-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-04-279					        					        
  TITLE:     Distance Education: Improved Data on Program Costs and
  Guidelines on Quality Assessments Needed to Inform Federal Policy
     DATE:   02/26/2004 

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entitled 'Distance Education: Improved Data on Program Costs and 
Guidelines on Quality Assessments Needed to Inform Federal Policy' 
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Report to Congressional Requesters:

United States General Accounting Office:

GAO:

February 2004:

Distance Education:

Improved Data on Program Costs and Guidelines on Quality Assessments 
Needed to Inform Federal Policy:

GAO-04-279:

GAO Highlights:

Highlights of GAO-04-279, a report to congressional requesters 

Why GAO Did This Study:

Distance educationï¿½that is, offering courses by Internet, video, or 
other forms outside the classroomï¿½has changed considerably in recent 
years and is a growing force in postsecondary education. More than a 
decade ago, concerns about fraud and abuse by some correspondence 
schools led to federal restrictions on, among other things, the 
percentage of courses a school could provide by distance education and 
still qualify for federal student aid. Given the recent changes in 
distance education, GAO was asked to review the extent to which the 
restrictions affect schoolsï¿½ ability to offer federal student aid and 
the Department of Educationï¿½s assessment of the continued 
appropriateness of the restrictions.

Additionally, GAO was asked to look at the extent to which accrediting 
agencies evaluate distance education programs, including their 
approach for assessing student outcomes.

What GAO Found:

While federal restrictions on the size of distance education programs 
affect only a small number of schoolsï¿½ ability to offer federal 
student aid, the growing popularity of distance education could cause 
the number to increase in the future. GAO found that 14 schools were 
either now adversely affected by the restrictions or would be affected 
in the future; collectively, these schools serve nearly 225,000 
students. Eight of these schools, however, will remain eligible to 
offer federal student aid because they have been granted waivers from 
the restrictions by Education. Education granted the waivers as part 
of a program aimed at assessing the continued appropriateness of the 
restrictions given the changing face of distance education. In 
considering the appropriateness of the restrictions, there are several 
policy options for amending the restrictions; however, amending the 
restrictions to improve access would likely increase the cost of the 
federal student aid programs. One way to further understand the effect 
of amending the restrictions would be to study data on the cost of 
granting the waivers to schools, but Education has yet to develop this 
information.

The seven accrediting agencies GAO reviewed varied in the extent to 
which they included distance education programs in their reviews of 
postsecondary institutions. All seven agencies had developed policies 
for reviewing these programs; however, there were differences in how 
and when they reviewed the programs. Agencies also differed in the 
extent to which they included an assessment of student outcomes in 
their reviews. GAOï¿½s work in examining how organizations successfully 
focus on outcomes shows that they do so by (1) setting measurable 
goals for program outcomes, (2) developing strategies for meeting 
these goals, and (3) disclosing the results of their efforts to the 
public. Measured against this approach, only one of the seven 
accrediting agencies we reviewed had policies that require schools to 
satisfy all three components. As the key federal link to the 
accreditation community, Education could play a pivotal role in 
encouraging an outcomes-based model.

What GAO Recommends:

GAO recommends that Education provide data on the cost of waiving 
restrictions on distance education and develop guidelines with 
accrediting agencies and schools on assessing distance education 
quality.

In commenting on a draft of this report, Education generally agreed 
with our findings and the merits of our recommendations.

www.gao.gov/cgi-bin/getrpt?GAO-04-279.

To view the full product, including the scope and methodology, click 
on the link above. For more information, contact Cornelia M. Ashby at 
(202) 512-8403 or [email protected].

[End of section]

Contents:

Letter:

Results in Brief:

Background:

Current Federal Restrictions on Distance Education Affect Few Schools' 
Ability to Offer Federal Student Aid, but Numbers Could Increase in the 
Future:

According to Education, the Demonstration Program Has Not Revealed 
Negative Consequences of Waiving the Current Federal Restrictions on 
Distance Education:

Accrediting Agency Reviews of Distance Education Varies:

Accrediting Agency Assessment of Student Learning Outcomes in Their 
Reviews Varies Considerably:

Conclusions:

Recommendations:

Agency Comments:

Appendix I: Scope and Methodology:

Appendix II: Comments from the Department of Education:

Appendix III: GAO Contacts and Staff Acknowledgments:

Contacts:

Staff Acknowledgments:

Tables:

Table 1: Examples of Potential Differences in Electronically 
Transmitted Distance Education and Traditional Classroom Instruction:

Table 2: Schools That Current Restrictions on Distance Education 
Programs Affect or Nearly Affect:

Table 3: Evaluation of Policy Options Related to Amending the 50-
Percent Rules:

United States General Accounting Office:

Washington, DC 20548:

February 26, 2004:

The Honorable Edward M. Kennedy: 
Ranking Minority Member: 
Committee on Health, Education, Labor, and Pensions: 
United States Senate:

The Honorable George Miller: 
Ranking Minority Member: 
Committee on Education and the Workforce: 
House of Representatives:

The Honorable Rubï¿½n Hinojosa: 
The Honorable Major Owens: 
House of Representatives:

As the largest provider of student financial aid to postsecondary 
students, the federal government has a substantial interest in the 
quality of courses and programs offered by postsecondary schools. In 
fiscal year 2003, students at more than 6,000 postsecondary schools 
received about $60 billion in loans and grants through federal student 
aid programs. Distance education--that is, taking courses by computer, 
by television, or by correspondence[Footnote 1]--is an increasing part 
of the educational landscape in which students pursue a degree or 
certificate. During the 1999-2000 school year, for example, an 
estimated 1.5 million students, or about 1 of every 13 postsecondary 
students, took at least one telecommunications[Footnote 2] distance 
education course.[Footnote 3]

Recent changes in distance education call into question the continued 
relevance of federal policies designed to limit the extent to which 
schools can deliver distance education courses and still qualify to 
participate in the federal student aid programs. A school is not 
eligible to participate in the federal student aid programs if the 
school (1) offers more than half of its courses through correspondence, 
(2) has half or more of its students enrolled in correspondence 
courses, or (3) offers correspondence and telecommunication courses 
that amount to half or more of all courses. Collectively, these 
restrictions are known as the "50-percent rules."[Footnote 4] More than 
a decade ago concerns about widespread fraud and abuse at some 
correspondence schools led the Congress to enact these limiting 
policies in order to protect the federal student aid programs. The 
rapid growth of distance education at mainstream schools, primarily 
through newer delivery modes such as Internet-based classes, have led 
to questions about whether these restrictions are still the most 
appropriate way to guard against fraud and abuse. In 1998, the Congress 
authorized the Department of Education (Education) to administer a 
Distance Education Demonstration Program (Demonstration Program) to, 
among other things, evaluate these restrictions.[Footnote 5]

A change in federal policy to reduce the restrictions might result in 
an increased reliance on the work of accrediting agencies[Footnote 6] 
to ensure program quality and guard against fraud and abuse. These 
agencies already review schools' programs, including distance 
education, for quality assurance purposes. To be eligible for the 
federal student aid programs, a school must be periodically reviewed 
and accredited by an agency recognized by Education. In doing so, 
Education, is responsible for determining that agencies have certain 
standards and procedures in place for evaluating educational quality. 
While the accreditation process applies to both distance education and 
campus-based instruction, many accreditation practices focus on campus-
based education, such as the adequacy of classroom facilities or 
instructional time spent with students. These measures can be more 
difficult to apply to distance education, when students are not on 
campus or may not interact with faculty in person. In this new 
environment, postsecondary education officials are increasingly 
recommending that student-learning outcomes--such as course completion 
rates or success in problem solving and written communication--be 
incorporated into assessments of distance education programs and 
campus-based programs.

In this context, and in light of the upcoming reauthorization of the 
Higher Education Act of 1965, as amended (Higher Education Act), you 
asked us to review various issues with respect to distance education. 
For this report, we reviewed both quality control approaches for 
distance education--federal restrictions on the size of distance 
education programs and accreditation reviews of distance education 
courses. Separately from this effort, we reported to you on issues 
related to the demographic characteristics of distance education 
students and the use of distance education by Minority Serving 
Institutions.[Footnote 7] For this report, as agreed with your offices, 
we focused our work on the following four questions:

* To what extent do current federal restrictions on distance education 
affect schools' ability to offer federal student aid to their students?

* What has Education's Demonstration Program revealed with respect to 
the continued appropriateness of these restrictions?

* To what extent do accreditation agencies include distance education 
in their reviews of schools or programs?

* As they evaluate distance education and campus-based programs, to 
what extent do accreditation agencies assess student-learning outcomes?

To address the two questions about current statutory and regulatory 
restrictions on federal aid, we obtained information from Education and 
other experts on how many of the over 6,000 postsecondary institutions 
had been affected by these provisions or might be affected in the 
future--that is, schools that might reach the limitations on the size 
of their distance education programs if their growth in this area 
continues. We interviewed officials at each of the institutions whose 
eligibility for the student aid programs had been affected or could be 
affected by the restrictions to determine the extent to which their 
ability to offer federal student aid to their students had been 
impacted.[Footnote 8] We also interviewed officials at Education who 
are responsible for assessing distance education issues and reviewed 
monitoring reports on participating institutions involved in the 
Demonstration Program and annual reports to the Congress.[Footnote 9] 
To address questions related to the work of accrediting agencies, we 
focused on the policies of seven accrediting agencies that collectively 
are responsible for more than two-thirds of all distance education 
programs.[Footnote 10] We evaluated the extent that the agencies assess 
student learning outcomes using criteria that we had developed in a 
variety of past work addressing performance and accountability 
issues.[Footnote 11] We conducted our work between October 2002 and 
February 2004 in accordance with generally accepted government auditing 
standards. See appendix I for further explanation of our approach and 
methodology.

Results in Brief:

While federal restrictions on the size of distance education programs 
affect only a small number of schools' ability to offer federal student 
aid, the growing popularity of distance education could cause the 
number to increase in the future. We found that 14 schools were either 
now adversely affected by the restrictions or would be affected in the 
future; collectively, these schools serve nearly 225,000 students. 
Eight of the 14 schools are currently exempt from restrictions on the 
size of their distance education programs because they are 
participating in the Demonstration Program. Three of the remaining 5 
schools in the Demonstration Program are negotiating with Education to 
obtain a waiver. One school that is not in the Demonstration Program 
anticipates becoming ineligible because of the restrictions in the 
future.

According to Education, the Demonstration Program revealed no evidence 
that waiving the current restrictions results in negative consequences, 
and in its most recent report on the program, Education said that there 
is a need to amend the laws and regulations governing federal student 
financial aid to expand distance education opportunities. However, 
deciding whether to eliminate or modify these restrictions involves 
consideration of several factors, including the extent to which any 
changes would improve access to postsecondary schools, the impact that 
changes would have on Education's ability to prevent institutions from 
conducting fraudulent or abusive practices, and the cost of 
implementation. Our analysis of these factors indicates that 
eliminating the restrictions without ensuring some form of management 
accountability would likely incur a higher risk for fraud and abuse 
than currently exists. Other options that involve some form of 
accountability include continuing to allow waivers (and monitoring 
schools that receive the waivers) or using other thresholds, such as 
student loan default rates, to decide which schools could be exempted 
from the restrictions. Education recognizes that there could be a cost 
to the federal student aid programs of eliminating or modifying the 
restrictions. Information from the Demonstration Program on potential 
budgetary impacts could inform policymakers; however, Education has yet 
to describe such information in its reports.

Accrediting agencies we reviewed varied in the extent to which their 
reviews include distance education. All seven agencies had developed 
standards, policies, and guidelines for reviewing distance education 
programs; however, there were differences in the extent to which their 
approaches ensured that distance education was included in assessing 
the quality of a school's educational program. The Higher Education Act 
gives agencies considerable flexibility in developing these standards, 
policies, and guidelines, and the agencies differed considerably in 
when and how they included reviews of distance education. For example, 
one agency includes distance education programs in its review when 25 
percent or more of a program's courses are offered by distance 
education; three other agencies do not review distance education 
programs until the percentage of courses rises to 50 percent; and the 
remaining three agencies apply various other thresholds in considering 
when to review distance education programs.

The accrediting agencies we reviewed also differed in the extent to 
which they included an assessment of student learning outcomes--for 
either classroom-based or distance learning--in their accreditation 
reviews. Several agencies have recently placed greater emphasis on 
holding institutions accountable for student learning outcomes--a 
strategy recommended by such organizations as the Council for Higher 
Education Accreditation, a national organization representing 
accrediting agencies, and by other postsecondary education officials. 
Our work in examining how organizations of various types successfully 
focus on outcomes shows that they do so by (1) setting measurable goals 
for program outcomes, (2) developing strategies for meeting these 
goals, and (3) disclosing the results of their efforts to the public. 
Measured against this approach, only one of the seven accrediting 
agencies we reviewed has policies and procedures that require schools 
to satisfy all three components. At present, there is no federal 
requirement that accrediting agencies require institutions to use such 
an approach, and while Education has expressed interest in holding 
postsecondary institutions accountable for student learning outcomes, 
it does not have the statutory authority to impose such requirements 
via the accrediting agencies. However, as the central federal link to 
the accreditation community, Education could take a more proactive role 
in promoting accountability.

In this report, we are making recommendations to the Secretary of 
Education to include empirical data in future Demonstration Program 
reports on the cost to the federal student aid programs of waiving the 
50-percent rules. With respect to accreditation, we are recommending 
that the Secretary of Education (1) develop, with the help of 
accrediting agencies and schools, guidelines or a mutual understanding 
for more consistent and thorough assessment and public disclosure of 
campus-based and distance education outcomes, including components of a 
system for holding institutions accountable for such outcomes and (2) 
if necessary, request authority from the Congress to require that 
accrediting agencies use these guidelines in their accreditation 
efforts.

In commenting on a draft of this report, Education generally agreed 
with our findings and the merits of our recommendations. For instance, 
Education said that it will consider the potential cost of the federal 
student aid programs of eliminating the 50-percent rules; however, due 
to the timing of the process of reauthorizing the Higher Education Act, 
Education believes it is unlikely these estimates will become part of a 
future report to Congress on the Demonstration Program.

Background:

Distance education is a growing force in postsecondary education, and 
its rise has implications for the federal student aid programs. Studies 
by Education indicate that enrollments in distance education quadrupled 
between 1995 and 2001. By the 2000-2001 school year, nearly 90 percent 
of public 4-year institutions were offering distance education courses, 
according to Education's figures. Entire degree programs are now 
available through distance education, so that a student can complete a 
degree without ever setting foot on campus. Students who rely 
extensively on distance education, like their counterparts in 
traditional campus-based settings, often receive federal aid under 
Title IV of the Higher Education Act, as amended, to cover the costs of 
their education, though their reliance on federal aid is somewhat less 
than students who are not involved in any distance education. We 
previously reported that 31 percent of students who took their entire 
program through distance education received federal aid, compared with 
39 percent of students who did not take any distance education 
courses.[Footnote 12]

There is growing recognition among postsecondary officials that changes 
brought about by the growing use of distance education need to be 
reflected in the process for monitoring the quality of schools' 
educational programs. Although newer forms of distance education--such 
as videoconferencing or Internet courses--may incorporate more elements 
of traditional classroom education than older approaches like 
correspondence courses, they can still differ from a traditional 
educational experience in many ways. Table 1 shows some of the 
potential differences.

Table 1: Examples of Potential Differences in Electronically 
Transmitted Distance Education and Traditional Classroom Instruction:

Electronically transmitted distance education setting: Courses may 
involve electronic content only (e.g., course modules on a compact 
disk or a school's Web server); 
Traditional classroom setting: Courses generally involve lectures or 
discussions with actual instructors.

Electronically transmitted distance education setting: When the 
instruction involves presentations by instructors, students often may 
have only indirect contact with them (e.g., over a video network or 
through e-mail); 
Traditional classroom setting: Students generally have face-to-face 
contact with instructors.

Electronically transmitted distance education setting: School may have 
no campus, may be hundreds of miles away, and research, tutoring, or 
counseling resources may be offered online rather than in-person; 
Traditional classroom setting: School has research facilities, 
tutoring, and other resources directly available on a campus.

Electronically transmitted distance education setting: Provider of the 
distance education coursework may be other than the school in which 
the student is enrolled; 
Traditional classroom setting: School in which the student is enrolled 
generally has direct responsibility for course content. 

Source: GAO analysis of reports and issue papers on distance education.

[End of table]

The Higher Education Act focuses on accreditation--a task undertaken by 
outside agencies--as the main tool for ensuring quality in 
postsecondary programs. Under the act, accreditation for purposes of 
meeting federal requirements can only be done by agencies that are 
specifically "recognized" by Education. In all, Education recognizes 62 
accrediting agencies.[Footnote 13] Some, such as Middle States 
Association of Colleges and Schools - Commission on Higher Education 
and the Western Association of Schools and Colleges - Accrediting 
Commission for Community and Junior Colleges, accredit entire 
institutions that fall under their geographic or other purview. Others, 
such as the American Bar Association--Council of the Section of Legal 
Education and Admissions to the Bar, accredit specific programs or 
departments. Collectively, accrediting agencies cover public and 
private 2-year and 4-year colleges and universities as well as for-
profit vocational schools and nondegree training programs. Thirty-nine 
agencies are recognized for the purpose of accrediting schools or 
programs for participation in the federal student aid programs. 
Education is required to recognize or re-recognize these agencies every 
5 years.

In order to be recognized by Education as a reliable authority with 
regard to educational quality, accrediting agencies must, in addition 
to meeting certain basic criteria, establish standards that address 10 
broad areas of institutional quality, including student support 
services, facilities and equipment, and success with respect to student 
achievement.[Footnote 14] While the statute provides that these 
standards must be consistently applied to an institution's courses and 
programs of study, including distance education courses and 
programs,[Footnote 15] it also gives accrediting agencies flexibility 
in deciding what to require under each of the 10 areas, including 
flexibility in whether and how to include distance education within the 
accreditation review. The current accreditation process is being 
carried out against a public backdrop of concern about holding schools 
accountable for student learning outcomes. For example, concerns have 
been expressed about such issues as the following:

* Program completion--the percentage of full-time students who graduate 
with a 4-year postsecondary degree within 6 years of initial enrollment 
was about 52 percent in 2000.[Footnote 16]

* Unprepared workforce--business leaders and educators have pointed to 
a skills gap between many students' problem solving, communications, 
and analytical thinking ability and what the workplace 
requires.[Footnote 17]

To address concerns such as these, there is increased interest in using 
outcomes more extensively as a means of ensuring quality in distance 
education and campus-based education. The Council for Higher Education 
Accreditation--a national association representing accreditors--has 
issued guidelines on distance education and campus-based programs, 
that, among other things, call for greater attention to student 
learning outcomes.[Footnote 18] Additionally, in May 2003,[Footnote 19] 
we reported that 18 states are promoting accountability by publishing 
the performance measures of their colleges and universities, including 
retention and graduation rates, because some officials believe that 
this motivates colleges to improve their performance in that area. At 
the national level, Education stated in its 2004 annual plan that it 
will propose to hold institutions more accountable for results, such as 
ensuring a higher percentage of students complete their programs on-
time. The congressionally appointed Web-based Education 
Commission[Footnote 20] has also called for greater attention on 
student outcomes. The Commission said that a primary concern related to 
program accreditation is that "quality assurance has too often measured 
educational inputs (e.g., number of books in the library, etc.) rather 
than student outcomes."[Footnote 21] Finally, the Business Higher 
Education Forum--an organization representing business executives and 
leaders in postsecondary education--has said that improvements are 
needed in adapting objectives to specific outcomes and certifiable job-
skills that address a shortage of workers equipped with analytical 
thinking and communication skills.

Current Federal Restrictions on Distance Education Affect Few Schools' 
Ability to Offer Federal Student Aid, but Numbers Could Increase in the 
Future:

Although current federal restrictions on the extent to which schools 
can offer programs by distance education and still qualify to 
participate in federal student aid programs affect a small number of 
schools, the growing popularity of distance education could cause the 
number to increase in the future. We found that 14 schools were either 
now adversely affected by the restrictions or would be affected in the 
future; collectively, these schools serve nearly 225,000 students. 
Eight of the 14 schools are exempt from the restrictions because they 
have received waivers as participants in Education's Demonstration 
Program, under which schools can remain eligible to participate in the 
student aid programs even if the percentage of distance education 
courses or the percentage of students involved in distance education 
rises above the maximums set forth in the law.[Footnote 22] Three of 
the remaining 5 schools in the Demonstration Program are negotiating 
with Education to obtain a waiver.

The 14 schools that the current federal restrictions--called the 50-
percent rules--affect, or nearly affect, are shown in table 2. They 
vary in a number of respects. For example, 2 are large (the University 
of Phoenix has nearly 170,000 students and the University of Maryland 
University College has nearly 30,000), while 5 have fewer than 1,000 
students. Six of the 14 are private for-profit schools, 5 are private 
nonprofit schools, and 3 are public. Thirteen of the schools are in 
Education's Demonstration Program, and without the waivers provided 
under this program, 8 of the 13 would be ineligible to participate in 
federal student aid programs because 50 percent or more of their 
students are involved in distance education. One school that is not 
part of the Demonstration Program faces a potential problem in the near 
future because of its growing distance education programs.[Footnote 23]

Table 2: Schools That Current Restrictions on Distance Education 
Programs Affect or Nearly Affect:

Schools in Education's Demonstration Program that have substantial 
distance education programs: 

1. Name: Capella University[A]; 
Number of students in 2000-2001: 3,985; 
Percent of students involved in distance education: 100; 
Type of school: Private for profit; 
When school first offered distance education: 1993; 
2001 default rate: 0.50 %.

2. Name: Charter Oak State College[A]; 
Number of students in 2000-2001: 1,496; 
Percent of students involved in distance education: 100; 
Type of school: Public; 
When school first offered distance education: 1992; 
2001 default rate: n/a.

3. Name: Eastern Oregon University[A]; 
Number of students in 2000-2001: 4,908; 
Percent of students involved in distance education: 69; 
Type of school: Public; 
When school first offered distance education: 1970; 
2001 default rate: 5.6 %.

4. Name: Southern Christian University[A]; 
Number of students in 2000- 2001: 1,029; 
Percent of students involved in distance education: 93; 
Type of school: Private nonprofit; 
When school first offered distance education: 1993; 
2001 default rate: 1 %.

5. Name: U.S. Sports Academy[A]; 
Number of students in 2000-2001: 704; 
Percent of students involved in distance education: 100; 
Type of school: Private nonprofit; 
When school first offered distance education: 2001; 
2001 default rate: 0 %.

6. Name: University Maryland University College[A]; 
Number of students in 2000-2001: 29,442[B]; 
Percent of students involved in distance education: 77; 
Type of school: Public; 
When school first offered distance education: 1994; 
2001 default rate: 4.5 %.

7. Name: Walden University[A]; 
Number of students in 2000-2001: 1,544; 
Percent of students involved in distance education: 100; 
Type of school: Private for profit; 
When school first offered distance education: 1970; 
2001 default rate: 2.8 %.

8. Name: Western Governor's University[A]; 
Number of students in 2000- 2001: 242; 
Percent of students involved in distance education: 100; 
Type of school: Private nonprofit; 
When school first offered distance education: 1999; 
2001 default rate: n/a.

9. Name: Jones International University[B]; 
Number of students in 2000- 2001: 446; 
Percent of students involved in distance education: 100; 
Type of school: Private for profit; 
When school first offered distance education: 1995; 
2001 default rate: n/a.

10. Name: North Central University[C]; 
Number of students in 2000-2001: 319; 
Percent of students involved in distance education: 100; 
Type of school: Private for profit; 
When school first offered distance education: 1997; 
2001 default rate: n/a.

11. Name: National Technical University[C]; 
Number of students in 2000- 2001: 969; 
Percent of students involved in distance education: 100; 
Type of school: Private nonprofit; 
When school first offered distance education: 1984; 
2001 default rate: n/a.

12. Name: University of Phoenix; 
Number of students in 2000-2001: 169,021; 
Percent of students involved in distance education: 29[D, E]; 
Type of school: Private for profit; 
When school first offered distance education: 1989; 
2001 default rate: 5.8 %.

13. Name: American Intercontinental University; 
Number of students in 2000-2001: 5,885; 
Percent of students involved in distance education: 54[E, F]; 
Type of school: Private for profit; 
When school first offered distance education: 2001; 
2001 default rate: 5.4 %.

Schools eligible for the federal student aid programs that may have 
problems with the 50-percent rules in the future, but that are not in 
the Demonstration Program: 

14. Name: St. Joseph's College; 
Number of students in 2000-2001: 5,063; 
Percent of students involved in distance education: 56[G]; 
Type of school: Private nonprofit; 
When school first offered distance education: 1974; 
2001 default rate: 4.1 %. 

Source: GAO interview with officials at the 14 schools and Education's 
fiscal year 2001 student loan cohort default rate database.

N/A indicates the 2001 student loan cohort default rate database did 
not have information on the school or the school did not have any 
students with loans in repayment.

[A] Denotes a school that has received a waiver from the 50-percent 
rules.

[B] University of Maryland University College also serves a large 
number of military personnel stationed in Europe and Asia. These 
students are not included in this figure.

[C] Denotes a school that has received a waiver from the 50-percent 
rules pending Education's approval of the schools administrative and 
financial systems for managing the federal student aid programs.

[D] In 2000-2001, the University of Phoenix had almost 49,000 students 
involved in distance education, or about 29 percent of its entire 
student body.

[E] According to an Education official, at least half of the programs 
offered by the University of Phoenix and American Intercontinental 
University are degree programs so that their students enrolled in 
telecommunications courses are not considered to be enrolled in 
correspondence courses, so long as the total amount of 
telecommunication and correspondence courses is less than 50-percent of 
all the courses at those institutions.

[F] In 2002-2003, American Intercontinental University had 7,000 
students involved in distance education (out of 13,000 students) or 
about 54 percent of its student body.

[G] St. Joseph's College has received a waiver from the 50 percent 
rules from the Secretary of Education because the students enrolled in 
its correspondence courses receive no more than 5 percent of all 
federal student aid received by students at the institution--an 
allowable exemption under federal regulations. However, a school 
official indicated that the number of distance education students that 
receive financial aid is growing and the school anticipates that it 
could have a problem with the 50-percent rules in the future if the 
student aid offered to distance education students exceeds 5 percent of 
the total aid received by students.

[End of table]

Two examples from among the 14 schools will help illustrate the effect 
that the restrictions on the size of distance education programs have 
on schools and their students.

* The University Maryland University College, a public institution, 
located in Adelphi, Maryland, had nearly 30,000 students and more than 
70 percent of its students took at least one Internet course in the 
2000-2001 school year. The college is participating in Education's 
Demonstration Program and has received waivers to the restrictions on 
federal student aid for schools with substantial distance education 
programs. According to university officials, without the waivers, the 
college and about 10,000 students (campus-based and distance education 
students) would no longer receive about $65 million in federal student 
aid.

* Jones International University, a private for-profit school founded 
in 1993 and located in Englewood, Colorado, served about 450 students 
in the 2000-2001 school year. The university offers all of its programs 
online and offers no campus-based courses. The university has received 
accreditation from the North Central Association of Colleges and 
Schools, a regional accrediting agency that reviews institutions in 19 
states. In August 2003, school administrators told us that they would 
be interested in federal student program eligibility in the future. In 
December 2003, the school became a participant in Education's 
Demonstration Program and, therefore, its students will be eligible for 
federal student aid when Education approves the school's administrative 
and financial systems for managing the federal student aid programs.

According to Education, the Demonstration Program Has Not Revealed 
Negative Consequences of Waiving the Current Federal Restrictions on 
Distance Education:

In the second of two congressionally mandated reports on federal laws 
and regulations that could impact access to distance education, 
Education concluded, "[T]he Department has uncovered no evidence that 
waiving the 50-percent rules, or any of the other rules for which 
waivers were provided, has resulted in any problems or had negative 
consequences." In its report, Education also stated that there is a 
need to amend the laws and regulations governing federal student 
financial aid to expand distance education opportunities, and officials 
at Education recognize that several policy options are available for 
doing so. A significant consideration in evaluating such options is the 
cost to the federal student aid programs. Regarding these costs, 
Education has not provided data on the cost of granting waivers to the 
50-percent rules in the first two reports on the Demonstration Program.

Based in part on our discussions with Education officials and proposals 
made by members of Congress,[Footnote 24] there appear to be three main 
options for consideration in deciding whether to eliminate or modify 
the current federal restrictions on distance education: (1) continuing 
the use of case-by-case waivers, as in the current Demonstration 
Program, coupled with regular monitoring and technical assistance; (2) 
offering exceptions to those schools with effective controls already in 
place to prevent fraud and abuse, as evidenced by such characteristics 
as low default rates; or (3) eliminating the rules and imposing no 
additional management controls. Evaluating these options involves three 
main considerations: the extent to which the changes improve access to 
postsecondary schools, the impact the changes would have on Education's 
ability to prevent institutions from fraudulent or abusive practices, 
and the cost to the federal student aid programs and to monitor schools 
with substantial distance education programs. Our analysis of the three 
options,[Footnote 25] as shown in table 3, suggests that while all 
three would improve students' access to varying degrees, the first two 
would likely carry a lower risk of fraud and abuse than the third, 
which would eliminate the rules and controls altogether. We also found 
support for some form of accountability at most of the 14 schools that 
current restrictions affect or nearly affect. For example, officials at 
11 of these schools said they were generally supportive of some form of 
accountability to preserve the integrity of the federal student aid 
programs rather than total elimination of the restrictions.

Table 3: Evaluation of Policy Options Related to Amending the 50-
Percent Rules:

Policy option: Continue the Demonstration Program, which allows for 
waivers to the 50-percent rules and provides monitoring and technical 
assistance on a routine basis; 

Relative Impact on access to federal student aid for schools above the 
current limits based on the 50- percent rules: Medium. Increased 
access to federal student aid for postsecondary education would be 
limited to students attending schools that have received waivers; 

Risk of fraud and abuse: Low. As part of the Demonstration Program, 
Education has provided oversight and technical assistance on a routine 
basis. According to participants, this has resulted in improved 
compliance with federal student aid program rules. Also, as part of 
the application process, Education screens schools for the program; 
this acts as another form of oversight; 

Relative Impact to the federal student aid programs and cost to 
monitor schools with substantial distance education programs: Medium. 
Increased cost to the federal student aid programs would be limited to 
those schools participating in the Demonstration Program. Education 
would need to continue monitoring schools with staff located in its 
field offices. Its ability to monitor substantially more schools on a 
routine basis may be limited, however. For example, in 2001, Education 
monitored less than 200 out of the over 6,000 schools eligible for the 
federal student aid programs.

Policy option: Offering exceptions to the 50-percent rules to schools 
with evidence of effective management controls, such as low default 
rates. For example, a Senate proposal (S. 1445) offered schools a 
waiver to the 50-percent rules if they had a default rate of 10 
percent or less for each of the 3 most recent fiscal years; 

Relative Impact on access to federal student aid for schools above the 
current limits based on the 50-percent rules: Medium to high. 
Increased access to federal student aid for postsecondary education 
would be limited to students attending schools with low default 
rates; 

Risk of fraud and abuse: Low to medium. Our evaluation shows that all 
9 schools eligible for the federal student aid programs (with loans in 
repayment) and that have or may have problems with the 50-percent 
rules had default rates of 6 percent or less in 2001. This alternative 
ensures that default rates remain reasonable; however, technical 
assistance and monitoring are not provided. One possible unintended 
effect of this option is that if a school exceeds the designated 
default rate, all students, including students enrolled in on-campus 
programs, might become ineligible for the federal student aid 
programs; 

Relative Impact to the federal student aid programs and cost to 
monitor schools with substantial distance education programs: Medium 
to high. The federal student aid program would cost more under this 
option since the only limiting factor would affect schools with high 
default rates. Initially, monitoring default rates would take minimal 
effort by Education, however, should rates increase, the costs 
associated with managing and guaranteeing the defaulted loans would 
increase.

Policy option: Eliminating the 50-percent rules with no additional 
management controls; 

Relative Impact on access to federal student aid for schools above the 
current limits based on the 50-percent rules: High. Increased access 
to federal student aid for students attending schools with substantial 
distance education; 

Risk of fraud and abuse: Medium to high. Without any monitoring or 
technical assistance, this option offers the highest risk of 
increasing fraud and abuse. Lessons learned from the Demonstration 
Program suggest that eliminating the 50- percent rules without 
adequate monitoring may increase the risk of fraud and abuse. For 
example, Education identified problems at 15 of the 21 participants[A] 
remaining in the program as part of its monitoring efforts. 
Alternatively, relying on accrediting agencies to monitor compliance 
with student aid rules may be difficult because accrediting agencies 
do not consider it their role to act as "regulators" for the federal 
government; 

Relative Impact to the federal student aid programs and cost to 
monitor schools with substantial distance education programs: High. 
The federal student aid programs would incur greater costs since there 
would be no limit on the number of distance education schools that 
could participate. Initially, the cost to monitor could be low, but 
such costs could increase substantially if fraud and abuse rise. 

Source: GAO analysis.

[A] The most common problems that surfaced included weaknesses in 
administrative systems for tracking satisfactory academic progress of 
students and the enrollment status (i.e., whether students withdrew 
from a class) of distance education students. Having sound 
administrative systems for tracking these two areas are important 
because they can result in an institution returning student aid funds 
to the federal government if improperly administered.

[End of table]

The first option would involve reauthorizing the Demonstration Program 
as a means of continuing to provide schools with waivers or other 
relief from current restrictions. Even though exempting schools from 
current restrictions on the size of distance education programs costs 
the federal student aid programs, Education has yet to describe the 
extent of the costs in its reports on the program. According to 
Education staff, developing the data on the amount of federal student 
aid could be done and there are no major barriers to doing so. The data 
would prove valuable in determining the potential costs of various 
policy options since the program is expanding in scope--five new 
schools joined in December 2003--and additional reports will need to be 
prepared for the Congress.

Our review of the Demonstration Program and our discussions with 
Education officials surfaced two additional considerations that would 
be worthwhile addressing if the Congress decided to reauthorize the 
program. They relate to streamlining Demonstration Program requirements 
and improving resource utilization.

* Reducing paperwork requirements. When the Congress authorized the 
Demonstration Program, it required that Education evaluate various 
aspects of distance education, including the numbers and types of 
students participating in the program and the effective use of 
different technologies for delivering distance education. These 
requirements now may be redundant since Education collects such 
information as part of its National Postsecondary Student Aid Study and 
other special studies on distance education. Eliminating such 
requirements could ease the paperwork burden on participating 
institutions and Education staff.

* Limiting participation to schools that are adversely affected by 
federal restrictions. Some schools participating in the Demonstration 
Program do not need waivers to the 50-percent rules, because their 
programs are not extensive enough to exceed current restrictions. 
Limiting participation in the program to only schools that need relief 
from restrictions on the size of distance education programs could ease 
the administrative burden on Education. However, in the future, more 
schools may be interested in receiving waivers if their distance 
education programs expand.

Accrediting Agency Reviews of Distance Education Varies:

The seven accrediting agencies we reviewed varied in the extent to 
which their institutional reviews included distance education. While 
all seven agencies had adopted standards or policies calling for 
campus-based and distance education programs to be evaluated using the 
same standards, the agencies varied in (1) the extent to which agencies 
required schools to demonstrate that distance education and campus-
based programs were comparable and (2) the size a distance education 
program had to be before it was formally included in the overall 
institutional review. While the Higher Education Act requires Education 
to ensure that accrediting agencies have standards and policies in 
place regarding the quality of education, including distance education, 
it gives the agencies latitude with regard to the details of setting 
their standards or policies. Differences in standards or policies do 
not necessarily lead to differences in educational quality, but if one 
accrediting agency's policies and procedures are more or less rigorous 
than another's, the potential for quality differences may increase. An 
Education official said the historical role of the federal government 
in exerting control over postsecondary education has been limited. 
Similarly, Education has limited authority to push for greater 
consistency in areas related to the evaluation of distance education.

Accrediting Agency Actions for Evaluating Distance Education Programs:

The agencies we reviewed all had standards or policies in place for 
evaluating distance education programs. The Higher Education Act does 
not specify how accrediting agencies should review distance education 
programs, but instead directs them to cover key subject areas, such as 
student achievement, curricula, and faculty. The law does not specify 
how accrediting agencies are to develop their standards or what an 
appropriate standard should be. All seven agencies had a policy stating 
that the standards they would apply in assessing a school's distance 
education programs would be the same as the standards used for 
assessing campus-based programs. The six regional accrediting agencies 
within this group had also adopted a set of supplemental 
guidelines[Footnote 26] to help schools assess their own distance 
education programs.[Footnote 27]

While all the agencies had standards or policies in place for 
evaluating distance education and campus-based learning, we found 
variation among the agencies in the degree to which they required 
institutions to compare their distance learning courses with their 
campus-based courses. Five of the seven agencies, including the one 
national accrediting agency reviewed, required schools to demonstrate 
comparability between distance education programs and campus-based 
programs. For example, one agency required each school to evaluate "the 
educational effectiveness of its distance education programs (including 
assessments of student learning outcomes, student retention, and 
student satisfaction) to ensure comparability to campus-based 
programs." Another accrediting agency required that the successful 
completion of distance education courses and programs be similar to 
those of campus-based courses and programs. The remaining two 
accrediting agencies did not require schools to demonstrate 
comparability in any tangible way.

A second area in which variations existed is in the threshold for 
deciding when to conduct a review of a distance education program. 
While accrediting agencies complete their major review of a school on a 
multiyear cycle, federal regulations provide they also must approve 
"substantive changes" to the accredited institutions' educational 
mission or program. The regulations[Footnote 28] prescribe seven types 
of change, such as a change in the established mission or objectives of 
the institution, that an agency must include in its definition of a 
substantive change for a school. For example, starting a new field of 
study or beginning a distance education program might both be 
considered a substantive change for a school. However, the seven 
agencies vary in their definition of "substantive" so the amount of 
change needed for such a review to occur varies from agency to agency. 
Three of the seven agencies review distance education programs when at 
least half of all courses in a program are offered through distance 
learning. A fourth agency reviews at an earlier stage--when 25 percent 
or more of a degree or certificate program are offered through distance 
learning. The remaining three agencies have still other polices for 
when they initiate reviews of distance education programs.

Education's Role and Responsibility in Monitoring Accrediting Agencies 
Is Limited:

The variations among accrediting agencies that we found probably result 
from the statutory latitude provided to accrediting agencies in 
carrying out their roles. For example, in the use of their varying 
policies and practices, the agencies are operating within the flexible 
framework provided under the Higher Education Act. Such variations 
likewise do not necessarily lead to differences in how effectively 
agencies are able to evaluate educational quality. However, the lack of 
consistently applied procedures for matters such as comparing distance 
education and campus-based programs or deciding when to incorporate 
reviews of new distance education programs could potentially increase 
the chances that some schools are being held to higher standards than 
others. Additionally, the flexible framework of the Higher Education 
Act extends to the requirements that accrediting agencies set for 
schools in evaluating student learning outcomes. In discussions on this 
matter, Education officials indicated that the law's flexibility 
largely precludes them from being more prescriptive about the 
standards, policies, or procedures that accrediting agencies should 
use.

Accrediting Agency Assessment of Student Learning Outcomes in Their 
Reviews Varies Considerably:

The seven accrediting agencies we reviewed varied in the extent to 
which their standards and policies address student-learning outcomes 
for either campus-based or distance education courses or programs. Over 
the past decade, our work on outcomes-based assessments in a variety of 
different areas shows that when organizations successfully focus on 
outcomes, they do so through a systematic approach that includes three 
main components.[Footnote 29] The three are (1) setting measurable and 
quantifiable goals for program outcomes, (2) developing strategies for 
achieving these goals, and (3) disclosing the results of their efforts 
to the public. The accrediting agencies we reviewed generally 
recognized the importance of outcomes, but only one of the seven had an 
approach that required schools to cover all three of these components.

Successful Implementation of Outcomes-Based Approach Generally 
Involves Three Main Components:

The three-part approach we found being used to successfully implement 
an outcomes-based management strategy was based on our assessments 
across a wide spectrum of agencies and activities, including, for 
example, the Federal Emergency Management Agency working with local 
governments and the building industry to strengthen building codes to 
limit deaths and property losses from disaster and the Coast Guard 
working with the towing industry to reduce marine casualties. Briefly, 
here are examples of how these three components would apply in an 
educational setting.

Developing measurable and quantifiable goals. It is important that 
outcome goals be measurable and quantifiable, because without such 
specificity there is little opportunity to determine progress 
objectively. A goal of improving student learning outcomes would 
require measures that reflect the achievement of student learning. For 
example, a goal of improving student learning outcomes would need to be 
translated into more specific and measurable terms that pertain 
directly to a school's mission, such as an average state licensing 
examination score or a certain job placement rate. Other measures could 
include test scores measuring writing ability, the ability to defend a 
point orally, or analyze critically, and work habits, such as time 
management and organization skills.

Developing strategies for achieving the goals. This component involves 
determining how human, financial, and other resources will be applied 
to achieve the goals. In education, this component could include such 
strategies as training for faculty, investments in information 
technology, or tutoring programs to help improve skills to desired 
levels. This component helps align an organization's efforts towards 
improving its efficiency and effectiveness. Our work has shown that 
providing a rationale for how the resources will contribute to 
accomplishing the expected level of performance is an important part of 
this component.

Reporting performance data to the public. Making student learning 
outcome results public is a primary means of demonstrating performance 
and holding institutions accountable for results. Doing so could 
involve such steps as requiring schools to put distance learning goals 
and student outcomes (such as job placement rates or pass rates on 
state licensing examinations) in a form that can be distributed 
publicly, such as on the school's Web site. This would provide a basis 
for students to make more informed decisions on whether to enroll in 
distance education programs and courses. It would also provide feedback 
to schools on where to focus their efforts to improve performance. 
Education's 2002-2007 strategic plan calls for public disclosure of 
data by stating, "[A]n effective strategy for ensuring that 
institutions are held accountable for results is to make information on 
student achievement and attainment available to the public, thus 
enabling prospective students to make informed choices about where to 
attend college and how to spend their tuition dollars."[Footnote 30] 
Similarly, in September 2003, the Council for Higher Education 
Accreditation stated that "institutions and programs should routinely 
provide students and prospective students with information about 
student learning outcomes and institutional and program performance in 
terms of these outcomes" and that accrediting organizations should 
"establish standards, policies and review processes that visibly and 
clearly expect institutions and programs to discharge [such] 
responsibilities."[Footnote 31]

Most Accrediting Agencies Lacked One or More Components:

The accrediting agencies we reviewed generally recognized the 
importance of student learning outcomes and had practices in place that 
embody some aspects of the outcomes-based approach. However, only one 
of the agencies required schools to have all three components in place.

Developing measurable and quantifiable goals. Five of seven agencies 
had standards or policies requiring that institutions develop 
measurable goals.[Footnote 32] For example, one accrediting agency 
required institutions to formulate goals for its distance learning 
programs and campus-based programs that cover student achievement, 
including course completion rates, state licensing examination scores, 
and job placement rates. Another accrediting agency required that 
schools set expectations for student learning in various ways. For 
example, the agency required institutions to begin with measures 
already in place, such as course and program completion rate, retention 
rate, graduation rate, and job placement rate.

We recognize that each institution will need to develop its own 
measures in a way that is aligned with its mission, the students it 
serves, and its strategic plans. For example, a 2-year community 
college that serves a high percentage of low-income students may have a 
different mission, such as preparing students for 4-year schools, than 
a major 4-year institution.

Developing strategies for achieving the goals. All of the agencies we 
visited had standards or policies requiring institutions to develop 
strategies for achieving goals and allocating resources. For example, 
one agency had a standard that requires institutions to effectively 
organize the human, financial, and physical resources necessary to 
accomplish its purposes. Another agency had a standard that an 
institution's student development services must have adequate human, 
physical, financial, and equipment resources to support the goals of 
the institution. In addition, the standard requires that staff 
development to be related to the goals of the student development 
program and should be designed to enhance staff competencies and 
awareness of current theory and practice. Our prior work on 
accountability systems, however, points out that when measurable goals 
are not set, developing strategies may be less effective because there 
is no way to measure the results of applying the strategies and no way 
of determining what strategies to develop.

Our visits to the accrediting agencies produced specific examples of 
schools they reviewed that had tangible results in developing 
strategies for meeting distance education goals. One was Old Dominion 
University, which had collected data on the writing skills of distance 
education students. When scores by distance learners declined during an 
academic year, school administrators identified several strategies to 
improve students' writing abilities. They had site directors provide 
information on tutoring to students and directed students to writing 
and testing centers at community colleges. In addition, they conducted 
writing workshops at sites where a demonstrated need existed. After 
putting these strategies in place, writing test scores improved.

Reporting performance data to the public. Only one of the agencies had 
standards or policies requiring institutions to disclose student 
learning outcomes to the public. However, various organizations, 
including the Council for Higher Education Accreditation, are 
considering ways to make the results of such performance assessments 
transparent and available to the public. Among other things, the 
Council is working with institutions and programs to create individual 
performance profiles or to expand existing profiles. The Student Right 
to Know and Campus Security Act of 1990 offers some context for 
reporting performance data to the public.[Footnote 33] This act 
requires schools involved in the federal student loan programs to 
disclose, among other things,[Footnote 34] completion or graduation 
rates and, if applicable, transfer-out rates for certificate-or degree-
seeking, full-time, first-time undergraduates.[Footnote 35] In this 
regard, Education is considering ways to make available on its Web site 
the graduation rates of these schools. However, according to two 
postsecondary experts, the extent that schools make such information 
available to prospective students may be uneven.

Conclusions:

The federal government has a substantial interest in the quality of 
postsecondary education, including distance education programs. As 
distance education programs continue to grow in popularity, statutory 
restrictions on the size of distance education programs--put in place 
to guard against fraud and abuse in correspondence schools--might soon 
result in increasing numbers of distance education students losing 
eligibility for federal student aid. At the same time, some form of 
control is needed to prevent the potential for fraud and abuse. Over 
the past few years, the Department of Education has had the authority 
to grant waivers to schools in the Demonstration Program so that 
schools can bypass existing statutory requirements. The waivers offer 
schools the flexibility to increase the size of their distance 
education programs while remaining under the watchful eye of Education. 
Education is required to evaluate the efficacy of these waivers as a 
way of determining the ultimate need for changing the statutory 
restrictions against distance education. To do so, the Department would 
need to develop data on the cost to the federal student aid programs of 
granting waivers to schools. Developing such data and evaluating the 
efficacy of waivers would be a helpful step in providing information to 
the Congress about ways for balancing the need to protect the federal 
student aid programs against fraud and abuse while potentially 
providing students with increased access to postsecondary education.

In addition to administering the federal student aid programs, 
Education is responsible for ensuring the quality of distance education 
through the postsecondary accreditation process. Among other things, 
measures of the quality of postsecondary education include student-
learning outcomes, such as the extent to which students complete 
programs and/or the extent to which students' performance improves over 
time. As distance education programs proliferate, challenges with 
evaluating these programs mount because accreditation procedures were 
developed around campus-based, classroom learning. There is growing 
awareness in the postsecondary education community that additional 
steps may be needed to evaluate and ensure the quality of distance 
education and campus-based programs, though there is far less unanimity 
about how to go about it. Several accrediting agencies have taken 
significant steps towards applying an outcome-based, results-oriented 
approach to their accreditation process, including for distance 
education. These steps represent a potential set of "best practices" 
that could provide greater accountability for the quality of distance 
education. Due to the autonomous nature of accrediting agency 
operations, Education cannot require that all accrediting agencies 
adopt these practices. It could, however, play a pivotal role in 
encouraging and fostering the use of an outcomes-based model. In the 
long run, if the practices of accrediting agencies remain so varied 
that program quality is affected, Education may need additional 
authority to bring about a more consistent approach. Finally, if 
Education wishes to hold schools more accountable for the quality of 
distance education and campus-based programs--such as ensuring that a 
minimum percentage of students complete their programs--aligning the 
efforts of accrediting agencies to ensure that these factors are 
measured could increase the likelihood for success in this area. 
Indeed, a more systematic approach by accrediting agencies could help 
Education in its effort to focus greater attention on evaluating 
schools and educational policy through such outcomes.

Recommendations:

To better inform federal policymakers, we recommend that the Secretary 
of Education include data in future Demonstration Program reports on 
the potential cost to the federal student aid programs of waiving the 
50-percent rules. To enhance oversight of distance education quality, 
we recommend that the Secretary of Education, (1) develop, with the 
help of accrediting agencies and schools, guidelines or a mutual 
understanding for more consistent and thorough assessment of distance 
education programs, including developing evaluative components for 
holding schools accountable for such outcomes and (2) if necessary, 
request authority from the Congress to require that accrediting 
agencies use these guidelines in their accreditation efforts.

Agency Comments:

In commenting on a draft of this report, Education generally agreed 
with our findings and the merits of our recommendations. For instance, 
Education said that it will consider the potential cost of the federal 
student aid programs of eliminating the 50-percent rules; however, due 
to the timing of the process of reauthorizing the Higher Education Act, 
Education believes it is unlikely these estimates will become part of a 
future report to Congress on the Demonstration Program. While we can 
appreciate the difficulties surrounding the timing of the 
reauthorization, we believe that policymakers would be better informed 
if this information was provided to them as part of the Demonstration 
Program. Given the uncertainty about whether Congress will indeed amend 
the 50-percent rules as part of reauthorization and that the timing of 
such changes is uncertain, providing information on the costs of the 
waivers would appear to have value--especially since such information 
would, in part, carry out the spirit of Demonstration Program 
requirements.

With respect to our recommendation for accreditation, Education said 
that it would study it carefully. Education agrees that it could engage 
in a series of discussions with accrediting agencies and schools 
leading to guidance on assessment and public disclosure of information. 
Education, however, said that the results would be largely 
informational because the agencies would not be required to adopt the 
guidance, and Education is not convinced of the necessity or 
appropriateness of requiring the guidance via the Higher Education Act. 
Again, we can appreciate Education's position on this issue, but 
continue to believe that greater accountability for student learning 
outcomes is necessary for enhanced oversight of distance education 
programs. Given Education's stated desire to hold institutions more 
accountable for results, such as ensuring a higher percentage of 
students complete their programs on time, working with accrediting 
agencies to develop guidelines or a mutual understanding of what this 
involves would be one management tool for doing so.

We are sending copies of this report to the Secretary of Education, 
appropriate congressional committees, and other interested parties. In 
addition, the report will be available at no charge on GAO's Web site 
at http://www.gao.gov. Please call me at (202) 512-8403 if you or your 
staffs have any questions about this report. Other contacts and 
acknowledgments are listed in appendix III.

Signed by: 

Cornelia M. Ashby: 
Director, Education, Workforce, and Income Security Issues:

[End of section]

Appendix I: Scope and Methodology:

To address the two questions about the extent to which current federal 
restrictions on distance education affect schools' ability to offer 
federal student aid to their students and what the Department of 
Education's Distance Education Demonstration Program has revealed with 
respect to the continued appropriateness of these restrictions, we 
obtained information from Education staff and other experts on which 
postsecondary institutions might be affected by these provisions or 
were close to being affected. We limited our work primarily to schools 
that were involved in the Demonstration Program or had electronically 
transmitted distance education programs and that were accredited or 
pre-accredited by accrediting agencies recognized by Education for 
eligibility in the federal student aid programs. We initially 
interviewed officials at 21 institutions with a standard set of 
questions regarding the effect, if any, current federal restrictions 
have on the schools' ability to offer federal student aid, and we 
obtained information on the distance education programs at the schools. 
Based on our interviews, we determined that only 14 of the 21 schools 
had been affected or could be affected by the restrictions. We also 
obtained data on default rates at the 14 schools, if applicable, from 
Education's student loan cohort default rate database. With respect to 
the Demonstration Program, we interviewed officials at Education who 
were responsible for assessing distance education issues. Additionally, 
we reviewed monitoring and progress reports on participating 
institutions involved in the Demonstration Program. We reviewed various 
reports on federal restrictions related to distance education as well 
as pertinent statutes and regulations.

To address the two questions related to the work of accrediting 
agencies: To what extent do accreditation agencies include distance 
education in their reviews of schools or programs and as they evaluate 
distance education programs and campus-based programs, to what extent 
do accreditation agencies assess educational outcomes, we focused on 
the standards and policies of seven accrediting agencies that 
collectively are responsible for more than two-thirds of all distance 
education programs.[Footnote 36] We interviewed agency administrators 
and evaluated the extent of their outcomes-based assessment standards 
and policies using criteria that we had developed in a variety of past 
work addressing performance and accountability issues. We compared 
accrediting agency standards and policies with prior work we conducted 
on key components for accountability. We provided our preliminary 
findings to the seven accrediting agencies and asked them to verify our 
initial findings. In addition, we interviewed staff at Education 
involved in accreditation issues. We reviewed Education's monitoring 
reports on accreditation agencies. Additionally, we interviewed 
officials at the Council for Higher Education Accreditation and 
reviewed various reports that they have produced.

We conducted our work in accordance with generally accepted government 
auditing standards from October 2002 to February 2004.

[End of section]

Appendix II: Comments from the Department of Education:

UNITED STATES DEPARTMENT OF EDUCATION:

OFFICE OF POSTSECONDARY EDUCATION:

FEB 20 2004:

THE ASSISTANT SECRETARY:

Ms. Cornelia M. Ashby 
Director, Education, Workforce, and Income Security Issues 
United States General Accounting Office 
Washington, DC 20548:

Dear Ms. Ashby:

Thank you for providing the Department of Education (the Department) 
with a draft copy of the U.S. General Accounting Office's (GAO's) 
report entitled, "Distance Education: Improved Data on Program Costs 
and Guidelines on Quality Assessments Needed to Inform Federal Policy" 
(GAO-04-279). We have reviewed the draft and have the following 
comments.

This study focuses on the appropriateness of the limitations on the 
size of distance education programs currently in place for institutions 
to participate in the Title IV programs, as well as whether data exist 
that may be utilized to support easing those restrictions. 
Additionally, this report raises the issues of cost to the federal 
student aid programs if certain restrictions are waived. A third focus 
of the report is the review of seven accrediting agencies and their 
approaches to examining distance programs, particularly whether they 
have included assessments of student outcomes as part of that review.

In this report, you recommend that the Department:

* include empirical data in future Demonstration Program reports on the 
potential cost to the federal student aid programs of waiving the 50 
percent rules;

* enhance oversight of distance education quality by developing, with 
the help of accrediting agencies and schools, guidelines or a mutual 
understanding for more consistent and thorough assessment and public 
disclosure of distance education programs, including developing 
evaluative components for holding schools accountable for such 
outcomes; and:

* if necessary, request authority from the Congress to require that 
accrediting agencies use these guidelines in their accreditation 
efforts.

In the President's fiscal year 2005 budget, we propose to make higher 
education more accessible by expanding college and university options 
for offering courses and programs online. As we work with Congress to 
develop specific legislative proposals, we will look carefully at the 
issues associated with the rules that limit the participation of 
institutions that offer more than 50 percent of courses or enroll more 
than 50 percent of their students via distance learning. As we work 
with Congress, we will carefully consider the potential cost to the 
federal student aid programs of eliminating the 50 percent rules. 
However, because of the timing of the process of reauthorizing the 
Higher Education Act of 1965, as amended (HEA), it is unlikely that 
these estimates will become part of a future report to Congress on 
the Demonstration Program.

We will also look carefully at your recommendations for accreditation 
in the area of distance learning. While the Department could engage in 
a series of discussions with accrediting agencies and schools leading 
to "guidance" in the form of information about best practices in 
accrediting distance education programs, this "guidance" would be 
primarily informational. Statutory flexibility for accrediting 
agencies, as GAO acknowledges, provides them with the discretion to 
decide whether they would adopt or implement any or all of the 
recommended practices. It is not clear, at this point, whether it would 
be necessary or appropriate to make changes to the HEA to require that 
accrediting agencies use certain guidelines in their accreditation 
efforts.

I appreciate your examination of this important issue. We have provided 
to your staff some technical comments on the report. The Department is 
committed to the continued development of distance education.

Sincerely, 

Signed by: 

Sally L. Stroup: 

[End of section]

Appendix III: GAO Contacts and Staff Acknowledgments:

Contacts:

Kelsey Bright, Assistant Director (202) 512-9037 Neil Asaba, Analyst-
in-Charge (206) 287-4774:

Staff Acknowledgments:

In addition to those named above, Jerry Aiken, Jessica Botsford, 
Elizabeth Curda, Luann Moy, Corinna Nicolaou, Jill Peterson, Stan 
Stenersen, and Susan Zimmerman made important contributions to this 
report.

FOOTNOTES

[1] 34 CFR 600.2 states that a correspondence course is (1) a home 
study course provided by an institution under which the institution 
provides instructional materials, including examinations on the 
materials, to students who are not physically attending classes at the 
institution. When students complete a portion of the instructional 
materials, the students take the examinations that relate to that 
portion of the materials and return the examinations to the institution 
for grading; (2) a home study course that provides instruction in whole 
or in part through the use of video cassettes or video discs in an 
award year is a correspondence course unless the institution also 
delivers the instruction on the cassette or disc to students physically 
attending classes at the institution during the same award year, and 
(3) a course at an institution that may otherwise satisfy the 
definition of a "telecommunications course" is a correspondence course 
if the sum of telecommunications and other correspondence courses 
offered by that institution equals or exceeds 50 percent of the total 
courses offered at that institution. In addition, if a course is part 
correspondence and part residential training, the course is considered 
to be a correspondence course.

[2] 34 CFR 600.2 states that a telecommunications course is a course 
offered principally through the use of television, audio, or computer 
transmission, including open broadcast, closed circuit, cable, 
microwave, satellite, audio conferencing, computer conferencing, video 
cassettes, or discs. The term "telecommunications" does not include a 
course that is delivered using video cassettes or disc recordings 
unless the institution also delivers comparable instruction offered on 
the cassettes or discs to students physically attending classes at the 
institution during the same award year. If the course offered in the 
manner described above does not qualify as a telecommunications course, 
it is considered to be a correspondence course.

[3] The estimated number of students taking at least one 
telecommunications distance education course is derived from our 
analysis of the National Postsecondary Student Aid Study database. The 
database did not include information on correspondence students. 

[4] The 50-percent rules involve three main statutory restrictions. 
First, under 20 U.S.C. 1002(a)(3)(A), a school that would otherwise be 
eligible for the federal student aid programs becomes ineligible if 
more than 50 percent of its courses are offered by correspondence. 
Second, under 20 U.S.C. 1002(a)(3)(B), an otherwise eligible school 
becomes ineligible if 50 percent or more of its students are enrolled 
in correspondence courses. Third, under 20 U.S.C. 1091(l)(1)(A), a 
student enrolled in a course of instruction that is offered in whole or 
in part through telecommunications and leads to a certificate for a 
program of 1 year or longer, or a recognized associate, baccalaureate, 
or graduate degree conferred by such institution, shall not be 
considered to be enrolled in correspondence courses unless the total 
amount of telecommunications and correspondence courses at such 
institution equals or exceeds 50 percent of the total number of courses 
at the institution.

[5] In authorizing the Demonstration Program, the Congress also called 
on Education to report annually on federal laws and regulations that 
could impact access to distance education.

[6] Education defines an accrediting agency as a legal entity, or that 
part of a legal entity, that conducts accrediting activities through 
voluntary, nonfederal peer review and makes decisions concerning the 
accreditation or preaccreditation status of institutions, programs, or 
both.

[7] See U.S. General Accounting Office, Distance Education: Growth in 
Distance Education Programs and Implications for Federal Education 
Policy, GAO-02-1125T (Washington, D.C.: Sept. 26, 2002); Distance 
Education: More Data Could Improve Education's Ability to Track 
Technology at Minority Serving Institutions, GAO-03-900 (Washington, 
D.C.: Sept. 12, 2003); and Distance Education: Challenges for Minority 
Serving Institutions and Implications for Federal Education Policy, 
GAO-04-78T (Washington D.C.: Oct. 6, 2003). 

[8] We excluded correspondence schools from our review because 
telecommunications distance education has been the main force behind 
the recent growth in distance education programs.

[9] See U.S. Department of Education, Report to Congress on the 
Distance Education Demonstration Program, (Washington, D.C.: January 
2001) and Distance Education Demonstration Program - Second Report to 
Congress, Department of Education (Washington, D.C.: July 2003).

[10] The seven agencies are (1) Middle States Association of Colleges 
and Schools, (2) Western Association of Schools and Colleges - 
Accrediting Commission for Community and Junior Colleges, (3) New 
England Association of Schools and Colleges, (4) North Central 
Association of Colleges and Schools, (5) Northwest Association of 
Schools and Colleges, (6) Southern Association of Colleges and Schools, 
and (7) the Accrediting Council for Independent Colleges and Schools.

[11] See U.S. General Accounting Office, Executive Guide: Effectively 
Implementing the Government Performance and Results Act, GAO/GGD-96-118 
(Washington, D.C.: June 1996).

[12] See GAO-02-1125T. Our analysis also showed that distance education 
students tended to have higher income levels, a fact that may help 
explain why fewer of them rely on federal assistance.

[13] In general, there are two main types of accrediting agencies--
regional and national. Regional accrediting agencies review 
institutions in a region of the United States that includes at least 
three states that are reasonably close to one another. National 
accrediting agencies review programs or specialized institutions, such 
as acupuncture schools or private business schools, on a national 
basis. 

[14] 20 U.S.C. 1099b(a)(5).

[15] 20 U.S.C. 1099b(a)(4).

[16] See U.S. Department of Education, Fiscal Year 2004 Annual Plan 
(Washington, D.C.: March 2003).

[17] See Business-Higher Education Forum, Building a Nation of 
Learners: The Need for Changes in Teaching and Learning to Meet Global 
Challenges (Washington, D.C.: June 2003).

[18] See Council for Higher Education Accreditation, Statement of 
Mutual Responsibilities for Student Learning Outcomes: Accreditation, 
Institutions, and Programs (Washington, D.C.: September 2003). Also, in 
May 2003, the Council identified six areas for accreditation and 
accountability reform, including expanding the use of student learning 
outcomes in accreditation reviews, offering more information to the 
public on the findings of accreditation reviews, and reviewing any 
distance learning providers or offerings that may become eligible for 
the federal student aid programs.

[19] See U.S. General Accounting Office, College Completion: Additional 
Efforts Could Help Education with Its Completion Goals, GAO-03-568 
(Washington, D.C.: May 23, 2003).

[20] The Congress established the Web-based Education Commission to 
prepare a report to the President and the Congress that contains 
recommendations for legislation and administrative actions, including 
those pertaining to the appropriate federal role in determining the 
quality of educational software products. Members of the Commission 
included Senators, Representatives, and leaders from postsecondary 
institutions. 

[21] See Web-based Education Commission, The Power of the Internet for 
Learning: Moving from Promise to Practice, (Washington, D.C.: December 
2000).

[22] Participation in the Demonstration Program does not necessarily 
exempt schools from federal restrictions on the size of their distance 
education programs. Schools must apply for waivers and Education 
reviews the applications and determines whether to grant the waivers. 
Through November 2003, there were 21 participants in the Demonstration 
Program. In December 2003, Education expanded the program to 26 
participants.

[23] In commenting on a draft of this report, an Education official 
indicated that Graceland University, a private nonprofit school, 
located in Limoni, Iowa was also affected by the 50 percent rules. The 
school serves over 3,000 students and is a new participant in the 
Demonstration Program. Education plans to grant the school waivers to 
the 50 percent rules.

[24] In January 2003, H.R. 12--Fed Up Higher Education Technical 
Amendments Act of 2003 and in April 2003, S. 901--Higher Education 
Technical Amendments Act of 2003, proposed that telecommunication 
courses would not be considered correspondence courses for purposes of 
the 50-percent rules if a school had a default rate of 10 percent or 
less for each of the 3 most recent fiscal years.

[25] Our analysis of the three options is based on several data 
sources, including Education's monitoring reports on schools 
participating in the Demonstration Program, structured interviews with 
officials at schools that are affected or that could be affected by 
federal restrictions, interviews with Education officials, a student 
loan cohort default rate data base and prior reports on the federal 
financial aid programs. Regarding the accuracy of the student loan 
cohort default rate database, Education sends preliminary default rate 
data to each school to verify the accuracy of the data.

[26] The "Best Practices for Electronically Offered Degree and 
Certificate Programs" was drafted by the Western Cooperative for 
Educational Telecommunications in Colorado. The executive directors of 
the eight regional accrediting agencies (including six covered in our 
review) requested the study on best practices to assist institutions in 
planning distance education activities and to provide a self-assessment 
framework for those already involved. According to the "best 
practices," overall program effectiveness is determined by such 
measures as student retention rates and student competence in 
fundamental skills such as communication, comprehension, and analysis.

[27] Four of six regional accrediting agencies we reviewed also had 
additional standards or policies that applied to schools with distance 
education programs.

[28] 34 C.F.R. 602.22(a)(2)(i) thru (vii).

[29] See GAO/GGD-96-118.

[30] U.S. Department of Education, Strategic Plan 2002-2007.

[31] See Council for Higher Education Accreditation, Statement of 
Mutual Responsibilities for Student Learning Outcomes: Accreditation, 
Institutions, and Programs (Washington, D.C.: September 2003).

[32] Two agencies did not require institutions to set measurable goals. 
Instead, they required schools to set goals without requiring them to 
be measurable.

[33] Pub. L. No. 101-542, Nov. 8, 1990.

[34] The act also requires schools to report information on graduation 
rates of students who receive athletically related student aid and 
crimes committed on and off campus.

[35] Education plans to release graduation rate data on all schools 
involved in the federal student aid programs in 2004.

[36] The seven are Middle States Association of Colleges and Schools, 
Western Association of Schools and Colleges--Accrediting Commission for 
Community and Junior Colleges, the New England Association of Schools 
and Colleges, North Central Association of Colleges and Schools, 
Northwest Association of Schools and Colleges, Southern Association of 
Colleges and Schools, and the Accrediting Council for Independent 
Colleges and Schools.

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