[Federal Register Volume 85, Number 171 (Wednesday, September 2, 2020)]
[Rules and Regulations]
[Pages 54742-54818]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-18636]



[[Page 54741]]

Vol. 85

Wednesday,

No. 171

September 2, 2020

Part III





Department of Education





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34 CFR Parts 600, 602 and 668





Distance Education and Innovation; Final Rule

  Federal Register / Vol. 85 , No. 171 / Wednesday, September 2, 2020 / 
Rules and Regulations  

[[Page 54742]]


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DEPARTMENT OF EDUCATION

34 CFR Parts 600, 602 and 668

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


Distance Education and Innovation

AGENCY: Office of Postsecondary Education, Department of Education.

ACTION: Final regulations.

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SUMMARY: The Secretary amends 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 amends the Student Assistance 
General Provisions regulations issued under the HEA.

DATES: Effective date: These regulations are effective July 1, 2021.
    Implementation date: For the implementation dates of the included 
regulatory provisions, see the Implementation Date of These Regulations 
section of this document.

FOR FURTHER INFORMATION CONTACT: For information on these Distance 
Education and Innovation regulations, please contact Greg Martin at 
(202) 453-7535 or by email at [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: Through this regulatory action, 
the Department of Education (Department or we) amends 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 amends the Student Assistance General Provisions regulations 
issued under the HEA. A more detailed summary can be found in the 
Summary of the Major Provisions of This Regulatory Action section.

Summary of the Major Provisions of This Regulatory Action

    These regulations--
     Clarify that when calculating the number of correspondence 
students, a student is considered ``enrolled in correspondence 
courses'' 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 Department action on any application an 
institution submits to the Secretary seeking a determination that it 
qualifies as an eligible institution and on 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 entity that 
does not participate in the title IV, HEA programs;
     Provide flexibility to institutions to modify their 
curricula 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 49 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 proprietary institutions, because the provisions are no 
longer applicable;
     Clarify the 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 
certification or recertification application 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 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

[[Page 54743]]

flexible enough to accommodate further technological advancements.
    Institutions that choose to offer these programs will 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 will 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 will be beneficial to students. Students, 
especially non-traditional students that find the existing competency-
based or distance education programs to be appealing for various 
reasons, can 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 
to accommodate other scheduling demands students have, and to recognize 
knowledge and skills gained elsewhere, may allow students to graduate 
with lower debt.\1\ However, it is not clear how students will respond, 
and whether more traditional students will also be attracted to 
competency based programs as more institutions develop them.
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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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    These regulations involve a significant amount of monetary 
transfers among the Federal Government, students, and institutions 
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, thus these 
changes will not have a significant budget impact. We estimate that new 
students attracted to new competency-based or other programs developed, 
in part, because of the clarity created by these regulations will 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.
    Implementation Date of These Regulations: Section 482(c) of the HEA 
requires that we publish regulations affecting programs under title IV 
of the HEA in final form by November 1, prior to the start of the award 
year (July 1) to which they apply. However, that section also permits 
the Secretary to designate any regulation as one that an entity subject 
to the regulations may choose to implement earlier and the conditions 
for early implementation.
    The Secretary is exercising her authority under section 482(c) of 
the HEA to designate the regulatory changes to regulations at title 34, 
parts 600, 602, and 668 of the Code of Federal Regulations included in 
this document for early implementation beginning on September 2, 2020, 
at the discretion of each institution, or each agency, as appropriate. 
The Department will implement the regulations as soon as possible after 
the implementation date and will publish a separate notice announcing 
the timing of the implementation. Otherwise, the final regulations 
included in this document are effective July 1, 2021.

Analysis of Comments and Changes

    We developed these regulations through negotiated rulemaking. 
Section 492 of the HEA requires that, before publishing any proposed 
regulations to implement programs under title IV of the HEA, the 
Secretary must obtain public involvement in the development of the 
proposed regulations. After obtaining advice and recommendations, the 
Secretary must conduct a negotiated rulemaking process to develop the 
proposed regulations. The negotiated rulemaking committee reached 
consensus on the proposed regulations that we published on April 2, 
2020. The Secretary invited comments on the proposed regulations by May 
4, 2020, and 238 parties submitted comments. An analysis of the 
comments and of the changes in the regulations since publication of the 
notice of proposed rulemaking (NPRM) \2\ follows.
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    \2\ 85 FR 18638.
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    We group major issues according to subject, with appropriate 
sections of the regulations referenced in parentheses. We discuss other 
substantive issues under the sections of the regulations to which they 
pertain. Generally, we do not address minor changes, technical changes, 
non-substantive changes, recommended changes that the law does not 
authorize the Secretary to make, or comments pertaining to operational 
processes. We also do not typically address comments pertaining to 
issues that were not within the scope of the NPRM.

General Support

    Comments: Many commenters expressed support for the regulations and 
urged the Department not to modify them in a way that would weaken 
student protections. These commenters, including several students, 
expressed that they supported the regulation as a means of both 
reducing barriers to innovation and achieving greater responsiveness to 
workforce needs. Stating that the Department's regulations have not 
kept up with changing technologies, many commenters underscored the 
importance of these regulations considering the sudden move to distance 
education due to COVID-19.
    Several students supporting the rule also urged instructors, 
institutions, accrediting agencies, or the Federal Government to do 
more to keep up with changing technologies, suggesting that the lessons 
learned during the pandemic would pay dividends in terms of better and 
more responsive academic programs after it is over. Several commenters 
said the regulations would reduce administrative burden, complement the 
changes made in the accreditation final rule,\3\ and properly balance 
support for innovation with protections for students and/or taxpayers.
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    \3\ 84 FR 58834.
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    A few commenters also--
    (1) praised the move to a focus on competencies and skills, rather 
than seat time;
    (2) suggested the regulation would have the benefit of reducing 
costs for students;
    (3) acknowledged that distance education does not necessarily make 
a course high- or low-quality but suggested that outdated technology 
and teaching methods can be to blame for lower outcomes;
    (4) asserted the rule would protect students from bad actors, 
especially during the pandemic, and noted approvingly that even the 
American Bar Association, which is typically resistant to distance 
education, has been forced by the pandemic to embrace distance 
learning, along with other flexibilities; and

[[Page 54744]]

    (5) suggested more innovative learning methods could close 
educational disparities and, by extension, wealth disparities, which 
could lead to more American innovation, including patents and other 
ideas that could benefit humanity.
    However, one commenter expressed that while many will see the 
benefits of distance education after the pandemic is over, that 
commenter cautioned that some programs would not be appropriate to 
conduct fully online and that flexibility should remain for blended 
learning along with research to evaluate efficacy.
    Other commenters supported the rule, generally noting that they-- 
(1) appreciated the safeguards to ensure regular interaction, which 
would reduce the need for instructors to assign ``largely pointless 
work'' to satisfy the standard; (2) praised the clarity of the 
regulations, particularly the definitions; and (3) suggested the 
regulations will benefit the education system by allowing programs to 
be more specifically tailored to each student's individual needs.
    One commenter said the rule would expand access to high-quality, 
affordable education options to a broader segment of students and that 
the proposals were generally fair to students, incentivized rather than 
punished innovation, focused quality assurance on outcomes, simplified 
eligibility requirements, and protected student and taxpayer 
investments.
    One commenter supported the Department's effort to realign the 
roles and responsibilities of the regulatory triad in postsecondary 
education: The Federal Government, State authorizing agencies, and 
accrediting agencies.
    Another commenter noted that institutions have been slow to adopt 
competency-based education (CBE) programs, often due to Federal 
regulations, and further suggested these programs could particularly 
benefit veterans and military-connected students and hoped institutions 
would develop new CBE programs because of these regulations.
    Discussion: The Department thanks these commenters for their 
support for these regulations, including the greater clarity provided 
in a number of definitions. We appreciate hearing from student 
commenters who shared their perspectives, especially as they relate to 
the impact of the COVID-19 pandemic on their educational experience, 
and we appreciate their efforts to embrace innovation, and the optimism 
they expressed that these regulations will help them and students to 
follow. The Department agrees with many commenters that it is best to 
allow institutions to better serve students utilizing the latest 
technology and to do so now, given the challenges many students and 
institutions are facing.
    The Department agrees that the proposed rule appropriately balances 
the need for innovation with strong protections for students and 
taxpayers. We also agree with the commenter who suggested that some 
disciplines may require at least some in-person instruction and noted 
that instructors, institutions, and accrediting agencies are in the 
best position to determine whether distance, blended, or ground-based 
instruction is most appropriate. The Department agrees that additional 
research could help it make even more informed decisions in the future. 
We also agree that veterans, military-connected students, and many 
other students can benefit from CBE programs and that more students 
will benefit from these programs because of these regulations.
    Changes: None.
    Comments: One commenter praised the negotiation process, calling it 
open, engaging, thorough, and fair, resulting in regulations that 
provide better clarity and protections for students. The commenter 
stated that the subcommittee, which made a complete set of 
recommendations to the main committee, engaged in active and informed 
interaction.
    One commenter supported the Department's effort to select 
negotiators representing diverse perspectives. The commenter expressed 
gratitude for the significant time and effort negotiators spent on this 
rulemaking. This commenter and several others also praised the work of 
the negotiators and the Department in reaching consensus.
    One commenter supported the consensus agreement and the proposed 
rule for clarifying and reaffirming the appropriate role of accrediting 
agencies in ensuring the integrity of distance education programs. The 
commenter also asked that the Department not include additional 
provisions that were not negotiated.
    Discussion: We appreciate the support from commenters and agree 
that one benefit of these regulations is to ensure clarity of the role 
of accrediting agencies in matters related to distance education. We 
note that the Administrative Procedure Act (APA) does not permit us to 
include additional provisions that were not subject to the rulemaking 
effort.
    Changes: None.
    Comments: Many commenters urged the Department to maintain 
consensus language in the final rule and not make changes that would 
weaken protections for students.
    Discussion: We appreciate these commenters' suggestion and agree 
that the final rule should maintain the consensus language to the 
greatest extent practicable. The Department is leaving most of the 
consensus language in the proposed rule unchanged. As discussed 
elsewhere, the Department is making some changes at the request of 
commenters, including to permit the use of asynchronous clock hours 
offered through distance education and subscription-based disbursement 
for programs not offered through direct assessment programs. As 
discussed in this document, the Department believes the benefits of 
these changes outweigh any risks. However, the Department believes the 
final rule will maintain the important protections for students 
presented in the NPRM.
    Changes: None.
    Comments: Several commenters acknowledged that the COVID-19 
pandemic necessitates some flexibility in the short-term but greater 
oversight in the long-term regarding distance education.
    Discussion: The Department believes, as detailed elsewhere, that 
the regulations appropriately consider both protections for consumers 
and taxpayers as well as the need for innovation. While we did not know 
during rulemaking sessions that a pandemic was in our future, these 
regulations address the needs of both institutions and students in 
response to COVID-19 and serve as additional evidence that the 
rulemaking effort resulted in a needed and meaningful modernization of 
our prior regulations. The Department also believes that there need not 
be a tradeoff between consumer protection and innovation.
    Changes: None.
    Comments: Several commenters supported many of the provisions of 
the proposed rule while suggesting that the lack of safeguards 
generally, or with regard to distance education in particular, may have 
downsides that necessitate strong consumer protections to protect 
students and some groups of students in particular (including veterans 
and military-connected students, low-income students, students of 
color, and those lacking academic preparation).
    Additionally, several commenters suggested that proprietary 
institutions would be especially likely to treat students unfairly.
    Discussion: The Department agrees that students should select 
programs that align well with their prior academic preparation, their 
learning style, and

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their lifestyle. Additionally, we believe that all educational programs 
must continue to have proper oversight by the Department, States, and 
accrediting agencies. While protections for all students are important, 
the benefits of a program should not be denied to some students simply 
because the program is not the right choice for others. The Department 
notes that the growth of adaptive learning and artificial intelligence 
tools in recent years have allowed institutions to provide more 
personalized academic supports, at scale, that may be even better than 
what would be available in a traditional classroom, particularly in 
traditional large lecture courses. These technologies may facilitate 
more regular and effective faculty-student interaction than a 
traditional classroom format enables.
    The Department believes the enforcement of provisions protecting 
students is vital and should occur without regard to the tax status of 
the institution in question unless Congress directs the Department 
otherwise. The Department takes all allegations of harm to students 
seriously and does not condone improper conduct by any type of 
institution whether public, private non-profit, or proprietary.
    Changes: None.
    Comments: One commenter urged the Department to avoid provisions 
that would create unintended consequences for osteopathic clinical 
education programs, including students completing out-of-State clinical 
rotations. The commenter further requested that the Department avoid 
new financial and administrative burdens during the COVID-19 pandemic.
    Discussion: The Department considered clinical education programs 
in this rulemaking as well as the accreditation rulemaking, which 
covered issues related to State authorization of distance education and 
are effective July 1, 2020. These distance education and innovation 
regulations become effective July 1, 2021, allowing institutions and 
others adequate time to plan for their implementation. Early 
implementation is optional. We do not anticipate that these regulations 
will create unique burdens on osteopathic clinical education programs, 
which may elect to not integrate or expand distance learning 
opportunities within those programs. The Department sought to reduce 
financial and regulatory burden overall during this rulemaking. The 
Regulatory Impact Analysis and Paperwork Reduction Act sections of this 
final rule contain additional information about cost and burden.
    Changes: None.

General Opposition

    Comments: Several commenters expressed opposition to the final 
regulations because of concerns over whether they would weaken existing 
regulatory requirements on distance education programs. Other 
commenters opposed the final regulations because they worried about the 
potential negative impacts on colleges, universities, and the learning 
environments of all students. One of these commenters suggested that 
the cumulative effect of the proposed rule would allow for drastic and 
unnecessary changes in the name of efficiency and innovation, while 
sacrificing students' learning and protection in the process, leading 
to further damage to students and taxpayers. Many of these commenters 
expressed similar concerns that the proposed changes would expose 
students and taxpayer-funded Federal aid dollars to undue risk.
    Discussion: We thank the commenters for expressing their concerns, 
and we have considered their objections. We do not share their 
apprehension about the predicted consequences of these final 
regulations. In fact, we believe that this final rule properly balances 
the need to protect student interests and guard taxpayer dollars, while 
also providing innovators the tools to deliver high-quality, distance 
education for students in the 21st century. We do not believe these 
goals must necessarily come at the expense of one another.
    Changes: None.
    Comments: Some commenters stated that the Department should rescind 
the proposed regulations and redraft new regulations that protect 
educational quality, the interests of students and taxpayers, and the 
general higher education community.
    Another commenter agreed that the proposed regulations should be 
rescinded, in part, because the Department did not conduct reasoned 
rulemaking as required by the APA. This commenter suggested that some 
negotiators did not understand the rules and that the Department 
``stacked the deck'' with an unmanageable agenda, created negotiating 
committees stacked heavily in favor of industry, and starved the 
committee of any real data or information to inform the rulemaking. 
Further, the commenter stated that the Department ``bullied'' 
negotiators who ``dared to oppose the Department's proposals and 
threatened others with promises of worse regulations if they refused to 
accede.'' The commenter concluded that the result was an 
``illegitimate'' vote of consensus. The same commenter added that the 
Department reneged on its historic consensus and changed the final 
regulations without sufficient factual justification. The commenter 
stated that the Department relied on ``little more than anecdotes, 
industry proposals, and ideology'' in its original proposals. The 
commenter also added that the Distance Education subcommittee should 
have more fully included student and taxpayer voices and interests and 
that the Department failed to follow its own agreed to protocols by not 
providing a preamble to members to review and comment on prior to 
publication. Similarly, a different commenter remarked that student 
veterans were not sufficiently represented, and more similar 
individuals should have been added to the negotiating committees.
    Another commenter argued that the livestreaming was not open to the 
public and that the consensus vote on the regulations could not be 
considered either valid or indicative of general support from any of 
the communities around the negotiation table. Further, the commenter 
stated that the data provided to the negotiators was disjointed and 
insufficient and that the Department should incorporate additional 
reporting requirements for distance education purposes, specifically 
reporting about the distance education status of students who take 
Federal loans.
    A group of commenters objected to the rulemaking process, stating 
that the Department appointed negotiators who appeared to have been 
selected, not for their subject-matter expertise, but for their ties to 
the for-profit college industry.
    Discussion: As we stated in the final regulations on student 
assistance general provisions, the Secretary's recognition of 
accrediting agencies, and the Secretary's recognition procedures for 
State agencies published on November 1, 2019, we disagree with the 
commenters who said that the Department's rulemaking process was 
flawed.\4\ It is not uncommon for the Department to address multiple 
topics with a single negotiated rulemaking committee, nor was this the 
first time that the Department utilized non-voting subcommittees to 
delve into a specific topic and provide recommendations to the main 
committee. The subcommittee's recommendations were not binding on the 
members of the main committee, who were free to discuss the issues in 
as much detail as they required to come to a consensus agreement. The 
Department notes that we added an

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additional negotiator, and an additional negotiating session at the 
request of negotiators, to represent all relevant constituencies and in 
hope of reaching consensus.
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    \4\ See: 84 FR 58836.
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    The Department disagrees with the commenter that our efforts to 
achieve consensus were inappropriate. Contrary to the commenter's 
assertions, the Department compromised countless times, moved away from 
its initial proposals, and accepted negotiators' request for 
substantially more time to negotiate.
    Regarding the makeup of the subcommittee, the process of negotiated 
rulemaking ensures that we consider a broad range of interests in the 
development of regulations. Specifically, negotiated rulemaking is 
designed to enhance the rulemaking process through the involvement of 
all parties significantly affected by the topics for which we will 
develop the regulations.
    Accordingly, section 492(b)(1) of the HEA, 20 U.S.C. 1098a(b)(1), 
requires that the Department choose negotiators from groups 
representing many different constituencies. The Department selected 
individuals with demonstrated expertise or experience in the relevant 
subjects under negotiation, reflecting the diversity of higher 
education interests and stakeholder groups, large and small, national, 
State, and local. In addition, the Department selected negotiators with 
the goal of providing adequate representation for the affected parties 
while keeping the size of the committee manageable. At the request of 
negotiators, the Department agreed to add a representative of State 
Higher Education Executive Officers on the main committee. In addition, 
a representative of the New York Attorney General was added as a member 
to the subcommittee.
    Students and consumer protection advocates were represented by non-
Federal negotiators on the full committee and the subcommittee--student 
veterans were well-represented on the full committee--with primary and 
alternate representatives for each of these constituencies. Moreover, 
the Department conducted three public hearings before the negotiated 
rulemaking began and provided time for public comment on each of the 12 
days that the main committee convened.
    We disagree with the commenters who stated that the Department 
failed to provide data or evidence, or stated that the data was 
disjointed or insufficient, to support the need for the proposed 
regulatory changes during negotiated rulemaking. The Department was 
unable to fulfill several data requests made by negotiators because the 
information was not available, but we do not believe the absence of 
those data prevented negotiators from considering reasoned proposals.
    We appreciate the commenter's proposal to add reporting 
requirements to the final regulations, but we do not adopt their 
proposal. The Department is comfortable with the current regime of 
reporting requirements for distance education and does not wish to 
create new burden on institutions that rely on or integrate distance 
education technology in their education programs.
    We acknowledge that there were temporary connectivity issues with 
the livestreaming of the distance education subcommittee. While we 
regret the interruption, the Department worked quickly to restore the 
connection to ensure that interested parties could view the discussion. 
The sessions were also recorded and can be viewed on the Department's 
YouTube channel.\5\ The proceedings of the main committee can be viewed 
at edstream.ed.gov.
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    \5\ U.S. Department of Education YouTube page, www.youtube.com/user/usedgov/videos.
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    We based the proposed regulatory changes on many factors, including 
public feedback, research outlined in greater detail in the NPRM, and 
emerging trends in postsecondary education. Specifically, the 
Department developed a list of proposed regulatory provisions based on 
advice and recommendations submitted by individuals and organizations 
as testimony in a series of three public hearings in September of 2018, 
as well as written comments submitted directly to the Department.
    Changes: None.
    Comments: One commenter provided statistics showing the types of 
institutions that are active in the online education industry and on 
the growing expansion of online education. This commenter concluded 
that growth has not correlated with increased access to minority and 
non-traditional students or more quality programs. The commenter also 
referenced lawsuits against online education providers and outlined 
arguments against distance education.
    Discussion: We appreciate the information provided by the 
commenter, as well as the outline of the arguments against distance 
education. We note, however, that institutions from all sectors-
regardless of whether they provide online or in-person classroom 
instruction-have been the subject of lawsuits and borrower defense 
claims. We reaffirm that legal action and the borrower defense process 
remain available to all students, notwithstanding these distance 
education regulations.\6\
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    \6\ 84 FR 49788.
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    The Department acknowledges the commenter's reference to litigation 
against online education providers, but those legal actions do not 
direct the Department's regulatory work. We also acknowledge the 
arguments against distance education, but the Department does not 
advocate for one type of education delivery system over any other. The 
Department supports education innovation that is rigorous, meets 
students' needs, and assists students in achieving their educational 
goals. These final regulations assist in removing unnecessary barriers 
to that innovation, while also assuring that online programs remain 
academically rigorous, well-planned, and appropriate.
    Changes: None.
    Comments: One commenter remarked that the Department has led 
taxpayers to believe that changes to the distance education regulations 
will allow students to ``fast-track their education and save money'' 
and that the taxpayer will eventually pay the bill. The commenter also 
wrote that CBE and career technology training is the ``adult version of 
Common Core.''
    Another commenter stated the proposed regulations are intended to 
create tax breaks and ease burdens on wealthy taxpayers.
    Discussion: The Department is confused by the commenter who 
suggested that the intended purpose of the final rule was to create tax 
breaks and ease the burden on wealthy taxpayers. The Department is not 
empowered to create tax breaks.
    We are similarly confused by the commenter who stated that CBE and 
career technology training is the ``adult version of Common Core.'' The 
Department is not attempting to dictate academic content or establish 
national content standards, so we are unclear on any similarity to a 
set of elementary and secondary English language arts and mathematics 
standards. While some students may be able to complete their program 
more quickly, the Department disagrees that this will result in some 
sort of ``balance'' that must be covered by taxpayers. The Department 
also never stated that the final rule would allow students to ``fast-
track'' their education. We believe that students should be able to 
access educational services that are appropriate to their needs, 
provide them with high-quality training and education, and meet the 
requirements of the HEA, as amended.
    Changes: None.

[[Page 54747]]

    Comments: One commenter stated that any weakening of the 
protections included in the consensus language would present a serious 
risk to all students, especially Latino students, who, according to the 
commenter, are overrepresented at institutions that, on average, 
produce worse outcomes for students. Another commenter similarly 
remarked that non-traditional students would be negatively impacted by 
the final regulations.
    Discussion: We appreciate the commenters' submissions and share 
their desire for all students--men, women, minorities, under-
represented populations, and non-traditional populations--to have 
access to high-quality education services.
    The Department rejects the notion that student protections are 
weakened in the proposed rule or that any such weakening 
disproportionately impacts one student population over another. As we 
stated in the Program Integrity: Gainful Employment final regulations, 
the Department believes that more must be done to improve outcomes for 
high-risk students, and more options must be made available to students 
for whom college--and, especially, the traditional college experience--
is not the best or preferred option.\7\ We believe that high-quality 
distance education programs, like the ones envisioned by the members of 
the subcommittee, can and do meet students' unique needs and expand 
educational opportunities to students previously underserved.
---------------------------------------------------------------------------

    \7\ 84 FR 31433.
---------------------------------------------------------------------------

    Changes: None.
    Comments: A group of commenters stated that the Department is 
attempting to use its deregulatory agenda to override congressional 
intent to ensure program quality and to protect students, taxpayers, 
and the integrity of the Federal financial aid programs. The commenters 
also suggest that the Department abused its rulemaking authority by 
rolling back legislative protections that guard the integrity of the 
student financial aid system. The commenters argued that the 
Department's actions further jeopardize students' opportunities to 
access a higher education system that promotes economic mobility. 
Finally, the commenters concluded that the Department's agenda is proof 
of its intent to disregard its obligation to responsibly administer 
Federal Student Aid (FSA) programs.
    Discussion: The Department thanks the commenters for their 
submission. We share their concern for protecting students, taxpayers, 
and the integrity of Federal financial aid programs. The consensus 
language reflects that concern. The Department notes that it is not 
within our regulatory authority to roll back legislative protections; 
our regulations--and these final regulations specifically--must fall 
within the parameters authorized by statute.
    We disagree with commenter's suggestion that the final regulations 
jeopardize opportunities to access higher education. This final rule 
promotes more high-quality, distance education opportunities for 
students who are not otherwise capable of attending traditional 
classroom-based courses. In fact, much of our work is animated by the 
desire to expand opportunities through education for economic mobility 
and advancement.
    The Department takes its responsibility to administer the title IV 
programs seriously and strenuously seeks to guard taxpayers' dollars in 
the operation of those programs. We disagree with the commenters' 
suggestions otherwise.
    Finally, legislators have the ability to further clarify their 
intent through future legislative action. We look forward to working 
with Congress on any such actions to promote educational opportunities 
for all students.
    Changes: None.
    Comments: One commenter wrote that the intent of the final 
regulations is to loosen the restrictions on institutions offering 
distance learning. The commenter stated that allowing schools to have 
more latitude over certain rules leaves room for schools to cut corners 
to save money at the expense of quality. The commenter added that the 
Department's contention that the reduction in regulation will increase 
the number of programs offered by institutions is exactly what 
predatory, for-profit, and fraudulent institutions want and that it 
will inevitably make it easier for such institutions to access 
financial aid funds at the cost of the students and taxpayers. Finally, 
the commenter said that loosening restrictions would allow a school to 
recycle pre-recorded lectures, give the student a test, and issue 
unwarranted degrees if the student passes. The commenter was concerned 
that such an outcome would greatly impact instructors' financial well-
being and the quality of the workforce.
    Discussion: The intent of the final regulations is not to loosen 
restrictions on any type of institution. The Department will continue 
to hold all education providers accountable. The Department does not 
condone the behavior of those who wrongfully cut corners to save money, 
take advantage of students, misrepresent the selectivity of their 
online programs, engage in pay-to-play admissions schemes, engage in 
predatory advertisement or enrollment activities, or fraudulently 
misrepresent their educational programs--and likely student outcomes. 
We will take necessary actions to hold institutions accountable, 
regardless of their tax status or organizational structure.
    The Department appreciates the commenters concerns and addresses 
the point regarding the use of recycled or pre-recorded lectures in the 
appropriate sections below. However, we note that such a concern is not 
limited to distance learning modalities.
    Changes: None.
    Comments: Many commenters asked the Department to rescind the 
proposed rule or, alternatively, delay its implementation, to maintain 
existing rules protecting the role of faculty and student interaction 
and restricting outsourcing. This would allow Congress and the public 
to better assess the needs of students and institutions. One of these 
commenters wrote that the Department has a responsibility to avoid 
making changes to distance education that would open the door to 
instruction without interaction between students and faculty, leaving 
students entirely reliant on software, apps, games, and prerecorded 
video. This commenter also wrote that the proposed rules would 
``undermine meaningful instruction by replacing it with standardized 
exams.'' The commenter concluded that further deregulation in the 
distance education environment did not make sense and that it would be 
dangerous to students and faculty who are trying to design high-quality 
programs to weaken the consensus language by expanding CBE programs.
    Discussion: The Department disagrees with the commenter's 
suggestion. We see no compelling reason, nor has one been provided 
through the public comment process, to rescind or delay the final 
regulations. We also note that reauthorization of the HEA is many years 
overdue, and statute currently references technologies that are sorely 
outdated. Therefore, we cannot rely solely on Congress to respond to 
the need for higher education to adapt and evolve to serve the needs of 
students.
    While we understand that some may oppose the growth of distance 
education, largely because of concerns about what this means to the job 
prospects of current and future educators, those concerns are 
misplaced. The role of the instructor is critical in high-quality 
distance education, as explained in the appropriate section below, and 
these regulations reaffirm the importance of

[[Page 54748]]

regular and substantive interaction as a key element that distinguishes 
between distance learning and correspondence education.
    We do not agree that the proposed rule would undermine meaningful 
instruction by replacing it with standardized exams and are confident 
that these final regulations do the opposite.
    Changes: None.
    Comments: One commenter suggested that the Department should only 
allow some types of programs to offer distance education courses. The 
commenter advocated for a rigid classification, reviewed by the 
Department, of subject matter areas that would be eligible for remote 
classes. The commenter stated that the basis for such a proposal is 
that some careers, such as nursing and teaching, require real world 
experiences and that the value that professors bring to their students 
is not the same in an online program.
    Discussion: The Department thanks the commenter for this proposal, 
but we do not adopt this change. While we recognize that the 
experiences of online learning and traditional classroom learning can 
be very different, the Department believes that high-quality learning 
is possible in both environments. We do not wish to forestall students 
interested in nursing and teaching to be kept out of those fields 
because they are not able to attend traditional, in-person classes. In 
many instances, distance learning opportunities are limited to students 
who are already working in fields such as teaching or nursing, and who 
do not need additional hands-on experiences. In many instances, 
distance learning enables practicing professionals to complete post-
graduate certificates or graduate degrees. Moreover, for many 
occupations, accrediting agencies and State licensing boards restrict 
the use of distance learning within certain programs.
    As we have seen during the COVID-19 pandemic, some accrediting 
agencies and State licensing boards are beginning to recognize the 
opportunities presented by distance learning and are permitting certain 
portions of programs to be provided through distance modalities. We 
will continue to rely on accrediting agencies and State licensing 
boards to determine when and if distance learning opportunities meet 
the education and training needs of students in particular fields.
    Changes: None.
    Comments: Many commenters referenced COVID-19 in their submissions 
to the Department and remarked upon the expanded prevalence of distance 
education.
    One commenter suggested that the proposed rule should be 
deliberated and commented on after the pandemic is over because the 
``last thing on American's [sic] minds'' is the accreditation of online 
schools.
    Many commenters concluded that a 30-day comment period during a 
pandemic was not sufficient to thoroughly review the proposed rules. 
These commenters requested that the Department delay the implementation 
of the proposed rules.
    A group of commenters stated that, at this pivotal moment and 
informed by institutions' experiences during the pandemic, any 
weakening of strong protections for students and taxpayers would open 
the door for predatory actors to repeat past abuses, putting the most 
vulnerable students at even greater risk.
    One commenter stated that the Department cannot, in good faith, 
move forward with any of the issues in the final regulations without 
first grappling with the massive changes that the COVID-19 crisis will 
bring to online education.
    A group of commenters proposed that the Department reopen the 
rulemaking process or postpone the enactment of the final regulations 
to allow for additional comments. Many of these commenters noted 
potential difficulty in responding to the NPRM because of COVID-19. One 
commenter suggested that military and veterans' communities should be 
allotted extra time to provide comments. Another commenter noted the 
need for the Department to put the needs of our nation's college 
students before the needs of ``distance education opportunists.''
    Discussion: While we acknowledge that the NPRM may not have been 
top-of-mind for most Americans during the COVID-19 pandemic, the 
Department is confident that the 30-day public comment period was an 
adequate time period for interested parties to submit comments. Because 
we reached consensus during negotiated rulemaking, the proposed 
regulatory language was available to the public at the conclusion of 
the final negotiating session approximately one full year before the 
comment period began, which afforded interested parties additional time 
to begin formulating their comments.
    Prior to issuing the proposed regulations, the Department conducted 
three public hearings and four negotiated rulemaking sessions, where 
stakeholders and members of the public had an opportunity to weigh in 
on the development of much of the language reflected in the proposed 
regulations.
    In addition, the 30-day public comment period was necessary to 
allow us to meet the HEA's master calendar requirements. Under those 
requirements, the Department must publish final regulations by November 
1, 2020, for them to be effective on July 1, 2021. Delaying the 
effective date of these regulations would unnecessarily delay the 
realization of the benefits associated with these changes.
    Changes: None.

Correspondence Courses: Definition and Limitations (Sec. Sec.  600.2 
and 600.7)

    Comments: Two commenters expressed support for the proposed 
definition of the term ``correspondence course.'' One of those 
commenters specifically supported the elimination of the reference to 
self-pacing in the previous definition of ``correspondence course'' and 
indicated that the proposed definition makes it clearer that self-paced 
programs are not necessarily correspondence programs. One commenter 
also expressed support for the clarification regarding the definition 
of a ``correspondence student'' in proposed Sec.  600.7(b)(2), 
indicating that the specificity in the new definition would support new 
and innovative academic models.
    Discussion: The Department thanks the commenters for their support.
    Changes: None.
    Comments: Several commenters opposed the Department's proposed 
changes to the definition of ``correspondence course,'' arguing that 
the changes would make the distinction between distance education and 
correspondence courses less clear. These commenters stressed the 
importance of maintaining that distinction given the more limited 
amount of support by qualified instructors in correspondence courses 
and past abuses associated with correspondence study. Another commenter 
indicated that the existing definition of ``correspondence course'' 
already adequately distinguished correspondence education from distance 
education and did not need to be changed.
    Discussion: We agree with the commenter about the importance of 
support by qualified instructors, especially given the emphasis of that 
concept in the statutory definition of ``distance education,'' which 
requires ``regular and substantive interaction'' between students and 
instructors. We also agree that it is important for the regulatory 
definitions of distance education and correspondence courses

[[Page 54749]]

to be sufficiently distinct, both to implement the statutory 
distinction between the terms and to ensure that institutions are able 
to design programs in a way that maintains compliance and avoids audit 
or program review findings with respect to their online programs. 
However, we disagree that the proposed changes will blur the 
distinction between the two terms.
    The most significant change made to the definition of 
``correspondence course'' in these regulations is the removal of the 
concept of self-pacing, which is not vital to the distinction between 
correspondence courses and distance education. The HEA also does not 
mention the concept of self-pacing, nor does it express that such a 
condition would require a course to be treated as offered through 
correspondence education rather than through distance education. We 
believe that the aspects of the definition of ``correspondence course'' 
that have been maintained in the definition--for example, that 
interaction in such a course is limited, not regular and substantive, 
and primarily initiated by the student--are more than adequate to 
preserve the important regulatory distinction between distance 
education and correspondence courses.
    Changes: None.
    Comments: One commenter objected to the proposed definition of 
``correspondence student'' under proposed Sec.  600.7(b)(2), asserting 
that the definition weakens the distinction between distance education 
and correspondence courses and could result in a larger number of 
participating institutions and students engaging in correspondence 
study.
    Discussion: We disagree that the proposed changes to Sec.  
600.7(b)(2) will weaken the distinction between distance education and 
correspondence courses or result in a greater number of institutions or 
students engaging in correspondence study. The only impact of the 
changes is to clarify how to calculate the number of correspondence 
students for the purpose of determining whether an institution has 
exceeded the statutory limitation on the number of correspondence 
students that may be enrolled at an eligible institution during an 
award year. The other relevant statutory and regulatory restrictions on 
correspondence study that discourage institutions from offering 
correspondence programs--for example, the institutional eligibility 
limitations, the restriction to half-time enrollment status for 
purposes of calculating Pell Grant disbursement amounts, and the 
limitations on the components of cost of attendance for students 
enrolled solely in correspondence study--would remain unchanged.
    Changes: None.

Definition of Academic Engagement (Sec.  600.2)

    Comments: Many commenters supported the Department's proposed 
definition of ``academic engagement.'' Several commenters noted that by 
moving key concepts on attendance and academic activities from the 
Return of title IV funds (R2T4) regulations (under Sec.  668.22) to a 
new definition of ``academic engagement'' in Sec.  600.2, the 
Department emphasizes the importance of active student participation in 
other parts of the regulations. One commenter also noted that the 
definition would expand academic quality and accountability. Two 
commenters specifically stressed their support of the Department's 
acknowledgement within the definition that student academic engagement 
can take on different forms, including interactive online courses and 
computer instruction.
    Two commenters specifically expressed support for the Department's 
inclusion of Sec.  600.2(2)(iv), ``Participating in an interactive 
tutorial, webinar, or other interactive computer-assisted 
instruction,'' in the definition. The commenters indicated that they 
believe this inclusion will help clarify the role adaptive learning and 
other technologies can play in providing academic engagement.
    Discussion: The Department thanks the commenters for their support.
    Changes: None.
    Comments: Several commenters requested that the Department include 
new categories of activities under the definition of ``academic 
engagement.'' Two commenters asked that the Department add a category 
for education offered through virtual and augmented reality because 
those modalities are becoming more commonly used in higher education.
    One commenter suggested that the Department include as a category 
under ``academic engagement'' instruction through computer-mediated 
adaptive instruction that alters the learning experience for each 
student based on that student's needs. Another commenter requested that 
the Department clarify that instructor interaction does not have to 
occur exclusively with a human instructor.
    Discussion: As the Department discussed in the preamble to the NPRM 
(85 FR 18638-18702), we consider ``other interactive computer-assisted 
instruction'' to include the use of artificial intelligence or other 
adaptive learning tools where the student is receiving feedback from 
technology-mediated instruction. Computer-assisted instruction would 
also include instruction through virtual or augmented reality, or any 
other form of instruction in which a student actively participates in a 
computer-based or computer-mediated learning environment, with or 
without the presence of a human instructor. An explicit goal of this 
rulemaking has been to reduce the need for updates to regulation when 
new technologies are developed, and so this definition is also 
inclusive of technologies that are in their infancy or not yet invented 
as long as they meet the regulation's other requirements. Therefore, 
because the types of learning described by the commenters (and others) 
are already accommodated in the proposed definition of ``academic 
engagement,'' we do not believe it is necessary to add additional 
categories.
    Changes: None.
    Comments: One commenter expressed concern that the proposed 
definition of ``academic engagement'' would require more than simply 
actively logging into a website. The commenter indicated that this 
could cause undue burden for students who were unable to academically 
engage during normal hours or afford the technologies required by 
institutions to demonstrate academic engagement as defined.
    Another commenter voiced a concern that paragraph (3)(iv) of the 
proposed definition, which states that academic engagement does not 
include participating in academic counseling or advisement, could 
discourage instructors from taking the time to speak with students 
about their academic future or professional goals. The commenter 
mentioned that depending on the nature of the course, it may be 
difficult at times for instructors to differentiate between interacting 
with students about ``academic matters,'' which qualify as academic 
engagement, and ``academic counseling and advisement,'' which does not 
qualify. The commenter requested that the Department remove the 
exclusion of academic counseling or advisement from the definition of 
academic engagement.
    Discussion: We disagree that the definition of ``academic 
engagement'' causes undue burden for students. Many institutions 
previously believed that, under the Department's prior regulations, 
students were required to not only log in, but engage in an activity 
weekly for which the institution maintains documentation to prove that 
the student was engaged every couple of days. This was identified as a

[[Page 54750]]

burdensome requirement that significantly exceeds requirements for 
ground-based instruction, and that often requires students enrolled in 
distance education to make time for what is otherwise viewed as ``busy 
work.'' The new regulation clarifies that engagement must be meaningful 
in order to be used as the basis for complying with the Department's 
related requirements (such as identifying a student's withdrawal date), 
but does not require, for example, students to post a non-substantive 
blog post each week simply to ``check the box'' on documenting 
participation.
    The definition does not require a student to log in or participate 
in a course or learning environment at a particular time, nor does it 
require or incentivize institutions to demand the use of expensive 
technologies to demonstrate academic engagement. The definition does 
rely on the concept of active participation by a student in his or her 
learning, which the Department believes is a necessary requirement for 
academic engagement. This concept of active participation--which cannot 
be demonstrated merely by documenting that a student has logged into an 
online system--is also vital to other regulatory requirements, 
including for purposes of determining a student's withdrawal date under 
the R2T4 regulations.
    For similar reasons, we also decline to remove the exclusion of 
academic counseling and advisement from the definition of ``academic 
engagement.'' While the Department views advisory activities related to 
a student's academic or career trajectory as an important component of 
many postsecondary programs, such advising by itself does not 
demonstrate that a student is participating or engaged in his or her 
academic program. Negotiators agreed that to the extent a qualified 
instructor is providing advising relevant to a specific course--for 
example, explaining where a student can find answers to content-related 
questions, or recommending a particular approach to a writing 
assignment for the course--academic engagement is taking place. 
However, general academic or technical advising that is provided 
outside of a specific course, and that is often provided by someone who 
does not qualify as an instructor for the course in which the student 
must be academically engaged--for example, guidance regarding which 
classes the student plans to take in the future, or technical support 
with instructional technology--does not constitute academic engagement.
    Changes: None.
    Comments: Several commenters asked the Department to clarify its 
position regarding asynchronous academic engagement. The commenters 
indicated that while the Department specifically mentions synchronous 
instruction in the definition, it does not mention asynchronous 
instruction even though asynchronous instruction is referenced 
elsewhere, both in the ``distance education'' definition in Sec.  600.2 
and as part of the new ``week of instruction'' definition in Sec.  
668.3. One commenter specifically suggested including ``or 
asynchronous'' after ``synchronous'' in paragraph (2)(i) of the 
definition to clarify that asynchronous attendance and participation in 
the classroom is included when documenting academic engagement in an 
online program. Another commenter asserted that though certain 
asynchronous activities, such as engagement in interactive forms of 
computer-assisted instruction, might be read into the listed activities 
in paragraph (2)(iv) of the definition, the omission of a direct 
reference to asynchronous instruction makes it difficult to have 
confidence in such an interpretation.
    Discussion: The Department's intent was not to exclude asynchronous 
participation in learning activities from the definition of academic 
engagement. Asynchronous academic engagement could occur under any of 
the categories described in the definition except for the category 
described under paragraph (2)(i) that describes attendance at a 
synchronous lecture, recitation, or field or laboratory activity. For 
example, a student can work on an academic assignment--described under 
paragraph (2)(ii) of the definition--at the time of his or her 
choosing, and submission of that assignment is an asynchronous learning 
activity that does not require real-time interaction with an 
instructor. Similarly, a student could demonstrate academic engagement 
under paragraph (2)(iv), ``participating in an interactive tutorial, 
webinar, or other interactive computer-assisted instruction,'' by 
engaging in a presentation through a virtual or augmented reality 
system or by participating in an online learning activity that uses 
artificial intelligence or adaptive learning. We do not believe that it 
is necessary to add the word ``asynchronous'' to the definition given 
the incorporation of this concept in each of these activities. We also 
decline to remove the word ``synchronous'' from paragraph (2)(i), since 
in that context it is used to describe a particular type of learning 
activity that is performed in real time with an instructor.
    Changes: None.

Definition of Additional Location (Sec.  600.2)

    Comments: One commenter requested clarification about the addition 
of a definition of ``additional location.''
    Discussion: We did not seek comment on the ``additional location'' 
definition in the NPRM that we address in this final rule. Instead, we 
sought comments on that definition in an NPRM published in the Federal 
Register on June 12, 2019 (84 FR 27404). That NPRM included 
Accreditation-related definitions, including the definition of 
``additional location.'' We published a final rule that included the 
definition of ``additional location'' in the Federal Register on 
November 1, 2019 (84 FR 58834) in which we addressed comments we 
received related to the definition.
    Changes: None.

Definition of a Clock Hour (Sec.  600.2)

    Comments: Numerous commenters voiced disagreement with the 
provisions in the Department's proposed definition of the term ``clock 
hour'' that require each clock hour in a distance education program to 
include synchronous instruction where students have an opportunity to 
interact with instructors and asked the Department to reconsider this 
requirement.
    Several commenters indicated that the proposed clock hour 
definition regarding distance education was too restrictive and should 
conform to the Department's definition of ``distance education,'' which 
allows for ``regular and substantive interaction between the students 
and the instructor or instructors, either synchronously or 
asynchronously.'' The commenters asked the Department to reconsider 
whether clock hours could be earned through asynchronous instruction, 
noting that several educational platforms are already capable of 
monitoring a student's participation and clocking the student out if 
active engagement ceases.
    One commenter noted the Department's reluctance to support 
asynchronous distance education (ADE) instruction within the clock hour 
definition was most likely due to the concern as to whether a clock 
hour student's required ``seat time''--50 minutes in a 60-minute 
period--could be validated. The commenter indicated that current 
technology already provides effective tools which, if properly 
incorporated into an asynchronous distance education platform, marry 
effective program instruction with effective ``seat time'' validation. 
As explained by the commenter, an

[[Page 54751]]

electronic synchronous distance education platform would include such 
components as sign-in assurance, time monitoring through trackable 
digital media assets, automated sign-off for inactivity, live student 
to student and student to instructor activities and automated Q & A, 
and testing processes. Based on this information, the commenter 
requested that the Department modify its proposed definition of a 
``clock hour'' to permit instruction provided via electronic 
synchronous distance education.
    One commenter stressed that permitting the development of 
asynchronous instruction in clock hour programs allows for the kind of 
instructional flexibility needed for career and technical education 
providers to use new methods of simulated, technology-mediated 
instruction without constraint or fear of compliance findings.
    Several commenters voiced a strong desire to afford the same 
flexibilities to students enrolled in clock hour distance education 
courses as students enrolled in credit hour distance education 
programs. To that end, one commenter indicated that program structure 
(clock hours or credit hours) is often based on institutional or State 
governance and has no relationship to the quality or content of a 
program. The commenters asserted that students enrolled in clock hour 
programs should not be penalized merely due to institutional structure.
    Another commenter stated that limiting clock hour distance 
education coursework to synchronous online classes would limit the 
convenience and flexibility to students of access to course content at 
any time or place. Several commenters expressed concerns that limiting 
distance education clock hour eligibility to synchronous activities 
could limit innovation and discourage institutions from creating more 
flexible and accessible learning experiences which could reduce 
potential barriers to access and completion of postsecondary programs 
and promote a more diverse student population.
    Several commenters stressed that the Department authorizes 
postsecondary institutions to offer eligible postsecondary programs in 
a distance learning format as approved by the institution's accrediting 
agency and that the exact same standards, quality assurance, integrity 
and accountability measures used to approve traditional on-campus 
programs are also applied to the distance education programs approved 
by the accrediting bodies.
    Several more commenters indicated that current technology in higher 
education attendance monitoring provides systems that monitor 
participation, proctor exams, verify attendance and provide tools for 
students to interact with instructors at the time and place of their 
choosing. The commenters further explained that online content is most 
often used to supplement in-person training or lab work and that 
asynchronous instruction can now be monitored by a school through many 
educational platforms, students can be clocked out for inactivity, and 
instructors and students have a variety of ways to interact with each 
other and review various course materials. Many commenters expressed a 
belief that current technology available to students and educators 
allow for the same objectives to be met in an asynchronous format, 
while allowing for more flexibility to overcome challenges related to 
geography, learning preferences, work or family obligations, 
disabilities, or resources. One commenter suggested asynchronous 
learning could include the recording of classes to be viewed within a 
specified time with periodic class meetings to answer questions.
    Several commenters urged the Department to allow asynchronous 
instruction via distance education if approved by State and accrediting 
agencies as long as an institution could clearly demonstrate instructor 
engagement with the student during each clock hour through a variety of 
means, which could include technology such as adaptive learning and 
artificial intelligence.
    Two commenters indicated that the synchronous format described in 
the proposed definition is too limiting and would not be broad enough 
to allow students to engage in certain types of projects or assignments 
such as reviewing written or recorded lectures outside of regular 
classroom hours. Another commenter stated that the critical variable is 
not coordinated schedules or designated time, but a learning 
environment with diverse and engaging learning activities and faculty 
involvement.
    Two commenters supported the inclusion of distance education into 
the Department's clock hour definition, arguing that distance learning 
technology has sufficiently advanced to permit institutions to conduct 
remotely synchronous instruction with students and to monitor the exact 
amount of time that students spend participating in these learning 
sessions. However, the commenters urged the Department to provide more 
clarification and greater flexibility under paragraph (3) of the clock 
hour definition which states that an institution must be capable of 
monitoring a student's attendance in 50 out of 60 minutes for each 
clock hour. Specifically, the commenters requested that the Department 
clarify that the new clock hour definition not require an institution 
to have live instructor involvement with a student each hour, so long 
as the institution can monitor a student's participation during 50 
minutes of each hour and the institution can otherwise demonstrate 
academic engagement (per the Department's definition) by utilizing 
suitable technology as demonstrated to the appropriate State and 
accrediting agency. The commenters stressed that requiring ``face-to-
face'' contact each hour or at least one live touch by an instructor 
per clock hour for synchronous or asynchronous instruction would ignore 
the direction that the Department's Proposed Rule is heading to expand 
recognition of the capabilities of technological advances to monitor 
student academic engagement and impose an undue hardship on students 
who need maximum scheduling flexibility in completing clock hours by 
means of distance education.
    One commenter objected to the proposed clock hour definition and 
suggested the definition be reworded to account for students who may 
have relocated to a different time zone from their institution, and 
therefore might not be able to attend a class session in real time or 
interact with the instructor during the normal period of attendance. 
The commenter indicated that they currently attend a class in a 
different time zone and often have to watch recordings of the class and 
do not want these types of situations to be excluded from being counted 
towards a student's academic progress.
    One commenter requested that the Department clarify if it indeed 
intended to limit distance education clock-hour eligibility to only 
synchronous learning experiences but instead grant more flexibility to 
correspondence courses. The commenter was concerned that, given the 
limitations on correspondence students and courses applied to 
correspondence education, institutions would prefer to designate 
courses as distance education rather than correspondence whenever 
appropriate.
    One commenter urged the Department to extend the temporary 
flexibilities for online instruction for clock hour programs due to the 
current coronavirus crisis as outlined in the Department's guidance for 
COVID-19. The commenter noted that the Department's temporary 
flexibility allows schools to offer synchronous or asynchronous online 
clock hour programs as long as the

[[Page 54752]]

school can demonstrate student academic engagement through various 
online learning platforms and systems or based on school data or the 
instructor's own knowledge. The commenter indicated that extending 
these flexibilities would allow institutions to determine on a local 
basis how to transition back to on-ground education and clarify that 
clock hour schools are permitted to offer hybrid programs--partially 
on-ground and partially online--through this period to provide maximum 
flexibility to meet the health and safety needs of employees and 
students.
    Several commenters specifically requested that the Department 
modify paragraph (1)(iv) of the proposed clock hour definition to 
include both attendance in a synchronous or asynchronous class for 
distance education coursework, while one commenter asked the Department 
to include ``participation through asynchronous academic engagement'' 
or similar language to the distance education eligibility criteria in 
paragraph (1)(iv) of the clock hour definition.
    In addition, several commenters asked the Department to consider 
modifying paragraph (1)(iv) to read, ``In distance education, 50 to 60 
minutes in a 60-minute period of attendance in a `computer-assisted' 
class, lecture, or recitation where there is opportunity for direct 
interaction between the instructor and students'', while other 
commenters simply requested that the word ``synchronous'' be removed 
from paragraph (1)(iv). The commenters explained that removing the word 
synchronous from the definition would allow institutions who wish to 
offer clock hour programs synchronously or asynchronously, or a 
combination of both, the flexibility and opportunity to prepare the 
twenty-first century workforce in engaging and innovative ways.
    Discussion: We are persuaded by the comments that preventing 
institutions from offering instruction by asynchronous means is 
unnecessarily restrictive and counter to the purposes of this 
rulemaking. The emergence of the COVID-19 pandemic has illustrated the 
need for institutional and student flexibility with regard to the time 
and place that coursework is completed, and a number of licensing 
agencies are also creating new flexibilities for the use of 
asynchronous learning in clock hour programs. Asynchronous learning 
allows students to design their own learning schedules around the 
demands of work and family that often interfere with class activities 
offered only at prescribed times. This flexibility can also greatly 
benefit students with health concerns for whom participation is 
contingent upon treatment schedules and feeling well enough to perform 
required tasks. The individual pacing made possible by asynchronous 
learning allows for a more tailored educational experience that 
promotes mastery of subject matter over attendance in scheduled 
activities. Moreover, the availability of asynchronous learning allows 
for mixed model learning reflective of non-title IV eligible 
programming with theory learned asynchronously and specific practical 
tasks through synchronous instruction.
    The Department does not wish to impede technological innovations at 
institutions that can help students overcome barriers to access and 
completion.
    The existence of the ``regular and substantive interaction'' 
requirement related to clock hours offered through distance education 
and the requirement that clock hours meet the requirements of an 
institution's accrediting agency and State provide the safeguards that 
ensure that students have access to quality instruction and instructor 
support. Given these baseline requirements, it is not necessary to 
require students to interact with instructors synchronously to earn 
clock hours.
    We also believe that commenters have made a strong case that, given 
current technology, clock hours completed asynchronously can be 
adequately supervised and monitored, provided the institution maintains 
the appropriate technological resources and internal controls. We 
disagree with commenters who indicated that learning technology is not 
yet capable of monitoring student engagement in this manner, especially 
since the Department has already reviewed and approved clock hour 
programs that used online learning platforms that are capable of the 
required monitoring.
    The Department remains concerned about the possibility that clock 
hours offered asynchronously could be used as a means to complete 
unsupervised homework assignments rather than coursework that otherwise 
would have occurred in the classroom, which is prohibited under the 
Department's longstanding policy for clock-hour programs. Our position 
is that the requirement for supervision of a clock hour in an 
asynchronous learning environment is met when the institution is 
capable of documenting the specific form of academic engagement 
associated with the activity--for example, asynchronous participation 
in an interactive tutorial or webinar online or a learning activity 
involving adaptive learning or artificial intelligence--and the 
institution has technological resources and policies and procedures 
that are sufficient to monitor and document the time each student 
spends performing that activity. If either of these conditions are not 
met, an institution would not be permitted to include time spent on an 
online activity toward completion of a clock hour for purposes of the 
title IV, HEA programs.
    We also agree with the commenters who argued that clock hours 
offered asynchronously should involve academic engagement, as defined 
elsewhere in these regulations, since that concept involves active 
participation in learning activities rather than passive consumption of 
knowledge or merely logging into an online system. An institution 
should establish, in accordance with its policies and those of its 
accrediting agency or State, what it considers to be academic 
engagement in a clock hour program in order to clearly demonstrate that 
students have spent the recorded time performing an activity.
    Institutions are permitted to offer clock hour programs both 
through correspondence or distance education, and the Department 
declines to opine on which type of program is most appropriate or best 
suited to the needs of individual students. However, institutions 
offering clock hour programs using distance education continue to be 
subject to the general requirements in the definition of ``distance 
education,'' which requires regular and substantive interaction between 
students and instructors. In such programs, some, but not all, clock 
hours would need to involve substantive interaction between students 
and instructors.
    Changes: We have modified paragraph (1)(iv) of the ``clock hour'' 
definition to express that a clock hour includes a synchronous or 
asynchronous class, lecture, or recitation where there is an 
opportunity for direct interaction between instructors and students. We 
also added a new subordinate paragraph to include, as part of the 
definition of a clock hour, 50 to 60 minutes of active participation in 
an asynchronous learning activity involving academic engagement in 
which a student interacts with technology that can monitor and document 
the amount of time that the student participates in the activity.
    Comments: One commenter urged the Department to provide flexibility 
to institutions with distance education clock hour programs, whether 
taught in

[[Page 54753]]

synchronous or asynchronous learning environments, such that when 
monitoring clock hours, the institutions be given the flexibility to 
assign clock hours based upon the assignments provided to students as 
long as there is adequate communication between the instructor and 
students. The commenter mentioned that providing the flexibility to 
monitor that instructors are providing relevant assignments equal to 
the number of clock hours for which a student is enrolled would be 
adequate since the quality of the educational program has been reviewed 
and monitored by the school's accrediting agency.
    Two commenters indicated that monitoring each student's time spent 
on academic engagement would be challenging given the cost and 
availability of current technology. One of those commenters indicated 
that it is currently impossible to properly monitor and track a 
student's attendance in 50 out of 60 minutes for each clock hour via 
distance education due to a lack of institutional means and 
technological uniformity. In addition, the commenter expressed a 
concern that the notion that 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 
students participate in learning sessions is flawed because it is based 
on the premise that both the instructors and students can obtain, 
operate, and monitor the required devices needed to properly conduct 
distance education learning. The commenter asserted that the Department 
would be best served by dropping the new clock hour definition and 
instead, focusing on ensuring that an adequate amount of work is being 
completed rather than mandating a set amount of time be spent on 
coursework.
    Discussion: While we agree that it should be possible for a student 
to earn clock hours through participation in asynchronous online 
learning activities, we disagree that an institution can measure such 
clock hours without monitoring a student's actual participation in 
those activities. A clock hour is a period of 50 to 60 minutes in a 60-
minute period spent receiving instruction or actively participating in 
a particular educational activity, and institutions are responsible for 
measuring the amount of time that students spend in such activities. 
The Department has never permitted institutions to award clock hours 
based on estimates of completed work and does not intend to do so for 
clock hour programs offered through distance education. We also 
disagree with the commenter that the technology needed to perform this 
monitoring does not exist or that it cannot be obtained by institutions 
and students. The Department has seen demonstrations of such technology 
by institutions that offer clock hour programs and was convinced that 
the technology was both viable and appropriate for use in monitoring 
clock hours completed asynchronously.
    Changes: None.
    Comments: One commenter asserted that the Department's proposed 
clock hour definition fell short of its stated goal in the NPRM ``to 
remove barriers that institutions face when trying to create and 
implement new and innovative ways of providing education to students.'' 
Specifically, the commenter suggested that the modern-day use of a 
calculation of seat time to measure student learning and progress is 
grounded on a false premise, especially considering today's online 
technologies, including artificial intelligence and adaptive learning 
tools. The commenter opined that since the definition of a ``clock 
hour'' is not defined in title IV, the Department should consider 
removing the definition of ``clock hour'' from Sec.  600.2 and instead, 
rely on accrediting agencies, as the entities that set standards on 
academic quality, to provide academic oversight of institutions' 
policies relating to the measurement of student learning and progress.
    Discussion: We disagree that the use of clock hours to measure a 
student's progress for purposes of the title IV, HEA programs prevents 
institutions from using innovative technology or instructional methods. 
We believe that it is vital for institutions to be able to award and 
disburse title IV, HEA assistance using clock hours as a measurement of 
student progress because that form of measurement still aligns with 
many Federal and State licensure requirements for a variety of 
professions. This alignment ensures that institutions that are already 
required to monitor and document a student's successful completion of 
clock hours for other purposes can use that monitoring to demonstrate 
that the student has made progress for purposes of the title IV, HEA 
programs rather than requiring such institutions to perform a 
cumbersome and potentially burdensome conversion of clock hours to 
credit hours or some other equivalent measure.
    Changes: None.
    Comments: One commenter expressed concern that the clock hour 
definition does not define student seat time precisely enough. The 
commenter pronounced that a vague seat time requirement may cause undue 
challenges for an institution with rigorous accrediting agencies at the 
regional and/or professional level.
    Discussion: The Department does not establish academic requirements 
for educational programs, including clock hour programs. Under the 
Department of Education Organization Act, such requirements remain 
within the purview of accrediting agencies and States, which are free 
to set requirements they feel appropriate for what is considered 
successful completion of a clock hour in each program.\8\ This 
longstanding approach to the oversight of academic requirements 
recognizes the autonomy of postsecondary institutions and the unique 
qualifications of their accrediting agencies and States to respond to 
issues of academic quality.
---------------------------------------------------------------------------

    \8\ See 20 U.S.C. 3403(b).
---------------------------------------------------------------------------

    Changes: None.
    Comments: One commenter urged the Department to maintain the 
requirements listed under paragraph (3) requiring programs to meet all 
clock hour limitations or criteria established by school accrediting 
agencies, States, and applicable licensure bodies. The commenter also 
expressed support for limiting clock hours via distance education to 
synchronous programs in the final rule because monitoring a student's 
completion of a clock hour in an asynchronous program would be 
virtually impossible.
    The commenter stated that monitoring asynchronous learning would 
diverge too much from the proposed clock hour definition and the 
Department would most likely be unable to assess the minimum technology 
needed for institutions to adequately monitor asynchronous distance 
education learning.
    Discussion: We do not believe that it would be impossible for an 
institution to maintain the appropriate technology and procedures to 
monitor and document clock hours earned based on completing 
asynchronous educational activities. However, we agree that it is 
important to ensure that institutions comply with any requirements set 
by accrediting agencies or State licensing or approval agencies 
regarding clock hours and intend to retain that component of the clock 
hour definition.
    Changes: None.

Definition of Credit Hour (Sec.  600.2)

    Comments: Numerous commenters expressed their overall support for 
the proposed changes to the definition of a

[[Page 54754]]

credit hour, with several of those commenters specifically asking that 
the Department make no changes to the consensus language agreed to by 
negotiators. Some of this support was qualified to varying degrees, 
ranging from observations that the credit hour is a less than ideal 
measure of student progress to a request on the part of two commenters 
concerned about the rule's enforceability that the Department restore 
the requirements in Sec. Sec.  602.24(f) and 603.24(c) (84 FR 58931) 
requiring that accreditors and State agencies respectively, conduct 
review and evaluation of the reliability and accuracy of the 
institution's assignment of credit hours.
    One commenter expressed opposition to the revised definition of 
``credit hour'' based on concerns that changing the definition of 
``credit hour'' to focus on student learning time may pose new risks to 
students and their privacy. The commenter offered that if recording of 
individual learning time becomes desirable initially for credit hour 
validation, it may become desirable for individual student measurement, 
and that the potential consequences of this should be available for 
public review.
    Another commenter asserted that the Department should maintain the 
definition of ``credit hour'' in the NPRM but that the Department made 
proposals to change the definition without any evidentiary basis or 
support, rendering them legally insufficient under the APA. The 
commenter asserted that by failing to present evidence during the 
negotiated rulemaking that would justify a change, and by failing to 
suggest in the NPRM that the Department has support to justify those 
original proposals now, the Department has no choice but to maintain 
the consensus definitions included in the NPRM.
    Concerned that the proposed definition of ``credit hour'' does not 
adequately account for transfer credits, one commenter offered 
revisions to the amendatory text in the NPRM that would change the 
characterization of a credit hour as, ``an amount of student work'' to 
``work by a student with average, but appropriate, preparation . . .'' 
and include recognition and consideration of the importance and 
widespread usage of credit transfer among institutions. The commenter 
also suggested that the Department address a perceived disparity 
between workload expectations of students in on-campus courses versus 
those offered through distance education. The commenter proposed to 
stipulate the equivalent amount of work as required in paragraph (1)(i) 
of the definition of ``credit hour'' for other academic activities as 
established by the institution be consistent, by institution and 
course, between requirements for on-campus and on-line monitoring of 
student work.
    Discussion: We appreciate the general support for our proposal to 
broaden the definition of ``credit hour'' in a way that focuses on 
student learning rather than seat time and is flexible enough to 
account for innovations in the delivery models used by institutions. 
Even among those commenters whose support was tempered with 
reservations over the proposed definition of a ``credit hour'' either 
adhering too closely to the current definition or broadening it too 
much, there was strong agreement that no changes should be made to the 
consensus language in the NPRM.
    In response to those commenters who expressed support for the 
proposed changes to the definition of ``credit hour'' but asked that 
the Department restore the requirements in current Sec. Sec.  602.24(f) 
and 603.24(c), as previously explained in the preamble to the November 
1, 2019 final rule on State Authorization and Accreditation (84 FR 
58875), we continue to believe the agency review requirements are 
unnecessarily prescriptive and administratively burdensome without 
significantly improving accountability or protection for students or 
taxpayers. However, we note that the ``credit hour'' definition in both 
current and proposed Sec.  600.2 requires that the amount of student 
work determined by an institution to comprise a credit hour be approved 
by the institution's accrediting agency or State approval agency. 
Moreover, nothing precludes an accrediting agency or State authorizing 
agency from examining or questioning an institution's credit hour 
policies either as part of a routine evaluation of that institution's 
academic programs or as the result of specific concerns.
    We disagree with the commenter who opposed the changes to the 
definition of ``credit hour'' proposed in the NPRM on the basis that an 
increased focus on student learning time may pose new risks to students 
and their privacy. The definition of ``credit hour'' as proposed in the 
NPRM does not place an increased emphasis on learning time. Time-based 
requirements relative to classroom instruction and other academic 
activities included in the proposed definition of ``credit hour'' are 
those found in the current definition. Additional language in the 
proposed definition clarifies that, in determining the amount of work 
associated with a credit hour, an institution may consider a variety of 
delivery methods, measurements of student work, academic calendars, 
disciplines, and degree levels. This new language actually deemphasizes 
the strict measure of learning time.
    Although the Department takes seriously any identified risk to 
student privacy, the commenter was not specific as to what those risks 
are. Finally, with respect to the potential consequences of these 
proposed rules being available for public review, we believe the 
comment period following publication of the NPRM in the Federal 
Register provided such an opportunity.
    We further disagree with the commenter who asserted that the 
Department made proposals to change the definition of ``credit hour'' 
without any evidentiary basis or support, rendering them legally 
insufficient under the APA, or that it failed to present evidence 
during the negotiated rulemaking that would justify changing the 
definition of ``credit hour.'' In preparation for the subcommittee 
meetings on distance learning and innovation, the Department produced 
several position papers outlining its reasons and justifications for 
all proposed rule changes under consideration by that subcommittee, 
including those related to the definition of a credit hour. The 
proposed definition was discussed at length in the subcommittee and 
again at the negotiating table. A detailed, written discussion of the 
Department's reasons for proposing these changes is contained in the 
April 2, 2020 NPRM on pages 18646 and 18647. However, we appreciate the 
commenter's overall support for the consensus language.
    In response to the commenter who expressed concern that the 
proposed definition of ``credit hour'' does not account for transfer 
hours, we note that credit hours, as they pertain to the title IV, HEA 
programs, are a measure of student workload necessary to determine 
enrollment status and award amounts. Credit hours that an institution 
accepts on transfer have no effect on making these determinations and 
are, therefore, not integral to the definition of a credit hour for 
title IV purposes. The commenter identified several problems with 
respect to transfer hours, including the disparity among institutions 
in how transfer hours are considered and accepted.
    While we agree on the need to address challenges regarding transfer 
of credit, we do not believe that this definition is the appropriate 
place to do so or that the revisions to the proposed definition of 
``credit hour'' suggested by the commenter would change the way 
transfer hours are treated by

[[Page 54755]]

institutions. With regard to any disparities that may exist between 
what is expected of students taking classes offered through distance 
education and what is expected of students enrolled in classes offered 
on campus, we do not agree with the commenter that these can be 
addressed by revising the proposed definition of ``credit hour.'' 
Institutions themselves set the academic standards for their programs. 
The definition of ``credit hour'' merely establishes a reasonable 
measure of student workload. We believe that the amendatory text, 
agreed to by negotiators, permitting 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, accommodates a variety of 
modalities, including distance education.
    Changes: None.

Definition of Distance Education

    Comments: Numerous commenters expressed their support for the 
Department's proposed definition of ``distance education.'' Many 
commenters thanked the Department for providing greater clarity and 
specificity to the definition. One commenter highlighted several recent 
audits by the Department's Office of Inspector General (OIG) focusing 
on the requirements for regular and substantive interaction and pointed 
to the large amount of proposed liabilities in those audits as a reason 
that the definition of ``distance education'' needed to be clarified. 
Another commenter asserted that the changes modernize the definition 
and permits more flexibility for postsecondary institutions to offer 
educational programs.
    Several commenters were appreciative of the Department's efforts to 
eliminate references to outdated technology such as CD-ROMs. Other 
commenters indicated that the definition holds institutions accountable 
for providing students in distance education programs with 
communication and engagement with qualified instructors on a 
predictable and regular basis.
    Many commenters supported the addition of the concept of 
``qualified instructors'' who meet the instructional requirements of an 
institution's accrediting agency. One commenter stated that the 
proposed definition would provide institutions with a single, clear 
definition of ``instructor'' for financial aid purposes, that could 
help prevent confusion during audits about which staff members can be 
classified as instructors. One commenter also expressed support for the 
Department's use of the plural ``instructors'' rather than ``the 
instructor'' because it would enable more people to teach as a team and 
provide more individualized attention to students.
    Several commenters supported the Department's proposed requirements 
for substantive interaction, indicating that the definition supports a 
variety of activities needed for teaching and learning. One commenter 
indicated that defining and clarifying what constitutes ``substantive 
interaction'' between students and faculty would give institutions the 
ability to innovate without fear of the loss of Federal student aid 
eligibility. Another commenter indicated that the requirements for 
substantive interaction are appropriately adaptable because they allow 
accrediting agencies to approve different types of instructional 
activities. One other commenter was supportive of the consensus 
language relating to substantive interactions, noting that while the 
Department's original proposal had defined substantive interaction as 
an interaction that simply related to course material under discussion, 
negotiators opposed this language because it did not specifically 
address teaching and learning in the way that the consensus language 
does.
    Several commenters also supported the Department's requirements for 
regular interaction. One commenter indicated that the flexibility of 
the definition was important given variability across a wide range of 
program types and topics and helped limit administrative burden. 
Another commenter supported the ability for institutions to determine 
the number of substantive interactions that are appropriate based on 
the length and amount of content associated with a course. One 
commenter expressed strong support for requiring both predictable 
opportunities for interaction and the prompt and proactive monitoring 
of student engagement, indicating that the requirements would result in 
more affordable and accessible pathways for students while ensuring 
high-quality instruction.
    Discussion: The Department thanks the commenters for their support.
    Changes: None.
    Comments: Many commenters urged the Department to maintain the 
regulatory language agreed upon in consensus with non-Federal 
negotiators for regular and substantive interaction and the 
requirements for instructors in distance education programs. Several 
commenters pointed out that the consensus agreement for the proposed 
definition of ``distance education'' reflected a thoroughly discussed 
compromise among negotiators.
    Several commenters contended that it is imperative to clearly 
distinguish between distance education and correspondence courses and 
ensure that quality standards exist for distance education programs, 
especially given the history of abuses related to correspondence 
courses. The commenters asserted that diluting the proposed definition 
could result in online programs becoming eligible for Federal student 
aid even when the programs do not offer the same quality of education 
or degree of connection between students and qualified instructors. One 
of those commenters urged the Department not to revert to its original 
proposal to allow accrediting agencies alone to articulate requirements 
for regular and substantive interaction and instructors with minimal 
Federal guidelines. One commenter asserted that the Department's 
original proposals for changing the definition, later rejected in the 
consensus language, would have undermined the requirements for regular 
and substantive interaction and for the qualifications for an 
instructor and urged the Department not to return to those proposals.
    Other commenters pointed out that the requirements for regular and 
substantive interaction exist in law because of past abuses in 
correspondence programs, particularly of veterans seeking to use 
educational benefits. One of these commenters noted that after passage 
of the 1944 Servicemen's Readjustment Act of 1944 (commonly known as 
the ``GI Bill'') hundreds of thousands of servicemen used their 
education benefits under that law to enroll in correspondence courses, 
but only approximately 10.7 percent of those veterans completed their 
programs. That commenter also pointed out that Congress acted in the 
early 1990s to address similar types of abuses in correspondence 
courses related to the title IV, HEA programs. Another commenter noted 
that the OIG has repeatedly raised concerns about distance education 
and has characterized it as an area that poses significant risk to the 
integrity of the FSA programs.
    One commenter referred to research that shows that Latino students 
enrolled in online education have lower academic and attainment 
outcomes than in face-to-face courses and that interviews with such 
students highlight the absence of a meaningful student-

[[Page 54756]]

instructor relationship as a contributing factor to those poor 
outcomes. Another commenter referenced research that suggests faculty-
student interaction plays a key role in a quality online education and 
that underprepared and disadvantaged students tend to underperform and, 
on average, experience poor outcomes in such programs. That commenter 
also referenced research that suggests online students desire greater 
interaction with their instructors and that, in general, online 
education has not improved affordability, frequently costs more, and 
does not produce a positive return on investment. One commenter 
asserted that if the requirement for regular and substantive 
interaction is weakened, there is a risk that inequities will increase 
between those students who have access to substantive interaction with 
instructors and those who do not. That commenter expressed that this is 
an even more critical issue now that institutions are moving online 
because of the COVID-19 emergency.
    Discussion: We agree that it is important for the regulations to 
clearly distinguish between the definitions of ``distance education'' 
and ``correspondence courses'' and believe that the proposed 
definitions accomplish that goal. Whereas the definition of a 
correspondence course describes interaction between students and 
instructors in such the course as ``limited . . . not regular and 
substantive, and . . . primarily initiated by the student,'' the 
definition of distance education requires regular and substantive 
interaction between students and instructors and clearly explains the 
requirements for each component of that definition. We also agree that 
it is important to adhere to the agreed-upon language of the members of 
the subcommittee and full committee, who were able to reach agreement 
on the definition of the term despite strong initial differences of 
opinion on the matter. We agree with the commenters who referenced the 
importance of regular and substantive interaction between students and 
instructors, particularly for students who are underprepared, and 
believe that the requirements for such interaction expressed in the 
definition strike the appropriate balance between assuring interaction 
with qualified instructors and allowing institutions the flexibility to 
offer programs using innovative, student-oriented pedagogical 
techniques.
    Changes: None.
    Comments: Several commenters opined on whether the Department 
should incorporate the concept of an ``instructional team'' into the 
definition of ``distance education.''
    One of these commenters described the use of instructional teams as 
a practice that occurs in on-campus settings across various fields of 
study and that provides exceptional opportunity to students by allowing 
them to interact with several experts in a given course. Another 
commenter argued that explicitly addressing the concept of 
instructional teams in the definition would acknowledge the reality 
that distance education is an instructional team endeavor that does not 
rely upon arbitrary distinctions between an instructor and someone 
involved in facilitating the delivery of course content who is not 
considered an instructor.
    One commenter argued that team-based instructional models could be 
complicated if substantive interactions could only be provided by 
individuals that met an accrediting agency's requirements for 
instruction and noted that some types of interactions described under 
paragraph (3) of the definition, including assessing or providing 
feedback on a student's coursework, could be provided by assessment 
specialists who do not meet the definition's requirements for a 
qualified instructor.
    Conversely, one commenter objected to the Department's proposal to 
use the term ``instructors'' rather than ``the instructor,'' arguing 
that doing so would allow quasi-professionals to teach more advanced 
subject matter as part of a team. The commenter asserted that this 
situation could result in such instructors only tangentially monitoring 
student discussion rather than substantively engaging with students.
    Discussion: The Department does not object to the use of 
instructional teams, regardless of the modality of the coursework. 
Indeed, we support innovative educational models that provide 
additional support, both academic and otherwise, to support student 
success. However, we believe that the current regulatory language 
accommodates the use of instructional teams and no change is necessary 
in order further encourage their use.
    Regardless of the composition of an instructional team, the 
Department expects that such a team would include qualified individuals 
with subject matter expertise who are expected to instruct, guide, or 
otherwise respond to questions from students about the subject matter 
of a course or competency. Such individuals, assuming they meet 
accrediting agency requirements for instruction, are the staff members 
whose substantive interaction with students can fulfill the 
requirements of the ``distance education'' definition for regular and 
substantive interaction between students and instructors. Note that 
accrediting agencies can choose to designate individuals as instructors 
who do not meet the traditional criteria for faculty, and many already 
do in instances, for example, where workforce experience may be more 
important to teaching and learning than an advanced degree. Accreditors 
are also permitted to designate an individual as an ``instructor'' 
meeting its requirements only in specific situations, for example, 
where a less-experienced individual is teaching in a team setting with 
an experienced instructor of record having responsibility for the 
course in general. Given this degree of flexibility, we believe that 
the regulation as written provides ample opportunity for distance 
education to occur with the use of instructional teams, but only when 
such use conforms with the requirements of an instruction's accrediting 
agency.
    Changes: None
    Comments: Several commenters expressed concern with the 
Department's proposal to replace the list of technologies in the 
definition of ``distance education'' with the phrase ``other media.''
    Two commenters indicated that the word ``media'' was not specific 
enough to limit the types of modalities that could be used in distance 
education. One of those commenters recommended that the Department add 
the phrase ``and other types of media'' after listing each type of 
technology. The other commenter recommended that the Department 
continue to add new media types to the definition rather than removing 
the existing types that were listed.
    One commenter suggested that the Department eliminate the list of 
technologies that could be used to offer a program through distance 
education unless we plan to update the appropriate formats on a regular 
basis (for example, annually).
    Another commenter expressed concern that replacing references to 
types of media with the phrase ``other media'' could cause 
institutional officials to interpret the phrase as the use of one type 
of media.
    Discussion: We appreciate the commenters' suggestions, but we do 
not plan to update the list of acceptable technologies at this time. 
The HEA currently prescribes the types of technologies that may be used 
for distance education, and in this rulemaking the Department is not 
making changes to the statutory

[[Page 54757]]

requirement, but is instead simplifying this list in the regulations by 
referring to ``other media'' rather than including all of the types of 
media that may be used to deliver distance education.
    Changes: None.
    Comments: One commenter suggested that the Department define 
``instruction'' rather than ``instructor'' and use the definition of 
the former to inform requirements for the latter.
    Discussion: The Department chose to clarify the requirements for an 
instructor for purposes of the definition of ``distance education'' 
because the term is specifically used in statute with reference to 
distance education. Moreover, we believe that it is beyond our purview 
to define the term ``instruction'' given its broad application in 
postsecondary education and the restrictions on the Department's 
oversight of academic quality in the Department of Education 
Organization Act.
    Changes: None.
    Comments: One commenter expressed concern about the variability 
between accrediting agencies regarding their requirements for an 
instructor in the context of the definition of ``distance education.'' 
The commenter stated that each accrediting agency should have a strong 
definition of a quality instructor that includes requirements for 
qualifications to teach in the relevant competencies. Two commenters 
also recommended that in cases where students have multiple 
instructors, the students should be informed of which instructor is the 
instructor of record.
    Discussion: We believe that accrediting agencies are the 
appropriate arbiters of academic quality for postsecondary education, 
including regarding the appropriate requirements for instructors. The 
Department is prohibited from creating regulations or other 
requirements regarding the academic quality of educational programs 
under the Department of Education Organization Act. Furthermore, while 
it is true that there may be variation among accrediting agencies 
regarding requirements for instructors, we believe this is appropriate 
given the different types of qualifications that may be needed 
depending on the types of programs and degree levels offered.
    Changes: None.
    Comments: Several commenters sought clarification regarding the 
Department's requirements for ``regular interaction.''
    One commenter indicated that interactions in asynchronous courses 
may not be predictable and asked the Department to clarify by providing 
a specific length of time that it considered to be ``regular'' for 
purposes of this definition.
    Another commenter asked how institutions would monitor a student's 
engagement in distance education, particularly when an interaction 
occurs during a videoconference where the instructor is working to 
develop the student's understanding of a particular topic while also 
attempting to monitor the student's engagement.
    One commenter expressed concern that the regulations only require 
the opportunity for interactions with instructors when needed. The 
commenter indicated that this lack of mandatory proactive instruction, 
when combined with a lack of emphasis on faculty involvement, could 
lead to confusion about the distinction between distance education and 
correspondence courses. The commenter recommended that the Department 
delete the words ``the opportunity'' from paragraph (5)(i) of the 
definition and delete ``when needed'' from paragraph (5)(ii) in order 
to require proactive substantive interaction for every student.
    Several commenters noted that the regulations describing ``regular 
interaction'' included a requirement for the interaction to be 
``regular,'' which the commenters felt was redundant. Three of those 
commenters recommended that the Department replace the phrase ``regular 
and predictable basis'' with the phrase ``scheduled and predictable 
basis.''
    Discussion: Given the variety of distance education programs, 
coursework, instructional modalities, and course schedules, we do not 
believe it is practical to offer a specific timeframe for regular 
interaction. The Distance Learning and Innovation subcommittee strongly 
disagreed with that approach when it was presented, arguing that 
establishing such a timeframe would either be overly prescriptive or 
excessively complex. Similarly, an institution cannot be expected to 
ensure perfect attendance by students at each opportunity for 
interaction with an instructor, which is why the Department, the 
subcommittee, and the negotiating committee agreed to frame the 
requirement as an ``opportunity'' for interaction rather than a 
required interaction. This approach has the added benefit of allowing 
institutions to demonstrate compliance with the requirements at the 
program design level without documenting each and every interaction 
between students and instructors.
    The requirements for regular interaction include monitoring a 
student's ``academic engagement and success'' with respect to a course 
or competency. This requirement is not intended to mandate that 
instructors personally monitor each student's engagement throughout 
each class session while also instructing, facilitating discussion, or 
responding to questions from students. Instead, the requirement is 
intended to ensure that instructors are generally monitoring whether a 
student is engaged and successful throughout a given course or 
competency and takes appropriate action as needed. Such monitoring 
could include evaluating a student's level of participation in 
synchronous class sessions, but it could also involve monitoring the 
student's activity on course websites or materials; considering the 
quality of the student's assignments or responses to questions about 
course materials; evaluating the level of the student's understanding 
of course materials during conversations with instructors or 
performance on exams; or other forms of monitoring the student's 
engagement and success in the course or competency.
    We agree with the commenters that the word ``scheduled'' is more 
descriptive and provides greater clarity than the word ``regular'' for 
purposes of describing ``regular interaction.'' Furthermore, the 
Department believes that the word ``scheduled'' more clearly reflects 
the intent of the Distance Learning and Innovation subcommittee and the 
full negotiating committee to ensure that students are provided 
scheduled opportunities to interact with instructors for which the 
students can prepare in advance.
    Changes: We have replaced the phrase ``predictable and regular 
basis'' with the phrase ``predictable and scheduled basis'' in 
paragraph (5)(i) of the definition.
    Comments: One commenter explained that there are two types of 
distance education models that higher education has developed--
synchronous and asynchronous--and that the asynchronous model better 
reflects the realities of working adults, differing levels of 
preparation, and the importance of assessment. The commenter pointed 
out that many new students in higher education are ``non-traditional'' 
and include a large number of veterans and students with families. The 
commenter asserted that these students have schedules that they cannot 
control and are better served by asynchronous courses that support 
their needs for flexibility, while the institution ensures that each 
student is evaluated based on the student's demonstration of mastery of 
the competency or course. The commenter

[[Page 54758]]

recommended that the requirements for regular interaction point to 
interactions that are appropriate to the course modality and consistent 
with student success.
    Discussion: We agree with the commenter that distance education 
may, in many cases, have the capability to address the needs of non-
traditional students better than traditional classroom courses. 
However, we disagree that the regulatory definition needs to include a 
reference to the appropriateness of interactions with respect to course 
modality and student success for institutions to offer programs that 
are sufficiently flexible. Though the definition of ``distance 
education'' establishes certain requirements for interaction in online 
programs, the Department defers to institutions and their accrediting 
agencies regarding whether a program's design involves interactions 
that are appropriate and tailored to the needs of students.
    Changes: None.
    Comments: A few commenters asked questions about the relationship 
between the Department's final regulations and the COVID-19 pandemic.
    One commenter asked the Department how its proposed definition of 
distance education would prepare institutions for future pandemics and 
whether institutions should be required to implement distance education 
training programs so that they are prepared to shift to an online 
modality if and when a pandemic prevents in-person instruction once 
again. The commenter asserted that new options for learning modalities 
would not prompt an increase in the number of students enrolling in 
distance education courses and asked how the Department's proposal 
would reduce barriers to access for students given those trends.
    Another commenter pointed out that the Department's recent guidance 
for distance education related to the COVID-19 pandemic were 
inconsistent with the regulatory requirements for distance education in 
the proposed rule.
    Discussion: Many institutions with limited distance education 
offerings at the time of the initial COVID-19 outbreak were unprepared 
for the impacts of the pandemic and did not have adequate resources or 
the expertise to quickly shift to an online learning modality. Though 
many institutions were able to shift to an entirely new modality, many 
were still faced with a complicated and confusing regulatory framework 
for distance education that they had never encountered before. The 
Department's hope is that clarifying and expanding the definition of 
``distance education'' will offer a degree of certainty to institutions 
both familiar and unfamiliar with online learning and will make it 
easier for institutions to shift to an online modality in the event of 
a pandemic in the future.
    The Department's recent COVID-19 distance education guidance for 
institutions related to COVID-19 was intended to be temporary and was 
necessary to address the urgent need to shift instructional operations 
online very quickly. The Department has established a specific 
timeframe for that guidance and will expect institutions to again 
comply with regulatory and statutory requirements when the waivers and 
flexibility related to COVID-19 expire.
    Changes: None.
    Comments: Many commenters asked questions about the Department's 
requirements for ``substantive interaction'' under the definition of 
``distance education.''
    A few commenters asked the Department to clarify whether 
substantive interaction was required to occur regularly at the 
``instructor level'' or the ``course-competency level.'' Two of those 
commenters expressed concern that if the definition were applied at the 
instructor level and not the course-competency level, it could exclude 
some aspects of an ``unbundled'' instructional model. One commenter 
offered the example of assessment experts whose skills and expertise 
are tailored toward developing and scoring assessment, as well as 
providing students with feedback, but who might not be considered to be 
``faculty.'' That commenter argued that the Department should indicate 
that its intent was for substantive interaction to occur at the course/
competency level.
    Several commenters asked the Department to explain the interaction 
between the regulations requiring at least two types of substantive 
interactions and the requirements for such interactions to be 
``regular.'' One commenter asked whether both types of substantive 
interaction were required throughout a semester, or whether an 
institution could engage in one or the other activities at any time to 
meet the requirements. A separate commenter asked whether the two forms 
of substantive interaction needed to be alternated on a regular basis 
or whether both forms of interaction were required in the same class 
session. That commenter recommended that the Department either clarify 
this point or strike the requirement for more than one form of 
substantive interaction, asserting that it could cause implementation 
challenges. Another commenter requested that the Department remove the 
requirement for at least two types of substantive interaction because 
it was unclear how often each type of interaction needed to occur and 
such ambiguity could cause considerable confusion for institutions 
attempting to implement the requirements.
    One commenter asked how instructors would calculate the time that 
they spend on substantive interaction when one of the categories of 
such interaction includes responding to questions about the content of 
a class.
    Discussion: The Department's requirements for regular and 
substantive interaction between instructors and students occurs at the 
course or competency level. The Department's intent with this 
definition is to ensure that, for a given unit of study (for example, a 
class such as English 101 or a competency such as the ability to 
perform statistical analysis) a student has ample opportunity to 
substantively interact with an instructor and the instructor (or 
instructors) monitor the student's engagement and performance, and 
provide scheduled opportunities for interaction with the student as 
needed on the basis of that monitoring. Additionally, the regulations 
must apply at the course or competency level because they are designed 
to distinguish distance education from correspondence courses for 
purposes of exempting distance education from the limitations on the 
percentage of correspondence courses that an institution may offer. 
Applying the regulatory requirements for distance education at the 
instructional unit level ensures that any online course or competency 
that is misclassified as distance education can be included in the 
calculation of the percentage of correspondence courses that the 
institution offers for purposes of the institutional eligibility 
requirements under 34 CFR 600.7.
    The Department also applies the requirement for a substantive 
interaction to include at least two types of activities listed in the 
definition at the course or competency level. The definition of 
``distance education'' lists several different types of interaction 
that can fulfill the requirements for ``substantive interaction,'' 
including direct instruction, assessment, responding to questions about 
the course materials, facilitating a group discussion regarding the 
course content, or other instructional activities approved by the 
institution's accrediting agency. The definition requires an 
institution to perform at least two of those activities, and since we 
apply the regulation at the course or competency

[[Page 54759]]

level, we also require an institution to perform at least two of those 
activities over the period of time that the student completes the 
course or competency. We believe that requiring a specific timeframe, 
sequence, or frequency that the activities need to occur within that 
timeframe would be impractical and would extend beyond our purview 
under the Department of Education Organization Act.
    The Department does not expect an institution to measure or 
document the exact amount of time that it or its students spend on any 
particular type of substantive interaction. An institution is expected 
to maintain academic policies or procedures that create expectations 
for faculty to substantively interact with students on a predictable 
and scheduled basis and to monitor each student's engagement and 
success and follow up with the student as needed.
    Changes: None.
    Comments: One commenter recommended that the Department add 
language requiring that institutions using distance education ensure 
the accessibility of the learning materials and remain compliant with 
Section 508 of the Rehabilitation Act. The commenter argued that 
technology can be a limiting factor for individuals with disabilities 
if the systems used are not accessible.
    The commenter also asked the Department to add a requirement for 
instructors to be ``flexible and work with the student to determine the 
most appropriate communication mode to maximize the student's ability 
to participate.'' The commenter indicated that because some students 
struggled with communication technology, instructors should customize 
their online programs to ensure that students are being evaluated for 
their knowledge of content rather than their ability to access 
technology.
    Discussion: The Department does not believe it is appropriate to 
regulate the Rehabilitation Act using the definition of ``distance 
education,'' which is derived from the HEA. That said, we strongly 
support the intent of the Rehabilitation Act and expect every 
institution with a distance education program to adhere to that law's 
statutory and regulatory requirements.
    Changes: None.
    Comments: Many commenters requested that the Department replace the 
``and'' between paragraphs (5)(i) and (ii) of the definition with 
``or'' in order to allow an institution to fulfill the requirement by 
taking either of the actions in paragraph (5)--providing the 
opportunity for substantive interactions with the student on a 
predictable and regular basis or monitoring the student's academic 
engagement and success and ensuring that an instructor is responsible 
for promptly and proactively engaging with the student--as opposed to 
requiring the institution to take both of those actions. One of these 
commenters argued that the proposed regulations would require 
institutions to adhere to a time-bound model that may not be 
appropriate for the institution's instructional modality or its 
students. Two other commenters indicated that the intent of the 
Distance Learning and Innovation subcommittee was to allow institutions 
to choose the type of ``regular'' interaction that best suited the 
academic program and recognized that some institutions have 
sophisticated technologies that monitor student engagement and success 
and alert instructors when students are not engaged or are struggling 
with material. These and other commenters also cautioned that requiring 
both components of the definition could result in a requirement that 
institutions adhere to a strict, time-bound schedule, which is counter 
to the format in many competency-based education programs. Many 
commenters also argued that many institutions lack the technology or 
resources needed to monitor a student's engagement and success. Another 
commenter indicated that the ``and'' would limit the variety of 
instructional approaches that could be available to institutions if one 
or the other action fulfilled the requirement. One commenter also noted 
that reverting to ``or'' between those paragraphs would recognize the 
importance of a team approach to instruction and co-curricular 
activities. Several commenters argued that reverting to ``or'' would 
set expectations for distance education, including monitoring each 
student's engagement, beyond what is expected or required for on-campus 
instruction. Several commenters also asserted that the change to 
``and'' could push institutions to adopt learning analytics tools to 
track student progress, which could increase the cost of educating 
students and introduce privacy or other ethical concerns. One commenter 
pointed out that requiring institutions to implement both components of 
the requirements for regular interaction could prevent them from 
adjusting quickly to market demands and emerging technology. Finally, 
one commenter pointed out that the Department's OIG would rely upon the 
new regulatory definition of ``distance education'' when assessing an 
institution's compliance, suggesting that additional flexibility in the 
definition was therefore preferable.
    Discussion: As one commenter noted, the Distance Learning and 
Innovation subcommittee's recommendation was to allow an institution to 
fulfill the requirement for regular interaction by either maintaining 
predictable and scheduled opportunities for interaction or by 
maintaining a system for evaluating a student's engagement and progress 
and ensuring that an instructor followed up when appropriate. The 
subcommittee's intent was to allow institutions with self-paced 
programs to use other techniques other than scheduling planned 
interactions, which in the past had led to perfunctory mandatory phone 
calls or class sessions that did not provide great benefit to students.
    Despite the subcommittee's concerns about requiring predictable 
opportunities for interaction, the full negotiating committee decided 
that it was important for both conditions to be met. The committee 
believed that the proposed definition, requiring both predictable 
interactions and student monitoring, offered sufficient flexibility 
regarding the number and frequency of scheduled interactions based upon 
the length and intensity of the student's coursework. In a self-paced 
course or competency in which a student approaches the coursework at 
his or her own pace, the institution is not required to schedule, for 
example, weekly opportunities for interaction. Instead, the institution 
may decide that the appropriate timeframe for scheduled opportunities 
for interactions is bi-weekly or monthly, or a different frequency. 
Furthermore, by not requiring mandated interactions, the definition 
does not impose a bureaucratic requirement for a scheduled course 
session, but instead simply ensures that students are aware that there 
will be planned occasions that they will be able to interact with an 
instructor about course content.
    Similar concerns were also raised by commenters about requiring 
more traditional class-based online programs to maintain a system for 
monitoring student engagement and interacting with the students on that 
basis. We disagree with several commenters that institutions would need 
to purchase expensive software to track and monitor each student's 
online activities to determine whether the student was sufficiently 
engaged. While such software would meet the requirement if it were part 
of a system for monitoring and interacting with students when the need 
arose, it is not a required element for regular and substantive 
interaction.

[[Page 54760]]

The Department's expectation is that instructors take a proactive 
approach to determining when students need assistance and then offering 
that assistance, and this could be done either using sophisticated 
systems for monitoring student activity or more traditional person-to-
person evaluation or through the use of tests and quizzes. The required 
``monitoring'' could consist of evaluating each student's performance 
in regular online class sessions or in regular assignments that have 
been turned in. This type of monitoring is common to nearly all 
postsecondary programs and has been performed since before the internet 
existed.
    Given all of these factors and the level of importance accorded by 
the negotiating committee to the use of ``and'' between paragraphs 
(5)(i) and (ii) of the definition, we decline to revert to the word 
``or'' between those paragraphs.
    Changes: None.
    Comments: One commenter proposed that the Department should provide 
an outline of the new definition of ``distance education'' to offer 
clarity to government officials and citizens about the changes to the 
definition.
    Discussion: We thank the commenter for this suggestion and agree 
that an outline could make the changes clearer. We plan to publish a 
clear description of each of the changes to the definition of 
``distance education'' in the FSA Handbook after the changes become 
effective.
    Changes: None.
    Comments: Several commenters asked the Department to clarify 
whether interactions that were initiated by a student would meet the 
requirements for regular and substantive interaction between students 
and instructors. One of those commenters sought clarification regarding 
whether the Department intends to require evidence of instructor-
initiated interaction, student-initiated interaction, or both.
    Discussion: The Department does not consider substantive 
interactions initiated by students to meet the requirements for regular 
interaction in the definition of ``distance education.'' An institution 
meets the requirement for regular interaction between students and 
instructors by, in part, providing the opportunity for substantive 
interactions with the student on a scheduled and predictable basis 
commensurate with the length of time and the amount of content in the 
course or competency. This requirement could be met if instructors made 
themselves available at a specific scheduled time and through a 
specific modality (e.g., an online chat or videoconference) for 
students to interact about the course material, regardless of whether 
the students chose to make use of this opportunity or interact with the 
instructor at the scheduled time. However, if an institution does not 
offer such opportunities for interaction on a regular and scheduled 
basis in an online program and instead relies solely upon students to 
initiate interactions with instructors, it would not meet the 
requirements for regular and substantive interaction between students 
and instructors and the online program would be considered to be taught 
using correspondence courses.
    Changes: None.
    Comments: Several commenters asked how the Department would oversee 
various aspects of the definition of distance education. One commenter 
asked how the Department would assess whether an institution's 
instructional activities were approved by the institution's or 
program's accrediting agency in audits or program reviews. The 
commenter also asked whether accrediting agencies would be required to 
create a list of approved instructional activities or whether the 
Department would allow agencies to have more ambiguous standards that 
are applied on a case-by-case basis, which could result in most or all 
institutions meeting the requirements. Another commenter asked what 
oversight mechanisms the Department would use to verify the amount of 
substantive interaction reported by institutions.
    Discussion: The Department's oversight of the requirements for 
regular and substantive interaction between students and instructors 
will focus on five critical factors that differentiate distance 
education from correspondence courses. The Department will seek to 
determine whether--
     The institution's online instruction is delivered through 
an appropriate form of media;
     The instructors with whom students regularly and 
substantively interact meet the requirements of the institution's 
accrediting agency for instruction in the subject matter;
     Instructors engage in at least two forms of substantive 
interaction meeting the regulatory requirements for the course or 
competency;
     The institution has established scheduled and predictable 
opportunities for substantive interaction between students and 
instructors and create expectations for instructors to monitor each 
student's engagement and substantively engage with students on the 
basis of that monitoring; and
     Instructors are responsive to students' requests for 
instructional support.
    The Department will evaluate whether an instructor meets an 
accrediting agency's requirements by reviewing the agency's written 
standards and any communication between the agency and the institution 
regarding the agency's requirements or whether the instructors in 
question met such requirements. If the Department is unable to 
determine whether the instructor meets the agency's requirements by 
reviewing such written materials, it may contact the agency to seek a 
determination on the matter.
    The Department does not require an institution to monitor or 
document every interaction between an instructor and a student to 
demonstrate that it has fulfilled the requirements for regular and 
substantive interaction. However, we encourage institutions to consider 
whether they have adequate means of monitoring online programs to 
ensure that they continue to meet all the conditions of the definition. 
In overseeing the requirements for regular and substantive interaction 
with instructors, the Department will determine whether an institution 
has established sufficient internal controls to demonstrate that it has 
established (1) appropriate academic policies and procedures for its 
instructors to implement these provisions; and (2) a system for 
monitoring or periodically evaluating its online programs to ensure 
that its instructors continue to observe such policies over time.
    Comments: One commenter, arguing that direct instruction was at the 
core of higher education, recommended that the Department require 
``substantive interaction'' to include direct instruction in addition 
to two other elements.
    Discussion: The required elements for substantive interaction were 
determined in consensus with the negotiating committee, and the 
Department does not believe it would be appropriate to diverge from 
that agreement to narrow the types of program offerings that would meet 
the Department's definition of ``distance education.'' Furthermore, we 
do not believe it is advisable to require regular direct instruction in 
all distance education programs given the proliferation of promising 
new educational models that do not rely on regularly scheduled 
instructional sessions. The Department wishes to remind the commenter 
that in the case of in-person classroom-based instruction, most schools 
are not required to take attendance. It the case of credit hour 
programs, it is the job of

[[Page 54761]]

the institution to provide the opportunity and it is the job of the 
student to take it.
    Changes: None.
    Comments: One commenter expressed dissatisfaction with the 
Department's proposed definitions of ``correspondence course'' and 
``distance education,'' stating that the requirement for ``constant 
communication'' initiated by the instructor in distance education was 
unfair and would hinder students who need flexibility with respect to 
the time and place that they interact with their instructors.
    Discussion: The proposed definition of ``distance education'' does 
not require constant communication between students and instructors and 
in fact only requires scheduled opportunities for interaction with 
qualified instructors and a system for monitoring student engagement 
and success. We believe these requirements are reasonable and will 
permit substantial flexibility for institutions to create new 
educational models that place the student, rather than the instructor 
or the institution, at the center of the learning exercise.
    Changes: None.
    Comments: Several commenters emphasized the importance of improving 
the quality of information and oversight related to distance education.
    One commenter said that while some information exists about 
distance education in the Integrated Postsecondary Education Data 
System (IPEDS), the data are not current and include only the number of 
students enrolled in distance education courses and completing distance 
education programs. The commenter also indicated that the National 
Center for Education Statistics (NCES) sample surveys collect some 
information about engagement with distance education, but because those 
surveys are based on samples and are not conducted annually, their 
usefulness in answering policy and research questions is limited. The 
commenter argued that the Department should improve timely data 
collection about distance education given the significant number of 
students who enroll in that format, the uncertainty about future 
reliance on distance education options, and the importance of 
evaluating regulations related to distance education. The commenter 
suggested adding a field for the distance education status of enrolled 
title IV recipients in the National Student Loan Data System (NSLDS). 
Another commenter suggested that the Department require institutions to 
establish a new location with the Department for exclusively online 
students. That commenter also reiterated a proposal that had been 
proposed by one of the non-Federal negotiators during negotiated 
rulemaking: That the Department require institutions to report, for 
students who are enrolled in programs in which at least one course can 
be completed online, whether each recipient of title IV, HEA assistance 
is enrolled exclusively online, exclusively as a brick-and-mortar 
student, or as a hybrid student in both online and brick-and-mortar 
instruction. One commenter called for a demonstration program for 
competency-based education authorized by Congress that would test 
replacements for the credit hour and allow institutions to reasonably 
experiment with different models of interaction with students, but 
argued that in lieu of such a program no changes should be made to the 
consensus regulations.
    Discussion: We agree with the commenters who suggested that 
additional data regarding the use of distance education would be 
helpful; however, we do not believe that collecting such data through 
the National Student Loan Data system is the appropriate vehicle for 
that data collection to occur. We will consider the feasibility of the 
other suggestions offered by commenters for collecting data related to 
students who are enrolled in distance education. The Department does 
not have the authority without action by Congress to develop a 
demonstration program with waivers that exceed the Department's 
authority under the Experimental Sites Initiative.
    Changes: None.
    Comments: One commenter recommended that the Department eliminate 
the regulatory definition of ``regular and substantive interaction'' 
for distance education entirely, arguing that there is no reason to 
impose additional requirements beyond what is in the statute given 
advances in technology that permit detailed monitoring of a student's 
online activities. The commenter suggested that the Department is not 
obligated to define ``regular and substantive interaction'' in a way 
that would prevent many on-ground courses from meeting those 
requirements. The commenter further advised that the Department's 
definition of ``academic engagement'' was sufficient to eliminate any 
confusion that had arisen about distance education because it is widely 
understood that ``regular and substantive interaction'' is a 
descriptive term for ``academic engagement.'' Finally, the commenter 
noted that the Department is not required to follow or defer to its 
prior sub-regulatory guidance, in particular Dear Colleague Letter GEN-
14-23, which provides additional explanation regarding the meaning of 
``regular and substantive interaction'' with respect to distance 
education.
    Discussion: We disagree that the statutory requirements for 
``regular and substantive interaction'' for a distance education 
program are sufficiently clear that a regulatory definition is not 
needed. For more than a decade since the statutory definition of 
``distance education'' was first created, institutions have expressed 
confusion about the practical meaning of the term and have argued that 
the ambiguity of what constitutes regular and substantive interaction 
have hampered innovation as a result of fears of non-compliance and 
audit or program review findings. Moreover, the concept of ``regular 
and substantive interaction'' is an important differentiating factor 
between distance education and correspondence courses, which, if 
improperly understood, could result in institutional ineligibility for 
an institution that suddenly becomes aware that it has been offering 
more than half of its courses or enrolling more than half of its 
students through correspondence courses. We also disagree that the 
definition, as currently written, would be impossible to meet if it 
were offered in a classroom setting, since scheduling class sessions 
and performing ongoing monitoring of each student's performance and 
engagement in class are traditional teaching functions that do not 
require the use of sophisticated software systems.
    We also disagree that the definition of ``academic engagement'' 
necessarily includes regular and substantive interaction between 
students and instructors and can be used in lieu of a description of 
those requirements in the regulations. While substantive interaction 
with an instructor related to a student's coursework is certainly a 
form of academic engagement, it is not synonymous with the broader 
concept of academic engagement.
    Finally, the Department agrees that it is not required by law to 
continue to abide by the guidance in Dear Colleague Letter GEN-14-23, 
and plans to retract and revise aspects of that guidance as well as 
guidance in Dear Colleague Letter GEN-13-10, related to the application 
process for direct assessment programs, that will no longer apply upon 
the implementation of these regulations.
    Changes: None.
    Comments: One commenter recommended that the Department include the 
concept of ``co-curricular'' education in the definition of distance

[[Page 54762]]

education, in particular with regard to the requirements for 
substantive interaction. The commenter proposed that the definition be 
revised to express that distance education could be either curricular 
or co-curricular.
    The commenter asserted that such revisions would recognize the 
importance of co-curricular activities, which the commenter defined as 
activities associated with and complementary of the curriculum. The 
commenter argued that, for many students who enroll in distance 
education programs, particularly adult learners, co-curricular learning 
plays a critical role in enhancing the student experience and helping 
to ensure student persistence and success and that such learning has 
also played a similar role in ground-based programs.
    Discussion: The Department agrees with the commenter that co-
curricular activities--which are generally aligned with and designed to 
complement the academic curriculum--are useful and often vital 
components of a postsecondary program that support student persistence 
and success. Because of the close ties between academic coursework and 
co-curricular activities, we believe that there may be occasions in 
which such activities are designated by an institution's accrediting 
agency as types of substantive interaction under paragraph (4)(v) of 
the definition of ``distance education.'' If an accrediting agency 
designates a co-curricular activity as a type of substantive 
interaction, interactions involving that activity would meet the 
requirements of the definition. However, we believe that including the 
concept of co-curricular activities in the definition would increase 
the scope of activities more broadly than intended by the negotiating 
committee, and therefore decline to add the suggested language to the 
text of the definition.
    Changes: None.
    Comments: Two commenters offered conflicting opinions on whether 
the Department should emphasize the concept of ``faculty'' rather than 
``instructors'' in the definition of ``distance education''.
    One commenter argued that the current requirements for instructors 
left too much discretion to institutions and accrediting agencies. The 
commenter recommended that the Department should emphasize to 
accrediting agencies that faculty should be the primary ``instructors'' 
in postsecondary education, regardless of modality. The commenter was 
supportive of innovation and the use of artificial intelligence or 
other innovative technologies but indicated that innovation could occur 
in the context of faculty interaction with students. The commenter 
expressed concern that the requirements for distance education in the 
proposed definition would not be the same as those for other 
modalities.
    Another commenter expressed the opposite view, arguing that the 
Department's OIG had raised concerns about replacing the word 
``instructor'' with the word ``faculty'' in the ``Promoting Real 
Opportunity, Success, and Prosperity through Education Reform Act'' 
(PROSPER Act), which was introduced in 2017. The commenter noted that 
the OIG believed that using the word ``faculty'' in the statutory 
definition of ``distance education'' would allow a school to qualify 
for full participation in the FSA programs based on email contact 
between students and faculty on matters unrelated to the subject matter 
of a program.
    Discussion: Though we do not agree with the level of concern that 
was raised by the Department's OIG regarding the use of the word 
``faculty,'' or that the use of that word in lieu of ``instructor'' 
would substantially undermine the definition of ``distance education,'' 
we believe that the word ``instructor'' is more appropriate in this 
context. Given the use of the word ``instructor'' in the statutory 
definition of ``distance education,'' we believe that it is appropriate 
to focus on a staff member's instructional function, rather than that 
person's faculty role, when making a determination about whether the 
staff person can fulfill the requirement for regular and substantive 
interaction with students. The function of instruction and the role of 
faculty are not necessarily synonymous; for example, many institutions 
hire research faculty that do not have teaching responsibilities.
    Changes: None.
    Comments: One commenter indicated that the proposed requirements 
for substantive interaction did not appear to require any direct 
instruction or group discussion. The commenter asked whether it would 
be possible for an institution to fulfill the requirements for 
substantive interaction without human engagement, e.g., through 
assessment and responses to students' questions through software or 
other non-human means. The commenter recommended that the Department 
include requirements for ``engagement between students and 
instructors'' rather than merely a reference to ``engaging students'' 
to make it clear that interactions need to be with human beings to meet 
the requirements.
    Discussion: Only individuals responsible for delivering course 
content and who meet the qualifications for instruction established by 
an institution's accrediting agency can fulfill the requirements for 
regular and substantive interaction with students. The Department does 
not prohibit other forms of substantive interaction that do not involve 
qualified instructors, but under the statutory definition such 
interaction cannot meet the requirements in the definition of 
``distance education.'' Interactions with artificial intelligence, 
adaptive learning systems, or other forms of interactive computer-
assisted instructional tools qualify as types of ``academic 
engagement,'' but in this limited context those forms of engagement do 
not meet the statutory requirements for regular and substantive 
interaction between students and instructors.
    While we agree with the commenter about the importance of human 
interaction in this definition, we do not believe the commenter's 
proposed changes are necessary because the definition currently 
requires regular and substantive interaction between students and 
instructors; substantive interactions with machines or other forms of 
technology that do not involve instructor would therefore not qualify.
    Changes: None.
    Comments: One commenter asked the Department to reconsider the need 
for the specific language regarding distance education in an 
accrediting agency's scope of recognition and, in doing so, recognize 
that distance education is a more global term regarding instructional 
delivery provided which can include online delivery of instruction and 
internships and field experiences, such as clinical rotations.
    Discussion: While the Department recognizes that the term 
``distance education'' is used to describe a wide variety of activities 
in higher education, the HEA requires a distance education program to 
be evaluated and approved by an accrediting agency with approval of 
distance education in the scope of its recognition by the Secretary.
    Changes: None

Definition of Juvenile Justice Facility (Sec.  668.2)

    Comment: One commenter supported the new definition of a juvenile 
justice facility to ensure that an otherwise eligible student is not 
prohibited from receiving a Federal Pell Grant solely because of 
confinement in such a facility.
    Discussion: We appreciate the support from the commenter. The 
Department has received questions in the past about

[[Page 54763]]

whether these facilities are correctional institutions and whether 
students in the facilities are eligible for Federal Pell Grants. 
Neither the HEA nor our regulations previously defined the term 
``juvenile justice facility.'' Therefore, we proposed to define this 
term in the regulations to codify sub-regulatory guidance published on 
December 8, 2014 (Dear Colleague Letter GEN 14-21). We also sought to 
clarify the term as referenced in the Department's regulations and 
materials, including in the definition of ``incarcerated student.'' 
Accordingly, we aimed to clarify that students in juvenile justice 
facilities may receive a Federal Pell Grant if they are otherwise 
eligible.
    Changes: None.
    Comment: One commenter provided both support and opposition to the 
definition of ``juvenile justice facility.'' The commenter stated that 
the HEA does not allow those who are incarcerated in a Federal or State 
prison to receive a Federal Pell Grant and quoted the statutory 
language. This commenter then noted that our proposed HEA change would 
define ``juvenile justice facility'' as being included among the list 
of correctional facilities in the definition of ``incarcerated 
student'' for the purposes of Pell Grant availability. The commenter 
favored extending Pell Grants to students in juvenile justice 
facilities but opposed including juvenile justice facilities under the 
correctional institutions in the ``incarcerated student'' definition. 
The commenter believed that the Department's proposed definition caused 
confusion about what constitutes an incarcerated student by including 
juvenile justice facilities within the ``incarcerated student'' 
definition. Finally, this commenter also noted that the Department did 
not include any evidence or studies from appropriate prison education 
experts on how this change would clarify the availability of Pell 
Grants to students in juvenile justice facilities.
    Discussion: We proposed this new definition to clarify that a 
person incarcerated in a juvenile justice facility is not considered to 
be incarcerated in a Federal or State penal institution, regardless of 
who operates or has jurisdiction over the facility. This definition 
clarifies that students incarcerated in a juvenile justice facility 
continue to be eligible for Federal Pell Grants. We believe the 
commenter was mistaken. These regulations do not change or contravene 
the HEA. Additionally, the Department is unaware of available research 
on the interpretation of this term and is merely codifying current 
practice.
    Changes: None.

Definition of Incarcerated Student (Sec.  668.2)

    Comments: A couple of commenters expressed support for the revised 
definition of an incarcerated student. One commenter supported the 
emphasis on access to Federal Pell Grants while in a juvenile justice 
facility, noting the importance of funding to complete postsecondary 
education coursework and potentially obtain an academic credential. The 
commenter believed this change would not only help those in juvenile 
justice facilities, but society as a whole because education increases 
the likelihood of positive outcomes when students are released and 
reduces the likelihood those students will reoffend. Another commenter 
who supported the proposed change suggested that adding the term 
``juvenile justice facility'' to the incarcerated student definition 
might imply that the Department is barring access to Federal Pell 
Grants to students serving in such a facility.
    Discussion: We appreciate the commenters' support for the revised 
``incarcerated student'' definition. We do not agree that the revised 
definition implies a prohibition on eligibility for a Federal Pell 
Grant for those in a juvenile justice facility. In fact, we amended the 
definition of incarcerated student to clarify that those held in a 
juvenile justice facility are not considered to be incarcerated to 
ensure that these students continue to be eligible for Federal Pell 
Grants.
    Changes: None.
    Comment: One commenter indicated that some criminal juvenile 
activity and related records may be confidential and pointed out that 
individuals may be in a juvenile facility voluntarily or without a 
court requirement. The commenter suggested that privacy concerns call 
for the Department to reconsider adding ``juvenile justice facility'' 
to the incarcerated student definition. This commenter further noted 
that the Free Application for Federal Student Aid (FAFSA) does not 
include a question about incarceration and assumed that the Department 
would seek such information. The commenter asserted that continuing to 
exclude the phrase would simplify the regulation and avoid excluding 
necessary exceptions.
    Discussion: The changes to the definition of ``incarcerated 
student'' do not substantively change our current practice. We revised 
this definition for clarity and to ensure access to Federal Pell Grants 
for those in a ``juvenile justice facility.'' We do not believe this 
revised definition requires access to confidential records or poses a 
privacy risk, nor are we aware of any needed exceptions to the 
regulatory definition. As we will not exclude those in a ``juvenile 
justice facility'' from receiving the Federal Pell Grant, this change 
would not require an additional FAFSA question or the need for other 
information.
    Changes: None.

Direct Assessment Programs (Sec. Sec.  600.10 and 668.10)

    Comments: Numerous commenters supported the proposed changes 
intended to simplify and clarify regulations for direct assessment 
programs. Commonly expressed among those writing in support, was the 
belief that the proposed changes strike an appropriate balance between 
supporting innovation, along with reducing the administrative burden on 
institutions, and ensuring a level of oversight necessary to promote 
program integrity.
    Discussion: We appreciate the commenters' support for these 
proposed changes.
    Changes: None.
    Comments: Several commenters expressed opposition to the proposed 
changes in Sec.  600.10 requiring an institution to seek and obtain the 
Department's approval of a direct assessment program only 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. Overwhelmingly, these commenters asserted that, in proposing 
not to require institutions to obtain approval for all direct 
assessment programs, the Department is acting contrary to the intent of 
Congress as expressed in section 481(b)(4) of the HEA and exceeding its 
statutory authority. In the opinion of the commenters, this will result 
in diminished oversight protection, which currently ensures that new 
direct assessment programs receive adequate scrutiny and that each new 
eligible direct assessment program is approved by the Secretary. One 
commenter further suggested the Department was attempting to ``rewrite 
statute through regulation,'' with another commenter offering that, 
``The Department does not have the authority to grant the Secretary 
discretion to approve some direct assessment programs and not others,'' 
while another commenter expressed the opinion that in proposing these 
changes, the Department has acted without supporting evidence or basis 
in law.

[[Page 54764]]

    Conveying disagreement with the Department's position, expressed in 
the NPRM, that once an institution demonstrates it can capably 
administer a direct assessment program, there is little risk that the 
same institution would not properly administer other direct assessment 
programs, a few commenters noted that programs of all types at the same 
institution, within the same credential level, can vary in quality and 
value, making it crucial for the Department maintain its oversight 
responsibilities consistent with its statutory obligations. One of 
those commenters also took issue with the Department's reasoning that, 
it ``will review the institution's processes related to title IV aid 
administration but will not evaluate the academic content or academic 
quality of programs, except to confirm that an accrediting agency has 
specifically approved each program,'' arguing that the Department's 
accreditation regulations, published in November 2019, weaken the 
accreditor's review and allow an accreditor's senior staff, rather than 
the accreditor's appointed board of commissioners, to review, approve, 
and monitor substantive changes to direct assessment programs.
    The same commenter offered that the Department failed to consider 
its OIG audits of accreditors of competency-based education programs 
that demonstrated why accreditors cannot be solely responsible for the 
evaluation and oversight of direct assessment programs. In the opinion 
of the commenter, the Department further failed to consider the OIG 
audits during the negotiated rulemaking or ask for public comment on 
how the audit findings may demonstrate whether accreditors' senior 
staff alone will be able to adequately assess the administration and 
effectiveness of direct assessment programs without the Department's 
review, as mandated by statute. Finally, referencing case law 
(Connecticut Light & Power Co. v. Nuclear Reg. Comm., 673 F.2d 525, 528 
(D.C. Cir. 1982)), the commenter suggested that, the Department has 
failed to provide an accurate picture of the reasoning that has led to 
the proposed rule, resulting in interested parties being unable to 
comment meaningfully upon the agency's proposals. The commenter 
additionally cited Portland Cement Ass'n v. Ruckelshaus, 486 F.2d 375, 
393 (D.C. Cir.1973) for the proposition that, ``It is not consonant 
with the purpose of a rulemaking proceeding to promulgate rules on the 
basis of inadequate data, or on data that, [in] critical degree, is 
known only to the agency.''
    A few commenters, in addition to asserting that the Department has 
a statutory obligation to approve each new direct assessment program, 
expressed the belief that direct assessment programs have access to a 
separate financing model from other types of credit-hour or clock-hour-
based programs. This supports (in the opinion of the commenters) 
heightened oversight of direct assessment programs, achieved through 
requiring institutions to obtain Department approval for each such 
program.
    One commenter maintained that the current regulations for 
determining direct assessment program eligibility should be unaltered 
because direct assessment programs are exempt from limitations on 
written arrangements. The commenter explained that, per Sec.  
668.10(e), direct assessment programs are exempt from the restriction 
that limits the percentage of learning resources that are provided by 
other entities, making the risks of inadequate oversight associated 
with such programs greater than they might otherwise be. In the 
commenter's opinion, under the Department's proposed regulations an 
institution that has already received approval for a direct assessment 
program at a given credential level would be able to stand up 
subsequent direct assessment programs at the same credential level 
where up to 100 percent of those programs is offered by outside 
entities without review from the Department regarding the program's 
eligibility.
    Discussion: We disagree with the commenters who assert that the 
Department did not have adequate legal authority to require the 
Department's approval of a direct assessment program only 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 than what was previously approved. Section 481(b)(4) of the 
HEA states that ``In the case of a program being determined eligible 
for the first time . . . such determination shall be made by the 
Secretary before such program is considered to be an eligible 
program.'' While Congress clearly intended for the Department to 
undertake an evaluation and approval of an institution's offering of 
direct assessment, whether or not the requirement applies on a program-
by-program basis is not prescribed and, therefore, left to the 
Department.
    We also disagree that requiring the Department's approval only for 
the first direct assessment program that an institution offers (or the 
first such program at a new level of offering) will result in 
diminished oversight or undermine the integrity of the title IV, HEA 
programs. As we indicated in the preamble to the NPRM, the Department 
does not evaluate academic content or academic quality of programs, but 
instead focuses its review of a direct assessment program on the 
institution's title IV aid administration in such programs. 
Institutions typically use information provided by the Department in 
response to their initial approvals to inform subsequent applications 
for direct assessment programs. Thus, multiple evaluations of direct 
assessment at the same institution often results in the institution 
providing nearly the same information for each subsequent program, and 
results in an approval process that yields little value to students, 
the institution, or taxpayers. Moreover, the Department's regulations 
under Sec.  668.10(a)(5) will still require an institution's 
accrediting agency to review and approve each direct assessment program 
and an institution's credit or clock hour equivalency methodology and 
institutions will be required to report new direct assessment programs 
to the Department in accordance with new Sec.  600.21(a)(12), which 
will provide the Department with an opportunity to ensure that such 
programs have been appropriately reviewed and approved by an 
institution's accrediting agency.
    The commenter who asserted that the Department did not consider the 
findings of its OIG when proposing the changes to the direct assessment 
programs is incorrect. In developing proposed regulations relating to 
direct assessment programs, we considered the findings in several of 
the Inspector General's audits \9\ over the past decade relating to 
direct assessment programs. In those audits, the Inspector General made 
a number of recommendations that have already been adopted by the 
Department's Office of Postsecondary Education and FSA, including 
ensuring that School Participation Division managers are fully informed 
of issues raised during the review of direct assessment program 
applications,

[[Page 54765]]

monitoring and evaluating accrediting agency approvals of direct 
assessment programs, and referring concerns about accrediting agency 
reviews of direct assessment programs to the Office of Postsecondary 
Education's Accreditation Group. The Department also included a new 
provision in these regulations, in consensus with negotiators, to 
require institutions to address how they avoid paying title IV, HEA 
program funds for credit that might be given students on the basis of 
prior learning or life experience in their direct assessment 
applications. We agree with the OIG that payment of title IV aid for 
credit earned through prior learning remains an ongoing risk that 
requires ongoing oversight and mitigation. We recognize that 
institutions offering direct assessment programs may use financing 
models that differ from credit hour versions of the same program; 
however, we believe that the risks associated with these models can be 
addressed in the institution's first direct assessment application and 
in requirements for institutions to report subsequent direct assessment 
programs to the Department. Furthermore, many competency-based 
programs, including direct assessment programs, use subscription-based 
financing models that are specifically addressed by the Department's 
proposed completion-based approach to disbursement of title IV, HEA 
program funds in subscription-based programs. The Department plans to 
continue monitoring use of the subscription-based disbursement system 
to determine whether additional changes are needed in the future.
---------------------------------------------------------------------------

    \9\ ``Direct Assessment Programs: Processes for Identifying 
Risks and Evaluating Applications for Title IV Eligibility Need 
Strengthening to Better Mitigate Risks Posed to the Title IV 
Programs,'' published September 30, 2014; ``The Higher Learning 
Commission Could Improve Its Evaluation of Competency-Based 
Education Programs to Help the Department Ensure the Programs Are 
Properly Classified for Title IV Purposes,'' published September 30, 
2015; and ``The Western Association of Schools and Colleges Senior 
College and University Commission Could Improve Its Evaluation of 
Competency-Based Education Programs to Help the Department Ensure 
Programs Are Properly Classified for Title IV Purposes,'' published 
August 2, 2016.
---------------------------------------------------------------------------

    Finally, the commenter who indicated that direct assessment 
programs are exempt from the restriction on the percentage of learning 
resources that are provided by other entities is correct, but we 
disagree that this exemption should prevent the Department from making 
the changes to the regulations agreed upon by the negotiating 
committee. The commenter argues that the Department will have no 
oversight over subsequent direct assessment programs added by an 
institution after its initial application, but that is inaccurate. 
Institutions will still be required to submit materials related to 
their direct assessment programs through the Department's reporting 
process under Sec.  600.21(a)(12). This reporting requirement will 
permit the Department to continue to monitor the types of direct 
assessment programs that are offered by an institution after its 
initial application and take action if it determines that there are 
irregularities with a particular program or programs.
    Changes: None.
    Comments: One commenter objected to the use of the word 
``abilities'' in the definition of ``direct assessment,'' arguing that 
using the word ``abilities'' in this context poses new risks to 
students and their privacy. The commenter explained that abilities 
might include psychological information that is confidential and 
governed by healthcare information protection laws. Citing the need to 
legally protect psychological abilities data in ways that might differ 
from the information protection protocols applicable to other education 
data, the commenter suggested that the potential consequences be 
provided for public review and comment before the Department moves to 
make the change final.
    Discussion: Nothing in the Department's regulations would permit an 
institution to violate applicable privacy laws, including healthcare 
laws, with respect to a student's psychological or cognitive abilities. 
The word ``abilities'' in these regulations refers only to the things 
that a student must demonstrate that he or she can do related to the 
competencies required in a direct assessment program.
    Changes: None.
    Comments: A few commenters, one of whom asserted that the NPRM 
failed to discuss reasonable alternatives, offered modifications they 
urged the Department to consider. One of these proposed the creation of 
a two-tier application process. The first tier would include all new 
programs and apply all of the application elements in the evaluation; 
the second tier would include additional programs offered at the same 
credential level, requiring only descriptions of the program under 
consideration and an explanation of how learning objectives are set and 
evaluated, without the necessity for the institution to provide 
information on the methodology for determining an equivalent number of 
credit or clock hours. Another suggested modification to what was 
proposed in the NPRM was that the Department require accreditors to 
utilize the Competency-Based Network (C-BEN) Quality Framework for 
Competency-Based Educational Programs in evaluating direct assessment 
programs so that both students and policymakers can be confident the 
program has been designed to meet quality standards. A further 
recommendation was the inclusion of additional language in the 
regulation which would require institutions to notify the Department 
and seek approval for substantively changed processes or policies 
within the approved direct assessment model for the institution.
    Discussion: We thank the commenter for the suggestion regarding a 
two-tier process for the Department's approval of direct assessment 
programs. Though we decline to adopt the suggestion, the process for 
the Department's evaluation of an institution's first and subsequent 
direct assessment programs will proceed in a similar fashion. An 
institution's first application for direct assessment, or its first 
application at a new level of offering, will undergo the Department's 
full approval process and the institution will not be permitted to 
disburse title IV, HEA program funds until it has received the 
Department's approval. Subsequent programs at the same level(s) of 
offering will be reported to the Department under new Sec.  
600.21(a)(12), and this reporting process will require the institution 
to submit to the Department a description of the program and evidence 
that its accrediting agency has approved the program and the 
institution's methodology for determining credit or clock hour 
equivalency for the program.
    We also appreciate the commenter's suggestion regarding a 
requirement for an institution to notify the Department and seek 
approval for changed processes or policies for the institutions direct 
assessment offerings. Though we believe that it would be too burdensome 
to implement this suggestion any time such a change occurred, the 
Department will evaluate such changes, and all regulatory requirements 
for an institution's direct assessment programs, during an 
institution's application for recertification.
    There was no discussion during negotiated rulemaking regarding a 
requirement for accrediting agencies to the use of C-BEN's Quality 
Framework for Competency-Based Educational Programs \10\ (Quality 
Framework) when approving new direct assessment programs, and we do not 
feel it is appropriate to introduce new requirements for accrediting 
agencies at this stage given that the Department has already published 
its final rule on accreditation. Additionally, though the Quality 
Framework includes helpful principles for the design and implementation 
of high-quality competency-based programs and we encourage institutions 
to consider these principles when planning to offer competency-based 
education programs, the principles may not be appropriate for all 
accrediting agencies in all

[[Page 54766]]

circumstances and imposing them on all accrediting agencies could 
undermine the autonomy of those entities and their oversight of 
academic quality, which is protected by the HEA. Therefore, we decline 
at this time to include a requirement for accrediting agencies to use 
the standards described in the Quality Framework when approving 
competency-based education programs, including direct assessment 
programs.
---------------------------------------------------------------------------

    \10\ www.cbenetwork.org/wp-content/uploads/2018/09/Quality-Framework-for-Competency-Based-Education-Programs-Updated.pdf.
---------------------------------------------------------------------------

    Changes: None.
    Comments: A few commenters indicated concerns over the proposed 
requirement for an institution to establish a methodology to reasonably 
equate each module in the direct assessment program to either credit or 
clock hours. Expressing disappointment at the Department's continued 
reliance on clock or credit-hour equivalencies, one of those commenters 
stressed the very nature of direct assessment programs in utilizing 
direct assessment of student learning or recognizing the direct 
assessment of student learning by others in lieu of credit or clock 
hours as the measure of student learning, and offered that the 
Department's focus on equating each module in the direct assessment 
program to either credit or clock hours is inconsistent with the HEA, 
which merely requires that any such assessment is consistent with the 
accreditation of the institution or program utilizing the results of 
the assessment (20 U.S.C. 1088(b)(4)). The same commenter further 
asserted that requiring institutions to craft, implement, and explain 
methodologies for creating credit or clock hour equivalences is 
administratively burdensome and shifts the program's focus away from 
student learning in favor of seat time.
    Another commenter suggested that the use of the term ``module'' in 
Sec.  668.10(a)(3) as the period measure of learning in direct 
assessment programs is confusing since it is already used in Sec.  
668.22, and in the NPRM further limited to describe courses in standard 
and nonstandard-term programs in relation to the return to title IV 
funds. In order to avoid this confusion the commenter recommended that 
the Department remove the term ``module'' in the direct assessment 
context and instead require in Sec.  668.10(a)(3) that ``An institution 
must establish a methodology to reasonably equate each of its stated 
measures of learning in the direct assessment program to either credit 
hours or clock hours . . .'' (85 FR 18698). This change, the commenter 
argues, would not alter the substance and meaning of the amendments in 
any way.
    Discussion: We disagree with the commenters who asserted that it is 
not necessary for the Department to require an institution to clearly 
describe its methodology for developing credit or clock hour 
equivalencies for its direct assessment programs. This requirement is 
vital to the integrity of the title IV, HEA programs because the 
requirements for calculating awards and disbursement amounts under 
those programs is still performed using credit or clock hours. Though 
we acknowledge that the credit hour is an outdated method of measuring 
a student's workload based on seat time and that developing an 
equivalency system involves administrative burden, there is currently 
no widely-accepted alternative ``currency'' for learning and 
workload.\11\ Without such an alternative, the Department will continue 
to use credit or clock hour equivalencies in order to ensure that an 
institution's choice of a unit of measurement for a direct assessment 
program does not result in an unfair or inflated determination of a 
student's eligibility for title IV, HEA funds. Such a ``currency'' is 
also important in enabling students to transfer credits between 
institutions.
---------------------------------------------------------------------------

    \11\ www.luminafoundation.org/files/resources/cracking-the-credit-hour.pdf.
---------------------------------------------------------------------------

    The Department encourages institutions and accrediting agencies to 
consider options for measures of student learning and workload that do 
not rely on credit hours but can be widely accepted and understood by 
practitioners and adopted by accrediting agencies. If the use of such a 
measure becomes prevalent in postsecondary education, the Department 
will consider allowing institutions to rely upon that measure for 
competency rather than requiring an equivalency to credit or clock 
hours.
    Though we agree with the commenter who indicated that it was 
possible that the use of the term ``module'' in this section could be 
conflated with the different usage of the term in the R2T4 regulations 
under Sec.  668.22, we decline to make a change in this case. We 
believe that replacing the word ``module'' would require the use of 
another term that may result in a substantively different approach in 
the direct assessment regulations. Because we did not discuss such an 
approach with the negotiating committee, nor include discussion of the 
issue in the NPRM, we decline to make the change at this time. 
Additionally, we do not believe that any confusion regarding the word 
``module'' will undermine the requirements in either Sec.  668.10 or 
Sec.  668.22 because of the different context for the usage of the word 
in each section.
    Changes: None.
    Comments: One commenter offered that, while the proposed regulation 
states that title IV, HEA funds cannot be utilized for the portion of 
the direct assessment program that the student is awarded based on 
prior learning, it does not define what activities comprise prior 
learning. In the opinion of the commenter, this leaves the proposed 
regulation open to a variety of interpretations and may result in 
miscommunication and confusion between the Department and institutions. 
The commenter proposes that ``prior learning'' and ``prior learning 
assessment'' be defined as follows:
     Prior Learning--Learning obtained outside of an academic 
context (experiential, personal, professional, workplace, etc.) that 
has not been officially awarded as academic credit.
     Prior Learning Assessment--is the process that evaluates 
and recognizes prior learning and awards the appropriate level of 
academic credit based on established institutional/organizational 
standards. Assessment of prior learning may occur before and during 
(concurrently) credit bearing (title IV eligible) course and programs.
    Discussion: We thank the commenter for the suggestions regarding 
how to define prior learning in the context of the direct assessment 
regulations. When the term ``prior learning'' is used in these 
regulations, it means learning that occurred prior to the student's 
enrollment at the institution or in a context other than the curriculum 
in which the student is enrolled (for example, the student's workplace 
or another academic institution). Prior learning includes learning 
associated with the transfer of credit from a prior institution, since 
the credits earned through transfer cannot be included in a student's 
enrollment status for purposes of calculating eligibility for title IV, 
HEA assistance. We agree with the commenter's definition of ``prior 
learning assessment,'' which means a process for evaluating and 
recognizing prior learning and awarding the appropriate level of 
academic credit based on established institutional/organizational 
standards. We also agree that assessment of prior learning may occur 
prior to and during a student's enrollment at the institution.
    Changes: None.
    Comments: One commenter suggested that competency-based education, 
as a less mature field, may not be ready for expansion. However, the 
commenter indicated that it is important to make data available that 
might help

[[Page 54767]]

researchers, practitioners, and others understand the field better and 
provide research and information that help future efforts by the 
Department or Congress to enable innovation while protecting students 
and taxpayers. The commenter offered several suggestions for the 
Department to collect and share data about direct assessment programs 
that have been approved directly by the Department, including 
publication of a list of institutions that have been approved for 
direct assessment and collecting information about tuition, retention 
rates, and completion rates for each direct assessment program. The 
commenter also suggested disaggregating and identifying these programs 
on the College Scorecard. The commenter recommended against requiring 
the collection or sharing of data related to course-based competency-
based education programs that do not require Department approval given 
the potential for increased burden.
    Discussion: We thank the commenter for their suggestions regarding 
how to improve data on direct assessment programs and institutional 
accountability. We believe that the commenter's suggestion of 
publishing a list of approved direct assessment programs and the 
institutions that offer them is reasonable and we will evaluate whether 
it is possible to post a public list of such programs. However, because 
the number of direct assessment programs remains small, we do not 
believe that we should collect data for such programs exceeding what is 
collected for other types of programs, nor do we currently intend to 
provide data on the College Scorecard specifically related to direct 
assessment programs. We will consider doing so in the future if the 
number of direct assessment programs increases substantially.
    We agree with the commenter that additional data is not needed for 
course-based competency-based programs. Because there is no consistent 
statutory definition of a competency-based program that does not use 
direct assessment, the Department does not feel that it is practical or 
useful to attempt to collect data about such programs, since the data 
would reflect a wide range of programs, many of which have in common 
only the competency-based learning modality.
    Changes: None.

New Program Approval (Sec.  600.20)

    Comments: Many commenters supported the removal of Sec.  
600.20(d)(1)(ii)(B), which provides that an institution that is 
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 
notified by the Secretary at least 30 days before the first day of 
class that the program must be approved. The commenters stated that 
these current regulations create an unnecessary burden, make it more 
difficult to quickly respond to the needs of employers, and duplicate 
the oversight of programs by State authorizing agencies and accrediting 
agencies. The commenters also supported the addition of provisions 
requiring that the Department take prompt action on any materially 
complete application under Sec.  600.20(a) or (b). Two commenters also 
noted that it is very difficult for institutions to be expected to wait 
until 30 days prior to the start of the program to advertise or enroll 
students in the program. One commenter also underscored the benefits of 
reduced redundancy while supporting the effort to minimize the impact 
of delays by the Department in the program approval process.
    Discussion: The Department agrees with the commenters. Removing 
Sec.  600.20(d)(1)(ii)(B) will ease the process of approving new 
programs and allow institutions to offer new programs in a timely 
manner to meet both student demand and workforce needs. The Department 
agrees that the current provision creates significant uncertainty about 
whether an institution will be allowed to offer a program until the 
program has nearly begun, without a tangible benefit in terms of 
oversight. It is not reasonable to expect institutions to either enroll 
students in a program that may not be allowed to operate or expect 
students to wait to enroll in these programs until 30 days prior to the 
start of the program. The Department seeks to conduct proper oversight 
in a timely manner without undue impact to institutions or students. As 
many commenters noted, this oversight role may also be duplicative of 
what is overseen by accrediting agencies and State authorizing 
agencies.
    Changes: None.
    Comments: One commenter encouraged the Department to consider 
streamlining the proposed regulations and processes for institutions on 
provisional status. The commenter suggested the Department either 
modify the regulations or use its discretion to streamline approvals 
for institutions with a strong record of compliance and stability. The 
commenter emphasized that the COVID-19 crisis may force an increasing 
number of institutions to be placed on provisional status and that such 
institutions may need quick assistance starting new and innovative 
programs.
    Discussion: The Department thanks the commenter for the suggestion. 
The Department has already proposed important regulatory flexibilities 
without jeopardizing proper oversight. Further regulatory changes would 
risk violating the consensus agreement and weakening important 
oversight of program reviews. The Department currently considers the 
past record of an institution in these reviews but agrees that some 
administrative processes could be improved to provide more timely 
responses, better communication, and more consistent decisions. The 
Department has already evaluated what it would take to make such 
improvements and hopes to implement them soon but declines to make 
further regulatory changes as the commenters suggest. The Department 
also thanks the commenters for the suggestion on streamlining processes 
in regard to COVID-19, but we believe the impacts COVID-19 has on 
schools will not necessarily result in a larger number of institutions 
that are placed on provisional status.
    Changes: None.
    Comments: Several commenters disagreed with the Department's 
contention that the changes in Sec.  600.20 restore functions related 
to program quality to accrediting agencies and State authorizing 
agencies. Instead, these commenters say that the approval process 
relates to the requirements related to access to title IV aid. 
Therefore, the commenters say, institutions should be required to 
report their intent to establish new programs to protect students and 
taxpayer funds. The commenters also assert that the elimination of the 
list of elements the Secretary will consider when reviewing an 
application under this section was not part of the consensus language 
nor was it explained in the NPRM and therefore the change should be 
reverted to the consensus language in the final rule.
    Discussion: The Department disagrees with the assertions made by 
the commenters. While they are correct that the provisions of Sec.  
600.20 broadly relate to the Department's oversight of access to title 
IV aid, the overwhelming majority of these provisions are left 
unchanged. Institutions continue to be required to notify the Secretary 
of their intent to offer an additional educational program. The 
proposed regulations simply require the Department to act promptly and 
remove restrictions that unnecessarily prevent an institution from 
quickly developing new programs in response to requests by students,

[[Page 54768]]

employers, or others. It is to the benefit of both students and 
institutions that there be certainty well in advance that a planned 
program will be able to operate. The Department intended that the 
amendatory instructions in the NPRM would be consistent with the 
consensus language adopted during the negotiated rulemaking. The 
amendatory instructions that were published, however, contained errors, 
which the Department has corrected in this final rule. The description 
of the changes to Sec.  600.20 in the preamble to the NPRM accurately 
reflected the consensus language.
    Changes: None.
    Comment: One commenter noted that the amendatory language appeared 
to contain drafting errors or changes that were not appropriately 
described, which differed from consensus language. The commenter urged 
the Department to reopen the NPRM for additional comment. The commenter 
noted that the proposed amendatory language would delete current Sec.  
600.20(d)(1)(ii)(E), a change that they would oppose on the basis that 
the elements in that section are important for any approvals the 
Secretary may consider. The commenter urged the Department to maintain 
current Sec.  600.20(d)(1)(ii)(E) (which is redesignated as Sec.  
600.20(d)(1)(ii)(D)) and revise the reference in that section to 
paragraph (d)(1)(ii)(B), which was deleted in the consensus language, 
to instead refer to paragraph (d)(1)(ii)(C), which relates to the 
Secretary's approval of an additional educational program.
    Discussion: The Department appreciates the commenter's close review 
of the proposed amendatory language. We did not intend to deviate from 
the consensus language of Sec.  600.20 and identified and discussed 
each of the intended revisions in the preamble to the NPRM. We agree 
that the proposed amendatory language contained errors, especially 
related to the revised numbering of paragraphs in Sec.  600.20(d)(1) 
and believe that the commenter's suggested revisions are reasonable.
    Changes: We have revised the amendatory language to reflect the 
consensus language, and also revised the reference in redesignated 
paragraph (d)(1)(ii)(D) to refer to paragraph (d)(1)(ii)(C).

Subscription Period Disbursement (Sec. Sec.  668.2 and 668.164)

    Comments: Many commenters supported the Department's definition of 
a subscription-based program model within Sec.  668.2. Two commenters 
indicated that the subscription-based model addresses the unique nature 
of competency-based and other self-paced programs of study and further 
encourages institutions of higher education to innovate by creating 
learning modalities that allow students to learn at their own pace 
while remaining eligible for title IV, HEA program assistance. Another 
commenter opined that the proposed subscription-based system supports 
postsecondary access and affordability for working adults. One 
commenter stated that the proposed subscription-based model balances 
flexible timelines for students with completion requirements that 
maintain the integrity of the title IV, HEA programs. Another commenter 
was supportive of the changes in timeframes associated with 
disbursements for subscription-based programs and indicated 
appreciation for the ability for institutions to offer early 
disbursements in such programs, asserting that the model's completion 
requirements would be essential to encouraging and supporting students 
to complete their programs on time. Another commenter supported the 
changes because it would permit self-paced coursework to ``float'' 
beyond the end of a term until a student masters the learning 
objectives for that coursework. Several commenters expressed support 
for proposed definition of a ``full-time student'' under Sec.  668.2 as 
it relates to subscription-based programs; one of those commenters 
indicated that it made sense to prevent a student from receiving a 
disbursement based on retaken coursework in a subscription-based 
program, and another stated that to do otherwise would be nonsensical.
    Discussion: The Department thanks the commenters for their support.
    Changes: None.
    Comments: Two commenters, while supportive of the Department's 
proposed regulations regarding subscription-based programs, urged the 
Department to rely more heavily on data and evidence to oversee such 
programs. One of those commenters noted that the Department has not yet 
produced any findings from its CBE Experiment and asked the Department 
to produce the statutorily-mandated reports detailing the findings of 
its experiments.\12\ This commenter also encouraged the Department to 
improve the collection of data from participating institutions in the 
future so that CBE experiments will be more useful in the future. The 
other commenter emphasized the importance of focusing on student 
outcomes to evaluate institutions and their impacts on students and the 
nation's ability to develop the talent needed to address economic and 
social challenges. The commenter expressed that shifting to a more 
transparent, outcomes-focused accountability system depends on the 
ability of existing and new entities to access and use better data and 
emphasized the importance of equity and quality in any such system.
---------------------------------------------------------------------------

    \12\ experimentalsites.ed.gov/exp/approved.html.
---------------------------------------------------------------------------

    Discussion: We agree with commenters about the importance of using 
data and evidence in the Department's oversight of subscription-based 
programs, and that such information is an important component of an 
outcomes-based accountability framework. To those ends, the Department 
plans to monitor which programs use the subscription-based model and 
will evaluate student-level data, such as disbursement amounts, debt 
levels, and withdrawal rates for students who are enrolled in such 
programs. This evaluation will take the place of the Department's CBE 
Experiment, which will end on June 30, 2020. The Department will also 
publish a final report on the CBE Experiment that will offer more 
information to the public about the results of that experiment related 
to subscription-based programs.
    Changes: None.
    Comments: One commenter, while acknowledging appreciation for the 
Department's attempt to balance the subscription-based model's 
completion requirements with the likelihood that some students could 
struggle to make progress during a specific period, indicated concern 
that the lack of alignment between disbursements and payment periods 
could cause confusion amongst students, families, and (at least 
initially) institutions.
    Discussion: We disagree that the subscription-based disbursement 
model is excessively complicated. Though the model does require an 
institution to carefully monitor a student's progress in order to 
ensure that he or she does not receive subsequent disbursements of 
title IV, HEA program assistance, each institution has the ability to 
clearly express to students the number of credits (or the equivalent) 
that must be completed by a given date in order to receive aid in the 
future. This facet of the subscription-based disbursement model has 
already been successfully implemented for many non-term programs under 
the existing disbursement system for such programs.
    Changes: None.
    Comments: Several commenters asked the Department to allow the 
subscription-based model to be used for programs that are not offered 
using direct assessment. One of those

[[Page 54769]]

commenters asked that the Department extend the ability to use the 
subscription-based disbursement model to any self-paced postsecondary 
program, arguing that doing so would provide for greater innovation 
while still tying access to Federal aid with student achievement. The 
commenter suggested that such a change would likely increase interest 
among institutions and software vendors to support innovation by using 
the new model.
    Two commenters expressed a related concern about institutions that 
had been participating in the Department's CBE Experiment and asked if 
such institutions offering credit-hour CBE programs would transition 
following the end of that experiment, which had allowed institutions to 
use a form of this model on a limited basis.
    One commenter, while supportive of the Department's proposed 
regulations for subscription-based programs, urged the Department not 
to expand the definition or weaken the flexibilities provided by such 
programs. The commenter noted that subscription-based systems are not 
without risk to students, since in such programs students are 
effectively committed to a single price based on the number of courses 
they expected to complete at the start of the semester, and this means 
that students who do not complete their programs quickly could overpay 
for an education that the student does not benefit from. The commenter 
emphasized that because tuition in subscription-based programs will be 
largely financed with student debts, students who do poorly in 
subscription-based programs could be at risk.
    Discussion: The Department agrees with commenters who argue that 
the subscription-based method for disbursing title IV, HEA program 
assistance should be extended to programs other than direct assessment 
programs. The Department had originally intended to limit the 
applicability of those provisions to direct assessment programs in 
order to ensure that the disbursement method was used only in programs 
offered by CBE. However, many CBE programs are not offered using direct 
assessment and would thus be prevented from using the subscription-
based model.
    Commenters also make a strong argument that limiting the 
applicability of the requirements to direct assessment programs would 
sharply limit the use of the model and would discourage software 
providers from creating technology that assists institutions in 
disbursing title IV, HEA funds using this method. This, in turn, would 
prevent the model from being effectively scaled at most institutions 
given the cost of incorporating the model into existing technology 
supporting the administration of title IV, HEA program funds.
    Moreover, we did not intend to hamper or limit flexibility in 
disbursement of title IV, HEA assistance for institutions that had 
previously been participants in the Department's CBE Experiment, but 
recognize that many of those institutions measure student progress 
using credit hours rather than direct assessment, which would have 
precluded them from using the subscription-based disbursement model 
under the proposed rule. We believe that expanding the use of the 
subscription-based model to any institution using subscription pricing 
will permit institutions with CBE programs using such pricing to 
transition more easily into full regulatory compliance following the 
end of the CBE Experiment.
    Finally, the Department believes that the subscription-based model 
includes safeguards for both students and taxpayers that limit the risk 
of expanding the use of the model more broadly. The model protects 
taxpayers by requiring students to complete courses or competencies 
before receiving subsequent disbursements of title IV, HEA program 
funds. The model also improves upon the existing non-term disbursement 
system for students by allowing students to switch between full-time 
and less-than-full-time versions of a program in order to limit the 
number of courses they are required to complete in order to receive 
subsequent disbursements of title IV, HEA program funds.
    We share commenters' concerns that students in subscription-based 
programs could quickly accrue debt while falling behind in their 
coursework. This risk was specifically why we designed the model to 
require students to complete coursework before receiving subsequent 
disbursements of title IV, HEA program funds. Institutions and students 
will both have a strong incentive to act if a student finds a 
subscription-based program too challenging or fails to make progress. 
Faced with the possibility of a student losing access to aid, an 
institution may provide additional assistance or resources to the 
student or encourage the student to transfer into a version of the 
program at a reduced enrollment status better suited to the student's 
rate of progress. Similarly, the student may decide to seek additional 
support or transfer into a different program. In either case, the 
model's completion requirements prevent a student from taking on too 
much debt if the student is unable to complete coursework in the 
program.
    Finally, use of the model would still be limited to institutions 
that charge students on a subscription basis, a practice which is rare 
and primarily used by competency-based programs. The Department will 
evaluate the effectiveness of, and monitor risks associated with, the 
model as it begins to be used more broadly and will make any changes 
necessary to protect students and the integrity of the title IV, HEA 
programs.
    Changes: We have removed the words ``direct assessment'' from the 
first sentence in the definition of ``subscription-based program.''
    Comments: One commenter requested a correction to the definition of 
a subscription-based program by adding ``(or the equivalent)'' 
following ``credit hours'' in the first sentence of the definition 
paragraph. The commenter contends this would align the first sentence 
to the third and last sentences of the same paragraph where the 
parenthetical already exists.
    Discussion: We agree with the commenter that referring to the 
equivalent of credit hour in the specified location would improve the 
consistency of the definition.
    Changes: We have added the words ``(or the equivalent)'' following 
the words ``credit hours'' in the first sentence of the definition of 
``subscription-based program.''
    Comments: One commenter expressed support for the Department's 
decision to provide a student with some control over the pace of 
learning in his or her subscription-based program by selecting a 
program version at a specific enrollment status. The commenter 
indicated that allowing a student to change to different program 
versions no more often than once per year supports student flexibility 
and results in a manageable level of administrative burden. Conversely, 
another commenter asserted that the Department had not provided 
sufficient justification for preventing students from switching between 
versions of a subscription-based program no more than once per academic 
year.
    Discussion: The limitation on the number of times that a student is 
permitted to switch between versions of a subscription-based program 
was agreed upon by the Distance Learning and Innovation subcommittee as 
a condition for the Department to waive the requirement for an 
institution to evaluate a student's pace for satisfactory academic 
progress purposes in a subscription-based program. We believe

[[Page 54770]]

that evaluating a student's pace is unnecessary if the program requires 
a particular rate of completion in order for the student to continue 
receiving title IV, HEA program assistance over time. This condition is 
met if the subscription-based program both requires the student to 
maintain a consistent enrollment status (e.g., half-time or full-time) 
and the student does not regularly change that enrollment status, which 
in turn would adjust the number of credits the student was required to 
complete before receiving subsequent disbursements.
    Allowing a student to frequently adjust enrollment status (e.g., by 
switching between versions of the same program) would mean that, 
without requiring the institution to evaluate the student's pace toward 
completion of the program, the Department would have no mechanism for 
ensuring that the student completes his or her program in a timely 
manner. We believe that the greater flexibility associated with the 
ability to switch enrollment status would be offset by the 
substantially greater complexity associated with measuring a student's 
pace for satisfactory academic progress purposes. Therefore, the 
Department believes that not requiring pace evaluations, but limiting 
students to switching between versions of the same subscription-based 
program once per year, is the most appropriate way to ensure that the 
student maintains an appropriate pace (in the judgment of the 
institution) toward program completion.
    Changes: None.
    Comments: One commenter asked whether a student enrolled in a 
subscription-based program would be required to complete credits 
associated with a payment period that the student did not attend in 
order to receive subsequent disbursements of title IV, HEA program 
assistance.
    Discussion: A student in a subscription-based program is not 
required to complete credit hours (or the equivalent) associated with a 
payment period the student did not attend. In a subscription-based 
program, the number of credit hours (or the equivalent) that a student 
is required to complete accrue only for payment periods in which the 
student attends at least one day. If an institution determines that a 
student did not attend a given payment period, the credit hours (or the 
equivalent) associated with that payment period would not accrue toward 
the student's future completion requirements.
    Changes: None.
    Comments: One commenter requested clarification regarding how a 
student would switch between versions of the same subscription-based 
program with different enrollment status requirements. The commenter 
inquired whether a student would be held accountable for incomplete 
credits associated with one enrollment level after changing to a 
different enrollment level and asked whether the Department would leave 
this to the discretion of institutional policy.
    To illustrate the question, the commenter sought the Department's 
viewpoint on an example of a student making such a change. In the 
commenter's example, a full-time student has completed six subscription 
periods, each of which is associated with 12 credit hours. Thus, the 
student would be required to have completed at least 60 credit hours 
(12 credit hours multiplied by five terms, excluding the first one that 
the student attended) before receiving title IV, HEA assistance for a 
future payment period. However, at the end of the sixth payment period, 
the student has only completed 52 credit hours. At that time, the 
student switches to a half-time version of the same subscription-based 
program. The commenter asked whether the student would still need to 
complete eight more credit hours (more than the six hours associated 
with half-time enrollment status) before receiving another disbursement 
of title IV, HEA funds in the next payment period.
    Discussion: In the situation described, the student would be 
required to complete eight more credit hours before receiving a 
disbursement at half-time enrollment status for the following payment 
period. Such a student would then be required to complete a further six 
credit hours (in addition to the eight credit hours needed to gain 
eligibility for the next disbursement) in order to receive the 
following disbursement of title IV, HEA program funds for the payment 
period after that.
    Any time that a student begins attendance in a payment period in a 
subscription-based program, the student must complete the credit hours 
(or the equivalent) associated with that payment period (except for the 
first payment period that the student attends) before receiving title 
IV, HEA program funds for the following payment period. When a student 
transfers between versions of the same subscription-based program, the 
student must first complete the hours associated with the student's 
enrollment status in the previous version of the program. Because the 
completion requirement in a subscription-based program is based on the 
number of payment periods that a student has attended, a student in 
such a program may only change his or her enrollment status at the 
beginning of a payment period, and when doing so must complete all the 
hours accrued for that program before receiving a subsequent 
disbursement of title IV, HEA funds.
    Note that a student who transfers from a subscription-based program 
to a non-term program, or a term-based program that does not use 
subscription periods, is not required to complete additional credit 
hours before receiving a disbursement in his or her new program. This 
includes cases in which the student transfers from a subscription-based 
version of a program to a version of the same program that does not use 
subscription periods.
    Changes: None.
    Comments: One commenter asked whether a student's Pell Grant 
enrollment status would need to be adjusted at the end of a 
subscription period to exclude any coursework for which the student did 
not begin attendance. The same commenter asked the Department to 
clarify whether a student could begin coursework used to establish the 
Pell Grant enrollment status after the subscription period for which 
the student was paid had ended.
    Discussion: Normally, a student in a term-based program is required 
to attend each class that the institution uses to establish the 
student's Pell Grant enrollment status under the Pell Grant regulations 
under Sec.  690.80(b)(2)(ii). Similar to a student enrolled in a 
nonterm program, a student in a subscription-based program is not 
required to attend all of the courses in a payment period that comprise 
the student's enrollment status. This is because the Department 
presumes that the student must attend a sufficient number of classes or 
demonstrate a sufficient number of competencies in order to earn the 
credit hours (or the equivalent) before receiving subsequent 
disbursements of title IV, HEA program funds.
    Note that because a student in a subscription-based program is 
always treated as having the same enrollment status, there is also no 
need for an institution to establish a Pell Grant recalculation date 
under Sec.  690.80(b)(2)(i).
    Changes: None.
    Comments: Two commenters asked the Department to clarify whether 
the use of the subscription-based disbursement model will be optional 
or required for an institution that offers a program that is billed by 
subscription period. Both commenters requested that an institution be 
given the option to use other disbursement methods--such as for 
standard term, nonstandard term, or nonterm programs--if the 
institution

[[Page 54771]]

otherwise meets the requirements to use those alternative disbursement 
methods. One of those commenters asked that institutions be permitted 
to continue using their current method for delivering title IV, HEA 
program funds while developing student-friendly plans to convert from 
one model to another and allowing software vendors to design, develop, 
and test the complex new disbursement model. The commenter argued that 
such flexibility would provide options for institutions wishing to 
``teach out'' students who were already receiving title IV, HEA program 
funds using one of the existing disbursement systems.
    Another commenter interpreted the proposed definitions of the terms 
``subscription-based program'' and ``full-time student'' to require 
institutions that use a subscription-based pricing model to also use 
the subscription-based model for disbursing title IV, HEA program 
funds. The commenter disagreed with this perceived approach, explaining 
that an institution could use subscription pricing in a program that 
otherwise meets the requirements to be treated as a traditional term-
based program. The commenter recommended that the Department allow an 
institution the flexibility to choose the type of disbursement method 
that best suits it even if it uses a subscription pricing model.
    Discussion: The Department views the use of the subscription-based 
model for disbursing title IV, HEA programs funds as entirely optional. 
All programs that meet the requirements for the subscription-based 
disbursement model would also be permitted to use the existing 
framework for disbursing funds in a non-term program. Additionally, if 
a subscription-based program also meets the requirements for a term-
based program--for example, students are required to begin and end all 
courses or competencies within the term start and end dates--the 
institution can disburse funds using standard terms or non-standard 
terms (as applicable) instead of the subscription-based format.
    When the final rule is effective, an institution that wishes to 
adopt the subscription-based format may ``teach out'' students who had 
previously been provided aid under the existing term-based or non-term 
disbursement systems. The institution would then be permitted to begin 
enrolling new cohorts of students using the subscription-based format. 
An institution could also choose to withdraw students from their term-
based or non-term programs and enroll the students under the 
subscription-based model. Students who transfer from a term-based or 
non-term program into a subscription-based program will be treated like 
all other students who first enroll in subscription-based programs, 
i.e., they will not be required to complete the credit hours (or the 
equivalent) associated with the first payment period of their 
enrollment in the program and will be required to complete the 
appropriate number of hours to receive subsequent disbursements 
thereafter. Note that students who transfer from one subscription-based 
program to another at the same institution, including transfers between 
versions of the same program, will not receive a ``free'' payment 
period when they transfer and must complete all the credit hours (or 
the equivalent) that have accrued in the prior program before receiving 
a disbursement in the program to which the student transferred.
    Changes: None.
    Comments: One commenter opposed the requirement for a student to 
complete a specific number of credit hours (or the equivalent) in order 
to receive subsequent disbursements of title IV, HEA program funds in a 
subscription-based program. The commenter also contended that 
institutions using innovative learning models rarely originate single-
term loans, and that the requirement to make two equal disbursements of 
a single-term loan is difficult to understand and results in a 
frustrating student experience just prior to a student's completion of 
a program. The commenter recommended that the Department allow one 
disbursement of a single term loan for single term loans with loan 
periods exceeding four and a half months in a subscription-based 
program.
    Discussion: We appreciate the comments and the recommendation but 
do not plan to change requirements under the Direct Loan regulations, 
because those regulations were not discussed during negotiated 
rulemaking, nor published for comment in the NPRM. Additionally, the 
completion requirements are integral to the subscription-based 
disbursement system and help to ensure that students are making 
adequate progress in their programs. The requirements were agreed upon 
by both the Distance Learning and Innovation subcommittee and the full 
negotiating committee, and we do not plan to eliminate those completion 
requirements for students in subscription-based programs.
    Changes: None.

Definition of Weeks of Instructional Time (Sec.  668.3)

    Comments: Commenters expressed overwhelming support for the 
Department's definition of a week of instructional time related to an 
academic year under Sec.  668.3(a)(2)(ii) to include programs that use 
asynchronous coursework through distance education or correspondence. 
Several commenters acknowledged the Department's efforts to create a 
definition that accounts for innovative non-traditional programs that 
are offered asynchronously, reflecting the unique nature of distance 
education modalities. Several commenters also noted that while time 
continues to be an important factor in awarding and disbursing title 
IV, HEA program funds, the new definition was a step away from a rigid 
conception of time-based, scheduled instruction, and a positive step 
toward emphasizing learning over time. One commenter also indicated 
that the new definition would provide clarity and transparency 
regarding regulatory thresholds for a week of instructional time.
    Discussion: The Department thanks the commenters for their support.
    Changes: None.
    Comments: One commenter indicated that changing the definition of 
``a week of instructional time'' is not necessary, because accrediting 
agencies are responsible for the content of instruction.
    Discussion: We agree that accrediting agencies have authority over 
instructional quality at postsecondary institutions. However, we do not 
believe that such authority precludes or obviates the need for changes 
to the definition of a week of instructional time.
    Changes: None.

Written Arrangements at Domestic Institutions (Sec.  668.5)

    Comments: A few commenters supported the proposed changes to 
written arrangements because they believe the changes will promote 
innovation and workforce responsiveness. One commenter said the changes 
will provide students with access to more high-quality programs. 
Another commenter said the changes will align the needs of graduates 
with those of employers and allow institutions to offer timely, 
relevant educational program offerings they may be unable to provide on 
their own, allowing them to better attract and retain students. One 
commenter supported the proposal, citing an improved ability for 
employers to engage with institutions to reduce skills gaps and 
personalize learning.

[[Page 54772]]

    Discussion: The Department appreciates the support for the proposed 
changes.
    Changes: None.
    Comments: Many commenters supported the consensus language, 
including the requirement in both current regulation and the proposed 
regulation that an ineligible institution or organization may provide 
up to 25 percent of a program (or up to 50 percent with accrediting 
agency approval). Several of these commenters urged the Department not 
to go beyond the 25 percent and 50 percent limits because doing so 
could pose risks to students and taxpayers, and particularly 
disadvantaged groups of students, especially if an outside entity could 
provide more than half of a program. They stated in various ways that 
going above 50 percent would risk, or outright permit, institutions to 
lend their accreditation or title IV eligibility status to others. One 
of these commenters worried that the motivation for abuse could be more 
acute given potentially declining revenues during and after the COVID-
19 pandemic if the Department went beyond 25 and 50 percent limits. 
These commenters cited discussion at negotiated rulemaking, including 
negotiators' rejection of proposals that would have allowed 
institutions to go beyond these limits. One of these commenters 
suggested that the current limit of 50 percent would allow for 
sufficient flexibility for institutions while ensuring they pass 
accountability measures.
    Discussion: The Department appreciates the support for consensus 
language from these commenters and acknowledges concerns about written 
arrangements, especially if the 25 and 50 percent limits were lifted. 
This topic received extensive discussion during negotiated rulemaking, 
both from negotiators and subcommittee members. The Department agrees 
that using written arrangements for all or nearly all of a program 
could raise questions about which entity confers the credential. 
Anything beyond 75 percent may trigger restrictions from accrediting 
agencies who require the institution conferring the credential to 
deliver at least 25 percent of the program. While the consensus 
agreement would not allow institutions to go beyond 50 percent, the 
Department maintains that written arrangements beyond 50 percent 
theoretically could be used responsibly.
    The Department disagrees with the implication from many commenters 
that written arrangements are somehow inherently dangerous for students 
or that the risk for abuse is greater for disadvantaged groups of 
students or considering the COVID-19 pandemic. Instead, the Department 
sees written arrangements as a tool that can provide more opportunity 
for students (especially for the groups or in the circumstances cited 
by commenters), because even the most well-resourced institutions may 
not be able to provide every conceivable course or instructional 
resource. In fact, many well-resourced institutions struggle to keep up 
with the latest practices of their students' future employers and 
written arrangements can help. Such tools can, of course, be misused 
and the Department encourages accrediting agencies to support written 
arrangements where they offer benefits to students, but be wary of them 
if they merely serve as a lifeline to institutions that could not 
otherwise meet the accrediting agency's requirements for fiscal and 
administrative capacity (or other standards) under Sec.  602.16. 
However, we agree with commenters who noted that the proposed language, 
which streamlines approvals but maintains the 25 and 50 percent limits, 
was the product of an extensively discussed consensus agreement and, as 
a result, the Department declines to make changes.
    Changes: None.
    Comments: One commenter was generally supportive of the provisions 
in this section, but opposed the 50 percent cap and suggested at least 
moving it to 75 percent, believing the Department is not sufficiently 
promoting innovative workforce partnerships, especially given the 
COVID-19 pandemic's impact on the economy.
    Discussion: As noted elsewhere in this section, the Department 
would have preferred greater flexibility for institutions to use 
written arrangements and believes such allowance could have been used 
responsibly. However, we agree with commenters who noted that the 
proposed language, which streamlines approvals but maintains the 25 and 
50 percent limits, was the product of an extensively discussed 
consensus agreement and so the Department declines to make changes.
    Changes: None.
    Comments: One commenter supported the provisions of Sec.  668.5(f) 
that clarify the ability of institutions utilizing written arrangements 
to modify their curriculum to meet workforce needs, but opposed the 
provisions that clarify the ability of institutions to make governance 
or decision-making changes as an alternative to faculty control or 
approval. This commenter argued that advisory boards should not have 
greater authority than faculty and that faculty expertise should be 
used to inform program design. Another commenter also opposed the 
latter provision citing their institution's shared governance model. 
One commenter suggested that faculty support must be a prerequisite to 
any academic or administrative change and believed that the Department 
is taking away the opportunity for faculty and staff to be involved in 
administrative changes.
    Discussion: The Department agrees that faculty perform an important 
role in any institution, but strongly disagrees that faculty should 
have veto authority over virtually every academic or administrative 
decision. Institutions use written arrangements to benefit from outside 
expertise, to better align a program with workforce needs, or for other 
purposes. The Department thanks the commenter for supporting this goal 
but notes that alignment with workforce needs can be achieved in 
different ways, including ways that are recommended by expert advisory 
boards that may have more direct experience in the workforce and better 
understand contemporary needs. To achieve this goal, many institutions 
understandably wish to act quickly in such cases for the benefit of 
their students. Institutions may be hamstrung if they must ask 
permission from different parties. Institutions may use traditional 
governance models. However, the Department sought to clarify that 
institutions may determine the level of faculty input that should be 
provided on decisions relating to written arrangements. The Department 
disagrees with the commenter's suggestion that the proposed rule 
affirmatively takes away the opportunity for faculty and staff 
involvement in administrative changes due to the diversity of existing 
governance arrangements.
    Changes: None.
    Comments: Several commenters related their concern about written 
arrangements to concerns about the extent to which institutions utilize 
online program managers (OPM) or other similar third parties that 
assist institutions with various functions not related to the actual 
provision of academic instruction. One commenter stated that the 
exclusion of issues related to OPMs from this rulemaking has prevented 
proper oversight of distance education programs, but generally 
supported the addition of language to clarify how to calculate the 
percentage of a program that is part of a written arrangement. This 
commenter believed that agreements with OPMs covering issues such as 
course development, instructor training, and student recruitment should 
be treated as written arrangements because they are

[[Page 54773]]

distinct from other types of agreements such as food service where the 
institution may not have expertise. The commenter opposed tuition-
sharing arrangements as being a source of risk. One commenter expressed 
appreciation for the Department's mention in the NPRM that written 
arrangements do not apply to such third-party services. One commenter 
suggested the proposed rule could incorrectly be read to imply that a 
written arrangement would be required if an outside entity provides 
design or administration but not instruction. One commenter implored 
the Department not to ``gut the meaning of college.'' Other commenters 
raised concerns with OPMs or other arrangements such as the acquisition 
of a proprietary institution by a public institution that do not relate 
to the proposed rule.
    Discussion: Although mentioned briefly in the NPRM, the Department 
wishes to expand upon its long-standing position that written 
arrangements do not generally apply to contracts with OPMs. Use of the 
word ``design'' or ``administration'' in Sec.  668.5(g) may refer to 
one or more of the following--establishing the requirements for 
successful completion of the course; delivering instruction in the 
course; or assessing student learning. One example of this would be if 
an ineligible entity provides instructors and delivers instruction via 
a ground-based or online program separate from what the eligible 
institution would normally provide. This would not include, as the 
commenter worries some might infer, a course's ``platform or method of 
delivery, technical support, or student services.'' In fact, 
institutions frequently utilize employer advisory boards or other 
outside expertise to develop courses or use a variety of methods to 
recruit students without written arrangements. In addition, just as in 
elementary and secondary schools, outside providers are frequently used 
to provide training and professional development to instructors in 
postsecondary education. Requiring a written arrangement for these core 
functions could grind the basic functions of an institution to a halt. 
Instead, the Department believes Sec.  668.5(h) is a non-exhaustive 
list of activities that do not require written arrangements, but many 
others from contracting for food service, or with OPMs, or facilitating 
ground-based instruction through upkeep to facilities--should be 
assumed to not require a written arrangement either, in accordance with 
longstanding practice. We further question one commenter's premise that 
written arrangements should only be for functions where the institution 
would not have expertise, such as food service. The diversity of 
institutional expertise is one reason the Department does not use such 
criteria to distinguish between agreements requiring written 
arrangements from those that do not. Instead, the regulations state 
that they are required if an ineligible entity provides ``part of the 
educational program,'' which means actual delivery of instruction using 
outside instructors and facilities. The Department assures one 
commenter that it is not changing and could not ``gut'' the meaning of 
college.
    Changes: None.
    Comments: Two commenters noted that a limited number of 
institutions were permitted to go above the 50 percent limit to partner 
with ineligible providers as part of the Department's Educational 
Quality through Innovative Partnerships (EQUIP) experiment. These 
commenters said that participants have struggled to meet Department 
benchmarks necessary to launch their programs and, as a result, data 
has been quite limited and so should not be used to justify changes to 
written arrangements. One commenter further suggested that some 
participants in the program engaged in practices that were harmful to 
students, noting one was cited by its State for deceptive advertising, 
and another precipitously closed. As a result, they asserted that not 
enough information is known about whether these types of programs can 
be successful.
    Discussion: EQUIP was launched under the Department's Experimental 
Sites Initiative.\13\ We acknowledge the limitations of the 
experiment.\14\ The Department believes there were multiple design 
flaws in that experiment, many unrelated to flexibility for written 
arrangements. As the commenters acknowledge, most potential 
participants were unable to start-up their programs and begin utilizing 
the waivers. This was at least in part due to the experiment's 
requirements, written under the prior administration, were so 
burdensome and complex that many institutions expressing interest did 
not ultimately apply, and those that applied, have slowly dropped out 
at various stages in the years-long process of attempting to obtain 
approval for and launch these programs. Much of this complexity relates 
to burdensome reporting requirements, the requirement for a third-party 
quality assurance entity to oversee program outcomes (in addition to 
the accrediting agency), and other issues (some quite similar to 
suggestions made at the negotiating table and by commenters). While 
these mechanisms were designed to protect students, promote 
transparency, allow for a rigorous evaluation, and other laudable 
goals, the Department believes that they were ultimately too burdensome 
and costly to justify the potential benefits of participation, which 
may have ultimately denied students the opportunity to benefit from 
innovative programs that were potentially quite valuable. In short, the 
Department believes that the most significant lesson from EQUIP is that 
burden must be weighed against safeguards in order to support 
innovation while protecting students. This was one of the reasons that 
the Department undertook this rulemaking and made the changes to Sec.  
668.5 and other sections.
---------------------------------------------------------------------------

    \13\ 80 FR 62047.
    \14\ ed.gov/news/press-releases/expanding-pathways-success-after-high-school-us-department-education-approves-first-innovative-equip-experiment.
---------------------------------------------------------------------------

    Changes: None.
    Comments: Several commenters urged the Department to rescind 
changes made to Sec.  602.22 in the accreditation rulemaking that allow 
senior staff of an accrediting agency to review several types of 
substantive change requests, including those relating to written 
arrangements, rather than requiring the agency's decision-making body 
to make the decision. One commenter also suggested removing a change 
that would require expedited approval by accrediting agencies of 
written arrangements, adding other reporting and data collection 
requirements, and closely reviewing written arrangements approved by 
accrediting agencies during recognition reviews. Another commenter 
suggested seeking data on the use of written arrangements from 
institutions and accrediting agencies.
    Discussion: The changes to Sec.  602.22 were made in a separate 
rulemaking effort and the Department declines to rescind the change it 
made months ago. However, the Department reminds these commenters, some 
of whom are strongly urging the Department to stick with the consensus 
agreement's limits of 25 and 50 percent in Sec.  668.5(c), that the 
Department and others agreed that maintaining these limits would not 
impede innovation, as long as approvals by accrediting agencies could 
be streamlined and take less time. We continue to believe that the 
consensus language strikes the right balance between enabling 
innovation and protecting students and taxpayers. The Department will 
uphold the consensus language regarding the 25 and 50

[[Page 54774]]

percent limits in Sec.  668.5(c), as well as regarding the efforts to 
streamline approvals in Sec.  602.22 either. The Department believes 
that these changes reduce burden on accrediting agencies and streamline 
institutions' ability to respond to workforce needs, as outlined in 
greater detail in the Department's NPRM and final rule on 
accreditation.\15\ As discussed during negotiated rulemaking, the 
Department declines to add further burdensome reporting requirements; 
however, according to Sec.  668.43(a)(12), institutions are required to 
disclose written arrangements to students, which is an added 
requirement included in the Accreditation and State Authorization final 
rule to improve transparency.
---------------------------------------------------------------------------

    \15\ 84 FR 27404 and 84 FR 58834, respectively.
---------------------------------------------------------------------------

    Changes: None.
    Comments: Several commenters responded to the question posed by the 
Department in the NPRM, which asked whether the requirement for non-
accredited entities to demonstrate prior experience and effectiveness 
prior to engaging in a written arrangement would be too difficult to 
meet. These commenters suggested that it would be too difficult for 
most third-party providers to meet a requirement to ``demonstrate 
experience'' before being given the opportunity to do so. One commenter 
added that institutions are sufficiently motivated to ensure academic 
rigor when using written arrangements and thoroughly vet them before 
signing a contract. This commenter noted that the content provided by 
the ineligible provider must still meet standards for accreditation and 
said that new entrants often have the most advanced and desirable 
content. The commenter questioned what type of information would be 
sufficient to demonstrate experience if the provision remained. Another 
commenter added that the ``experience'' requirement would intrude into 
matters overseen by accrediting agencies. And one commenter believed 
the requirement was ambiguous while restraining innovation.
    Discussion: The Department agrees with the commenters who uncovered 
serious flaws in a requirement to demonstrate prior experience and 
effectiveness. The Department does not change consensus language 
without a good reason, especially in a provision so vigorously debated 
during negotiations. However, after negotiations, the Department noted 
similarity between the experience requirement in Sec.  668.5(c)(1)(i) 
and provisions removed in the accreditation regulations, especially 
those in Sec.  602.12, which previously required accrediting agencies 
to demonstrate prior experience in a given area before the Department 
would allow an expansion of scope to conduct accreditation activities 
in those areas. We removed such provisions because they could have had 
an anticompetitive effect and created a sometimes-impossible standard 
requiring an entity to demonstrate experience doing something they are 
legally barred from doing. The Department was unable to find, and 
commenters did not suggest, a workable alternative that would have 
maintained the language while avoiding similar problems. The Department 
does not believe a viable alternative exists that would provide 
meaningful protection without having an anticompetitive effect, being 
overly burdensome, or being unenforceable. In addition, the Department 
believes the requirement that the provider be effective in meeting 
stated learning objectives is vague, likely unenforceable, may be 
deemed arbitrary and capricious, and may violate 20 U.S.C. 3403(b), 
which prohibits the Secretary from exercising authority over 
curriculum, administration, and personnel of educational institutions. 
The Department believes that commenters made a compelling case that the 
proposed provision could interfere into areas overseen by accrediting 
agencies.
    Changes: The Department concurs with the commenters. We have 
deleted Sec.  668.5(c)(1)(i) and renumbered the section accordingly.
    Comments: One commenter supported the proposed removal of language 
that previously required the certificate or degree-granting institution 
to provide more than 50 percent of the educational program in a written 
arrangement between two or more eligible institutions owned or 
controlled by the same individual, partnership, or corporation.
    One commenter opposed this change and stated that there may be 
differences in quality or the student experience between institutions 
sharing ownership, which could lead to students being misled about the 
nature of their education. The commenter suggested students may be 
required to take more courses online through one affiliated institution 
when they expected to be taking ground-based courses from the other. 
The commenter suggested the Department has provided insufficient 
evidence to support the change.
    Discussion: The Department thanks the commenter for supporting 
removal of this restrictive provision. The Department maintains that 
there is value in maintaining flexibility to achieve synergies between 
two or more eligible institutions owned or controlled by the same 
individual, partnership, or corporation.
    The COVID-19 pandemic highlights a worst-case scenario, where 
institutions had to quickly move students online and expand any remote 
learning infrastructure they had at their disposal. However, a local or 
national economic shift that quickly necessitates more training in one 
area and less in another may be a more common example. The Department 
notes that many accrediting agencies require at least 25 percent of the 
program to be delivered by the institution conferring the credential 
and defers to accrediting agencies in this area. The Department does 
not believe this provision, which applies to a very small subset of 
institutions and students, exposes those students to meaningful 
additional risk and notes that any misrepresentation or fraud of the 
kind the commenter fears may be addressed through existing enforcement 
means. As noted elsewhere, we not only maintained the requirement to 
disclose these arrangements to students in Sec.  668.43(a)(12), but we 
actually strengthened those requirements in the accreditation final 
rule, which was developed though a consensus agreement as part of the 
same negotiated rulemaking as this regulation.\16\
---------------------------------------------------------------------------

    \16\ 84 FR 58834.
---------------------------------------------------------------------------

    Students may enroll in a program they choose. However, options are 
finite and may be unexpectedly limited, regardless of the use of a 
written arrangement. Unavailability of faculty or facilities, 
insufficient demand to offer a certain course during any given term, or 
other factors could limit students' options. In most cases, despite the 
commenter's assertions, the Department believes this provision is 
likely to increase (rather than decrease) available options to 
students. The risk of fraud is always present any time Federal funds 
are involved. The Department prefers strong enforcement of a limited 
number of important and straightforward safeguards rather than 
diverting resources to maintaining numerous low-risk restrictions that 
could deny benefits to students.
    Changes: None.

Clock to Credit Hour Conversion (Sec.  668.8)

    Comments: One commenter expressed support for the proposed changes 
to Sec.  668.8(k), noting that the changes eliminate confusion about 
the inclusion of homework time in the clock-hour determination.

[[Page 54775]]

    Another commenter asserted that compliance with these regulatory 
changes would, in addition to having negative financial effects, be 
potentially burdensome, and conflict with accreditor expectations. The 
commenter further offered that credit hours are more suitable than 
clock hours for evaluating satisfactory academic progress and the 
current regulation (Sec.  668.8(k) and (l)) is more reflective of the 
levels of learning at their institution. Finally, the commenter 
expressed concern over the effect the proposed changes might have on 
the institution's ability to provide the same levels of contact for 
online and in-person courses.
    One commenter noted that the Department neglected in the NPRM to 
address the proposed change to Sec.  668.8(k)(2)(ii), removing the 
requirement that an institution demonstrate students enroll in and 
graduate from degree programs and replacing it with a requirement that 
the institution demonstrate that at least one student was enrolled in 
the program during the current or most recently completed award year. 
The commenter asserted that the proposed rule would allow institutions 
to effectively invent a nonexistent program to use as a back-door way 
to avoid the conversion formula, thus compromising program integrity.
    Discussion: The actual scope of what was proposed in the NPRM is 
essentially a revision to the conversion formula. The applicability of 
clock-to-credit-hour conversion is not expanded as a result of these 
changes. Under current regulations, any program that is at least two 
academic years in length and provides an associate or bachelor's degree 
(presumably the overwhelming majority of those programs offered at 
four-year public and private, degree-granting institutions) is not 
subject to clock-to-credit-hour conversion. This would not change under 
what was proposed in the NPRM. It should further be noted that there 
are no Department rules requiring the use of clock hours as opposed to 
credit hours in measuring students' progress.
    We inadvertently omitted from the NPRM any discussion of proposed 
Sec.  668.8(k)(2)(ii), which removes the requirement that an 
institution demonstrate students enroll in and graduate from degree 
programs and replaces it with a requirement that the institution 
demonstrate that at least one student was enrolled in the program 
during the current or most recently completed award year, and thank the 
commenter who brought this omission to our attention. This change was 
made at the request of negotiators who expressed the concern that 
programs with small numbers of students may not produce graduates in a 
given year, or even over a couple of years, raising the prospect of 
those programs being found in violation of Sec.  668.8(k)(2)(ii). The 
change was included in amendatory text on which consensus was reached.
    While appreciative of those negotiators' concerns, we are persuaded 
that removal of the requirement for institutions to demonstrate that 
students enroll in and graduate from the program would make it possible 
for an unscrupulous institution to stand-up nonexistent programs that 
do not actually graduate anyone, effectively circumventing the clock-to 
credit-hour conversion requirement.
    With respect to degree programs with limited numbers of students, 
we note that current Sec.  668.8(k)(2)(ii) makes no mention of the 
frequency with which students must be shown to graduate from the degree 
program that courses from the program that would otherwise be subject 
to clock-to-credit hour conversion are acceptable toward; and a year 
where no student graduates from the degree program is not, in and of 
itself, an indicator of noncompliance. Accordingly, we are revising 
Sec.  668.8(k)(2)(ii) to clarify that an institution must be able to 
demonstrate that at least one student graduated from the program during 
the current award year or the two preceding award years. We continue to 
believe that the exception in Sec.  668.8(k)(2) is appropriately 
limited to programs that consistently produce graduates. Even where an 
institution is not attempting to deliberately circumvent clock-to-
credit-hour requirements, a circumstance where no student graduates 
from the degree-granting program over multiple years legitimately calls 
into question whether that program is truly meeting the requirements 
for the exception found in Sec.  668.8(k)(2). Therefore, because the 
exemption requirement only applies when an institution offers a program 
that leads to a degree, and the shortest degree programs are generally 
no less than two years in length, the Department believes that a two-
year look-back period would be sufficient to identify programs that 
could fulfill this requirement for an exemption from the clock-to-
credit conversion requirements. If no student graduates from a program 
during the entire expected timeframe for completion of that program, it 
calls into question whether the transferability of credits into such a 
program is in fact useful to a student enrolled in a non-degree 
programs, which is the essence of the exemption in the first place.
    Changes: We have revised Sec.  668.8(k)(2)(ii) to clarify that in 
meeting the clock-to-credit hour exemption, an institution must 
demonstrate that at least one student graduated from the program during 
the current award year or the two preceding award years.

Certification Procedures (Sec.  668.13)

    Comments: Several commenters stated their support for language 
providing that if the Secretary does not make a decision to grant or 
deny certification within 12 months of an institution's expiration date 
of its current period of participation, the Department will grant the 
institution an automatic recertification, which may be provisional. The 
commenters supported this change for the increased certainty and 
transparency it provides to institutions that would otherwise receive 
month-to-month extensions of their eligibility. The commenters also 
believed that such changes properly balance this increased certainty 
for institutions with Department oversight on behalf of students and 
taxpayers. One commenter added that the change will allow institutions 
to move forward with new programs in a timely and responsive manner.
    Discussion: The Department thanks the commenters for their support 
and agrees that the changes provide for increased certainty and 
transparency while balancing the need to protect students and 
taxpayers.
    Changes: None.
    Comment: One commenter opposed automatic certification renewal when 
the Secretary does not decide to grant or deny within 12 months of an 
institution's expiration date. The commenter claimed that this change 
contradicts the HEA and circumvents the Secretary's obligations under 
the Act. The commenter asserted that this change would undo the 
Secretary's obligation under 20 U.S.C. 1099c(a) to evaluate the 
institution's legal authority to operate within a State, accreditation 
status, administrative capability, and financial responsibility. The 
commenter also claimed that the Department provided no evidence of the 
uncertainty experienced by institutions because of the current 
practice. The commenter suggested that there could be good reason for 
the Department to delay its review, including if it is investigating 
the institution. The commenter believed that, due to the lack of 
evidence or reasoning, the proposed change is both arbitrary and 
capricious and that the Department would violate the APA by making the 
proposed change. The commenter further stated that the Department 
failed to consider

[[Page 54776]]

reasonable alternatives and that it has a legal obligation to do so. 
The commenter suggested that the Department instead seek additional 
funding for staff to review recertification applications to ensure a 
prompt review and decision. The commenter also proposed providing a 
shorter extension of, perhaps, three or six months while the Department 
continues its review.
    Discussion: The Department appreciates the commenter's interest in 
this topic. Certification decisions can have major implications for 
institutions and students. We agree that more must be done at the 
administrative level to provide more timely responses and better 
communication. However, we believe those steps alone are insufficient. 
Further, we believe it is in the best interest of students and 
taxpayers for the Department to timely identify deficiencies and take 
appropriate action.
    The Department appreciates the suggestion that the Department grant 
three- or six-month extensions instead of a month-to-month extension. 
However, institutions must make important budgetary and academic 
decisions annually. The Department believes those proposals would have 
the same drawbacks and present the same uncertainty to institutions as 
the status quo. An extension longer than one year would not give the 
Department sufficient oversight to revisit a decision in the short term 
if needed.
    The Department disagrees that it has failed to provide a proper 
justification for this change and did not deviate from the consensus 
language on this topic. As discussed during negotiated rulemaking and 
as other commenters have noted, delaying decisions causes significant 
uncertainty. The Department believes that 12 months beyond the 
expiration date of the institution's current certification is more than 
sufficient time, especially since the institution is required to submit 
the application for recertification no less than 90 days prior to the 
expiration of its current certification. The Department's review 
usually begins more than a month before the expiration date, adding 
additional time to the process. If an investigation is underway, the 
Department has other options at its disposal. The Department can 
provisionally certify the institution for as little as one year or can 
deny the recertification if justified. If the Department must issue 
sanctions, it may do so at any time. This change does not reduce the 
Department's enforcement power. Instead, it encourages the Department 
to process applications promptly, which provides timely feedback for 
institutions, helps the Department to properly oversee institutions, 
and can allow speedier remedies if deficiencies are identified. As 
such, and contrary to the assertion made by this commenter, the 
certification renewal process outlined in Sec.  668.13 is neither 
arbitrary and capricious nor would it constitute an impermissible 
abdication of the Secretary's responsibility 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.
    Changes: None.

Limitation on Number of Clock Hours Based on Minimum State Requirements 
(Sec.  668.14(b)(26))

    Comments: Many commenters supported the proposed requirement that 
eligible short-term programs demonstrate reasonable program length. 
These commenters acknowledged the trade-off between setting proper 
safeguards to ensure program length is not inflated and ensuring 
students are able to meet States' occupational licensure requirements. 
The commenters believed that the Department struck a proper balance, 
which will promote worker mobility across State lines and reduce 
barriers to employment, especially in regional economies that cross 
State boundaries.
    Several other commenters underscored that the negotiating committee 
compromised on the provisions related to program length and suggested 
that the provisions would protect students from fraud. One of these 
commenters noted the proposed rule provided balance and an acute 
positive impact on student veterans and military-connected students.
    Several commenters said they preferred the proposed rule's 
provision over other options discussed during negotiated rulemaking, 
especially the Department's initial proposal allowing program length of 
100 percent of the longest minimum requirement in any State. These 
commenters urged the Department to maintain the consensus agreement 
contained in the proposed rule.
    One commenter praised the changes to this provision and the 
positive impact they will have on veterans and their spouses, who 
frequently move across State lines.
    One commenter suggested that the proposed provision did not go far 
enough to prevent institutions from lengthening their programs in ways 
that do not benefit students, including if labor markets do not 
significantly overlap two States' borders. They cited past statements, 
including from the Department's OIG, of institutions that the 
commenters say falsified their program length. Instead, this commenter 
suggested that we allow institutions to lengthen their program based on 
an adjacent State's requirement only if the institution is within a 
metropolitan statistical area (MSA) that includes another State. The 
commenter also suggested an alternative, that the institution instead 
attest to, and demonstrate if asked, that it has enrolled a student who 
lived in that State within the preceding three years or that recent 
graduates are gainfully employed in that State.
    One commenter supported the proposed rule in this area and cited a 
need for greater occupational licensure reciprocity across State lines.
    Discussion: We appreciate the support from commenters on this issue 
and acknowledge that setting the right balance on this issue is 
difficult for reasons outlined in the NPRM, most notably that 
individuals often move from one State to another or live, work, and 
learn in different States at the same time.
    The Department appreciates the concern from the commenter who 
suggested the proposed rule would not go far enough to prevent 
institutions from artificially increasing program length. We have 
serious concerns any time an institution, accrediting agency, or State 
takes steps to artificially limit access to a profession. The 
Department will continue to speak out against such policies and take 
steps where possible to prevent credential inflation and related 
barriers to opportunity. However, as outlined in the NPRM and supported 
by many commenters, the Department believes this language strikes a 
reasonable balance between supporting students who must qualify for 
State licensure and preventing abuse. If abuse rises to the level of 
falsification of documents, as the commenter suggests, we will use 
existing enforcement methods.
    The Department thanks the commenter for the suggestion about tying 
requirements to out-of-State MSAs or past success at finding students 
employment in a neighboring State. However, we believe this would 
hamper mobility across State lines and impose burdens on institutions 
and the Department. The tie to MSAs would only benefit areas that are 
more heavily populated or where MSAs cross State lines (they frequently 
do not) so the

[[Page 54777]]

proposal does not seem to be a viable alternative.\17\
---------------------------------------------------------------------------

    \17\ www2.census.gov/geo/maps/metroarea/us_wall/Sep2018/CBSA_WallMap_Sep2018.pdf.
---------------------------------------------------------------------------

    We also do not agree that institutions should be required to 
demonstrate that their graduates have been successful at finding 
employment in another State when the institution's programs, under our 
current regulations, may be unable to meet the requirements of 
preparing individuals to be licensed in that State.
    The Department appreciates the support of the commenter who noted 
that reciprocity for occupational licensure is a helpful, but 
incomplete, step States can take to lower barriers for individuals. 
Time-based requirements that may not be tied to employer needs can be 
harmful and deny opportunity to individuals looking to build a better 
life.
    Changes: None.
    Comments: A few commenters supported the proposed provision and 
asked that the Department define ``adjacent State'' to include States 
whose border is within 100 miles of the State in which the institution 
is located to allow for greater flexibility for regional economies.
    Discussion: Although the Department appreciates the suggestion to 
define an ``adjacent State'' as one whose border is within 100 miles of 
the State in which the institution is located, such a change would not 
align with the consensus agreement or the definition of the word 
``adjacent'' in this context, which means ``having a common endpoint or 
border.'' \18\ The Department wishes to maximize opportunity and 
minimize barriers and appreciates hearing from institutions with 
students that may benefit from this provision. However, many States 
have ``statutory language allowing reciprocity or endorsement 
agreements for licenses'' including for cosmetology and, as already 
mentioned, States have opportunities to lower the barriers they have 
erected in these areas.\19\ As many commenters have noted, the 
consensus agreement in this area involved genuine compromise and 
balancing of competing priorities. While a small number of students may 
be willing to travel up to 100 miles and cross two State borders to 
work or learn, the Department does not believe this benefit is 
outweighed by the risk of institutions using a significantly longer 
requirement two States away in order to lengthen their programs for all 
students.
---------------------------------------------------------------------------

    \18\ merriam-webster.com/dictionary/adjacent.
    \19\ ncsl.org/research/labor-and-employment/occupational-licensing-statute-database.aspx.
---------------------------------------------------------------------------

    Changes: None.
    Comments: A few commenters requested that the Department use its 
authority to allow voluntary early implementation of this provision.
    Discussion: The Department will allow voluntary early 
implementation on the entire rule, including this provision.
    Changes: None.

Return of Title IV Funds (R2T4) (Sec.  668.22)

    Comments: Numerous commenters expressed support for the proposed 
changes in the treatment of title IV funds when a student withdraws. 
One of those commenters stated that the changes regarding which 
students are considered withdrawn for R2T4 calculation are a welcome 
attempt to resolve technical problems in the current rules existing for 
students enrolled in self-paced instruction and in modules, whose 
treatment with respect to R2T4 sometimes does not reflect their actual 
level of coursework completion. Another commenter expressed 
appreciation for the Department's attention in considering the 
inequities that currently exist for students withdrawing from a program 
delivered in modules. Pointing out the unfairness of penalizing a 
student by requiring an R2T4 calculation and the potential return of 
funds solely because that student completed her program on a more 
aggressive timeline than originally anticipated, other commenters 
thanked the Department for removing the requirement to conduct an R2T4 
calculation in cases where a student has completed graduation 
requirements.
    Discussion: We appreciate the support of these commenters.
    Changes: None.
    Comments: Several commenters requested clarification on the 
proposed rule, which does not consider a student withdrawn from a 
program offered in modules 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.
    The commenters identified various ways in which application of the 
proposed rule as written might result in inequitable treatment of 
students who withdraw from programs taught in modules. One commenter 
offered the example of a 102-day term consisting of two modules, the 
first module 50 days in length and ending on a Friday and the second 
comprising the remaining 52 days and beginning the following Monday. 
Students who complete only the first module could be treated as 
withdrawn, because their first module included a scheduled break or did 
not include a weekend.
    Another commenter provided the example of a program offered in 
standard semesters, each comprised of two, 8-week modules. Both modules 
of the fall semester, each 54 days in length, are separated by a 
weekend and there are no breaks of five or more days in the semester. 
The spring semester contains a spring break of nine days occurring 
between the first and second modules (each 54 days in length) of the 
semester. A student enrolls in five credits in the first module of the 
fall semester and six credits in the second module of that term, 
successfully completing the first module but opting not to return for 
the second module. With the break included, the fall semester is 110 
days in length, 54 days, or 49 percent of which the student completed, 
meaning he or she would be considered withdrawn. Another student 
enrolls in the same pattern during the spring semester, again 
completing the first module of 54 days but not returning for the second 
module, also 54 days in length. However, with the spring break excluded 
from the number of the number of days in the semester, this student has 
completed 54 of 108 days or 50 percent of the spring semester and is 
not considered withdrawn. Both students completed the same five credits 
and 54 days in the payment period, but in the case of the first student 
the institution is required to perform the R2T4 calculation due to the 
break between the modules being less than five days (i.e., a weekend).
    Finally, one commenter explained that in a standard term program 
where the total days in the payment period is an odd number and the 
first of two modules offered over the semester is one day shorter than 
the second, a student enrolling in both modules but completing only the 
first module would complete only 49 percent of the payment period. The 
commenter offered that this could result in students, who for all 
intents and purposes completed a module lasting half of the term, being 
considered withdrawn for lack of one day.
    To address these issues, commenters variously suggested counting 
only days of instruction (excluding both breaks and weekends) instead 
of calendar days, excluding scheduled breaks of less than 5 days 
between modules from the number of calendar days to address the issue 
of weekends between modules,

[[Page 54778]]

and changing the minimum completion percentage from ``50 percent or 
more'' to ``49 percent or more.''
    Discussion: We agree with the commenters that additional 
clarifications to the proposed changes in Sec.  668.22 are necessary to 
avoid the potential unintended consequences identified above. As 
expressed in the preamble of the NPRM, the Department's intent in 
proposing modifications to the treatment of modules in the R2T4 was 
that a student would be considered to have completed the period if he 
or she completed coursework constituting at least half of the days in 
the period, not including the days in scheduled breaks. It is not our 
intent in these final rules that students who have otherwise met that 
standard be considered withdrawn due to minor differences in the number 
of days that constitute 50 percent of a term, resulting from weekends 
falling between modules, the absence of breaks of five days or more, or 
terms with uneven numbers of days etc. Accordingly, we are revising 
proposed Sec.  668.22(a)(2)(ii)(A)(2)(i) and (ii) to reflect that a 
student who withdraws from a program offered in modules who completes 
one module that includes 49 percent or more of the number of days in a 
payment period or a combination of modules that when combined contain 
49 percent or more of the number of days in the payment period, will 
not be considered withdrawn. This change will ensure that a day or two 
difference in the number of days in each module does not become the 
determining factor in whether a student is considered withdrawn. We are 
further revising Sec.  668.22(a)(2)(ii)(A)(2)(i)and (ii) to exclude 
scheduled breaks of five or more consecutive days and all days between 
modules from the number of days in the payment period used to calculate 
whether the module(s) completed by the student comprise 49 percent of 
the payment period.
    Changes: We have revised Sec.  668.22(a)(2)(ii)(A)(2)(i) and (ii) 
to reflect that 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 from a program offered in modules if the 
student successfully completes one module that includes 49 percent or 
more of the number of days in the payment period, excluding scheduled 
breaks of five or more consecutive days and all days between modules or 
combination of modules that when combined contain 49 percent or more of 
the number of days in the payment period, excluding scheduled breaks of 
five or more consecutive days and all days between modules.
    Comments: One commenter referenced the Department's proposal in the 
preamble of the NPRM 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. The preamble also 
stated that non-term programs would no longer be considered programs 
``offered in modules'' in any circumstances. Specifically, the 
commenter requested the Department clarify whether a student who 
completes at least a half-time coursework in a subscription period 
before ceasing enrollment will be considered to have withdrawn from the 
payment period for purposes of R2T4.
    Another commenter expressed overall support for the proposed 
changes to Sec.  668.22(l)(6), clarifying 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. However, the commenter noted that the 
change, while discussed in the preamble, is not included in the 
amendatory text of the NPRM. The same commenter offered that, given 
these changes, use of the term ``module'' in Sec.  668.10(a)(3), 
relevant to direct assessment programs, is confusing and an alternative 
term should be found to replace it.
    Discussion: We appreciate the commenter bringing the omission of 
proposed Sec.  668.22(l)(6) from the preamble to our attention.
    A student in a subscription-based or nonterm program is not 
considered to have completed a payment period if the student completed 
at least half-time coursework in that payment period because the 
Department does not consider a nonterm program or a subscription-based 
program to be ``offered in modules.'' The nature of such programs--
which are not required to set limits on the timeframes for students to 
complete coursework--are not suited to the use of modules, which 
presume a clear start and end date for the coursework that a student is 
attempting during a payment period. Such a timeframe is crucial to the 
incorporation of modules into the Department's framework for the R2T4 
calculations because the number of days in the modules that a student 
is scheduled to complete in a payment period or period of enrollment 
comprise the denominator of the calculation that determines the amount 
of title IV, HEA program funds that the student earns for the period.
    During meetings of the Distance Learning and Innovation 
subcommittee, the Department specifically expressed its intent to make 
changes to Sec.  668.22 that would exclude non-term and subscription-
based programs from the types of programs that are considered ``offered 
in modules'' and eliminate regulations specific to subscription-based 
and nonterm programs that previously incorporated the concept of 
modules. As noted above, these changes are discussed in the preamble to 
the NPRM but are not reflected in the amendatory text. The Department 
therefore believes that it is necessary to make a change to Sec.  
668.22(l)(6) in order to fully implement its proposed approach, which 
was approved by both the Distance Learning and Innovation subcommittee 
and the full negotiated rulemaking committee.
    Finally, regarding the reference to modules in Sec.  668.10, we 
believe the term is used correctly in that section and does not 
prejudice the amendatory text in Sec.  668.22(l)(6). Proposed Sec.  
668.10(a)(3) requires an institution to establish a methodology to 
reasonably equate each module in the direct assessment program to 
either credit hours or clock hours. If it were the case that all direct 
assessment programs were subscription-based, this might be a source of 
confusion. However, many direct assessment programs are offered in 
terms using modules. We believe the clear statement in Sec.  
668.22(l)(6) that a program offered in modules is not considered to be 
a subscription-based program is sufficient to avoid any confusion 
between these two sections.
    Changes: We have revised 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. The amendatory 
text in the final rule includes Sec.  668.22(l)(6) which was 
inadvertently omitted in the NPRM.
    Comments: One commenter requested that the Department clarify 
whether a completed module is one the student successfully completed, 
or simply one the student attended all the way through, i.e., the 
module end date is in the past, the student began attendance and did 
not withdraw or stop attending;

[[Page 54779]]

the module grade(s) could be earned failing grades or incompletes.
    Discussion: As discussed in the NPRM, the Department proposed 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. In 
achieving that balance, the Department believes it is reasonable to 
require that a student successfully complete the module(s) comprising 
49 percent of the payment period or half-time enrollment. This standard 
will have the added benefit of reducing confusion for institutions that 
are not required to take attendance, since passing grades will 
necessarily be the determining factor in whether a student is treated 
as a completer rather than a withdrawal. Successful completion of a 
module requires the student receive at least one passing grade for that 
module. Successful completion of coursework equal to or greater than 
the coursework necessary for half-time enrollment requires that the 
student receive a passing grade in a sufficient number of credits to 
comprise half-time enrollment status (as defined by the institution 
under applicable regulations) for the payment period.
    A student who completes a module but receives all incomplete 
grades, or a combination of course incompletes and failing grades is 
not considered to have successfully completed that module unless at 
least one course incomplete converts to a passing grade before the 
deadline by which the institution must otherwise perform an R2T4 
calculation for that student. Likewise, a student receiving all course 
incompletes or a combination of course incompletes and failing grades 
is not considered to have successfully completed the number of credits 
necessary to establish half-time enrollment unless a number of course 
incompletes sufficient to comprise half-time enrollment convert to 
passing grades before the deadline by which the institution must 
otherwise perform an R2T4 calculation for that student.
    Changes: We have revised the provisions of Sec.  
668.22(a)(2)(ii)(A)(2) to reflect that a student who is enrolled in a 
program offered in modules is not considered to have withdrawn if the 
student successfully completes one module that includes 49 percent or 
more of the number of days in the payment period, excluding scheduled 
breaks of five or more consecutive days, and all days between modules 
or combination of modules that when combined contain 49 percent or more 
of the number of days in the payment period, excluding scheduled breaks 
of five or more consecutive days and all days between modules.
    Comments: One commenter noted that proposed Sec.  
668.22(a)(2)(i)(C) provides that 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). However, 
Sec.  668.22(a)(2)(i)(D), which provides that 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, lacks a similar 
qualifier clarifying that a student who is unable to resume attendance 
within the prescribed period is not considered withdrawn if on an 
approved leave of absence.
    Discussion: We appreciate the commenter bringing this unintentional 
discrepancy to our attention and clarify that no student on an approved 
leave of absence is ever considered to be withdrawn.
    Changes: We have revised Sec.  668.22(a)(2)(i)(D) to clarify that a 
student who is unable to resume attendance in a non-term or 
subscription-based program within a payment period or period of 
enrollment within 60 calendar days after ceasing enrollment is, 
nevertheless, not considered withdrawn if on an approved leave of 
absence.
    Comments: One commenter asked the Department to consider whether, 
in view of the November 5, 2019 electronic announcement (EA) extending 
the maximum length of a semester to 21 weeks, proposed changes to Sec.  
668.22(a)(3)(ii) requiring students enrolled in programs offered in 
standard terms to confirm that they will enroll in another module 
within 45 days of ceasing enrollment to avoid being treated as 
withdrawn is still justified. The commenter observed that prior to the 
Department's revised policy for standard term length issued on November 
5, 2019, it was uncommon for a module in a standard term program to 
begin more than 45 days following the end of a prior module. However, 
the new guidance that allows a standard term to be as long as 21 weeks, 
increases the likelihood that more than 45 days would elapse.
    Discussion: While the commenter is correct in asserting that a 
standard term of 21 weeks, as permitted by the November 5, 2019 EA, 
increases the potential for a student to be scheduled to return to a 
course that begins more than 45 days after the end of the module the 
student ceased attending, we are not persuaded that this obviates the 
reasons for which the Department proposed the changes to Sec.  
668.22(a)(3)(ii). As explained in the preamble of the NPRM, 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. The increased likelihood for these 
extended periods of non-attendance to occur with longer standard terms, 
we believe, argues in favor of this requirement.
    Changes: None.
    Comments: Under proposed Sec.  668.22(l)(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. One commenter requested that the 
Department clarify whether the most recent determination of enrollment 
status would be used for this purpose or whether the Department is 
referring to a specific initial or ``census'' date, or whether this can 
be a matter of institutional policy. The commenter asked, if the 
latter, will institutions have the latitude to implement a policy with 
multiple points of determination during the term much like existing 
policies with multiple Pell recalculation dates?
    Discussion: In the preamble to the NPRM, the Department proposed to 
use the student's schedule at a fixed point to determine the number of 
days the student is scheduled to attend during the period for R2T4 
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 R2T4 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. In order to allow 
institutions flexibility in adopting a policy that is practical for 
their program(s), we are not prescribing a specific date that 
institutions must use as the fixed point for determining the number of 
days the student is scheduled to attend. A Pell recalculation date or

[[Page 54780]]

census date is an allowable option, as would be some other date 
determined by the institution. An institutional policy that includes 
multiple dates, such as is permitted for Pell recalculation dates, is 
acceptable.
    Changes: None.
    Comments: One commenter noted that the proposed amendatory text in 
Sec.  668.22(a)(2)(ii)(A)(3), addressing written confirmation for a 
payment period or period of enrollment in which courses in the program 
are offered in modules, specifically allows ``electronic 
confirmation,'' whereas Sec.  668.22(a)(2)(ii)(A)(4) and (5) pertaining 
to subscription-based programs and non-term programs respectively, make 
no reference to the use of electronic confirmation.
    Discussion: We thank the commenter for bringing this inconsistency 
to our attention. It is the Department's longstanding policy that, in 
the absence of regulations specifically requiring that a notification 
or authorization be sent via U.S. mail, a school may provide notices or 
receive authorizations electronically. It is further permissible to use 
an electronic process to provide required notices and make disclosures 
by directing students to a secure website that contains the required 
notifications and disclosures. Because of this, we believe specific 
mention, in any regulation, of the option to distribute required 
notifications and disclosures, or collect required authorizations and 
confirmations through electronic means, is redundant and may cause 
confusion.
    Changes: We have revised Sec.  668.22(a)(2)(ii)(A)(3) to remove the 
reference to ``electronic confirmation.''

Satisfactory Academic Progress (Sec.  668.34)

    Comments: Several commenters expressed general support for the 
proposed changes to satisfactory academic progress (SAP). However, some 
of those commenters asked that the Department consider amending the 
proposed rule to account for enrollment status in determining whether a 
student is meeting maximum timeframe requirements as measured in 
calendar time. One commenter objected to allowing institutions to 
measure maximum timeframe in calendar time because it could negatively 
affect students for whom life challenges preclude ongoing full-time 
attendance. The commenter suggested an alternative of allowing a 
maximum timeframe of 200 percent of program length. The commenter also 
suggested grandfathering students under existing standards as another 
alternative.
    Discussion: We appreciate the support for our proposals to 
eliminate redundancy and provide greater flexibility in the application 
of SAP requirements. In response to those commenters who suggested that 
the definition of ``maximum timeframe,'' as measured in calendar time, 
accommodate differences in enrollment status, we note that the 
limitation on maximum timeframe of 150 percent of the published length 
of the program (for an undergraduate program) is an intentionally 
static measure designed to ensure completion of that program within a 
reasonable time. For example, a four-year, 120 credit Bachelor of Arts 
program may have a maximum timeframe of 180 attempted credits or six 
years. Measuring maximum timeframe for the program in credit hours, 
with pace determined by dividing the cumulative number of successfully 
completed credit hours by the cumulative number of attempted hours, 
does account for variances in enrollment status. However, this is 
because credit hours are measured only as attempted, not because 
students who attend part-time are permitted additional hours beyond 
180. Calendar time elapses at a constant rate regardless of how many 
credit hours a student attempts or completes. As a result, maximum time 
frame expressed in calendar time is, necessarily, less flexible with 
respect to variances in enrollment status. Factoring part-time 
enrollment into the measurement of students' pace would potentially 
result in a maximum timeframe, as expressed in calendar time, of 
greater than 150 percent of published program length.
    We do not agree that allowing institutions to measure maximum 
timeframe in calendar time will negatively affect students whose 
personal situations preclude full-time attendance in a program. First, 
this flexibility was not proposed with the expectation that large 
numbers of institutions would adopt calendar time in lieu of credit 
hours. Most institutions will continue to express maximum timeframe for 
their programs in credit hours which, as described above, does account 
for differing enrollment statuses throughout a student's matriculation. 
Those institutions opting to measure in calendar time will likely do so 
having determined that it makes better sense for the type of programs 
they offer, e.g., competency-based programs or programs requiring a 
prescribed set of courses in each term for all students. Last, we 
remind commenters that a student who fails to meet SAP, including for 
reasons related to maximum timeframe, may file a SAP appeal (if the 
institution's SAP policy permits such appeals).
    Changes: None.

Foreign Schools (Sec. Sec.  600.52 and 600.54)

    Comments: Two commenters supported retaining the current exception 
for independent research done by an individual student in the United 
States. The provision permits not more than one academic year of 
research conducted during the dissertation phase of a doctoral program 
(and where the research can only be performed at a facility in the 
United States). The provision also permits 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. However, both 
commenters requested that the proposed regulation 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. One of those commenters opined that the research phase 
of a doctoral program can take years and should not be subject to an 
artificial time limit that could preclude students from pursuing a 
program that provides insights into their chosen field. The commenter 
concluded that since the research phase of a doctoral program is 
separate and distinct from the classroom phase, it is both logical and 
equitable that students be permitted to undertake research in the 
United States without regard to whether or not they have taken a 
portion of their classroom study in that country.
    Responding to the Department's request for comments on whether 
written arrangements for students studying in the U.S. should include 
organizations that are not eligible institutions, one commenter replied 
in the affirmative. The commenter explained that a student's home 
institution is responsible for designing and supervising its students 
and that any written arrangement involving another entity, whether an 
eligible institution or not, is ultimately subject to the approval and 
review of the home, eligible institution. The eligible institution must 
itself be approved to offer postsecondary education by a recognized 
authority in its home country that provides oversight that is the 
equivalent of that provided in the United States. The commenter further 
stressed that, as proposed, the rules regarding written arrangements 
would

[[Page 54781]]

circumscribe the ability of eligible foreign institutions to offer 
diverse programs that include partnerships with other universities that 
specialize in certain topics, and entities which provide unique 
experiences within a student's program of study, as well as access to 
career-enhancing internships.
    One commenter supported the proposed revisions to Sec.  600.54(c) 
that would 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. The same 
commenter requested that, given the potential for ongoing ramifications 
related to the COVID-19 pandemic, the Department increase the 
percentage of study permitted at recognized ineligible foreign 
institutions to as much as 50 percent. This, it was suggested, would 
provide students the flexibility to navigate the changing situation 
without having to appeal for special dispensation in future 
circumstances that are impossible to predict.
    Two commenters asked that the Department reconsider the prohibition 
on foreign institutions offering any portion of an eligible program 
through distance education found in current Sec.  600.51(d). One of 
those commenters suggested that there is sufficient ambiguity in the 
applicable statute on which to base permitting some use of distance 
education, especially in view of the temporary flexibilities extended 
under the Coronavirus Aid, Relief, and Economic Security Act (CARES) 
Act.\20\ Another commenter expressed the opinion that temporary 
flexibility, under the CARES Act, for foreign institutions to use 
distance education is tacit acknowledgement by Congress of the 
difficulties American students face as a result of the ban on distance 
education. In view of this, the commenter asked that the Department 
modify its regulations to permit American students to take up to 25 
percent of their program of study via distance education.
---------------------------------------------------------------------------

    \20\ S. 3548, 116th Congress (2020).
---------------------------------------------------------------------------

    Finally, one commenter rejected the proposal to allow students 
enrolled in foreign institutions to complete up to 25 percent of a 
program in the United States based on concerns that, in conjunction 
with other Department rule changes, there would be no way to determine 
the fiscal and academic quality of such foreign institutions, and the 
potential for the change to result in opening the door to millions of 
students receiving degrees without completing the requirements deemed 
necessary by academic and industry leaders. The commenter further 
expressed opposition to foreign institutions gaining access to, and 
leveraging control over title IV financial aid, explaining that this 
would be a direct and overtly questionable act, constituting an ethical 
breach, and not in the best interest of the Department, American higher 
education institutions, or our nation's students.
    Discussion: We appreciate the commenters' concerns over the need 
for universities to make flexible and diverse research opportunities 
available for doctoral candidates whose specialized research often 
takes place over several years, and requires travel to specific 
locations, including in the United States. However, the Department is 
not convinced that providing those opportunities necessitates or 
warrants allowing students who have already completed 25 percent of 
their programs in the United States to spend an additional year 
conducting research in the United States. This ``stacking'' would 
create the potential for a student enrolled in a four-year doctoral 
program at an eligible foreign institution to complete half of that 
program in the United States. As explained in the preamble of the NPRM, 
the Department's intention in proposing these rules is to enhance the 
range of educational opportunities available to U.S. students enrolled 
in eligible foreign institutions, aligning them with those enjoyed by 
students attending domestic institutions, while adhering to the basic 
principle 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. We believe 
this balance to be equally necessary at the graduate and undergraduate 
level.
    The Department is declining to permit stacking of the allowance for 
a student to complete up to 25 percent of their program at an eligible 
institution in the United States under proposed Sec.  600.52. However, 
an exception is permitted 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 (where the research can only be performed at a facility in the 
United States) under current Sec.  600.51. Nevertheless, we wish to 
clarify that the proposed changes to Sec.  600.52 do not preclude an 
institution from allowing doctoral students to study and/or conduct 
research in the United States using the flexibilities provided in each 
section. The examples below illustrate the practical application of 
both provisions.
Example 1
    A student in the dissertation phase of her three-year doctoral 
program requests permission from the institution to conduct research in 
the United States. The student has not completed any portion of her 
program in the United States. Having concurred that her research can 
only be performed at a facility located there, the institution approves 
one year of research time in the United States.
Example 2
    A student enrolled in a three-year doctoral program requests to 
study at an institution in the United States under a written 
arrangement. The home institution approves her request to take 12 
credits at the Ph.D. level over two 16-week semesters, 24 percent of 
the length of the program as determined under proposed Sec.  668.5(g) 
(i.e., dividing the number of semester, trimester, or quarter credit 
hours, clock hours, or the equivalent that are provided by the eligible 
U.S. institution by the total number of semester, trimester, or quarter 
credit hours, clock hours, or the equivalent required for completion of 
the program). Subsequently, while in the dissertation phase of her 
program, the student requests to conduct research in the United States. 
Because the one-year limit on the amount of time a doctoral student may 
remain in the United States in order to conduct research is measured in 
calendar time, it is necessary for the institution to consider any time 
the student has already spent studying or conducting research there. 
With 32 weeks of previous study factored in, the student is approved 
for an additional period of research in the United States of up to 20 
weeks.
    We thank the commenter who responded to our request for comments on 
whether written arrangements for students studying in the U.S. should 
include organizations that are not eligible institutions. With respect 
to internships, we agree with the commenter that limiting these to 
eligible institutions would circumscribe opportunities for U.S. 
students attending eligible foreign institutions in a way that is 
contrary to the intent of proposed regulations. The preponderance of 
internship opportunities is not at eligible postsecondary institutions 
but rather with corporations, other businesses, and non-profit 
organizations other than

[[Page 54782]]

postsecondary institutions. Given the extent to which relevant 
internship experience can enhance a student's educational experience 
and affect a graduate's employment prospects, we are convinced that 
U.S. students attending eligible foreign institutions should not be 
placed at a disadvantage relative to their counterparts attending 
domestic institutions, and should have the same opportunities to pursue 
internships in any country including the United States.
    While appreciative of the commenter's position that increased 
latitude be accorded coursework as well, we are not similarly persuaded 
of the need to allow U.S. students attending eligible foreign 
institutions to take coursework in the United States, as part of their 
eligible program, at any entity other than an eligible institution. 
Unlike the situation in foreign countries, where another eligible 
institution may not exist or be within a reasonable travel distance for 
ground-based instruction, there is no lack of eligible institutions in 
the United States with which to execute a written arrangement. We 
believe the partnerships with other universities in specialized topics 
and unique student experiences referred to by the commenter can readily 
be secured through written arrangements with one or more of the 6,000 
plus eligible institutions in the United States. In addition, we are 
concerned that an institution in a foreign country may not have 
sufficient opportunity to enforce elements of a written arrangement 
with a non-eligible entity located in the U.S., making such 
arrangements inherently risky.
    As a result, we are amending proposed Sec.  600.52 (Foreign 
institution) to remove internships and externships from the list of 
program-related activities that may only be performed in the United 
States at an eligible institution, and specifying that internships and 
externships may be provided by an ineligible organization as described 
in proposed Sec.  668.5(h)(2). Proposed Sec.  668.5(h)(2) clarifies 
that the limitations on written arrangements are not applicable to the 
internship or externship portion of a program if the internship or 
externship is governed by the standards of an outside oversight entity, 
such as an accrediting agency or government entity, 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.
    We thank the commenter for writing in support of the proposed 
revisions to Sec.  600.54(c) that would permit written arrangements 
between an eligible foreign institution and an ineligible entity (other 
than in the United States), 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. However, we 
disagree with the commenter that the percentage of a program that is 
provided by the ineligible entity should be increased to 50 percent. 
Domestic institutions entering into a written arrangement with an 
ineligible entity to offer more than 25 percent, but less than 50 
percent of an eligible program, must obtain accreditor approval. No 
similar protocol exists for foreign institutions. Requiring that a non-
eligible entity satisfy the regulatory definition of ``foreign 
institution'' does reasonably assure some degree of program integrity. 
However, the Department is not persuaded that this is an adequate 
substitute for accreditor approval where the percentage of the eligible 
program offered by an ineligible entity would be greater than 25 
percent. Moreover, it would create a standard for eligible foreign 
institutions lower than that applied to domestic institutions.
    In response to the commenters who asked that the Department 
reconsider the prohibition on foreign institutions offering any portion 
of an eligible program through distance education reflected in current 
Sec.  600.51(d), we note that this prohibition (sec. 481(b)(3) of the 
HEA) is statutory and provides no flexibility. Although the CARES Act 
does authorize the use of distance education by eligible foreign 
institutions, and we believe that students benefit from having access 
to distance learning opportunities, including while enrolled at a 
foreign institution, that authority is temporary and tied to the 
national emergency declared on March 13, 2020.
    We disagree with the commenter who objected to allowing students 
enrolled in foreign institutions to complete up to 25 percent of a 
program in the United States, and asserted that the Department would be 
unable--(1) To determine the fiscal and academic quality of such 
foreign institutions; or (2) to prevent millions of students from 
receiving degrees without completing the requirements deemed necessary 
by academic and industry leaders. We further disagree that these 
changes facilitate foreign institutions gaining access to or leveraging 
control over title IV financial aid. First, eligible foreign 
institutions already participate in the Direct Loan program. The 
changes proposed in the NPRM do not, in any way, increase the scope of 
foreign institutions' participation in the title IV programs, nor do 
they loosen the existing financial responsibility standards that 
eligible foreign institutions must adhere to. Regarding academic 
quality and the potential for students to receive degrees that their 
work does not merit, we note that the proposed regulations make no 
changes to the current rules governing institutional eligibility. 
Lastly, we are uncertain of what the commenter means with reference to 
foreign institutions gaining access to or leveraging control over the 
title IV programs. As previously discussed, eligible foreign 
institutions already participate in the Direct Loan program, and the 
title IV, HEA programs are not structured in such a way that it is 
possible for any institution, foreign or domestic, to leverage control 
over them.
    Changes: The definition of Foreign institution in proposed Sec.  
600.52 (Foreign institution, paragraph (1)(ii)(C)) is changed to remove 
internships and externships from the list of program-related activities 
that may only be performed in the United States at an eligible 
institution. Paragraph (1)(ii)(C)(2) is added to allow participation in 
an internship or externship provided by an ineligible organization as 
described in Sec.  668.5(h)(2).

Request for Review (Sec.  668.113)

    Comments: One commenter expressed strong support for the proposed 
changes to Sec.  668.113, establishing 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 
practices in higher education.
    Another commenter, offering qualified support for the proposed 
changes, suggested that the Department clarify which fields would be 
suitable for distance education as the criteria for applying the 
standards in Sec.  668.113. To make these determinations, the commenter 
offered that the Department should analyze whether the use of distance 
education is appropriate for and sustains the quality of instruction in 
those online programs where a final program review or audit 
determination has assessed liabilities.

[[Page 54783]]

    Discussion: We thank the commenter who expressed strong support for 
these proposed changes. In response to the commenter who suggested the 
Department clarify which fields are suitable for distance education and 
make determinations regarding the appropriateness of that mode of 
instruction for individual programs, we note that the applicable 
statute and regulations place no constraints on the fields of study in 
which an institution may offer instruction using distance education, 
nor do they grant the Department authority to make such determinations. 
Assessing the quality of an educational program offered by an eligible 
postsecondary institution or establishing if that program may be 
offered using distance education is entirely within the purview of the 
institution's accrediting agency and, in some cases, the State agency 
with oversight responsibilities. Were an institution to offer a program 
through distance education that its accrediting agency or State agency 
had determined may not be taught using that modality, the Department 
would hold the institution potentially liable for all of the title IV 
funds disbursed to students enrolled in that program. The proposed 
changes to Sec.  668.113 do not, in any way, compromise the 
Department's oversight authority in this area and, if anything, clarify 
that institutions are accountable to accreditor and State agency 
requirements in offering programs through distance education.
    Changes: None.

Past Performance (Sec.  668.174)

    Comments: Several commenters agreed that the proposal 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 a viable teach-out plan approved by that institution's 
accrediting agency and/or state regulatory body. The commenters 
believed the proposal change will help to protect students attending 
institutions that close and ensure that individuals affiliated with an 
institution that closed without a viable teach out plan, will not 
participate again in the title IV programs.
    Discussion: The Secretary thanks the commenters for their support.
    Changes: None.

Factors of Financial Responsibility (Sec. Sec.  668.15 and 668.171-
668.175)

    Comments: One commenter questioned the need for, and implications 
of, the proposal to apply the financial standards in Sec.  668.15 to 
institutions that undergo a change of ownership and control. The 
commenter noted that historically, the Department has used only two of 
the financial measures in this section--the acid test ratio and 
positive tangible net worth or positive unrestricted net asset 
standards--to evaluate institutions that changed ownership and control. 
The commenter argued that applying, or potentially applying, all of 
Sec.  668.15 to changes in ownership would constitute a significant 
change in Department practice that would more appropriately call for a 
substantive rulemaking to clarify the relationship between the two 
sections of the regulations that address financial responsibility--
Sec. Sec.  668.15 and 668.171 through 668.175. In addition, the 
commenter stated that the proposed change to the title and 
applicability of this section was presented during negotiated 
rulemaking as a technical update rather than a substantive change.
    Given the significant concern of many institutions and others for 
the Department to initiate a rulemaking on financial responsibility 
standards and the composite score, the commenter urged the Department 
to withdraw this proposed change and defer making revisions to changes 
of ownership standards to a broader rulemaking discussion.
    Discussion: In as much as the Department intended to clarify that 
Sec.  668.15 applies only to institutions that undergo a change of 
ownership and control, we agree with the commenter that a broader 
discussion is warranted, particularly since the Department intends to 
conduct future negotiated rulemaking for the financial responsibility 
standards, including those applicable to changes of ownership.
    Changes: We have withdrawn the proposed changes to Sec.  668.15.

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 rule is an economically significant 
action and would have an annual effect on the economy of more than $100 
million. This regulation will 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 rule is considered an 
E.O. 13771 deregulatory action. We believe the effect of this 
regulation will 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 will be, in sum, deregulatory.
    As required by Executive Order 13563, the Department has assessed 
the potential costs and benefits, both

[[Page 54784]]

quantitative and qualitative, of this regulatory action, and we are 
issuing these regulations only on a reasoned determination that their 
benefits 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 will 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 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 changes benefit institutions by enabling them to employ 
innovative methods and models without undue risk of inadvertently 
violating title IV requirements. These options 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 
may be much more likely to persist in and complete their programs and 
institutions will be much more equipped to drive student 
success.21 22 The regulations 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 definitions clarify terms used in, but not defined 
by, the HEA. In other cases, the regulations 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 provide needed certainty to institutions about how to 
disburse aid to students enrolled in CBE programs. The regulations 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 makes 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 regulations acknowledge that subscription-based programs are 
permissible and provide instructions to institutions about how to 
disburse aid and evaluate satisfactory academic progress for students 
enrolled in these programs. These regulations also reduce the steps 
involved in gaining approval for direct assessment programs, which 
reduces the burden associated with administering these programs and 
reduces the risk that an institution could invest resources in 
designing a high-quality 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 one 
of those models, and administering it properly, thus avoiding improper 
payments and improving the student experience.
    The 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 regulations 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 will 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 regulatory action will 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

[[Page 54785]]

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 
direct assessment models since licensing boards may resist change--
although in the wake of COVID-19 we are seeing greater receptivity 
among licensing boards to distance learning.\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. However, despite the 
increase in enrollments in online options, the total number of 
postsecondary enrollments has been in decline for the last several 
years. Therefore, it is clear that an increase in the percentage of 
students who enroll in online classes will, alone, 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

[[Page 54786]]

 
    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 information about the number and distribution of distance 
education programs and students has clearly been temporarily altered in 
2020 because of COVID-19 and the disruption of ground-based campus 
operations during times of mandatory or recommended quarantine. While 
some students may have withdrawn because of COVID-19 related 
circumstances, the Department believes that most students continued 
their program, albeit at least temporarily in a distance format. The 
extent to which this transformation continues in the remainder of 2020 
and beyond will depend on the further developments with respect to 
COVID-19, the experience students have in their distance education 
courses and the value they place on campus activities, and the 
decisions institutions make about resuming on-campus programs. 
Additionally, as noted by the commenter, adverse economic conditions 
have been associated with increases in postsecondary enrollment, 
particularly for programs with an emphasis on career training and 
development. Postsecondary enrollment increased substantially from 
2007-08 to 2010-11 as students responded to the recession during that 
time.\31\ Table 2 reflects this increase and the significant growth in 
proprietary enrollment during this period. The shape of the economic 
recovery from COVID-19 and the experience and outcomes of those who 
pursued postsecondary credentials during the last recession may affect 
how big an increase is seen in future postsecondary enrollment. The 
Department believes it is reasonable to expect some additional increase 
in new distance education students, the possibility of which is 
incorporated into the cost estimate in the Net Budget Impact section of 
this RIA.
---------------------------------------------------------------------------

    \31\ Foote, A. & Grosz, M. (2019). The Effect of Local Labor 
Market Downturns on Postsecondary Enrollment and Program Choice. MIT 
Press Journals.
    Schmidt, Erik, ``Postsecondary Enrollment Before, During, and 
Since the Great Recession,'' P20-580, Current Population Reports, 
U.S. Census Bureau, Washington, DC, 2018. (https://www.census.gov/content/dam/Census/library/publications/2018/demo/P20-580.pdf).
    Barr, Andrew, and Sarah Turner. 2012. ``Out of a Job and into 
School: Labor Market Policies and College Enrollment during the 
Great Recession.'' Working Paper, University of Virginia.
    \32\ U.S. Department of Education, National Center for Education 
Statistics, Digest of Education Statistics 2018, Table 303.20: Total 
fall enrollment in all postsecondary institutions participating in 
title IV programs and annual percentage change in enrollment, by 
degree-granting status and control of institution: 1995 through 
2017. Available at https://nces.ed.gov/programs/digest/d18/tables/dt18_303.20.asp. Last Accessed May 26, 2020.

                                        Table 2 32--Trends in Fall Enrollment 2007-2013 by Control of Institution
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                 Public                      Private                    Proprietary                     Total
                Year                 -------------------------------------------------------------------------------------------------------------------
                                          Number        Percent        Number        Percent        Number        Percent        Number        Percent
--------------------------------------------------------------------------------------------------------------------------------------------------------
2007................................      13,603,772  ...........       3,595,466  ...........       1,478,231  ...........      18,677,469  ...........
2008................................      14,090,863          3.6       3,684,190          2.5       1,778,731         20.3      19,553,784          4.7
2009................................      14,936,402          6.0       3,793,751          3.0       2,123,270         19.4      20,853,423          6.6
2010................................      15,279,455          2.3       3,881,630          2.3       2,430,657         14.5      21,591,742          3.5
2011................................      15,251,185         -0.2       3,954,173          1.9       2,368,440         -2.6      21,573,798         -0.1
2012................................      15,000,302         -1.6       3,973,422          0.5       2,174,457         -8.2      21,148,181         -2.0
2013................................      14,856,309         -1.0       3,990,858          0.4       2,000,883         -8.0      20,848,050         -1.4
--------------------------------------------------------------------------------------------------------------------------------------------------------

    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

[[Page 54787]]

length of time it takes for the Department to review applications for 
direct assessment programs, and because several audits by the 
Department's OIG in the past decade have been sharply critical of the 
oversight of direct assessment by the Department and accrediting 
agencies.33 34 35 The Department also believes that another 
recent report by the Department's Inspector General, which found one 
institution's team teaching model did not comply with title IV, HEA 
requirements, may have deterred other institutions that were 
considering the development of CBE programs. Even the threat of an 
audit finding recommending the return of hundreds of millions of 
dollars in title IV funds could dissuade institutions from pursuing 
such innovations. This may still be the case even if audit 
recommendations are not accepted by the Department.\36\
---------------------------------------------------------------------------

    \33\ www2.ed.gov/about/offices/list/oig/auditreports/fy2014/a05n0004.pdf.
    \34\ www2.ed.gov/about/offices/list/oig/auditreports/fy2015/a05o0010.pdf.
    \35\ www2.ed.gov/about/offices/list/oig/auditreports/fy2016/a05p0013.pdf.
    \36\ 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.\37\ 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.
---------------------------------------------------------------------------

    \37\ 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.\38\ 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.\39\ As in the 2018 survey, popular fields 
for competency-based programs include nursing, computer and information 
sciences, and business administration.\40\ 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.\41\
---------------------------------------------------------------------------

    \38\ 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.
    \39\ Id., p. 25.
    \40\ Id., p.26.
    \41\ 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 noted in the executive 
summary of the NPRM 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, these final regulations send 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 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 may have not fundamentally transformed the 
way we educate students, monitor their progress, or diagnose when and 
what kind of additional support services a student needs. Many 
institutions 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 rule 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 regulations update 
our definitions of ``distance education'' and ``correspondence 
courses'' to acknowledge that as a result of CBE and

[[Page 54788]]

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 regulations acknowledge that 
adaptive learning can play an important role in a student's educational 
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 final 
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.

Summary of Comments and Changes From NPRM

    As described throughout this preamble, the Department considered a 
number of comments and made some technical corrections and changes in 
these final regulations. One comment focused on the RIA analysis and 
emphasized that the Department should have accounted for the effects of 
COVID-19 and the resulting increase in distance education. The 
commenter noted that previous recessions had resulted in significant 
increases in postsecondary enrollment and that the specifics of the 
COVID-19 situation would likely result in students choosing distance 
education options over traditional, campus-based programs. The 
commenter also pointed out that distance education and competency-based 
programs are often attractive to veterans, students of color, low-
income students, students who are parents, or working students who are 
disproportionately affected by the COVID-19 health effects and economic 
disruption. The commenter encouraged the Department to rescind the 
rule, open a new round of negotiated rulemaking in light of COVID-19, 
or, at least to redo the cost estimates and regulatory analysis for 
these final regulations to take COVID-19 impacts into account.
    The Department appreciates the comment and recognizes that the NPRM 
was published on April 2, 2020, when we were still understanding the 
impact that COVID-19 could have on enrollments in distance learning. 
The rapid transformation of the postsecondary educational landscape as 
a result of COVID-19 supports the Department's point that the creation 
of innovative postsecondary programs, including distance education and 
competency-based programs, will be driven by student demands and other 
events that generate demand. The changes in these final regulations 
allow those student-driven program development decisions to be 
implemented more efficiently while maintaining appropriate safeguards 
for students.
    Another consideration is that the cost estimate for the NPRM and 
these final regulations is intended to capture the impacts of the 
regulatory changes. The rapid transformation to distance education 
occurred independent of these final regulations, although the 
Department did waive several provisions in line with the proposed 
changes in these final regulations to facilitate the response to COVID-
19. For example, the Department waived preapproval requirements that 
would have otherwise delayed institutions in their efforts to move to 
distance learning, and it permitted accreditors to develop policies and 
procedures to enable rapid transition to distance learning without 
going through the regular policy-making process that would have taken 
months to accomplish. In addition, the Department permitted students 
enrolled at foreign institutions to complete up to 25 percent of their 
program at an eligible U.S. institution or an ineligible foreign 
institution so that students whose primary institution suspended 
operations could continue their education elsewhere without 
jeopardizing their continued participate in title IV programs. The 
consequences of COVID-19 and subsequent economic disruption are part of 
the conditions and environment within which these regulations will have 
an impact, and while it may be impossible to definitively distinguish 
between the effects of the regulations versus the effects of COVID-19 
on the transition to distance learning, we attempt in this RIA to do 
so. In light of the recent, COVID-19 related transformation in 
postsecondary education, the Department has updated some of the 
information about such programs and has considered how the experience 
over the past months may increase or accelerate institutions' plans to 
develop additional distance or competency-based programs. This is 
addressed in the Net Budget Impact section of this RIA.

Costs, Benefits, and Transfers

    The Department anticipates that the regulations would affect 
students, IHEs, accrediting agencies, and the Federal Government. State 
government may also be impacted in some instances. Table 3 refers to 
key changes described in the identified preamble sections and 
summarizes potential impacts.

                                         Table 3--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.

[[Page 54789]]

 
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 or, as permitted by these
                                                                        final regulations, asynchronous
                                                                        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. As
                                                                        described in the preamble and further
                                                                        discussed after this table, potential
                                                                        concerns with allowing asynchronous
                                                                        instruction include a lack of direct
                                                                        interaction and the use of the hours for
                                                                        the completion of homework.
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 consider 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 54790]]

 
                   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 respond more
                                                                        quickly 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.                                                        monitor the growth and development of
                                                                        direct assessment programs. Also allows
                                                                        cross-checking with accreditors to be
                                                                        sure program or 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 at entities other than
                                                                        eligible institutions. Benefits students
                                                                        by allowing them to find internships or
                                                                        externships in a variety of settings in
                                                                        which they may wish to pursue a career.
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.

[[Page 54791]]

 
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 to permit
 offering such a program from including                                 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/       Revision from NPRM expands use of
 for title IV disbursement purposes as     Federal Government.          subscription-based model to all types of
 standard or non-standard term program                                  programs, not just direct assessment
 for which an institution charges a                                     programs. Benefits all parties by
 student for a term with the expectation                                clarifying how title IV aid
 that the student completes a specified                                 disbursements work for subscription-
 number of credit hours within the term.                                based programs. Provides flexibility for
 Clarifies that no specific timeframe                                   students to take advantage of self-
 applies for the terms and that students                                pacing inherent in this program model
 must complete a cumulative number of                                   while limiting potential for abuse by
 credit hours (or the equivalent) during                                requiring completion before subsequent
 or following the term before receiving                                 disbursements of aid. Some protection
 another disbursement of title IV funds.                                for students with possibility of one
                                                                        single subscription period for catch-up
                                                                        work before loss of title IV
                                                                        eligibility. Clarity provided by
                                                                        definition may increase the
                                                                        establishment of direct assessment
                                                                        programs or other programs that could
                                                                        benefit from this approach, 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. A potential risk
                                                                        of expanding subscription-based model
                                                                        beyond direct assessment programs
                                                                        include the possibility that students in
                                                                        subscription-based programs will quickly
                                                                        accrue debt early in their programs
                                                                        while falling behind in their
                                                                        coursework.
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 to ensure access to
 an academic year.                                                      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. As
 resources, and instructor support                                      noted by commenters, the interactions in
 necessary for academic engagement and                                  asynchronous courses may not be
 completion of course objectives''.                                     predictable.
----------------------------------------------------------------------------------------------------------------
                     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.

[[Page 54792]]

 
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 would not, as was     Institutions...............  Allows institutions to use third parties
 proposed in the NPRM, have to                                          to deliver portions of programs, to
 demonstrate experience in delivery and                                 integrate advanced technologies, enable
 assessment of the program or portion                                   student access to specialized facilities
 the ineligible entity delivers and that                                and experts, expand the number of
 the programs have been successful in                                   learning options available to students
 meeting stated learning objectives.                                    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. In the
                                                                        final regulations, ineligible entities
                                                                        will not be required to demonstrate
                                                                        prior experience and success in meeting
                                                                        learning objectives for portions of
                                                                        programs they deliver. However, there
                                                                        are potential risks inherent in
                                                                        contracting with an ineligible entity
                                                                        that lacks demonstrable experience. The
                                                                        outside provider could be of lower
                                                                        quality, have less of a vested interest
                                                                        in the student's success, or lack the
                                                                        necessary resources to provide the
                                                                        educational services agreed upon in the
                                                                        written arrangement.
----------------------------------------------------------------------------------------------------------------
                                      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.

[[Page 54793]]

 
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 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 668.22--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 49 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.
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.

[[Page 54794]]

 
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 be 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.

[[Page 54795]]

 
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 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 
definitions 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 will 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.
    Significant changes in the final regulation from the proposed 
regulations include: (1) The expansion of the subscription-based 
disbursement model to all programs, not just direct assessment; (2) 
modification of the clock hour definition to include clock hours in 
which instruction occurs asynchronously; (3) clarification that 
internships and externships of students at foreign institutions can be 
completed at entities in the United States that are not eligible 
institutions; (4) elimination of the prior experience requirement for 
ineligible entities involved in a written agreement; and (5) withdrawal 
of the proposed provisions regarding change of ownership in Sec.  
668.15.

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 do not 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. To the extent that institutions determine that 
this funding model fits other types of programs, the expansion of this 
disbursement model beyond direct assessment programs in these final 
regulations increases the flexibility and options for students. 
Students will have to evaluate if programs using this model meet their 
schedule and educational objectives.
    The 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,\42\ 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. Even a small percentage of 
that group represents a sizeable potential market for expansion of 
competency-based or other distance education programs. Additionally, 
students outside that age range and those with a degree may want to 
pursue competency-based graduate certificates or degrees to enhance 
their careers. 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 be in class (many institutions do not take 
attendance, and therefore do not monitor how much time an individual 
student actually is in class). 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.\43\ 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

[[Page 54796]]

where students with poor self-directed learning skills might otherwise 
fail.44 45
---------------------------------------------------------------------------

    \42\ 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.
    \43\ California Community College Chancellor's Office, 2017 
Distance Education Report, 2017, http://californiacommunitycolleges.cccco.edu/Portals/0/Reports/2017-DE-Report-Final-ADA.pdf.
    \44\ www.texaspolicy.com/new-study-less-expensive-competency-based-education-programs-just-as-good-as-traditional-programs/.
    \45\ 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 \46\ 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.\47\ 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 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.\48\ 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.\49\
---------------------------------------------------------------------------

    \46\ 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.
    \47\ Id, p. 11, Table 4 Cost Structures of Portfolio and Prior 
Learning Assessment Programs.
    \48\ Id, p.14. Table 5 Costs of Subscription-Based CBE Programs 
Compared to Other Online Providers.
    \49\ 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 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 will also benefit from the changes to the definition of a 
week of instruction. Under the 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 will 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 inclusion of asynchronous coursework that provides for direct 
interaction between students and instructors in the definition of 
clock-hours could expand the options for students in such programs. 
Asynchronous coursework has the advantage of being able to facilitate 
an individualized learning experience for each student in a way that 
cannot be accomplished through scheduled meetings or lectures. Students 
can access lectures and other class activities as their schedules 
permit, spending as much time as is necessary to master a particular 
task or concept. New technologies permit lectures to be combined with 
videos and other resources enabling students to pause at any point to 
reinforce mastery of subject matter. Moreover, the availability of 
asynchronous learning allows for mixed model learning reflective of 
non-title IV eligible programming with theory learned asynchronously 
and specific practical tasks through synchronous instruction.
    Adjustments made for COVID-19 conditions have demonstrated to 
institutions, accrediting agencies, and licensing agencies that at 
least some parts of certain clock-hour programs can be delivered 
effectively through asynchronous coursework. While this will need to be 
monitored on an ongoing basis, this development will benefit students 
involved in these programs.
    The Department provides additional detail related to burden 
estimates in the Paperwork Reduction Act section of this final rule and 
none of the burden is assigned to students in that analysis.

Institutions

    Institutions should benefit from the 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 six institutions, as of 
2020, have been approved by the Department to offer direct assessment 
programs. This indicates that there could be 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 regulations will reduce burden and provide 
clarity to encourage more institutions to experiment with direct 
assessment programs. Under the rule, the Department is 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

[[Page 54797]]

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 will 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 regulations 
are described in the Net Budget Impact section of this analysis.
    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. The inclusion of asynchronous 
coursework with sufficient monitoring of participation and direct 
interaction between instructors and students in the definition of clock 
hour in these final regulations could expand institutions' program 
offerings. 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 will be served or that more students will persist to 
completion.
    The regulations 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.50 51
---------------------------------------------------------------------------

    \50\ www.bls.gov/ooh/personal-care-and-service/barbers-hairstylists-and-cosmetologists.htm.
    \51\ www.bls.gov/ooh/healthcare/massage-therapists.htm.
---------------------------------------------------------------------------

    Institutions will also benefit from simplifications to the formula 
for clock-to-credit hour conversions. The 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 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.
    Institutions will also benefit from the options allowed in these 
final regulations with respect to asynchronous coursework in clock-hour 
programs and the expansion of subscription-based disbursement beyond 
direct assessment programs. Institutions considering asynchronous 
coursework would have to invest in systems to monitor active 
engagement, but several such technologies are available. Expanding 
subscription-based disbursement could lead to economies of scale that 
make it worthwhile for institutions to develop such subscription-based 
pricing plans. These changes from the NPRM give institutions additional 
options in designing their programs. This could also result in 
additional competition from expanded course offerings at other 
institutions.
    As discussed further in the Paperwork Reduction Act of 1995 section 
of this preamble, the regulations are expected to result in a net 
reduction in burden for institutions. 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.\52\ 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 regulations also impose burden related to reporting 
subsequent direct assessment programs estimated to impose 18 hours of 
burden annually for a cost of $1,926 using the same hourly rate of 
$53.47 multiplied by two for overhead and benefits for a rate of 
$106.94. Together, the estimated net reduction in burden for 
institutions is -2,790 hours and $-298,363.
---------------------------------------------------------------------------

    \52\ www.bls.gov/oes/current/oes119033.htm.
---------------------------------------------------------------------------

Accrediting Agencies

    The 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

[[Page 54798]]

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. 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 final rule and 
does not estimate any additional burden to accrediting agencies from 
the regulations.

Federal Government

    In the 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 
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 regulations will have a net Federal budget 
impact for Federal student loan cohorts between 2020-2029, of $[-54] 
million in outlays in the primary estimate scenario and an increase in 
Pell Grant outlays of $1,163 million over 10 years, for a total net 
impact of $1,109 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 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 
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 preamble 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 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 \53\ 
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).\54\ 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.\55\ 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.
---------------------------------------------------------------------------

    \53\ U.S. Department of Education, Official Cohort Default Rates 
for Schools, PEPS300.xls available at www2.ed.gov/offices/OSFAP/defaultmanagement/cdr.html.
    \54\ 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.
    \55\ 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 addressed in separate notices of 
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.\56\
---------------------------------------------------------------------------

    \56\ 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

[[Page 54799]]

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 5. Instead, we assume that the growth associated 
with programs that are developed or expanded in part because the 
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 CBE 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 fewer 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 
particularly appeal to non-traditional students. Tables 4.A to 4.E 
illustrate the changes in title IV grant and loan volume developed for 
use in estimating the net budget impact of these 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 regulations. As noted 
in response to the comment about the RIA in the NPRM, the expansion of 
distance education in response to COVID-19 disruptions is not a 
response to these regulations, and the extent to which the 
transformation will persist is unknown. Instead, the response to COVID-
19 has provided evidence that additional flexibilities are necessary 
and appropriate to enable institutions to adapt to the changing needs 
of students and society.
    We did not increase the estimated number of students to reflect the 
current shift of campus-based students to distance learning, nor did we 
attribute to the regulation the possibility that some students may 
prefer that distance programs or alternative types of programs like CBE 
after their experience during the COVID-19 shutdown. Additionally, any 
COVID-19 related economic downturn will be reflected in future baseline 
updates, with the potential increase in enrollment and related 
financial aid as a reaction to economic conditions and not driven by 
the changes in these final regulations. However, we did recognize that 
institutions' experience in shifting programs to distance platforms may 
encourage them to accelerate the development of distance of CBE 
programs. Students may also decide that distance learning is a good 
approach for them and consider it for furthering their education or for 
future programs. This is reflected in an increase in programs in Table 
4.A to 968 compared to 864 in the NPRM, leading to an estimated 60,379 
additional Pell Grant recipients. On the other hand, because the rapid 
shift to distance may provide students with sub-optimal experiences, 
there could also be a negative backlash in which students will resist 
engaging in distance learning if their experience during the COVID-19 
necessitated transition was less than satisfactory.

                                Table 4.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........................................         24         72         95        150        225        275        325        375        420        450
75........................................         12         20         40         60         90        110        135        150        175        200
150.......................................         10         18         26         40         68         75         90        113        120        128
350.......................................          8         15         25         30         38         50         60         70         80         90
750.......................................          3          8         14         20         30         38         48         56         65         70
1500......................................          1          4          7         10         14         18         20         25         28         30
--------------------------------------------------------------------------------------------------------------------------------------------------------

    As seen in Table 4.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; \57\ 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.
---------------------------------------------------------------------------

    \57\ 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.
---------------------------------------------------------------------------

    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.\58\ 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.
---------------------------------------------------------------------------

    \58\ 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.

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

[[Page 54800]]

    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 4.B.

                                            Table 4.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 4.C--Number of Additional Undergraduate Students
--------------------------------------------------------------------------------------------------------------------------------------------------------
              Size of program                  2021       2022       2023       2024       2025       2026       2027       2028       2029       2030
--------------------------------------------------------------------------------------------------------------------------------------------------------
25........................................        498      1,404      1,663      2,438      3,375      3,781      4,063      4,688      4,725      5,063
75........................................        747      1,170      2,100      2,925      4,050      4,950      6,075      6,750      7,875      9,000
150.......................................      1,245      2,106      2,730      3,900      6,075      6,750      8,100     10,125     10,800     11,520
350.......................................      2,324      4,200      6,563      7,875      9,975     12,250     14,700     17,150     19,600     22,050
750.......................................      1,743      4,800      8,400     12,000     16,875     21,375     27,000     31,500     36,563     39,375
1,500.....................................      1,245      4,980      8,400     12,000     16,380     21,060     22,500     28,125     31,500     33,750
                                           -------------------------------------------------------------------------------------------------------------
    Total.................................      7,802     18,660     29,855     41,138     56,730     70,166     82,438     98,338    111,063    120,758
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                                    Table 4.D--Number of Additional Graduate Students
--------------------------------------------------------------------------------------------------------------------------------------------------------
              Size of program                  2021       2022       2023       2024       2025       2026       2027       2028       2029       2030
--------------------------------------------------------------------------------------------------------------------------------------------------------
25........................................        100        400        710      1,310      2,250      3,090      4,060      4,690      5,780      6,190
75........................................        150        330        900      1,580      2,700      3,300      4,050      4,500      5,250      6,000
150.......................................        260        590      1,170      2,100      4,050      4,500      5,400      6,750      7,200      7,680
350.......................................        480      1,050      2,190      2,630      3,330      5,250      6,300      7,350      8,400      9,450
750.......................................        360      1,200      2,100      3,000      5,630      7,130      9,000     10,500     12,190     13,130
1,500.....................................        260      1,020      2,100      3,000      4,620      5,940      7,500      9,380     10,500     11,250
                                           -------------------------------------------------------------------------------------------------------------
    Total.................................      1,610      4,590      9,170     13,620     22,580     29,210     36,310     43,170     49,320     53,700
--------------------------------------------------------------------------------------------------------------------------------------------------------

    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,\59\ but this 
varies significantly by institution and program type. One motivating 
factor 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 expected family contribution (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

[[Page 54801]]

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 CBE 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 47 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 4.E.
---------------------------------------------------------------------------

    \59\ U.S. Department of Education, The FY 2021 Justification of 
Appropriations Estimates to Congress Vol. II: Student Financial 
Assistance, p. p-11. Available at www2.ed.gov/about/overview/budget/budget21/justifications/p-sfa.pdf.

                                                     Table 4.E--Estimated Additional Pell Recipients
--------------------------------------------------------------------------------------------------------------------------------------------------------
              Size of program                  2021       2022       2023       2024       2025       2026       2027       2028       2029       2030
--------------------------------------------------------------------------------------------------------------------------------------------------------
25........................................        249        702        831      1,219      1,688      1,891      2,031      2,344      2,363      2,531
75........................................        374        585      1,050      1,463      2,025      2,475      3,038      3,375      3,938      4,500
150.......................................        623      1,053      1,365      1,950      3,038      3,375      4,050      5,063      5,400      5,760
350.......................................      1,162      2,100      3,281      3,938      4,988      6,125      7,350      8,575      9,800     11,025
750.......................................        872      2,400      4,200      6,000      8,438     10,688     13,500     15,750     18,281     19,688
1,500.....................................        623      2,490      4,200      6,000      8,190     10,530     11,250     14,063     15,750     16,875
                                           -------------------------------------------------------------------------------------------------------------
    Total.................................      3,901      9,330     14,928     20,569     28,365     35,083     41,219     49,169     55,531     60,379
--------------------------------------------------------------------------------------------------------------------------------------------------------

    We also assumed a distribution of Pell recipients based on expected 
growth in programs by type and control of institutions, as shown in 
Table 4.F. However, the share of programs reflected in Table 4.F does 
not necessarily reflect the share of students at each type of 
institution.

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

    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 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 60,379 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 $1,397 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 4.G presents the 
assumed borrowing rate by loan type of the additional students.

                                                    Table 4.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 PB2021 estimates to estimate a total increase in volume by loan 
type, as shown in Tables 4.H and 4.I.

                                             Table 4.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
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 54802]]


                                                Table 4.I--Estimated Additional Loan Volume by Loan Type
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
--------------------------------------------------------------------------------------------------------------------------------------------------------
Additional loan volume                                                  2021               2022               2023               2024               2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Subsidized...............................................         14,886,216         35,603,280         56,963,340         78,675,469        108,496,125
Unsubsidized.............................................         19,867,793         47,825,580         77,175,175        106,792,950        148,519,140
Parent PLUS..............................................         14,472,710         35,230,080         57,590,295         80,711,775        113,006,160
Grad Unsubsidized........................................         11,641,910         33,591,915         67,784,640        101,203,410        168,570,990
Grad PLUS................................................         10,460,975         30,707,100         63,066,675         95,782,650        161,672,800
--------------------------------------------------------------------------------------------------------------------------------------------------------
Additional loan volume                                                  2026               2027               2028               2029               2030
--------------------------------------------------------------------------------------------------------------------------------------------------------
Subsidized...............................................        134,508,701        158,032,688        188,955,506        213,906,375        233,122,354
Unsubsidized.............................................        184,467,071        218,541,813        261,233,569        296,870,063        324,113,130
Parent PLUS..............................................        143,419,815        171,305,125        207,197,113        238,340,125        263,975,895
Grad Unsubsidized........................................        220,725,365        277,172,385        333,617,760        384,769,980        422,887,500
Grad PLUS................................................        214,182,325        273,232,750        333,164,475        391,600,800        438,460,500
--------------------------------------------------------------------------------------------------------------------------------------------------------

    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 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 
4.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 4.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.
    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 $107 billion. The assumed 
changes in loan volume would result in a small savings that represents 
the net impact of offsetting subsidy changes by loan type and risk 
group due to positive subsidy rates for Subsidized and Unsubsidized 
Stafford loans and negative subsidy rates for PLUS Loans. Given the 
higher loan amounts associated with PLUS loans and loans to graduate 
students, the negative subsidy rates that range from -20.57 in 2021 to 
-16.60 in 2028 generate significant savings ($-427 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 
regulations. We are uncertain to what extent and in what direction the 
performance of programs that expand or develop under the 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 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 5 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.

[[Page 54803]]



                Table 5--Estimated Net Impact of Pell Grant and Loan Changes-- 2021-2030 Outlays
                                                     [$mns]
----------------------------------------------------------------------------------------------------------------
                                                                       Main            Alt 1           Alt 2
----------------------------------------------------------------------------------------------------------------
Pell Grants.....................................................           1,163             465           1,804
Loans...........................................................             -54             -26             107
                                                                 -----------------------------------------------
    Overall.....................................................           1,109             439           1,911
----------------------------------------------------------------------------------------------------------------

    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 5, 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 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''.\60\ It is also unclear if the size and type of existing CBE 
programs is representative of future CBE programs, especially direct 
assessment programs.
---------------------------------------------------------------------------

    \60\ 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 6. 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 6--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.
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.
------------------------------------------------------------------------


[[Page 54804]]

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 7--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..
------------------------------------------------------------------------
                                                  $-0.30          $-0.30
                                         -------------------------------
                                                  Not Quantified
------------------------------------------------------------------------
                Category                               Costs
------------------------------------------------------------------------
                Category                             Transfers
------------------------------------------------------------------------
Increased transfers of Pell Grants......              7%              3%
                                                  $101.2          $109.6
Increased transfers of loans to students           $-6.9           $-6.1
 in additional programs established, in
 part, due to the regulations...........
------------------------------------------------------------------------

Alternatives Considered

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

                  Table 8--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.
------------------------------------------------------------------------

Regulatory Flexibility Act Analysis

    These final regulations are expected to have a significant impact 
on institutions, many of which are considered to be small entities. The 
analysis presented below evaluates the impact of the final regulations 
on these small entities.

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

    The Department is regulating to reflect the 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 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 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 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.

[[Page 54805]]

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

    These final regulations amend the Institutional Eligibility 
regulations issued under the HEA, related to distance education and 
innovation in 34 CFR part 600. In addition, these regulations amend the 
Student Assistance General Provisions regulations issued under the HEA 
in 34 CFR parts 602 and 668. The changes to part 600 are authorized by 
20 U.S.C. 1001, 1002, 1003, 1088, 1091, 1094, 1099b, and 1099c. The 
change to part 602, removing the definition of ``Distance education'' 
(now defined in part 600), is authorized by 20 U.S.C. 1099b while the 
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 final 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 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 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 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 most 
accurately reflects a common basis for determining size categories that 
is linked to the provision of educational services.

                         Table 9 \61\--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 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 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 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 enough 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 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.
---------------------------------------------------------------------------

    \61\ U.S. Department of Education analysis of IPEDs 2015-16 
enrollment data.

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

[[Page 54806]]

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 final rule. 
Overall, the Department estimates $300,288 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 burden reduction ($300,288*85 percent 
= $255,245) will be enjoyed by small entities. The Department is unable 
to estimate the effect of this change on the profits of institutions, 
including those considered to be small entities. No mechanism exists to 
track profits at institutions. The only way to obtain data on profits 
would be through a manual review of financial statements submitted by 
each institution. Even with that information, the effect of this change 
on profits could not be estimated with any degree of accuracy. First, 
it would be necessary to determine which schools used (NPV), which was 
optional per our regulations. Second, it would have to be known, for 
the period that an institution used NPV, what revenue from 
institutional loans would have been had that revenue included only loan 
payments received by the institution during the fiscal year. Also, 
despite the estimated cost savings due to paperwork burden reduction, 
the full time equivalent of those employees who calculated NPV most 
likely remains a salary expense. Finally, any savings identified that 
would benefit profits would have to be offset by the corresponding 
reduction in revenue resulting from no longer being able to apply NPV. 
Regarding overall economic impact, it would be negligible given that 
total savings of $255,245 is spread over 85% of the nearly 3,000 
participating for-profit institutions. There are also some small 
increases in burden related to reporting about direct assessment 
programs that is expected to increase burden on small entities by 
approximately 10 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 
Regulations

    The 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 regulations and considered several 
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. 
In proposing to remove limits on the portion of a program that may be 
offered through a written arrangement with an ineligible entity, the 
Department sought to make a wider range of occupationally-related 
educational resources available to students than could be reasonably 
provided by the institutions they attend. It was the Department's 
belief that this change would particularly benefit smaller institutions 
whose resources are typically more limited than those of larger 
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.
    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.
Section 600.21--Updating Application Information
    Requirements: The regulations in Sec.  600.21 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 regulations 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 will provide more than 25 percent of a program. We also 
intend to request that institutions report additional information 
related to the use of asynchronous distance education in clock hour 
programs and would incorporate this change in the Department's system 
for reporting information related to the eligibility of academic 
programs. We would meet all applicable Paperwork Reduction Act of 1995 
(44 U.S.C. 3501-3520) requirements before collecting this information.
    Burden Calculation: We believe that the reporting of written 
arrangements will 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 activities for a total estimated burden of 18 hours under OMB 
Control Number 1845-NEW1.
    We estimate that there are 12 proprietary institutions that will be 
required to report this information for 6 burden hours (12 institutions 
x .5 hours = 6 hours). We estimate that there are 11 private 
institutions that will 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 will be required to report this 
information for 7 burden hours (13 institutions x .5 hours = 7 hours).

[[Page 54807]]



                               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           1,926
----------------------------------------------------------------------------------------------------------------

Section 668.5--Written Arrangements To Provide Education Programs
    Requirements: The proposed regulations in Sec.  668.5 which 
required an eligible institution to demonstrate how an 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 has 
been removed from the final rule.
    Burden Calculation: The proposed burden of 120 hours in the 
information collection 1845-NEW2 is being withdrawn.
Section 668.28--Non-Title IV Revenue (90/10)
    Requirements: The regulations in Sec.  668.28 remove the Net 
Present Value calculation currently in the regulations.
    Burden Calculation: This regulatory language change will remove 
burden from the institution. Based on the explanation provided in the 
preamble, the regulations in Sec.  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 will be eliminated. Upon the 
effective date of these regulation, the currently assessed 2,808 burden 
hours will 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 \62\ x 2 to account for benefits and expenses for a 
total per hour cost of $106.94. As 85 percent of for-profit 
institutions are considered to be small entities, most of the reduction 
and corresponding cost savings will accrue to those institutions.
---------------------------------------------------------------------------

    \62\ www.bls.gov/oes/current/oes119033.htm.

 
----------------------------------------------------------------------------------------------------------------
                                                                         OMB control No. &
          Regulatory section               Information collection         estimated burden      Estimated costs
                                                                         (change in burden)       $106.94/hour
----------------------------------------------------------------------------------------------------------------
Sec.   600.21 Updating application     The regulations in Sec.        1845-NEW1--18 hours....             $1,926
 information.                           600.21 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 been awarded such
                                        approval. The regulations
                                        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 regulations in Sec.        1845-NEW2--0 hours.....                  0
 provide education programs.            668.5 requiring the eligible
                                        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 has been removed
                                        from the final rule and this
                                        estimated burden is
                                        withdrawn.
Sec.   668.28 Non-title IV revenue     The regulations in Sec.        -2,808.................          (300,288)
 (90/10).                               668.28 removes the Net
                                        Present Value calculation
                                        currently in the regulations.
----------------------------------------------------------------------------------------------------------------


[[Page 54808]]

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

 
----------------------------------------------------------------------------------------------------------------
                        OMB control No.                            Total burden hours     Change in burden hours
----------------------------------------------------------------------------------------------------------------
1845-NEW1.....................................................                     + 18                     + 18
1845-NEW2.....................................................                        0                        0
1845-0096.....................................................                   -2,808                   -2,808
                                                               -------------------------------------------------
    Total.....................................................                   -2,790                   -2,790
----------------------------------------------------------------------------------------------------------------

Intergovernmental Review

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

Assessment of Educational Impact

    Based on the response to the NPRM and on our review, we have 
determined that these final regulations do not 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. In the NPRM we noted that parts 600 and 668 may have 
federalism implications and encouraged State and local elected 
officials to review and provide comments on these final regulations. In 
the Public Comment section of this preamble, we discuss any comments we 
received on this subject.
    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 602

    Colleges and universities, 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 amends 
parts 600, 602, and 668 of title 34 of the Code of Federal Regulations 
as follows:

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

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

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


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''.
0
c. Adding, in alphabetical order, a definition for ``Juvenile justice 
facility''.
0
d. Revising the definition ``Nonprofit institution''.
0
e. Removing the authority citation at the end of the section.
    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

[[Page 54809]]

    (iv) In distance education, 50 to 60 minutes in a 60-minute period 
of attendance in--
    (A) A synchronous or asynchronous class, lecture, or recitation 
where there is opportunity for direct interaction between the 
instructor and students; or
    (B) An asynchronous learning activity involving academic engagement 
in which the student interacts with technology that can monitor and 
document the amount of time that the student participates in the 
activity.
    (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 if it exceeds an agency's or State'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 paragraphs (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 scheduled 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 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

[[Page 54810]]

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 a new paragraph (b)(2).
0
c. Removing the authority citation at the end of the section.
    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) and 
removing the authority citation at the end of the section 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, 
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 revised to read as follows:


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

    (a) Initial eligibility application. (1) An institution that wishes 
to establish its eligibility to participate in any HEA program must 
submit an application to the Secretary for a determination that it 
qualifies as an eligible institution under this part. The Secretary 
must ensure prompt action is taken by the Department on any materially 
complete application required under this section.
    (2) If the institution also wishes to be certified to participate 
in the title IV, HEA programs, it must indicate that intent on the 
application, and submit all the documentation indicated on the 
application to enable the Secretary to determine that it satisfies the 
relevant certification requirements contained in 34 CFR part 668, 
subparts B and L.
    (3) A freestanding foreign graduate medical school, or a foreign 
institution that includes a foreign graduate medical school, must 
include in its application to participate--
    (i)(A) A list of all medical school educational sites and where 
they are located, including all sites at which its students receive 
clinical training, except those clinical training sites that are not 
used regularly, but instead are chosen by individual students who take 
no more than two electives at the location for no more than a total of 
eight weeks; and
    (B) The type of clinical training (core, required clinical 
rotation, not required clinical rotation) offered at each site listed 
on the application in accordance with paragraph (a)(3)(i)(A) of this 
section; and
    (ii) Whether the school offers--
    (A) Only post-baccalaureate/equivalent medical programs, as defined 
in Sec.  600.52;
    (B) Other types of programs that lead to employment as a doctor of 
osteopathic medicine or doctor of medicine; or
    (C) Both; and
    (iii) Copies of the formal affiliation agreements with hospitals or 
clinics providing all or a portion of a clinical training program 
required under Sec.  600.55(e)(1).
    (b) Reapplication. (1) A currently designated eligible institution 
that is not participating in the title IV, HEA programs must apply to 
the Secretary for a determination that the institution continues to 
meet the requirements in this part if the Secretary requests the 
institution to reapply. If the institution chooses to be certified to 
participate in the title IV, HEA programs, it must submit an 
application to the Secretary and must submit all the supporting 
documentation indicated on the application to enable the Secretary to 
determine that it satisfies the relevant certification requirements 
contained in subparts B and L of 34 CFR part 668.
    (2)(i) A currently designated eligible institution that 
participates in the title IV, HEA programs must apply to the Secretary 
for a determination that the institution continues to meet the 
requirements in this part and in 34 CFR part 668 if the institution 
chooses to--
    (A) Continue to participate in the title IV, HEA programs beyond 
the scheduled expiration of the institution's current eligibility and 
certification designation;
    (B) Reestablish eligibility and certification as a private 
nonprofit, private for-profit, or public institution following a change 
in ownership that results in a change in control as described in Sec.  
600.31; or
    (C) Reestablish eligibility and certification after the institution 
changes its status as a proprietary, nonprofit, or public institution.
    (ii) The Secretary must ensure prompt action is taken by the 
Department on any materially complete application required under 
paragraph (a)(2)(i) of this section.
    (3) A freestanding foreign graduate medical school, or a foreign 
institution that includes a foreign graduate medical school, must 
include in its reapplication to participate--
    (i)(A) A list of all of the foreign graduate medical school's 
educational sites and where they are located, including all sites at 
which its students receive clinical training, except those clinical 
training sites that are not used regularly, but instead are chosen by 
individual students who take no more than two electives at the location 
for no more than a total of eight weeks; and
    (B) The type of clinical training (core, required clinical 
rotation, not required clinical rotation) offered at each site listed 
on the application in accordance with paragraph (b)(3)(i)(A) of this 
section; and
    (ii) Whether the school offers--
    (A) Only post-baccalaureate/equivalent medical programs, as defined 
in Sec.  600.52;
    (B) Other types of programs that lead to employment as a doctor of 
osteopathic medicine or doctor of medicine; or
    (C) Both; and
    (iii) Copies of the formal affiliation agreements with hospitals or 
clinics providing all or a portion of a clinical training program 
required under Sec.  600.55(e)(1).
    (c) Application to expand eligibility. A currently designated 
eligible institution that wishes to expand the scope of its eligibility 
and certification and disburse title IV, HEA Program funds to students 
enrolled in that expanded scope must apply to the Secretary and wait 
for approval to--
    (1) Add an educational program or a location at which the 
institution offers or will offer 50 percent or more of an educational 
program if one of the

[[Page 54811]]

following conditions applies, otherwise it must report to the Secretary 
under Sec.  600.21:
    (i) The institution participates in the title IV, HEA programs 
under a provisional certification, as provided in 34 CFR 668.13.
    (ii) The institution receives title IV, HEA program funds under the 
reimbursement or cash monitoring payment method, as provided in 34 CFR 
part 668, subpart K.
    (iii) The institution acquires the assets of another institution 
that provided educational programs at that location during the 
preceding year and participated in the title IV, HEA programs during 
that year.
    (iv) The institution would be subject to a loss of eligibility 
under 34 CFR 668.188 if it adds that location.
    (v) The Secretary notifies, or has notified, the institution that 
it must apply for approval of an additional educational program or a 
location under Sec.  600.10(c).
    (2) Increase its level of program offering (e.g., adding graduate 
degree programs when it previously offered only baccalaureate degree 
programs);
    (3) Add an educational program if the institution is required to 
apply to the Secretary for approval under Sec.  600.10(c);
    (4) Add a branch campus at a location that is not currently 
included in the institution's eligibility and certification 
designation;
    (5) For a freestanding foreign graduate medical school, or a 
foreign institution that includes a foreign graduate medical school, 
add a location that offers all or a portion of the foreign graduate 
medical school's core clinical training or required clinical rotations, 
except for those locations that are included in the accreditation of a 
medical program accredited by the Liaison Committee on Medical 
Education (LCME) or the American Osteopathic Association (AOA); or
    (6) Convert an eligible location to a branch campus.
    (d) Notice and application--(1) Notice and application procedures. 
(i) To satisfy the requirements of paragraphs (a), (b), and (c) of this 
section, an institution must notify the Secretary of its intent to 
offer an additional educational program, or provide an application to 
expand its eligibility, in a format prescribed by the Secretary and 
provide all the information and documentation requested by the 
Secretary to make a determination of its eligibility and certification.
    (ii)(A) An institution that notifies the Secretary of its intent to 
offer an educational program under paragraph (c)(3) of this section 
must ensure that the Secretary receives the notice described in 
paragraph (d)(2) of this section at least 90 days before the first day 
of class of the educational program.
    (B) If an institution does not provide timely notice in accordance 
with paragraph (d)(1)(ii)(A) of this section, the institution must 
obtain approval of the additional educational program from the 
Secretary for title IV, HEA program purposes.
    (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.
    (D) When reviewing an application under paragraph (d)(1)(ii)(C) of 
this section, the Secretary will take into consideration the following:
    (1) The institution's demonstrated financial responsibility and 
administrative capability in operating its existing programs.
    (2) Whether the additional educational program is one of several 
new programs that will replace similar programs currently provided by 
the institution, as opposed to supplementing or expanding the current 
programs provided by the institution.
    (3) Whether the number of additional educational programs being 
added is inconsistent with the institution's historic program 
offerings, growth, and operations.
    (4) Whether the process and determination by the institution to 
offer an additional educational program that leads to gainful 
employment in a recognized occupation is sufficient.
    (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) and (3) 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.
    (2) If the Secretary denies the institution's application to add an 
additional educational program, the Secretary will permit the 
institution to respond to the reasons for the denial and request 
reconsideration of the denial.
    (2) Notice format. An institution that notifies the Secretary of 
its intent to offer an additional educational program under paragraph 
(c)(3) of this section must at a minimum--
    (i) Describe in the notice how the institution determined the need 
for the program and how the program was designed to meet local market 
needs, or for an online program, regional or national market needs. 
This description must contain any wage analysis the institution may 
have performed, including any consideration of Bureau of Labor 
Statistics data related to the program;
    (ii) Describe in the notice how the program was reviewed or 
approved by, or developed in conjunction with, business advisory 
committees, program integrity boards, public or private oversight or 
regulatory agencies, and businesses that would likely employ graduates 
of the program;
    (iii) Submit documentation that the program has been approved by 
its accrediting agency or is otherwise included in the institution's 
accreditation by its accrediting agency, or comparable documentation if 
the institution is a public postsecondary vocational institution 
approved by a recognized State agency for the approval of public 
postsecondary vocational education in lieu of accreditation; and
    (iv) Provide the date of the first day of class of the new program.
    (e) Secretary's response to applications. (1) If the Secretary 
receives an application under paragraph (a) or (b)(1) of this section, 
the Secretary notifies the institution--
    (i) Whether the applicant institution qualifies in whole or in part 
as an eligible institution under the appropriate provisions in 
Sec. Sec.  600.4 through 600.7; and
    (ii) Of the locations and educational programs that qualify as the 
eligible institution if only a portion of the applicant qualifies as an 
eligible institution.
    (2) If the Secretary receives an application under paragraph (a) or 
(b) of this section and that institution applies to participate in the 
title IV, HEA programs, the Secretary notifies the institution--
    (i) Whether the institution is certified to participate in those 
programs;
    (ii) Of the title IV, HEA programs in which it is eligible to 
participate;
    (iii) Of the title IV, HEA programs in which it is eligible to 
apply for funds;
    (iv) Of the effective date of its eligibility to participate in 
those programs; and
    (v) Of the conditions under which it may participate in those 
programs.
    (3) If the Secretary receives an application under paragraph (b)(2) 
of this section, the Secretary notifies the institution whether it 
continues to be certified, or whether it reestablished its

[[Page 54812]]

eligibility and certification to participate in the title IV, HEA 
programs and the scope of such approval.
    (4) If the Secretary receives an application under paragraph (c)(1) 
of this section for an additional location, the Secretary notifies the 
institution whether the location is eligible or ineligible to 
participate in the title IV, HEA programs, and the date of eligibility 
if the location is determined eligible.
    (5) If the Secretary receives an application under paragraph (c)(2) 
of this section for an increase in the level of program offering, or 
for an additional educational program under paragraph (c)(3) of this 
section, the Secretary notifies the institution whether the program 
qualifies as an eligible program, and if the program qualifies, the 
date of eligibility.
    (6) If the Secretary receives an application under paragraph (c)(4) 
or (5) of this section to have a branch campus certified to participate 
in the title IV, HEA programs as a branch campus, the Secretary 
notifies the institution whether that branch campus is certified to 
participate and the date that the branch campus is eligible to begin 
participation.

0
6. Amend Sec.  600.21 by revising paragraph (a)(11) and adding 
paragraphs (a)(12) and (13) and removing the authority citation at the 
end of the section 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 percent of a 
program pursuant to 34 CFR 668.5(c).
* * * * *

0
7. Section 600.52 is amended by revising the definition of ``Foreign 
institution'' and removing the authority citation at the end of the 
section 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 34 CFR 
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 34 CFR 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--
    (1) Enrolling in the coursework, research, work, or special studies 
offered by an eligible institution in the United States; or
    (2) Participating in an internship or externship provided by an 
ineligible organization as described in 34 CFR 668.5(h)(2);
    (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 (3), 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) and removing the 
authority citation at the end of the section 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 34 CFR 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 602--THE SECRETARY'S RECOGNITION OF ACCREDITING AGENCIES

0
9. The authority citation for part 602 continues to read as follows:

    Authority: 20 U.S.C. 1099b, unless otherwise noted.


0
10. Section 602.3 is amended by:
0
a. Adding periods at the ends of paragraphs (a)(1) through (14).
0
b. Redesignating paragraphs (a)(6) through (14) as paragraphs (a)(7) 
through (15).
0
c. Adding a new paragraph (a)(6).
0
d. In paragraph (b), removing the definition of ``Distance education.''
0
e. Removing the authority citation at the end of the section.
    The addition reads as follows:


Sec.  602.3   What definitions apply to this part?

    (a) * * *
    (6) Distance education.
* * * * *

[[Page 54813]]

PART 668--STUDENT ASSISTANCE GENERAL PROVISIONS


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

    Authority: 20 U.S.C. 1001-1003, 1070g, 1085, 1088, 1091, 1092, 
1094, 1099c, 1099c-1, 1221-3, and 1231a, unless otherwise noted.

    Section 668.14 also issued under 20 U.S.C. 1085, 1088, 1091, 
1092, 1094, 1099a-3, 1099c, and 1141.
    Section 668.41 also issued under 20 U.S.C. 1092, 1094, 1099c.
    Section 668.91 also issued under 20 U.S.C. 1082, 1094.
    Section 668.171 also issued under 20 U.S.C. 1094 and 1099c and 
section 4 of Pub. L. 95-452, 92 Stat. 1101-1109.
    Section 668.172 also issued under 20 U.S.C. 1094 and 1099c and 
section 4 of Pub. L. 95-452, 92 Stat. 1101-1109.
    Section 668.175 also issued under 20 U.S.C. 1094 and 1099c.


0
12. Section 668.1 is amended by revising paragraph (b) introductory 
text and removing the authority citation at the end of the section to 
read as follows:


Sec.  668.1  Scope.

* * * * *
    (b) As used in this part, an ``institution,'' unless otherwise 
specified, includes--
* * * * *

0
13. Section 668.2 is amended by:
0
a. Designating the undesignated words and phrases in paragraph (a) as 
paragraphs (a)(1) through (26).
0
b. Adding periods at the ends of newly designated paragraphs (a)(1) 
through (26).
0
c. Removing newly designated paragraph (a)(26).
0
d. Further redesignating newly designated paragraphs (a)(7) through 
(23), (24), and (25) as paragraphs (a)(8) through (24), (26), and (27), 
respectively.
0
e. Adding new paragraphs (a)(7) and (25) and paragraphs (a)(28) through 
(31).
0
f. In paragraph (b):
0
i. Removing the definition of ``Academic Competitiveness Grant (ACG) 
Program'' and the authority citation following the definition;
0
ii. Revising the definition of ``Full-time student'' and removing the 
authority citation following the definition;
0
iii. Adding in alphabetical order the definition of ``Subscription-
based program''; and
0
iv. In the definition of ``Third-party servicer'', revising paragraph 
(1)(i)(D) and removing the authority citation at the end of the 
definition.
    The additions and revisions read as follows:


Sec.  668.2  General definitions.

    (a) * * *
    (7) Direct assessment program.
* * * * *
    (25) Religious mission.
* * * * *
    (28) Teach-out.
    (29) Teach-out agreement.
    (30) Teach-out plan.
    (31) Title IV, HEA program.
    (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 
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 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 (or the equivalent) 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

[[Page 54814]]

the current and most recently attended terms.
* * * * *
    Third-party servicer: (1) * * *
    (i) * * *
    (D) Originating loans;
* * * * *

0
14. Section 668.3 is amended by revising paragraphs (b)(2) and (3) and 
removing the authority citation at the end of the section 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; and
    (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
15. Section 668.5 is amended by:
0
a. Revising paragraphs (a), (c), and (d)(1).
0
b. Adding paragraphs (f), (g), and (h).
0
c. Removing the authority citation at the end of the section.
    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 has not--
    (i) Had its eligibility to participate in the title IV, HEA 
programs terminated by the Secretary;
    (ii) 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;
    (iii) Had its certification to participate in the title IV, HEA 
programs revoked by the Secretary;
    (iv) Had its application for recertification to participate in the 
title IV, HEA programs denied by the Secretary; or
    (v) 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 of the educational program, including in accordance 
with 34 CFR 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 34 CFR 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 
in this part 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--

[[Page 54815]]

    (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, 
or, in the case of an eligible foreign institution, the standards of an 
outside oversight entity, such as an accrediting agency or government 
entity, 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
16. Section 668.8 is amended by revising paragraphs (e)(1)(iii), 
(k)(2), and (l) and removing the authority citation at the end of the 
section to read as follows:


Sec.  668.8  Eligible program.

* * * * *
    (e) * * * (1) * * *
    (iii) The institution can demonstrate reasonable program length, in 
accordance with Sec.  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 least one student 
graduated from the program during the current award year or the two 
preceding award years.
    (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.
* * * * *
    17. 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 eligible 
without further approvals from the Secretary except as required by 34 
CFR 600.10(c)(1)(iii), 600.20(c)(1), or 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.

[[Page 54816]]

    (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
18. 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).
0
k. Removing the authority citation at the end of the section.
    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 Sec.  
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
19. Section 668.14 is amended by revising paragraphs (b)(10), (26), and 
(31) introductory text 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 Sec.  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 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
20. 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)(A), (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. Revising paragraphs (l)(6) and (7).
0
l. Adding paragraph (l)(9).
0
m. Removing the authority citation at the end of the section.
    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

[[Page 54817]]

resume attendance within a payment period or period of enrollment for 
more than 60 calendar days after ceasing attendance, unless the student 
is on an approved leave of absence, as defined in paragraph (d) of this 
section.
    (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 successfully completes--
    (i) One module that includes 49 percent or more of the number of 
days in the payment period, excluding scheduled breaks of five or more 
consecutive days and all days between modules;
    (ii) A combination of modules that when combined contain 49 percent 
or more of the number of days in the payment period, excluding 
scheduled breaks of five or more consecutive days and all days between 
modules; or
    (iii) 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;
    (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 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) of this section 
and, if applicable, paragraph (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.
* * * * *
    (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) * * *
    (6) 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.
    (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

[[Page 54818]]

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
21. Section 668.28 is amended by removing and reserving paragraph (b) 
and removing the authority citation at the end of the section.

0
22. Section 668.34 is amended by:
0
a. Revising paragraph (a)(5).
0
b. Revising paragraph (1) in the definition for ``Maximum timeframe'' 
in paragraph (b).
0
c. Removing the authority citation at the end of the section.
    The revisions read as follows:


Sec.  668.34  Satisfactory academic progress.

    (a) * * *
    (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. * * *
    (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]

    23. 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) and removing the authority 
citation at the end of the section.

0
24. Section 668.113 is amended by:
0
a. Removing the word ``shall'' and adding in its place the word 
``must'' in both instances it is used in paragraph (c) introductory 
text.
0
b. Redesignating paragraphs (d)(1) and (2) as paragraphs (d)(2) and 
(3).
0
c. Adding a new paragraph (d)(1).
0
d. Removing the authority citation at the end of the section.
    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
25. 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 (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 ``; 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 Sec.  668.2.
* * * * *

0
26. Section 668.171 is amended by:
0
a. Removing the word ``or'' at the end of paragraph (i)(1).
0
b. Removing the period and adding in its place ``; or'' in paragraph 
(i)(2).
0
c. Adding paragraph (i)(3).
    The addition reads as follows:


Sec.  668.171  General.

* * * * *
    (i) * * *
    (3) Deny the institution's application for certification or 
recertification to participate in the title IV, HEA programs.

0
27. 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'' 
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 ``entity,'' 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 ``entity,'' after the phrase ``owes the liability by that'' 
in paragraph (b)(2)(ii)(A).
0
h. Adding ``entity,'' 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 text.
0
k. Removing the authority citation at the end of the section.
    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--
* * * * *
    (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
* * * * *

[FR Doc. 2020-18636 Filed 9-1-20; 8:45 am]
BILLING CODE 4000-01-P