[Federal Register Volume 87, Number 202 (Thursday, October 20, 2022)]
[Rules and Regulations]
[Pages 63689-63695]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-22822]


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DEPARTMENT OF EDUCATION

34 CFR Parts 668, 600, and 602

[Docket ID ED-2018-OPE-0076, ED-2018-OPE-0027]
RIN 1840-AD26, 1840-AD36, 1840-AD37, 1840-AD38


Student Assistance General Provisions, Federal Family Education 
Loan Program, and William D. Ford Federal Direct Loan Program; Student 
Assistance General Provisions, The Secretary's Recognition of 
Accrediting Agencies, The Secretary's Recognition Procedures for State 
Agencies; Distance Education and Innovation; Corrections

AGENCY: Office of Postsecondary Education, Department of Education.

ACTION: Final rule; technical corrections.

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SUMMARY: The Department of Education (Department or we) corrects the 
text in regulations issued under the Higher Education Act of 1965, as 
amended (HEA) and published in the Federal Register on: September 23, 
2019, for provisions relating to Borrower Defense to Repayment and 
Financial Responsibility; November 1, 2019, for provisions relating to 
Accreditation, State Authorization, and the Student Assistance General 
Provisions; and September 2, 2020, for provisions relating to Distance 
Education and Innovation, Institutional Eligibility, and the Student 
Assistance General Provisions.

DATES: These corrections are effective October 20, 2022. The 
incorporation by reference of certain publications listed in this 
document is approved by the Director of the Federal Register as of 
October 20, 2022.

FOR FURTHER INFORMATION CONTACT: Gregory Martin, 400 Maryland Avenue 
SW, Room 2C-136, Washington DC 20202. Telephone: (202) 453-7535. Email: 
[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 1-
800-877-8339.

SUPPLEMENTARY INFORMATION:
    Incorporation by Reference. In Sec.  668.172(c)(1) of this 
correction, we reference the following accounting standard: Accounting 
Standards Codification (ASC) 205. ASC 205 provides standards on the 
presentation of financial statements. In Sec.  668.23(d)(1), we 
reference the following accounting standard: Accounting Standards 
Codification

[[Page 63690]]

(ASC) 850. ASC 850 provides for accounting and reporting issues 
concerning related party transactions and relationships. These 
standards are available at www.fasb.org, registration required.

Summary of Corrections

    The Department's Borrower Defense to Repayment Rule, published in 
the Federal Register on September 23, 2019, (84 FR 49788) contains the 
following errors:
    1. The regulations in 34 CFR 668.175(c) mistakenly suggest that an 
institution that is not financially responsible may participate as a 
financially responsible institution by providing any of the financial 
protections included in 34 CFR 668.175(h). However, under Section 
498(c) of the HEA, some options included in 34 CFR 668.175(h) do not 
make an institution financially responsible. To conform the regulations 
to the provisions of the HEA, the reference in 34 CFR 668.175(c) is 
corrected to refer only to the surety provisions in 34 CFR 
668.175(h)(2)(i).
    2. The audit requirements in 34 CFR 668.23(d) do not specify that 
the Supplemental Schedule is part of the audited financial statements 
submission, as required under 34 CFR 668.172(a) and Section 2 of 
Appendix A and B to subpart L of the General Provisions regulations, 
and do not cite the current audit guidance and accounting standards. 
This correction updates 34 CFR 668.23(d).
    3. The financial ratios in 34 CFR 668.172(b) do not conform to the 
related revisions to the accounting terminology and to the definition 
of terms as specified in Appendices A and B to subpart L of the General 
Provisions regulations. This correction updates 34 CFR 668.172(b).
    4. Two of the terms described in 34 CFR 668.172(c)(1), 
``extraordinary gains and losses'', and ``income or losses from 
discontinued operations'' do not reflect changes in accounting 
standards. The accounting standards eliminated ``extraordinary gains 
and losses'' and modified the requirements for ``income and losses from 
discontinued operations.'' This correction updates 34 CFR 668.172(c) to 
conform to accounting standards.
    The Department's Accreditation and State Authorization Rule, 
published in the Federal Register on November 1, 2019, (84 FR 58834) 
contained the following errors:
    1. The regulations in 34 CFR 602.32(h)(4)(ii) relating, in part, to 
the disposition of an accrediting agency's recognition conflict with 
related provisions in 34 CFR 602.34, Advisory Committee meetings, and 
34 CFR 602.36, Senior Department Official's decision. Under 34 CFR 
602.23(h)(4)(iii), Department staff have the option to recommend that 
the senior Department official renew an agency with compliance 
reporting, but that option is not aligned with 34 CFR 602.34(g) and 34 
CFR 602.36(e), which require continuing recognition pending submission 
of a compliance report. This correction updates 34 CFR 602 (h)(4)(ii) 
to conform with the provisions in 602.34(g) and 602.36(e). We note that 
we acknowledged that 34 CFR 602.32(h)(4)(ii) did not align with 
602.36(e) at page 27437 of the proposed rule (84 FR 27404) and it was 
an oversight that we did not correct this inconsistency at that time. 
Additionally, allowing renewal under 34 CFR 602.32(h)(4)(ii), when 
there are noncompliant issues would violate section 496b(d) of the HEA 
(20 U.S.C. 1099b), which provides that no accrediting agency or 
association may be determined by the Secretary to be a reliable 
authority, unless the agency or association meets criteria established 
by the Secretary.
    2. The eligible program regulations in 34 CFR 668.8(d)(4)(i) were 
not updated to conform to a related revision to 34 CFR 602.11. The 
amendment to Sec.  602.11 revised the requirements for establishing the 
geographic area of an accrediting agency's activities that may cause 
accrediting agencies previously defined as ``regional agencies'' to be 
defined instead as agencies whose activities extend throughout the 
United States. This correction updates 34 CFR 668.8(d)(4)(i) to conform 
with the current provisions in 34 CFR 602.11 by referring to 
accrediting agencies that were defined as regional areas on October 1, 
2007 rather than referring to agencies that were previously defined as 
``regional.''
    3. The provisional certification provisions in 34 CFR 
668.13(c)(2)(i) erroneously reference paragraph (c)(1)(i) instead of 
paragraph (c)(1)(i)(A). The correction updates 34 CFR 668.13(c)(2)(i) 
with the correct cross-reference applicable to institutions seeking 
initial participation in the Title IV, HEA programs.
    4. The provisional certification provisions in 34 CFR 
668.13(c)(2)(ii) erroneously reference ``paragraphs (c)(1)(ii), (iii), 
(iv) or (e)(2)'' instead of referencing ``paragraphs (c)(1)(i)(B), (C), 
(D) or (c)(1)(ii).'' The correction updates 34 CFR 668.13(c)(2)(ii) 
with the correct cross-references.
    5. The provisional certification provisions in 34 CFR 
668.13(c)(2)(iii) erroneously reference paragraph (c)(1)(v) instead of 
paragraph (c)(1)(i)(E). The correction updates 34 CFR 668.13(c)(2)(iii) 
with the correct cross-reference.
    6. The provisional certification provisions in 34 CFR 
668.13(c)(1)(i)(E) erroneously reference 34 CFR part 603 instead of 34 
CFR part 602. The correction updates 34 CFR 668.13(c)(1)(i)(E) with the 
correct cross-reference.
    The Department's Distance Education and Innovation Rule, published 
in the Federal Register on September 2, 2020, (85 FR 54742) contained 
the following errors:
    1. The amendatory instructions at the end of the rule mistakenly 
instructed the Office of the Federal Register to revise Sec.  
600.10(c)(1)(iii) with language that was supposed to amend paragraph 
(c)(1)(ii). Consequently, Sec.  600.10(c)(1)(ii) was not amended and 
the substance of Sec.  600.10(c)(iii) was instead removed from the 
regulations. This correction restores the text in paragraph (c)(1)(iii) 
relating to the Secretary's approval of short-term programs and revises 
paragraph (c)(1)(ii). These changes ensure that the language in Sec.  
600.10(c) reflects the language that the negotiated committee reached 
consensus on. For more information about the substance of the amendment 
to Sec.  600.10(c)(2)(ii), please see discussion of this change in the 
Department's April 2, 2020, notice of proposed rulemaking (85 FR 
18650).
    2. The accrediting agency regulations under 34 CFR 
602.22(a)(1)(ii)(J) were not updated to conform to a related change 
made to the written arrangement provisions under 34 CFR 
668.5(c)(3)(ii)(A). Current Sec.  668.5(c)(3)(ii)(A) allows an 
ineligible institution or organization to provide more than 25 percent 
but less than 50 percent of an educational program in accordance with 
34 CFR 602.22(a)(1)(ii)(J). However, accrediting agency approval of 
such an arrangement is required under 34 CFR 602.22(a)(1)(ii)(J). 
Notably, the negotiated rulemaking committee for the Distance Education 
and Innovation Rule reached consensus on the revisions to current Sec.  
668.5(c)(3)(ii)(A). This correction updates 34 CFR 602.22(a)(1)(ii)(J) 
to align with Sec.  668.5(c)(3)(ii)(A), which is the language that the 
negotiated rulemaking committee agreed to.

Waiver of Proposed Rulemaking, Negotiated Rulemaking and Delayed 
Effective Date

    In accordance with the Administrative Procedure Act, 5 U.S.C. 553, 
the Department generally offers

[[Page 63691]]

interested parties the opportunity to comment on proposed regulations. 
However, the APA provides that an agency is not required to conduct 
notice-and-comment rulemaking when the agency, for good cause, finds 
that notice and public comment thereon are impracticable, unnecessary, 
or contrary to the public interest (5 U.S.C. 553(b)(B)). There is good 
cause to waive rulemaking here as unnecessary.
    Rulemaking is ``unnecessary'' in those situations in which ``the 
administrative rule is a routine determination, insignificant in nature 
and impact, and inconsequential to the industry and to the public.'' 
Utility Solid Waste Activities Group v. EPA, 236 F.3d 749, 755 (D.C. 
Cir. 2001), quoting U.S. Department of Justice, Attorney General's 
Manual on the Administrative Procedure Act 31 (1947) and South Carolina 
v. Block, 558 F. Supp. 1004, 1016 (D.S.C. 1983). However, the 
regulatory changes in this document are necessary to correct errors and 
to make routine technical updates. Thus, the Department has determined 
that publication of a proposed rule is unnecessary under 5 U.S.C. 
553(b)(B).
    In addition, under section 492 of the HEA (20 U.S.C. 1098a), all 
regulations proposed by the Department for programs authorized under 
title IV of the HEA are subject to negotiated rulemaking requirements. 
Section 492(b)(2) of the HEA provides that negotiated rulemaking may be 
waived for good cause when doing so would be ``impracticable, 
unnecessary, or contrary to the public interest.'' There is likewise 
good cause to waive the negotiated rulemaking requirement in this case, 
since, as explained above, notice and comment rulemaking is 
unnecessary.
    The APA generally requires that regulations be published at least 
30 days before their effective date, unless the agency has good cause 
to implement its regulations sooner (5 U.S.C. 553(d)(3)). As previously 
stated, because the final regulations correct errors and make routine 
technical updates, there is good cause to waive the delayed effective 
date in the APA and make the final regulations effective upon 
publication.

Regulatory Flexibility Act Certification

    The Regulatory Flexibility Act does not apply to this rulemaking 
because there is good cause to waive notice and comment under 5 U.S.C. 
553.

Paperwork Reduction Act of 1995

    The final regulations do not create any new information collection 
requirements.

Intergovernmental Review

    The Student Assistance General Provisions, the Secretary's 
Recognition of Accrediting Agencies, and the Secretary's Recognition 
Procedures for State Agencies are subject to Executive Order 12372 and 
the regulations in 34 CFR part 79. One of the objectives of the 
Executive order is to foster an intergovernmental partnership and a 
strengthened federalism. The Executive order relies on processes 
developed by State and local governments for coordination and review of 
proposed Federal financial assistance.
    This document provides early notification of our specific plans and 
actions for these programs.

Assessment of Educational Impact

    Based on our own review, we have determined that the final 
regulations do not require transmission of information that any other 
agency or authority of the United States gathers or makes available.

Federalism

    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. This final rule may have federalism 
implications.
    Accessible Format: On request to the program contact person listed 
under FOR FURTHER INFORMATION CONTACT, individuals with disabilities 
can obtain this document in an accessible format. The Department will 
provide the requestor with an accessible format that may include Rich 
Text Format (RTF) or text format (txt), a thumb drive, an MP3 file, 
braille, large print, audiotape, or compact disc, or other accessible 
format.
    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 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, Foreign relations, Grant programs-
education, Loan programs-education, Reporting and recordkeeping 
requirements, Selective Service System, Student aid, Vocational 
education.

34 CFR Part 602

    Reporting and recordkeeping requirements.

34 CFR Part 668

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

Nasser H. Paydar,
Assistant Secretary for Postsecondary Education.

    For the reasons discussed in the preamble, the Secretary of 
Education amends 34 CFR parts 600, 602, and 668 by making the following 
technical corrections:

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 600.10 is amended by revising paragraphs (c)(1)(ii) and 
(iii) and the OMB control number at the end of the section to read as 
follows:


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

* * * * *
    (c) * * *
    (1) * * *
    (ii) For the first direct assessment program under 34 CFR 668.10 
offered at each credential level, and for a comprehensive transition 
and postsecondary program under 34 CFR 668.232, obtain the Secretary's 
approval.
    (iii) For an undergraduate program that is at least 300 clock hours 
but less than 600 clock hours and does not

[[Page 63692]]

admit as regular students only persons who have completed the 
equivalent of an associate degree under 34 CFR 668.8(d)(3), obtain the 
Secretary's approval.
* * * * *

(Approved by the Office of Management and Budget under control 
number 1845-0012)

PART 602--THE SECRETARY'S RECOGNITION OF ACCREDITING AGENCIES

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

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


0
4. Section 602.22 is amended by revising paragraph (a)(1)(ii)(J) to 
read as follows:


Sec.  602.22   Substantive change.

* * * * *
    (a) * * *
    (1) * * *
    (ii) * * *
    (J) Entering into a written arrangement under 34 CFR 668.5 under 
which an institution or organization not certified to participate in 
the title IV, HEA programs offers more than 25 percent but less than 50 
percent of one or more of the accredited institution's educational 
programs.
* * * * *

0
5. Section 602.32 is amended by revising paragraph (h)(4)(ii) to read 
as follows:


Sec.  602.32  Procedures for Department review of application for 
recognition or for change in scope, compliance reports, and increases 
in enrollment.

* * * * *
    (h) * * *
    (4) * * *
    (ii) Recommending that the senior Department official approve, 
continue recognition with a compliance report-to be submitted to the 
Department within 12 months, continue recognition with a compliance 
report to be submitted to the Department with a deadline in excess of 
12 months based on a finding of good cause and extraordinary 
circumstances, approve with monitoring or other reporting requirements, 
or deny, limit, suspend, or terminate recognition; and
* * * * *

PART 668--STUDENT ASSISTANCE GENERAL PROVISIONS UNDER THE HIGHER 
EDUCATION ACT OF 1965, AS AMENDED

0
6. 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-1, 1221-3, and 1231a, unless otherwise noted.


0
7. Section 668.8 is amended by revising paragraph (d)(4)(i) to read as 
follows:


Sec.  668.8  Eligible program.

* * * * *
    (d) * * *
    (4) * * *
    (i) Is provided by an institution that is accredited by a 
recognized accrediting agency or association that was defined as a 
regional accrediting agency or association on October 1, 2007, and has 
held such accreditation since October 1, 2007, or earlier; and
* * * * *

0
8. Section 668.13 is amended by revising paragraphs (c)(1)(i)(E) and 
(c)(2)(i) through (iii) and the OMB control number at the end of the 
section to read as follows:


Sec.  668.13  Certification procedures.

* * * * *
    (c) * * *
    (1) * * *
    (i) * * *
    (E) The institution is a participating institution that was 
accredited or preaccredited by a nationally recognized accrediting 
agency on the day before the Secretary withdrew the Secretary's 
recognition of that agency according to the provisions contained in 34 
CFR part 602; or
* * * * *
    (2) * * *
    (i) Not later than the end of the first complete award year 
following the date on which the Secretary provisionally certified the 
institution under paragraph (c)(1)(i)(A) of this section;
    (ii) Not later than the end of the third complete award year 
following the date on which the Secretary provisionally certified the 
institution under paragraphs (c)(1)(i)(B), (C), and (D) or paragraph 
(c)(1)(ii) of this section; and
    (iii) If the Secretary provisionally certified the institution 
under paragraph (c)(1)(i)(E) of this section, not later than 18 months 
after the date that the Secretary withdrew recognition from the 
institution's nationally recognized accrediting agency.
* * * * *

(Approved by the Office of Management and Budget under control 
number 1845-0022)


0
9. Section 668.23 is amended by:
0
a. Revising paragraph (d)(1);
0
b. Adding paragraph (i);
0
c. Revising the OMB control number at the end of the section; and
0
d. Removing the authority citation at the end of the section.
    The revisions and addition read as follows:


Sec.  668.23  Compliance audits and audited financial statements.

* * * * *
    (d) * * *
    (1) General. To enable the Secretary to make a determination of 
financial responsibility, an institution must, to the extent requested 
by the Secretary, submit to the Secretary a set of financial statements 
for its latest complete fiscal year, as well as any other documentation 
the Secretary deems necessary to make that determination. Financial 
statements submitted to the Secretary must include the Supplemental 
Schedule required under Sec.  668.172(a) and Section 2 of Appendix A 
and B to subpart L of this part, and must be prepared on an accrual 
basis in accordance with generally accepted accounting principles, and 
audited by an independent auditor in accordance with generally accepted 
government auditing standards, issued by the Comptroller General of the 
United States and other guidance contained in 2 CFR Part 200--Uniform 
Administrative Requirements, Cost Principles, And Audit Requirements 
For Federal Awards; or in audit guides developed by, and available 
from, the Department of Education's Office of Inspector General, 
whichever is applicable. As part of these financial statements, the 
institution must include a detailed description of related entities 
based on the definition of a related entity as set forth in Accounting 
Standards Codification (ASC) 850. The disclosure requirements under 
this provision extend beyond those of ASC 850 to include all related 
parties and a level of detail that would enable to Secretary to readily 
identify the related party. Such information may include, but is not 
limited to, the name, location and a description of the related entity 
including the nature and amount of any transactions between the related 
party and the institution, financial or otherwise, regardless of when 
they occurred.
* * * * *
    (i) Incorporation by reference. The material listed in this 
paragraph (i) is incorporated by reference into this section with the 
approval of the Director of the Federal Register under 5 U.S.C. 552(a) 
and 1 CFR part 51. This incorporation by reference (IBR) material is 
available for inspection at U.S. Department of Education and at the 
National Archives and Records Administration (NARA). Contact U.S. 
Department of Education at: Office of the General Counsel, 400 Maryland

[[Page 63693]]

Avenue SW, room 2C-136, Washington DC 20202; phone: (202) 401-6000;

https://www2.ed.gov/about/offices/list/ogc/index.html?src=oc. For 
information on the availability of this material at NARA, contact the 
Office of the Federal Register--email: [email protected]; website: 
www.archives.gov/federal-register/cfr/ibr-locations.html. The material 
may be obtained from the Financial Accounting Standards Board (FASB), 
401 Merritt 7, P.O. Box 5116, Norwalk, CT 06856-5116; (203) 847-0700; 
www.fasb.org.
    (1) Accounting Standards Codification (ASC) 850, Related Party 
Disclosures, Updated through September 10, 2018.
    (2) [Reserved]

(Approved by the Office of Management and Budget under control 
number 1845-0038 10.


0
10. Section 668.172 is amended by revising paragraphs (b), (c)(1), and 
(e) and the OMB control number at the end of the section to read as 
follows:


Sec.  668.172  Financial ratios.

* * * * *
    (b) Ratios. The Primary Reserve, Equity, and Net Income ratios are 
defined under appendix A to this subpart for proprietary institutions, 
and under appendix B to this subpart for private non-profit 
institutions.
BILLING CODE 4000-01-P

[[Page 63694]]

[GRAPHIC] [TIFF OMITTED] TR20OC22.005

BILLING CODE 4000-01-C
    (c) * * *
    (1) Generally excludes income or losses from discontinued 
operations under Accounting Standards Codification 205, prior period 
adjustments, the cumulative effect of changes in accounting principles, 
and the effect of changes in accounting estimates;
* * * * *
    (e) Incorporation by reference. The material listed in this 
paragraph (e) is incorporated by reference into this section with the 
approval of the Director of the Federal Register under 5 U.S.C.

[[Page 63695]]

552(a) and 1 CFR part 51. This incorporation by reference (IBR) 
material is available for inspection at U.S. Department of Education 
and at the National Archives and Records Administration (NARA). Contact 
U.S. Department of Education at: Office of the General Counsel, 400 
Maryland Avenue SW, Room 2C-136, Washington DC 20202; phone: (202) 401-
6000; https://www2.ed.gov/about/offices/list/ogc/index.html?src=oc. For 
information on the availability of this material at NARA, contact the 
Office of the Federal Register--email: [email protected]; website: 
www.archives.gov/federal-register/cfr/ibr-locations.html. The material 
may be obtained from the Financial Accounting Standards Board (FASB), 
401 Merritt 7, P.O. Box 5116, Norwalk, CT 06856-5116; (203) 847-0700; 
www.fasb.org.
    (1) Accounting Standards Update (ASU) 2016-02, Leases (Topic 842), 
(February 2016).
    (2) Accounting Standards Codification (ASC) 205, Presentation of 
Financial Statements, Updated through August 9, 2021 (with taxonomy 
revisions as of January 26, 2022).

(Approved by the Office of Management and Budget under control 
number 1845-0022)


0
11. Section 668.175 is amended by revising paragraph (c) to read as 
follows:


Sec.  668.175  Alternative standards and requirements.

* * * * *
    (c) Financial protection alternative for participating 
institutions. A participating institution that is not financially 
responsible either because it does not satisfy one or more of the 
standards of financial responsibility under Sec.  668.171(b), (c), or 
(d), or because of an audit opinion or going concern disclosure 
described under Sec.  668.171(h), qualifies as a financially 
responsible institution by submitting an irrevocable letter of credit 
that is acceptable and payable to the Secretary, or providing other 
surety described under paragraph (h)(2)(i) of this section, for an 
amount determined by the Secretary that is not less than one-half of 
the title IV, HEA program funds received by the institution during its 
most recently completed fiscal year, except that this requirement does 
not apply to a public institution.
* * * * *
[FR Doc. 2022-22822 Filed 10-19-22; 8:45 am]
BILLING CODE 4000-01-P