[Federal Register Volume 65, Number 249 (Wednesday, December 27, 2000)]
[Rules and Regulations]
[Pages 81740-81743]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-32810]


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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: Final rule.

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SUMMARY: This document amends 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. These changes implement 
provisions of the Veterans' Benefits Improvements Act of 1996 and the 
Veterans' Benefits Act of 1997. This document also amends the 
regulations to conform to statutory provisions and makes changes for 
the purpose of clarification.

DATES: Effective Date: This final rule is effective December 27, 2000.
    Applicability Date: October 9, 1996.

FOR FURTHER INFORMATION CONTACT: William G. Susling, Jr., Assistant 
Director for Policy and Program Development, Education Service (225), 
Veterans Benefits Administration, 202-273-7187.

SUPPLEMENTARY INFORMATION: On February 2, 2000, VA published a proposed 
rule in the Federal Register (65 FR 4914) to amend the VA educational 
assistance and educational benefit regulations in 38 CFR part 21, 
subparts D, K, and L to conform with provisions of the Veterans' 
Benefits Improvement Act of 1996 (Pub. L. 104-275) and with section 
401(e) of the Veterans' Benefits Act of 1997 (Pub. L. 105-114).
    Interested persons were given 60 days to submit comments. We 
received three comments: One from a veterans service organization, one 
from an educational institution, and one from an association of 
educational institutions. The service organization indicated that it 
had no comments.
    The educational institution wrote that the provisions of 38 CFR 
21.4251, as currently written, concerning (a) courses that were similar 
in character to other courses and (b) courses offered at additional 
facilities, should be added to the proposed rule.
    The regulations previously provided that VA could approve the 
enrollment of a veteran or eligible person in a course offered by a 
school other than a job-training establishment only if the course had 
been in operation for 2 years or more immediately prior to the date of 
enrollment of the person. There were two exceptions to this rule which 
are the subject of the comment. The first exempted courses similar in 
character to instruction previously offered by the school for more than 
2 years. (38 CFR 21.4251(a)(2)). The second exempted courses at 
additional facilities acquired by a school in the same general locality 
because of space limitations, since those were not considered to be 
courses at a subsidiary branch or extension, otherwise required to be 
offered for 2 years. (38 CFR 21.4251(f)(3)).
    The ``similar in character'' requirement was derived from 38 U.S.C. 
3689, which was specifically rescinded by Congress in the enactment of 
Pub. L. 104-275. The proposed rule is based on 38 U.S.C. 3680A(e), as 
added by Pub. L. 104-275, which bars approval of enrollment in courses 
not leading to a standard college degree offered by propriety schools 
that have operated on site for less than two years. Under the amended 
statute it does not matter how long the courses themselves have been 
offered at that site or whether they are similar in character to 
courses formerly offered at other sites. Rather, VA need only verify 
that the educational institution has been in operation at the site for 
two years. Therefore, we believe that adopting the commenter's 
suggestion to include the ``similar in character'' exemption of the old 
rule is unnecessary.
    Similarly, we find no support in law for the old rule exempting 
courses at additional facilities created as a result of space 
limitations, because, as amended by Pub. L. 104-275, the law now 
requires that enrollment in all courses not leading to a standard 
college degree offered at a branch of a proprietary educational 
institution must be disapproved if the branch has been operating for 
less than two years. (38 U.S.C. 3680A(e)(2)).
    The association of educational institutions objected that the 
definition of ``change of ownership'' in 38 CFR 21.4251(f)(2) was too 
vague. Specifically, the association stated that the language 
``Transactions that may cause a change of ownership include, but are 
not limited to the following * * *'' made it difficult for institutions 
to decide if a change of ownership has taken place. The association 
suggested that we consider a change of ownership as having taken place 
when the Department of Education believes this occurred.
    After careful consideration, we have decided not to adopt this 
suggestion. Under the previous rule, VA made the final decision whether 
changes in ownership had taken place. Thus, we believe VA has 
sufficient experience in making change-in-ownership decisions. 
Moreover, we expect that changes in ownership not specifically included 
in the definition would be extremely rare and approval would be barred 
only if the facts clearly show a change in ownership did occur.
    The association of educational institutions also questioned the 
final-rule requirement in 38 CFR 21.4251(g) that an educational 
institution use substantially the same instructional methods and offer 
courses leading to the same educational objectives following a change 
of ownership or following a

[[Page 81741]]

move outside its general locality. Among the requirements of 38 U.S.C. 
3680A(e) is a requirement that VA cannot approve an enrollment for VA 
training in a course not leading to a standard college degree offered 
by a proprietary educational institution if the institution offering 
the course completely moves outside its original general locality or 
has changed ownership and does not retain substantially the same 
courses as before the change in ownership or move, unless the 
institution has operated for two years following the change in 
ownership or move. The association of educational institutions 
suggested that it would be better policy to permit the use of different 
instructional methods and the teaching of additional courses if the 
institution's accrediting body so permits.
    We believe that 38 U.S.C. 3680A(e), which establishes the 
applicable policy as a matter of law, may not be interpreted to permit 
adoption of this suggestion. We do not believe that courses could be 
``substantially the same'' if they used different instructional methods 
or had different educational objectives.
    Based on the rationale stated in this document and the proposed 
rule, we are adopting the provisions of the proposed rule as a final 
rule with one nonsubstantive change.
    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.
    The Secretary of Defense, Commandant of the Coast Guard, and the 
Secretary of Veterans Affairs hereby certify that this final rule will 
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 final rule will 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 final rule, 
therefore, is exempt from the initial and final regulatory flexibility 
analyses requirements of sections 603 and 604.
    The Catalog of Federal Domestic Assistance numbers 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: October 10, 2000.
Hershel W. Gober,
Acting Secretary of Veterans Affairs.

    Approved: October 20, 2000.
Col. Curtis B. Taylor,
U.S. Army, Principal Director, (Military Personnel Policy) Department 
of Defense.

    Approved: December 12, 2000.
F.L. Ames,
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 continues to read as 
follows:

    Authority: 10 U.S.C. 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 means an individual, corporation, 
partnership, or other legal entity.

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

    (b) Some educational institutions must be in operation for 2 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 2 years;
    (2) Offers the course at a branch or extension and the branch or 
extension has been operating for less than 2 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, after 
such change or move, has been in operation for at least 2 years.

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

    (c) Exception to the 2-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 2 years. VA will consider, for the purposes of 
paragraph (b) of this section, that a proprietary

[[Page 81742]]

educational institution (or a branch or extension of such an 
educational institution) will be deemed to have been operating for 2 
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
    (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 2 or more educational institutions; and
    (iv) The division of one educational institution into 2 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 2 
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 
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 by:
    a. In paragraph (e)(6), removing ``school, or'' and adding, in its 
place, ``school;''.
    b. In paragraph (e)(7), removing ``course.'' and adding, in its 
place, ``course; or''.
    c. Revising paragraphs (e)(1) through (e)(5), and the authority 
citation for paragraph (e).
    d. In paragraph (e)(6), removing from the end of the paragraph ``, 
or'' and adding, in its place, ``;''.
    e. In paragraph (e)(7), removing the period at the end of the 
paragraph and adding, in its place, ``; or''.
    f. Adding paragraph (e)(8).
    The addition and revisions 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));

[[Page 81743]]

    (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 continues to read as 
follows:


    Authority: 10 U.S.C. ch. 1606; 38 U.S.C. 501, unless otherwise 
noted.

    9. Section 21.7622 is amended by:
    a. In paragraph (f)(4)(v), removing ``or''.
    b. In paragraph (f)(4)(vi), removing ``course.'' and adding, in its 
place, ``course; or''.
    c. Adding a new paragraph (f)(4)(vii).
    d. Revising the authority citation for paragraph (f).
    The addition and revision 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. 00-32810 Filed 12-26-00; 8:45 am]
BILLING CODE 8320-01-P