[Federal Register Volume 75, Number 138 (Tuesday, July 20, 2010)]
[Proposed Rules]
[Pages 42190-42236]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-17313]



[[Page 42189]]

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Part II





Department of Education





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34 CFR Parts 600, 668, and 682



Foreign Institutions--Federal Student Aid Programs; Proposed Rule

  Federal Register / Vol. 75 , No. 138 / Tuesday, July 20, 2010 / 
Proposed Rules  

[[Page 42190]]


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DEPARTMENT OF EDUCATION

34 CFR Parts 600, 668, and 682

RIN 1840-AD03
[Docket ID ED-2010-OPE-0009]


Foreign Institutions--Federal Student Aid Programs

AGENCY: Office of Postsecondary Education, Department of Education.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Secretary proposes to implement provisions related to the 
eligibility of foreign institutions for participation in the Federal 
student aid programs that were added to the Higher Education Act of 
1965, as amended (HEA), by the Higher Education Opportunity Act of 2008 
(HEOA), as well as other provisions related to the eligibility of a 
foreign institution by amending the regulations for Institutional 
Eligibility Under the Higher Education Act of 1965, the Student 
Assistance General Provisions, and the Federal Family Education Loan 
(FFEL) Program.

DATES: We must receive your comments on or before August 19, 2010.

ADDRESSES: Submit your comments through the Federal eRulemaking Portal 
or via postal mail, commercial delivery, or hand delivery. We will not 
accept comments by fax or by e-mail. Please submit your comments only 
one time, in order to ensure that we do not receive duplicate copies. 
In addition, please include the Docket ID at the top of your comments.
     Federal eRulemaking Portal: Go to http://www.regulations.gov to submit your comments electronically. Information 
on using Regulations.gov, including instructions for finding a 
regulation, submitting a comment, finding a comment, and signing up for 
e-mail alerts, is available on the site under ``How To Use 
Regulations.gov'' in the Help section.
     Postal Mail, Commercial Delivery, or Hand Delivery. If you 
mail or deliver your comments about these proposed regulations, address 
them to Wendy Macias, U.S. Department of Education, 1990 K Street, NW., 
room 8017, Washington, DC 20006-8502.

    Privacy Note: The Department's policy for comments received from 
members of the public (including those comments submitted by mail, 
commercial delivery, or hand delivery) is to make these submissions 
available for public viewing in their entirety on the Federal 
eRulemaking Portal at http://www.regulations.gov. Therefore, 
commenters should be careful to include in their comments only 
information that they wish to make publicly available on the 
Internet


.FOR FURTHER INFORMATION CONTACT: For general information or 
information related to nonprofit status for foreign institutions, 
public foreign institutions and financial responsibility, eligibility 
of training programs at foreign institutions, and foreign graduate 
medical schools, Wendy Macias. Telephone: (202) 502-7526 or via the 
Internet at: [email protected].
    For information related to audited financial statements and 
compliance audits, Anthony Gargano. Telephone: (202) 502-7519, or via 
the Internet at: [email protected].
    For information related to the definition of a foreign institution, 
Gail McLarnon. Telephone: (202) 219-7048, or via the Internet at: 
[email protected].
    For information related to single legal authorization for groups of 
foreign institutions, foreign veterinary schools, foreign nursing 
schools and certification of foreign institutions, Brian Smith. 
Telephone: (202) 502-7551, or via the Internet at [email protected].
    If you use a telecommunications device for the deaf, call the 
Federal Relay Service, toll free, at 1-800-877-8339.
    Individuals with disabilities can obtain this document in an 
accessible format (e.g., braille, large print, audiotape, or computer 
diskette) on request to one of the contact persons listed under FOR 
FURTHER INFORMATION CONTACT.

SUPPLEMENTARY INFORMATION: 

Invitation To Comment

    As outlined in the section of this notice entitled Negotiated 
Rulemaking, significant public participation, through three public 
hearings and three negotiated rulemaking sessions, has occurred in 
developing this notice of proposed rulemaking (NPRM). In accordance 
with the requirements of the Administrative Procedure Act, we invite 
you to submit comments regarding these proposed regulations on or 
before August 19, 2010. To ensure that your comments have maximum 
effect in developing the final regulations, we urge you to identify 
clearly the specific section or sections of the proposed regulations 
that each of your comments addresses and to arrange your comments in 
the same order as the proposed regulations.
    We invite you to assist us in complying with the specific 
requirements of Executive Order 12866, including its overall 
requirements to assess both the costs and the benefits of the proposed 
regulations and feasible alternatives, and to make a reasoned 
determination that the benefits of these proposed regulations justify 
their costs. Please let us know of any further opportunities we should 
take to reduce potential costs or increase potential benefits while 
preserving the effective and efficient administration of the programs.
    During and after the comment period, you may inspect all public 
comments about these proposed regulations by accessing Regulations.gov. 
You may also inspect the comments, in person, in room 8031, 1990 K 
Street, NW., Washington, DC, between the hours of 8:30 a.m. and 4:00 
p.m., Eastern time, Monday through Friday of each week except Federal 
holidays.

Assistance to Individuals With Disabilities in Reviewing the Rulemaking 
Record

    On request, we will supply an appropriate aid, such as a reader or 
print magnifier, to an individual with a disability who needs 
assistance to review the comments or other documents in the public 
rulemaking record for these proposed regulations. If you want to 
schedule an appointment for this type of aid, please contact one of the 
persons listed under FOR FURTHER INFORMATION CONTACT.

Negotiated Rulemaking

    Section 492 of the HEA requires the Secretary, before publishing 
certain proposed regulations for programs authorized by Title IV of the 
HEA, to obtain public involvement in the development of the proposed 
regulations. After obtaining advice and recommendations from the 
public, including individuals and representatives of groups involved in 
the Federal student financial assistance programs, the Secretary in 
many cases must subject the proposed regulations to a negotiated 
rulemaking process. Proposed regulations that the Department publishes 
on which the negotiators reached consensus must conform to final 
agreements resulting from that process unless the Secretary reopens the 
process or provides a written explanation to the participants stating 
why the Secretary has decided to depart from the agreements. Further 
information on the negotiated rulemaking process can be found at: 
http://www.ed.gov/policy/highered/leg/hea08/index.html.
    On May 26, 2009, the Department published a notice in the Federal 
Register (74 FR 24728) announcing our intent to establish two 
negotiated rulemaking committees to prepare proposed regulations. One 
committee would focus on issues related to

[[Page 42191]]

program integrity (Team I--Program Integrity Issues). A second 
committee would focus on issues related to the eligibility of foreign 
institutions for participation in the Title IV, HEA programs (Team II--
Foreign School Issues). On September 9, 2009, the Department published 
a second notice in the Federal Register (74 FR 46399) listing the 
topics the committees were likely to address and requested nominations 
of individuals for membership on the committees who could represent the 
interests of key stakeholder constituencies on each committee.
    Team II--Foreign School Issues (Team II) met to develop proposed 
regulations during the months of November 2009, January 2010, and 
February 2010.
    The Department developed a list of proposed regulatory provisions 
based on the provisions contained in the HEOA and from advice and 
recommendations submitted by individuals and organizations as testimony 
to the Department in a series of three public hearings held on--
     June 15-16, 2009, at the Community College of Denver in 
Denver, Colorado;
     June 18-19, 2009, at the University of Arkansas in Little 
Rock, Arkansas;
     June 22-23, 2009, at the Community College of Philadelphia 
in Pennsylvania.
    In addition, the Department accepted written comments on possible 
regulatory provisions submitted directly to the Department by 
interested parties and organizations. A summary of all comments 
received orally and in writing is posted as background material in the 
docket for this NPRM. Transcripts of the regional meetings can be 
accessed at http://www.ed.gov/policy/highered/leg/hea08/index.html.
    Staff within the Department also identified issues for discussion 
and negotiation.
    At its first meeting, Team II reached agreement on its protocols. 
The agenda included the issues identified for the Committee's 
consideration.
    Team II included the following members:
     Harrison Wadsworth, representing the International 
Education Council.
     Yvonne Oberhollenzer and John Hayton (alternate), 
Australian Education International North America, representing the 
Embassy of Australia, the Embassy of New Zealand, the British Council 
and the German Academic Exchange Service.
     Judy Stymest, McGill University, and Alexander Leipziger 
(alternate), Canadian Embassy, representing the Canadian Association of 
Student Financial Aid Administrators.
     Warren Ross and Jerry Thornton (alternate), representing 
the International University of Nursing and the University of Medicine 
and Health Sciences.
     Cynthia Holden, American University of the Caribbean, and 
James McIntyre (alternate), McIntyre Law Firm, PLLC, representing 
American University of the Caribbean.
     Nancy Perri, Ross University School of Medicine, and 
William Clohan (alternate), DeVry Inc., representing Ross University 
School of Medicine.
     Steven Rodger, and Patrick Donnellan (alternate) 
representing R3 Education Inc.
     Ronald Blumenthal and Rebecca Campoverde (alternate) 
representing Kaplan, Inc.
     Charles Modica, representing St. George's University.
     Betsy Mayotte, American Student Assistance, and Jacqueline 
Fairbairn (alternate), Great Lakes Higher Education Guaranty 
Corporation, representing guaranty agencies.
     David Bergeron and Gail McLarnon (alternate), U.S. 
Department of Education, representing the Federal Government.
    The Committee's protocols provided that the Committee would operate 
by consensus, meaning there must be no dissent by any member. Under the 
protocols, if the Committee reaches consensus on all issues, the 
Department will use the consensus-based language in the proposed 
regulations and Committee members and the organizations whom they 
represent will refrain from commenting negatively on the package, 
except as provided for in the agreed upon protocols.
    During the meetings, Team II reviewed and discussed drafts of 
proposed regulations. At the final meeting in February 2010, Team II 
reached consensus on the proposed regulations in this document.
    More information on the work of Team II can be found at http://www2.ed.gov/policy/highered/reg/hearulemaking/2009/negreg-summerfall.html.

Summary of Proposed Changes

    These proposed regulations would implement provisions related to 
the eligibility of foreign institutions to participate in the Title IV, 
HEA programs including--
     Establishing submission requirements for compliance audits 
and audited financial statements specific to foreign institutions;
     Clarifying and revising the definition of a foreign 
institution;
     Establishing a definition of nonprofit status specific to 
foreign institutions;
     Establishing a financial responsibility standard for 
foreign public institutions that is comparable to the financial 
responsibility standard for domestic public institutions;
     Permitting a single legal authorization for groups of 
foreign institutions under the purview of a single government entity;
     Establishing eligibility of training programs at foreign 
institutions;
     Establishing institutional eligibility criteria specific 
to foreign graduate medical schools, foreign veterinary schools, and 
foreign nursing schools; and
     Revising the maximum certification period for some foreign 
institutions.

Significant Proposed Regulations

    We group major issues according to subject, with appropriate 
sections of the proposed regulations referenced in parentheses. We 
discuss other substantive issues under the sections of the proposed 
regulations to which they pertain. Generally, we do not address 
proposed regulatory provisions that are technical or otherwise minor in 
effect.
    Until amended effective July 1, 2010, section 102(a)(1)(C) of the 
HEA provided that foreign institutions may participate in the Title IV, 
HEA programs ``only for purposes of part B of Title IV.'' Part B of 
Title IV contains the statutory requirements for the FFEL Program. With 
the enactment of the Health Care and Education Reconciliation Act of 
2010 (Pub. L. 111-152) (HCERA) on March 30, 2010, as of July 1, 2010, 
there will be no new originations of FFEL Program loans. All new 
originations with a first disbursement on or after July 1, 2010, will 
be made via the William D. Ford Federal Direct Loan (Direct Loan) 
Program, including loans for students attending foreign institutions. 
At the time these proposed regulations were negotiated, it was unclear 
whether the proposed legislation that would end the FFEL Program would 
be enacted. As a result, these proposed regulations reference 
participation in the FFEL Program, except as noted. When the Department 
publishes final regulations to implement these proposed regulations, it 
will correct those references in the regulations resulting from these 
proposed regulations to indicate participation in the Direct Loan 
Program, rather than the FFEL Program. Any substantive or technical 
changes to the Title IV, HEA program regulations

[[Page 42192]]

resulting from the HCERA will be addressed through future rulemaking 
efforts. For more information about the transition of foreign 
institutions to the Direct Loan Program, contact the Office of Federal 
Student Aid's Foreign Schools Team at [email protected] or 
(202) 377-3168.
    Part 600 Institutional Eligibility Under the Higher Education Act 
of 1965, as Amended.

Nonprofit Status for Foreign Institutions (Sec.  600.2)

    Statute: Section 102(a)(2)(A) of the HEA directs the Secretary to 
establish criteria by regulation for the determination that foreign 
institutions are comparable to an institution of higher education as 
defined in section 101 of the HEA--which specifies that an institution 
of higher education must be a public or other nonprofit institution--
except that foreign graduate medical schools, foreign veterinary 
schools, and foreign nursing schools may be for-profit. Sections 
101(a)(4) and 101(b)(2) of the HEA identify nonprofit institutions as 
one type of institution that may be an institution of higher education 
and, therefore, may be eligible to apply to participate in the Title 
IV, HEA programs.
    Current Regulations: Section 600.54 provides that, to participate 
in the Title IV, HEA programs, a foreign institution must be a public 
or private nonprofit educational institution. Foreign graduate medical 
schools, foreign veterinary schools, and foreign nursing schools are 
excepted from this requirement by section 102(a)(2)(A) of the HEA. 
Section 600.2 defines a nonprofit institution as an institution that--
     Is owned and operated by one or more nonprofit 
corporations or associations, no part of the net earnings of which 
benefits any private shareholder or individual;
     Is legally authorized to operate as a nonprofit 
organization by each State in which it is physically located; and
     Is determined by the U.S. Internal Revenue Service (IRS) 
to be an organization to which contributions are tax-deductible in 
accordance with section 501(c)(3) of the Internal Revenue Code (26 
U.S.C. 501(c)(3)).
    Proposed Regulations: Under proposed Sec.  600.2, a new paragraph 
(2) of the definition of a nonprofit institution would provide that if 
a recognized tax authority of a foreign institution's home country is 
recognized by the Secretary for purposes of making determinations of an 
institution's nonprofit status for Title IV, HEA purposes, the 
Secretary would automatically accept that tax authority's determination 
of nonprofit educational status for any institution located in that 
country. If a recognized tax authority of the institution's home 
country is not recognized by the Secretary for purposes of making 
determinations of an institution's nonprofit status for Title IV, HEA 
program purposes, a foreign institution would have to demonstrate to 
the satisfaction of the Secretary that it is a nonprofit educational 
institution. The proposed regulations would also make clear that a 
nonprofit foreign institution may not be owned by a for profit entity, 
directly or indirectly. A foreign institution that did not meet this 
definition of a nonprofit foreign institution would not be eligible to 
participate in the Title IV, HEA programs unless it was a medical, 
veterinary, or nursing school.
    Reasons: As foreign institutions must be nonprofit institutions to 
participate in the Title IV, HEA programs, unless they are medical, 
veterinary, or nursing schools, the Department believes it is necessary 
to delineate in regulations the requirements for demonstrating 
nonprofit status for foreign institutions. Some non-Federal negotiators 
originally suggested that the Department should always defer to any 
determination by a foreign country that an institution is nonprofit. 
The Department pointed out that a domestic institution must be 
determined by the U.S. IRS to be a nonprofit organization in order to 
be eligible as a nonprofit institution for participation in the Title 
IV, HEA programs. The Department also noted that certain countries may 
not have standards for the determination of nonprofit status that are 
comparable to those used in the United States, and may not ensure that 
the institution's net earnings do not benefit any private shareholder 
or individual. Therefore, to make the proposed regulations as 
comparable as possible to those applicable to domestic institutions, 
the Department proposed, and the Committee agreed, that a determination 
that an institution is nonprofit by an entity in the institution's 
foreign country would qualify an institution as nonprofit only if the 
determination is made by a recognized tax authority of the country, and 
the Secretary has recognized that tax authority as one that can make a 
determination using criteria that are similar to those used by the IRS. 
In response to non-Federal negotiators pointing out that some countries 
may have more than one recognized entity for the purpose of making 
determinations of the nonprofit status of its institutions, the 
Department made clear during the negotiations that under the language 
proposed, the Secretary may recognize more than one tax authority in a 
country. Some non-Federal negotiators suggested that the Department 
allow a determination of nonprofit status to be made by an entity other 
than a recognized tax authority of the country. The Department noted 
that, as the proposed language was written, information submitted by 
such entities would be taken into account by the Department; however, 
this would be done as part of an individual determination of the 
eligibility of an institution. The Department believes that the only 
entities it should recognize across the board for making determinations 
of nonprofit status are those that are responsible for administering 
the country's tax laws.

Definition of a Foreign Institution (Sec. Sec.  600.51, 600.52, 600.54, 
682.200 and 682.611)

    Statute: Section 102(a)(1)(C) of the HEA provides that an 
``institution of higher education,'' only for the purposes of part B of 
Title IV, includes an institution outside the United States that is 
comparable to an institution of higher education as that term is 
defined in section 101 of the HEA and is an institution that has been 
approved by the Secretary. Section 102(a)(2)(A) of the HEA requires the 
Secretary to establish regulatory criteria for the approval of such 
institutions and for the determination that they are comparable.
    Current Regulations: Subpart E of 34 CFR part 600 (Sec. Sec.  
600.51 through 600.57) contains the eligibility requirements that a 
foreign institution must meet to participate in the FFEL Program. 
Current Sec.  600.51 explains the purpose and scope of subpart E and 
provides that a foreign institution is eligible to participate in the 
FFEL Program if it is comparable to an eligible institution of higher 
education located in the United States and has been approved by the 
Secretary. Implementing a statutory provision in section 481(b)(4) of 
the HEA, current Sec.  600.51 also provides that a program offered by a 
foreign school through any use of a telecommunications or 
correspondence course or through a direct assessment program is not an 
eligible program.
    Current Sec.  600.52 contains the definitions associated with 
subpart E and defines foreign institution as an institution that is not 
located in a State. State is defined in Sec.  600.2 as a State of the 
Union, American Samoa, the Commonwealth of Puerto Rico, the District of 
Columbia, Guam, the Virgin Islands, the Commonwealth of the

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Northern Mariana Islands, the Republic of the Marshall Islands, the 
Federal States of Micronesia, and the Republic of Palau.
    Current Sec.  600.54 contains the criteria the Secretary uses to 
determine whether a foreign institution is eligible to apply to 
participate in the FFEL Program. A public or private nonprofit foreign 
institution may apply to participate in the FFEL Program if the 
institution--
     Admits as regular students only those students with a 
secondary school completion credential or its recognized equivalent;
     Is legally authorized by an appropriate authority to 
provide an eligible program beyond the secondary school level in the 
country in which the institution is located; and
     Provides eligible programs for which the institution is 
legally authorized to award the equivalent of an associate, 
baccalaureate, graduate, or professional degree awarded in the United 
States; provides an eligible program that is at least a two-academic 
year program acceptable for full credit toward the equivalent of a 
baccalaureate degree awarded in the United States; or, provides an 
eligible program that is equivalent to at least a one-academic year 
training program in the United States that leads to a certificate, 
degree, or other recognized educational credential and prepares 
students for gainful employment in a recognized occupation.
    Currently, Sec. Sec.  668.2 and 682.200 do not contain a reference 
to the definition of foreign institution in the list of definitions set 
forth in 34 CFR part 600.
    Lastly, current Sec.  682.611 provides that a foreign school is 
required to comply with the provisions of part 682 unless the 
regulations or other official Department of Education publications or 
documents state otherwise.
    Proposed Regulations: The proposed regulations would remove and 
reserve Sec.  682.611, remove the definition of foreign school from 
Sec.  682.200(b)(1), and add references to Sec. Sec.  668.2(a)(2) and 
682.200(a)(2) specifying that the definition of foreign institution is 
contained in regulations for Institutional Eligibility under the HEA, 
as amended, 34 CFR part 600. These proposed revisions would consolidate 
the requirements and definitions related to the eligibility of foreign 
institutions to apply for Title IV, HEA program participation in 
subpart E of 34 CFR part 600. The proposed regulations would revise 
Sec.  600.51(c) to incorporate the provisions of removed Sec.  682.611, 
i.e., that a foreign institution must comply with all requirements for 
eligible and participating institutions except to the extent those 
provisions are inconsistent with the HEA, 34 CFR part 600, or other 
regulatory provisions specific to foreign institutions. Proposed Sec.  
600.51(c) would also exempt foreign institutions from requirements that 
the Secretary identifies through a notice in the Federal Register.
    The proposed regulations would amend Sec.  600.52 to include a 
detailed definition of foreign institution. Under the definition 
proposed, foreign institution would mean, for the purposes of students 
who receive Title IV, HEA program aid, an institution that--
     Is not located in a State;
     Except with respect to clinical training offered at 
foreign graduate medical, veterinary, and nursing schools, has no U.S. 
locations;
     Has no written arrangements, within the meaning of Sec.  
668.5, with institutions or organizations located in the U.S. for 
students at foreign institutions to take a portion of the program from 
institutions located in the U.S.;
     Does not permit students to enroll in any course offered 
by the foreign institution in the U.S. except for independent research 
under very limited circumstances;
     Is legally authorized by the education ministry, council, 
or equivalent agency of its home country to provide an education 
program beyond the secondary level;
     Awards degrees, certificates, or other recognized 
educational credentials in accordance with Sec.  600.54(d) that are 
officially recognized by the institution's home country; and
     For any program designed to prepare the student for 
employment in a recognized occupation, provides a credential that 
satisfies the educational requirements in the institution's home 
country for entry into that occupation, including licensure; and 
satisfies the educational requirements for entry into that occupation 
in the U.S., including licensure.
    The proposed definition of foreign institution would also require 
that if an educational enterprise enrolls students both within a State 
and outside a State, and the number of students who would be eligible 
to receive Title IV, HEA program funds attending locations outside a 
State is at least twice the number of students enrolled within a State, 
the locations outside a State must apply to participate as one or more 
foreign institutions and must meet all requirements of the definition 
of foreign institution and other requirements of 34 CFR part 600. Under 
the proposed regulations, educational enterprise would mean an 
enterprise consisting of two or more locations offering all or part of 
an educational program that are directly or indirectly under common 
control.
    The proposed regulations would amend the threshold criteria in 
Sec.  600.54 for determining whether a foreign institution is 
comparable to a domestic ``institution of higher education'' as that 
term is defined in the HEA, and eligible for Title IV, HEA program 
participation. Proposed Sec.  600.54(a) states that to be eligible, a 
foreign institution that is not a freestanding foreign graduate 
medical, veterinary, or nursing school must be a public or private 
nonprofit educational institution (i.e., a for-profit foreign 
institution may participate only if it is a freestanding foreign 
graduate medical, veterinary, or nursing school). Proposed Sec.  
600.54(c)(1) would prohibit an eligible foreign institution from 
entering into a written arrangement under which an ineligible 
institution or organization provides any portion of one or more of the 
eligible foreign institution's programs. Written arrangements would not 
include affiliation agreements for the provision of clinical training 
for foreign graduate medical, veterinary, and nursing schools under 
this proposed change. Proposed Sec.  600.54(c)(2) would require that an 
additional location of a foreign institution must separately meet the 
proposed definition of foreign institution in Sec.  600.52 if it is 
located outside of the country in which the main campus is located, 
except for clinical locations of foreign graduate medical, veterinary, 
and nursing schools, as provided for in Sec.  600.55(h)(1), Sec.  
600.56(b), Sec.  600.57(a)(2), Sec.  600.55(h)(3), and except for 
locations at which independent research is conducted as part of a 
doctoral program as provided for in the definition of foreign 
institution in Sec.  600.52. Under proposed Sec.  600.52(c)(2), an 
additional location of a foreign institution would also have to meet 
separately the definition of foreign institution, even if that location 
is within the same country as the main campus, if it is not covered by 
the legal authorization of the main campus. Lastly, proposed Sec.  
600.54(e) would prohibit any portion of an eligible for-profit foreign 
graduate medical or veterinary program from being offered at what would 
be an undergraduate level in the U.S. and would deny Title IV, HEA 
program eligibility to any joint degree programs offered at for-profit 
foreign graduate medical, veterinary, or nursing schools.
    Reasons: Proposed Sec. Sec.  600.52 and 600.54, revising and adding 
detail to the

[[Page 42194]]

definition of foreign institution, are necessary to ensure that a 
foreign institution is comparable to institutions in the United States, 
in accordance with section 102(a)(1)(C) of the HEA, before the foreign 
institution is allowed to apply for Title IV, HEA program 
participation. The Department is concerned that a foreign institution 
that is not comparable to a domestic institution, especially in terms 
of the quality of its educational programs, may misuse Federal funds to 
the detriment of its students who may have to borrow heavily in order 
to attend the foreign institution. The proposed regulations also more 
fully implement the scheme of the HEA, which distinguishes between 
foreign and domestic institutions and includes provisions unique to 
each. For example, these regulations would prevent a domestic 
institution from claiming to be a foreign institution by virtue of the 
fact that it has established an offshore location, thereby avoiding the 
requirements applied to domestic institutions such as recognized 
accreditation, but that sends its students to the United States for the 
majority of the required coursework.
    During the first round of negotiated rulemaking, the Federal 
negotiator explained the need for a more detailed definition of foreign 
institution and sought comments and feedback from the non-Federal 
negotiators. Several negotiators urged the Department to define foreign 
institution in a way that ensures quality control through high academic 
standards and avoids abuse of the Title IV, HEA programs. The non-
Federal negotiators suggested requiring that foreign institutions be 
subject to accreditation by accreditors recognized by the Department as 
a means of ensuring comparability with domestic institutions. The 
Federal negotiator explained that the Department does not recognize 
U.S. accreditors for accreditation of institutions outside the United 
States. In light of this fact, the non-Federal negotiators suggested a 
requirement that foreign institutions be ``legally authorized'' by an 
appropriate authority in the country in which the institution is 
located, such as a Ministry of Education or other governmental agency. 
Other non-Federal negotiators also urged the Department to be flexible 
in this area because such authority could reside in different branches 
of government depending on the country. Recognizing that there might be 
pressure on some foreign governments to set minimal standards because 
educational institutions are an important part of their economy, 
several non-Federal negotiators suggested that the Department require 
foreign countries to recognize the degrees and licenses offered by a 
foreign institution.
    In the second round of negotiations, the Department responded with 
draft language that addressed many of the non-Federal negotiators' 
suggestions from the first round of discussion. However, the 
Department's inclusion of provisions prohibiting foreign institutions 
from entering into written arrangements with institutions located in 
the United States and preventing foreign institution students from 
engaging in courses, research, work, and other pursuits within the 
United States drew objections from the non-Federal negotiators. The 
Federal negotiator explained that these provisions addressed abuses 
witnessed by the Department whereby an institution sets up an offshore 
campus to claim foreign institution status and thus avoids domestic 
requirements even though the institution is, for all intents and 
purposes, a domestic institution. The non-Federal negotiators felt the 
language prohibiting students from engaging in pursuits within the U.S. 
was too broad and urged the Department to make exceptions for research 
conducted in the United States by PhD students. The non-Federal 
negotiators also requested that the Department clarify what it meant by 
``written arrangements'' in the provision that would prohibit foreign 
institutions from having written arrangements with U.S. institutions or 
organizations, noting that many foreign institutions have multiple 
types of written arrangements with institutions in the U.S.
    Based on comments received from the non-Federal negotiators at the 
second round of negotiated rulemaking, the Department returned to the 
last round with language that added a cross-reference to Sec.  668.5 in 
draft paragraph (1)(iii) of the definition of foreign institution to 
clarify the meaning of written arrangements. The proposed language also 
added an exception in draft paragraph (1)(iv) of the definition of 
foreign institution for independent research done under certain 
circumstances during the dissertation phase of a doctoral program from 
the general prohibition on enrolling students in courses offered by a 
foreign institution in the United States. In draft paragraph (2) of the 
definition of foreign institution, the Department sought to further 
distinguish between foreign and domestic institutions by prohibiting 
foreign locations of an educational enterprise from being considered 
additional locations of a domestic location of the educational 
enterprise if the enterprise has at least twice as many students 
enrolled in foreign locations as those enrolled in domestic locations. 
This provision would prevent a predominantly foreign educational 
enterprise from establishing a minor presence within the United States 
for the purpose of circumventing the statutory provision limiting 
foreign institution participation to the Direct Loan program (or, 
before July 1, 2010, to the FFEL program), so as to provide other Title 
IV grant, loan, and work-study funds to students at what are really 
foreign institutions. In addition, in response to requests by non-
Federal negotiators, the Department added clarity to the paragraph by 
describing an ``educational enterprise'' as an entity that consists of 
two or more locations offering all or part of an educational program 
that are directly or indirectly under common ownership. Locations are 
considered to be ``indirectly'' under common ownership if, at any 
level, the locations are owned and controlled by the same parties, or 
related parties, within the meaning of Sec.  600.31. In draft Sec.  
600.54(c)(1), the Department clarified that written arrangements do not 
include affiliation agreements for the provision of clinical training.
    The non-Federal negotiators were comfortable with the majority of 
the Department's proposed language but several non-Federal negotiators 
continued to raise concerns about the proposed language prohibiting 
U.S. locations of foreign institutions and written arrangements with 
institutions located in the United States. The Federal negotiator 
stated that foreign institutions are free to establish U.S. locations 
and have written arrangements with institutions located in the United 
States, but that such locations and institutions would need to be 
separately certified and meet the requirements applicable to domestic 
institutions in order for U.S. students attending them to receive Title 
IV, HEA program funds. In this regard, the Department does not want a 
foreign institution to send its U.S. students to a U.S. location of a 
foreign institution, or to a U.S. institution with which it has an 
agreement for their training, because students enrolled in a foreign 
institution are only eligible for Direct Loan program (or, before July 
1, 2010, FFEL program) loans. Instead the Department wants U.S. 
students attending postsecondary institutions in the United States to 
be eligible for the full range of Title IV, HEA program funds available 
to domestic institutions. The Federal negotiator noted that it would be 
acceptable for a U.S. student to transfer officially from a foreign 
institution to an

[[Page 42195]]

institution in the U.S. that would be separately certified as a 
domestic institution. The non-Federal negotiators asked the Department 
to clarify that the proposed definition of foreign institution would 
apply only for the purposes of students who receive Title IV, HEA 
program funds. For example, a foreign institution would not be 
prohibited from having U.S. locations, but the locations would not be 
recognized as part of the institution for Title IV purposes, so no 
student attending the location, or enrolled in a program designed to be 
offered there in whole or in part, would be eligible to receive Title 
IV, HEA program funds. Similarly, a foreign institution may also 
maintain agreements with a U.S. institution or organization so that 
students of the foreign institution may continue to engage in exchange 
opportunities offered by U.S. institutions, but the agreement would not 
be recognized for Title IV, HEA purposes, so no student attending the 
U.S. institution, or enrolled in a program designed to be offered there 
in whole or in part, would be eligible to receive Title IV, HEA program 
funds. The Department noted that the Title IV, HEA program regulations 
are always applicable for Title IV, HEA program purposes only, but 
agreed to add the clarification.

Certification of Foreign Institutions (Sec. Sec.  600.52 and 668.13)

    Statute: Section 102(a)(5) of the HEA requires the Secretary to 
certify an institution's qualifications as an institution of higher 
education in accordance with subpart 3, part H of Title IV. Under 
section 498(g)(1) of the HEA, the Secretary is authorized to certify an 
institution's eligibility for purposes of participating in the Title 
IV, HEA programs for a period of up to six years.
    Current Regulations: Section 600.52 of the Institutional 
Eligibility regulations defines foreign graduate medical school as a 
foreign institution that is listed in the most current edition of the 
World Directory of Medical Schools. Foreign nursing school and foreign 
veterinary school are not currently defined in Sec.  600.52.
    Section 668.13(b)(1) of the General Provisions regulations 
specifies that an institution's period of participation expires six 
years after the date of certification, except that the Secretary may 
specify a shorter period.
    Proposed Regulations: The proposed regulations would modify the 
definition of foreign graduate medical school and add definitions for 
the terms foreign nursing school and foreign veterinary school in Sec.  
600.52. In addition, the proposed regulations would modify the 
regulations governing certification procedures in Sec.  668.13.
    The proposed definition of foreign graduate medical school in Sec.  
600.52 would be modified by removing the reference to the World 
Directory of Medical Schools (see the discussion under Foreign Graduate 
Medical Schools below) and replacing it with language specifying that a 
foreign graduate medical school is a foreign institution or component 
of a foreign institution that has, as its sole mission, providing an 
educational program that leads to a degree of medical doctor, doctor of 
osteopathy, or its equivalent. The proposed definition would clarify 
that references to a foreign graduate medical school as 
``freestanding'' pertain solely to a school that qualifies by itself as 
a foreign institution, and not to a school that is a component of a 
larger university that qualifies as a foreign institution. Similar 
language is included in the proposed definitions for the terms foreign 
nursing school and foreign veterinary school.
    The proposed regulations would amend Sec.  668.13(b)(1) to specify 
that the period of participation for a private, for-profit foreign 
institution expires three years after the date the institution is 
certified by the Secretary, rather than the current six years.
    Reasons: The National Committee on Foreign Medical Education and 
Accreditation (NCFMEA) recommended that a foreign graduate medical 
school that is a component of a larger foreign institution be certified 
as a separate institution of higher education from the larger 
institution (Recommendation 14(a)). The Department initially proposed 
implementing this recommendation and applying it to foreign nursing and 
veterinary schools as well. Under that proposal, a graduate medical, 
nursing, or veterinary school that is part of a larger institution 
would be given its own OPEID number. Cohort default rates for the 
graduate medical, nursing, or veterinary school would be calculated 
independently of the cohort default rate for the larger foreign 
institution.
    After discussions with the non-Federal negotiators regarding the 
administrative burdens that separate certification of non-freestanding 
graduate medical, veterinary, and nursing schools would entail, the 
Department decided to withdraw this proposal. Instead, the Department 
will track such graduate medical, veterinary, and nursing schools 
separately from the larger institution. To facilitate this, the 
Department proposed regulations that clarify the distinction between 
``freestanding'' graduate medical, veterinary, and nursing schools and 
graduate medical, veterinary, and nursing schools that are components 
of a larger foreign institution.
    The NCFMEA also recommended that all foreign graduate medical 
schools be certified for a period of no more than three years 
(Recommendation 14(b)). The Department initially proposed reducing the 
certification period for all foreign institutions from six years to 
three years to provide the Department with more oversight over foreign 
institutions. Non-Federal negotiators noted that the Department's 
proposal to decrease the certification period would be administratively 
burdensome for institutions. Some non-Federal negotiators felt that the 
increased administrative burden might lead foreign institutions that 
enroll small numbers of Title IV borrowers to reconsider participating 
in the Title IV, HEA programs. Non-Federal negotiators also noted that 
for-profit foreign institutions might have difficulty raising capital 
based on three-year certifications rather than six-year certifications.
    Non-Federal negotiators also contended that the reduction in the 
certification period would not provide much benefit to the Department. 
They felt that the relevant information for an institution would not be 
likely to change significantly in three years. The non-Federal 
negotiators also pointed out that this change would increase the 
workload for the Department staff who review and approve institutional 
eligibility applications for foreign institutions.
    The Department continues to believe that reducing the certification 
period will give the Department better oversight over foreign 
institutions, particularly over institutions that enroll large numbers 
of Title IV borrowers. However, the Department acknowledges that 
decreasing the certification period from six to three years would be 
unnecessary for certain types of institutions. Therefore, the 
Department revised its proposal by limiting the three-year 
certification period to private, for-profit medical, veterinary, and 
nursing schools. These institutions, among all participating foreign 
institutions, continue to receive by far the largest amounts of Title 
IV, HEA program funds. Under the revised proposal, public and nonprofit 
institutions would continue to be recertified every six years.

[[Page 42196]]

Single Legal Authorization for Groups of Foreign Institutions (Sec.  
600.54)

    Statute: Section 101(a)(2) of the HEA requires a domestic 
institution of higher education to be legally authorized by the State 
in which it is located to provide a program of postsecondary education. 
Section 102(a)(2)(A) of the HEA requires the Secretary, through 
regulation, to develop eligibility criteria for foreign institutions of 
higher education that are comparable to the eligibility criteria for 
U.S. institutions of higher education. Section 498(a) and (b) of the 
HEA require the Secretary to determine whether an institution is 
legally authorized and to prepare and prescribe an application form for 
purposes of determining that the requirements of eligibility, 
accreditation, financial responsibility, and administrative capability 
are met.
    Current Regulations: Section 600.54(b) of the current regulations 
requires a foreign institution to be legally authorized by an 
appropriate authority to provide postsecondary education in the country 
where the institution is located.
    Proposed Regulations: Proposed Sec.  600.54(f) would provide three 
different methods for a foreign institution to prove that it is legally 
authorized to provide postsecondary education in the country where the 
institution is located. The documentation from a foreign country's 
education ministry, council, or equivalent agency may either be--
     A single legal authorization that covers all eligible 
foreign institutions in the country;
     A single legal authorization that covers all eligible 
foreign institutions in a jurisdiction within the country; or
     Separate legal authorizations for each eligible foreign 
institution in the country.
    Reasons: To ease administrative burden for foreign institutions, 
the Department sought to determine if compliance with any of the 
foreign institution eligibility criteria could be demonstrated at a 
nationwide level, for all eligible institutions within a country, 
rather than at the individual institution level. After discussions with 
the non-Federal negotiators and our own internal review of the Title IV 
institutional eligibility criteria, the Department determined that the 
requirement for proof of legal authorization to provide postsecondary 
education could be provided this way.
    Non-Federal negotiators were generally supportive of the 
Department's proposal. However, they did raise some concerns. Some non-
Federal negotiators felt that institutions should not have to rely on a 
national government to develop a nationwide list of institutions 
legally authorized to provide postsecondary education in the country. 
They contended that some national governments might not have the 
resources to develop and maintain such a list. The non-Federal 
negotiators argued that for institutions in some countries, it might be 
cumbersome and time-consuming to obtain such a list from the national 
government. This would have the effect of slowing down the eligibility 
certification processes for some foreign institutions. These non-
Federal negotiators recommended that institutions retain the option of 
providing the Department with their own individual legal 
authorizations, rather than relying on a nationwide list.
    Other non-Federal negotiators believed that it was too constricting 
to limit the authority for developing the list of institutions to an 
agency of the national government. They noted that in some countries, 
such as Canada, legal authorization to provide postsecondary education 
is provided by the provincial governments, not by the national 
government. These non-Federal negotiators requested that the Department 
make provision for legal authorizations from government entities at a 
provincial level, not at the national level.
    The Department agreed with these recommendations. In addition to 
allowing proof of legal authorization to be provided on a nationwide 
basis, the proposed regulations allow for proof of legal authorization 
to be provided for all eligible institutions in a jurisdiction within 
the country, and continue to allow proof of legal authorization to be 
provided separately for each eligible institution in a country.

Eligibility of Training Programs at Foreign Institutions (Sec.  600.54)

    Statute: Section 101(b)(1) of the HEA provides, in part, that one 
type of educational program that a Title IV ``institution of higher 
education'' may provide to be eligible to apply to participate in the 
Title IV, HEA programs is a training program of at least one year that 
prepares students for gainful employment in a recognized occupation. 
Section 102(a)(2)(A) provides for participation in the Title IV, HEA 
programs by entities that are comparable to such institutions under 
regulations prescribed by the Secretary.
    Current Regulations: Section 600.54 provides that, in order to be 
eligible to apply to participate in the Title IV, HEA programs, a 
foreign institution must provide an eligible educational program that 
leads to a degree that is equivalent to a U.S. degree, or be at least a 
two-academic-year program acceptable for full credit toward the 
equivalent of a U.S. baccalaureate degree, or be equivalent to at least 
a one-academic-year training program that leads to a certificate, 
degree, or other recognized educational credential and prepares 
students for gainful employment in a recognized occupation.
    Section 668.3 defines an academic year as--
     For a program offered in credit hours, a minimum of 30 
weeks of instructional time and, for an undergraduate program, an 
amount of instructional time whereby a full-time student is expected to 
complete at least 24 semester or trimester credit hours or 36 quarter 
credit hours; or
     For a program offered in clock hours, a minimum of 26 
weeks of instructional time and, for an undergraduate program, an 
amount of instructional time whereby a full-time student is expected to 
complete at least 900 clock hours.
    Proposed Regulations: Under the proposed regulations, a foreign 
institution would have to demonstrate to the satisfaction of the 
Secretary (who would make program-by-program determinations of 
comparability) that the amount of academic work required by a program 
it seeks to qualify as eligible is at least a one-academic-year 
training program that is equivalent to--
     For a program offered in credit hours, a minimum of 30 
weeks of instructional time and, for an undergraduate program, an 
amount of instructional time whereby a full-time student is expected to 
complete at least 24 semester or trimester credit hours or 36 quarter 
credit hours; or
     For a program offered in clock hours, a minimum of 26 
weeks of instructional time and, for an undergraduate program, an 
amount of instructional time whereby a full-time student is expected to 
complete at least 900 clock hours.
    Reasons: The Department believes the proposed regulations are 
necessary because many foreign institutions use educational 
measurements other than conventional U.S. semester, trimester, quarter 
credits and clock-hours. As the definition of an academic year--the 
program length measurement used here--specifically references these 
U.S. measurements, it is necessary to make some sort of comparability 
determination in order to determine the eligibility of these programs 
at foreign institutions, and the eligibility of those foreign 
institutions that do not offer any other type of Title IV, HEA eligible 
program. The non-Federal negotiators

[[Page 42197]]

provided the Department with information regarding the definition of 
non-degree programs by different countries, units of measurement for 
programs in other countries, and evaluation and comparability 
determinations made by private entities. The information provided 
consistently indicates that the assignment of credits or other measures 
of academic work by foreign institutions vary greatly. As a result, 
under the proposed regulations, the Secretary would make determinations 
of comparability on a program-by-program basis, based on information 
provided by a foreign institution to demonstrate that the amount of 
academic work required by a program it seeks to qualify as eligible is 
comparable to at least a one-academic-year training program that is 
equivalent to the academic work required for eligibility of these 
programs at domestic institutions.
    Two of the issues under negotiation by the Team I negotiating 
committee (Program Integrity Issues)--the definition of what it means 
to ``provide gainful employment in a recognized occupation'' and the 
definition of a credit hour for Title IV, HEA program purposes--could 
impact the eligibility of all programs, offered at foreign and domestic 
institutions, that are eligible because they are at least one academic 
year in length and prepare students for gainful employment in a 
recognized occupation. These Team I issues are distinct from the issue 
negotiated here by Team II--i.e., the translation of credits or other 
measures of academic work by foreign institutions for purposes of 
determining program length (a measure of both weeks and credit hours).

Foreign Graduate Medical Schools (Sec. Sec.  600.20, 600.21, 600.52, 
600.55)

    Statute: Section 102(a)(2)(A) of the HEA provides that 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 101 of the HEA, except that a foreign 
graduate medical, veterinary or nursing school may be for-profit. That 
section also provides that, except for foreign graduate medical schools 
that had a clinical training program that was approved by a State as of 
January 1, 1992, at least 60 percent of students and graduates must not 
be persons described in section 484(a)(5) of the HEA in the year 
preceding the year for which students are seeking Title IV, HEA program 
loans, and that at least 60 percent of students and graduates taking 
the United States Medical Licensing Examination (USMLE) administered by 
the Educational Commission for Foreign Medical Graduates (ECFMG) must 
have received a passing score in that preceding year.
    Effective July 1, 2010, the HEOA amended sections 102(a)(2)(A) and 
(B) of the HEA to (1) increase the pass rate threshold for the USMLE 
from 60 percent to 75 percent; (2) allow a foreign graduate medical 
school that was eligible based on having a clinical training program 
approved by a State as of July 1, 1992, to continue to be eligible as 
long as it has continuously operated a clinical training program in at 
least one State that approves the program; and (3) allow for the 
promulgation, through regulations, of new eligibility criteria for 
foreign graduate medical schools that have a clinical training program 
approved by a State prior to January 1, 2008, but that would not meet 
the otherwise--applicable requirement that at least 60 percent of their 
students and graduates not be persons described in section 484(a)(5) of 
the HEA in the year preceding the year for which students are seeking 
Title IV, HEA program loans. Section 102(a)(2)(B)(iii)(IV)(aa) of the 
HEA provides that such new eligibility criteria must be based on the 
recommendations contained in a report to be prepared by August 14, 
2009, by the NCFMEA. The NCFMEA is a panel of medical experts that 
evaluates the medical school accrediting agency standards used in the 
foreign country where medical education is provided to determine 
comparability to the standards of accreditation applied to medical 
schools in the United States. The statute required the NCFMEA's report 
to address: entrance requirements; retention and graduation rates; 
successful placement of students in U.S. medical residency programs; 
passage rate of students on the USMLE; the assessment of program 
quality by State medical boards; the extent to which graduates would be 
unable to practice medicine in one or more States, based on the 
judgment of a State medical board; any areas recommended by the 
Comptroller General (i.e., head of the Government Accountability Office 
(GAO)) under section 1101 of the HEOA; and any additional areas the 
Secretary may require. The statute provides that the regulations must, 
at a minimum, require a USMLE pass rate of at least 75 percent.
    The HEOA also provides that the Department may issue an NPRM 
addressing the new eligibility criteria for foreign graduate medical 
schools no earlier than 180 days after the submission of the report, 
and may issue final regulations no earlier than one year after the 
issuance of the NPRM.
    Current Regulations: Neither Sec.  600.20, which addresses the 
application procedures for establishing, reestablishing, maintaining, 
or expanding institutional eligibility and certification, nor Sec.  
600.21, which addresses when and how an institution must update 
application information, currently include any provisions specific to 
foreign graduate medical schools. Section 600.52 defines a foreign 
graduate medical school as a foreign institution that qualifies to be 
listed in, and is listed as a medical school in, the most current 
edition of the World Directory of Medical Schools published by the 
World Health Organization (WHO). The regulations do not currently 
include a definition of clinical training, the NCFMEA, or a post-
baccalaureate/equivalent medical program. Section 600.55(a)(5) contains 
the additional criteria for determining whether a foreign graduate 
medical school is eligible to apply to participate in the Title IV, HEA 
programs. Currently, a foreign graduate medical school generally must, 
in addition to satisfying the criteria in Sec.  600.54 for determining 
a foreign institution's eligibility (except the criterion that the 
institution be public or private nonprofit), satisfy all of the 
following criteria:
     Provide, and require its students to complete a program of 
clinical and classroom medical instruction of not less than 32 months 
that is supervised closely by members of the school's faculty and that 
is provided either (1) Outside the United States, in facilities 
adequately equipped and staffed to afford students comprehensive 
clinical and classroom medical instruction; or (2) In the United 
States, through a training program for foreign medical students that 
has been approved by all medical licensing boards and evaluating bodies 
whose views are considered relevant by the Secretary.
     Have graduated classes during each of the two twelve-month 
periods immediately preceding the date the Secretary receives the 
school's request for an eligibility determination.
     Employ only those faculty members whose academic 
credentials are the equivalent of credentials required of faculty 
members teaching the same or similar courses at medical schools in the 
United States;
     Be approved by an accrediting body (1) that is legally 
authorized to evaluate the quality of graduate medical school 
educational programs and facilities in the country where the school is 
located; and (2) whose standards of accreditation

[[Page 42198]]

of graduate medical schools have been evaluated by the advisory panel 
of medical experts established by the Secretary and have been 
determined to be comparable to standards of accreditation applied to 
medical schools in the United States.
    In addition, current regulations provide that foreign graduate 
medical schools that do not have a clinical training program that has 
been continuously approved by a State since January 1, 1992, must--
     During the academic year preceding the year for which any 
of the school's students seeks a FFEL program loan, have at least 60 
percent of those enrolled as full-time regular students in the school 
and at least 60 percent of the school's most recent graduating class be 
persons who did not meet the citizenship and residency criteria 
contained in section 484(a)(5) of the HEA, 20 U.S.C. 1091(a)(5); and
     For a foreign graduate medical school outside of Canada, 
have at least 60 percent of the school's students and graduates who 
took any step of the USMLE administered by the ECFMG (including the 
ECFMG English test) in the year preceding the year for which any of the 
school's students seeks a FFEL program loan to have received passing 
scores on the exams. In performing the calculation, a foreign graduate 
medical school must count as a graduate each person who graduated from 
the school during the three years preceding the year for which the 
calculation is performed.
    Proposed Regulations: Location of a graduate medical education 
program, affiliation agreements, and application and notification 
procedures for foreign graduate medical schools
    Section 600.55(h)(2) of the proposed regulations would provide that 
no portion of the medical education program offered to U.S. students by 
a foreign graduate medical school, other than the clinical training 
portion of the program, would be allowed to be located outside of the 
country in which the main campus of the school is located.
    For clinical training sites located outside the United States, 
proposed Sec.  600.55(h)(1) would require that, with two exceptions, 
all portions of the medical education program offered to U.S. students 
must be located in a country whose medical school accrediting standards 
are comparable to standards used in the United States, as determined by 
the NCFMEA. Under proposed Sec.  600.55(h)(3), with the same two 
exceptions, if any portion of the clinical training portion of the 
educational program is located in an approved comparable foreign 
country other than the country in which the main campus is located, the 
institution's medical accrediting agency must have conducted an on-site 
evaluation and specifically approved the clinical training sites in 
order for students attending the site to be eligible to borrow Title 
IV, HEA program funds. Furthermore, clinical instruction offered at a 
site in a foreign NCFMEA-approved country must be offered in 
conjunction with medical educational programs offered to students 
enrolled in accredited medical schools located in that approved foreign 
country. The two exceptions are that these criteria would not have to 
be met if the clinical training location is included in the 
accreditation of a medical program accredited by the Liaison Committee 
on Medical Education (LCME), or if no individual student takes more 
than two electives at the clinical training location and the combined 
length of the electives does not exceed eight weeks.
    Proposed Sec.  600.55(e)(1) would require a foreign graduate 
medical school to have: (1) A formal affiliation agreement with any 
hospital or clinic at which all or a portion of the school's core 
clinical training or required clinical rotations are provided; and (2) 
either a formal affiliation agreement or other written arrangements 
with any hospital or clinic at which all or a portion of its clinical 
rotations that are not required are provided, except for those 
locations that are not used regularly, but instead are chosen by 
individual students who take no more than two electives at the location 
for no more than a combined total of eight weeks.
    The proposed regulations would require these affiliation agreements 
or other written arrangements to state how the following will be 
addressed at each site: (1) Maintenance of the school's standards; (2) 
appointment of faculty to the medical school staff; (3) design of the 
curriculum; (4) supervision of students; (5) provision of liability 
insurance; and (6) evaluation of student performance.
    Proposed Sec.  600.20(a)(3)(iii) and Sec.  600.20(b)(3)(iii) would 
require a foreign graduate medical school (i.e., a freestanding foreign 
graduate medical school or a foreign institution that includes a 
foreign graduate medical school) to provide copies of the affiliation 
agreements with hospitals and clinics that it is required to have under 
proposed Sec.  600.55(e)(2) as a part of any application for initial 
certification or recertification to participate in the Title IV, HEA 
programs.
    Proposed Sec.  600.20(a)(3)(i)(A) and Sec.  600.20(b)(3)(i)(A) 
would provide that, for initial certification or for recertification, a 
foreign graduate medical school (i.e., a freestanding foreign graduate 
medical school or a foreign institution that includes a foreign 
graduate medical school) would be required to list on the application 
to participate all educational sites and where they are located, except 
for those locations that are not used regularly, but instead are chosen 
by individual students who take no more than two electives at the 
location for no more than a combined total of eight weeks.
    In Sec.  600.52, the proposed regulations would add a definition of 
clinical training. Clinical training would be defined as the portion of 
a graduate medical education program that counts as a clinical 
clerkship for purposes of medical licensure. Proposed Sec. Sec.  
600.20(a)(3)(i)(B) and (b)(3)(i)(B) would require freestanding foreign 
graduate medical schools, and foreign institutions that include a 
foreign graduate medical school, to identify, for each clinical site 
reported in the certification or recertification application as 
required under Sec. Sec.  600.20(a)(3)(i)(A) and (b)(3)(i)(A), the type 
of clinical training (core, required clinical rotation, not required 
clinical rotation) offered at that site.
    Proposed Sec.  600.20(c)(5) would require a foreign graduate 
medical school (i.e., a freestanding foreign graduate medical school or 
a foreign institution that includes a foreign graduate medical school) 
that adds a location that offers all or a portion of the school's core 
clinical training or required clinical rotations to apply to the 
Secretary and wait for approval if it wishes to provide Title IV, HEA 
program funds to the students at that location, except for those 
locations that are included in the accreditation of a medical program 
accredited by the LCME. If a foreign graduate medical school (i.e., a 
freestanding foreign graduate medical school or a foreign institution 
that includes a foreign graduate medical school) adds a location that 
offers all or a portion of the school's clinical rotations that are not 
required, proposed Sec.  600.21(a)(10) would require the school to 
notify the Secretary no later than 10 days after the location is added, 
except for those locations that are included in the accreditation of a 
medical program accredited by the LCME, or that are not used regularly, 
but instead are chosen by individual students who take no more than two 
electives at the location for no more than a combined total of eight 
weeks.

[[Page 42199]]

    In addition, proposed Sec.  600.20(a)(3)(ii) and Sec.  
600.20(b)(3)(ii) would require that, for initial certification or for 
recertification, a foreign graduate medical school (i.e., a 
freestanding foreign graduate medical school or a foreign institution 
that includes a foreign graduate medical school) indicate whether it 
offers (1) only post-baccalaureate/equivalent medical programs; (2) 
other types of programs that lead to employment as a doctor of 
osteopathic medicine or doctor of medicine; or (3) both. Proposed Sec.  
600.52 would define a post-baccalaureate/equivalent medical program as 
a program that consists solely of courses and training leading to 
employment as a doctor of medicine or doctor of osteopathic medicine, 
and is offered by a foreign graduate medical school that requires, as a 
condition of admission, that its students have already completed their 
non-medical undergraduate studies.

General

    Proposed Sec.  600.52 would replace the definition of a foreign 
graduate medical school and clarify that a foreign graduate medical 
school can be free-standing or a component of an eligible foreign 
institution.
    Proposed Sec.  600.55(a)(1) would continue to provide that, in 
addition to satisfying the general criteria for determining a foreign 
institution's eligibility (except the criterion that the institution be 
public or private nonprofit), a foreign graduate medical school would 
have to satisfy all applicable criteria in this section, except that 
the proposed regulations would clarify that the general criteria that 
must be satisfied are all applicable criteria in part 600, rather than 
just Sec.  600.55.
    Proposed Sec.  600.55(a)(2) would require a foreign graduate 
medical school to provide, and require its students to complete, a 
program of clinical training and classroom medical instruction of not 
less than 32 months, that is supervised closely by members of the 
school's faculty, and that is both (1) provided in facilities 
adequately equipped and staffed to afford students comprehensive 
clinical and classroom medical instruction; and (2) approved by all 
medical licensing boards and evaluating bodies whose views are 
considered relevant by the Secretary, regardless of whether it is 
located outside or inside the United States.
    In addition, the proposed regulations would make clear that a 
foreign graduate medical school may offer, as part of its clinical 
training, no more than two electives consisting of a combined total of 
no more than eight weeks per student at a site located in a foreign 
country other than the country in which the main campus is located or 
in the United States, unless that location is included in the 
accreditation of a medical program that is accredited by the LCME.
    Proposed Sec.  600.55(a)(3) would require that a foreign graduate 
medical school appoint, rather than employ, only those faculty members 
whose academic credentials are the equivalent of credentials required 
of faculty members teaching the same or similar courses at medical 
schools in the United States.
    Finally, proposed Sec.  600.55(a)(4) would continue to require that 
a foreign graduate medical school have graduated classes during each of 
the two twelve-month periods immediately preceding the date the 
Secretary receives the school's request for an eligibility 
determination.

Accreditation

    The proposed regulations would make no substantive changes to the 
accreditation requirements for foreign graduate medical schools.

Admission Criteria and Collection and Submission of Data

    Section 668.55(c) would require a foreign graduate medical school 
with a post-baccalaureate/equivalent medical program to require 
students accepted for admission who are U.S. citizens, nationals, or 
permanent residents to have taken the Medical College Admission Test 
(MCAT) and to have reported their scores to the school. In addition, 
Sec.  600.55(c) would require a foreign graduate medical school to 
determine the consent requirements for and require the necessary 
consents of all students accepted for admission who are U.S. citizens, 
nationals, or eligible permanent residents to enable the school to 
comply with the collection and submission requirements in proposed 
Sec.  600.55(d) for MCAT scores, residency placement, and USMLE scores.
    Proposed Sec.  600.55(d) would require a foreign graduate medical 
school to obtain, at its own expense, and by September 30 of each year 
submit to its accrediting authority: (1) MCAT scores for all students 
who are U.S. citizens, nationals, or eligible permanent residents 
admitted during the preceding award year and the number of times each 
student took the exam; and (2) the percentage of students who are U.S. 
citizens, nationals, or eligible permanent residents graduating during 
the preceding award year who are placed in an accredited U.S. medical 
residency. A school would have to submit the data on MCAT scores and 
placement in a U.S. residency program to the Secretary only upon 
request. In addition, proposed Sec.  600.55(d) would require a foreign 
graduate medical school to obtain, at its own expense and by September 
30 of each year submit to the Secretary, unless the Secretary notifies 
schools that it will receive the information directly from the ECFMG, 
or other responsible third parties, USMLE scores earned during the 
preceding award year by at least each student who is a U.S. citizen, 
national, or eligible permanent resident, and each graduate who is a 
U.S. citizen, national, or eligible permanent resident who graduated 
during the three preceding years, and the date each student took each 
test, including any failed tests. The USMLE scores submitted would have 
to be disaggregated by step/test for Step 1, which assesses knowledge 
and application of basic science concepts; Step 2-Clinical Skills (Step 
2-CS), which assesses knowledge of clinical science principles; and 
Step 2-Clinical Knowledge (Step 2-CK), which tests a student's ability 
to examine and interact with patients and colleagues, and by attempt. A 
school would not be required to submit data on the USMLE Step 3, which 
provides a final assessment of a physician's ability to assume 
independent delivery of general medical care. All foreign graduate 
medical schools would be required to submit these data, even those that 
are not required to meet the 60 percent/75 percent USMLE pass rate 
requirement.

Notification to Accrediting Body

    Proposed Sec.  600.55(e)(2) would require a foreign graduate 
medical school to notify its accrediting body within one year of any 
material changes in (1) the educational programs, including changes in 
clinical training programs; and (2) the overseeing bodies in the formal 
affiliation agreements with hospitals and clinics.

Citizenship and USMLE Pass Rate Percentages

    Proposed Sec.  600.55(f)(1)(i)(B) would allow a foreign graduate 
medical school to be exempt from the existing citizenship requirement 
(in proposed Sec.  600.55(f)(1)(i)(A)) that at least 60 percent of the 
school's students and recent graduates not be U.S. citizens, nationals, 
or eligible permanent residents if it had a clinical training program 
approved by a State as of January 1, 2008, and continues to operate a 
clinical training program in at least one State that approves the 
program. In addition, proposed Sec.  600.55(f)(2)(ii) would allow a 
foreign

[[Page 42200]]

graduate medical school that was eligible to participate in the Title 
IV, HEA programs and exempt from the USMLE pass rate requirement based 
on having a clinical training program approved by a State as of January 
1, 1992, to continue to be eligible and exempt from the USMLE pass rate 
requirement as long as it continues to operate a clinical training 
program in at least one State that approves the program. Proposed Sec.  
600.55(f)(1)(ii) would make the following changes to the USMLE pass 
rate requirement:
     Increase the USMLE pass rate threshold from 60 percent to 
75 percent (Sec.  600.55(f)(1)(ii)).
     Limit the pass rate requirement to Step 1, Step 2-CS, and 
Step 2-CK, excluding Step 3.
     Require a foreign graduate medical school to have at least 
a 75 percent pass rate on each step/test of the USMLE (limited to Step 
1, Step 2-CS, and Step 2-CK), rather than a combined pass rate for all 
steps/tests.
     Require foreign graduate medical schools to include in the 
calculation only U.S. citizens, nationals, or eligible permanent 
residents, rather than all students taking the USMLE.
     Require foreign graduate medical schools to include only 
first time test takers in the calculation.
    For example, the award year 2011-2012 pass rate for the USMLE-Step 
1 would be calculated as follows:
    Those from the denominator who passed Step 1.
    All U.S. citizens, nationals, and eligible permanent residents who 
are students during award year 2010-2011, or who graduated in award 
year 2008-2009, 2009-2010, or 2010-2011, and took Step 1 of the exam 
for the first time in award year 2010-2011.
    Under proposed Sec.  600.55(f)(4), if the result of any step/test 
pass rate would be based on fewer than eight students, a single pass 
rate would be determined for the school based on the performance of 
U.S. citizens, nationals, and eligible permanent residents on Step 1, 
Step 2-CS and Step 2-CK combined. If that combined pass rate would be 
based on fewer than eight step/test results, the school would be deemed 
to have no pass rate for that year, and the results for the year would 
be combined with each subsequent year until a pass rate based on at 
least eight step/test results could be derived.

Other Criteria

    Proposed Sec.  600.55(g)(1) would require a foreign graduate 
medical school to apply existing Sec.  668.16(e)(2)(ii)(B), (C), and 
(D) for establishing a quantitative satisfactory academic progress 
policy and require that a student complete his or her educational 
program within 150 percent of the published length of the educational 
program. In addition, proposed Sec.  600.55(g)(2) would require a 
foreign graduate medical school to document the educational remediation 
it provides to assist students in making satisfactory academic 
progress. Finally, proposed Sec.  600.55(g)(3) would require a foreign 
graduate medical school to publish all the languages in which 
instruction is offered.
    Reasons: As required by statute, the recommendations of the 2009 
Report to the U.S. Congress by the National Committee on Foreign 
Medical Education and Accreditation Recommending Institutional 
Eligibility Criteria for Participation by Certain Foreign Medical 
Schools in the Federal Family Education Loan Program (NCFMEA report) 
that could be implemented through regulations were taken into 
consideration in the development of these proposed regulations. The 
report is available at http://www2.ed.gov/about/bdscomm/list/ncfmea-dir/reporttocongress2009.pdf. The Department determined that the 
following recommendations made by the NCFMEA could be addressed through 
regulatory change: 1(a), 1(b), 3, 4(a), 4(b), 4(c), 9(a), 9(b), 10, 
12(a), 12(b), 14(a) and 14(b). The Committee's consideration of these 
recommendations is discussed below in relation to the areas of the 
proposed regulations to which they pertain, except for Recommendations 
14(a) and 14(b), which are discussed under Certification of Foreign 
Institutions (Sec. Sec.  600.52, and 668.13) above.
    Although the HEOA specified that the NCFMEA was to take into 
account in the development of their recommendations the results of the 
GAO report related to foreign graduate medical schools, the HEOA 
specified a later deadline for the issuance of the GAO report than for 
the NCFMEA recommendations. As a result, the GAO report was not 
completed in time for the NCFMEA to take it into account. The GAO 
report was published June 2010. The Department will take the GAO report 
into consideration as the rulemaking process continues. Although the 
statute directed the NCFMEA to make recommendations for a specific 
group of schools, the NCFMEA stated on page seven of its report, ``It 
also suggests the recommendations contained within the report be 
applied to all foreign graduate medical schools participating in the 
FFEL program. The NCFMEA does not believe that two sets of criteria 
should be applied, given the millions of dollars in Federal student 
loans disbursed annually to foreign graduate medical schools that are 
already participating in the FFEL program. If performance levels are 
set to ensure quality, they should apply to all.'' The Department in 
general agrees with this recommendation; thus, these proposed 
regulations for foreign graduate medical schools would apply to all 
foreign graduate medical schools, except where noted. Some non-Federal 
negotiators believed the NCFMEA report contains a contradictory 
statement indicating the NCFMEA's desire to limit its recommendations 
for change to a specific group of schools (``The foreign medical 
schools that are subject to the recommendations contained within this 
report are identified as * * * having American citizens/permanent 
residents constitute more than 40 percent of its fulltime enrollment 
and/or graduates from the preceding year.'' page five). These non-
Federal negotiators were concerned about the large overall 
administrative burden that the proposed regulations as a whole would 
have on foreign graduate medical schools with small numbers of U.S. 
students with Title IV, HEA program loans. The Department made clear 
during the negotiations that it believes the statement identified by 
the non-Federal negotiators is merely a restating of the statute. 
Regardless, the Department believes that these proposed regulations are 
important to the integrity of the Title IV, HEA programs and should 
apply to all foreign graduate medical schools, except where noted.

Location of a Graduate Medical Education Program, Affiliation 
Agreements, and Application and Notification Procedures for Foreign 
Graduate Medical Schools

    Under section 102(a)(2)(B) of the HEA, a foreign graduate medical 
school must be accredited or preaccredited by an accrediting agency 
recognized by the Secretary, or approved under foreign accrediting 
standards found comparable by the NCFMEA to standards applied in the 
United States. In order for this provision to have effect, and as the 
Department's implementing regulations have always provided, an 
accrediting body approved by NCFMEA must be legally authorized to 
evaluate the quality of the medical school educational programs and 
facilities in the country in which those schools are located. The 
Department generally construes this requirement for comparable 
accreditation to mean that (except for clinical training locations in 
the U.S. that are provided for in the statute) the graduate medical 
program

[[Page 42201]]

must be located in the country in which the main campus of the school 
is located. Although a medical accrediting body may accredit locations 
of institutions in other countries, the Department believes this is the 
best interpretation of the statute because, with limited exceptions, an 
accrediting body's actual authority does not extend beyond the country 
in which it is established. The Department currently does not approve 
for participation in the Title IV, HEA programs any educational program 
in which a portion of what is commonly referred to as the basic science 
part of the program is located outside of the country in which the main 
campus is located. However, the Department has allowed for the clinical 
training part of the program to be located in an approved comparable 
foreign country other than the country in which the main campus is 
located, if the site is located in an NCFMEA approved country, the 
institution's medical accrediting agency has conducted an on-site 
evaluation and specifically approved the site, and the clinical 
instruction is offered in conjunction with medical educational programs 
offered to students enrolled in accredited medical schools located in 
that foreign country. The Department's initial proposal reflected this 
policy, which is also the approach recommended by NCFMEA Recommendation 
12(a).
    Several non-Federal negotiators felt this initial proposal was too 
limiting. The Committee discussed at length the different parts of a 
graduate medical program and the characteristics of each part that 
might justify different treatment. In addition to distinguishing 
between the basic science and the clinical training parts of the 
program, the Committee discussions distinguished between the different 
parts of clinical training referred to in these proposed regulations as 
the core rotations, the required clinical rotations (the electives that 
students are required to take), and the not required clinical rotations 
(the electives that students can choose).
    In general, some non-Federal negotiators felt that matriculating in 
different countries as part of a graduate medical program would benefit 
students by exposing them to medical education and practice in 
different environments and cultures. One non-Federal negotiator argued 
that allowing a portion of the basic science part of the program to be 
located in the United States would assist in providing a smooth 
transition to clinical training in the United States. The negotiator 
also proposed a way of achieving what some non-Federal negotiators felt 
was sufficient oversight to permit a portion of the basic science part 
of the program to be located in a non-NCFMEA approved foreign country 
other than the country in which the main campus is located: Limiting a 
school to the establishment of one such site, limiting the amount of 
the program that could be offered there, requiring a visit and approval 
by the school's accrediting body, setting cohort default rate and USMLE 
pass rate thresholds, requiring specific evaluations by the school's 
accrediting body, requiring a formal agreement/recognition of the 
accrediting body's authority by the country in which the site was 
located, and requiring an NCFMEA determination that the accrediting 
body has demonstrated its capacity to conduct off-site and on-site 
reviews of the site that are comparable to the reviews conducted of the 
main campus and additional locations within the country in which the 
main campus is located. Others suggested that a portion of the basic 
science part of the program be allowed to be located in a country other 
than the country in which the main campus is located if the location is 
accredited by a comparable accrediting agency.
    Non-Federal negotiators also argued for more leniency regarding the 
offering of the clinical training part of the program in countries 
other than the country in which the main campus is located. While some 
felt that all clinical training should be permitted to be located in 
another country without as much oversight as the Department proposed, 
others felt that leniency was appropriate only for the clinical 
rotation part because exposure to different medical environments and 
cultures was most important during the hospital-based part of the 
clinical training where the students are in direct contact with 
patients and medical residents. Other non-Federal negotiators felt that 
leniency was appropriate only for the not-required-clinical-rotation 
part, because that is when a student will most benefit from the 
exposure without the program losing coherence. The Committee discussed 
how the not-required-clinical-rotation part of the program may be very 
individualized, with numerous sites, sometimes suggested by students, 
at which students study for short periods of time. They pointed out 
that, as a result, some sites are only used for a short period of time. 
They noted that an accrediting body would not have the time or 
resources to visit and approve these short-term sites. Non-Federal 
negotiators suggested various ways of achieving what they felt was 
sufficient oversight of these locations: e.g., limiting the amount of 
the program that could be offered there, limiting the amount of the 
program an individual student could take at the location, and limiting 
the number of students who could attend the location. The non-Federal 
negotiators pointed to language in the September 2009 NCFMEA Guidelines 
for Requesting a Comparability Determination (page 17) that omits any 
mention of non-core portions of a clinical training program in its 
discussion of the site visits that the school's accrediting body is 
required to make (the document is available at http://www2.ed.gov/about/bdscomm/list/ncfmea-dir/ncfmea-guidelines.pdf).
    In addition, some non-Federal negotiators felt that locations that 
are included in the accreditation of a medical program accredited by 
the LCME, such as locations of some Canadian schools, should be exempt 
because the LCME accrediting standards are those that are applied to 
medical schools in the United States. The Department agreed.
    Because of the lack of direct authority of accrediting bodies from 
different countries, the Department held firm on limiting the location 
of the basic science portion of the program to the institution's home 
country. The Department reiterated its belief that the basic sciences 
part of a graduate medical program should be located in the same 
country as the main campus so that the majority of the classroom 
instruction part of the program will be under the direct authority of 
the school's accrediting body. In one draft of the proposed 
regulations, the Department referred to this part of the program as the 
``didactic components.'' A non-Federal negotiator pointed out that this 
term could be construed to include lectures and other instruction that 
take place during the clinical training portion of the program. The 
non-Federal negotiator argued that blurring the line between the 
``basic science'' and the ``clinical training'' portions of the 
programs could lead to an interpretation of the regulations whereby a 
foreign graduate medical school would offer parts of what is really the 
basic science portion of the program in the United States. As a result, 
the Committee agreed to add a definition of clinical training to the 
proposed regulations to make clear that only parts of the program that 
meet that definition may be located in the United States. The 
definition was also added to clarify the terminology that the proposed 
regulations are using for the

[[Page 42202]]

components of clinical training, as provisions both here and elsewhere 
in the proposed regulations differentiate among these components.
    The Department agreed that it was acceptable to balance less 
oversight of a short-term location at which individual students were 
taking a small portion of the not-required-clinical-rotation part of 
the program, with the benefits of exposure to other medical 
environments and cultures. The Department believes this is warranted 
because of the individualized nature of the not-required-clinical-
rotation part of the program, when individual sites are often used for 
short periods of time. The Department also agreed that locations in 
countries other than the country in which the main campus is located 
that are included in the accreditation of a medical program accredited 
by the LCME should also be exempt from meeting the three criteria 
(i.e., required to be located in an approved comparable country, 
required on-site evaluation and specific approval of the site by the 
institution's medical accrediting agency, and the requirement that 
instruction must be offered in conjunction with medical educational 
programs offered to students enrolled in accredited medical schools 
located in that approved foreign country) because the LCME accrediting 
standards are those that are applied to medical schools in the United 
States. Therefore, the Department's final proposal, which was agreed to 
by the Committee, provided that clinical training may be offered 
outside the United States and the country in which the main campus is 
located without the site meeting the three criteria, if the location is 
included in the accreditation of a medical program accredited by the 
LCME, or if no individual student takes more than two electives at the 
location and the combined length of the electives does not exceed eight 
weeks.
    Because of the importance and more standardized nature of core and 
required clinical rotations, proposed Sec.  600.55(e)(1) would require 
a foreign graduate medical school to have a formal affiliation 
agreement with any hospital or clinic at which all or a portion of the 
school's core clinical training or required clinical rotations are 
provided. However, for any hospital or clinic at which only clinical 
rotations that are not required are provided, a school would be 
permitted to have other written arrangements instead of a formal 
affiliation agreement, and the proposed regulations would not require a 
school to have any written arrangements for those locations that are 
not used regularly, but instead are chosen by individual students who 
take no more than two electives at the location for no more than a 
combined total of eight weeks. Also, in accordance with NCFMEA 
Recommendation 12(b), proposed Sec.  600.20(a)(3)(iii) and Sec.  
600.20(b)(3)(iii) would require a foreign graduate medical school to 
provide as a part of any application for initial certification or 
recertification to participate in the Title IV, HEA programs, copies of 
the affiliation agreements that it is required to have for locations 
that offer the core and required-clinical-rotation parts of the 
clinical training, but not copies of written arrangements for locations 
offering the not-required-clinical-rotation part of the program. The 
Department was persuaded by the non-Federal negotiators who noted that 
it would be quite burdensome for institutions to execute formal 
affiliation agreements with the sites of rotations that are not 
required, because there are often so many of them and use is often for 
the short-term. They assured the Department that other written 
arrangements, such as letters of good standing, insurance arrangements, 
and other documents specific to a particular student, are made with 
these locations that cover the elements of formal affiliation 
agreements. Because of the multitude of documentation comprising the 
written arrangements with these often short-term sites, the Department 
did not believe it was necessary to require a regular submission to the 
Department. In accordance with NCFMEA Recommendation 12(b), to ensure 
continuity of the eligible program from the main campus to remote 
locations, the proposed regulations would require that all required 
affiliation agreements or other written arrangements address 
maintenance of the school's standards, appointment of faculty, design 
of the curriculum, provision of liability insurance, and supervision 
and evaluation of student performance.
    Although an institution would not be required to have formal 
affiliation agreements with locations that offer the not-required-
clinical-rotation part of the clinical training, proposed Sec.  
600.20(a)(3)(i) and Sec.  600.20(b)(3)(i) would provide that, for 
initial certification or for recertification, a foreign graduate 
medical school would be required to list these locations and where they 
are located on the application to participate, along with the sites at 
which the non-clinical, core clinical, and required-clinical-rotation 
parts of the program are offered, except that those not-required-
clinical-rotation locations that are not used regularly, but instead 
are chosen by individual students who take no more than two electives 
at the location for no more than a combined total of eight weeks, do 
not have to be listed. The Department believes it is essential for the 
Department to be aware of all locations of an institution to which 
Title IV, HEA program funds are provided, and agreed to make an 
exception only for sites that are not used regularly and, therefore, 
would be difficult and burdensome to track. Some non-Federal 
negotiators indicated that most institutions can and do track the 
locations the proposed regulations would require them to report to the 
Department, so providing this information to the Department would not 
be unduly burdensome.
    Consistent with these proposed regulations, proposed Sec.  
600.20(c)(5) would require a foreign graduate medical school that adds 
a location that offers all or a portion of the school's core clinical 
training or required clinical rotations to apply to the Secretary and 
wait for the Secretary's approval before providing Title IV, HEA 
program funds to the students at the location. In proposed 
600.21(a)(10), they would allow a foreign graduate medical school that 
adds a location that offers all or a portion of the school's clinical 
rotations that are not required to provide Title IV, HEA program funds 
to the students at the location without waiting for approval from the 
Secretary, provided the school notifies the Secretary no later than 10 
days after the location is added. As with the proposed exceptions to 
the requirements for offering a portion of the clinical training 
portion of the program outside of the country in which the main campus 
of the school is located, and the proposed regulations specifying when 
affiliation agreements would be required, an exception from the prior 
approval requirement for adding locations offering core/required 
rotations would be allowed for those locations that are included in the 
accreditation of a medical program accredited by the LCME. No 
notification to the Department would be required for adding LCME 
locations, or locations offering only non-core, non-required rotations 
that are not used regularly, but instead are chosen by individual 
students who take no more than two electives at the location for no 
more than a combined total of eight weeks.
    So that the Department may track and enforce provisions specific to 
post-baccalaureate/equivalent medical programs, proposed Sec. Sec.  
600.20(a)(3)(ii) and 600.20(b)(3)(ii) would require that, for initial 
certification or for recertification, a foreign graduate medical school 
(i.e., a freestanding

[[Page 42203]]

foreign graduate medical school or a foreign institution that includes 
a foreign graduate medical school) indicate whether it offers only 
post-baccalaureate/equivalent medical programs, other types of programs 
that lead to employment as a doctor of osteopathic medicine or doctor 
of medicine, or both.
    Finally, a proposed definition of NCFMEA was added to make clear 
that the NCFMEA is the operational committee of medical experts 
established by the Secretary to determine whether the medical school 
accrediting standards used in other countries are comparable to those 
applied to medical schools in the U.S., for purposes of evaluating the 
eligibility of accredited foreign graduate medical schools to 
participate in the Title IV, HEA programs.

General

    Proposed Sec.  600.52 would remove from the definition of a foreign 
graduate medical school the requirement that a foreign graduate medical 
school be a foreign institution that qualifies to be listed in, and is 
listed as a medical school in, the most current edition of the World 
Directory of Medical Schools published by the World Health Organization 
(WHO) as the Department believes it is no longer a needed measure of 
comparability in light of the proposed new criteria for foreign 
graduate medical schools as well as the proposed changes to the 
definition of a foreign institution.
    Proposed Sec.  600.55(a)(1) would clarify that the general criteria 
that must be satisfied is all applicable criteria in part 600, rather 
than just Sec.  600.54, to make clear that, unless otherwise specified, 
all the provisions of part 600 apply to foreign institutions, including 
foreign graduate medical schools. Current regulations require only 
instruction that is offered outside of the United States to be provided 
in facilities adequately equipped and staffed to afford students 
comprehensive clinical and classroom medical instruction, and require 
only the training located in the United States to be approved by all 
medical licensing boards and evaluating bodies whose views are 
considered relevant by the Secretary. Proposed Sec.  600.55(a)(2) would 
apply these provisions to all portions of the medical program, 
regardless of whether the program is located outside or inside the 
United States, as the Department believes they are good requirements 
regardless of location. To provide consistency with the proposed 
provisions addressing the location of clinical training (see the 
discussion of Location of a graduate medical education program, 
affiliation agreements, and application and notification procedures for 
foreign graduate medical schools above), the proposed regulations would 
make clear that a foreign graduate medical school may offer, as part of 
its clinical training, no more than two electives consisting of a 
combined total of no more than eight weeks per student at a site 
located in a foreign country other than the country in which the main 
campus is located or in the United States, unless that location is 
included in the accreditation of a medical program that is accredited 
by the LCME. Non-Federal negotiators noted that foreign graduate 
medical schools do not necessarily directly employ faculty for the 
clinical training portion of the program, but rather appoint them and 
the individuals are usually employed by the hospital or clinic at which 
the clinical training takes place. The Committee agreed the regulations 
should be changed to reflect actual practice.

Admission Criteria and Collection and Submission of Data

    The Department initially proposed that, consistent with NCFMEA 
Recommendations 1(a) and 1(b), a foreign graduate medical school would 
have to require students who it admits to have a specific educational 
background (e.g., for a post-baccalaureate equivalent medical program, 
students must have a baccalaureate degree, or at least 90 semester 
credit hours or the equivalent, in general education that includes, but 
is not limited to, coursework in the social sciences, history, and 
languages). Several of the non-Federal negotiators felt that such 
provisions were unduly limiting. The Committee, including the 
Department, ultimately agreed it would be more appropriate for the 
NCFMEA to establish these provisions as guidelines for accrediting 
bodies. The Department had also included as a part of its initial 
proposal, that a school having an integrated program for a first 
professional program leading to a Doctor of Medicine (M.D.) degree, or 
its equivalent, must require students who are U.S. citizens, nationals, 
or permanent residents to take the MCAT no later than three years after 
admission to the program. Although this provision was consistent with 
NCFMEA Recommendation 1(b), the Department was ultimately persuaded to 
remove the provision by non-Federal negotiators who pointed out that 
requiring students to take the MCAT early in the program would distract 
them from the education that was preparing them to take the USMLE.
    Ultimately, the Department agreed to retain from Recommendations 
1(a) and 1(b) only the provision that would require U.S. students who 
are admitted to a school having a post-baccalaureate equivalent medical 
program to have taken the MCAT and to report the score. This provision 
would not require a foreign graduate medical school to give weight to a 
U.S. student's score on the MCAT as part of its admission requirements. 
Although some non-Federal negotiators expressed concern that the MCAT 
would not be readily available to U.S. students who are residing 
outside of the United States prior to enrolling in a foreign graduate 
medical school, it was determined that the MCAT is administered several 
times during the year in countries around the world.
    The inclusion of the requirement that a foreign graduate medical 
school determine the consent requirements for, and require the 
necessary consents of, all students accepted for admission who are U.S. 
citizens, nationals, or eligible permanent residents to enable the 
school to comply with the collection and submission requirements for 
MCAT scores, residency placement, and USMLE scores reflects NCFMEA 
Recommendations 9(a), 3, and 4(a), but limits the requirement to U.S. 
citizens, nationals, or eligible permanent residents. These proposed 
regulations would not establish eligibility thresholds for MCAT scores 
or residency placement. As indicated in the discussion of these 
recommendations in the NCFMEA report, the NCFMEA believes, and the 
Department agrees, that successful performance by an institution in 
these three areas may be valuable for the evaluation of the quality of 
education being provided to students attending foreign graduate medical 
schools. The data will facilitate the NCFMEA's further study of the 
issues, strengthen the accreditation process, and allow for the 
potential development of additional recommendations for regulatory 
change, and/or the NCFMEA standards for evaluating accrediting bodies 
of foreign graduate medical schools. Non-Federal negotiators argued, 
and the Department agreed, that the Department's main concern is how 
well students from the United States, who represent potential borrowers 
of Title IV, HEA funds, are doing at these schools. The non-Federal 
negotiators felt that it was inappropriate to include non-U.S. students 
who may not have as much at stake when they take the United States' 
MCAT or USMLE, or attempt to be placed in a

[[Page 42204]]

U.S. residency, and, thus, may skew the data.
    Some non-Federal negotiators expressed concern that requiring 
foreign institutions to obtain student consent for the release of 
information may be in violation of certain countries' privacy laws. In 
response to the Department's request for specific information, the 
Department was provided with an analysis of the privacy laws and 
requirements of one country that had been identified as one that could 
have problems in this area. After analyzing the information, the 
Department concluded that there would be several ways that institutions 
in that country could legally obtain the required information from 
students, and committed to working with those schools and schools in 
any country that have concerns to facilitate compliance. The Department 
noted, however, that the Department cannot waive statutory or 
regulatory requirements used to determine institutional eligibility and 
that if a foreign country's privacy laws did preclude obtaining the 
information and materials necessary for establishing compliance the 
institutions located in those countries would not be able to qualify 
for participation in the Title IV, HEA programs.
    The proposed regulations state that collection and submission of 
data must be done at the institution's own expense to emphasize that 
the institution is ultimately responsible for providing this 
information. In the future, the Department may be able to obtain the 
necessary USMLE pass rates directly from the ECFMG. However, unless and 
until the Secretary notifies institutions that this is the case, an 
institution would be required to take whatever steps are necessary to 
obtain and provide the data to its accrediting agency and the 
Secretary. Currently, an institution can obtain a student's consent for 
USMLE pass rate data on Steps 1 and 2 by requiring students to sign 
ECFMG's Institutional Request for an Official USMLE Transcript Form 
173. The form and information on its use are available at the ECFMG's 
Web site at http://www.ecfmg.org/usmle/transcripts/index.html. We also 
note that the ECFMG has established an online procedure by which 
schools can obtain data on Steps 1 and 2 directly from the ECFMG (see 
the ECFMG's Web site at http://www.ecfmg.org/emswp.html). As this 
procedure is still new, the Committee was not able to ascertain whether 
the data provided to schools in this manner would be sufficient for 
schools to meet the requirements of these proposed regulations. As 
information becomes available, the Department will evaluate the 
appropriateness of these data for meeting the proposed requirement.
    Although the Department originally proposed requiring schools to 
submit data on all steps of the USMLE, non-Federal negotiators pointed 
out that it would be extremely difficult for schools to obtain data on 
Step 3. The non-Federal negotiators noted that this difficulty stems 
from the fact that Step 3, which is administered by the Federation of 
State Medical Boards (FSMB), is taken by students after they have 
graduated from the institution and a student cannot sign a consent to 
provide information on Step 3 to third parties until he or she is 
actually taking the test. Although the Department is continuing to 
explore the collection of data from the FSMB for evaluating its use in 
the future, the Department agrees that it would be unreasonable to 
require institutions to be responsible for its collection and 
submission at this time.
    As one of the purposes of the data submission provision is to 
provide data for the evaluation of whether additional performance 
measures should be required of foreign graduate medical schools, all 
foreign graduate medical schools, even those that are exempt from 
meeting the 60 percent/75 percent USMLE pass rate requirement, would 
have to submit the data under proposed Sec.  600.55(d).
    The Department believes that the proposed periods for which data 
must be collected and the proposed annual September 30 submission 
deadline will provide for consistent submission of data by all schools, 
taking into consideration the timing of the events for which data must 
be obtained. As these data, other than the USMLE data, are to be 
collected for the use of the accrediting bodies and, indirectly, by the 
NCFMEA, schools would be required to make submissions of the data to 
their accrediting bodies but, except for data on the USMLE, would be 
required to submit such data to the Secretary only upon request. The 
Secretary would collect the USMLE data on a regular basis in support of 
the requirement in Sec.  600.55(f)(1)(ii) that an institution have at 
least a 75 percent pass rate on the USMLE.

Notification to Accrediting Body

    Proposed Sec.  600.55(e)(2), which would require a foreign graduate 
medical school to notify its accrediting body within one year of any 
material changes in educational programs and the overseeing bodies in 
the formal affiliation agreements with hospitals and clinics, would 
reflect NCFMEA Recommendations 12(a) and 12(b) and would allow a 
school's accrediting body to assess any substantive impact the change 
would have on the school's operations.

Citizenship and USMLE Pass Rate Percentages

    The proposed change in Sec.  600.55(f)(1)(i)(B) would allow a 
foreign graduate medical school to be exempt from the existing 
citizenship rate requirement if it had a clinical training program 
approved by a State as of January 1, 2008, and continues to operate a 
clinical training program in at least one State that approves the 
program reflects the statutory change made by the HEOA. As a result, 
both foreign graduate medical schools that had a clinical training 
program approved by a State as of January 1, 1992, and those that had a 
clinical training program approved by a State as of January 1, 2008, 
are exempt from the citizenship rate provision, provided the school 
continues to operate a clinical training program in at least one State 
that approves the program. The increase in the USMLE pass rate 
threshold from 60 percent to 75 percent also reflects a change made by 
the HEOA, as does proposed Sec.  600.55(f)(2)(ii), which would allow a 
foreign graduate medical school that was eligible and exempt from the 
USMLE pass rate requirement based on having a clinical training program 
approved by a State as of January 1, 1992, to continue to be eligible 
and exempt from the USMLE pass rate requirement as long as it continues 
to operate a clinical training program in at least one State that 
approves the program.
    Although the Department originally proposed requiring pass rate 
information for all steps of the USMLE, as stated previously in the 
discussion of the submission of USMLE pass data under Admission 
criteria and collection and submission of data above, the Department 
believes that it would be unreasonable to require institutions to 
obtain data on Step 3 of the USMLE for inclusion in the pass rate at 
this time.
    As suggested by NCFMEA Recommendations 4(b) and 4(c), the proposed 
regulations would require a foreign graduate medical school to have at 
least a 75 percent pass rate on each step/test of the USMLE (limited to 
Step 1, Step 2-CS, and Step 2-CK), rather than a combined pass rate for 
all steps/tests. This approach would provide an assessment of the 
sequential performance of students on the USMLE, which the NCFMEA and 
the Department believe provides a better measure of a medical program's 
effectiveness by evaluating how well it prepares students

[[Page 42205]]

for each step/test of the USMLE and, in particular, will allow for the 
judgment of the performance of each institution in preparing students 
for future clinical performance.
    The Committee decided to limit the USMLE pass rate calculation to 
U.S. citizens, nationals, and eligible permanent residents for the 
reasons discussed for limiting the collection and submission of data 
related to MCAT scores, placement in a U.S. medical residency program, 
and the USMLE in the same manner (see Admission criteria and collection 
and submission of data above). That is, the Committee desired to focus 
the pass rate on the students the Department is most concerned about, 
students from the United States, who represent potential borrowers of 
Title IV, HEA funds, and to prevent a school's rate from being lowered 
by non-U.S. students who may not be as invested in passing the USMLE as 
U.S. students.
    As for the actual calculation used to determine the pass rate for 
each step/test of the USMLE, the Department had suggested a rate that 
would have required an institution to count an individual student in 
the denominator for each time the student took Step 1, Step 2-CS and 
Step 2-CK. The Department believed this approach was consistent with 
NCFMEA Recommendation 4(b) and was a better measure of how well 
prepared students were by the medical education program because it 
would reflect failures on repeated attempts. Some non-Federal 
negotiators felt that this approach was too burdensome and not an 
appropriate means of achieving the Department's goal. They argued that 
the pass rates of students in subsequent attempts is typically quite 
low; thus, such a measure would be redundant and not more indicative of 
the quality of the institution's instruction. Eventually, the non-
Federal negotiators suggested that the calculation be limited to first 
time test takers only. The non-Federal negotiators noted that reports 
issued in other contexts about pass rates for domestic schools have 
included only first time test takers. Ultimately, the Department was 
persuaded that a proposed regulation that would require foreign 
graduate medical schools to include only first time test takers in the 
calculation provided a better evaluation of an institution's 
performance than that required under current regulations, and had the 
benefit of being comparable to rates published for domestic schools.
    The non-Federal negotiators raised strong concerns about the pass 
rate's applicability to schools with small numbers of U.S. students. 
They pointed out that such a school's eligibility for participation 
could be put at risk by the failure of just a small number of students, 
or even one student, for those with fewer than four students who would 
be included in the cohort for the calculation. The non-Federal 
negotiators felt that schools with small numbers of students should be 
exempt from this requirement or, at the very least, the regulations 
should provide an alternative way for these institutions to comply. The 
Department noted that the statute does not provide for exempting 
institutions from this requirement. However, in response to these 
concerns, the Department proposed an alternative way to comply in Sec.  
600.55(f)(4) to allow for the use of a rate that would combine the 
performance of U.S. students on Step 1, Step 2-CS and Step 2-CK, if the 
result of any step/test pass rate would be based on fewer than eight 
students. If that combined pass rate would be based on fewer than eight 
step/test results, the school would be deemed to have no pass rate for 
that year, and the results for the year would be combined with each 
subsequent year until a pass rate based on at least eight step/test 
results could be derived. The Department believes that this approach 
applies the pass rate provision to all institutions, while 
appropriately mitigating the unduly harsh effect a small number of 
failures could have on the pass rate calculation for schools with small 
numbers of U.S. students.

Other Criteria

    The proposed requirements in Sec.  600.55(g)(1) and (g)(2) that 
would require a foreign graduate medical school to include in its 
satisfactory academic progress standards a requirement that a student 
complete his or her educational program within 150 percent of the 
published length of the educational program and document the 
educational remediation it provides to assist students in making 
satisfactory academic progress adopts NCFMEA Recommendation 9(b), but 
requires schools to document, rather than submit to the Department as 
the NCFMEA recommended, any educational remediation provided.
    For consistency with current regulations, in adopting NCFMEA 
Recommendation 9(b), suggesting that a student's enrollment prior to 
graduation must not exceed 150 percent of the normal length of the 
program, the proposed regulations refer to existing Sec. Sec.  
668.16(e)(2)(ii)(B), (C), and (D). These regulations, currently 
applicable to undergraduate programs, provide additional requirements 
as to the quantitative aspect of a foreign graduate medical school's 
institutional satisfactory academic progress standards.
    Although the Committee agreed with the NCFMEA that there is merit 
to requiring institutions to document the remediation it provides to 
assist students in making satisfactory academic progress so that, as 
needed, the Department, the NCFMEA, or the accrediting body may collect 
and examine the data to see if this is an area of concern that may need 
to be addressed, they did not believe it was necessary or cost 
effective to require the regular submission of these data to the 
Department.
    Finally, proposed Sec.  600.55(g)(3), which would require a foreign 
graduate medical school to publish all the languages in which 
instruction is offered, would provide information to students that 
could be essential to a student's success in the program. Although 
NCFMEA Recommendation 10 suggested requiring schools to publish the 
primary language of instruction, and if not English, identify any 
alternate language of instruction, the Committee agreed that requiring 
schools to publish all languages in which instruction is offered would 
be more beneficial and no more burdensome.

Foreign Veterinary Schools (Sec.  600.56)

    Statute: Section 102(a)(2)(A)(ii) of the HEA stipulates that Title 
IV borrowers attending a foreign for-profit veterinary school must 
complete clinical training at an approved veterinary school located in 
the United States. The HEA does not establish additional eligibility 
criteria specific to foreign veterinary schools. Section 102(a)(2)(A) 
of the HEA requires the Secretary, through regulations, to develop 
eligibility criteria for foreign institutions that are comparable to 
the eligibility criteria for domestic ``institutions of higher 
education.''
    Current Regulations: Section 600.56 of the Institutional 
Eligibility regulations includes additional eligibility criteria for 
foreign veterinary schools. Under Sec.  600.56(a)(1)(i), foreign 
veterinary school facilities outside the United States must be 
adequately equipped and staffed to provide students comprehensive 
clinical and classroom veterinary instruction. Under Sec.  
600.56(a)(1)(ii), foreign veterinary school programs provided inside 
the United States must be approved by all veterinary licensing boards 
and evaluating bodies that the Secretary considers to be relevant. 
Under Sec.  600.56(a)(3), the credentials of faculty members employed 
by the foreign veterinary school must be equivalent to the credentials 
of faculty members

[[Page 42206]]

teaching the same or similar courses in the United States.
    Proposed Regulations: The proposed regulations would combine the 
requirements in Sec.  600.56(a)(1)(i) and Sec.  600.56(a)(1)(ii) into 
one paragraph, eliminating the distinction in those sections between 
portions of veterinary programs provided inside and outside of the 
United States. Proposed Sec.  600.56(a)(4) would require a foreign 
veterinary school to be accredited or provisionally accredited by an 
organization acceptable to the Secretary. Proposed Sec.  600.56(a)(4) 
would also specify that the requirement for accreditation or 
provisional accreditation does not take effect until July 1, 2015. 
Finally, proposed Sec.  600.56(b)(2)(i) would require that, for a for-
profit veterinary school, the school's students must complete their 
clinical training at an approved veterinary school located in the 
United States. Under proposed Sec.  600.56(b)(2)(ii), for a veterinary 
school that is public or private nonprofit, the school's students may 
complete their clinical training at an approved veterinary school 
located in the United States or in the home country, and may also take 
clinical training at a location outside of the United States or the 
home country if no individual student takes more than two electives at 
the location and the combined length of the elective(s) does not exceed 
eight weeks.
    Reasons: The Department proposed revising the regulations governing 
eligibility criteria for foreign veterinary schools to improve the 
Department's process for making determinations of eligibility of 
foreign veterinary schools to participate in the Title IV, HEA 
programs. The Department's expertise with regard to making independent 
evaluations of the academic quality of veterinary programs is limited, 
and currently the Department relies heavily on information provided to 
us by the foreign veterinary school to make eligibility determinations. 
If the school has been accredited or reviewed by the American 
Veterinary Medical Association (AVMA), the Department considers reports 
provided by the AVMA to the school to assist in making eligibility 
determinations.
    The Department initially proposed to build on the Department's 
current practice by requiring AVMA accreditation for foreign veterinary 
schools applying to participate in the Title IV, HEA programs. We 
believed that requiring AVMA accreditation would provide the Department 
with an assurance of the academic quality of the veterinary program. 
AVMA standards for accrediting veterinary schools are detailed and 
specific, and the AVMA has the expertise and resources to evaluate 
veterinary schools that the Department lacks. In addition, the AVMA has 
a history of accrediting foreign veterinary school academics. For 
example, veterinary schools in Canada, Australia, and the Netherlands 
are currently accredited by the AVMA.
    Non-Federal negotiators generally acknowledged the high quality of 
the AVMA's accreditation standards and procedures. One non-Federal 
negotiator agreed that it was logical to require AVMA accreditation of 
foreign veterinary schools, as most U.S. students studying at those 
schools ultimately practice as veterinarians in the United States. 
However, several non-Federal negotiators had concerns about requiring 
AVMA accreditation as a condition for participation in the Title IV, 
HEA programs.
    Some non-Federal negotiators pointed out that the process for 
receiving AVMA accreditation is lengthy and expensive. Non-Federal 
negotiators asserted that the standards of foreign accrediting agencies 
such as the Veterinary Schools Accreditation Advisory Committee 
(VSAAC), which accredits veterinary schools in Australia and New 
Zealand, and the Royal College of Veterinary Surgeons (RCVS), which 
accredits veterinary schools in the United Kingdom, are comparable to 
the AVMA's standards. These non-Federal negotiators contended that it 
would be unnecessarily burdensome to require a veterinary school that 
has already been accredited by an agency such as VSAAC to also obtain 
AVMA accreditation to participate in the Title IV, HEA programs. The 
non-Federal negotiators cautioned the Department that foreign 
veterinary schools that enroll small numbers of Title IV borrowers may 
determine that obtaining AVMA accreditation is not cost effective, and 
may choose to end their participation in the Title IV, HEA programs. 
This would have the effect of limiting the options of U.S. students 
considering attending foreign veterinary schools.
    Other non-Federal negotiators contended that it is extremely 
difficult for for-profit veterinary schools to obtain AVMA 
accreditation. Although they felt that for-profit veterinary schools 
can meet AVMA's standards around facilities, curriculum, and faculty, 
the AVMA standards also require veterinary schools to have a strong 
research component. These negotiators stated that for-profit veterinary 
schools tend not to have the resources to pursue research to the extent 
required by AVMA. These negotiators pointed out that public veterinary 
schools often have State sources of funding for research programs, 
while for-profit veterinary schools do not. The expense of establishing 
a research program acceptable to AVMA could be prohibitive for most 
for-profit veterinary schools. These non-Federal negotiators contended 
that, for purposes of preparing students for employment as competent 
veterinarians in most non-research venues, it is not necessary to 
include a research component of the kind required by AVMA.
    In addition, non-Federal negotiators expressed concerns that 
foreign veterinary schools without AVMA accreditation that currently 
participate in the Title IV, HEA programs might be forced out of the 
Title IV, HEA programs if the Department went forward with its 
proposal. The effective date for most of the regulations in this NPRM 
is expected to be July 1, 2011. As the accreditation process can take 
several years, even a school that ultimately receives AVMA 
accreditation might not be able to obtain AVMA accreditation before the 
regulations become effective. Although AVMA offers provisional 
accreditation for schools in the U.S. or Canada that are on track to 
become accredited, it currently does not offer provisional 
accreditation to other schools.
    As an alternative, non-Federal negotiators recommended using other 
measures, such as pass rates on licensing exams, licensure rates, or 
default rates, to determine eligibility of a foreign veterinary school. 
In addition, non-Federal negotiators recommended that the Department 
delay the effective date for the accreditation provision of the 
proposed regulations for up to ten years, if the Department goes 
forward with the AVMA requirement.
    The Department noted that using measures such as pass rates on 
licensing examinations can be operationally complicated, raising 
concerns over privacy rights, obtaining exam results, and calculating 
pass rates in ways that are not disadvantageous to schools with low 
numbers of Title IV students. In addition, pass rates would not 
necessarily be a reliable indicator of the academic credentials of the 
faculty at a foreign veterinary school, and would provide no indication 
that the facilities at the veterinary school are adequate and safe for 
the students or for the animals housed in the facilities.
    Instead, the Department accepted the recommendation of some of the 
non-Federal negotiators to replace the proposed requirement that a 
foreign veterinary school be accredited or provisionally accredited by 
the AVMA,

[[Page 42207]]

with a requirement that the school be accredited or provisionally 
accredited by an agency acceptable to the Secretary. Although the 
Department continues to believe that AVMA accreditation is the most 
desirable standard for foreign schools that train students for 
veterinary practice in the United States, we recognize that other 
accrediting agencies may also be satisfactory for this purpose. Under 
the revised regulations, foreign veterinary schools must still be 
accredited or provisionally accredited by an agency with expertise in 
accrediting veterinary education programs, but the agency does not have 
to be the AVMA. This gives the Department some flexibility in 
evaluating schools' compliance with the accreditation requirement, and 
gives schools some flexibility with regard to obtaining accreditation.
    In addition, the Department delayed the effective date of the 
accreditation requirement until July 1, 2015, giving foreign veterinary 
schools that are currently in the Title IV, HEA programs approximately 
five years after final regulations are published to obtain 
accreditation from an acceptable accrediting agency. The Department 
believes that five years should be sufficient time for a school to 
obtain accreditation or provisional accreditation from an acceptable 
accrediting agency. In addition, Title IV borrowers who are currently 
enrolled in a foreign veterinary school should be able to complete 
their education programs before the five years elapses. Newly enrolled 
Title IV borrowers coming into those schools after this NPRM is 
published should be advised by the school's financial aid officers that 
there is a possibility that the school could lose Title IV, HEA program 
eligibility after July 1, 2015, so those borrowers can plan 
accordingly.
    The Department proposed combining the requirements in Sec.  
600.56(a)(1)(i) and in Sec.  600.56(a)(1)(ii) into one paragraph to 
simplify the regulations, and to eliminate the distinction between 
veterinary school activities in the United States and outside the 
United States for purposes of these particular requirements. The 
Department did not believe that this distinction in the current 
regulations served any useful purpose. The non-Federal negotiators did 
not express concerns about this modification to the existing 
regulations.
    Regarding the provisions addressing the location of a foreign 
veterinary school in proposed Sec.  600.57(b), the Committee agreed to 
be consistent with provisions that would permit some clinical training 
locations of foreign graduate medical schools to be outside of the 
United States and of the country in which the main campus of the school 
is located. Proposed Sec.  600.57(b) would permit students who attend a 
public or private nonprofit foreign veterinary school to take no more 
than two electives at the clinical training location per student, as 
long as the elective(s) have a combined length of not more than eight 
weeks. This provision could not be extended to for-profit veterinary 
schools because the statute requires students who attend these schools 
to complete their clinical training in the United States.

Foreign Nursing Schools (Sec.  600.57)

    Statute: The HEOA amended section 102(a)(2)(A) of the HEA to 
provide specific standards for foreign nursing schools. The amendments 
are effective beginning July 1, 2010, except that, for nursing schools 
that were eligible for Title IV, HEA program participation on August 
13, 2008 (the day before enactment of the HEOA), they are effective 
July 1, 2012.
    The HEA, as amended by the HEOA and HCERA, provides that a foreign 
nursing school, including a for-profit nursing school, may not 
participate in the Title IV, HEA programs unless the school--
     Has an agreement with a hospital or accredited school of 
nursing (as those terms are defined in section 801 of the Public Health 
Service Act (42 United States Code 296)) located in the United States 
that requires the students of the nursing school to complete the 
students' clinical training at the hospital or accredited school of 
nursing;
     Has an agreement with an accredited school of nursing 
located in the United States providing that the students graduating 
from the foreign nursing school also receive a degree from the 
accredited U.S. school of nursing;
     Certifies only Federal Direct Stafford loans under section 
455(a)(2)(A) of the HEA, Federal Direct Unsubsidized loans under 
section 455(a)(2)(D) of the HEA, or Federal Direct PLUS loans under 
section 455(a)(2)(B) of the HEA for students attending the school; and
     Reimburses the Secretary for the cost of any loan defaults 
for current and former students included in the calculation of the 
school's cohort default rate during the previous fiscal year.
    In addition, the HEOA amendments to the HEA require that at least 
75 percent of the individuals who were students or graduates of a 
foreign nursing school, and who took the National Council Licensure 
Examination for Registered Nurses (NCLEX-RN) in the year preceding the 
year for which the school is certifying a Title IV, HEA program loan, 
received a passing score on the NCLEX-RN.
    Current Regulations: Current regulations do not define foreign 
nursing school, or specify Title IV eligibility criteria unique to 
foreign nursing schools.
    Proposed Regulations: The proposed regulations would add several 
new definitions relating to foreign nursing schools to Sec.  600.52, 
would redesignate current Sec.  600.57 as Sec.  600.58, and would add a 
new Sec.  600.57 specifying additional Title IV eligibility criteria 
for foreign nursing schools. The proposed regulations would add 
definitions to Sec.  600.52 for associate degree school of nursing, 
collegiate school of nursing, and diploma school of nursing. The 
proposed new definitions are derived from definitions relating to 
nursing schools in section 801 of the Public Health Service Act, as 
amended (42 U.S.C. 201 et seq.), as required by the HEA as amended by 
the HEOA.
    Under the proposed definitions, the primary distinction between the 
three types of nursing schools is the type of degree offered by the 
school. For an associate degree school of nursing, the nursing program 
must lead to a degree equivalent to an associate degree in the U.S. For 
a collegiate school of nursing, the nursing program must lead to a 
degree equivalent to a bachelor of arts, a bachelor of science, or a 
bachelor of nursing in the U.S, or to a degree equivalent to a graduate 
degree in nursing in the U.S. For a diploma school of nursing, the 
nursing program must lead to the equivalent of a diploma in the U.S. or 
to other indicators equivalent to a diploma that demonstrate that the 
student has satisfactorily completed the program.
    Proposed new Sec.  600.57 would require a foreign nursing school to 
meet the applicable eligibility criteria elsewhere in part 600. In 
addition, a foreign nursing school must--
     Meet the definition of associate degree school of nursing, 
collegiate school of nursing, or diploma school of nursing;
     Have an agreement with a hospital located in the United 
States or an accredited school of nursing located in the United States 
that requires students of the nursing school to complete the student's 
clinical training at the hospital or accredited school of nursing;
     Have an agreement with an accredited school of nursing 
located in the United States providing that students graduating from 
the nursing school located outside of the United

[[Page 42208]]

States also receive a degree from the accredited school of nursing 
located in the United States;
     Only certify Federal Stafford Loan program loans or 
Federal PLUS program loans for students attending the nursing school;
     Reimburse the Secretary for the cost of any loan defaults 
for current and former students included in the calculation of the 
institution's cohort default rate during the previous fiscal year;
     Determine the consent requirements for, and require the 
necessary consents of, all students accepted for admission who are U.S. 
citizens, nationals, or eligible permanent residents, to enable the 
school to comply with the requirements for collection and submission of 
NCLEX-RN results or pass rates;
     Annually, at its own expense, obtain all results on the 
NCLEX-RN achieved by students and graduates who are U.S. citizens, 
nationals, or eligible permanent residents, together with the dates the 
student has taken the examination (including any failed examinations) 
and provide the results to the Secretary;
     As an alternative to obtaining the NCLEX results 
individually, the school may obtain a report or reports from the 
National Council of State Boards of Nursing (NCSB), or an NCSB 
affiliate or NCSB contractor, reflecting the percentage of the school's 
students and graduates taking the NCLEX-RN in the preceding year who 
passed the examination, or the data from which the percentage could be 
derived, and provide the report to the Secretary;
     Demonstrate at least a 75 percent pass rate on the NCLEX-
RN for all of the U.S. citizens, nationals, or eligible permanent 
residents who were students or graduates of the school and who took the 
NCLEX-RN in the year preceding the year for which the institution is 
certifying Federal Stafford or Federal Plus loans;
     Provide a program of clinical and classroom nursing 
instruction, which students are normally required to complete, that is 
supervised closely by members of the school's faculty. The program, 
which includes programs provided through agreements with nursing 
schools in the United States, must be provided in facilities adequately 
equipped and staffed to afford students comprehensive clinical and 
classroom nursing instruction, through a training program for foreign 
nursing students that has been approved by all nurse licensing boards 
and evaluating bodies whose views are considered relevant by the 
Secretary;
     Have graduated classes during each of the two twelve-month 
periods immediately preceding the date the Secretary receives the 
school's request for an eligibility determination; and
     Employ only those faculty members whose academic 
credentials are the equivalent of credentials required of faculty 
members teaching the same or similar courses at nursing schools in the 
United States.
    In addition, the proposed regulations would specify that for 
purposes of reimbursing the Secretary for defaulted loans, the cost of 
a loan default is the sum of the defaulted loan's--
     Outstanding principal;
     Accrued interest;
     Unpaid late fees and collection costs;
     Special allowance payments;
     Reinsurance payments; and
     Any related or similar payments the Secretary is obligated 
to make on the loan.
    The proposed regulations also would specify that after a school 
reimburses the Secretary for the cost of a loan default, the loan is 
assigned to the school. The borrower remains liable to the school for 
the outstanding balance of the loan, under the terms and conditions 
specified in the promissory note.
    Finally, proposed Sec.  600.57(d) would provide that no portion of 
the foreign nursing program offered to U.S. students may be located 
outside of the country in which the main campus of the foreign nursing 
school is located, except for clinical sites located in the United 
States.
    Reasons: The Department modeled the proposed language in new Sec.  
600.57 on the provisions in the HEOA regarding foreign nursing schools, 
as well as on language in existing Sec. Sec.  600.55 and 600.56, which 
provide additional eligibility criteria for foreign graduate medical 
schools and foreign veterinary schools. In addition, in an effort to 
alleviate some of the burden entailed in demonstrating compliance with 
the NCLEX-RN pass rate requirement, the Department provided leeway for 
the school to obtain and submit, if available, reports on NCLEX-RN 
results from the NCSB, or one of its affiliates or contractors, showing 
the percentage of students from the school who passed the NCLEX-RN.
    In most cases, the non-Federal negotiators did not have concerns or 
questions regarding the proposed language in Sec.  600.57 that was 
modeled on language in sections Sec. Sec.  600.55 and 600.56. However, 
non-Federal negotiators did have concerns relating to several of the 
provisions unique to foreign nursing schools.
    The non-Federal negotiators believed that the new requirements in 
Sec. Sec.  600.57(a)(2) and 600.57(a)(3), requiring agreements between 
foreign nursing schools and U.S nursing schools and hospitals, would 
force many foreign nursing schools that currently participate in the 
Title IV, HEA programs out of the Title IV, HEA programs. The non-
Federal negotiators stated that most foreign nursing schools do not 
currently have such agreements and could not revamp their nursing 
programs to provide clinical training in the U.S. for their Title IV 
students. This issue was of special concern with regard to foreign 
nursing schools that enroll relatively small numbers of Title IV 
borrowers. The Title IV loan amounts such schools receive might not be 
sufficient enough to justify the expense of revamping their nursing 
programs.
    The Department noted that the proposed regulations reflect the 
statute, and that any regulations developed by the Department must be 
consistent with statutory requirements.
    Non-Federal negotiators also had concerns about the statutory 
provision, reflected in proposed Sec.  600.57(a)(5), requiring a 
foreign nursing school to reimburse the Secretary for the cost of loan 
defaults for loans included in the calculation of a school's cohort 
default rate. Discussion of the reimbursement requirement centered 
around two major topics: the cost of a loan default and the status of 
the loan after the school reimburses the Secretary. Proposed Sec. Sec.  
600.57(b) and 600.57(c) address these two issues.
    At the time that these proposed regulations were being negotiated, 
it was unclear whether foreign institutions would continue to 
participate in the FFEL program or be required to switch over to the 
Direct Loan Program. Given this uncertainty, the Department drafted 
proposed Sec. Sec.  600.57(b) and 600.57(c) in such a way that the 
regulations could apply to either a FFEL loan or a Direct Loan.
    The cost of a loan default, as specified in proposed Sec.  
600.57(b), includes some items that only apply to FFEL loans, such as 
special allowance payments, reinsurance payments, and payments of other 
fees. For a Direct Loan, the calculation of cost of a loan default 
would not include such costs. The cost of loan default for a Direct 
Loan would include such items as outstanding principal, accrued 
interest, and unpaid late fees or collection costs.
    Proposed Sec.  600.57(c) would specify that after a school 
reimburses the Secretary for the cost of a loan default,

[[Page 42209]]

the loan would be assigned to the school. The borrower would be 
required to repay the loan to the school, under the terms and 
conditions of the promissory note. The reimbursement by the school 
would not change the school's official cohort default rate or exempt 
the school from the consequences of its cohort default rate.
    In the initial discussions with the non-Federal negotiators, the 
non-Federal negotiators emphasized the importance of borrowers 
remaining liable for repayment of the loan after the school has 
reimbursed the Department for the loan default. The non-Federal 
negotiators stressed that if the reimbursement is deemed to have paid 
off the loan, the borrower's obligation to repay the loan would 
effectively be discharged. This would provide a perverse incentive for 
borrowers to default deliberately on their Title IV loans.
    The Department agreed with the non-Federal negotiators. Initially 
we proposed that after the Secretary is reimbursed, the loan would 
remain with the loan holder, who would continue to collect on the loan. 
However, the Department determined that after it received the 
reimbursement payment, it would have no financial interest in the loan, 
and would have no statutory basis for collecting on the loan. 
Accordingly, the Department modified the proposed regulatory language 
to require that the loan to be assigned to the school.
    Although non-Federal negotiators supported borrowers remaining 
liable for the loan, some non-Federal negotiators had concerns about 
how assigning the loan to the school would affect the borrower. One 
non-Federal negotiator asked how NSLDS reporting, loan rehabilitation, 
and total and permanent disability discharges would be handled for 
these loans.
    The Department did not address in detail operational matters with 
regard to defaulted loans assigned to a school. Instead, the Department 
pointed out that currently a FFEL loan can fall out of the FFEL 
program, usually due to a due diligence failure. The terms and 
conditions on the promissory note remain in effect on these loans, and 
loan holders continue to collect on them. Procedures currently in place 
for FFEL loans that have lost their eligibility would apply to 
defaulted Title IV loans that are assigned to a foreign nursing school.
    Non-Federal negotiators questioned how foreign schools could comply 
with proposed Sec.  600.57(a)(8), which would require that the clinical 
training provided at a U.S. school or hospital be ``supervised 
closely'' by members of the foreign school's faculty, in light of the 
fact that that training would already be supervised by faculty of the 
U.S. school. The Department noted that faculty at the U.S. clinical 
training facility could be appointed as faculty of the foreign school 
as well, and that, in any event, the foreign graduate medical school 
needs to have its own faculty supervise its entire program. The 
Department emphasized that Title IV eligibility is based on a school 
offering an eligible program, not a portion of an eligible program. The 
foreign school would have to develop agreements with U.S. schools that 
ensure continuity between the training offered at the foreign school 
and at the U.S. school.
    Non-Federal negotiators also questioned the provision in Sec.  
600.57(a)(8) requiring a training program to be approved ``by all 
licensing boards and evaluating bodies whose views are considered 
relevant by the Secretary.'' Non-Federal negotiators asked how a 
nursing program could be expected to obtain approval from state 
licensing boards in all 50 states. The Department responded that the 
Department would focus on the licensing boards and evaluating bodies 
applicable to the state where the training program is located, not 
licensing boards and evaluating bodies for all of the states, in 
determining compliance with this eligibility requirement, although 
approval or disapproval decisions from other states would be considered 
if available.
    Proposed Sec.  600.57(d) would provide that no portion of the 
foreign nursing program offered to U.S. students may be located outside 
of the country in which the main campus of the foreign nursing school 
is located, except for clinical sites located in the United States, to 
protect the coherence of the educational program and ensure continuity 
of oversight by the foreign government. The statute requires these 
nursing programs to provide their clinical training in the United 
States.
    As negotiated, proposed Sec.  600.57(d) does not reflect the 
inapplicability, through June 30, 2012, to foreign nursing schools that 
were participating in a Title IV, HEA program as of August 13, 2008, of 
the HEOA's new eligibility requirements for foreign nursing schools. In 
the final regulations, the Department will specify that this section 
becomes effective on July 1, 2012, with respect to foreign nursing 
schools that were participating in a Title IV, HEA program as of August 
13, 2008.

Part 668 Student Assistance General Provisions Audited Financial 
Statements (Sec.  668.23)

    Statute: Section 487(c)(1)(A)(i) of the HEA was amended by the HEOA 
to give the Secretary the authority to modify the financial and 
compliance audit requirements for foreign institutions, and the 
authority to waive the audit requirements for foreign institutions that 
receive less than $500,000 in Title IV, HEA program funds in the 
preceding year.
    Current Regulations: Currently, under Sec.  668.23(a)(2), an annual 
submission of both a compliance audit and audited financial statements 
is required of all institutions participating in the Title IV, HEA 
programs. Section 668.23(d)(1) requires that an institution's audited 
financial statements must be prepared on an accrual basis in accordance 
with U.S. generally accepted accounting principles (U.S. GAAP), and 
audited by an independent auditor in accordance with U.S. generally 
accepted government auditing standards (U.S. GAGAS) and other guidance 
contained in the Office of Management and Budget Circular A-133 and A-
128 regarding audits of States, Local Government and Non-Profit 
Organizations, or in audit guides developed by, and available from, the 
Department of Education's Office of Inspector General, whichever is 
applicable. Section 668.15(h) permits a foreign institution whose 
enrolled students received less than $500,000 in U.S. FFEL Program 
funds per fiscal year to have its required audited financial statements 
prepared according to the generally accepted accounting principles and 
auditing standards of the institution's home country. Current 
regulations notwithstanding, on May 15, 2009, the Department of 
Education published a Dear Colleague Letter (GEN-09-06) that announced 
that the Secretary was waiving the annual audited financial statements 
requirement for foreign institutions whose enrolled students received 
less than $500,000 in U.S. FFEL Program funds during the award year 
preceding the audit period. The waiver applies to any audited financial 
statements for such a foreign institution due on or after August 14, 
2008, the effective date of the HEOA amendment described previously, 
and renders unnecessary Sec.  668.15(h), providing for submission of 
audits prepared under home country standards.
    Proposed Regulations: Proposed Sec.  668.23 would establish new 
financial audit submission requirements for foreign institutions as 
follows:

[[Page 42210]]

     For a public or nonprofit foreign institution that 
received less than $500,000 in U.S. Title IV, HEA program funds during 
the institution's most recently completed fiscal year, the audited 
financial statements submission would be waived, unless the institution 
is in its initial provisional period of participation and received 
Title IV, HEA program funds during that year, in which case the 
institution must submit, in English, audited financial statements 
prepared in accordance with the generally accepted accounting 
principles of the institution's home country.
     For a public or nonprofit foreign institution that 
received at least $500,000 but less than $3,000,000 in U.S. Title IV, 
HEA program funds during its most recently completed fiscal year, the 
institution would be allowed to submit for that year, in English, 
audited financial statements prepared in accordance with the generally 
accepted accounting principles of the institution's home country in 
lieu of financial statements prepared in accordance with U.S. GAAP.
     For a public or nonprofit foreign institution that 
received at least $3,000,000 but less than $5,000,000 in U.S. Title IV, 
HEA program funds during its most recently completed fiscal year, the 
institution would be required to submit once every three years audited 
financial statements prepared in accordance with the generally accepted 
accounting principles of both the institution's home country and U.S. 
GAAP, but for the two years in between would be allowed to submit, in 
English, audited financial statements prepared in accordance with the 
generally accepted accounting principles of the institution's home 
country in lieu of financial statements prepared in accordance with 
U.S. GAAP.
     For a public or nonprofit foreign institution that 
received $5,000,000 or more in U.S. Title IV, HEA program funds during 
its most recently completed fiscal year, and for any for-profit foreign 
institution, the institution would be required to submit for that year 
audited financial statements prepared in accordance with the generally 
accepted accounting principles of both the institution's home country 
and U.S. GAAP.
    Proposed Sec.  668.23(h)(3)(i) would allow the Secretary to issue a 
letter to a foreign institution that has been identified as having 
problems with its financial condition or financial reporting that would 
require the foreign institution to submit its audited financial 
statements in the manner specified by the Secretary.
    In addition, the proposed regulations would: (1) Remove the 
superseded language in Sec.  668.15 addressing submission of financial 
audits for foreign institutions; (2) make technical corrections to 
reflect the Office of Management and Budget's (OMB's) 2003 rescission 
of Circular A-128 and expansion of Circular A-133 to include State and 
local governments and (3) add ``issued by the Comptroller General of 
the United States'' to Sec.  668.23(d)(1) to make clear that United 
States generally accepted government auditing standards must be used 
for all submitted financial statements, including those from foreign 
institutions. The removal of the superseded language in Sec.  668.15(h) 
would not impact the Secretary's ability to make a determination of 
financial responsibility for any foreign institution. The Secretary 
would make such a determination on the basis of financial statements 
submitted under proposed Sec.  668.23(h).
    These proposed regulations would supersede the May 15, 2009, Dear 
Colleague Letter (GEN-09-06). The proposed regulations would apply the 
waiver of the annual audited financial statements requirement to public 
or nonprofit foreign institution that received less than $500,000 in 
U.S. Title IV, HEA program funds during the institution's most recently 
completed fiscal year, instead of applying it to foreign institutions 
that received less than $500,000 in U.S. Title IV, HEA Program funds 
during the award year preceding the audit period, as the Dear Colleague 
Letter does. This would match the Title IV, HEA program funds being 
administered by a foreign institution with the period of time covered 
in the audited financial statements of the institution. If this 
proposed provision becomes final, the Department will provide 
implementation guidance to institutions addressing the change in the 
period used to determine the amount of Title IV, HEA program funds 
received by a foreign institution.
    Reasons: The negotiators reached agreement on the proposed 
regulatory language only after extensive negotiations and significant 
compromises.
    The Department initially proposed to require audited financial 
statements prepared in accordance with U.S. GAAP, which is the 
requirement for domestic institutions, for public foreign institutions 
that received $1,000,000 or more in U.S. Title IV, HEA program funds, 
or private foreign institutions that received $500,000 or more in U.S. 
Title IV, HEA program funds, as well as for any institution in its 
initial provisional period of participation. For public foreign 
institutions, if an institution received at least $500,000 in U.S. 
Title IV, HEA program funds, but less than $1,000,000 in U.S. Title IV, 
HEA program funds during the institution's fiscal year preceding the 
audit period, the institution would have been allowed to submit audited 
financial statements prepared in accordance with the generally accepted 
accounting principles of the institution's home country in lieu of 
financial statements prepared in accordance with U.S. GAAP. If there 
was an unpaid liability due to the Secretary by any public institution 
controlled by the same government entity, all public institutions 
controlled by that government entity would be required to submit 
audited financial statements prepared in accordance with U.S. GAAP.
    Upon hearing the Department's initial proposal, some non-Federal 
negotiators argued that nonprofit foreign institutions should be 
treated the same as public foreign institutions. Others opined that 
requiring the audited financial statements to be prepared in accordance 
with U.S. GAAP was cost prohibitive, and suggested that a non-U.S. GAAP 
financial statement such as the International Financial Reporting 
Standards (IFRS) would be comparable and provide the Department with 
the information it needs. Another non-Federal negotiator suggested that 
the cost of preparing audited financial statements would be paid by 
students in the form of higher tuition and fees. It was also suggested 
that a rating from a financial rating agency such as Moody's or 
Standard and Poor's could be used as an indicator of financial 
solvency. Several non-Federal negotiators suggested that the Department 
should accept audited financial statements prepared under the 
institution's home country accounting standards from nonprofit or 
public foreign institutions where the Department determined those home 
country standards were comparable to U.S. GAAP, regardless of the 
amount of U.S Title IV, HEA program funds that an institution may have 
received in the fiscal year preceding the audit. Non-Federal 
negotiators pointed out that no evidence had been presented during the 
negotiating sessions that international accounting principles are 
inferior to U.S. GAAP, and noted that an institution's compliance audit 
would continue to be used to demonstrate that

[[Page 42211]]

Title IV, HEA program funds are being handled appropriately.
    Other suggestions made by the non-Federal negotiators included that 
the Department tie its requirement of U.S. GAAP financial statements to 
a foreign institution's cohort default rate, given that such rates are 
generally lower than those for domestic institutions, and that public 
foreign institutions be relieved from submitting U.S. GAAP financial 
statements if the total number of U.S. students enrolled at that entity 
was less than fifty, regardless of the amount of U.S. Title IV, HEA 
program funds received during the institution's fiscal year.
    The Department responded that it believes there is a risk threshold 
of Title IV, HEA program dollars administered by foreign institutions 
where the audited financial statements for those institutions should be 
provided in the same format and at the level of testing required from 
domestic institutions. These submissions would be reviewed on an equal 
footing with domestic institutions, and allow the Department to 
evaluate efficiently and effectively the financial condition of those 
institutions. The Department explained that financial statements 
prepared under U.S. GAAP provide Department staff with detailed 
information about the financial condition and operation of an 
institution. The additional information comes from the analysis of the 
audited financial statements, the accompanying audit opinion letters 
and related disclosures, and items in the footnote disclosures. 
Although the Department explored the use of IFRS as an alternative to 
U.S. GAAP, the Department believes it is premature to consider doing so 
now because the adoption of IFRS by the U.S. and other countries is 
proceeding slowly and inconsistently within the different countries.
    After consideration of the feedback from the non-Federal 
negotiators, the Department agreed to treat nonprofit and public 
foreign institutions alike, and removed the requirement that an unpaid 
liability due to the Secretary by related public institutions would 
require the submission of audited financial statements prepared in 
accordance with U.S. GAAP. In order to reach a compromise with the non-
Federal negotiators, the Department agreed to raise the threshold for 
nonprofit and public foreign institutions that would be allowed to 
submit audited financial statements prepared in accordance with the 
generally accepted accounting principles of the institution's home 
country from $1,000,000 to $3,000,000 in U.S. Title IV, HEA program 
funds.
    The Department also clarified that a foreign institution required 
to submit audited financial statements prepared in accordance with U.S. 
GAAP would be required also to submit a copy of the institution's 
audited financial statements that were prepared under the institution's 
home country accounting standards for the same period. By doing so, the 
Department would be able to perform a comparative analysis between both 
sets of financial statements to determine if the requirement to provide 
U.S. GAAP financial statements could be changed in the future.
    Upon hearing the revised regulatory proposals, several non-Federal 
negotiators suggested that, in lieu of a required annual submission of 
any audited financial statements, the Department could simply rely on 
applying the exception provided to the Secretary under Sec.  
668.23(h)(3)(i) and require an institution to submit audited financial 
statements on only an ``as needed'' basis. Some non-Federal negotiators 
suggested raising the threshold to as much as $10,000,000 in U.S. Title 
IV, HEA program funds. Others suggested that a threshold should be 
based on a percentage of U.S. Title IV, HEA program funds received 
against the total student generated revenues by an institution.
    The Department responded to these concerns with a final 
modification for public and nonprofit institutions that receive at 
least $3,000,000 but less than $5,000,000 in U.S. Title IV, HEA program 
funds annually. The Department was unwilling to accept only audited 
financial statements prepared in the home country standards on an 
ongoing basis for these institutions due to the unknown comparability 
of these submissions to audited financial statements prepared under 
U.S. GAAP. However, the Department proposed having these institutions 
submit U.S. GAAP financial statements once every three years, rather 
than every year, which would allow the Department to achieve the 
appropriate level of monitoring while providing some burden relief to 
these institutions. This proposal was discussed in detail, and 
consensus was reached on this issue.

Compliance Audits (Sec.  668.23)

    Statute: Section 487(c)(1)(A)(i) of the HEA was amended by the HEOA 
to give the Secretary the authority to modify the financial and 
compliance audit requirements for foreign institutions, and the 
authority to waive the audit requirements for foreign institutions that 
receive less than $500,000 in Title IV, HEA program funds in the 
preceding year.
    Current Regulations: Section 668.23(a)(2) of the current 
regulations requires an annual submission of both a compliance audit 
and audited financial statements from all institutions participating in 
the Title IV, HEA programs.
    Sections 668.23(b)(1) and (2) require that an institution's 
compliance audit must cover, on a fiscal year basis, all Title IV, HEA 
program transactions, and must cover all of those transactions that 
have occurred since the period covered by the institution's last 
compliance audit. They also require that the compliance audit under 
this section be conducted in accordance with the general standards for 
compliance audits contained in the U.S. GAO Government Auditing 
Standards and procedures for audits contained in audit guides developed 
by the Department of Education's Office of Inspector General.
    The Inspector General's current Foreign School Audit Guide, as 
amended, includes an Alternative Compliance Engagement that may be used 
for foreign institutions whose enrolled students received less than the 
$500,000 threshold in U.S. Title IV, HEA program funds.
    Proposed Regulations: The proposed regulations would separate 
foreign institutions into two groups, establishing new compliance audit 
requirements for foreign institutions based upon whether the 
institution received less than $500,000 or $500,000 or more in U.S. 
Title IV, HEA program funds during the institution's most recently 
completed fiscal year.
    Under proposed Sec.  668.23(h)(2)(ii) and (iii), foreign 
institutions that receive less than $500,000 per year in U.S. Title IV, 
HEA program funds would be required to submit compliance audits under 
an alternative compliance audit performed in accordance with the audit 
guide from the Department's Office of Inspector General. The proposed 
regulations would require an annual submission of the compliance audit, 
except that, under certain conditions as described in the following 
paragraphs, an institution would submit a compliance audit annually for 
two consecutive years, then, once notified by the Secretary, would be 
permitted to submit a cumulative compliance audit every three years 
thereafter.
    In order to submit a cumulative compliance audit once every three 
years instead of annually, a foreign institution would be required to 
have received less than $500,000 U.S. in U.S. Title IV, HEA program 
funds for its most recently

[[Page 42212]]

completed fiscal year, be fully certified, have timely submitted and 
had accepted compliance audits for two consecutive fiscal years, and 
have no history of late submissions since then.
    Under an alternative compliance audit, the auditor performs 
prescribed procedures and reports the findings, but, unlike a standard 
compliance audit, is not required to express an opinion of the 
reliability of the institution's assertions concerning the 
institution's compliance with the requirements. The alternative 
compliance audit is performed as an agreed-upon procedures attestation 
engagement, and the standard compliance audit is performed as an 
examination-level attestation engagement. An alternative compliance 
audit is an agreed-upon procedures attestation engagement, which 
consists of specific procedures performed on a subject matter and is 
substantially narrower in scope than a standard compliance audit, which 
is an examination-level attestation engagement.
    Under proposed Sec.  668.23(h)(2)(i), foreign institutions that 
receive $500,000 or more per year in U.S. Title IV, HEA program funds, 
as in the current regulations, would be required to submit annual 
compliance audits using the standard audit procedures for foreign 
institutions set out in the audit guide issued by the Office of 
Inspector General.
    When an institution submits a standard compliance audit because it 
received more than $500,000 in U.S. Title IV, HEA program funds in its 
previous year, the institution must also submit any alternative 
compliance audit or audits for preceding years that were prepared in 
accordance with proposed Sec.  668.23(h)(2)(ii) for any preceding 
fiscal year or years in which the foreign institution received less 
than $500,000 in U.S. Title IV, HEA program funds.
    Section 668.23(h)(3)(ii) of the proposed regulations would provide 
the Secretary with the authority to require that a foreign 
institution's compliance audit must be performed at a higher level of 
engagement, and/or require that a compliance audit must be submitted to 
the Secretary annually, if the institution has been notified by the 
Secretary about problems with its administrative capability or 
compliance reporting.
    Section 668.23(h)(2) of the proposed regulations would make clear 
that, as under current regulations, a foreign institution's compliance 
audit must be done on a fiscal year basis, and all Title IV, HEA 
program transactions that have occurred since the period covered by the 
institution's last compliance audit must be covered. For institutions 
that are permitted to submit one compliance audit every three years, 
this requirement ensures that the compliance audit is cumulative. Also, 
when an institution is required to submit a compliance audit, the 
compliance audit must be submitted no later than six months after the 
last day of the institution's preceding fiscal year.
    Reasons: The Department believes that by allowing foreign 
institutions that receive $500,000 or less in U.S. Title IV, HEA 
program funds per year to make less frequent audit submissions, the 
proposed regulations would provide a basis to establish a streamlined 
set of compliance audit requirements that would provide flexibility and 
cost benefits to a large number of relatively small foreign 
institutions and would reduce the reporting burden for the majority of 
foreign institutions that currently participate in the Title IV, HEA 
programs.
    The proposed regulations would also allow the Department to 
concentrate its resources on reviewing compliance audits from larger 
volume institutions and institutions that have demonstrated Title IV, 
HEA program problems, which represent the Department's greatest 
financial risk. It would also be more efficient to review the 
cumulative audit submissions from lower-volume foreign institutions. 
Approximately 75% of the foreign institutions that participate in the 
Title IV, HEA programs are in this lower-volume group, and these 
institutions account for less than 7.5% of total Title IV, HEA program 
funds received by foreign institutions. Where problems are identified 
with a foreign institution, Sec.  668.23(h)(3)(ii) of the proposed 
regulations provides that the Secretary may require the compliance 
audit to be performed at a higher level of engagement and may require 
the compliance audit to be submitted annually.

Public Foreign Institutions and Financial Responsibility (Sec.  
668.171)

    Statute: Section 487(c)(1)(B) of the HEA provides that the 
Secretary shall prescribe regulations, as necessary, to provide for the 
establishment of reasonable standards of financial responsibility for 
institutions that participate in the Title IV, HEA programs. Section 
102(a)(2)(A) of the HEA provides that the Secretary shall prescribe 
regulations for determining the comparability of foreign institutions 
to Title IV ``institutions of higher education.''
    Current Regulations: Section 668.171(c) provides that an 
institution is financially responsible if the institution--
     Notifies the Secretary that it is designated as a public 
institution by the State, local, or municipal government entity, tribal 
authority, or other government entity that has the legal authority to 
make that designation; and
     Provides a letter from an official of that State or other 
government entity confirming that the institution is a public 
institution. In addition, the institution may not be in violation of 
any past performance requirement.
    Proposed Regulations: The proposed regulations would permit a 
foreign public institution to meet the financial responsibility 
requirements in a manner similar to domestic public institutions. That 
is, the Secretary would consider a public foreign institution to be 
financially responsible if the institution: (1) Notifies the Secretary 
that it is designated as a public institution by the country or other 
government entity that has the legal authority to make that 
designation; and (2) provides documentation from an official of that 
country or other government entity confirming that the institution is a 
public institution and is backed by the full faith and credit of the 
country or other government entity. As with domestic public 
institutions, a foreign public institution would not meet this standard 
of financial responsibility if it was in violation of any past 
performance requirement.
    If a foreign public institution did not meet the new requirements, 
its financial responsibility would be determined under the general 
requirements of financial responsibility, including the application of 
the equity, primary reserve, and net income ratios. Although the full 
faith and credit provision would provide an alternate way of meeting 
the financial responsibility standards for public foreign institutions, 
it would not excuse the institution from required submissions of 
audited financial statements (see the discussion under Audited 
Financial Statements above). If a government entity provided full faith 
and credit backing, the entity would be held liable for any Title IV, 
HEA program liabilities that were not paid by the institution.
    Reasons: Current Sec.  668.171(c) is not addressed to foreign 
institutions. Therefore, the proposed regulations would establish a 
financial responsibility standard for public foreign institutions that 
is comparable to public domestic institutions that participate in the 
Title IV, HEA programs. Although the Department has not identified 
specific countries that would be willing to provide the

[[Page 42213]]

proposed full faith and credit backing, and one non-Federal negotiator 
reported that a particular country with several public institutions 
that participate in the Title IV, HEA programs did not think that it 
would be willing to provide such backing, the Committee agreed that it 
was a good idea to make this alternative available.

Executive Order 12866

Regulatory Impact Analysis

    Under Executive Order 12866, the Secretary must determine whether 
the regulatory action is ``significant'' and therefore subject to the 
requirements of the Executive Order and subject to review by the OMB. 
Section 3(f) of Executive Order 12866 defines a ``significant 
regulatory action'' as an action likely to result in a rule that may 
(1) have an annual effect on the economy of $100 million or more, or 
adversely affect a sector of the economy, productivity, competition, 
jobs, the environment, public health or safety, or State, local, or 
tribal governments or communities in a material way (also referred to 
as an ``economically significant'' rule); (2) create serious 
inconsistency or otherwise interfere with an action taken or planned by 
another agency; (3) materially alter the budgetary impacts of 
entitlement grants, user fees, or loan programs or the rights and 
obligations of recipients thereof; or (4) raise novel legal or policy 
issues arising out of legal mandates, the President's priorities, or 
the principles set forth in the Executive order.
    Pursuant to the terms of the Executive Order, it has been 
determined this proposed regulatory action would not have an annual 
effect on the economy of more than $100 million. Therefore, this action 
is not ``economically significant'' and subject to OMB review under 
section 3(f)(1) of Executive Order 12866. Notwithstanding this 
determination, the Secretary has assessed the potential costs and 
benefits of this regulatory action and has determined that the benefits 
justify the costs.

Need for Federal Regulatory Action

    These proposed regulations are needed to implement provisions of 
the HEA, as amended by the HEOA, particularly related to audit 
requirements for foreign institutions, the USMLE pass rate for foreign 
graduate medical schools, clinical training programs of foreign 
graduate medical schools, eligibility criteria for foreign graduate 
medical schools that have a clinical training program approved by a 
State prior to January 1, 2008, clinical training programs for foreign 
veterinary schools, provisions for participation by for-profit foreign 
nursing schools, and eligibility restrictions applicable to for-profit 
(and, later, all) foreign nursing schools. A brief description of the 
proposed rules, the reasons for adopting them, and an analysis of their 
effects is presented in the following sections of this NPRM:
    Definition of a Foreign Institution (Sec. Sec.  600.51, 600.52, 
600.54, 682.200, 682.611): Section 102(a)(2)(A) of the HEA requires the 
Secretary to establish regulatory criteria for the approval of foreign 
institutions and for the determination that they are comparable to an 
institution of higher education within the United States. Proposed 
Sec. Sec.  600.52 and 600.54 would include a more detailed definition 
of foreign institution to ensure that a foreign institution is 
comparable to institutions in the United States, in accordance with HEA 
section 102(a)(1)(C), before allowing a foreign institution to 
participate in the Title IV, HEA programs. The Department is concerned 
that a foreign institution that is not comparable to a domestic 
institution, especially in terms of the quality of its educational 
programs, may misuse Federal funds to the detriment of its students who 
may have to borrow heavily in order to attend the foreign institution. 
The proposed regulations also more fully implement the scheme of the 
HEA, which distinguishes between foreign and domestic institutions and 
includes provisions unique to each. For example, these regulations 
would prevent a domestic institution from claiming to be a foreign 
institution by virtue of the fact that it has established an offshore 
location, thereby avoiding the requirements applied to domestic 
institutions such as recognized accreditation, but that sends its 
students to the United States for the majority of the required 
coursework.
    As described in the preamble section related to this provision, 
under current regulations a foreign institution is eligible to 
participate if it is comparable to an institution of higher education 
located in the United States; has been approved by the Secretary; does 
not offer its programs through any use of telecommunications, 
correspondence course, or direct assessment program; is not located in 
a State as defined in Sec.  600.2; admits as regular students only 
those with a secondary school credential or recognized equivalent; and 
is legally authorized by an appropriate authority to provide an 
eligible program beyond the secondary level in the country in which it 
is located. The foreign institution must also provide eligible programs 
for which the institution is authorized to award the equivalent of an 
associate, baccalaureate, graduate, or professional degree in the 
United States; or a two-year program acceptable for full credit towards 
the equivalent of a baccalaureate degree awarded in the United States; 
or a program equivalent to a one-academic year training program that 
leads to a certificate, degree, or other credential and prepares a 
student for gainful employment in a recognized occupation.
    The proposed regulations would consolidate the definitions and 
requirements related to the eligibility of foreign institutions to 
apply for Title IV, HEA program eligibility in subpart E of 34 CFR 600. 
As is the current practice, foreign institutions would be required to 
comply with all other requirements for eligible and participating 
institutions except to the extent the provisions are inconsistent with 
the HEA, 34 part CFR 600, or other regulatory provisions specific to 
foreign institutions. Proposed Sec.  600.51(c) would also exempt 
foreign institutions from requirements that the Secretary identifies 
through a notice in the Federal Register. The proposed regulations 
would amend Sec.  600.52 to include a detailed definition of foreign 
institution. Under the definition proposed, foreign institution would 
mean, for the purposes of students who receive Title IV, HEA program 
aid, an institution that is not located in a State; has no U.S. 
locations except with respect to clinical training for foreign graduate 
medical, veterinary, and nursing schools; has no written agreements 
with institutions or organizations located in the United States for 
students to take a portion of the program in the United States; does 
not permit students to enroll in any course offered by the foreign 
institution in the United States except for independent research under 
very limited circumstances; is legally authorized by an agency of its 
home country to provide an education program beyond its secondary 
level; awards degrees that are officially recognized by the 
institution's home country; and, for a program designed to prepare a 
student for gainful employment in a recognized occupation, provides a 
credential that satisfies the education requirements in the 
institution's home country for entry into that occupation and satisfies 
the educational requirements for entry into that occupation in the 
United States, including licensure. Proposed Sec.  600.54(a) clarifies 
that, with the exception of freestanding foreign

[[Page 42214]]

graduate medical, veterinary, or nursing schools that may be for-
profit, foreign institutions must be public or private nonprofit 
education institutions to be eligible.
    Nonprofit Status for Foreign Institutions (Sec.  600.2): As foreign 
institutions must be public or private nonprofit institutions to 
participate in the Title IV, HEA programs, unless they are medical, 
veterinary, or nursing schools, the Department believes it is necessary 
to delineate in regulations the requirements for demonstrating 
nonprofit status for foreign institutions. Current section 600.2 
defines a nonprofit institution as an institution that--
     Is owned and operated by one or more nonprofit 
corporations or associations, no parts of the net earnings of which 
benefits any private shareholder or individual;
     Is legally authorized to operate as a nonprofit 
organization by each State in which it is physically located; and
     Is determined by the U.S. Internal Revenue Service (IRS) 
to be an organization to which contributions are tax-deductible in 
accordance with section 501(c)(3) of the Internal Revenue Code (26 
U.S.C. 501(c)(3)).
    Under proposed Sec.  600.2, a new paragraph (2) of the definition 
of a nonprofit institution would provide that if a recognized tax 
authority of a foreign institution's home country is recognized by the 
Secretary for purposes of making determinations of an institution's 
nonprofit status for Title IV, HEA purposes, the Secretary would 
automatically accept that tax authority's determination of nonprofit 
educational status for any institution located in that country. If a 
recognized tax authority of the institution's home country is not 
recognized by the Secretary for purposes of making determinations of an 
institution's nonprofit status for Title IV, HEA program purposes, a 
foreign institution would have to demonstrate to the satisfaction of 
the Secretary that it is a nonprofit educational institution. The 
proposed regulations would also make clear that a nonprofit foreign 
institution may not be owned by a for profit entity, directly or 
indirectly. A foreign institution that did not meet this definition of 
a nonprofit foreign institution would not be eligible to participate in 
the Title IV, HEA programs unless it was a medical, veterinary, or 
nursing school.
    The proposed regulations should increase comparability in the 
determination of nonprofit status between domestic and foreign 
institutions. A domestic institution must be determined by the IRS to 
be a nonprofit organization in order to be eligible as a nonprofit 
institution for participation in the Title IV, HEA programs. 
Additionally, certain countries may not have standards for the 
determination of nonprofit status that are comparable to those used in 
the United States, and may not ensure that the institution's net 
earnings do not benefit any private shareholder or individual. 
Therefore, to make the proposed regulations as comparable as possible 
to those applicable to domestic institutions, the Department proposed, 
and the Committee agreed, that a determination that an institution is 
nonprofit by an entity in the institution's foreign country would 
qualify an institution as nonprofit only if the determination is made 
by a recognized tax authority of the country, and the Secretary has 
recognized that tax authority as one that can make a determination 
using criteria that are similar to those used by the U.S. IRS. The 
Secretary may recognize more than one tax authority in a country. 
Information submitted by entities other than recognized tax authorities 
would be taken into account by the Department; however, this would be 
done as part of an individual determination of the eligibility of an 
institution.
    Foreign Graduate Medical Schools (Sec. Sec.  600.20, 600.21, 
600.52, 600.55): As discussed in the section of the preamble related to 
this provision, the proposed regulations reflect amendments made to the 
sections 102(a)(2)(A) and (B) of the HEA by the HEOA and the 
requirement in 102(a)(2)(B)(iii)(IV)(aa) of the HEA that the 
regulations be based on the recommendations of the 2009 NCFMEA report. 
The NCFMEA is a panel of medical experts that evaluates the medical 
school accrediting agency standards used in the country where medical 
education is provided to determine comparability to the standards of 
accreditation applied to medical schools in the United States.
    Current section 600.52 defines a foreign graduate medical school as 
a foreign institution that qualifies to be listed in, and is listed as 
a medical school in, the most current edition of the World Directory of 
Medical Schools published by the World Health Organization. The 
regulations do not define clinical training, the NCFMEA, or a post-
baccalaureate/equivalent medical degree. Neither section 600.20, which 
addresses the application procedures for establishing, reestablishing, 
maintaining, or expanding institutional eligibility and certification, 
nor Sec.  600.21, which addresses when and how an institution must 
update application information, currently include any provisions 
specific to foreign graduate medical schools. Foreign graduate medical 
schools generally must meet the criteria in Sec.  600.54 for 
determining a foreign institution's eligibility (except the criterion 
that the institution be public or private nonprofit), as well as the 
additional criteria in Sec.  600.55(a)(5). The additional criteria 
include the following: (1) Providing and requiring students to complete 
a program of clinical and classroom medical instruction of not less 
than thirty-two months that is supervised closely by faculty and that 
is provided (a) outside the United States in facilities adequately 
equipped and staffed to afford students comprehensive clinical and 
classroom medical instruction, or (b) in the United States, through a 
training program for foreign medical students that has been approved by 
all medical licensing boards and evaluating bodies whose views are 
considered relevant by the Secretary; (2) having graduated classes 
during each of the two twelve-month periods immediately preceding the 
date the Secretary receives the school's request for an eligibility 
determination; (3) employing only those faculty members whose academic 
credentials are the equivalent of credentials required of faculty 
members teaching the same or similar courses at medical schools in the 
United States; and (4) being approved by an accrediting body that is 
legally authorized to evaluate graduate medical schools in the country 
where the school is located and whose standards of accreditation have 
been evaluated by the advisory panel of medical experts established by 
the Secretary and have been determined to be comparable to standards of 
accreditation applied to medical schools in the United States. In 
addition, current regulations provide that foreign graduate medical 
schools that do not have a clinical training program that has been 
continuously approved by a State since January 1, 1992, must: (1) 
During the academic year preceding the year for which any of the 
school's students seeks a FFEL program loan, have at least 60 percent 
of those enrolled as full-time regular students in the school and at 
least 60 percent of the school's most recent graduating class be 
persons who did not meet the citizenship and residency criteria 
contained in section 484(a)(5) of the HEA, 20 U.S.C. 1091(a)(5); and 
(2) for a foreign graduate medical school outside of Canada, have at 
least 60 percent of the school's students and graduates who took any 
step of the USMLE administered by the

[[Page 42215]]

ECFMG (including the ECFMG English test) in the year preceding the year 
for which any of the school's students seeks a FFEL program loan to 
have received passing scores on the exams.
    The proposed regulations would deal with location requirements for 
foreign medical education programs, affiliation agreements, application 
and notification procedures, accreditation, admission criteria, 
collection and submission of data, citizenship and USMLE pass rate 
percentages, maximum timeframes for program completion, required 
documentation related to educational remediation a school provides as 
part of a satisfactory academic progress policy, and publication of the 
languages in which instruction is offered.
    Proposed Sec.  600.55(h) contains regulations concerning the 
locations where a foreign graduate medical school can establish its 
program. No portion of the medical education program offered to United 
States students by a foreign graduate medical school, other than the 
clinical training portion of the program, would be allowed to be 
offered outside the country where the main campus of the school is 
located. In addition to distinguishing between the basic science and 
the clinical training parts of the program, the Committee discussions 
distinguished between the different parts of clinical training; 
referred to in these proposed regulations as the core, the required 
clinical rotation (the electives that students are required to take), 
and the not required clinical rotation (the electives that students can 
choose). The proposed regulations set three criteria for clinical 
training sites outside the United States--the requirement to be located 
in an approved comparable country; required on-site evaluation and 
specific approval of the site by the institution's medical accrediting 
agency if a location is in a comparable foreign country outside the 
country of the program's main campus; and the requirement that 
instruction be offered in conjunction with medical educational programs 
offered to students enrolled in accredited medical schools located in 
that approved foreign country--but allow two exceptions. The two 
exceptions would permit a foreign graduate medical school to have a 
clinical training program in a foreign country other than the country 
in which the main campus is located or in the United States without 
meeting these three criteria if the clinical training location is 
included in the accreditation of a medical program accredited by the 
LCME, or if no individual student takes more than two electives at the 
clinical training location and the combined length of the electives 
does not exceed eight weeks.
    Proposed Sec.  600.55(e)(1) would require a foreign graduate 
medical school to have: (1) A formal affiliation agreement with any 
hospital or clinic at which all or a portion of the school's core 
clinical training or required clinical rotations are provided; and (2) 
either a formal affiliation agreement or other written arrangements 
with any hospital or clinic at which all or a portion of its clinical 
rotations that are not required are provided, except for those 
locations that are not used regularly, but instead are chosen by 
individual students who take no more than two electives at the location 
for no more than a combined total of eight weeks. The proposed 
regulations would require these affiliation agreements or other written 
arrangements to state how the following will be addressed at each site: 
(1) Maintenance of the school's standards; (2) appointment of faculty 
to the medical school staff; (3) design of the curriculum; (4) 
supervision of students; (5) provision of liability insurance; and (6) 
evaluation of student performance. In addition, the proposed 
regulations would require a foreign graduate medical school to do the 
following in its application for participation in Title IV, HEA 
programs: (1) To provide copies of the affiliation agreements with 
hospitals and clinics that it is required to have under proposed Sec.  
600.55(e)(2); (2) to list all educational sites associated with its 
program on its application for participation, except those not used 
regularly that are chosen by individual students who take no more than 
two electives there for no more than a combined total of eight weeks; 
(3) to apply for certification and wait for approval before dispensing 
Title IV, HEA program funds at any additional location that offers core 
clinical training, except for those locations included in the 
accreditation of a medical program accredited by the LCME; and (4) to 
indicate whether it offers only post-baccalaureate/equivalent medical 
programs, other types of programs that lead to employment as a doctor 
of osteopathic medicine or doctor of medicine, or both. The Department 
believes that distinguishing between the parts of the medical education 
program allows a balance between effective oversight and exposure to 
other medical environments and cultures for short-term elective 
training.
    Other proposed regulations address general definitions and 
requirements related to foreign graduate medical programs. The proposed 
regulations would change the definition of a foreign graduate medical 
school, removing the requirement that a school qualify for listing in 
the World Directory of Medical Schools and clarifying that schools 
would have to meet all applicable criteria for foreign institution's 
Title IV, HEA program eligibility in part 600, not just the criteria in 
Sec.  600.55. In its place, the definition proposed would clarify that 
a foreign graduate medical school can be free-standing or a component 
of an eligible foreign institution. Current regulations require only 
clinical training and classroom instruction that is offered outside of 
the United States to be provided in facilities adequately equipped and 
staffed to afford students comprehensive clinical and classroom medical 
instruction, and require only the clinical training and classroom 
instruction located in the United States to be approved by all medical 
licensing boards and evaluating bodies whose views are considered 
relevant by the Secretary. Proposed Sec.  600.55(a)(2) would apply 
these provisions to the entire medical program, regardless of whether a 
particular portion is located outside or inside the United States, as 
the Department believes both are good requirements for medical 
education regardless of location. In Sec.  600.52, the proposed 
regulations would add a definition of clinical training. Clinical 
training would be defined as the portion of a graduate medical 
education program that counts as a clinical clerkship for purposes of 
medical licensure. Proposed Sec. Sec.  600.20(a)(3)(i)(B) and 
(b)(3)(i)(B) would require freestanding foreign graduate medical 
schools, and foreign institutions that include a foreign graduate 
medical school, to identify, for each clinical site reported in the 
certification or recertification application as required under 
Sec. Sec.  600.20(a)(3)(i)(A) and (b)(3)(i)(A), the type of clinical 
training (core, required clinical rotation, not required clinical 
rotation) offered at that site. Proposed Sec.  600.55(a)(3) would 
require foreign graduate medical schools to appoint, rather than 
employ, faculty members with comparable academic credentials to those 
teaching similar courses at U.S. medical schools. The proposed 
regulations make no substantive changes to existing accreditation 
requirements for foreign graduate medical schools.
    The proposed regulations also address admission criteria and 
collection and submission of data in order to provide data for the 
evaluation of whether additional performance measures should be 
required of foreign graduate medical schools. Proposed Sec.  668.55(c)

[[Page 42216]]

would require foreign graduate medical school with a post-
baccalaureate/equivalent medical program to require U.S. citizens, 
nationals, or permanent residents accepted as students to have taken 
the MCAT and have reported the scores to the school. To provide 
information valuable for the future evaluation of the quality of 
education being provided to students attending foreign graduate medical 
schools, foreign graduate medical schools must determine consent 
requirements, obtain necessary consents from U.S. citizens, nationals, 
or eligible permanent residents, and comply with the collection and 
submission requirements in proposed Sec.  600.55(d) for MCAT scores, 
residency placement, and USMLE examination scores. Proposed Sec.  
600.55(d) requires that schools obtain the required information at 
their own expense, submit MCAT scores and medical residency data to 
their accrediting agency by September 30 of each year, and submit the 
USMLE scores for Step 1, Step 2--Clinical Skills, and Step 2--Clinical 
Knowledge to the Department annually by September 30 unless the 
Department informs the school that it will get the USMLE scores from 
ECFMG. The provision in proposed Sec.  600.55(e)(2) would require a 
foreign graduate medical school to notify its accrediting body within 
one year of any material changes in educational programs, and the 
overseeing bodies and in the formal affiliation agreements with 
hospitals and clinics would reflect NCFMEA Recommendations 12(a) and 
12(b) and would allow a school's accrediting body to assess any 
substantive impact the change would have on the school's operations.
    The proposed change in Sec.  600.55(f)(1)(i)(B) to allow a foreign 
graduate medical school to be exempt from the existing citizenship 
requirement if it had a clinical training program approved by a State 
as of January 1, 2008, and continues to operate a clinical training 
program in at least one State that approves the program, reflects a 
change made by the HEOA. As a result, both foreign graduate medical 
schools that had a clinical training program approved by a State as of 
January 1, 1992, and those that had a clinical training program 
approved by a State as of January 1, 2008, are exempt from the 
citizenship rate provision, provided the school continues to operate a 
clinical training program in at least one State that approves the 
program.
    The increase in the USMLE pass rate threshold from 60 percent to 75 
percent also reflects a change made by the HEOA, as does proposed Sec.  
600.55(f)(2)(ii), which would allow a foreign graduate medical school 
that was eligible to participate in the Title IV, HEA programs and 
exempt from the USMLE pass rate requirement based on having a clinical 
training program approved by a State as of January 1, 1992, to continue 
to be eligible and exempt from the USMLE pass rate requirement as long 
as it continues to operate a clinical training program in at least one 
State that approves the program. Proposed Sec.  600.55(f)(1)(ii) would 
make the following changes to the USMLE pass rate requirement: (1) 
Increase the USMLE pass rate threshold from 60 percent to 75 percent 
(Sec.  600.55(f)(1)(ii)); (2) limit the pass rate requirement to Step 
1, Step 2--CS, and Step 2--CK, excluding Step 3; (3) require a foreign 
graduate medical school to have at least a 75 percent pass rate on each 
step/test of the USMLE (limited to Step 1, Step 2--CS, and Step 2--CK), 
rather than a combined pass rate for all steps/tests; (4) require 
foreign graduate medical schools to include in the calculation only 
U.S. citizens, nationals, or eligible permanent residents, rather than 
all students taking the USMLE; and (5) require foreign graduate medical 
schools to include only first time test takers in the calculation. As 
described in the preamble section related to this provision, under 
proposed Sec.  600.55(f)(4), pass rates must be based on at least eight 
step/test results.
    Proposed Sec.  600.55(g)(1) would require a foreign graduate 
medical school to follow existing regulations currently applicable to 
undergraduate programs for establishing a maximum timeframe in which a 
student must complete his or her program of medical education and 
require that a student complete his or her program within 150 percent 
of the published length of the program. This adopts NCFMEA 
Recommendation 9(b). In addition, proposed Sec.  600.55(g)(2) would 
require a foreign graduate medical school to document the educational 
remediation it provides to assist students in making satisfactory 
academic progress. In the future, the Department or the NCFMEA may 
collect and examine the data to see if this is an area of concern that 
may need to be addressed, but they did not believe it was currently 
necessary or cost effective to require the regular submission of these 
data to the Department. Finally, proposed Sec.  600.55(g)(3) would 
require a foreign graduate medical school to publish all the languages 
in which instruction is offered. Although NCFMEA Recommendation 10 
suggested requiring schools to publish the primary language of 
instruction, and if not English, identify any alternate language of 
instruction, the Committee agreed that requiring schools to publish all 
languages in which instruction is offered would be more beneficial and 
no more burdensome.
    Foreign Veterinary Schools (Sec.  600.56): Section 102(a)(2)(A)(ii) 
of the HEA stipulates that Title IV borrowers attending a foreign for-
profit veterinary school must complete clinical training at an approved 
veterinary school located in the United States. The HEA does not 
establish additional eligibility criteria specific to foreign 
veterinary schools, and requires the Secretary to develop, through 
regulation, eligibility criteria for foreign institutions that are 
comparable to the eligibility criteria for domestic institutions of 
higher education. Under current regulations, foreign veterinary school 
facilities outside the United States must be adequately equipped and 
staffed to provide students comprehensive clinical and classroom 
veterinary instruction, foreign veterinary school programs provided 
inside the United States must be approved by all veterinary licensing 
boards and evaluating bodies that the Secretary considers to be 
relevant, and the credentials of faculty members employed by the 
foreign veterinary school must be equivalent to the credentials of 
faculty members teaching the same or similar courses in the United 
States.
    The Department proposed revising the regulations governing 
eligibility criteria for foreign veterinary schools to improve the 
Department's process for making determinations of eligibility of 
foreign veterinary schools to participate in the Title IV, HEA 
programs. The proposed regulations would apply the current regulatory 
standards regarding facilities, approvals and faculty credentials 
without distinguishing between portions of veterinary programs provided 
inside and outside of the United States, and, as of July 1, 2015, would 
require a foreign veterinary school to be accredited or provisionally 
accredited by an organization acceptable to the Secretary. As required 
by the HEA, the proposed regulations also distinguish between for-
profit foreign veterinary schools and those that are public or private 
nonprofit. Students from a for-profit foreign veterinary school must 
complete their clinical training at an approved veterinary school 
located in the United States. Students from public or private nonprofit 
foreign veterinary schools may complete their clinical training at an 
approved veterinary school located

[[Page 42217]]

in the United States or in the home country, and may also take clinical 
training outside the United States or the home country if no individual 
student takes more than two electives at the location and the combined 
length of the elective does not exceed eight weeks. The Department 
agreed to be consistent with medical school provisions that would 
permit some clinical training locations of foreign graduate medical 
schools to be outside of the United States and the country in which the 
main campus of the school is located. This provision could not be 
extended to for-profit veterinary schools because the statute requires 
students who attend these schools to complete their clinical training 
in the United States.
    Foreign Nursing Schools (Sec.  600.57): The HEOA amended section 
102(a)(2)(A) of the HEA to provide specific standards for foreign 
nursing schools. The amendments are effective beginning July 1, 2010, 
except that, for nursing schools that were eligible for Title IV, HEA 
program participation on August 13, 2008 (the day before enactment of 
the HEOA), they are effective July 1, 2012. The HEA, as amended by the 
HEOA and HCERA, provides that a foreign nursing school, including a 
for-profit nursing school, may not participate in the Title IV, HEA 
programs unless the school: (1) Has an clinical training agreement with 
a hospital or accredited school of nursing located in the United 
States; (2) has an agreement with an accredited school of nursing 
located in the United States providing that the students graduating 
from the foreign nursing school also receive a degree from the 
accredited U.S. school of nursing; (3) certifies only Federal Direct 
Stafford Loans under section 455(a)(2)(A) of the HEA, Federal Direct 
Unsubsidized Stafford Loans under section 455(a)(2)(D) of the HEA, or 
Federal Direct PLUS loans under section 455(a)(2)(B) of the HEA for 
students attending the school; and (4) reimburses the Secretary for the 
cost of any loan defaults for current and former students included in 
the calculation of the school's cohort default rate during the previous 
fiscal year. In addition, the HEOA amendments to the HEA require that 
at least 75 percent of the individuals who were students or graduates 
of a foreign nursing school, and who took the National Council 
Licensure Examination for Registered Nurses (NCLEX-RN) in the year 
preceding the year for which the school is certifying a Title IV, HEA 
program loan, received a passing score on the NCLEX-RN. Current 
regulations do not define the term ``foreign nursing school'', or 
specify Title IV, HEA program eligibility criteria unique to foreign 
nursing schools.
    The proposed regulations would add several new definitions relating 
to foreign nursing schools to Sec.  600.52, and would add a new Sec.  
600.57 specifying additional Title IV eligibility criteria for foreign 
nursing schools. The proposed regulations would add definitions to 
Sec.  600.52 for the terms associate degree school of nursing, 
collegiate school of nursing, and diploma school of nursing, with the 
primary distinction between the three types of nursing schools being 
the type of degree offered by the school. For an associate degree 
school of nursing, the nursing program must lead to a degree equivalent 
to an associate degree in the U.S. For a collegiate school of nursing, 
the nursing program must lead to a degree equivalent to a bachelor of 
arts, a bachelor of science, or a bachelor of nursing in the U.S., or 
to a degree equivalent to a graduate degree in nursing in the U.S. For 
a diploma school of nursing, the nursing program must lead to the 
equivalent of a diploma in the U.S. or to other indicia equivalent to a 
diploma that demonstrates that the student has satisfactorily completed 
the program. These definitions are drawn from the Public Health Service 
Act, as required by the foreign nursing school provisions of the HEOA 
amendments to the HEA.
    Proposed new Sec.  600.57 would require a foreign nursing school to 
meet the applicable eligibility criteria elsewhere in part 600. In 
addition, a foreign nursing school must meet the statutory requirements 
described above as well as the following eligibility criteria: (1) Meet 
the definition of associate degree school of nursing, collegiate school 
of nursing, or diploma school of nursing; (2) reimburse the Department 
for the cost of any loan defaults for current and former students 
included in the calculation of the institution's cohort default rate 
during the previous fiscal year; (3) determine the consent requirements 
for, and require the necessary consents of, all students accepted for 
admission who are U.S. citizens, nationals, or eligible permanent 
residents, to enable the school to comply with the requirements for 
collection and submission of NCLEX-RN results or pass rates; (4) 
annually, at its own expense, obtain all results on the NCLEX-RN 
achieved by students and graduates who are U.S. citizens, nationals, or 
eligible permanent residents, together with the dates the student has 
taken the examination (including any failed examinations) and provide 
the results to the Secretary; (5) as an alternative to obtaining the 
NCLEX results individually, the school may obtain a report or reports 
from the National Council of State Boards of Nursing (NCSB), or an NCSB 
affiliate or NCSB contractor, reflecting the percentage of the school's 
students and graduates taking the NCLEX-RN in the preceding year who 
passed the examination, or the data from which the percentage could be 
derived, and provide the report to the Secretary; (6) provide, a 
program of clinical and classroom nursing instruction, which students 
are normally required to complete, that is supervised closely by 
members of the school's faculty. The program, which includes programs 
provided through agreements with nursing schools in the United States, 
must be provided in facilities adequately equipped and staffed to 
afford students comprehensive clinical and classroom nursing 
instruction, through a training program for foreign nursing students 
that has been approved by all nurse licensing boards and evaluating 
bodies whose views are considered relevant by the Secretary; (7) have 
graduated classes during each of the two twelve-month periods 
immediately preceding the date the Secretary receives the school's 
request for an eligibility determination; and (8) employ only those 
faculty members whose academic credentials are the equivalent of 
credentials required of faculty members teaching the same or similar 
courses at nursing schools in the United States.
    The proposed regulations also would specify that after a school 
reimburses the Secretary for the cost of a loan default, the loan is 
assigned to the school. The borrower remains liable to the school for 
the outstanding balance of the loan, under the terms and conditions 
specified in the promissory note.
    Proposed Sec.  600.56(b) would provide that no portion of the 
foreign nursing program offered to U.S. students may be located outside 
of the country in which the main campus of the foreign nursing school 
is located, except for clinical sites, which by statute must be located 
in the United States.

Single Legal Authorization for Groups of Foreign Institutions (Sec.  
600.54)

    To ease administrative burden for foreign institutions, the 
Department sought to determine if compliance with any of the foreign 
institution institutional eligibility criteria could be demonstrated at 
a nationwide level, for all eligible institutions within a country, 
rather than at the individual institution level. After discussions with 
the non-Federal negotiators and our own

[[Page 42218]]

internal review of the Title IV institutional eligibility criteria, the 
Department determined that the requirement for proof of legal 
authorization to provide postsecondary education could be provided this 
way. Section 600.54(b) of the current regulations requires a foreign 
institution to be legally authorized by an appropriate authority to 
provide postsecondary education in the country where the institution is 
located. Proposed Sec.  600.54(f) would provide three different methods 
for a foreign institution to prove that it is legally authorized to 
provide postsecondary education in the country where the institution is 
located. The documentation from a foreign country's education ministry, 
council, or equivalent agency may either be: (1) A single legal 
authorization that covers all eligible foreign institutions in the 
country; (2) a single legal authorization that covers all eligible 
foreign institutions in a jurisdiction within the country; or (3) 
separate legal authorizations for each eligible foreign institution in 
the country.
    The proposed regulations reflect recommendations made in response 
to concerns raised by non-Federal negotiators about reliance on 
national governments to produce lists of institutions legally 
authorized to provide postsecondary education because of efficiency and 
provincial level regulation of educational providers in some countries. 
In addition to allowing proof of legal authorization to be provided on 
a nationwide basis, the proposed regulations allow for proof of legal 
authorization to be provided for all eligible institutions in a 
jurisdiction within the country, and continue to allow proof of legal 
authorization to be provided separately for each eligible institution 
in a country.
    Eligibility of Training Programs at Foreign Institutions (Sec.  
600.54): Section 101(b)(1) of the HEA provides, in part, that one type 
of educational program that a Title IV ``institution of higher 
education'' may provide to be eligible to apply to participate in the 
Title IV, HEA programs, is a training program of at least one year that 
prepares students for gainful employment in a recognized occupation. 
Section 102(a)(2)(A) provides for participation in the Title IV, HEA 
programs by entities that are comparable to such institutions under 
regulations prescribed by the Secretary. Current regulations provide 
that, in order to be eligible to apply to participate in the Title IV, 
HEA programs, a foreign institution must provide an eligible 
educational program that leads to a degree that is equivalent to a U.S. 
degree, or be at least a two-academic year program acceptable for full 
credit toward the equivalent of a U.S. baccalaureate degree, or be 
equivalent to at least a one-academic-year training program that leads 
to a certificate, degree, or other recognized educational credential 
and prepares students for gainful employment in a recognized 
occupation.
    Under the proposed regulations, a foreign institution would have to 
demonstrate to the satisfaction of the Secretary (who would make 
program-by-program determinations of comparability) that the amount of 
academic work required by a program it seeks to qualify as eligible as 
at least a one-academic-year training program is equivalent to--
     For a program offered in credit hours, a minimum of 30 
weeks of instructional time and, for an undergraduate program, an 
amount of instructional time whereby a full-time student is expected to 
complete at least 24 semester or trimester credit hours or 36 quarter 
credit hours; or
     For a program offered in clock hours, a minimum of 26 
weeks of instructional time and, for an undergraduate program, an 
amount of instructional time whereby a full-time student is expected to 
complete at least 900 clock hours.
    The Department believes the proposed regulations are necessary 
because many foreign institutions use educational measurements other 
than conventional U.S. semester, trimester, quarter credits and clock-
hours. The non-Federal negotiators provided the Department with 
information regarding the definition of non-degree programs by 
different countries, units of measurement for programs in other 
countries, and evaluation and comparability determinations made by 
private entities. The information provided consistently indicates that 
the assignment of credits or other measures of academic work by foreign 
institutions vary greatly. As the definition of an academic year--the 
program length measurement used here--specifically references these 
U.S. measurements, it is necessary to make some sort of comparability 
determination in order to determine the eligibility of these programs 
at foreign institutions, and in some cases to determine the eligibility 
of the foreign institution itself. Under the proposed regulations, the 
Secretary would make determinations of comparability on a program-by-
program basis, based on information provided by a foreign institution 
to demonstrate that the amount of academic work required by a program 
it seeks to qualify as eligible as comparable to at least a one-
academic-year training program is equivalent to the academic work 
required for eligibility of these programs at domestic institutions.
    Audited Financial Statements (Sec.  668.23): Section 
487(c)(1)(A)(i) of the HEA was amended by the HEOA to give the 
Secretary the authority to modify the financial and compliance audit 
requirements for foreign institutions and the authority to waive the 
audit requirements for foreign institutions that receive less than 
$500,000 in Title IV, HEA program funds in the preceding year. 
Currently, under Sec.  668.23(a)(2), an annual submission of both a 
compliance audit and audited financial statements is required of all 
institutions participating in the Title IV, HEA programs. Section 
668.23(d)(1) requires that an institution's financial statements must 
be prepared on an accrual basis in accordance with U.S. GAAP, and 
audited by an independent auditor in accordance with U.S. GAGAS, or in 
compliance with guidance in Office of Management and Budget Circular A-
133 and A-128 or in audit guides developed by, and available from, the 
Department of Education's Office of Inspector General.
    The proposed regulations categorize foreign institutions by control 
and amount of Title IV, HEA program funds received during the 
institution's most recently completed fiscal year and establish new 
financial audit submission requirements. For a public or nonprofit 
foreign institution that received less than $500,000 in U.S. Title IV, 
HEA program funds during the institution's most recently completed 
fiscal year, the audited financial statements submission normally would 
be waived. However, if the institution is in its initial provisional 
period of participation, and received Title IV, HEA program funds 
during that year, the institution must submit, in English, audited 
financial statements prepared in accordance with generally accepted 
accounting principles of the institution's home country. For a public 
or nonprofit foreign institution that received at least $500,000 but 
less than $3,000,000 in U.S. Title IV, HEA program funds during its 
most recently completed fiscal year, the institution would be allowed 
to submit for that year, in English, audited financial statements 
prepared in accordance with the generally accepted accounting 
principles of the institution's home country in lieu of financial 
statements prepared in accordance with U.S. GAAP. For a public or 
nonprofit foreign institution that received at least $3,000,000 but 
less than $5,000,000 in

[[Page 42219]]

U.S. Title IV, HEA program funds during its most recently completed 
fiscal year, the institution would be required to submit once every 
three years audited financial statements prepared in accordance with 
the generally accepted accounting principles of both the institution's 
home country and U.S. GAAP, but, for the two years in between, would be 
allowed to submit in English, audited financial statements prepared in 
accordance with the generally accepted accounting principles of the 
institution's home country in lieu of financial statements prepared in 
accordance with U.S. GAAP. Foreign institutions that receive more than 
$5,000,000 or more annually would remain subject to current 
requirements for audited financial statements prepared in accordance 
with U.S. GAAP.
    The proposed regulations also allow the Secretary to issue a letter 
to a foreign institution that has been identified as having problems 
with its financial condition or financial reporting that requires the 
foreign institution to submit its audited financial statements in the 
manner specified by the Secretary.
    Compliance Audits (Sec.  668.23): Current regulations require an 
annual submission of both a compliance audit and audited financial 
statements from all institutions participating in the Title IV, HEA 
programs. An institution's compliance audit must cover on a fiscal year 
basis, all Title IV, HEA program transactions, and must cover all of 
those transactions that have occurred since the period covered by the 
institution's last compliance audit and be conducted in compliance with 
the general standards for compliance audits contained in the U.S. GAO 
Government Auditing Standards and procedures for audits contained in 
audit guides developed by the Department of Education's Office of 
Inspector General. The current Inspector General's Audit Guide 
concerning compliance audits for foreign institutions includes an 
Alternative Compliance Engagement that may be used for foreign 
institutions whose enrolled students received less than the $500,000 
threshold in U.S. Title IV, HEA program funds.
    The proposed regulations would separate foreign institutions into 
two groups, establishing new compliance audit requirements for foreign 
institutions based upon whether the institution received less than 
$500,000 or $500,000 or more in U.S. Title IV, HEA program funds during 
the institution's most recently completed fiscal year. For foreign 
institutions that receive less than $500,000 per year in U.S. Title IV, 
HEA program funds would be required to submit compliance audits under 
an alternative compliance audit performed in accordance with the audit 
guide from the Department's Office of Inspector General. Under an 
alternative compliance audit, the auditor performs prescribed 
procedures and reports the findings, but, unlike a standard compliance 
audit, is not required to express an opinion of the reliability of the 
institution's assertions concerning the institution's compliance with 
the requirements. The alternative compliance audit is performed as an 
agreed-upon procedures attestation engagement, and the standard 
compliance audit is performed as an examination-level attestation 
engagement. The proposed regulations would require an annual submission 
of the compliance audit, except that, in specified circumstances, an 
institution would submit a compliance audit annually for two 
consecutive years, then, once notified by the Department, would be 
permitted to submit a compliance audit every three years thereafter. To 
qualify for these less frequent submission requirements, a foreign 
institution would be required to have received less than $500,000 in 
the most recently completed fiscal year, be fully certified, have 
timely submitted and had accepted compliance audits for two consecutive 
fiscal years, and have no history of late submissions since then.
    Foreign institutions that receive $500,000 or more in U.S. Title 
IV, HEA program funds would be required to submit an annual compliance 
audit using the standard audit procedures for foreign institutions in 
the audit guide issued by the Office of Inspector General. The 
compliance audit would be submitted along with any alternative 
compliance audits for any preceding fiscal years in which the 
institutions received less than $500,000 in U.S. Title IV, HEA program 
funds.
    Section 668.23(h)(3)(ii) of the proposed regulations would provide 
the Secretary with the authority to require that a foreign 
institution's compliance audit be performed at a higher level of 
engagement, and/or require that a compliance audit must be submitted to 
the Secretary annually if it has been identified that the institution 
has problems with its administrative capability or compliance 
reporting. Section 668.23(h)(2) of the proposed regulations would make 
clear that, as under the current regulations, a foreign institution's 
compliance audit must be done on a fiscal year basis, and all Title IV, 
HEA program transactions that have occurred since the period covered by 
the institution's last compliance audit must be covered. Also, a 
compliance audit must be submitted no later than six months after the 
last day of the institution's fiscal year.
    The Department believes the proposed regulations provide a basis to 
establish a streamlined set of compliance audit requirements that would 
provide flexibility and cost benefits to the large number of relatively 
small foreign institutions and reduce the reporting burden for the 
majority of foreign institutions. Approximately 75% of the foreign 
institutions that participate in the Title IV, HEA programs are in this 
lower-volume group, and these institutions account for less than 7.5% 
of total Title IV, HEA program funds received by foreign institutions. 
The proposed regulations should allow the Department to concentrate its 
resources on reviewing compliance audits from the larger volume 
institutions and institutions that have demonstrated Title IV, HEA 
program problems that represent the Department's greatest financial 
risk.

Public Foreign Schools and Financial Responsibility (Sec.  668.171)

    Section 487(c)(1)(B) of the HEA provides that the Secretary shall 
prescribe regulations, as necessary, to provide for the establishment 
of reasonable standards of financial responsibility for institutions 
that participate in the Title IV, HEA programs. Section 102(a)(2)(A) 
provides that the Secretary shall prescribe regulations for determining 
the comparability of foreign schools to Title IV ``institutions of 
higher education.'' Current section 668.171(c) provides that an 
institution is financially responsible if the institution notifies the 
Secretary that it is designated as a public institution by the State, 
local, or municipal government entity, tribal authority, or other 
government entity that has the legal authority to make that 
designation, and provides a letter from an official of that State or 
other government entity confirming that the institution is a public 
institution. In addition, the institution may not be in violation of 
any past performance requirement. Current Sec.  668.171(c) is not 
addressed to foreign institutions. The proposed regulations would 
permit a foreign public institution to meet the financial 
responsibility in a manner similar to domestic public institutions as 
described above. If a foreign public institution did not meet the new 
requirements, its financial responsibility would be determined under 
the general requirements of financial responsibility, including the 
application of the equity, primary reserve, and net income ratios.

[[Page 42220]]

Although the full faith and credit provision would provide an alternate 
way of meeting the financial responsibility standards for public 
foreign institutions, it would not excuse the institution from required 
submissions of audited financial statements.
    The following section addresses the alternatives that the Secretary 
considered in implementing these regulations. These alternatives are 
also discussed in more detail in the Reasons sections of this preamble 
related to the specific regulatory provisions.

Regulatory Alternatives Considered

    Definition of a Foreign Institution (Sec. Sec.  600.51, 600.52, 
600.54, 682.200, 682.611): As described in the section of the preamble 
related to this provision, there were extensive comments and 
negotiations related to the definition of a foreign institution. In 
response to the Department's position that a more detailed definition 
of foreign institution is necessary and request for comments, several 
non-Federal negotiators urged the Department to define the term to 
ensure quality control through high academic standards and suggested 
subjecting foreign institutions to accreditation by accreditors 
recognized by the Department. When the Department indicated that it 
does not recognize U.S. accreditors for accreditation of institutions 
outside the United States, the non-Federal negotiators suggested a 
requirement that foreign institutions be ``legally authorized'' by an 
appropriate authority in the country in which the institution is 
located, with some negotiators urging the Department to be flexible in 
this area as such authority could reside in different branches of 
government depending on the country. Several non-Federal negotiators 
suggested that the Department require foreign countries to recognize 
the degrees and licenses offered by a foreign institution.
    The Department drafted regulatory language that responded to these 
suggestions and also included provisions prohibiting foreign 
institutions from entering into written arrangements with institutions 
located in the United States and preventing foreign institution 
students from engaging in courses, research, work, and other pursuits 
within the United States that drew objections from the non-Federal 
negotiators. The Department included these provisions to address abuses 
whereby an institution sets up an offshore campus to claim foreign 
institution status and thus avoids domestic requirements even though 
the institution is, for all intents and purposes, a domestic 
institution, but the non-Federal negotiators felt the language was too 
broad and urged the Department to make exceptions for research 
conducted in the United States by PhD students. In responding to these 
comments, the Department clarified the meaning of the terms written 
agreement and educational enterprise and sought to further distinguish 
between foreign and domestic institutions by prohibiting foreign 
locations of an educational enterprise from being considered additional 
locations of a domestic location of the educational enterprise if the 
enterprise has at least twice as many students enrolled in foreign 
locations as those enrolled in domestic locations.
    The non-Federal negotiators were comfortable with the majority of 
the Department's proposed language but several non-Federal negotiators 
continued to raise concerns about the proposed language prohibiting 
U.S. locations of foreign institutions and written arrangements with 
institutions located in the United States. The Department indicated 
that foreign institutions can establish locations in the United States, 
but that such locations and institutions would need to be separately 
certified and meet the requirements applicable to domestic institutions 
in order for U.S. students attending them to receive Title IV, HEA 
funds. The Department does not want a foreign institution to send its 
U.S. students to a U.S. location of a foreign institution or to a U.S. 
institution with which it has an agreement for their training because 
students enrolled in a foreign institution are only eligible for Direct 
Loan program (or, before July 1, 2010, FFEL program) loans. Instead, 
the Department wants U.S. students attending postsecondary institutions 
in the United States to be eligible for the full range of Title IV, HEA 
program funds available to domestic institutions.
    Foreign Graduate Medical Schools (Sec. Sec.  600.20, 600.21, 
600.52, 600.55): The Department's initial proposal related to the 
location of foreign graduate medical schools reflected the approach 
recommended by NCFMEA Recommendation 12(a) and the Department's current 
policy of allowing clinical training sites outside of the program's 
main country if the site is located in an NCFMEA approved country, the 
institution's medical accrediting agency has conducted an on-site 
evaluation and specifically approved the site, and the clinical 
instruction is offered in conjunction with medical educational programs 
offered to students enrolled in accredited medical schools located in 
that foreign country. Several non-Federal negotiators felt this initial 
proposal was too limiting and that matriculating in different countries 
as part of a graduate medical program would benefit students by 
exposing them to medical education and practice in different 
environments and cultures. After negotiations involving possible 
locations for the basic science portion of the program as well as 
accreditation requirements for clinical training sites, the proposed 
framework that distinguishes the basic science, required clinical 
training, and elective clinical training was established. The 
Department reiterated its belief that the basic sciences part of a 
graduate medical program should be located in the same country as the 
main campus so that the classroom instruction part of the program will 
be under the direct authority of the school's accrediting body. In 
addition, the Department agreed to the position of some non-Federal 
negotiators who felt that clinical locations that are included in the 
accreditation of a medical program accredited by the LCME, such as 
locations of some Canadian schools, should be eligible regardless of 
locale because the LCME accrediting standards are those that are 
applied to medical schools in the United States.
    The Department initially proposed that, consistent with NCFMEA 
Recommendations 1(a) and 1(b), a foreign graduate medical school would 
have to require students who it admits to have a specific educational 
background (e.g., for a post-baccalaureate/equivalent medical program, 
students must have a baccalaureate degree, or at least 90 semester 
credit hours or the equivalent, in general education that includes, but 
is not limited to, coursework in the social sciences, history, and 
languages). Several of the non-Federal negotiators felt that such 
provisions were unduly limiting, and ultimately the negotiators agreed 
it would be more appropriate for the NCFMEA to establish these 
provisions as guidelines for accrediting bodies. The Department had 
also included as a part of its initial proposal, that a school having 
an integrated program for a first professional program leading to a 
Doctor of Medicine (M.D.) degree, or its equivalent must require 
students who are U.S. citizens, nationals, or permanent residents to 
take the MCAT no later than three years after admission to the program. 
The Department was ultimately persuaded to remove the provision by non-
Federal negotiators who pointed out that requiring students to take the 
MCAT early in the program would distract

[[Page 42221]]

them from the education that was preparing them to take the USMLE. 
Ultimately, the Department agreed to retain from Recommendations 1(a) 
and 1(b) only the provision that would require U.S. students who are 
admitted to a school having a post-baccalaureate/equivalent medical 
program to have taken the MCAT and to report the score. This provision 
would not require a foreign graduate medical school to give weight to a 
U.S. student's score on the MCAT as part of its admission requirements.
    The Department originally proposed requiring schools to submit data 
on all steps of the USMLE, but non-Federal negotiators pointed out that 
it would be extremely difficult for schools to obtain data on Step-3 as 
it is taken by students after they have graduated from the institution 
and a student cannot sign a consent to provide information on Step 3 to 
third parties until he or she is actually taking the test. Although the 
Department is continuing to explore the collection of data from the 
FSMB for evaluating its use in the future, the Department agrees that 
it would be unreasonable to require institutions to be responsible for 
its collection and submission at this time. To focus the USMLE pass 
rate on the students the Department is most concerned about and allow 
comparability to domestic schools, the USMLE pass rate calculation was 
limited to U.S. citizens, nationals, and eligible permanent residents 
taking the tests for the first time.
    Some non-Federal negotiators expressed concern that requiring 
foreign institutions to obtain student consent for the release of 
information may be in violation of certain countries' privacy laws. 
After reviewing an analysis of the privacy laws and requirements of one 
country that had been identified as one that could have problems in 
this area, the Department concluded that there would be several ways 
that institutions in that country could legally obtain the required 
information from students, and committed to working with those schools 
and schools in any country that have concerns to facilitate compliance. 
The Department noted, however, that the Department cannot waive 
statutory or regulatory requirements used to determine institutional 
eligibility and that if a foreign country's privacy laws did preclude 
obtaining the information and materials necessary for establishing 
compliance, the institutions located in those countries unfortunately 
would not be able to qualify for participation in the Title IV, HEA 
programs.
    Foreign Veterinary Schools (Sec.  600.56): The Department's initial 
proposal built on current practice by requiring AVMA accreditation for 
foreign veterinary schools applying to participate in Title IV, HEA 
programs. The AVMA's standards are detailed and specific, it has the 
expertise to evaluate foreign veterinary programs that the Department 
lacks, and it has a history of accrediting foreign veterinary programs 
as veterinary schools in Australia, Canada, the Netherlands and other 
foreign countries are currently accredited by the AVMA. Non-Federal 
negotiators acknowledged the quality of the AVMA's accreditation 
standards and the logic of requiring it for foreign veterinary schools 
as most U.S. students at those schools eventually practice in the 
United States. However, several non-Federal negotiators had concerns 
about requiring AVMA accreditation as it is a lengthy and expensive 
process, many foreign accrediting agencies have comparable standards, 
some schools with a small number of U.S. students would opt out of 
receiving Title IV, HEA program funds thus limiting the options for 
U.S. students, and it is difficult for for-profit veterinary schools to 
obtain AVMA accreditation because of the research component. The non-
Federal negotiators suggested using other measures such as pass rates 
on licensing exams, licensure rates, or default rates to determine 
eligibility of foreign veterinary schools. The Department noted that 
using measures such as pass rates on licensing examinations can be 
operationally complicated, raising concerns over privacy rights, 
obtaining exam results, and calculating pass rates in ways that are not 
disadvantageous to schools with low numbers of Title IV, HEA program 
students. In addition, pass rates would not necessarily be a reliable 
indicator of the academic credentials of the faculty at a foreign 
veterinary school, and would provide no indication that the facilities 
at the veterinary school are adequate and safe for the students or for 
the animals housed in the facilities. Instead, the Department accepted 
the recommendation of some of the non-Federal negotiators to replace 
the proposed requirement that a foreign veterinary school be accredited 
or provisionally accredited by the AVMA, with a requirement that the 
school be accredited or provisionally accredited by an agency 
acceptable to the Secretary. This gives the Department some flexibility 
in evaluating school's compliance with the accreditation requirement, 
and gives schools some flexibility with regard to obtaining 
accreditation. In addition, the Department delayed the effective date 
of the accreditation requirement until July 1, 2015, giving foreign 
veterinary schools that are currently in the Title IV, HEA programs 
approximately five years after final regulations are published to 
obtain accreditation from an acceptable accrediting agency.
    Foreign Nursing Schools (Sec.  600.57): As described in the 
preamble section related to this provision, the Department modeled the 
proposed language on portions of the HEOA related to foreign nursing 
schools and on existing regulatory language related to foreign medical 
and veterinary schools. For the most part, the non-Federal negotiators 
accepted this approach, but had some concerns about the provisions 
specific to foreign nursing programs. In particular, the requirement 
for clinical training to be provided in the United States, the 
requirement that a foreign nursing school reimburse the Department for 
the cost of loan defaults for loans included in the calculation of a 
school's cohort default rate, and the status of loans post-default were 
subject to extensive discussion.
    Audited Financial Statements (Sec.  668.23): The negotiators 
reached agreement on the proposed regulatory language on financial 
audits only after extensive negotiations and significant compromise. As 
detailed in the section of the preamble related to this provision, the 
Department initially proposed to require audited financial statements 
prepared in accordance with the same requirements for domestic 
institutions (U.S. GAAP) for public institutions that received 
$1,000,000 or more in U.S. Title IV, HEA program funds, or private 
foreign institutions that received $500,000 or more in U.S. Title IV, 
HEA program funds, as well as for any institution in its initial 
provisional period of participation. For public foreign institutions, 
if an institution received at least $500,000 in U.S. Title IV, program 
funds, but less than $1,000,000 in U.S. Title IV, HEA program funds 
during the institution's fiscal year preceding the audit period, the 
institution would have been allowed to submit audited financial 
statements prepared in accordance with the generally accepted 
accounting principles of the institution's home country in lieu of 
financial statements prepared in accordance with U.S. GAAP. If there 
was an unpaid liability due to the Secretary by any public institution 
controlled by the same government entity, all public institutions 
controlled by that government entity would be required to submit 
audited financial statements prepared in accordance with U.S. GAAP. 
Non-Federal negotiators argued

[[Page 42222]]

that foreign nonprofit institutions should be treated the same as 
foreign public institutions, the requirement to submit audited 
financial statements prepared in accordance with U.S. GAAP was cost 
prohibitive, a non-U.S. GAAP financial statement such as one prepared 
in accordance with International Financial Reporting Standards (IFRS) 
would be comparable and provide any information the Department with the 
information it needs, or that the audited financial statement 
requirement should be tied to cohort default rates.
    After consideration of the feedback from the non-Federal 
negotiators, the Department revised its initial proposal to treat 
nonprofit and public foreign institutions alike, and eliminated the 
provision that would have required all public institutions controlled 
by the same government entity to submit audited financial statements 
prepared in accordance with the same requirements for domestic 
institutions if there is an unpaid liability due to the Secretary by 
any public institution controlled by the same government entity. In 
addition, the Department raised the threshold for nonprofit and public 
foreign institutions that would be allowed to submit audited financial 
statements prepared in accordance with the generally accepted 
accounting principles of the institution's home country from $1,000,000 
to $3,000,000 in U.S. Title IV, program funds. The Department also 
clarified that it would require that foreign institutions that would be 
required to submit audited financial statements prepared in accordance 
with U.S. GAAP would also be required to submit a copy of an 
institution's audited financial statements for the same period that 
were prepared under the institution's home country standards, allowing 
a comparative analysis to determine if the requirement to provide U.S. 
GAAP financial statements could be changed in the future.
    Non-Federal negotiators responded to this revised proposal with 
additional comments on the thresholds for audit requirements and a 
suggestion to eliminate the $3,000,000 cap and rely entirely upon 
``exceptions'' that would permit the Secretary to require U.S. GAAP 
financial statements on a case-by-case basis. The Department reiterated 
its view that did not view the matter in terms of rigor of accounting 
standards of other countries, but a level of risk that justified 
requiring submission of U.S. GAAP financial statements. The Department 
offered a final revised proposal that modified the audit submission 
requirements for public and nonprofit institutions that receive at 
least $3,000,000 but less than $5,000,000 in U.S. Title IV, HEA program 
funds annually. Pursuant to the revised proposal, institutions in this 
group would submit financial statements prepared in accordance with 
home country accounting standards and U.S. GAAP for one year, and then, 
if no problems were identified, submit financial statements prepared in 
accordance with the home country standards for the next two years and 
once every three years, rather every year, U.S. GAAP financial 
statements.

Benefits

    Benefits provided in these regulations include submission 
requirements for compliance audits and audited financial statements 
specific to foreign institutions; a revised definition of a foreign 
institution and a definition of nonprofit status specific to foreign 
institutions; the creation of a financial responsibility standard for 
foreign public institutions that is comparable to the financial 
responsibility standard for domestic public institutions; permission 
for a single legal authorization for groups of foreign institutions 
under the purview of a single government entity; the establishment of 
program eligibility requirements specific to training programs at 
foreign institutions; institutional eligibility criteria specific to 
foreign graduate medical schools, foreign veterinary schools, and 
foreign nursing schools; and revised maximum certification periods for 
some foreign institutions. The revised requirements for audited 
financial statements improve comparability between foreign and domestic 
institutions and enhance the security of Title IV, HEA program funds 
while taking into account the burden on foreign institutions of 
different sizes. The specific eligibility criteria for foreign graduate 
medical schools allow students to benefit from exposure to other 
medical environments and cultures while ensuring a comparable education 
to that available in domestic institutions. It is difficult to quantify 
benefits related to the new institutional and other third-party 
requirements, as there is little specific data available on the effect 
of the provisions on borrowers, institutions, or the Federal taxpayer. 
The Department is interested in receiving comments or data that would 
support a more rigorous analysis of the impact of these provisions.
    As discussed in greater detail under Net Budget Impacts below, 
these proposed provisions result in net costs to the government of $0.0 
million over 2011-2015.

Costs

    Several of the provisions implemented though this NPRM would 
require regulated entities to update existing policies and procedures 
related to financial and compliance audits. Other proposed regulations 
generally would require discrete changes in specific parameters 
associated with existing requirements--such as changes to clinical 
training programs, application procedures, USMLE pass rates, and 
notification requirements--rather than wholly new requirements. 
Accordingly, entities wishing to continue to participate in the student 
aid programs have already absorbed many of the administrative costs 
related to implementing these proposed regulations. Marginal costs over 
this baseline are primarily due to new procedures that, while possibly 
significant in some cases, are an unavoidable cost of continued program 
participation. As discussed above, foreign nursing schools would be 
required to reimburse the Department for the costs of defaults for 
loans included in the calculation of the school's cohort default rate 
for the previous year. This is estimated to cost the participating 
schools approximately $3.1 to $3.9 million a year in gross default 
costs. As the subsequent holders of the loans, the schools would be 
able to pursue recovery of those funds, reducing the anticipated net 
costs to approximately $1.7 to $2.2 million. Some foreign institutions 
could choose to withdraw from participation in the Title IV, HEA 
programs as a result of these provisions. However, the Department 
believes the flexibility and targeting of the negotiated provisions 
should allow institutions to remain in the programs while enhancing the 
security of Title IV, HEA program funds and ensuring compliance with 
statutory requirements.
    In assessing the potential impact of these proposed regulations, 
the Department recognizes that certain provisions are likely to 
increase workload for some program participants, as described below. 
(This additional workload is discussed in more detail under the 
Paperwork Reduction Act of 1995 section of this preamble.) Additional 
workload would normally be expected to result in estimated costs 
associated with either the hiring of additional employees or 
independent auditors or opportunity costs related to the reassignment 
of existing staff from other activities. In total, these changes are 
estimated to increase burden on entities participating in the Federal 
Student Assistance

[[Page 42223]]

programs by 18,684 hours. Of this increased burden, 18,364 hours are 
associated with foreign institutions and 320 hours are associated with 
borrowers, generally reflecting the time required to read new 
disclosures or submit required information. Approximately 95 percent of 
this burden is associated with the financial and compliance audit 
requirements in proposed Sec.  668.23. As described in the Paperwork 
Reduction Act section of this NPRM, if the regulatory changes had not 
been proposed, the burden associated with the financial statement and 
compliance audit requirements would be significantly higher. The 
monetized cost of this additional burden, using loaded wage data 
developed by the Bureau of Labor Statistics and used for domestic 
institutions, is $466,569 of which $461,321 is associated with foreign 
institutions and $5,248 with individuals. The wage data for foreign 
institutions was assumed to be comparable to domestic institutions as 
many are located in developed economies with wages similar to those in 
the United States, institutions located in countries with lower wage 
scales have to compete for employees familiar with the lending 
programs, and substituting U.S. wage rates for those in lower wage 
countries results in a conservative estimate. For institutions, an 
hourly rate of $24.88 was used to monetize the burden of these 
provisions. This was a blended rate based on wages of $15.51 for office 
and administrative staff and $36.33 for managers and financial 
professionals, assuming that office staff would perform 55 percent of 
the work affected by these regulations. Given the limited data 
available, the Department is particularly interested in comments and 
supporting information related to possible burden stemming from the 
proposed regulations. Estimates included in this notice will be 
reevaluated based on any information received during the public comment 
period.

Net Budget Impacts

    The provisions implemented by these proposed regulations are 
estimated to have a net budget impact of -$2.6 million over FY 2011-
2015, from savings associated with the assignment of defaulted loans 
from foreign nursing schools. Consistent with the requirements of the 
Credit Reform Act of 1990, budget cost estimates for the student loan 
programs reflect the estimated net present value of all future non-
administrative Federal costs associated with a cohort of loans. (A 
cohort reflects all loans originated in a given fiscal year.)
    These estimates were developed using the Office of Management and 
Budget's Credit Subsidy Calculator. This calculator will also be used 
for re-estimates of prior-year costs, which will be performed each year 
beginning in FY 2009. The OMB calculator takes projected future cash 
flows from the Department's student loan cost estimation model and 
produces discounted subsidy rates reflecting the net present value of 
all future Federal costs associated with awards made in a given fiscal 
year. Values are calculated using a ``basket of zeros'' methodology 
under which each cash flow is discounted using the interest rate of a 
zero-coupon Treasury bond with the same maturity as that cash flow. To 
ensure comparability across programs, this methodology is incorporated 
into the calculator and used government-wide to develop estimates of 
the Federal cost of credit programs. Accordingly, the Department 
believes it is the appropriate methodology to use in developing 
estimates for these proposed regulations. That said, however, in 
developing the following Accounting Statement, the Department consulted 
with OMB on how to integrate our discounting methodology with the 
discounting methodology traditionally used in developing regulatory 
impact analyses.
    Absent evidence on the impact of these proposed regulations on 
student behavior, budget cost estimates were based on behavior as 
reflected in various Department data sets and longitudinal surveys 
listed under Assumptions, Limitations, and Data Sources. Program cost 
estimates were generated by running projected cash flows related to 
each provision through the Department's student loan cost estimation 
model. Student loan cost estimates are developed across five risk 
categories: two-year proprietary institutions, two-year public and 
private institutions, not-for-profit; freshman and sophomore at four-
year institutions, junior and senior at four-year institutions, and 
graduate students. Risk categories have separate assumptions based on 
the historical pattern of behavior--for example, the likelihood of 
default or the likelihood to use statutory deferment or discharge 
benefits--of borrowers in each category.
    Estimates indicate that three foreign graduate medical schools may 
become eligible under these provisions in the next few years but that 
this would potentially shift volume among schools but not significantly 
increase the total volume of loans. The Department estimates no 
budgetary impact for most of the proposed regulations included in this 
NPRM as there is no data indicating that the provisions will have any 
impact on the volume or composition of Federal student aid programs. 
The provision requiring foreign nursing schools to reimburse the 
Secretary for defaulted loans is expected to generate approximately 
$2.6 million in savings for the Department between 2011 and 2015.

Assumptions, Limitations, and Data Sources

    Impact estimates provided in the preceding section reflect a pre-
statutory baseline in which the HEOA changes implemented in these 
proposed regulations do not exist. Costs have been quantified for five 
years. In general, these estimates should be considered preliminary; 
they will be reevaluated in light of any comments or information 
received by the Department prior to the publication of the final 
regulations. The final regulations will incorporate this information in 
a revised analysis.
    In developing these estimates, a wide range of data sources were 
used, including data from the National Student Loan Data System; 
operational and financial data from Department of Education systems, 
including especially the Fiscal Operations Report and Application to 
Participate (FISAP); and data from a range of surveys conducted by the 
National Center for Education Statistics such as the 2008 National 
Postsecondary Student Aid Survey, the 1994 National Education 
Longitudinal Study, and the 1996 Beginning Postsecondary Student 
Survey. Data from other sources, such as the U.S. Census Bureau, were 
also used. Data on administrative burden at participating institutions 
are extremely limited; accordingly, as noted earlier in this 
discussion, the Department is particularly interested in receiving 
comments in this area.
    Elsewhere in this SUPPLEMENTARY INFORMATION section we identify and 
explain burdens specifically associated with information collection 
requirements. See the heading Paperwork Reduction Act of 1995.

Accounting Statement

    As required by OMB Circular A-4 (available at http://www.Whitehouse.gov/omb/Circulars/a004/a-4.pdf), in Table 2, we have 
prepared an accounting statement showing the classification of the 
expenditures associated with the provisions of these proposed 
regulations. This table provides our best estimate of the changes in 
Federal student aid payments as a result of these proposed regulations. 
Expenditures are

[[Page 42224]]

classified as transfers from the Federal government to student loan 
borrowers.

 Table 2--Accounting Statement: Classification of Estimated Expenditures
                              [In millions]
------------------------------------------------------------------------
                 Category                             Transfers
------------------------------------------------------------------------
Annualized Monetized Costs................  $3.9.
                                            Cost of defaults for foreign
                                             nursing schools and cost of
                                             compliance with paperwork
                                             requirements.
Annualized Monetized Transfers............  $0.
From Whom To Whom?                          Federal Government To
                                             Student Loan Borrowers.
------------------------------------------------------------------------

Clarity of the Regulations

    Executive Order 12866 and the Presidential memorandum on ``Plain 
Language in Government Writing'' require each agency to write 
regulations that are easy to understand.
    The Secretary invites comments on how to make these proposed 
regulations easier to understand, including answers to questions such 
as the following:
     Are the requirements in the proposed regulations clearly 
stated?
     Do the proposed regulations contain technical terms or 
other wording that interferes with their clarity?
     Does the format of the proposed regulations (grouping and 
order of sections, use of headings, paragraphing, etc.) aid or reduce 
their clarity?
     Would the proposed regulations be easier to understand if 
we divided them into more (but shorter) sections? (A ``section'' is 
preceded by the symbol ``Sec.  '' and a numbered heading; for example, 
Sec.  601.30.)
     Could the description of the proposed regulations in the 
``Supplementary Information'' section of this preamble be more helpful 
in making the proposed regulations easier to understand? If so, how?
     What else could we do to make the proposed regulations 
easier to understand?
    To send any comments that concern how the Department could make 
these proposed regulations easier to understand, see the instructions 
in the ADDRESSES section of this preamble.

Regulatory Flexibility Act Certification

    The Secretary certifies that these proposed regulations would not 
have a significant economic impact on a substantial number of small 
entities. These proposed regulations would affect foreign institutions 
that participate in Title IV, HEA programs and loan borrowers. The 
definition of ``small entity'' in the Regulatory Flexibility Act 
encompasses ``small businesses,'' ``small organizations,'' and ``small 
governmental jurisdictions.'' The definition of ``small business'' 
comes from the definition of ``small business concern'' under section 3 
of the Small Business Act as well as regulations issued by the U.S. 
Small Business Administration. The SBA defines a ``small business 
concern'' as one that is ``organized for profit; has a place of 
business in the U.S.; operates primarily within the U.S. or makes a 
significant contribution to the U.S. economy through payment of taxes 
or use of American products, materials or labor * * *'' ``Small 
organizations,'' are further defined as any ``not-for-profit enterprise 
that is independently owned and operated and not dominant in its 
field.'' For the purposes of the Regulatory Flexibility Act analysis, 
the foreign institutions would not fall within the definition of small 
businesses or small organizations based upon this definition of ``small 
business concern.''
    The definition of ``small entity'' also includes ``small 
governmental jurisdictions,'' which includes ``school districts with a 
population less than 50,000.'' The definition of ``small governmental 
jurisdictions'' is not applicable to this rule. The Secretary invites 
comments from small institutions and other affected entities as to 
whether they believe the proposed changes would have a significant 
economic impact on them and, if so, requests evidence to support that 
belief.

Paperwork Reduction Act

    Sections 600.20, 600.21, 600.54, 600.55, 600.56, 600.57, 668.13, 
668.23, and 668.171 contain information collection requirements. Under 
the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)), the Department 
has submitted a copy of these sections to OMB for its review.

Section 600.20--Application Procedures for Establishing, 
Reestablishing, Maintaining, or Expanding Institutional Eligibility and 
Certification

    Proposed Sec.  600.20(a)(3) and Sec.  600.20(b)(3) would provide 
that, for initial certification or for recertification, a foreign 
graduate medical school (i.e., a freestanding foreign graduate medical 
school or a foreign institution that includes a foreign graduate 
medical school) be required to--
     List on the application to participate all educational 
sites and where they are located, except for those locations that are 
not used regularly, but instead are chosen by individual students who 
take no more than two electives at the location for no more than a 
total of eight weeks;
     Identify, for each clinical site reported in the 
certification or recertification application, the type of clinical 
training (core, required clinical rotation, not required clinical 
rotation) offered at that site;
     Indicate whether it offers only post-baccalaureate/
equivalent medical programs, other types of programs that lead to 
employment as a doctor of osteopathic medicine, doctor or medicine, or 
both;
     Provide copies of the affiliation agreements with 
hospitals and clinics that it is required to have as a part of any 
application for initial certification or recertification to participate 
in the Title IV, HEA programs.
    Proposed Sec.  600.20(c)(5) would require a foreign graduate 
medical school that adds a location that offers all or a portion of the 
school's core clinical training or required clinical rotations, to 
apply to the Secretary and wait for approval if it wishes to provide 
Title IV, HEA program funds to the students at that location, except 
for those locations that are included in the accreditation of a medical 
program accredited by the LCME.
    While we recognize that there would be burden assessed under 
Sec. Sec.  600.20(a)(3) and 600.20(c)(5), we do not anticipate either 
an initial eligibility application or an application to expand 
eligibility at this time.
    We estimate that 58 public institutions would take .58 hours (35 
minutes) per institution to submit a reapplication, which would 
increase burden by 34 hours. We estimate that 10 private nonprofit 
institutions would take .58 hours (35 minutes) per institution to 
submit a reapplication, which would increase burden by 6 hours. We 
estimate that 3 for-profit institutions would take .58 hours (35 
minutes) per institution to submit a reapplication, which would 
increase burden by 2 hours. There would be a total 42 hours of burden 
associated with Sec.  600.20(b)(3) in OMB Control Number 1845-0012.

Section 600.21--Updating Application Information

    Proposed Sec.  600.21(a)(10) would require, if a foreign graduate 
medical school adds a location that offers all or a portion of the 
school's clinical rotations that are not required, that the

[[Page 42225]]

school notify the Department no later than 10 days after the location 
is added, except for those locations that are included in the 
accreditation of a medical program accredited by the LCME, or those 
that are not used regularly, but instead are chosen by individual 
students who take no more than two electives at the location for no 
more than a combined total of eight weeks. This requirement mirrors the 
requirement of proposed Sec.  600.20(c)(5).
    We estimate that 6 public institutions would take .17 hours (10 
minutes) per institution to fulfill the reporting requirement, which 
would increase burden by 1 hour. We estimate that 1 private nonprofit 
institution would take .17 hours (10 minutes) to fulfill the reporting 
requirement, which would increase burden by 10 minutes. We estimate 1 
for-profit institution would take .17 hours (10 minutes) to fulfill the 
reporting requirement, which would increase burden by 10 minutes. 
Therefore, the proposed total increase in burden would be 1 hour and 20 
minutes associated with Sec.  600.21(a)(10) in OMB Control Number 1845-
0012.

Section 600.54--Criteria for Determining Whether a Foreign Institution 
Is Eligible To Apply To Participate in the FFEL Programs

    Under proposed Sec.  600.54(d)(3)(ii), a foreign institution would 
have to demonstrate to the satisfaction of the Secretary (who would 
make program-by-program determinations of comparability) that the 
amount of academic work required by a program it seeks to qualify as 
eligible as at least a one-academic-year training program is equivalent 
to an academic year as defined in Sec.  668.3.
    We estimate that 93 public institutions would take .17 (10 minutes) 
to demonstrate the comparability of the academic work and would 
increase burden by 16 hours. We estimate that 33 private institutions 
would take .17 (10 minutes) to demonstrate the comparability of the 
academic work and would increase burden by 6 hours. Therefore, the 
proposed total increase in burden would be 22 hours associated with 
Sec.  600.54(d)(3)(ii) in OMB 1845-NEWA.

Section 600.55--Additional Criteria for Determining Whether a Foreign 
Graduate Medical School Is Eligible To Apply To Participate in the 
Title IV, HEA Programs

    Proposed Sec.  668.55(c)(2) would require a foreign graduate 
medical school to determine the consent requirements for, and require 
the necessary consents of, all students accepted for admission who are 
U.S. citizens, nationals, or eligible permanent residents to enable the 
school to comply with the collection and submission requirements in 
proposed Sec.  600.55(d) for Medical College Admission Test (MCAT) 
scores, residency placement, and U.S. Medical Licensing Examination 
(USMLE) scores.
    We estimate that 58 public institutions would take .50 hours (30 
minutes) to develop this consent form and would increase burden by 29 
hours. We estimate that 5 private nonprofit institutions would take .50 
hours (30 minutes) to develop this consent form and would increase 
burden by 5 hours. We estimate that 3 for-profit institutions would 
take .50 hours (30 minutes) to develop this consent form and would 
increase burden by 2 hours. We estimate that 2,800 individuals would 
take .08 hours (5 minutes) to complete this consent form and would 
increase burden by 224 hours. Therefore, the total proposed burden 
increase would be 260 hours associated with Sec.  600.55(c)(2) in OMB 
1845-NEWA.
    Proposed Sec.  600.55(d) would require a foreign graduate medical 
school to obtain, at its own expense, and by September 30 of each year 
submit to its accrediting authority for all students who are U.S. 
citizens, nationals, or eligible permanent residents: (1) MCAT scores 
for students admitted during the preceding award year and the number of 
times each student took the exam; and (2) the percentage of students 
graduating during the preceding award year who are placed in an 
accredited U.S. medical residency. A school would have to submit the 
data on MCAT scores and placement in a U.S. residency program to the 
Department only upon request. In addition, proposed Sec.  600.55(d) 
would require a foreign graduate medical school to obtain, at its own 
expense and by September 30 of each year submit to the Department, 
unless the Department notifies schools that it will receive the 
information directly from the ECFMG, or other responsible third 
parties, USMLE scores earned during the preceding award year on the 
first attempt by at least each student, and each student who graduated 
during the three preceding years, and the date each student/graduate 
took each test, including any failed tests. The USMLE scores submitted 
would have to be disaggregated by step/test for Step 1, Step 2-Clinical 
Skills (Step 2-CS), and Step 2-Clinical Knowledge (Step 2-CK), and by 
attempt. A school would not be required to submit data on the USMLE 
Step 3.
    We estimate that 58 public institutions would require 1.25 hours (1 
hour 15 minutes) to create this annual report and would increase burden 
by 73 hours. We estimate that 10 private nonprofit institutions would 
require 1.25 hours (1 hour 15 minutes) to create this annual report and 
would increase burden 13 hours. We estimate that 3 for-profit 
institutions would require 1.25 hours (1 hour 15 minutes) to create 
this annual report and would increase burden by 4 hours. Therefore, the 
total proposed burden increase would be 90 hours associated with Sec.  
600.55(d) in OMB 1845-NEWA.
    Proposed Sec.  600.55(e)(2) would require a foreign graduate 
medical school to notify its accrediting body within one year of any 
material changes in (1) the educational programs, including changes in 
clinical training programs; and (2) the overseeing bodies and (3) the 
formal affiliation agreements with hospitals and clinics.
    We estimate that 15 public institutions would require .82 hours (50 
minutes) to complete the accrediting agency clinical training 
notifications and would increase burden by 12 hours. We estimate that 3 
private nonprofit institutions would require .82 hours (50 minutes) to 
complete the accrediting agency clinical training notifications and 
would increase burden by 3 hours. We estimate that 1 for-profit 
institution would require .82 hours (50 minutes) to complete the 
accrediting agency clinical training notifications and would increase 
burden by 1 hour. Therefore, the total proposed burden increase would 
be 16 hours associated with Sec.  600.55(e) in OMB 1845-NEWA.
    Proposed Sec.  600.55(g)(1) would require a foreign graduate 
medical school to apply the existing satisfactory academic progress 
regulations in Sec.  668.16(e) for establishing a maximum timeframe in 
which a student must complete their educational program and require 
that a student complete their educational program within 150 percent of 
the published length of the educational program. In addition, proposed 
Sec.  600.55(g)(2) would require a foreign graduate medical school to 
document the educational remediation it provides to assist students in 
making satisfactory academic progress.
    We estimate that 58 public institutions would require 2.5 hours (2 
hours 30 minutes) to update the satisfactory academic policy and 
document remediation provided to student and would increase burden by 
145 hours. We estimate that 10 for private nonprofit institutions would 
require 2.5 hours (2 hours 30 minutes) to update the satisfactory 
academic policy and document remediation provided to student and would 
increase burden by 25 hours. We estimate that 3

[[Page 42226]]

for-profit institutions would require 2.5 hours (2 hours 30 minutes) to 
update the satisfactory academic policy and document remediation 
provided to student and would increase burden by 7 hours and 30 
minutes. The total proposed burden for increase would be 177 hours and 
30 minutes associated with Sec.  600.55(g)(1) and (2) in OMB 1845-NEW2.
    Finally, proposed Sec.  600.55(g)(3) would require a foreign 
graduate medical school to publish all the languages in which 
instruction is offered.
    We estimate that 58 public institutions would require .33 hours (20 
minutes) to publish the languages in which instruction is provided 
increasing burden by 19 hours. We estimate that 10 private nonprofit 
institutions would require .33 hours (20 minutes) to publish the 
languages in which instruction is provided increasing burden by 3 
hours. We estimate that 3 for-profit institutions would require .33 
hours (20 minutes) to publish the languages in which instruction is 
provided increasing burden by 1 hour. Therefore, the total proposed 
burden increase would be 23 hours associated with Sec.  600.55(g)(3) in 
OMB 1845-NEWA.
    In total, we estimate that proposed Sec.  600.55 would increase by 
389 hours in OMB 1845-NEWA, and 177 hours and 30 minutes in OMB 1845-
NEW2.

Section 600.56--Additional Criteria for Determining Whether a Foreign 
Veterinary School Is Eligible To Apply To Participate in the FFEL 
Programs

    Proposed Sec.  600.56(a)(4) would require a foreign veterinary 
school to be accredited or provisionally accredited by an organization 
acceptable to the Secretary. Proposed Sec.  600.56(a)(4) would also 
specify that the requirement for accreditation or provisional 
accreditation does not take effect until July 1, 2015.
    The Department has delayed the effective date of the accreditation 
requirement until July 1, 2015. This allows foreign veterinary schools 
that are currently in the Title IV, HEA programs approximately five 
years after final regulations are published to obtain accreditation 
from an acceptable accrediting agency. Therefore, no burden assessment 
has been made at this time, but the issue will be reviewed closer to 
the effective date of this section of the regulations thereby enabling 
the Department to use a more accurate number of participating 
veterinary schools in its assessment.

Section 600.57--Additional Criteria for Determining Whether a Foreign 
Nursing School Is Eligible To Apply To Participate in the FFEL Program

    The proposed regulations would add a new Sec.  600.57 specifying 
additional Title IV, HEA program eligibility criteria for foreign 
nursing schools. These criteria include Sec.  600.57(a)(6)(i), where 
the school must determine the consent requirements for, and require the 
necessary consents of, all students accepted for admission who are U.S. 
citizens, nationals, or eligible permanent residents, to enable the 
school to comply with the requirements for collection and submission of 
National Council Licensure Examination for registered Nurses (NCLEX-RN) 
results or pass rates.
    We estimate that 3 new nursing institutions would require .50 hours 
(30 minutes) to develop the consent form increasing burden by 1 hour 
and 30 minutes. We estimate that 1,200 individuals would require .08 
hours (10 minutes) to respond to this consent form and increasing 
burden by 96 hours in OMB Control Number 1845-NEWA.
    The foreign nursing school eligibility also includes Sec.  
600.57(a)(6)(ii) where an institution must annually, at its own 
expense, obtain all results on the NCLEX-RN achieved by students and 
graduates who are U.S. citizens, nationals, or eligible permanent 
residents, together with the dates the student has taken the 
examination (including any failed examinations) and provide the results 
to the Department. As an alternative to obtaining the NCLEX results 
individually, the school may obtain a report or reports from the 
National Council of State Boards of Nursing (NCSB), or an NCSB 
affiliate or NCSB contractor, reflecting the percentage of the school's 
students and graduates taking the NCLEX-RN in the preceding year who 
passed the examination, or the data from which the percentage could be 
derived, and provide the report to the Department.
    We estimate that 3 new nursing institutions would require 1.5 hours 
(1 hour 30 minutes) to compile this annual report submission increasing 
burden by 4 hours 30 minutes in OMB Control Number 1845-NEWA. In total, 
we estimate there would be 102 hours of burden associated with Sec.  
600.57(a)(6) in OMB Control Number 1845-NEWA.
    In addition, proposed Sec.  600.57(c) would specify that after a 
school reimburses the Department for the cost of a loan default, the 
loan would be assigned to the school. The borrower would remain liable 
to the school for the outstanding balance of the loan, under the terms 
and conditions specified in the promissory note.
    While burden would normally be associated with notification and 
collection activity, because there is no history of Federal borrowing 
for attendance at these schools and due to the extended period of time 
prior to a student borrower defaulting on a Title IV, HEA loan at a 
newly approved foreign nursing school during the first year after the 
implementation of the final regulations, we believe that it would be 
inappropriate to project burden to schools and individuals at this 
time.

Section 668.13--Certification Procedures

    The proposed regulations would amend Sec.  668.13(b)(1) to specify 
that the period of participation for a private, for-profit foreign 
institution expires three years after the date the institution is 
certified by the Department, rather than the current six years.
    While the duration of the approval process is reduced from six 
years to three years and, therefore, the time associated with the 
submission for recertification will be filed more often, this proposed 
change in the regulations does not represent a substantive impact on 
the amount of annual burden generated by these regulations. We do not 
estimate a change in the burden as a result of the proposed regulations 
to OMB 1845-0022.

Section 668.23--Compliance Audits and Audited Financial Statements

    The proposed regulation in Sec.  668.23(h)(1) would revise 
financial statement submission requirements for foreign institutions 
receiving Title IV, HEA program funds in the most recently completed 
fiscal year.
     In Sec.  668.23(h)(1)(i)--For a public or nonprofit 
foreign institution that received less than $500,000 in U.S. Title IV, 
HEA program funds during the institution's most recently completed 
fiscal year, the audited financial statements submission would be 
waived, unless the institution is in its initial provisional period of 
participation and received Title IV, HEA program funds during that 
year, in which case the institution must submit, in English, audited 
financial statements prepared in accordance with the generally accepted 
accounting principles of the institution's home country.
     In Sec.  668.23(h)(1)(iii)(A)--For a public or nonprofit 
foreign institution that received $500,000 or more in U.S. Title IV, 
HEA program funds, but less than $3,000,000 in U.S. Title IV, HEA

[[Page 42227]]

program funds during its most recently completed fiscal year, the 
institution would be allowed to submit for that year, in English, 
audited financial statements prepared in accordance with the generally 
accepted accounting principles of the institution's home country in 
lieu of financial statements prepared in accordance with U.S. GAAP.
     In Sec.  668.23(h)(1)(iii)(B)--For a public or nonprofit 
foreign institution that received at least $3,000,000 but less than 
$5,000,000 in U.S. Title IV, HEA program funds during its most recently 
completed fiscal year, the institution would be required to submit once 
every three years audited financial statements prepared in accordance 
with the generally accepted accounting principles of both the 
institution's home country and U.S. GAAP, but for the two years in 
between would be allowed to submit, in English, audited financial 
statements prepared in accordance with the generally accepted 
accounting principles of the institution's home country in lieu of 
financial statements prepared in accordance with U.S. GAAP.
     In Sec.  668.23(h)(1)(ii)--For a public or nonprofit 
foreign institution that received $5,000,000 or more in U.S. Title IV, 
HEA program funds during its most recently completed fiscal year, and 
for any for-profit foreign institution, the institution would be 
required to submit for that year audited financial statements prepared 
in accordance with the generally accepted accounting principles of both 
the institution's home country and U.S. GAAP.
    We estimate that 15 public institutions would require 35 hours for 
the translation of financial statements to English increasing burden by 
525 hours. We estimate that 15 private institutions would require 35 
hours for the translation of financial statements to English increasing 
burden by 525 hours for a total of 1,050 hours.
    We estimate 20 public institutions would require 100 hours for the 
preparation of the U.S. GAAP financial statement increasing burden by 
2,000 hours. We estimate that 8 private nonprofit institutions would 
require 100 hours for the preparation of the U.S. GAAP financial 
statement increasing burden by 800 hours. We estimate that four for-
profit institutions require 100 hours for the preparation of the U.S. 
GAAP financial statement increasing burden by 400 hours for a total of 
3,200 hours. Collectively, we estimate that there would be 4,250 hours 
of burden associated with proposed Sec.  668.23(h)(1) in OMB Control 
Number 1845-0038.
    Proposed Sec.  668.23(h)(2) would separate foreign institutions 
into two groups, establishing new compliance audit requirements for 
foreign institutions based upon whether the institution received less 
than $500,000 or $500,000 or more in U.S. Title IV, HEA program funds 
during the institution's most recently completed fiscal year.
    For foreign institutions that receive less than $500,000 per year 
in U.S. Title IV, HEA program funds, under proposed Sec.  
668.23(h)(2)(ii) and (iii) they would be required to submit compliance 
audits under an alternative compliance audit performed in accordance 
with the audit guide from the Department's Office of Inspector General. 
The alternative compliance audit is performed as an agreed-upon 
procedures attestation engagement, and the standard compliance audit is 
performed as an examination-level attestation engagement. An 
alternative compliance audit is an agreed-upon procedures attestation 
engagement, which consists of specific procedures performed on a 
subject matter and is substantially narrower in scope than a standard 
compliance audit, which is an examination level attestation.
    The proposed regulations would require an annual submission of the 
compliance audit, except that, under certain conditions as described in 
the following paragraphs, an institution would submit a compliance 
audit annually for two consecutive years, then, if notified by the 
Department, would be permitted to submit a cumulative compliance audit 
every three years thereafter as long as the institution continued to 
receive less than $500,000 in U.S. Title IV funds each fiscal year 
being audited.
    We anticipate 269 public institutions would require 25 hours to 
provide the alternate compliance audit increasing burden by 6,725 
hours. We anticipate 81 private institutions would require 25 hours to 
provide the alternate compliance audit increasing burden by 2,025 
hours. Collectively we anticipate a total of 8,750 hours of increased 
burden for Sec.  668.23(h)(2)(ii) and (iii) in OMB Control Number 1845-
0038.
    For foreign institutions that receive $500,000 or more per year in 
U.S. Title IV, HEA program funds, as in the current regulations, under 
proposed Sec.  668.23(h)(2)(i) they would be required to submit annual 
compliance audits using the standard audit procedures for foreign 
institutions set out in the audit guide issued by the Office of 
Inspector General. This compliance audit would be submitted together 
with an alternative compliance audit or audits prepared in accordance 
with proposed Sec.  668.23(h)(2)(ii) for any preceding fiscal year or 
years in which the foreign institution received less than $500,000 in 
U.S. Title IV, HEA program funds.
    We estimate 90 public institutions would require 40 hours to submit 
a full compliance audit increasing burden by 3,600 hours. We estimate 
29 private nonprofit institutions would require 40 hours to submit a 
full compliance audit increasing burden by 1,160 hours. We estimate 4 
for-profit institutions would require 40 hours to submit a full 
compliance audit increasing burden by 160 hours for a total of 4,920 
hours. Collectively, we estimate that there would be 13,670 hours of 
increased burden associated with Sec.  668.23(h)(2)(i) in OMB Control 
1845-0038.
    In total, we estimate that the burden related to proposed Sec.  
668.23(h) would increase by 17,920 hours in OMB Control Number 1845-
0038.
    Although audited financial statements and compliance audits have 
long been required of foreign schools, no separate calculation of the 
burden of those requirements had been done until now. As a result, by 
and large the burdens estimated are not new. What is new is the 
reduction in already-existing burdens that would result from the 
proposed regulations if finalized.
    In relation to the proposed requirement to submit audited financial 
statements, if the proposed regulations (allowing for alternate 
submissions for institutions with funding over $500,000 in U.S. Title 
IV, HEA program funds) had not been offered, there would have been 123 
foreign institutions required to submit annually audited financial 
statements prepared in accordance with U.S. GAAP at a burden of 12,300 
hours (123 institutions x 100 hours = 12,300 hours). The proposed 
regulations reduce that burden by 9,100 hours (proposed burden of 3,200 
hours subtracted from estimated burden of 12,300 hours required under 
current regulations).
    In relation to the proposed requirement to submit a compliance 
audit, if the proposed regulations had not been offered, there would 
have been an annual standard compliance audit submission requirement 
burden of 17,500 hours over two years (350 institutions x 25 hours 
annual burden x 2 years) that foreign institutions disbursing less than 
$500,000 in U.S. Title IV, HEA program funds would have had to 
complete. The proposed regulations decrease burden by allowing for 
submission of alternative compliance audits once every three years upon 
notification from the Department.

[[Page 42228]]

Section 668.171--General (Subpart L--Financial Responsibility)

    Proposed Sec.  668.171 would consider a public foreign institution 
to be financially responsible if the institution: (1) Notifies the 
Secretary that it is designated as a public institution by the country 
or other government entity that has the legal authority to make that 
designation; and (2) provides documentation from an official of that 
country or other government entity confirming that the institution is a 
public institution and is backed by the full faith and credit of the 
country or other government entity. A foreign public institution would 
not meet this standard of financial responsibility if it was in 
violation of any past performance requirements in Sec.  668.174.
    If a foreign public institution did not meet the new requirements, 
its financial responsibility would be determined under the general 
requirements of financial responsibility, including the application of 
the equity, primary reserve, and net income ratios. Although the full 
faith and credit provision would provide an alternate way of meeting 
the financial responsibility standards for public foreign institutions, 
it would not excuse the institution from required submissions of 
audited financial statements. In addition, if a government entity 
provided full faith and credit backing, the entity would be held liable 
for any Title IV, HEA program liabilities that were not paid by the 
institution.
    We estimate 13 public institutions would require 16 hours to obtain 
documentation from the applicable government entity at an increase in 
burden of 208 hours in OMB Control Number 1845-0022.

                        Collection of Information
------------------------------------------------------------------------
                                   Information
     Regulatory section            collection            Collection
------------------------------------------------------------------------
600.20--Application           This proposed         OMB 1845-0012. The
 procedures for                regulation change     burden would
 establishing,                 would add             increase by 42
 reestablishing,               information that      hours.
 maintaining, or expanding     must be collected    This regulatory
 institutional eligibility     to determine the      change may require
 and certification.            eligibility of        changes to the
                               foreign graduate      form, but they
                               medical schools to    cannot be completed
                               participate in        until the language
                               Title IV programs.    of the final rule
                                                     is determined.
600.21--Updating application  This proposed         OMB 1845-0012. The
 information.                  regulation would      burden would
                               identify when a       increase by 1 hour
                               foreign graduate      and 20 minutes.
                               medical school must  This regulatory
                               notify the            change may require
                               Department of         changes to the
                               specific changes in   form, but they
                               locations used by     cannot be completed
                               the school.           until the language
                                                     of the final rule
                                                     is determined.
600.54--Criteria for          This proposed         OMB 1845-NEWA. This
 determining whether a         regulation would      would be a new
 foreign institution is        require that the      collection. A
 eligible to participate in    foreign institution   separate 60-day
 the FFEL programs.            demonstrate that      Federal Register
                               its academic work     notice will be
                               for training          published to
                               program of at least   solicit comment.
                               one-academic-year     The burden would
                               is equivalent to an   increase by 22
                               academic year as      hours.
                               defined for
                               domestic
                               institutions.
600.55--Additional criteria   This proposed         OMB 1845-NEWA. This
 for determining whether a     regulation would      would be a new
 foreign graduate medical      require the schools   collection. A
 school is eligible to apply   to provide a          separate 60-day
 to participate in the Title   consent form          Federal Register
 IV, HEA programs.             allowing the school   notice will be
                               to receive a copy     published to
                               of the students'      solicit comment.
                               MCAT score; would     The burden would
                               require a medical     increase by 389
                               school to produce     hours.
                               annually and to
                               provide to its
                               accrediting agency
                               a report with data
                               regarding its
                               students who are US
                               citizens,
                               nationals, or
                               eligible permanent
                               residents, some of
                               which data would be
                               required to be
                               submitted to the
                               Department on an
                               annual basis; and
                               would require the
                               school to notify
                               their accrediting
                               body within one
                               year of material
                               changes to its
                               educational program
                               and formal
                               affiliation
                               agreements. This
                               section also would
                               require schools to
                               identify the
                               languages in which
                               it provides
                               instruction.
600.55(g)(2)--Additional      This proposed         OMB 1845-NEW2. This
 criteria for determining      regulation would      would be a new
 whether a foreign graduate    require the foreign   collection. A
 medical school is eligible    graduate medical      separate 60-day
 to apply to participate in    schools to expand     Federal Register
 the Title IV, HEA programs.   the satisfactory      notice will be
                               academic progress     published to
                               policy requirements   solicit comment.
                               to include foreign    The burden would
                               graduate medical      increase by 177
                               schools and           hours and 30
                               calculations of       minutes.
                               maximum timeframes
                               to complete the
                               program, and
                               document any
                               student remediation
                               regarding SAP.
600.57--Additional criteria   This proposed         OMB 1845-NEWA. This
 for determining whether a     regulation would      would be a new
 foreign nursing school is     require the schools   collection. A
 eligible to apply to          to provide a          separate 60-day
 participate in the FFEL       consent form          Federal Register
 program.                      allowing the school   notice will be
                               to receive a copy     published to
                               of the students'      solicit comment.
                               NCLEX-RN results or   The burden would
                               pass rate and would   increase by 102
                               require a nursing     hours.
                               school to annually
                               produce and provide
                               to the Department a
                               report with data
                               regarding the
                               results of the
                               NCLEX-RN exam taken
                               by its students and
                               graduates.

[[Page 42229]]

 
668.13--Certification         The proposed          OMB 1845-0022. We do
 procedures.                   regulation would      not anticipate a
                               change the            change in burden.
                               certification time
                               frame for for-
                               profit schools from
                               6 to 3 years.
668.23(h)(1)--Compliance      The proposed          OMB 1845-0038. The
 audits and audited            regulation would      burden would
 financial statements.         change the            increase by 17,920
                               requirements of       hours.
                               institutions for
                               submission of
                               audited financial
                               statements to the
                               Department and
                               would change the
                               requirements of
                               institutions for
                               submission of
                               compliance audits
                               to the Department.
668.171--General (Subpart L-- The proposed          OMB 1845-0022. The
 Financial Responsibility).    regulation would      burden would
                               provide an            increase by 208
                               alternate method to   hours.
                               show financial
                               responsibility by
                               showing that it is
                               a public
                               institution
                               designated by the
                               proper governing
                               authority in the
                               country and by
                               providing
                               documentation of
                               the full faith and
                               credit of that
                               country.
------------------------------------------------------------------------

    If you want to comment on the proposed information collection 
requirements, please send your comments to the Office of Information 
and Regulatory Affairs, OMB, Attention: Desk Officer for U.S. 
Department of Education. Send these comments by e-mail to [email protected] or by fax to (202) 395-6974. You may also send a 
copy of these comments to the Department contact named in the ADDRESSES 
section of this preamble.
    We consider your comments on these proposed collections of 
information in--
     Deciding whether the proposed collections are necessary 
for the proper performance of our functions, including whether the 
information will have practical use;
     Evaluating the accuracy of our estimate of the burden of 
the proposed collections, including the validity of our methodology and 
assumptions;
     Enhancing the quality, usefulness, and clarity of the 
information we collect; and
     Minimizing the burden on those who must respond. This 
includes exploring the use of appropriate automated, electronic, 
mechanical, or other technological collection techniques or other forms 
of information technology (e.g., permitting electronic submission of 
responses).
    OMB is required to make a decision concerning the collections of 
information contained in these proposed regulations between 30 and 60 
days after publication of this document in the Federal Register. 
Therefore, to ensure that OMB gives your comments full consideration, 
it is important that OMB receives the comments within 30 days of 
publication. This does not affect the deadline for your comments to us 
on the proposed regulations.

Intergovernmental Review

    These programs are not subject to Executive Order 12372 and the 
regulations in 34 CFR part 79.

Assessment of Educational Impact

    In accordance with section 411 of the General Education Provisions 
Act, 20 U.S.C. 1221e-4, the Secretary particularly requests comments on 
whether these proposed regulations would require transmission of 
information that any other agency or authority of the United States 
gathers or makes available.
    Electronic Access to This Document: You can view this document, as 
well as all other Department of Education documents published in the 
Federal Register, in text or Adobe Portable Document Format (PDF) on 
the Internet at the following site: http://www.ed.gov/news/fedregister. 
To use PDF you must have Adobe Acrobat Reader, which is available free 
at this site. If you have questions about using PDF, call the U.S. 
Government Printing Office (GPO), toll free, at 1-888-293-6498; or in 
the Washington, DC, area at (202) 512-1530.

    Note: The official version of this document is the document 
published in the Federal Register. Free Internet access to the 
official edition of the Federal Register and the Code of Federal 
Regulations is available on GPO Access at: http://www.gpoaccess.gov/nara/index.html.


    Catalog of Federal Domestic Assistance Numbers: 84.063 Federal 
Pell Grant Program; 84.033 Federal Work-Study Program; 84.379 TEACH 
Grant Program; 84.069 LEAP).

List of Subjects

34 CFR Part 600

    Colleges and universities, Foreign relations, Grant programs--
education, Loan programs--education, Reporting and recordkeeping 
requirements, Student aid, Vocational education.

34 CFR Part 668

    Administrative practice and procedure, Aliens, Colleges and 
universities, Consumer protection, Grant programs--education, Loan 
programs--education, Reporting and recordkeeping requirements, 
Selective Service System, Student aid, Vocational education.

34 CFR Part 682

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

    Dated: July 12, 2010.
Arne Duncan,
Secretary of Education.

    For the reasons discussed in the preamble, the Secretary proposes 
to amend parts 600, 668, and 682 of title 34 of the Code of Federal 
Regulations as follows:

PART 600--INSTITUTIONAL ELIGIBILITY UNDER THE HIGHER EDUCATION ACT 
OF 1965, AS AMENDED

    1. The authority citation for part 600 continues to read as 
follows:

    Authority:  20 U.S.C. 1001, 1002, 1003, 1088, 1091, 1094, 1099b, 
and 1099c, unless otherwise noted.

    2. Section 600.2 is amended by revising paragraphs (1) and (2) of 
the definition of Nonprofit institution.
    The revision reads as follows:


Sec.  600.2  Definitions.

* * * * *
    Nonprofit institution: An institution that--

[[Page 42230]]

    (1)(i) Is owned and operated by one or more nonprofit corporations 
or associations, no part of the net earnings of which benefits any 
private shareholder or individual;
    (ii) Is legally authorized to operate as a nonprofit organization 
by each State in which it is physically located; and
    (iii) Is determined by the U.S. Internal Revenue Service to be an 
organization to which contributions are tax-deductible in accordance 
with section 501(c)(3) of the Internal Revenue Code (26 U.S.C. 
501(c)(3)); or
    (2) For a foreign institution--
    (i) An institution that is owned and operated only by one or more 
nonprofit corporations or associations; and
    (ii)(A) If a recognized tax authority of the institution's home 
country is recognized by the Secretary for purposes of making 
determinations of an institution's nonprofit status for title IV 
purposes, is determined by that tax authority to be a nonprofit 
educational institution; or
    (B) If no recognized tax authority of the institution's home 
country is recognized by the Secretary for purposes of making 
determinations of an institution's nonprofit status for title IV 
purposes, the foreign institution demonstrates to the satisfaction of 
the Secretary that it is a nonprofit educational institution.
* * * * *
    3. Section 600.20 is amended by:
    A. Revising paragraph (a).
    B. Adding a new paragraph (b)(3).
    C. In paragraph (c)(4), removing the word ``or''.
    D. Redesignating paragraph (c)(5) as paragraph (c)(6).
    E. Adding a new paragraph (c)(5).
    The revision and additions read as follows:


Sec.  600.20  Application procedures for establishing, reestablishing, 
maintaining, or expanding institutional eligibility and certification.

    (a) Initial eligibility application. (1) An institution that wishes 
to establish its eligibility to participate in any HEA program must 
submit an application to the Secretary for a determination that it 
qualifies as an eligible institution under this part.
    (2) If the institution also wishes to be certified to participate 
in the title IV, HEA programs, it must indicate that intent on the 
application, and submit all the documentation indicated on the 
application to enable the Secretary to determine that it satisfies the 
relevant certification requirements contained in 34 CFR part 668, 
subparts B and L.
    (3) A freestanding foreign graduate medical school, or a foreign 
institution that includes a foreign graduate medical school, must 
include in its application to participate--
    (i)(A) A list of all educational sites and where they are located, 
including all sites at which its students receive clinical training, 
except those clinical training sites that are not used regularly, but 
instead are chosen by individual students who take no more than two 
electives at the location for no more than a total of eight weeks; and
    (B) The type of clinical training (core, required clinical 
rotation, not required clinical rotation) offered at each site listed 
on the application in accordance with paragraph (a)(3)(i)(A) of this 
section; and
    (ii) Whether the school offers--
    (A) Only post-baccalaureate/equivalent medical programs, as defined 
in Sec.  600.52;
    (B) Other types of programs that lead to employment as a doctor of 
osteopathic medicine or doctor of medicine; or
    (C) Both; and
    (iii) Copies of the formal affiliation agreements with hospitals or 
clinics providing all or a portion of a clinical training program 
required under Sec.  600.55(e)(1).
    (b) * * *
    (3) A freestanding foreign graduate medical school, or a foreign 
institution that includes a foreign graduate medical school, must 
include in its reapplication to participate--
    (i)(A) A list of all educational sites and where they are located, 
including all sites at which its students receive clinical training, 
except those clinical training sites that are not used regularly, but 
instead are chosen by individual students who take no more than two 
electives at the location for no more than a total of eight weeks; and
    (B) The type of clinical training (core, required clinical 
rotation, not required clinical rotation) offered at each site listed 
on the application in accordance with paragraph (b)(3)(i)(A) of this 
section; and
    (ii) Whether the school offers--
    (A) Only post-baccalaureate/equivalent medical programs, as defined 
in Sec.  600.52;
    (B) Other types of programs that lead to employment as a doctor of 
osteopathic medicine or doctor of medicine; or
    (C) Both; and
    (iii) Copies of the formal affiliation agreements with hospitals or 
clinics providing all or a portion of a clinical training program 
required under Sec.  600.55(e)(1).
* * * * *
    (c) * * *
    (5) For a freestanding foreign graduate medical school, or a 
foreign institution that includes a foreign graduate medical school, 
add a location that offers all or a portion of the school's core 
clinical training or required clinical rotations, except for those 
locations that are included in the accreditation of a medical program 
accredited by the Liaison Committee on Medical Education (LCME); or
* * * * *
    4. Section 600.21 is amended by adding paragraph (a)(10) to read as 
follows:


Sec.  600.21  Updating application information.

    (a) * * *
    (10) For a freestanding foreign graduate medical school, or a 
foreign institution that includes a foreign graduate medical school, 
the school adds a location that offers all or a portion of the school's 
clinical rotations that are not required, except for those that are 
included in the accreditation of a medical program accredited by the 
Liaison Committee on Medical Education (LCME), or that are not used 
regularly, but instead are chosen by individual students who take no 
more than two electives at the location for no more than a total of 
eight weeks.
* * * * *
    5. Section 600.51 is amended by revising paragraph (c) to read as 
follows:


Sec.  600.51  Purpose and scope.

* * * * *
    (c) A foreign institution must comply with all requirements for 
eligible and participating institutions except--
    (1) To the extent those provisions are inconsistent with this 
subpart or other provisions of these regulations or the HEA specific to 
foreign institutions; or
    (2) When the Secretary, through a notice in the Federal Register, 
identifies specific provisions as inapplicable to foreign institutions.
* * * * *
    6. Section 600.52 is amended by:
    A. Adding, in alphabetical order, a definition of Associate degree 
school of nursing.
    B. Adding, in alphabetical order, a definition of Clinical 
training.
    C. Adding, in alphabetical order, a definition of Collegiate school 
of nursing.
    D. Adding, in alphabetical order, a definition of Diploma school of 
nursing.
    E. Revising the definition of Foreign graduate medical school.
    F. Revising the definition of Foreign institution.
    G. Adding, in alphabetical order, a definition of Foreign nursing 
school.

[[Page 42231]]

    H. Adding, in alphabetical order, a definition of Foreign 
veterinary school.
    I. Adding, in alphabetical order, a definition of National 
Committee on Foreign Medical Education and Accreditation (NCFMEA).
    J. Revising the definition of Passing score.
    K. Adding, in alphabetical order, a definition of Post-
baccalaureate/equivalent medical program.
    The additions and revisions read as follows:


Sec.  600.52  Definitions.

    Associate degree school of nursing: A school that provides 
primarily or exclusively a two-year program of postsecondary education 
in professional nursing leading to a degree equivalent to an associate 
degree in the United States.
    Clinical training: The portion of a graduate medical education 
program that counts as a clinical clerkship for purposes of medical 
licensure comprising core, required clinical rotation, and not required 
clinical rotation.
    Collegiate school of nursing: A school that provides primarily or 
exclusively a minimum of a two-year program of postsecondary education 
in professional nursing leading to a degree equivalent to a bachelor of 
arts, bachelor of science, or bachelor of nursing in the United States, 
or to a degree equivalent to a graduate degree in nursing in the United 
States, and including advanced training related to the program of 
education provided by the school.
    Diploma school of nursing: A school affiliated with a hospital or 
university, or an independent school, which provides primarily or 
exclusively a two-year program of postsecondary education in 
professional nursing leading to the equivalent of a diploma in the 
United States or to equivalent indicia that the program has been 
satisfactorily completed.
    Foreign graduate medical school: A foreign institution (or, for a 
foreign institution that is a university, a component of that foreign 
institution) having as its sole mission providing an educational 
program that leads to a degree of medical doctor, doctor of osteopathic 
medicine, or the equivalent. A reference in these regulations to a 
foreign graduate medical school as ``freestanding'' pertains solely to 
those schools that qualify by themselves as foreign institutions and 
not to schools that are components of universities that qualify as 
foreign institutions.
    Foreign institution:
    (1) For the purposes of students who receive title IV aid, an 
institution that--
    (i) Is not located in a State;
    (ii) Except as provided with respect to clinical training offered 
under Sec.  600.55(h)(1), Sec.  600.56(b), or Sec.  600.57(a)(2)--
    (A) Has no U.S. location;
    (B) Has no written arrangements, within the meaning of Sec.  668.5, 
with institutions or organizations located in the United States for 
students enrolling at the foreign institution to take courses from 
institutions located in the United States;
    (C) Does not permit students to enroll in any course offered by the 
foreign institution in the United States, including research, work, 
internship, externship, or special studies within the United States, 
except that independent research done by an individual student in the 
United States for not more than one academic year is permitted, if it 
is conducted during the dissertation phase of a doctoral program under 
the guidance of faculty, and the research can only be performed in a 
facility in the United States;
    (iii) Is legally authorized by the education ministry, council, or 
equivalent agency of the country in which the institution is located to 
provide an educational program beyond the secondary education level;
    (iv) Awards degrees, certificates, or other recognized educational 
credentials in accordance with Sec.  600.54(d) that are officially 
recognized by the country in which the institution is located; and
    (v) For any program designed to prepare the student for employment 
in a recognized occupation, with or without licensure, provides a 
credential, including a degree, that--
    (A) Satisfies the educational requirements in the country in which 
the institution is located for entry into that occupation, including 
educational requirements for licensure; and
    (B) Satisfies the educational requirements, including requirements 
for licensure, for entry into that occupation in the United States; or
    (2) If the educational enterprise enrolls students both within a 
State and outside a State, and the number of students who would be 
eligible to receive title IV, HEA program funds attending locations 
outside a State is at least twice the number of students enrolled 
within a State, the locations outside a State must apply to participate 
as one or more foreign institutions and must meet all requirements of 
paragraph (1) of this definition, and the other requirements of this 
part. For the purposes of this paragraph, an educational enterprise 
consists of two or more locations offering all or part of an 
educational program that are directly or indirectly under common 
ownership.
    Foreign nursing school: A foreign institution (or, for a foreign 
institution that is a university, a component of that foreign 
institution) that is an associate degree school of nursing, a 
collegiate school of nursing, or a diploma school of nursing. A 
reference in these regulations to a foreign nursing school as 
``freestanding'' pertains solely to those schools that qualify by 
themselves as foreign institutions and not to schools that are 
components of universities that qualify as foreign institutions.
    Foreign veterinary school: A foreign institution (or, for a foreign 
institution that is a university, a component of that foreign 
institution) having as its sole mission providing an educational 
program that leads to the degree of doctor of veterinary medicine, or 
the equivalent. A reference in these regulations to a foreign 
veterinary school as ``freestanding'' pertains solely to those schools 
that qualify by themselves as foreign institutions and not to schools 
that are components of universities that qualify as foreign 
institutions.
    National Committee on Foreign Medical Education and Accreditation 
(NCFMEA): The operational committee of medical experts established by 
the Secretary to determine whether the medical school accrediting 
standards used in other countries are comparable to those applied to 
medical schools in the U.S., for purposes of evaluating the eligibility 
of accredited foreign graduate medical schools to participate in the 
title IV, HEA programs.
    Passing score: The minimum passing score as defined by the 
Educational Commission for Foreign Medical Graduates (ECFMG), or on the 
National Council Licensure Examination for Registered Nurses (NCLEX-
RN), as applicable.
    Post-baccalaureate/equivalent medical program: A program offered by 
a foreign graduate medical school that requires, as a condition of 
admission, that its students have already completed their non-medical 
undergraduate studies and that consists solely of courses and training 
leading to employment as a doctor of medicine or doctor of osteopathic 
medicine.
* * * * *
    7. Section 600.54 is revised to read as follows:


Sec.  600.54  Criteria for determining whether a foreign institution is 
eligible to apply to participate in the FFEL programs.

    The Secretary considers a foreign institution to be comparable to 
an eligible institution of higher education in the United States and 
eligible to apply to participate in the FFEL

[[Page 42232]]

programs if the foreign institution meets the following requirements:
    (a) Except for a freestanding foreign graduate medical school, 
foreign veterinary school, or foreign nursing school, the foreign 
institution is a public or private nonprofit educational institution.
    (b) The foreign institution admits as regular students only persons 
who--
    (1) Have a secondary school completion credential; or
    (2) Have the recognized equivalent of a secondary school completion 
credential.
    (c)(1) Notwithstanding Sec.  668.5, an eligible foreign institution 
may not enter into a written arrangement under which an ineligible 
institution or organization provides any portion of one or more of the 
eligible foreign institution's programs. For the purposes of this 
paragraph, written arrangements do not include affiliation agreements 
for the provision of clinical training for foreign medical, veterinary, 
and nursing schools.
    (2) An additional location of a foreign institution must separately 
meet the definition of a foreign institution in Sec.  600.52 if it is--
    (i) Located outside of the country in which the main campus is 
located, except as provided in Sec.  600.55(h)(1), Sec.  600.56(b), 
Sec.  600.57(a)(2), Sec.  600.55(h)(3), and the definition of foreign 
institution found in Sec.  600.52; or
    (ii) Located within the same country as the main campus, but is not 
covered by the legal authorization of the main campus.
    (d) The foreign institution provides an eligible education 
program--
    (1) For which the institution is legally authorized to award a 
degree that is equivalent to an associate, baccalaureate, graduate, or 
professional degree awarded in the United States;
    (2) That is at least a two-academic-year program acceptable for 
full credit toward the equivalent of a baccalaureate degree awarded in 
the United States; or
    (3)(i) That is equivalent to at least a one-academic-year training 
program in the United States that leads to a certificate, degree, or 
other recognized educational credential and prepares students for 
gainful employment in a recognized occupation.
    (ii) An institution must demonstrate to the satisfaction of the 
Secretary that the amount of academic work required by a program in 
paragraph (d)(3)(i) of this section is equivalent to at least the 
definition of an academic year in Sec.  668.3.
    (e) For a for-profit foreign medical, veterinary, or nursing 
school--
    (1) No portion of an eligible medical or veterinary program offered 
may be at what would be an undergraduate level in the United States; 
and
    (2) The title IV, HEA program eligibility does not extend to any 
joint degree program.
    (f) Proof that a foreign institution meets the requirements of 
paragraph (1)(iii) of the definition of a foreign institution in Sec.  
600.52 may be provided to the Secretary by a legal authorization from 
the appropriate education ministry, council, or equivalent agency--
    (i) For all eligible foreign institutions in the country;
    (ii) For all eligible foreign institutions in a jurisdiction within 
the country; or
    (iii) For each separate eligible foreign institution in the 
country.

(Authority: 20 U.S.C. 1082, 1088)

    8. Section 600.55 is revised to read as follows:


Sec.  600.55  Additional criteria for determining whether a foreign 
graduate medical school is eligible to apply to participate in the 
title IV, HEA programs.

    (a) General. (1) The Secretary considers a foreign graduate medical 
school to be eligible to apply to participate in the title IV, HEA 
programs if, in addition to satisfying the criteria of this part 
(except the criterion in Sec.  600.54 that the institution be public or 
private nonprofit), the school satisfies the criteria of this section.
    (2) A foreign graduate medical school must provide, and in the 
normal course require its students to complete, a program of clinical 
training and classroom medical instruction of not less than 32 months 
in length, that is supervised closely by members of the school's 
faculty and that--
    (i) Is provided in facilities adequately equipped and staffed to 
afford students comprehensive clinical training and classroom medical 
instruction;
    (ii) Is approved by all medical licensing boards and evaluating 
bodies whose views are considered relevant by the Secretary; and
    (iii) As part of its clinical training, does not offer more than 
two electives consisting of no more than eight weeks per student at a 
site located in a foreign country other than the country in which the 
main campus is located or in the United States, unless that location is 
included in the accreditation of a medical program accredited by the 
Liaison Committee on Medical Education (LCME).
    (3) A foreign graduate medical school must appoint for the program 
described in paragraph (a)(2) of this section only those faculty 
members whose academic credentials are the equivalent of credentials 
required of faculty members teaching the same or similar courses at 
medical schools in the United States.
    (4) A foreign graduate medical school must have graduated classes 
during each of the two twelve-month periods immediately preceding the 
date the Secretary receives the school's request for an eligibility 
determination.
    (b) Accreditation. A foreign graduate medical school must--
    (1) Be approved by an accrediting body--
    (i) That is legally authorized to evaluate the quality of graduate 
medical school educational programs and facilities in the country where 
the school is located; and
    (ii) Whose standards of accreditation of graduate medical schools 
have been evaluated by the NCFMEA or its successor committee of medical 
experts and have been determined to be comparable to standards of 
accreditation applied to medical schools in the United States; or
    (2) Be a public or private nonprofit educational institution that 
satisfies the requirements in Sec.  600.4(a)(5)(i).
    (c) Admission criteria. (1) A foreign graduate medical school 
having a post-baccalaureate/equivalent medical program must require 
students accepted for admission who are U.S. citizens, nationals, or 
permanent residents to have taken the Medical College Admission Test 
(MCAT) and to have reported their scores to the foreign medical school; 
and
    (2) A foreign graduate medical school must determine the consent 
requirements for and require the necessary consents of all students 
accepted for admission who are U.S. citizens, nationals, or eligible 
permanent residents to enable the school to comply with the collection 
and submission requirements of paragraph (d) of this section.
    (d) Collection and submission of data. A foreign graduate medical 
school must obtain, at its own expense, and by September 30 of each 
year, submit--
    (1) To its accrediting authority and, on request, to the Secretary, 
the scores on the MCAT or successor examination, of all students 
admitted during the preceding award year who are U.S. citizens, 
nationals, or eligible permanent residents, together with a statement 
of the number of times each student took the examination;
    (2) To its accrediting authority and, on request, to the Secretary, 
the percentage of students graduating during the preceding award year 
(including at least all graduates who are

[[Page 42233]]

U.S. citizens, nationals, or eligible permanent residents) who obtain 
placement in an accredited U.S. medical residency program;
    (3) To the Secretary, except upon written notice from the Secretary 
that the necessary information has been obtained by the Secretary for 
the year directly from the Educational Commission for Foreign Medical 
Graduates (ECFMG) or other responsible third parties, all scores, 
disaggregated by step/test--i.e., Step 1, Step 2--Clinical Skills (Step 
2--CS), and Step 2--Clinical Knowledge (Step 2--CK), or the successor 
examinations--and attempt, earned during the preceding award year by at 
least each student and graduate who is a U.S. citizen, national, or 
eligible permanent resident, on Step 1, Step 2--CS, and Step 2--CK, or 
the successor examinations, of the U.S. Medical Licensing Examination 
(USMLE), together with the dates the student has taken each test, 
including any failed tests;
    (e) Requirements for clinical training. (1)(i) A foreign graduate 
medical school must have--
    (A) A formal affiliation agreement with any hospital or clinic at 
which all or a portion of the school's core clinical training or 
required clinical rotations are provided; and
    (B) Either a formal affiliation agreement or other written 
arrangements with any hospital or clinic at which all or a portion of 
its clinical rotations that are not required are provided, except for 
those locations that are not used regularly, but instead are chosen by 
individual students who take no more than two electives at the location 
for no more than a total of eight weeks.
    (ii) The agreements described in paragraph (e)(1)(i) of this 
section must state how the following will be addressed at each site--
    (A) Maintenance of the school's standards;
    (B) Appointment of faculty to the medical school staff;
    (C) Design of the curriculum;
    (D) Supervision of students;
    (E) Provision of liability insurance; and
    (F) Evaluation of student performance.
    (2) A foreign graduate medical school must notify its accrediting 
body within one year of any material changes in--
    (i) The educational programs, including changes in clinical 
training programs; and
    (ii) The overseeing bodies and in the formal affiliation agreements 
with hospitals and clinics described in paragraph (e)(1)(i) of this 
section.
    (f) Citizenship and USMLE pass rate percentages. (1)(i)(A) During 
the academic year preceding the year for which any of the school's 
students seeks an title IV, HEA program loan, at least 60 percent of 
those enrolled as full-time regular students in the school and at least 
60 percent of the school's most recent graduating class must have been 
persons who did not meet the citizenship and residency criteria 
contained in section 484(a)(5) of the HEA, 20 U.S.C. 1091(a)(5); or
    (B) The school must have had a clinical training program approved 
by a State prior to January 1, 2008, and must continue to operate a 
clinical training program in at least one State that approves the 
program; and
    (ii) Except as provided in paragraph (f)(4) of this section, for a 
foreign graduate medical school outside of Canada, for Step 1, Step 2--
CS, and Step 2--CK, or the successor examinations, of the USMLE 
administered by the ECFMG, at least 75 percent of the school's U.S. 
citizen, national, or eligible permanent resident students and 
graduates who took that step/test of the examination in the year 
preceding the year for which any of the school's students seeks a title 
IV, HEA program loan must have received a passing score on that step/
test and are taking the step/test for the first time; or
    (2)(i) The school must have had a clinical training program 
approved by a State as of January 1, 1992; and
    (ii) The school must continue to operate a clinical training 
program in at least one State that approves the program.
    (3) In performing the calculation required in paragraph (f)(1)(ii) 
of this section, a foreign graduate medical school shall--
    (i) Count as a graduate each U.S. citizen, national, or eligible 
permanent resident who graduated from the school during the three years 
preceding the year for which the calculation is performed; and
    (ii) Count each U.S. citizen, national, or eligible permanent 
resident who takes more than one step/test of the USMLE examination in 
a year in the denominator for each of those steps/tests;
    (4)(i) If the calculation described in paragraph (f)(1)(ii) of this 
section would result in any step/test pass rate based on fewer than 
eight students, a single pass rate for the school is determined instead 
based on the performance of the school's U.S. citizen, national, and 
eligible permanent resident students and graduates on Step 1, Step 2--
CS, and Step 2--CK combined;
    (ii) If combining the results on all three step/tests as permitted 
in paragraph (f)(4)(i) of this section would result in a pass rate 
based on fewer than eight step/test results, the school is deemed to 
have no pass rate for that year and the results for the year are 
combined with each subsequent year until a pass rate based on at least 
eight step/test results is derived.
    (g) Other criteria. (1) As part of establishing, publishing, and 
applying reasonable satisfactory academic progress standards, a foreign 
graduate medical school must include as a quantitative component a 
maximum timeframe in which a student must complete his or her 
educational program that must--
    (i) Be no longer than 150 percent of the published length of the 
educational program measured in academic years, terms, credit hours 
attempted, clock hours completed, etc., as appropriate; and
    (ii) Meet the requirements of Sec.  668.16(e)(2)(ii)(B), (C) and 
(D).
    (2) A foreign graduate medical school must document the educational 
remediation it provides to assist students in making satisfactory 
academic progress.
    (3) A foreign graduate medical school must publish all the 
languages in which instruction is offered.
    (h) Location of a program. (1) Except as provided in paragraph 
(h)(3)(ii) of this section, all portions of a graduate medical 
education program offered to U.S. students must be located in a country 
whose medical school accrediting standards are comparable to standards 
used in the United States, as determined by the NCFMEA, except for 
clinical training sites located in the United States.
    (2) No portion of the graduate medical educational program offered 
to U.S. students, other than the clinical training portion of the 
program, may be located outside of the country in which the main campus 
of the foreign medical school is located.
    (3)(i) Except as provided in paragraph (h)(3)(ii) of this section, 
for any part of the clinical training portion of the educational 
program located in a foreign country other than the country in which 
the main campus is located or in the United States, in order for 
students attending the site to be eligible to borrow title IV, HEA 
program funds--
    (A) The site must be located in an NCFMEA approved comparable 
foreign country;
    (B) The institution's medical accrediting agency must have 
conducted an on-site evaluation and specifically approved the clinical 
training site; and

[[Page 42234]]

    (C) Clinical instruction must be offered in conjunction with 
medical educational programs offered to students enrolled in accredited 
medical schools located in that approved foreign country.
    (ii) A clinical training site located in a foreign country other 
than the country in which the main campus is located or in the United 
States is not required to meet the requirements of paragraph (h)(3)(i) 
of this section in order for students attending that site to be 
eligible to borrow title IV, HEA program funds if--
    (A) The location is included in the accreditation of a medical 
program accredited by the Liaison Committee on Medical Education 
(LCME); or
    (B) No individual student takes more than two electives at the 
location and the combined length of the electives does not exceed eight 
weeks.
    9. Section 600.56 is revised as follows:


Sec.  600.56  Additional criteria for determining whether a foreign 
veterinary school is eligible to apply to participate in the FFEL 
programs.

    (a) The Secretary considers a foreign veterinary school to be 
eligible to apply to participate in the FFEL programs if, in addition 
to satisfying the criteria in this part (except the criterion in Sec.  
600.54 that the institution be public or private nonprofit), the school 
satisfies all of the following criteria:
    (1) The school provides, and in the normal course requires its 
students to complete, a program of clinical and classroom veterinary 
instruction that is supervised closely by members of the school's 
faculty, and that is provided in facilities adequately equipped and 
staffed to afford students comprehensive clinical and classroom 
veterinary instruction through a training program for foreign 
veterinary students that has been approved by all veterinary licensing 
boards and evaluating bodies whose views are considered relevant by the 
Secretary.
    (2) The school has graduated classes during each of the two twelve-
month periods immediately preceding the date the Secretary receives the 
school's request for an eligibility determination.
    (3) The school employs for the program described in paragraph 
(a)(1) of this section only those faculty members whose academic 
credentials are the equivalent of credentials required of faculty 
members teaching the same or similar courses at veterinary schools in 
the United States.
    (4) Effective July 1, 2015, the school is accredited or 
provisionally accredited by an organization acceptable to the Secretary 
for the purpose of evaluating veterinary programs.
    (b)(1) No portion of the foreign veterinary educational program 
offered to U.S. students, other than the clinical training portion of 
the program as provided for in paragraph (b)(2) of this section, may be 
located outside of the country in which the main campus of the foreign 
veterinary school is located;
    (2)(i) For a veterinary school that is neither public nor private 
nonprofit, the school's students must complete their clinical training 
at an approved veterinary school located in the United States;
    (ii) For a veterinary school that is public or private nonprofit, 
the school's students may complete their clinical training at an 
approved veterinary school located--
    (A) In the United States;
    (B) In the home country; or
    (C) Outside of the United States or the home country, if no 
individual student takes more than two electives at the location and 
the combined length of the elective does not exceed eight weeks.

    Authority: 20 U.S.C. 1002 and 1092.

    10. Section 600.57 is redesignated as Sec.  600.58 and a new Sec.  
600.57 is added to read as follows:


Sec.  600.57  Additional criteria for determining whether a foreign 
nursing school is eligible to apply to participate in the FFEL program.

    (a) The Secretary considers a foreign nursing school to be eligible 
to apply to participate in the FFEL programs if, in addition to 
satisfying the criteria in this part (except the criterion in Sec.  
600.54 that the institution be public or private nonprofit), the 
nursing school satisfies all of the following criteria:
    (1) The nursing school is an associate degree school of nursing, a 
collegiate school of nursing, or a diploma school of nursing.
    (2) The nursing school has an agreement with a hospital located in 
the United States or an accredited school of nursing located in the 
United States that requires students of the nursing school to complete 
the student's clinical training at the hospital or accredited school of 
nursing.
    (3) The nursing school has an agreement with an accredited school 
of nursing located in the United States providing that students 
graduating from the nursing school located outside of the United States 
also receive a degree from the accredited school of nursing located in 
the United States.
    (4) The nursing school certifies only Federal Stafford Loan program 
loans or Federal PLUS program loans, as those terms are defined in 
Sec.  668.2, for students attending the nursing school.
    (5) The nursing school reimburses the Secretary for the cost of any 
loan defaults for current and former students included in the 
calculation of the institution's cohort default rate during the 
previous fiscal year.
    (6)(i) The nursing school determines the consent requirements for 
and requires the necessary consents of all students accepted for 
admission who are U.S. citizens, nationals, or eligible permanent 
residents to enable the school to comply with the collection and 
submission requirements of paragraph (a)(6)(ii) of this section.
    (ii) The nursing school annually either--
    (A) Obtains, at its own expense, all results achieved by students 
and graduates who are U.S. citizens, nationals, or eligible permanent 
residents on the National Council Licensure Examination for Registered 
Nurses (NCLEX-RN), together with the dates the student has taken the 
examination, including any failed examinations, and provides such 
results to the Secretary; or
    (B) Obtains a report or reports from the National Council of State 
Boards of Nursing (NCSB), or an NCSB affiliate or NCSB contractor, 
reflecting the percentage of the school's students and graduates taking 
the NCLEX-RN in the preceding year who passed the examination, or the 
data from which the percentage could be derived, and provides the 
report to the Secretary.
    (7) Not less than 75 percent of the school's students and graduates 
who are U.S. citizens, nationals, or eligible permanent residents who 
took the NCLEX-RN in the year preceding the year for which the 
institution is certifying a Federal Stafford Loan or a Federal Plus 
Loan, passed the examination.
    (8) The school provides, including under the agreements described 
in paragraphs (a)(2) and (a)(3) of this section, and in the normal 
course requires its students to complete, a program of clinical and 
classroom nursing instruction that is supervised closely by members of 
the school's faculty that is provided in facilities adequately equipped 
and staffed to afford students comprehensive clinical and classroom 
nursing instruction, through a training program for foreign nursing 
students that has been approved by all nurse licensing boards and 
evaluating bodies whose views are considered relevant by the Secretary.
    (9) The school has graduated classes during each of the two twelve-
month periods immediately preceding the date the Secretary receives the 
school's request for an eligibility determination.

[[Page 42235]]

    (10) The school employs only those faculty members whose academic 
credentials are the equivalent of credentials required of faculty 
members teaching the same or similar courses at nursing schools in the 
United States.
    (b) For purposes of paragraph (a)(5) of this section, the cost of a 
loan default is the sum of the defaulted loan's--
    (1) Outstanding principal;
    (2) Accrued interest;
    (3) Unpaid late fees and collection costs;
    (4) Special allowance payments;
    (5) Reinsurance payments; and
    (6) Any related or similar payments the Secretary is obligated to 
make on the loan.
    (c) After a school reimburses the Secretary for the amount 
specified in paragraph (b) of this section, the loan is assigned to the 
school, and the borrower remains liable to the school for the 
outstanding balance of the loan, under the terms and conditions 
specified in the promissory note.
    (d) No portion of the foreign nursing program offered to U.S. 
students may be located outside of the country in which the main campus 
of the foreign nursing school is located, except for clinical sites 
located in the United States.

PART 668--STUDENT ASSISTANCE GENERAL PROVISIONS

    11. The authority citation for part 668 continues to read as 
follows:

    Authority: 20 U.S.C. 1001, 1002, 1003, 1070g, 1085, 1088, 1091, 
1092, 1094, 1099c, and 1099c-1, unless otherwise noted.

    12. Section 668.2 is amended by adding the words ``Foreign 
institution'' immediately after ``Federal Family Education Loan (FFEL) 
programs'' in the list of definitions in paragraph (a).
    13. Section 668.13(b) is revised to read as follows:


Sec.  668.13  Certification procedures.

* * * * *
    (b) Period of participation. (1) If the Secretary certifies that an 
institution meets the standards of this subpart, the Secretary also 
specifies the period for which the institution may participate in a 
title IV, HEA program. An institution's period of participation expires 
six years after the date that the Secretary certifies that the 
institution meets the standards of this subpart, except that--
    (i) The period of participation for a private, for profit foreign 
institution expires three years after the date of the Secretary's 
certification; and
    (ii) The Secretary may specify a shorter period.
    (2) Provided that an institution has submitted an application for a 
renewal of certification that is materially complete at least 90 days 
prior to the expiration of its current period of participation, the 
institution's existing certification will be extended on a month to 
month basis following the expiration of the institution's period of 
participation until the end of the month in which the Secretary issues 
a decision on the application for recertification.

Sec.  668.15  [Amended]

    14. Section 668.15 is amended by removing paragraph (h).
    15. Section 668.23 is amended by:
    A. In paragraph (a)(5), removing the words `` ``Audits of 
Institutions of Higher Education and Other Non-profit Organizations''; 
Office of Management and Budget Circular A-128, ``Audits of State and 
Local Governments'' '' and adding, in their place, the words ``Audits 
of States, Local Governments, and Non-Profit Organizations'' ''.
    B. In paragraph (d)(1)--
    Adding the words ``issued by the Comptroller General of the United 
States'' after ``with generally accepted government auditing 
standards'' and removing the words `` ``Audits of Institutions of 
Higher Education and Other Non-profit Organizations''; Office of 
Management and Budget Circular A-128, ``Audits of State and Local 
Governments'' ''; and adding, in their place, ``Audits of States, Local 
Governments, and Non-Profit Organizations''.
    C. Removing paragraph (d)(3).
    D. Redesignating paragraph (d)(4) as paragraph (d)(3).
    E. Redesignating paragraph (d)(5) as paragraph (d)(4).
    F. Adding paragraph (h).
    The addition reads as follows:


Sec.  668.23  Compliance audits and audited financial statements.

* * * * *
    (h) Audit submission requirements for foreign institutions. (1) 
Audited financial statements. (i) The Secretary waives for that fiscal 
year the submission of audited financial statements if the institution 
is a foreign public or nonprofit institution that received less than 
$500,000 in U.S. title IV program funds during its most recently 
completed fiscal year, unless that foreign public or nonprofit 
institution is in its initial provisional period of participation, and 
received title IV program funds during that year, in which case the 
institution must submit, in English, audited financial statements 
prepared in accordance with generally accepted accounting principles of 
the institution's home country.
    (ii) Except as provided in paragraph (h)(1)(iii) of this section, a 
foreign institution that received $500,000 or more in U.S. title IV 
program funds during its most recently completed fiscal year must 
submit, in English, for each most recently completed fiscal year in 
which it received title IV program funds, audited financial statements 
prepared in accordance with generally accepted accounting principles of 
the institution's home country along with corresponding audited 
financial statements that meet the requirements of paragraph (d) of 
this section.
    (iii) In lieu of making the submission required by paragraph 
(h)(1)(ii) of this section, a public or private nonprofit institution 
that received--
    (A) $500,000 or more in U.S. title IV program funds, but less than 
$3,000,000 in U.S. title IV program funds during its most recently 
completed fiscal year, may submit for that year, in English, audited 
financial statements prepared in accordance with the generally accepted 
accounting principles of the institution's home country, and is not 
required to submit the corresponding audited financial statements that 
meet the requirements of paragraph (d) of this section;
    (B) At least $3,000,000, but less than $5,000,000 in U.S. title IV, 
program funds during its most recently completed fiscal year, must 
submit in English, for each most recently completed fiscal year, 
audited financial statements prepared in accordance with the generally 
accepted accounting principles of the institution's home country along 
with corresponding audited financial statements that meet the 
requirements of paragraph (d) of this section, except that an 
institution that continues to receive at least $3,000,000 but less than 
$5,000,000, in U.S. title IV funds during its most recently completed 
fiscal year may omit the audited financial statements that meet the 
requirements of paragraph (d) of this section for up to two consecutive 
years following the submission of audited financial statements that 
meet the requirements of paragraph (d) of this section.
    (2) Compliance audits. A foreign institution's compliance audit 
must cover, on a fiscal year basis, all title IV, HEA program 
transactions, and must cover all of those transactions that have 
occurred since the period covered by the institution's last compliance 
audit. A compliance audit that is due under this paragraph must be 
submitted no later than six months after the last day of the 
institution's fiscal year, and must meet the following requirements:

[[Page 42236]]

    (i) If the foreign institution received $500,000 or more in U.S. 
dollars in title IV, HEA program funds during its most recently 
completed fiscal year, it must submit a standard compliance audit for 
that year that is performed in accordance with audit guides developed 
by, and available from, the Department of Education's Office of 
Inspector General, together with an alternative compliance audit or 
audits prepared in accordance with paragraph (h)(2)(ii) of this section 
for any preceding fiscal year or years in which the foreign institution 
received less than $500,000 in U.S. dollars in title IV, HEA program 
funds;
    (ii) If the foreign institution received less than $500,000 U.S. in 
title IV, HEA program funds for its most recently completed fiscal 
year, it must submit an alternative compliance audit for that prior 
fiscal year that is performed in accordance with audit guides developed 
by, and available from, the Department of Education's Office of 
Inspector General, except as noted in paragraph (h)(2)(iii) of this 
section.
    (iii) If so notified by the Secretary, a foreign institution may 
submit an alternative compliance audit performed in accordance with 
audit guides developed by, and available from, the Department of 
Education's Office of Inspector General, that covers a period not to 
exceed three of the institution's consecutive fiscal years if such 
audit is submitted either no later than six months after the last day 
of the most recent fiscal year, or contemporaneously with a standard 
compliance audit timely submitted under paragraph (h)(2)(i) or 
(h)(3)(ii) of this section for the most recently completed fiscal year, 
and if the following conditions are met:
    (A) The institution received less than $500,000 in title IV, HEA 
program funds for its most recently completed fiscal year.
    (B) The institution has timely submitted acceptable compliance 
audits for two consecutive fiscal years, and following such submission, 
has no history of late submission since then.
    (C) The institution is fully certified.
    (3)(i) Exceptions. Notwithstanding the provisions of paragraphs 
(h)(1)(i) and (h)(1)(iii) of this section, the Secretary may issue a 
letter to a foreign institution that identifies problems with its 
financial condition or financial reporting and requires the submission 
of audited financial statements in the manner specified by the 
Secretary.
    (ii) Notwithstanding the provisions of paragraphs (h)(2)(ii) and 
(h)(2)(iii) of this section, the Secretary may issue a letter to a 
foreign institution that identifies problems with its administrative 
capability or compliance reporting that may require the compliance 
audit to be performed at a higher level of engagement, and may require 
the compliance audit to be submitted annually.
    16. Section 668.171 is amended by revising paragraph (c) to read as 
follows:


Sec.  668.171  General.

* * * * *
    (c) Public institutions. (1) The Secretary considers a domestic 
public institution to be financially responsible if the institution--
    (i)(A) Notifies the Secretary that it is designated as a public 
institution by the State, local, or municipal government entity, tribal 
authority, or other government entity that has the legal authority to 
make that designation; and
    (B) Provides a letter from an official of that State or other 
government entity confirming that the institution is a public 
institution; and
    (ii) Is not in violation of any past performance requirement under 
Sec.  668.174.
    (2) The Secretary considers a foreign public institution to be 
financially responsible if the institution--
    (i)(A) Notifies the Secretary that it is designated as a public 
institution by the country or other government entity that has the 
legal authority to make that designation; and
    (B) Provides documentation from an official of that country or 
other government entity confirming that the institution is a public 
institution and is backed by the full faith and credit of the country 
or other government entity; and
    (ii) Is not in violation of any past performance requirement under 
Sec.  668.174.
* * * * *

PART 682--FEDERAL FAMILY EDUCATION LOAN (FFEL) PROGRAM

    17. The authority citation for part 682 continues to read as 
follows:

    Authority: 20 U.S.C. 1071-1087-2, unless otherwise noted.

    18. Section 682.200 is amended by:
    A. Adding the words ``Foreign institution'' immediately after 
``Federal Family Education Loan Program (formerly known as the 
Guaranteed Student Loan (GSL) Program'' in the list of definitions in 
paragraph (a)(2).
    B. Removing the definition of Foreign school in paragraph (b).


Sec.  682.611  [Removed]

    19. Section 682.611 is removed and reserved.

[FR Doc. 2010-17313 Filed 7-19-10; 8:45 am]
BILLING CODE 4000-01-P