[Federal Register Volume 85, Number 64 (Thursday, April 2, 2020)]
[Proposed Rules]
[Pages 18638-18702]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-05700]



[[Page 18637]]

Vol. 85

Thursday,

No. 64

April 2, 2020

Part II





Department of Education





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34 CFR Parts 600 and 668





Distance Education and Innovation; Proposed Rule

  Federal Register / Vol. 85 , No. 64 / Thursday, April 2, 2020 / 
Proposed Rules  

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DEPARTMENT OF EDUCATION

34 CFR Parts 600 and 668

[Docket ID ED-2018-OPE-0076]
RIN 1840-AD38


Distance Education and Innovation

AGENCY: Office of Postsecondary Education, Department of Education.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Secretary proposes to amend the general, establishing 
eligibility, maintaining eligibility, and losing eligibility sections 
of the Institutional Eligibility regulations issued under the Higher 
Education Act of 1965, as amended (HEA), related to distance education 
and innovation. In addition, the Secretary proposes to amend the 
Student Assistance General Provisions regulations issued under the HEA.

DATES: The U.S. Department of Education (the ``Department'' or ``we'') 
must receive your comments on or before May 4, 2020.

ADDRESSES: Submit your comments through the Federal eRulemaking Portal 
or via postal mail, commercial delivery, or hand delivery. We will not 
accept comments submitted by fax or by email or those submitted after 
the comment period. To ensure that we do not receive duplicate copies, 
please submit your comments only once. In addition, please include the 
Docket ID at the top of your comments.
    If you are submitting comments electronically, we strongly 
encourage you to submit any comments or attachments in Microsoft Word 
format. If you must submit a comment in Adobe Portable Document Format 
(PDF), we strongly encourage you to convert the PDF to print-to-PDF 
format or to use some other commonly used searchable text format. 
Please do not submit the PDF in a scanned format. Using a print-to-PDF 
format allows the Department to electronically search and copy certain 
portions of your submissions.
     Federal eRulemaking Portal: Go to www.regulations.gov to 
submit your comments electronically. Information on using 
Regulations.gov, including instructions for accessing agency documents, 
submitting comments, and viewing the docket, is available on the site 
under ``Help.''
     Postal Mail, Commercial Delivery, or Hand Delivery: The 
Department strongly encourages commenters to submit their comments 
electronically. However, if you mail or deliver your comments about the 
proposed regulations, address them to Scott Filter, U.S. Department of 
Education, 400 Maryland Ave. SW, Mail Stop 294-42, Washington, DC 
20202.
    Privacy Note: The Department's policy is to make comments received 
from members of the public available for public viewing on the Federal 
eRulemaking Portal at www.regulations.gov. Therefore, commenters should 
be careful to include in their comments only information that they wish 
to make publicly available.

FOR FURTHER INFORMATION CONTACT: For further information, contact Scott 
Filter at (202) 453-7249 or [email protected].
    If you use a telecommunications device for the deaf (TDD) or a text 
telephone (TTY), call the Federal Relay Service (FRS), toll free, at 
(800) 877-8339.

SUPPLEMENTARY INFORMATION:

Executive Summary

Purpose of This Regulatory Action

    The purpose of these distance education and innovation regulations 
is to reduce barriers to innovation in the way institutions deliver 
educational materials and opportunities to students, and assess their 
knowledge and understanding, while providing reasonable safeguards to 
limit the risks to students and taxpayers. Institutions of higher 
education (IHEs) may be dissuaded from innovating because of added 
regulatory burden and uncertainty about how the Department will apply 
its regulations to new types of programs and methods of institutional 
educational delivery. In the past, the Department has not updated its 
regulations frequently enough to keep pace with new types of technology 
or educational innovations. For example, the current regulations do not 
address subscription-based programs or consider programs made possible 
through artificial intelligence-driven adaptive learning. On the other 
hand, the regulations refer to outdated technologies, in some cases 
based on statutory language, such as ``facsimile transmission'' and 
``video cassettes, DVDs, and CD-ROMs.'' Because of the time it takes to 
implement new regulations, it is unlikely that the Department will be 
able to keep pace with developing technologies and other innovations in 
real time. These proposed regulations attempt to remove barriers that 
institutions face when trying to create and implement new and 
innovative ways of providing education to students, and also provide 
sufficient flexibility to ensure that future innovations we cannot yet 
anticipate have an opportunity to move forward without undue risk of a 
negative program finding or other sanction on an institution.
    The Department's proposed regulations are also designed to protect 
students and taxpayers from unreasonable risks. Inadequate consumer 
information could result in students enrolling in programs that will 
not help them meet their goals. In addition, institutions adopting 
innovative methods of educating students may expend taxpayer funds in 
ways that were not contemplated by Congress or the Department, 
resulting in greater risk to the taxpayers of waste, fraud, and 
unnecessary spending. These proposed regulations attempt to limit risks 
to students and taxpayers resulting from innovation by delegating 
various oversight functions to the bodies best suited to conduct that 
oversight--States and accreditors. This delegation of authority through 
the higher education regulatory triad entrusts oversight of most 
consumer protections to States, assurance of academic quality to 
accrediting agencies, and protection of taxpayer funds to the 
Department.
    Through this regulatory action, the Department proposes to: (1) 
Amend the definitions of ``clock hour'' and ``credit hour'' to provide 
flexibility to distance education and other types of educational 
programs that emphasize demonstration of learning rather than seat time 
when measuring student outcomes, while still allowing those programs to 
participate in the Federal Student Aid programs authorized under title 
IV of the HEA (title IV, HEA programs), (2) amend the definitions of 
``distance education'' and ``correspondence course'' to account for 
changes in distance education technology and the types of programs 
offered by institutions, e.g., competency-based education (CBE) 
programs, (3) clarify, through new definitions, the requirements of 
regular and substantive interaction between students and instructors 
for a course to be considered distance education and not a 
correspondence course, (4) define ``incarcerated student'' and 
``juvenile justice facility'' to clarify the Pell Grant eligibility 
requirements for incarcerated students, (5) allow students enrolled in 
foreign institutions to take courses at domestic institutions, (6) 
define ``subscription-based programs'' and establish the conditions for 
disbursement of title IV, HEA assistance in such programs, (7) clarify 
and simplify the requirements for ``direct assessment programs,'' 
including regulations for the determination of equivalent credit hours 
for such

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programs, (8) define a ``week of instruction'' for asynchronous online 
programs to clarify how that term applies to distance education or 
correspondence courses, (9) amend regulations to ensure the treatment 
of students enrolled in distance or competency-based programs in a 
manner consistent with their peers in traditional programs, and (10) 
amend regulations regarding financial responsibility to codify and 
clarify requirements when there is an institutional change of ownership 
or control.

Summary of the Major Provisions of This Regulatory Action

    The proposed regulations would--
     Clarify that when calculating the number of correspondence 
students, a student is considered ``enrolled in a correspondence 
course'' if correspondence courses constitute 50 percent or more of the 
courses in which the student enrolled during an award year;
     Limit the requirement for the Secretary's approval to an 
institution's first direct assessment program at each credential level;
     Require institutions to report to the Secretary when they 
add a second or subsequent direct assessment program or establish a 
written arrangement for an ineligible institution or organization to 
provide more than 25 percent, but no more than 50 percent, of a 
program;
     Require prompt action by the Department on any 
applications submitted by an institution to the Secretary seeking a 
determination that it qualifies as an eligible institution and any 
reapplications for a determination that the institution continues to 
meet the requirements to be an eligible institution for HEA programs;
     Allow students enrolled in eligible foreign institutions 
to complete up to 25 percent of an eligible program at an eligible 
institution in the United States; and clarify that, notwithstanding 
this provision, an eligible foreign institution may permit a Direct 
Loan borrower to perform research in the United States for not more 
than one academic year if the research is conducted during the 
dissertation phase of a doctoral program;
     Clarify the conditions under which a participating foreign 
institution may enter into a written arrangement with an ineligible 
entity;
     Provide flexibility to institutions to modify their 
curriculum at the recommendations of industry advisory boards and 
without relying on a traditional faculty-led decision-making process;
     Provide flexibility to institutions when conducting clock-
to-credit hour conversions to eliminate confusion about the inclusion 
of homework time in the clock-hour determination;
     Clarify the eligibility requirements for a direct 
assessment program;
     Clarify, in consideration of the challenges to 
institutions posed by minimum program length standards associated with 
occupational licensing requirements, which vary from State to State, 
that an institution may demonstrate a reasonable relationship between 
the length of a program, as defined in 20 U.S.C. 1001(b)(1), and the 
entry-level requirements of the occupation for which that program 
prepares students;
     Clarify that a student is not considered to have withdrawn 
for purposes of determining the amount of title IV grant or loan 
assistance that the student earned if the student completes all the 
requirements for graduation for a non-term program or a subscription-
based program, if the student completes one or more modules that 
comprise 50 percent or more of the number of days in the payment 
period, or if the institution obtains written confirmation that the 
student will resume attendance in a subscription-based or non-term 
program;
     Remove provisions pertaining to the use and calculation of 
the Net Present Value of institutional loans for the calculation of the 
90/10 ratio for for-profit IHEs, because the provisions are no longer 
applicable;
     Clarify satisfactory academic progress requirements for 
non-term credit or clock programs, term-based programs that are not a 
subscription-based program, and subscription-based programs;
     Clarify that the Secretary will rely on the requirements 
established by an institution's accrediting agency or State authorizing 
agency to evaluate an institution's appeal of a final audit or program 
review determination that includes a finding about the institution's 
classification of a course or program as distance education, or the 
institution's assignment of credit hours;
     Clarify that the Secretary may deny an institution's 
application for certification or recertification to participate in the 
title IV, HEA programs if an institution is not financially responsible 
or does not submit its audits in a timely manner; and
     Clarify that an institution is not financially responsible 
if a person who exercises substantial ownership or control over an 
institution also exercised substantial ownership or control over 
another institution that closed without executing a viable teach-out 
plan or agreement.
    Costs and Benefits: As further detailed in the Regulatory Impact 
Analysis, the benefits of the proposed regulations include--(1) 
updating and clarifying definitions of key terms related to distance 
education, correspondence courses, direct assessment and competency-
based programs to support the continued development of these innovative 
educational methods; (2) identifying a disbursement process for a 
subscription model for competency-based education so schools know how 
their students can access title IV aid for them, removing one potential 
barrier to growth of such programs; and (3) eliminating references to 
outdated technologies and making the regulations flexible enough to 
accommodate further technological advancements. Institutions that 
choose to offer these programs would benefit from the clarifications of 
terms and processes involved in establishing and administering direct 
assessment programs and reduced barriers to entry. While those 
currently offering such programs or competency-based courses would be 
best positioned to offer new programs in the near-term, we expect 
additional institutions to take advantage of the opportunities to offer 
new programs. While it is more a function of continued evolution in the 
postsecondary market, removing the barriers to entry will increase 
competition and some institutions could face a cost associated with 
losing students to those that offer appealing new programs.
    The emphasis on flexibility, workforce development, and innovative 
educational approaches could be beneficial to students. Students, 
especially non-traditional students that have been a key market for 
existing competency-based or distance education programs, could benefit 
from flexible pacing and different models for assessing progress. 
Additionally, while competency-based models are a relatively new 
segment of the postsecondary market, some evidence suggests that the 
self-pacing model and other efforts by institutions may allow students 
to graduate with lower debt, but it is not clear how that factor will 
develop as more institutions develop competency-based programs.\1\
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    \1\ www.texaspolicy.com/new-study-less-expensive-competency-based-education-programs-just-as-good-as-traditional-programs/.
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    The proposed regulations would involve a significant amount of 
monetary transfers among the Federal government, students, and 
institutions

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through increased Pell Grants and Federal student loans. The Department 
assumes students in the existing baseline who switch from one program 
to another will receive similar amounts of Federal aid and not have a 
significant budget impact. We estimate that new students attracted to 
the new competency-based or other programs developed in part because of 
the proposed regulations would have a net Federal budget impact over 
the 2020-2029 loan cohorts of $[-237] million in outlays in the primary 
estimate scenario and an increase in Pell Grant outlays of $1,021 
million over 10 years, for a total net impact of $784 million. The 
Department provides additional detail related to budget estimates in 
the Regulatory Impact Analysis section and provides burden estimates in 
the Paperwork Reduction Act section of this NPRM.
    Invitation to Comment: We invite you to submit comments regarding 
these proposed regulations. 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 address, and provide relevant information 
and data whenever possible, even when there is no specific solicitation 
of data and other supporting materials in the request for comment. We 
also urge you to arrange your comments in the same order as the 
proposed regulations. Please do not submit comments that are outside 
the scope of the specific proposals in this NPRM, as we are not 
required to respond to such comments.
    We invite you to assist us in complying with the specific 
requirements of Executive Orders 12866, 13563, and 13771 and their 
overall requirement of reducing regulatory burden that might result 
from these proposed regulations. Please let us know of any further ways 
we could reduce potential costs or increase potential benefits while 
preserving the effective and efficient administration of the 
Department's programs and activities.
    During and after the comment period, you may inspect all public 
comments about the proposed regulations by accessing Regulations.gov. 
You may also inspect the comments in person at 400 Maryland Ave. SW, 
Washington, DC, between 8:30 a.m. and 4:00 p.m., Eastern Time, Monday 
through Friday of each week except Federal holidays. To schedule a time 
to inspect comments, please contact the person listed under FOR FURTHER 
INFORMATION CONTACT.
    Assistance to Individuals with Disabilities in Reviewing the 
Rulemaking Record: On request, we will provide an appropriate 
accommodation or auxiliary aid to an individual with a disability who 
needs assistance to review the comments or other documents in the 
public rulemaking record for the proposed regulations. To schedule an 
appointment for this type of accommodation or auxiliary aid, please 
contact the person listed under FOR FURTHER INFORMATION CONTACT.

Background

    The Secretary proposes to amend Sec. Sec.  600.2, 600.7, 600.10, 
600.20, 600.21, 600.52, 600.54, 668.1, 668.2, 668.3, 668.5, 668.8, 
668.10, 668.13, 668.14, 668.15, 668.22, 668.28, 668.34, 668.111, 
668.113, 668.164, 668.171, 668.174, and 668.175 of title 34 of the Code 
of Federal Regulations (CFR). The regulations in 34 CFR part 600 
pertain to institutional eligibility under the HEA. The regulations in 
34 CFR part 668 pertain to student assistance general provisions. We 
are proposing these amendments to--(1) clarify that when calculating 
the number of correspondence students, a student is considered 
``enrolled in a correspondence course'' if correspondence courses 
constitute 50 percent or more of the courses in which the student 
enrolled during an award year; (2) limit the requirement for the 
Secretary's approval to an institution's first direct assessment 
program at each credential level; (3) require prompt action by the 
Department on any applications submitted by an institution to the 
Secretary seeking a determination that it qualifies as an eligible 
institution and any reapplications for a determination that the 
institution continues to meet the requirements to be an eligible 
institution for title IV, HEA programs; (4) require institutions to 
report to the Secretary when they add a second or subsequent direct 
assessment program or establish a written arrangement for an ineligible 
institution or organization to provide more than 25 percent of a 
program; (5) allow students enrolled in eligible foreign institutions 
to complete up to 25 percent of an eligible program at an eligible 
institution in the United States; (6) clarify that an eligible foreign 
institution may permit an individual Direct Loan recipient to perform 
research in the United States for not more than one academic year, if 
the research is conducted during the dissertation phase of a doctoral 
program; (7) clarify the conditions under which a foreign school may 
enter into a written arrangement with an ineligible entity to provide 
educational services; (8) provide flexibility to institutions to modify 
curricula at the recommendations of industry advisory boards that 
include employers who hire program graduates, widely recognized 
industry standards and organizations, or industry-recognized 
credentialing bodies; (9) provide flexibility to institutions when 
conducting clock-to-credit hour conversions to eliminate confusion 
about the inclusion of homework time in the clock-hour determination; 
(10) clarify the requirements for a direct assessment program to 
qualify as an eligible program; (11) clarify the eligibility 
requirements for programs that prepare students for gainful employment 
in a recognized occupation by establishing how an institution may 
demonstrate a reasonable relationship between the length of a program, 
as defined in 20 U.S.C. 1001(b)(1), and the entry-level requirements of 
the occupation for which that program prepares students; (12) clarify 
that a student is not considered to have withdrawn if the student 
completes all the requirements for graduation from his or her 
educational program, if the student completes one or more modules that 
comprise 50 percent or more of the number of days in the payment 
period, or if the institution obtains written confirmation that the 
student will resume attendance in a subscription-based or non-term 
program; (13) remove provisions pertaining to the use and calculation 
of the Net Present Value of institutional loans for the calculation of 
the 90/10 ratio for for-profit institutions, because the provisions are 
no longer applicable; (14) clarify the requirements for satisfactory 
academic progress for students enrolled in non-term credit or clock 
programs, term-based programs that are not a subscription-based 
program, and subscription-based programs; (15) clarify that the 
Secretary will rely on the requirements established by an institution's 
accrediting agency to evaluate an institution's compliance when the 
institution appeals a final audit or program review determination that 
includes a finding about the institution's classification of a course 
or program as distance education, or the institution's assignment of 
credit hours; (16) clarify that the Secretary may deny an institution's 
application for certification or recertification to participate in the 
title IV, HEA programs if an institution is not financially responsible 
or does not submit its audits in a timely manner; (17) clarify that an 
institution is not financially responsible if a person who exercises 
substantial

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ownership or control over an institution also exercised substantial 
ownership or control over another institution that closed without a 
viable teach-out plan or agreement approved by the institution's 
accrediting agency and faithfully executed by the institution; and (18) 
make technical and conforming changes.

Public Participation

    On July 31, 2018, we published a notice in the Federal Register (83 
FR 36814) announcing our intent to establish a negotiated rulemaking 
committee to prepare proposed regulations for the title IV, HEA 
programs. We also announced our intention to create two subcommittees 
for this committee. In addition, we announced three public hearings at 
which interested parties could comment on the topics suggested by the 
Department and could suggest additional topics that should be 
considered for action by the negotiating committee. The hearings were 
held on--
     September 6, 2018, in Washington, DC;
     September 11, 2018, in New Orleans, LA; and
     September 13, 2018 in Sturtevant, WI.
    Transcripts from the public hearings are available at: www2.ed.gov/policy/highered/reg/hearulemaking/2018/index.html.
    We also invited parties unable to attend a public hearing to submit 
written comments on the proposed topics and to submit other topics for 
consideration. Written comments submitted in response to the July 31, 
2018, Federal Register notice may be viewed through the Federal 
eRulemaking Portal at www.regulations.gov, within docket ID ED-2018-
OPE-0076. Instructions for finding comments are also available on the 
site under ``Help.''

Negotiated Rulemaking

    Section 492 of the HEA, 20 U.S.C. 1098a, requires the Secretary to 
obtain public involvement in the development of proposed regulations 
affecting programs authorized by title IV of the HEA. After obtaining 
extensive input and recommendations from the public, including 
individuals and representatives of groups involved in the title IV, HEA 
programs, the Secretary in most cases, must subject the proposed 
regulations to a negotiated rulemaking process. If negotiators reach 
consensus on the proposed regulations, the Department agrees to publish 
without substantive alteration a defined group of regulations on which 
the negotiators reached consensus unless the Secretary reopens the 
process or provides a written explanation to the participants stating 
why the Secretary has decided to depart from the agreement reached 
during negotiations. Further information on the negotiated rulemaking 
process can be found at: www2.ed.gov/policy/highered/reg/hearulemaking/hea08/neg-reg-faq.html.
    On October 15, 2018, the Department published a notice in the 
Federal Register (83 FR 51906) announcing its intention to establish 
one negotiated rulemaking committee--the Accreditation and Innovation 
Committee (committee)--to prepare proposed regulations for the title 
IV, HEA programs. The notice set forth a schedule for the committee 
meetings and requested nominations for individual negotiators to serve 
on the negotiating committee. We also announced the creation of three 
subcommittees--the Distance Learning and Innovation Subcommittee 
(referred to as the ``subcommittee'' in this document unless otherwise 
noted), the Faith-Based Entities Subcommittee, and the TEACH Grants 
Subcommittee--and requested nominations for individuals with pertinent 
expertise to participate on the subcommittees.
    The Department sought negotiators to represent the following groups 
for the Accreditation and Innovation Committee: Students; legal 
assistance organizations that represent students; financial aid 
administrators at postsecondary institutions; national accreditation 
agencies; regional accreditation agencies; programmatic accreditation 
agencies; IHEs primarily offering distance education; IHEs eligible to 
receive Federal assistance under title III, parts A, B and F, and title 
V of the HEA, which include Historically Black Colleges and 
Universities, Hispanic-Serving Institutions, American Indian Tribally 
Controlled Colleges and Universities, Alaska Native and Native 
Hawaiian-Serving Institutions, and other institutions with a 
substantial enrollment of needy students as defined in title III of the 
HEA; two-year public IHEs; four-year public IHEs; faith-based IHEs; 
private, nonprofit IHEs; private, proprietary IHEs; employers; and 
veterans.
    For the Distance Learning and Innovation Subcommittee, the 
Department sought negotiators to represent the following groups: 
Students; legal assistance organizations that represent students; 
private, nonprofit IHEs, with knowledge of direct assessment programs 
and competency-based education; private, for-profit IHEs, with 
knowledge of direct assessment programs and competency-based education; 
public IHEs, with knowledge of direct assessment programs and 
competency-based education; accrediting agencies; associations or 
organizations that provide guidance to or represent institutions with 
direct assessment programs and competency-based education; financial 
aid administrators at postsecondary institutions; academic executive 
officers at postsecondary institutions; nonprofit organizations 
supporting inter-State agreements related to State authorization of 
distance or correspondence education programs; and State higher 
education executives.
    The Accreditation and Innovation negotiating committee included the 
following members:

    Susan Hurst, Ouachita Baptist University, and Karen McCarthy 
(alternate), National Association of Student Financial Aid 
Administrators, representing financial aid administrators at 
postsecondary institutions.
    Robyn Smith, Legal Aid Foundation of Los Angeles, and Lea 
Wroblewski (alternate), Legal Aid of Nebraska, representing legal 
assistance organizations that represent students.
    Ernest McNealey, Allen University, and Eric Hill Hart 
(alternate), North Carolina A&T State University, representing IHEs 
that award or have awarded TEACH grants and that are eligible to 
receive Federal assistance under title III, Parts A, B, and F, and 
title V of the HEA, which include Historically Black Colleges and 
Universities, Hispanic-Serving Institutions, American Indian 
Tribally Controlled Colleges and Universities, Alaska Native and 
Native Hawaiian-Serving Institutions, Predominantly Black 
Institutions, and other institutions with a substantial enrollment 
of needy students as defined in title III of the HEA.
    David Dannenberg, University of Alaska, Anchorage, and Tina 
Falkner (alternate), University of Minnesota, representing four-year 
public IHEs.
    Terry Hartle, American Council on Education, and Ashley Ann 
Reich (alternate), Liberty University, representing private, 
nonprofit IHEs.
    Jillian Klein, Strategic Education, Inc., and Fabian Fernandez 
(alternate), Schiller International University, representing 
private, proprietary IHEs.
    William Pena, Southern New Hampshire University, and M. Kimberly 
Rupert (alternate), Spring Arbor University, representing IHEs 
primarily offering distance education.
    Christina Amato, Sinclair College, and Daniel Phelan 
(alternate), Jackson College, representing two-year public IHEs.
    Barbara Gellman-Danley, Higher Learning Commission, and 
Elizabeth Sibolski (alternate), Middle States Commission on Higher 
Education, representing regional accreditation agencies.
    Laura King, Council on Education for Public Health, and Janice 
Knebl (alternate),

[[Page 18642]]

American Osteopathic Association Commission on Osteopathic College 
Accreditation, representing programmatic accreditation agencies.
    Michale S. McComis, Accrediting Commission of Career Schools and 
Colleges, and India Y. Tips (alternate), Accrediting Bureau of 
Health Education Schools, representing national accreditation 
agencies.
    Steven M. Sandberg, Brigham Young University, and David 
Altshuler (alternate), San Francisco Theological Seminary, 
representing faith-based IHEs.
    Joseph Verardo, National Association of Graduate-Professional 
Students, and John Castellaw (alternate), University of Arizona, 
representing students.
    Edgar McCulloch, IBM Corporation, and Shaun T. Kelleher 
(alternate), BAM Technologies, representing employers.
    Daniel Elkins, Enlisted Association of the National Guard of the 
U.S., and Elizabeth Bejar (alternate), Florida International 
University, representing veterans.
    Annmarie Weisman, U.S. Department of Education, representing the 
Department.

    The negotiated rulemaking committee met to develop proposed 
regulations on January 14-16, 2019; February 19-22, 2019; March 25-28, 
2019; and April 1-3, 2019.
    The negotiated rulemaking committee also tasked a subcommittee to 
make recommendations on issues related to Distance Learning and 
Innovation. The subcommittee met on January 17-18, 2019; February 12-
13, 2019; and March 11-12, 2019. The membership of the Distance 
Learning and Innovation Subcommittee included the following members:

    Mary C. Otto, Campbell University, representing financial aid 
administrators at postsecondary institutions.
    Jessica Ranucci, New York Legal Assistance Group, representing 
legal assistance organizations that represent students.
    Merodie Hancock, Thomas Edison University, representing public 
IHEs, with knowledge of direct assessment programs and competency-
based education.
    Jody Feder, National Association of Independent Colleges and 
Universities, representing private, nonprofit IHEs, with knowledge 
of direct assessment programs and competency-based education.
    Sue Huppert, Des Moines University, representing nonprofit 
organizations supporting inter-State agreements related to State 
authorization of distance or correspondence education programs.
    Russell Poulin, The WICHE Cooperative for Educational 
Technologies, representing associations or organizations that 
provide guidance to or represent institutions with direct assessment 
programs and competency-based education.
    Robert E. Anderson, State Higher Education Executive Officers, 
representing State higher education executives.
    Jillian Klein, Strategic Education, Inc., representing private, 
for-profit IHEs, with knowledge of direct assessment programs and 
competency-based education.
    Leah K. Matthews, Distance Education Accrediting Commission, 
representing accrediting agencies.
    David Schejbal, Marquette University, representing academic 
executive officers at postsecondary institutions.
    Amanda Martinez, American University, and Joseph Verardo, 
National Association of Graduate-Professional Students, representing 
students.
    Carolyn Fast, Office of the New York State Attorney General, 
representing State attorneys general.
    Gregory Martin and David Musser, U.S. Department of Education, 
representing the Department.

    At its first meeting, the full negotiated rulemaking committee 
reached agreement on its protocols and proposed agenda. The protocols 
provided, among other things, that the committee would operate by 
consensus. Consensus means that there must be no dissent by any member 
for the committee to have reached agreement. Under the protocols, the 
Department would use the consensus-based language in its proposed 
regulations for each ``bucket'' of issues, as described in more detail 
below, on which final consensus was achieved. Furthermore, the 
Department would not substantively alter the consensus-based language 
of its proposed regulations unless the Department reopened the 
negotiated rulemaking process or provided a written explanation to the 
committee members regarding why it decided to depart from that 
language.
    At the first meeting, the Department received a petition for 
membership from David Tandberg, Vice President of Policy Research and 
Strategic Initiatives at the State Higher Education Executive Officers 
Association, to represent State Higher Education Executive Officers. 
The negotiated rulemaking committee voted to include Mr. Tandberg on 
the full committee. The Department also received petitions to add other 
members. The Department received a petition to add a member 
representing State Attorneys General to the full committee and the 
Distance Education and Innovation subcommittee. The committee did not 
agree to add a member representing this constituency to the full 
committee but did agree by consensus to add Carolyn Fast, a 
representative of the New York Attorney General, as a member to the 
subcommittee.
    During the first meeting, the negotiating committee agreed to 
negotiate an agenda of 22 issues related to distance learning and 
innovation, including some definitions and topics related to 
accreditation that have been addressed in another notice of proposed 
rulemaking published in the Federal Register on June 12, 2019 (84 FR 
27404). These 22 issues were: Accreditation-related definitions; 
definitions of ``additional location'' and ``branch campus''; 
definition of ``clock hour''; definition of ``credit hour''; 
definitions of ``distance education'' and ``correspondence course''; 
definitions of ``incarcerated student'' and ``nonprofit''; State 
authorization of distance education; definitions of ``teach-out'' and 
``teach-out agreement''; changes in ownership and eligibility of 
additional locations; limitations on taking coursework in the United 
States while enrolled at a foreign institution; written arrangements 
with ineligible institutions or organizations; subscription period 
disbursement; definition of a ``week of instruction for asynchronous 
online programs''; clock-to-credit hour conversion; direct assessment 
programs; certification procedures; limitation on hours in a program 
that exceeds the State minimum for employment; return of title IV 
funds; satisfactory academic progress; disclosure related to prior 
learning assessment; use of accrediting agency definitions for audit or 
program review appeals; and financial responsibility. Under the 
protocols, these issues were placed into a ``bucket'' on distance 
learning and innovation upon which a final consensus would be voted on 
by the full negotiated rulemaking committee.
    During committee meetings, the committee reviewed and discussed the 
Department's drafts of regulatory language and the committee and 
subcommittee members' alternative language and suggestions. The 
committee was briefed by each of the subcommittees, including the 
Distance Learning and Innovation Subcommittee, through extensive 
written materials and in-person presentations. At the final meeting on 
April 3, 2019, the committee reached consensus on the Department's 
proposed regulations. For this reason, and according to the committee's 
protocols, all parties who participated or were represented in the 
negotiated rulemaking and the organizations that they represent have 
agreed to refrain from commenting negatively on the consensus-based 
regulatory language. For more information on the negotiated rulemaking 
sessions, please visit: www2.ed.gov/policy/highered/reg/hearulemaking/2012/programintegrity.html#info.

Summary of Proposed Changes

    The proposed regulations would--

[[Page 18643]]

     Amend in Sec.  600.2 the definitions of ``clock hour,'' 
``correspondence course,'' ``credit hour,'' ``distance education,'' 
``incarcerated student,'' and ``nonprofit institution'';
     Add in Sec.  600.2 new definitions for ``academic 
engagement'' and ``juvenile justice facility'';
     Provide in Sec.  600.7 that, when calculating the number 
of correspondence students for purposes of determining whether an 
institution exceeds statutory limitations on the number of such 
students it enrolls, a student is considered ``enrolled in 
correspondence courses'' if correspondence courses constituted more 
than 50 percent of the courses in which the student enrolled during an 
award year;
     Amend Sec.  600.10 to require the Secretary's approval for 
an institution's first direct assessment program at each credential 
level;
     Amend Sec.  600.20 to require prompt action by the 
Department on any materially complete applications submitted by 
participating IHEs to the Secretary seeking approval for new programs. 
Additionally, the Department proposes to amend this section to remove 
the requirement that an institution obtain approval to offer additional 
educational programs, unless the Secretary alerts the institution that 
a program must be approved;
     Establish new reporting requirements in Sec.  600.21 to 
require an institution to report to the Secretary its addition of a 
second or subsequent direct assessment program or its establishment of 
a written arrangement for an ineligible institution or organization to 
provide more than 25 percent of a program pursuant to Sec.  668.5(c);
     Amend in Sec.  600.52 the definition of ``foreign 
institution'' to clarify that students enrolled in eligible foreign 
institutions may complete up to 25 percent of an eligible program at an 
eligible institution in the United States, and that an institution may 
permit an individual Direct Loan borrower to perform research in the 
United States for not more than one academic year, if conducted during 
the dissertation phase of a doctoral program;
     Clarify in Sec.  600.54 the conditions under which a 
foreign school may enter into a written arrangement with an ineligible 
entity;
     Provide clarifying edits in Sec.  668.1;
     Remove the definition of ``Academic Competitiveness 
Grant,'' amend the definition of ``full-time student'' to include 
students enrolled in subscription-based programs, provide clarifying 
edits to the definition of ``third-party servicer,'' and define 
``subscription-based program'' in Sec.  668.2;
     Amend Sec.  668.3 to clarify the definition of ``a week of 
instructional time for a program offered using asynchronous coursework 
through distance education'';
     Amend Sec.  668.5 to increase the flexibility of 
institutions using written arrangements to timely provide relevant 
educational program offerings, allowing institutions to modify their 
curriculum at the recommendations of industry advisory boards or 
faculty review committees, and calculating the percentage of a program 
that is offered by an ineligible institution or organization;
     Amend Sec.  668.8 to provide additional flexibility for 
institutions that are conducting a clock-to-credit hour conversion by 
equating a semester or trimester hour to 30 clock hours of instruction;
     Amend Sec.  668.10 to clarify the requirements for a 
direct assessment program to qualify as an eligible program;
     Amend Sec.  668.13 to clarify the requirements the 
Secretary will use to certify a location as a branch campus and to 
grant renewal of certification to an institution if the Secretary does 
not make a determination within 12 months of the expiration of its 
current period of participation and provide a number of clarifying 
edits;
     Provide clarifying edits in Sec.  668.14 and provide 
additional flexibility to programs described in 20 U.S.C. 1001(b)(1), 
in demonstrating a reasonable relationship between the length of the 
program and licensure requirements associated with the recognized 
occupation for which the program prepares students;
     Provide clarifying edits in Sec.  668.15;
     Amend Sec.  668.22 to remove any references to ``modules'' 
with respect to non-term credit hour and clock hour programs and 
clarify that a student is not considered to have withdrawn if the 
student completes all the requirements for graduation before completing 
the days or hours in the period that he or she was scheduled to 
complete, if the student completes one or more modules that comprise 50 
percent or more of the number of days in the payment period, or if the 
institution obtains written confirmation that the student will resume 
attendance in a subscription-based or non-term program;
     Remove the provisions pertaining to the use and 
calculation of the Net Present Value of institutional loans from Sec.  
668.28, because those provisions are no longer applicable;
     Amend Sec.  668.34 to clarify that an institution may 
establish a program's maximum time frame in credit hours or in calendar 
time, that a pace for evaluation for a non-term credit or clock hour 
program is not required due to the requirements that students complete 
half of the hours and weeks of instruction in an academic year before a 
subsequent disbursement of aid can be made, and that an institution may 
calculate a student's pace in a term-based program that is not a 
subscription-based program by dividing the cumulative number of hours 
the student has successfully completed by the cumulative number of 
hours the student has attempted or by determining the number of hours 
that the student should have completed at the evaluation point in order 
to complete the program within the maximum timeframe;
     Provide clarifying edits in Sec.  668.111;
     Amend Sec.  668.113 to clarify that in cases where an 
institution or third-party servicer appeals a final audit or program 
review determination that includes a finding about the institution's 
classification of a course or program as distance education, or the 
institution's assignment of credit hours, the Secretary relies on the 
requirements established by the institution's accrediting agency or 
State approval agency to evaluate the institution's or servicer's 
compliance;
     Provide clarifying and technical edits in Sec.  668.164 
for a subscription-based program by revising the early disbursement 
rules to clarify the earliest an institution may disburse funds to 
students in such a program;
     Amend Sec.  668.171 to clarify that the Secretary may deny 
the institution's application for certification or recertification to 
participate in the title IV, HEA programs if an institution is not 
financially responsible or does not submit its audits timely;
     Amend Sec.  668.174 to clarify that an institution is not 
financially responsible if a person who exercises substantial ownership 
or control over the institution also exercised substantial ownership or 
control over another institution that closed without a viable teach-out 
plan or agreement approved by the institution's accrediting agency and 
faithfully executed by the institution and to provide clarifying edits; 
and
     Provide clarifying edits in Sec.  668.175.
    Significant Proposed Regulations: We discuss substantive issues 
under the sections of the proposed regulations to which they pertain. 
Generally, we do not address proposed regulatory

[[Page 18644]]

provisions that are technical or otherwise minor in effect.

Sec.  600.2 Definitions

Academic Engagement
    Statute: The HEA does not define ``academic engagement.''
    Current Regulations: There is no regulatory definition of 
``academic engagement.'' The regulations governing the return of title 
IV funds process under Sec.  668.22 set certain requirements for 
activities that may be considered ``academic attendance'' or 
``attendance at an academically-related activity'' and use those 
requirements as the basis for establishing a student's withdrawal date. 
The types of academic attendance identified in Sec.  668.22(l)(7)(i)(A) 
include the following: (1) Physically attending a class where there is 
an opportunity for direct interaction between the instructor and 
students; (2) submitting an academic assignment; (3) taking an exam, 
interactive tutorial, or computer assisted instruction; (4) attending a 
study group assigned by the institution; (5) participating in an online 
discussion about academic matters; and (6) initiating contact with a 
faculty member to ask a question about the academic subject studied in 
the course. Section 668.22(l)(7)(i)(B) provides that certain types of 
activities may not be considered academic attendance or attendance at 
an academically-related activity, including (1) living in institutional 
housing; (2) participating in an institution's meal plan; (3) logging 
into an online class without active participation; and (4) 
participating in academic counseling or advisement.
    Proposed Regulations: The Department proposes to incorporate the 
majority of the language in the regulations governing the return of 
title IV funds in Sec.  668.22(l)(7) relating to requirements for 
academic attendance and attendance at academically-related activities 
into a definition of ``academic engagement'' under Sec.  600.2. We 
propose to modify those requirements by specifying that academic 
engagement includes active participation by a student in activities 
related to their course of study, such as an online course with an 
opportunity for interaction or an interactive tutorial, webinar, or 
other interactive computer-assisted instruction. It does not include, 
for example, simply logging into an online platform. Such interaction 
could include the use of artificial intelligence or other adaptive 
learning tools so that the student is receiving feedback from 
technology-mediated instruction. We also propose to strike the phrase 
``without active participation'' and replace it with ``without any 
further participation.''
    Reasons: The definitions of ``academic attendance'' and 
``attendance at an academically-related activity'' were included in a 
final rule published in the Federal Register on October 29, 2010 (75 FR 
66832) to clarify the types of activities that the Department viewed as 
sufficient for an institution to use as a basis for establishing a 
student's withdrawal date for purposes of the return of title IV funds 
process. The Department proposes to exclude certain activities, such as 
participating in academic counseling or advisement or logging into an 
online class without participation, from the types of activities that 
can be considered academic attendance, because these activities have 
been sources of past abuse and, while potentially beneficial, may not 
by themselves help a student progress through their program.
    During subcommittee meetings, the Department proposed to use the 
framework for defining ``academic attendance'' that had been 
established in the return of title IV funds regulations to establish 
requirements for earning a clock hour in a program using distance 
education or correspondence courses. The underlying concepts behind the 
requirements for attendance focus on student participation in 
activities that are academic in nature. Thus, they are easily 
applicable to the requirements for earning clock hours. Members of the 
subcommittee were generally supportive of this approach but proposed to 
move the requirements for academic attendance to the definitions under 
part 600 for consistency. The Department agreed to this approach, and 
it was later agreed to by the full committee.
    In response to comments from members of the subcommittee and the 
full committee, the Department made several changes to the requirements 
for academic attendance as they existed in the return of title IV funds 
regulations. One subcommittee member expressed concern that 
participating in an online tutorial or webinar that was not interactive 
was more akin to reading or homework performed passively, and therefore 
should not be included in a definition of ``academic engagement.'' The 
Department added the word ``interactive'' before the words ``tutorial, 
webinar, or other interactive computer-assisted instruction'' to 
address this member's concern. This change clarifies that the 
Department expects that academic engagement will involve the 
opportunity for active engagement by a student rather than only the 
passive consumption of information. Active engagement in this regard 
could include the use of artificial intelligence or other adaptive 
learning tools so that the student is receiving feedback from 
technology-mediated instruction. The interaction need not be 
exclusively with a human instructor.
    The Department also made changes in response to other comments from 
committee members. We revised paragraph (2)(i) of the definition, which 
had previously referred to physical attendance in a class, to include 
attendance at a synchronous online class where there is an opportunity 
for interaction between the instructor and students. This change 
reflects the committee's view that this type of academic engagement is 
similar in both classroom and online modalities. We also propose to 
include ``field or laboratory activity'' as academic attendance, 
because these activities are interactive and have traditionally been 
considered forms of academic engagement. Finally, to clarify an 
ambiguity raised by committee members, we rephrased paragraph (3)(iii) 
to omit the word ``active'' before ``participation'' and instead refer 
to ``any further participation.''
Clock Hour
    Statute: The HEA does not define a ``clock hour.'' Section 
481(a)(2) of the HEA defines an ``academic year for an undergraduate 
program,'' in part, as requiring a minimum of 24 semester or trimester 
credit hours or 36 quarter credit hours in a course of study that 
measures academic progress in credit hours or 900 clock hours in a 
course of study that measures academic progress in clock hours. Section 
481(b) of the HEA defines an ``eligible program,'' in part, as a 
program of at least 600 clock hours, 16 semester hours, or 24 quarter 
hours or, in certain instances, a program of at least 300 clock hours, 
8 semester hours, or 12 quarter hours.
    Current Regulations: Section 600.2 defines a ``clock hour'' as a 
period of time consisting of a 50- to 60-minute class, lecture, or 
recitation in a 60-minute period; a 50- to 60-minute faculty supervised 
laboratory, shop training, or internship in a 60-minute period; or 60 
minutes of preparation in a correspondence course.
    Proposed Regulations: The proposed regulations would define a 
``clock hour in a distance education program'' as 50 to 60 minutes in a 
60-minute period of attendance in a synchronous class, lecture, or 
recitation where there is an opportunity for direct interaction between 
the instructor and students. The proposed regulations specify that a 
clock hour in a distance education program must meet all accrediting

[[Page 18645]]

agency and State requirements and that it does not meet the conditions 
of the definition if it exceeds an agency's restrictions on the number 
of clock hours that may be offered through distance education. As is 
always the case, the Department may take action if an agency is not 
following its policies. The proposed regulations would also require 
that an institution be technically capable of monitoring a student's 
attendance in 50 out of 60 minutes for each clock hour in a distance 
education program through technology that measures time spent on 
relevant work or other means.
    Reasons: In recent years, distance learning technology has 
sufficiently advanced to permit institutions to conduct remotely 
synchronous, face-to-face instruction with students and to monitor the 
exact amount of time that students spend participating in these 
learning sessions. However, the current regulatory definition of 
``clock hour'' has existed in substantially the same form since it was 
promulgated as part of the Basic Educational Opportunity Grant 
regulations on November 6, 1974 (39 FR 39412), except for an amendment 
to include a definition relating to correspondence programs. The 
current definition therefore predates the internet and the emergence of 
distance education programs.
    The current definition of ``clock hour'' presumes that, in programs 
other than correspondence programs, students will be in a classroom, 
laboratory, or other physical setting and will be supervised by one or 
more faculty members. Because of this presumption, the Department has 
received numerous questions from institutions regarding whether the 
regulations permit any distance education coursework to use clock hours 
for title IV purposes. In response to these questions, the Department 
has previously adopted the position that a clock hour program can 
include clock hours earned through distance education, but only if the 
institution's or program's accrediting agency permits the institution 
to use that modality and the institution has sufficient technological 
resources to monitor a student's academic engagement in 50 to 60 
minutes of distance education.
    We propose to amend the definition of ``clock hour'' to codify this 
policy, and to further specify that only clock hours that involve 
synchronous instruction where students have an opportunity to interact 
with instructors meet the requirements of the proposed definition. We 
believe that this definition closely aligns with the requirements of 
the current definition of ``clock hour'' while incorporating reasonable 
requirements to ensure that institutions can monitor a student's 
participation during each hour. The proposed definition would also 
clearly distinguish between activities that have historically been 
included in the definition of ``clock hour,'' such as instruction and 
hands-on training, and activities such as reading or studying that 
would have been considered homework and would not have counted toward 
the student's completion of clock hours under the current regulations.
    States and accrediting agencies may also have an interest in 
limiting the number of hours that students are permitted to earn 
through distance education or setting specific standards for hours 
earned through online training, particularly when the hours are 
associated with programs or professions that require hands-on training. 
The Department proposes to clarify that any hours that are not approved 
or permitted by States or accrediting agencies would not meet the 
requirements of the Department's definition of ``clock hour'' as the 
Department is relying upon those approvals to make its determinations.
Correspondence Course
    Statute: The HEA does not define ``correspondence course.'' 
Institutional eligibility requirements in section 102(a)(3) of the HEA 
provide that institutions offering more than 50 percent of their 
courses by correspondence or enrolling 50 percent or more of their 
students in correspondence courses, are ineligible for title IV, HEA 
program assistance.
    Current Regulations: The definition of ``correspondence course'' in 
Sec.  600.2 states that interaction between the instructor and the 
student in such a course is limited, is not regular and substantive, 
and is primarily initiated by the student. The definition also notes 
that a correspondence course is typically designed so that a student 
proceeds through the course at the student's own pace.
    Proposed Regulations: The Department proposes to change the 
definition of ``correspondence course'' to refer to ``instructors'' 
rather than ``the instructor'' and to strike the sentence indicating 
that correspondence courses are typically self-paced.
    Reasons: Much of the distinction between correspondence courses and 
distance learning courses depends upon the role of the instructor. 
However, the term ``instructor'' has been the subject of questions from 
the field and a recent audit by the Department's Office of the 
Inspector General. We also believe that the definition should be 
changed because approaches other than a single instructor at the front 
of a traditional lecture hall may be effective at helping students 
learn.
    The current definition of ``correspondence course'' suggests that 
only one instructor is responsible for a given course and is involved 
with the majority of academic interactions with students. However, the 
Department is aware of many postsecondary programs that use more than 
one instructor to teach a course, including those that rely heavily on 
the use of non-credentialed graduate students to provide a significant 
amount of instruction or grading. Other arrangements utilize a team 
approach to educating a student where each member of the team may 
perform a different function. In some team--taught courses or programs, 
each instructor uses his or her specialized expertise to serve students 
in different ways. These arrangements occur in correspondence courses 
as well as in in-person courses. Therefore, the Department proposes to 
make the term ``instructors'' plural in the definition of a 
``correspondence course.'' The Department also seeks to clarify that 
instructional support roles directly related to the course meet the 
definition of ``instructor'' as long as the roles of such personnel 
meet qualifications for instruction established by the institution's 
accrediting agency.
    The current definition of ``correspondence course'' indicates that 
correspondence courses are typically self-paced. While self-pacing is a 
facet of many correspondence courses, the Department does not consider 
whether a course is self-paced when distinguishing a correspondence 
course from a course offered using distance education. Instead, the 
Department evaluates the level of interaction between students and 
instructors in such courses. Therefore, the sentence relating to self-
pacing in correspondence courses is both unnecessary and confusing, and 
the Department proposes to strike it.
Credit Hour
    Statute: The HEA does not define ``credit hour.'' Section 481(a)(2) 
of the HEA defines an ``academic year for an undergraduate program,'' 
in part, as requiring a minimum of 24 semester or trimester credit 
hours or 36 quarter credit hours in a course of study that measures 
academic progress in credit hours or 900 clock hours in a course of 
study that measures academic progress in clock hours. Section 481(b) of 
the HEA defines an ``eligible program,'' in

[[Page 18646]]

part, as a program of at least 600 clock hours, 16 semester hours, or 
24 quarter hours or, in certain instances, a program of at least 300 
clock hours, 8 semester hours, or 12 quarter hours. Sections 428(b)(1), 
428B(a)(2), 428H(d)(1), 455(a)(1), and 484(b)(3) and (4) of the HEA 
specify that a student must be carrying at least one-half of the normal 
full-time work load for the student's course of study to qualify for a 
loan under parts B or D of title IV of the HEA. Section 401 of the HEA 
provides that a student's Federal Pell Grant must be adjusted based on 
the student's enrollment status and that a student must be enrolled at 
least half time to be eligible for a second consecutive Federal Pell 
Grant in an award year.
    Current Regulations: The definition of ``credit hour'' in Sec.  
600.2, except as it pertains to the requirements for clock-to-credit 
hour conversion, is an amount of work represented in intended learning 
outcomes and verified by evidence of student achievement that is an 
institutionally established equivalency that reasonably approximates 
not less than--
     One hour of classroom or direct faculty instruction and a 
minimum of two hours of out of class student work each week for 
approximately fifteen weeks for one semester or trimester hour of 
credit, or ten to twelve weeks for one quarter hour of credit, or the 
equivalent amount of work over a different amount of time; or
     Other academic activities as established by the 
institution including laboratory work, internships, practica, studio 
work, and other academic work leading to an award of credit hours.
    Proposed Regulations: The Department proposes to retain, in large 
part, the current definition of ``credit hour,'' including time-based 
requirements relative to classroom instruction and other academic 
activities. The Department proposes that the amount of student work 
defined by the institution as appropriate in meeting the requirement 
for a credit hour be approved by its accrediting agency or State 
approval agency. In addition, current language defining a ``credit 
hour,'' in part, ``as an amount of work represented by intended 
learning outcomes and verified by evidence of student achievement'' 
would be modified to reference work defined by an institution that is 
consistent with commonly accepted practice in postsecondary education. 
Finally, we propose to add language clarifying that, in determining the 
amount of work associated with a credit hour, an institution may take 
into account a variety of delivery methods, measurements of student 
work, academic calendars, disciplines, and degree levels. This would 
incorporate into the regulation, sub-regulatory guidance in Dear 
Colleague Letter GEN-11-06 \2\ relevant to the current definition of 
``credit hour.''
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    \2\ ifap.ed.gov/dpcletters/GEN1106.html.
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    Reasons: The current regulatory definition of ``credit hour'' was 
established in 2010 (75 FR 66831), based on the HEA use of credit hour 
as a proxy for learning. Accrediting agencies have held institutions to 
various credit hour standards prior to that regulation. The credit 
hour's legacy dates to Andrew Carnegie and his desire to measure 
faculty workload in order to help them earn a pension. It was not 
designed to measure student learning, but has been used by accrediting 
agencies as an imperfect measure of student progress.\3\ Those 
agencies' definitions have, in turn, been used by institutions to 
determine the types and amounts of title IV aid for which students are 
eligible. Over the last decade, as a result of new educational delivery 
methods and growth in distance education program offerings and 
enrollment, the Department believes that it is necessary to adopt a 
broader definition of ``credit hour'' that focuses on student learning 
rather than seat time and is flexible enough to account for innovations 
in the delivery models used by institutions. It is also important to 
recognize that the Department has no evidence that students complete 
the requisite two hours of out of class work required by the current 
definition, nor has the Department ever enforced or required 
institutions to prove that such homework is being completed. 
Additionally, the Department is concerned that students enrolled in 
most laboratory classes do not receive credit for out-of-class hours, 
even though such classes typically do have intense homework 
requirements that are necessary to carry out work in the 
laboratory.4 5
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    \3\ www.newamerica.org/education-policy/higher-education/higher-ed-watch/the-curious-birth-of-the-credit-hour/.
    \4\ www.asccc.org/content/credit-where-credit-due-incongruities-value-lab-and-lecture.
    \5\ www.dailytexanonline.com/2019/02/14/ut-students-deserve-more-credit-for-required-lab-courses.
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    During the first meeting of the subcommittee, the Department 
proposed revising the definition of ``credit hour'' to eliminate time-
based requirements and allow institutions to develop their own 
definitions, provided they met accrediting agency requirements. Citing 
the need for a definition of ``credit hour'' that creates some measure 
of consistency across higher education, the subcommittee generally 
opposed removing time-based requirements associated with direct faculty 
instruction, out of class student work, and other academic activities 
from the definition. The proposed definition includes language 
ultimately agreed upon by the subcommittee, and on which consensus was 
reached, that retains existing time-based standards. While the 
Department and others expressed concern about the 2010 credit hour 
regulation as written, some subcommittee members believed that 
subsequent guidance, in particular, Dear Colleague Letter GEN-11-06, 
provided needed clarity.\6\ The sub-regulatory guidance in the Dear 
Colleague Letter permits an institution to consider a variety of 
delivery methods, measurements of student work, academic calendars, 
disciplines, and degree levels in determining the amount of work 
associated with a credit hour. We agree that the Dear Colleague Letter 
established appropriately flexible standards and accommodates different 
types of programs, while ensuring consistency among postsecondary 
institutions in how credit hours are defined. Therefore, we agreed with 
the subcommittee recommendation to adopt language from Dear Colleague 
Letter GEN-11-06 into the proposed regulations. However, the Department 
continues to be concerned that, despite agreement that the institutions 
must be consistent in the way that they assign credit hours, in 
practice institutions and accreditors assign different values to 
laboratory classes than they do to lecture 
classes.7 8 9 10 11 For example, a student who takes a 
lecture class that meets for three hours per week, and who is expected 
to do two hours of homework for each hour spent in class, is awarded 
three credits. This, despite ample evidence that most students do not 
spend anywhere near the amount of time doing homework that they are 
given credit for in the credit hour definition. On the other hand, a 
student who spends three hours in a laboratory class, and who is more 
likely to actually complete homework assignments since laboratory 
classes generally require

[[Page 18647]]

considerable preparation as well as laboratory reports after-the-fact, 
receives only one credit. As mentioned previously, because the credit 
hour was developed to measure eligibility for faculty employment 
benefits and since laboratory classes are often taught by graduate 
students or part-time faculty, there was less interest in assigning a 
credit value that would result in higher wages to individuals in these 
roles. This is unfair to students and it means that a student in a STEM 
major is likely to spend many more hours in class than a non-STEM major 
who is completing an equivalent number of credits in lecture classes. 
This leaves fewer hours available for a STEM student to work or 
participate in extracurricular activities and could contribute to STEM 
attrition. The Department wishes to call attention to the need to be 
consistent in the way that institutions and accreditors measure a 
credit hour, and that it may no longer be justifiable to treat lecture 
and laboratory classes differently when assigning credit. The new 
definition of a credit hour demands equitable treatment of student 
work; therefore, the amount of credit awarded for laboratory classes 
should be equivalent to that awarded for lecture classes.\12\
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    \6\ ifap.ed.gov/dpcletters/GEN1106.html
    \7\ www.lasc.edu/students/Credit%20Hour%20Definition%20for%20LASC.pdf.
    \8\ docs.accet.org/downloads/docs/doc15.pdf.
    \9\ academicprograms.humboldt.edu/sites/default/files/howtocalculatescu.pdf.
    \10\ oucc.dasa.ncsu.edu/courseleaf-2/instructional-formats/.
    \11\ www.ccsf.edu/en/employee-services/office-of-instruction/curriculum_committee/policies_resolutions/lecture_lab_hours.html.
    \12\ static.newamerica.org/attachments/2334-cracking-the-credit-hour/Cracking_the_Credit_Hour_Sept5_0.ab0048b12824428cba568ca359017ba9.pdf
.
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Distance Education
    Statute: Section 103 of the HEA defines ``distance education'' as 
education that uses one or more technologies to deliver education to 
students who are separated from the instructor and to support regular 
and substantive interaction between the students and the instructor, 
either synchronously or asynchronously. The definition contains a list 
of technologies.
    Current Regulations: Section 600.2 states that ``distance 
education'' means education that uses one or more technologies to 
deliver instruction to students who are separated from the instructor 
and to support regular and substantive interaction between the students 
and the instructor, either synchronously or asynchronously. The 
technologies may include the internet; one-way and two-way 
transmissions through open broadcast, closed circuit, cable, microwave, 
broadband lines, fiber optics, satellite, or wireless communications 
devices; audio conferencing; or video cassettes, DVDs, and CD-ROMs, if 
the cassettes, DVDs, or CD-ROMs are used in a course in conjunction 
with any of the other technologies listed.
    Proposed Regulations: The Department proposes to amend the 
definition of ``distance education'' to refer to ``the instructor or 
instructors'' rather than simply ``the instructor.'' We also propose to 
eliminate references to the various types of media described under 
paragraph (2)(iv) of the definition and replace those references with 
the phrase ``other media.''
    We propose to add a paragraph (3) to the definition that would 
define an ``instructor'' as an individual responsible for delivering 
course content and who meets the qualifications for instruction 
established by the institution's accrediting agency.
    We also propose to add a paragraph (4) to the definition that would 
define ``substantive interaction'' as engaging students in teaching, 
learning, and assessment, consistent with the content under discussion, 
and including at least two of the following--providing direct 
instruction; assessing or providing feedback on a student's coursework; 
providing information or responding to questions about the content of a 
course or competency; facilitating a group discussion regarding the 
content of a course or competency; or other instructional activities 
approved by the institution's or program's accrediting agency.
    We propose to add a paragraph (5) to the definition that would 
require that an institution ensures regular interaction between a 
student and an instructor or instructors by, prior to the student's 
completion of a course or competency, providing the opportunity for 
substantive interactions with the student on a predictable and regular 
basis commensurate with the length of time and the amount of content in 
the course or competency, and monitoring the student's academic 
engagement and success and ensuring that an instructor is responsible 
for proactively engaging in substantive interaction with the student 
when needed, on the basis of such monitoring, or upon request by the 
student.
    Reasons: Since the Higher Education Opportunity Act of 2008 created 
a statutory definition of ``distance education,'' there have been 
significant improvements in distance education technology, including 
interactive software that supports student learning and learning 
analytics tools that help institutions better understand their 
students' strengths and weaknesses, as well as students' level of 
academic engagement.
    Some of the improvements in distance education technology have 
contributed to increased interest in CBE programs that measure student 
progress based on their demonstration of specific competencies rather 
than sitting in a seat or at a computer for a prescribed period of 
time. Many CBE programs are designed to permit students to learn at 
their own pace while having access to instructional resources and 
faculty support when assistance is needed. As postsecondary 
institutions have begun to experiment and innovate with new 
instructional modalities, including CBE, that are facilitated by 
distance education technology, the Department has been asked regularly 
about the meaning of several terms in the definition of ``distance 
education'' that, in this context, are ambiguous or unclear. The 
majority of these questions have related to the statutory requirement 
for distance education to ``support regular and substantive interaction 
between the students and the instructor,'' which is the primary factor 
(in addition to the types of technology that may be used) that 
distinguishes distance education from correspondence courses. Ambiguity 
with respect to this phrase has complicated the Department's 
enforcement of the law through the resolution of audits or program 
reviews. Efforts to provide clarity through a series of sub-regulatory 
guidance documents have provided some assurance to institutions, but 
uncertainty remains about both the content of the guidance and its 
permanence because it is not in the regulations.
    The lack of clarity in the definition of ``distance education'' has 
also prevented some institutions from using certain innovative 
technology or pedagogical techniques in online programs for fear of 
being found to be out of compliance with the Department's regulations. 
The repercussions for violating the requirements of the definition of 
``distance education'' can be particularly severe because an online 
course that does not meet the requirements for distance education is 
treated as a correspondence course, which could limit eligibility for 
title IV, HEA assistance for students enrolled in such a course, and 
could also cause an institution to lose eligibility for title IV, HEA 
program funds entirely if it offers too many correspondence courses or 
enrolls too many correspondence students. Therefore, the Department 
seeks to more clearly distinguish between correspondence courses and 
distance education courses.
    Consistent with our proposed changes to the definition of 
``correspondence course,'' we propose adding the words ``or 
instructors'' after the phrase ``the

[[Page 18648]]

instructor'' in the definition of ``distance education'' to clarify 
that an institution can fulfill the requirements of the definition by 
ensuring that students regularly and substantively interact with 
multiple qualified instructors rather than a single individual. We also 
proposed to simplify the definition by replacing references to the 
various types of media that can be used to deliver distance education 
in conjunction with the internet, one-way and two-way electronic 
transmissions, and audio conferencing with the phrase ``other media.''
    The Department originally proposed to reformulate the concept of 
``instructor'' in the definition of ``distance education'' by adding an 
option for students to interact with members of an ``instructional 
team,'' which could be comprised of more staff members than a single 
instructor. The subcommittee generally expressed support for the 
concept of an instructional team but indicated a preference for a 
strong role for subject-matter experts on such teams. However, the 
subcommittee did not agree on the extent to which subject-matter 
experts, as opposed to other staff members, would be required to 
interact with students. Some subcommittee members indicated that an 
instructional team should include a subject-matter expert who had the 
``primary responsibility'' for interacting with students, whereas other 
members of the instructional team would identify problem areas and 
refer students to subject-matter experts when needed. Other members of 
the subcommittee indicated that requiring people to refer students to 
subject-matter experts does not reflect the current or future state of 
distance education, which is increasingly using analytics to identify 
struggling or accelerated learners in order to refer them to subject-
matter experts or additional adaptive learning experiences to support 
their learning needs.
    The subcommittee ultimately agreed with a proposal to define an 
``instructor'' as a content expert whose qualifications would be 
determined by an institution's accrediting agency. Accrediting agencies 
were chosen for this role because they are responsible for academic 
oversight and for setting standards related to academic quality. The 
full committee largely adopted the subcommittee's approach to the 
requirements for an ``instructor,'' but decided to replace the concept 
of ``content expert'' with language that expressed that an instructor 
was someone who had responsibility for delivering course content, as 
opposed to merely advising students about the courses in which a 
student should enroll or about administrative or technical matters.
    The Department originally proposed to define ``substantive 
interaction'' as interaction that was ``related to course material 
under discussion'' to limit the types of interactions to those specific 
to the course. The subcommittee generally opposed that definition, 
because it did not specifically address teaching and learning. 
Following discussion of the topic, the subcommittee tentatively agreed 
to define ``substantive'' as engaging students in teaching, learning, 
and assessment, consistent with the content under discussion, and to 
identify providing direct instruction, assessing or providing feedback 
on a student's coursework, providing information or responding to 
questions about the content of a course or competency, and facilitating 
a group discussion regarding the content of a course or competency as 
specific activities that would be considered ``substantive'' for 
purposes of fulfilling the requirement for supporting ``regular and 
substantive interaction.'' These activities were chosen because they 
represent traditional instructional tasks associated with teaching and 
learning, and because several subcommittee members wished to ensure 
that the definition did not de-emphasize learning in favor of 
administrative check-ins with students. The committee largely adopted 
the subcommittee's approach to the definition of ``substantive 
interaction,'' but in recognition of the possibility that alternative 
methods of instruction could be as effective or more effective than 
established methods, the committee agreed to add a fifth option that 
would include other instructional activities that are approved by an 
institution's accrediting agency or, in event that one or more of an 
institution's programs is programmatically accredited, by the relevant 
programmatic accrediting agency (or agencies). The committee also 
agreed to define ``substantive interaction'' as including at least two 
instructional activities in order to prevent a course from qualifying 
as ``distance education'' if the institution provides only a single 
limited form of interaction as part of that course.
    During the initial discussions in the subcommittee, the Department 
sought to reach agreement on possible requirements for the 
``regularity'' of substantive interactions between students and 
instructors that were clear and easy to understand. Using those 
guidelines, the Department proposed one option that would have required 
one substantive interaction in every week of instruction for a course 
that was worth at least three credit hours, or one substantive 
interaction for every two weeks of instruction for a course that was 
worth fewer than three credit hours. However, the subcommittee 
expressed concerns about that proposal and any other one-size-fits-all 
requirement for how often substantive interactions must occur, citing 
the wide variety of different types of online programs and pedagogical 
techniques used in postsecondary education. Several subcommittee 
members also indicated that requirements for regularity that were too 
restrictive would impose unnecessary administrative burdens on 
institutions and students, such as mandating that an instructor ``check 
in'' with a student even if the student did not need or request such a 
check-in or requiring students to submit blog posts or other similar 
assignments that may be tied more to a mandate for quantity than 
quality. One subcommittee member proposed tying the number and 
frequency of required substantive interactions to the number of credit 
hours associated with the courses in which a student was enrolled and 
the timeframe in which those courses would take place, but the 
Department indicated that it had attempted to develop a requirement 
using that framework and had determined that any such system would be 
too complex and administratively burdensome to implement.
    Most of the subcommittee members ultimately agreed to a compromise 
in which an institution would ensure regular interaction by either 
scheduling substantive interactions on a predictable and regular basis, 
or by monitoring a student's academic engagement and promptly and 
proactively engaging in substantive interaction with the student on the 
basis of that monitoring. The committee subsequently decided to require 
institutions to offer predictable and regular opportunities for 
substantive interaction and to monitor each student's academic 
engagement and success in order to ensure that instructors engage with 
the student as needed. The committee also revised the wording of the 
proposed definition to require scheduled opportunities for interaction 
rather than scheduled interactions in order to emphasize that the 
regulations should not require every student to participate in every 
scheduled interaction.
Incarcerated Student
    Statute: Section 401 of the HEA prohibits the award of a Federal 
Pell Grant to an individual who is

[[Page 18649]]

incarcerated in a Federal or State penal institution or who is subject 
to an involuntary civil commitment upon completion of a period of 
incarceration for a forcible or non-forcible sexual offense (as 
determined in accordance with the Federal Bureau of Investigation's 
Uniform Crime Reporting Program).
    Section 472 of the HEA states that the cost of attendance for 
incarcerated students can only include tuition and fees and, if 
required, books and supplies. Section 484 of the HEA states that no 
incarcerated student is eligible to receive a loan. However, the term 
``incarcerated student'' is not defined in the HEA.
    Current Regulations: Current regulations define ``incarcerated 
student'' as a student who is serving a criminal sentence in a Federal, 
State, or local penitentiary, prison, jail, reformatory, work farm, or 
other similar correctional institution. A student is not considered 
incarcerated if that student is in a half-way house or home detention 
or is sentenced to serve only on weekends.
    Proposed Regulations: We propose to add ``juvenile justice 
facility'' to the list of correctional institutions in the definition 
of ``incarcerated student.'' We also propose to add that for the 
purposes of Pell Grant eligibility under Sec.  668.32(c)(2)(ii), a 
student who is incarcerated in a juvenile justice facility, or in a 
local or county facility, is not considered to be incarcerated in a 
Federal or State penal institution, regardless of which governmental 
entity operates or has jurisdiction over the facility, including the 
Federal government or a State, but is considered incarcerated for 
purposes of determining the cost of attendance under HEA section 472 in 
determining eligibility for and the amount of a Pell Grant.
    Reasons: The Department proposes to add the term ``juvenile justice 
facility'' to the definition in response to questions raised during 
Department technical assistance events regarding whether these 
facilities are correctional institutions. A subcommittee member 
believed that the addition of the term ``juvenile justice facility'' 
could be misinterpreted by the public to mean that the Department is 
attempting to restrict access to Federal Pell Grants to students 
serving in a juvenile justice facility. Several main committee members 
agreed.
    Current Sec.  668.32(c)(2)(ii) states that an individual 
incarcerated in a Federal or State penal institution is not eligible 
for a Federal Pell Grant. The Department proposes to add that a student 
who is incarcerated in a juvenile justice facility is not considered to 
be incarcerated in a Federal or State penal institution, regardless of 
which governmental entity operates or has jurisdiction over the 
facility, to ensure that students incarcerated in a juvenile justice 
facility continue to be eligible for Federal Pell Grants. A reference 
to section 472 of the HEA was added because the same rules apply for 
determining the cost of attendance for all incarcerated students. These 
amendments to the definition of ``incarcerated student'' represent no 
substantive change to current practice.
Juvenile Justice Facility
    Statute: There is no statutory reference to ``juvenile justice 
facility'' in the HEA.
    Current Regulations: There is no current regulatory definition of 
``juvenile justice facility.''
    Proposed Regulations: The Department proposes to define a 
``juvenile justice facility'' as a public or private residential 
facility that is operated primarily for the care and rehabilitation of 
youth who, under State juvenile justice laws--
    (1) Are accused of committing a delinquent act;
    (2) Have been adjudicated delinquent; or
    (3) Are determined to be in need of supervision.
    Reasons: The Department proposes to add a definition of ``juvenile 
justice facility'' to codify current sub-regulatory guidance published 
on December 8, 2014 (DCL ID: GEN 14-21) \13\ and to provide sufficient 
clarity where the term is referenced in the Department's regulations 
and materials, including in the definition of ``incarcerated student.''
---------------------------------------------------------------------------

    \13\ ifap.ed.gov/dpcletters/GEN1421.html.
---------------------------------------------------------------------------

Nonprofit Institution
    Statute: Section 103 of the HEA defines the term ``nonprofit'' as a 
school, agency, organization, or institution owned and operated by one 
or more nonprofit corporations or associations, no part of the net 
earnings of which inures, or may lawfully inure, to the benefit of any 
private shareholder or individual.
    Current Regulations: Paragraph (1) of the definition of ``nonprofit 
institution'' in Sec.  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 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)).
    Paragraph 3 of this definition repeats the language in paragraph 
(1), stipulating that an institution is a ``nonprofit institution'' if 
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)).
    Proposed Regulations: The Department proposes to delete paragraph 
(3) from the definition of ``nonprofit institution.''
    Reasons: The language in paragraph (3) is entirely redundant of 
paragraph (1)(iii). Members of the subcommittee and the full committee 
endorsed this change.

Sec.  600.7 Conditions of Institutional Ineligibility

    Statute: Section 102(a)(3) of the HEA states that an institution 
does not meet the definition of an ``institution of higher education'' 
if the institution offers more than 50 percent of its courses by 
correspondence (unless the institution meets the definition in section 
3(3)(C) of the Carl D. Perkins Career and Technical Education Act) or 
enrolls 50 percent of more of its students by correspondence. The 
statute specifically excludes courses offered by telecommunication from 
consideration in those calculations and provides that an institution 
may be exempted from the limitation on correspondence students by the 
Secretary for good cause if the institution provides a 2- or 4-year 
program of instruction for which the institution awards an associate or 
baccalaureate degree, respectively.
    Current Regulations: Section 600.7(a)(1)(i) and (ii) incorporates 
the statutory limitations on the number of correspondence courses that 
an institution may offer and the number of correspondence students that 
an institution may enroll. Section 600.7(b)(1)(i) defines a 
correspondence course for this purpose as either a complete educational 
program offered by correspondence, or one course provided by 
correspondence in an on-campus (residential) educational program. 
Section 600.7(b)(1)(ii) states that a course must be considered as 
being offered once during an award year regardless of the number of 
times it is

[[Page 18650]]

offered during the year. Section 600.7(b)(1)(iii) provides that a 
course that is offered both on campus and by correspondence must be 
considered two courses for the purposes of determining the total number 
of courses the institution provided during an award year. There are 
currently no regulations that clarify which students are ``enrolled in 
correspondence courses.''
    Proposed Regulations: The Department proposes to add a new 
paragraph (b)(2) to provide that a student is considered ``enrolled in 
correspondence courses'' if correspondence courses constitute more than 
50 percent of the courses in which the student enrolled during an award 
year.
    Reasons: Currently, the regulations do not address when a student 
who is enrolled in some correspondence coursework should be counted as 
''enrolled in correspondence courses'' for the purpose of determining 
whether an institution has exceeded the limitation on the number of 
correspondence students it may enroll during an award year. This has 
led to confusion regarding an important institutional eligibility 
factor for the title IV, HEA programs.
    During the negotiations, the Department initially proposed to 
define a ``student enrolled in correspondence courses'' as one whose 
enrollment during an award year was entirely in correspondence courses. 
Several subcommittee members indicated that this would create a 
loophole whereby an institution could avoid considering a student to be 
a correspondence student by having the student enroll in a single 
distance education or in-person course. Some subcommittee members 
indicated that enrollment in 50 percent or 75 percent correspondence 
courses would avoid that loophole. The Department incorporated those 
suggestions by using a ``more than 50 percent'' threshold of enrollment 
in correspondence courses because it means a student would be mostly 
enrolled in such courses.

Date, Extent, Duration, and Consequence of Eligibility (Sec.  600.10)

    Statute: Section 498 of the HEA requires the Secretary to determine 
the legal authority to operate within a State, the accreditation 
status, and the administrative capability and financial responsibility 
of an IHE. Section 498(b) requires the Secretary to provide a single 
application form that requires sufficient information and documentation 
from institutions to determine that the requirements of eligibility, 
accreditation, financial responsibility, and administrative capability 
are met.
    Section 481(b) of the HEA defines the types of educational programs 
for which students can receive aid under the title IV, HEA programs and 
includes among those programs instructional programs that use direct 
assessment of student learning, or recognize the direct assessment of 
student learning by others, in lieu of measuring student learning in 
credit hours or clock hours. Section 481(b)(4) provides that, in the 
case of a direct assessment program for which eligibility is being 
determined for the first time, the Secretary must make the eligibility 
determination before the program is considered eligible for title IV 
participation.
    Current Regulations: Section 600.10(c)(1)(iii) provides that an 
institution that seeks to establish eligibility for a direct assessment 
program must obtain the Secretary's approval every time the institution 
adds a program.
    Proposed Regulations: The proposed regulations would require an 
institution to seek and obtain the Department's approval of a direct 
assessment program when the institution adds such a program for the 
first time, and when the institution offers the first direct assessment 
program at each level of offering (e.g., a first direct assessment 
master's degree program or bachelor's degree program) than what the 
Secretary had previously approved.
    Reasons: We believe that once an institution demonstrates that it 
can capably administer a direct assessment program, there is little 
risk that the same institution would not properly administer other 
direct assessment programs. In reviewing initial direct assessment 
requests, the Department will review the institution's processes 
related to title IV aid administration but will not evaluate academic 
content or academic quality of programs, except to confirm that an 
accrediting agency has specifically approved each program. Accordingly, 
once an institution has demonstrated its capability to administer these 
programs, there is little value in the Department reviewing subsequent 
programs.
    Under the proposed regulations, an institution would not be 
required to submit a second or subsequent direct assessment program to 
the Department for approval unless otherwise required to do so under 
Sec.  600.20(c)(1). The committee requested an exception to this rule, 
however, when an institution adds a direct assessment program at a 
different level of offering than what the Secretary had previously 
approved, arguing that such a change was worthy of additional scrutiny. 
The Department agrees that an institution may have different 
administrative procedures, capacity, and expertise in place for 
graduate versus undergraduate programs or for two-year versus four-year 
programs, so additional review would have merit in these circumstances.
    The Department has revised the consensus language to clarify that 
the first program at each credential level must be approved. The 
language could have been read to imply that each program at a new 
credential level would need to be approved (but not at the first 
credential level). Instead, the Department would approve a first direct 
assessment program (for example, a bachelor's degree program) and then, 
to ensure an institution has sufficient capacity and expertise, also 
approve the first master's degree program. Since the Department is not 
approving subsequent bachelor's degree programs, there would be no 
reason to approve subsequent master's degree programs and that was not 
the goal of the consensus language.

Sec.  600.20 Notice and Application Procedures for Establishing, 
Reestablishing, Maintaining, or Expanding Institutional Eligibility and 
Certification

    Statute: Section 498 of the HEA requires the Secretary to determine 
an institution's legal authority to operate within a State, its 
accreditation status, and its administrative capability and financial 
responsibility for purposes of determining the institution's 
eligibility to participate in title IV, HEA programs. In making such 
determinations, the Secretary considers information and documentation 
provided by the institution.
    Current Regulations: Section 600.20(d)(1)(ii)(A) requires an 
institution that notifies the Secretary of its intent to add an 
educational program for which it is required to apply to the Secretary 
for approval under Sec.  600.10(c), to ensure such notification is 
received by the Secretary at least 90 days before the first day of 
class of the educational program. An institution that properly submits 
its notification of intent to add an educational program is not 
required to obtain approval to offer the additional program unless the 
Secretary alerts the institution at least 30 days before the first day 
of class that the program must be approved for title IV, HEA purposes.
    Proposed Regulations: The proposed regulations would remove Sec.  
600.20(d)(1)(ii)(B), which provides that an institution submitting a 
notice in accordance with Sec.  600.20(d)(1)(ii)(A) is not required to 
obtain approval to offer the additional program unless alerted by

[[Page 18651]]

the Secretary at least 30 days before the first day of class that the 
program must be approved. Additionally, the Department proposes to 
modify Sec.  600.20(a) and (b) to commit the Secretary to take prompt 
action in response to any initial eligibility application or 
reapplication received from an institution.
    Reasons: The current regulations create an unnecessarily prolonged 
process for approval of new programs, especially since an institution 
trying to timely offer new programs to meet student demand or workforce 
needs cannot reasonably wait until 30 days prior to the start of the 
program to advertise or enroll students in the program. The regulations 
also do not include a time frame for the Secretary to notify an 
institution that approval by the Secretary is necessary. This could 
create a situation where the Department's approval is delayed for so 
long that the institution's State authorizing agency or its accrediting 
agency requires the institution to start over and submit a new 
application and fees and undergo an additional site visit at the 
institution's expense. Since the Department does not determine program 
quality, the Department should not second-guess the accrediting agency 
or State authorizing agency approval of new programs. After the 
approval process has concluded, the Secretary notifies the institution 
of the outcome. The proposed regulations recognize the appropriate role 
of accrediting agencies and State authorizing agencies in determining 
the quality of new programs and reflects the Department's intent that 
the Department should not block an institution's addition of new 
programs except in rare and unique circumstances related to the 
Department's regulatory requirements or in relation to requirements 
that are specifically indicated in an institution's program 
participation agreement (PPA).

Sec.  600.21 Updating Application Information

    Statute: Section 498(b) of the HEA requires the Secretary to 
provide a single application form that requires sufficient information 
and documentation from institutions to determine that the requirements 
of eligibility, accreditation, administrative capability, and financial 
responsibility are met.
    Section 481(b) of the HEA provides for the eligibility of direct 
assessment programs, and HEA section 481(b)(4) states that, in the case 
of a direct assessment program for which eligibility is being 
determined for the first time, the Secretary must make the eligibility 
determination before the program is considered eligible for title IV 
participation.
    Current Regulations: Section 600.21 requires an institution to 
notify the Department of various changes to certain information 
regarding the institution no later than 10 days after the change occurs 
in the information. Section 600.10 requires the Department to approve 
all direct assessment programs, necessitating submission of information 
regarding those programs to the Secretary and obviating the need for a 
separate reporting requirement under Sec.  600.21. The regulations 
currently do not require institutions to notify the Department when 
they add a program in which more than 25 percent of the program is 
provided by an ineligible institution or organization.
    Proposed Regulations: The Department proposes to add two new 
reporting requirements to Sec.  600.21. Under the proposed regulations, 
an institution would be required to report the following changes to the 
Secretary, no later than 10 days after the change occurs:
     The addition of a second or subsequent direct assessment 
program at the same credential level; and
     The establishment of a written arrangement for an 
ineligible institution or organization to provide more than 25 percent 
of a program under Sec.  668.5(c).
    The Department also revises Sec.  600.21(a)(11) to remove citations 
and a reference to ``updating certification pursuant to Sec.  
668.414(b).''
    Reasons: Section 600.10(c)(1)(iii) requires the Department to 
approve each direct assessment program an institution offers. Under the 
proposed regulations, the Department would review and approve such 
programs only the first time an institution offers such a program and 
the first time it offers a direct assessment program at a higher degree 
level. Since the Department would no longer have a role in approving 
direct assessment programs after the first one is approved, unless the 
new direct assessment program is at a different credential level, the 
Department would need to create a reporting mechanism to track such 
programs. Therefore, without a conforming change to Sec.  600.21, the 
Department would only be notified that an institution had added its 
first direct assessment program at each degree level and would not be 
told about subsequent direct assessment programs. Because direct 
assessment programs are still a relatively recent development in 
postsecondary education, the Department has an interest in monitoring 
the growth and expansion of such programs even though there is no 
compelling reason for the Department to approve each one. Therefore, we 
propose to add a requirement in Sec.  600.21 for an institution to 
report the addition of a second or subsequent direct assessment program 
no later than 10 days after the first day that the program is offered.
    Similarly, because the Department has an interest in understanding 
the extent to which written arrangements are used to deliver title IV 
eligible programs, we propose to require an institution to report when 
it enters into a written arrangement with an ineligible institution or 
organization to provide more than 25 percent of a program under Sec.  
668.5(c). This will enable the Department to monitor such arrangements 
and ensure that institutions have sought and received approval for such 
arrangements from their accrediting agencies.
    The changes to Sec.  600.21(a)(11) remove references to sections 
that were modified or eliminated in the final Gainful Employment 
regulation.\14\
---------------------------------------------------------------------------

    \14\ 84 FR 31392.
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Sec.  600.52 Definitions

    Statute: Section 102 of the HEA establishes that for the purposes 
of part D of title IV (Federal Direct Student Loan Program), an 
institution outside the United States that is comparable to an IHE as 
defined in section 101 of the HEA and that has been approved by the 
Secretary for the purpose of part D of title IV, meets the definition 
of an IHE for title IV purposes. Section 102 further directs the 
Secretary to establish criteria by regulation for the approval of 
institutions outside the United States and for the determination that 
such institutions are comparable to an IHE as defined in section 101 of 
the HEA.
    Current Regulations: The definition of a ``foreign institution'' in 
Sec.  600.52 precludes such an institution, except with respect to 
clinical training offered under Sec.  600.55(h)(1), Sec.  600.56(b), or 
Sec.  600.57(a)(2), from having any type of written arrangement, within 
the meaning of Sec.  668.5, with any institutions or organizations 
within the United States for students to take courses from such 
institutions or organizations. Additionally, a foreign institution may 
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. The definition does, however, contain 
an exception for independent research done by an individual student in 
the United States for not more than one

[[Page 18652]]

academic year, if that research is conducted during the dissertation 
phase of a doctoral program and the research can only be performed in 
the United States.
    Proposed Regulations: The Department proposes to revise paragraph 
(1)(ii)(B) of the definition of ``foreign institution'' to allow an 
eligible foreign institution to enter into a written arrangement with 
an eligible institution within the United States to provide no more 
than 25 percent of the courses required for a student's eligible 
program. The proposed regulations would further permit students 
enrolled in a program at an eligible foreign institution to complete up 
to 25 percent of an eligible program by enrolling in coursework, 
research, work, internship, externship, or special studies offered by 
an eligible institution in the United States. The current exception for 
independent research done by an individual student in the United States 
for not more than one academic year for research conducted during the 
dissertation phase of a doctoral program (and the research can only be 
performed at a facility in the United States) would be retained but 
moved to paragraph (2) of the definition and would not be subject to 
the overall restriction on the percentage coursework offered by the 
institution in the United States. Accordingly, a doctoral candidate 
conducting research in the United States under this exception would be 
able to do so for a full academic year even if that academic year 
comprises more than 25 percent of the doctoral program. However, it 
would not be permissible for a student enrolled in a doctoral program, 
who, prior to the dissertation phase of that program, has completed any 
portion of it by taking coursework in the United States (as permitted 
under the proposed definition of ``foreign institution,'' paragraph 
(1)(ii)(B) and (1)(ii)(C)), to later conduct independent research in 
the United States that cumulatively exceeds 25 percent of the program. 
The Department seeks comments regarding whether this limitation as 
proposed is necessary and appropriate or should be broadened such that 
a doctoral student, having already completed 25 percent of his or her 
eligible program by taking coursework in the United States, would be 
permitted an additional full academic year to conduct independent 
research there as well.
    In several places, the Department has modified the existing and 
consensus regulations to remove the word ``State'' and replace it with 
``United States'' in order to clarify that the distinction being made 
relates to whether an institution is located in any State (i.e. the 
United States), rather than one State or another.
    Reasons: Current restrictions on foreign institutions executing 
written arrangements with institutions or organizations in the United 
States or permitting students enrolled in eligible programs to enroll 
in any coursework offered in the United States are based on the 
Department's long-held position that U.S. students borrowing from the 
Direct Loan program for enrollment in a program at an eligible foreign 
institution should reside in the country where that institution is 
located. The proposed regulations are consistent with that position. 
However, we believe that the current regulations are needlessly 
restrictive and unfairly circumscribe the overall educational 
experience that foreign institutions may offer their U.S. students. 
There are several legitimate reasons why a foreign institution might 
want to permit U.S. students enrolled in its eligible programs to 
complete part of their education in the United States. For example, a 
student may wish to continue his or her education while residing at 
home during the institution's summer recess or pursue opportunities for 
a specific internship or externship that is only in the United States, 
or may experience personal difficulties that would necessitate study in 
the United States for a limited time period.
    While introducing flexibilities that the Department believes will 
enable foreign institutions to provide U.S. students an improved 
educational experience, these proposed regulations retain key 
safeguards that would ensure program integrity and reinforce the 
expectation that U.S. students enrolling in an eligible foreign 
institution do so with the intent of taking coursework from that 
institution and, for the period of matriculation, residing in the 
country where it is located. Toward that end, the Department proposes 
to limit to 25 percent the portion of an eligible program offered at a 
foreign institution that may be provided by an institution in the 
United States either under a written arrangement or through the student 
enrolling in coursework, internship, externship, or special studies at 
an eligible institution in the United States. Additionally, such 
coursework or other types of work could only be offered by institutions 
meeting the definition of an ``eligible institution.'' The Department 
seeks comments regarding whether the options available to students for 
study or internships in the United States under this proposed 
flexibility should be expanded to include organizations that are not 
eligible institutions. We wish to clarify that these proposed 
regulations would not permit students who are enrolled in an eligible 
foreign institution but taking coursework in the United States under a 
written arrangement to receive title IV, HEA assistance other than a 
Direct Loan. While the terms of such an arrangement may stipulate that 
the host institution (the U.S. institution in this case) is responsible 
for the functions of awarding and disbursing title IV aid, that 
institution may only award Direct Loans and not other types of aid for 
which a student at a foreign institution is ineligible.

Sec.  600.54 Criteria for Determining Whether a Foreign Institution Is 
Eligible To Apply To Participate in the Direct Loan Program

    Statute: Section 102 of the HEA establishes that for the purposes 
of part D of title IV (Federal Direct Student Loan Program), an 
institution outside the United States that is comparable to an IHE as 
defined in section 101 of the HEA and that has been approved by the 
Secretary for the purpose of part D of title IV, meets the definition 
of an IHE for title IV purposes. Section 102 further directs the 
Secretary to establish criteria by regulation for the approval of 
institutions outside the United States and for the determination that 
such institutions are comparable to an IHE as defined in section 101 of 
the HEA.
    Current Regulations: Section 600.54(c) prohibits a 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.
    Proposed Regulations: The Department proposes to revise Sec.  
600.54(c) to permit written arrangements between an eligible foreign 
institution and an ineligible entity, provided the ineligible entity is 
an institution that satisfies the definition in paragraphs (1)(iii) and 
(iv) of ``foreign institution'' and the ineligible foreign institution 
provides 25 percent or less of the educational program.
    Reasons: We believe that the current regulatory prohibition on 
eligible foreign institutions entering into written arrangements with 
ineligible foreign institutions unfairly restricts U.S. students 
enrolled abroad from taking advantage of an important option available 
to their counterparts attending domestic institutions, namely the 
opportunity to take courses at any number of host institutions under an 
agreement that allows credits earned at those institutions to count 
toward matriculation in the student's program

[[Page 18653]]

of study at his or her home institution. Currently, eligible foreign 
institutions may enter into written arrangements with other eligible 
foreign institutions, but due to the limited number of those 
institutions, students' options are similarly limited.
    These proposed regulations would broaden the educational 
experiences available to U.S. students enrolled in eligible foreign 
institutions while providing assurance that the quality of academic 
instruction offered students at ineligible host institutions is 
reasonably equivalent to what they receive at their home institutions. 
As discussed above, ineligible foreign institutions would be required 
to meet the definition of ``foreign institution'' under paragraphs 
(1)(iii) and (iv) of that definition in order to enter into written 
arrangements with eligible foreign institutions. Those provisions 
require the ineligible institution to be legally authorized by the 
educational ministry, council, or equivalent agency of the country in 
which the institution is located to provide an education beyond the 
secondary level; and award degrees, certificates, or other recognized 
educational credentials in accordance with Sec.  600.54(e) that are 
officially recognized by the country in which the institution is 
located.

Sec.  668.1 Scope

    Statute: Title I, part A of the HEA establishes the general 
provisions that define ``institution of higher education'' for the 
purposes of title IV programs, including public or nonprofit 
institutions and proprietary institutions of higher education.
    Current Regulations: Section 668.1 defines the scope for part 668, 
which establishes general rules that apply to an institution that 
participates in any title IV, HEA program. This section also provides 
that an institution's use of a third-party servicer does not alter the 
institution's responsibility for compliance with the regulations in 
part 668. This section also states that the term ``institution'' 
includes those that are defined in 34 CFR 600.4 (definition of 
``institution of higher education''), 600.5 (definition of 
``proprietary institution of higher education''), and 600.6 (definition 
of ``postsecondary vocational institution''). This section lists the 
following programs as title IV, HEA programs: Federal Pell Grant, 
Academic Competitiveness Grant (ACG), Federal Supplemental Educational 
Opportunity Grant, the Leveraging Educational Assistance Partnership 
Program, the Federal Stafford Loan Program, the Federal PLUS Program, 
the Federal Consolidation Loan Program, the Federal Work-Study Program, 
the William D. Ford Federal Direct Loan Program, the Federal Perkins 
Loan Program, the National SMART Grant program, and the TEACH Grant 
program.
    Proposed Regulations: The Department proposes to add the phrase 
``unless otherwise specified'' in paragraph (b), which states that for 
this part, an ``institution'' includes the definition of ``institution 
of higher education'' established in 34 CFR 600.4, the definition of a 
``proprietary institution of higher education'' established in 34 CFR 
600.5, and the definition of a ``postsecondary vocational institution'' 
as established in 34 CFR 600.6.
    Reasons: This proposed addition is a technical change to indicate 
that the Department will note if there is any change to the definition 
of ``institution'' throughout Part 668. For example, if a regulation 
only applies to a postsecondary vocational institution, the Department 
would note that in an appropriate regulation. Otherwise, the term 
``institution'' includes all three types of institutions, as defined in 
Sec. Sec.  600.4, 600.5, and 600.6.

Sec.  668.2 Definitions

Academic Competitiveness Grant
    Statute: Section 401(A) previously authorized the Academic 
Competitiveness Grant program.
    Current Regulations: Section 668.2 defines the ``Academic 
Competitiveness Grant (ACG) Program'' as a grant program authorized by 
Title IV-A-1 of the HEA under which grants are awarded during the first 
and second academic years of study to eligible financially needy 
undergraduate students who successfully complete rigorous secondary 
school programs of study.
    Proposed Regulations: The Department proposes to eliminate the 
definition of ``Academic Competitiveness Grant (ACG) program.''
    Reasons: We propose to eliminate the definition of the ``Academic 
Competitiveness Grant program,'' because the program is no longer 
authorized by the HEA and regulatory provisions using the definition 
are therefore no longer effective.
Full-Time Student
    Statute: The definition of ``academic and award year,'' in section 
481 of the HEA, provides that a full-time student is expected to 
complete at least 24 semester or trimester hours or 36 quarter credit 
hours in a course of study that measures its program length in credit 
hours, or 900 clock hours in a course of study that measures its 
program length in clock hours.
    Current Regulations: Section 668.2 defines a ``full-time student'' 
as an enrolled student who is carrying a full-time academic workload, 
as determined by the institution, under a standard applicable to all 
students enrolled in a particular educational program. That definition 
also states that, for a term-based program, the student's workload may 
include repeating any coursework previously taken in the program but 
may not include more than one repetition of a previously passed course. 
The definition sets requirements for an institution's minimum standard 
for full-time enrollment in an undergraduate program, including:
     For a program that measures progress in credit hours and 
uses standard terms (semesters, trimesters, or quarters), 12 semester 
hours or 12 quarter hours per academic term.
     For a program that measures progress in credit hours and 
does not use terms, 24 semester hours or 36 quarter hours over the 
weeks of instructional time in the academic year, or the prorated 
equivalent if the program is less than one academic year.
     For a program that measures progress in credit hours and 
uses nonstandard-terms (terms other than semesters, trimesters, or 
quarters) the number of credits determined by dividing the number of 
weeks of instructional time in the term by the number of weeks of 
instructional time in the program's academic year; and multiplying the 
resulting fraction determined by the number of credit hours in the 
program's academic year.
     For a program that measures progress in clock hours, 24 
clock hours per week.
     A series of courses or seminars that equals 12 semester 
hours or 12 quarter hours in a maximum of 18 weeks.
     The work portion of a cooperative education program in 
which the amount of work performed is equivalent to the academic 
workload of a full-time student.
     For correspondence coursework, a full-time course load 
must be commensurate with the full-time definitions listed above, and 
at least one-half of the coursework must be made up of non-
correspondence coursework that meets one-half of the institution's 
requirement for full-time students.
    There is currently no regulatory definition of a ``subscription-
based program,'' nor a definition of a ``full-

[[Page 18654]]

time student in a subscription-based program'' in Sec.  668.2.
    Proposed Regulations: In the definition of ``full-time student,'' 
we propose to exclude subscription-based programs from the types of 
term-based programs in which a student's workload may include no more 
than one repetition of a previously passed course. We also propose to 
add a new paragraph (8) to this definition that describes the 
requirements for full-time enrollment in a subscription-based program 
as completion of a full-time course load commensurate with the ``full-
time'' definitions in paragraphs (1), (3), and (5) through (7) of the 
definition of ``full-time student.''
    Reasons: The Department proposes changes to the definition of 
``full-time student'' to provide clarity for subscription-based 
programs in accordance with discussion during negotiated rulemaking 
that concluded that current regulations were insufficient to 
accommodate new technology-driven models of education. The Department 
wishes to express our continuing concern that there is often a 
disconnect between the requirements for licensure and the requirements 
for employment. We encourage employers to be cognizant of the 
limitations the Department places on students when preparing to enter a 
field that is subject to licensure requirements.
    The requirements for subscription-based programs are not addressed 
in the current regulations because they are generally programs that 
have become possible or practicable only with the development of more 
recent technology-driven models in direct assessment programs.
    Under subscription-based models, a student does not progress until 
demonstrating competency in a given skill or subject area, as opposed 
to completing a course with a defined timeframe in a traditional 
educational program. In a traditional course, a student may have passed 
the course but failed to master some of the material. Alternatively, 
sections of the same course taught by different instructors could 
present different information. However, subscription-based programs 
measure student progress based on demonstrated competencies rather than 
the passage of time. There would be no reason for a student who 
demonstrated all of the necessary competencies to complete a 
subscription-based course to be given an opportunity to repeat the 
course. Therefore, the regulatory provision allowing a student to 
retake a completed course for title IV, HEA purposes is nonsensical 
when applied to a subscription-based direct assessment program.
    Finally, because the Department is also proposing a definition for 
``subscription-based program,'' the inclusion of that term in ``full-
time student'' is a necessary conforming change in order to ensure that 
student eligibility for those enrolled in a subscription-based program 
can be established.
Subscription-Based Program
    Statute: Under sections 428G(a) and 455(a) of the HEA the interval 
between the first and second installment of Federal Direct Loan student 
loan payments must not be less than one-half of the period of 
enrollment, except in the case of programs offered in semesters, 
quarters, or a similar division of the period of enrollment. Section 
401(b)(2)(B) provides that in any case where a student attends an 
institution on a less than full-time basis, the amount of Pell Grant 
funds to which the student is entitled shall be reduced in proportion 
to the student's enrollment in accordance with a schedule of reductions 
established by the Secretary. Section 401(e) of the HEA states that 
Pell Grant payments shall be made in accordance with regulations 
promulgated by the Secretary. Section 484(b)(2) of the HEA provides 
that to be eligible for a loan under the Direct Loan program, a student 
must be carrying at least one-half the normal full-time work-load for 
the course of study that the student is pursuing, as determined by an 
eligible institution. The HEA does not refer to the term 
``subscription-based education.''
    Current Regulations: Section 668.4(a) provides that for a student 
enrolled in an eligible program that measures progress in credit hours 
and uses standard terms (semesters, trimesters, or quarters), or for a 
student enrolled in an eligible program that measures progress in 
credit hours and uses nonstandard-terms that are substantially equal in 
length, the payment period is the academic term. Section 668.4(b) 
provides that for a student enrolled in an eligible program that 
measures progress in credit hours and uses nonstandard-terms that are 
not substantially equal in length, for purposes of the Pell Grant, 
FSEOG, and TEACH Grant programs the payment period is the term, but for 
purposes of the Direct Loan Program the payment period is the period of 
time in which the student successfully completes half of the credit 
hours and weeks of instructional time in the academic year, or, if the 
program or the remaining portion of the program that the student is 
attending is shorter than an academic year, half of the credit hours 
and weeks of instruction in the program or remaining portion of the 
program, respectively. Section 668.4(c) provides that for an academic 
program that does not have academic terms or a program that measures 
progress in clock hours, the payment period is the period of time in 
which the student successfully completes half of the credit hours and 
weeks of instructional time in the academic year, or, if the program or 
the remaining portion of the program that the student is attending is 
shorter than an academic year, half of the credit hours and weeks of 
instruction in the program or remaining portion of the program, 
respectively. The current regulations do not refer to subscription-
based programs.
    Proposed Regulations: We propose to define ``subscription-based 
program'' as a standard or nonstandard-term direct assessment program 
in which the institution charges a student for each term on a 
subscription basis with the expectation that the student will complete 
a specified number of credit hours during that term. We propose to 
clarify that coursework in a subscription-based program is not required 
to begin or end within a specific timeframe in each term, and that 
students in subscription-based programs must complete a cumulative 
number of credit hours (or the equivalent) during or following the end 
of each term before receiving subsequent disbursements of title IV, HEA 
program funds. We also propose to require that an institution must 
establish a single enrollment status that will apply to a student 
throughout the student's enrollment in a subscription-based program, 
except that a student may change his or her enrollment status no more 
often than once per academic year. Finally, we propose to explain the 
method for determining the number of credit hours (or the equivalent) 
that a student in a subscription-based program must complete before 
receiving subsequent disbursements as follows:
     An institution first determines, for each term, the number 
of credit hours (or the equivalent) associated with the institution's 
minimum standard for the student's enrollment status (for example, 
full-time, three-quarter time, or half-time) for that period. An 
institution would be required to adjust this figure to at least one 
credit (or the equivalent) for a student who is enrolled less than 
half-time.
     Following this determination, the institution adds 
together the number of credit hours (or the equivalent) determined for 
each term that the

[[Page 18655]]

student enrolled in and attended, excluding the current and most 
recently attended terms.
    Reasons: The current regulatory requirements for disbursements by 
payment period in term-based and non-term programs are designed to 
ensure that institutions are permitted to make all title IV, HEA 
program disbursements at the same time using consistent definitions of 
payment periods that apply to all programs. The requirements for term-
based programs are intended to maintain a simple and consistent aid 
delivery system for term-based programs by making each term a payment 
period in cases where an institution's terms are of sufficient length 
and have discrete start and end dates. The Secretary's approach for 
non-term credit hour and clock hour programs ensured that institutions 
offering such programs would be prohibited from making a second 
disbursement of Federal student loan funds until the later of the 
calendar midpoint of the loan period or the date that the student 
completes half the academic coursework in the loan period.
    CBE programs, including direct assessment programs, measure a 
student's academic progress by assessing the student's learning, 
typically based on the student's demonstration of proficiency or 
mastery of a defined set of competency standards. Because advancement 
in CBE programs is not tied to scheduled time periods, many CBE 
programs allow students to set their own pace for progressing through a 
program. Therefore, under the current statutory and regulatory 
requirements for title IV aid disbursement, an institution providing a 
CBE program has two choices: The institution can either set a discrete 
period of time during which a student must begin and end work on a 
given competency in order to use standard or nonstandard terms, or, if 
the institution chooses to operate the program as a non-term program, 
the student's title IV aid may be disbursed only after the student has 
completed both a specific predefined portion of coursework and a 
predefined period of calendar time. Requiring competency-based 
coursework to begin and end within a specific timeframe limits a 
student's flexibility to work at his or her own pace and could 
artificially delay a student's progress if the institution was required 
to deny a student's request to begin a new competency near the end of a 
term. Conversely, implementing a non-term disbursement system for a CBE 
program is more complicated than for a non-term program that has a 
strict progression. Substantial variation in the speed at which 
students progress through the program would require an institution to 
carefully monitor each student to ensure that it did not make a 
disbursement before the student had completed the requisite weeks of 
instruction and credit hours (or the equivalent). Therefore, the 
current requirements for disbursement in term-based and non-term 
programs make it substantially more difficult for institutions to 
implement CBE programs in which students work at their own pace without 
adopting a complicated and administratively burdensome disbursement 
methodology.
    In a Federal Register notice published July 31, 2014 (79 FR 44429), 
the Secretary established the Competency-Based Education Experiment in 
order to test new approaches to disbursing title IV, HEA assistance to 
students in CBE programs. The experiment permitted an institution to 
disburse title IV, HEA assistance for institutional charges as soon as 
a student completed a required number of competencies while requiring 
disbursements of aid for indirect costs (such as living expenses) at 
regular intervals related to the completion of a certain number of 
weeks of instruction. A number of institutions participating in the 
experiment indicated to the Department that there were administrative 
challenges to implementing the experiment resulting from the 
requirement to track separately a student's completion of competencies 
and the student's completion of calendar time and make disbursements of 
title IV, HEA assistance separately for direct and indirect costs, 
respectively. Institutions also indicated that there were specific 
challenges associated with implementing that form of disbursement for 
programs that charged students a set amount for a defined period of 
time rather than charging an amount for each required competency in the 
program. The Secretary responded by expanding the Competency-Based 
Education experiment in a Federal Register notice published November 
18, 2015 (80 FR 72052). The expanded experiment permitted an 
institution to participate in one of three different versions of the 
experiment, including a new version that provided waivers and 
modifications of regulatory requirements specifically designed to 
support disbursement in subscription-based programs.
    The new version of the experiment (referred to as ``Subscription-
Based Disbursement'') allowed participating institutions to include in 
a determination of a student's enrollment status competencies that 
began prior to the start of the subscription period as long as it did 
not include such competencies in the same student's enrollment status 
for more than one payment period. Participating institutions were 
required to disburse title IV, HEA assistance based on the number of 
competencies that the institution expected the student to complete 
during a given subscription period. Participating institutions also 
identified drawbacks to this version of the experiment, noting that the 
version limited flexibility by requiring institutions to ``lock'' 
enrollment on a given date several weeks after the beginning of a 
payment period. The experiment also required an institution to identify 
specific competencies that had been counted in a student's enrollment 
status and ensure that such competencies were never included in 
enrollment status again, resulting in substantial administrative burden 
for the institution monitoring a student's progress.
    During the second meeting of the subcommittee, the Department 
proposed to implement a term-based method of disbursing title IV, HEA 
assistance in direct assessment programs, to limit the administrative 
burden for institutions, increase the flexibility for students to 
complete competencies at their own pace, and maintain the integrity of 
the title IV, HEA programs. The Department's proposed disbursement 
method would permit an institution to treat a subscription period as a 
payment period, but would avoid requiring institutions to identify 
specific competencies to assign to a given payment period, instead 
requiring a student to complete a certain number of competencies in 
past subscription periods to receive title IV, HEA assistance in 
subsequent subscription periods. The Department's proposal would also 
permit an institution to allow students to work on competencies at any 
time, rather than requiring students to begin and end work on a given 
competency within the specific timeframe established for the 
subscription period. This would provide substantially greater 
flexibility for students to study on their own schedule, rather than 
adhering to a schedule mandated by the Department's regulations.
    As part of its presentation to the subcommittee, the Department 
provided an example illustrating the differences between the proposed 
subscription-based disbursement method and the current disbursement 
requirements for term-based and non-term credit hour programs.

[[Page 18656]]

[GRAPHIC] [TIFF OMITTED] TP02AP20.000

    The example demonstrates that under the Department's proposed 
disbursement method for subscription-based programs, students would be 
permitted to take coursework that overlaps or extends beyond the start 
and end dates of payment periods, unlike in term-based credit hour 
programs under the current regulations. Additionally, the example 
showed that under the proposed subscription-based disbursement method, 
an institution would not be required to wait until the middle of a 
student's academic year in order to make a second or subsequent 
disbursement of title IV, HEA assistance, as is currently required for 
credit hour non-term programs. Under subscription-based disbursement, 
students could receive disbursements of title IV, HEA assistance at the 
beginning of each payment period, but only if the student had completed 
the requisite number of credit hours or the equivalent associated with 
the student's enrollment status in all prior payment periods.
    The Department proposed limiting the use of this disbursement 
method to direct assessment programs that charged students for each 
term on a subscription basis with the expectation that the student 
complete a specified number of competencies during that term. The 
Department would prefer to allow all CBE programs to use the method, 
but the HEA does not provide a definition of ``CBE programs'' on which 
the Secretary could rely for this purpose. The subcommittee did not 
object to the proposed limitations on the types of programs that would 
be permitted to adopt the proposed disbursement method.
    Following the Department's presentation, subcommittee members 
identified two concerns with the Department's proposed approach:
    1. The approach would require institutions using this disbursement 
method to track each student's completion of credit hours or the 
equivalent, which is an administratively burdensome process that can be 
confusing for students.
    2. The approach would be disadvantageous to students who fall 
behind on completing coursework, because it would cut off those 
students' ability to receive title IV, HEA assistance. Institutions 
would have little incentive to let such students continue if the 
students were unable to pay for institutional charges without such 
assistance.
    One subcommittee member presented an alternative to the 
Department's proposal that would have permitted disbursement based on 
attempted coursework rather than completed coursework and would have 
allowed an institution to include a competency in a student's 
enrollment status more than once if the competency overlapped more than 
one subscription period. The Department could not support that 
framework, because we believe it could lead to abuse by allowing 
institutions to pay title IV aid for the same course twice. This 
potential for abuse was also the reason that the Department proposed to 
prevent institutions with subscription-based programs from including 
repeated coursework in a student's enrollment status.
    The Department indicated that it believes that the completion 
framework is the best way to permit adequate flexibility related to the 
timeframe for completing coursework while ensuring integrity of the 
title IV, HEA programs. As an added protection for students, in the 
third subcommittee meeting, the Department and the subcommittee agreed 
to revise the proposal to provide a single additional subscription 
period to permit students to catch up without losing eligibility for 
title IV, HEA assistance if the students had failed to complete a 
sufficient number of credit hours. That agreement also provided that an 
institution using the subscription-based disbursement method would be 
required to establish a single enrollment status (i.e., full-time, 
three-quarters time, half-time, or less-than-half time) that would 
apply to a student throughout his or her program.

[[Page 18657]]

    Under the language agreed upon by the subcommittee, students would 
be permitted to transfer into different versions of the same program--
for example, from the full-time version to the half-time version--no 
more than once per academic year. This limitation is intended to permit 
students to reduce or increase their enrollment status according to 
changing personal needs while avoiding ``gaming'' in which students 
repeatedly switch between enrollment statuses for no reason except to 
avoid completion requirements. The subcommittee agreed to this 
limitation in order to address the Department's concerns about the 
integrity of the Title IV programs.
    The subcommittee also agreed to establish a minimum enrollment 
status requirement of one credit or the equivalent per term for less-
than-half-time subscription-based programs. This requirement was 
established because, in the absence of a statutory or regulatory 
definition of a ``less-than-half-time student,'' a de minimis standard 
for completion is needed in order to ensure that students in less-than-
half-time programs make at least some progress in each subscription 
period in order to qualify for subsequent disbursements of title IV, 
HEA assistance.
    The full committee accepted the subcommittee's agreement regarding 
the requirements for subscription-based programs and recommended no 
further changes.
Third-Party Servicer
    Statute: Section 481(c) of the HEA defines the term ``third-party 
servicer'' as ``any individual, any State, or any private, for-profit 
or nonprofit organization'' that enters into a contract with an 
eligible IHE to administer any aspect of the institution's student 
assistance programs or a guaranty agency, or an eligible lender, to 
administer any aspect of such agency's or lender's student loan 
programs.
    Current Regulations: Section 668.2 defines a ``third-party 
servicer'' as an entity that enters into a contract with an eligible 
institution to administer any aspect of the institution's participation 
in any title IV, HEA program. Under paragraph (1)(i) of the definition 
of ``third-party servicer,'' the Secretary considers administration of 
participation in a title IV, HEA program to include, among other 
things, certifying loan applications.
    Proposed Regulations: We propose to replace the words ``Certifying 
loan applications'' with ``Originating loans'' in paragraph (1)(i)(D) 
of the definition of ``third-party servicer.''
    Reasons: We propose to change ``certifying loan applications'' to 
``originating loans'' to capture current terminology used in the 
student loan award and application process. The proposed change would 
not change current practices but merely update the terminology used.

Sec.  668.3 Academic Year

    Statute: Section 481(a)(2) of the HEA provides that, for purposes 
of the title IV, HEA programs, an ``academic year'' requires a minimum 
of 30 weeks of instructional time for a credit hour program and a 
minimum of 26 weeks of instructional time for a clock-hour program. An 
academic year for an undergraduate program of study must additionally 
include at least 24 semester or trimester hours, 36 quarter hours, or 
900 clock hours.
    Current Regulations: Section 668.3 defines the minimum requirements 
for an institution's definition of an ``academic year,'' and defines 
certain terms related to that definition. The regulations currently 
define a ``week of instructional time'' as any week in which at least 
one day of regularly scheduled instruction or examinations occurs or, 
after the last scheduled day of classes for a term or payment period, 
at least one day of study for final examinations occurs. The definition 
currently excludes vacation periods, homework, or periods of 
orientation or counseling.
    Proposed Regulations: The Department proposes to revise the 
definition of a ``week of instructional time'' as it pertains to an 
institution's definition of an ``academic year.'' The definition would 
be separated into two parts: One that applies to traditional 
postsecondary programs and one that applies to programs using 
asynchronous coursework through distance education or correspondence 
courses. The definition applying to traditional programs would remain 
unchanged and would be included as paragraph (2)(i) of the definition. 
The Department proposes to add a new paragraph (2)(ii) to establish the 
requirements for a week of instructional time in a program using 
asynchronous coursework through distance education or correspondence 
courses. For those programs, a week of instructional time would be 
defined in paragraph (2)(ii)(A) as a week in which the institution 
makes available the instructional materials, other resources, and 
instructor support necessary for academic engagement and completion of 
course objectives. The Department proposes to establish in paragraph 
(2)(ii)(B) that in a program using asynchronous coursework through 
distance education (not a correspondence course) the institution must 
also expect enrolled students to perform educational activities 
demonstrating academic engagement during the week. We also propose to 
amend paragraph (3) of the definition, relating to the types of 
activities excluded from the definition of a ``week of instructional 
time,'' to remove references to vacation periods and homework and 
instead refer to scheduled breaks and activities not included in the 
definition of ``academic engagement'' under 34 CFR 600.2.
    Reasons: The Department proposes to clarify the definition of a 
``week of instructional time'' to accommodate programs without 
scheduled instruction, specifically distance education and 
correspondence courses that are offered asynchronously.
    The definition of a ``week of instructional time'' is an important 
component in the regulatory requirements for the proration of Pell 
Grant and Direct Loan funds, but the definition currently states that a 
week of instructional time must include at least one day of scheduled 
instruction. This requirement, which is not included in the statute, 
effectively makes it impossible for institutions to offer title IV-
eligible postsecondary programs without scheduling at least one day of 
instruction per week. Because the statutory definition of ``distance 
education'' under HEA section 103(7) specifically includes asynchronous 
instruction, we believe the current regulations are not consistent with 
Congress' overall intent and must be revised to accommodate distance 
education coursework offered asynchronously.
    The Department originally proposed to apply the alternative 
definition of a ``week of instructional time'' to both direct 
assessment programs and programs using asynchronous coursework through 
distance education or correspondence. However, one subcommittee member 
opposed including direct assessment programs in the definition, noting 
that direct assessment is a large category that may or may not include 
distance education. Based on that concern, the Department agreed to 
limit the alternative definition to only distance education and 
correspondence programs offered asynchronously. Several subcommittee 
members also expressed concern about the limited requirements for a 
week of instruction, indicating that a requirement for an institution 
to merely provide the materials and instructional support for student 
engagement did not seem comparable to the requirements

[[Page 18658]]

for programs with scheduled instruction. Acknowledging this concern, 
the Department proposed adding a separate requirement for asynchronous 
programs offered through distance education (as opposed to 
correspondence courses) that would ensure that such programs created an 
expectation for academic engagement (in accordance with the proposed 
definition of that term in Sec.  600.2) while also ensuring that the 
appropriate materials and instructional support were available to 
students.
    Following the first subcommittee meeting, the Department proposed 
to exempt distance education or correspondence programs from the 
prohibition on including homework in the concept of ``instructional 
time'' since such programs are generally completed at home and the 
concept of homework is less clear in such programs. However, one 
subcommittee member indicated that allowing institutions to count 
homework as meeting requirements for a week of instructional time in a 
distance education or correspondence program would provide an advantage 
for such programs over traditional programs with classroom instruction. 
The Department responded to this concern by revising that part of the 
definition to exclude activities not included in the definition of 
academic engagement under 34 CFR 600.2 instead of homework. This would 
provide institutions with additional flexibility to design innovative, 
non-traditional programs while still protecting taxpayers.
    The subcommittee members did not object to that language or other 
aspects of the definition presented by the Department at the third 
subcommittee meeting. The committee accepted the definition as written, 
except that it proposed to replace the phrase ``vacation periods'' with 
``scheduled breaks'' to use a phrase more commonly understood among 
postsecondary institutions. The Department agreed to this change as 
part of consensus with the committee.

Sec.  668.5 Written Arrangements To Provide Educational Programs

    Statute: While the HEA does not reference written arrangements, it 
does allow the Department to establish criteria for institutions to 
follow as part of the institution's PPA to participate in the title IV, 
HEA programs.
    Current Regulations: Section 668.5 establishes the framework for 
written arrangements between two eligible institutions or written 
arrangements between an eligible institution and an ineligible 
institution or organization to provide part of an educational program. 
This section does not address workforce responsiveness or the 
methodology for calculating the portion of a program offered by an 
ineligible institution or organization. Additionally, it does not 
address an institution's acceptance of transfer credits or use of prior 
learning assessment or other non-traditional methods of providing 
academic credit, or the internship or externship portion of a program.
    Proposed Regulations: The Department proposes to revise Sec.  668.5 
by adding new paragraphs (f) Workforce responsiveness, (g) Calculation 
of percentage of a program, and (h) Non-applicability to other 
interactions with outside entities. The Department proposes to clarify 
that institutions utilizing written arrangements may align or modify 
their curriculum in order to meet the recommendations or requirements 
of industry advisory boards or industry-recognized credentialing 
bodies. This flexibility to account for established industry standards 
in designing programs would extend to institutional governance or 
decision-making changes where an institution looks to such standards as 
an alternative to allowing or requiring faculty control or approval.
    The Department also proposes to clarify the calculation for 
determining the percentage of the program that is provided by an 
ineligible institution or organization under Sec.  668.5(c) in 
paragraph (g). The number of semester, trimester, or quarter credit 
hours, clock hours, or the equivalent that are provided by the 
ineligible organization or organizations would be divided by the total 
number of semester, trimester, or quarter credit hours, clock hours, or 
the equivalent required for completion of the program. A course would 
be considered to be provided by an ineligible institution or 
organization if the contracted organization with which the institution 
has a written arrangement has authority over the design, 
administration, or instruction in the course. Lastly, the Department 
proposes to clarify that neither the acceptance by the institution of 
transfer credits, the use of prior learning assessment or other non-
traditional methods of providing academic credit, nor the internship/
externship portion of a program, if governed by accrediting agency 
standards that require the oversight and supervision of the institution 
are subject to the provisions of Sec.  668.5 in paragraph (h).
    The Department further proposes to revise the existing regulatory 
language pertinent to written arrangements between two or more eligible 
institutions that are owned or controlled by the same individual, 
partnership, or corporation in Sec.  668.5(a)(2), and written 
arrangements between an eligible institution and an ineligible 
institution or organization in Sec.  668.5(c)(1). In the case of the 
former, the proposed regulations would remove current Sec.  
668.5(a)(2)(ii), which requires that, under the terms of a written 
arrangement between two or more eligible institutions owned or 
controlled by the same individual, partnership, or corporation, the 
institution granting the degree or certificate must provide more than 
50 percent of the eligible program. With respect to the latter 
provision, proposed Sec.  668.5(c)(1)(i) would require an ineligible 
institution or organization that is party to a written arrangement with 
an eligible institution to demonstrate (1) experience in the delivery 
and assessment of the program or portion of the program they will be 
contracted to deliver under the provisions of the written arrangement 
and (2) that the program has been effective in meeting the stated 
learning objectives. The Department has also added citations to the 
consensus language in order to reference the appropriate portion of the 
substantive change regulations in Sec.  602.22.
    Reasons: The Department believes the proposed revisions to Sec.  
668.5 would better facilitate educational innovations and allow 
institutions increased flexibility in partnering with entities to 
provide critical workforce training that may be beyond the capability 
of institutions to offer on their own. The proposed revisions are also 
intended to clarify the requirements for institutions to seek and 
receive approval from accrediting agencies to engage in such 
partnerships in some circumstances.
    Specifically, the proposed addition of paragraph (f) Workforce 
responsiveness would make clear an institution's prerogative to modify 
its curriculum or academic requirements to meet the needs of industry 
advisory boards and employers who hire program graduates. Proposed 
Sec.  668.5(c)(1)(i) would balance this flexibility by requiring that 
an ineligible organization that enters into a written arrangement with 
an eligible institution demonstrate experience in the delivery and 
assessment of the program or portion of the program the ineligible 
institution will be contracted to deliver under the provisions of the 
written arrangement and that the program has been effective in meeting 
the stated learning objectives. However, the Department seeks comment 
on whether this requirement would be difficult to meet as it may 
require an institution to ``demonstrate experience

[[Page 18659]]

in the delivery and assessment of the program'' and show that the 
program has been ``effective'' before it can enroll students in 
partnership with an institution. The Department has removed other 
similar ``experience'' requirements, including in Sec.  602.12.
    We propose to add paragraph (g) to establish specific requirements 
for how an institution must determine the percentage of a program that 
an ineligible organization will offer through a written arrangement. 
The current regulations do not establish specific requirements for 
performing this calculation, which has resulted in ambiguity regarding 
when an institution is subject to requirements under Sec.  
668.5(c)(3)(ii) for accrediting agency approval of the arrangement. Our 
intent is to offer a clear and simple method for an institution to 
determine the portion of the program offered by an ineligible 
institution or organization by dividing the number of hours provided by 
the ineligible organization by the total number of hours in the 
program. We propose to include in the numerator of this calculation the 
credit hours, clock hours, or the equivalent associated with any course 
in which the ineligible organization has authority over the design, 
administration, or instruction in the course, including the 
establishment of requirements for successful completion of the course, 
delivering instruction, or assessing student learning. These criteria 
were chosen because they reflect a circumstance in which the ineligible 
institution exerts full control over one or more of the fundamental 
academic functions associated with a given course, and such transfer of 
academic authority merits additional oversight by an institution's 
accrediting agency when undertaken for a significant portion of the 
educational program.
    In other words, this provision is reserved for cases where the 
eligible institution is relying upon the outside entity to offer part 
of a program just as it might defer to the expertise of another 
eligible institution. This section would not be utilized, for example, 
in cases where an institution seeks support moving a ground-based 
program online or where an institution utilizes third-party resources, 
instructors, or expertise to deliver part of a program through its own 
ground-based or online resources unless the entity providing such 
resources or support is actually performing instructional functions 
instead of the eligible institution. Written arrangements are focused 
exclusively on the delivery of instruction, and are separate and 
distinct from online program management, hiring a third party for food 
service, and other efforts by institutions to utilize a third-party 
service provider in an area it does not have core expertise.
    In seeking to better prepare students for the workplace and provide 
them with a competitive advantage in securing employment, many 
institutions include internship options alongside their curriculum. 
Through policy guidance, the Department has concluded that written 
arrangements are not necessary for these internships, nor do the 
restrictions on such arrangements apply to the internship or externship 
portion of a program if the internship or externship is governed by 
accrediting agency standards that require the oversight and supervision 
of the institution, and students are monitored by qualified 
institutional personnel. The addition of proposed paragraph (h) Non-
applicability of other interactions with outside entities would codify 
this guidance in the regulations. This paragraph would also clarify the 
Department's position that the limitations on written arrangements do 
not apply to acceptance by the institution of transfer credits or use 
of prior learning assessment or other non-traditional methods of 
providing academic credit.
    The Department proposes to eliminate Sec.  668.5(a)(2)(ii), 
requiring that under a written arrangement between two or more eligible 
institutions owned or controlled by the same individual, partnership, 
or corporation, the institution granting the degree or certificate 
provide more than 50 percent of the eligible program, because we 
believe that the provision is needlessly restrictive. Although 
institutions that are party to such a written arrangement may share 
ownership or control, each institution must meet the criteria to be an 
eligible institution.
    The Department initially proposed to relax the limitations on the 
percentage of a program that may be provided by an ineligible 
institution or organization through a written arrangement. The 
Department sought comment from the subcommittee on appropriate 
limitations for these arrangements. The Department's goal was to 
facilitate partnerships between the eligible institutions offering 
programs and organizations that can provide instruction using trade 
experts in a workplace environment that mirrors what graduates will 
encounter in their places of employment. Members of the subcommittee 
generally opposed making any changes to the restrictions currently 
found in Sec.  668.5(c)(3). Subcommittee members expressed the 
collective opinion that the existing allowances already provide 
sufficient flexibility for the purposes expressed by the Department and 
that permitting any larger portion of an educational program to be 
offered by an ineligible entity would call into question whether that 
program was in fact being offered by an eligible institution.
    In the absence of agreement between the Department and non-Federal 
subcommittee members, the matter was referred to the main negotiating 
committee without recommended proposed regulatory language. Non-Federal 
negotiators expressed concerns similar to those of the subcommittee. A 
minority of negotiators suggested that greater accreditor oversight 
would adequately ensure program integrity in the case of educational 
programs largely provided by ineligible entities. In light of these 
concerns, the Department withdrew its initial proposal to allow an 
increased portion of educational programs to be offered by noneligible 
entities.
    Instead, in response to concerns about the amount of processing 
time required for institutions' requests to obtain accreditor approval 
to execute written arrangements involving more than 25 but less than 50 
percent of a program being provided by an ineligible entity, 
negotiators agreed to add language to Sec.  602.22(a) that would 
require an accreditor to make a final decision on such requests within 
90 days. Accreditors would also be able to designate agency senior 
staff to approve or disapprove the request, instead of requiring board 
approval, which should allow more timely decisions. This would ensure 
that programs designed to respond to immediate workforce needs are not 
needlessly delayed.

668.8 Eligible Program

    Statute: Section 481(a)(2) of the HEA defines an academic year for 
an undergraduate program, in part, as requiring a minimum of 24 
semester or trimester credit hours or 36 quarter credit hours in a 
course of study that measures academic progress in credit hours or 900 
clock hours in a course of study that measures academic progress in 
clock hours. Section 481(b) of the HEA defines an eligible program, in 
part, as a program of at least 600 clock hours, 16 semester hours, or 
24 quarter hours or, in certain instances, a program of at least 300 
clock hours, 8 semester hours, or 12 quarter hours. Sections 428(b)(1), 
428B(a)(2), 428H(d)(1), 455(a)(1), and 484(b)(3) and (4) of the HEA 
specify that a student must be carrying at least one-half of the normal 
full-time work load for the student's

[[Page 18660]]

course of study to qualify for a loan under parts B or D of title IV of 
the HEA. Section 401 of the HEA provides that a student's Federal Pell 
Grant must be adjusted based on the student's enrollment status and 
that a student must be enrolled at least halftime to be eligible for a 
second consecutive Federal Pell Grant in an award year. Section 
496(a)(5)(H) of the HEA requires that an accrediting agency assess an 
institution's measure of program length.
    Current Regulations: Section 668.8(e) states that the number of 
clock hours in ``short-term'' programs, that is, programs subject to 
the requirements of Sec.  668.8(d)(3)(i) through (iv), may not exceed 
by more than 50 percent the minimum number of clock hours required for 
licensure in the recognized occupation for which the program prepares 
students, as established by the State in which the program is offered, 
if the State has established such a requirement, or as established by 
any Federal agency.
    Section 668.8(k) requires an institution offering a program in 
credit hours that is less than two academic years in length and does 
not lead to an associate degree, bachelor's degree, a professional 
degree, or an equivalent degree as determined by the Secretary; or, 
alternatively, does not provide for each course within that program to 
be acceptable for full credit toward as associate degree, bachelor's 
degree, professional degree, or equivalent degree as determined by the 
Secretary, to use the formula in section 668.8(l) to determine the 
number of credit hours in that program. The formula for converting 
clock hours to credit hours requires that a semester or trimester hour 
include at least 37.5 clock hours of instruction and a quarter hour at 
least 25 hours of instruction. However, if student work outside of 
class combined with clock hours of instruction meets or exceeds these 
numeric values (the institution's accrediting agency, or recognized 
State agency for vocational institutions, must not have identified any 
deficiencies with the institution's policies and procedures for 
determining the number of credit hours it awards), the institution may 
convert clock hours to credit hours using a minimum standard by which a 
semester or trimester hour must include at least 30 clock hours of 
instruction and a quarter hour at least 25 clock hours of instruction.
    Proposed Regulations: The Department proposes to revise Sec.  
668.8(e)(1)(iii) to state that an eligible short-term program must 
demonstrate reasonable program length, in accordance with Sec.  
668.14(b)(26).
    Additionally, the Department proposes revisions to Sec.  668.8(l), 
which contains the formula for calculating a clock-to-credit hour 
conversion. Under the proposed regulations, the minimum number of clock 
hours that must be included in a semester or trimester credit hour 
would be reduced from 37.5 to 30, and the minimum number of clock hours 
that must be included in a quarter credit hour would be reduced from 25 
to 20. All references to work outside of class would be removed and 
have no bearing on the conversion formula.
    Reasons: The limits on program length for short-term programs in 
Sec.  668.8 reflect those in Sec.  668.14, which applies to all gainful 
employment programs for which an institution must demonstrate a 
reasonable relationship between the length of the program and entry-
level requirements for the recognized occupation for which the program 
prepares the student. We are proposing revisions to Sec.  668.14(b)(26) 
that would make changes to the standard used to demonstrate that 
reasonable relationship. The consensus language mirrored most, but not 
all, of the provisions of Sec.  668.14(b)(26). For this reason, the 
Department is instead proposing to simply refer to this provision to 
make the regulations in each section as consistent and clear as 
possible.
    Regarding the proposed revisions to the formula for calculating a 
clock-to-credit hour conversion, the Department believes the current 
formula described above has proved confusing for institutions while 
yielding little in way of increased program integrity.
    When the clock-to-credit conversion was originally established in 
final regulations published July 23, 1993 (58 FR 39618), the Secretary 
adopted a regulatory formula based upon the statutory definition of an 
``academic year,'' which included at least 24 semester or trimester 
hours, 36 quarter hours, or 900 clock hours of instruction. During that 
rulemaking, the original conversion ratios adopted by the Secretary 
were obtained by dividing 900 clock hours by 24 semester hours or 36 
quarter hours, yielding ratios of 37.5 clock hours for each semester 
hour and 25 clock hours for each quarter hour, respectively. However, 
the Secretary acknowledged in the final rule that the formula did not 
account for the fact that credit hours have traditionally assumed both 
in-class and out-of-class work, whereas clock hours have been defined 
only in terms of in-class instructional hours. Thus, the formula did 
not account for the number of hours of outside preparation assumed for 
credit hours. To address this problem, the Secretary revised the 
formula to reduce the ratios to 30 clock hours for each semester hour 
and 20 clock hours for each quarter hour with a presumption that at 
least some out-of-class work was being performed for each credit hour 
subject to the conversion.
    In final regulations published October 29, 2010 (75 FR 66832), the 
Secretary revised the conversion formula in an attempt to more strictly 
reflect the statute's definition of an academic year. The ratio was set 
at 37.5 clock hours for each semester hour and 25 clock hours for each 
quarter hour with an option for an institution to use the original 30-
to-1 and 20-to-1 ratios if the institution (1) documented adequate out-
of-class work to make up the other hours; and (2) had not been cited by 
its accrediting agency for problems with its establishment of credit 
hours.
    In the period since that regulation was published, the Secretary 
has identified a number of significant problems regarding the 
implementation and enforcement of the conversion requirements. As noted 
above with respect to the proposed definition of a ``credit hour,'' 
even absent the conversion requirement, the Department has no evidence 
that students complete the requisite two hours of out of class work 
required by the current definition of a credit hour. Neither the 
Department nor accrediting agencies are capable of systematically 
evaluating whether students actually perform work outside of class, and 
thus are forced to rely on each institution's assertion that it expects 
students to perform such work under the current regulations. 
Additionally, the revised conversion formula added substantial 
complication to an institution's calculation of each student's 
eligibility for title IV, HEA funds and resulted in a diminished amount 
of aid for students during portions of programs without written 
expectations of out-of-class work, such as laboratory or clinical 
requirements, despite the fact that many students perform substantial 
out-of-class work during those experiences.
    Given these problems, the Secretary proposes to revert to the 
original conversion ratios that presume an amount of out-of-class work 
in accordance with an accrediting agency's requirements for the 
establishment of credit hours. The proposed changes would establish 
equitable, measurable, and clear conversion standards keyed only to 
instructional hours, eliminating the ambiguity associated with the 
consideration of outside work.

[[Page 18661]]

Sec.  668.10 Direct Assessment Program

    Statute: Section 481(b)(4) of the HEA provides that instructional 
programs that use direct assessment of student learning or recognize 
the direct assessment of student learning by others, in lieu of 
measuring student learning in credit hours or clock hours, are eligible 
to participate in title IV, HEA programs as long as the assessment is 
consistent with the institution's or program's accreditation. The 
statute also requires the Secretary to approve an institution's first 
direct assessment program.
    Current Regulations: Section 668.10(a) defines a ``direct 
assessment program'' as an instructional program that, in lieu of 
credit hours or clock hours as a measure of student learning, utilizes 
direct assessment or recognizes the direct assessment of student 
learning by others, and specifies that the assessment must be 
consistent with the accreditation of the institution or program 
utilizing the results of the assessment. The regulations clarify that 
``direct assessment of student learning'' is a measure by the 
institution of what a student knows and can do in terms of the body of 
knowledge making up the educational program, and that such measures 
provide evidence that a student has command of a specific subject, 
content area, or skill or that the student demonstrates a specific 
quality associated with the subject matter of the program. The 
regulations provide several examples of direct assessments. Section 
668.10(a) also clarifies that references to credit or clock hours as a 
measurement in that section apply to direct assessment programs and 
that, because direct assessment programs do not utilize credit or clock 
hours as a measure of student learning, an institution must establish a 
methodology to reasonably equate the direct assessment program (or the 
direct assessment portion of any program, as applicable) to credit or 
clock hours for the purpose of complying with applicable regulatory 
requirements and provide a factual basis satisfactory to the Secretary 
for its methodology.
    Section 668.10(a) also contains definitions for a number of terms 
that exist elsewhere in the regulations for the title IV, HEA programs, 
including the definitions of ``academic year,'' ``payment period,'' 
``week of instructional time,'' and ``full-time student.'' The 
definitions for ``academic year'' and ``week of instructional time'' 
are different for direct assessment programs. In Sec.  668.10(a), an 
``academic year'' is a minimum of 30 weeks of instruction and 24 
semester or trimester credit hours, 36 quarter credit hours, or 900 
clock hours, whereas there are exceptions to those requirements under 
Sec.  668.3. The definition of a ``week of instruction'' in Sec.  
668.10(a) is one in which at least one day of educational activity 
occurs, which differs from the definition of the term for all other 
programs in Sec.  668.3(b)(2) insofar as the definition in Sec.  
668.3(b)(2) requires one day of scheduled instruction rather than 
educational activity and does not include a lengthy discussion of the 
types of educational activities that are included in the definition in 
Sec.  668.10(a).
    Section 668.10(b) establishes the requirements for an application 
for an institution to offer a direct assessment program that is 
eligible to participate in title IV, HEA programs. Such an application 
must include--
     A description of the educational program, including the 
educational credential offered (degree level or certificate) and the 
field of study;
     A description of how the assessment of student learning is 
done;
     A description of how the direct assessment program is 
structured, including information about how and when the institution 
determines on an individual basis what each student enrolled in the 
program needs to learn;
     A description of how the institution assists students in 
gaining the knowledge needed to pass the assessments;
     The number of semester or quarter credit hours, or clock 
hours, that are equivalent to the amount of student learning being 
directly assessed;
     The methodology the institution uses to determine the 
number of credit or clock hours to which the program is equivalent;
     The methodology the institution uses to determine the 
number of credit or clock hours to which the portion of a program an 
individual student will need to complete is equivalent;
     Documentation from the institution's accrediting agency 
indicating that the agency has evaluated the institution's offering of 
direct assessment program(s) and has included the program(s) in the 
institution's grant of accreditation;
     Documentation from the accrediting agency or relevant 
State licensing body indicating agreement with the institution's claim 
of the direct assessment program's equivalence in terms of credit or 
clock hours; and
     Any other information the Secretary may require in 
determining whether to approve the institution's application.
    Under Sec.  668.10(c), an eligible direct assessment program must 
meet the requirements in Sec.  668.8 including, if applicable, minimum 
program length and qualitative factors.
    Under Sec.  668.10(d), no program offered by a foreign institution 
that involves direct assessment is an eligible program.
    Under Sec.  668.10(e), a direct assessment program may use learning 
resources (e.g., courses or portions of courses) that are provided by 
entities other than the institution providing the direct assessment 
program without regard to the limitations on contracting for part of an 
educational program in Sec.  668.5(c)(3).
    Under Sec.  668.10(f), title IV, HEA program funds may be used only 
for learning that results from instruction provided, or overseen, by 
the institution, not for the portion of the program that the student 
has demonstrated mastery of prior to enrollment in the program or tests 
of learning that are not associated with educational activities 
overseen by the institution.
    Under Sec.  668.10(g), title IV, HEA program eligibility is limited 
to direct assessment programs approved by the Secretary, and title IV, 
HEA program funds may not be used for the course of study described in 
Sec.  668.32(a)(1)(ii) and (iii) if offered by direct assessment, or 
remedial coursework described in Sec.  668.20 offered by direct 
assessment, except that remedial instruction that is offered in credit 
or clock hours in conjunction with a direct assessment program is 
eligible for title IV, HEA program funds.
    Under Sec.  668.10(h), the Secretary's approval of a direct 
assessment program expires on the date that the institution changes one 
or more aspects of the program described in the institution's 
application and specifies that an institution making such changes must 
obtain prior approval from the Secretary through a reapplication under 
the requirements in Sec.  668.10(b).
    Proposed Regulations: The Department proposes to simplify and 
clarify numerous aspects of the regulations for direct assessment 
programs. We propose to revise the definition of ``direct assessment'' 
to state that it is a measure of a student's knowledge, skills, and 
abilities designed to provide evidence of the student's proficiency in 
the relevant subject area. We propose to add a new paragraph (a)(3) 
that would require an institution to establish a methodology to 
reasonably equate each module in the direct assessment program to 
either credit hours or clock hours, expressing that this methodology 
must be consistent with the requirements of the institution's 
accrediting agency or State approval agency. We propose to revise 
redesignated paragraph (a)(4) to state

[[Page 18662]]

that all regulatory requirements in that section that refer to credit 
or clock hours as a measurement apply to direct assessment programs 
according to whether they use credit or clock hour equivalencies, 
respectively. We propose to add a paragraph (a)(5) to clearly state 
that a direct assessment program that is not consistent with the 
requirements of an institution's accrediting agency or State approval 
agency is not an eligible program, and in order for direct assessment 
programs to be considered eligible programs, the agency must have 
evaluated the programs based on the agency's accreditation standards 
and criteria, included them in the institution's grant of accreditation 
or preaccreditation, and reviewed and approved the institution's claim 
of each direct assessment program's equivalence in terms of credit or 
clock hours. We propose to remove the definitions of ``academic year,'' 
``payment period,'' ``week of instructional time,'' and ``full-time 
student'' in Sec.  668.10(a) and refer instead to requirements 
appearing elsewhere in the regulations.
    We propose to revise Sec.  668.10(b) to require an institution to 
submit for the Secretary's approval only the first direct assessment 
program that it offers, whereas additional direct assessment programs 
at an equivalent or lower academic level may be determined to be 
eligible without further approvals from the Secretary except as 
required by Sec.  600.10(c)(1)(iii), Sec.  600.20(c)(1), or Sec.  
600.21(a), as applicable, if such programs are consistent with the 
policies and procedures of the institution's accreditation or State 
approval agency. We propose to require an institution to explain how it 
excludes from consideration of a student's eligibility for title IV, 
HEA program funds any credits or competencies earned on the basis of 
prior learning. Failing to do so could result in a negative audit 
finding or program review. We also propose to remove current paragraph 
(b)(10), which states that the application must include any other 
information the Secretary may require.
    We propose to remove current Sec.  668.10(c), which states that a 
direct assessment program must meet the requirements in Sec.  668.8.
    We propose to revise the prohibitions on the types of coursework 
for which direct assessment can be used while maintaining eligibility 
for title IV, HEA funds to state that such coursework can be eligible, 
but only if the Secretary has already approved one or more direct 
assessment programs at the institution and the institution's offering 
of direct assessment coursework is consistent with the institution's 
accreditation and State authorization, if applicable. If an institution 
meets such requirements, it may offer the course of study described in 
Sec.  668.32(a)(1)(ii) and (iii) and (a)(2)(i)(B), or remedial 
coursework described in Sec.  668.20, using direct assessment for title 
IV, HEA purposes.
    We propose to clarify that student progress in a direct assessment 
program can be measured using a combination of credit hours and credit 
hour equivalencies or clock hours and clock hour equivalencies.
    We propose to remove current Sec.  668.10(h), which states that the 
Secretary's approval of a direct assessment program expires on the date 
that the institution changes one or more aspects of the program 
described in the institution's application and that an institution 
making such changes must reapply for approval of the program.
    Reasons: The current regulations for direct assessment programs are 
lengthy, complicated, and in several areas, redundant of other 
regulations. The Department proposes to simplify the direct assessment 
regulations and, wherever possible, to refer to other regulatory 
requirements rather than restating such requirements or modifying them 
specifically for direct assessment programs.
    The Department proposes to require approval only of an 
institution's first direct assessment program to comply with statutory 
requirements while limiting administrative burden. The current 
regulations requiring the Department's approval of each new direct 
assessment program and any change to an existing direct assessment 
program imposes substantial administrative burden on institutions that 
wish to offer direct assessment programs. Furthermore, the Department's 
experience with the direct assessment application process has shown 
that institutions that have completed the application process for their 
first direct assessment program largely understand the requirements for 
such programs and have overcome technical and operational difficulties 
implementing the title IV, HEA program regulations associated with such 
programs and can therefore be trusted to do so in the best interest of 
students and taxpayers. Published metrics from institutions offering 
multiple such programs have shown signs of success. For example, 
Western Governors University states that 97 percent of employers 
surveyed felt graduates were prepared for their jobs and that graduates 
are able to finish their bachelor's degree in 2.5 years on average, 
resulting in cost savings to students.15 16 Similarly, the 
University of Wisconsin's Flex Option program found that 98 percent of 
graduates would recommend their program.\17\ By eliminating the 
requirement to review subsequent programs, the Department would reduce 
the administrative burden on the institution while maintaining 
substantial oversight over the institution's implementation of direct 
assessment programs during the initial approval process.
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    \15\ www.wgu.edu/online-business-degrees/bachelors-programs.html.
    \16\ www.wgu.edu/blog/how-long-to-online-degree1902.html.
    \17\ flex.wisconsin.edu/wp-content/uploads/2019/10/FY19_UW-Flexible-Option-Annual-Report.pdf.
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    We propose to require an institution to explain how it excludes 
credit earned through prior learning assessment from consideration of a 
student's eligibility for title IV, HEA program funds, because the 
Department remains concerned that institutions may include such 
coursework in their determination of a student's eligibility. The 
nature of CBE programs, including direct assessment programs, is such 
that an institution is often assessing a student's proficiency or 
learning in a given area without regard to whether it has provided 
instruction in that area, making it more difficult for the institution 
to separate credit earned through prior learning assessment and credit 
earned through instruction by the institution. The Department proposes 
requiring an institution to explain its approach in this area to ensure 
that it has considered how it will comply with the Department's 
prohibition on payment of title IV, HEA assistance for credit earned 
through prior learning assessment.
    We propose to permit institutions to offer coursework described in 
Sec.  668.32(a)(1)(ii) and (iii) and (a)(2)(i)(B), or remedial 
coursework described in Sec.  668.20, using direct assessment, because 
such coursework does not meaningfully differ from coursework in other 
eligible programs. The Department believes that an institution that has 
been approved to offer a direct assessment program is capable of 
applying the normal title IV, HEA regulatory requirements to these 
types of coursework. Similarly, we propose to permit institutions to 
offer programs that are offered in part through credit hours or clock 
hours and in part through credit hour equivalencies or clock hour 
equivalencies to increase the amount of flexibility institutions have 
when designing educational programs. Although this increased 
flexibility would afford institutions more latitude in the design of 
direct assessment

[[Page 18663]]

programs than currently exists, proposed new paragraph (a)(3) 
(discussed above) would require an institution to establish a 
methodology to reasonably equate each module in the direct assessment 
program to either credit hours or clock hours. For example, a program 
would not be permitted to switch between clock hours and credit hour 
equivalencies. Accordingly, transitions within programs would occur 
between traditional coursework and direct assessment under like 
measures, posing little risk to the integrity of the title IV, HEA 
programs.

Sec.  668.13 Certification Procedures

    Statute: Section 498(a)of the HEA requires the Secretary to 
determine an institution's legal authority to operate within a State, 
its accreditation status, and its administrative capability and 
financial responsibility when determining the institution's eligibility 
to participate in title IV, HEA programs.
    Current Regulations: Section 668.13(a) sets the requirements for 
the certification that an institution must complete to be eligible to 
participate in the title IV, HEA programs. It requires institutions 
that are participating for the first time in the title IV, HEA programs 
or that have undergone a change in ownership to complete training 
provided by the Secretary. Those individuals that are required to 
complete the training include the title IV administrator and the 
institution's chief administrator. The regulations do not specifically 
address the Secretary's responsibilities with respect to an application 
from an institution for recognition of a branch campus. Section 
668.13(b) directs the Secretary to extend, on a month-to-month basis, 
an institution's existing certification, provided the institution has 
submitted an application for renewal of certification that is 
materially complete at least 90 days prior to expiration of its current 
period of participation. However, the regulations do not specify a 
timeframe for the Secretary to decide on the application. Section 
668.13(c) sets the conditions for which the Secretary may provisionally 
certify an institution, and paragraph (d) allows the Secretary to 
revoke an institution's provisional certification if the Secretary 
determines that the provisionally certified institution is unable to 
meet its responsibilities under its PPA.
    Proposed Regulations: The Department proposes to add a new 
paragraph (ii) to Sec.  668.13(a)(1), clarifying that on an application 
from an institution, the Secretary certifies a location of an 
institution as a branch if it satisfies the definition of ``branch'' in 
Sec.  600.2. The Department also proposes to renumber paragraph (a)(1) 
as (a)(1)(i). The Department proposes to add Sec.  668.13(b)(3), 
indicating that in the event the Secretary does not make a 
determination to grant or deny certification within 12 months of the 
expiration date of an institution's current period of participation, 
the institution will automatically be granted renewal of certification, 
which may be provisional for cause, but not automatically because the 
Department failed to make an affirmative decision within the twelve-
month timeframe. The Department also proposes to clarify in a new 
paragraph (c)(1)(i)(F) that the Secretary may provisionally certify an 
institution if the institution is a participating institution that has 
been provisionally recertified under the automatic recertification 
requirement under paragraph (b)(3). References to transmission of 
documentation by facsimile in Sec.  668.13(d) would be replaced by the 
phrase ``electronic transmission'' and the option to mail documentation 
through means other than the U.S. Postal Service would be recognized.
    Reasons: Current regulations do not directly address the actions to 
be taken by the Secretary upon receipt of an application from an 
institution for certification of a branch location. The proposed 
addition of paragraph (ii) to Sec.  668.13(a)(1) would provide that the 
Secretary will certify a location of an institution as a branch if it 
satisfies the definition of a ``branch campus.''
    As noted above, when an institution that is currently certified 
submits a materially complete application for recertification to the 
Department no later than 90 calendar days before its PPA expires, its 
PPA remains valid, and its eligibility to participate in the title IV, 
HEA programs is extended on a month-to-month basis until its 
application is either approved or not approved. Although an 
institution's eligibility is extended on a month-to-month basis for as 
long as is necessary for the Secretary to render a decision on its 
application for renewal of certification, we are aware of the 
uncertainty experienced by institutions in cases where the decision 
period is lengthy. The proposed regulations would address this by 
providing that renewal of an institution's certification is 
automatically granted if the Secretary has not made a determination to 
grant or deny certification within 12 months of the expiration of the 
current period of participation. Because the renewal of an 
institution's certification may be provisional (for as little as one 
year in length), the Department would retain the requisite degree of 
control over the certification process.

Sec.  668.14 Program Participation Agreement

    Statute: Section 487(a) of the HEA requires that, in order to be 
eligible to participate in title IV, HEA programs, an institution must 
be an IHE or an eligible institution that has entered into a program 
participation agreement with the Secretary.
    Current Regulations: Section 668.14(b) identifies the terms to 
which an institution must agree when entering into a PPA. Paragraph 
(b)(10) provides that an institution that advertises job placement 
rates as a means of attracting students must make available to 
prospective students the most recent available data concerning 
employment statistics and relevant State licensing requirements of the 
State in which the institution is located. Under paragraph (b)(26), if 
an educational program offered by an institution is required to prepare 
a student for gainful employment in a recognized occupation, the 
institution must be able to demonstrate a reasonable relationship 
between the length of the program and the entry-level requirements for 
the recognized occupation for which the program prepares the student. 
The Secretary considers the relationship to be reasonable if the number 
of clock hours in the program does not exceed by more than 50 percent 
the minimum number of clock hours required for training in the 
occupation for which the program prepares the student, as established 
by the State in which the institution is located, if the State has 
established such a requirement, or as established by a Federal agency. 
Under paragraph (b)(31), the institution is required to submit a teach-
out plan to its accrediting agency.
    Proposed Regulations: The Department proposes to clarify the 
requirements in Sec.  668.14(b)(10) by specifying that the institution 
must make available to prospective students the most recent data 
available concerning employment statistics, graduation statistics, and 
any other information to substantiate the truthfulness of its 
advertisements that used job placement rates as a means of attracting 
students. Additionally, the Department proposes to remove the 
requirement to provide the source of such statistics and any associated 
timeframes and methodology. The Department proposes to replace the 
phrase ``an educational program offered by the institution'' with the 
phrase ``the course of instruction'' in paragraph

[[Page 18664]]

(b)(10)(ii). Proposed changes to Sec.  668.14(b)(26) would still 
require an institution to demonstrate a reasonable relationship between 
the length of the program and the entry-level requirements for which 
the program prepares the student. However, the requirement for a 
reasonable relationship would be satisfied if the number of clock hours 
in the program does not exceed the greater of 150 percent of the 
minimum number of clock hours required for training in the occupation 
for which the program prepares the student, as established by the State 
in which the institution is located, if the State has established such 
a requirement, or as established by a Federal agency; or the minimum 
number of clock hours required for training in a recognized occupation 
for which the program prepares the student established in a State 
adjacent to the State in which the institution is located. In paragraph 
(b)(31), the regulations list certain circumstances under which an 
institution must provide a teach-out plan to its accrediting agency. 
The Department proposes to further require that the institution update 
its teach-out plan under those circumstances. The Department also 
references 34 CFR 668.43(a)(5)(v) to more clearly connect this 
provision with recently published provisions relating to State 
Authorization of Distance Education.
    The changes to Sec.  668.43(b)(26) remove a reference to a section 
that was eliminated in the final Gainful Employment regulation.\18\
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    \18\ 84 FR 31392.
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    Reasons: The Department proposes a technical change in paragraph 
(b)(10) to change the word ``it'' to ``the institution.'' The 
Department believes this will clarify the wording in this paragraph to 
ensure that institutions understand their responsibilities if they use 
job placement rates as a means of attracting students. In paragraph 
(b)(10)(i), the Department proposes to delete the phrase ``including 
the source of such statistics and any associated time frames and 
methodology,'' because the Department believes this language is 
redundant with the other requirements in that paragraph to provide the 
most recent available data to students and any information necessary to 
substantiate the truthfulness of the advertisements, which may include 
methodologies. In paragraph (b)(10)(ii), the Department proposes to 
replace the phrase ``an educational program offered by the 
institution'' to ``the course of instruction'' to ensure that 
institutions are providing proper information to prospective students 
when they are interested in enrolling at that institution. The 
Department believes that if an institution uses job placement rates for 
any educational offerings, even if it is not an official educational 
program, the institution should be able to provide updated data and 
prove the truthfulness of such advertising.
    A number of occupations, such as massage therapy and cosmetology, 
are subject to varying licensure requirements from one State to 
another. This can present a difficult challenge to both institutions 
and students. This can lead to difficulty not only in meeting licensing 
requirements, but also in transferring credits. Students who reside in 
and attend a program in one State may seek to be employed in an 
adjacent State where the minimum number of hours required for licensure 
is at least 150 percent of the minimum number of clock hours required 
for training in the occupation for which the program prepares the 
student, as established by the State in which the institution is 
located. For example, New Jersey requires 500 hours for a massage 
therapy license, but New York requires 1,000 hours.19 20
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    \19\ www.op.nysed.gov/prof/mt/mtlic.htm.
    \20\ www.njconsumeraffairs.gov/mbt/Pages/individual.aspx.
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    To reduce unnecessary barriers to employment that the Department's 
limitations on program length create, the Department proposes that a 
program meets the reasonable length requirement if it does not exceed 
150 percent of the hours required by the State in which it is located 
t, or it does not exceed 100 percent of the requirements of an adjacent 
State. This would help ensure that institutions can offer programs that 
meet the professional licensure requirements of multiple nearby States, 
even when one or more of those nearby States maintain entry-level 
requirements that are greater than 150 percent of entry-level 
requirements in the State where the institution is located. This change 
would help institutions in multi-State regions to better meet the needs 
of students.
    The Department initially proposed changes to Sec.  668.14(b)(26) to 
allow a program length equal to 100 percent of the requirements in any 
State. Members of the subcommittee generally opposed providing this 
degree of latitude. Subcommittee members suggested that institutions 
might set a program's length at 100 percent of the longest minimum 
requirement of any State, without regard to whether graduates of that 
program seek employment in that State.
    Subsequently, the Department proposed limiting program length to 
100 percent of the minimum program length required for licensure in an 
adjoining State. Although this proposal enjoyed majority support among 
subcommittee members, several members continued to express concern 
about changing the requirements in any way, suggesting that it would 
encourage institutions to add hours to programs beyond those necessary 
for students to become employed. These members argued that the current 
150 percent threshold is reasonable and sufficient to accommodate most 
cases where nearby States have higher requirements. We also raise 
concerns that students face disparate treatment because Title IV funds 
can be used by a student who wishes to pursue a graduate degree simply 
because they are interested in a topic, but cannot be used by a student 
in a CTE program who wants to complete coursework to develop advanced 
skills and competencies that go beyond basic licensure requirements. We 
agree that we do not want schools to inflate the number of hours in a 
program beyond those that a student needs to complete in order to get a 
good job in their field, but at the same time, we need to afford those 
pursuing career and technical education the same opportunities to 
develop advanced competencies in order to qualify for higher paying and 
more secure jobs.
    One subcommittee member suggested that where institutions needed 
more hours than 150 percent of State requirements, an accrediting 
agency could be the arbiter of whether additional hours were necessary. 
Since accreditors are typically more knowledgeable about occupational 
standards and the needs of employers, the Department was supportive of 
that recommendation.
    Discussions among the committee members mirrored those that took 
place in the subcommittee. Ultimately, negotiators reached consensus on 
the second proposal, which would limit program length to the greater of 
150 percent of the minimum program length required for licensure in the 
State in which the institution is located or 100 percent of the minimum 
program length required for licensure in an adjoining State.
    The Department proposes to require an institution to update its 
teach-out plan if the Secretary initiates the limitation, suspension, 
or termination of the institution's participation in the title IV, HEA 
programs; the institution's accrediting agency acts to withdraw, 
terminate, or suspend the accreditation or pre-accreditation of the 
institution; the institution's State licensing or authorizing agency 
revokes the

[[Page 18665]]

institution's license; or the institution otherwise intends to cease 
operations. We believe that an institution should update its teach-out 
plan to protect students in the event that steps are taken that may 
ultimately lead to an institution's closure. The Department believes 
that it is vital for an institution to have an updated plan when 
certain negative events may occur to provide the best protections to 
students and the taxpayers.

Sec.  668.15 Factors of Financial Responsibility

    Statute: Section 487(a) of the HEA provides that in order to be an 
eligible institution for the purposes of any title IV, HEA program, an 
institution must be an IHE or an eligible institution for a particular 
program and enter into a program participation agreement.
    Section 498(c) requires the Secretary to determine whether an 
institution has the financial responsibility to provide the services 
described in its official publications, provide the administrative 
resources necessary to comply with title IV requirements, and to meet 
all its financial obligations. Institutions that do not meet those 
requirements may still be deemed financially responsible if they submit 
a third-party financial guarantee, such as a bond or letter of credit. 
Determinations about an institution's financial responsibility is based 
on audited and certified financial statements of the institution.
    Current Regulations: Section 668.15(a) requires that for an 
institution to begin and to continue participation in any title IV, HEA 
program, it must demonstrate to the Secretary that it is financially 
responsible under the requirements in Sec.  668.15.
    Proposed Regulations: The Department proposes to change the title 
of Section 668.15 to ``Factors of financial responsibility for changes 
in ownership or control.'' Additionally, the Department proposes to 
revise paragraph (a) to provide that, to begin and continue to 
participate in any title IV, HEA program after a change in ownership or 
control, an institution must demonstrate to the Secretary that the 
institution is financially responsible under the requirements 
established in Sec.  668.15.
    Reasons: The proposed regulations would codify the current practice 
of the Department to use the factors of financial responsibility when 
it is notified of an institution's change in ownership or control. The 
Department seeks to clarify that the regulations governing the factors 
of financial responsibility must be addressed when there is a change of 
ownership or control of an IHE.

Sec.  668.22 Treatment of Title IV Funds When a Student Withdraws

    Statute: Section 484B(a)(1) of the HEA provides that if a recipient 
of title IV, HEA assistance withdraws from an institution during the 
payment period or period of enrollment in which the recipient began 
attendance, the institution must perform a calculation under that 
section to determine the amount of funds to be returned to the title 
IV, HEA programs. Section 484B(b) states that an institution must 
return the lesser of the amount of title IV, HEA assistance not earned 
by the student or an amount equal to the total institutional charges 
incurred by the student for the period multiplied by the percentage of 
title IV, HEA assistance not earned by the student, and section 
484B(a)(3)(B)(i) defines the ``percentage earned'' as equal to the 
percentage of the payment period or period of enrollment for which 
assistance was awarded that was completed as of the day the student 
withdrew, provided that such date occurs on or before the completion of 
60 percent of the payment period or period of enrollment. Section 
484B(a)(3)(B)(ii) provides that a student has earned 100 percent if the 
day the student withdrew occurs after the student has completed 60 
percent of the period.
    Current Regulations: Section 668.22 contains several references to 
programs that are no longer authorized, specifically the ACG, the 
National SMART Grant, the Federal Perkins Loan, and the Federal Family 
Education Loan (FFEL) program, including:
     Sec.  668.22(a)(3), which identifies the types of title 
IV, HEA assistance that are included in the return of title IV funds 
calculation; and
     Sec.  668.22(i), which explains the order in which funds 
from the various title IV, HEA programs must be returned.
    Section 668.22(a)(2)(i) provides that a student is considered to 
have withdrawn during a payment period or period of enrollment:
     In the case of a program that is measured in credit hours, 
if the student does not complete all the days in the payment period or 
period of enrollment that the student was scheduled to complete prior 
to withdrawing;
     In the case of a program that is measured in clock hours, 
if the student does not complete all the clock hours in the payment 
period or period of enrollment that the student was scheduled to 
complete prior to withdrawing.
    Paragraph (a)(2)(i) also provides that for students in non-term or 
nonstandard-term programs, a student is considered to have withdrawn if 
he or she is not scheduled to begin another course within a payment 
period or period of enrollment for more than 45 calendar days after the 
end of the module the student ceased attending, unless the student is 
on an approved leave of absence.
    Under Sec.  668.22(a)(2)(ii), a student enrolled in a program that 
is offered in modules is not considered to have withdrawn if the 
institution obtains written confirmation from the student at the time 
that would have been a withdrawal of the date that he or she will 
attend a module that begins later in the same payment period or period 
of enrollment, except that such module must begin no later than 45 days 
after the end of the module the student has ceased attending if the 
student is enrolled in a non-term or nonstandard-term program. 
Furthermore, if an institution has obtained written confirmation of 
future attendance, a student may change the date of return to a module 
that begins later in the same payment period or period of enrollment 
provided that the student does so in writing prior to the return date 
that he or she had previously confirmed. Students in non-term or 
nonstandard-term programs may only select a date of return to a module 
that begins no later than 45 days after the end of the module the 
student ceased attending. If an institution obtains written 
confirmation of future attendance in these circumstances, but the 
student does not return as scheduled, the student is considered 
withdrawn from the period and the student's withdrawal date is the 
withdrawal date that would have applied if the student had not provided 
written confirmation of a future date of attendance in accordance with 
the regulations.
    Section 668.22(a)(6) explains that post-withdrawal disbursements 
must be made from available grant funds before available loan funds and 
that if outstanding charges exist on the student's account, the 
institution may credit the student's account up to the amount of 
outstanding charges with all or a portion of any grant funds that make 
up the post-withdrawal disbursement in accordance with Sec.  
668.164(d)(1) and (d)(2) and loan funds that make up the post-
withdrawal disbursement in accordance with Sec.  668.164(d)(1), (d)(2), 
and (d)(3) only after obtaining confirmation from the student or parent 
(in the case of a parent PLUS loan) that they wish to have the loan 
funds disbursed.

[[Page 18666]]

    Section 668.22(b)(1) provides that a withdrawal date for a student 
who withdraws from an institution that is required to take attendance 
is the last date of academic attendance as determined by the 
institution from its attendance records. Section 668.22(c)(3) provides 
that an institution that is not required to take attendance may choose 
to use as a student's withdrawal date the student's last date of 
attendance at an academically-related activity provided that the 
institution documents that the activity is academically-related and 
documents the student's attendance at the activity.
    Section 668.22(d) includes the requirements for an approved leave 
of absence, which include a requirement that upon the student's return 
from the leave of absence, the student must be permitted to complete 
the coursework he or she began prior to the leave of absence. The 
requirement for a student to be permitted to resume coursework does not 
apply to clock hour or non-term credit hour programs.
    Section 668.22(f)(2)(i) provides that, for credit hour programs, in 
calculating the percentage of the payment period or period of 
enrollment completed, it is necessary to take into account the total 
number of calendar days that the student was scheduled to complete 
prior to withdrawing without regard to any course completed by the 
student that is less than the length of the term, except that the total 
number of days does not include scheduled breaks of at least five 
consecutive days, days in which the student was on an approved leave of 
absence or, for a period in which any of the courses in the program are 
offered in modules, any scheduled breaks of at least five consecutive 
days when the student is not scheduled to attend a module or other 
course offered during that time.
    Section 668.22(l) establishes several definitions related to the 
return of title IV funds requirements, including:
     Under paragraph (l)(6), a program is ``offered in 
modules'' if a course or courses in the program do not span the entire 
length of the payment period or period of enrollment; and
     Under paragraph (l)(7), ``academic attendance'' and 
``attendance at an academically-related activity'' include, but are not 
limited to, physically attending a class where there is an opportunity 
for direct interaction between the instructor and students; submitting 
an academic assignment; taking an exam, an interactive tutorial, or 
computer-assisted instruction; attending a study group that is assigned 
by the institution; participating in an online discussion about 
academic matters; and initiating contact with a faculty member to ask a 
question about the academic subject studied in the course. However, 
``academic attendance'' and ``attendance at an academically-related 
activity'' do not include activities where a student may be present, 
but not academically engaged, such as living in institutional housing; 
participating in the institution's meal plan; logging into an online 
class without active participation; or participating in academic 
counseling or advisement.
    Proposed Regulations: In Sec.  668.22(a)(2)(i)(C), the Department 
proposes to eliminate the reference to non-term programs and add 
standard term programs (except for subscription-based programs) to the 
types of programs in which students must be considered withdrawn if 
they have ceased attendance and are not scheduled to begin another 
course within a payment period for more than 45 calendar days after the 
end of the module they ceased attending. We propose to add a new clause 
(a)(2)(i)(D) that explains that a student in a non-term program or a 
subscription-based program is considered withdrawn if the student is 
unable to resume attendance within a payment period or period of 
enrollment for more than 60 calendar days after ceasing attendance.
    We propose to establish in Sec.  668.22(a)(2)(ii) two new 
exceptions to the requirements for determining that a student has 
withdrawn. First, we would not consider a student to have withdrawn if 
the student completes all the requirements for graduation from his or 
her program before completing the days or hours in the period that he 
or she was scheduled to complete. Second, in a program offered in 
modules, we would not consider a student to have withdrawn if the 
student completes:
     One module that includes 50 percent or more of the number 
of days in the payment period;
     A combination of modules that when combined contain 50 
percent or more of the number of days in the payment period; or
     Coursework equal to or greater than the coursework 
required for the institution's definition of a half-time student under 
Sec.  668.2 for the payment period.
    We propose to specify that an electronic confirmation is one type 
of written confirmation that a student can provide to avoid being 
considered withdrawn and having title IV, HEA assistance returned as 
part of the return of title IV funds process.
    We propose to eliminate the reference to non-term programs and 
include standard term programs (except for subscription-based programs) 
among the types of programs in which students cannot avoid being 
considered withdrawn, even with a written confirmation of future 
attendance, if the next module the student plans to attend begins later 
than 45 days after the end of the module the student ceased attending. 
We also propose to provide that, for non-term and subscription-based 
programs, a student is not considered to have withdrawn if the 
institution obtains written confirmation from the student at the time 
that would have been a withdrawal of the date that he or she will 
resume attendance, and that date is no later than 60 calendar days 
after the student ceased attendance. The regulations would also 
prescribe that students enrolled in subscription-based programs may 
only avoid withdrawal through a written confirmation of future 
attendance if they indicate that they plan to resume attendance during 
the same payment period or period of enrollment.
    In the regulations explaining how a student may change the date of 
his or her planned return after providing written confirmation of 
future attendance, we propose to eliminate the reference to non-term 
programs and include standard term programs (except for subscription-
based programs), among the types of programs in which students cannot 
change the date of their return to a module that begins later than 45 
calendar days after the end of the module the student ceased attending. 
We also propose that, for non-term and subscription-based programs, the 
student can change his or her date of return if the student's program 
permits the student to resume attendance no later than 60 calendar days 
after the student ceased attendance.
    We propose to strike references to title IV, HEA programs under 
which financial aid is no longer authorized to be awarded or disbursed, 
specifically the Federal Perkins Loan, FFEL, ACG, and National SMART 
Grant programs, in each place they appear in Sec.  668.22. We also 
propose to add Iraq and Afghanistan Service Grants to the types of 
grants that are included in the return of title IV funds calculation 
and insert those grants as the second type of grant to be returned by 
an institution if the institution is subject to a return of grant 
funds. Iraq and Afghanistan Service Grants would be returned after Pell 
Grants, but before FSEOG Program aid. The resulting order of return of 
would be:
    1. Unsubsidized Federal Direct Stafford loans.

[[Page 18667]]

    2. Subsidized Federal Direct Stafford loans.
    3. Federal Direct PLUS loans made to a parent to pay expenses on 
behalf of the student.
    4. Federal Pell Grants.
    5. Iraq and Afghanistan Service Grants.
    6. FSEOG Program grants.
    7. TEACH Grants.
    We propose to make technical changes in various places in Sec.  
668.22 to correct references to parts of the cash management 
regulations that were changed in the final regulations published 
October 30, 2015 (80 FR 67126).
    Under the requirements for a leave of absence in Sec.  
668.22(d)(1)(vii), we propose to add subscription-based programs to the 
types of programs that do not require the institution to permit the 
student to complete coursework he or she began prior to the leave of 
absence to grant an approved leave of absence.
    We propose to amend Sec.  668.22(l)(6) to clarify that a program is 
``offered in modules'' if the program uses a standard term or 
nonstandard-term academic calendar, is not a subscription-based 
program, and a course or courses in the program do not span the entire 
length of the payment period or period of enrollment. Non-term programs 
would no longer be considered programs ``offered in modules'' in any 
circumstances.
    We propose to amend the definitions of ``academic attendance'' and 
``attendance at an academically-related activity'' in Sec.  
668.22(l)(6) to refer to the proposed definition of ``academic 
engagement'' in Sec.  600.2 rather than listing the specific activities 
that would be included and excluded from those definitions.
    Reasons: In general, the Department proposes to remove any 
references to ``modules'' with respect to non-term credit hour and 
clock hour programs and replace such references with separate 
requirements relating specifically to non-term programs. The 
Department's requirements for programs offered in modules are primarily 
intended to address abuse in term-based programs, and the Department 
maintains separate requirements for non-term programs that obviate the 
need for many of the requirements relating to modules.
    The primary purpose of the regulations related to modules was to 
prevent an institution from considering a student to have completed a 
payment period or period of enrollment by virtue of completing a very 
short module at the beginning of a term. However, a payment period in a 
non-term program is defined in Sec.  668.4(c) as the period of time 
during which a student completes half the credit hours or clock hours 
in the academic year or program, whichever is shorter, and a period of 
enrollment for such a program is always comprised of two payment 
periods. Thus, completion of a single course or module in a non-term 
program does not automatically result in the student's completion of 
the entire period for purposes of the return of title IV funds 
calculation even absent the regulations for modules.
    There were some instances in which the Department did not maintain 
separate requirements for non-term programs that accomplish the same 
thing as the requirements for programs offered in modules, and in those 
cases, we propose to add separate requirements that would be specific 
to non-term programs. For example, the Department's various regulations 
related to written confirmation of a student's intent to return at a 
later point in a payment period or period of enrollment currently apply 
to all programs using modules, including non-term programs using credit 
hours or clock hours. Because we are eliminating all references to 
modules with respect to non-term programs, we propose to alter the 
requirements related to written confirmation to specify that students 
in non-term programs may provide written confirmation of their intent 
to return if their program permits a return within 60 days of the date 
that the student ceased attendance. These requirements are intended to 
be like the requirements for programs offered in modules.
    The Department also proposes to make standard term programs subject 
to the limitations on the timeframe for a student to return following a 
written confirmation of future attendance. Though it is less common for 
a module in a standard term program to begin more than 45 days 
following the end of a prior module, the Department maintains the same 
concerns about long periods of non-attendance for standard term 
programs as it does for nonstandard-term and non-term programs, and 
believes that students should be treated consistently in these 
situations.
    We propose to make several changes regarding whether a student is 
considered withdrawn in order to address specific unintended 
circumstances that have arisen as a result of the current regulations. 
First, we propose that a student who has completed all the requirements 
for graduation should not be considered withdrawn under any 
circumstances, since such a student has effectively completed his or 
her educational program and should not be penalized for doing so faster 
than anticipated.
    Second, we are proposing changes related to withdrawals in programs 
offered in modules, because the current regulations have created 
unintended consequences that have created inequitable outcomes for 
students who withdrew from such programs. Under the current 
regulations, a student is considered withdrawn from a credit hour 
program if the student ceases attendance before completing all the days 
that he or she was scheduled to attend in the payment period or period 
of enrollment. This requirement does not pose a problem when all 
classes during a period occur during the same timeframe. However, when 
the student's classes occur during different timeframes--that is, when 
the student is enrolled in a program offered in modules--substantial 
complications can arise, especially when a student is permitted to make 
changes to his or her enrollment throughout the payment period or 
period of enrollment. For example, consider a student who is enrolled 
in two modules in a single payment period. The student attends the 
first module, but then decides to withdraw. If the student follows the 
institution's process for formally withdrawing from the institution and 
drops all classes in both modules at the same time, the student will be 
considered withdrawn and the institution will include in the 
denominator of the student's return of title IV funds calculation all 
the days in both modules. However, if the student decides to drop the 
classes in the second module first, waits a week, and then drops the 
classes in his or her current module, the denominator of the student's 
return of title IV funds calculation will include only the days in the 
first module. Depending on how much of the first module the student has 
attended at the time he or she withdraws, this decision could have 
substantial effects on the amount of title IV, HEA assistance the 
student has earned, potentially resulting in a difference of thousands 
of dollars in aid eligibility between the two scenarios. This 
difference in treatment has no policy purpose but can have negative 
effects on a student that chooses to drop all of his or her courses at 
the same time.
    In order to mitigate these problems, the Department proposes two 
remedies. First, we propose to consider students to have completed a 
payment period or period of enrollment in certain circumstances when 
the student has

[[Page 18668]]

completed coursework in such a period. Second, we propose to treat a 
student as being scheduled to complete the days in a module if any 
coursework in that module was used to determine the amount of the 
student's eligibility for title IV, HEA funds.
    The Department proposes to revise its approach to the treatment of 
students who complete some, but not all, of the coursework they were 
scheduled to attend during a payment period to ensure more equitable 
treatment of such students while maintaining the integrity of the title 
IV, HEA programs. When the return of title IV funds requirements were 
first implemented in 1999, the Department took the position that a 
student who completed any coursework in a payment period or period of 
enrollment was not considered to have withdrawn. The Department revised 
its approach in 2010 after it became aware of instances of abuse in 
which institutions established very short modules (e.g., one or two 
weeks in duration) that were easy for students to complete, and then 
used such completions as a basis to avoid return of title IV funds 
provisions for those students even if the students completed no other 
part of the period. The Department now proposes to treat a student as 
having completed a period if the student has completed a substantial 
portion of the time or coursework that the student was scheduled to 
attend during the period. We believe that this approach would prevent 
the types of abuse described above while also avoiding punitive 
consequences for students who complete a substantial amount of 
coursework during the period.
    In discussions with the subcommittee, the Department originally 
proposed that, under the proposed regulations, a student would be 
considered to have completed a payment period or period of enrollment 
if the student completed a module or a set of modules that constituted 
at least 50 percent of the days in the period. The Department's intent 
was that a student would be considered to have completed the period if 
the student completed coursework constituting at least half of the days 
in the period, not including the days in scheduled breaks. While the 
subcommittee generally accepted the Department's rationale for this 
change, one subcommittee member proposed to also consider a student to 
have completed a period if the student completed the equivalent of 
half-time coursework during that period. Acknowledging that this 
approach would also address the Department's concerns about a student 
avoiding a withdrawal by completing a minimal amount of coursework, the 
Department adopted the subcommittee member's suggestion.
    The Department also proposes to introduce a new method of 
determining the number of days that should be used in the denominator 
of a return of title IV funds calculation when a student withdraws from 
a program offered in modules to simplify the calculation and reduce the 
administrative burden associated with such calculations. Currently, a 
student is considered to be scheduled to attend a module if he or she 
is scheduled to attend the module on the day of the withdrawal. 
However, a student's enrollment in modules can fluctuate during a 
payment period or period of enrollment, and as described above, there 
are circumstances in which dropping or adding courses before or after 
withdrawing can have a significant impact on a student's return of 
title IV funds calculation without a specific policy purpose. To limit 
the uncertainty inherent in these situations, the Department proposes 
to establish a clear system for identifying the number of days that a 
student is scheduled to attend in a payment period when the student's 
coursework uses modules. An institution awards and disburses a 
student's title IV assistance using an enrollment status that is based 
on a determination of a student's schedule at a specific point in time, 
and the Department proposes to use the student's schedule at that fixed 
point to determine the number of days the student is scheduled to 
attend during the period for return of title IV funds purposes. Using 
this approach, subsequent fluctuations in the student's enrollment 
would have no effect on the number of days in the denominator of the 
return of title IV funds calculation if the student withdraws, 
resulting in a greater degree of certainty for students, a diminished 
likelihood of improper payments, and reduced administrative burden for 
institutions performing such calculations.
    Finally, the Department proposes to eliminate all references to 
title IV, HEA programs under which financial aid is no longer 
authorized to be awarded or disbursed and add programs that have been 
authorized since the last time the regulations were changed, to reflect 
statutory requirements and provide additional clarity in the 
regulations.
    The committee discussed clarifying changes to the requirements 
related to considering a student to have completed a period if the 
student completed a module or set of modules comprising at least 50 
percent of the period and ultimately reached consensus on the language. 
The changes would clarify that the 50 percent threshold could be 
reached either with a single module or a combination of modules that, 
when combined, contain 50 percent or more of the number of days in the 
payment period.

Sec.  668.28 Non-Title IV Revenue (90/10)

    Statute: Section 487 of the HEA requires that, to be an eligible 
institution, an institution must enter into a program participation 
agreement with the Secretary that, in the case of a proprietary IHE, 
stipulates that such institution must derive not less than ten percent 
of its revenues from sources other than title IV, HEA program funds. 
The percentage of revenues from sources other than title IV, HEA 
program funds is calculated according to the formula prescribed in 
Sec.  668.21(d)(1) (90/10 calculation). Institutions failing to meet 
the required ten percent threshold for revenue derived from a source 
other than title IV, HEA program funds, would be subject to the 
sanctions described in Sec.  668.21(d)(2) of this section.
    Current Regulations: Section 668.28, in paragraph (a)(5), addresses 
the proper treatment of revenue generated from institutional aid in the 
90/10 calculation. Specifically, for loans made to students (by the 
institution) on or after July 1, 2008, and prior to July 1, 2012, 
institutions are instructed to include as revenue, the net present 
value of the loans made to students during the fiscal year. Paragraph 
(b)(1) of this section contains the formula for determining net present 
value. As an alternative to performing the calculation, institutions 
are permitted under paragraph (b)(2) to use 50 percent of the total 
amount of loans that the institution made during the fiscal year as the 
net present value, with the restriction that it may not sell any of the 
loans until they have been in repayment for at least two years.
    Proposed Regulations: The Department proposes to remove paragraph 
(b), pertaining to net present value, in its entirety.
    Reasons: For loans made to students before July 1, 2008, and on or 
after July 1, 2012, the applicable regulations in Sec.  
668.28(a)(5)(ii) and Sec.  668.28(a)(5)(iii) respectively instruct 
institutions to include as revenue in the 90/10 calculation only the 
amount of payments made on those loans that the institution received 
during the fiscal year. The intervening four-year period during which 
net present value was to be used has elapsed. And because revenue under 
the net present value calculation is derived only from loans

[[Page 18669]]

made during a given fiscal year, future payments are not a 
consideration. Accordingly, the regulatory formula for calculating net 
present value is unnecessary.

Sec.  668.34 Satisfactory Academic Progress

    Statute: Section 484(a)(2) of the HEA requires that a student make 
satisfactory progress in the student's course of study to be eligible 
to receive title IV, HEA program funds. Section 484(c) of the HEA 
provides that a student is making satisfactory progress if the 
institution reviews the progress of the student at the end of each 
academic year, or its equivalent, and the student has a cumulative C 
average, or its equivalent, or academic standing consistent with the 
requirements for graduation, as determined by the institution, at the 
end of the student's second academic year. Section 484(c)(2) of the HEA 
provides that a student who has failed to maintain satisfactory 
progress and, subsequent to that failure, has academic standing 
consistent with the requirements for graduation, as determined by the 
institution, may again be determined eligible for assistance under 
title IV, HEA programs.
    Current Regulations: Section 668.34 requires that an institution's 
satisfactory academic progress (SAP) policy specify, for all programs, 
the pace at which a student must progress through his or her 
educational program to ensure that the student will complete the 
program within the maximum timeframe, as defined in in paragraph (b) of 
this section. The pace at which a student is progressing must be 
calculated by dividing the cumulative number of hours the student has 
successfully completed by the cumulative number of hours the student 
has attempted. Maximum timeframe is currently defined in Sec.  
668.34(b) as, for an undergraduate program measured in credit hours, a 
period that is no longer than 150 percent of the published length of 
the educational program, as measured in credit hours. For an 
undergraduate program measured in clock hours, maximum timeframe is 
defined as a period of time that is no longer than 150 percent of the 
published length of the educational program, as measured by the 
cumulative number of clock hours the student is required to complete 
and expressed in calendar time.
    Proposed Regulations: The Department proposes to revise current 
Sec.  668.34(a)(5)(ii) to provide that the requirement for an 
institution's SAP policy to specify the pace at which a student must 
progress through his or her educational program to ensure that the 
student will complete the program within the maximum timeframe, applies 
only to credit hour programs using standard or nonstandard-terms that 
are not subscription-based programs. For those programs, institutions 
would, in addition to dividing the cumulative number of hours the 
student has successfully completed by the cumulative number of hours 
the student has attempted, have the option of calculating pace by 
determining the number of hours that the student should have completed 
at the evaluation point in order to complete the program within the 
maximum timeframe.
    The proposed regulations would continue to require that an 
institution's SAP policy specify, for all programs, a maximum timeframe 
within which students must complete the educational program in order to 
be eligible to receive title IV, HEA program funds. However, under 
proposed Sec.  668.34(b), maximum timeframe for an undergraduate 
program measured in credit hours could be a period expressed in 
calendar time, as well as measured in credit hours (the only option 
permitted under current regulations) that is no longer than 150 percent 
of the published length of the educational program.
    Regardless of whether pace is calculated by dividing the cumulative 
number of hours successfully completed by the number of hours attempted 
or determining the number of hours that the student should have 
completed at the evaluation point, it must be a measure of whether a 
student is on track to complete the program within the maximum 
timeframe. For example, a four-year, degree-granting program might 
consist of 120 credit hours. Expressed in credit hours, the 150 percent 
maximum timeframe for such a program is 180 attempted credit hours. A 
cumulative pace of completion of 66.666 percent (rounded to 67 
percent), evaluated at each evaluation point, ensures that a student 
will be able to complete his or her program within the 150 percent 
maximum timeframe.
    Alternatively, the institution could, under these proposed 
regulations, choose to define the 150 percent maximum timeframe for 
this program in calendar time, meaning that a student would have six 
years to complete a four-year program. However, it still must be 
determined at each evaluation point whether the student has 
successfully completed enough credit hours to enable completion of the 
program within the six-year maximum timeframe. Assuming the institution 
checks SAP for this program on an annual basis, a student must have 
successfully completed at least 20 credit hours after the first year, 
40 credit hours after the second year, 60 credit hours after the third 
year etc. to maintain a pace necessary to complete all 120 credit hours 
in the program within the maximum timeframe of six years.
    Reasons: The definition of a payment period in Sec.  668.4(c), as 
it pertains to a program that measures progress in credit hours and 
does not have academic terms or for a program that measures progress in 
clock hours, requires a student to successfully complete all the credit 
or clock hours, and all the weeks in that payment period. Only then 
does the student progress to the next payment period and become 
eligible for the disbursement of title IV, HEA funds associated with 
that payment period. Unlike for students in term-based, credit hour 
programs, it is not possible for a student enrolled in a non-term 
credit hour or clock hour program to receive subsequent disbursements 
until all the hours for which he or she has already been paid are 
successfully completed. The de facto 100 percent pace requirement 
imposed by the definition of a payment period for programs that measure 
progress in credit hours without terms or clock hours obviates the need 
for an institution's SAP policy to specify the pace at which a student 
must progress through his or her educational program to ensure that he 
or she will complete the program within the maximum timeframe. We 
believe this proposed change will significantly reduce the 
administrative burden on institutions offering non-term programs in 
performing redundant SAP calculations associated with pace.
    As noted earlier, under proposed Sec.  668.2 (see the discussion 
related to Sec.  668.2), the Department would add a new definition of 
``subscription-based program,'' clarifying that students in 
subscription-based programs must complete a cumulative number of credit 
hours (or the equivalent) during or following the end of each term 
before receiving subsequent disbursements of title IV, HEA program 
funds. The current regulations require an institution to evaluate a 
student's pace of completion by dividing completed credits over 
attempted credits. This calculation is difficult to apply in 
competency-based programs, including subscription-based programs, 
because there is often no set period of time during which a student 
``attempts'' a competency in such programs; rather, the student works 
on a competency until he or she can demonstrate mastery of it. Given 
the limitations in this proposed definition on a student's eligibility 
to receive additional

[[Page 18670]]

disbursements, we believe it is unnecessary and needlessly burdensome 
for an institution's SAP policy to include pace requirements for 
subscription-based programs.
    Finally, the Department proposes to provide additional flexibility 
by giving institutions the option of expressing the maximum timeframe 
(for an undergraduate program measured in credit hours) in calendar 
time. Measuring maximum timeframe in credit hours, with pace determined 
by dividing the cumulative number of successfully completed credit 
hours by the cumulative number of attempted hours, more easily accounts 
for variances in enrollment status. However, using calendar time may 
make more sense for certain programs, especially those where coursework 
or enrollment status is prescribed.
    Members of the subcommittee were generally supportive of the 
proposed changes to Sec.  668.34. One member expressed the desire for 
more flexibility in applying SAP to subscription-based programs given 
that the Department's proposed disbursement changes for such programs 
would already require students to make progress in order to receive 
subsequent disbursements of title IV, HEA assistance. The proposed 
regulations in this section applicable to subscription-based programs 
reflect discourse which occurred, both in the subcommittee and among 
negotiators, within the wider context of defining subscription-based 
programs (refer to the discussion of subscription-based programs under 
Sec.  668.2 Definitions).

Sec.  668.111 Scope and Purpose

    Statute: Section 487(b) of the HEA provides that an institution 
that has received written notice of a final audit determination or a 
program review determination may seek a review of the determination by 
the Secretary.
    Current Regulations: Section 668.111 explains the scope of Subpart 
H--Appeal Procedures for Audit Determinations and Program Review 
Determinations. The regulations indicate that subpart H establishes 
rules governing the appeal by an institution or third-party servicer of 
a final audit determination or a final program review determination.
    Proposed Regulations: The Department proposes to expand the scope 
to include the issuance of such determinations by the Department.
    Reasons: The proposed expansion of scope for this subpart to 
include the issuance of final audit determinations and final program 
review determinations is a conforming change to the proposed changes in 
Sec.  668.113, which would provide that the Secretary will rely on an 
accrediting agency's or State approval agency's requirements in 
resolving findings related to distance education or the establishment 
of credit hours.

Sec.  668.113 Request for Review

    Statute: Section 487(b) of the HEA provides that an institution 
that has received written notice of a final audit determination or a 
program review determination may seek a review of the determination by 
the Secretary.
    Current Regulations: Section 668.113 establishes the requirements 
for an institution or a third-party servicer to submit a written 
request for review of a final audit determination or a final program 
review determination. The regulations establish that an institution or 
servicer must file its request for review no later than 45 days from 
the date that the determination was received, must attach a copy of the 
determination to its request, and must state its position together with 
the pertinent facts and reasons supporting that position. The 
regulations also provide in paragraph (d)(1) that if an institution's 
violation results from an administrative, accounting, or recordkeeping 
error that was not part of a pattern of error and there is no evidence 
of fraud or misconduct related to the error, the Secretary permits the 
institution to correct the error. Paragraph (d)(2) states that an 
institution corrects an error described in paragraph (d)(1) with regard 
to liability if the correction eliminates the basis for the liability.
    Proposed Regulations: The Department proposes to add a new 
paragraph that explains that if a final audit determination or final 
program review determination includes liabilities resulting from the 
institution's classification of a course or program as distance 
education, or the institution's assignment of credit hours, the 
Secretary would rely on the requirements of the institution's 
accrediting agency or State approval agency regarding qualifications 
for instruction and whether the work associated with the institution's 
credit hours is consistent with commonly accepted practice in higher 
education.
    Reasons: The Department proposes these changes in order to conform 
with changes to the definitions of ``distance education'' and ``credit 
hour'' under Sec.  600.2, both of which rely upon the judgment and 
requirements of an institution's accrediting agency or State approval 
agency. To the extent that a final audit determination or a final 
program review determination addresses these topics, we believe such 
determinations should specifically reference the agency's requirements.

Sec.  668.164 Disbursing Funds

    Statute: Section 487(c)(1)(B) of the HEA provides that the 
Secretary ``shall prescribe such regulations as may be necessary to 
provide for'' reasonable standards of financial responsibility, and 
appropriate institutional administrative capability to administer the 
title IV, HEA programs, in matters not governed by specific program 
provisions, ``including any matter the Secretary deems necessary to the 
sound administration of the financial aid programs.''
    Current Regulations: Section 668.164 establishes requirements for 
the disbursement of funds under the title IV, HEA programs. Current 
Sec.  668.164(i) provides that the earliest an institution may disburse 
title IV, HEA funds to an eligible student or parent is--
     For a student enrolled in a credit-hour program offered in 
terms that are substantially equal in length, 10 days before the first 
day of classes; or
     For a student enrolled in a non-term program or a term-
based program in which the terms are not substantially equal in length, 
the later of 10 days before the first day of classes in a payment 
period or the date the student completed the previous payment period 
for which he or she received title IV, HEA funds.
    Proposed Regulations: The Department proposes to exclude 
subscription-based programs from the current provisions for early 
disbursements under Sec.  668.164(i)(1)(i) and (ii) and establish 
requirements that will apply specifically to subscription-based 
programs in new paragraph (i)(1)(iii). The proposed regulations would 
establish that if a student is enrolled in a subscription-based 
program, the earliest that an institution may make a disbursement to 
that student is the later of 10 days before the first day of classes in 
the payment period or the date that the student completed the 
cumulative number of credit hours associated with the student's 
enrollment status in all prior terms attended under the definition of a 
subscription-based program in Sec.  668.2.
    Reasons: We are proposing these changes to conform with the 
establishment of the proposed disbursement methodology for 
subscription-based programs that is provided under Sec.  668.2. The 
proposed regulations would establish the specific timing requirements 
for disbursement in a subscription-based programs. The requirements 
would be similar to

[[Page 18671]]

requirements for programs with terms that are substantially equal, 
except that an institution would not be permitted to disburse funds to 
a student in a subscription-based program until the student has 
completed the appropriate number of credit hours (or the equivalent) in 
accordance with the requirements in the definition of ``subscription-
based program.''

Sec.  668.171 General

    Statute: Section 498(c) of the HEA grants the Secretary the 
authority to determine whether an institution is financially 
responsible.
    Current Regulations: If the Secretary determines that an 
institution is not financially responsible under the standards and 
provisions of Sec.  668.171 or under an alternative standard in Sec.  
668.175, or the institution does not submit a financial or compliance 
audit by the date permitted and in the manner required under Sec.  
668.23, the Secretary may initiate an action under subpart G of part 
668 to fine the institution, or to limit, suspend, or terminate the 
institution's participation in the title IV, HEA programs or for an 
institution that is provisionally certified, take an action against the 
institution under the procedures established in Sec.  668.13(d).
    Proposed Regulations: The Department proposes to add Sec.  
668.171(e)(3), which would allow the Secretary to deny the 
institution's application for certification or recertification to 
participate in the title IV, HEA programs if the Secretary determines 
that an institution is not financially responsible under the standards 
and provisions of this section or under an alternative standard in 
Sec.  668.175, or the institution does not submit its financial and 
compliance audits by the date permitted and in the manner required 
under Sec.  668.23.
    Reasons: The Department proposes to codify current practice into 
regulation. The addition of Sec.  668.171(e)(3) represents no 
substantive change and will have no impact on current practice.

Sec.  668.174 Past Performance

    Statute: Section 498(c) of the HEA grants the authority to 
determine whether an institution is financially responsible to the 
Secretary.
    Current Regulations: Section 668.174 governs the past performance 
of an institution and provides that an institution is not financially 
responsible if a person who exercises substantial control over the 
institution, or any member of that person's family, (1) owes a 
liability for a violation of a title IV, HEA program requirement that 
is not being repaid; or (2) exercises or exercised control over another 
institution with an outstanding liability that is not being repaid.
    In such cases, the Secretary may nonetheless determine that an 
institution is financially responsible if the institution notifies the 
Secretary that the person who exercises substantial control over the 
institution has repaid a portion of the liability that equals or 
exceeds the greater of (1) the total percentage of the ownership 
interest held by that person and/or any member of that person's family 
(including when represented by a voting trust, power of attorney, 
proxy, or similar agreement; or (2) 25 percent, if the person or any 
member of the person's family is or was a member of the board of 
directors, chief executive officer, or other executive officer of the 
institution that owes the liability. Additionally, the Secretary may 
determine an institution is financially responsible if the owner's 
liability is currently being repaid in accordance with a written 
agreement with the Secretary. Lastly, the Secretary may find that the 
institution is financially responsible if the institution demonstrates 
why the person who exercises substantial control over the institution 
does not or did not exercise substantial control over the institution 
that owes the liability.
    The current regulations also define the term ``ownership interest'' 
as a share of the legal or beneficial ownership or control of, or a 
right to share in the proceeds of, the operation of an institution, an 
institution's parent corporation, a third-party servicer, or a third-
party servicer's parent corporation. The definition also indicates that 
a person is considered to exercise substantial control over an 
institution or third-party servicer if the person directly or 
indirectly holds at least a 25 percent ownership interest in the 
institution or servicer, holds at least a 25 percent ownership interest 
in the institution or servicer, represents at least a 25 percent 
ownership in the institution or servicer, or is a member of the board 
of directors, a general partner, the chief executive officer, or other 
executive officer as designated by institution, or an entity that holds 
at least a 25 percent ownership interest in the institution.
    Proposed Regulations: The Department proposes to add either the 
term ``or entity'' or the term ``or entities'' after the references to 
``person'' or ``persons'' in Sec.  668.174(b), (b)(1)(ii), (b)(2)(i), 
(b)(2)(ii), (b)(2)(ii)(A), (b)(2)(ii)(B), (b)(2)(iii)(A), 
(b)(2)(iii)(B), and (c)(3). We also propose to revise ``substantial 
control'' in Sec.  668.174(b)(1)(i) and (b)(1)(i)(A) to ``substantial 
ownership or control.''
    The Department proposes to add Sec.  668.174(b)(1)(ii)(B), which 
would state that an institution is not considered financially 
responsible if a person or entity who exercises substantial ownership 
or control over the institution, or any member or members of that 
person's family, alone or together exercised substantial ownership or 
control over another institution that closed without a viable teach-out 
plan or agreement approved by the institution's accrediting agency and 
faithfully executed by the institution.
    Reasons: The Department proposes to add ``or entity'' or ``or 
entities'' to follow the words ``person'' or ``persons'' in various 
provisions because substantial ownership or control of an institution 
is sometimes vested in an entity as well as an individual. We believe 
that this addition would allow the Department to consider more 
structures of substantial ownership or control when determining the 
past performance of an institution in assessing its financial 
responsibility.
    The Department proposes to add ``substantial ownership or control'' 
to conform with the proposed language change in Sec.  668.15.
    The Department proposes to add Sec.  668.174(b)(1)(i)(B) because we 
believe the Secretary should consider whether a person or entity 
affiliated with an institution has overseen the precipitous closure of 
another institution. We want to encourage all institutions to have a 
viable teach-out plan if the institution closes. We believe this will 
prevent an institution from being substantially owned or controlled by 
persons or entities that would cause the institution to be financially 
irresponsible and close without providing to students a plan to finish 
their education in place or at another institution.

Sec.  668.175 Alternative Standards and Requirements

    Statute: Section 498(c) of the HEA grants authority to the 
Secretary to determine whether an institution is financially 
responsible.
    Current Regulations: A participating institution that is not 
financially responsible solely because the Secretary determines that 
its composite score is less than 1.5 may participate in the title IV, 
HEA programs as a financially-responsible institution for no more than 
three consecutive years, beginning with the year in which the Secretary 
determines that the institution qualifies under this alternative as 
long as the institution meets the two conditions in Sec.  668.175(d), 
as long as its composite score is in the range from 1.0 to 1.4,

[[Page 18672]]

which is known as the zone alternative. Institutions that are qualified 
under the zone alternative must provide information regarding certain 
oversight and financial events to the Secretary, under Sec.  
668.175(d)(2)(ii). Under Sec.  668.175(d)(3)(i), institutions can 
submit this information to the Secretary by certified mail or 
electronic or facsimile transmission.
    Proposed Regulations: The Department proposes to delete the 
reference to facsimile transmission from Sec.  668.175(d)(3)(i).
    Reasons: Facsimile transmission is an outdated method of 
correspondence that is encompassed by the broader term ``electronic 
transmission.'' The deletion of the words ``facsimile transmission'' 
represents no substantive change and will have no impact on current 
practice.

Executive Orders 12866, 13563, and 13771

Regulatory Impact Analysis

    Under Executive Order 12866, the Office of Management and Budget 
(OMB) determines whether this regulatory action is ``significant'' and, 
therefore, subject to the requirements of the Executive order and 
subject to review by 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 stated in the 
Executive order.
    OMB has determined that this proposed rule is an economically 
significant action and would have an annual effect on the economy of 
more than $100 million. This regulation would enable institutions to 
harness the power of innovation to expand postsecondary options, 
leverage advances in technology to improve student learning, and allow 
students to progress by demonstrating competencies rather than seat 
time. According to the Department's FY 2020 Budget Summary, Federal 
Direct Loans and Pell Grants accounted for almost $124 billion in new 
aid available in 2018. Given this scale of Federal student aid amounts 
disbursed yearly, the addition of even small percentage changes could 
result in transfers between the Federal government and students of more 
than $100 million on an annualized basis.
    Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), 
the Office of Information and Regulatory Affairs designated this rule 
as a ``major rule,'' as defined by 5 U.S.C. 804(2).
    Under Executive Order 13771, for each new regulation that the 
Department proposes for notice and comment or otherwise promulgates 
that is a significant regulatory action under Executive Order 12866, 
and that imposes total costs greater than zero, it must identify two 
deregulatory actions. For FY 2020, any new incremental costs associated 
with a new regulation must be fully offset by the elimination of 
existing costs through deregulatory actions. The proposed rule is 
considered an E.O. 13771 deregulatory action. We believe the effect of 
this regulation would be to remove barriers for development of distance 
and direct assessment programs and their participation in title IV, HEA 
funding, reduce the Department's role in approving programs, and 
promote innovation in higher education. We believe this regulatory 
action would be, in sum, deregulatory.
    As required by Executive Order 13563, the Department has assessed 
the potential costs and benefits, both quantitative and qualitative, of 
this regulatory action, and we are issuing these proposed regulations 
only on a reasoned determination that their benefits would justify 
their costs. In choosing among alternative regulatory approaches, we 
selected those approaches that maximize net benefits. Based on the 
analysis that follows, the Department believes that the regulations are 
consistent with the principles in Executive Order 13563.
    We also have determined that this regulatory action would not 
unduly interfere with State, local, or Tribal governments in the 
exercise of their governmental functions.
    In accordance with the Executive orders, the Department has 
assessed, both quantitatively and qualitatively, the potential costs 
and benefits of this regulatory action.
    In this regulatory impact analysis, we discuss the need for 
regulatory action, the potential costs and benefits, net budget 
impacts, and regulatory alternatives we considered.
    Elsewhere in this section, under Paperwork Reduction Act of 1995, 
we identify and explain burdens specifically associated with 
information collection requirements.

Need for Regulatory Action

    The emphasis in the proposed regulations is on clarifying the 
distinctions between distance education and correspondence courses, 
affirming the permissibility of team teaching models, improving worker 
mobility by accommodating differences in licensure requirements across 
State lines, simplifying conversions between clock and credit hours to 
enable students to meet licensure requirements while also earning 
credits more likely to transfer to other institutions, establishing 
regulations regarding subscription-based programs so that institutions 
can confidently implement programs that measure competencies rather 
than seat time, and reducing barriers that limit the number of direct 
assessment programs available to students.
    These proposed changes would benefit institutions by enabling them 
to employ innovative methods and models without undue risk of 
inadvertently violating title IV requirements. These options would 
benefit students by expanding the number of postsecondary education 
opportunities available to them, including those who may have been 
poorly served by more traditional ``seat-time'' instructional models. 
By providing a larger variety of postsecondary options and strategies 
such as blended learning, adaptive learning, and competency-based 
education, students will be much more likely to persist in and complete 
their programs and institutions will be much more equipped to drive 
student success.21 22 Proposed regulations would define or 
clarify terms such as ``correspondence course,'' ``distance 
education,'' and ``regular and substantive interaction,'' and would 
streamline the current regulations to reduce the complexity of 
performing clock-to-credit hour conversions, disbursing aid to students 
enrolled in subscription-based programs, and ensuring that programs 
align with program length restrictions, while improving worker mobility 
across State lines. In some instances, the proposed definitions would 
clarify terms used in, but not defined by, the HEA. In other cases, the 
proposed regulations would

[[Page 18673]]

codify program administration requirements that had previously been 
communicated only through sub-regulatory guidance, to give institutions 
the certainty they need to expand the postsecondary education options 
that they make available to students.
---------------------------------------------------------------------------

    \21\ www2.deloitte.com/us/en/insights/industry/public-sector/improving-student-success-in-higher-education.html.
    \22\ www.texaspolicy.com/new-study-less-expensive-competency-based-education-programs-just-as-good-as-traditional-programs/.
---------------------------------------------------------------------------

    For instance, while CBE programs using direct assessment have been 
permitted by statute since 2006, most institutions continue to evaluate 
progress in CBE programs based on measures of time (or time 
equivalency) rather than a student's demonstration of competency. This 
is largely due to uncertainties regarding how to disburse and calculate 
return-to-title IV for students enrolled in programs that measure 
competencies rather than time.
    As a result, the potential benefits of CBE programs, such as 
accelerated learning and completion as well as providing better 
assurances to employers that graduates are prepared for workplace 
demands, were mitigated because programs still were required to adhere 
to time-based title IV disbursement methodologies.\23\ These 
regulations would provide needed certainty to institutions about how to 
disburse aid to students enrolled in CBE programs. The regulations 
would also eliminate a significant legal obstacle to the adoption of 
direct assessment CBE programs by permitting title IV-eligible programs 
to be offered partly through direct assessment and partly using credit 
or clock hours. Eliminating this restriction would make it easier for 
institutions to experiment with direct assessment without having to 
immediately establish and implement a program offered entirely through 
direct assessment.
---------------------------------------------------------------------------

    \23\ www2.deloitte.com/us/en/insights/industry/public-sector/improving-student-success-in-higher-education.html.
---------------------------------------------------------------------------

    The proposed regulations acknowledge that subscription-based 
programs are permissible and would provide instructions to institutions 
about how to disburse aid and evaluate satisfactory academic progress 
for students enrolled in these programs. These regulations would also 
reduce the steps involved in gaining approval for direct assessment 
programs, which would reduce the burden associated with administering 
these programs and reduce the risk that an institution could invest 
resources in designing a program that the Department denies or 
unnecessarily delays. Institutions that better understand the rules for 
administering Federal student aid in circumstances that depart from 
traditional delivery models are more likely to invest in developing 
those models, and administering them properly, thus avoiding improper 
payments and improving the student experience.
    The proposed regulations also acknowledge that, given the cost of 
developing sophisticated technology-driven instructional tools or 
building specialized facilities on college campuses, a rational 
approach may be to rely on a third-party provider with a much broader 
reach than an individual institution or on industry partners who have 
other incentives to maintain state-of-the-art facilities and equipment. 
Until institutions fully understand what is permissible in the 
development and implementation of innovative delivery models, 
institutional leaders will remain largely risk averse, and solutions 
that would otherwise help large numbers of students will not be made 
available to them.
    Finally, the proposed regulations would change the return of title 
IV funds and satisfactory academic progress provisions to reduce 
administrative burden and increase flexibility for many postsecondary 
institutions offering innovative programs. Reducing the amount of 
burden and expense associated with the administration of the title IV, 
HEA programs for unique or non-traditional programs would also 
encourage institutions to offer programs that do not fit into the 
traditional mold and improve the available offerings for students.
    The Department believes this proposed regulatory action would have 
an annual effect on the economy of more than $100 million. If students 
have more postsecondary options to select from and if more students 
persist to completion, the number of students who enroll for the full 
duration of a program may increase. For example, although extremely 
limited in availability now, if there were fewer barriers to starting a 
direct assessment program, there could be an increase in the number 
available, and perhaps adult learners would find this to be a more 
satisfying way to learn, or the only way they can juggle the demands of 
work, school, and family.
    While a limited number of experienced institutions with established 
direct assessment programs may increase their program offerings, it is 
difficult to predict whether larger numbers of students will be 
attracted to higher education, in general, or if the current number of 
students would be distributed differently across the landscape of 
available programs. Direct assessment programs may be considerably more 
attractive to busy adult learners who would get credit for what they 
know from prior work or life experience.\24\
---------------------------------------------------------------------------

    \24\ onlinelibrary.wiley.com/doi/full/10.1002/cbe2.1008.
---------------------------------------------------------------------------

    The demand for distance education programs has visibly increased in 
recent years. In 2003-04, 15.6 percent of undergraduate students took 
at least one distance education class and only 4.9 percent of students 
were exclusively in distance education while by 2015-16, 43 percent of 
undergraduate students took at least one distance education class and 
approximately 11 percent were in exclusively distance programs.\25\ In 
many cases, more students are taking at least one online class while 
enrolled in a traditional ground-based program. Correspondingly, there 
has also been significant growth in the number of students who are 
enrolled in exclusively online programs.\26\ We have also seen 
significant redistribution of online enrollments as some large non-
profit and public institutions have increased their market share, while 
at the same time some proprietary schools that once dominated distance 
education delivery are suffering sizeable enrollment losses and even 
closures. Overall, growth in the number of students enrolled 
exclusively online has been moderate, increasing 22 percent between 
2013 and 2018. The number of students taking at least one online class 
has increased 28 percent between 2013 and 2018.27 28 29
---------------------------------------------------------------------------

    \25\ U.S. Department of Education, National Center for Education 
Statistics, Digest of Education Statistics 2018, Table 311.22. 
Number and percentage of undergraduate students enrolled in distance 
education or online classes and degree programs, by selected 
characteristics: Selected years, 2003-04 through 2015-16. Available 
at nces.ed.gov/programs/digest/d18/tables/dt18_311.22.asp.
    \26\ www.insidehighered.com/digital-learning/article/2019/12/11/more-students-study-online-rate-growth-slowed-2018.
    \27\ nces.ed.gov/programs/digest/d18/tables/dt18_311.15.asp.
    \28\ nces.ed.gov/programs/digest/d14/tables/dt14_311.15.asp.
    \29\ U.S. Department of Education, National Center for Education 
Statistics, IPEDS, Spring 2019, Fall Enrollment component 
(provisional data)., Number and percentage distribution of students 
enrolled at Title IV institutions, by control of institution, 
student level, level of institution, distance education status of 
student, and distance education status of institution: United 
States, fall 2018.
---------------------------------------------------------------------------

    While current providers of CBE and direct assessment learning do so 
through distance learning modalities, it is possible that, as 
regulatory requirements become clearer, those institutions that 
primarily provide ground-based education will also develop and 
implement CBE and direct assessment programs. On the other hand, 
programs that lead to licensure may be slower to introduce CBE or

[[Page 18674]]

direct assessment models since licensing boards tend to resist 
change.\30\
---------------------------------------------------------------------------

    \30\ ij.org/wp-content/themes/ijorg/images/ltw2/License_to_Work_2nd_Edition.pdf.
---------------------------------------------------------------------------

    As can be seen in Table 1 below, which is based on data collected 
by the National Center for Education Statistics (NCES), while the 
percentage of students who are enrolled exclusively in online programs 
has increased slightly between 2013 and 2018, the largest growth has 
been in the percentage of students who take at least one, but not all, 
of their classes online. The number of students engaged in online 
learning grew between 2013 and 2018 from approximately 5.5 million to 
6.9 million. This suggests that learning modalities will change as 
innovation creates a broader range of options, but, based on current 
trends, an increase in the percentage of students who enroll in online 
classes will not likely result in overall increases in postsecondary 
enrollments. College enrollments are most dependent upon economic 
cycles, so changes in delivery models may be less important than 
macroeconomic conditions in determining total enrollments.

                                                                         Table 1
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                             No-distance          At least one          All-distance
                        All institutions                           Total students (#)     education courses   distance course, not    education courses
                                                                                                 (%)                 all (%)                 (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2018............................................................            20,008,434                  65.3                  18.4                  16.3
2017............................................................            19,765,598                  66.3                  18.0                  15.7
2015............................................................            19,977,270                  70.2                  15.4                  14.4
2013............................................................            20,375,789                  72.9                  14.1                  13.1
4-year (total):
    2018........................................................            13,901,011                  64.3                  18.0                  17.6
    2017........................................................            13,823,640                  65.8                  17.3                  16.9
    2015........................................................            13,486,342                  69.7                  14.4                  15.9
    2013........................................................            13,407,050                  73.0                  12.2                  14.8
2-year (total):
    2018........................................................             6,107,423                  67.6                  19.2                  13.2
    2017........................................................             5,941,958                  67.5                  19.5                  13.0
    2015........................................................             6,490,928                  71.2                  17.6                  11.2
    2013........................................................             6,968,739                  72.7                  17.6                   9.8
Public:
    2018........................................................            14,639,681                  66.1                  21.5                  12.3
    2017........................................................            14,560,155                  67.8                  20.8                  11.4
    2015........................................................            14,568,103                  72.0                  18.0                  10.0
    2013........................................................            14,745,558                  74.6                  16.7                   8.7
Private Non-Profit:
    2018........................................................             4,147,604                  69.7                  10.1                  20.2
    2017........................................................             4,106,477                  71.3                   9.5                  19.2
    2015........................................................             4,063,372                  75.0                   8.5                  16.5
    2013........................................................             3,974,004                  80.0                   6.9                  13.1
Private For-Profit:
    2018........................................................             1,221,149                  41.0                   8.6                  50.4
    2017........................................................             1,098,966                  29.0                  11.1                  59.9
    2015........................................................             1,345,795                  35.9                   8.6                  55.5
    2013........................................................             1,656,227                  40.7                   7.6                  51.7
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Growth in the number and percentage of online learners was 
especially strong among private not-for-profit institutions, where 
students who took all courses through distance education increased over 
54 percent, from 13.1 to 20.2 percentage points. At 2-year 
institutions, the percentage of students taking all courses online 
increased from 9.8 to 13.2 percentage points, almost a 35-percent jump 
from 2013 to 2018. However, total enrollments at 2-year institutions 
during that same time period decreased by over 850,000 students.
    While the percentage of students enrolled exclusively in distance 
learning is highest among proprietary institutions (60 percent), 
relatively few students are enrolled at these institutions (only 
approximately 1 million of the nearly 20 million enrolled in 
postsecondary education in 2017 were enrolled at proprietary 
institutions). There have been sizable decreases in total enrollments 
at proprietary institutions between 2013 and 2017, and in 2017 only 
659,379 students were enrolled exclusively online at proprietary 
institutions as compared to 821,296 students who were enrolled 
exclusively online at private non-profit institutions and 1.6 million 
who were enrolled exclusively in online programs at public 
institutions. These data suggest that increases in enrollments among 
exclusively online courses do not necessarily result in increased 
number of total postsecondary enrollments.
    The CBE marketplace overall has also seen significant attention 
from within the postsecondary education community and general public, 
but the direct assessment component of CBE has not, potentially because 
of the length of time it takes for the Department to review 
applications for direct assessment programs, and because several audits 
by the Department's Office of Inspector General in the past decade have 
been sharply critical of the oversight of direct assessment by the 
Department and accrediting agencies.31 32 33 The Department 
also believes that another recent report by the Department's

[[Page 18675]]

Inspector General, which questioned the validity of the team teaching 
model employed by one institution (and permitted by the Department's 
sub-regulatory guidance), had a chilling effect on other institutions 
that were considering the development of CBE programs. Audit 
determinations requiring the return of hundreds of millions of dollars 
in title IV funds pose an existential threat to most institutions, 
including public institutions, even if such determinations are 
ultimately reversed.\34\
---------------------------------------------------------------------------

    \31\ www2.ed.gov/about/offices/list/oig/auditreports/fy2014/a05n0004.pdf.
    \32\ www2.ed.gov/about/offices/list/oig/auditreports/fy2015/a05o0010.pdf.
    \33\ www2.ed.gov/about/offices/list/oig/auditreports/fy2016/a05p0013.pdf.
    \34\ www2.ed.gov/documents/press-releases/20190111-wgu-audit.pdf.
---------------------------------------------------------------------------

    The Department's data does not break out information about 
competency-based education students to the same extent as it does for 
distance education students, but a number of surveys and articles 
provide some background on existing programs. According to the 2018 
National Survey of Postsecondary Competency-Based Education (NSPCBE), 
co-authored by American Institutes of Research (AIR) and Eduventures, a 
majority of respondents believe that CBE will experience strong growth 
although they also perceive that a number of barriers to implementation 
remain.\35\ The survey was sent to over 3,000 institutions including 
primarily 2- and 4-year institutions listed in the Integrated 
Postsecondary Education Data System (IPEDS). About 69 percent of 
respondents were 4-year institutions and 31 percent were 2-year 
institutions. A total of 501 institutions replied to the survey, 
representing a survey response rate of 16 percent. It is possible that 
the survey may suffer from selection bias if the institutions that 
completed the survey were more likely to be those institutions 
considering adding CBE programs, which would mean that the survey 
results could not be accurately projected to the full postsecondary 
system.
---------------------------------------------------------------------------

    \35\ www.air.org/sites/default/files/National-Survey-of-Postsec-CBE-2018-AIR-Eduventures-Jan-2019.pdf.
---------------------------------------------------------------------------

    Four-hundred-thirty of the 501 respondents reported being 
interested in, or in the process of, implementing CBE programs, while 
71 indicated no interest. Some 57 institutions stated that they were 
currently offering at least one CBE program, with these institutions, 
in aggregate, offering a total of 512 CBE programs. The largest portion 
of programs (427 of 512) was at the undergraduate level with 85 at the 
graduate level. The highest concentration of CBE programs was in the 
fields of nursing and computer science. Given the requirement for 
nursing students to participate in clinical rotations, it is likely 
that CBE programs in nursing were designed to target students who are 
already registered nurses (with an associate degree) and now wish to 
complete a bachelor's degree.
    Over 50 percent of institutions reported CBE undergraduate 
enrollments of no more than 50 students per program while only a small 
number of institutions (approximately 4 percent) enrolled more than 
1,000 undergraduate students in CBE programs at their institution. 
Thus, assuming these findings are characteristic of the overall CBE 
landscape, it appears that most institutions are still in the early 
stages of implementing CBE programs with only a handful of institutions 
operating large-scale programs.
    Similar results were described in the 2019 survey that had 602 
respondents with 54 percent from public institutions, 42 percent from 
private, nonprofit institutions and 4 percent were from proprietary 
institutions.\36\ Of the 588 programs offered by 64 institutions, 84 
percent were undergraduate and 16 percent were graduate programs. The 
majority of existing programs remain small, with 53 percent with 
enrollment under 50 students.\37\ As in the 2018 survey, popular fields 
for competency-based programs include nursing, computer and information 
sciences, and business administration.\38\ Seventy-seven percent of 
responding institutions with competency-based programs reported that 
they are eligible for federal financial aid. Of those, 75 percent 
report they maintain that eligibility by using a course structure to 
map to credit hours.\39\
---------------------------------------------------------------------------

    \36\ American Institutes for Research, State of the Field--
Findings from the 2019 National Survey of Postsecondary Competency-
Based Education, available at www.air.org/sites/default/files/National-Survey-of-Postsecondary-CBE-Lumina-October-2019-rev.pdf.
    \37\ Id., p. 25.
    \38\ Id., p. 26.
    \39\ Id., p. 31.
---------------------------------------------------------------------------

    One of the three top barriers to implementing CBE programs, as 
cited by over 50 percent of the responding institutions, was ``Federal 
student aid regulations.'' The other two key barriers to entry included 
the need to change business processes and the high costs associated 
with start-up. While the survey results point to a guarded optimism on 
the growth of CBE programs, this optimism is tempered by a perception 
that the regulatory climate needs to be flexible and conducive to 
expansion of CBE programs; however, the report suggests that it is 
crucial to preserve consumer protections.
    The Department agrees with this theme, as we note in the executive 
summary that ``the purpose of these distance education and innovation 
regulations is to reduce barriers to innovation in the way institutions 
deliver educational materials and opportunities to students, and assess 
their knowledge and understanding, while providing reasonable 
safeguards to limit the risks to students and taxpayers.''
    Therefore, this NPRM sends a signal to the higher education 
community that the Department is committed to reducing regulatory 
burden to make way for responsible innovations, such as CBE programs 
and direct assessment programs. Further, the proposed regulations would 
enable institutions to develop new title IV disbursement models, such 
as subscription-based programs, to align the delivery of aid with 
programs that allow students to complete as many classes as possible 
during a given period of time, but to also pace themselves 
appropriately based on other demands and learning needs.
    While technology has transformed the way almost every industry in 
America does business, it has not fundamentally transformed the way we 
educate students, monitor their progress, or diagnose when and what 
kind of additional support services a student needs. We are educating 
postsecondary students today in a very similar manner to methods and 
practices used a hundred years ago. Nonetheless, there have been some 
early innovators who have made advances despite the Department's 
lagging in this area. In that regard, this NPRM represents the 
Department's effort to catch up with innovations that are already 
taking place at forward-looking institutions. We seek to promote 
continuing innovation, both in distance learning and ground-based 
education. The proposed regulations would update our definitions of 
``distance education'' and ``correspondence courses'' to acknowledge 
that as a result of CBE and direct assessment, many students enrolled 
in distance education progress at their own pace, which is a 
characteristic that in the past was determinant of a correspondence 
course. With the introduction of adaptive learning and other 
technologies, a student enrolled in distance education is likely to be 
learning at his or her own pace, although that learner continues to 
have regular and substantive interactions with the instructor(s). The 
proposed regulations acknowledge that adaptive learning can play an 
important role in a student's educational

[[Page 18676]]

experience and can facilitate regular and substantive interaction 
between students and instructors by providing students with continuous 
feedback regarding their learning. The Department appreciates the 
considerable effort of negotiators to recommend and agree to regulatory 
changes that promote and enable flexibility, while at the same time 
ensuring the preservation of student protections and the responsible 
distribution of title IV, HEA assistance.
    It is the combination of changes addressed in these proposed 
regulations that cumulatively would have sufficient impact on the 
economy to warrant classifying this regulation as economically 
significant. Specifically, while there could be increases in the number 
of students seeking title IV, HEA assistance, or the number of students 
who persist to completion, these increased Federal expenditures could 
result in the preparation of a more capable workforce and a better-
educated citizenry. As more adults are required to obtain additional 
postsecondary courses or credentials throughout their professional 
lifetime, the availability of more efficient learning opportunities, 
such as CBE and direct assessment learning, will enable more adults to 
evolve in their careers.

Costs, Benefits, and Transfers

    The Department anticipates that the proposed regulations would 
affect students, IHEs, accrediting agencies, and the Federal 
government. State government may also be impacted in some instances. 
Table 2 refers to key changes described in the identified preamble 
sections and summarizes potential impacts.

                                         Table 2--Summary of Key Changes
----------------------------------------------------------------------------------------------------------------
                 Change                         Affected parties                        Impacts
----------------------------------------------------------------------------------------------------------------
                                         Reg Section 600.2--Definitions
----------------------------------------------------------------------------------------------------------------
Create definition for ``academic          Students/Institutions/       Clarifies and expands the types of
 engagement''.                             Federal Government.          activities that verify student
                                                                        enrollment for the purpose of performing
                                                                        return to title IV funds calculations
                                                                        while standardizing the Department's
                                                                        definition of ``academic engagement''
                                                                        for use elsewhere in the regulations.
                                                                        Prevents improper payment of title IV
                                                                        funds to students who are not
                                                                        legitimately engaged in postsecondary
                                                                        learning.
Defines ``clock hour'' for distance       Students/Institutions/       Codifies current policy allowing
 education.                                Federal Government/          institutions to record clock hours
                                           Accrediting Agencies.        earned through distance education but
                                                                        requires such hours to be taught through
                                                                        synchronous instruction by the
                                                                        instructor. Clock hours may be earned
                                                                        through distance education only when
                                                                        permitted by licensing boards or other
                                                                        regulatory entities that require
                                                                        enrollment to be measured in clock
                                                                        hours. Regulatory clarity may encourage
                                                                        greater use of distance education to
                                                                        provide the didactic portion of
                                                                        occupationally focused programs, thus
                                                                        expanding access to students who are
                                                                        working, raising families, or live far
                                                                        from campus.
Modifies definitions of ``correspondence  Students/Institutions/       Benefits students by encouraging the
 course'' and ``distance education'' to    Federal Government/          development of programs taught by
 clarify that it is permissible to         Accrediting Agencies.        instructional teams consisting of
 employ a team approach to instruction                                  experts in the various elements of high-
 and clarifies that the requirements for                                quality instruction, as opposed to a
 regular interaction are met if the                                     more traditional model that relies on a
 institution provides opportunities for                                 single faculty member to meet all of the
 interaction, even if each student does                                 student's learning needs. Benefits
 not take advantage of each opportunity.                                students and institutions by potentially
 Removes self-pacing from definition of                                 reducing some of the costs of
 ``correspondence course'' as it is not                                 instruction. Reduces the need for
 a necessary characteristic for such                                    institutions to require students to
 courses.                                                               engage in less substantive work solely
                                                                        for the purpose of documenting that
                                                                        regular and substantive interaction took
                                                                        place in order to document that a course
                                                                        is offered using distance education and
                                                                        is not a correspondence course.
Refines definition of ``credit hour'' to  Students/Institutions/       Maintains time-based standard to ensure
 reflect current sub-regulatory guidance   Federal Government.          consistency among institutions regarding
 in DCL GEN-11-06 that references a                                     the awarding of academic credit, while
 variety of delivery methods.                                           also creating the necessary flexibility
                                                                        to take into account that many new
                                                                        educational delivery models are not
                                                                        based on seat time. Codifies flexibility
                                                                        provided in sub-regulatory guidance
                                                                        under the Department's Dear Colleague
                                                                        Letter GEN-11-06.
Amends definition of ``distance           Students/Institutions/       Updates regulations to remove references
 education'' by removing references to     Federal Government/          to outdated forms of electronic media
 specific kinds of electronic media used   Accrediting Agency.          and to ensure that new forms of
 in providing instruction, relegating                                   electronic media will be covered by the
 the determination of instructor                                        regulations in the future. Acknowledges
 qualifications to accrediting agencies,                                that the use of interactive learning
 including the use of interactive                                       technologies can facilitate regular and
 technologies to meet the requirements                                  substantive interaction between students
 for ``substantive interaction,'' and                                   and instructors. Benefits institutions
 establishing standards for ``regular                                   by more clearly explaining regulatory
 interaction'' that include predictable                                 compliance requirements for educational
 opportunities for interaction and                                      innovations, thus reducing risk and
 monitoring of student engagement.                                      potential financial penalties for those
                                                                        institutions pursuing educational
                                                                        innovation. Benefits students by
                                                                        expanding learning opportunities and
                                                                        flexibilities, including personalized
                                                                        learning, without unnecessary
                                                                        bureaucratic hurdles for the purpose of
                                                                        meeting title IV requirements for
                                                                        regular participation. Benefits the
                                                                        Federal government by ensuring that
                                                                        students are receiving high-quality
                                                                        education when using Federal student aid
                                                                        to pay for that education. Benefits
                                                                        students by ensuring that online
                                                                        learning includes meaningful
                                                                        interactions with qualified instructors
                                                                        who can monitor and improve student
                                                                        learning.
Clarifies definitions of ``incarcerated   Students/Institutions/       Reflects current practice and sub-
 student'' and ``juvenile justice          Federal Government.          regulatory guidance and clarifies that
 facilities''.                                                          individuals in certain correctional
                                                                        facilities may be eligible for Pell
                                                                        grants, but limits the use of Pell
                                                                        grants to appropriate instructional
                                                                        expenses.
Amends definition of ``nonprofit          Institutions...............  Redundant language removed; no impact
 institution'' to delete reference to                                   anticipated.
 501(c)(3) tax status.
----------------------------------------------------------------------------------------------------------------
                           Reg Section 600.7--Conditions of Institutional Eligibility
----------------------------------------------------------------------------------------------------------------
Establishes that a student is not         Students/Institutions......  Impact minimal based on the small number
 considered to be ``enrolled in                                         of correspondence courses operating in
 correspondence courses'' until at least                                the country. Potential benefit to
 50 percent of the student's classes are                                institutions and students is that
 correspondence courses.                                                enrollment in a single or small number
                                                                        of correspondence courses does not cause
                                                                        a student to be counted against the
                                                                        institution for eligibility purposes.
                                                                        Provides greater flexibilities for
                                                                        students who are managing multiple life
                                                                        demands or for whom travel to the campus
                                                                        is difficult or for whom technology
                                                                        access is limited, by allowing them to
                                                                        participate in a small number of
                                                                        correspondence courses without putting
                                                                        title IV participation for the
                                                                        institution at risk.
----------------------------------------------------------------------------------------------------------------

[[Page 18677]]

 
                   Reg Section 600.10--Date, Extent, Duration, and Consequences of Eligibility
----------------------------------------------------------------------------------------------------------------
Limits Secretary's approval of direct     Students/Institutions/       Acknowledges that the Department's role
 assessment programs at the same           Federal Government.          in approving direct assessment programs
 academic levels to the first such                                      is limited to ensuring the integrity of
 program at an institution.                                             the title IV, HEA programs, and assumes
                                                                        that if an institution can disburse aid
                                                                        properly to students in one program at a
                                                                        given academic level, it is likely to be
                                                                        able to do so for additional programs.
                                                                        Ensures that an institution that creates
                                                                        a first new direct assessment program at
                                                                        a new academic level is reviewed by the
                                                                        Department to ensure appropriate
                                                                        administration of title IV funds.
                                                                        Encourages institutions that have
                                                                        demonstrated the ability to design and
                                                                        operate a direct assessment program to
                                                                        expand that model of instruction and
                                                                        enables institutions to more quickly
                                                                        respond to student and workforce needs.
                                                                        Reduces a potential barrier or reduces
                                                                        time required to establish a direct
                                                                        assessment program. A consequence of
                                                                        eliminating the requirement that the
                                                                        Secretary approve each new direct
                                                                        assessment program at the same academic
                                                                        level is that it may lead to the rapid
                                                                        expansion a direct assessment programs
                                                                        without the guardrail of the
                                                                        Department's review.
----------------------------------------------------------------------------------------------------------------
     Reg Section 600.20--Notice and application procedures for establishing, reestablishing, maintaining, or
                              expanding institutional eligibility and certification
----------------------------------------------------------------------------------------------------------------
Requires the Secretary to provide timely  Students/Institutions/       Benefits institutions and students by
 review of new program applications and    Federal Government.          allowing faster development of new
 enables institutions to start                                          programs, especially those responsive to
 advertising programs early enough to                                   workforce development needs. Reflects
 enroll a full cohort of students.                                      role of accreditors in assessing program
                                                                        quality and Department's intent to rely
                                                                        on accreditor's assessment except in
                                                                        rare circumstances related to the
                                                                        Department's statutory and regulatory
                                                                        requirements or specific requirements of
                                                                        the institution's PPA. Protects an
                                                                        institution from Department's failure to
                                                                        act on an application for new program
                                                                        approval and reduces the likelihood that
                                                                        delays on the Department's part will
                                                                        require an institution to navigate the
                                                                        State and accreditor approval process a
                                                                        second time.
----------------------------------------------------------------------------------------------------------------
                              Reg Section 600.21--Updating Application Information
----------------------------------------------------------------------------------------------------------------
Adds reporting requirements for (1) the   Institutions/Federal         With the elimination of the requirement
 addition of second and subsequent         Government.                  for the Department to approve subsequent
 direct assessment programs at the same                                 programs, this allows the Department to
 academic level; and (2) written                                        monitor the growth and development of
 arrangements with ineligible                                           direct assessment programs and written
 institutions or organizations to                                       arrangements. Also allows cross-checking
 provide 25 percent or more of an                                       with accreditors to be sure program or
 eligible program.                                                      arrangement has approval.
----------------------------------------------------------------------------------------------------------------
                         Reg Section 600.52 and 600.54 (related to Foreign Institutions)
----------------------------------------------------------------------------------------------------------------
Amended to permit written arrangements    Students/Institutions/       Benefits students by allowing them to
 with an eligible institution in the       Federal Government.          take Federal student loans to enroll at
 United States to provide no more than                                  certain foreign institutions but retain
 25 percent of a student's program.                                     the ability to take a limited number of
                                                                        courses in the U.S., such as during
                                                                        summer breaks. Also enables title IV-
                                                                        participating students enrolled at
                                                                        foreign institutions to pursue
                                                                        qualifying internships or externships in
                                                                        the United States.
Amended to permit written arrangements    Students/Foreign             Allows students at eligible foreign
 between a foreign institution and an      Institutions/Federal         institutions to take courses at other
 ineligible entity for no more than 25     Government.                  approved foreign institutions in that
 percent of a student's program;                                        country, thus benefiting from the same
 provided that the ineligible entity                                    opportunities as their international
 satisfies definition of ``foreign                                      peers enrolled at foreign schools.
 institution''.                                                         Broadens educational opportunities
                                                                        available to U.S. students at foreign
                                                                        institutions while maintaining
                                                                        reasonably equivalent quality. However,
                                                                        while the regulations require the
                                                                        ineligible institution to meet the
                                                                        requirements of the foreign country in
                                                                        which it is located, these arrangements
                                                                        would not be overseen by a recognized
                                                                        accrediting agency or the Department,
                                                                        outside of the regulatory requirements,
                                                                        which may make it difficult to ensure
                                                                        academic quality of the coursework
                                                                        offered by the ineligible foreign
                                                                        institution.
----------------------------------------------------------------------------------------------------------------
                                         Reg Section 668.2--Definitions
----------------------------------------------------------------------------------------------------------------
Eliminates definition of Academic         None.......................  ACG program is no longer authorized by
 Competitiveness Grant (ACG).                                           HEA. Removing definition has no impact
                                                                        on students or institutions.
Amends ``full-time student'' to define    Students/Institutions/       Provides clarity for institutions
 requirements for subscription-based       Federal Government.          regarding subscription-based models and
 programs and to prevent an institution                                 how they can be structured in order to
 offering such a program from including                                 permit students to receive title IV, HEA
 repeated courses for which a student                                   assistance.
 has already received a passing grade in
 a student's enrollment status.
Defines ``subscription-based program''    Students/Institutions/       Benefits all parties by clarifying how
 for title IV disbursement purposes as     Federal Government.          title IV aid disbursements work for
 standard or non-standard term direct                                   subscription-based programs. Provides
 assessment program for which an                                        flexibility for students to take
 institution charges a student for a                                    advantage of self-pacing inherent in
 term with the expectation that the                                     this program model while limiting
 student completes a specified number of                                potential for abuse by requiring
 credit hours within the term. Clarifies                                completion before subsequent
 that no specific timeframe applies for                                 disbursements of aid. Some protection
 the terms and that students must                                       for students with possibility of one
 complete a cumulative number of credit                                 single subscription period for catch-up
 hours (or the equivalent) during or                                    work before loss of title IV
 following the term before receiving                                    eligibility. Clarity provided by
 another disbursement of title IV funds.                                definition may increase the
                                                                        establishment of direct assessment
                                                                        programs, to the benefit of the
                                                                        institutions that offer them, and as
                                                                        options for students, including the non-
                                                                        traditional students that have taken
                                                                        advantage of existing CBE programs.
                                                                        Provides an opportunity for students who
                                                                        fall behind in a subscription-based
                                                                        program to catch up and get back on
                                                                        track.

[[Page 18678]]

 
Requires institutions to establish a      Students/Institutions/       Provides consistency for students
 single enrollment status that applies     Federal Government.          regarding expectations for completion of
 to a student throughout his or her                                     coursework in a subscription-based
 enrollment in a subscription-based                                     program. Offers clarity to institutions
 program, with the student able to                                      regarding requirements for structuring
 change their enrollment status once in                                 such programs in order to ensure access
 an academic year.                                                      to Federal aid. Improves program
                                                                        integrity by limiting options for
                                                                        students to avoid completion
                                                                        requirements through changes in
                                                                        enrollment status.
Explains method for determining number    Students/Institutions/       Benefits institutions by clarifying how
 of credit hours (or the equivalent)       Federal Government.          to match disbursements to pace of each
 that must be completed before                                          student's progress. Benefits the Federal
 subsequent disbursements of title IV                                   government by establishing a clear
 aid.                                                                   completion standard for students to meet
                                                                        before they receive subsequent
                                                                        disbursements of Federal aid. Benefits
                                                                        students by allowing for an additional
                                                                        term to ``catch-up'' on coursework
                                                                        before losing title IV eligibility.
Modifies definition of ``third party      None.......................  Reflects current practices and
 servicer'' to use ``originating loans''                                terminology. No impact anticipated on
 instead of ``certifying loan                                           any party.
 applications''.
----------------------------------------------------------------------------------------------------------------
                                        Reg Section 668.3--Academic Year
----------------------------------------------------------------------------------------------------------------
Revises definition of ``week of           Students/Institutions/       Benefits institutions by clarifying
 instructional time'' as it pertains to    Federal Government.          requirements for building instructional
 an institution's ``academic year.'' One                                calendars in programs offered
 part of the definition would cover                                     asynchronously through distance
 traditional postsecondary programs and                                 education and may spur additional
 remain unchanged and the other would                                   innovation given better understanding of
 cover programs using asynchronous                                      compliance thresholds. Benefits students
 coursework through distance education                                  and the Federal government by ensuring
 or correspondence courses. For these                                   that institutions make appropriate
 courses, defines it as a week in which                                 instructional materials and support
 the institution ``makes available the                                  available during instructional periods
 instructional material, other                                          in exchange for Federal student aid.
 resources, and instructor support
 necessary for academic engagement and
 completion of course objectives''.
----------------------------------------------------------------------------------------------------------------
                     Reg Section 668.5--Written Arrangements to Provide Educational Programs
----------------------------------------------------------------------------------------------------------------
Clarifies that institutions using         Institutions/Faculty/        Enables institutions to keep pace with
 written arrangements may align or         Students/Accrediting         changing needs of employers and protects
 modify their curriculum to meet           Agencies.                    non-accredited providers from having
 requirements of industry advisory                                      their educational programs or
 boards or other industry-recognized                                    technologies manipulated by others. This
 credentialing bodies rather than going                                 is important since providers through
 through a mandatory, and typically                                     written arrangements must prove the
 lengthy, shared governance decision-                                   efficacy of their programs, so outsiders
 making process.                                                        should not be allowed to modify or
                                                                        change the program in a way that could
                                                                        influence those results. Ensures that
                                                                        students are better prepared for entry
                                                                        to the workforce in certain occupations.
                                                                        Could create tension with faculty and
                                                                        reduce their influence over certain
                                                                        aspects of the curriculum but could
                                                                        require proper oversight by partnering
                                                                        institutions and accreditors to reduce
                                                                        risk of harm to students.
Clarifies calculation of percentage of    Students/Institutions/       Ensures that degree-granting institutions
 program that could be provided by an      Accreditors/Ineligible       retain academic control of a program and
 ineligible institution.                   Entities involved in         maintain the responsibility for
                                           Written Arrangements.        delivering at least half of an academic
                                                                        program. Setting out a clear methodology
                                                                        makes clear when and how written
                                                                        arrangements may be used but ensures
                                                                        that colleges and universities are not
                                                                        simply outsourcing instructional
                                                                        responsibilities to non-accredited
                                                                        providers. Benefits institutions by
                                                                        improving speed with which accrediting
                                                                        agencies review and approve such
                                                                        arrangements. While the accrediting
                                                                        agency can deny the request for a
                                                                        written arrangement, increasing the
                                                                        speed for review and expanding the
                                                                        options for staff that can review these
                                                                        arrangements could make for a less
                                                                        robust or rigorous review. Benefits
                                                                        students and institutions by allowing
                                                                        institutions to engage other providers,
                                                                        such as unions and apprenticeship
                                                                        providers, who may have specialized
                                                                        facilities and uniquely trained
                                                                        employees who can serve as teachers and
                                                                        mentors. Benefits institutions by
                                                                        allowing them to offer educational
                                                                        opportunities or technologies that are
                                                                        developed by outside providers who may
                                                                        be better situated to invest in new
                                                                        technologies due to their opportunities
                                                                        to deliver them to a larger population
                                                                        of students than are typically at a
                                                                        single institution.
Clarifies that written arrangements are   Institutions/Students......  Offers clarity for institutions to ensure
 not necessary for certain other                                        that use of written arrangements does
 interactions with outside entities.                                    not result in fewer credits being
 Specifically, the limitations in Sec.                                  accepted through transfer or awarded
 668.5 do not apply to the transfer of                                  through prior learning assessment.
 credits, use of prior learning                                         Benefits students by reducing costs and
 assessment or other non-traditional                                    time to completion for those who bring
 methods of providing academic credit,                                  pre-existing knowledge and skills to the
 or the internship or externship portion                                classroom.
 of a program.
Removes 50 percent limitation on written  Institutions...............  Allows greater opportunities for
 arrangements between two or more                                       institutions to share administrative or
 eligible institutions under joint                                      instructional resources when under
 ownership.                                                             shared ownership.
Ineligible entities must demonstrate      Institutions...............  Allows institutions to use third parties
 experience in delivery and assessment                                  to deliver portions of programs, to
 of the program or portion the                                          integrate advanced technologies, enable
 ineligible entity delivers and that the                                student access to specialized facilities
 programs have been successful in                                       and experts, expand the number of
 meeting stated learning objectives.                                    learning options available to students
                                                                        and potentially increase the number of
                                                                        students an institution can responsibly
                                                                        serve. While written arrangements may
                                                                        reduce the cost of delivering certain
                                                                        kinds of instruction, constructing
                                                                        specialized facilities, or developing
                                                                        new technologies, the written
                                                                        arrangement will have associated costs
                                                                        that could reduce revenue. Students
                                                                        could have access to newer technologies
                                                                        or higher quality instruction than could
                                                                        be provided by the institution, but
                                                                        there are risks that the outside
                                                                        provider could be of lower quality and
                                                                        have less of a vested interest in the
                                                                        student's success.
----------------------------------------------------------------------------------------------------------------

[[Page 18679]]

 
                                      Reg Section 668.8--Eligible Programs
----------------------------------------------------------------------------------------------------------------
Eliminates consideration of ``out-of-     Institutions...............  Aligns the Department's requirements with
 class'' hours for purposes of                                          those of most licensing boards and
 performing clock-to-credit conversions                                 simplifies the conversion process.
 for non-degree programs that are                                       Enables students to meet licensure
 subject to those requirements.                                         requirements in programs that are title
                                                                        IV eligible and helps institutions by
                                                                        allowing them to comply with the
                                                                        reasonable length requirements while
                                                                        also allowing credit hour to clock hour
                                                                        conversions. May result in additional
                                                                        title IV funds expenditures for programs
                                                                        currently lacking any out-of-class
                                                                        components.
----------------------------------------------------------------------------------------------------------------
                                 Reg Section 668.10--Direct Assessment Programs
----------------------------------------------------------------------------------------------------------------
Revises definition of ``direct            Institutions...............  Simplifies and clarifies requirements
 assessment'' and eliminates separate                                   related to direct assessment programs.
 definitions of key terms for direct
 assessment programs, referring instead
 to requirements elsewhere in
 regulations.
Eliminates certain prohibitions on types  Students/Institutions/       Allows institutions to provide students
 of coursework that can be offered         Federal Government.          with more options so that learners can
 through direct assessment, including                                   select the learning modality that best
 remedial coursework, and enables                                       meets their needs. Allows students to
 ``hybrid'' programs to provide students                                take some traditional courses even if
 options to take some direct assessment                                 some of their other courses are direct
 courses and some traditional or                                        assessment courses. Recognizes that co-
 distance learning courses.                                             remediation is a promising practice, and
                                                                        direct assessment classes may increase
                                                                        the number of students who can
                                                                        participate in co-remediation programs
                                                                        while taking other classes.
Codifies current policy by adding         Students/Institutions/       Benefits students and taxpayers by
 prohibition on paying title IV, HEA       Federal Government.          discouraging institutions from charging
 funds for credit earned solely through                                 excessive fees for conducting prior
 prior learning assessment.                                             learning assessment and ensures that
                                                                        taxpayer dollars are not being used to
                                                                        pay institutions for instruction that
                                                                        they are not providing.
----------------------------------------------------------------------------------------------------------------
                                  Reg Section 668.13--Certification Procedures
----------------------------------------------------------------------------------------------------------------
Automatic renewal of an institution's     Institutions...............  Benefits institutions by setting a time
 certification if the Secretary does not                                limit for the uncertainty of month-to-
 make a decision on an application for                                  month eligibility. With the option of
 recertification submitted no later than                                provisional recertification, the
 90 calendar days before its PPA expires                                Department retains sufficient control
 within 12 months.                                                      over recertification process but cannot
                                                                        use certification delays to prevent
                                                                        institutions from starting new programs
                                                                        or making other necessary changes.
----------------------------------------------------------------------------------------------------------------
                               Reg Section 668.14--Program Participation Agreement
----------------------------------------------------------------------------------------------------------------
Clarifies requirements related to making  Institutions...............  Benefits institutions by reducing the
 data available to prospective students                                 amount of information that must be
 about the most recent employment                                       disclosed to students in order to enable
 statistics, graduation statistics, or                                  institutions to include graduation rates
 other information to substantiate the                                  or employment statistics in their
 truthfulness of its advertising that                                   marketing materials. Benefits students
 uses job placement rates to attract                                    by improving the accuracy and
 students.                                                              truthfulness of published outcomes data,
                                                                        and by making an appropriate amount of
                                                                        information available to students
                                                                        without overwhelming them with
                                                                        extraneous data. Maintains the
                                                                        requirement for institutions to make
                                                                        available any information needed to
                                                                        substantiate the truthfulness of the
                                                                        institution's advertisements about job
                                                                        placement or graduation rates.
Eliminates requirements to provide the    ...........................  Considered redundant to requirement to
 source of such statistics, associated                                  provide data and other information to
 timeframes, and methodology.                                           substantiate truth in the institution's
                                                                        advertising.
Aligns program length to occupational     Students/institutions......  Allows institutions to create programs
 requirements. Limits program length to                                 that meet professional licensure
 150 percent of minimum program length                                  requirements in multiple States, thus
 for the State in which the institution                                 expanding the potential pool of students
 is located or 100 percent of the                                       served and the number of job
 minimum program hours for licensure in                                 opportunities available to graduates.
 an adjoining State.                                                    Students benefit by increased
                                                                        occupational mobility and, in some
                                                                        cases, being able to go to school in a
                                                                        lower cost State but work upon
                                                                        graduation in a different State where
                                                                        wages are higher. Conversely, if an
                                                                        institution increases program length, a
                                                                        student may have to pay more to meet
                                                                        requirements of a State in which the
                                                                        student does not plan to work.
Requires updates to teach-out plans       Students/Institutions/       Allows accrediting agencies to gather
 after specified negative events.          Accrediting Agencies.        more information from institutions that
                                                                        will be helpful to triad partners in
                                                                        assisting students find transfer and
                                                                        teach-out opportunities, and retain
                                                                        access to their academic records, when a
                                                                        school closure occurs. Requires
                                                                        institutions to update teach-out plans
                                                                        in instances where risk of closure
                                                                        increases.
----------------------------------------------------------------------------------------------------------------
                             Reg Section 668.15--Factors of Financial Responsibility
----------------------------------------------------------------------------------------------------------------
Changes section title to emphasize        Institutions/Federal         Codifies current practice requiring
 changes in ownership or control.          Government.                  factors of financial responsibility to
                                                                        be addressed when there is a change in
                                                                        ownership or control of an institution.
----------------------------------------------------------------------------------------------------------------
                    Reg Section 668.22--Treatment of Title IV Funds When a Student Withdraws
----------------------------------------------------------------------------------------------------------------
Adds several exceptions to determination  Students/Institutions......  Benefits institutions by not requiring
 a student has withdrawn, including                                     them to return title IV funds simply
 early completion of requirements for                                   because a student is a faster learner.
 graduation, completion of module(s)                                    Benefits students by allowing them to
 containing 50 percent or more of the                                   complete courses at a quicker pace and
 days in the payment period, or                                         still retain full title IV eligibility.
 completion of coursework equal to or                                   Could improve completion rates and
 greater than the institution's                                         reduce time to completion if students
 requirements for a half-time student.                                  are not required to participate in busy
                                                                        work if they finish the legitimate work
                                                                        required by the course more quickly than
                                                                        other students.

[[Page 18680]]

 
Applies 45-day time limit on delaying     Students/Institutions......  Improves consistency of regulations as
 withdrawal for students who cease                                      they apply to programs with different
 attendance to standard term programs.                                  types of academic calendars and
 Eliminates references to modules for                                   addresses concerns about long periods of
 nonterm programs and revises timeframes                                non-attendance by students. Ensures that
 for allowing students to provide                                       institutions perform return of title IV
 written confirmation of intent to                                      calculations when students cease
 return without beginning an approved                                   attendance for long periods of time
 leave of absence.                                                      without beginning an approved leave of
                                                                        absence.
Clarifies requirements for determining    Institutions/Federal         Simplifies and clarifies requirements for
 the number of days in the payment         Government.                  establishing the denominator of the
 period or period of enrollment for a                                   return of title IV funds calculation
 student who is enrolled in a program                                   when a student is enrolled in a program
 offered using modules. Requires an                                     that uses modules. May result in a
 institution to include all the days in                                 greater amount of title IV funds being
 modules that included coursework used                                  returned for a limited number of
 to determine the student's eligibility                                 students who enroll in numerous modules
 for title IV, HEA assistance.                                          during a payment period or period of
                                                                        enrollment but fail to attend those
                                                                        modules.
Eliminates references to programs under   ...........................  No impact anticipated for technical
 which financial aid is no longer                                       changes incorporating current policy.
 disbursed. Adds Iraq and Afghanistan
 Service Grants to types of aid subject
 to the return of title IV funds
 calculation and clarifies order for
 application of returned funds.
----------------------------------------------------------------------------------------------------------------
                                Reg Section 668.28--Non-title IV Revenue (90/10)
----------------------------------------------------------------------------------------------------------------
Removes references to net present value   ...........................  No impact anticipated for technical
 when including institutional loans in                                  changes.
 the 90/10 calculation.
----------------------------------------------------------------------------------------------------------------
                               Reg Section 668.34--Satisfactory Academic Progress
----------------------------------------------------------------------------------------------------------------
Eliminates pace requirements for          Students/Institutions/       Reduces burden on institutions for making
 satisfactory academic progress for        Federal Government.          pace-based title IV calculations for
 subscription-based programs.                                           students in subscription-based programs.
                                                                        Improves flexibility for students by
                                                                        allowing them to determine the pace of
                                                                        their learning without certain limits.
Allows maximum timeframe for              Students/Institutions/       Increases flexibility for institutions
 undergraduate programs measured in        Federal Government.          and students and provides new options
 credit hours to be expressed in                                        for monitoring student progress when
 calendar time in addition to current                                   traditional semester-based time
 credit hour measurement. Limited to 150                                constraints conflict with a student's
 percent of published length of program.                                work or life responsibilities. However,
                                                                        sets outer limit for use of aid to
                                                                        ensure that students are progressing
                                                                        through their program and using Federal
                                                                        student aid funds efficiently.
----------------------------------------------------------------------------------------------------------------
                     Reg Section 668.111--Scope and Purpose and 668.113--Request for Review
----------------------------------------------------------------------------------------------------------------
Indicates that, for final audit or        Institutions/Federal         Conforms with changes to definitions of
 program review determinations related     Government.                  ``distance education'' and ``credit
 to classification of a program as                                      hour'' and provides regulatory clarity
 distance education or the assignment of                                that accreditors are the triad member
 credit hours, the Secretary will rely                                  given the responsibility of monitoring
 on institution's accrediting agency or                                 program quality and establishing
 State agency requirements.                                             standards for academic quality, faculty
                                                                        credentials, and effective distance
                                                                        learning.
----------------------------------------------------------------------------------------------------------------
                                      Reg Section 668.164--Disbursing Funds
----------------------------------------------------------------------------------------------------------------
Establishes disbursement requirements     Students/Institutions/       Conforming change with disbursement
 specific to subscription-based            Federal Government.          pattern for subscription-based programs
 programs. Sets the later of 10 days                                    in Sec.   668.2 to enforce requirement
 before the first day of classes in the                                 that no disbursements are made until the
 payment period or the date the student                                 student has completed the appropriate
 completed the cumulative number of                                     credit hours.
 credit hours associated with student's
 enrollment status in all prior terms
 attended.
----------------------------------------------------------------------------------------------------------------
                                          Reg Section 668.171--General
----------------------------------------------------------------------------------------------------------------
Allows the Secretary to determine an      Institutions/Federal         Codifies current practice; no impact
 institution is not financially            Government.                  expected.
 responsible if the institution does not
 submit its financial and compliance
 audits by the date permitted and manner
 required under Sec.   668.23.
----------------------------------------------------------------------------------------------------------------
                                      Reg Section 668.174--Past Performance
----------------------------------------------------------------------------------------------------------------
Adds the term ``entity'' or ``entities''  Institutions/Federal         Allows the Department to consider more
 to various provisions as ownership may    Government.                  ownership structures when evaluating
 be vested in an entity or an individual.                               past performance.
Clarifies that institution is not         Institutions/Federal         Allows the Department to consider whether
 financially responsible if a person who   Government.                  a person or entity affiliated with an
 exercises substantial ownership or                                     institution has overseen the precipitous
 control over the institution also                                      closure of another institution with the
 exercised substantial ownership or                                     goal of preventing an institution from
 control over another institution that                                  being substantially owned or controlled
 closed without a viable teach-out plan                                 by persons or entities that would cause
 or agreement approved by the                                           the institution to be financially
 institution's accrediting agency and                                   irresponsible and close without
 faithfully executed by the institution.                                providing to students a plan to finish
                                                                        their education in place or at another
                                                                        institution.
----------------------------------------------------------------------------------------------------------------
                           Reg Section 668.175--Alternative Standards and Requirements
----------------------------------------------------------------------------------------------------------------
Eliminates reference to fax transmission  None.......................  Change to recognize technological
                                                                        advancements. No impact.
----------------------------------------------------------------------------------------------------------------

    A key change that would result from this regulation is greater 
certainty among institutions about how to implement innovative programs 
without running afoul of title IV disbursement requirements. 
Institutions are not

[[Page 18681]]

inherently opposed to regulations, but instead crave information that 
will enable them to be sure they are complying with regulations that 
are otherwise difficult to interpret. The new proposed definitions 
would ensure a shared understanding of the various kinds of programs an 
institution can provide and the rules for disbursing title IV aid to 
students enrolled in those programs. Greater clarity in our regulations 
would reduce the likelihood that student and taxpayer dollars will be 
wasted or that institutions will face undeserved negative program 
review findings and financial liabilities that could have devastating 
consequences to the institution and its students.

Students

    Students will benefit from the expanded program options available 
when institutions understand the ground rules for offering new kinds of 
programs and when they don't fear surprises at a program review. 
Despite being permitted by the HEA for decades, there are relatively 
few competency-based programs available to students, and even fewer 
direct assessment programs. Yet these types of programs may be very 
appealing to adult learners who bring considerable knowledge and skills 
to their programs. Expansion of subscription-based programs provides 
students with the scheduling flexibility they may need if managing 
responsibilities from school, work, and family. A clearer framework for 
administering title IV aid to students enrolled in competency-based 
programs on a subscription basis may increase institutions' willingness 
to develop new programs.
    The proposed regulations eliminate the financial penalties that 
students and institutions would otherwise face when a student 
progresses quickly through a course and completes it early. Students, 
especially non-traditional students, could benefit from the flexible 
pacing and different model for assessing progress offered by this type 
of program. The emphasis on flexibility, workforce development, and 
innovative educational approaches could be beneficial to students and 
the national economy.
    According to U.S Census data,\40\ for the civilian non-
institutionalized population, there were approximately 44 million 
adults between the ages of 25 and 49 with high school or some college 
as their highest educational level in 2018. In addition to students 
outside that age range and those with a degree who may want to pursue 
competency-based graduate certificates or degrees to enhance their 
careers, even a small percentage of that group represents a sizeable 
potential market for expansion of competency-based or other distance 
education programs. While a variety of factors may explain individual 
education attainment, to the extent that traditional programs were not 
suitable for some students' academic and employment goals, competency-
based programs may provide an appealing option. However, evaluating the 
quality of new programs may be challenging, and it could be difficult 
to determine how much a student should learn to be awarded a certain 
amount of credit, as opposed to more traditional delivery models that 
award aid and mark progress by the number of hours during which a 
student is scheduled to sit in a seat (many institutions do not take 
attendance, and therefore do not monitor how much time an individual 
student actually sits in a seat). As with all programs, students would 
need to carefully consider if specific competency-based or distance 
education programs are appropriate for their objectives and learning. 
Distance learning, subscription-based programs, and other self-paced 
options require a higher degree of academic discipline on the part of 
students, which may pose challenges to students who are already 
burdened by work and family responsibilities.\41\ For those who are so 
motivated, they could complete their program more quickly. For those 
who struggle to stay engaged, innovative learning models emphasizing 
coach or mentor support may improve retention and completion in online 
programs where students with poor self-directed learning skills might 
otherwise fail.\42\ \43\
---------------------------------------------------------------------------

    \40\ U.S. Census Bureau, Table 1. Educational Attainment of the 
Population 18 Years and Over, by Age, Sex, Race, and Hispanic 
Origin: 2018. Available at www.census.gov/data/tables/2018/demo/education-attainment/cps-detailed-tables.html. Last accessed 
November 29, 2019.
    \41\ California Community College Chancellor's Office, 2017 
Distance Education Report, 2017, http://californiacommunitycolleges.cccco.edu/Portals/0/Reports/2017-DE-Report-Final-ADA.pdf.
    \42\ www.texaspolicy.com/new-study-less-expensive-competency-based-education-programs-just-as-good-as-traditional-programs/.
    \43\ Xu, D. and Xu, Y. March 2019. The Promises and Limits of 
Online Higher Education: Understanding How Distance Education 
Affects Access, Cost, and Quality. American Enterprise Institute.
---------------------------------------------------------------------------

    Another potential benefit for students in competency-based programs 
could be reduced costs to obtain a postsecondary credential. Western 
Governors University (WGU), for example, is known for its success in 
adopting this instructional approach, although it still disburses aid 
using a time-based model. In its 2018 annual report, WGU states that 
the average time to a bachelor's degree completion among its students 
is 2.5 years, which could generate substantial savings to students and 
taxpayers. An analysis done by Robert Kelchen \44\ based on 14 cost 
structures at 13 institutions for credits earned through portfolio or 
prior learning assessment found that significant savings could be 
generated, but they vary substantially among colleges. Potential 
savings for 3 credits varied from $127 to $1,270.\45\ The fee 
structure, amount of credits allowed to be obtained through these 
methods, the availability of federal aid, and the ability of students 
to pass those assessments with limited attempts all contribute to 
determining whether a competency-based approach would generate savings 
for a given student. The other pricing model, one that is supported by 
the proposed regulations, is subscription based pricing in which the 
potential savings relate to the number of credits a student completes 
during a subscription period and student's eligibility for financial 
aid in their specific program. Kelchen calculates the number of credits 
needed in a subscription period for students who receive a full Pell 
Grant and non-aided students to break even with traditional pricing 
models at 5 institutions that offer a subscription pricing option. 
These range from 6 credits for a non-aided student to 27 credits for a 
student in a bachelor's degree program who receives a full Pell 
Grant.\46\ The subscription periods and prices vary by institution and 
pricing policies may have been updated since the time of this analysis, 
but that idea that subscription pricing may result in cost savings for 
students depending upon the speed of their progress is still valid.\47\
---------------------------------------------------------------------------

    \44\ Robert Kelchen, The Landscape of Competency-Based 
Education--Enrollments, Demographics, and Affordability, January 
2015. Center for Higher Education Reform, American Enterprise 
Institute AEI Series on Competency-Based Higher Education. Available 
at www.aei.org/wp-content/uploads/2015/04/Competency-based-education-landscape-Kelchen-2015.pdf.
    \45\ Id, p. 11, Table 4 Cost Structures of Portfolio and Prior 
Learning Assessment Programs.
    \46\ Id, p.14. Table 5 Costs of Subscription-Based CBE Programs 
Compared to Other Online Providers.
    \47\ Western Governors University, WGU 2018 Annual Report, p. 
17. Available at www.wgu.edu/content/dam/western-governors/documents/annual-report/annual-report-2018.pdf.
---------------------------------------------------------------------------

    While more difficult to quantify, the Department also expects 
students would find benefits in programs they can complete more quickly 
in terms of reduced opportunity costs, which include wages lost when 
the student is in school rather than in the job for

[[Page 18682]]

which the student is preparing. Also, since student retention declines 
as time to degree completion expands, programs that enable students to 
finish more quickly are likely to increase credential completion.
    Of course, it could be the unique attributes of WGU, or the 
students attracted to the institution, that contribute to these 
results, and it is not yet known if the results would be replicated by 
other institutions that adopt the WGU model. A number of factors, 
including a given student's anticipated pace of learning, likelihood of 
completion, desired employment outcomes, personal motivation, and the 
range of options available to them will influence the return the 
student enjoys on their educational investment.
    Students would also benefit from the proposed changes to the 
definition of a week of instruction. Under the proposed regulations, 
institutions would be less likely to assign less substantive work to 
students (such as posting a blog or responding to a chat) simply to 
meet title IV requirements. Where these activities are substantive, 
they would likely continue to take place, but in many instances, these 
activities have been integrated into courses simply to provide evidence 
of ``regular and substantive'' interaction. Students who may otherwise 
be successful in distance learning can become frustrated if they are 
not allowed to move at their own pace because of requirements to post 
blogs, participate in chats, or answer questions that do not actually 
enhance learning.
    The Department provides additional detail related to burden 
estimates in the Paperwork Reduction Act section of this NPRM and none 
of the burden is assigned to students in that analysis.
Institutions
    Institutions should benefit from the proposed regulatory 
clarifications, especially those institutions that seek to expand 
competency-based and direct assessment learning options but are 
uncertain as to the Department's requirements for disbursing aid to 
students enrolled in those programs. A significant barrier to entry for 
institutions seeking to provide direct assessment programs is a lack of 
clarity regarding what the Department expects of these programs in 
order to approve them, and the slowness with which the Department has 
made decisions on applications submitted by institutions. Only a 
handful of institutions, as of 2019, have been approved by the 
Department to offer direct assessment programs. This indicates that 
either there is a lack of interest in offering direct assessment 
programs, or institutions are hesitant to invest in their development 
because approval requirements are too burdensome or uncertainties too 
great about what the Department and accreditors require. The proposed 
regulations would reduce burden and provide clarity to encourage more 
institutions to experiment with direct assessment programs. Under the 
proposed rule, the Department would be required to approve the first 
direct assessment program offered by an institution at a given 
credential level, but after that, only the accreditor would be required 
to review the program to ensure academic quality. Some institutions may 
aggressively seek approval for more direct assessment programs, while 
others may take a wait-and-see attitude until other institutions have 
forged new ground.
    In the short term, it is likely that institutions already approved 
to offer at least one direct assessment program would expand offerings 
since their experience well positions them to do so. According to the 
Department's data, there are only six institutions that have 
established direct assessment programs. Although these institutions may 
expand the number of direct assessment programs available, the 
Department anticipates that these programs would mostly attract 
students away from more traditional distance learning programs, but may 
not add significantly to the total number of students enrolled in 
postsecondary education. Students looking for a flexible postsecondary 
program can find many advantages through distance education already but 
may gravitate to direct assessment programs because of added 
advantages, including in pacing and format. The Department's 
assumptions about potential student growth related to the proposed 
regulations are described in the Net Budget Impact section of this 
analysis and we welcome comments about the number and source of future 
enrollees in such programs.
    However, over time, additional institutions may develop new direct 
assessment programs, especially if early adopters create demand among 
students for this new form of education. The Department projects that 
if new institutions engage in direct assessment, and those already 
approved to offer direct assessment programs launch new programs, there 
could be shifting of students from other programs to self-paced direct 
assessment programs. It is also possible that students not interested 
in current pedagogical models will find direct assessment programs to 
be attractive and will decide to enroll in a postsecondary program. 
This could increase the number of students who would qualify for Pell 
Grants or take Federal Direct Loans. While increased interest in direct 
assessment could result in higher title IV participation, it is 
possible that students enrolled in direct assessment programs would 
finish their programs more quickly, therefore reducing the amount of 
financial aid a student uses to complete his or her program.
    Changes to the limitations on the ability of clock hour programs to 
offer didactic instruction through distance learning may enable more 
individuals to enroll in these programs. In turn, this could increase 
the number of individuals qualified for State licensure or 
certification, and thus gainful employment, in licensed occupations. 
There are very few clock-hour programs that use distance learning to 
provide portions of the program since there are few State or 
professional licensing boards that permit distance learning for clock-
hour programs. However, for clock-hour programs permitted to 
incorporate distance learning, it is possible that more students could 
be served or that more students would persist to completion.
    The proposed regulations would more clearly define what constitutes 
a reasonable length for clock-hour programs and allow institutions to 
meet the licensure requirements of surrounding States, thus enabling 
greater student and workforce mobility. There are only a few States 
that have licensure requirements that are significantly longer than 
other States, but if programs in surrounding States increase their 
clock hours to meet those requirements, there could be small increases 
in cost and utilization of title IV, HEA assistance. On the other hand, 
if programs can be structured to ensure that students can work if they 
cross State lines, there could be cost savings since, under the status 
quo, a student who moves from one State to another may be required to 
start their program over in order to meet the clock-hour requirements 
since shorter-term ``completer programs'' are not typically approved by 
those States. Therefore, this regulation could reduce the cost of 
education for students who move from one State to the next and could 
increase worker mobility in fields that employ large numbers of 
workers, such as cosmetology and massage therapy.\48\ \49\
---------------------------------------------------------------------------

    \48\ www.bls.gov/ooh/personal-care-and-service/barbers-hairstylists-and-cosmetologists.htm.
    \49\ www.bls.gov/ooh/healthcare/massage-therapists.htm.
---------------------------------------------------------------------------

    Institutions would also benefit from simplifications to the formula 
for clock-

[[Page 18683]]

to-credit hour conversions. The proposed regulations would eliminate 
the need for institutions to consider the number of homework hours 
associated with each credit hour in programs that are subject to the 
conversion. This change would reduce administrative burden while 
allowing institutions to offer programs in credit hours that are more 
likely to transfer to other schools than clock hours, but still meet 
the clock-hour requirements of licensing boards by calculating clock-
hour equivalencies.
    As discussed further in the Paperwork Reduction Act of 1995 section 
of this preamble, the proposed regulations are expected to result in a 
net reduction in burden. In estimating costs and savings associated 
with these changes in burden, we assume that these activities are 
conducted by postsecondary administrators, which earn an average wage 
of $53.47.\50\ Throughout, to estimate the total costs and savings 
associated with these changes, we multiply wage rates by two to account 
for overhead and benefits. The elimination of the Net Present Value 
calculation related to the 90/10 rule is estimated to save -2,808 
hours, which would generate cost savings of approximately $300,000 
annually. The proposed regulations also impose burden related to 
reporting subsequent direct assessment programs, reporting about 
written arrangements, and demonstrating that ineligible institutions 
have the experience in the delivery and assessment of the program or 
portion thereof it is contracted to provide. Together, these provisions 
are estimated to impose 138 hours of burden annually for a cost of 
$15,000 using the same hourly rate of $53.47 multiplied by two for 
overhead and benefits. Together, the estimated net reduction in burden 
is -2,670 hours and $-285,000.
---------------------------------------------------------------------------

    \50\ www.bls.gov/oes/current/oes119033.htm.
---------------------------------------------------------------------------

Accrediting Agencies
    The proposed regulations recognize the primary role that 
accrediting agencies play in evaluating the quality of new programs and 
approving institutions to offer them. Although the Department's review 
of direct assessment programs focuses on an institution's technical 
ability to calculate and disburse title IV aid to students enrolled in 
these programs, accreditors have always had--and will continue to 
have--the responsibility of ensuring that these programs are rigorous 
and of high quality. In conjunction with the recently published 
Accreditation and State Authorization Regulations, one or more existing 
or new accrediting agencies may step forward to become a leader in the 
field for assessing and approving direct assessment programs, which 
could lead to more rapid expansion of direct assessment programs. 
Accrediting agencies will continue to play an important role in 
approving written arrangements covering between 25 and 50 percent of a 
program; however, changes already published in the accreditation 
regulations to allow these approvals to take place at the staff level, 
and requirements for accrediting agencies to approve or deny them 
within 90 days, could encourage more institutions to consider entering 
into written arrangements.
    Accrediting agencies play an important role in evaluating the 
quality of academic programs, including distance education programs, 
and will continue to play that role. These regulations do not create 
new responsibilities in this regard; however, until accrediting 
agencies have more experience in reviewing and approving competency-
based and direct assessment programs, the approval process could be 
somewhat more burdensome. Some agencies may also need to develop new 
standards to facilitate the evaluation of these programs, but many 
already have such standards in place. The Department welcomes 
information from accrediting agencies on existing standards and 
experience with evaluating such programs and any costs they anticipate 
from the proposed regulations. If growth in competency-based programs 
is more significant than anticipated, there could be an increase in 
accrediting agency workload, but it is possible that demand for 
approval of traditional programs would decline as interest shifts to 
competency-based or direct assessment programs.
    The Department provides additional detail related to burden 
estimates in the Paperwork Reduction Act section of this NPRM and does 
not estimate any additional burden to accrediting agencies from the 
proposed regulations.
Federal Government
    In the proposed regulations, the Federal government is reducing 
some of the complexity of administering Federal student aid and 
calculating return-to-title IV obligations. These regulations also 
reaffirm that it is accreditors--and not the Department--who are 
authorized by the HEA to establish and evaluate compliance with 
education quality standards, including when innovative delivery models 
challenge the status quo. The proposed regulations require the 
Secretary to provide a timely review of new program applications and 
limit the Secretary's approval of direct assessment programs at the 
same academic level to the first such program at an institution, both 
provisions designed to support the expansion of innovative educational 
programs.
Net Budget Impact
    We estimate that these proposed regulations would have a net 
Federal budget impact for Federal student loan cohorts between 2020-
2029, of $[-237] million in outlays in the primary estimate scenario 
and an increase in Pell Grant outlays of $1,021 million over 10 years, 
for a total net impact of $784 million. A cohort reflects all loans 
originated in a given fiscal year. 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. The 
Net Budget Impact is compared to a modified version of the 2020 
President's Budget baseline (PB2021) that adjusts for the recent 
publication of the final Borrower Defense, Gainful Employment, and 
Accreditation and State Authorization rules.
    The Department emphasizes that its estimates of transformations in 
higher education delivery that could occur as a result of these 
proposed regulations are uncertain. Similarly, the Department is 
constrained in its budget estimates by the limited data available to 
it. We estimate how institutions and students would respond to the 
regulatory changes, and we present alternative scenarios to capture the 
potential range of impacts on Federal student aid transfers. Similarly, 
we do not attempt to estimate effects based on evidence cited in this 
NPRM that students enrolled in similar programs have persisted longer, 
completed at higher rates, and finished in a shorter period of time 
with less debt. While increased enrollment and persistence could result 
in increased transfers to students in the form of Federal student aid 
grants and loans, it could also produce graduates better prepared to 
succeed in the workplace and encourage robust economic growth. The 
Administration's emphasis on workforce development may encourage more 
institutions to implement competency-based educational programs, which 
could improve employment outcomes and loan repayment performance.
    There is anecdotal evidence that competency-based education 
programs may have strong loan repayment performance. Looking again to 
WGU, an

[[Page 18684]]

institution that has been an early adopter of competency-based 
learning, we note that its three-year cohort default rates of 4.6 
percent for 2014, 4.1 percent for 2015, and 4.2 percent for 2016 \51\ 
are below the national average of 10.1 percent overall in 2016 (6.6 
percent for private, 9.6 percent for public, and 15.2 percent for 
proprietary institutions).\52\ Comparatively, Capella University, 
another leader in competency-based education, had a cohort default rate 
of 6.5 percent in 2015 and 6.8 percent in 2016.\53\ Factors that could 
lead to lower defaults among institutions employing innovative learning 
models--and in particular when those models are used to provide 
graduate education--may be that they would attract older students who 
are employed and are seeking specific credentials for advancement or a 
career change. These individuals may be more likely to have resources 
(including those provided by current employers) to reduce the need to 
borrow and to repay any loans they need to take. On the other hand, the 
non-traditional students that may be the primary market for competency-
based learning or direct assessment may have employment and family 
obligations that could make them less likely to complete their 
programs, potentially increasing their default risk.
---------------------------------------------------------------------------

    \51\ U.S. Department of Education, Official Cohort Default Rates 
for Schools, PEPS300.xls available at www2.ed.gov/offices/OSFAP/defaultmanagement/cdr.html.
    \52\ U.S. Department of Education, Comparison of FY 2016 
Official National Cohort Default Rates to Prior Two Official Cohort 
Default Rates available at www2.ed.gov/offices/OSFAP/defaultmanagement/schooltyperates.pdf. Accessed February 21, 2020.
    \53\ U.S. Department of Education, Official Cohort Default Rates 
for Schools, PEPS300.xls available at www2.ed.gov/offices/OSFAP/defaultmanagement/cdr.html.
---------------------------------------------------------------------------

    An additional complicating factor in developing these estimates are 
the related regulatory changes on which the committee reached consensus 
in this negotiated rulemaking that we proposed in separate notices of 
proposed rulemaking. The budget impacts estimated here are in addition 
to the potential increases attributed to the accreditation changes 
promulgated in the final rule published November 1, 2019 that are 
reflected in the PB 2021 baseline.\54\
---------------------------------------------------------------------------

    \54\ 84 FR 58834.
---------------------------------------------------------------------------

    The main budget impacts estimated from these final regulations come 
from changes in loan volumes and Pell Grants disbursed to students if 
these new delivery models were to attract an increased number of 
students who receive title IV, HEA funds. The Department believes that 
much of the growth in this area will come from future students that 
shift from more traditional ground-based or distance learning programs 
to those offered using competency-based learning or direct assessment 
methods. In developing the primary estimate, the Department does not 
estimate the types of programs and institutions students who choose 
competency based education may come from or the potential cost 
differential between those programs, as further discussed after Table 
4. Instead, we assume that the growth associated with programs that are 
developed or expanded in part because the proposed regulations make it 
easier to administer title IV aid to such programs comes from students 
who would not otherwise have borrowed to attend a different type of 
program and apply an average level of borrowing to each estimated 
enrollee. The Department believes that many of the students who enroll 
in competency based education will do so as a substitute for a 
different type of program for which they likely would receive some form 
of title IV aid, but there will be some small increase in enrollment 
from students who either not have pursued postsecondary education or 
who would not have received title IV aid for their program. 
Additionally, the alternate budget scenarios consider the possibility 
that the implementation of new pedagogical and delivery models could 
result in more or less new students being interested in pursuing a 
postsecondary credential. Expansion of subscription-based programs, 
provisions in these regulations that would encourage innovation, the 
growth of workforce development programs, and the new methods of 
delivery may appeal, in particular, to non-traditional students. Tables 
3.A to 3.E illustrate the changes in title IV grant and loan volume 
developed for use in estimating the net budget impact of these proposed 
regulations for the primary scenario, with discussion about underlying 
assumptions following the tables.
    In order to have a common basis for the Pell Grant and loan 
assumptions and to facilitate comment, we started the estimate with an 
assumption about the number of additional programs that would be 
established because of the combined effect of the proposed regulations.

                                Table 3.A--Assumptions About Cumulative Number of Additional Programs by Size of Program
--------------------------------------------------------------------------------------------------------------------------------------------------------
              Size of program                  2021       2022       2023       2024       2025       2026       2027       2028       2029       2030
--------------------------------------------------------------------------------------------------------------------------------------------------------
25........................................         12         36         80        150        225        275        325        350        415        435
75........................................          5         15         35         55         90        105        128        135        160        180
150.......................................          3         12         26         40         68         75         90        113        120        128
350.......................................          3         10         20         28         40         52         60         70         78         84
750.......................................          3          8         14         20         30         38         48         56         65         70
1,500.....................................          0          3          5          9         12         16         20         24         26         30
--------------------------------------------------------------------------------------------------------------------------------------------------------

    As seen in Table 3.A, we expect the current trends of distance 
education programs capturing an increasing share of students to 
continue, and perhaps to accelerate as institutions and accreditors 
become more experienced in establishing or evaluating these programs. 
We also expect more institutions to engage in competency-based learning 
and direct assessment, which may or may not be delivered online. The 
initial distribution of programs by enrollment size uses information 
from the 2018 AIR survey and the 2019 survey; \55\ however, we 
acknowledge that the results of that survey may be biased in that we 
expect the small proportion of institutions interested in starting CBE 
or direct assessment programs were more likely to respond. Nonetheless, 
these are the best data available to us, and we projected the results 
of that survey onto the postsecondary system as a whole. We assumed, 
based on the 2018 and 2019 survey data, that the majority of programs 
will be small, but assumed that over time larger programs would evolve.
---------------------------------------------------------------------------

    \55\ American Institutes for Research, State of the Field--
Findings from the 2019 National Survey of Postsecondary Competency-
Based Education, available at www.air.org/sites/default/files/National-Survey-of-Postsecondary-CBE-Lumina-October-2019-rev.pdf.

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

[[Page 18685]]

    In addition, as institutions become more comfortable with using 
written agreements to access facilities and experts that private sector 
organizations and unions make available, there could be growth in 
career and technical education programs that are currently limited due 
to the high cost of constructing facilities, procuring equipment and 
hiring faculty qualified to teach in those programs.\56\ As more 
hospitals and health care facilities require nurses to have bachelor's 
degrees, we expect to see continued growth of RN to BSN programs, which 
can be delivered using CBE or direct assessment because students in 
these programs are typically required to be working in the field, thus 
negating the need for the institution to provide clinical placements.
---------------------------------------------------------------------------

    \56\ Shulock, N., Lewis, J., & Tan, C. (2013). Workforce 
Investments: State Strategies to Preserve Higher-Cost Career 
Education Programs in Community and Technical Colleges. California 
State University: Sacramento. Institute for Higher Education 
Leadership & Policy.
---------------------------------------------------------------------------

    Other factors that support the increase in programs are recent 
regulatory developments with respect to accreditation and no 
requirement for approval of new delivery methods as a substantive 
change. The provisions requiring the Secretary to provide a timely 
review of new program applications and to limit the Secretary's review 
to the first competency-based education program at a given academic 
level could also accelerate the process of establishing programs.
    We then had to develop an assumption for how many of the additional 
programs would be undergraduate or graduate programs for the purposes 
of determining how many would potentially serve Pell recipients and 
subsidized loan borrowers. Of the 512 programs described in the 2018 
survey, approximately 17 percent were identified as graduate programs 
and of the 588 programs described in the 2019 survey, 16 percent were 
graduate programs. However, competency-based programs could be a good 
fit for working adults wanting a self-paced program to earn a graduate 
credential, so we assumed that that the distribution of undergraduate 
versus graduate programs would change over time, especially among 
smaller programs, as shown in Table 3.B.

                                            Table 3.B--Undergraduate Share of Cumulative Additional Programs
--------------------------------------------------------------------------------------------------------------------------------------------------------
              Size of program                2021 (%)   2022 (%)   2023 (%)   2024 (%)   2025 (%)   2026 (%)   2027 (%)   2028 (%)   2029 (%)   2030 (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
25........................................         83         78         70         65         60         55         50         50         45         45
75........................................         83         78         70         65         60         60         60         60         60         60
150.......................................         83         78         70         65         60         60         60         60         60         60
350.......................................         83         80         75         75         75         70         70         70         70         70
750.......................................         83         80         80         80         75         75         75         75         75         75
1,500.....................................         83         83         80         80         78         78         75         75         75         75
--------------------------------------------------------------------------------------------------------------------------------------------------------

    This resulted in an assumed number of additional undergraduate and 
graduate students who may receive Pell Grants or take loans.

                                                 Table 3.C--Number of Additional Undergraduate Students
--------------------------------------------------------------------------------------------------------------------------------------------------------
              Size of program                  2021       2022       2023       2024       2025       2026       2027       2028       2029       2030
--------------------------------------------------------------------------------------------------------------------------------------------------------
25........................................        257        702      1,400      2,438      3,375      3,781      4,063      4,375      4,669      4,894
75........................................        280        878      1,838      2,681      4,050      4,725      5,738      6,075      7,200      8,100
150.......................................        374      1,404      2,730      3,900      6,075      6,750      8,100     10,125     10,800     11,520
350.......................................        813      2,744      5,250      7,350     10,500     12,740     14,700     17,150     19,110     20,580
750.......................................      1,743      4,800      8,400     12,000     16,875     21,375     27,000     31,500     36,563     39,375
1,500.....................................  .........      3,735      6,000     10,800     14,040     18,720     22,500     27,000     29,250     33,750
                                           -------------------------------------------------------------------------------------------------------------
    Total.................................      3,467     14,263     25,618     39,169     54,915     68,091     82,100     96,225    107,591    118,219
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                                    Table 3.D--Number of Additional Graduate Students
--------------------------------------------------------------------------------------------------------------------------------------------------------
              Size of program                  2021       2022       2023       2024       2025       2026       2027       2028       2029       2030
--------------------------------------------------------------------------------------------------------------------------------------------------------
25........................................         50        200        600      1,310      2,250      3,090      4,060      4,380      5,710      5,980
75........................................         60        250        790      1,440      2,700      3,150      3,830      4,050      4,800      5,400
150.......................................         80        400      1,170      2,100      4,050      4,500      5,400      6,750      7,200      7,680
350.......................................        170        690      1,750      2,450      3,500      5,460      6,300      7,350      8,190      8,820
750.......................................        360      1,200      2,100      3,000      5,630      7,130      9,000     10,500     12,190     13,130
1,500.....................................  .........        770      1,500      2,700      3,960      5,280      7,500      9,000      9,750     11,250
                                           -------------------------------------------------------------------------------------------------------------
    Total.................................        720      3,510      7,910     13,000     22,090     28,610     36,090     42,030     47,840     52,260
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The next assumption involved the percent of those additional 
students who would receive Pell Grants and would take out different 
types of loans. For existing programs, the percent of undergraduates 
with Pell Grants is approximately 39 percent overall,\57\ but this 
varies significantly by institution and program type. One motivating 
factor

[[Page 18686]]

for competency-based programs is to expand opportunities for non-
traditional students, who typically qualify for Pell grants at higher 
rates; in the 2018-19 award year 54 of dependent applicants had a Pell 
eligible EFC, while 85 of independent applicants met that threshold. 
However, independent applicants are often ineligible for Pell at 
relatively moderate incomes-- in AY 2018-19 88 percent of the eligible 
independent applicants with dependents had family incomes under $50,000 
and 96 percent of the eligible independent applicants without 
dependents had family incomes under $25,000. If programs attract more 
students from lower income brackets, Pell Grant costs will increase. On 
the other hand, CBE and distance learning programs, including direct 
assessment programs, may be more attractive to working adults, who may 
be less likely to qualify for Pell grants given their earnings. 
Evidence is mixed from existing programs, both because the data does 
not always distinguish students in CBE programs from those in 
traditional programs at the institution and the percentage of students 
receiving Pell Grants does vary among institutions with at least some 
CBE programs. In 2017-18 IPEDS student financial assistance data, the 
percent of undergraduates receiving a Pell Grant at some institutions 
known for at least some competency based education programs was 30 
percent for Western Governor's University, 33 percent for Sinclair 
Community College, 35 percent for Northern Arizona University, 43 
percent for Capella University, 45 percent for the University of 
Wisconsin Flex program, and and47 percent for Southern New Hampshire 
University. Nonetheless, we assumed that the percentage of students who 
may be eligible for Pell Grants increases to 50 percent, resulting in 
the estimated number of additional Pell recipients shown in Table 3.E.
---------------------------------------------------------------------------

    \57\ U.S. Department of Education, The FY 2021 Justification of 
Appropriations Estimates to Congress Vol. II: Student Financial 
Assistance, p. p11. Available at www2.ed.gov/about/overview/budget/budget21/justifications/p-sfa.pdf.

                                                     Table 3.E--Estimated Additional Pell Recipients
--------------------------------------------------------------------------------------------------------------------------------------------------------
              Size of program                  2021       2022       2023       2024       2025       2026       2027       2028       2029       2030
--------------------------------------------------------------------------------------------------------------------------------------------------------
25........................................        129        351        700      1,219      1,688      1,891      2,031      2,188      2,334      2,447
75........................................        140        439        919      1,341      2,025      2,363      2,869      3,038      3,600      4,050
150.......................................        187        702      1,365      1,950      3,038      3,375      4,050      5,063      5,400      5,760
350.......................................        407      1,372      2,625      3,675      5,250      6,370      7,350      8,575      9,555     10,290
750.......................................        872      2,400      4,200      6,000      8,438     10,688     13,500     15,750     18,281     19,688
1,500.....................................  .........      1,868      3,000      5,400      7,020      9,360     11,250     13,500     14,625     16,875
                                           -------------------------------------------------------------------------------------------------------------
    Total.................................      1,734      7,131     12,809     19,584     27,458     34,046     41,050     48,113     53,796     59,109
--------------------------------------------------------------------------------------------------------------------------------------------------------

    We also assumed a distribution of Pell recipients based on expected 
growth in programs by type and control of institutions, as shown in 
Table 3.F. However, the share of programs reflected in Table 3.F does 
not necessarily reflect the share of students at each type of 
institution.

    Table 3.F--Assumed Distribution of New Programs by Institutional
                                Category
------------------------------------------------------------------------
                                                             Share of
                                                             programs
                                                             (percent)
------------------------------------------------------------------------
4-year public...........................................              22
2-year public...........................................              30
4 year private..........................................              15
2 year private..........................................               8
Proprietary.............................................              25
------------------------------------------------------------------------

    We welcome comments about the Pell Grant assumptions presented in 
Tables 3.A through 3.F as we recognize that competency-based and direct 
assessment programs, in particular, are a relatively new and developing 
part of the postsecondary market and it is not clear what institutions 
will pursue opportunities in this area or how the size and scope of 
programs offered will develop. Estimated program costs for Pell Grants 
range from $30.1 billion in AY 2021-22 to $36.1 billion in AY 2030-31, 
with a 10-year total estimate of $329.0 billion. On average, the FY 
2021 President's Budget projects a baseline increase in Pell Grant 
recipients from 2021 to 2030 of approximately 150,000 annually. The 
increase in Pell Grant recipients estimated due to these proposed 
regulations ranges from about 6 percent in 2022 to approximately 41 
percent by 2030 of the projected annual increase that would otherwise 
occur. The additional 59,109 recipients estimated for 2030 would 
account for under 1 percent of all estimated 8.25 million Pell 
recipients in 2030-31 and result in an increase in program costs of 
approximately $1,337 million, a 0.4 percent increase in estimated 10-
year Pell Grant program costs of $329.0 billion.
    For the loan programs, we used the estimated split between graduate 
and undergraduate programs to develop additional volume estimates by 
loan type and student loan model risk-group. Table 3.G presents the 
assumed borrowing rate by loan type of the additional students.

                                                    Table 3.G--Estimated Borrowing Rates by Loan Type
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             2021 (%)   2022 (%)   2023 (%)   2024 (%)   2025 (%)   2026 (%)   2027 (%)   2028 (%)   2029 (%)   2030 (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Subsidized................................         45         45         45         45         45         45         45         45         45         45
Unsubsidized..............................         55         55         55         55         55         55         55         55         55         55
Parent PLUS...............................         10         10         10         10         10         10         10         10         10         10
Grad Unsubsidized.........................         35         35         35         35         35         35         35         35         35         35
Grad PLUS.................................         25         25         25         25         25         25         25         25         25         25
--------------------------------------------------------------------------------------------------------------------------------------------------------

    We then used estimated average loans by loan type as projected for 
the PB2020 estimates to estimate a total increase in volume by loan 
type, as shown in Tables 3.H and 3.I.

[[Page 18687]]



                                             Table 3.H--Estimated Average Amounts per Borrower by Loan Type
--------------------------------------------------------------------------------------------------------------------------------------------------------
               Average loan                    2021       2022       2023       2024       2025       2026       2027       2028       2029       2030
--------------------------------------------------------------------------------------------------------------------------------------------------------
Subsidized................................      4,240      4,240      4,240      4,250      4,250      4,260      4,260      4,270      4,280      4,290
Unsubsidized..............................      4,630      4,660      4,700      4,720      4,760      4,780      4,820      4,830      4,860      4,880
PLUS......................................     18,550     18,880     19,290     19,620     19,920     20,440     20,780     21,070     21,460     21,860
Grad Unsubsidized.........................     20,660     20,910     21,120     21,230     21,330     21,590     21,810     22,080     22,290     22,500
Grad PLUS.................................     25,990     26,760     27,510     28,130     28,640     29,330     30,100     30,870     31,760     32,660
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                                Table 3.I--Estimated Additional Loan Volume by Loan Type
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
--------------------------------------------------------------------------------------------------------------------------------------------------------
Additional Loan Volume                                                  2021               2022               2023               2024               2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Subsidized...............................................          6,615,656         27,212,850         48,878,190         74,910,234        105,024,938
Unsubsidized.............................................          8,829,543         36,554,788         66,221,238        101,682,075        143,767,470
Parent PLUS..............................................          6,431,888         26,927,600         49,416,158         76,849,088        109,390,680
Grad Unsubsidized........................................          5,206,320         25,687,935         58,470,720         96,596,500        164,912,895
Grad PLUS................................................          4,678,200         23,481,900         54,401,025         91,422,500        158,164,400
--------------------------------------------------------------------------------------------------------------------------------------------------------
Additional Loan Volume                                                  2026               2027               2028               2029               2030
--------------------------------------------------------------------------------------------------------------------------------------------------------
Subsidized...............................................        130,530,926        157,385,700        184,896,338        207,220,748        228,221,297
Unsubsidized.............................................        179,011,896        217,647,100        255,621,713        287,591,411        317,299,125
Parent PLUS..............................................        139,178,515        170,603,800        202,746,075        230,890,823        258,426,188
Grad Unsubsidized........................................        216,191,465        275,493,015        324,807,840        373,223,760        411,547,500
Grad PLUS................................................        209,782,825        271,577,250        324,366,525        379,849,600        426,702,900
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Clearly, the large average borrowing amounts of graduate students 
contribute significantly to the loan volume estimates, so a different 
mix of programs or a different borrowing level would affect the 
estimated impact of the proposed regulations, so we adjust this factor 
in the alternate scenarios to identify a range of possible impacts.
    As subsidy rates differ by risk group and loan type, the Department 
assumed a distribution of the undergraduate loans as shown in Table 3-
J. This distribution is based on the PB2021 distribution of loan volume 
by risk group, but reduces the share in the 4-year Junior/Senior risk 
group by 10-15 percentage points and the 4-year Freshman/Sophomore risk 
group by approximately 5 percentage points and increases the share in 
the 2-year risk groups. All graduate loans are in the graduate risk 
group.

                    Table 3-J--Assumed Distribution of Additional Loan Volumes by Risk Group
----------------------------------------------------------------------------------------------------------------
                                                                                   Unsubsidized     Parent PLUS
                                                                  Subsidized (%)        (%)             (%)
----------------------------------------------------------------------------------------------------------------
2-year Proprietary..............................................              18              15              10
2-year Not-for-Profit...........................................              20              15              10
4-year Freshman/Sophomore.......................................              32              35              42
4-year Junior/Senior............................................              30              35              38
----------------------------------------------------------------------------------------------------------------

    The resulting additional loan volumes are generated by simple 
multiplication of the estimated additional undergraduate students by 
the percent borrowing and average amount per borrower by loan type, and 
then by the distribution by risk group. The same process occurred for 
graduate students. We welcome comments on, and data related to, the 
assumed mix of undergraduate and graduate programs, the expected size 
of additional programs, the borrowing levels by loan type, and the 
distribution of borrowing by risk group. Any comments received will be 
considered in the development of estimates for the final regulations.
    As seen from the approximately $100 billion total annual loan 
volume, even small changes would result in a significant amount of 
additional loan transfers. We update loan volume estimates regularly; 
for PB2021 the total non-consolidated loan volume estimates between 
FY2021 and FY2030 range from $94 billion to $107 billion. The assumed 
changes in loan volume would result in a small savings that represents 
the net impact of offsetting subsidy changes by loan type and risk 
group due to positive subsidy rates for Subsidized and Unsubsidized 
Stafford loans and negative subsidy rates for PLUS Loans. Given the 
higher loan amounts associated with PLUS loans and loans to graduate 
students, the negative subsidy rates that range from -20.57 in 2021 to 
-16.70 in 2028 generate significant savings ($-356 mn in outlays) to 
offset the increased costs in other loan types. In Alternate 2, the 
higher non-consolidated loan volume eventually results in higher 
consolidated loan volume, that, combined with the other positive 
subsidy categories results in a net cost in that scenario.
    We do not assume any changes in subsidy rates from the potential 
creation of new programs or the other changes reflected in the proposed 
regulations. We are uncertain to what extent and in what direction the 
performance of programs that expand or develop under the proposed 
regulations will shift relative to current programs. As indicated 
previously, several institutions known for competency-based programs 
have default performance that is as good as or better than national 
averages, but it is not clear that most programs that will be created 
in the future will achieve that result. Depending on how programs are

[[Page 18688]]

configured, the market demand for them, and their quality, key subsidy 
components such as defaults, prepayments, and repayment plan choice may 
vary and affect the cost estimates.
    Table 4 summarizes the Pell and loan effects for the Main, Alt1, 
and Alt2 scenarios over a 10-year period. Each column reflects a 
scenario showing estimated changes to Pell Grants and Direct Loans 
under those conditions. Therefore, the overall amounts reflect the sum 
of outlay changes occurring under each scenario for Pell Grants and 
Direct Loans when combined.

                 Table 4--Estimated Net Impact of Pell Grant and Loan Changes--2021-2030 Outlays
                                                     [$mns]
----------------------------------------------------------------------------------------------------------------
                                                                       Main            Alt 1           Alt 2
----------------------------------------------------------------------------------------------------------------
Pell Grants.....................................................           1,110             446           1,741
Loans...........................................................             -45             -20             106
----------------------------------------------------------------------------------------------------------------
    Overall.....................................................           1,065             426           1,847
----------------------------------------------------------------------------------------------------------------

    The cost estimates presented above do not attempt to account for 
several factors that could ultimately result in a different net budget 
impact than the primary estimate presented in Table 4, including 
potential cost differences among programs and relative repayment 
performance. As discussed previously, one potential benefit of 
competency based programs is reduced costs for students relative to 
other programs. If a large share of students would have attended a 
different program or completed faster, their Pell Grant or borrowing 
may be lower than assumed in the PB2021 baseline. However, without more 
significant evidence, we are not estimating any savings from that 
possibility. Other provisions that we do not include in the budget 
estimate because of limited information on the potential significance 
include the treatment of out-of-class hours and the reasonable length 
provisions related to clock hour programs.
    As discussed previously, the uncertainty around several factors 
affected by the proposed changes led the Department to develop some 
alternative scenarios for the potential impacts. The extent to which 
institutions invest in making direct assessment programs work and try 
to enroll additional students as opposed to converting some portion of 
existing enrollments to this type of program is unclear. In the AIR 
survey about competency-based education, approximately 40 percent of 
the 501 institutional respondents indicated CBE is in their 
institutions' strategic plans in a ``minor way'' and 16 percent in a 
``major way''.\58\ It is also unclear if the size and type of existing 
CBE programs is representative of future CBE programs, especially 
direct assessment programs.
---------------------------------------------------------------------------

    \58\ www.air.org/sites/default/files/National-Survey-of-Postsec-CBE-2018-AIR-Eduventures-Jan-2019.pdf.
---------------------------------------------------------------------------

    In order to capture the effect of changing some of the key 
assumptions associated with the primary budget estimate, the Department 
developed the Alternate Scenarios presented in Table 5. Alternate 1 is 
a low impact scenario that reduces the number of additional programs 
and students and lowers the average amount borrowed and the percentage 
of students eligible for Pell Grants. Alternate 2, the high impact 
scenario, increases programs and student growth, the percentage of Pell 
recipients, and amounts borrowed.

                      Table 5--Alternate Scenarios
------------------------------------------------------------------------
                                Alternate 1--low      Alternate 2--high
                                     impact                impact
------------------------------------------------------------------------
Program Growth..............  Eliminate half the    +20 programs per
                               programs per cell     cell for 3 smallest
                               for 3 smallest        categories; +5
                               categories and one-   programs per cell
                               third of programs     for 3 largest size
                               in 3 largest size     categories through
                               categories.           2025 and +10 per
                                                     cell for 2026 to
                                                     2029.
Undergraduate Program Share.  +15 percent.........  -15 percent.
Percent of Pell Recipients..  30 percent..........  75 percent.
Distribution of Pell          4-yr Public 10%.....  4-yr Public 30%.
 Recipients by Institutional  4-yr Private 5%.....  4-yr Private 24%.
 Category.                    2-yr Public 38%.....  2-yr Public 20%.
                              2-yr Private 10%....  2-yr Private 5%.
                              Proprietary 37%.....  Proprietary 21%.
Borrowing Rates.............  Subsidized -10%.....  Subsidized +5%.
                              Unsubsidized -15%...  Unsubsidized +10%.
                              Plus -5%............  Plus +5%.
                              Grad Unsub -15%.....  Grad Unsub +10%.
                              Grad Plus -15%......  Grad Plus +10%.
Average Loan Amount.........  Decrease 20 percent.  Increase 10 percent.
Distribution by Risk Group    2-yr Prop -10%......  2-yr Prop +15%.
 (Subsidized and              2-yr NFP -5%........  2-yr NFP +10%.
 Unsubsidized).               4-yr FRSO +10%......  4-yr FRSO -15%.
                              4-yr JRSR +5%.......  4-yr JRSR -10%.
                              GRAD No change......  GRAD No change.

[[Page 18689]]

 
Distribution by Risk Group    2-yr Prop -6%.......  2-yr Prop +12%.
 (PLUS).                      2-yr NFP -3%........  2-yr NFP +8%.
                              4-yr FRSO +6%.......  4-yr FRSO -12%.
                              4-yr JRSR +3%.......  4-yr JRSR -8%.
                              GRAD No change......  GRAD No change.
------------------------------------------------------------------------

Accounting Statement

    As required by OMB Circular A-4 (available at www.whitehouse.gov/sites/default/files/omb/assets/omb/circulars/a004/a-4.pdf), in the 
following table we have prepared an accounting statement showing the 
classification of the expenditures associated with the provisions of 
these final regulations. This table provides our best estimate of the 
changes in annual monetized transfers as a result of these final 
regulations. Expenditures are classified as transfers from the Federal 
Government to affected student loan borrowers and Pell Grant 
recipients.

 Table 6--Accounting Statement: Classification of Estimated Expenditures
                              [In millions]
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Category                                             Benefits
------------------------------------------------------------------------
Clarification of terms and processes
 related to establishing programs and
 administering title IV aid to encourage
 development of new programs............          Not Quantified
------------------------------------------------------------------------
Net Reduction in Paperwork Burden on                  7%              3%
 Institutions, primarily due to
 elimination of Net Present Value
 calculation related to the 90/10 rule..
------------------------------------------------------------------------
                                                  $-0.12          $-0.12
                                         -------------------------------
                                                  Not Quantified
------------------------------------------------------------------------
                Category                               Costs
------------------------------------------------------------------------
                Category                             Transfers
------------------------------------------------------------------------
Increased transfers of Pell Grants......              7%              3%
                                                   $95.8          $104.3
Increased transfers of loans to students           $-5.7           $-5.1
 in additional programs established, in
 part, due to the proposed regulations..
------------------------------------------------------------------------

Alternatives Considered

    A number of proposals were considered on various sections of the 
proposed regulations as the negotiated rulemaking committee moved 
toward consensus. Some key alternatives that were considered are 
summarized in Table 76.

                  Table 76--Key Alternatives Considered
------------------------------------------------------------------------
            Topic             Alternative proposal    Reasons rejected
------------------------------------------------------------------------
Definition of Credit Hour...  Eliminate time-based  Retain definition
                               requirements.         for some
                                                     consistency across
                                                     higher education.
Subscription-based programs.  Disbursement based    Concern for
                               on attempted          potential abuse
                               programs, not         leading to paying
                               completed ones.       title IV aid for
                              Include a competency   same course twice.
                               in student's
                               enrollment status
                               more than once if
                               it overlapped more
                               than one
                               subscription period.
Written Arrangement.........  No limitation on      Goal was to
                               percentage of         facilitate
                               program that could    partnerships with
                               be provided by        organizations using
                               written arrangement   trade experts in
                               with ineligible       workplace
                               entity.               environment.
                                                     Committee found
                                                     sufficient
                                                     flexibility with
                                                     existing limit and
                                                     changes would call
                                                     into question
                                                     whether the
                                                     eligible
                                                     institution was
                                                     really offering the
                                                     program.
Program Length..............  Allow limiting        Concern that changes
                               program length to     would encourage
                               100 percent of the    institutions to add
                               requirements in any   hours beyond what
                               State and then 100    is necessary for
                               percent required      student to become
                               for licensure in an   employed.
                               adjoining State.
------------------------------------------------------------------------

Clarity of the Regulations

    Executive Order 12866 and the Presidential memorandum ``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

[[Page 18690]]

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.  668.43.)
     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.

Regulatory Flexibility Act Analysis

Description of the Reasons That Action by the Agency Is Being 
Considered

    The Department is regulating to reflect development in 
postsecondary education delivery models, including those facilitated by 
technology and those that are based on the demonstration of 
competencies rather than seat time, to help institutions understand 
regulatory requirements for such programs and to facilitate further 
innovations in such areas. The proposed regulations provide or clarify 
definitions of terms such as correspondence course, distance education, 
subscription-based program, and clock hour, where the HEA provides no 
definition.
    The proposed regulations send a signal to the higher education 
community that the Department is committed to supporting educational 
innovations such as subscription-based and direct assessment programs 
as well as new technology-driven delivery mechanisms, such as adaptive 
learning. The proposed regulations also seek to clarify definitions 
used to differentiate between distance education and correspondence 
courses, while at the same time preserving student protections and 
title IV financial aid distribution.

Succinct Statement of the Objectives of, and Legal Basis for, the 
Regulations

    The Secretary proposes to amend the Institutional Eligibility 
regulations issued under the HEA, related to distance education and 
innovation in 34 CFR part 600. In addition, the Secretary proposes to 
amend the Student Assistance General Provisions regulations issued 
under the HEA in 34 CFR part 668. The proposed changes to part 600 are 
authorized by 20 U.S.C. 1001, 1002, 1003, 1088, 1091, 1094, 1099b, and 
1099c, while the proposed changes to part 668 are authorized by 20 
U.S.C. 1001-1003, 1070a, 1070g, 1085, 1087b, 1087d, 1087e, 1088, 1091, 
1092, 1094, 1099c, 1099c-1, 1221e-3, and 3474.
    Through the proposed regulations, we attempt to remove barriers 
that institutions face when trying to create and implement new and 
innovative ways of providing education to students, and also provide 
sufficient flexibility to ensure that future innovations we cannot yet 
anticipate have an opportunity to move forward.
    The proposed regulations are also designed to protect students and 
taxpayers from unreasonable risks. Inadequate consumer information 
could result in students enrolling in programs that will not help them 
meet their goals. In addition, institutions adopting innovative methods 
of educating students may expend taxpayer funds in ways that were not 
contemplated by Congress or the Department, resulting in greater risk 
to the taxpayers of waste, fraud, and abuse and to the institution of 
undeserved negative program review findings. These proposed regulations 
attempt to limit risks to students and taxpayers resulting from 
innovation by delegating various oversight functions to the bodies best 
suited to conduct that oversight--States and accreditors. This 
delegation of authority through the higher education regulatory triad 
entrusts oversight of most consumer protections to States, assurance of 
academic quality to accrediting agencies, and protection of taxpayer 
funds to the Department.

Description of and, Where Feasible, an Estimate of the Number of Small 
Entities to which the Regulations Will Apply

    Of the entities that the final regulations will affect, we consider 
many institutions to be small. The Department recently proposed a size 
classification based on enrollment using IPEDS data that established 
the percentage of institutions in various sectors considered to be 
small entities, as shown in Table 8. We described this size 
classification in the NPRM published in the Federal Register on July 
31, 2018 for the proposed borrower defense rule (83 FR 37242, 37302). 
The Department discussed the proposed standard with the Chief Counsel 
for Advocacy of the Small Business Administration, and while no change 
has been finalized, the Department continues to believe this approach 
better reflects a common basis for determining size categories that is 
linked to the provision of educational services.

                            Table 8--Small Entities Under Enrollment Based Definition
----------------------------------------------------------------------------------------------------------------
                 Level                            Type                 Small           Total          Percent
----------------------------------------------------------------------------------------------------------------
2-year................................  Public..................             342           1,240              28
2-year................................  Private.................             219             259              85
2-year................................  Proprietary.............           2,147           2,463              87
4-year................................  Public..................              64             759               8
4-year................................  Private.................             799           1,672              48
4-year................................  Proprietary.............             425             558              76
                                                                 -----------------------------------------------
    Total.............................  ........................           3,996           6,951              57
----------------------------------------------------------------------------------------------------------------

    The proposed regulations would provide needed clarity around title 
IV eligibility for distance education, correspondence courses, 
subscription-based programs and direct assessment programs. They would 
also provide greater clarity regarding how the Department determines 
whether or not a program is of reasonable length. The effect on small 
entities would vary by the extent they currently participate in such 
programs or that they choose to do

[[Page 18691]]

so going forward. Introducing competency-based programs in areas with 
strong demand could be an opportunity for some small entities to 
maintain or expand their business. On the other hand, small entities 
could be vulnerable to competition from other institutions, large or 
small, that are capturing an increasing share of the postsecondary 
market with distance or competency-based programs. Developing and 
implementing new programs and delivery models, and especially those 
that require sophisticated technology, may be impractical for small 
institutions that cannot distribute the cost among a population of 
sufficient size to result in favorable return-on-investment. We expect 
that the development of the first direct assessment program at an 
institution would be a multi-stage and multi-year process involving 
choosing the subject areas appropriate for this model, developing 
competencies, modifying course materials and teaching approaches, 
reaching out to potential future employers to build acceptance of the 
credential, and getting approval from accreditors and the Department, 
and recruiting students. The Department does not have a detailed 
understanding of the costs and timeframe involved with establishing 
these programs, especially for small entities and we welcome such 
information. Small institutions may be more inclined to rely on 
consortia arrangements with other, larger institutions, to make 
distance learning and competency-based education available to their 
students. The proposed regulations would remove many barriers to 
innovation that currently restrain institutions, including small ones, 
and may accelerate innovations, but these innovations were likely to 
take place in postsecondary education anyway given the call for new, 
more efficient delivery models for the growing population of non-
traditional students and the likelihood that adults will be engaged in 
postsecondary education throughout their lifetime.
    The Secretary invites comments from small 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.

Description of the Projected Reporting, Recordkeeping, and Other 
Compliance Requirements of the Regulations, Including an Estimate of 
the Classes of Small Entities that Will Be Subject to the Requirement 
and the Type of Professional Skills Necessary for Preparation of the 
Report or Record

    The Department provides additional detail related to burden 
estimates in the Paperwork Reduction Act section of this NPRM. Overall, 
the Department estimates $127,371 in reduced paperwork burden 
associated with the elimination of the net present value calculation 
related to the 90/10 rule. This affects proprietary institutions, of 
which approximately 85 percent are considered small according to Table 
8 (2,572/3,021), so most of that reduction ($127,371*85 percent = 
$108,265) will go to small entities. There are also some small 
increases in burden related to reporting about direct assessment 
programs, reporting about written arrangements, and demonstrating an 
ineligible institution's competence to perform its contracted duties 
under a written arrangement. Overall, these provisions are expected to 
increase burden on small entities by approximately 79 hours, a small 
increase for those small institutions that choose to participate in 
direct assessment programs or written arrangements.

Identification, to the Extent Practicable, of All Relevant Federal 
Regulations That May Duplicate, Overlap, or Conflict With the Proposed 
Regulations

    The proposed regulations are unlikely to conflict with or duplicate 
existing Federal regulations.

Alternatives Considered

    As described above, the Department participated in negotiated 
rulemaking when developing the proposed regulations and considered a 
number of options for some of the provisions. These included: (1) 
Eliminating time-based requirements for credit hours; (2) no limitation 
on the percentage of a program that could be offered through written 
arrangement with an ineligible entity; (3) allowing limiting program 
length to 100 percent of the requirements in any State and then 100 
percent required for licensure in an adjoining State, (4) disbursing 
funds in subscription-based programs based on attempted competencies, 
not completed ones; and (5) including a competency that overlaps 
subscription periods in a student's enrollment status more than once. 
No alternatives were aimed specifically at small entities.

Paperwork Reduction Act of 1995

    As part of its continuing effort to reduce paperwork and respondent 
burden, the Department provides the general public and Federal agencies 
with an opportunity to comment on proposed and continuing collections 
of information in accordance with the Paperwork Reduction Act of 1995 
(PRA) (44 U.S.C. 3506(c)(2)(A)). This helps ensure that: The public 
understands the Department's collection instructions, respondents can 
provide the requested data in the desired format, reporting burden 
(time and financial resources) is minimized, collection instruments are 
clearly understood, and the Department can properly assess the impact 
of collection requirements on respondents.
    Parts 600 and 668 contains information collection requirements. 
Under the PRA the Department has submitted a copy of these sections to 
OMB for its review.
    A Federal agency may not conduct or sponsor a collection of 
information unless OMB approves the collection under the PRA and the 
corresponding information collection instrument displays a currently 
valid OMB control number.
    Notwithstanding any other provision of law, no person is required 
to comply with, or is subject to penalty for failure to comply with, a 
collection of information if the collection instrument does not display 
a currently valid OMB control number.
    In the final regulations we will display the control numbers 
assigned by OMB to any collection requirements proposed in this NPRM 
and adopted in the final regulations.
Section 600.21--Updating application information
    Requirements: The proposed regulations in Sec.  600.21 would 
require the institution to only report the addition of a second or 
subsequent direct assessment program without the review and approval of 
the Department when it previously has such approval. The proposed 
regulations would also require an institution to report the 
establishment of a written arrangement between the eligible institution 
and an ineligible institution or organization in which the ineligible 
institution or organization would provide more than 25 percent of a 
program.
    Burden Calculation: We believe that the calculation would impose 
burden on institutions. We estimate that 36 institutions will need to 
report such activities. We anticipate that an institution will require 
an average of .5 hours (30 minutes) to report such

[[Page 18692]]

activities for a total estimated burden of 18 hours under OMB Control 
Number 1845-NEW.
    We estimate that there will be 12 proprietary institutions that be 
required to report this information for 9 burden hours (12 institutions 
x .5 hours = 6 hours). We estimate that there are 11 private 
institutions that be required to report this information for 5 burden 
hours (11 institutions x .5 hours = 5 hours). We estimate that there 
are 13 public institutions that be required to report this information 
for 7 burden hours (13 institutions x .5 hours = 7 hours).

                               600.21--Updating Application Information--1845-NEW1
----------------------------------------------------------------------------------------------------------------
                                                                    Time factor
        Institution type            Respondents      Responses        (hours)      Burden hours    Cost $106.94
----------------------------------------------------------------------------------------------------------------
Proprietary.....................              12              12              .5               6            $642
Private.........................              11              11              .5               5             538
Public..........................              13              13              .5               7             749
                                 -------------------------------------------------------------------------------
    Total.......................              36              36  ..............              18           1,929
----------------------------------------------------------------------------------------------------------------

Section 668.5--Written arrangements to provide education programs
    Requirements: The proposed regulations in Sec.  668.5 would require 
the institution to demonstrate how the ineligible institution has the 
experience in the delivery and assessment of the program or portions 
thereof that the ineligible institution would be contracted to deliver 
under the terms of the written arrangement.
    Burden Calculation: We believe that the calculation would impose 
recordkeeping burden on institutions. We estimate that 24 institutions 
will need to document such information. We anticipate that an 
institution will require an average of 5 hours to document such 
activities for a total estimated burden of 120 hours under OMB Control 
Number 1845-NEW2.
    We estimate that there are 8 proprietary institutions that be 
required to document this information for 40 burden hours (8 
institutions x 5 hours = 40 hours). We estimate that there are 8 
private institutions that be required to document this information for 
40 burden hours (8 institutions x 5 hours = 40 hours). We estimate that 
there are 8 public institutions that be required to report this 
information for 40 burden hours (8 institutions x 5 hours = 40 hours).

                  Section 668.5--Written Arrangements To Provide Education Programs.--1845-NEW2
----------------------------------------------------------------------------------------------------------------
                                                                    Time factor
        Institution type            Respondents      Responses        (hours)      Burden hours    Cost $106.94
----------------------------------------------------------------------------------------------------------------
Proprietary.....................               8               8               5              40          $4,278
Private.........................               8               8               5              40           4,278
Public..........................               8               8               5              40           4,278
                                 -------------------------------------------------------------------------------
    Total.......................              24              24  ..............             120          12,834
----------------------------------------------------------------------------------------------------------------

    Section 668.28--Non-title IV revenue (90/10).
    Requirements: The proposed regulations in Sec.  668.28 would remove 
the Net Present Value calculation currently in the regulations.
    Burden Calculation: We believe that the proposed regulatory 
language change would remove burden from the institution. Based on the 
explanation provided in the preamble, the regulations in 668.28(b) no 
longer applies to the calculation of the treatment of revenue. 
Therefore, the current burden applied under OMB Control Number 1845-
0096 would be eliminated. Upon the effective date of these regulation, 
the currently assessed 2,808 burden hours would be discontinued.

                            Section 668.28--Non-Title IV Revenue (90/10).--1845-0096
----------------------------------------------------------------------------------------------------------------
                                                                    Time factor                    Cost savings
        Institution type            Respondents      Responses        (hours)      Burden hours    $106.94/hour
----------------------------------------------------------------------------------------------------------------
Proprietary.....................            -936            -936               2          -1,872        $200.192
Proprietary.....................            -936            -936               1            -936         100,096
                                 -------------------------------------------------------------------------------
    Total.......................          -1,872          -1,872  ..............          -2,808         300,288
----------------------------------------------------------------------------------------------------------------

    The estimated cost to institutions is $53.47 per hour based on the 
2018 mean hourly information from the Bureau of Labor Statistics 
Occupational Employment Statistics for Postsecondary Education 
Administrators \59\ x 2 to account for benefits and expenses for a 
total per hour cost of $106.94.
---------------------------------------------------------------------------

    \59\ www.bls.gov/oes/current/oes119033.htm.

[[Page 18693]]



----------------------------------------------------------------------------------------------------------------
                                                                       OMB Control Number and
          Regulatory section               Information collection         estimated burden      Estimated costs
                                                                         (change in burden)       $106.94/hour
----------------------------------------------------------------------------------------------------------------
Sec.   600.21 Updating application     The proposed regulations in    1845-NEW1..............             $1,929
 information.                           Sec.   600.21 would require   18 hours...............
                                        the institution to only
                                        report the addition of a
                                        second or subsequent direct
                                        assessment program without
                                        the review and approval of
                                        the Department when it
                                        previously been awarded such
                                        approval. The proposed
                                        regulations would also
                                        require an institution to
                                        report the establishment of
                                        a written arrangement
                                        between the eligible
                                        institution and an
                                        ineligible institution or
                                        organization in which the
                                        ineligible institution or
                                        organization would provide
                                        more than 25 percent of a
                                        program.
Sec.   668.5--Written arrangements to  The proposed regulations in    1845-NEW2..............             12,834
 provide education programs.            Sec.   668.5 would require    120 hours..............
                                        the institution to
                                        demonstrate how the
                                        ineligible institution has
                                        the experience in the
                                        delivery and assessment of
                                        the program or portions
                                        thereof that the ineligible
                                        institution would be
                                        contracted to deliver under
                                        the terms of the written
                                        arrangement.
Sec.   668.28 Non-title IV revenue     The proposed regulations in    -2,808.................         ($300,288)
 (90/10).                               Sec.   668.28 would remove
                                        the Net Present Value
                                        calculation currently in the
                                        regulations.
----------------------------------------------------------------------------------------------------------------

Collection of Information
    The total burden hours and change in the burden hours associated 
with each OMB control number affected by the proposed regulations 
follows:

------------------------------------------------------------------------
                                                             Proposed
           OMB control number             Total proposed     change in
                                           burden hours    burden hours
------------------------------------------------------------------------
1845-NEW1...............................             +18             +18
1845-NEW2...............................            +120            +120
1845-0096...............................          -2,808          -2,808
                                         -------------------------------
    Total...............................          -2,670          -2,670
------------------------------------------------------------------------

Intergovernmental Review

    These regulations 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.

Federalism

    Executive Order 13132 requires us to ensure meaningful and timely 
input by State and local elected officials in the development of 
regulatory policies that have federalism implications. ``Federalism 
implications'' means substantial direct effects on the States, on the 
relationship between the National Government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government. The proposed regulations in 600 and 668 may have federalism 
implications. We encourage State and local elected officials to review 
and provide comments on these proposed regulations.
    Accessible Format: Individuals with disabilities can obtain this 
document in an accessible format (e.g., braille, large print, 
audiotape, or compact disc) on request to the person listed under FOR 
FURTHER INFORMATION CONTACT.
    Electronic Access to This Document: The official version of this 
document is the document published in the Federal Register. You may 
access the official edition of the Federal Register and the Code of 
Federal Regulations at www.govinfo.gov. At this site you can view this 
document, as well as all other documents of this Department published 
in the Federal Register, in text or Adobe Portable Document Format 
(PDF). To use PDF you must have Adobe Acrobat Reader, which is 
available free at the site.
    You may also access documents of the Department published in the 
Federal Register by using the article search feature at: 
www.federalregister.gov. Specifically, through the advanced search 
feature at this site, you can limit your search to documents published 
by the Department.

List of Subjects

34 CFR Part 600

    Colleges and universities, grant programs-education, loan programs-
education, reporting and recordkeeping requirements, student aid, 
vocational education.

34 CFR Part 668

    Administrative practice and procedure, colleges and universities, 
consumer protection, grant programs--education, loan programs--
education, reporting and recordkeeping requirements, student aid, 
vocational education.

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

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

0
1. The authority citation for part 600 continues to read as follows:


[[Page 18694]]


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

0
2. Section 600.2 is amended by:
0
a. Adding, in alphabetical order, a definition for ``academic 
engagement''.
0
b. Revising the definitions of ``clock hour'', ``correspondence 
course'', ``credit hour'', ``distance education'', and ``incarcerated 
student'', and ``nonprofit institution''.
0
c. Adding, in alphabetical order, a definition for ``juvenile justice 
facility''.
    The additions and revisions read as follows:


Sec.  600.2   Definitions.

* * * * *
    Academic engagement: Active participation by a student in an 
instructional activity related to the student's course of study that--
    (1) Is defined by the institution in accordance with any applicable 
requirements of its State or accrediting agency;
    (2) Includes, but is not limited to--
    (i) Attending a synchronous class, lecture, recitation, or field or 
laboratory activity, physically or online, where there is an 
opportunity for interaction between the instructor and students;
    (ii) Submitting an academic assignment;
    (iii) Taking an assessment or an exam;
    (iv) Participating in an interactive tutorial, webinar, or other 
interactive computer-assisted instruction;
    (v) Participating in a study group, group project, or an online 
discussion that is assigned by the institution; or
    (vi) Interacting with an instructor about academic matters; and
    (3) Does not include, for example--
    (i) Living in institutional housing;
    (ii) Participating in the institution's meal plan;
    (iii) Logging into an online class or tutorial without any further 
participation; or
    (iv) Participating in academic counseling or advisement.
* * * * *
    Clock hour: (1) A period of time consisting of--
    (i) A 50- to 60-minute class, lecture, or recitation in a 60-minute 
period;
    (ii) A 50- to 60-minute faculty-supervised laboratory, shop 
training, or internship in a 60-minute period;
    (iii) Sixty minutes of preparation in a correspondence course; or
    (iv) In distance education, 50 to 60 minutes in a 60-minute period 
of attendance in a synchronous class, lecture, or recitation where 
there is opportunity for direct interaction between the instructor and 
students.
    (2) A clock hour in a distance education program does not meet the 
requirements of this definition if it does not meet all accrediting 
agency and State requirements or exceeds an agency's restrictions on 
the number of clock hours in a program that may be offered through 
distance education.
    (3) An institution must be capable of monitoring a student's 
attendance in 50 out of 60 minutes for each clock hour under this 
definition.
* * * * *
    Correspondence course: (1) A course provided by an institution 
under which the institution provides instructional materials, by mail 
or electronic transmission, including examinations on the materials, to 
students who are separated from the instructors. Interaction between 
instructors and students in a correspondence course is limited, is not 
regular and substantive, and is primarily initiated by the student.
    (2) If a course is part correspondence and part residential 
training, the Secretary considers the course to be a correspondence 
course.
    (3) A correspondence course is not distance education.
    Credit hour: Except as provided in 34 CFR 668.8(k) and (l), a 
credit hour is an amount of student work defined by an institution, as 
approved by the institution's accrediting agency or State approval 
agency, that is consistent with commonly accepted practice in 
postsecondary education and that--
    (1) Reasonably approximates not less than--
    (i) One hour of classroom or direct faculty instruction and a 
minimum of two hours of out-of-class student work each week for 
approximately fifteen weeks for one semester or trimester hour of 
credit, or ten to twelve weeks for one quarter hour of credit, or the 
equivalent amount of work over a different period of time; or
    (ii) At least an equivalent amount of work as required in paragraph 
(1)(i) of this definition for other academic activities as established 
by the institution, including laboratory work, internships, practica, 
studio work, and other academic work leading to the award of credit 
hours; and
    (2) Permits an institution, in determining the amount of work 
associated with a credit hour, to take into account a variety of 
delivery methods, measurements of student work, academic calendars, 
disciplines, and degree levels.
* * * * *
    Distance education: (1) Education that uses one or more of the 
technologies listed in paragraphs (2)(i) through (iv) of this 
definition to deliver instruction to students who are separated from 
the instructor or instructors and to support regular and substantive 
interaction between the students and the instructor or instructors, 
either synchronously or asynchronously.
    (2) The technologies that may be used to offer distance education 
include--
    (i) The internet;
    (ii) One-way and two-way transmissions through open broadcast, 
closed circuit, cable, microwave, broadband lines, fiber optics, 
satellite, or wireless communications devices;
    (iii) Audio conference; or
    (iv) Other media used in a course in conjunction with any of the 
technologies listed in paragraph (2)(i) through (iii) of this 
definition.
    (3) For purposes of this definition, an instructor is an individual 
responsible for delivering course content and who meets the 
qualifications for instruction established by an institution's 
accrediting agency.
    (4) For purposes of this definition, substantive interaction is 
engaging students in teaching, learning, and assessment, consistent 
with the content under discussion, and also includes at least two of 
the following--
    (i) Providing direct instruction;
    (ii) Assessing or providing feedback on a student's coursework;
    (iii) Providing information or responding to questions about the 
content of a course or competency;
    (iv) Facilitating a group discussion regarding the content of a 
course or competency; or
    (v) Other instructional activities approved by the institution's or 
program's accrediting agency.
    (5) An institution ensures regular interaction between a student 
and an instructor or instructors by, prior to the student's completion 
of a course or competency--
    (i) Providing the opportunity for substantive interactions with the 
student on a predictable and regular basis commensurate with the length 
of time and the amount of content in the course or competency; and
    (ii) Monitoring the student's academic engagement and success and 
ensuring that an instructor is responsible for promptly and proactively 
engaging in substantive interaction with the student when needed on the 
basis of such monitoring, or upon request by the student.
* * * * *
    Incarcerated student: A student who is serving a criminal sentence 
in a Federal, State, or local penitentiary, prison, jail, reformatory, 
work farm, juvenile justice facility, or other similar correctional 
institution. A student is not

[[Page 18695]]

considered incarcerated if that student is in a half-way house or home 
detention or is sentenced to serve only weekends. For purposes of Pell 
Grant eligibility under 34 CFR 668.32(c)(2)(ii), a student who is 
incarcerated in a juvenile justice facility, or in a local or county 
facility, is not considered to be incarcerated in a Federal or State 
penal institution, regardless of which governmental entity operates or 
has jurisdiction over the facility, including the Federal government or 
a State, but is considered incarcerated for the purposes of determining 
costs of attendance under section 472 of the HEA in determining 
eligibility for and the amount of the Pell Grant.
    Juvenile justice facility: A public or private residential facility 
that is operated primarily for the care and rehabilitation of youth 
who, under State juvenile justice laws--
    (1) Are accused of committing a delinquent act;
    (2) Have been adjudicated delinquent; or
    (3) Are determined to be in need of supervision.
    Nonprofit institution: An institution that--
    (1)(i) Is owned and operated by one of 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.
* * * * *
0
3. Section 600.7 is amended by:
0
a. Redesignating paragraph (b)(2) as (b)(3).
0
b. Adding new paragraph (b)(2).
    The addition reads as follows:


Sec.  600.7  Conditions of institutional eligibility.

* * * * *
    (b) * * *
    (2) Calculating the number of correspondence students. For purposes 
of paragraph (a)(1)(ii) of this section, a student is considered 
``enrolled in correspondence courses'' if the student's enrollment in 
correspondence courses constituted more than 50 percent of the courses 
in which the student enrolled during an award year.
* * * * *
* * * * *
0
4. Section 600.10 is amended by revising paragraph (c)(1)(iii) to read 
as follows:


Sec.  600.10  Date, extent, duration, and consequence of eligibility.

* * * * *
    (c) * * *
    (1) * * *
    (iii) For a first direct assessment program under 34 CFR 668.10, or 
the first direct assessment program offered at each credential level, 
and for a comprehensive transition and postsecondary program under 34 
CFR 668.232, obtain the Secretary's approval.
* * * * *
0
5. Section 600.20 is amended by:
0
a. Adding a sentence to the end of paragraph (a)(1).
0
b. Removing the word ``wishes'' in paragraphs (b)(1) and (2) and adding 
in its place the word ``chooses.''
0
c. Redesignating paragraphs (b)(2)(i) through (iii) as paragraphs 
(b)(2)(i)(A) through (C).
0
d. Redesignating paragraph (b)(2) introductory text as paragraph 
(b)(2)(i) introductory text.
0
e. Adding a new paragraph (b)(2)(ii).
0
f. Removing paragraph (d)(1)(ii)(B) and redesignating paragraphs 
(d)(1)(ii)(C) through (F) as paragraphs (d)(1)(ii)(B) through (E).
0
g. Revising redesignated paragraph (d)(1)(1i)(C).
0
h. Removing redesignated paragraph (d)(1)(ii)(D) and redesignating 
paragraphs (d)(1)(ii)(E) and (F) as paragraphs (d)(1)(ii)(D) and (E).
0
i. Revising redesignated paragraph (d)(1)(ii)(E)(1).
    The additions and revisions read as follows:


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

    (a)(1) * * * The Secretary must ensure prompt action is taken by 
the Department on any materially complete application required under 
this section.
* * * * *
    (b) * * *
    (2) * * *
    (ii) The Secretary must ensure prompt action is taken by the 
Department on any materially complete application required under 
paragraph (b)(2)(i) of this section.
* * * * *
    (d)(1) * * *
    (ii) * * *
    (C) If an additional educational program is required to be approved 
by the Secretary for title IV, HEA program purposes under paragraph 
(d)(1)(ii)(B) of this section, the Secretary may grant approval, or 
request further information prior to making a determination of whether 
to approve or deny the additional educational program.
* * * * *
    (E)(1) If the Secretary denies an application from an institution 
to offer an additional educational program, the denial will be based on 
the factors described in paragraphs (d)(1)(ii)(D)(2), (3), and (4) of 
this section, and the Secretary will explain in the denial how the 
institution failed to demonstrate that the program is likely to lead to 
gainful employment in a recognized occupation.
* * * * *
0
6. Amend Sec.  600.21 by revising paragraph (a)(11) and adding 
paragraphs (a)(12) and (13) to read as follows:


Sec.  600.21  Updating application information.

    (a) * * *
    (11) For any program that is required to provide training that 
prepares a student for gainful employment in a recognized occupation--
    (i) Establishing the eligibility or reestablishing the eligibility 
of the program;
    (ii) Discontinuing the program's eligibility;
    (iii) Ceasing to provide the program for at least 12 consecutive 
months;
    (iv) Losing program eligibility under Sec.  600.40; or
    (v) Changing the program's name, CIP code or credential level.
    (12) Its addition of a second or subsequent direct assessment 
program.
    (13) Its establishment of a written arrangement for an ineligible 
institution or organization to provide more than 25

[[Page 18696]]

percent of a program pursuant to Sec.  668.5(c).
* * * * *
0
7. Section 600.52 is amended by revising the definition of ``foreign 
institution'' to read as follows:


Sec.  600.52  Definitions.

* * * * *
    Foreign institution: (1) For the purposes of students who receive 
title IV aid, an institution that--
    (i) Is not located in the United States;
    (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 
those institutions or organizations to provide a portion of an eligible 
program, as defined under Sec.  668.8, except for written arrangements 
for no more than 25 percent of the courses required by the program to 
be provided by eligible institutions located in the United States; and
    (C) Does not permit students to complete an eligible program by 
enrolling in courses offered in the United States, except that it may 
permit students to complete up to 25 percent of the program by 
enrolling in the coursework, research, work, internship, externship, or 
special studies offered by an eligible institution 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; 
and
    (iv) Awards degrees, certificates, or other recognized educational 
credentials in accordance with Sec.  600.54(e) that are officially 
recognized by the country in which the institution is located.
    (2) Notwithstanding paragraph (1)(ii)(C) of this definition, 
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 is performed only in a facility in the 
United States.
    (3) If the educational enterprise enrolls students both within the 
United States and outside the United States, and the number of students 
who would be eligible to receive title IV, HEA program funds attending 
locations outside the United States is at least twice the number of 
students enrolled within the United States, the locations outside the 
United States 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.
* * * * *
0
8. Section 600.54 is amended by revising paragraph (c) to read as 
follows:


Sec.  600.54  Criteria for determining whether a foreign institution is 
eligible to apply to participate in the Direct Loan Program.

* * * * *
    (c)(1) Notwithstanding Sec.  668.5, written arrangements between an 
eligible foreign institution and an ineligible entity are limited to 
those under which--
    (i) The ineligible entity is an institution that meets the 
requirements in paragraphs (1)(iii) and (iv) of the definition of 
``foreign institution'' in Sec.  600.52; and
    (ii) The ineligible foreign institution provides 25 percent or less 
of the educational program.
    (2) For the purpose of this paragraph (c), written arrangements do 
not include affiliation agreements for the provision of clinical 
training for foreign medical, veterinary, and nursing schools.
* * * * *

PART 668--STUDENT ASSISTANCE GENERAL PROVISIONS

0
9. The authority citation for part 668 continues to read as follows:

    Authority:  20 U.S.C. 1001-1003, 1070a, 1070g, 1085, 1087b, 
1087d, 1087e, 1088, 1091, 1092, 1094, 1099c, 1099c-1, 1221e-3, and 
3474, unless otherwise noted.

0
10. Section 668.1 is amended by revising paragraph (b) introductory 
text to read as follows:


Sec.  668.1   Scope.

* * * * *
    (b) As used in this part, an ``institution,'' unless otherwise 
specified, includes--
* * * * *
0
11. Section 668.2 is amended by:
0
a. Adding in alphabetical order in the list of definitions in paragraph 
(a) the words ``Direct assessment program'', ``Distance education'', 
``Religious mission'', ``Teach-out'', ``Teach-out agreement'', and 
``Teach-out plan''.
0
b. In paragraph (a):
0
i. Removing from the list of definitions the words ``Telecommunications 
course''; and
0
ii. Adding in alphabetical order in the list of definitions the words 
``Title IV, HEA program''.
0
c. In paragraph (b):
0
i. Removing the definition of ``Academic Competitiveness Grant (ACG)'';
0
ii. Revising the definition of ``full-time student'';
0
iii. Adding in alphabetical order the definition of ``subscription-
based program''; and
0
iv. In the definition of ``Third-party servicer'', in paragraph 
(1)(i)(D), removing the words ``Certifying loan applications'' and 
adding in their place the words ``Originating loans''.
    The additions and revisions read as follows:


Sec.  668.2  General definitions.

* * * * *
    (b) * * *
    Full-time student: An enrolled student who is carrying a full-time 
academic workload, as determined by the institution, under a standard 
applicable to all students enrolled in a particular educational 
program. The student's workload may include any combination of courses, 
work, research, or special studies that the institution considers 
sufficient to classify the student as a full-time student. For a term-
based program that is not subscription-based, the student's workload 
may include repeating any coursework previously taken in the program; 
however, the workload may not include more than one repetition of a 
previously passed course. For an undergraduate student, an 
institution's minimum standard must equal or exceed one of the 
following minimum requirements, based on the type of program:
    (1) For a program that measures progress in credit hours and uses 
standard terms (semesters, trimesters, or quarters), 12 semester hours 
or 12 quarter hours per academic term.
    (2) For a program that measures progress in credit hours and does 
not use terms, 24 semester hours or 36 quarter hours over the weeks of 
instructional time in the academic year, or the prorated equivalent if 
the program is less than one academic year.
    (3) For a program that measures progress in credit hours and uses 
nonstandard-terms (terms other than semesters, trimesters, or quarters) 
the number of credits determined by--
    (i) Dividing the number of weeks of instructional time in the term 
by the number of weeks of instructional time in the program's academic 
year; and
    (ii) Multiplying the fraction determined under paragraph (3)(i) of

[[Page 18697]]

this definition by the number of credit hours in the program's academic 
year.
    (4) For a program that measures progress in clock hours, 24 clock 
hours per week.
    (5) A series of courses or seminars that equals 12 semester hours 
or 12 quarter hours in a maximum of 18 weeks.
    (6) The work portion of a cooperative education program in which 
the amount of work performed is equivalent to the academic workload of 
a full-time student.
    (7) For correspondence coursework--
    (i) A full-time course load must be commensurate with the 
requirements listed in paragraphs (1) through (6) of this definition; 
and
    (ii) At least one-half of the coursework must be made up of non-
correspondence coursework that meets one-half of the institution's 
requirement for full-time students.
    (8) For a subscription-based program, completion of a full-time 
course load commensurate with the requirements in paragraphs (1), (3), 
and (5) through (7) of this definition.
* * * * *
    Subscription-based program: A standard or nonstandard-term direct 
assessment program in which the institution charges a student for each 
term on a subscription basis with the expectation that the student 
completes a specified number of credit hours during that term. 
Coursework in a subscription-based program is not required to begin or 
end within a specific timeframe in each term. Students in subscription-
based programs must complete a cumulative number of credit hours (or 
the equivalent) during or following the end of each term before 
receiving subsequent disbursements of title IV, HEA program funds. An 
institution establishes an enrollment status (for example, full-time or 
half-time) that will apply to a student throughout the student's 
enrollment in the program, except that a student may change his or her 
enrollment status no more often than once per academic year. The number 
of credit hours (or the equivalent) a student must complete before 
receiving subsequent disbursements is calculated by--
    (1) Determining for each term the number of credit hours (or the 
equivalent) associated with the institution's minimum standard for the 
student's enrollment status (for example, full-time, three-quarter 
time, or half-time) for that period commensurate with paragraph (8) in 
the definition of ``full-time student,'' adjusted for less than full-
time students in light of the definitions of ``half-time student'' and 
``three-quarter time student,'' and adjusted to at least one credit (or 
the equivalent) for a student who is enrolled less than half-time; and
    (2) Adding together the number of credit hours (or the equivalent) 
determined under paragraph (1) for each term in which the student was 
enrolled in and attended that program, excluding the current and most 
recently attended terms.
* * * * *
0
12. Section 668.3 is amended by revising paragraphs (b)(2) and (3) to 
read as follows:


Sec.  668.3  Academic year.

* * * * *
    (b) * * *
    (2) A week of instructional time is any week in which--
    (i) At least one day of regularly scheduled instruction or 
examinations occurs, or, after the last scheduled day of classes for a 
term or payment period, at least one day of study for final 
examinations occurs; or
    (ii)(A) In a program offered using asynchronous coursework through 
distance education or correspondence courses, the institution makes 
available the instructional materials, other resources, and instructor 
support necessary for academic engagement and completion of course 
objectives; and
    (B) In a program using asynchronous coursework through distance 
education, the institution expects enrolled students to perform 
educational activities demonstrating academic engagement during the 
week.
    (3) Instructional time does not include any scheduled breaks and 
activities not included in the definition of ``academic engagement'' in 
34 CFR 600.2, or periods of orientation or counseling.
0
13. Section 668.5 is amended by:
0
a. Revising paragraphs (a), (c), and (d)(1).
0
b. Adding paragraphs (f), (g) and (h).
    The revisions and additions read as follows:


Sec.  668.5  Written arrangements to provide educational programs.

    (a) Written arrangements between eligible institutions. (1) Except 
as provided in paragraph (a)(2) of this section, if an eligible 
institution enters into a written arrangement with another eligible 
institution, or with a consortium of eligible institutions, under which 
the other eligible institution or consortium provides part of the 
educational program to students enrolled in the first institution, the 
Secretary considers that educational program to be an eligible program 
if the educational program offered by the institution that grants the 
degree, certificate, or other recognized educational credential 
otherwise satisfies the requirements of Sec.  668.8.
    (2) If the written arrangement is between two or more eligible 
institutions that are owned or controlled by the same individual, 
partnership, or corporation, the Secretary considers the educational 
program to be an eligible program if the educational program offered by 
the institution that grants the degree, certificate, or other 
recognized educational credential otherwise satisfies the requirements 
of Sec.  668.8.
* * * * *
    (c) Written arrangements between an eligible institution and an 
ineligible institution or organization. Except as provided in paragraph 
(d) of this section, if an eligible institution enters into a written 
arrangement with an institution or organization that is not an eligible 
institution under which the ineligible institution or organization 
provides part of the educational program of students enrolled in the 
eligible institution, the Secretary considers that educational program 
to be an eligible program if--
    (1) The ineligible institution or organization--
    (i) Demonstrates experience in the delivery and assessment of the 
program or portion of the program they will be contracted to deliver 
under the provisions of the written arrangement and that the program 
has been effective in meeting the stated learning objectives; and
    (ii) Has not--
    (A) Had its eligibility to participate in the title IV, HEA 
programs terminated by the Secretary;
    (B) Voluntarily withdrawn from participation in the title IV, HEA 
programs under a termination, show-cause, suspension, or similar type 
proceeding initiated by the institution's State licensing agency, 
accrediting agency, or guarantor, or by the Secretary;
    (C) Had its certification to participate in the title IV, HEA 
programs revoked by the Secretary;
    (D) Had its application for recertification to participate in the 
title IV, HEA programs denied by the Secretary; or
    (E) Had its application for certification to participate in the 
title IV, HEA programs denied by the Secretary;
    (2) The educational program offered by the institution that grants 
the degree, certificate, or other recognized educational credential 
otherwise satisfies the requirements of Sec.  668.8; and
    (3)(i) The ineligible institution or organization provides 25 
percent or less

[[Page 18698]]

of the educational program, including in accordance with Sec.  
602.22(b)(4); or
    (ii)(A) The ineligible institution or organization provides more 
than 25 percent but less than 50 percent of the educational program, in 
accordance with Sec.  602.22(a)(1)(ii)(J);
    (B) The eligible institution and the ineligible institution or 
organization are not owned or controlled by the same individual, 
partnership, or corporation; and
    (C) The eligible institution's accrediting agency or, if the 
institution is a public postsecondary vocational educational 
institution, the State agency listed in the Federal Register in 
accordance with 34 CFR part 603 has specifically determined that the 
institution's arrangement meets the agency's standards for executing a 
written arrangement with an ineligible institution or organization.
    (d) Administration of title IV, HEA programs. (1) If an institution 
enters into a written arrangement as described in paragraph (a), (b), 
or (c) of this section, or provides coursework as provided in paragraph 
(h)(2) of this section, except as provided in paragraph (d)(2) of this 
section, the institution at which the student is enrolled as a regular 
student must determine the student's eligibility for the title IV, HEA 
program funds, and must calculate and disburse those funds to that 
student.
* * * * *
    (f) Workforce responsiveness. Nothing in this or any other section 
prohibits an institution utilizing written arrangements from aligning 
or modifying its curriculum or academic requirements in order to meet 
the recommendations or requirements of industry advisory boards that 
include employers who hire program graduates, widely recognized 
industry standards and organizations, or industry-recognized 
credentialing bodies, including making governance or decision-making 
changes as an alternative to allowing or requiring faculty control or 
approval or integrating industry-recognized credentials into existing 
degree programs.
    (g) Calculation of percentage of program. When determining the 
percentage of the program that is provided by an ineligible institution 
or organization under paragraph (c) of this section, the institution 
divides the number of semester, trimester, or quarter credit hours, 
clock hours, or the equivalent that are provided by the ineligible 
organization or organizations by the total number of semester, 
trimester, or quarter credit hours, clock hours, or the equivalent 
required for completion of the program. A course is provided by an 
ineligible institution or organization if the organization with which 
the institution has a written arrangement has authority over the 
design, administration, or instruction in the course, including, but 
not limited to--
    (1) Establishing the requirements for successful completion of the 
course;
    (2) Delivering instruction in the course; or
    (3) Assessing student learning.
    (h) Non-applicability to other interactions with outside entities. 
Written arrangements are not necessary for, and the limitations in this 
section do not apply to--
    (1) Acceptance by the institution of transfer credits or use of 
prior learning assessment or other non-traditional methods of providing 
academic credit; or
    (2) The internship or externship portion of a program if the 
internship or externship is governed by accrediting agency standards 
that require the oversight and supervision of the institution, where 
the institution is responsible for the internship or externship and 
students are monitored by qualified institutional personnel.
* * * * *
0
14. Section 668.8 is amended by revising paragraphs (e)(1)(iii), 
(k)(2), and (l) to read as follows:


Sec.  668.8  Eligible program.

* * * * *
    (e) * * * (1) * * *
    (iii) The institution can demonstrate reasonable program length, in 
accordance with 34 CFR 668.14(b)(26); and
* * * * *
    (k) * * *
    (2) Each course within the program is acceptable for full credit 
toward completion of an eligible program offered by the institution 
that provides an associate degree, bachelor's degree, professional 
degree, or equivalent degree as determined by the Secretary, provided 
that--
    (i) The eligible program requires at least two academic years of 
study; and
    (ii) The institution can demonstrate that at least one student was 
enrolled in the program during the current or most recently completed 
award year.
    (l) Formula. For purposes of determining whether a program 
described in paragraph (h) of this section satisfies the requirements 
contained in paragraph (c)(3) or (d) of this section, and the number of 
credit hours in that educational program for the purposes of the title 
IV, HEA programs--
    (1) A semester or trimester hour must include at least 30 clock 
hours of instruction; and
    (2) A quarter hour must include at least 20 clock hours of 
instruction.
* * * * *
0
15. Section 668.10 is revised to read as follows:


Sec.  668.10  Direct assessment programs.

    (a)(1) A direct assessment program is a program that, in lieu of 
credit or clock hours as the measure of student learning, utilizes 
direct assessment of student learning, or recognizes the direct 
assessment of student learning by others. The assessment must be 
consistent with the accreditation of the institution or program 
utilizing the results of the assessment.
    (2) Direct assessment of student learning means a measure of a 
student's knowledge, skills, and abilities designed to provide evidence 
of the student's proficiency in the relevant subject area.
    (3) An institution must establish a methodology to reasonably 
equate each module in the direct assessment program to either credit 
hours or clock hours. This methodology must be consistent with the 
requirements of the institution's accrediting agency or State approval 
agency.
    (4) All regulatory requirements in this chapter that refer to 
credit or clock hours as a measurement apply to direct assessment 
programs according to whether they use credit or clock hour 
equivalencies, respectively.
    (5) A direct assessment program that is not consistent with the 
requirements of the institution's accrediting agency or State approval 
agency is not an eligible program as provided under Sec.  668.8. In 
order for any direct assessment program to qualify as an eligible 
program, the accrediting agency must have--
    (i) Evaluated the program based on the agency's accreditation 
standards and criteria, and included it in the institution's grant of 
accreditation or preaccreditation; and
    (ii) Reviewed and approved the institution's claim of each direct 
assessment program's equivalence in terms of credit or clock hours.
    (b)(1) An institution that wishes to offer a direct assessment 
program must apply to the Secretary to have its direct assessment 
program or programs determined to be eligible programs for title IV, 
HEA program purposes. Following the Secretary's initial approval of a 
direct assessment program, additional direct assessment programs at an 
equivalent or lower academic level may be determined to be

[[Page 18699]]

eligible without further approvals from the Secretary except as 
required by Sec.  600.10(c)(1)(iii), Sec.  600.20(c)(1), or Sec.  
600.21(a), as applicable, if such programs are consistent with the 
institution's accreditation or its State approval agency.
    (2) The institution's direct assessment application must provide 
information satisfactory to the Secretary that includes--
    (i) A description of the educational program, including the 
educational credential offered (degree level or certificate) and the 
field of study;
    (ii) A description of how the direct assessment program is 
structured, including information about how and when the institution 
determines on an individual basis what each student enrolled in the 
program needs to learn and how the institution excludes from 
consideration of a student's eligibility for title IV, HEA program 
funds any credits or competencies earned on the basis of prior 
learning;
    (iii) A description of how learning is assessed and how the 
institution assists students in gaining the knowledge needed to pass 
the assessments;
    (iv) The number of semester, trimester, or quarter credit hours, or 
clock hours, that are equivalent to the amount of student learning 
being directly assessed for the certificate or degree;
    (v) The methodology the institution uses to determine the number of 
credit or clock hours to which the program or programs are equivalent; 
and
    (vi) Documentation from the institution's accrediting agency or 
State approval agency indicating that the agency has evaluated the 
institution's offering of direct assessment program(s) and has included 
the program(s) in the institution's grant of accreditation and approval 
documentation from the accrediting agency or State approval agency 
indicating agreement with the institutions methodology for determining 
the direct assessment program's equivalence in terms of credit or clock 
hours.
    (vii) Notwithstanding paragraphs (a) and (b) of this section, no 
program offered by a foreign institution that involves direct 
assessment will be considered to be an eligible program under Sec.  
668.8.
    (c) A direct assessment program may use learning resources (e.g., 
courses or portions of courses) that are provided by entities other 
than the institution providing the direct assessment program without 
regard to the limitations on contracting for part of an educational 
program in Sec.  668.5(c)(3).
    (d) Title IV, HEA program funds may be used to support instruction 
provided, or overseen, by the institution, except for the portion of 
the program that the student is awarded based on prior learning.
    (e) Unless an institution has received initial approval from the 
Secretary to offer direct assessment programs, and the institution's 
offering of direct assessment coursework is consistent with the 
institution's accreditation and State authorization, if applicable, 
title IV, HEA program funds may not be used for--
    (1) The course of study described in Sec.  668.32(a)(1)(ii) and 
(iii) and (a)(2)(i)(B), if offered using direct assessment; or
    (2) Remedial coursework described in Sec.  668.20, if offered using 
direct assessment.
    (f) Student progress in a direct assessment program may be measured 
using a combination of--
    (1) Credit hours and credit hour equivalencies; or
    (2) Clock hours and clock hour equivalencies.
0
16. Section 668.13 is amended by:
0
a. Redesignating paragraph (a)(1) as paragraph (a)(1)(i).
0
b. Adding paragraph (a)(1)(ii).
0
c. Adding paragraph (b)(3).
0
d. Removing the word ``or'' at the end of paragraph (c)(1)(i)(D).
0
e. Removing the period and adding in its place ``; or'', at the end of 
paragraph (c)(1)(i)(E).
0
f. Adding paragraph (c)(1)(i)(F).
0
g. Removing the word ``facsimile'' and adding in its place the word 
``electronic'' in paragraphs (d)(3)(i) and (d)(3)(ii)(C).
0
h. Revising paragraph (d)(3)(iii).
0
i. Removing paragraph (d)(3)(iv).
0
j. Revising paragraph (d)(5).
    The additions and revisions read as follows:


Sec.  668.13  Certification procedures.

    (a) * * * (1)(i) * * *
    (ii) On application from the institution, the Secretary certifies a 
location of an institution that meets the requirements of 34 CFR 
668.13(a)(1)(i) as a branch if it satisfies the definition of 
``branch'' in 34 CFR 600.2.
* * * * *
    (b) * * *
    (3) In the event that the Secretary does not make a determination 
to grant or deny certification within 12 months of the expiration of 
its current period of participation, the institution will automatically 
be granted renewal of certification, which may be provisional.
    (c) * * * (1)(i) * * *
    (F) The institution is a participating institution that has been 
provisionally recertified under the automatic recertification 
requirement in paragraph (b)(3) of this section.
* * * * *
    (d) * * *
    (3) * * *
    (iii) Documents filed by electronic transmission must be 
transmitted to the Secretary in accordance with instructions provided 
by the Secretary in the notice of revocation.
* * * * *
    (5) The mailing date of a notice of revocation or a request for 
reconsideration of a revocation is the date evidenced on the original 
receipt of mailing from the U.S. Postal Service or another service that 
provides delivery confirmation for that document.
* * * * *
0
17. Section 668.14 is amended by revising paragraphs (b)(10), (26), and 
(31) to read as follows:


Sec.  668.14  Program participation agreement.

* * * * *
    (b) * * *
    (10) In the case of an institution that advertises job placement 
rates as a means of attracting students to enroll in the institution, 
the institution will make available to prospective students, at or 
before the time that those students apply for enrollment--
    (i) The most recent available data concerning employment 
statistics, graduation statistics, and any other information necessary 
to substantiate the truthfulness of the advertisements; and
    (ii) Relevant State licensing requirements of the State in which 
the institution is located for any job for which the course of 
instruction is designed to prepare such prospective students, as 
provided in 34 CFR 668.43(a)(5)(v);
* * * * *
    (26) If an educational program offered by the institution is 
required to prepare a student for gainful employment in a recognized 
occupation, the institution must--
    (i) Demonstrate a reasonable relationship between the length of the 
program and entry level requirements for the recognized occupation for 
which the program prepares the student. The Secretary considers the 
relationship to be reasonable if the number of clock hours provided in 
the program does not exceed the greater of--
    (A) One hundred and fifty percent of the minimum number of clock 
hours required for training in the recognized occupation for which the 
program prepares the student, as established by the State in which the 
institution is

[[Page 18700]]

located, if the State has established such a requirement, or as 
established by any Federal agency; or
    (B) The minimum number of clock hours required for training in the 
recognized occupation for which the program prepares the student as 
established in a State adjacent to the State in which the institution 
is located; and
    (ii) Establish the need for the training for the student to obtain 
employment in the recognized occupation for which the program prepares 
the student.
* * * * *
    (31) The institution will submit a teach-out plan to its 
accrediting agency in compliance with 34 CFR 602.24(c) and the 
standards of the institution's accrediting agency. The institution will 
update its teach-out plan upon the occurrence of any of the following 
events:
* * * * *
0
18. Section 668.15 is amended by:
0
a. Revising the section heading; and
0
b. Adding the phrase ``after a change in ownership or control'' after 
the phrase ``any Title IV, HEA program'' in paragraph (a).
    The revision reads as follows:


Sec.  668.15  Factors of financial responsibility for changes in 
ownership or control.

* * * * *
0
19. Section 668.22 is amended by:
0
a. Removing the word ``or'' at the end of paragraph (a)(2)(i)(B).
0
b. Revising paragraph (a)(2)(i)(C).
0
c. Adding paragraph (a)(2)(i)(D).
0
d. Revising paragraph (a)(2)(ii).
0
e. Removing the word ``nonterm'' and adding in its place the word 
``non-term'' in paragraph (a)(2)(iii)(B).
0
f. Revising paragraph (a)(3).
0
g. Removing the citation ``Sec.  668.164(g)'' at the end of paragraph 
(a)(5) and adding in its place the citation ``Sec.  668.164(i)''.
0
h. Revising paragraphs (a)(6)(ii), (d)(1)(vii), and (i).
0
i. Removing the citation ``Sec.  668.164(g)'' in paragraph (l)(1) and 
adding in its place the citation ``Sec.  668.164(j)''.
0
j. Removing the citation ``Sec.  668.164(g)(2)'' in paragraph (l)(4) 
and adding in its place the citation ``Sec.  668.164(j)(2)''.
0
k. Adding the phrase ``the program uses a standard term or nonstandard-
term academic calendar, is not a subscription-based program, and'' 
after the word ``if'' in paragraph (l)(6).
0
l. Revising paragraph (l)(7).
0
m. Adding paragraph (l)(9).
    The additions and revisions read as follows:


Sec.  668.22  Treatment of title IV funds when a student withdraws.

    (a) * * *
    (2)(i) * * *
    (C) For a student in a standard or nonstandard-term program, 
excluding a subscription-based program, the student is not scheduled to 
begin another course within a payment period or period of enrollment 
for more than 45 calendar days after the end of the module the student 
ceased attending, unless the student is on approved leave of absence, 
as defined in paragraph (d) of this section; or
    (D) For a student in a non-term program or a subscription-based 
program, the student is unable to resume attendance within a payment 
period or period of enrollment for more than 60 calendar days after 
ceasing attendance.
    (ii)(A) Notwithstanding paragraph (a)(2)(i) of this section--
    (1) A student who completes all the requirements for graduation 
from his or her program before completing the days or hours in the 
period that he or she was scheduled to complete is not considered to 
have withdrawn;
    (2) In a program offered in modules, a student is not considered to 
have withdrawn if the student completes--
    (i) One module that includes 50 percent or more of the number of 
days in the payment period;
    (ii) A combination of modules that when combined contain 50 percent 
or more of the number of days in the payment period; or
    (iii) Coursework equal to or greater than the coursework required 
for the institution's definition of a half-time student under 34 CFR 
668.2 for the payment period;
    (3) For a payment period or period of enrollment in which courses 
in the program are offered in modules--
    (i) A student is not considered to have withdrawn if the 
institution obtains written confirmation, including electronic 
confirmation, from the student at the time that would have been a 
withdrawal of the date that he or she will attend a module that begins 
later in the same payment period or period of enrollment; and
    (ii) For standard and nonstandard-term programs, excluding 
subscription-based programs, that module begins no later than 45 
calendar days after the end of the module the student ceased attending;
    (4) For a subscription-based program, a student is not considered 
to have withdrawn if the institution obtains written confirmation from 
the student at the time that would have been a withdrawal of the date 
that he or she will resume attendance, and that date occurs within the 
same payment period or period of enrollment and is no later than 60 
calendar days after the student ceased attendance; and
    (5) For a non-term program, a student is not considered to have 
withdrawn if the institution obtains written confirmation from the 
student at the time that would have been a withdrawal of the date that 
he or she will resume attendance, and that date is no later than 60 
calendar days after the student ceased attendance.
    (B) If an institution has obtained the written confirmation of 
future attendance in accordance with paragraph (a)(2)(ii)(A) of this 
section--
    (1) A student may change the date of return that begins later in 
the same payment period or period of enrollment, provided that the 
student does so in writing prior to the return date that he or she had 
previously confirmed;
    (2) For standard and nonstandard-term programs, excluding 
subscription-based programs the later module that he or she will attend 
begins no later than 45 calendar days after the end of the module the 
student ceased attending; and
    (3) For non-term and subscription-based programs, the student's 
program permits the student to resume attendance no later than 60 
calendar days after the student ceased attendance.
    (C) If an institution obtains written confirmation of future 
attendance in accordance with paragraph (a)(2)(ii)(A) and, if 
applicable, (a)(2)(ii)(B) of this section, but the student does not 
return as scheduled--
    (1) The student is considered to have withdrawn from the payment 
period or period of enrollment; and
    (2) The student's withdrawal date and the total number of calendar 
days in the payment period or period of enrollment would be the 
withdrawal date and total number of calendar days that would have 
applied if the student had not provided written confirmation of a 
future date of attendance in accordance with paragraph (a)(2)(ii)(A) of 
this section.
* * * * *
    (3) For purposes of this section, ``title IV grant or loan 
assistance'' includes only assistance from the Direct Loan, Federal 
Pell Grant, Iraq and Afghanistan Service Grant, TEACH Grant, and FSEOG 
programs, not including the non-Federal share of FSEOG awards if an 
institution meets its FSEOG matching share by the individual recipient 
method or the aggregate method.
* * * * *

[[Page 18701]]

    (6) * * *
    (ii)(A) If outstanding charges exist on the student's account, the 
institution may credit the student's account up to the amount of 
outstanding charges in accordance with Sec.  668.164(c) with all or a 
portion of any--
    (1) Grant funds that make up the post-withdrawal disbursement; and
    (2) Loan funds that make up the post-withdrawal disbursement only 
after obtaining confirmation from the student or parent in the case of 
a parent PLUS loan, that they still wish to have the loan funds 
disbursed in accordance with paragraph (a)(6)(iii) of this section.
* * * * *
    (d)(1) * * *
    (vii) Except for a clock hour or non-term credit hour program, or a 
subscription-based program, upon the student's return from the leave of 
absence, the student is permitted to complete the coursework he or she 
began prior to the leave of absence; and
* * * * *
    (i) Order of return of title IV funds--(1) Loans. Unearned funds 
returned by the institution or the student, as appropriate, in 
accordance with paragraph (g) or (h) of this section respectively, must 
be credited to outstanding balances on title IV loans made to the 
student or on behalf of the student for the payment period or period of 
enrollment for which a return of funds is required. Those funds must be 
credited to outstanding balances for the payment period or period of 
enrollment for which a return of funds is required in the following 
order:
    (i) Unsubsidized Federal Direct Stafford loans.
    (ii) Subsidized Federal Direct Stafford loans.
    (iii) Federal Direct PLUS received on behalf of the student.
    (2) Remaining funds. If unearned funds remain to be returned after 
repayment of all outstanding loan amounts, the remaining excess must be 
credited to any amount awarded for the payment period or period of 
enrollment for which a return of funds is required in the following 
order:
    (i) Federal Pell Grants.
    (ii) Iraq and Afghanistan Service Grants.
    (iii) FSEOG Program aid.
    (iv) TEACH Grants.
* * * * *
    (l) * * *
    (7)(i) ``Academic attendance'' and ``attendance at an academically-
related activity'' must include academic engagement as defined under 34 
CFR 600.2.
    (ii) A determination of ``academic attendance'' or ``attendance at 
an academically-related activity'' must be made by the institution; a 
student's certification of attendance that is not supported by 
institutional documentation is not acceptable.
* * * * *
    (9) A student in a program offered in modules is scheduled to 
complete the days in a module if the student's coursework in that 
module was used to determine the amount of the student's eligibility 
for title IV, HEA funds for the payment period or period of enrollment.
* * * * *


Sec.  668.28  [Amended]

0
20. Section 668.28 is amended by removing and reserving paragraph (b).
0
21. Section 668.34 is amended by:
0
a. Revising paragraph (a)(5).
0
b. Adding the phrase ``or expressed in calendar time'' after the phrase 
``credit hours'' in paragraph (1) in the definition for ``maximum 
timeframe'' in paragraph (b).
    The revision reads as follows:


Sec.  668.34  Satisfactory academic progress.

    (a) * * *
    (1) * * *
    (5) The policy specifies--
    (i) For all programs, the maximum timeframe as defined in paragraph 
(b) of this section; and
    (ii) For a credit hour program using standard or nonstandard terms 
that is not a subscription-based program, the pace, measured at each 
evaluation, at which a student must progress through his or her 
educational program to ensure that the student will complete the 
program within the maximum timeframe, calculated by either dividing the 
cumulative number of hours the student has successfully completed by 
the cumulative number of hours the student has attempted or by 
determining the number of hours that the student should have completed 
by the evaluation point in order to complete the program within the 
maximum timeframe. In making this calculation, the institution is not 
required to include remedial courses.
* * * * *
    (b) * * *
    Maximum timeframe. Maximum timeframe means--
    (1) For an undergraduate program measured in credit hours, a period 
that is no longer than 150 percent of the published length of the 
educational program, as measured in credit hours, or expressed in 
calendar time;
* * * * *


Sec.  668.111  [Amended]

0
22. Section 668.111 is amended by adding the phrase ``issuance by the 
Department of and'' after the phrase ``establishes rules governing 
the'' in the first sentence of paragraph (a).
0
23. Section 668.113 is amended by:
0
a. Replacing the word ``shall'' with the word ``must'' in both 
instances it is used in paragraph (c) introductory language.
0
b. Redesignating paragraphs (d)(1) and (2) as paragraphs (d)(2) and 
(3).
0
c. Adding new paragraph (d)(1).
    The addition reads as follows:


Sec.  668.113  Request for review.

* * * * *
    (d)(1) If the final audit determination or final program review 
determination in paragraph (a) of this section results from the 
institution's classification of a course or program as distance 
education, or the institution's assignment of credit hours, the 
Secretary relies upon the requirements of the institution's accrediting 
agency or State approval agency regarding qualifications for 
instruction and whether the amount of work associated with the 
institution's credit hours is consistent with commonly accepted 
practice in postsecondary education, in applying the definitions of 
``distance education'' and ``credit hour'' in 34 CFR 600.2.
* * * * *
0
24. Section 668.164 is amended by:
0
a. Adding the phrase ``that is not a subscription-based program'' after 
the phrase ``equal in length'' in paragraphs (i)(1)(i) and (i)(1)(ii).
0
b. Removing the word ``or'' at the end of paragraph (i)(1)(i).
0
c. Removing the period and adding in its place the punctuation and the 
word ``; or'' in paragraph (i)(1)(ii)(B).
0
d. Adding paragraph (i)(1)(iii).
    The addition reads as follows:


Sec.  668.164  Disbursing funds.

* * * * *
    (i)(1) * * *
    (iii) If the student is enrolled in a subscription-based program, 
the later of--
    (A) Ten days before the first day of classes of a payment period; 
or
    (B) The date the student completed the cumulative number of credit 
hours associated with the student's enrollment status in all prior 
terms that the student attended under the definition of a subscription-
based program in 34 CFR 668.2.
* * * * *
0
25. Section 668.171 is amended by:
0
a. Removing the word ``or'' at the end of paragraph (e)(1).
0
b. Removing the period and adding in its place the punctuation and the 
word ``; or'', in paragraph (e)(2).
0
c. Adding paragraph (e)(3).

[[Page 18702]]

    The additions reads as follows:


Sec.  668.171  General.

* * * * *
    (e) * * *
    (3) Deny the institution's application for certification or 
recertification to participate in the title IV, HEA programs.
* * * * *
0
26. Section 668.174 is amended by:
0
a. Revising paragraph (b)(1)(i) introductory text.
0
b. Adding the phrase ``ownership or'' after the word ``substantial'' in 
and removing the word ``or'' at the end of, paragraph (b)(1)(i)(A).
0
c. Redesignating paragraph (b)(1)(i)(B) as paragraph (b)(1)(i)(C).
0
d. Adding a new paragraph (b)(1)(i)(B).
0
e. Adding the word ``entity'' and a comma after the phrase ``That 
person,'' in paragraph (b)(1)(ii).
0
f. Adding the phrase ``or entity'' after the word ``person'' in 
paragraphs (b)(2)(i) and (ii).
0
g. Adding the word ``entity'' and a comma afterward after the phrase 
``owes the liability by that'' in paragraph (b)(2)(ii)(A).
0
h. Adding the word ``entity'' and a comma afterward after the phrase 
``owes the liability that the'' in paragraph (b)(2)(ii)(B).
0
i. Adding the phrase ``or entity'' after the phrase ``The person'' in 
paragraphs (b)(2)(iv)(A) and (B).
0
j. Adding the phrase ``or entity'' after both uses of the word 
``person'' in paragraph (c)(3) introductory language.
    The revisions and additions read as follows:


Sec.  668.174  Past performance.

* * * * *
    (b) Past performance of persons or entities affiliated with an 
institution. (1)(i) Except as provided in paragraph (b)(2) of this 
section, an institution is not financially responsible if a person or 
entity who exercises substantial ownership or control over the 
institution, as described under 34 CFR 600.31, or any member or members 
of that person's family alone or together--
    (A) * * *
    (B) Exercised substantial ownership or control over another 
institution that closed without a viable teach-out plan or agreement 
approved by the institution's accrediting agency and faithfully 
executed by the institution; or
* * * * *


Sec.  668.175  [Amended]

0
27. Section 668.175 is amended by deleting the phrases ``or facsimile'' 
and ``or by facsimile transmission'' in paragraph (d)(3)(i).
[FR Doc. 2020-05700 Filed 4-1-20; 8:45 am]
BILLING CODE 4000-01-P