[Federal Register Volume 71, Number 68 (Monday, April 10, 2006)]
[Notices]
[Pages 18146-18150]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-3365]



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Part II





Department of Housing and Urban Development





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Eligibility of Students for Assisted Housing Under Section 8 of the 
U.S. Housing Act of 1937; Supplementary Guidance; Notice

  Federal Register / Vol. 71, No. 68 / Monday, April 10, 2006 / 
Notices  

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5036-N-02]


Eligibility of Students for Assisted Housing Under Section 8 of 
the U.S. Housing Act of 1937; Supplementary Guidance

AGENCY: Office of the Assistant Secretary for Housing-Federal Housing 
Commissioner, and Office of the Assistant Secretary for Public and 
Indian Housing, HUD.

ACTION: Notice.

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SUMMARY: On December 30, 2005, HUD published a final rule implementing 
a new law that restricts individuals who are (1) enrolled at an 
institution of higher education (i.e., students), under the age of 24, 
not a veteran, unmarried, and do not have a dependent child, and (2) 
seeking assistance under section 8 of the United States Housing Act of 
1937 (section 8 assistance) in their individual capacity (that is, 
separately from their parents) from receiving section 8 assistance if 
neither the student nor the student's parents are income eligible. This 
notice provides guidance to further assist with the implementation of 
these new eligibility restrictions.

FOR FURTHER INFORMATION CONTACT: For section 8 voucher issues, Patricia 
Arnaudo and LaDonna Reed-Morton, Management and Occupancy Division, 
Office of Public and Indian Housing, Room 4210, telephone (202) 708-
0744; for the Office of Housing's Project-Based Section 8, Gail 
Williamson, Director, Housing Assistance Policy Division, Room 6138, 
telephone (202) 708-3000. For all of the individuals, the address is 
Department of Housing and Urban Development, 451 Seventh Street, SW., 
Washington, DC 20410-8000. None of the aforementioned telephone numbers 
are toll-free numbers. Persons with hearing or speech impairments may 
access these numbers through TTY by calling the toll-free Federal 
Information Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION

I. Background

    Fiscal Year 2006 appropriations for HUD were enacted in Title III 
of Public Law 109-115 (119 Stat. 2936) on November 30, 2005 (the Act). 
Section 327 of the administrative provisions of the Act (1) introduced 
new restrictions on housing assistance that may be provided to students 
of higher education under section 8 of the United States Housing Act of 
1937 (42 U.S.C. 1437f) (1937 Act), and (2) directed HUD to issue a 
final rule no later than 30 days following enactment of the Act. In 
accordance with this statutory direction, HUD published a final rule 
implementing section 327 of the Act (section 327) on December 30, 2005 
(70 FR 77742), and this rule became effective on January 30, 2006.
    In brief, the new law and HUD's rule require that if a student is 
enrolled at an institution of higher education, is under the age of 24, 
is not a veteran, unmarried and does not have a dependent child, is 
individually ineligible for section 8 assistance, or the student's 
parents are, individually or jointly, ineligible for assistance, no 
section 8 assistance can be provided to the student. Unless the student 
is determined independent from his or her parents, as discussed in this 
guidance, the eligibility of a student seeking section 8 assistance 
will be based on both the student and the parents being determined 
income eligible for section 8 assistance.
    Under the new law and HUD's rule, the eligibility of a student 
seeking section 8 assistance will be examined along with the income 
eligibility of the student's parents. Both the student's income and the 
parents' income must be separately assessed for income eligibility. 
Additionally, the financial assistance of the student in excess of 
tuition will be included in annual income when determining the 
student's eligibility for section 8 assistance, unless the student is 
over the age of 23 with dependent children, and for rent calculation 
purposes as addressed in section II, E of this notice. The new law and 
rule focus on a student under the age of 24 who meets the additional 
requirements of section 327 of the Act and who is not residing in a 
section 8 assisted unit with his or her parents, but who is seeking on 
his or her own to reside in a section 8 assisted unit. The new law and 
rule do not apply to students residing with their parents in a section 
8 assisted unit or who reside with parents who are applying to receive 
section 8 assistance. (See definition of ``parents'' in Appendix A of 
this notice.)
    This notice provides guidance to public housing agencies (PHAs) and 
multifamily project owners and management agents (Owners and Managers) 
to assist with implementation of the new eligibility restrictions. 
Appendix A to this guidance defines certain terms. The new law, HUD's 
recently issued rule, and this guidance are intended to help ensure 
that section 8 assistance is provided to those truly in need of and 
eligible for such assistance.

II. Guidance

A. Covered HUD Programs

    The new student eligibility restrictions only apply to HUD's 
section 8 programs. These new restrictions do not apply to HUD's Public 
Housing program. The new eligibility restrictions apply to the 
following section 8 programs administered by the Office of Housing and 
the Office of Public and Indian Housing.
Office of Housing Programs
     The Section 8 New Construction, Substantial 
Rehabilitation, State Agency, Rural Housing Services Section 515, Loan 
Management Set-Aside and Property Disposition Set-Aside Programs; and
     The Section 202/8 Direct Loan Program for the Elderly and 
Persons with Disabilities.
Office of Public and Indian Housing Programs
     The Housing Choice Voucher Program;
     The Project-Based Certificate Program;
     The Project-Based Voucher Program; and
     The Section 8 Moderate Rehabilitation Program.

B. Student Eligibility Requirements

    The new eligibility restrictions imposed on students enrolled at 
institutions of higher education and seeking section 8 assistance are 
set out in two parts: Section 327(a) and section 327(b) of the Act.
1. Requirements of Section 327(a) of the Act and 24 CFR 5.612 of the 
Final Rule
    The new eligibility restrictions of section 327(a) are implemented 
and codified in HUD's regulation at 24 CFR 5.612 and provide as 
follows:
    No assistance shall be provided under section 8 of the 1937 Act to 
any individual who:
     Is enrolled as a student at an institution of higher 
education, as defined under section 102 of the Higher Education Act of 
1965 (20 U.S.C. 1002);
     Is under 24 years of age;
     Is not a veteran of the United States military;
     Is unmarried;
     Does not have a dependent child, and
     Is not otherwise individually eligible, or has parents 
who, individually or jointly, are not eligible on the basis of income 
to receive assistance under section 8 of the 1937 Act.
    For a student under the age of 24 who is not a veteran, is 
unmarried, does not

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have a dependent child and who is seeking section 8 assistance, section 
327(a) of the Act sets up a two-part income eligibility test. Both 
parts of this test must be affirmatively met. That is, both the student 
and the student's parents (the parents individually or jointly) must be 
income eligible for the student to receive section 8 assistance. If it 
is determined that the parents are not income eligible, the student is 
ineligible to receive section 8 assistance.
    As noted earlier in this guidance, based on program practices and 
criteria already in place, a student under the age of 24 who meets the 
additional criteria of section 327 of the Act may be income eligible 
for assistance in circumstances where an examination of the income of 
the student's parents may not be relevant or where the student can 
demonstrate the absence of, or his or her independence from, parents. 
These practices and criteria include but are not limited to 
consideration of all of the following:
    1. The individual must be of legal contract age under state law.
    2. The individual must have established a household separate from 
parents or legal guardians for at least one year prior to application 
for occupancy or the individual meets the U.S. Department of 
Education's definition of an independent student. (See definition for 
``independent student'' in Appendix A of this notice.)
    3. The individual must not be claimed as a dependent by parents or 
legal guardians pursuant to IRS regulations.
    4. The individual must obtain a certification of the amount of 
financial assistance that will be provided by parents, signed by the 
individual providing the support. This certification is required even 
if no assistance will be provided.
    PHAs, Owners, and Managers of section 8 assistance will need to 
verify a student's independence from his or her parents to determine 
that the student's parents' income is not relevant for determining the 
student's eligibility for assistance by taking into consideration all 
of the following:
    1. Reviewing and verifying previous address information to 
determine evidence of a separate household, or Verifying the student 
meets the U.S. Department of Education's definition of ``independent 
student''; and
    2. Reviewing prior year income tax returns to verify if a parent or 
guardian has claimed the student as a dependent (except if the student 
meets the Department of Education definition of ``independent 
student''); and
    3. Verifying income provided by a parent by requiring a written 
certification from the individual providing the support. Certification 
is also required if the parent is providing no support to the student. 
Financial assistance that is provided by persons not living in the unit 
is part of annual income.
    As also noted earlier in this guidance, the new law and HUD's rule 
do not affect students residing in a section 8 assisted unit with his 
or her parents or who reside with parents who are applying to receive 
section 8 assistance. The law and HUD's rule focus on a student under 
the age of 24 who meets the additional eligibility requirements of 
section 327 of the Act and who is already residing in a section 8 
assisted unit without his or her parents, or who is seeking on his or 
her own to reside in a section 8 assisted unit.
2. Requirements of Section 327(b) of the Act and 24 CFR 5.609 of the 
Final Rule
    For section 8 programs only and as provided in 24 CFR 5.612, any 
financial assistance, in excess of amounts received for tuition, that 
an individual receives under the Higher Education Act of 1965 (20 
U.S.C. 10001 et seq.), from private sources, or from an institution of 
higher education (as defined under the Higher Education Act of 1965 (20 
U.S.C. 1002)) shall be considered income to that individual, except 
that financial assistance described in this paragraph is not considered 
annual income for persons over the age of 23 with dependent children. 
(See definition of ``dependent child'' in Appendix A.) For purposes of 
this paragraph, ``financial assistance'' does not include loan proceeds 
for the purpose of determining income.
    HUD's final rule issued on December 30, 2005, amended Sec.  
5.609(b) to add a new paragraph (b)(9) to include, as annual income, 
any financial assistance in excess of amounts received for tuition that 
a student who meets the criteria of the new Sec.  5.612 receives. With 
the exception of students who are over the age of 23 with dependent 
children, students under the age of 24 who are seeking section 8 
assistance will need to meet the income requirements for the section 8 
program, taking into consideration the additional eligibility 
restrictions provided in 24 CFR 5.609(b)(9) and 5.612. Therefore, in 
determining the income eligibility of a student, the student's 
financial assistance in excess of tuition as defined in Sec.  
5.609(b)(9) will be included in the calculation of annual income. (Also 
see definitions ``financial assistance'' and ``tuition'' in Appendix A 
of this notice.) If the student's financial assistance in excess of 
tuition makes the student income ineligible for section 8 assistance, 
the student cannot receive section 8 assistance. The income eligibility 
of a student will also rely on program practices and criteria already 
in place that assess the student's independence from his or her parents 
as addressed in paragraph 1, above.
    As noted in this guidance, section 327 was not intended to affect 
the section 8 eligibility of a student's parents when the student is 
receiving financial assistance and residing with his or her parents, or 
is residing with parents who are applying to receive section 8 
assistance, but only the eligibility of students applying for or 
receiving section 8 assistance separately from their parents. The 
amendment of the procedure for the determination of annual income at 
Sec.  5.609 by the December 30, 2005, final rule is consistent with 
this intent.
    A student's financial assistance under new Sec.  5.609(b)(9) is 
considered income only in the context of that student's application 
for, or retention of, section 8 assistance separately from the 
student's parents. This is consistent with the language of section 
327(b), which states, in relevant part, ``For the purposes of 
determining the eligibility of a person to receive assistance under 
section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437f), 
any financial assistance (in excess of amounts received for tuition) 
that an individual receives * * * shall be considered income to that 
individual,'' (emphasis added). The focus of section 327(b), and of 
section 327 as a whole, is on the income eligibility of a single 
student under the age of 24 who is not a veteran, is unmarried, does 
not have a dependent child, and whether the financial assistance of 
that individual student in excess of tuition makes that student income 
ineligible, and whether the income of the student's parents makes the 
student income ineligible. There is no apparent intent to affect the 
eligibility of a student's parents when the student resides with his or 
her parents.
    The financial assistance of a student residing with his or her 
parents therefore would continue to be excluded from annual income 
under Sec.  5.609(c)(6), which excludes student financial assistance 
from income. The December 30, 2005, final rule amended the exclusion of 
student financial assistance from income at Sec.  5.609(c)(6) by making 
the exclusion, ``Subject to paragraph (b)(9) of this section,'' which 
is the new section adding student financial assistance as income only 
to a student applying separately from his or her parents for section 8 
assistance.

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3. Recertification of Students Already Receiving Section 8 Assistance
    HUD strongly encourages PHAs, Owners, and Managers to recertify 
those section 8 participants who may be affected by this new law as 
soon as it is practicable. The latest time, however, that the 
eligibility and income requirements can be implemented is at the time 
of annual recertification.
    PHAs, Owners, and Managers must ensure at each annual 
recertification, a student remains eligible to receive section 8 
assistance under the restrictions of this new law.
    PHAs, Owners, and Managers have an obligation to make sure that 
section 8 assisted units are provided to those truly in need of such 
assistance.
4. All Other Eligibility Requirements Apply
    While the new law and HUD's recently issued rule focus on the 
income eligibility of students, all student applicants for section 8 
assistance must also meet all other HUD program requirements that 
determine eligibility for the section 8 assistance.

C. Screening and Verification of Applicants for Assistance

    As it relates to the verification of a parent(s) income, PHAs, 
Owners, and Managers may accept from a parent(s) a declaration and 
certification of income, which includes a penalty of perjury. The 
processing entity retains the right to request and review supporting 
documentation at any time they determine the declaration, 
certification, and eligibility of the parent(s) is in question. 
Supporting documentation includes, but is not limited to: Internal 
Revenue Services (IRS) tax returns, consecutive and original pay stubs, 
bank statements, pension benefit statements, Temporary Assistance to 
Needy Families (TANF) award letter, Social Security Administration 
(SSA) award letter, other official and authentic documents from a 
Federal, State or local agency.
    As is the case with all applicants for section 8 assistance, PHAs, 
Owners, and Managers administering section 8 programs must adequately 
screen and verify an applicant's source(s) of income. Failure of PHAs, 
Owners, and Managers, to screen applicants and verify income in 
accordance with applicable program requirements can result in sanctions 
being imposed.
    PHAs must immediately update their Administrative Plans and Owners 
and Managers must immediately update their Tenant Selection Plans to 
reflect the new income eligibility restrictions for students.

D. Denial and Termination of Assistance

    Denial of Assistance. An applicant who is a student and who does 
not meet the income eligibility requirements or who has parents who, 
individually or jointly, do not meet the income eligibility 
requirements for section 8 assistance are not eligible for section 8 
assistance and will be prohibited from participating in the section 8 
Program.
    Termination of Assistance. A student under the age of 24 who is not 
a veteran, unmarried, does not have a dependent child and who is 
currently receiving section 8 assistance, if at recertification is 
determined to be ineligible, will have his or her assistance 
terminated.
    Owners and Managers of projects under the Office of Housing's 
section 8 program cannot evict or require an ineligible student to move 
from a unit as long as the student is in compliance with the terms of 
the lease. Although the student is allowed to remain in the unit, the 
student will no longer be eligible to receive section 8 assistance. The 
section 8 assistance will not be prorated; therefore, if the ineligible 
student is residing in a household other than with the student's 
parents the assistance will be terminated for the entire household. If 
the ineligible student moves from the unit, the remaining members of 
the household may again be eligible for section 8 assistance, if 
available. If the household composition no longer qualifies the 
household for the unit size, the household may be required to move to 
an appropriate size unit when one is available, or, with the approval 
of the owner may move in another eligible person as a member of the 
household and remain in their same unit.
    For PHAs administering the Housing Choice Voucher program, any 
member within a household comprised of both eligible and ineligible 
students who is determined ineligible to receive section 8 assistance 
in accordance with 24 CFR part 5, subpart F, and is terminated under 24 
CFR 982.552(b)(5), shall be ineligible to receive continued assistance 
under the Housing Choice Voucher program. Eligible students, residing 
in such households, however, shall not be terminated under Sec.  
982.552(b)(5), but shall be issued a voucher to move with continued 
assistance in accordance with program regulations or shall be given the 
opportunity to lease in place if the terminated ineligible student 
members elect to move out of the assisted unit. HUD will issue separate 
guidance for PHAs administering the Moderate Rehabilitation, Project-
Based Certificate and Project-Based Voucher programs.
    Upon notification of denial or termination of assistance, the 
household is entitled to request an informal hearing to discuss the 
reasons for the denial or termination, in accordance with established 
program procedures and requirements.

E. Rent Determination

    Determination of rent is made in accordance with the requirements 
for the section 8 program under which the student seeks assistance.

III. Additional HUD Guidance

    In addition to this notice, HUD's Office of Housing and Office of 
Public and Indian Housing are developing additional guidance. This 
guidance, when completed, will be posted on HUD's Web site at http://www.hud.gov.

    Dated: April 3, 2006.
Brian D. Montgomery,
Assistant Secretary for Housing-Federal Housing Commissioner.

Orlando J. Cabrera,
Assistant Secretary for Public and Indian Housing.

Appendix A--Definitions

    1. Dependent Child in the context of the new eligibility 
restrictions, means a dependent child of an enrolled student who 
meets the criteria of 24 CFR 5.612. In this context, ``dependent 
child'' is defined in HUD's income eligibility regulations at 24 CFR 
5.603 is a member of the family (except foster children and foster 
adults) other than the family head or spouse, who is under 18 years 
of age, or a person with a disability, or is a full-time student.
    2. Financial Assistance included in annual income is any 
financial assistance that a student receives in excess of tuition 
(e.g., athletic and academic scholarships) and that the student 
receives (1) under the Higher Education Act, (2) from private 
sources, or (3) from an institution of higher education as defined 
by the Higher Education Act of 1965. Financial assistance does not 
include loan proceeds.
    a. Higher Education Act Assistance under the Higher Education 
Act of 1965 includes Pell Grants, Federal Supplement Educational 
Opportunity Grants, Academic Achievement Incentive Scholarships, 
State Assistance under the Leveraging Educational Assistance 
Partnership Program, the Robert G. Byrd Honors Scholarship Program, 
and Federal Work Study programs.
    b. Assistance from Private Sources is non-governmental sources 
of assistance, including assistance that may be provided to a 
student from parent, guardian or other family member, whether 
residing within the family in the section 8 assisted unit or not, 
and from other persons not residing in the unit.
    c. Assistance from an Institution of Higher Education requires 
reference to the particular

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institution and the institution's listing of financial assistance. 
(See definition for Institution of Higher Education in 7, below.)
    d. Loans Are Not Financial Assistance, and, therefore, the loan 
programs cited in the Higher Education Act of 1965 (the Perkins, 
Stafford and Plus loans) are not included in the term ``financial 
assistance'' in determining student eligibility for section 8 
assistance.
    3. Independent Student for Title IV aid, a student must meet one 
or more of the following criteria:
    a. Be at least 24 years old by December 31 of the award year for 
which aid is sought;
    b. Be an orphan or a ward of the court through the age of 18;
    c. Be a veteran of the U.S. Armed Forces;
    d. Have legal dependents other than a spouse (for example, 
dependent children or an elderly dependent parent);
    e. Be a graduate or professional student; or,
    f. Be married.
    4. Parents, for purposes of the student eligibility 
restrictions, and consistent with long-standing HUD policy regarding 
eligibility for the Section 8 Programs, means the biological or 
adoptive parents, or guardians (e.g., grandparents, aunt/uncle, 
godparents, etc.), or such other definition as may be adopted by the 
PHA, Owner, or Manager through appropriate amendment to its 
admissions policies.
    5. Student means all students enrolled either full-time or part-
time at an institution of higher education. The new law does not 
exempt part-time students.
    6. Tuition shall have the meaning given this term by the 
institution of higher education in which the student is enrolled.
    7. Veteran, as used by the Department of Veterans Affairs, is 
codified at 38 U.S.C. 101(2). Since use of this definition is 
widespread in other federal programs affecting veterans, PHAs, 
Owners and Managers may find it useful to adopt this definition for 
purposes of administering the student eligibility restrictions.
    Definition of veteran from 38 U.S.C. 101(2): The term 
``veteran'' means a person who served in the active military, naval, 
or air service, and who was discharged or released therefrom under 
conditions other than dishonorable.
    8. Institution of Higher Education shall have the meaning given 
this term in the Higher Education Act of 1965 in 20 U.S.C. 1001 and 
1002.

a. Definition of ``Institution of Higher Education'' From 20 U.S.C. 
1001

    (a) Institution of higher education. For purposes of this 
chapter, other than subchapter IV and part C of subchapter I of 
chapter 34 of Title 42, the term ``institution of higher education'' 
means an educational institution in any State that-(1) Admits as 
regular students only persons having a certificate of graduation 
from a school providing secondary education, or the recognized 
equivalent of such a certificate;
    (2) Is legally authorized within such State to provide a program 
of education beyond secondary education;
    (3) Provides an educational program for which the institution 
awards a bachelor's degree or provides not less than a 2-year 
program that is acceptable for full credit toward such a degree;
    (4) Is a public or other nonprofit institution; and
    (5) Is accredited by a nationally recognized accrediting agency 
or association, or if not so accredited, is an institution that has 
been granted preaccreditation status by such an agency or 
association that has been recognized by the Secretary for the 
granting of preaccreditation status, and the Secretary has 
determined that there is satisfactory assurance that the institution 
will meet the accreditation standards of such an agency or 
association within a reasonable time.
    (b) Additional institutions included. For purposes of this 
chapter, other than subchapter IV and part C of subchapter I of 
chapter 34 of Title 42, the term ``institution of higher education'' 
also includes--
    (1) Any school that provides not less than a 1-year program of 
training to prepare students for gainful employment in a recognized 
occupation and that meets the provision of paragraphs (1), (2), (4), 
and (5) of subsection (a) of this section; and
    (2) A public or nonprofit private educational institution in any 
State that, in lieu of the requirement in subsection (a)(1) of this 
section, admits as regular students persons who are beyond the age 
of compulsory school attendance in the State in which the 
institution is located.
    (c) List of accrediting agencies. For purposes of this section 
and section 1002 of this title, the Secretary shall publish a list 
of nationally recognized accrediting agencies or associations that 
the Secretary determines, pursuant to subpart 2 of part G of 
subchapter IV of this chapter, to be reliable authority as to the 
quality of the education or training offered.

b. Definition of ``Institution of Higher Education'' From 20 U.S.C. 
1002

    (a) Definition of institution of higher education for purposes 
of student assistance programs
    (1) Inclusion of additional institutions. Subject to paragraphs 
(2) through (4) of this subsection, the term ``institution of higher 
education'' for purposes of subchapter IV of this chapter and part C 
of subchapter I of chapter 34 of title 42 includes, in addition to 
the institutions covered by the definition in section 1001 of this 
title--
    (A) A proprietary institution of higher education (as defined in 
subsection (b) of this section);
    (B) A postsecondary vocational institution (as defined in 
subsection (c) of this section); and
    (C) Only for the purposes of part B of subchapter IV of this 
chapter, an institution outside the United States that is comparable 
to an institution of higher education as defined in section 1001 of 
this title and that has been approved by the Secretary for the 
purpose of part B of subchapter IV of this chapter.
    (2) Institutions outside the United States
    (A) In general. For the purpose of qualifying as an institution 
under paragraph (1)(C), the Secretary shall establish criteria by 
regulation for the approval of institutions outside the United 
States and for the determination that such institutions are 
comparable to an institution of higher education as defined in 
section 1001 of this title (except that a graduate medical school, 
or a veterinary school, located outside the United States shall not 
be required to meet the requirements of section 1001 (a)(4) of this 
title). Such criteria shall include a requirement that a student 
attending such school outside the United States is ineligible for 
loans made, insured, or guaranteed under part B of subchapter IV of 
this chapter unless--
    (i) In the case of a graduate medical school located outside the 
United States--
    (I)(aa) At least 60 percent of those enrolled in, and at least 
60 percent of the graduates of, the graduate medical school outside 
the United States were not persons described in section 1091(a)(5) 
of this title in the year preceding the year for which a student is 
seeking a loan under part B of subchapter IV of this chapter; and
    (bb) At least 60 percent of the individuals who were students or 
graduates of the graduate medical school outside the United States 
or Canada (both nationals of the United States and others) taking 
the examinations administered by the Educational Commission for 
Foreign Medical Graduates received a passing score in the year 
preceding the year for which a student is seeking a loan under part 
B of subchapter IV of this chapter; or
    (II) The institution has a clinical training program that was 
approved by a State as of January 1, 1992; or
    (ii) In the case of a veterinary school located outside the 
United States that does not meet the requirements of section 
1001(a)(4) of this title, the institution's students complete their 
clinical training at an approved veterinary school located in the 
United States.
    (B) Advisory panel
    (i) In general. For the purpose of qualifying as an institution 
under paragraph (1)(C) of this subsection, the Secretary shall 
establish an advisory panel of medical experts that shall--
    (I) Evaluate the standards of accreditation applied to applicant 
foreign medical schools; and
    (II) Determine the comparability of those standards to standards 
for accreditation applied to United States medical schools.
    (ii) Special rule if the accreditation standards described in 
clause (i) are determined not to be comparable, the foreign medical 
school shall be required to meet the requirements of section 1001 of 
this title.
    (C) Failure to release information. The failure of an 
institution outside the United States to provide, release, or 
authorize release to the Secretary of such information as may be 
required by subparagraph (A) shall render such institution 
ineligible for the purpose of part B of subchapter IV of this 
chapter.
    (D) Special rule. If, pursuant to this paragraph, an institution 
loses eligibility to participate in the programs under subchapter IV 
of this chapter and part C of subchapter I of chapter 34 of title 
42, then a student enrolled at such institution may, notwithstanding 
such loss of eligibility,

[[Page 18150]]

continue to be eligible to receive a loan under part B while 
attending such institution for the academic year succeeding the 
academic year in which such loss of eligibility occurred.
    (3) Limitations based on course of study or enrollment. An 
institution shall not be considered to meet the definition of an 
institution of higher education in paragraph (1) if such 
institution--
    (A) Offers more than 50 percent of such institution's courses by 
correspondence, unless the institution is an institution that meets 
the definition in section 2471 (4)(C) of this title;
    (B) Enrolls 50 percent or more of the institution's students in 
correspondence courses, unless the institution is an institution 
that meets the definition in such section, except that the 
Secretary, at the request of such institution, may waive the 
applicability of this subparagraph to such institution for good 
cause, as determined by the Secretary in the case of an institution 
of higher education that provides a 2-or 4-year program of 
instruction (or both) for which the institution awards an associate 
or baccalaureate degree, respectively;
    (C) Has a student enrollment in which more than 25 percent of 
the students are incarcerated, except that the Secretary may waive 
the limitation contained in this subparagraph for a nonprofit 
institution that provides a 2-or 4-year program of instruction (or 
both) for which the institution awards a bachelor's degree, or an 
associate's degree or a postsecondary diploma, respectively; or
    (D) Has a student enrollment in which more than 50 percent of 
the students do not have a secondary school diploma or its 
recognized equivalent, and does not provide a 2-or 4-year program of 
instruction (or both) for which the institution awards a bachelor's 
degree or an associate's degree, respectively, except that the 
Secretary may waive the limitation contained in this subparagraph if 
a nonprofit institution demonstrates to the satisfaction of the 
Secretary that the institution exceeds such limitation because the 
institution serves, through contracts with Federal, State, or local 
government agencies, significant numbers of students who do not have 
a secondary school diploma or its recognized equivalent.
    (4) Limitations based on management. An institution shall not be 
considered to meet the definition of an institution of higher 
education in paragraph (1) if--
    (A) The institution, or an affiliate of the institution that has 
the power, by contract or ownership interest, to direct or cause the 
direction of the management or policies of the institution, has 
filed for bankruptcy, except that this paragraph shall not apply to 
a nonprofit institution, the primary function of which is to provide 
health care educational services (or an affiliate of such an 
institution that has the power, by contract or ownership interest, 
to direct or cause the direction of the institution's management or 
policies) that files for bankruptcy under chapter 11 of title 11 
between July 1, 1998, and December 1, 1998; or
    (B) The institution, the institution's owner, or the 
institution's chief executive officer has been convicted of, or has 
pled nolo contendere or guilty to, a crime involving the 
acquisition, use, or expenditure of funds under subchapter IV of 
this chapter and part C of subchapter I of chapter 34 of title 42, 
or has been judicially determined to have committed fraud involving 
funds under subchapter IV of this chapter and part C of subchapter I 
of chapter 34 of title 42.
    (5) Certification. The Secretary shall certify an institution's 
qualification as an institution of higher education in accordance 
with the requirements of subpart 3 of part G of subchapter IV of 
this chapter.
    (6) Loss of eligibility. An institution of higher education 
shall not be considered to meet the definition of an institution of 
higher education in paragraph (1) if such institution is removed 
from eligibility for funds under subchapter IV of this chapter and 
part C of subchapter I of chapter 34 of title 42 as a result of an 
action pursuant to part G of subchapter IV of this chapter.
    (b) Proprietary institution of higher education
    (1) Principal criteria. For the purpose of this section, the 
term ``proprietary institution of higher education'' means a school 
that--
    (A) Provides an eligible program of training to prepare students 
for gainful employment in a recognized occupation;
    (B) Meets the requirements of paragraphs (1) and (2) of section 
1001 (a) of this title;
    (C) Does not meet the requirement of paragraph (4) of section 
1001 (a) of this title;
    (D) Is accredited by a nationally recognized accrediting agency 
or association recognized by the Secretary pursuant to part G of 
subchapter IV of this chapter;
    (E) Has been in existence for at least 2 years; and
    (F) Has at least 10 percent of the school's revenues from 
sources that are not derived from funds provided under subchapter IV 
of this chapter and part C of subchapter I of chapter 34 of title 
42, as determined in accordance with regulations prescribed by the 
Secretary.
    (2) Additional institutions. The term ``proprietary institution 
of higher education'' also includes a proprietary educational 
institution in any State that, in lieu of the requirement in 
paragraph (1) of section 1001 (a) of this title, admits as regular 
students persons who are beyond the age of compulsory school 
attendance in the State in which the institution is located.
    (c) Postsecondary vocational institution.
    (1) Principal criteria. For the purpose of this section, the 
term ``postsecondary vocational institution'' means a school that--
    (A) Provides an eligible program of training to prepare students 
for gainful employment in a recognized occupation;
    (B) Meets the requirements of paragraphs (1), (2), (4), and (5) 
of section 1001 (a) of this title; and
    (C) Has been in existence for at least 2 years.
    (2) Additional institutions. The term ``postsecondary vocational 
institution'' also includes an educational institution in any State 
that, in lieu of the requirement in paragraph (1) of section 1001 
(a) of this title, admits as regular students persons who are beyond 
the age of compulsory school attendance in the State in which the 
institution is located.

[FR Doc. 06-3365 Filed 4-7-06; 8:45 am]
BILLING CODE 4210-67-P