteer Force Educational Assistance Program 
(Montgomery GI Bill--Active Duty)

    6. The authority for part 21, subpart K continues to read as 
follows:

    Authority:  38 U.S.C. 501(a), chs. 30, 36, unless otherwise 
noted.

    7. Section 21.7122 is amended as follows:
    a. Paragraph (e)(6) is amended by removing ``school, or'' and 
adding, in its place, ``school;'';
    b. Paragraph (e)(7) is amended by removing ``course.'' and adding, 
in its place, ``course; or'';
    c. Paragraphs (e)(1) through (e)(5), and the authority citation for 
paragraph (e) are revised; and
    d. Paragraph (e)(8) is added, to read as follows:


Sec. 21.7122  Courses precluded.

* * * * *
    (e) Other courses. VA shall not pay educational assistance for--
    (1) An enrollment in an audited course (see Sec. 21.4252(i));
    (2) An enrollment in a course for which the veteran or 
servicemember received a nonpunitive grade in the absence of mitigating 
circumstances (see Sec. 21.4252(j));
    (3) New enrollments in a course where approval has been suspended 
by a State approving agency;
    (4) An enrollment in certain courses being pursued by 
nonmatriculated students as provided in Sec. 21.4252(l);
    (5) Except as provided in Sec. 21.4252(j), an enrollment in a 
course from which the veteran or servicemember withdrew without 
mitigating circumstances;
* * * * *
    (8) An enrollment in a course offered under contract for which VA 
approval is prohibited by Sec. 21.4252(m).

(Authority: 38 U.S.C. 3002(3), 3034, 3672(a), 3676, 3680(a), 
3680A(a), 3680A(f), 3680A(g))

Subpart L--Educational Assistance for Members of the Selected 
Reserve

    8. The authority for part 21, subpart L is revised to read as 
follows:


[[Page 4918]]


    Authority:  10 U.S.C. ch. 1606; 38 U.S.C. 501(a), 512, ch. 36, 
unless otherwise noted.

    9. Section 21.7622 is amended as follows:
    a. Paragraph (f)(4)(v) is amended by removing ``or'';
    b. Paragraph (f)(4)(vi) is amended by removing ``course.'' and 
adding, in its place, ``course; or'';
    c. The authority citation for paragraph (f) is revised; and
    d. Paragraph (f)(4)(vii) is added, to read as follows:


Sec. 21.7622  Courses precluded.

* * * * *
    (f) * * *
    (4) * * *
    (vii) An enrollment in a course offered under contract for which VA 
approval is prohibited by Sec. 21.4252(m).

(Authority: 10 U.S.C. 16131(c), 16136(b); 38 U.S.C. 3672(a), 3676, 
3680(a), 3680A(f), 3680A(g); Sec. 642, Public Law 101-189, 103 Stat. 
1458)

[FR Doc. 00-2211 Filed 2-1-00; 8:45 am]
BILLING CODE 8320-01-P