[Federal Register Volume 89, Number 10 (Tuesday, January 16, 2024)]
[Rules and Regulations]
[Pages 2493-2502]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-00629]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 21

RIN 2900-AR56


85/15 Rule Calculations, Waiver Criteria, and Reports

AGENCY: Department of Veterans Affairs.

ACTION: Final rule.

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

SUMMARY: The Department of Veterans Affairs (VA) is amending its 
educational assistance regulations by eliminating the four 85/15 rule 
calculation exemptions for students in receipt of certain types of 
institutional aid. Currently, VA regulations provide exceptions that 
allow certain categories of students to be considered ``non-supported'' 
for purposes of the 85/15 rule notwithstanding their receipt of 
institutional aid. In this final rule, VA is eliminating these 
exceptions, thus clarifying the types of scholarships that educational 
institutions must include in their calculations of ``supported'' 
students. Also, VA is revising the criteria that shall be considered by 
the Director of Education Service when granting an 85/15 rule 
compliance waiver. Lastly, VA is amending the timeline for certain 
educational institutions' submission of 85/15 compliance reports.

DATES: This rule is effective February 15, 2024. The provisions of this 
final rule shall apply to all terms that begin on or after January 16, 
2025, to include all 85/15 waivers pending before VA on that date.

FOR FURTHER INFORMATION CONTACT: Thomas Alphonso, Assistant Director, 
Policy and Procedures Education Service, Department of Veterans 
Affairs, 810 Vermont Avenue NW, Washington, DC 20420, (202) 461-9800. 
(This is not a toll-free number.)

SUPPLEMENTARY INFORMATION: The 85/15 rule (38 U.S.C. 3680A(d); 38 CFR 
21.4201(a)) prohibits the Department of Veterans Affairs (VA) from 
paying educational assistance benefits to any new students once ``more 
than 85 percent of the students enrolled in the [program of education] 
are having all or part of their tuition, fees, or other charges paid to 
or for them by the educational institution or by the Department of 
Veterans Affairs.'' 38 U.S.C. 3680A(d)(1). ``Institutional aid'' refers 
to the financial assistance that is provided by the educational 
institution to the student that includes any scholarship, aid, waiver, 
or assistance, but does not include loans and funds provided under 
section 401(b) of the Higher Education Act of 1965 or financial 
assistance from a third-party. ``VA aid'' refers to financial benefits 
paid under Chapters 30, 31, 33, 35 and 36 of Title 38 and Chapter 1606 
of Title 10. VA refers to students who receive such institutional or VA 
aid as ``supported students.'' Conversely, no less than 15 percent of 
the students enrolled in the program must be attending without having 
any of their tuition, fees, or other charges paid to or for them by the 
educational institution or VA (referred to as ``non-supported 
students''). The 85/15 rule is a market validation tool designed to 
prevent schools from inflating tuition charges for VA education 
beneficiaries. The rule functions by requiring a school to enroll no 
less than 15 percent of its students paying the full tuition charge 
without institutional or VA aid. If a school fails to enroll enough 
non-supported students, the cost of the program is presumed to be out 
of step with the competitive market and thus too expensive for VA to 
continue to support due to the burden on taxpayers.
    Currently, in accordance with 38 CFR 21.4201, educational 
institutions are required to track the percentage of supported and non-
supported students enrolled in each of their approved programs and to 
confirm their compliance with the required 85/15 percent ratio (38 CFR 
21.4201(e)-(f)). During the time that the ratio of supported to non-
supported students exceeds 85 percent, no new students can be certified 
to receive VA education benefits for that program (38 CFR 
21.4201(g)(2)). ``New students'' include

[[Page 2494]]

students returning after a break in enrollment unless the break is 
wholly due to circumstances beyond the student's control (38 CFR 
21.4201(g)(6)). The 85/15 rule does allow VA to continue to pay 
benefits for students already enrolled in the program and receiving 
benefits prior to the ratio of supported students exceeding 85 percent 
of the total population enrolled in the program (38 CFR 21.4201(g)(2)). 
Further, although students receiving Veteran Readiness and Employment 
(38 U.S.C. chapter 31) or Survivors' and Dependents' Educational 
Assistance (38 U.S.C. chapter 35) benefits must be counted as supported 
students when calculating 85/15 rule compliance, VA notes that the rule 
does not prohibit the enrollment of new chapter 31 and chapter 35 
students while the 85 percent ratio is exceeded. The rules regarding 
reporting requirements and how individual students must be assessed 
based on their program of education and campus location are detailed in 
38 CFR 21.4201. Specifically, paragraph (e) details the rules regarding 
how to compute the 85/15 percent ratio, and paragraph (e)(2) provides 
special rules by which some students, even though they are in receipt 
of institutional aid, are nonetheless counted as ``non-supported 
students.''
    VA is amending 38 CFR 21.4201(e)(2) to define ``non-supported 
students'' and ``supported students'' and remove paragraphs (e)(2)(i) 
through (e)(2)(iv), which diminish the effectiveness of the market 
validation mechanism of the rule. Although 38 U.S.C. 3680A(d)(1) 
explicitly states that the 85 percent side of the ratio (i.e., the 
supported student count) should include all students ``having all or 
part of their tuition, fees, or other charges paid to or for them by 
the educational institution or by the Department of Veterans Affairs,'' 
current VA regulations at 38 CFR 21.4201(e)(2) create tension with this 
essential goal of the 85/15 rule by providing four categories of 
students who are considered ``non-supported'' students notwithstanding 
their receipt of institutional aid. Currently, the four categories of 
such ``non-supported'' students are as follows: (1) non-Veteran 
students not in receipt of institutional aid; (2) all graduate students 
receiving institutional aid; (3) students in receipt of any Federal aid 
(other than VA benefits); and (4) undergraduate and non-college degree 
students receiving any assistance provided by the educational 
institution, if the institutional policy for granting this aid is the 
same for Veterans and non-Veterans alike. VA is removing all four 
categories.
    Removal of the first and third categories will have no impact 
because these students are already considered ``non-supported,'' as 
they are not receiving institutional or VA aid. Regarding whether 
Federal aid (other than VA benefits), such as student loans and grants, 
is considered ``institutional aid,'' VA has never considered it to be 
institutional aid and will continue to not consider it institutional 
aid. Through this final rule (as further detailed below in the section 
titled REMOVAL OF INSTITUTIONAL AID EXEMPTION), VA is adding a 
regulatory definition that clarifies why it is not appropriate to 
classify Federal, state, or municipal grant funding as ``institutional 
aid.'' Therefore, recipients of these funds are to be counted as ``non-
supported,'' barring receipt of other prohibited funding. Consequently, 
the removal of these ``exclusions,'' which are not included to begin 
with, amounts to a clarification of current practice since their 
numbers would remain on the 15 percent side of the ratio calculation.
    The practical impact is in the removal of the second and fourth 
categories, which provide that students can be in receipt of 
institutional aid and still be considered non-supported. These two 
categories (and particularly the fourth category) have created 
loopholes that educational institutions have exploited since the 
inception of the Post-9/11 GI Bill (PGIB). The problem stems from the 
fact that the PGIB pays up to the full amount of tuition and fees 
directly to educational institutions. This is unlike prior VA 
educational benefits implemented since 1952, from the Korean War GI 
Bill through the Montgomery GI Bill, for which VA pays a one-size-fits-
all stipend amount directly to the beneficiary, and the beneficiary 
then pays tuition, fees, or other approved education-related expenses 
to the school using the stipend and/or other means. Under the prior 
model, if the tuition and fees exceed the stipend amount, then the 
beneficiary incurs out-of-pocket costs. By the same token, if the 
tuition and fees are less than the stipend amount, then the beneficiary 
may apply the funds towards other education costs. When beneficiary 
payments are structured this way, there is no incentive for an 
educational institution to inflate costs, as such a tactic might drive 
VA beneficiaries away in a competitive free market. Conversely, since 
under the PGIB, VA pays the net charges for tuition and fees (subject 
to benefit level and statutory caps for certain types of educational 
institutions) directly to the educational institution, the same 
competitive market forces do not apply. Consequently, the only students 
who can serve to validate the cost effectiveness of the program are 
those non-supported students who are counted on the 15 percent side of 
the 85/15 rule. However, given that the provisions in sections 
21.4201(e)(2)(ii) and (iv) stipulate that certain scholarship 
recipients are to be considered ``non-supported,'' a school can meet 
its 15 percent non-supported requirement while providing scholarships 
to some number of students so long as the students are graduate level, 
or the terms of the scholarship are such that Veterans and non-Veterans 
alike may qualify. These students are likewise not motivated by 
competitive free market forces because their actual charges for tuition 
and fees are reduced. Because these students are allowed, through 
sections 21.4201(e)(2)(ii) and (iv), to be considered ``non-
supported,'' they serve as a false-positive market validation for the 
tuition and fee charges levied on VA. This undermines the operative 
mechanism of the 85/15 rule by allowing schools to inflate their 
tuition and fees since there is no longer an effective counterweight.
    The original GI Bill (for Veterans of World War II, in effect from 
1944 to 1948) also paid tuition and fees directly to schools and was 
fraught with abuses and overcharges by schools. After investigating the 
abuses of the original GI Bill, Congress, when designing the successor 
Korean War GI Bill, took steps to eliminate such abuses by making 
payments directly to students and by instituting the 85/15 rule. Now 
that PGIB once again pays tuition and fees directly to schools, and 
having witnessed the same abuses seen under the original GI Bill, VA 
needs to restructure its implementation of the 85/15 rule to give the 
rule the force it was originally intended to have when payments are 
being made directly to schools. As this presents an immediate 
exploitation of taxpayers' investment in Veterans' education and 
training, VA must emphasize the fundamental objective of the rule and 
strictly adhere to the requirement that students counted on the 15 
percent side of the 85/15 rule are not ``having all or part of their 
tuition, fees, or other charges paid to or for them by the educational 
institution or by the Department of Veterans Affairs.'' VA is 
accomplishing this by removing all exceptions listed in section 
21.4201(e)(2), thus ensuring that every student who receives 
institutional

[[Page 2495]]

or VA aid will be counted as a ``supported student.''
    These changes also clarify requirements for schools, thereby making 
it easier for schools operating in good faith to remain in compliance. 
The current various classifications of students are difficult for the 
School Certifying Officials (SCO) at educational institutions to 
follow, which can lead to improper payments and overpayments. 
Currently, when school officials have questions about making accurate 
student count calculations, they must individually reach out to their 
state Education Liaison Representative or VA staff in Washington, DC. 
As a result, the guidance they receive may be delayed or vary slightly 
depending upon the source. Further, some schools may opt not to seek VA 
guidance and instead rely on their own interpretations of the 85/15 
rule. All of these scenarios have resulted in non-supported 
calculations by schools which do not reflect the intent of the 
regulation's underlying statute. The removal of all four current 
exceptions to the ``non-supported'' side of the 85/15 ratio will 
simplify the calculation of the 85/15 ratio--meaning, any student 
receiving any funding from either VA, or the school will be considered 
``supported.'' Further, these amendments will resolve related 
compliance process issues by removing ambiguity about the appropriate 
classification of students in receipt of aid. These regulatory 
amendments will both simplify and promote consistency in calculating 
and reporting 85/15 counts and will better align the regulation with 
its underlying statute.
    There may be instances where certain schools have a large 
percentage of their students (both Veteran and non-Veteran alike) in 
receipt of institutional aid, even if the amount of the aid is 
insignificant. In these situations, it is unlikely that the school's 
institutional aid program is a subterfuge to disguise tuition inflation 
while complying with the 85/15 rule. In response to any concerns that 
such schools would be unfairly placed in noncompliance with the 85/15 
rule by operation of this rule, VA notes that whenever an educational 
institution exceeds the 85 percent limit, it may apply for a waiver of 
the 85/15 rule under 38 CFR 21.4201(h). Accordingly, VA is amending 
section 21.4201(h) to allow an education institution to demonstrate 
that although its program is in violation of 85/15, its non-VA 
scholarship recipients are effectively serving as market validation, 
and, therefore, continued enrollment of new VA education beneficiaries 
is nonetheless in the best interest of the students and the Federal 
government. Consequently, the elimination of section 21.4201(e)(2) does 
not mean that all generous schools will be eliminated from the GI Bill. 
It merely means that, on a case-by-case basis, a well-intentioned 
generous school could be granted a waiver while simultaneously limiting 
the potential for miscalculations and misapplication of scholarship 
information, whether intentional or unintentional.
    Regarding the current 85/15 waiver criteria, VA further amends the 
criteria found at 38 CFR 21.4201(h) by removing paragraphs (2) and (3) 
while leaving paragraph (1) in place and modifying paragraph (4). This 
is necessary because, while current regulations list four criteria to 
be considered, only paragraphs (1) and (4) (the availability of 
comparable education facilities effectively open to Veterans in the 
vicinity of the school requesting a waiver; and the general 
effectiveness of the school's program in providing educational and 
employment opportunities to the Veteran population it serves) are 
cogent indicators of a program's qualifications to obtain a waiver.
    Paragraph (2) only applies to schools in receipt of a Strengthening 
Institutions Program grant or a Special Needs Program grant 
administered by the Department of Education (ED). The Strengthening 
Institutions Program grant is only available to accredited institutions 
of higher learning. However, many GI Bill-approved institutions are 
non-degree granting and thus ineligible for these programs. 
Specifically, data from a February 2023 study showed that 56% of 
institutions then approved for receipt of GI Bill institutions, were 
non-degree granting. Therefore, this criterion is irrelevant when 
considering waiver requests for such programs. Furthermore, the 
``Special Needs Program'' grants referenced in paragraph (2) as being 
located in title 34, parts 624-626, of the Code of Federal Regulations 
no longer exist at that reference. VA rarely receives waiver requests 
from schools in receipt of either of these grants, so the criterion in 
paragraph (2) rarely is satisfied. This absence of qualifying schools 
therefore is not dispositive in the adjudication of waiver requests. 
Paragraph (3)--previous compliance history of the school--is of no 
independent value to VA's decision-making because if a school has 
failed to satisfy the criterion in paragraph (3), then the program's 
approval would be suspended or withdrawn by the State Approving Agency 
(SAA). Consequently, by default, the Director of Education Service 
bases decisions on waiver requests almost exclusively on a school's 
performance relative to the criteria in paragraphs (1) and (4). 
However, because paragraphs (2) and (3) are included in this 
regulation, schools must expend resources to address these criteria in 
their requests. Likewise, the Director must expend resources to respond 
to these criteria in his or her decision. Therefore, VA is removing 
paragraphs (2) and (3) to conserve both school and VA resources. It is 
important to note that because these criteria have been functionally 
irrelevant in the adjudication of waiver requests, such a removal will 
have no substantive effect on the likely outcome of any future waiver 
request decisions.
    Additionally, VA is amending the list of factors to be considered 
in paragraph (4) because the current list is not particularly helpful 
to the decision maker. The list contains only two criteria, and one of 
them--ratio of educational and general expenditures to full-time 
equivalency enrollment--is difficult to ascertain and verify while also 
being of questionable utility. Therefore, there is only one practical 
and pertinent factor--the percentage of Veteran-students completing the 
entire course--generally left to consider. Accordingly, VA is amending 
the list to provide a broad range of factors that may be considered 
(although the list will not be all inclusive). VA is maintaining the 
current graduation rate factor but adding other factors of graduate 
employment statistics, graduate salary statistics, satisfaction of 
Department of Education (ED) rules regarding gainful employment (where 
applicable), other ED metrics (such as student loan default rate), 
student complaints, industry endorsements, and participation in and 
compliance with the Principles of Excellence program, which was 
established by Executive Order 13607 on April 27, 2012 (published in 
the Federal Register on May 2, 2012), to ensure that student Veterans, 
Service members, and family members have information, support, and 
protections while using Federal education benefits (where applicable), 
etc. This list is not exhaustive. The Director could, on a case-by-case 
basis, consider other factors not listed, which provide an indication 
of the program's general effectiveness. In addition, the Director may 
consider whether the educational institution's aid program appears to 
be consistent with or appears to undermine the 85/15 rule's tuition and 
fee costs market validation mechanism.
    Lastly, for educational institutions organized on a term, quarter, 
or semester basis, the 85/15 calculations

[[Page 2496]]

currently must be submitted to VA no later than 30 days after the 
beginning of each regular school term (excluding summer sessions) or 
before the beginning of the following term, whichever occurs first (38 
CFR 21.4201(f)(2)(i)). Educational institutions not organized on a 
standard term, quarter, or semester basis also must submit their 85/15 
calculations to VA, however, no later than 30 days after the beginning 
of each calendar quarter to which the waiver applies (38 CFR 
21.4201(f)(2)(ii)). Consequently, educational institutions with short, 
non-standard terms that begin and end more frequently than once per 
calendar quarter may have several terms that begin before VA is 
notified of failure to comply with the 85/15 rule. To remedy this 
shortcoming, VA is amending 38 CFR 21.4201(f)(1) and (f)(2)(ii) to 
require that educational institutions with non-standard terms submit 
their exemption justification reports and 85/15 percent calculations to 
VA no later than 30 days after the beginning of each non-standard term. 
This will provide VA with the opportunity to review compliance reports 
submitted by educational institutions before approving additional 
enrollments that impact compliance with the 85/15 rule. This amendment 
will promote accurate and up-to-date 85/15 calculations, ensure that 
reporting is done on a fair and consistent basis, and enable VA to base 
consideration of 85/15 waiver requests on relevant criteria.
    In summary, the 85/15 rule was created to prevent training 
institutions from developing courses solely for GI Bill students and 
then inflating tuition charges. The 85/15 rule serves as a market 
validation tool by which the cost of the program is validated by 
demonstrating that a sufficient number of students (15 percent of the 
total program enrollment) are willing to pay the full cost of tuition 
out of pocket. These changes will strengthen the existing 85/15 rule by 
addressing the regulatory provisions that, over time, have been shown 
to be ineffective with regard to the rule's intent.

Public Comments

    56 comments were received in response to VA's NPRM ``85/15 Rule 
Calculations, Waiver Criteria, and Reports.'' Several commenters 
expressed support for the rule, while several others expressed 
concerns. VA believes that many of the concerns are best answered via 
further clarification both in the responses to the substantive comments 
below and in changes VA is making to the proposed language from the 
NPRM, also discussed below.

Ensuring the Best Schools for Veterans Act of 2022

    Some commenters requested that VA address Public Law 117-174, the 
``Ensuring the Best Schools for Veterans Act of 2022,'' in the preamble 
to this rulemaking. VA acknowledges that there has been some confusion 
as to the content of this rulemaking due to the proximity of its NPRM's 
publication with the enactment of Public Law 117-174, which was signed 
into law on August 26, 2022. VA's NPRM ``85/15 Rule Calculations, 
Waiver Criteria, and Reports'' was published in the Federal Register 
(Vol. 87, No. 196) on October 12, 2022. This did not afford VA enough 
time to address the law in the NPRM or this final rule. While VA has 
effectively implemented the law and provided guidance to schools on its 
impacts, VA plans to address it specifically in a future rulemaking. 
However, VA also will address the law here, as its enactment does have 
major implications on the impact this rulemaking will have on schools.
    Public Law 117-174 clarifies Congressional intent regarding the 
statutory requirements of the 35 percent exemption to the 85/15 rule. 
The law provides that an institution that (1) has a Veteran population 
less than 35 percent of its total student enrollment and (2) has most 
of its programs approved under section 3672 or 3675 of title 38, 
U.S.C., is statutorily exempt from all 85/15 requirements including 
reporting, computing, monitoring, and complying with 85/15 ratios. As 
one commenter noted, ``virtually all public and non-profit colleges and 
universities qualify for this exemption: they have veteran populations 
below 35 percent--typically well below that threshold and often in the 
single digits--and the majority of their programs are typically 
approved under section 3672 or 3675.'' VA agrees with this commenter. 
Due to the changes made by Public Law 117-174, presumably a large 
percentage of GI Bill schools will be exempt from the 85/15 rule 
because they are accredited schools with less than 35 percent of their 
student population being Veterans. The changes made by this final rule 
will therefore have no functional impact on these exempt schools, as 
the 85/15 rule is irrelevant to them. Therefore, while this rulemaking 
does not implement Public Law 117-174, any review, analysis, and 
evaluation of the 56 public comments must keep in mind the 
inapplicability of the changes made in this final rulemaking to a large 
percentage of GI Bill-approved schools that are exempt from the 85/15 
requirements due to the law. As of May 25, 2023, 57 percent of all GI 
Bill-approved schools are exempt from 85/15 under Public Law 117-174 
and therefore are unaffected by the rules contained herein (out of the 
9,247 education training institutions approved for GI Bill benefits, 
there are 5,257 schools with 35 percent exemptions on record with the 
VA and more are being added each day). Thus, this rulemaking does take 
Public Law 117-174 into account while not attempting to implement that 
law.
    VA makes no changes to the rule based on these comments.

Implementation of Revised 85/15 Rule

    One commentor expressed concern regarding the lack of information 
provided to schools about the ``timeline'' of the implementation of the 
proposed rulemaking.
    VA disagrees that insufficient notice of a potential change has 
been provided. VA has provided ample information concerning the 
implementation process of the proposed rule to the public, which 
includes schools, via the rulemaking process. Further, a VA 
communications plan was executed following the NPRM's publication to 
encourage its primary stakeholders, schools, to both acquaint 
themselves with and comment on the rulemaking.
    The notification of the implementation of a proposed rulemaking was 
conducted pursuant to the Administrative Procedure Act's notice and 
comment process for agency rulemaking, found in 5 U.S.C. 553. This 
``notice and comment'' process requires Government agencies to notify 
the public through the Federal Register of a proposed new or revised 
rule, and to accept and consider public comments. VA's proposal to 
revise its educational assistance regulations in the rulemaking titled 
``AR56--85/15 Rule Calculations, Waiver Criteria, and Reports'' was 
submitted to the Federal Register and published on October 12, 2022. 
This published ``notice of proposed rulemaking'' announced the proposed 
regulation to the public, provided a detailed description of the 
planned regulation and its legal basis, and allowed the public the 
opportunity to submit written comments concerning the proposed 
regulation.
    However, as a prudential matter, VA believes it is in the best 
interest of the students, schools, and the Federal government to 
provide schools with an extended amount of time after publication of 
the final rule to prepare for and mitigate any impacts these new rules 
may have. Therefore, VA will delay the applicability date to one year 
after the publication of this final rule to

[[Page 2497]]

ensure both that VA will have adequate time to train schools as much as 
needed about the regulatory provisions herein and that schools will 
have enough time to implement any necessary changes in their policies 
to comply with these provisions.

Definition of ``Institutional Aid''

    One commentor requested that VA revise the definition of 
``institutional aid'' in 38 CFR 21.4201(e)(2) by narrowing it to the 
receipt of tuition and mandatory fees only.
    In response, VA notes that 38 U.S.C. 3680A(d)(1) explicitly states 
that ``other charges paid to or for [students] by the educational 
institution'' are to be included in the 15 percent calculation; 
therefore, VA is required by law to include charges other than tuition 
and mandatory fees in its definition of institutional aid. Excluding 
``other charges'' would require Congressional action to amend the 
statutory language.
    As such, VA makes no changes to the rule based on this comment.

Definition of ``Supported Students''

    Some commenters opposed VA making any changes to the definition of 
``supported students,'' concerned that classifying students in receipt 
of any type of institutional aid, regardless of monetary amount, as 
``supported'' will significantly increase the amount of supported 
students.
    In contrast, one commentor noted how the existing language ``seems 
to favor schools'' by letting them claim students in receipt of 
institutional aid as non-supported, which helps them reach the required 
15 percent, and how it ``creates space for institutions looking to 
raise tuition prices by disguising supported students'' as non-
supported.
    VA agrees that by categorizing students in receipt of any 
institutional aid, regardless of monetary amount, as ``supported,'' the 
number of supported students, as counted for the 85/15 rule, will 
increase, and in some cases, this could result in a significant 
increase of supported students for individual institutions and 
programs. However, VA makes no changes based on these comments, as this 
is the unavoidable impact of these changes to more closely align to the 
statutory language.
    As stated in the preamble to the NPRM, VA is aligning this 
regulation more directly with the language of 38 U.S.C. 3680A(d)(1), 
which explicitly states that the 85 percent side of the ratio (i.e., 
the supported student count) should include all students ``having all 
or part of their tuition, fees, or other charges paid to or for them by 
the educational institution or by the Department of Veterans Affairs.'' 
The original language for the exemptions was introduced in 1979 with 
changes through the current language, which was last updated in 1990. 
The Secretary has the authority to make these exceptions under 38 
U.S.C. 3680A(d)(2) if they are ``in the interest of the eligible 
veteran and the Federal Government.'' Recent enforcement actions by the 
Department of Justice (DOJ) show that the loopholes created by the 
existing language are no longer in the interest of beneficiaries or the 
Federal Government.\1\
---------------------------------------------------------------------------

    \1\ See, e.g., Florida Academy Agrees To Pay $512,000 To Resolve 
Misrepresentation Claims Impacting Veterans' Post-9/11 Tuition 
Subsidy Program (Jan. 27, 2020), https://www.justice.gov/usao-mdfl/pr/florida-academy-agrees-pay-512000-resolve-misrepresentation-claims-impacting-veterans; Universal Helicopters Inc. and Dodge City 
Community College Agree to Pay $7.5 Million to Settle False Claims 
Act Allegations Related to Post-9/11 GI Bill Funding (Aug. 15, 
2022), https://www.justice.gov/opa/pr/universal-helicopters-inc-and-dodge-city-community-college-agree-pay-75-million-settle-false; 
Justice Department Announces Enforcement Action Involving Over $100 
Million in Losses to Department of Veterans Affairs (Sept. 16, 
2022), https://www.justice.gov/opa/pr/justice-department-announces-enforcement-action-involving-over-100-million-losses-department.
---------------------------------------------------------------------------

    Additionally, VA believes the impact on institutions will be 
significantly less than commenters opposing the proposed definition of 
``supported'' may believe. VA agrees that the proposed definition could 
be more problematic for institutions if it were applicable to a large 
portion of institutions. However, a large portion of training 
facilities are exempt from the 85/15 rule because they qualify for the 
35 percent exemption. Furthermore, as discussed in the Ensuring the 
Best Schools for Veterans Act of 2022 section of this preamble, Public 
Law 117-174 clarifies Congressional intent regarding the statutory 
requirements of the 35 percent exemption to the 85/15 rule and broadens 
the exemption. Moreover, any educational institution exceeding the 85/
15 threshold has the option to apply for a waiver, as provided in 38 
U.S.C. 3680A(d)(2) and 38 CFR 21.4201(h).
    VA makes no changes to the rule based on these comments.

85/15 Calculation/Exception Categories

    A few commentors disagreed with the calculation of the 85/15 
percent ratio. Specifically, commentors were opposed to the removal of 
the exception category found in 38 CFR 21.4201(e)(2)(iv), which allows 
students receiving certain institutional scholarships to be counted as 
``non-supported,'' resulting in these students being included on the 15 
percent (non-supported) side of the ratio calculation. One commentor 
stated that the elimination of this exception category would 
``artificially inflate the number of students counted on the 85 percent 
[supported] side of the equation.''
    VA disagrees with these comments. The exemption in section 
21.4201(e)(2)(iv) has been causing supported students to be 
undercounted in 85/15 calculation; therefore, its removal will result 
in a more accurate count. Students receiving institutional aid always 
should have been counted as ``supported.'' This has been the case since 
the creation of the 85/15 rule. The 85 percent rule, which can be found 
at 38 U.S.C. 3680A, was enacted in 1952 to combat predatory school 
abuses following implementation of the Servicemen's Readjustment Act of 
1944. The removal of this exception category returns the 85/15 rule to 
its original intent of serving as a market validation tool to prevent 
schools from inflating tuition charges for Veterans using VA 
educational assistance. VA finds that the exception category in 38 CFR 
21.4201(e)(2)(iv) created loopholes which have been exploited by some 
schools--exploitation that has been exacerbated under the Post-9/11 GI 
Bill. Closing this loophole is one of the primary purposes of this 
rulemaking.
    Furthermore, removal of the exception in 38 CFR 21.4201(e)(2)(iv) 
likely will not significantly increase the ratio of ``supported'' 
students enrolled in a program because Veterans statistically make up a 
small percentage of most schools' overall student populations. 
According to data from the Postsecondary National Policy Institute 
(PNPI), as of academic year (AY) 2015-16, only 4.9 percent of 
undergraduate students were Veterans--a small portion of the population 
attending schools.\2\ Also, though some schools with a significant 
population of disadvantaged students who are receiving institutional 
aid may result in the educational institution exceeding the 85/15 
threshold, the educational institution has the option to apply for an 
85/15 waiver, as provided in 38 U.S.C. 3680A(d) and 38 CFR 21.4201.
---------------------------------------------------------------------------

    \2\ Veterans Fact Sheet, Postsecondary National Policy 
Institute, available at https://pnpi.org/wp-content/uploads/2022/11/VeteransFactSheet-Nov-2022.pdf.
---------------------------------------------------------------------------

    VA makes no changes to the rule based on these comments.

35 Percent Exemption

    Some commenters requested for VA to clarify in the final rule that 
the changes proposed by the rulemaking do not apply to institutions 
that qualify for the 35 percent exemption, in order to

[[Page 2498]]

provide clarity for School Certifying Officials (SCO) and Education 
Liaison Representatives (ELR).
    VA concurs with these comments and has explained the impact of the 
35 percent exemption in the preamble. For further clarification, please 
refer to the Ensuring the Best Schools for Veterans Act of 2022 section 
above. While portions of the newly enacted law and this rulemaking do 
overlap, as stated earlier, this rulemaking is not implementing the 
provisions of Public Law 117-174, Ensuring the Best Schools for 
Veterans Act of 2022. Additionally, VA did not address the 35 percent 
exemption in the NPRM because VA was not proposing any changes to the 
35 percent exemption at the time of publication. However, to alleviate 
further confusion, VA will address comments regarding the 35 percent 
exemption.
    Some commenters requested for VA to create an exemption that if the 
total Veteran student ratio is under 35 percent, then the institution 
would be exempt from having to track the 85/15 ratios.
    The 35 percent exemption to all schools is found in statute. Public 
Law 117-174 modified the statutory requirements of the 35 percent 
exemption to the 85/15 rule. As the law clarifies, if an institution 
that (1) has a Veteran population less than 35 percent of its total 
student enrollment and (2) has most of its programs approved under 
section 3672 or 3675 of title 38 U.S.C., that institution is 
statutorily exempt from all 85/15 requirements including reporting, 
computing, monitoring, and complying with 85/15 ratios. Therefore, this 
law exempts many schools from the requirement of tracking the 85/15 
ratios. VA will address the law more specifically in a future 
rulemaking, to include consideration of adding a blanket statement of 
situations in which a school is exempt from having to track 85/15 
ratios in VA's regulations.
    Some commenters stated concerns that VA is putting more stock in 
the 35 percent waiver to circumvent the 85/15 reporting and requested 
that VA find a better way to punish bad actors. One commenter stated 
that the 35 percent exemption undermines the 85/15 rule because there 
is no market validation price checking mechanism for campuses that 
enroll fewer than 35 percent Veteran students overall.
    VA notes that the 85/15 ratio and the 35 percent exemption are 
statutorily mandated. Further, VA did not intend this rule as an 
enforcement action to ``punish bad actors'' but rather is revising the 
85/15 ratio criteria to better leverage the 85/15 rule as a market 
validation tool and to better serve the interests of benefit recipients 
and the Federal government.
    Some commenters also requested VA add new language to 38 CFR 
21.4201 for further clarification of the 35 percent exemption.
    VA will not be adding new language regarding the 35 percent 
exemption at this time, as the language for the exemption already 
exists at 38 CFR 21.4201(c)(4). VA did not address the 35 percent 
exemption in this rulemaking because this rulemaking does not modify 
said language. However, with the enactment of Public Law 117-174, 
Congress modified the language that authorizes the 35 percent 
exemption. VA will address these changes in a future rulemaking.
    VA makes no changes to the rule based on these comments.

Lack of Student Choice

    Several commentors expressed concern that proposed changes to the 
85/15 rule could limit choices of undergraduate and graduate Veteran 
and non-Veteran students. The commenters stated that removing the four 
exceptions to the 85/15 rule--most notably the fourth exception 
category in 38 CFR 21.4201(e)(2)(iv), ``undergraduate and non-college 
degree students receiving any assistance provided by the educational 
institution''--and classifying all students in receipt of any type of 
institutional aid as ``supported'' will significantly increase the 
ratio of ``supported'' students enrolled in a program. This increase of 
students counted as supported would, according to these commentors, 
lead to program suspension due to violation of the 85/15 rule, which 
would bar new students from enrolling in programs that align with their 
interests.
    VA does not disagree with these commenters' assertions that this 
rulemaking could produce new violations of the 85/15 rule and possibly 
new suspensions. However, Congress intentionally chose to enact a 
statute that limits choices for GI Bill students when ``more than 85 
percent of the students enrolled in the course are having all or part 
of their tuition, fees, or other charges paid to or for them by the 
educational institution or by the Department of Veterans Affairs.'' 38 
U.S.C. 3680A(d)(1). As previously stated in this preamble and the 
preamble to the NPRM, this rulemaking is realigning VA's regulation 
with the existing statute to close loopholes that VA has determined are 
not in the interest of benefit recipients or the Federal Government.
    For additional clarification, a school exceeding the 85 percent 
threshold will not impact any currently enrolled students because the 
statute explicitly states that it applies only to students ``not 
already enrolled.'' However, the statute explicitly functions to limit 
available options for students by preventing the enrollment of new GI 
Bill students when a school exceeds the 85 percent threshold.
    Furthermore, VA will not speculate on the number of choices that 
will be available after these changes. Some schools with a significant 
population of students receiving institutional aid may end up exceeding 
the 85/15 threshold. In those cases, the school has the option to apply 
for an 85/15 waiver as provided in 38 U.S.C. 3680A(d) and 38 CFR 
21.4201. In addition, a program suspended for violating the 85/15 rule 
retains all its current students. Only future enrollments are 
potentially affected. Furthermore, Public Law 117-174, discussed in the 
Ensuring the Best Schools for Veterans Act of 2022 section of this 
preamble, exempts a large portion of training facilities from the 85/15 
requirements.
    VA makes no changes to this rule based on these comments.

Removal of Institutional Aid Exemption

    A few commentors were concerned that the removal of the fourth 
exception category from being considered supported (the exception for 
institutional aid) would negatively impact students eligible for grants 
provided by Federal programs, such as Federal Work Study (FWS) (34 CFR 
parts 673 and 675), the Federal Supplemental Educational Opportunity 
Grants (FSEOG) (34 CFR part 676), and the Workforce Innovation and 
Opportunity Act (WIOA) (Pub. L. 113-128). FWS and FSEOG are Federal 
grant programs that require the institution to contribute a proportion 
of the funds paid to the recipient, meaning that when the fourth 
exception category is removed, such grant recipients would be 
considered in receipt of institutional aid and therefore counted on the 
``supported'' side of the 85/15 calculation. The commenter opined that 
this provision would discourage training institutions from 
participating in these federally funded programs, which would adversely 
affect both students and the training institution.
    VA acknowledges the validity of these comments and recognizes the 
importance of other Federal programs that benefit students and schools 
alike; the FWS program provides a source of

[[Page 2499]]

part-time income for undergraduate and graduate students with financial 
need, and the FSEOG program, a Title IV campus-based program, provides 
grants to eligible students who demonstrate exceptional financial need 
and encourages training institutions to provide grants to low-income 
undergraduate students.
    The WIOA was enacted in July 2014 ``to bring about increased 
coordination among Federal workforce development and related programs . 
. . [and] to provide a combination of education and training services 
to prepare individuals for work and to help them improve their 
prospects in the labor market.'' Congressional Research Service, The 
Workforce Innovation and Opportunity Act and the One-Stop Delivery 
System (Sept. 26, 2022), available at https://crsreports.congress.gov/product/pdf/R/R44252. Titles I and III of the WIOA are administered by 
the Department of Labor's Employment and Training Administration (ETA), 
and Titles II and IV of the WIOA are administered by ED. The annual 
Congressional appropriation for these programs is a formulaic allotment 
to states administered by ETA and ED who, in turn, distribute the 
funding to schools per the WIOA program requirements. Importantly, no 
grants are awarded directly to individuals, and there are no 
``matching'' requirements for the states or the recipient training 
institution.
    Even though making changes based on these comments will not impact 
the scope of this rulemaking, VA understands the confusion to 
stakeholders resulting from the proposed removal of language previously 
included in the third exception category (``Students in receipt of any 
Federal aid (other than Department of Veterans Affairs benefits).''). 
VA will continue to consider Federal aid (other than VA benefits) as 
distinct from ``institutional aid.'' VA considers Federal aid to 
include state and municipal funds, as well as institutional matching 
funds pursuant to participation in such Federal, state, or municipal 
grant programs. In this final rule, VA is adding regulatory text 
clarifying that ``institutional aid'' does not include Federal, state, 
or municipal grant funding, nor does it include matching funds provided 
by the educational institution pursuant to participation in such 
Federal, state, or municipal grant programs. As such, grants to 
students under WIOA and other similar programs mentioned by the 
commentors will be counted as ``non-supported,'' barring receipt of 
other prohibited funding.
    This categorization of other Federal funding is being informed by 
similar statutory language concerning institutional aid found in the 
Post-9/11 GI Bill and at 38 U.S.C. 3313(c)(1)(A)(II). These provisions 
refer to relevant financial assistance provided by the educational 
institution to the student as including any scholarship, aid, waiver, 
or assistance, but do not include loans and funds provided under 
section 401(b) of the Higher Education Act of 1965 or financial 
assistance from a third party. VA believes the additional language 
concerning ``institutional aid'' is consistent with the concepts 
embodied by Congress in section 3313.
    Moreover, while students in receipt of Federal financial aid count 
on the ``non-supported'' side of the 85/15 ratio, VA reiterates that 
pursuant to Public Law 117-174, many, if not most, accredited schools 
are likely to be exempt from the 85/15 reporting requirements 
altogether.

Impact on Low-Income and Disadvantaged Students and the Schools That 
Serve Them

    Several commenters indicated that this rulemaking would impose a 
hardship on low-income students who rely on financial aid to attend an 
educational institution. Specifically, those commenting expressed the 
following concerns for low-income students who need scholarships and 
other financial assistance or aid to pay tuition and fees: (1) 
institutions will be forced to decrease the amount of financial 
assistance provided to low-income students to comply with the 85/15 
rule which is unfair to these students because their financial 
assistance is ``counted against them'' when enrolled at an educational 
institution, and (2) ``under-privileged'' and ``indigent'' students 
will not have access to educational programs without the use of 
institutional financial aid. One commentor stated that institutions 
will be forced to decrease the amount of financial assistance provided 
to low-income students to stay within the 85/15 rule calculations. 
Another commentor pointed out that students needing scholarships and 
financial aid to attend an educational institution should not have 
their financial assistance counted against them when seeking enrollment 
at an institution.
    Under this rulemaking, supported students are defined as students 
who have all or part of their tuition, fees or other charges paid for 
them by the educational institution, or by VA under title 38, U.S.C., 
or under title 10, U.S.C. As such, only students receiving ``VA aid'' 
and ``institutional aid'' will be counted as supported students. Per 
statute, when a school chooses to grant institutional aid to a student, 
the student must be counted as supported, which is the exact intent of 
the law. Hence, if the school chooses to go over the 85 percent 
threshold in a specific program of education, future GI Bill students 
will be impacted. Those students receiving Federal financial aid other 
than from VA or the educational institution will remain counted as non-
supported students for the 85/15 calculations. As a result, there will 
be no impact to students who are in receipt of non-VA Federal aid such 
as need-based grants, Federal direct subsidized or non-subsidized 
loans, or non-institutional financial aid such as third-party loans or 
scholarships. Those categories of students already are considered non-
supported students in 85/15 calculations and will remain on the 15 
percent side of the ratio calculation.
    Any schools with a significant population of disadvantaged students 
who receive institutional aid, which might result in the educational 
institution violating the 85 percent limitation of ``supported 
students'' under this rulemaking, may apply for a waiver, which, as a 
result of this rulemaking, will be a more straightforward process. 
Specifically, under the amendments to 38 CFR 21.4201(h), VA may grant a 
waiver of the 85 percent limitation when favorable consideration is 
made on the educational institution's performance relative to the 
criteria of ``availability of comparable alternative educational 
facilities effectively open to veterans in the vicinity of the school 
requesting a waiver'' and ``the general effectiveness of the school's 
program in providing educational and employment opportunities to the 
veteran population it serves.'' Whereas there currently are four 
criteria that must be addressed in order to obtain this waiver, this 
final rule reduces the number of criteria that must be addressed.
    Several comments expressed concern that by removing the third 
category (``students in receipt of any Federal Aid (other than VA 
benefits)'') from VA's current regulatory definition of ``non-
supported'' students at section 21.4201(e)(2), this rule would 
negatively impact two-year institutions that serve low-income or 
underserved populations that need Federal financial aid to attend 
school. One commenter stated that this change would force schools to 
choose between the underprivileged and Veteran populations. Another 
commentor was concerned that programs such as the WIOA would now be 
counted on the supported side of the

[[Page 2500]]

calculation because of the removal of the third category. The commenter 
stated that many programs attractive to WIOA beneficiaries would also 
be attractive to Veterans, and therefore may cause the schools to lose 
prospective students.
    As stated above, students receiving Federal financial aid and/or 
aid from WIOA or similar Federal programs will be not considered 
``supported'' for the 85/15 calculations. As previously stated, 
supported students are only those students who are having all or part 
of their tuition, fees or other charges paid for them by the 
educational institution, or by VA under title 38, U.S.C., or under 
title 10, U.S.C. According to the PNPI, in the AY 2015-16, only 5.1 
percent of students enrolled at minority-serving institutions (MSI) 
were Veterans.\3\ Additionally, in 2020, the Department of Health and 
Human Services published a list of MSIs that shows the majority are 
public institutions.\4\
---------------------------------------------------------------------------

    \3\ Veterans Fact Sheet, supra note 2.
    \4\ 2020 List of Minority Serving Institutions, U.S. Department 
of Health and Human Services, available at https://www.minorityhealth.hhs.gov/assets/PDF/2020_Minority_Serving_Institutions.pdf.
---------------------------------------------------------------------------

    Furthermore, Public Law 117-174, discussed in the Ensuring the Best 
Schools for Veterans Act of 2022 section of this preamble, exempts a 
large portion of training facilities from the 85/15 requirements.
    One commenter stated that counting students receiving institutional 
aid as ``supported'' would discourage schools from offering funds to 
lower income students or risk having Veteran students locked out of the 
programs they are interested in.
    In response, VA notes students receiving institutional aid have 
been classified by statute as ``supported'' since the inception of the 
statute creating the 85/15 rule. The 85 percent rule was enacted in 
1952 to combat predatory school abuses found to occur following the 
implementation of the Servicemen's Readjustment Act of 1944. The 
statutory authority for the 85/15 rule currently resides in 38 U.S.C. 
3680A, where it was added by Public Law 102-568, the ``Veterans 
Benefits Act of 1992.'' VA has no authority to remove ``students 
receiving institutional aid'' from being counted as ``supported''; only 
Congress does.
    Some commenters expressed concerns that the changes to the 85/15 
calculations would negatively impact institutional revenue by requiring 
extensive and possibly duplicative manhours from SCOs (in addition to 
VA employees) when computing the 85/15 calculations and the 35 percent 
exemptions.
    VA disagrees with this statement. To the extent the commenters' 
concern is having to revise calculations for prior years, VA notes that 
85/15 calculations are done point forward. Calculations that have 
already been reported for completed or in-progress terms need not be 
recalculated. To the extent the commenters are concerned about 
duplication of effort, VA notes this rulemaking has been designed to 
minimize burdens on both schools and the government while still 
accomplishing the objective of strengthening the 85/15 rule. By 
removing the exceptions, the calculation process will be streamlined 
and more straightforward, enabling SCOs and VA employees to calculate 
and review easily. Finally, the NPRM did not address the 35 percent 
exemption, and this rulemaking does not make any changes to the 
portions of the regulation that address this rule.
    Additionally, Public Law 117-174, discussed in the Ensuring the 
Best Schools for Veterans Act of 2022 section of this preamble, exempts 
a large portion of training facilities from the 85/15 requirements. As 
one commenter noted, ``virtually all public and non-profit colleges and 
universities qualify for this exemption: they have veteran populations 
below 35 percent--typically well below that threshold and often in the 
single digits--and the majority of their programs are typically 
approved under section 3672 or 3675.''
    Furthermore, according to the PNPI, in 2021, only 6.4 percent of 
the U.S. population aged 18 or over were Veterans of the U.S. military. 
For the AY 2015-2016, only 4.9 percent of undergraduates were Veterans. 
At for-profit institutions during the same period, this figure was 
slightly higher at 9.2 percent; however, this percentage is still well 
below the 35 percent mark established by statute.\5\ This means that a 
large portion of those schools previously reporting 85/15 ratios will 
not be impacted by this rulemaking, as they will be exempt from 
reporting.
---------------------------------------------------------------------------

    \5\ Veterans Fact Sheet, supra note 2.
---------------------------------------------------------------------------

    VA makes no changes to the rule based on these comments.

Administrative Burden

    Many commenters opposed VA's 85/15 rule, due to the administrative 
burden it poses on a school's VA Certifying Official(s). However, one 
commenter provided a counterpoint, stating that ``the removal of these 
four exemptions will provide clarity and efficiency to the 
certification process, reducing the workload of administrators and 
minimizing categorization mistakes.''
    VA acknowledges the administrative burden placed on schools that 
are required to submit 85/15 calculations. However, this rulemaking is 
not increasing the current burden of having to report 85/15 
calculations. Furthermore, the removal of all four current exceptions 
to the ``non-supported'' side of the 85/15 ratio simplifies the 
calculation of the 85/15 ratio and clarifies requirements for schools, 
thereby making it easier for schools to remain in compliance. In 
theory, this should lighten the existing administrative burden. Also, 
the administrative burden of having to submit 85/15 calculations will 
be reduced due to the implementation of ``Ensuring the Best Schools for 
Veterans Act of 2022,'' since this law exempts most accredited schools 
from 85/15 requirements if their GI Bill student enrollment is lower 
than 35 percent of the total student population.
    VA makes no changes to the rule based on these comments.

Waiver Process

    There were several comments concerning the amendments to 85/15 
waiver criteria. One commenter disagreed with the retention of the 
criterion in 38 CFR 21.4201(h)(1) and the elimination of the waiver 
criterion in paragraph (3), stating that for paragraph (1), they 
believed that the unavailability of another similar program in the 
vicinity of a non-compliant program would not be an indicator of a 
program's quality or outcome. This commenter stated that the criterion 
in paragraph (3) should be retained and its language revised to refer 
to the ``past performance'' of an institution, rather than to past 
compliance. The commenter further stated that in the adjudication of 
waiver requests, the consideration of an institution's past performance 
would protect students from predatory schools.
    VA disagrees with the commenter's recommendations. VA maintains 
that the criterion in paragraph (1) (``the availability of comparable 
schools open to Veterans in the vicinity of the school requesting a 
waiver'') is a valid and quantifiable criterion to evaluate whether an 
institution should be granted a waiver. The availability of comparable 
schools nearby also provides effective market validation of tuition 
costs because this factor compares the cost-effectiveness of programs 
at comparable schools.
    As to the commenter's suggestion to keep the criterion in paragraph 
(3) but amend the language to state ``past

[[Page 2501]]

performance'' instead of the past compliance of an institution, VA 
believes that making this distinction is not useful or logical. VA and/
or SAAs often learn of past performance issues through their compliance 
actions. In some cases, non-compliance with VA law or policy leads to 
the suspension or withdrawal of program approval, giving a clear 
indication of a past performance issue. Further, ``performance'' 
compliance or lack thereof is always documented and is a clear measure 
of past performance. Regardless, VA concludes that retaining paragraph 
(3) with either the existing or suggested revision is not necessary 
altogether since the revision to the criterion in 38 CFR 21.4201(h)(4) 
(``general effectiveness of the school's program in providing 
educational and employment opportunities to the Veteran population it 
serves'') adds the factor of an educational institution's participation 
in and compliance with the Principles of Excellence program established 
by Executive Order 13607. This added factor to the paragraph (4) 
criterion will provide comprehensive performance indicators to evaluate 
an educational institution's general effectiveness and protect students 
from predatory schools while using Federal education benefits.
    Another commenter objected to the revision of the list of factors 
to be considered in the ``general effectiveness of the school's 
program'' criterion in 38 CFR 21.4201(h)(4), stating that the current 
factors are required to comply with Principles of Excellence and, as 
such, should remain in the criteria considered in the 85/15 waiver 
decision process. The commenter also opposed maintaining the existing 
graduation rate factor in paragraph (4), stating that this factor may 
not accurately measure the success of student outcomes since there are 
instances of students attending, but not graduating from, community 
college because they attended the community college only to prepare for 
entry into a university.
    VA disagrees with these comments. The current list of factors 
contained in 38 CFR 21.4201(h)(4), including the ``ratio of educational 
and general expenditures to full-time equivalency enrollment,'' largely 
is not useful when deciding on a waiver and should be revised. As 
stated in the rulemaking, the current graduation rate factor will be 
retained and the list expanded to include other factors such as 
graduate employment, graduate salary, gainful employment, student 
complaints, and industry endorsements, as these factors are strong and 
logical indicators of an educational institution's general 
effectiveness.
    As to the commenter's opposition to retaining the existing 
graduation rate factor, this factor is still both relevant and 
applicable to most waiver request determinations. Further, this 
amendment expands the current list of factors that may be considered to 
include not only graduate employment but graduate salary, gainful 
employment, student complaints, and industry endorsements. 
Additionally, under this rulemaking, VA will have authority to weigh 
other unlisted factors on a case-by-case basis. Thus, there are ample 
metrics provided by this rulemaking to minimize the significance of the 
number of students who transfer to, and then graduate from, another 
educational institution.
    Another commenter stated that a school seeking a waiver would be 
detrimental to Veterans due to the ``additional amount of time'' 
expended to seek a waiver. This commenter indicated that a student's 
program would be suspended pending the waiver determination and that 
Veterans would be unable to enroll or attend classes in the affected 
programs.
    VA does not agree with this statement since the rulemaking 
simplifies the waiver application process by decreasing the number of 
waiver criteria. Therefore, the process of waiver application will be 
simplified for the educational training institute and for VA to 
adjudicate. Additionally, as previously stated in this preamble, with 
the enactment of Public Law 117-174, it is likely that fewer 
educational training institutes will be seeking waivers, as many are 
now exempt from tracking the 85/15 ratio.
    VA makes no changes to the rule based on these comments.

Executive Orders 12866, 13563 and 14094

    Executive Order 12866 (Regulatory Planning and Review) directs 
agencies to assess the costs and benefits of available regulatory 
alternatives and, when regulation is necessary, to select regulatory 
approaches that maximize net benefits (including potential economic, 
environmental, public health and safety effects, and other advantages; 
distributive impacts; and equity). Executive Order 13563 (Improving 
Regulation and Regulatory Review) emphasizes the importance of 
quantifying both costs and benefits, reducing costs, harmonizing rules, 
and promoting flexibility. Executive Order 14094 (Executive order on 
Modernizing Regulatory Review) supplements and reaffirms the 
principles, structures, and definitions governing contemporary 
regulatory review established in Executive Order 12866 of September 30, 
1993 (Regulatory Planning and Review), and Executive Order 13563 of 
January 18, 2011 (Improving Regulation and Regulatory Review). The 
Office of Information and Regulatory Affairs has determined that this 
rulemaking is a significant regulatory action under Executive Order 
12866, Section 3(f)(1), as amended by Executive Order 14094. The 
Regulatory Impact Analysis associated with this rulemaking can be found 
as a supporting document at www.regulations.gov.

Regulatory Flexibility Act

    The Secretary hereby certifies that this final rule will not have a 
significant economic impact on a substantial number of small entities 
as they are defined in the Regulatory Flexibility Act (5 U.S.C. 601-
612). Notwithstanding data collection limitations regarding the number 
of schools that are classified as small entities, VA's certification is 
based on the fact that students will continue to provide revenue to 
schools regardless of whether they are classified as supported or non-
supported. Should a school already at or near the statutory 85/15 ratio 
limit find that a reclassification of students from ``non-supported'' 
to ``supported'' will alter its ratio to the point where it will fall 
out of compliance with the 85/15 rule, the school can recruit 
additional non-supported students to restore that ratio. While needing 
to recruit more non-supported students is an effect on schools, it does 
not qualify as a significant economic impact. Therefore, pursuant to 5 
U.S.C. 605(b), the initial and final regulatory flexibility analysis 
requirements of 5 U.S.C. 603 and 604 do not apply. Nonetheless, VA 
acknowledges that the provisions in this rulemaking may create some 
uncertainty and reactive behavior from both Veteran students and 
personnel within institutions of higher learning.

Unfunded Mandates

    The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C. 
1532, that agencies prepare an assessment of anticipated costs and 
benefits before issuing any rule that may result in the expenditure by 
State, local, and Tribal Governments, in the aggregate, or by the 
private sector, of $100 million or more (adjusted annually for 
inflation) in any one year. This final rule will have no such effect on 
State, local, and Tribal Governments, or on the private sector.

Paperwork Reduction Act

    Although this final rule contains collections of information under 
the provisions of the Paperwork Reduction

[[Page 2502]]

Act of 1995 (44 U.S.C. 3501-3521), there are no provisions associated 
with this rulemaking constituting any new collection of information or 
any revisions to the existing collections of information. The 
collections of information for 38 CFR 21.4201 are currently approved by 
the Office of Management and Budget (OMB) and have been assigned OMB 
control numbers 2900-0896 and 2900-0897.

Assistance Listing

    The Assistance Listing numbers and titles for the programs affected 
by this document are 64.027, Post-9/11 Veterans Educational Assistance; 
64.028, Post-9/11 Veterans Educational Assistance; 64.032, Montgomery 
GI Bill Selected Reserve; Reserve Educational Assistance Program; 
64.117, Survivors and Dependents Educational Assistance; 64.120, Post-
Vietnam Era Veterans' Educational Assistance; and 64.124, All-Volunteer 
Force Educational Assistance.

Congressional Review Act

    Pursuant to Subtitle E of the Small Business Regulatory Enforcement 
Fairness Act of 1996 (known as the Congressional Review Act) (5 U.S.C. 
801 et seq.), the Office of Information and Regulatory Affairs 
designated this rule as not satisfying the criteria under 5 U.S.C. 
804(2).

List of Subjects in 38 CFR Part 21

    Administrative practice and procedure, Armed forces claims, 
Colleges and universities, Education, Employment, Reporting and 
recordkeeping requirements, Schools, Veterans, Vocational education.

Signing Authority

    Denis McDonough, Secretary of Veterans Affairs, approved and signed 
this document on January 8, 2024, and authorized the undersigned to 
sign and submit the document to the Office of the Federal Register for 
publication electronically as an official document of the Department of 
Veterans Affairs.

Luvenia Potts,
Regulation Development Coordinator, Office of Regulation Policy & 
Management, Office of General Counsel, Department of Veterans Affairs.

    For the reasons stated in the preamble, the Department of Veterans 
Affairs amends 38 CFR part 21 as set forth below:

PART 21--VETERAN READINESS AND EMPLOYMENT AND EDUCATION

Subpart D--Administration of Educational Assistance Programs

0
1. The authority citation for part 21, subpart D continues to read as 
follows:

    Authority: 10 U.S.C. 2141 note, ch. 1606; 38 U.S.C. 501(a), chs. 
30, 32, 33, 34, 35, 36, and as noted in specific sections.

0
2. Amend Sec.  21.4201 by revising paragraphs (e)(2), the introductory 
text of paragraph (f)(1), and paragraphs (f)(2)(ii) and (h) to read as 
follows:


Sec.  21.4201  Restrictions on enrollment; percentage of students 
receiving financial support.

* * * * *
    (e) * * *
    (2) Assigning students to each part of the ratio. In accordance 
with the provisions of paragraph (a) of this section, non-supported 
students are those students enrolled in the course who are having none 
of their tuition, fees or other charges paid for them by the 
educational institution, or by VA under title 38, U.S.C., or under 
title 10, U.S.C., while supported students are those students enrolled 
in the course who are in receipt of institutional aid or VA educational 
assistance benefits (i.e., having all or part of their tuition, fees or 
other charges paid for them by the educational institution, or by VA 
under chapter 36, title 38, United States Code, or under title 10, 
United States Code.). Institutional aid does not include Federal, 
state, or municipal grant funding, nor does it include matching funds 
provided by the educational institution through participation in such 
Federal, state, or municipal grant programs. Recipients of these funds 
are to be counted as non-supported students barring receipt of other 
institutional aid or VA educational assistance benefits.
* * * * *
    (f) * * * (1) Schools must submit to VA all calculations (those 
needed to support the exemption found in paragraph (c)(4) of this 
section as well as those made under paragraph (e)(3) of this section). 
If the school is organized on a term, quarter, or semester basis, it 
shall make that submission no later than 30 days after the beginning of 
the first term for which the school wants the exemption to apply. If 
the school is organized on a non-standard term basis, it shall make its 
submission no later than 30 days after the beginning of the first non-
standard term for which the school wishes the exemption to apply. A 
school having received an exemption found in paragraph (c)(4) of this 
section shall not be required to certify that 85 percent or less of the 
total student enrollment in any course is receiving Department of 
Veterans Affairs assistance:
* * * * *
    (2) * * *
    (ii) If a school is organized on a non-standard term basis, reports 
must be received by the Department of Veterans Affairs no later than 30 
days after the beginning of each non-standard term.
* * * * *
    (h) Waivers. Schools which desire a waiver of the provisions of 
paragraph (a) of this section for a course where the number of full-
time equivalent supported students receiving VA education benefits 
equals or exceeds 85 percent of the total full-time equivalent 
enrollment in the course may apply for a waiver to the Director, 
Education Service. When applying, a school must submit sufficient 
information to allow the Director, Education Service, to judge the 
merits of the request against the criteria shown in this paragraph. 
This information and any other pertinent information available to VA 
shall be considered in relation to these criteria:
    (1) Availability of comparable alternative educational facilities 
effectively open to veterans in the vicinity of the school requesting a 
waiver.
    (2) General effectiveness of the school's program in providing 
educational and employment opportunities to the particular veteran 
population it serves. Factors to be considered should include, but are 
not limited to: percentage of veteran-students completing the entire 
course, graduate employment statistics, graduate salary statistics, 
satisfaction of Department of Education requirements regarding gainful 
employment (where applicable), other Department of Education metrics 
(such as student loan default rate), student complaints, industry 
endorsements, participation in and compliance with the Principles of 
Excellence program, established by Executive Order 13607 (where 
applicable), etc.
    (3) Whether the educational institution's aid program appears to be 
consistent with or appears to undermine the 85/15 rule's tuition and 
fee costs market validation mechanism.

[FR Doc. 2024-00629 Filed 1-12-24; 8:45 am]
BILLING CODE 8320-01-P