Office of Postsecondary Education - U.S. Department of Education

Friday,October 29, 2010Part IIDepartment ofEducation34 CFR Parts 600, 602, 603, et al.Program Integrity Issues; Final RuleWReier-Aviles on DSKGBLS3C1PROD with RULES2VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00001 Fmt 4717 Sfmt 4717 E:\FR\FM\29OCR2.SGM 29OCR2

WReier-Aviles on DSKGBLS3C1PROD with RULES266832 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and RegulationsDEPARTMENT OF EDUCATION34 CFR Parts 600, 602, 603, 668, 682,685, 686, 690, and 691[Docket ID ED–2010–OPE–0004]RIN 1840–AD02Program Integrity IssuesAGENCY: Office of PostsecondaryEducation, Department of Education.ACTION: Final regulations.SUMMARY: The Secretary is improvingintegrity in the programs authorizedunder title IV of the Higher EducationAct of 1965, as amended (HEA), byamending the regulations forInstitutional Eligibility Under the HEA,the Secretary’s Recognition ofAccrediting Agencies, the Secretary’sRecognition Procedures for StateAgencies, the Student AssistanceGeneral Provisions, the Federal FamilyEducation Loan (FFEL) Program, theWilliam D. Ford Federal Direct LoanProgram, the Teacher EducationAssistance for College and HigherEducation (TEACH) Grant Program inpart 686, the Federal Pell GrantProgram, and the AcademicCompetitiveness Grant (AGC) andNational Science and MathematicsAccess to Retain Talent Grant (NationalSmart Grant) Programs.DATES: These regulations are effectiveJuly 1, 2011 with the exception of therevision of subpart E of part 668,Verification and Updating of StudentAid Application Information. Revisedsubpart E of part 668 is effective July 1,2012. The incorporation by reference ofcertain publications listed in the rule isapproved by the Director of the FederalRegister as of July 1, 2011.FOR FURTHER INFORMATION CONTACT: Forinformation related to the provisions onhigh school diplomas and verification ofinformation on the Free Application forFederal Student Aid (FAFSA),Jacquelyn Butler. Telephone: (202) 502–7890 or via the Internet at:Jacquelyn.Butler@ed.gov.For information related to the returnof title IV, HEA funds calculationprovisions for term-based modules ortaking attendance, Jessica Finkel orWendy Macias. Telephone: (202) 502–7647 or via the Internet at:Jessica.Finkel@ed.gov. Telephone: (202)502–7526 or via the Internet at:Wendy.Macias@ed.gov.For information related to theprovisions on retaking coursework,Vanessa Freeman. Telephone: (202)502–7523 or via the Internet at:Vanessa.Freeman@ed.gov.For information on the provisionsrelated to incentive compensation,Marty Guthrie. Telephone: (202) 219–7031 or via the Internet at:Marty.Guthrie@ed.gov.For information related to theprovisions on satisfactory academicprogress, Marty Guthrie or MariannaDeeken. Telephone: (202) 219–7031 orvia the Internet at:Marty.Guthrie@ed.gov. Telephone: (206)615–2583 or via the Internet at:Marianna.Deeken@ed.gov.For information related to theprovisions on ability to benefit, DanKlock. Telephone: (202) 377–4026 or viathe Internet at Dan.Klock@ed.gov.For information related to gainfulemployment in a recognizedoccupation, John Kolotos. Telephone:(202) 502–7762 or via the Internet at:John.Kolotos@ed.gov.For information related to theprovisions for written agreementsbetween institutions, CarneyMcCullough. Telephone: (202) 502–7639 or via the Internet at:Carney.McCullough@ed.gov.For information related to theprovisions on misrepresentation, CarneyMcCullough or Vanessa Freeman.Telephone: (202) 502–7639 or via theInternet at: Carney.McCullough@ed.gov.Telephone: (202) 502–7523 or via theInternet at: Vanessa.Freeman@ed.gov.For information related to theprovisions on timeliness and method ofdisbursement, Harold McCullough.Telephone: (202) 377–4030 or via theInternet at: Harold.McCullough@ed.gov.For information related to theprovisions related to the definition ofcredit hour, Fred Sellers. Telephone:(202) 502–7502 or via the Internet at:Fred.Sellers@ed.gov.For information related to provisionson State authorization, Fred Sellers.Telephone: (202) 502–7502 or via theInternet at: Fred.Sellers@ed.gov.If you use a telecommunicationsdevice for the deaf (TDD), call theFederal Relay Service (FRS), toll free, at1–800–877–8339.Individuals with disabilities canobtain this document in an accessibleformat (e.g., braille, large print,audiotape, or computer diskette) onrequest to one of the contact personslisted under FOR FURTHER INFORMATIONCONTACT.SUPPLEMENTARY INFORMATION: On June18, 2010, the Secretary published anotice of proposed rulemaking (NPRM)for program integrity issues in theFederal Register (75 FR 34806).In the preamble to the NPRM, theSecretary discussed on pages 34808through 34848 the major regulationsVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00002 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2proposed in that document tostrengthen and improve theadministration of programs authorizedunder the HEA. These proposedregulations included the following:• Requiring institutions to developand follow procedures to evaluate thevalidity of a student’s high schooldiploma if the institution or theSecretary has reason to believe that thediploma is not valid or was not obtainedfrom an entity that provides secondaryschool education;• Expanding eligibility for title IV,HEA program assistance to studentswho demonstrate they have the abilityto benefit by satisfactorily completingsix credits of college work, or theequivalent amounts of coursework, thatare applicable toward a degree orcertificate offered by an institution;• Amending and adding definitionsof terms related to ability to benefittesting, including ‘‘assessment center,’’‘‘independent test administrator,’’‘‘individual with a disability,’’ ‘‘test,’’‘‘test administrator,’’ and ‘‘testpublisher’’;• Consolidating into a singleregulatory provision the approvalprocesses for ability to benefit testsdeveloped by test publishers and States;• Establishing requirements underwhich test publishers and States mustprovide descriptions of processes foridentifying and handling test scoreabnormalities, ensuring the integrity ofthe testing environment, and certifyingand decertifying test administrators;• Requiring test publishers and Statesto describe any accommodationsavailable for individuals withdisabilities, as well as the process a testadministrator would use to identify andreport to the test publisher instances inwhich these accommodations wereused;• Revising the test approvalprocedures and criteria for ability tobenefit tests, including proceduresrelated to the approval of tests forspeakers of foreign languages andindividuals with disabilities;• Revising the definitions andprovisions that describe the activitiesthat constitute substantialmisrepresentation by an institution ofthe nature of its educational program, itsfinancial charges, or the employabilityof its graduates;• Removing the ‘‘safe harbor’’provisions related to incentivecompensation for any person or entityengaged in any student recruitment oradmission activity, including makingdecisions regarding the award of title IV,HEA program assistance;• Clarifying what is required for aninstitution of higher education, a

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66833WReier-Aviles on DSKGBLS3C1PROD with RULES2proprietary institution of highereducation, and a postsecondaryvocational institution to be consideredlegally authorized by the State;• Defining a credit hour andestablishing procedures that certaininstitutional accrediting agencies musthave in place to determine whether aninstitution’s assignment of a credit houris acceptable;• Modifying provisions to clarifywhether and when an institution mustaward student financial assistance basedon clock or credit hours and thestandards for credit-to-clock-hourconversions;• Modifying the provisions related towritten arrangements between two ormore eligible institutions that are ownedor controlled by the same person orentity so that the percentage of theeducational program that may beprovided by the institution that does notgrant the degree or certificate under thearrangement may not exceed 50 percent;• Prohibiting written arrangementsbetween an eligible institution and anineligible institution that has had itscertification to participate in title IV,HEA programs revoked or itsapplication for recertification denied;• Expanding provisions related to theinformation that an institution with awritten arrangement must disclose to astudent enrolled in a program affectedby the arrangement, including, forexample, the portion of the educationalprogram that the institution that grantsthe degree or certificate is not providing;• Revising the definition ofunsubsidized student financial aidprograms to include TEACH Grants,Federal PLUS Loans, and Direct PLUSLoans;• Codifying current policy that aninstitution must complete verificationbefore the institution may exercise itsprofessional judgment authority;• Eliminating the 30 percentverification cap;• Retaining the ability of institutionsto select additional applicants forverification;• Replacing the five verification itemsfor all selected applicants with atargeted selection from items includedin an annual Federal Register noticepublished by the Secretary;• Allowing interim disbursementswhen changes to an applicant’s FAFSAinformation would not change theamount that the student would receiveunder a title IV, HEA program;• Codifying the Department’s IRSData Retrieval System Process, whichallows an applicant to import incomeand other data from the IRS into anonline FAFSA;• Requiring the processing of changesand corrections to an applicant’s FAFSAinformation;• Modifying the provisions related toinstitutional satisfactory academicprogress policies and the impact thesepolicies have on a student’s eligibilityfor title IV, HEA program assistance;• Expanding the definition of fulltimestudent to allow, for a term-basedprogram, repeated coursework taken inthe program to count towards a full-timeworkload;• Clarifying when a student isconsidered to have withdrawn from apayment period or period of enrollmentfor the purpose of calculating a returnof title IV, HEA program funds;• Clarifying the circumstances underwhich an institution is required to takeattendance for the purpose ofcalculating a return of title IV, HEAprogram funds;• Modifying the provisions fordisbursing title IV, HEA program fundsto ensure that certain students canobtain or purchase books and suppliesby the seventh day of a payment period;• Updating the definition of the termrecognized occupation to reflect currentusage;• Establishing requirements forinstitutions to submit information onstudents who attend or completeprograms that prepare students forgainful employment in recognizedoccupations; and• Establishing requirements forinstitutions to disclose on their Web siteand in promotional materials toprospective students, the on-timecompletion rate, placement rate, medianloan debt, program cost, and otherinformation for programs that preparestudents for gainful employment inrecognized occupations.Implementation Date of TheseRegulationsSection 482(c) of the HEA requiresthat regulations affecting programsunder title IV of the HEA be publishedin final form by November 1 prior to thestart of the award year (July 1) to whichthey apply. However, that section alsopermits the Secretary to designate anyregulation as one that an entity subjectto the regulation may choose toimplement earlier and to specify theconditions under which the entity mayimplement the provisions early.The Secretary has not designated anyof the provisions in these finalregulations for early implementation. Asindicated in the DATES section, theregulations contained in subpart E ofpart 668, Verification and Updating ofStudent Aid Application Informationare effective July 1, 2012.VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00003 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2While the Secretary has designatedamended § 600.9(a) and (b) as beingeffective July 1, 2011, we recognize thata State may be unable to provideappropriate State authorizations to itsinstitutions by that date. We areproviding that the institutions unable toobtain State authorization in that Statemay request a one-year extension of theeffective date of these final regulationsto July 1, 2012, and if necessary, anadditional one-year extension of theeffective date to July 1, 2013. To receivean extension of the effective date ofamended § 600.9(a) and (b) forinstitutions in a State, an institutionmust obtain from the State anexplanation of how a one-year extensionwill permit the State to modify itsprocedures to comply with amended§ 600.9.Analysis of Comments and ChangesThe regulations in this documentwere developed through the use ofnegotiated rulemaking. Section 492 ofthe HEA requires that, before publishingany proposed regulations to implementprograms under title IV of the HEA, theSecretary must obtain publicinvolvement in the development of theproposed regulations. After obtainingadvice and recommendations, theSecretary must conduct a negotiatedrulemaking process to develop theproposed regulations. The negotiatedrulemaking committee did not reachconsensus on the proposed regulationsthat were published on June 18, 2010.The Secretary invited comments on theproposed regulations by August 2, 2010.Approximately 1,180 parties submittedcomments, a number of which weresubstantially similar. An analysis of thecomments and of the changes in theregulations since publication of theNPRM follows.We group major issues according tosubject, with appropriate sections of theregulations referenced in parentheses.We discuss other substantive issuesunder the sections of the regulations towhich they pertain. Generally, we donot address minor, nonsubstantivechanges, recommended changes that thelaw does not authorize the Secretary tomake, or comments pertaining tooperational processes. We also do notaddress comments pertaining to issuesthat were not within the scope of theNPRM.General CommentsComment: We received a significantnumber of comments that expressedsupport for the Secretary’s proposedregulations. Many of the commentersnoted that the proposed regulationswould protect taxpayer investments in

WReier-Aviles on DSKGBLS3C1PROD with RULES266834 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulationshigher education by helping to curtailfraud and abuse and would protect theinterests of a diverse population ofstudents who are seeking highereducation for personal and professionalgrowth. Some of the commenters alsostated that the Secretary’s proposedregulations would provide a levelplaying field that benefits the majorityof institutions of higher education thatare committed to sound academic andadministrative practices.Discussion: The Departmentappreciates the numerous comments wereceived in support of the proposedregulations.Changes: None.Comment: Several commentersdisagreed with the process by which theDepartment developed the proposedregulations. The commenters believethat the Department did not negotiate ingood faith and did not follow faithfullythe Federal negotiated rulemakingprocess. These commenters believedthat the Department excluded importantmembers of the proprietary schoolsector from the process and failed toprovide adequate time for review of andcomment on the proposed regulations.Because of the complexity of theproposed regulations, these samecommenters also requested that theDepartment delay the effective date forimplementation of the final regulations.Several other commenters believed thatbefore negotiating proposed regulationswith such a broad scope, theDepartment should have conductedstudies to assess the impact theproposed regulations would have onaffected institutions. Lastly, onecommenter expressed the view that theDepartment began negotiations withoutpresenting examples of abuse or datathat supported additional regulation andthat many of the Department’s concernsabout program integrity could have beenbetter addressed by enforcing currentregulations.Discussion: We disagree with thecommenters who said that theDepartment did not act in good faith innegotiating the proposed regulations orthat we did not follow the negotiatedrulemaking process. In conducting thenegotiated rulemaking for theseproposed regulations, the Departmentfollowed the requirements in section492 of the HEA, which govern thenegotiated rulemaking process andrequire the Department to choose non-Federal negotiators from the groupsinvolved in the student financialassistance programs authorized by titleIV of the HEA. As addressed earlier inthis preamble, all of these groups wererepresented during the negotiations.We believe that the 45-day publiccomment period was an adequate periodof time for interested parties to submitcomments, especially in light of the factthat prior to issuing the proposedregulations, the Department conductedpublic hearings and three negotiatedrulemaking sessions, wherestakeholders and members of the publichad an opportunity to weigh in on thedevelopment of much of the languagereflected in the proposed regulations. Inaddition, we believe that the 45-daypublic comment period is necessary inlight of the HEA’s master calendarrequirements. Under thoserequirements, the Department mustpublish final regulations by November1, 2010, in order for them to be effectiveon July 1, 2011. The Department mustadhere to the master calendar set forthby Congress and does not have thestatutory authority to amend it.We also do not agree that, except forcertain provisions of the regulationssuch as those that may involve systemschanges that require adequate lead timeto make, implementation of the finalregulations should be delayed. Forexample, the proposed regulations onFAFSA verification cannot beimplemented by the July 1, 2011effective date because the changeswould require system updates that willnot be in place by that date. We discussthe implementation delay of regulationsthat involve these system changeselsewhere in this preamble. Absentthese system-related or similar issues,however, we believe a delay inimplementing the final regulations willundermine the Department’s goal ofprotecting taxpayers and students byensuring the integrity of the title IV,HEA programs.Lastly, we disagree with thecommenters who stated that theDepartment should have conducted astudy to assess the impact of theproposed regulations on institutions ofhigher education before negotiating theproposed changes and thosecommenters who stated that theDepartment did not present examples ofabuse or data to support the proposedregulations. The Department’s decisionto improve program integrity bystrengthening the regulations was basedon many factors, including feedback wereceived from the public. Specifically,the Department developed a list ofproposed regulatory provisions based onadvice and recommendations submittedby individuals and organizations astestimony in a series of three publichearings in June of 2009, as well aswritten comments submitted directly tothe Department. Department staff alsoidentified issues for discussion andVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00004 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2negotiation. The proposed regulationsthat were negotiated during negotiatedrulemaking and included in theproposed regulations were developedfor one or more of the following reasons:• To implement provisions of theHEA, as amended by the HigherEducation Opportunity Act of 2008(HEOA).• To update current regulations thathad not been updated in some time sothat they more accurately reflect thestate of the law as well as theDepartment’s current practices andpolicies (e.g., aligning the regulationswith the Department’s FAFSAsimplification initiative).• To respond to problems identifiedby students and financial aid advisorsabout the aggressive sales tactics usedby some institutions.• To respond to a report from theUnited States GovernmentAccountability Office published inAugust of 2009 that raised concernsabout proprietary institutions andrecommended stronger Departmentoversight to ensure that only eligiblestudents receive Federal student aid.We believe that all of these factorsprovided ample support for theDepartment to immediately proposestronger regulations to protect studentsand prevent fraud and abuse in the titleIV, HEA programs.Changes: None.Comment: Many commentersexpressed concern about what theyargued would be a negative impact ofthe proposed regulations on institutionsof higher education, particularlyproprietary institutions. Thesecommenters stated that the proposedregulations are too complex and toobroad in scope and that, as a result, theywould disproportionately imposeburdens on the institutions that servemany of the students who need the mostfinancial assistance. Other commentersstated that, in these trying economictimes, institutions simply do not havethe resources to administer thedisclosure, reporting, andimplementation requirements includedin the proposed regulations. Some ofthese commenters stated that theyfeared that the cost of compliance withthese regulations, which many arguedwere ambiguous or inconsistent, woulddrive their small proprietary institutionsout of business.Several commenters stated that theproposed regulations target the entireproprietary school sector of highereducation, while the actions of only afew proprietary institutions are causefor concern. These commenters decriedthe Department’s ‘‘one-size-fits-all’’approach to ensuring program integrity.

66836 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and RegulationsWReier-Aviles on DSKGBLS3C1PROD with RULES2conveyed to prospective students. Topromote the goal of facilitating informedchoice, the disclosure must be simpleand meaningful.The Department intends to develop inthe future a disclosure form and will beseeking public comment about thedesign of the form through theinformation collection process underthe Paperwork Reduction Act of 1995(PRA). While the form will bedeveloped through that process, theregulations require institutions toprovide clear and prominent notice,delivered to students at appropriatetimes and in promotional materialsprior to enrollment. Until a form isdeveloped and approved under the PRAprocess, institutions must comply withthese disclosure requirementsindependently. In addition, we agreewith the comments that disclosuresalone are likely to be inadequate andhave proposed to establish programperformance standards in our NPRM onProgram Integrity—Gainful Employmentthat was published in the FederalRegister on July 26, 2010 (75 FR 43616).Changes: Section 668.6(b) has beenrevised to provide that an institutionmust prominently provide theinformation it is required to discloseabout a program in a simple andmeaningful manner on the home page ofits program Web site, and provideprominent and direct links to this pageon any other Web page containinggeneral, academic, or admissionsinformation about the program. Therevised provision also states that aninstitution must use the disclosure formdeveloped by the Secretary when itbecomes available and the disclosureinformation must be displayed on theinstitution’s Web site in an open formatthat can be retrieved, downloaded,indexed, and searched by commonlyuse Web search applications. An openformat is one that is platformindependent,is machine-readable, andis made available to the public withoutrestrictions that would impede the reuseof that information.Finally, § 668.6(b) has been revised toprovide that an institution must makethe information available in thepromotional materials conveyed toprospective students.Placement RatesComment: Many commenters objectedto using the placement rate calculationin § 668.8(g) arguing that it is overlyburdensome and administrativelycomplex. The commenters opined thattracking a student for 180 days aftergraduation for a period of 13 weeks wastoo long and believed that it would bevirtually impossible for the Departmentor any other auditor to affirm theaccuracy of the placement data becausethe tracking period represents nothingmore than a snap-shot of how manystudents were employed for 13 weeks atthe time the data was collected. Thecommenters asserted that if theDepartment requires placementinformation to be disclosed to students,the information that an institutioncurrently provides to its accreditingagency, which routinely assesses thatinformation, would be more accurate. Inaddition, the commenters wereconcerned about potential conflicts withthe misrepresentation provisions insubpart F of part 668 on the groundsthat any placement rate disclosed tostudents would be obsolete as soon asit was posted to an institution’s Website. Some of the same commentersobjected to the proposed alternative ofrelying on State-sponsored workforcedata systems arguing that there is noconsistency between the States thatmaintain employment outcome data,and that in many cases the datacollected fails to provide a full andaccurate depiction of the demand,growth, and earnings of keyoccupations.A number of commenters opposedusing the placement rate calculation in§ 668.8(g) arguing that it is a highlyrestrictive measure developed solely forextremely short programs offered by afew institutions. The commenters notedthat an institution is already requiredunder § 668.41(d)(5) to disclose anyplacement rates it calculates and that itwould be confusing to students todisclose any additional rates beyondthose that it is required to calculateunder accrediting agency or Staterequirements. Some of thesecommenters suggested that in caseswhere an institution is not required byits accrediting agency to calculateplacement rates, the institution shouldcalculate the rates using a methodologyfrom a national accrediting agency orthe State in which the institution isauthorized to operate. Under either theagency or State methodology, thecommenters requested flexibility indetermining the rates for degreeprograms because employmentopportunities for graduates of degreeprograms are much more diverse thanfor graduates of occupationally specifictraining programs.One commenter stated that itsinstitution’s mission of educatingworking adults is at odds with theconcept of placement rates—many ofthe institution’s students are alreadyemployed and enroll to enhance theircareers through further education. Inaddition, the commenter stated that itVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00006 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2would be impractical to administer a jobplacement regime for students takingonline programs who reside throughoutthe world. The commenterrecommended that placement rates becalculated in accordance with aninstitution’s accrediting agency or Staterequirements, but that the proposeddisclosures should not apply wherethere are no agency or Staterequirements. As an alternative, thecommenter suggested that regionallyaccredited institutions, which are notrequired to track employment outcomes,conduct post graduation surveys askingprogram graduates if they are working intheir field. An affirmative responsewould count as a ‘‘placement’’ even ifthe graduate maintained the sameemployment he or she had whileattending the institution. Along thesame lines, another commentersuggested that the Department allow aninstitution that is not required by anoutside agency to calculate placementrates, to develop and implement amethod that best reflects the make-up ofits student body, including surveys,collecting employer documentation, orother methods.One commenter objected to using theplacement rate calculation intended forshort-term programs in § 668.8(g)because all of its programs were at orabove the baccalaureate level. While thecommenter stated that requiring publicdisclosure of relevant outcomes putspressure on an institution to ensure thatit is providing a good education to itsstudents, the commenter suggested thatunless an institution’s accreditingagency or State requires it to discloseplacement rates, the institution shouldonly disclose rates that it calculates onan annual basis for internal purposes orany employment or placementinformation it receives from surveyingits students. Another commenter madethe same suggestions and asked theDepartment to clarify that placementrates would only need to be updatedannually.Another commenter argued that theplacement rate methodology in§ 668.8(g) was never intended forgainful employment purposes and madeseveral recommendations including:(1) Excluding from the total number ofstudents who completed a programduring an award year, the students whoare unable to seek employment due toa medical condition, active militaryduty, international status, continuingeducation, incarceration, or death. Inaddition, an institution could excludethose graduates who certify they are notseeking employment or those that it isunable to locate. The commenterspecified the documentation an

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66837WReier-Aviles on DSKGBLS3C1PROD with RULES2institution would have to obtain foreach of these exclusions.(2) Removing the requirement in§ 668.8(g)(1)(iii) that a student must beemployed, or have been employed, for13 weeks and allowing students to findemployment within 6 months from thelast graduation date in the award year.(3) Replacing the employercertification, income tax form, andSocial Security provisions in§ 668.8(g)(3) with other ways that aninstitution would verify that a studentobtained gainful employment.Several commenters suggested usingthe methodology developed by anational accrediting agency because theproposed method in § 668.8(g) does nottake into consideration circumstancesthat would prevent graduates fromseeking employment, such as healthissues, military deployment orcontinuing education, or practical issuesrelated to the employment ofinternational or foreign students.Several commenters stated it wouldbe difficult, if not impossible, for theseinstitutions to obtain the data needed tocalculate placement rates. Some of thesecommenters supported the use of Statesponsoredworkforce data systems, butcautioned that many communitycolleges would not be able to obtainsufficiently detailed placementinformation through data matches withthese systems to satisfy the proposedrequirements. Other commenters notedthat some States do not have workforcedata systems, so institutions in thoseStates would have to use the nonpreferred placement rate methodologyunder § 668.8(g). Many of thecommenters believed the requirement todocument employment on a case-bycasebasis under § 668.8(g)(2) would beoverly burdensome and labor intensive.Others opined that the placementprovisions are counterproductive,claiming that a substantial number ofcommunity colleges eschewedparticipating in programs under theWorkforce Investment Act because ofplacement rate requirements. On theother hand, another commentersupported the placement rate provisionsand recommended that all institutionsin a State participate in a workforce datasystem, if the State has one. Thecommenter asked the Department toclarify how the data obtained from aworkforce data system would be used tomeet the placement rate requirementsand the timeline for reporting thoserates. In addition, the commentersuggested revising the placement rateprovisions in § 668.8(g) to more closelyalign those provisions with practicesused by State data systems.One commenter stated that in order toreceive Federal funding under the CarlD. Perkins Career and TechnicalEducation Act, a program must receiveState approval that entails a review ofdocumentation requiring that theprogram be high demand, high wage orin an emerging field. As part of the Statereview, the institution providesdocumentation of potential placement.The commenter recommended that theDepartment waive the gainfulemployment provisions for allcertificate programs approved by theState under this review process.A commenter supported disclosingplacement rate data, but noted that theinstitution would only be able to reporton graduates who are employed in theState or continued their education. Theinstitution would not be able to provideoccupationally specific placement data,or data about graduates who findemployment outside the State, becausethe State’s labor data base only tracks (1)the type of business a graduate isemployed by, not the occupation of thegraduate, and (2) graduates who areemployed in the State.Several other commenters supportedthe proposed placement ratedisclosures, but believed that theprovisions in § 668.8(g) wereinadequate. The commenters madeseveral suggestions, including:(1) Expanding the category of studentswho complete a program (currently in§ 668.8(g)(1)(i)) to include students whoare eligible for a degree or certificate.The commenters stated they are awareof institutions that delay providing thedegree or certificate to students, whichomits these students from the placementrate calculation.(2) Specifying that the time standardsin § 668.8(g) (employment within 180days of completing a program andemployment for 13 weeks) also apply torates calculated from State workforcedata systems.(3) Specifying that employment mustbe paid. The commenters stated they areaware of institutions that have countedstudents in unpaid internships as beingemployed.(4) To be counted in the placementrate, providing that a student must findemployment in one of the SOC codesidentified for the program unless thestudent finds a job that pays more thanany of the identified SOC codes. Thecommenters believed that someinstitutions stretch the concept of a‘‘related’’ comparable job as currentlyprovided in § 668.8(g)(1)(ii). Forexample, an institution might includeany job at a hospital, including thelowest paying jobs, when the studentwas trained for a skilled job such as anVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00007 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2x-ray technician. The higher earningsrecommendation would condition asuccessful placement but allow aninstitution to count a student employedin an unrelated SOC.(5) To address the situation where astudent cannot qualify for employmentuntil he or she passes a licensing orcertification examination, providing thatthe 180-day period during which thestudent would otherwise have to findemployment should start after theresults of the examination are available.(6) To be counted in the placementrate, specifying that a student mustwork for at least 32 hours per week. Thecommenters stated that they are awareof institutions that include as successfulplacements any student that works atany time during a week, even if it isonly for a few hours per week.(7) Specifying that institutions mustuse a State data system if it is availableto ensure accurate reporting.(8) If the institution chooses todemonstrate placement rates by salary,providing that documentation mustinclude signed copies of tax returns,W–4s or paystubs to document earnings.(9) To more thoroughly substantiateplacement rates, requiring the auditorwho performs the institution’scompliance audit under § 668.23 todirectly contact former students andemployers whose statements wereobtained by the institution.Discussion: We are persuaded by thecomments that using the methodologyin § 668.8(g) may not be the mostappropriate method for determining theplacement rate for the majority of theprograms that are subject to the gainfulemployment provisions. Moreover, inview of the varied suggestions for howthe rate should be calculated,documented, and verified, in early 2011we will begin the process for developingthe method to calculate placement ratesfor institutions through the NationalCenter for Education Statistics (NCES).These final regulations establish somereporting requirements using existingplacement data as explained below,with a transition in a later period forinstitutions to disclose placement ratesobtained from the NCES methodology.NCES will develop a placement ratemethodology and the processesnecessary for determining anddocumenting student employment andreporting placement data to theDepartment using the IntegratedPostsecondary Education Data System(IPEDS).NCES employs a collaborative processthat affords the public significantopportunities to participate in making,and commenting on, potential changesto IPEDS. Potential changes are

66838 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and RegulationsWReier-Aviles on DSKGBLS3C1PROD with RULES2examined by the IPEDS TechnicalReview Panel (TRP), which is a peerreview panel that includes individualsrepresenting institutions, educationassociations, data users, Stategovernments, the Federal government,and other groups. The TRP meets todiscuss and review IPEDS-related plansand looks at the feasibility and timingof the collection of proposed new items,added institutional burden, and possibleimplementation strategies. After eachmeeting, a meeting report andsuggestions summary is posted to theIPEDS Web site. The postsecondaryeducation community then has 30 daysto submit comments on the meetingreport and summary. After thosecomments are considered, theDepartment requests the Office ofManagement and Budget (OMB) toinclude the changes in the next IPEDSdata collection. This request for formsclearance is required by the PaperworkReduction Act of 1995, as amended. Adescription of the changes and theassociated institutional reportingburden is included in the request whichis then published by OMB as a notice inthe Federal Register, initiating a 60-daypublic comment period. After that, asecond notice is published in theFederal Register, initiating a 30-daypublic comment period. Issues raised bycommenters are resolved, and thenOMB determines whether to grant formsclearance. Only OMB cleared items areadded to the IPEDS data collection.Although we agree with thecommenters that the data maintained orprocesses used by workforce datasystems may vary State by State, andthat the data systems are not availableto all institutions or in all States, wecontinue to believe that these datasystems afford participating institutionsan efficient and accurate way ofobtaining employment outcomeinformation. However, because of Stateto-Statevariances and in response tocomments about how employmentoutcome data translate to a placementrate, NCES will develop the methodsneeded to use State employment data tocalculate placement rates under itsdeliberative process for IPEDS.Until the IPEDS-developed placementrate methodology is implemented, aninstitution that is required by itsaccrediting agency or State to calculatea placement rate, or that otherwisecalculates a placement rate, mustdisclose that rate under the currentprovisions in § 668.41(d)(5). However,under new § 668.6(b), the institutionmust disclose on its Web site andpromotional materials the placementrate for each program that is subject tothe gainful employment provisions ifthat information is available or can bedetermined from institutionalplacement rate calculations.Consequently, to satisfy the newdisclosure requirements, an institutionthat calculates a placement rate for oneor more programs would disclose thatrate under § 668.6(b) by identifying theaccrediting agency or State agencyunder whose requirements the rate wascalculated. Otherwise, if an accreditingagency or State requires an institution tocalculate a placement rate only at theinstitutional level, the institution mustuse the agency or State methodology tocalculate the placement rate for each ofits programs from information it alreadycollects and must disclose the programspecificplacement rates in accordancewith § 668.6(b).Changes: Section 668.6(b) has beenrevised to specify that an institutionmust disclose for each program theplacement rate calculated under amethodology developed by itsaccrediting agency, State, or theNational Center for Education Statistics(NCES). The institution must disclosethe accrediting agency or State-requiredplacement rate beginning on July 1,2011 and must identify the accreditingagency or State agency under whoserequirements the rate was calculated.The NCES-developed placement ratewould have to be disclosed when therates become available.On-Time Completion RateComment: Many commenters askedthe Department to clarify the meaning of‘‘on-time’’ completion rate. Othercommenters assumed that ‘‘on-time’’completion referred to the graduationrate currently calculated under theStudent Right to Know requirements in§ 668.45, or encouraged the Departmentto either (1) adopt the currentrequirements in § 668.45 for gainfulemployment purposes, or (2) use acompletion rate methodology from anaccrediting agency or State, to minimizeconfusion among students and burdenon institutions. One of the commenterssuggested that if the Departmentintended ‘‘on-time’’ to mean 100 percentof normal time for completion, then theproposed rate should be calculated inthe same manner as the completion ratein § 668.45 for normal time andincorporate the exclusions for studentstransferring out of programs and otherexceptions identified in § 668.45(c) and(d). Another commenter opined thatabsent significant enforcement to ensurethat all institutions consistently use thesame definition of ‘‘on-time’’ completionrate, students will be unfairly led tobelieve that institutions who reportconservatively have less favorableVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00008 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2outcomes than institutions who reportaggressively. One commenter cautionedthat it may be misleading to focusheavily on graduation and placementrates, particularly for institutions whosestudents are employed while seeking adegree.A number of commenters supportedthe ‘‘on-time’’ completion requirement,and in general all of the proposeddisclosures, stating that providingoutcome data would allow prospectivestudents to make more informeddecisions. The commenters believedthat better outcome data will help toensure that the taxpayer investment iswell spent, and that students areprotected from programs that overchargeand under-deliver.A commenter stated that under Statelicensing requirements for cosmetologyschools a student must be present,typically for 1,500 hours, to qualify forgraduation and to complete theprogram. Taking attendance andensuring that a student is present forthese hours is typically required. Thecommenter reasoned that for a studentto complete the program ‘‘on-time’’ thestudent could not miss a single day oreven be late for classes as opposed to acredit hour program where a studentdoes not have to attend classes 100percent of the time but will still beconsidered to satisfy the on-timerequirement. To mitigate the differencebetween clock and credit hour programsand account for legitimatecircumstances where a student wouldmiss classes, the commenter suggestedthat the standard for ‘‘on-time’’incorporate the concept of a maximumtimeframe under the satisfactoryacademic progress provisions that allowa student to complete a program at aspecified rate.Discussion: In proposing the on-timecompletion rate requirement, theDepartment intended to include allstudents who started a program todetermine the portion of those studentswho completed the program no laterthan its published length. This approachdiffered significantly in two ways fromthe completion rate under the StudentRight to Know (SRK) provisions in§ 668.45. First, in calculating thecompletion rate the SRK methodologyincludes in the cohort only full-time,first-time undergraduate students, notall students. Second, the SRK rate isbased on 150 percent of normal time,not the actual length of the program.However, in view of the commentssuggesting that we use the SRKmethodology, or a modified version, weexamined whether the cohort ofstudents under SRK could be expandedto include all students and from that,

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66839WReier-Aviles on DSKGBLS3C1PROD with RULES2whether a completion rate could becalculated based on normal time, asdefined in § 668.41(a). We concludedthat doing this would be difficult andtoo complex for institutions and theDepartment.We believe prospective studentsshould know the extent to which formerstudents completed a program on time,not only to ground their expectationsbut to plan for the time they will likelybe attending the program—an importantconsideration for many students whocannot afford to continue theireducation without earnings fromemployment. Therefore, to minimizeburden on institutions while providingmeaningful information to prospectivestudents, an institution must calculatean on-time completion rate for eachprogram subject to the gainfulemployment provisions by:(1) Determining the number ofstudents who completed the programduring the most recently completedaward year.(2) Determining the number ofstudents in step (1) who completed theprogram within normal time, regardlessof whether the students transferred intothe program or changed programs at theinstitution. For example, the normaltime to complete an associate degree istwo years. The two-year timeframewould apply to all students who enrollin the program. In other words, if astudent transfers into the program,regardless of the number of credits theinstitution accepts from the student’sattendance at the prior institution, thetransfer credits have no bearing on thetwo-year timeframe. This student wouldstill have two years to complete fromthe date he or she began attending thetwo-year program. To be counted ascompleting on time, a student whoenrolls in the two-year program fromanother program at the institutionwould have to complete the two-yearprogram in normal time beginning fromthe date the student started attendingthe prior program.(3) Dividing the number of studentswho completed within normal time instep (2) by the total number ofcompleters in step (1) and multiplyingby 100.With regard to the commenter whobelieved that a student could not missa single day of classes to complete aprogram on time, we note that under§ 668.4(e) a student can be excused fromattending classes. Under this section, astudent may be excused for an amountof time that does not exceed the lesserof (1) any thresholds established by theinstitution’s accrediting agency or Stateagency, or (2) 10 percent of the clockhours in a payment period. Absent anyState or accrediting agencyrequirements, for a typical paymentperiod of 450 clock hours a studentcould miss 45 hours. In the commenter’sexample of a 1,500 clock hour program,the student could miss 150 hours andstill complete on time for thisrequirement. Also, under § 668.41(a),normal time for a certificate program isthe time published in the institution’scatalog and that time may include makeupdays. So, an institution couldschedule make-up days, as part ofnormal time, to enable students whomissed classes to complete the numberof hours required for State licensingpurposes.Changes: Section 668.6(b) has beenrevised to specify how an institutioncalculates an on-time completion ratefor its programs.Median Loan DebtComment: Many commenters objectedstrongly to the requirement in proposed§ 668.6(a)(4) that an institution reportannually to the Department, for eachstudent attending a program that leadsto gainful employment, the amount eachstudent received from private educationloans and institutional financing plans.With regard to private education loanstaken out by students, the commentersargued that because the loans are selfcertified,in many cases an institution isnot aware of the loans and should onlyhave to report the amount of the privateloans it knows about or the amount ofthose loans that were paid directly tothe institution. Commentersrepresenting students and consumeradvocacy groups contended that mostinstitutions have preferred lender lists,help students arrange private loans,recommend a lender, receive studentpayments from a lender, or otherwisehave information about the lender.Consequently, to clarify that aninstitution cannot avoid reporting onprivate loans by feigned ignorance, thecommenters suggested that aninstitution report any private loan itknows about or should reasonably knowabout. To clarify the meaning of ‘‘privateeducation loan’’ one commentersuggested that the Department referencethe definition in § 601.2.With regard to institutional financingplans, many commenters, argued that aninstitution should only be required toreport the amount of any remaininginstitutional loans or debt obligationsowed by a student after he or shecompletes the program, not the amountof the loan or credit extended to thestudent at the start of, or during, theprogram.Many commenters asked theDepartment to clarify whether medianVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00009 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2loan debt would include only loan debtincurred by students who completed aparticular program or loan debt incurredfrom previously attended programs orinstitutions. Some of the commentersargued that it would be difficult todetermine the relevant loan debt ofstudents who enroll inpostbaccalaureate certificate programsand end up concurrently pursuing anassociated master’s degree. Thecommenters argued that extracting theportion of debt that applies to thecertificate would be difficult, butreporting based on the total debtaccumulated during the graduate-levelenrollment period would overstate theamount borrowed if the intent was toreport on the certificate program. Theyalso believed that an institution wouldhave to track loan debt pertaining tocredits accepted for a program that werenot necessarily earned by students whocontinue in a graduate program,including transfer credits accepted fromother institutions. In addition, thecommenters believed that for anyundergraduate work that ‘‘transfers up,’’the portion of the loan debt from thatperiod would have to be identified. Inview of these complexities andconsidering that two-year transferprograms are excluded from thereporting requirements, the commentersrequested a similar exclusion forgraduate certificate programs where thecredits apply directly to a graduatedegree. Along the same lines, othercommenters requested thatpostbaccalaureate certificate programsor courses such as a certification as aschool principal, districtsuperintendent, or director ofinstruction be exempted from theseregulations.A commenter requested an exemptionfor four-year degree-granting institutionsstating that such institutions only havea handful of certificate programs thatwould be of no concern to theDepartment.A few commenters believed thatinstitutions should either (1) be allowedto disclose separately the amount ofloan debt students accumulate forinstitutional charges and the amountincurred for living expenses, or (2) notbe required to disclose loan debtincurred for living expenses becausethat debt is incurred at the student’sdiscretion and not be required todisclose loan debt incurred by a studentat prior, unrelated institutions.Other commenters urged theDepartment to use the mean instead ofthe median loan debt arguing that usingmedian debt would unjustly penalizestudents attending institutions withlarger numbers of borrowers by

WReier-Aviles on DSKGBLS3C1PROD with RULES266840 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulationsproviding a competitive advantage toinstitutions with smaller populations ofstudent loan borrowers.Many commenters supported theproposed requirement for disclosing themedian debt of students who completea program, but suggested thatinstitutions should also disclose themedian debt of noncompleters. Thecommenters stated that it was one thingfor students to be told that 40 percentgraduate with $20,000 in loan debt, butit’s another for them to understand thatthe majority of students who don’tcomplete have $15,000 in loan debt theywould have to repay. The commentersbelieved that separating the disclosuresby completers and noncompleterswould enable better comparisonsbetween programs, and would not createthe appearance of low median debt forprograms with low completion rates. Inaddition, to minimize burden thecommenters suggested that collectingthe data needed to calculate the medianloan debt could appropriately be limitedto programs in which a significant shareof students borrow. According to thecommenters, this approach wouldensure that potential students and theDepartment know when a program hashigh student borrowing rates and lowcompletion rates.Discussion: We agree with thecommenters that the debt an institutionreports under § 668.6(a)(4) forinstitutional financing plans is theamount a student is obligated to repayupon completing the program. Underthis same section, an institution mustalso report the amount of any privateeducation loans it knows that studentsreceived.The HEOA amended both the HEAand the Truth-in-Lending Act (TILA) torequire significant new disclosures forborrowers of private education loans.The HEOA also requires privateeducation lenders to obtain a privateloan self-certification form from everyborrower of such a loan before thelender may disburse the privateeducation loan.Although the term ‘‘private educationlender’’ is defined in the TILA, theFederal Reserve Board considers anentity to be a private education lender,including an institution of highereducation, if it meets the definition of‘‘creditor.’’ The term ‘‘creditor’’ is definedby the Federal Reserve Board in 12 CFR226.2(a)(17) as a person who regularlyextends consumer credit that is subjectto a finance charge or is payable bywritten agreement in more than fourinstallments (not including a downpayment), and to whom the obligation isinitially payable, either on the face ofthe note or contract, or by agreementwhen there is no note or contract. Aperson regularly extends consumercredit only if it extended credit morethan 25 times (or more than 5 times fortransactions secured by a dwelling) inthe preceding calendar year. If a persondid not meet these numerical standardsin the preceding calendar year, thenumerical standards must be applied tothe current calendar year.The term private education loan isdefined in 12 CFR 226.46(b)(5) as anextension of credit that:• Is not made, insured, or guaranteedunder title IV of the HEA;• Is extended to a consumerexpressly, in whole or in part, forpostsecondary educational expenses,regardless of whether the loan isprovided by the educational institutionthat the student attends;• Does not include open-end credit orany loan that is secured by real propertyor a dwelling; and• Does not include an extension ofcredit in which the covered educationalinstitution is the creditor if (1) the termof the extension of credit is 90 days orless (short-term emergency loans) or (2)an interest rate will not be applied tothe credit balance and the term of theextension of credit is one year or less,even if the credit is payable in morethan four installments (institutionalbilling plans).Examples of private education loansinclude, but are not limited to, loansmade expressly for educationalexpenses by financial institutions, creditunions, institutions of higher educationor their affiliates, States and localities,and guarantee agencies.As noted previously, the HEOArequires that before a creditor mayconsummate a private education loan, itmust obtain a self-certification formfrom the borrower. The Department, inconsultation with the Federal ReserveBoard, developed and disseminated theprivate loan self-certification form inDear Colleague Letter GEN 10–01published in February of 2010.The Department’s regulations in 34CFR 601.11(d), published on October28, 2009, require an institution toprovide the self-certification form andthe information needed to complete theform upon an enrolled or admittedstudent applicant’s request. Aninstitution must provide the privateloan self-certification form to theborrower even if the institution alreadycertifies the loan directly to the privateeducation lender as part of an existingprocess. An institution must alsoprovide the self-certification form to aprivate education loan borrower if theinstitution itself is the creditor. Oncethe private loan self-certification formVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00010 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2and the information needed to completethe form are disseminated by theinstitution, there is no requirement thatthe institution track the status of aborrower’s private education loan.The Federal Reserve Board, in 12 CFR226.48, built some flexibility into theprocess of obtaining the selfcertificationform for a private educationlender. The private education lendermay receive the form directly from theconsumer, the private education lendermay receive the form from the consumerthrough the institution of highereducation, or the lender may providethe form, and the information theconsumer will require to complete theform, directly to the borrower. However,in all cases the information needed tocomplete the form, whether obtained bythe borrower or by the private educationlender, must come directly from theinstitution.Thus, even though an institution isnot required to track the status of itsstudent borrowers’ private educationloans, the institution will know aboutall the private education loans a studentborrower receives, with the exception ofdirect-to-consumer private educationloans, because most private educationloans are packaged and disbursedthrough the institution’s financial aidoffice. The institution must report theseloans under § 668.6(a)(4). Direct-toconsumerprivate education loans aredisbursed directly to a borrower, not tothe school. An institution is notinvolved in a certification process forthis type of loan.We wish to make clear that any loan,extension of credit, payment plan, orother financing mechanism that wouldotherwise not be considered a privateeducation loan but that results in a debtobligation that a student must pay to aninstitution after completing a program,is considered a loan debt arising from aninstitutional financing plan and must bereported as such under § 668.6(a)(4).The Department will use the debtreported for institutional financingplans and private education loans alongwith any FFEL or Direct Loan debt fromNSLDS that was incurred by studentswho completed a program to determinethe median loan debt for the program.In general, median loan debt for aprogram at an institution does notinclude debt incurred by students whoattended a prior institution, unless theprior and current institutions are undercommon ownership or control, or areotherwise related entities. In caseswhere a student changes programswhile attending an institution ormatriculates to a higher credentialedprogram at the institution, theDepartment will associate the total

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66841amount of debt incurred by the studentto the program the student completed.So, in the commenter’s example wherea student enrolls in a postbaccalaureatecertificate program and is concurrentlypursuing a master’s degree, the debt thestudent incurs for the certificateprogram would be included as part ofthe debt the student incurs forcompleting the program leading to amaster’s degree. If the student does notcomplete the master’s degree program,but completes the certificate program,then only the debt incurred by thestudent for the certificate programwould be used in determining thecertificate program’s median loan debt.The Department will provide themedian loan debt to an institution foreach of its programs, along with themedian loan debt identified separatelyfor FFEL and Direct Loans, and forprivate education loans andinstitutional financing plans. Theinstitution would then disclose thesedebt amounts, as well as any otherinformation the Department provides tothe institution about its gainfulemployment programs, on its Web siteand in its promotional materials tosatisfy the requirements in § 668.6(b)(5).While we generally agree with thesuggestion that disclosing the medianloan debt for students who do notcomplete a program may be helpful toprospective students, determining whenor whether students do not complete isSchool Aproblematic for many programs even forstudents who withdraw or stopattending during a payment period—those students may return the followingpayment period. Because further reviewand analysis are needed before we couldpropose a requirement along these lines,institutions will need to report the CIPcode for every student who attends aprogram subject to the gainfulemployment provisions and the totalnumber of students who are enrolled ineach of its programs at the end of anaward year.In cases where a student matriculatesfrom one program to a highercredentialed program at the sameinstitution, the Department willassociate all the loan debt incurred bythe student at the institution to thehighest credentialed program completedby the student. To do this, theinstitution must inform the Departmentthat even though a student completed aprogram, the student is continuing hisor her education at the institution inanother program. We wish to make clearthat an institution would still need toprovide the information under § 668.6(a)about each program the studentcompletes. The Department will includethe student’s loan debt in calculatingthe median loan debt for the programthe student most recently completed, ordelay including the student’s associatedloan debt in calculating the median loandebt for the higher credentialedSchool Bprogram. The Department will includethe student’s associated debt for thehigher credentialed program when thestudent completes that program. If thestudent does not complete the highercredentialed program, then only theloan debt incurred by the student forcompleting the first program would beused in calculating the median loandebt for the first program.Similarly, in cases where a studenttransfers from school A to school B, theDepartment will delay including theloan debt incurred by a studentattending a program at school Apending the student’s success at schoolB. If the student completes a highercredentialed program at school B, themedian loan debt for that programincludes only the student’s loan debtincurred at school B. If the student doesnot complete the program at school B,then only the student’s loan debtincurred for completing the program atschool A is included in calculating themedian loan debt for the program atschool A. In other words, a student whocompletes a program and continues hisor her education at the same institutionor at another institution is considered tobe in an in-school status and we willdelay using the student’s loan debt untilthe student completes a highercredentialed program or stops attending.The following chart and discussionillustrate this process.Student Loan debt Loan debtCertificate $3,000 Completed Degree $4,000 Completed GainfulEmploymentProgram?1 ........................... ............................ ................ Yes ..................... ............................ ................ Yes ..................... Yes.2 ........................... ............................ ................ Yes ..................... ............................ ................ No ....................... Yes.3 ........................... ............................ ................ Yes ..................... ............................ ................ Yes ..................... No.Same School4 ........................... ............................ ................ Yes ..................... ............................ ................ Yes ..................... Yes.5 ........................... ............................ ................ Yes ..................... ............................ ................ No ....................... Yes.6 ........................... ............................ ................ Yes ..................... ............................ ................ Yes ..................... No.WReier-Aviles on DSKGBLS3C1PROD with RULES2Student 1. Student is in an in-schoolstatus until the degree program iscompleted at School B. School A and Bwould report loan debt for each of theirprograms. Only the $4,000 debt incurredby the student at School B would beincluded in the median loan debtcalculation for the degree program(highest credential completed). Thestudent’s loan debt at School A wouldnot be included in calculating themedian loan debt for the certificateprogram.Student 2. Student is in an in-schoolstatus while attending School B, butdoes not complete the degree program.Only the $3,000 debt incurred by thestudent at School A would be includedin the median loan debt calculation forthe certificate program. The student’sloan debt at School B would not beincluded in calculating the median loandebt for the degree program because thestudent did not complete that program.Student 3. Student is in an in-schoolstatus while attending School B, but theVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00011 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2degree program at School B is notsubject to the gainful employmentprovisions. When the student completesthe degree program, none of thestudent’s debt would be included in themedian loan debt calculation for thecertificate program and no calculationwould be performed for the degreeprogram because it is not subject to thegainful employment provisions.Student 4. Student is in an in-schoolstatus until the degree program iscompleted. All of the student’s debt at

66842 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and RegulationsWReier-Aviles on DSKGBLS3C1PROD with RULES2the school is associated to the degreeprogram and included in the medianloan debt calculation for the degreeprogram. None of the student’s debt isincluded in calculating the median loandebt of the certificate program.Student 5. Student is in an in-schoolstatus while attending the degreeprogram, but does not complete thatprogram. Only the $3,000 debt incurredby the student for completing thecertificate program would be includedin the median loan debt calculation forthat program. None of the student’s debtwould be included in the median loandebt calculation for the degree programbecause the student did not completethat program.Student 6. Student is in an in-schoolstatus while attending the degreeprogram, but the degree program is notsubject to the gainful employmentprovisions. When the student completesthe degree program, none of thestudent’s debt would be included in themedian loan debt calculation for thecertificate program and no calculationwould be performed for the degreeprogram because it is not subject to thegainful employment provisions.The Department disagrees with thesuggestions that an institution shouldnot be required to disclose loan debtincurred by students for living expensesbecause many students cannot afford toenroll in a program without borrowingto pay for living expenses and othereducation-related costs. Identifying onlya portion of the loan debt that a studentis likely to incur not only defeats thepurpose of the disclosure but also maybe misleading. With respect to thecomments that loan debt related toliving expenses should be disclosedseparately from loan debt tied directlyto institutional charges, we areconcerned about how institutions wouldmake or portray these disclosures andbelieve that separating the debt amountswould be confusing to prospectivestudents.We find little merit in the argumentthat using median loan debt, instead ofmean loan debt, would provide acompetitive advantage to institutionswith fewer student loan borrowers.Assuming that an institution with fewerborrowers has the same enrollment asan institution with a large number ofborrowers, then regardless of whetherthe mean or the median is used, the loandebt will be lower for an institutionwith fewer borrowers because all of thestudents who do not borrow wouldreduce its mean or median loan debt.When these regulations take effect onJuly 1, 2011, the Department willrequire institutions to report no laterthan October 1, 2011 the informationdescribed in § 668.6(a) for the 2006–07,2007–08, and 2008–09 award years. Inaccordance with the record retentionrequirements under § 668.24(e), mostinstitutions should have the requiredinformation. We note that manyinstitutions may have an existingpractice of keeping student records forlonger periods, or do so for State oraccrediting purposes. If an institutionhas the records for the earlier periods,it must report the information describedin § 668.6(a). Institutions that are nototherwise required to maintain theinformation for the 2006–07 award yeardescribed in § 668.6(a) at the time thisregulation goes into effect on July 1,2011, should consider doing so for theirown purposes. In any case, if aninstitution is unable to report all orsome the required information, it mustprovide an explanation of why themissing information is not available.Changes: Section 668.6(a) has beenrevised to provide that in accordancewith procedures established by theSecretary, an institution must provide(1) information for the award yearbeginning on July 1, 2006 andsubsequent award years, (2) informationabout whether a student matriculated toa higher credentialed program at theinstitution, (3) if it has evidence,information that a student transferred toa higher credentialed program atanother institution, and (4) if theinstitution is unable to report requiredinformation, an explanation of why themissing information is not available.Student Information DatabaseComment: Several commentersquestioned the Department’s ability tocollect data under section 134 of theHEA which prohibits the Departmentfrom developing, implementing, ormaintaining a Federal database ofpersonally identifiable information. Thecommenters claimed that obtainingidentifying information on programcompleters by CIP code and programcompletion date would constitute aviolation of section 134 of the HEA.Some of the commenters suggested thatinstitutions provide only aggregateinformation for individuals by CIP codeand opined that the completion datewas not necessary and should beremoved. These commenters reasonedthat the Department should use existinginformation, such as enrollment andloan repayment data in NSLDS and inany other systems, to determine whenstudents are enrolled or have completedtheir program. Another commenter citedsection 134 of the HEA as a reason whyan institution should not be required toprovide information on private orinstitutional loans.VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00012 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2Because section 134 of the HEAexempts existing systems that areneeded to operate the student aidprograms, some commenters asked theDepartment to clarify which currentsystems would be used to gather theinformation requested under proposed§ 668.6(a). Several of the commentersdid not believe that institutions shouldhave to collect and report informationfor students who completed theirprograms in the past three years andrequested that the information beprospective (students who beginattending a program after July 1, 2011).Discussion: Section 134 of the HEAplaces restrictions on the Department’sability to develop, implement, ormaintain a new database of personallyidentifiable information aboutindividuals attending institutions andreceiving title IV, HEA program funds,including systems that track individualstudents over time. It does not prohibitthe Department from including suchinformation in an existing system that isnecessary for the operation of theFederal student aid programs. In thiscase, the information being reported isalready a part of the information that ismaintained by institutions in theirstudent financial aid and academicrecords, and is subject to complianceand program reviews. Institutionsreporting that students have started orcompleted a program for which thosestudents received title IV, HEA programfunds will augment the existinginformation in the Department’s systemsthat are used to monitor and maintainthe operations for the title IV, HEAprograms. The information is also beingcompiled to create aggregateinformation to evaluate whether aprogram demonstrates that it leads togainful employment for its students,rather than to monitor the individualstudents attending those programs overtime. For those reasons, the reportingand use of this information is notprohibited under the law.Changes: None.Links to O*NetComment: Several commenters agreedit was important to inform students andthe public about possible jobopportunities that could result fromenrolling in a program, but wereconcerned that the proposedrequirement would not serve toaccurately inform students. Some of thecommenters believed that the proposedrequirements might work for someprograms like teaching and nursing.However, for graduate-level programs,like MBAs and PhDs in Psychology,institutions would be required toprovide an unwieldy amount of data.

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66843WReier-Aviles on DSKGBLS3C1PROD with RULES2For example, it would be impossible foran institution to identify and disclosethe full range and number of jobopportunities that might exist for MBAgraduates. As an alternative, thecommenters suggested that theDepartment require schools to disclosethe types of employment found by theirgraduates in the preceding three years.Other commenters had similar concernsand suggested that instead of disclosingall occupations by name and SOC code,the Department should allow aninstitution to disclose a sampling orrepresentative set of links for theoccupations stemming from itsprograms. Otherwise, the commenterswere concerned that an institutionwould run afoul of themisrepresentation provisions unless itfully and completely listed all of theSOC and O*NET codes related to eachprogram offered at the institution.Another commenter suggested that aninstitution should only list thoseoccupations in which a majority of itsprogram completers were placed.A commenter claimed that it wouldbe confusing and misleading to provideinformation on hundreds of jobs. Toillustrate this point, the commenterstated that entering a CIP code of 52 for‘‘Business, Management, Marketing andRelated Support Services’’ would lead to86 codes representing more than 300occupational profiles. To avoidconfusing students, the commentersuggested that an institution providelinks only to those careers where itsstudents have typically foundemployment.One commenter thought that the linkto O*Net was unnecessary becausestudents could use search engines toresearch potential jobs.Another commenter supported theO*NET disclosures because theadditional administrative burden wasnot significant and the change was longoverdue.Discussion: In general, we do notbelieve that the links to O*NET willlead to an unwieldy amount ofinformation when the full 6-digit CIPcode is entered on the SOC crosswalk athttp://online.onetcenter.org/crosswalk/.For example, entering the full 6 digitCIP code, 52.9999, for Business,Management, Marketing and RelatedSupport Services, identifies only ninerelated occupations (SOCs). As shownbelow, it is these links to, and the namesof, the nine occupations that aninstitution must post on its Web site.52.9999 Business, Management,Marketing, & Related SupportServices, Other11–9151.00 Social and CommunityService Managers11–9199.00 Managers, All Other13–1199.00 Business OperationsSpecialists, All Other41–1011.00 First-Line Supervisors/Managers of Retail Sales Workers41–1012.00 First-Line Supervisors/Managers of Non-Retail Sales Workers41–3099.00 Sales Representatives,Services, All Other41–4011.00 Sales Representatives,Wholesale and Manufacturing,Technical and Scientific Products41–4012.00 Sales Representatives,Wholesale and Manufacturing, ExceptTechnical and Scientific Products41–9099.00 Sales and RelatedWorkers, All OtherHowever, for 6-digit CIP codes thatyield more than ten occupations, aninstitution may, in lieu of providinglinks to all the identified SOCs, providelinks to a representative sample of theSOCs for which its graduates typicallyfind employment within a few yearsafter completing a program.Changes: Section 668.6(b) has beenrevised to allow an institution toprovide prospective students with Weblinks to a representative sample of theSOCs for which its graduates typicallyfind employment within a few yearsafter completing the program.Disclosing Program CostsComment: Many commenterssupported the proposal to discloseprogram costs. The commenters laudedthis information as more useful tostudents than disclosing costs by credithour or by semester and severalcommenters encouraged the Departmentto make this section of the regulationseffective as soon as possible.Some commenters indicated that theprogram costs in proposed § 668.6(b)(2)differ from the costs an institutionmakes available under § 668.43(g). Thecommenters suggested that all costs thata student may incur should be disclosedincluding charges for full-time and parttimestudents, estimates of costs fornecessary books and supplies as well asestimated transportation costs. Othercommenters asked the Department toclarify how program costs under theproposed Web site disclosures would becalculated differently than thoserequired in the student consumerinformation section of the regulations.In addition, some of these commentersnoted that although § 668.43 requires aninstitution to disclose program costupon request, many students do notknow to ask for it, or the information isnot currently presented in a clearmanner. Another commenter noted thatthe phrase ‘‘institutional costs’’ could beinterpreted to mean only those costspayable to the institution andVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00013 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2recommended that the phrase bechanged to ‘‘cost of attendance.’’Several commenters opined thatproviding program costs would confusestudents. One of the commentersrecommended using just the net pricecalculator as that would also easeinstitutional burden.Discussion: Although we recentlyrevised § 668.43(a) to provide that aninstitution must make program costinformation readily available, not justupon the request of a student, thatsection does not require the institutionto disclose program costs on its Website. All of the disclosures in § 668.6(b),including the disclosure of programcosts, must be on the same Web page toenable a prospective student to easilyobtain pertinent information about aprogram and compare programs. Alongthese lines, and in view of the recentGAO investigation (see http://www.gao.gov/new.items/d10948t.pdf)raising concerns over program costinformation, § 668.6(b) specificallyrequires an institution to disclose on thesame Web page (1) Links to O*NETidentifying the occupations stemmingfrom a program or Web links to arepresentative sample of the SOCs forwhich its graduates typically findemployment within a few years aftercompleting the program, (2) the on-timegraduation rate of students completingthe program, (3) the placement rate forstudents completing the program, (4) themedian loan debt incurred by studentscompleting the program, and (5) thecosts of that program. The institutionmust disclose the total amount of tuitionand fees it charges a student forcompleting the program within normaltime, the typical costs for books andsupplies (unless those costs areincluded as part of tuition and fees), andthe cost of room and board if theinstitution provides it. The institutionmay include information on other costs,such as transportation and livingexpenses, but in all cases must providea Web link, or access, to theinstitutional information it is requiredto provide under § 668.43(a).Changes: Section 668.6(b) has beenrevised to provide that an institutionmust disclose, for each program, all ofthe required information in itspromotional materials and on a singleWeb page. The institution must providea prominent and direct link to this pageon the program home page of its Website or from any other page containinggeneral, academic, or admissionsinformation about the program. Inaddition, this section is revised tospecify that an institution must disclosethe total amount of tuition and fees itcharges a student for completing the

66844 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and RegulationsWReier-Aviles on DSKGBLS3C1PROD with RULES2program within normal time, the typicalcosts for books and supplies (unlessthose costs are included as part oftuition and fees), and the amount ofroom and board, if applicable. Theinstitution may include information onother costs, such as transportation andliving expenses, but must provide a Weblink, or access, to the program costinformation it makes available under§ 668.43(a).One-Year ProgramComment: A commenter supportedremoving references to degree programsin proposed § 600.4(a)(4)(iii) believing itwould avoid confusion andmisrepresentation of the programssubject to the proposed regulations ongainful employment. Anothercommenter noted that for technicalreasons the Department should haveinstead revised § 600.4(a)(4)(i)(C).To better understand which programswould be subject to the reporting anddisclosure requirements in proposed§ 668.6, another commenter asked theDepartment to clarify whether thephrase ‘‘fully transferable to abaccalaureate degree’’ means that everycredit must be transferable to thatdegree.Discussion: A program is fullytransferable to a baccalaureate degree ifit meets the requirements in§ 668.8(b)(1)(ii) and qualifies a studentfor admission into a third year of abachelors degree program.We agree that proposed§ 600.4(a)(4)(iii) should be removed inorder to avoid confusion andmisrepresentation of the programssubject to the regulations on gainfulemployment. We also agree that§ 600.4(a)(4)(i)(C) should be revised tostate that an institution of highereducation provides an educationalprogram that is at least a one academicyear training program that leads to acertificate, or other nondegreerecognized credential, and preparesstudents for gainful employment in arecognized occupation.Changes: Proposed § 600.4(a)(4)(iii)has been removed and § 600.4(a)(4)(i)(C)has been revised as noted in thediscussion above.Definition of a Credit Hour (§§ 600.2,602.24, 603.24, and 668.8)GeneralComment: Several commenterssupported the Secretary’s proposeddefinition of a credit hour, including acommenter representing institutionalregistrars and admissions officers. A fewcommenters believed that institutionsare already using this definition. Onecommenter believed that the Secretary’sdefinition aligned with New YorkState’s regulatory definition of asemester hour.Discussion: We appreciate the supportof those commenters who approved ofthe definition of a credit hour. Likesome commenters, we believe that manyinstitutions and others, including States,are already following the definition of acredit hour or a reasonably comparablestandard that would require minimal orno adjustment for purposes ofparticipating in Federal programs.Changes: None.Comment: Several commentersbelieved that during the negotiatedrulemaking process, Federal and non-Federal negotiators reached tentativeagreement on proposed credit-hourregulations that did not include adefinition of a credit hour. A fewcommenters believed that during thenegotiated rulemaking process, mostnon-Federal negotiators were opposedto a Federal credit-hour definition.Several of these commenters believedthat the Department should adhere tothe proposed regulations agreed uponduring the negotiated rulemakingprocess and should remove the credithourdefinition from the regulations.Other commenters believed that theFederal and non-Federal negotiatorsagreed to proposed regulations thatrelied more heavily on accreditingagencies and institutions to determinecredit assignment policies. Thesecommenters believed that the proposedregulations did not appropriately reflectthis position.Discussion: The commenters arecorrect in noting that during thenegotiated rulemaking process tentativeagreement was reached on the proposalrelated to credit hours that did notinclude a definition of a credit hour asproposed by the Department. Tentativeagreement was reached by removing thedefinition from the proposals to satisfyone non-Federal negotiator. The Federaland non-Federal negotiators tentativelyagreed to proposed credit hourregulations that relied heavily onaccrediting agencies and institutions indetermining the appropriate credithours that represented a student’sacademic work. We also agree with thecommenters who proposed continuingthis reliance to a significant degree, andwe believe that this reliance is reflectedin the final regulations. We note thattentative agreements reached during thenegotiated rulemaking meetings are notbinding on the Department in form orsubstance. It is not unusual for most ifnot all of the substance of a tentativeagreement to be included in a proposedregulation because the Department seesVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00014 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2the benefits that are realized through thediscussion process. In some cases,though, changes may be made uponfurther reflection, or to reinstateconcepts that may have been removedin furtherance of an overall consensusthat was not achieved. In the case of thedefinition of a credit hour wedetermined that the proposed definitionof a credit hour is necessary to establisha basis for measuring eligibility forFederal funding. This standard measurewill provide increased assurance that acredit hour has the necessaryeducational content to support theamounts of Federal funds that areawarded to participants in Federalfunding programs and that students atdifferent institutions are treatedequitably in the awarding of thosefunds.Changes: None.Institutional Determination andFlexibilityComment: Many commenters believedthat institutions and accreditingagencies should have the ultimateresponsibility for determining academiccredit. Several commenters believedthat institutions must have thediscretion to use their existing systemsof self-review and faculty involvementto determine the appropriate credit toassign to academic activities. Some ofthese commenters also believed thatinstitutional processes are solelycapable of considering the uniquequalities of each class, program,professor, and institution. Twocommenters believed that any problemswith credit assignment can be addressedthrough existing institutional reviewprocedures.A few commenters agreed with theprovision in proposed paragraph (3) ofthe credit-hour definition allowinginstitutions to provide reasonable‘‘equivalencies’’ for the amount of workspecified in proposed paragraph (1) ofthe definition. Two of these commentersbelieved that this provision allowsinstitutions to use alternative methodsof instruction and measures of creditthat are more appropriate forinstitutions with nontraditionalstudents entering the modern workforce.These commenters suggested makingproposed paragraph (3) the firstparagraph in the credit-hour definitionin § 600.2. Another of these commentersbelieved that this provision would allowinstitutions the flexibility to use anddevelop innovative forms of coursecontent delivery.Several commenters believed that aFederal definition of a credit hourwould undermine the integrity of theAmerican higher education system

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66845WReier-Aviles on DSKGBLS3C1PROD with RULES2which they believed has been effectiveat assigning credit for over 100 years.One commenter noted that theeducation community has been able toreach consensus on creditdeterminations despite the lack of auniform definition.Many commenters believed that credithours are fundamentally measurementsof academic achievement and othersbelieved that the Secretary’s only reasonfor defining a credit hour is to have astandard measure for determiningeligibility for and distribution of title IV,HEA program funds. The commentersbelieved that credit hours should not betreated as fiscal units. One of thesecommenters contended that the systemsof assigning academic credit anddetermining the distribution of title IV,HEA program funds are different andshould be kept separate. Anothercommenter expressed concern thattreating credit hours as fiscal unitswould cause the Federal Government togive consideration to fiscal mattersabove all others.Several commenters believed that theSecretary’s proposed definition of acredit hour is too restrictive and doesnot account for institutional orprogrammatic variances. Thesecommenters believed that a Federalcredit-hour definition is inapplicable toa diverse educational system composedof different types of institutions,programs, and course formats.One commenter expressed concernthat the proposed credit-hour definitiondid not account for events that mayoccur within institutions’ academiccalendars, such as Federal and religiousholidays, natural disasters, or campussafety issues. This commenter believedthat these events may prohibitinstitutions’ compliance with proposedparagraph (1) of the credit-hourdefinition because institutions may notmeet the requirements for classroominstruction or minimum weeks in asemester.A few commenters believed that theproposed credit-hour definition neededmore specificity in proposed paragraph(1) with regard to the quantity of timethat constitutes a credit hour. Onecommenter suggested revising theproposed definition to specifically statethat a credit hour consists of 50 minutesof instructor contact for every creditearned in a 16 week semester and twohours of out-of-class work for eachcredit. Another commenter suggesteddefining a credit hour in proposedparagraph (1) of the definition in termsof clock hours.One commenter suggestedgeneralizing the proposed definition ofa credit hour to state: (1) A credit houris a unit of measure associated with theachievement of prescribed learningoutcomes for a particular course ofstudy, regardless of instructionaldelivery, (2) each institutionparticipating in title IV, HEA programsmust define, document, andconsistently apply its process for thedetermination of credit for theachievement of learning outcomes, and(3) some institutions may also adhere toa standard academic credit conversionrate as defined by their accreditingagency or State agency.One commenter believed that allaccrediting agencies should be requiredto use a more general definition of acredit hour wherein a semester hourconsists of at least 15 hours of classroomcontact; 30 hours of supervisedlaboratory instruction, shop instruction,or documented independent studyactivities; or not fewer than 45 hours ofexternship, internship, or work relatedexperience. This commenter believedthat a quarter hour should consist of atleast 10 hours of classroom contact; 20hours of supervised laboratoryinstruction, shop instruction, ordocumented independent studyactivities; or not fewer than 30 hours ofexternship, internship, or work relatedexperience.One commenter believed that theproposed credit-hour definitionprovided institutions with too muchautonomy to determine an equivalentamount of work as defined in proposedparagraph (1) because there are nostandard measures for student learningoutcomes. This commenter suggestedrevising proposed paragraph (1) toequate classroom time with directfaculty instruction and three hours oflaboratory work with one hour ofclassroom time and two hours of out-ofclasswork. The commenter alsosuggested revising proposed paragraphs(2) and (3) to require institutions toestablish and document academicactivities equivalent to the work definedin proposed paragraph (1) and revisingproposed paragraph (3) to requireinstitutions to compare studentachievement to the intended outcomesassigned and student achievementattained for credit hours measuredunder proposed paragraph (1).Discussion: The credit-hour definitionin § 600.2 and the provisions in§§ 602.24(f) and 603.24(c) weredesigned to preserve the integrity of thehigher education system by providinginstitutions, accrediting agencies, andState agencies recognized under 34 CFRpart 603 with the responsibility fordetermining the appropriate assignmentof credit hours to student work. Underproposed §§ 602.24(f) and 603.24(c), theVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00015 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2institution’s accrediting agency, orrecognized State agency if, in lieu ofaccreditation, the institution isapproved by one of the four Stateagencies recognized under 34 CFR part603, would be responsible for reviewingand evaluating the reliability andaccuracy of an institution’s assignmentof credit hours in accordance with thedefinition of credit hour in § 600.2.These final regulations employ thesebasic principles of reliance oninstitutions and on accrediting agenciesor, if appropriate, recognized Stateagencies, for ensuring institutions’appropriate determinations of the credithours applicable to students’coursework.The credit-hour definition in § 600.2is intended to establish a quantifiable,minimum basis for a credit hour that, bylaw, is used in determining eligibilityfor, and the amount of, Federal programfunds that a student or institution mayreceive. We believe that the definition ofa credit hour in § 600.2 is consistentwith general practice, provides for thenecessary flexibilities, and may be usedby institutions in their academicdecision-making processes andaccrediting agencies and recognizedState agencies in their evaluation ofinstitutions’ credit assignments.We note, however, that institutions,accrediting agencies recognized under34 CFR part 602, and State agenciesrecognized under 34 CFR part 603 arerequired to use the definition in § 600.2for Federal program purposes such asdetermining institutional eligibility,program eligibility, and studentenrollment status and eligibility. Webelieve that in most instances thedefinition will generally require no orminimal change in institutional practiceto the extent an institution adopts thedefinition for its academic purposesrather than maintaining a separateacademic standard.The provisions in §§ 600.2, 602.24,and 603.24 neither limit nor prescribethe method or manner in whichinstitutions may assign credits to theircourses for academic or other purposesapart from Federal programs. Theseregulations do not require institutions toadopt the definition of a credit hour in§ 600.2 in lieu of existing institutionalmeasurements of academicachievement, but rather to quantifyacademic activity for purposes ofdetermining Federal funding. Aninstitution will be able to continueusing the long-standing creditassignmentpractices that it has found tobe most effective for determining credithours or equivalent measures foracademic purposes, so long as it eitherensures conformity, or uses a different

WReier-Aviles on DSKGBLS3C1PROD with RULES266846 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulationsmeasure, for determining credit hoursfor Federal purposes. This position isconsistent with the application of otherFederal program requirements. Forexample, an institution may choose todefine full-time enrollment status in asemester for academic purposes as 15semester hours while it defines full-timefor title IV, HEA program purposes as 12semester hours under the minimumrequirements of the definition of fulltimein § 668.2.We do not agree that the proposeddefinition is too restrictive or isinapplicable in a diverse educationalsystem. Nor do we believe that thedefinition would prevent institutionsfrom taking into consideration eventssuch as Federal and religious holidaysor campus safety issues. In the event ofnatural disasters, the Department hasconsistently provided guidance on howthe regulations may be applied in suchexceptional circumstances. The credithourdefinition allows an institution toestablish an academic calendar thatmeets its needs and its students’ needs,while ensuring a consistent measure ofstudents’ academic engagement forFederal purposes.We do not agree with the commentersthat paragraph (1) of the proposedcredit-hour definition needs morespecificity of the term ‘‘one hour.’’ Webelieve that it is unnecessary to defineone hour as either 50 minutes or oneclock hour because the primary purposeof paragraph (1) of the proposed credithourdefinition is to provide institutionswith a baseline, not an absolute value,for determining reasonableequivalencies or approximations for theamount of academic activity defined inthe paragraph.We do not agree that the proposeddefinition should be more generalizedor that differing standards should beadopted. A credit hour is a basic unit fordetermining the eligibility of recipientsfor, and the amount of, Federalassistance that may be provided toparties participating in Federalprograms. We believe the proposeddefinition provides a consistent basis forthe equitable treatment of participantsand recipients.Changes: We have revised thedefinition of credit hour to clarify thebasic principles applied in the proposeddefinition of a credit hour to delineatefurther that it is an institution’sresponsibility to determine theappropriate credit hours orequivalencies. The revision requiresthat, except as provided in § 668.8(k)and (l), an institution determines thecredit hours applicable to an amount ofwork represented in intended learningoutcomes and verified by evidence ofstudent achievement that reasonablyapproximates not less than the amountof work described in paragraph (1) or (2)of the definition of credit hour in§ 600.2 of the final regulations. The finalregulations also continue to provide thatinstitutions may establish othermeasures that approximate theminimum standards in paragraph (1) or(2) of the definition in § 600.2, thuspermitting each institution to considerthe unique characteristics of its courseand program offerings, as well as, itsdistinctive student populations.Comment: Many commenters believedthat credit hours do not represent areasonable assessment of studentlearning. Many commenters believedthat the Secretary’s proposed definitionof a credit hour dictates that theoutdated concept of ‘‘seat time’’ is themain metric by which programsubstance should be judged rather thanthe appropriate focus on studentlearning outcomes.A few commenters believed that acredit hour, and in particular, theCarnegie Unit, does not account foracademic rigor. These commentersbelieved that a student’s completion ofa specified number of hours of directinstruction and out-of-class work doesnot provide assurance that the studenthas acquired a certain level ofcompetency.Two commenters believed that theproposed credit-hour definition doesnot consider the actual behavior ofstudents in American higher education.One commenter believed that thetypical student does not spend twohours on out-of-class work for everyhour of instruction. The othercommenter believed that there has notbeen enough research into the amountof time that students are engaged inacademic activities.One commenter believed that theSecretary’s proposed credit-hourdefinition put too much emphasis onwork outside of class instead of studentlearning outcomes.A few commenters believed thatcredit hours are measurements ofeducational inputs. One commenterstated that credit hours, when used todetermine eligibility for financial aid,are only proximate preconditions forstudent learning and are equivalent toother input measures such as scores onstandardized tests, high school GPAs, orfaculty degrees.One commenter believed that thecredit-hour definition would forceinstitutions to treat all students thesame, regardless of ability, as long asthey are in class for the specifiednumber of hours.VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00016 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2One commenter expressed concernthat the Secretary’s proposed credithourdefinition does not considercurrent efforts in higher education toincrease institutional accountability.This commenter believed that theproposed credit-hour definition wouldundermine institutional efforts to assessstudent learning outcomes.Discussion: We do not agree with thecommenters that the credit-hourdefinition emphasizes the concept of‘‘seat-time’’ as the primary metric fordetermining student work. We believethat the definition of a credit hour in§ 600.2 in these final regulationsemphasizes that institutions may awardcredit to courses for an amount of workrepresented by verifiable studentachievement of institutionallyestablished learning outcomes.Eligibility for Federal programsrequires that institutions are able todemonstrate that the amount of work ina course assigned credit for Federalpurposes will constitute a reasonableapproximation of the amount ofacademic activity defined in paragraph(1) of the definition of credit hour in§ 600.2. Institutions are responsible andaccountable for demonstrating that eachcourse has the appropriate amount ofeducational content to receive credit forFederal program purposes and forstudents to achieve the level ofcompetency defined by institutionallyestablished course objectives.Changes: None.Comment: Many commenters believedthat a Federal credit-hour definition willstifle institutions’ ability to develop newand innovative education models,especially with regard to deliverymethods. Several commenters believedthat institutions’ ability to respondcreatively to changing pedagogies,circumstances, and student needswould be limited under the proposedcredit-hour definition.A few commenters believed that theproposed credit-hour definition wouldlimit innovation in education at acritical time. One of these commentersbelieved that because of the economicrecession, institutions need to be moreinnovative in developing alternativedelivery methods. One commenterbelieved that institutions must be ableto respond to the rapidly changingeducation sector. Another commenterbelieved that other nations are currentlydeveloping new educational models andthe United States will fall behind thesenations in education.Many commenters believed that theSecretary’s proposed credit-hourdefinition would have a negative impacton alternative delivery methods such ascompressed and accelerated programs,

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66847WReier-Aviles on DSKGBLS3C1PROD with RULES2online and distance educationprograms, and hybrid programs withonline and in-class components. A fewcommenters believed that the proposedcredit-hour definition wouldparticularly suppress innovation ofdelivery methods because institutionswould be focused on ensuring they meetthe Federal definition of a credit hourand not on the desired academicoutcomes. These commenters believedthat institutions would not be able torespond to changing studentpopulations by diversifying deliverymethods. A few commenters noted thatminority students and nontraditionalstudents such as veterans, activemilitary personnel, and working adultswould be particularly harmed becausethey rely on programs offered throughalternative delivery methods.Several commenters believed that theproposed credit-hour definition is notapplicable to alternative deliverymethods. A few commenters believedthat credit hours are not compatiblewith technological advancements ineducation. These commenters believedthat the proposed credit-hour definitionwould minimize the use of technologyin education. Some commentersbelieved that proposed paragraph (1)assumed a classroom or lecture basedmodel of instruction and was notapplicable to online or hybrid programs.A few commenters questioned how tomeasure direct faculty instruction withregard to an online or hybrid programwhen no physical classroom exists. Twocommenters noted that in distanceeducation and hybrid programs, theconcept of contact hours does not apply.The commenters recommendedexpanding paragraph (3) of the proposeddefinition to specifically address thatinstitutions offering nontraditionalprograms including distance deliveryprograms and accelerated programs mayprovide institutionally establishedequivalencies for the amount of workrequired in paragraph (1) within thediscretion of the institution.Several commenters believed that theSecretary’s proposed credit-hourdefinition would negatively impact howearned credits are calculated for onlineand hybrid courses.One commenter believed that theSecretary’s proposed credit-hourdefinition represented an effort by theSecretary to reinstate a regulation thathad been removed in 2002 whichrequired higher education programs thatdid not operate in a standard semester,trimester, or quarter system to offer aminimum of 12 hours of course workper week to maintain eligibility for titleIV, HEA program funds.Two commenters believed that theSecretary’s proposed credit-hourregulations would legitimizeinstitutions’ use of the Carnegie Unit,which generally consists of a ratio oftwo hours of work outside of class forevery hour of classroom time, andincrease scrutiny on institutions that donot currently use the Carnegie Unit.These commenters believed that underthe proposed regulations, aninstitutional credit system that is notcurrently based on the Carnegie Unitwould be undervalued because theseinstitutions would have a significantburden to develop and demonstratestudent achievement of learningoutcomes that their peers using theCarnegie Unit would not have.Discussion: We do not agree with thecommenters that the credit-hourdefinition in § 600.2 will limitinstitutions’ flexibility to creativelyrespond to innovations in educationaldelivery methods and changing studentneeds. A fundamental component of thecredit-hour definition in § 600.2provides that institutions mustdetermine the academic activity thatapproximates the amount of workdefined in paragraph (1) based oninstitutionally established learningoutcomes and verifiable studentachievement. The definition allowsinstitutions that have alternativedelivery methods, measurements ofstudent work, or academic calendars todetermine intended learning outcomesand verify evidence of studentachievement.All institutions participating in titleIV, HEA programs have a responsibilityto ensure appropriate treatment ofFederal funds, regardless of courseformat or educational delivery method.The definition in § 600.2 providesinstitutions with a baseline fordetermining the amount of student worknecessary for title IV, HEA programeligibility, but does not specify theparticular program formats or deliverymethods that institutions must use.The credit-hour definition is not areinstatement of the old ‘‘12-hour rule,’’that was removed from the Department’sregulations in 2002. The 12-hour rulerequired programs that did not operatein standard semester-, trimester-, orquarter-term systems to offer aminimum of 12 hours of course workper week to maintain eligibility forFederal programs. The credit-hourdefinition in these final regulationsapplies to all institutions, regardless ofwhether they operate on a standard-termacademic calendar. In addition, whilethe old 12-hour rule required 12 hoursof instruction, examination, orpreparation offered by an institution perVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00017 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2week, the credit-hour provisions in§ 600.2 require institutions to providestudents with an amount of workequivalent to the amount of workdescribed in paragraph (1) of the credithourdefinition.Changes: None.Comment: Several commentersobjected to proposed paragraph (3) ofthe credit-hour definition. A fewcommenters believed that paragraph (3)of the proposed credit-hour definition isvague regarding the entity responsiblefor determining ‘‘reasonableequivalencies.’’ A few commentersbelieved that the proposed credit-hourprovisions did not provide enoughguidance on what academic activitiesthe Department would accept asreasonable equivalencies for the amountof work defined in proposed paragraph(1). A few commenters believed that theterm ‘‘reasonable’’ put the Department inthe position of final arbiter on thedetermination of reasonableequivalencies.One commenter believed thatproposed paragraph (3) createduncertainty and the potential forlitigation related to whether aninstitution’s proposed equivalency forthe work defined in paragraph (1) isreasonable. This commenter expressedconcern that institutions would be liablefor using equivalencies that theDepartment viewed as unacceptable.One commenter asked for clarificationon the types of corrective actions thatthe Department can take to enforce theprovisions of the credit-hour definitionin proposed § 600.2.Discussion: Institutions have aresponsibility to ensure that the use ofFederal program funds is in accordancewith applicable regulations. In addition,the Department has the oversightresponsibility to determine thatinstitutions are acting in accordancewith the definition of a credit hour inthese final regulations to ensure theappropriate use of Federal programfunds. It is therefore necessary andappropriate for the Secretary to reviewan institution’s assignment of credit forFederal purposes and an accreditingagencies’ or State agencies’ evaluationsof an institution’s credit polices andtheir implementation to determinewhether an institution is assigningcredit hours for Federal programpurposes in accordance with these finalregulations. If an institution is found tobe out of compliance for Federalprogram purposes with the credit-hourdefinition in § 600.2, the amount orTitle IV, HEA funds awarded under theincorrect assignment of credit hoursmay be recalculated to establish arepayment liability owed by the

66848 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and RegulationsWReier-Aviles on DSKGBLS3C1PROD with RULES2institution. In cases where the amountof credit hours assigned to a program issignificantly overstated, the Secretarymay fine the institution or limit,suspend, or terminate its participationin Federal programs.Changes: None.Comment: Some commenters believedthat the proposed credit-hour definitionwould alter institutions’ current creditassignments and courses. A few of thesecommenters believed that a Federaldefinition of a credit hour sets anexpectation that institutions shouldassign additional credit to courses if thework exceeds the amount defined in theproposed definition. One commenterbelieved that the proposed definitionwould increase the amount of class timethat students are required to complete inorder to earn credit. Another commenterbelieved that the proposed definitioncould cause institutions to increasecourses’ lecture or theory content anddecrease hands-on training.One commenter believed that theproposed credit-hour definition wouldforce accrediting agencies to imposehomework requirements on vocationalinstitutions.Discussion: The credit-hour definitiondoes not require institutions to altertheir assignment of credit to courses foracademic purposes; however,institutions have the responsibility todemonstrate that credit hours assignedto courses for Federal program purposesadhere to the minimum standards of thecredit-hour definition in § 600.2. If aninstitution determines that its currentassignment of credits to its programs forFederal program purposes does notsatisfy the minimum standards in theregulation, the institution will eitherhave to reduce the credits associatedwith the program, increase the workrequired for the program, or both.There is no requirement forinstitutions to assign additional credit tocourses if the amount of work exceedsthe amount described in paragraph (1)of the credit-hour definition. We haverevised the credit-hour definition in§ 600.2 to clarify that the amount ofwork described in paragraph (1)represents a minimum acceptable levelof academic activity for which creditcan be awarded to constitute a credithour for Federal purposes. Institutionsmay use their discretion to assignadditional credit if the amount of workfor a course justifies such an assignmentof credit in accordance with § 600.2.There is no requirement under thecredit-hour definition that would forceaccrediting agencies to imposehomework requirements on vocationalinstitutions. In general, institutions willbe assessed to determine if they haveestablished credit hours for title IV,HEA program purposes that meet atleast the minimum standards in theregulation. Unless the program issubject to the credit-to-clock-hourconversion requirements in § 668.8(l)and (k), an institution would berequired to determine the appropriatecredit hours in accordance withparagraphs (1) and (2) of the credit-hourdefinition in § 600.2 of these finalregulations for a program or courseworkin a program that has no student workoutside the classroom.Changes: We have revised the credithourdefinition in § 600.2 to clarify thatthe amount of work specified inparagraph (1) is a minimum standardand that there is no requirement for thestandard to be exceeded.Comment: One commenter believedthat the proposed provisions in § 600.2did not appropriately address facultyworkloads or faculty time in class.Discussion: We do not believe that§ 600.2 should address facultyworkloads or faculty time in class asthese issues are institutionaladministrative considerations outsidethe scope of these final regulationswhich set minimum standards for themeasurement of credit hours.Changes: None.Comment: One commenter questionedwhy the proposed credit-hourregulations did not address § 668.9which provides in paragraph (b) that apublic or private nonprofit hospitalbasedschool of nursing that awards adiploma at the completion of theschool’s program of education is notrequired to apply the formula containedin § 668.8(l) to determine the number ofsemester, trimester, or quarter hours inthat program for purposes of calculatingTitle IV, HEA program funds. Thiscommenter questioned whether forprofithospital-based nursing programswould be subject to the proposedprovisions in § 668.8(k) and (l).Discussion: Section 481A of the HEAand § 668.9(b) specify that anyregulations promulgated by theSecretary concerning the relationshipbetween clock hours and semester,trimester, or quarter hours in calculatingstudent grant, loan, or work assistanceunder the title IV, HEA programs do notapply to a public or private nonprofithospital-based school of nursing thatawards a diploma at the completion ofthe school’s program of education.Changes: None.Comment: One commenter believedthat institutions would need anaccrediting or State agency’s review oftheir programs’ compliance with theproposed credit-hour definition in§ 600.2. The commenter believed thatVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00018 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2the regulations are unclear on howprograms should operate in the interim.One commenter expressed concernthat waiting for accrediting agencies torevise their standards after the proposedregulations are finalized would bedetrimental to institutions offeringprograms in alternative formats.One commenter believed thatinstitutions will be developing newcredit policies and should be affordedan adjustment period to receive andreact to guidance from State agencies ontheir credit assignment policies.Discussion: The provisions in§§ 602.24 and 603.24 provide that aninstitution must have a process forassigning credit that meets itsaccrediting agency’s or State agency’sstandards, as well as, the credit-hourdefinition in § 600.2. An institution’scredit assignment process is subject toreview by its accrediting agency or, insome cases, a State agency recognizedunder 34 CFR part 603. We believe thatinstitutions already have processes forassigning credit and, to the extent thatthese existing processes do not complywith these final regulations, institutionswill need to revise their creditassignments to comply with the credithourdefinition in these final regulationsfor Federal program purposes. Duringthe interim period between the effectivedate of these regulations and anaccrediting agency’s or State agency’sreview of institutions’ compliance withthe credit-hour definition in § 600.2, aninstitution is responsible andaccountable for ensuring that its credithourassignments conform to theprovisions of the credit-hour definitionin § 600.2 of these final regulations andthat its processes are in accord with itsdesignated accrediting agency’s orrecognized State agency’s requirements.Changes: None.Out-of-Class Student WorkComment: Several commenters didnot agree with the component ofproposed paragraph (1) of the credithourdefinition related to student workoutside of class. A few commentersbelieved that an institution cannotdetermine how much time studentsspend on work outside of class and thatquantifying work outside of the classdoes not account for variations instudents’ learning abilities and styles.One commenter believed that theSecretary’s proposed credit-hourdefinition did not take into account thenature of different courses. Thiscommenter believed that certain coursesrequire more direct faculty instructionand supervision while other coursesmay require more study outside of theclassroom.

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66849WReier-Aviles on DSKGBLS3C1PROD with RULES2Two commenters did not agree withthe Secretary’s proposed credit-hourdefinition with regard to the ratio ofclassroom time to time outside of classand suggested revising the proposeddefinition to allow for more directclassroom instruction. Thesecommenters recommended revisingproposed paragraph (1) to define acredit hour as one hour of classroom ordirect faculty instruction and aminimum of two hours of student workin or out of the classroom.One commenter recommended thatthe Department distinguish class timefrom time outside of class by makingexplicit in the proposed definition thatclass time refers to instruction.One commenter asked for clarificationof proposed paragraph (2) regardingwhether a credit hour awarded forlaboratory work must consist of onehourwork in the laboratory and twohours outside the laboratory performingeither preparation or follow upactivities.Discussion: Institutions mustdemonstrate that the credit hoursawarded for the amount of academicwork necessary for Federal programpurposes approximates the amount ofwork defined in paragraph (1) of thedefinition of credit hour in § 600.2. Thecredit-hour definition in § 600.2 sets aminimum standard and institutions mayoffer additional hours of instructionaltime to courses or provide for additionalstudent work outside of class beyondwhat is specified in paragraph (1) of thedefinition at their discretion. We do notbelieve it is necessary to decrease theamount of out-of-class time specified inparagraph (1) of the definition.We do not want to limit theinterpretation of class time only todirect instruction in order to take intoconsideration other in-class activitiessuch as examinations. Similarly, theprovisions related to laboratory work inparagraph (2) of the definition do notrequire one hour of work in thelaboratory and two hours of out-of-classwork related to the laboratory.Paragraph (2) of the credit-hourdefinition allows institutions to usetheir discretion to determine the in-classand out-of-class components forlaboratory work to the extent the creditawarded reasonably approximates therequirements of paragraph (1) of thecredit-hour definition in § 600.2. Aninstitution’s basis for making thisdetermination would be subject toreview by its accrediting agency, theState agency recognized under 34 part603, and the Department in order todemonstrate that it was reasonable.Changes: None.Authority and Need To RegulateComment: Several commentersbelieved that the Secretary does nothave the legal authority to promulgatethe proposed regulations in §§ 600.2,602.24, 603.24, and 668.8. Thesecommenters believed the credit-hourdefinition in proposed § 600.2represented a Federal intrusion intoacademic matters. A few commentersbelieved that the General EducationProvisions Act (20 U.S.C. 1232a) and theDepartment of Education OrganizationAct (20 U.S.C. 3403) prohibit theSecretary from exercising undue controlof curricula, programs, administration,and personnel of educationalinstitutions. These commenters believedthat the Secretary needs explicitCongressional authorization topromulgate regulations that intrude inthe academic decision-making processat institutions. Two commentersrecommended including language in thefinal regulations reaffirming that it isappropriate for institutions andaccrediting agencies to address studentachievement, but that it is not withinthe Secretary’s authority.Many commenters believed that aFederal definition of a credit hourrepresents a Federal intrusion into acore academic issue and the academicdecision-making process. A few of thesecommenters expressed concern that aFederal definition of a credit hourwould set a precedent for Federalinterference in other academic matters.One commenter representinginstitutional registrars and admissionsofficers believed the proposed definitionof a credit hour should be revised torequire an institution to make areasonable determination of whether theinstitution’s assignment of credit hoursconforms to commonly acceptedpractice in higher education asdemonstrated in the portability of suchcredits to other institutions of highereducation offering similar programs.One commenter believed that theSecretary is not authorized to makeacademic decisions and did not wantinstitutions to be subject to any adverseadministrative action by the Departmentif the Department did not concur withan institution’s or accrediting agency’sdetermination of appropriate credit.This commenter suggested that the finalregulations specify that the credit hoursawarded for a program shall be deemedin compliance with the definition of acredit hour as defined in § 600.2, wherethe credit hours awarded have beenapproved by the institution’s accreditingagency based upon a review performedin accordance with § 602.24(f).VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00019 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2Several commenters believed that theSecretary’s proposed credit-hourdefinition was incongruent withexisting Federal laws, State regulations,or accrediting agency policies.One commenter believed that theproposed credit-hour definition in§ 600.2 could conflict with theAmericans with Disabilities Act of 1990,as amended, which requires entitiessuch as institutions of higher educationto make reasonable accommodations forstudents with disabilities.Several commenters believed that theproposed credit-hour definition wouldforce some institutions that use credithours to use clock hours. Thesecommenters believed that this changewould conflict with some Stateregulations and is not required by anyother Federal agency.A few commenters believed that theproposed credit-hour regulations wereharmful to institutions that had beenrequired to convert from clock hours tocredit hours by State mandates. Thesecommenters believed that theseinstitutions would be at a disadvantagecompared to institutions that werepreviously using credit hours. Onecommenter recommended that theDepartment allow institutions that haveconverted to credit hours based on Statemandates to use State-mandated clockto-credit-hourconversion rates todetermine Federal program eligibility.Several commenters believed that theproposed credit-hour definition maydirectly violate some State regulationsbecause it inherently requires thatinstitutions take attendance.Discussion: The Secretary isauthorized under 20 U.S.C. 1221e–3, tomake, promulgate, issue, rescind, andamend rules and regulations governingthe manner of operation of, andgoverning the applicable programsadministered by, the Department. Theintent of the regulations in §§ 600.2,602.24, 603.24, and 668.8 is not tointerfere with the academic decisionmakingprocesses at institutions,accrediting agencies, and recognizedState agencies, but to rely on theseprocesses to ensure the integrity of theFederal programs, including the title IV,HEA programs. Fundamental to thesedecision-making processes is themeasurement of the credit used todetermine the amounts of title IV, HEAprogram funds provided to eligiblestudents who are enrolled in eligibleprograms. Since the regulationsestablish a minimum standard, andinstitutions may choose to include morework for their credit hours than theminimum amount, credit hours at oneinstitution will not necessarily equate tocredit hours at another institution for a

66850 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and RegulationsWReier-Aviles on DSKGBLS3C1PROD with RULES2similar program. Thus, we do not agreewith the recommendation that aninstitution should be required todemonstrate the portability of suchcredits to other institutions of highereducation offering similar programs aswe believe such a requirement would,in fact, interfere with the academicdecision-making processes atinstitutions.These regulations should not beinconsistent with current Federal laws,State regulations, and accreditingagencies’ policies because of theirintended narrow application to thedetermination of eligibility for, anddistribution of, Federal program funds.Therefore, to the extent an institutiondetermines that it may be necessary touse a current credit assignment system,for example, to comply with otherrequirements such as State mandates, aninstitution may continue using itscurrent system for purposes unrelated toFederal programs.We do not agree with the commenterthat the credit-hour definition in § 600.2conflicts with the Americans withDisabilities Act of 1990, as amended.The credit-hour definition in § 600.2does not prohibit institutions fromdeveloping policies for academicallyaccommodating students withdisabilities in accordance with theAmericans with Disabilities Act of 1990,as amended. The credit-hour definitionprovides institutions with the flexibilityto determine the appropriate credithours or equivalencies to award forstudent work.Changes: None.Comment: Several commentersbelieved that a Federal definition of acredit hour is unnecessary. Many ofthese commenters noted that there hasbeen no history of fraudulent practicesin credit assignment by institutions inthe nonprofit sector and that any fraudor abuses identified have been in thefor-profit sector. Some of thesecommenters believed that it is unfair toapply a Federal definition of a credithour to all institutions. One commentersuggested that the credit-hour definitionapply only to institutions that are notaccredited by regional or specializedaccreditors.A few commenters believed that theSecretary’s only motive to define acredit hour stemmed from a report fromthe Department’s Inspector Generalregarding one regional accreditingagency’s accreditation of a for-profitinstitution it found to haveinappropriate credit-hour policies. Onecommenter believed that although therehave been problems reported with someinstitutions’ assignment of credit hours,these problems were primarily related totwo regional accrediting agencies’evaluation of degree programs and notwith vocational career educationprograms.One commenter expressed concernthat enforcement of institutions’compliance with the credit-hourdefinition would be directed primarilyat for-profit institutions even thoughthere have been inappropriate creditawarding practices at nonprofitinstitutions as well.A few commenters believed thatinstitutional credit assignment problemsidentified in the nonprofit sector areeffectively resolved through the existingprocesses of accreditation andinstitutional self-review.One commenter suggested thatinstead of establishing a Federal credithourdefinition, the Department shouldrequire institutions to describe theircredit assignment policies in theircatalogs and promotional materials.Discussion: The Secretary did notintend to define a credit hour forFederal program purposes as a punitivemeasure against institutions in aparticular sector or institutions thathave engaged in inappropriate creditawarding practices in the past. Instead,the revised credit-hour definition isintended to provide a minimum,consistent standard for all institutionsregardless of State, sector, or accreditorin determining the amount of studentwork necessary to award credit hoursequitably for Federal program purposes.Changes: None.Comment: A few commentersbelieved that a Federal credit-hourdefinition is unnecessary because Stateagencies already review institutions’credit-hour policies within their generaloversight of an institution’s integrity.Discussion: We do not agree. ManyState agencies do not perform suchoversight activities nor do they use auniform standard that would assure theequitable administration of Federalprograms.Changes: None.Administrative BurdenComment: Several commentersbelieved that the proposed credit-hourprovisions would cause an undueadministrative and financial burden oninstitutions. A few commenters believedthat institutions would be forced tofocus their administrative resources onensuring that their programs andcourses conform to the Federal credithourdefinition and remain eligible fortitle IV, HEA program funds instead ofother important academic matters suchas ensuring program integrity. Othercommenters believed that in order tocomply with the proposed credit-hourVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00020 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2definition, institutions would beburdened with administrative taskssuch as reevaluating and significantlyrestructuring their credit-assignmentsystems, ensuring compliance with theiraccrediting agency’s standards,reconfiguring the use of classroomspace, and recalculating students’financial aid packages.One commenter believed that Stateagencies and accrediting agencies willbe burdened by the requirement to focuson institutions at a more detailed leveland will need to increase their staffs andcosts to account for the increasedworkload. This commenter believed thatincreased costs would be passed toinstitutions, and subsequently, tostudents.Discussion: We do not believe thatassigning credit to courses inaccordance with the definition of credithour in § 600.2 for Federal programpurposes will cause any significantincrease in administrative or financialburden on institutions. Institutionsparticipating in Federal programs suchas title IV, HEA programs are alreadyresponsible for ensuring the appropriatetreatment of Federal funds, includingaccurate distribution of Federal funds tostudents. Institutions will not berequired to change their current systemsof awarding credit for academicpurposes which in many instances willalready be compliant with these finalregulations, but some institutions willbe required to make the necessarychanges to ensure accurate andequitable credit assignments for Federalprogram purposes.We do not believe that the credit-hourdefinition will cause any significantincrease in the administrative burden onaccrediting agencies or State agenciesrecognized under 34 CFR part 603.Section 496(a)(5) of the HEA requiresaccrediting agencies recognized by theSecretary to evaluate an institution’s orprogram’s ‘‘measures of program lengthand the objectives of the degrees orcredentials offered’’ which inherentlyrequires accrediting agencies to evaluatethe courses that constitute institutions’programs.Changes: None.Accrediting Agency Procedures(§ 602.24(f))Comment: Several commenterssupported the addition of § 602.24(f).These commenters believed thataccrediting agencies are the appropriateentities to ensure institutions’compliance with the credit-hourprovisions in § 600.2.Many other commenters believed thatthe proposed provisions in § 602.24(f)are unnecessary. These commenters

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66851WReier-Aviles on DSKGBLS3C1PROD with RULES2believed that the integrity ofinstitutions’ assignment of credit hoursis already reviewed and evaluated byaccrediting agencies through a system ofpeer review. These commenters alsobelieved that the peer-review system iscapable of recognizing how credit hoursare defined in different settings. A fewcommenters noted that the Secretary hasalready permitted accrediting agenciesto perform this function and thataccreditors have been diligent in theirduties. One commenter believed that theSecretary could tighten Federalregulatory control over institutions’credit-hour policies by revising theexisting accrediting agency recognitionregulations in 34 CFR part 602.One commenter believed thataccrediting agencies have long-standingpractices, or in the case of some nationalaccrediting agencies, formulas thatprovide reasonable measures of credithours.Discussion: We agree with thecommenters who believed thataccrediting agencies’ peer-reviewsystems are structured to evaluate theappropriateness of institutions’ creditpolicies and assignments in diverseeducational settings. Amending § 602.24to add § 602.24(f) initially was aproposal of the non-Federal negotiatorsrepresenting accrediting agencies toclarify their role in overseeing theassignment of credit hours byinstitutions as it relates to Federalprogram requirements. With theaddition of the credit-hour definition in§ 600.2, we added § 602.24(f) regardingan accrediting agency’s review of aninstitution’s policies and procedures forassigning credit hours, and theinstitution’s application of thesepolicies because this addition indicateshow those requirements fit together andmakes the two regulations consistent.We note that these provisions relatesolely to an accrediting agency’sconsideration of an institution’simplementation of the credit-hourdefinition for Federal program purposes.The regulations do not require theaccrediting agency to use the definitionof credit hour in § 600.2 for non-Federalpurposes nor do the regulations prohibitan accrediting agency from only usingthe definition of credit hour in § 600.2.We believe that § 602.24(f) is theappropriate place to define accreditingagencies’ responsibilities for reviewinginstitutions’ processes for assigningcredit for title IV, HEA programpurposes because § 602.24 defines theprocedures institutional accreditorsmust have if the institutions theyaccredit participate in title IV, HEAprograms.Changes: None.Comment: Several commenters didnot support the addition of § 602.24(f)because they believed the proposedprovisions would allow the Departmentto indirectly regulate academic matters.A few of these commenters requestedthat the Department add language to theregulations making it clear that noprovision in § 602.24 would permit theSecretary to establish any criteria thatspecifies, defines, or prescribes theprocedures that accrediting agenciesshall use to assess any institution’scredit-hour policies or procedures.One commenter believed that byrequiring accrediting agencies to ensureinstitutions’ compliance with theproposed credit-hour definition in§ 600.2, the Department would beplacing accrediting agencies into aquasi-regulatory role for which they areneither designed nor intended. Thiscommenter believed that over timeaccrediting agencies’ regulatory role willbe seen as their most important role andaccrediting agencies will in effectbecome government agents. Anothercommenter believed that proposed§ 602.24(f) would cause accreditingagencies to focus on institutions’assignment of credit hours instead ofother valuable areas of review.One commenter requestedclarification of whether § 602.24(f)would allow the Department to relyexclusively on an accrediting agency’sdetermination of an institution’sdefinition and assignment of credit, orwhether the Department would haveseparate authority under the regulationsto evaluate and regulate an institution’sdefinition or assignment of credit fortitle IV, HEA program eligibilitypurposes.One commenter believed that anaccrediting agency found to bepermitting inappropriate creditassignment activities at institutionsshould be cited and forced to addressthe identified issues. Anothercommenter believed that institutions’policies for assigning credit areextremely diverse, and that theDepartment is not capable of properlydetermining whether an accreditingagency has appropriately evaluated thevariety of institutional policies.One commenter believed theprovisions in § 602.24(f) areunnecessary because section496(a)(5)(H) of the HEA requiresaccrediting agencies to assessinstitutions’ measures of program lengthbut does not mandate any quantitativerequirements establishing thecomponents necessary for the measureof credit.Discussion: The provisions in§ 602.24(f) reflect that accreditingVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00021 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2agencies are the oversight bodiesresponsible for evaluating theappropriateness of institutions’ policiesand procedures for assigning credit thatis consistent with Federal programpurposes. This role is in accordancewith the provisions of the HEA underwhich accrediting agencies have theprimary responsibility, as part of theoversight triad with the FederalGovernment and State agencies, todetermine whether institutionsparticipating in Federal programs suchas the title IV, HEA programs, meetminimum standards of educationalquality. The provisions in § 602.24(f)further support accrediting agencies infulfilling these responsibilities but donot prescribe the methods by whichaccrediting agencies must perform theseevaluations.If the Secretary determines that arecognized accrediting agency does notcomply with the provisions in§ 602.24(f) for purposes of Federalprograms, or is not effective in itsperformance with respect to theseprovisions, then the Secretary mayrestrict or remove the agency’srecognition in accordance with 34 CFRpart 602, subpart C.We do not agree that the provisions in§ 602.24(f) are unnecessary. Whilesection 496(a)(5)(H) of the HEA requiresaccrediting agencies to assessinstitutions’ measures of programlength, we believe the provisions in§ 602.24(f) provide necessaryclarification regarding the means ofevaluating an institution’s assignment ofcredit hours.Changes: None.Comment: A few commentersbelieved that the provisions in§ 602.24(f) were not specific enoughwith regard to the requirements foraccrediting agencies.One commenter proposed that theDepartment require accrediting agenciesto base their evaluations of the validityof institutions’ credit-hour assignmentson the manner in which otherinstitutions offering similar programsassess and accept credits for purposes ofevaluating credit for transfer.One commenter asked the Departmentto revise proposed § 602.24(f)(1)(ii) tospecify that accrediting agencies mustmake a determination of whether aninstitution’s assignment of credit hoursconforms to the provisions in proposed§ 600.2.One commenter recommended thatthe Department require accreditingagencies to prescribe clearly themethodologies and equivalencies thatwill be utilized by institutions todetermine the amount of work specifiedby the credit assigned to courses as

WReier-Aviles on DSKGBLS3C1PROD with RULES266852 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulationsrepresented through stated studentlearning outcomes and demonstratedachievement of those outcomes,regardless of the delivery method.One commenter recommendedrevising the proposed accreditingagency requirements in § 602.24(f) tostate that in the case of competencybasedprograms that do not use clockhours or classroom time as a basis forcredit, an accrediting agency mustdetermine the appropriate assignment ofcredit by reviewing a well-substantiatedlist of competencies and assessingdocumented evidence of studentachievement of competencies.A few commenters requested that theDepartment revise proposed§ 602.24(f)(2) to clarify that accreditingagencies have the authority andautonomy to determine reviewmethodologies and techniques.One commenter believed that itwould be appropriate for an accreditingagency to review a sample of aninstitution’s curriculum to determinewhether the credit assignment policieswere being appropriately applied by aninstitution, but it would not beappropriate for an accrediting agency toemploy an unspecified sample of otherinstitutions to determine whether or notthe credits awarded for a particularcourse or program conformed tocommonly accepted practice in highereducation. This commenter suggestedrevising proposed paragraph§ 602.24(f)(2) to specify that the agencymust sample courses within aninstitution’s program of study.One commenter suggested thataccrediting agencies review annualinstitutional submissions of data,policies, and procedures for assigningcredit hours.Discussion: We do not believe thatfurther specificity is appropriate ornecessary in § 602.24(f). Accreditingagencies must have the flexibility toreview institutional credit-assignmentprocesses that may vary widely in theirpolicies and implementation and mayhave differing methods for measuringstudent work such as direct assessment.We believe that accrediting agencies arecapable of developing appropriatemethods for evaluating institutionalcredit processes without providingfurther specificity in the regulations. Wenote that accrediting agencies mustdemonstrate their ability toappropriately review these areas inorder to receive recognition by theSecretary as reliable authorities on thequality of education or training offeredby the institutions and programs theyaccredit, and that evaluation by theSecretary continues during periodicreviews of accrediting agencies.We believe that it is not necessary tospecify how an accrediting agencyshould review a competency-basedprogram that does not use credit hoursor clock hours as a basis for credit. Inthe case of a competency-basedprogram, the institution may either basethe assignment of credit on the time ittakes most students to complete theprogram, or the program must meet thedefinition of a direct assessmentprogram in § 668.10. In the firstscenario, the institution’s accreditingagency would review the institution’scompliance with the provisions in§ 600.2 or § 668.8(k) and (l) asapplicable. In the second scenario, theinstitution’s accrediting agency mustreview and approve each of theinstitution’s direct assessmentprogram’s equivalencies in terms ofcredit hours or clock hours.Changes: None.Comment: A few commentersopposed the proposed provisions in§ 602.24(f)(1)(i)(A) and (B) requiringaccrediting agencies to evaluate aninstitution’s policies and procedures fordetermining credit hours in accordancewith proposed § 600.2 and to evaluatean institution’s application of thosepolicies and procedures to its programsand courses. Two commenters suggestedthat the provisions should not requireaccrediting agencies to evaluatecompliance with proposed § 600.2 butshould permit institutions to justify themanner in which credit hours areassigned and permit accreditingagencies to determine whether aninstitution’s application of its policiesand procedures are appropriate. Thesecommenters believed that the proposedprovisions require accrediting agenciesto instruct institutions to follow aspecific approach to assigning credithours.A few commenters suggested that thecross reference to the proposed credithourdefinition in § 600.2 be strickenfrom proposed § 602.24(f)(1)(i)(A) andreplaced with a provision requiringaccrediting agencies to conduct theirreview of an institution’s assignment ofcredit hours consistent with theprovisions of § 602.16(f).Discussion: We do not believe that theprovisions in proposed § 602.24(f)require accrediting agencies to mandatespecific policies for institutions withregard to assigning credit hours toprograms and coursework. However, wedo believe that it is necessary to specifyin § 602.24(f) that accrediting agenciesmust review an institution’s policiesand procedures for determining credithours, and the application of thosepolicies and procedures to programsand coursework in accordance withVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00022 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2§ 600.2 for title IV, HEA programpurposes. Accreditation by anaccrediting agency recognized by theSecretary is an institutional andprogrammatic requirement for eligibilityfor the title IV, HEA programs.It is appropriate to specify theresponsibilities of an accrediting agencyin reviewing institutions’ processes forassigning credit hours in § 602.24, andnot § 602.16. The provisions in § 602.24are related specifically to proceduresaccrediting agencies must have forinstitutions they accredit to obtaineligibility to participate in title IV, HEAprograms. The provisions in § 602.16(f)address the processes used byaccrediting agencies in setting standardsin statutorily-defined areas required foragencies to be recognized by theSecretary.Changes: None.Comment: A few commentersexpressed concern about proposed§ 602.24(f)(1)(ii), which requiresaccrediting agencies to determinewhether an institution’s assignment ofcredit hours conforms to commonlyaccepted practice in higher education.A few commenters believed that thisproposal was inconsistent with theproposed credit-hour definition in§ 600.2 and expressed a preference forthe language in proposed§ 602.24(f)(1)(ii).One commenter suggested strikingthis proposed provision from theregulations and including thisinformation in the ‘‘Guide to theAccrediting Agency RecognitionProcess’’ issued by the Department. Thisguide was issued in August 2010 underthe title ‘‘Guidelines for Preparing/Reviewing Petitions and ComplianceReports.’’One commenter suggested revisingproposed § 602.24(f)(1)(ii) to requireaccrediting agencies to evaluateinstitutions’ assignment of credit hoursbased on a comparative study of similarinstitutions.Discussion: We do not agree that theprovisions in §§ 600.2 and602.24(f)(1)(ii) are inconsistent. Theprovisions in § 600.2 establish a title IV,HEA program requirement forinstitutions to award credit hours for anamount of academic work that is areasonable equivalency to the amount ofwork defined in paragraph (1) of thecredit-hour definition. By comparison,the reference to ‘‘commonly acceptedpractice in higher education’’ in§ 602.24(f)(1)(ii) establishes theparameters for accrediting agencies todetermine whether institutions establishreasonable equivalences for the amountof work in paragraph (1) of the credithourdefinition within the framework of

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66853WReier-Aviles on DSKGBLS3C1PROD with RULES2acceptable institutional practices atcomparable institutions of highereducation.We believe that it is necessary toinclude § 602.24(f)(1)(ii) in theregulations, rather than solely in theDepartment’s ‘‘Guidelines for Preparing/Reviewing Petitions and ComplianceReports.’’ The regulations provide therequirements for accrediting agenciesrecognized by the Secretary whereas the‘‘Guidelines for Preparing/ReviewingPetitions and Compliance Reports’’provides guidance to accreditingagencies seeking the Secretary’srecognition and does not have the forceof regulations. We will rely upon theaccrediting agencies to choose themethods used to evaluate institutions’processes for assigning credit hours.Changes: None.Comment: One commenter expressedconcern that the reference to ‘‘commonlyaccepted practice in higher education’’in proposed § 602.24(f)(1)(ii) mayrequire institutions that primarily useclock hours to adopt credit-hourassignment policies that were developedby traditional four-year degree grantinginstitutions, but are unsuitable forspecialized institutions.Discussion: The reference to‘‘commonly accepted practice in highereducation’’ in § 602.24(f)(1)(ii) is not arequirement for clock-hour institutionsto convert to credit hours.Changes: None.Notification RequirementsComment: Several commentersopposed proposed § 602.24(f)(4) thatwould require an accrediting agency,that identifies noncompliance with theagency’s policies regarding aninstitution’s credit assignments during areview under proposed § 602.24(f), tonotify the Secretary of the identifieddeficiencies. A few commentersbelieved that proposed § 602.24(f)(4)lacked due process provisions. Some ofthese commenters believed that thenotification requirement would forceaccrediting agencies to report minor ortrivial credit-hour problems to theDepartment. One commenter believedthat institutions would not be affordedan opportunity to respond to allegationsor attempt immediate corrective actionswhich may lead to delayed resolutionsto credit assignment problems.A few commenters believed thatproposed § 602.24(f)(4) was redundantwith regard to the existing notificationrequirements in § 602.27. Thesecommenters suggested removingproposed paragraph § 602.24(f)(4) andcross-referencing § 602.27.One commenter believed thatproposed § 602.24(f)(4) contradicts therequirements of proposed § 602.24(f)(3)which requires an accrediting agency totake appropriate action to address anyinstitutional deficiencies it identifies aspart of its review under proposed§ 602.24(f)(1)(i).A few commenters believed that theterms ‘‘systemic noncompliance’’ and‘‘significant noncompliance’’ inproposed § 602.24(f)(4) needclarification. One commenter suggestedspecifying that if an accrediting agencyhas any reason to believe that aninstitution is failing to meet its title IV,HEA program responsibilities, or isengaged in fraud or abuse, then thatagency must notify the Department inaccordance with existing regulations.Another commenter suggestedspecifying that if an accrediting agencydetermines that an institution does notdevelop and adhere to an acceptablecredit assignment policy, then theagency must promptly notify theSecretary. This commenter alsosuggested that because institutions willbe developing new credit policies, theyshould be afforded an adjustment periodto receive and react to guidance fromaccrediting agencies on their creditassignment policies prior to beingreported to the Secretary.Discussion: We agree with thecommenters that § 602.24(f)(4) does notspecify due process provisions forinstitutions. Section 602.24(f)(4) onlyrequires an accrediting agency to reportits findings and an agency’s process ofestablishing and reporting a finding willrely upon the agency’s own procedures.The Secretary recognition processensures that accrediting agencyprocedures provide due process.Further, we believe § 602.24(f)(4) isneeded because it corresponds to theprovisions in § 602.27 that require anaccrediting agency to submitinformation upon request from theSecretary about an accredited orpreaccredited institution’s compliancewith its title IV, HEA programresponsibilities. The provisions in§ 602.24(f)(4) specify the agency’sexisting responsibility under § 602.27with regard to inappropriateinstitutional processes for assigningcredits.We do not agree with the commenterwho believed that § 602.24(f)(3) and(f)(4) is contradictory. The provisions in§ 602.24(f)(3) require an accreditingagency to take appropriate action toaddress any institutional deficiencies itidentifies as part of its review under§ 602.24(f)(1)(i). Section 602.24(f)(4),however, requires an accrediting agencyto notify the Secretary of any severedeficiencies such as systemic orsignificant noncompliance with theVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00023 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2agency’s policies identified at aninstitution during a review under§ 602.24(f).The terms ‘‘systemic noncompliance’’and ‘‘significant noncompliance’’ do notencompass trivial or minor deficiencies.The term ‘‘systemic noncompliance’’refers to an institutional process forawarding credits that is fundamentallyflawed with regard to assigning credithours in accordance with the credithourdefinition in § 600.2 and itsaccrediting agencies policies. The term‘‘significant noncompliance’’ refers toinstitutional assignment of credit hoursto individual courses or programs thatare particularly egregious with regard tothe compliance with § 600.2.We do not believe that it is necessaryto delay the effective date of thedefinition of a credit hour in § 600.2 or§ 602.24(f) in these final regulations. Aninstitution must implement thedefinition of a credit hour regardless ofwhether its accrediting agency hasissued guidance on the implementationof § 602.24(f). While an accreditingagency is required to implement§ 602.24(f) effective July 1, 2011, we willreview on a case-by-case basis, based onan adequate justification as determinedby the Secretary, any reasonable requestfrom an accrediting agency for a delayedimplementation date.Changes: None.State Agency Procedures (§ 603.24(c))GeneralComment: Several commentersopposed proposed § 603.24(c). A fewcommenters believed that the proposedprovisions would be confusing for Stateagencies and that State agencies do nothave the administrative capabilities toreview institutions’ credit-hour policies.One commenter believed that theproposed provisions would lead toinconsistencies and inequalitiesbetween States based on States’ reviewsof institutions’ credit policies andenforcement of institutions’ compliancewith the proposed credit-hour definitionat § 600.2.One commenter believed that someState agencies, such as those in Iowa,would not be able to comply withproposed § 603.24(c) because theagencies may operate within the definedscope authorized by the State code andcompliance would require changes inState law. This commenter also believedthat some State agencies would not havethe expertise to evaluate institutions’credit policies.One commenter suggested specifyingthat if a State agency determines that aninstitution does not develop and adhereto an acceptable credit assignment

66854 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and RegulationsWReier-Aviles on DSKGBLS3C1PROD with RULES2policy, the agency must promptly notifythe Secretary.One commenter believed that withregard to proposed § 603.24(c)(2), itwould be appropriate for a State agencyto review a sample of an institution’scurriculum to determine whether thecredit assignment policies were beingappropriately applied by an institution,but it would not be appropriate for aState agency to employ an unspecifiedsample of other institutions todetermine whether the credits awardedfor a particular course or programconformed to commonly acceptedpractice in higher education. Thiscommenter suggested revising proposed§ 603.24(c)(1) to require State agenciesto evaluate an institution’s assignmentof credit hours based on a comparativestudy of similar institutions, and torevise proposed § 603.24(c)(2) to specifythat the agency must sample courseswithin an institution’s program of study.Discussion: We do not agree with thecommenters who believed that Stateagencies subject to the recognitioncriteria in 34 CFR part 603 will beconfused by § 603.24(c) or will lack theadministrative resources to meet theserequirements. To be subject to§ 603.24(c), a State agency must be anagency recognized by the Secretaryunder 34 CFR part 603 as a reliableauthority regarding the quality of publicpostsecondary vocational education inits State. The only States that currentlyhave recognized State agencies under 34CFR part 603 are New York,Pennsylvania, Oklahoma, and PuertoRico.As with accrediting agencies that arerecognized by the Secretary, we do notbelieve it is necessary to define thespecific methods that State agenciesrecognized by the Secretary should useto evaluate institutions’ processes forassigning credit hours.We believe that § 603.24(c)(4)provides the necessary level ofspecificity with regard to a recognizedState agency’s notification to theSecretary in case of institutionalnoncompliance with the credit-hourdefinition in § 600.2.Changes: None.Program Eligibility: Clock-to-Credit-Hour Conversion (§ 668.8)Comment: One commenter questionedwhether it is necessary to have a clockto-credit-hourconversion if a credithour is defined in the regulations andaccrediting agencies are required toreview institutional policies forawarding credits to ensure compliance.Two commenters believed thatproposed §§ 600.2 and 668.8(l) define acredit hour in two different ways andare therefore inconsistent. Thesecommenters believed that it is illogicalto define credit hours for purposes ofthe title IV, HEA programs in differentways depending on whether or not aprogram is subject to the clock-hour-tocredit-hourconversion.Discussion: On October 1, 1990, theSecretary published proposedregulations (55 FR 40148–40150) toestablish standards for clock-to-credithour-conversionfor undergraduatevocational training programs and onJuly 23, 1993, the Secretary publishedfinal regulations (58 FR 39618–39623)based on the public comments. TheSecretary published the regulations toaddress significant abuse in the title IV,HEA programs, citing, for example, a309 clock-hour program that wasconverted to a 27.7 quarter-creditprogram. We believe that the potentialfor such abuse continues to exist andthat § 668.8(k) and (l) continues to beessential to the administrative integrityof the title IV, HEA programs. In§ 668.8(l)(2) of the final regulations, wehave included consideration by aninstitution’s accrediting agency of theinstitution’s policies and procedures,and their implementation, fordetermining credit hours in a program ifan institution seeks to establish anyconversions that are less than theconversion rate specified in§ 668.8(l)(1).Due to the separate conversionformula in new § 668.8(l), programs thatare subject to the clock-to-credit-hourconversion in § 668.8(l) are exemptedfrom using the credit-hour definition in§ 600.2. Therefore, we do not believethere is any inconsistency between thedefinition in § 600.2 and the provisionsof § 668.8(l).Changes: None.Comment: One commenter asked forclarification regarding whether aninstitution that was recently approvedfor a degree program must wait forstudents to graduate from the programbefore it utilizes the exemption, inproposed § 668.8(k)(1)(ii), from therequirements to perform a clock-tocredit-hourconversion under theprovisions in proposed § 668.8(l) withregard to students in a diploma programin which all credits are fullytransferable to the new degree program.Discussion: Section 668.8(k)(1)(ii)provides that an institution’s shorterlength program is not subject to theconversion formula in § 668.8(l) if eachcourse within the shorter program isacceptable for full credit toward adegree that is offered by the institutionthat requires at least two academic yearsof study. Additionally, under§ 668.8(k)(1)(ii), an institution would beVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00024 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2required to demonstrate that studentsenroll in, and graduate from, the longerlength degree program. Thus, for arecently approved degree program thatis at least two academic years in length,an institution must use clock hours forits title IV, HEA programs that are fullyaccepted for transfer into the newdegree program until students graduatefrom the new degree program unless theinstitution offers other degree programs,each with graduates, and all thecoursework in the first year of theprogram is acceptable for full credittoward one or more of these otherdegree programs. After studentsgraduate from the new degree program,the programs at the institutions that arefully accepted for transfer into the newdegree program will qualify under theexception in § 668.8(k)(1)(ii). We believethat it is essential that an institution isable to demonstrate that studentsgraduate from the longer length degreeprogram to ensure that the exceptionprovided in § 668.8(k)(1)(ii) is beingappropriately applied. We note that inan instance where a student is enrolledin a new degree program in which thefirst year of study may lead to acertificate or diploma and the secondyear provides an associate’s degree, anystudent in the first year must haveeligibility for title IV, HEA programsdetermined on a clock-hour basis untilstudents graduate from the programwith a degree after completing thesecond year.Changes: None.Comment: Several commenters didnot agree with the provisions inproposed § 668.8(k)(2)(i)(A) and (B),which provide for when a program isrequired to measure student progress inclock hours.Two commenters believed that if aninstitution’s State licensing board oraccrediting agency approve a credentialto be awarded in credit hours, then thatapproval should be sufficient to awardtitle IV, HEA program funds based oncredit hours. These commentersbelieved that the provisions in§ 668.8(k)(2)(i)(A) and (B) create anunnecessary duplication of servicesprovided by these approving entities.One commenter believed that thisprovision would be detrimental toinstitutions that have received licensing,accrediting, or Federal approval to usecredit hours because these institutionswould need to convert to clock hours.A few commenters believed thatproposed § 668.8(k)(2)(i)(A) is unclearon the requirement to measure studentprogress in clock hours. Thesecommenters believed that Stateagencies’ disclosure and calculationrequirements may involve clock hours

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66855WReier-Aviles on DSKGBLS3C1PROD with RULES2but do not necessarily require that aninstitution measure student progress inclock hours. These commentersrecommended revising proposed§ 668.8(k)(2)(i)(A) so that an institutionis not required to measure studentprogress in clock hours unless theFederal or State authority requires theinstitution to measure student progressexclusively in clock hours. Onecommenter believed that manyaccrediting agencies and State agenciesrequire institutions to include a clockto-credit-hourconversion rate as part ofthe new program submission process,but it is not the agencies’ intent toconsider these credit-hour programs asclock-hour programs. The commentersuggested adding a provision toproposed § 668.8(k)(2)(i)(A) so that itdoes not apply to institutions that arerequired to include a clock-to-credithourconversion rate in their accreditingagency or State application for a newprogram.One commenter believed thataccrediting agencies’ standards varywith regard to requirements forprograms offering a certain number ofclock hours in order for a graduate to beeligible to take a certification orlicensure exam and students’requirement to attend the programs’clock hours. This commenter believedthat there should be no requirement fora program to be a clock-hour programunless an accrediting agency specifiesthat students must attend the clockhours to take the certification orlicensure exam.A few commenters believed thatcredit-hour programs are morerecognized by employers andinstitutions. These commenters believedthat it is difficult for students in clockhourprograms to transfer to credit-hourprograms. The commenters alsobelieved that employer-paid oremployer-reimbursed tuition programsare generally administered based oncredit hours.One commenter believed that theproposed clock-to-credit-hourconversion provisions that only usecredit hours were not consistentconcerning States throughout theproposed regulations.Discussion: The provisions in§ 668.8(k)(2)(i)(A) provide that aprogram must be considered a clockhourprogram for title IV, HEA programpurposes if the program is required tomeasure student progress in clock hoursfor Federal or State approval orlicensure. We believe that anyrequirement for a program to bemeasured in clock hours to receiveFederal or State approval or licensure,and any requirement for a graduate tocomplete clock hours to apply forlicensure or authorization to practice anoccupation demonstrates that a programis fundamentally a clock-hour program,regardless of whether the program hasreceived Federal, State, or accreditingapproval to offer the program in credithours. As clock-hour programs, theseprograms are required to measurestudent progress in clock hours for titleIV, HEA program purposes. In thesecircumstances where a requirementexists for the program to be measured inclock hours, this becomes thefundamental measure of that programfor title IV, HEA program purposes. Thisoutcome is not changed for such aprogram when an institution’s Statelicensing board or accrediting agencyalso allows the institution to award acredential based upon credit hours, orwhen a State licensing board mayrequire that a program be measured inclock hours but the program is approvedby the institution’s accrediting agencyin credit hours. Further, because theinstitution is already required to reportor otherwise establish the underlyingclock hours of a program, we do notagree that provisions in§ 668.8(k)(2)(i)(A) and (B) create anunnecessary duplication of servicesprovided by these approving entities.We also do not believe that using clockhours for title IV, HEA programpurposes will be detrimental toinstitutions that have received licensing,accrediting, or Federal approval to usecredit hours for academic purposes. Inthe case of institutions that are requiredto include a clock-to-credit-hourconversion rate in their accreditingagency or State application for a newprogram, we do not believe thoseaccrediting agency or State requirementswould affect the application of theprovisions of § 668.8(k)(2)(i)(A) and (B)because the institution is clearlyrequired to establish the clock hours inthe program to receive approval.With regard to the commenters whobelieved that credit-hour programs aremore recognized and accepted byemployers and institutions, there are noprovisions in § 668.8(k) and (l) thatwould prevent a program that must beconsidered a clock-hour program fortitle IV, HEA program purposes fromalso being offered in credit hours foracademic or other purposes. We agreethere was an inconsistency in proposed§ 668.8(l)(2) with State requirements.Proposed § 668.8(l)(2) incorrectlyreferred to an institution’s relevant Statelicensing authority when it should havereferred to an institution’s recognizedState agency for the approval of publicpostsecondary vocational institutionsVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00025 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2that approves the institution in lieu ofaccreditation by a nationally recognizedaccrediting agency. This has beencorrected.Changes: Section 668.8(l)(2) has beenmodified to remove the reference fromproposed § 668.8(l)(2) to an institution’srelevant State licensing authority andnow refers to an institution’s recognizedState agency for the approval of publicpostsecondary vocational institutions.Comment: Several commenters didnot agree with proposed§ 668.8(k)(2)(iii) that provides that aninstitution must require attendance inthe clock hours that are the basis forcredit hours awarded, except asprovided in current § 668.4(e).Some of these commenters questionedthe effect this provision would have oninstitutions’ attendance policies andasked that the Department clarifywhether institutions are required to takeattendance and have attendance policiesthat prohibit students from havingabsences. Two commenters believedthat institutions would be required totake attendance in clock hours andcredit hours. A few commenters notedthat institutions that recently convertedto systems using credit hours instead ofclock hours, but that do not takeattendance, would be particularlyburdened.A few commenters believed that theDepartment did not address howinstitutions should handle typicalclassroom absences or extended leavesof absence when calculating clock hourscompleted or converting credit hours toclock hours. One commenter expressedconcern that this provision in proposed§ 668.8(k)(2)(iii) would decreaseinstitutions’ ability to address students’needs in regard to absences. A fewcommenters asked whether a studentmust attend 100 percent of the clockhours in a course in order to receivecredit for the course.One commenter believed that theproposed provision is impracticalbecause most institutions use a 50-minute instructional hour instead of a60-minute clock hour. This commenteralso believed that the provision wasunclear on whether the relevant clockhours would be considered to beprovided if no instructor appeared forthe clock hour.One commenter believed that theDepartment should clearly state in thefinal regulations that § 668.8(k)(2)(iii) isnot intended to be a test of thereasonable equivalencies thatinstitutions can develop with regard todetermining credit hours as that term isdefined in proposed § 600.2.Discussion: We believe it is essentialfor an institution to require students to

WReier-Aviles on DSKGBLS3C1PROD with RULES266856 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulationscomplete the clock hours that are thebasis for the credit hours awarded in aprogram even when an institutionconverts a program to credit hoursunder the provisions of § 668.8(k) and(l). These programs are still required tocontain the clock hours that support theconversion under the regulations, andinstitutions are expected to make surethat those clock hours are completed bythe students, subject to the institution’sexisting policies for excused absencesand make-up classes.We do not agree with the commenterswho believe that § 668.8(k)(2)(iii) doesnot provide for excused absences orwould require 100 percent attendance,because the regulations for clock hourprograms already account for excusedabsences. Section 668.8(k)(2)(iii)specifically accounts for excusedabsences in accordance with the currentregulations in § 668.4(e) which providesguidance on when an institution, indetermining whether a student hassuccessfully completed the clock hoursin a payment period, may include clockhours for which the student has anexcused absence. An institution shouldensure that students taking a program incredit hours are still completing theclock hours associated with theconversion, and excused absences fromthe classes should be within thetolerance permitted in the clock hourregulations. With regard to a leave ofabsence, an institution is expected toensure that a student returning from anapproved leave of absence stillcompletes the clock hours that areneeded to support the conversion for theprogram.We do not agree with the commenterwho believed that § 668.8(k)(2)(iii) isimpractical because most institutionsuse a 50-minute instructional hourinstead of a 60-minute clock hour. Aclock hour is currently defined in§ 600.2 as (1) a 50- to 60-minute class,lecture, or recitation in a 60-minuteperiod; (2) a 50- to 60-minute facultysupervisedlaboratory, shop training, orinternship in a 60-minute period; or (3)sixty minutes of preparation in acorrespondence course. We also do notagree with this commenter’s belief thatthe provision is unclear on whether therelevant clock hours would beconsidered to be provided if noinstructor appeared for the clock hour.If a student is unable to complete aclock hour because the instructor is notpresent, there is no clock hour to becounted towards meeting the requiredclock hours unless it may be counted asan approved absence.Changes: None.Comment: One commenter believedthat the Department should clearly statein the final regulations that§ 668.8(k)(2)(iii) is not intended to be atest of the reasonable equivalencies thatinstitutions can develop with regard todetermining credit hours as that term isdefined in § 600.2.Discussion: We do not believe it isnecessary to amend § 668.8(k)(2)(iii) tostate that the provision is not intendedto be a test of the reasonableequivalencies that institutions candevelop with regard to determiningcredit hours as defined in § 600.2. Thecredit-hour definition in § 600.2specifically excludes its applicability toa program subject to the conversionformula in § 668.8(l).Changes: None.Comment: Many commenters believedthat proposed § 668.8(l) would decreasestudents’ eligibility for title IV, HEAprogram funds. These commentersbelieved that students enrolled in shorttermand nondegree programs measuredin credit hours would unjustlyexperience a decrease in their eligibilityfor title IV, HEA program funds becausethe proposed clock-to-credit-hourconversion would require institutions touse 900 clock hours instead of thecurrent 720 clock hours to support thesame amount of credit hours.These commenters believed thatstudents’ decreased eligibility wouldforce them to withdraw from short-termand nondegree programs or rely onloans which would increase their debt.One of these commenters expressedconcern that the decreased eligibility fortitle IV, HEA program funds woulddisproportionately impactnontraditional and financiallydisadvantaged students.Discussion: We do not agree with thecommenters who believed that studentscurrently enrolled in short-term ornondegree programs would unjustlyexperience a decrease in their eligibilityfor title IV, HEA program funds nor dowe believe that the conversion formulainappropriately impacts students’ titleIV, HEA program eligibility. We do notbelieve that the clock-to-credit-hourconversion rate in current § 668.8(l)provides equitable outcomes forstudents taking similar programsmeasured in clock-hours and credithours. The current regulations result instudents in some credit hour programshaving greater eligibility based on aconversion from clock hours to credithours that assumed student workoutside of class is always present in thesame ratio to the time the studentsspend in class. The changes to theconversion formula in § 668.8(l) of thesefinal regulations provide for a moreequitable accounting for student workoutside of class. New § 668.8(l)(2) wouldVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00026 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2provide for conversion based on thevarying rates of work outside class forparticular educational activities withina student’s courses or program ratherthan mandating the use of a constantratio that may be incorrect. Aninstitution applying the appropriateconversion rate to a program inaccordance with § 668.8(l)(1) would beconsidered compliant with § 668.8(l).Changes: None.Comment: Many commenters believedthat the proposed clock-to-credit-hourconversion formula would forceinstitutions to increase the lengths oftheir programs or offer associate’sdegrees in order to retain their eligibilityfor title IV, HEA program funds. Severalof these commenters believed thatincreasing program lengths would causefinancial hardships for students bydelaying students’ entry into workforceand increasing tuition. A fewcommenters believed that manyprograms would be potentiallyeliminated because of the institutionalburden of unnecessarily extendingprogram lengths.Discussion: We do not agree withthese commenters. Under the currentregulations in § 668.8(d), public andprivate nonprofit institutions andproprietary institutions offeringundergraduate programs may haveeligible programs with a minimum of600 clock hours, 16 semester ortrimester hours, or 24 quarter hours. Tothe extent that any short-term programswould not have been eligible for title IV,HEA program funds in the past due tothe inequitable clock-to-credit-hourconversion rate, we believe thatstudents enrolled in these programsshould not have been eligible for titleIV, HEA program funds. Short-termprograms offered in credit hours thatcontained outside work that met orexceeded the assumed outside work thatwas implicit in the conversion shouldbe in compliance with the newrequirements and unaffected by thechange.Changes: None.Comment: A few commentersquestioned how proposed § 668.8(l)would affect institutional creditpolicies. One commenter believed thatprograms that were designed to becompliant with the clock-to-credit-hourconversion ratio for a semester hour incurrent § 668.8(l) cannot be easily orquickly changed because using the ratioalters the delivery, design, andcurricular structure of the programs.One commenter requestedclarification of how the conversionshould be applied when one programhas courses that require outside workand other courses that do not.

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66857WReier-Aviles on DSKGBLS3C1PROD with RULES2Discussion: We do not believe that itis necessary for programs to changetheir structure or credit assignments foracademic purposes if they are subject tothe conversion formula in new§ 668.8(l); however, institutions areresponsible for ensuring that the credithours awarded for title IV, HEA programpurposes comply with the provisions in§ 668.8(l). In some instances, there maybe no discernable difference betweeninstitutions’ determinations of credithours for academic purposes and titleIV, HEA program purposes dependingon the outcome of determinations ofwork outside of class and instructionalperiods within a program. Someinstitutions may currently award fewercredits then the existing regulationsallow or would be allowed under thefinal regulations.The provisions in § 668.8(l)(2) providean exception to the minimum standardfor converting clock hours to credithours in § 668.8(l)(1) for coursework ina program that qualifies for a lesser rateof conversion based on additionalstudent work outside of class. In a casewhere a program offers courses withwork outside of class, an institutionmust use the standards in § 668.8(l)(1)for the courses without the work outsideof class and may apply the exception in§ 668.8(l)(2) to courses with workoutside of class.Changes: None.Comment: One commenter supportedproposed § 668.8(l)(2) because itprovides institutions the ability toaccount for work outside of class. Onecommenter supported the provision, butrecommended that the Departmentspecify when an institution is eligible touse work outside of class as part of thetotal clock-hour calculation.A few commenters asked forclarification regarding proposed§ 668.8(l)(2) and the work outside ofclass that may be combined with clockhours of instruction in order to meet orexceed the numeric requirementsestablished in § 668.8(l)(1). Thesecommenters requested clarification onhow institutions should measurestudent’s completion of work outside ofclass, whether work outside of classshould be identified in course syllabi,whether work outside of class should begraded, and what entity shoulddetermine that a program is suited toinclude work outside of class.Discussion: Under § 668.8(l)(2), aninstitution may use a determination ofappropriate amounts of work outside ofclass for various educational activitiesin a course or program in determiningthe appropriate conversion rate fromclock hours to credit hours for eacheducational activity in the course orprogram. However, we do not believethat it is appropriate for the Departmentto provide more specificity fordetermining the appropriate conversionrates for various educational activitiesin a course or program. An institution,in accordance with the requirements ofits designated accrediting agency, orState agency for the approval of publicpostsecondary vocational institutions,recognized under 34 CFR 603, isresponsible for making determinationsof the appropriate credit hours underproposed § 668.8(l)(2). If an institutionis unsure of how to apply the provisionsof § 668.8(l)(2) to a program, it would beconsidered compliant if it uses theappropriate conversion ratio specifiedin § 668.8(l)(1).Changes: None.Comment: One commenter suggestedeliminating the provision in proposed§ 668.8(k)(2)(ii) that requires institutionsto measure student progress in clockhours in any program if the credit hoursawarded for the program are not incompliance with the definition of credithour in § 600.2. The commenterbelieved the Secretary’s proposedcredit-hour definition in § 600.2 allowedthe Secretary to interfere in academicmatters.Discussion: The definition of credithour in § 600.2 is intended to establisha quantifiable, minimum basis for acredit hour for Federal programpurposes, including the title IV, HEAprograms. We believe that it is necessaryto establish the standards by which aprogram that awards credit hours thatare not in compliance with thedefinition of credit hour in § 600.2 maystill be eligible for title IV, HEA programfunds. Thus, § 668.8(k)(2)(ii) providesthat a program that does not awardcredit hours in compliance with § 600.2may still be eligible for title IV, HEAprograms using the underlying clockhoursof the program.Changes: None.Comment: A few commentersrequested clarification on how toaddress students that are alreadyenrolled in programs that may changethe measurement of student progress tocomply with proposed § 668.8(k) and (l).A few of these commenters alsorequested additional time to complywith the proposed regulations in thesesections. One commenter requested thatcurrent students should be permitted tocomplete their programs using thecurrent conversion ratio. Onecommenter asked that the Secretaryallow institutions that offered credithourprograms in the 2010–11 academicyear, but will need to measure studentprogress in clock hours under proposed§ 668.8(k)(2)(i)(B), to continueVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00027 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2measuring student progress in theseprograms using credit hours.One commenter asked whetherinstitutions are required to executerevised Enrollment Agreements withcurrently enrolled students when thenew regulations take effect.One commenter suggested that theconversation rate in § 668.8(l) shouldnot be applied to existing programs forat least one year from July 1, 2011 toallow for accrediting agencies to createprocedures for assessing institutions’assignment of credit hours. Thiscommenter added that only newprograms should be required to use theproposed conversion rate.One commenter requested that theproposed provisions in § 668.8(l)(2)(i)not take effect for two award years inorder for institutions that use clockhours to have time to redesign theirprograms.Discussion: We agree with thecommenters’ concerns regarding theapplicability of the changes to § 668.8(k)and (l) to students enrolled prior to theeffective date of these regulations inprograms affected by the changes in therequirements. We agree that for studentsenrolled in programs subject to theprovisions in § 668.8(k) and (l) as of theJuly 1, 2011 effective date of these finalregulations, an institution may chooseto apply the regulations in current§ 668.8(k) and (l) until these studentscomplete the program or to applyamended § 668.8(k) and (l) in these finalregulations for all students enrolled inpayment periods or assigned to the2011–12 and subsequent award years.For students who enroll or reenroll onor after July 1, 2011 in programs affectedby changes in § 668.8(k) and (l),institutions must determine title IV,HEA eligibility using § 668.8(k) and (l)in these final regulations.We do not agree that a delay in theeffective date is needed for institutionsto allow institutions more time to bringtheir existing programs into compliance.If an institution’s accrediting agency, orState agency, is not yet compliant withthe provisions of § 602.24(f) for anaccrediting agency, or § 603.24(c) for aState agency, the institution must usethe conversion formula in § 668.8(l)(1)of these final regulations until the Stateagency and accrediting agency arecompliant.Changes: None.

66858 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and RegulationsWReier-Aviles on DSKGBLS3C1PROD with RULES2State Authorization (§§ 600.4(a)(3),600.5(a)(4), 600.6(a)(3), 600.9, and668.43(b))General—No Mandate for a StateLicensing AgencyComment: Several commentersbelieved the proposed regulationswould create mandates for States tocreate new State oversight bodies orlicensing agencies, or compel States tocreate bureaucratic structures thatwould further strain higher educationresources. Some commenters believedthat a majority of the States would haveto modify licensing requirements oradopt new legislation and that theregulations would cause a major shift inState responsibility.Discussion: These final regulations donot mandate that a State create anylicensing agency for purposes of Federalprogram eligibility. Under the finalregulations, an institution may belegally authorized by the State based onmethods such as State charters, Statelaws, State constitutional provisions, orarticles of incorporation that authorizean entity to offer educational programsbeyond secondary education in theState. If the State had an additionalapproval or licensure requirement, theinstitution must comply with thoserequirements. In the case of an entityestablished as a business or nonprofitcharitable organization, i.e., not as aneducational institution, the entity wouldbe required to have authorization fromthe State to offer educational programsbeyond secondary education. Whilethese final regulations require thecreation of a State licensing agency, aState may choose to rely on such anagency to legally authorize institutionsto offer postsecondary education in theState for purposes of Federal programeligibility.Changes: None.Comment: Several commenterssupported the proposed regulations asan effort to address fraud and abuse inFederal programs through Stateoversight. An association representingState higher education officials notedthat despite differences in Statepractice, all the States, within ourFederal system, have responsibilities toprotect the interests of students and thepublic in postsecondary education andsupported the basic elements ofproposed § 600.9. A State agency officialpraised the Department’s proposedregulations but suggested that theDepartment insert ‘‘by name’’ in theproposed § 600.9(a)(1) to provide someprotection against recurrence ofsituations such as the one in Californiawhen the State licensing agency lapsedprior to the State renewing the agencyor a successor to the agency and noState approval was in place that namedan institution as licensed or authorizedto operate in the State.Discussion: We appreciate the supportof the commenters. We agree with thecommenter that a State’s authorizationshould name the institution beingauthorized. We believe that by namingthe institution in its authorization forthe institution to offer postsecondaryeducation in the State, the State isproviding the necessary positiveauthorization expected under § 600.9.Changes: We are amending proposed§ 600.9, where appropriate, to recognizethat an institution authorized by namein a State will meet the Stateauthorization requirements as discussedfurther in response to other comments.Comment: Some commenters believedthat the proposed regulations exceededthe Department’s authority andinfringed on the States’ authority. Onecommenter requested that the proposedregulations be eliminated becauseprivate institutions are authorizedthrough various unique authorizations.Another commenter believed that theproposed regulations upset the balanceof the ‘‘Triad’’ of oversight by States,accrediting agencies, and the FederalGovernment. One commenterquestioned whether the Departmentcould impose conditions restricting aState’s freedom of action in determiningwhich institutions are authorized by theState by requiring that a State’sauthorization must be subject to, forexample, adverse actions and provisionfor reviewing complaints. Thecommenter believed that there was nointent to have the Department imposesuch conditions. Another commenterbelieved that proposed § 600.9unnecessarily intruded on each State’sprerogative to determine its own lawsand regulations relative to theauthorization of higher educationinstitutions and to define the conditionsfor its own regulations. One commentersuggested that the Department onlyapply proposed § 600.9 to the problemareas that the commenter identified assubstandard schools, diploma mills, andprivate proprietary institutions.One commenter believed that theproposed regulations would infringeupon the States’ sovereignty bycommanding state governments toimplement legislation enacted byCongress. Specifically, the commenternoted that under the proposedregulations the States must adoptlegislation or rules that expresslyauthorize institutions to offerpostsecondary programs and furthermake such an authorization subject toadverse action by the State and that theVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00028 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2proposed regulations would require thatStates establish a process to act oncomplaints about the institution andenforce State laws against theinstitution. The commenter believedthat the Department would improperlydirect State officials to participate in theadministration of a federally enactedregulatory scheme in violation of StateSovereignty. By doing so, thecommenter believed that the FederalGovernment would be forcing Stategovernments to absorb the financialburden of implementing a Federalregulatory program, while allowing theFederal government to take credit for‘‘solving’’ problems without having toask their constituents to pay for thesolutions with higher Federal taxes. Thecommenter believed that theDepartment cannot construe the HEA torequire a State to regulate according tothe Department’s wishes. Thecommenter believed that such aconstruction would exceed theDepartment’s authority under the HEAand violate the States’ rights under theTenth Amendment.Discussion: We disagree with thecommenters that the proposedregulations exceed the Department’sauthority and infringe on States’authority. Under the provisions of theHEA and the institutional eligibilityregulations, the Department is requiredto determine whether an institution islegally authorized by a State to offerpostsecondary education if theinstitution is to meet the definition of aninstitution of higher education,proprietary institution of highereducation, or postsecondary vocationalinstitution (20 U.S.C. 1001 and 1002) asthose terms are defined in §§ 600.4,600.5, and 600.6 of the institutionaleligibility regulations. In accordancewith the provisions of the HEA, theDepartment is establishing minimumstandards to determine whether aninstitution is legally authorized to offerpostsecondary education by a State forpurposes of Federal programs. Theproposed regulations do not seek toregulate what a State must do, butinstead considers whether a Stateauthorization is sufficient for aninstitution that participates, or seeks toparticipate, in Federal programs.Contrary to the commenter’ssuggestion that the Department isupsetting the Triad, we believe theseregulations clarify the role of the States,a key participant in the Triad, inestablishing an institution’s eligibilityfor Federal programs. Further, theDepartment believes that clarifying theState role in the Triad will address someof the oversight concerns raised by

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66859WReier-Aviles on DSKGBLS3C1PROD with RULES2another commenter regarding problemareas with certain types of institutions.Changes: None.Comment: Several commentersquestioned the need for proposed§ 600.9. For example, severalcommenters questioned whether theDepartment’s concern that the failure ofCalifornia to reinstate a State regulatoryagency was justified. Commentersbelieved that the regulations would nothave prevented the concerns theDepartment identified in the case of thelapsing of the California State agency.One commenter believed the Californiaissue was resolved and thataccreditation and student financial aidprocesses worked. Some commentersbelieved that the current Stateregulatory bodies or other authorizationmethods were sufficient. Onecommenter stated that authorizationsare spelled out in State statutes, andthere is no need for the regulations.Some commenters believed thatadditional information is needed, suchas a State-by-State review of the impactof proposed § 600.9, or the States withadequate or inadequate oversight.Several commenters were concernedthat proposed § 600.9 wouldunnecessarily impact small Stateswithout discernable problems. Somecommenters believed there is noevidence of marginal institutionsmoving to States with lower standardsand that there is no danger to title IV,HEA program funds. One commenterbelieved that proposed § 600.9 shouldbe eliminated because the commenterbelieved that its full effect is not knownand that it will be chaotic ifimplemented. Another commenterbelieved that proposed § 600.9 would beburdensome, is not economicallyfeasible, and would leave an institutionat the mercy of the State. Onecommenter believed that proposed§ 600.9 would encourage for-profitinstitutions to undermine State agenciessuch as through lobbying to underfundan agency and would stallreconsideration of legislation.Some commenters believed that theDepartment’s concerns were valid. Oneof these commenters believed that, inthe absence of regulations, many Stateshave forfeited their publicresponsibilities to accrediting agencies.In the case of the interim lapse of theState regulatory agency in California,the commenter believed that we do notknow yet the extent of the mischief thatmay have occurred or may still occur,but the commenter has received reportsthat schools began operating in the gapperiod and are being allowed tocontinue to operate without Stateapproval until the new agency isoperational. The commenter understoodthat at least one of those schools closedabruptly, leaving many students withdebts owed and no credential to showfor their efforts.Some commenters believed that theproposed regulations would not addressissues with degree mills as they are notaccredited. Some commenters urged theDepartment to offer leadership andsupport of Federal legislation andfunding to combat diploma mills.One commenter recommended thatthe Department use Federal funds foroversight. Another commentersuggested that the Departmentencourage the Federal Government toprovide incentives to the States.Discussion: We do not agree with thecommenters who believe that proposed§ 600.9 should be eliminated. Forexample, we believe these regulationsmay have prevented the situation inCalifornia from occurring or would havegreatly reduced the period of timeduring which the State failed to provideadequate oversight. While it may appearthat the California situation wassatisfactorily resolved as somecommenters suggested, the absence of aregulation created uncertainty. As onecommenter noted, during the periodwhen the State failed to act, it appearsthat problems did occur, and that noprocess existed for new institutions toobtain State authorization after thedissolution of the State agency. We areconcerned that States have notconsistently provided adequateoversight, and thus we believe Federalfunds and students are at risk as wehave anecdotally observed institutionsshopping for States with little or nooversight. As a corollary effect ofestablishing some minimal requirementsfor State authorization for purposes ofFederal programs, we believe the publicwill benefit by reducing the possibilitiesfor degree mills to operate, without theneed for additional Federal interventionor funding. We do not believe thatadditional information is needed tosupport § 600.9 in these finalregulations as § 600.9 only requires aninstitution demonstrate that it meets aminimal level of authorization by theState to offer postsecondary education.Because the provisions of § 600.9 areminimal, we believe that many Stateswill already satisfy these requirements,and we anticipate institutions in allStates will be able to meet therequirements under the regulations overtime. This requirement will also bringgreater clarity to State authorizationprocesses as part of the Triad. Since thefinal regulations only establish minimalstandards for institutions to qualify aslegally authorized by a State, we believeVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00029 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2that, in most instances they do notimpose significant burden or costs.States are also given numerous optionsto meet these minimum requirements ifthey do not already do so, and thisflexibility may lead to some States usingdifferent authorizations for differenttypes of institutions in order tominimize burden and provide betteroversight. The question of whether theseregulations will impact the ability ofany group to seek changes to a State’srequirements is beyond the purview ofthese final regulations. As onecommenter requested, we will continueto support oversight functions asprovided under Federal law, and webelieve that these final regulations willprovide the necessary incentives to theStates to assure a minimal level of Stateoversight.Changes: None.Comment: Some commentersquestioned how the Department wouldenforce the proposed regulations. Onecommenter stated that the Departmenthas no mechanism to enforce theproposed regulations and asks how theywill improve program integrity. Onecommenter questioned why aninstitution may be held accountable forthe actions of the State over which it hasno direct control.Discussion: Any institution applyingto participate in a Federal programunder the HEA must demonstrate that ithas the legal authority to offerpostsecondary education in accordancewith § 600.9 of these final regulations. Ifa State declines to provide an institutionwith legal authorization to offerpostsecondary education in accordancewith these regulations, the institutionwill not be eligible to participate inFederal programs.As to an institution’s inability tocontrol the actions of a State, we do notbelieve such a circumstance is anydifferent than an institution failing tocomply with an accreditationrequirement that results in theinstitution’s loss of accredited status.We believe that in any circumstance inwhich an institution is unable to qualifyas legally authorized under § 600.9 ofthese final regulations, the institutionand State will take the necessary actionsto meet the requirements of § 600.9 ofthese final regulations.Changes: None.Comment: One commenter believedthat proposed § 600.9 would result in anunfunded mandate by the FederalGovernment. Another commenter statedthat many States may see proposed§ 600.9 as a revenue-generatingopportunity and pass the costs of thisrequirement on to institutions, which

66860 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and RegulationsWReier-Aviles on DSKGBLS3C1PROD with RULES2would have no choice but to pass thatcost on to students.Discussion: We do not agree that§ 600.9 of these final regulations willresult in an unfunded mandate by theFederal Government, since many Stateswill already be compliant and optionsare available that should permit otherStates to come into compliance withonly minimal changes in procedures orrequirements if they want to provideacceptable State authorizations forinstitutions. The regulations alsoinclude a process for an institution torequest additional time to becomecompliant. Furthermore, if a State isunwilling to become compliant with§ 600.9, there is no requirement that itdo so. We also do not agree that Stateswill see coming into compliance with§ 600.9 as a revenue-generatingopportunity, since any required changesare likely to be minimal.Changes: None.ImplementationComment: Some commenters believedthat the proposed regulations areambiguous in meaning and applicationor are vague in identifying which Statepolicies are sufficient. For example, oneState higher education official suggestedthat proposed § 600.9 should beamended to differentiate amongauthorities to operate arising fromadministrative authorization of privateinstitutions from legislation and fromconstitutional provisions assigningresponsibility to operate publicinstitutions. The commenter believedthat proposed § 600.9 obfuscated thevarious means of establishing Stateauthorization and the fundamental rolesof State legislatures and Stateconstitutions and recommended thatthese means of authorization and rolesof State entities should be clarified.Several commenters questioned whatauthorizing an institution to offerpostsecondary programs entails. A fewcommenters pointed out that there is awide array of State approval methodsand many institutions were foundedbefore the creation of State licensingagencies. An association representingState higher education officials urgedthat ample discretionary authorityexplicitly be left to the States. Onecommenter indicated that proposed§ 600.9 failed to address when morethan one State entity is responsible fora portion of the oversight in Stateswhere dual or multiple certifications arerequired. Another commenter believedthat proposed § 600.9 did notadequately address the affect aninstitution’s compliance with proposed§ 600.9 would have if one of twodifferent State approvals lapsed andboth were necessary to be authorized tooperate in the State or if the State ceasedto have a process for handlingcomplaints but the institutionscontinued to be licensed to offerpostsecondary education. Somecommenters asked whether specificState regulatory frameworks would meetthe provisions of the proposedregulations. For example, onecommenter believed that, under Statelaw and practice in the commenter’sState, the private institutions in theState already met the requirements inproposed § 600.9 that the commenterbelieved included: (1) The institutionbeing authorized by a State through acharter, license, approval, or otherdocument issued by an appropriateState government agency or State entity;(2) the institution being authorizedspecifically as an educationalinstitution, not merely as a business oran eleemosynary organization; (3) theinstitution’s authorization being subjectto adverse action by the State; and (4)the State having a process to review andappropriately act on complaintsconcerning an institution. Thecommenter noted that all postsecondaryinstitutions in the State must eitherhave a ‘‘universal charter’’ awarded bythe legislature or be approved to offerpostsecondary programs. Thecommenter noted that these institutionsare authorized as educationalinstitutions, not as businesses. Inanother example, a commenter fromanother State believed that current lawin the commenter’s State addresses andcovers many of the requirementsoutlined in proposed § 600.9. Thecommenter noted that many of the Statelaws are enforced by the State’sAttorney General and attempt to protectindividuals from fraud and abuse in theState’s system of higher education.However, the commenter believed thatit remained unclear whether the Statewould be required to create an oversightboard for independent institutions likethe commenter’s institution or would besubject to State licensure requirementsvia the State licensure agency. Thecommenter believed that either optionwould erode the autonomy of thecommenter’s institution and add layersof bureaucracy to address issuescurrently covered by State and Federallaws.One commenter suggested thatproposed § 600.9(a)(1) be amended toprovide that authorization may be basedon other documents issued by anappropriate State government agencyand delete the reference to ‘‘state entity.’’The commenter believed that thedocuments would affirm or convey theVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00030 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2authority to the institution to operateeducational programs beyond secondaryeducation by duly enacted Statelegislation establishing an institutionand defining its mission to provide sucheducational programs or by dulyadopted State constitutional provisionsassigning authority to operateinstitutions offering such educationalprograms.Some commenters questionedwhether there were any factors that aState may not consider when grantinglegal authorization. One commenterrequested confirmation that under theproposed regulations authorization doesnot typically include State regulation ofan institution’s operations nor does itinclude continual oversight. A fewcommenters expressed concernregarding the involvement of the Statesin authorization and that a State’s rolemay extend into defining, for example,curriculum, teaching methods, subjectmatter content, faculty qualifications,and learning outcomes. One commenterwas concerned that proposed § 600.9would create fiscal constraints on aninstitution due to, for example,additional reporting requirements orwould impose homogeneity uponinstitutions that would compromisetheir unique missions. One commenterstated that the Department does nothave the authority to review issues ofacademic freedom or curriculumcontent.One commenter wanted assurancesthat the Department does not intend touse the proposed regulations tostrengthen State oversight of collegesbeyond current practices. Onecommenter was concerned that Statescould exercise greater and moreintrusive oversight of private colleges.One commenter suggested that theDepartment grandfather all institutionscurrently operating under a State’sregulatory authority without adetermination of its adequacy. Anotherindicated that private colleges anduniversities operating under a Stateapprovedcharter issued prior to 1972are already subject to State regulation,even as they are exempt from Statelicensing. One commenter believed thatthe Department should accept Statelaws and regulations that can bereasonably interpreted as meeting theregulatory requirements.Discussion: We agree with thecommenters who were concerned thatproposed § 600.9 may be viewed asambiguous in describing a minimalstandard for establishing State legalauthorization. We agree, in principle,with the State higher education officialwho suggested that proposed § 600.9should be amended to differentiate the

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66861types of State authorizations forinstitutions to operate, but not basedupon whether the source of theauthorization is administrative orlegislative. We believe the distinctionfor purposes of Federal programs iswhether the legal entities arespecifically established under Staterequirements as educational institutionsor instead are established as business ornonprofit charitable organizations thatmay operate without being specificallyestablished as educational institutions.We believe this clarification addressesthe concerns of whether specific States’requirements were compliant with§ 600.9 as provided in these finalregulations.We continue to view Stateauthorization to offer postsecondaryeducational programs as a substantiverequirement where the State takes anactive role in authorizing an institutionto offer postsecondary education. Thisview means that a State may choose anumber of ways to authorize aninstitution either as an educationalinstitution or as a business or nonprofitcharitable organization without specificauthorization by the State to offerpostsecondary educational programs.These legal means include provisions ofa State’s constitution or law, Statecharter, or articles of incorporation thatname the institution as established tooffer postsecondary education. Inaddition, such an institution also maybe subject to approval or licensure byState boards or State agencies thatlicense or approve the institution tooffer postsecondary education. If a legalentity is established by a State as abusiness or a nonprofit charitableorganization and not specifically as aneducational institution, it may besubject to approval or licensure by Stateboards or State agencies that license orapprove the institution to offerpostsecondary education. The key issueis whether the legal authorization theinstitution receives through these meansis for the purpose of offeringpostsecondary education in the State.In some instances, as one commenternoted, a State may have multiple Stateentities that must authorize aninstitution to offer postsecondaryprograms. In this circumstance, tocomply with § 600.9, we would expectthat the institution would demonstratethat it was authorized to offerpostsecondary programs by all of therelevant State entities that conferredsuch authorizations to that type ofinstitution.We do not believe it is relevant thatan institution may have beenestablished prior to any State oversight.We are concerned that institutionscurrently be authorized by a State tooffer postsecondary education, althoughwe recognize that a State’s currentapproval for an institution may be basedon historical facts. We therefore do notbelieve it is necessary to grandfatherinstitutions currently operating under aState’s regulations or statutes nor are wemaking any determination of theadequacy of a State’s methods ofauthorizing postsecondary educationapart from meeting the basic provisionsof § 600.9 in these final regulations. If aprivate college or university is operatingunder a State-approved charterspecifically authorizing the institutionby name to offer postsecondaryeducation in the State, a State mayexempt an institution from any furtherState licensure process. Therequirement to be named specifically ina State action also applies if theinstitution is exempt from Statelicensure based upon another condition,such as its accreditation by a nationallyrecognized accrediting agency or yearsin operation.Further, these regulations only requirechanges where a State does not have anyauthorizing mechanisms for institutionsother than an approval to operate as abusiness entity, or does not have amechanism to review complaintsagainst institutions. We anticipate thatmany States already meet theserequirements, and will have time tomake any necessary adjustments to meetthe needs of the institutions.With regard to the commenters whowere concerned with the potential scopeof a State’s authority, we note that theDepartment does not limit a State’soversight of institutions, and only setsminimum requirements for institutionsto show they are legally authorized bya State to provide educational programsabove the secondary level. Theseregulations neither increase nor limit aState’s authority to authorize, approve,or license institutions operating in theState to offer postsecondary education.Further, nothing in these finalregulations limits a State’s authority torevoke the authorization, approval, orlicense of such institutions. Section600.9 ensures that an institutionqualifies for Federal programs based onits authorization by the State to offerpostsecondary education.Changes: We are amending proposed§ 600.9 to distinguish the type of Stateapprovals that are acceptable for aninstitution to demonstrate that it isauthorized by the State to offereducational programs beyond thesecondary level.An institution is legally authorized bythe State if the State establishes theinstitution by name as an educationalinstitution through a charter, statute,constitutional provision, or other actionto operate educational programs beyondsecondary education, includingprograms leading to a degree orcertificate. If, in addition, the State hasan applicable State approval orlicensure process, the institution mustalso comply with that process to beconsidered legally authorized. However,an institution created by the State maybe exempted by name from any Stateapproval or licensure requirementsbased on the institution’s accreditationby an accrediting agency recognized bythe Secretary or based upon theinstitution being in operation for at least20 years.If the legal entity is established by aState as a business or a nonprofitcharitable organization and notspecifically as an educationalinstitution, the State must have aseparate procedure to approve or licensethe entity by name to operate programsbeyond secondary education, includingprograms leading to a degree orcertificate. For an institution authorizedunder these circumstances, the Statemay not exempt the entity from theState’s approval or licensurerequirements based on accreditation,years in operation, or other comparableexemption.The following chart and examplesillustrate the basic principles ofamended § 600.9:WReier-Aviles on DSKGBLS3C1PROD with RULES2VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00031 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2

66862 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and RegulationsMEETS STATE AUTHORIZATION REQUIREMENTS *Legal entity Entity description Approval or licensure processEducational institution .......................Business ...........................................Charitable organization .....................A public, private nonprofit, or for-profit institution establishedby name by a State through a charter,statute, or other action issued by an appropriateState agency or State entity as an educational institutionauthorized to operate educational programsbeyond secondary education, includingprograms leading to a degree or certificate.A for-profit entity established by the State on thebasis of an authorization or license to conductcommerce or provide services.A nonprofit entity established by the State on thebasis of an authorization or license for the publicinterest or common good.The institution must comply with any applicableState approval or licensure process and be approvedor licensed by name, and may be exemptedfrom such requirement based on its accreditation,or being in operation at least 20years, or use both criteria.The State must have a State approval or licensureprocess, and the institution must comply with theState approval or licensure process and be approvedor licensed by name.An institution in this category may not be exemptedfrom State approval or licensure based on accreditation,years in operation, or a comparableexemption*Notes:• Federal, tribal, and religious institutions are exempt from these requirements.• A State must have a process, applicable to all institutions except tribal and Federal institutions, to review and address complaints directly orthrough referrals.• The chart does not take into requirements related to State reciprocity.WReier-Aviles on DSKGBLS3C1PROD with RULES2ExamplesInstitutions considered legallyauthorized under amended § 600.9:• A college has a royal charter fromthe colonial period recognized by theState as authorizing the institution byname to offer postsecondary programs.The State has no licensure or approvalprocess.• A community college meets therequirements based upon its status as apublic institution.• A nonprofit institution has Stateconstitutional authorization by name asa postsecondary institution; State doesnot apply a licensure or approvalprocess.• A nonprofit institution has a Statecharter as a postsecondary institution.State law, without naming theinstitution, considers the institution tobe authorized to operate in lieu of Statelicensure based on accreditation by aregional accrediting agency.• An individual institution is ownedby a publically traded corporation thatis incorporated in a different State fromwhere the institution is located. Theinstitution is licensed to provideeducational programs beyond thesecondary level in the State where it islocated.• An institution is owned by apublicly traded corporation establishedas a business without the articles ofincorporation specifying that theinstitution is authorized to offerpostsecondary education, but theinstitution is licensed by the State tooperate postsecondary educationprograms.• An individual institution is ownedby a publically traded corporation thatis incorporated in a different State fromwhere the institution is located. TheState licenses the institution by name asa postsecondary institution.• Rabbinical school awarding only acertificate of Talmudic studies hasexemption as a religious institutionoffering only religious programs.• Tribal institution is chartered by thetribal government.Institutions not considered legallyauthorized under amended § 600.9:• An institution is a publicly tradedcorporation established as a businesswithout the articles of incorporationspecifying that it is authorized to offerpostsecondary education, and the Statehas no process to license or approve theinstitution to offer postsecondaryeducation.• A nonprofit institution is charteredas a postsecondary institution. A Statelaw considers the institution to beauthorized based on accreditation inlieu of State licensure but the institutionis not named in the State law and doesnot have a certification by anappropriate State official, e.g., StateSecretary of Education or State AttorneyGeneral, that it is in compliance withthe exemption for State licensurerequirements.• An institution is established as anonprofit entity without specificauthorization to offer postsecondaryeducation, but State law considers theinstitution to be authorized based on itbeing in operation for over 30 years. TheState Secretary of Education issues acertificate of good standing to theinstitution naming it as authorized tooffer postsecondary education based onits years in operation.• A Bible college is chartered as areligious institution and offers liberalarts and business programs as well asBible studies. It is exempted by StateVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00032 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2law from State licensure requirementsbut does not meet the definition of areligious institution exempt from Statelicensure for Federal purposes becauseit offers other programs in addition toreligious programs.• An institution is authorized basedsolely on a business license, and theState considers the institution to beauthorized to offer postsecondaryprograms based on regionalaccreditation.Comment: One commenter providedproposed wording to amend proposed§ 600.9(a)(1) to clarify that the Stateentity would include a State’s legalpredecessor. The commenter believedthat the change was necessary to ensurethat colonial charters would satisfy theState authorization requirement.Discussion: If a State considers aninstitution authorized to offerpostsecondary education programs inthe State based on a colonial charter thatestablished the entity as an educationalinstitution offering programs beyond thesecondary level, the institution wouldbe considered to meet the provisions of§ 600.09(a)(1)(i) of these finalregulations so long as the institutionalso meets any additional licensurerequirements or approvals required bythe State.Changes: None.Comment: Several commentersexpressed concern that all institutionswithin a State could lose title IV, HEAprogram eligibility at once and that theregulations put students at risk of harmthrough something neither they nor theinstitution can control.One commenter was concerned withhow the Department would specificallyassess State compliance with proposed§ 600.9. Another commenter believed

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66863WReier-Aviles on DSKGBLS3C1PROD with RULES2that the Department should accept Statelaws and regulations that can bereasonably interpreted as meeting therequirements of § 600.9 especially ifState officials interpret their laws andregulations in such a manner.One commenter requested that theDepartment explain how it wouldaddress currently enrolled students if aState is deemed not to provide sufficientoversight in accordance with Federalregulatory requirements. Anothercommenter asked how the Departmentwill avoid such negative consequencesas granting closed school loandischarges for large numbers of enrolledstudents. One commenter requested thatthe Department provide for seamlessreinstatement of full institutionaleligibility when a State meets alleligibility requirements after losingeligibility.Discussion: We do not anticipate thatall institutions in a State will lose titleIV, HEA program assistance due to anyState failing to provide authorization toits institutions under the regulations,because States may meet thisrequirement in a number of ways, andalso with different ways for differenttypes of institutions. If a State were toundergo a change that limited orremoved a type of State approval thathad previously been in place, it wouldgenerally relate to a particular set ofinstitutions within a State. For example,a licensing agency for truck drivingschools could lapse or be closed at aState Department of Transportationwithout providing another means ofauthorizing postsecondary truck drivingprograms. Only the eligibility of truckdriving schools in the State would beaffected under § 600.9 while the Statecould continue to be compliant for allother institutions in the State. It alsoseems likely that the State wouldconsider alternate ways to provide Stateauthorization for any institutionsaffected by such a change.We believe that the provisions inamended § 600.9 are so basic that Statecompliance will be easily establishedfor most institutions. The determinationof whether an institution has acceptableState authorization for Federal programpurposes will be made by theDepartment. We also note that theregulations permit a delayed effectivedate for this requirement under certaincircumstances discussed below, and thisdelay will also limit the disruption tosome institutions within a State.If an institution ceased to qualify asan eligible institution because its Statelegal authorization was no longercompliant with amended § 600.9, theinstitution and its students would besubject to the requirements for loss ofeligibility in subpart D of part 600 andan institution would also be subject to§ 668.26 regarding the end of itsparticipation in those programs. If aninstitution’s State legal authorizationsubsequently became compliant withamended § 600.9, the institution couldthen apply to the Department to resumeparticipation in the title IV, HEAprogram.Changes: None.Comment: Several commenters wereconcerned that students may loseeligibility for title IV, HEA programfunds if a State is not compliant withproposed § 600.9. Some commentersnoted that States may have to take stepsto comply, which may include makingsignificant statutory changes, and theregulations therefore need to allowadequate time for such changes,reflecting the various State legislativecalendars. In some cases, thecommenters believed a State’snoncompliance would be because theState could no longer afford to meet theprovisions of proposed § 600.9. Onecommenter believed that alternativepathways should be allowed for meetingState authorization and that States thatexempt or grant waivers from licensingshould be considered to fulfillrequirements of proposed § 600.9 andanother questioned whether a State thatis not in compliance would have anopportunity to cure perceived problemsbefore all institutions operating in theState lost institutional eligibility.Discussion: We recognize that a Statemay not already provide appropriateauthorizations as required by § 600.9 forevery type of institution within theState. However, we believe theframework in § 600.9 is sound andprovides a State with different ways tomeet these requirements. Unless a Stateprovides at least this minimal level ofreview, we do not believe it should beconsidered as authorizing an institutionto offer an education program beyondsecondary education.If a State is not compliant with § 600.9for a type or sector of institutions in aState, we believe the State and affectedinstitutions will create the necessarymeans of establishing legalauthorization to offer postsecondaryeducation in the State in accordancewith amended § 600.9. However, in theevent a State is unable to provideappropriate State authorizations to itsinstitutions by the July 1, 2011 effectivedate of amended § 600.9(a) and (b), weare providing that the institutionsunable to obtain State authorization inthat State may request a one-yearextension of the effective date of thesefinal regulations to July 1, 2012, and ifnecessary, an additional one-extensionVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00033 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2of the effective date to July 1, 2013. Asdescribed in the section of the preambleentitled ‘‘Implementation Date of TheseRegulations,’’ to receive an extension ofthe effective date of amended § 600.9(a)and (b) for institutions in a State, aninstitution must obtain from the State anexplanation of how a one-year extensionwill permit the State to modify itsprocedures to comply with amended§ 600.9.Changes: None.Comment: A few commentersrequested that the Department identify,publish, and maintain a list of Statesthat meet or do not meet therequirements. One commenter cited ananalysis that estimated that 13 Stateswould comply with the proposedregulations upon implementation; 6States would clearly not be incompliance; and 37 States would likelyhave to amend, repeal, or otherwisemodify their laws. One commenterrequested data to be provided by theDepartment for each sector ofpostsecondary education, includinghow many States are out of compliance,how many institutions are within thoseStates, and how many students areenrolled at those institutions.Discussion: We do not believe thatthere is a need to maintain and publisha list of States that meet, or fail to meetthe requirements. States generallyemploy more than one method ofauthorizing postsecondary education.For example, a State may authorize aprivate nonprofit university throughissuing a charter to establish theuniversity, another private nonprofitcollege through an act of the Statelegislature, a for-profit business schoolthrough a State postsecondary educationlicensing agency, a cosmetology schoolthrough a State cosmetology board, anda truck-driving school through theState’s Department of Transportation.We believe that an institution ofwhatever sector and type already isaware of the appropriate Stateauthorizing method or methods thatwould establish the institution’s legalauthorization to offer postsecondaryeducation and publication of any list isunnecessary.Changes: None.Comment: One commenter expressedconcern with whether a State mustregulate the activities of institutions andexercise continual oversight overinstitutions.Discussion: While a State must havea process to handle student complaintsunder amended § 600.9(a) for allinstitutions in the State except Federaland tribal institutions, the regulationsdo not require, nor do they prohibit, any

66864 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and RegulationsWReier-Aviles on DSKGBLS3C1PROD with RULES2process that would lead to continualoversight by a State.Changes: None.Comment: Several commentersexpressed concern regarding thefinancial burden on the States to makechanges in State laws and the amount oftime that would be needed to make thenecessary changes. Commenters fearedthat the States would most likely haveto reduce further State tax subsidiesprovided to public institutions. As aresult, costs will be increased forstudents at public institutions to coverlost revenues and increase costs for thetitle IV, HEA programs. One commenterstated that schools could delay progressof degree completion at State fundeduniversities because they will be forcedto reduce offerings.Discussion: We do not believe that itwould impose an undue financialburden on States to comply with theprovisions in § 600.9. In most instanceswe believe that a State will already becompliant for most institutions in theState or will need to make minimalchanges to come into compliance. Thus,we do not agree with commenters whobelieved that the regulations wouldgenerally impact the funding of publicinstitutions in a State or wouldnecessitate a reduction in the offeringsat public institutions.Changes: None.Exemptions: Accreditation and Years ofOperationComment: Several commenterssupported the existing practice bywhich a State bases an institution’s legalauthorization to offer postsecondaryeducation upon its accreditation by anationally recognized accreditingagency, i.e., an accrediting agencyrecognized by the Secretary. Thecommenters believed that proposed§ 600.9 should be revised or clarified topermit existing practices allowingexemption by accreditation. Anothercommenter indicated that several Stateshave exempted accredited institutionsfrom State oversight unless thoseinstitutions run afoul of theiraccreditors’ requirements. Onecommenter believed that proposed§ 600.9 would require the creation ofunnecessary, duplicative, andunaffordable new bureaucracies, andrecommended that its State shouldcontinue its partial reliance onnationally recognized accreditingagencies. Another commenter believedit appropriate that a State delegate someor all of its licensure function to anationally recognized accreditingagency provided that the State entersinto a written agreement with theaccrediting agency.One commenter stated that theDepartment should eliminate theambiguity about how much a State mayrely on accrediting agencies. Severalcommenters stated that the regulationsare confusing as to which exemptionsare permissible and which are not. Onecommenter believed that theDepartment should make it clear thatalthough a State is not prohibited fromrelying on accrediting agencies forquality assessments, the essential dutiesof State authorization cannot becollapsed into the separate requirementfor accreditation.Some commenters noted that aninstitution’s legal authorization may bebased on a minimum number of yearsthat an institution has been operating.One of the commenters cited aminimum number of years used byStates that ranged as low as 10 years ofoperation while two other commentersnoted that institutions had beenexempted in their State because theyhad been in operation over 100 yearsand were accredited. The commentersbelieved that the Department shouldconsider it acceptable for a State to relyon the number of years an institutionhas been operating.Some commenters did not think thatStates should be allowed to deferauthorization to accrediting agencies.One of these commenters believed thatbasing State authorization onaccreditation was contrary to law. Onecommenter believed that existing lawmakes clear that institutional eligibilityfor title IV, HEA programs is based onthe Triad of accreditation, Stateauthorization, and the Federalrequirements for administrativecapability and financial responsibility.As a result the commenter believed thatthe extent to which States may rely onaccrediting agencies should be clear andlimited. Along the same lines, anothercommenter believed strongly thataccrediting agencies should never beallowed to grant authorization tooperate in a State, and that furtherclarifications about the ways in whichaccrediting agencies may substitute forState agencies is necessary. Onecommenter encouraged the Departmentto study more carefully the role of Stateentities and accreditation agencies.Another commenter believed thatrelying on accrediting agencies to besurrogates for State authorization isinappropriate and should not be the soledeterminant for authorization. Onecommenter stated that accreditationmay not be accepted as a sufficient basisfor granting or continuing authorizationto operate and that the authorizationprocess must be independent of anyaccreditation process or decision.VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00034 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2One commenter believed thatproposed § 600.9 would undermine therole of accreditation and the publicprivatepartnership and would call forStates to intrude into academic areas.The commenter believed that theproposed regulations would movetoward establishing accreditation as aState actor, a role that is incompatiblewith accreditation’s commitment to selfregulationand peer and professionalreview. Another commenter believedthat the Department should make itclear that although a State is notprohibited from relying on accreditingagencies for quality assessments, theessential duties of State authorizationcannot be collapsed into the separaterequirement for accreditation. If aninstitution’s State and accreditingagency have different standards, onecommenter was concerned regardingwhich entity’s standards would beapplied.Discussion: While we recognize andshare the concerns of some commentersthat States should not be allowed todefer authorization to accreditingagencies, we believe that such a practicewould be permissible so long as it doesnot eliminate State oversight and clearlydistinguishes the responsibilities of theState and accreditor under such anarrangement. We also do not agree thatadditional study is needed of the rolesof State entities and accrediting agenciesas we believe these relationships arewell understood.We believe that accreditation may beused to exempt an institution from otherState approval or licensing requirementsif the entity has been established byname as an educational institutionthrough a charter, statute, constitutionalprovision, or other action issued by anappropriate State entity to operateeducational programs beyond secondaryeducation, including programs leadingto a degree or certificate. For such aneducational institution, a State couldrely on accreditation to exempt theinstitution from further approval orlicensing requirements, but could not doso based upon a preaccredited orcandidacy status.We also agree with the commentersthat States may utilize an institution’syears in operation to exempt it fromState licensure requirements, but only,as with accreditation, for a legal entitythat the State establishes as aneducational institution authorized tooffer postsecondary education.However, we believe that there shouldbe a minimum standard for allowingyears of operation to exempt aninstitution to ensure that this exemptionis not set to a short period of time thatwould not provide a historical basis to

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66865WReier-Aviles on DSKGBLS3C1PROD with RULES2evaluate the institution. Based on ourconsideration of the public comment,we believe that standard should be atleast 20 years of operation. As in thecase of accreditation, such an exemptioncould only be used if the State hasestablished the entity as an educationalinstitution. As noted above, a State mayuse a separate process to recognize byname the entity as an educationalinstitution that offers programs beyondthe secondary level if an institution wasnot authorized by name to offereducational programs in its approval asa legal entity within a State. We notethat a State may also base a licensingexemption on a combination ofaccreditation and the number of yearsan institution has been in operation, aslong as the State requirements meet orexceed at least one of the two minimumrequirements, that is, an institutionmust be fully accredited or must havebeen operating for at least 20 years.If an institution is established as alegal entity to operate as a business orcharitable organization but lacksauthorization to operate by name as aneducational institution that offerspostsecondary education, the institutionmay not be exempted from Statelicensing or approval based onaccreditation, years in operation, orcomparable exemption from Statelicensure or approval.We do not believe that permittingsuch exemptions from State licensingrequirements will distort the oversightroles of the State and an accreditingagency. We believe these comments arebased on a misunderstanding of the roleof a State agency recognized by theSecretary under 34 CFR part 603 as areliable authority regarding the qualityof public postsecondary vocationaleducation in its State. Publicpostsecondary vocational institutionsare approved by these agencies in lieuof accreditation by a nationallyrecognized accrediting agency. As notedin the comments, there are overlappinginterests among all members of theTriad in ensuring that an educationalinstitution is operating soundly andserving its students, and a State mayestablish licensing requirements thatrely upon accreditation in somecircumstances.If an institution’s State andaccrediting agency have differentstandards, there is no conflict forpurposes of the institution’s legalauthorization by the State, as theinstitution must establish its legalauthorization in accordance with theState’s requirements.Changes: We have amended proposed§ 600.9 to provide that, if an institutionis an entity that is established by nameas an educational institution by theState and the State further requirescompliance with applicable Stateapproval or licensure requirements forthe institution to qualify as legallyauthorized by the State for Federalprogram purposes, the State mayexempt the institution by name from theState approval or licensure requirementsbased on the institution’s accreditationby one or more accrediting agenciesrecognized by the Secretary or basedupon the institution being in operationfor at least 20 years. If an institution isestablished by a State as a business ora nonprofit charitable organization, forthe institution to qualify as legallyauthorized by the State for Federalprogram purposes, the State may notexempt the institution from the State’sapproval or licensure requirementsbased on accreditation, years inoperation, or other comparableexemption.ComplaintsComment: An association of Statehigher education officials recommendedthat the States, through their respectiveagencies or attorneys general, shouldretain the primary role andresponsibility for student consumerprotection against fraudulent or abusivepractices by postsecondary institutions.The commenter stated that handlingcomplaints is not a role that can orshould be delegated to nongovernmentalagencies such as accrediting agencies,nor should it be centralized in theFederal Government. Anothercommenter asked about the role of Stateenforcement of laws unrelated topostsecondary institutions licensuresuch as a law related to fraud or falseadvertising. A few commenters askedfor clarification as to whether Stateconsumer protection agencies or StateAttorneys General could retain theprimary role for student consumerprotection and handling studentcomplaints. One commenter believedthat the proposed regulations failed toaddress circumstances where the Statelicensure or approval agency and theagency handling complaints aredifferent agencies.Several commenters recommendedthat the Department allow States to relyon accrediting agencies but require amemorandum of understanding with theaccrediting association that wouldinclude, at a minimum, procedures forperiodic reports on actions taken by theassociation and procedures for handlingstudent complaints. One commenterstrongly believed that accreditingagencies should never be allowed tohandle complaints in lieu of the State.VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00035 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2One commenter expressed concernthat the Department is requiring Statesto serve as an additional check oninstitutional integrity, but believed thatthere would be no check on the State.One commenter from an accreditingagency believed that proposed§ 600.9(b)(3) is an unnecessary use oflimited public resources, is impractical,and would be impractical and chaotic toadminister. Several other commentersexpressed concern that requiring Statesto act on complaints would beduplicative because 34 CFR 602.23already requires accrediting agencies tohave a process to respond to complaintsregarding their accredited institutions.One commenter requested that theDepartment exempt publicpostsecondary institutions from thecomplaint processes. Otherwise, thecommenter asked that the Departmentclarify that a State is permitted todetermine whether an institution withinits borders is sufficiently accountablethrough institutional complaint andsanctioning processes. One commenterrequested that the Department clarifythat student complaints unrelated toviolations of State or Federal law are notsubject to State process or reviewingand acting on State laws, instead thecommenter believed that studentcomplaints are appropriately addressedat the institutional level. A commenterquestioned how the requirements forState review of complaints relate tostudent complaints about day-to-dayinstruction or operations and whetherthe potential review process representsan expansion of State authority. Thecommenter believes that studentcomplaints that are unrelated toviolations of State or Federal law areappropriately addressed at theinstitutional level and thus not subjectto the process for review of complaintsincluded as part of proposed § 600.9.One commenter suggested that theDepartment’s Office of Ombudsmanrespond to student complaints as analternative if a State does not have aprocess for complaints.Discussion: We agree with thecommenters who believed that theStates should retain the primary roleand responsibility for student consumerprotection against fraudulent or abusivepractices by some postsecondaryinstitutions. For an institution to beconsidered to be legally authorized tooffer postsecondary programs, a Statewould be expected to handle complaintsregarding not only laws related tolicensure and approval to operate butalso any other State laws including, forexample, laws related to fraud or falseadvertising. We agree that a State mayfulfill this role through a State agency or

66866 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and RegulationsWReier-Aviles on DSKGBLS3C1PROD with RULES2the State Attorney General as well asother appropriate State officials. A Statemay choose to have a single agency orofficial handle complaints regardinginstitutions or may use a combination ofagencies and State officials. All relevantofficials or agencies must be included inan institution’s institutional informationunder § 668.43(b). Directly relying on aninstitution’s accrediting agency wouldnot comply with § 600.9(a)(1) of thesefinal regulations; however, to the extenta complaint relates to an institution’squality of education or other issueappropriate to consideration by aninstitution’s accrediting agency, a Statemay refer a complaint to theinstitution’s accrediting agency forresolution. We do not believe it isnecessary to prescribe memoranda ofunderstanding or similar mechanisms ifa State chooses to rely on aninstitution’s accrediting agency as theState remains responsible for theappropriate resolution of a complaint.Section 600.9(a)(1) requires aninstitution to be authorized by a State,thus providing an additional check oninstitutional integrity; however, we donot believe there are inadequate checkson State officials and agencies as theyare subject to audit, review, and Statelegislative action.We do not agree with the commentersthat proposed § 600.9(b)(3) wouldunnecessarily use State resources, beimpractical, or be chaotic to administer.There are complaints that only a Statecan appropriately handle, includingenforcing any applicable State law orregulations. We do not agree that publicinstitutions should be exempt from thisrequirement as a complainant must havea process, independent of anyinstitution—public or private, to havehis or her complaint considered by theState. The State is not permitted to relyon institutional complaint andsanctioning processes in resolvingcomplaints it receives as these do notprovide the necessary independentprocess for reviewing a complaint. AState may, however, monitor aninstitution’s complaint resolutionprocess to determine whether it isaddressing the concerns that are raisedwithin it.We do not agree with the suggestionsthat the Department’s Student LoanOmbudsman is an appropriatealternative to a State complaintsprocess. The Ombudsman is charged,under the HEA, with the informalresolution only of complaints byborrowers under the title IV, HEA loanprograms. By comparison, a State’scomplaint resolution process wouldcover the breadth of issues that ariseunder its laws or regulations.Changes: We have amended proposed§ 668.43(b) to provide that an institutionmust make available to a student orprospective student contact informationfor filing complaints with its accreditorand with its State approval or licensingentity and any other relevant Stateofficial or agency that wouldappropriately handle a student’scomplaint.Comment: One commenter believedthat proposed § 668.43(b) under whichan institution must provide to studentsand prospective students the contactinformation for filing complaints withthe institution’s State approval orlicensing entity should make allowancefor situations in which a State has noprocess for complaints, or defers to theaccrediting agency to receive andresolve complaints. Another commenterbelieved that, in the case of distanceeducation, the institution should beresponsible for responding tocomplaints. Instead of providingstudents and prospective students,under proposed § 668.43(b), the contactinformation for filing complaints withthe institution’s accrediting agency andState approval or licensing entity, thecommenter recommended that theinstitution provide students with theinstitution’s name, location, and Website to file complaints.Discussion: We do not agree thatproposed § 668.43(b) needs to makeallowance for an institution in a Statewithout a process for complaints, sinceevery State is charged with enforcing itsown laws and no institution is exemptfrom complying with State laws. If nocomplaint process existed, theinstitution would not be considered tobe legally authorized. With respect to aninstitution offering distance educationprograms, the institution must provide,under § 668.43(b), not only the contactinformation for the State or States inwhich it is physically located, but alsothe contact information for States inwhich it provides distance education tothe extent that the State has anylicensure or approval processes for aninstitution outside the State providingdistance education in the State.Changes: None.Reciprocity and Distance EducationComment: In general, commentersexpressed concerns regarding legalauthorization by a State incircumstances where an institution isphysically located across State lines aswell as when an institution is operatingin another State from its physicallocation through distance education oronline learning. One commenter urgedthe Department to include clarifyinglanguage regarding a State’s ability toVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00036 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2rely on other States’ authorization in thefinal regulation rather than in thepreamble. Several commentersrequested that the Department limit theState authorization requirement in§ 600.9 to the State in which theinstitution is physically located. Onecommenter believed that a State shouldonly be allowed to rely on anotherState’s determination if the school hasno physical presence in the State andthe other State’s laws, authority, andoversight are at least as protective ofstudents and taxpayers. One commenterasked whether the phrase ‘‘the State inwhich the institution operates’’ is thesame as ‘‘where the institution isdomiciled’’. The commenter asked forclarification of the meaning of ‘‘operate’’including whether it means whereonline students are located, wherestudent recruiting occurs, where aninstructor is located, or wherefundraising activity is undertaken. Onecommenter requested that theDepartment clarify and affirm thatreciprocity agreements that existbetween States with respect to publicinstitutions operating campuses orprograms in multiple States are notimpacted by these regulations. Anothercommenter believed that theDepartment should issue regulationsrather than merely provide in thepreamble of the NPRM that a State isallowed to enter into an agreement withanother State. One commenter askedwhether an institution that operates inmore than one State can rely on anauthorization from a State that does notmeet the authorization requirements.One commenter urged the Departmentto clarify that States may rely on theauthorization by other States,particularly as it relates to distanceeducation. One commenter stated thatthe proposed regulations would behighly problematic for students whotransfer between different States.Another commenter feared that largeproprietary schools that are regional ornational in scope would likely lobbyStates to turn over their oversight toanother State where laws, regulations,and oversight are more lax. Anothercommenter was concerned that forprofitinstitutions may lobby a State torelinquish its responsibilities to a Stateof those institutions’ choosing. Thissituation could result in a State withlittle regulation that is home to a largefor-profit institution actually controllingpolicies in many States where thecorporation does business. Onecommenter suggested that if aninstitution is not physically located in aState, the State could enter into anagreement with other States where the

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66867WReier-Aviles on DSKGBLS3C1PROD with RULES2institution does have physical locationsto rely on the information the otherStates relied on in granting authority. Inthis case, the commenter recommendedthat the oversight be at least asprotective of students and the public asthose of the State, and the State shouldconsider any relevant information itreceives from other sources. However,the commenter thought the State shouldretain authority to take independentadverse action including revoking theauthority to offer postsecondaryprograms in the State. Anothercommenter expressed concern that theproposed regulations would confuseand burden the States and institutionsbecause they are not clear regardingwhether a State can continue to rely onthe authorization of another State. Thecommenter believed that withoutclarification, an institution that offerseducation to students located in otherStates might be needlessly burdenedwith seeking authorization from each ofthose States. Another commenterexpressed concern that the proposedregulations could potentially require aninstitution offering distance educationcourses in 50 different States to obtainauthorization in each State, whichwould be an administrative burden thatcould result in increased tuition fees forstudents. Another commenter statedthat during the negotiations, theDepartment indicated it was not itsintent to require authorization in everyState. Therefore, the commenter urgedthe Department to include this policyexpressly in the final regulations.Discussion: We agree with thecommenters that further clarification isneeded regarding legal authorizationacross State lines in relation toreciprocity between States and todistance education and correspondencestudy. In making these clarifications, weare in no way preempting any Statelaws, regulations, or other requirementsestablished by any State regardingreciprocal agreements, distanceeducation, or correspondence study.To demonstrate that an institution islegally authorized to operate in anotherState in which it has a physicalpresence or is otherwise subject to Stateapproval or licensure, the institutionmust demonstrate that it is legallyauthorized by the other State inaccordance with § 600.9. We continue tobelieve that we do not need to regulateor specifically authorize reciprocalagreements. If both States provideauthorizations for institutions thatcomply with § 600.9 and they have anagreement to recognize each other’sauthorization, we would consider theinstitution legally authorized in bothStates as long as the institutionprovided appropriate documentation ofauthorization from the home State andof the reciprocal agreement. In addition,the institution must provide thecomplaint contact information under 34CFR 668.43(b) for both States.If an institution is offeringpostsecondary education throughdistance or correspondence education ina State in which it is not physicallylocated, the institution must meet anyState requirements for it to be legallyoffering distance or correspondenceeducation in that State. An institutionmust be able to document upon requestfrom the Department that it has suchState approval.A public institution is considered tocomply with § 600.9 to the extent it isoperating in its home State. If it isoperating in another State, we wouldexpect it to comply with therequirements, if any, the other Stateconsiders applicable or with anyreciprocal agreement between the Statesthat may be applicable.Changes: We have revised § 600.9 toclarify in paragraph (c) that, if aninstitution is offering postsecondaryeducation through distance orcorrespondence education to students ina State in which it is not physicallylocated, the institution must meet anyState requirements for it to be legallyoffering postsecondary distance orcorrespondence education in that State.We are further providing that aninstitution must be able to documentupon request by the Department that ithas the applicable State approval.State InstitutionsComment: Many commentersrequested that public institutions beexempted from the proposedregulations. They were concerned thatrequiring States to reexamine their Stateauthorization for public colleges wouldnot be a good use of resources. Onecommenter requested that theDepartment explicitly state that publicinstitutions are by definition agents ofthe State and thus need no furtherauthorization. One commenter from aState university system believed that theFederal Government should not imposea uniform model with ‘‘one size fits allStates.’’ Another commenter noted thata State may not have legal power overdecisions made by authorities givenunder the State’s constitution foroversight of certain publicpostsecondary institutions. Onecommenter believed that publicinstitutions should be exempt from theproposed requirements for adverseactions and complaint processes.Discussion: As instrumentalities of aState government, State institutions areVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00037 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2by definition compliant with§ 600.9(a)(1)(i), and no exemption fromthe provisions of § 600.9 of these finalregulations is necessary. We do notagree that State institutions should beexempt from the requirement that aState have a process to review andappropriately act on complaintsconcerning an institution. We believethat students, their families, and thepublic should have a process to lodgecomplaints that is independent of aninstitution.Changes: None.Religious InstitutionsComment: Two commenters requesteda definition of the term religiousinstitution. One of these commentersfelt strongly that a religious exemptionmust be tailored to prevent loopholesfor abuse but needed to offer analternative for religious institutions sothat changes to a State’s constitutionwould not be necessary. The commentersuggested that a religious institutionshould be exempted if the institution isowned, controlled, operated, andmaintained by a religious organizationlawfully operating as a nonprofitreligious corporation pursuant to theInternal Revenue Code and meets thefollowing requirements:• Instruction is limited to theprinciples of that religious organization.• A diploma or degree awarded bythe institution is limited to evidence ofcompletion of that education.• The institution offers degrees anddiplomas only in the beliefs andpractices of the church, religiousdenomination, or religious organization.• The institution does not awarddegrees in any area of physical science.• Any degree or diploma granted bythe institution contains on its face, inthe written description of the title of thedegree being conferred, a reference tothe theological or religious aspect of thedegree’s subject area.• A degree awarded by the institutionreflects the nature of the degree title,such as ‘‘associate of religious studies,’’‘‘bachelor of religious studies,’’ ‘‘masterof divinity,’’ or ‘‘doctor of divinity.’’Discussion: We agree with thecommenters that a definition of areligious institution is needed to clarifythe applicability of a religiousexemption. We also agree that amodification to the proposedregulations is needed to allow a State toprovide an exemption to religiousinstitutions without requiring the Stateto change its constitution.Changes: We have expanded§ 600.9(b) to provide that an institutionis considered to be legally authorized bythe State if it is exempt from State

WReier-Aviles on DSKGBLS3C1PROD with RULES266868 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulationsauthorization as a religious institutionby State law in addition to the provisionof the proposed regulations that theexemption by law, or exempt under theState’s constitution. We have alsoincluded a definition of a religiousinstitution, which provides that aninstitution is considered a religiousinstitution if it is owned, controlled,operated, and maintained by a religiousorganization lawfully operating as anonprofit religious corporation andawards only religious degrees orreligious certificates including, but notlimited to, a certificate of Talmudicstudies, an associate of biblical studies,a bachelor of religious studies, a masterof divinity, or a doctor of divinity. Wenote, however, that a religiousinstitution is still subject to therequirement in § 600.9(a)(1) of thesefinal regulations that, for the institutionto be considered to be legally authorizedin the State, the State must have aprocess to review and appropriately acton complaints concerning theinstitution.Tribal InstitutionsComment: One commenter suggestedthe Department should exempt fromState authorization any institutionestablished and operated by tribalgovernments. Three commenters statedthat the Department should recognizethat tribal institutions would not besubject to State oversight but instead thetribe would exercise oversight. One ofthose commenters suggested amendingthe regulations to add ‘‘tribal authority’’wherever State authority is mentionedin the proposed regulations.Discussion: We agree that tribalinstitutions are not subject to Stateoversight for institutions operatingwithin tribal lands. Proposed§ 600.9(a)(2) provided that a tribalcollege would be considered to meet thebasic provisions of proposed§ 600.9(a)(1) if it was authorized to offereducational programs beyond secondaryeducation by an Indian tribe as definedin 25 U.S.C. 1802(2). However,proposed § 600.9(b), could be read asinappropriately making a tribalinstitution subject to adverse actions bythe State and a State process forhandling student complaints. We didnot intend to make a tribal institutionsubject to any State process for handlingcomplaints and have clarified thelanguage in § 600.9. If a tribal college islocated outside tribal lands within aState, or has a physical presence oroffers programs to students that arelocated outside tribal lands in a State,the tribal college must demonstrate thatit has the applicable State approvalsneeded in those circumstances.Changes: Section 600.9 has beenrevised to clarify the status of tribalinstitutions. As noted elsewhere in thispreamble, we have removed proposed§ 600.9(b)(2) regarding adverse actions.Further, we are providing that, in§ 600.9(a)(2)(ii) of the final regulations,the tribal government must have aprocess to review and appropriately acton complaints concerning a tribalinstitution and enforce applicable tribalrequirements or laws.Part 668 Student Assistance GeneralProvisions Retaking Coursework(§ 668.2)Comment: Many commenters agreedwith the Secretary’s proposal to amendthe definition of full-time student in§ 668.2(b) to allow repeated courseworkto count towards a student’s enrollmentstatus in term-based programs. Thecommenters believed the change wouldalleviate the administrative burdenrelated to tracking student courseworkto prevent payment based on repeatedcoursework, as is currently required.Discussion: The Department agreeswith the commenters that amending thedefinition of full-time student in§ 668.2(b) will be beneficial for studentswho retake coursework.Changes: None.Comment: Several commenters askedthe Department to clarify whetheramending the definition of full-timestudent will apply to all students,regardless of their enrollment status,including less-than-half-time, half-time,and three-quarter-time enrollmentstatuses.Discussion: Less-than-half-time, halftime,and three-quarter-time statuses aregenerally defined in relation to thedefinition of a full-time student. In§ 668.2 half-time and three-quarter-timestatuses generally are defined as at leastone-half and three quarters of theacademic workload of a full-timestudent, respectively. Less-than-halftimestatus is not defined, as the termis self-explanatory in its relationship tohalf-time and full-time statuses. Thus,including this provision in thedefinition of full-time student will applyto less-than-full-time students who areenrolled in term-based programs.Changes: None.Comment: Some commenters askedthe Department to allow earlyimplementation of this retakingcoursework provision, because theDepartment’s current guidance in theFederal Student Aid Handbook does notprovide for this benefit.Discussion: We have determined, as ageneral policy, that no provisions ofthese final regulations should bedesignated for early implementation.VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00038 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2We will update the Handbook for the2011–2012 award year to reflect theamended definition of full-time studentin these final regulations.Changes: None.Comment: Some commentersquestioned whether institutions maycontinue to set their own policy inregards to retaking coursework andawarding credits for repeatedcoursework. One commenter asked theDepartment to clarify if the proposedregulation on retaking courseworkwould allow a student to repeat coursesalready passed to achieve a highergrade. Another commenter asked theDepartment to clarify whether a studentwho has already earned the maximumnumber of remedial courses allowedcould be paid to retake coursework ifthe student repeats more remedialcourses.Discussion: In general, the regulationsdo not affect an institution’s policiesgoverning whether a student may retakecoursework in term-based programs,including repeating courses to achieve ahigher grade, as these regulations applyonly to determining enrollment statusfor title IV, HEA program purposes.Moreover, the regulations do not limitan institution’s ability to establishpolicies for title IV, HEA programpurposes to the extent those policies arenot in conflict with title IV, HEAprogram requirements. However, withrespect to repeating courseworkpreviously passed by a student in aterm-based program, the student’senrollment status for title IV, HEApurposes may include any courseworkpreviously taken in the program, but weare limiting the provision so that it maynot include more than one repetition ofa previously passed course or anyrepetition of previously passedcoursework that would be taken due toa student’s failure of other coursework.In other words, an institution may paya student one time for retakingpreviously passed coursework if, forexample, the student needed to meet anacademic standard for that particularcourse, such as a minimum grade.Conversely, an institution may not paya student for retaking previously passedcourses if the student is required toretake those courses because the studentfailed a different course in a prior term.For example, if a student enrolls in fourclasses in the fall semester and passesthree of them, the institution couldrequire the student to retake the failedclass and also require the student toretake the other three classes because offailing the one class. If the studentretakes the four classes in the springsemester, the failed class would beincluded in the student’s enrollment

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66869WReier-Aviles on DSKGBLS3C1PROD with RULES2status, but the three classes passed inthe fall would not be included indetermining the student’s enrollmentstatus for the spring semester forpurposes of the title IV, HEA programs.We believe these revisions are necessaryto limit potential abuse from coursesbeing retaken multiple times, whileproviding institutions sufficientflexibility to meet the needs of moststudents.We would also note that aninstitution’s satisfactory academicprogress policy could further limit astudent from retaking coursework,because the credits associated with anycourse the student retakes count towardthe maximum time-frame requirement.The regulations do not affect the oneyearacademic limitation on noncreditand reduced-credit remedial courseworkunder § 668.20(d) and (f). For example,if a student repeats a remedial coursethat exceeds the one-year limitation, thecourse could not be considered in thestudent’s enrollment status.Changes: We have revised thedefinition of full-time student in§ 668.2(b) to provide that a student’senrollment status for a term-basedprogram may include repeating anycoursework previously taken in theprogram but may not include more thanone repetition of a previously passedcourse, or any repetition of a previouslypassed course due to the student’sfailing other coursework.Comment: One commenterrecommended that the change in thedefinition of full-time student should beexpanded to include nonstandard-termand nonterm programs.Discussion: Since the change in thedefinition applies to all term-basedprograms, the change would apply tostandard terms, including semesters,trimesters, and quarters, as well asnonstandard terms. Under the definitionof a nonterm payment period in§ 668.4(c), a student’s coursework isdivided into payment periods based onthe hours and weeks of instructionaltime in the program. In general, underthese nonterm provisions a studentmust successfully complete the credit orclock hours in a payment period toadvance to the next payment period,and may not be paid for repeatingcoursework regardless of whether thestudent successfully completed it unlessthe provisions of § 668.4(g) apply.Changes: None.Written Arrangements (§§ 668.5 and668.43)GeneralComment: Several commenters agreedwith the proposed regulations relatingto written arrangements. Onecommenter commended theDepartment’s proposals on this topic,noting that they strike a fair balance inthe presence of many minutia-drivenconcerns. Some commenters stated thatthe proposed changes eliminateinconsistencies that exist in the currentregulations and provide betterinformation to students while allowinginstitutions to determine the best way todisseminate the required information.Other commenters stated that theyagreed with the proposed changes in§§ 668.5 and 668.43 because if aneligible institution enters into a writtenarrangement with another eligibleinstitution, under which the othereligible institution provides part of theeducational program to studentsenrolled in the first institution, it isimportant for all parties to have a clearunderstanding of which institution isproviding the credential and themajority of the education and training.Discussion: We appreciate thecommenters’ support of the proposedchanges reflected in §§ 668.5 and668.43.Changes: None.Written Arrangements Between Two orMore Eligible Institutions (§ 668.5(a))Comment: Some commenters objectedto the Department’s assertion—in thepreamble of the NPRM (75 FR 34806,34815)—that students who want to takemore than 50 percent of an educationalprogram at another institution couldtransfer to the institution that providesthe preponderance of the program’scoursework. One commenter stated thatstudents should be allowed to takecourses at more than one campus ofeligible institutions that have a writtenarrangement without needing to gothrough unnecessary activities related totransfer of credit.Several commenters disagreed withthe proposed changes reflected in§ 668.5(a)(2)(ii). First, they argued thatimposing a limitation on the portion ofan educational program one institutioncan provide under a writtenarrangement is not consistent with thepurpose of consortium agreements,which is to allow students to obtain adegree or certificate from theirinstitution of choice while allowingthem to satisfy course requirements bytaking courses delivered by anotherinstitution. Second, the commentersdisagreed with the limitation becausewe do not place similar restrictions oninstitutions when they accept transferstudents who have earned more thanhalf of the credits that will go towardtheir educational program at anotherinstitution. Finally, the commentersVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00039 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2argued that more students are attendingmultiple institutions before completingtheir degree or certificate programs anda requirement that the credentialgrantinginstitution must provide 50percent of the individual student’seducational program would be a barrierto the students’ postsecondary success.In addition, a few commenters notedthat current articulation agreementsallow students to further their educationat another institution that may acceptenough credits on transfer that thestudent has less than 50 percent of theprogram remaining to be completed.Some commenters expressed the viewthat the proposed regulations governingwritten arrangements should not applyto articulation agreements while otherssought clarification of whether theDepartment’s position is that they doapply to such agreements. Commentersexpressed concern that the proposalwould result in undue hardship andfewer opportunities for students insmall communities who take a portionof their coursework locally. Onecommenter asked whether the proposedchanges reflected in § 668.5 affectstudents who obtained college creditwhile still in high school.Discussion: There appears to be someconfusion about the scope of theproposed changes to § 668.5. Underproposed § 668.5(a)(1), eligibleinstitutions that are not under commonownership may enter into a writtenarrangement (which may include thetype of consortium agreementsmentioned by the commenters) underwhich the non-degree-grantinginstitution offers part of the degreegrantinginstitution’s educationalprogram; this provision does not imposea specific limitation on the portion ofthe educational program that may beoffered by the non-degree-grantinginstitution. In contrast, under proposed§ 668.5(a)(2)(ii), if a written arrangementis between two or more eligibleinstitutions that are under commonownership (i.e., are owned or controlledby the same individual, partnership orcorporation), the degree- or certificategrantinginstitution must provide morethan 50 percent of the educationalprogram. In this situation, a student isconsidered a regular student at thedegree- or certificate-granting institutionwhile taking a portion of theeducational program at anotherinstitution under common ownership.Under this regulatory framework, aconsortium agreement between twoeligible institutions that are not undercommon ownership is not subject to the50 percent limitation in § 668.5(a)(2)(ii).Moreover, § 668.5(a) does not apply toarticulation agreements under which

WReier-Aviles on DSKGBLS3C1PROD with RULES266870 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulationsinstitutions agree to accept credits whenstudents transfer from one institution toanother, or to cases where individualstudents transfer to a differentinstitution to complete their educationalprograms. Students who enroll in aninstitution and have college creditsaccepted on transfer that were earnedwhile in high school also do not comewithin the scope of this regulation.Changes: None.Comment: A number of commentersdisagreed with proposed § 668.5(a)(2),which has the effect of limiting therelative portions of an educationalprogram provided by more than oneinstitution under the same ownership orcontrol. Some commenters argued thatthe limit is arbitrary and inappropriatebecause—for all intents and purposes—institutions under common ownershipare the same. A few commenterssuggested that the regulations shouldfocus more narrowly on the institutionswith problems as opposed to allinstitutions under common ownership.Some commenters were unclear aboutwhat constitutes ‘‘common ownership’’and what types of written arrangementsare subject to the 50 percent limitationin § 668.5(a)(2)(ii).Some commenters indicated that theproposed regulations should apply to allinstitutions and not apply only to forprofitinstitutions. Several commentersexpressed concern about theapplicability of this provision to themany written arrangements betweenpublic institutions within a State andwhether a State is considered to ‘‘own’’all of its institutions. Other commentersasked the Department to clarify thatpublic and private nonprofit institutionsare not covered by the proposedlanguage in § 668.5(a)(2).In addition, commenters raisedconcerns about the potential impactthese regulations could have onstudents who move to another area andwant to transfer to another location ofthe same institution. One commenterstated that the proposed change woulddiscourage students who finish aprogram from transferring to anotherinstitution under the same control for ahigher level program.Some commenters objected to theDepartment’s assertions in the preambleof the NPRM that written arrangementsare used by institutions under commonownership to circumvent otherregulations and argued that theDepartment provided only anecdotalevidence to support the proposedchanges in § 668.5. Commenters statedthat institutions that are circumventingthe current regulations will find otheropportunities to do so and should facesanctions under the misrepresentationprovisions.Discussion: As indicated in thepreamble to the NPRM, the Departmentfocused its regulatory changes on thetypes of institutions and situationswhere problems have been identifiedrather than expanding a requirement foraccrediting agencies to review writtenarrangements between institutionsunder common ownership. We modeledthese regulations on the language in§ 668.5(c)(3)(ii)(B), regarding writtenarrangements between an eligibleinstitution and an ineligible institutionor organization because that section ofthe regulations refers to institutions thatare owned or controlled by the sameindividual, partnership, or corporation.We do not agree with the commenterwho stated that the regulations arearbitrary and inappropriate becauseinstitutions under common ownershipare the same entity. This is becauseinstitutions are approved to participatein the Federal student aid programs asseparate entities, and they mustindividually demonstrate eligibility asan institution, eligibility for theprograms they offer, programcompliance, cohort default rates,financial responsibility, andadministrative capability. Somelimitations on institutions that are basedon program measures can becircumvented if programs that appear tobe offered by one institution are actuallyoffered by another institution. Theprohibition in this regulation willensure that the institution providingmost of the program will be the oneassociated with the students that aretaking the program.Section 668.5(a)(2) does not apply topublic or private nonprofit institutionsbecause these institutions are not ownedor controlled by other entities andgenerally act autonomously. Somenonprofit institutions may havebusiness relationships throughmanagement agreements or serviceagreements where similar concernscould arise, but those instances areexpected to be infrequent and will beaddressed on a case-by-case basis.These provisions do not impact theability of individual students to transferto another location of the sameinstitution or to another institutionunder the same ownership or controleither to complete an educationalprogram or to enroll in a higher-levelprogram. When a student transfers to anew institution and enrolls for thepurpose of completing a degree orcertificate, the new institution becomesthe degree-granting institution.We agree that institutions thatcircumvent or otherwise violateVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00040 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2regulations should face appropriatesanctions.Changes: None.Comment: A number of commenterssupported the proposed changes to§ 668.5 regarding the limitations on theportion of the educational program thatmay be offered by another institutionunder a written arrangement, but soughtclarification on how to measure portionsof educational programs for thesepurposes. These commenters suggestedthat, for the purposes of determining thepercentage of the educational programprovided by each institution, we shouldtrack the provision of educationalservices on a programmatic basis ratherthan by the amount of coursework anindividual student may elect to take.Discussion: For purposes ofdetermining the portions of theeducational program provided by eachinstitution under any writtenarrangement under § 668.5, the degreegrantinginstitution is responsible forlimiting the amount of the program thatmay be taken from any other institution.Because an institution cannot offermore than 50 percent of an educationalprogram through another institution thatis under common ownership or control,if an institution offered an educationalprogram on campus and online (througha written arrangement with anotherinstitution under common ownership)and offered students the option of takingcourses by either method, the institutionmust ensure that each studentcompletes more than 50 percent of theeducational program on campus. If thesame institution enrolled students wholive beyond a reasonable commutingdistance to the campus and, therefore,take the online portion of the programfirst, the institution must be able todemonstrate that the students intend toattend on campus to complete at least50 percent of their educational program.Changes: None.Comment: Some commenters agreedthat the institution that grants thedegree or certificate should providemore than 50 percent of the educationalprogram, but suggested that monitoringfor compliance with this regulatoryprovision should be done by accreditingagencies rather than the Department.These commenters noted that to theextent that written arrangements arepart of a deliberative process related tothe development of curriculum andacademic requirements, they are part ofa decision-making process bestperformed by an institution’s facultyand leadership and best evaluated byaccrediting agencies. Some commentersstated that the Department should relyon accrediting agencies to setappropriate limits on the portion of an

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66871WReier-Aviles on DSKGBLS3C1PROD with RULES2educational program that can beprovided by the non-degree-grantinginstitution. One commenter stated that,currently, some national accreditingagencies allow students the opportunityto take more than 50 percent of theireducational program from the nondegree-grantinginstitution.Discussion: We acknowledge theimportant role that an institution’sfaculty and leadership play in thedevelopment of written arrangements aswell as the role of accrediting agenciesin monitoring the use of sucharrangements in accordance with theirstandards. However, as we learnedduring negotiations, accreditingagencies have differing practicesconcerning the review of writtenarrangements, and some accreditingagencies do not routinely review writtenarrangements. As such, we believe thatit is important to establish a thresholdfor the amount of the educationalprogram that can be offered under awritten arrangement by an institutionunder common ownership with a hostinstitution. Accrediting agencies mayestablish a more restrictive measure ifthey wish to do so.Changes: None.Comment: One commenter expressedconcern that proposed § 668.5(a) wouldaffect the Service Members OpportunityCollege Army Degree (SOCAD)Institution Agreements currently inplace, which allow 75 percent of aneducational program to be provided bythe non-degree-granting institution.However, the Contract Administrator ofSOCAD provided a separate commentstating that the proposed regulationswould not affect the currentrelationships provided to members ofthe military.Discussion: As noted earlier, theproposed limitations in § 668.5(a)(2)apply only to written arrangementsbetween two or more eligibleinstitutions that are owned or controlledby the same individual, partnership, orcorporation. To the extent that theeligible institutions that participate inSOCAD are not owned or controlled bythe same individual, partnership, orcorporation, they are not subject to theproposed changes in § 668.5(a)(2).Changes: None.Comment: One commenter supportedthe clarification that the enrollinginstitution has all the necessaryapprovals to offer an educationalprogram in the format in which it isbeing provided. Another commenterargued that it is nonsensical to requirethe enrolling institution to have all thesame approvals as the providinginstitution. The commenter stated thatwritten arrangements exist to permitflexibility for students and additionaloptions for students in pursuing theireducation goals. One of the benefits ofsuch arrangements, argued thecommenter, is to provide student accessto learning resources and opportunitiesthat the degree-granting institutioncannot provide. For example, writtenarrangements may afford studentsaccess to online learning from aninstitution with demonstratedcompetencies in providing distanceeducation. Our clarification in thepreamble to the NPRM that theinstitution enrolling the student musthave the approval to offer an educationprogram in the format in which it isbeing offered limits the ability forcampus-based schools to offer cuttingedgeonline delivery methods for someprograms even when these onlinecourses are provided by affiliated andfully accredited institutions. Onecommenter argued that the Departmenthad failed to provide data to supportthis limitation. Another commentersuggested that there should be atransition or grace period to allowinstitutions to get any needed approvals.Discussion: We agree that writtenarrangements are designed to provideeducational flexibility for students andto allow them access to resources andopportunities that may not be availablefrom their degree-granting institution.However, we believe that it is importantthat the degree-granting institution haveall the necessary approvals to offer theeducational program in the format inwhich it is being offered. We note thatonly in cases in which an institution isoffering more than 50 percent of aneducational program through distanceeducation is the institution required toreceive approval from its accreditingagency to offer distance education.Therefore, a student who is taking onlya few courses online as part of a writtenarrangement would not be likely totrigger the requirement that aninstitution seek approval from itsaccrediting agency to offer distanceeducation. We do not see a need for atransition or grace period to allowinstitutions to get any needed approvalsbecause we believe that mostinstitutions already have the necessaryapprovals in place.Changes: None.Requirements for ArrangementsBetween Eligible Institutions andIneligible Institutions or Organizations(§ 668.5(c))Comment: One commenter supportedthe expansion of the list of conditionsthat preclude an arrangement betweenan eligible institution and an ineligibleentity reflected in proposed § 668.5(c).VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00041 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2Another commenter stated that the listof exclusions in proposed § 668.5(c) isoverly broad. This commenter agreedwith the Department’s intent butpointed out that denial of recertification(§ 668.5(c)(iv)) may be due to a factorsuch as program length. The commentersuggested that we narrow § 668.5(c)(iv)to cover only denials of recertificationthat are based on the institution’s lackof administrative capability or financialresponsibility.Discussion: We appreciate the supportfor the expansion of the list ofconditions that preclude an arrangementbetween an eligible institution and anineligible entity reflected in § 668.5(c).We disagree with the commenter whorecommended that we limit the denialof recertification condition to cover onlythose recertification denials that arebased on the institution’s lack ofadministrative capability or financialresponsibility. An institution that has itsrecertification denied because it doesnot offer one or more programs ofsufficient length to qualify to participatein the Title IV, HEA programs hascommitted a serious programmaticviolation that the Department believesshould be included in this prohibition.Changes: None.Disclosures to Students (§§ 668.5(e) and668.43(a)(12))Comment: Several commenterssupported the requirement thatinstitutions providing an educationalprogram under § 668.5(a), (b), or (c)inform students when part of theireducational program is provided by adifferent institution and of additionalcharges that the student may incurwhen enrolling in an educationalprogram that is provided in part byanother institution. They noted that allcommunication to students should beclear, user-friendly, and understandable.One commenter suggested that werevise § 668.43(a)(12)(ii) to require theinstitution to include in its descriptionof its written arrangements the Websites along with the names and locationsof the other institutions or organizationsthat are providing the portion of theeducational program that the degree- orcertificate-granting institution is notproviding. Another commenter askedwhether § 668.43(a)(12)(iv) requires theinstitution to include in its descriptionof its written arrangements an estimateof the costs incurred by students takingonline courses (e.g., the costs ofpurchasing a computer and obtainingInternet access).A few commenters requestedclarification on whether the requiredstudent notifications apply only toeducational programs that require

66872 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and RegulationsWReier-Aviles on DSKGBLS3C1PROD with RULES2students to take coursework at anotherinstitution or whether they apply toinstitutions that enter into arrangementswhen students choose to takecoursework at another institution. Thecommenters stated that if thenotifications apply to both situations,the regulations would create anoverwhelming burden for institutions.These commenters expressed concernthat this burden would result ininstitutions limiting the use of writtenarrangements and that this, in turn,would result in less choice for students.Discussion: We appreciate the supportfor requiring additional disclosuresregarding the portion of a program beingprovided by a different institution andthe additional costs that a student mayincur under such an arrangement. Weagree that these disclosures should beclear and understandable. While weagree that providing the Web site of thenon-degree-granting institution in thedisclosures may be helpful to students,on balance, we determined thatrequiring that particular disclosure isnot necessary and that the decision toinclude such information in thedisclosure should be left to the degreegrantinginstitution’s discretion.As noted by the commenters, therequired disclosures include disclosureof the estimated additional costsstudents may incur as the result ofenrolling in an educational program thatis provided, in part, under a writtenarrangement. Therefore, when thecoursework provided through thewritten arrangement is provided online,it would be appropriate to includeestimated additional costs such as thecosts of purchasing a computer andobtaining Internet access.As stated in the preamble to theNPRM, the disclosure requirementsreflected in §§ 668.5(e) and668.43(a)(12) apply to writtenarrangements between or amonginstitutions under which the degreegrantinginstitution can offereducational programs that are provided,in part, by another institution (i.e., on aneducational program-by-program basis)and not to individual, student-initiatedwritten arrangements. Weacknowledged that requiring disclosuresto individual, student-initiated writtenarrangements would be impractical,burdensome and unnecessary becausethe student is a party to the arrangementand would already have the informationrequired to be disclosed.Changes: None.Incentive Compensation (§ 668.14(b))GeneralComment: A significant number ofcommenters supported the Secretary’sproposed changes to § 668.14(b)(22),which they stated would align theregulations with the statute andcomprehensively ban the use ofcommissions, bonuses, and other directforms of compensation based on successin securing enrollments or the award offinancial aid. These commenterssupported our efforts to ensure theintegrity of the Federal student aidprograms and to protect students againstaggressive admissions and recruitmentpractices. They agreed that the currentregulations, which included thelanguage describing permittedcompensation activities (i.e., ‘‘safeharbors’’), did not achieve the goalsintended by the Congress. Thesecommenters expressed the belief thatthe current safe harbors enableinstitutions to circumvent the law.Several commenters stated that theproposed definitions reflected in§ 668.14(b)(22)(iii) would be particularlyhelpful and expressed appreciation forour readiness to provide broad andappropriate guidance to institutions,rather than opinions on an individualinstitution’s arrangements, in evaluatingcompensation issues.Numerous commenters, particularlygroups representing admissionscounselors, specifically supported thedeletion of the twelve safe harbors. Thegroups representing admissionscounselors stated that they believe thatcounselors should be compensated inthe form of a fixed salary. They furtherargued that because the admissionsprofession is a form of counseling,admissions professionals can onlydischarge their ethical obligations ifthey are free of vested interests in theenrollment decisions made by theprospective students they advise. Thecommenters representing admissionspersonnel also noted that elimination ofthe safe harbors would help prevent arecruiter’s financial interest fromoverriding a student’s academic interest.Discussion: The Secretary appreciatesthe support offered by the commenters.Changes: None.Comment: A number of commenterswho expressed support for theSecretary’s goal in proposing changes to§ 668.14(b)(22) requested modificationsto the regulatory language or to thepreamble discussion. The majority ofthese commenters requestedclarifications to assist institutions inunderstanding whether particularcompensation activities would beVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00042 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2prohibited under proposed§ 668.14(b)(22).Many commenters opposed theproposed changes and appealed for theDepartment to retain the current safeharbors. They challenged the legaladequacy of the changes and assertedthat the need for the proposed changesremained unsupported by any evidenceor data. Some commenters alleged thatthe Department had failed to specifysound reasons for the change in policyand instead had offered nonspecificreferences to its reviews ofcompensation practices andexpenditures of resources.Other commenters asked whether allpayments permitted under the currentsafe harbors would be prohibited underthis new regulatory framework.Discussion: Under section 410 of theGeneral Education Provisions Act (20U.S.C. 1221e–3), the Secretary has theauthority to make, promulgate, issue,rescind, and amend rules andregulations governing the manner ofoperation of, and governing applicableprograms administered by, theDepartment. For regulations governingthe title IV, HEA programs, theSecretary also must ensure that thedevelopment and issuance of thoseregulations comply with the negotiatedrulemaking requirements in section 492of the HEA. In 2002, the Departmentadopted the incentive compensationsafe harbors reflected in current§ 668.14(b)(22)(ii) under the statutoryauthority granted in GEPA and thenegotiated rulemaking requirements inthe HEA. The Department adopted thecurrent safe harbors based on a‘‘purposive reading of section 487(a)(20)of the HEA.’’ (67 FR 51723 (August 8,2002).) Since that time, however, theDepartment’s experience hasdemonstrated that unscrupulous actorsroutinely rely upon these safe harbors tocircumvent the intent of section487(a)(20) of the HEA. As such, ratherthan serving to effectuate the goalsintended by Congress through itsadoption of section 487(a)(20) of theHEA, the safe harbors have served toobstruct those objectives and havehampered the Department’s ability toefficiently and effectively administer thetitle IV, HEA programs.For example, it has been theDepartment’s experience that manyinstitutions routinely use employeeevaluation forms that acknowledge thatthe number of students enrolled is animportant, if not the most important,variable, in determining recruitercompensation. These forms also listcertain qualitative factors that areostensibly considered in makingcompensation decisions. The forms, on

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66873WReier-Aviles on DSKGBLS3C1PROD with RULES2their face, appear to demonstratecompliance with the first safe harbor,which permits compensation schemesthat are not ‘‘solely’’ based on thenumber enrolled. However, theDepartment has been repeatedly advisedby institutional employees that theseother qualitative factors are not reallyconsidered when compensationdecisions are made, and that they areidentified only to create the appearanceof title IV compliance. It is clear fromthis information that institutions aremaking actual compensation decisionsbased exclusively on the numbers ofstudents enrolled.The Department’s need to look behindthe documents that institutions allegethey have used to make recruitercompensation decisions requires theexpenditure of enormous amounts ofresources, and has resulted in aninability to adequately determinewhether institutions are in compliancewith the incentive compensation ban inmany cases.For these reasons, we believe it isappropriate to remove the safe harborsand instead to require institutions todemonstrate that their admissionscompensation practices do not provideany commission, bonus, or otherincentive payment based in any part,directly or indirectly, upon success insecuring enrollments or the award offinancial aid to any person or entityengaged in any student recruitment oradmission activity or in makingdecisions regarding the award of title IV,HEA program funds. We believe thatinstitutions can readily determine if apayment or compensation is permissibleunder section 487(a)(20) of the HEA byanalyzing—(1) Whether it is a commission, bonus,or other incentive payment, defined asan award of a sum of money orsomething of value paid to or given toa person or entity for services rendered;and(2) Whether the commission, bonus,or other incentive payment is providedto any person based in any part, directlyor indirectly, upon success in securingenrollments or the award of financialaid, which are defined as activitiesengaged in for the purpose of theadmission or matriculation of studentsfor any period of time or the award offinancial aid.If the answer to each of thesequestions is yes, the commission, bonus,or incentive payment would not bepermitted under the statute.Therefore, going forward, actions thatwere permitted under current§ 668.14(b)(22) will neither beautomatically prohibited, norautomatically permitted. Instead,institutions will need to re-examinetheir practices to ensure that theycomply with § 668.14(b)(22). To theextent that a safe harbor created anexception to the statutory prohibitionfound in section 487(a)(20) of the HEA,its removal would establish that such anexception no longer exists.Changes: None.Current Safe HarborsComment: Several commenters statedthat removing the safe harbor fromcurrent § 668.14(b)(22)(ii)(B), whichpermits compensation to recruitersbased upon enrollment of students inineligible title IV, HEA programs, iscontrary to congressional intent. Thesecommenters stated that the HEA was notintended to regulate other educationalendeavors of the institution. In addition,one commenter asked about a specificpractice permitted by some Statecosmetology boards that allows twonon-title IV, HEA eligible programs tobe combined and in that form, tobecome eligible for title IV, HEA aid.Another commenter asked about howthe removal of this safe harbor wouldimpact advanced education classes thatare not title IV eligible.Discussion: In our experience,institutions have used the safe harborreflected in § 668.14(b)(22)(ii)(B) to steerstudents away from title IV, HEAprograms. We believe that retaining thissafe harbor would continue to allowinstitutions to manipulate the system byinitially enrolling students in non-titleIV, HEA eligible programs so that theinstitutions pay incentive compensationto recruiters based on such enrollments,only to later re-enroll the same studentsin title IV, HEA eligible programs.We do not agree that the removal ofthis safe harbor is contrary tocongressional intent. In particular, theonly exception Congress provided insection 487(a)(20) of the HEA is to therecruitment of foreign students residingin foreign countries who are not eligibleto receive Federal student assistance.For the reasons addressed in thepreceding discussions, we believe it isinappropriate to carve out a furtherexception to include non-foreignstudents who are not immediatelyreceiving Title IV funds.Moreover, as to the commentregarding cosmetology schools, there isnothing in the identified practice thatsupports allowing compensation to bepaid to recruitment personnel that isotherwise inconsistent with section487(a)(20) of the HEA.Finally, to the extent that the HEA’sban on the payment of incentivecompensation is not otherwise limitedto students enrolled in title IV, HEAVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00043 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2eligible programs, institutions need tomake sure that they are in compliancewith the prohibition on incentivecompensation regardless of the nature ofthe particular program of instruction.Changes: None.Comment: A few commentersexpressed concerns about the safeharbor reflected in current§ 668.14(b)(22)(ii)(C), which permitscompensation to recruiters who arrangecontracts between an institution and anemployer, where the employer pays thetuition and fees for its employees (eitherdirectly to the institution or byreimbursement to the employee). Onecommenter noted that because underthis type of contract there is no directcontact between the entity or individualseeking the arrangement and thestudent, these contracts seem to bepermissible. Another commenter askedwhether the following type ofarrangement would be permissiblewithout this safe harbor: An employeesecures contracts for non-degree trainingthat is not eligible for title IV, HEAprogram funding, and such contracts arebilled at a flat rate and are paid for bythe employer. This commenterspecifically asked whether the employeein this situation may be compensatedbased on revenue from those contracts.Discussion: This safe harbor permitscompensation that is ultimately basedupon success in securing enrollments.Because this is inconsistent with section487(a)(20) of the HEA, we believe thatthe safe harbor should not be retainedin these final regulations. We agree withthe commenter that in some instancescompensation to recruiters who arrangecontracts between an institution and anemployer, where the employer pays thetuition and fees for its employees,would be permissible under the ban onincentive compensation. As previouslydiscussed, we encourage institutions toapply the two-part test provided withinthe NPRM in evaluating whether aparticular compensation practice ispermissible. Given the number ofpossible variables within any particularproposal, the Department is notprepared to say that the examplesgenerally offered by commenters willalways be permissible, but weacknowledge that there arecircumstances where such arrangementsmay prove to be compliant with theHEA.We strongly believe that institutionsdo not need to rely on safe harbors toprotect compensation that complieswith section 487(a)(20) of the HEA.Ultimately, the institution mustdetermine whether its compensation isbased in any part, directly or indirectly,on securing enrollments or the award of

WReier-Aviles on DSKGBLS3C1PROD with RULES266874 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulationsfinancial aid. If it is not, suchcompensation would continue to bepermissible even with the removal ofthe safe harbor from current§ 668.14(b)(22)(ii)(C).Changes: None.Comment: A number of commentersvoiced their support for the safe harborfrom current § 668.14(b)(22)(ii)(E),which permits compensation basedupon a student’s successfullycompleting his or her educationalprogram or one academic year of his orher educational program, whichever isshorter. Some commenters expressedconcern that removal of this safe harborwould eliminate an important safeguardfor students because this safe harborencourages institutions to admit onlyqualified students. Other commentersnoted that to disallow incentivecompensation based on completion ofan educational program is contrary tothe Administration’s stated goal ofstudent retention. Several commenterssuggested that the Department shouldmeasure the positive effect thatincentive payments based oncompletion of an educational programcan have on students’ educationalexperience. Another commenter askedwhether payments based on a graduatedstudent’s employment in the student’sfield of study would be permitted underthe new regulatory framework forincentive compensation.Discussion: The Department believesthat an institution’s resolute andongoing goal should be for its studentsto complete their educational programs.Employees should not be rewardedbeyond their standard salary or wagesfor their contributions to thisfundamental duty. The safe harbor incurrent § 668.14(b)(22)(ii)(E) permitscompensation that is ‘‘indirectly’’ basedupon securing enrollments—that is,unless the student enrolls, the studentcannot successfully complete aneducational program. With theproliferation of short-term, acceleratedprograms, and the potential for shorterand shorter programs, we have seenincreased efforts by institutions to relyupon this safe harbor to incentivizerecruiters. Accordingly, we believe thatthe retention of the current safe harborcan be readily exploited, and that it isnot necessary for institutions toappreciate the value of keeping studentsin school. On balance, we believe thatthe proliferation of these types ofprograms justify any benefit that thissafe harbor allegedly provided studentsby encouraging institutions to admitonly qualified students.We disagree with the commenter whostated that removal of this safe harbor isinconsistent with the Administration’sgoal of increasing student retention inpostsecondary education. Institutionsshould not need this safe harborallowing incentive payments torecruiters to demonstrate theircommitment to retaining studentswithin their program of instruction.In addition, there is nothing about themaking of incentivized payments torecruiters based upon student retentionthat enhances the quality of a student’seducational experience. If the programof instruction has value and isappropriate for a student’s needs, astudent will likely enjoy a positiveeducational experience regardless of themanner in which the student’s recruiteris compensated.Finally, the Department’s experiencehas shown that some institutions payincentive compensation to recruitersbased upon claims that the studentswho the recruiter enrolled graduatedand received jobs in their fields ofstudy. Yet, included among the abusesthe Department has seen, for example, isa circumstance where a student’s fieldof study was culinary arts, and the socalledemployed student was workingan entry-level position in the fast foodindustry. Such a position did notrequire the student to purchase a highereducation ‘‘credential.’’ As a result, webelieve that paying bonuses to recruitersbased upon retention, completion,graduation, or placement remain inviolation of the HEA’s prohibition onthe payment of incentive compensation.Changes: None.Comment: Many commentersquestioned our rationale for eliminatingthe safe harbor in current§ 668.14(b)(22)(ii)(G), which exemptsmanagerial and supervisory employeeswho do not directly manage orsupervise employees who are directlyinvolved in recruiting or admissionsactivities, or the awarding of title IV,HEA program funds from theprohibition on receiving incentivepayments. These commenters arguedthat a bright line designation is neededand that the incentive compensationban should only apply to employeeswho are involved in direct recruitmentor admission of students or decisionsinvolving the award of title IV, HEA aid.Others recommended that we retain thissafe harbor, and that we clarify that thewords ‘‘indirectly or directly’’ do notapply to the determination of whichpersons are covered by the prohibition.Several commenters expressed theirconcerns about having the regulationsprohibit compensation practices at anylevel of an organization, no matter howfar removed from actual recruitment,admissions, or financial aid activity.These commenters argued that such anVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00044 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2approach would prevent institutionsfrom evaluating top management withrespect to student population metrics orany other business or organizationalmetric that is a function of studentenrollment.A few commenters raised morespecific concerns about thecompensation of top college officials insituations where the president attendsan open house or speaks with potentialstudents who the institution isrecruiting, either in a group orindividually. Some commenters alsoasked whether the proposed regulationswould permit a president to receive abonus or other payment if one factor inattaining the bonus or other paymentwas meeting an institutionalmanagement plan or goal that includedincreasing minority enrollment by acertain percentage.Finally, a few commenters askedwhether institutions can still rewardathletic coaches whose student athletesstay in school and graduate.Discussion: We intend the incentivecompensation ban in § 668.14(b)(22)(i)to apply to all employees at aninstitution who are engaged in anystudent recruitment or admissionactivity or in making decisionsregarding the award of title IV, HEAprogram funds. We interpret theseemployees to include any higher levelemployee with responsibility forrecruitment or admission of students, ormaking decisions about awarding titleIV, HEA program funds. To make thisclearer, we are revising§ 668.14(b)(22)(iii) to add a definitionfor the term entity or person engaged inany student recruitment or admissionactivity or in making decisions aboutthe award of financial aid. This newdefinition expressly includes anyemployee who undertakes recruiting oradmitting of students or who makesdecisions about and awards title IV,HEA program funds, as well as higherlevel employees as specified.Therefore, the actions of a collegepresident could potentially come withinthe HEA’s prohibition on the paymentof incentive compensation. However,the Department does not see how mereattendance at an open house or speakingwith prospective students about thevalue of a college education or thevirtues of attending a particularinstitution would violate the incentivecompensation plan. Other activitiesshould be evaluated within the contextof the Department’s previouslydiscussed two-part test to receiveassistance as to whether a particularactivity is permissible.Finally, recruitment of studentathletes is not different from

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66875WReier-Aviles on DSKGBLS3C1PROD with RULES2recruitment of other students. Incentivecompensation payments to athleticdepartment staff are governed by therestrictions included in § 668.14(b)(22).If the payments are made based onsuccess in securing enrollments or theaward of financial aid, the payments areprohibited; however, the Departmentdoes not consider ‘‘bonus’’ paymentsmade to coaching staff or other athleticdepartment personnel to be prohibited ifthey are rewarding performance otherthan securing enrollment or awardingfinancial aid, such as a successfulathletic season, team academicperformance, or other measures of asuccessful team.Changes: We have added a definitionof the term entity or person engaged inany student recruitment or admissionactivity or in making decisions aboutthe award of financial aid to§ 668.14(b)(22)(iii). New paragraph(b)(22)(iii)(C) of this section providesthat the term means—(1) With respect to an entity, anyinstitution or organization thatundertakes the recruiting or theadmitting of students or that makesdecisions about and awards title IV,HEA program funds; and(2) With respect to a person, anyemployee who undertakes recruiting oradmitting of students or who makesdecisions about and awards title IV,HEA program funds, and any higherlevel employee with responsibility forrecruitment or admission of students, ormaking decisions about awarding titleIV, HEA program funds.Comment: One commenter asked howthe removal of the safe harbor fromcurrent § 668.14(b)(22)(ii)(H), whichpermits an institution to provide a tokengift not to exceed $100 to an alumnusor student provided that the gift is notin the form of money and no more thanone gift is provided annually to anindividual, will affect institutionscompensating students for referrals. Thecommenter asked whether an individualwho is referred can be given ascholarship for friends or family of theindividual who is referring or a tuitionwaiver.Discussion: Section 668.14(b)(22)does not prohibit institutions fromproviding any commission, bonus, orincentive payment to students who arereferrals. Therefore, an individual whois referred to an institution should beable to receive whatever scholarshipmoney or tuition assistance that he orshe may otherwise be eligible to receivewithout violating the HEA.Changes: None.Comment: Several commenters askedfor clarification regarding the safeharbor in current § 668.14(b)(22)(ii)(J)permitting an institution to awardcompensation for Internet-basedrecruitment and admission activitiesthat provide information about theinstitution to prospective students, referprospective students to the institution,or permit prospective students to applyfor admission online. Specifically, thecommenters asked us to clarify thatinstitutions can make payments to thirdparties that provide Internet-basedrecruitment and admission services aslong as they do not otherwise violate thestatutory prohibition. Other commentersasked for confirmation that clickthroughpayments are permitted if thethird party is paid based on those whoclick, not those who enroll. Othercommenters requested examples ofpermitted relationships.Discussion: The HEA does notprohibit advertising and marketingactivities by a third party, as long aspayment to the third party is based onthose who ‘‘click’’ and is not based inany part, directly or indirectly, on thenumber of individuals who enroll or areawarded financial aid; therefore, theregulatory language would not prohibitsuch click-through payments. Further,institutions may make payments to thirdparties and entities with formal thirdpartyarrangements as long as the partiesare not compensated in any part,directly or indirectly, based on successin securing enrollments or the award offinancial aid.Changes: None.Comment: Many commenters offeredsuggestions regarding the safe harborsreflected in current § 668.14(b)(22)(ii)(K)and (b)(22)(ii)(L), which both involvepayments to third parties for sharedservices. A number of commentersrepresenting organizations that providea variety of services to institutions askedfor clarification about their continuedability to assist institutions in this way,as long as the compensationarrangements are not prohibited by theHEA. Many commenters asked whethertuition-sharing arrangements with thirdpartiesto secure servicers that includerecruitment would be permitted. Theyquestioned whether these arrangementsshould be treated the same asarrangements involving volume-drivenpayments. Several commentersexpressed concern about the affect theseregulations will have on third partieswho provide services to assist studentswho study abroad.One commenter suggested thatentities that provide enrollment servicesbe able to elect to be treated as ‘‘thirdpartyservicers,’’ with all of therestrictions, obligations, liabilities,reporting requirements, and oversightthat accompany that status.VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00045 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2Other commenters asked whetherinstitutions would be held accountablefor the actions of third-party servicers.A few commenters also requested theDepartment to provide examples ofarrangements with third parties thatwould be permitted under the newregulatory framework (i.e., with theremoval of the safe harbors from current§ 668.14(b)(22)(ii)(K) and (b)(22)(ii)(L)).Discussion: The Departmentunderstands the value of partnershipsbetween institutions and entities thatprovide various support andadministrative services to theseinstitutions. Such arrangements arepermitted under these regulations aslong as no entity or person engaged inany student recruitment or admissionactivity or in making decisions aboutthe award of financial aid (as defined in§ 668.14(b)(22)(iii)(C)) is compensatedin any part, directly or indirectly, basedupon success in securing enrollments orthe award of financial aid.In addition, as the Department statedin the NPRM, arrangements underwhich an institution is billed based onthe number of student files that areprocessed (e.g., a volume-drivenarrangement) are not automaticallyprecluded, provided that payment is notbased in any part, directly or indirectly,on success in securing studentenrollments or the award of financialaid.Further, it is longstanding Departmentpolicy that an institution is responsiblefor the actions of any entity thatperforms functions and tasks on theinstitution’s behalf. The definition of athird-party servicer is established in§ 668.2; the responsibilities of a thirdpartyservicer are described in § 668.25.No additional language is needed.Changes: None.Permissible Compensation ActivitiesComment: Many commentersrequested clarification on the types ofcompensation that would be permittedunder proposed § 668.14(b)(22) andsection 487(a)(20) of the HEA. A fewcommenters who supported theproposed changes to § 668.14(b)(22)suggested additional alterations tostrengthen the language—such asmoving language we had included inthe NPRM preamble to the regulatorytext—to ensure that incentive paymentsare not based ‘‘in any part’’ on successin securing enrollments or financial aid.In addition, several commenterssuggested that more than two changes inpay in a calendar year should beconsidered evidence that the paymentsare incentive compensation.These commenters also requestedguidance about allowable salary

WReier-Aviles on DSKGBLS3C1PROD with RULES266876 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulationsadjustments, including whether raises(for promotions) would be permittedand whether reductions (for demotions)would be permitted. Some commentersrequested clarification on whether asalary could be paid. One commenterasked whether benefits could be paid atdifferential rates by class of employee oron a sliding scale by salary.Discussion: Based on these comments,the Secretary agrees that somemodifications to the language inproposed § 668.14(b)(22) would behelpful to ensure that incentivepayments are not based ‘‘in any part’’ onsuccess in securing enrollments orfinancial aid. In particular, we agree thatit is appropriate to add language toavoid confusion as to whether some partof an individual’s compensation may bebased on incentive compensation. Forthis reason, we are revising§ 668.14(b)(22)(i) to reinforce the ideathat compensation must not be based inany part, directly or indirectly, onsuccess in securing enrollments or theaward of financial aid.In addition, we support revising theregulations to provide that an employeewho receives multiple compensationadjustments in a calendar year isconsidered to have received adjustmentsbased upon success in securingenrollments or the award of financialaid in violation of the incentivecompensation ban in § 668.14(b)(22) ifthose adjustments create compensationthat is based in any part, directly orindirectly, upon success in securingenrollments or the award of financialaid.Finally, with respect to the requestsfor clarification on allowable salaryadjustments, we note that individualsmay be compensated in any fashion thatis consistent with the prohibitionidentified in section 487(a)(20) of theHEA. Accordingly, while notcommenting on any specificcompensation structure that aninstitution may choose to implement,the Department recognizes, for example,that institutions often maintain ahierarchy of recruitment personnel withdifferent amounts of responsibility. Aslong as an institution complies withsection 487(a)(20) of the HEA, it may beappropriate for an institution to havesalary scales that reflect an addedamount of responsibility. Institutionsalso remain free to promote and demoterecruitment personnel, as long as thesedecisions are consistent with the HEA’sprohibition on the payment of incentivecompensation. Finally, it is appropriateto pay recruitment personnel a fixedsalary.Changes: We have revised§ 668.14(b)(22)(i)(A) (which has beenredesignated as § 668.14(b)(22)(i)) toclarify that a prohibited incentivecompensation includes anycommission, bonus, or other incentivepayment based in any part, directly orindirectly, upon success in securingenrollments or the award of financialaid to any person or entity engaged inany student recruitment or admissionactivity or in making decisionsregarding the award of title IV, HEAprogram funds.In addition, we have redesignatedproposed § 668.14(b)(22)(i)(B) as§ 668.14(b)(22)(i)(A) and added a newparagraph (b)(22)(i)(B) to provide that,for the purposes of this paragraph, anemployee who receives multipleadjustments to compensation in acalendar year and is engaged in anystudent enrollment or admissionactivity or in making decisionsregarding the award of title IV, HEAprogram funds is considered to havereceived such adjustments based uponsuccess in securing enrollments or theaward of financial aid if thoseadjustments create compensation that isbased in any part, directly or indirectly,upon success in securing enrollments orthe award of financial aid.Finally, we have revised§ 668.14(b)(22)(ii) to provide thateligible institutions, organizations thatare contractors to eligible institutions,and other entities may make merit-basedadjustments to employee compensationprovided that such adjustments are notbased in any part, directly or indirectly,upon success in securing enrollments orthe award of financial aid.Comment: Commenters raised anumber of questions related to the twoparttest the Department has offered thatwill demonstrate whether acompensation plan or paymentcomplies with the statute and theimplementing regulations. Manycommenters seemed confused about theapplication of the two-part test andraised a wide range of specific questionsabout employment possibilities andcompensation practices. For example,some commenters asked for clarificationabout the types of items that could beconsidered something of value, such asletters of recommendation to volunteerinterns.Several commenters asked that weinclude the language of the two-part testin the regulatory text.Finally, one commenter asserted thatthe two-part test will not add clarity oncompensation issues but instead willraise questions about the legality ofcertain types of merit-basedcompensation systems that seem to falloutside the scope of compensationVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00046 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2restriction but that could fail to satisfythe two-part test.Discussion: As discussed earlier inthis preamble, the Department hasdescribed a two-part test for evaluatingwhether a payment constitutes acommission, bonus, or other incentivepayment based in any part, directly orindirectly, upon success in securingenrollments or the award of financialaid to any person or entity engaged inany student recruitment or admissionactivity or in making decisionsregarding the award of title IV, HEAprogram aid in violation of the banreflected in § 668.14(b)(22)(i). TheDepartment first described this test inthe preamble to NPRM. (See 75 FR34818 (June 18, 2010).) The test consistsof the following two questions, theanswers to which will permit aninstitution to know whether thecompensation is considered incentivecompensation:(1) Whether the payment is acommission, bonus, or other incentivepayment, defined as an award of a sumof money or something of value paid toor given to a person or entity forservices rendered; and(2) Whether the commission, bonus,or other incentive payment is providedto any person based in any part, directlyor indirectly, upon success in securingenrollments or the award of financialaid, which are defined as activitiesengaged in for the purpose of theadmission or matriculation of studentsfor any period of time or the award offinancial aid.If the answer to each of thesequestions is yes, the payment would notbe permitted under section 487(a)(20) ofthe HEA or § 668.14(b)(22). TheDepartment merely provided this test asa tool to help institutions evaluatecompensation practices they mayconsider implementing. The test doesnot add any substantive requirementsthat are not otherwise included in§ 668.14(b)(22)(i). For this reason, we donot think it is necessary or appropriateto include the text of the test in theregulations.The Department further notes that, asa general matter, it does not believe thatthe provision of letters ofrecommendation to volunteer internswould constitute a proscribed incentivepayment.Finally, we disagree with thecomment that the two-part test will notserve generally to answer institutions’questions regarding a particularcompensation plan. As previouslystated, we believe that the prohibitionidentified in section 487(a)(20) of theHEA is clear and that institutionsshould not have difficulty maintaining

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66877WReier-Aviles on DSKGBLS3C1PROD with RULES2compliance with the new regulatorylanguage. To the extent an institutionhas questions about what it intends todo, the Department has offered the twoparttest as an aid to reaching a properconclusion. To the extent that aninstitution does not wish to use the testto assist it in evaluating its practices, itis not required to do so.Changes: None.Comment: A number of commentersquestioned the use of the term‘‘indirectly’’ in the prohibition onincentive compensation in proposed§ 668.14(b)(22). They expressed concernabout the broad scope of this term andbelieved that interpretive discord willresult from its inclusion in§ 668.14(b)(22). These commentersargued that any compensation involvingan institution of higher education isbased indirectly on success in securingenrollments and asked how far removedan activity must be in order for it not tobe considered indirectly related. Othercommenters specifically requested thatwe define the term ‘‘indirectly.’’Several commenters suggested thatproposed § 668.14(b)(22)(i)(A) shoulduse the term ‘‘solely’’ rather than‘‘directly or indirectly’’ (i.e., ‘‘it will notprovide any commission, bonus, orother incentive payment based solelyupon success’’ rather than ‘‘it will notprovide any commission, bonus, orother incentive payment based directlyor indirectly upon success’’). These andother commenters alleged that thelanguage in proposed§ 668.14(b)(22)(i)(A) is not consistentwith congressional intent. Many of thesecommenters cited to the conferencereport, which states that the use of theterm ‘‘indirectly’’ does not mean thatinstitutions are prohibited from basingsalaries on merit; they may not,however, be based ‘‘solely’’ on thenumber of students recruited, admitted,enrolled, or awarded.Discussion: The Department does notagree with the view that the use of thephrase ‘‘directly or indirectly’’ will leadto interpretation problems or that it isinconsistent with congressional intent.Given the Department’s experience withhow the safe harbor in current§ 668.14(b)(22)(i)(A), which permits upto two salary adjustments per yearprovided that they are not based solelyon the number of students recruited,admitted, enrolled, or awarded financialaid, has been abused, the Departmentdoes not believe that it servescongressional intent to limit theincentive compensation ban in section487(a)(20) of the HEA to those paymentsthat are based solely upon success insecuring enrollments or the award offinancial aid. The Department believesthat, consistent with section 487(a)(20)of the HEA, incentive payments shouldnot be based in any part, directly orindirectly, on success in securingenrollments or the award of financialaid.The safe harbor in current§ 668.14(b)(22)(i)(A) has led toallegations in which institutionsconceded that their compensationstructures included consideration of thenumber of enrolled students, butaverred that they were not solely basedupon such numbers. In some of theseinstances, the substantial weight of theevidence suggested that the other factorspurportedly analyzed were not trulyconsidered, and that, in reality, theinstitution based salaries exclusivelyupon the number of students enrolled.After careful consideration, theDepartment determined that removal ofthe safe harbor was preferable toretaining but revising the safe harbor.For example, we considered suggestionsthat we change the word solely to someother modifier, such as ‘‘primarily’’ or‘‘substantially,’’ but ultimatelydetermined that doing so would notcorrect the problem. With such achange, we believe the evaluation of anyalternative arrangement would merelyshift to whether the compensation was‘‘primarily’’ or ‘‘substantially’’ basedupon enrollments. Such a shift wouldnot reduce the ability of anunscrupulous actor to claim that studentenrollments constituted this lesserfactor within a recruiter’s evaluationand would foster the same sorts ofabuses that have become apparent byinstitutions attempting to assert thattheir compensation practices are notsolely based on enrollments.Changes: None.Comment: A number of commentersraised questions about proposed§ 668.14(b)(22)(ii), which allows eligibleinstitutions, organizations that arecontractors to eligible institutions, andother entities to make merit-basedadjustments to employee compensationprovided that such adjustments are notbased upon success in securingenrollments or the award of financialaid. They expressed concern thatlimiting merit-based adjustments tothose that are not based upon success insecuring enrollments or the award offinancial aid would make it impossiblefor them to award merit increases foremployees whose job it is to enrollstudents. They noted that there are nostandard evaluative factors concerningenrollment that are not directly orindirectly based on securingenrollments.Some commenters requestedclarification about whether an increaseVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00047 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2could be based on seniority or length ofemployment, including whether aretention bonus could be paid based onthe employee’s retention at theinstitution if it is paid evenly to allemployees.Some commenters argued that theregulations should recognize and permitcompensation based on the performanceof, and success at, the core job functionsof admissions representatives andfinancial aid officials. They questionedhow it would be possible to measureemployee performance withoutevaluating success. They asked that weprovide concrete guidance about howinstitutions can make salaryadjustments without violating theincentive compensation prohibition.Discussion: Section 668.14(b)(22)does not prohibit merit-basedcompensation for financial aid oradmissions staff. An institution may usea variety of standard evaluative factorsas the basis for this type ofcompensation; however, consistent withsection 487(a)(20) of the HEA and§ 668.14(b)(22), an institution may notconsider the employee’s success insecuring student enrollments or theaward of financial aid in providing thistype of compensation. Further, anincrease in compensation that is basedin any part either directly or indirectlyon the number of students recruited orawarded financial aid is prohibited.As previously mentioned, manyinstitutions currently claim to evaluatetheir recruitment personnel on a seriesof qualitative factors, as well as on thenumber of enrolled students, todemonstrate compliance with the safeharbor reflected in current§ 668.14(b)(22)(i)(A), which prohibitscompensation based solely on thenumber of students enrolled. As aresult, it appears that these institutionshave identified other factors that are notdependent upon student enrollmentsthat we believe could by themselves beconsidered for making a merit-basedcompensation decision. In addition,seniority or length of employment is anappropriate basis for making acompensation decision separate andapart from any consideration of thenumbers of students enrolled. Finally,as many commenters from groupsrepresenting admissions personnelnoted, as a general matter, recruitmentpersonnel should be compensated witha fixed salary to ensure that their abilityto focus on what is in a student’s bestinterest is not compromised.Changes: None.Comment: Several commenters raisedissues about the relationship between aninstitution’s goals and payments toemployees. Many asked whether

WReier-Aviles on DSKGBLS3C1PROD with RULES266878 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulationsemployees could be rewarded throughprofit-sharing or other payments forsuccess in meeting retention,graduation, and placement goals as longas they are not rewarded for the numberof students recruited and admitted.These commenters requested that wedefine an acceptable percentage of anemployee’s compensation adjustmentthat can be based on the number ofstudents recruited, admitted, enrolled,or awarded financial aid.One commenter asked that we clarifywhether payments tied to overallinstitutional revenues, including profitsharing,pension, and retirement plansare allowed. A number of commentersasked more broadly whether such planswould be permissible. A fewcommenters requested changes toincorporate the distribution of profitsharingor bonus payments undercertain circumstances, such as when apayment is made to a broad group ofemployees.Discussion: While there is nostatutory proscription upon offeringemployees either profit-sharing or abonus, if either is based in any part,directly or indirectly, upon success insecuring enrollments or the award offinancial aid, it is not permitted undersection 487(a)(20) of the HEA or§ 668.14(b)(22).The Department agrees withcommenters that there arecircumstances when profit-sharingpayments should be permitted. Underproposed § 668.14(b)(22), an institutionmay distribute profit-sharing paymentsif those payments are not provided toany person who is engaged in studentrecruitment or admission activity or inmaking decisions regarding the award oftitle IV, HEA program funds. TheDepartment believes that such paymentsare consistent with the HEA as they arenot being made to a particular groupwho is active in admissions or financialaid.For this reason, we are making achange to § 668.14(b)(22)(ii) to providethat institutions may make payments,including profit-sharing payments, solong as they are not provided to anyperson who is engaged in studentrecruitment or admission activity or inmaking decisions regarding the award oftitle IV, HEA program funds.Changes: We have revised§ 668.14(b)(22)(ii) to clarify that,notwithstanding the ban in§ 668.14(b)(22)(i), eligible institutions,organizations that are contractors toeligible institutions, and other entitiesmay make profit-sharing payments, solong as such payments are not providedto any person who is engaged in studentrecruitment or admission activity or inmaking decisions regarding the award oftitle IV, HEA program funds.Comment: Several commenters askedus to clarify what kinds of activitieswould not be considered under thedefinition of securing enrollments or theaward of financial aid. They asked thatwe revise the regulations to provideexplicitly that payments based on anyadditional activities are not allowed ifthey are directly or indirectly based onenrollment or the awarding of aid.Other commenters raised questionsabout the use of ‘‘aggregators,’’ that is,entities that assist an institution withthe institution’s outreach efforts. Theseefforts include but are not limited to,identifying students, offering counselingand information on multipleinstitutions, and encouraging potentialstudents to fill out an applicationdirectly with the individual institutions.Aggregators are paid based on thestudent remaining at the institution fora certain time period rather than basedon the fact that the student enrolls.Commenters asked us to clarify whetherthese practices are permitted undersection 487(a)(20) of the HEA and§ 668.14(b)(22).Some commenters focused onarrangements under which institutionspay third parties for student contactinformation and asked whether suchinformation may be sorted or qualified.Further, they questioned whetherinstitutions would be permitted to payonly for information that yields actualcontact with a student. They asked thatwe confirm that institutions may paystudents for contact information on aper person basis as long as payments arenot based on the number of studentswho apply or enroll. In addition, theysuggested that we allow qualitativefactors to be included in theconsideration of the price to provideincentives to third parties toappropriately identify students thatmore closely fit an institution’s profile.Some commenters believed that theproposed definition of securingenrollments or the award of financialaid does not make it clear that theactivities are prohibited through thecompletion of a student’s educationalprogram.Discussion: The Department agreesthat it would be helpful to clarify thetype of activities that are and are notconsidered securing enrollments or theaward of financial aid. For this reason,we have revised the definition ofsecuring enrollments or the award offinancial aid to specifically include (asexamples) contact through preadmissionor advising activities, scheduling anappointment for the prospective studentto visit the enrollment office or anyVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00048 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2other office of the institution,attendance at such an appointment, orinvolvement in a prospective student’ssigning of an enrollment agreement orfinancial aid application (see§ 668.14(b)(22)(iii)(B)(1) of these finalregulations).We also revised the definition toclarify that it does not include makinga payment to a third party for theprovision of student contact informationprovided that such payment is not basedon any additional conduct by the thirdparty, such as participation inpreadmission or advertising activities,scheduling an appointment to visit theenrollment office or any other office ofthe institution or attendance at such anappointment, or the signing, or beinginvolved in the signing of a prospectivestudent’s enrollment agreement orfinancial aid application (see§ 668.14(b)(22)(iii)(B)(2) of these finalregulations).With respect to the commentsrequesting guidance on ‘‘aggregators,’’we do not believe it is necessary orappropriate for the Department toindicate whether these types ofactivities would, across the board, bepermitted. Each arrangement must beevaluated on its specific terms. As notedearlier in this preamble, we believe anyinstitution can determine whether apayment it intends to make isprohibited by § 668.14(b)(22) byapplying the two-part test we havedescribed. Specifically, the first step foran institution in determining if paymentfor an activity or action is consideredincentive compensation is to evaluatewhether the entity is receivingsomething of value, then to determinewhether the payment is made based inany part, directly or indirectly, onsuccess in securing enrollments or theaward of financial aid.Finally, we agree with commentersthat the definition of the term securingenrollments or the award of financialaid should be revised to specify thatthese activities include activities thatrun throughout completion of thestudent’s educational program.Changes: We have revised thedefinition of securing enrollments or theaward of financial aid in§ 668.14(b)(22)(iii)(B) to provide moredetail about actions that are consideredto be covered by the definition. We alsohave revised the definition to clarifythat it includes activities through thecompletion of an educational program.Comment: Numerous commentersrequested that the Department offerguidance on the practicalimplementation of the proposeddefinitions. Many expressed concernabout our stated intention to address

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66879WReier-Aviles on DSKGBLS3C1PROD with RULES2only broadly applicable principlesrather than responding to questions onindividual compensation issues. Thesecommenters asserted that institutionsneed guidance before they should be thesubject of an investigation or legalaction. They raised concerns about theconfusion that could result withoutadditional clarification and theattendant costs to partners in thestudent aid process in ‘‘today’s legalenvironment.’’ They believed that theDepartment already knows thatguidance will be needed based on ourpre-2002 experiences and noted thatissuing guidance is a fundamentalpurpose of the Department and shouldbe continued.Discussion: The Department believesthe proposed language is clear andreflective of section 487(a)(20) of theHEA. As modified, it is designed toappropriately guide institutions as theyevaluate compensation practices. To theextent that ongoing questions arise on aparticular aspect of the regulations, theDepartment will respond appropriatelyin a broadly applicable format and willdistribute the information widely to allparticipating institutions. This responsemay include a clarification in aDepartment publication, such as theFederal Student Aid Handbook or aDear Colleague Letter. The Departmentdoes not intend to provide privateguidance regarding particularcompensation structures in the futureand will enforce the regulations aswritten.Changes: None.Satisfactory Academic Progress(§§ 668.16(e), 668.32(f), and 668.34)GeneralComment: Many commenterssupported the proposed changes to theSatisfactory Academic Progress (SAP)regulations. Several commenters notedthat the consolidation of the SAPrequirements into § 668.34 would easecompliance and suggested that it wouldbe helpful to revise the Federal StudentAid (FSA) Handbook to mirror the neworganization of the requirements in theregulations.Several commenters noted that theyappreciated that the proposed SAPregulations retain the flexibilityprovided under the current regulationsfor institutions to establish policies thatbest meet the needs of their students.Many commenters expressed supportfor the proposed changes to the SAPregulations because they viewed themas a means for helping hold studentsaccountable for their academic goalsearlier in their careers, which theybelieved would lead to lower studentdebt levels. Several commenters notedthat their current policy and practiceseither met or exceeded the requirementsin the proposed regulations.Many commenters supported, inparticular, the definition of the termsfinancial aid warning and financial aidprobation as well as the standardizeddefinitions of other terms related toSAP. These commenters stated that thisstandardization would lead to a moreconsistent application of the SAPregulations among institutions, which,in turn, will make them moreunderstandable to students.Many commenters also supported theSAP regulations because they give thoseinstitutions that choose to evaluate SAPmore frequently than annually theability to use a financial aid warningstatus, which they viewed as beingbeneficial to students. They stated thatsuch a warning would lead to earlyintervention for students who faceacademic difficulties. Commenters alsonoted that the financial aid warningstatus will allow financial aid offices tostrengthen their SAP policies toencourage students to use designatedsupport services on campus and lead tofurther student success.Discussion: The Departmentappreciates the support of its efforts toimprove program integrity through itsSAP regulations. With regard to thecomment recommending that we revisethe FSA Handbook to align it with thechanges we have made in the SAPregulations, we will take thisrecommendation into account duringthe next revision of the FSA Handbook.Changes: None.GeneralComment: Several commenters didnot support the proposed changes to theSAP regulations. Two commentersstated that the Department should delayimplementation of the SAP regulations,including proposed § 668.34, so that wecan resubmit these proposals fornegotiation and evaluation in a futurenegotiated rulemaking proceeding.These commenters argued that theDepartment had not made a sufficientargument for what would be gained bythe changes, and how these benefitswould justify the additional burdenimposed upon institutions by theseregulations.Two commenters stated thatinstitutions were in the best position todesign and implement a satisfactoryacademic progress policy that fit theirinstitutional needs, and that the currentregulations were sufficient for achievingthis purpose. These commentersasserted that the proposed changes wereintrusive and would lead to increasedVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00049 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2audit exceptions. These commentersalso noted that the Department shouldconsider incentives to encourageinstitutions to research student successin light of their own SAP policies. Onecommenter stated that the proposedregulations were too prescriptive, andthat institutions would requiresignificant guidance in the FSAHandbook in order to be able to complywith the new regulations.Two commenters stated that whilethey generally agreed with theDepartment’s desire to clarify the SAPregulations and with the proposedapproach reflected in the NPRM, theregulations had a number of unintendedconsequences. These commentersindicated that the Department’sproposal would force institutions tochoose whether to take on additionalworkload by evaluating students eachterm, or to take on the additionalworkload caused by the dramaticincrease in appeals. One of thecommenters noted as an example aninstitution that has a number of AlaskanNative students to whom it providessignificant support, particularly early intheir careers; in this case, thecommenter stated that these studentswould be significantly harmed by theseSAP regulations as the students oftencannot remedy their academic problemsin a short period of time. Both of thesecommenters noted that while theDepartment believes that it has toaddress abuses with the currentregulations, that it should weigh thisagainst the unintended consequences ofthe proposed regulations, which includeincreased workload for institutions andunfair impact on certain groups ofstudents.Discussion: The Department disagreeswith the commenters who suggestedthat these regulations should beresubmitted for the negotiatedrulemaking process. The proposedchanges to the SAP regulations in§§ 668.16(e), 668.32(f), and 668.34 havealready been through the negotiatedrulemaking process. In fact, thenegotiators reached tentative agreementon these proposed changes. Duringnegotiations, most negotiators statedthat it was appropriate for theDepartment to provide certainflexibilities for those institutions thatchose to check on the satisfactoryacademic progress of students moreoften than was required by the statutoryminimum of annually. Many of thenegotiators said that they supported theproposed changes to the SAPregulations because they continued toprovide significant flexibilities forinstitutions to craft SAP policies thatmet the needs of their student bodies

66880 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and RegulationsWReier-Aviles on DSKGBLS3C1PROD with RULES2while still preserving program integrity.For the commenter who suggested thatthe Department should encourageinstitutions to study the consequencesof their SAP policies and allowincentives for doing so, we will take thisunder advisement when we next havethe opportunity to develop experimentalsite proposals.We do not agree with the commenterswho suggest that the SAP regulationsare too prescriptive or intrusive. Section484(c)(1)(A) of the HEA requires that aneligible student be making satisfactoryprogress towards program completion,and that institutions check at leastannually for programs longer than ayear, that a student is annually meetingthat requirement. These regulations donot require institutions to do any morethan what is required by the HEA, andare not more difficult to comply withthan the current regulations. Therefore,institutions should not experienceincreased incidents of noncompliance.We will continue to provide anyapplicable and needed guidance in theFSA Handbook to assist institutions incomplying with the regulations.We do agree with the commenterswho stated that an increase in SAPmonitoring to a payment period bypayment period basis would increaseadministrative burden. However,institutions are free to continue tomonitor as frequently as they currentlydo, and are not required to change theirSAP policy and monitor every paymentperiod. As for the unintendedconsequences for particular groups ofstudents, these regulations allow forinstitutions to craft SAP policies thatbest fit the needs of their students. Aninstitution could evaluate the needs ofany special student groups and findways to work effectively with thosestudents. For example, a specificstudent may need to have assistancedeveloping an academic plan that willenable him or her to be successful.Changes: None.Delayed ImplementationComment: Several commenterssuggested that implementation of theproposed changes to §§ 668.16(e),668.32(f) and 668.34 should be delayedfor a couple of years to allowinstitutions to prepare their policies andprocedures to comply with theregulatory changes. One commenterrecommended that implementation bedelayed until the 2012–13 award year toallow for institutions to make changes totheir monitoring systems. Anothercommenter encouraged the Departmentto delay implementation of theregulations for SAP, but noted that if wedo not delay implementation, then theDepartment should issue guidance as tohow the new regulations will affectsummer crossover payment periods.This commenter expressed concern that,without this additional guidance, it willbe unclear as to which SAP regulationsapply to students enrolled in summer.Discussion: While the Departmentappreciates that some institutions mayhave to make changes to computermonitoring systems, or written policiesand procedures, we do not believe thatthe changes to the SAP regulations areextensive enough to warrant delayedimplementation. Institutions that mayhave to adjust or change their SAPpolicy will have to publicize such achange to students, and let studentsknow when any new SAP policy iseffective. As such, the summercrossover payment period would beaddressed by the school’s new policyand would be subject to the effectivedate of the school’s new policy. Forexample, a school may decide that forthe purpose of this policy change, a2011–12 summer crossover period willbe subject to their current SAP policyand procedures, as part of the 2010–11award year. This would be acceptable,and should be addressed in the school’snotification to their students of theeffective date of any new policy.Changes: None.Satisfactory Academic Progress(§ 668.34)Comment: Two commenters statedthat the term ‘‘financial aid applicants’’should be substituted for the word‘‘students’’ in § 668.34. The commentersindicated that students who had notapplied for financial aid would beconfused by notifications abouteligibility under the SAP regulations.These commenters argued thatinstitutions should only be required tosend notifications to financial aidapplicants, and that the proposedrequirement that notifications be sent toall of an institution’s students isunreasonable.Discussion: There is no requirementin the proposed regulations for schoolsto notify students who are not applyingor receiving title IV, HEA aid of theireligibility under SAP. These regulationsdo not impose such a requirement.Moreover, we do not believe it isnecessary to replace the term ‘‘student’’with the term ‘‘financial aid applicant’’in these regulations since we arereferring to general student eligibilitycriteria, which affect not only financialaid applicants, but recipients of title IV,HEA funds as well. There is no attemptto regulate any other students in theseregulations.Changes: None.VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00050 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2Consistency Among Categories ofStudentsComment: One commenter noted thatproposed § 668.34(a)(2) retained thelanguage from current § 668.16(e)(3) thatthe institution’s policy must beconsistent among categories of students.This commenter questioned whether,within the categories of students, aninstitution could evaluate sub-categoriesof students differently. For example,within the group of undergraduatestudents, could an institution choose toevaluate freshmen and sophomorestudents every payment period butupperclassmen only once a year. Thecommenter noted that this approachmight be used if the institutiondetermined that students in the first twoyears needed more intervention, andthat after that time students were morelikely to remain enrolled untilgraduation. The commenter also asked ifthis approach is allowable, could theinstitution use a financial aid warningfor those students who are evaluatedevery payment period.One commenter noted that proposed§ 668.34(a)(2) does not appear to allowfor different evaluation periods basedupon the type of student or programbeing evaluated. For example, thiscommenter noted that an institutionmay want to evaluate undergraduateseach payment period and evaluategraduate students annually. Thecommenter proposed changes to theregulatory language that would allow forsuch a difference.Discussion: These regulations retainthe flexibility for an institution toevaluate different categories of studentsdifferently, as long as the policyprovides for consistent application ofstandards within each of the categoriesof students. Institutions retain flexibilityto create a policy within those groups ofstudents to best meet the needs of itsstudent body. If they wish to institute apolicy that evaluates freshmen andsophomores every payment period, andjuniors and seniors annually, aninstitution is free to do so. Such a policywould only allow for the automaticfinancial aid warning status to be usedfor those students who are evaluatedevery payment period. This would,however, allow for a policy that issensitive to the needs of the institution’sstudent body. For this reason, we do notbelieve that any changes are needed torespond to the commenters’ concerns.Changes: None.Frequency of EvaluationComment: One commenter supportedthe proposed regulations, but expressedconcern that an institution may not have

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66881WReier-Aviles on DSKGBLS3C1PROD with RULES2time prior to the start of the next termto evaluate SAP, thereby resulting instudents owing a repayment of title IV,HEA funds. Several commenters notedthat for some academic periods there isnot enough time to evaluate studentsprior to the beginning of the nextpayment period. These commentersnoted that this is particularly true forinstitutions with quarters and even mosttraditional calendar schools for theperiod after the summer term. Onecommenter stated that, in order toaccommodate the realities ofinstitutions that use the quarter system,all institutions that monitor theirstudents’ satisfactory academic progressmore frequently than annually shouldbe allowed to use the financial aidwarning status.Several commenters argued that theDepartment should not requireinstitutions to evaluate more frequentlythan annually. Numerous commentersdid not agree with the Departmentgiving additional flexibilities to thoseinstitutions that evaluate the satisfactoryacademic progress of its students eachpayment period rather than annually.One commenter stated that it wasunfair to ‘‘pressure’’ institutions to checka student’s satisfactory academicprogress more frequently than once peryear, particularly if they have stablestudent populations and goodgraduation rates. This commenterargued that these types of institutionsshould be allowed to use the flexibilityof the financial aid warning status evenif they monitored SAP less frequentlythan every payment period. Anothercommenter representing an associationnoted that some of its members objectedto what they perceived as theDepartment restricting flexibility whenan institution is in compliance with theminimum yearly requirementestablished under section 484(c)(1)(A) ofthe HEA. Another commenter arguedthat it would decrease student successto require all institutions to checksatisfactory progress each paymentperiod, as students would not knowfrom one term to the next what theireligibility for aid might be. Thiscommenter expressed concern that thiswould particularly disadvantage lowincome and minority students.One commenter argued that bystrengthening other parts of the SAPregulations, only one probationaryperiod for example, abuses could becurtailed, and institutions would not beencouraged to create more lenientpolicies.Discussion: The Departmentappreciates the fact that there could bean increased administrative burden forsome institutions to change thefrequency with which they monitor thesatisfactory academic progress of theirstudents to a payment period-bypaymentperiod basis. However,changing the frequency for monitoringsatisfactory academic progress is notrequired under these regulations;institutions still have the flexibility tocreate a policy that best meets the needsof their student body. If an institutionbelieves, for example, that evaluatingSAP every payment period would createtoo much uncertainty for their students,then they are not required to developsuch a policy.With respect to the commenter whosuggested that institutions with stablestudent populations and goodgraduation rates should be able to usethe flexibility of the financial aidwarning status even if they monitoredSAP on an annual basis, we do notbelieve it is appropriate to allowextended periods of financial aidwarning because this is essentiallyproviding title IV, HEA aid to studentswho are not making progress towardsprogram completion. We understandthat some institutions believe that theDepartment is unfairly placingrestrictions on institutions that chooseto stay with minimum annualevaluations, or to evaluate lessfrequently than every payment period.However, we do not believe that it isappropriate to continue to allow astudent who does not meet eligibilitycriteria to continue to receive title IV,HEA funds without a formalintervention by the institution in theform of an appeal approval or anacademic plan.Changes: None.Comment: Several commenters notedthat students who attend quarter schoolsface an inequity under proposed§ 668.34 in that they could lose title IV,HEA eligibility after 20 weeks, whereasfor a student at a semester school, theycould lose title IV, HEA eligibility after30 weeks, which is an academic year.These commenters asserted that thissubjects the student at a quarter schoolto more rigorous evaluation. Thesecommenters expressed concern thatinstitutions might choose to evaluate theSAP of their students annually in orderto level the playing field for theirstudents, as well as relieveadministrative burden.One commenter expressed concernthat the term ‘‘annually’’ in § 668.34 wassubject to interpretation and thatquestions would arise as to whether thisterm referred to every calendar year,every 12 months, or every academicyear. This commenter suggested that theDepartment revise § 668.34(a)(3)(ii) andVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00051 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2(d) to refer to ‘‘every academic year’’rather than ‘‘annually’’.Discussion: The Department notesthat a student in a quarter programwould be evaluated three times in anacademic year, while the student in asemester program would be evaluatedtwice in an academic year. While someinstitutions may view this as a morerigorous evaluation, it also allows moreopportunities for intervention by theinstitution. We would hope that aninstitution would develop a policy thatwould best serve the needs of students,and that if the institution believes thatmore frequent evaluations would bebeneficial, that it would work withfaculty and other parties to attempt tomake such a review possible, forexample, by shortening the amount oftime that it takes grades to becomeavailable for evaluation.The Department notes thatinstitutions that currently reviewstudent progress annually choose toreview all students at a specific point intime, such as at the end of the springterm or spring payment period. TheDepartment agrees that this is anappropriate and reasonable institutionalpolicy for an institution that reviewsacademic progress annually. We do notbelieve that further regulatory languageis necessary to specify that the reviewshappen every academic year because ifthe review happens annually, itnecessarily will happen every academicyear.Changes: None.Comment: Several commentersindicated that the proposed SAPregulations will not work well fornonterm and nonstandard termprograms. They noted that becausestudents in these types of programscomplete payment periods at variouspoints during the year, institutions withthese types of programs would beunable to evaluate SAP at the end ofeach payment period. One commenterspecifically asked the Department toclarify how SAP in a nonterm programcould be evaluated under proposed§ 668.34. Another commenter noted thatinstitutions with 8-week terms wouldfind it overly burdensome to evaluateacademic progress every paymentperiod. This commenter indicated thatan unintended consequence of theproposed changes reflected in § 668.34would be that institutions withnonstandard term or nonterm programswould evaluate less frequently thancurrently, due to the administrativeburden. Several commenters suggestedthat to avoid this unintendedconsequence, the regulations shouldallow institutions with nontermprograms to set evaluations based upon

WReier-Aviles on DSKGBLS3C1PROD with RULES266882 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulationscalendar dates rather than paymentperiod completion. One commenterstated that these ‘‘scheduled satisfactoryacademic progress calculation’’ periodscould then be used as the basis for thestudent’s continued receipt of aid orplacement on financial aid warning.This commenter also suggested that werevise § 668.34 to make the financial aidwarning status available to thoseinstitutions with nonterm programs thatevaluate student academic progressmore frequently than annually but notin conjunction with payment periods.The commenter expressed that muchconfusion will result if the Departmentdoes not address how institutions withnonterm programs, where the annualreview date chosen for SAP review doesnot coincide with a payment period, cancomply with these regulations.Another commenter stated that theDepartment should consider studyingdifferent instructional delivery modelsin order to determine how to bestregulate accountability for institutionsthat need to evaluate SAP for studentsin nonstandard programs.Discussion: The Departmentrecognizes the complicated monitoringthat institutions with nonterm andnonstandard term programs will need toimplement to comply with § 668.34 forevaluating the academic progress ofstudents in these programs, if theychoose to evaluate SAP on a paymentperiod-by-payment period bases. This isbecause, for these programs, institutionscould have students completingpayment periods on a daily basis. Weunderstand why institutions may find iteasier to set one particular calendar dateto evaluate the SAP of all of theirstudents in these programs. However,we do not believe that this approachwill work because on any given date,any particular student could be at thebeginning, middle, or end of a paymentperiod. The SAP review must accountfor completed coursework, and studentsin the middle of a payment period, forexample, might still have days or weeksto go to finish that work. We do believethat the institution could set a particulartime period when it evaluates SAP forall of its students. For example, theinstitution could set a policy that SAPevaluation will occur for all studentsupon the completion of the paymentperiod in a given month(s). Theevaluation would then include all of thecoursework that an individual studentcompletes for the payment periodcompleted in that month. We do notbelieve that evaluating students at anymoment in time other than at the end ofa payment period is an appropriatemeasure of the student’s currentprogress towards program completion,as it is not generally possible to evaluatethe work in progress. By evaluating allof the most recently completed work, aSAP evaluation will be most accurate inportraying a student’s progress, and willenable the institution to evaluate SAPprior to making the payment for the nextpayment period thereby insuringpayments only to eligible students. Wehave, therefore, made a change to theproposed regulations to clarify that theevaluation must occur at the end of apayment period. With regards to thecommenter who suggested that theDepartment should conduct a study inorder to determine the best way toregulate accountability for students innontraditional programs, we will takethis recommendation under advisement.Changes: We have revised§ 668.34(a)(3)(ii) to provide that, forprograms longer than an academic yearin length, satisfactory academic progressis measured at the end of each paymentperiod or at least annually to correspondto the end of a payment period.Comment: Two commenters notedthat the proposed SAP regulations donot address students with disabilitiesand their needs, especially during theappeals process, as such students mayneed several appeals.Discussion: When evaluating astudent appeal under § 668.34, aninstitution may take into considerationfactors that could have affected thestudent’s academic progress. Thesefactors can include whether the studenthas a disability or other extenuatingcircumstances. Additionalconsiderations may also be given in anacademic plan for a student who has adisability as long as applicable title IV,HEA program requirements arefollowed. Therefore, we do not believethat it is necessary to include anyadditional regulatory language onevaluating the SAP of students withdisabilities or the appeals process forthose students.Changes: None.Comment: One commenter, whoexpressed concern that the proposedSAP regulations were cumbersome,asked whether the regulations wouldpermit two specific types of situations.First, the commenter asked whether aninstitution could retain the ability toutilize the financial aid warning statusif its SAP policy stated that it wouldbegin monitoring a student’s academicprogress after the student’s firstacademic year, and then continue tomonitor the student’s progress everypayment period thereafter. Second, thecommenter asked whether a studentcould continue to receive title IV, HEAaid without further appeal if the studentis in financial aid warning status and heVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00052 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2or she submits, and continues to meetthe terms of, an acceptable academicplan.Discussion: The proposed regulationsallow for significant flexibilities forinstitutions. If the institution wishes tomonitor at different periods in time,such as at the end of the first year, andthen by payment period after that, it isfree to do so. In this situation, onlythose students who are evaluated eachpayment period may receive theautomatic financial aid warning status.With regard to the second scenariodescribed by the commenter, a studentwho has appealed a determination thathe or she is not meeting satisfactoryacademic progress and is attending hisor her program under an approvedacademic plan because he or she is onfinancial aid warning status remainseligible for title IV, HEA aid as long ashe or she continues to meet theconditions of that plan. In such asituation, the student’s academicprogress would simply be re-evaluatedat the same time as the institution’sother title IV, HEA aid recipients areevaluated, unless its policy called for adifferent review period.Changes: None.Comment: One commenter noted thatat his institution summer is considereda trailing term, and the institutionevaluates SAP at the end of the springterm. The commenter asked whethersummer coursework could be usedretroactively as part of the student’sacademic plan. The commenter alsoquestioned whether the institutioncould state in its SAP policy that itreviews SAP after all work for theacademic year is completed. Under thisapproach, the institution would reviewsome students in the spring and othersafter they complete summer term.Another commenter asked how tohandle an optional summer term.Discussion: An institution may chooseto state in its SAP policy that itmonitors academic progress at the endof the student’s completion of theacademic year. These SAP regulationsstill leave the flexibility to theinstitution to determine what policywill best serve its students. We note,however, that under an institution’sSAP policy, the institution mustevaluate all of the student’s courseworkat some point, and that the financial aidwarning status described in § 668.34(b)is only available to institutions thatevaluate a student’s academic progressevery payment period.If an institution evaluates SAP bypayment period, then it would evaluatea student’s academic progress at the endof each payment period that the studentattends. If the institution evaluates SAP

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66883WReier-Aviles on DSKGBLS3C1PROD with RULES2annually, then it would evaluate all ofthe coursework that the student hasattempted and completed since the lastannual evaluation to determine whetherthe student is making satisfactoryacademic progress. There are no periodsof the student’s attendance that are notconsidered in the evaluation.Changes: None.Minimum GPAComment: One commenter noted that,under current § 668.34(b), a studentmust have a ‘‘C’’ average or its equivalentafter two years in order to makesatisfactory academic progress. Thecommenter noted that the Department’sguidance in this area has been that thestudent must have a ‘‘C’’ average or itsequivalent after two years of attendance,regardless of the student’s enrollmentstatus during that time. The commenterstated that proposed § 668.34(4)(ii)states that the ‘‘C’’ average is required atthe end of two academic years. Thecommenter asked the Department toclarify whether the use of the phrase‘‘two academic years’’ as opposed to thephrase ‘‘two years’’ results in anysubstantive change in how theDepartment interprets this requirement.Another commenter stated that thecurrent regulations are sufficient in thisarea, because they allow institutions tointerpret the phrase ‘‘two years’’ in theway that is best for their students.Discussion: The term ‘‘academic year’’is used in section 484(c)(1)(B) of theHEA, which states that a student isconsidered to be maintainingsatisfactory academic progress if thestudent has a cumulative ‘‘C’’ average, orits equivalent or academic standingconsistent with the requirements forgraduation, as determined by theinstitution, at the end of the secondsuch academic year. We changed thereference from ‘‘year’’ to ‘‘academic year’’in § 668.34 to more closely align thisregulatory language with thecorresponding statutory language. Thischange, however, does not alter theDepartment’s interpretation that thisrequirement means that a student musthave a ‘‘C’’ average or its equivalent aftertwo years of attendance, regardless ofthe student’s enrollment status.Changes: None.PaceComment: Two commenters notedthat proposed § 668.34(a)(5)(ii) statesthat an institution is not required toinclude remedial coursework whendetermining the attempted andcompleted hours for purposes ofevaluating a student’s pace towardcompletion of the program. Bothcommenters requested clarification thatan institution may, but is not requiredto, include remedial coursework whenmaking its SAP determination.Discussion: It is the Department’slongstanding position that an institutionis not required to include remedialcourses when calculating the student’sprogress towards program completion.While an institution is not required toinclude remedial courses whencalculating pace under the SAPanalysis, it may do so as long as its SAPpolicy otherwise meets the requirementsin § 668.34.Changes: None.Comment: One commenter, whonoted that its students enter a programat multiple points during the year, askedthe Department to clarify how tocalculate a student’s ‘‘pace’’ towardprogram completion under proposed§ 668.34(a)(5)(ii). This commenter alsoasked whether full time or part timeenrollment should be used to calculatepace toward completion under theseregulations. Another commenter askedthe Department to clarify how pacerelates to maximum timeframe underthese regulations. This commenterquestioned whether a time componentof weeks or months to programcompletion needed to be part of thepace measurement. Another commenterexpressed concern that proposed§ 668.34(a)(5) is less clear than a strictpercentage of completion policy. Thiscommenter, who came up with a 67percent minimum required completionrate when applying the pace formulaand the maximum timeframerequirements to the normal BAgraduation requirements, argued thatthe Department should revise theregulations to list the minimumcompletion rate that would allow astudent to complete his or her programin a 150 percent maximum timeframe(67 percent completion in thecommenter’s calculation).This commenter also stated that anyinstitution that had a stricter thanminimum SAP policy, such as higherrequired completion rates, should beallowed to use the financial aid warningstatus, even if it only checked SAP onan annual basis. The commenter statedthat this would allow those institutionswith stricter policies and highcompletion rates to use the flexibilityoffered through the use of the financialaid warning status.Discussion: Proposed § 668.34(a)(5)(i),together with the definition ofmaximum timeframe in § 668.34(b),defines ‘‘pace’’ for purposes of SAPevaluations; it is the pace at which astudent must progress through his or hereducational program to ensure that thestudent will complete the programVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00053 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2within the maximum timeframe andprovides for measurement of thestudent’s progress at each SAPevaluation. Proposed § 668.34(a)(5)(ii)provides the formula that an institutionmust use at each SAP evaluation tocalculate pace: divide the cumulativenumber of hours the student hassuccessfully completed by thecumulative number of hours the studenthas attempted. This calculation is to beused regardless of the student’senrollment status, as the formula isdesigned to measure completionappropriately for each studentregardless of whether that studentattends full time or part time. TheDepartment believes that theserequirements for measuring pace towardprogram completion provide maximumflexibility for both students andinstitutions. Students are free to attendat whatever enrollment status isappropriate for them, and institutionscan measure the pace as appropriate fortheir students. Because a graduated pacestandard (i.e., 50 percent the first year,60 percent the second year, and 70percent every year thereafter) ispermissible, the Department does notbelieve it is appropriate to regulate aspecific completion rate for all studentsin all programs at all institutions.Changes: None.Transfer CreditsComment: Several commenters statedthat, for purposes of calculating pacetoward program completion under§ 668.34(a)(5), transfer credits shouldonly count in the completed hourscategory, but not the attempted hourscategory, because those credits were nottaken at the institution determiningSAP. Another commenter stated thattransfer credits should only be countedin the attempted hours category but notthe completed hours category. Onecommenter requested clarification as towhether the requirement in§ 668.34(a)(6) to count transfer credits asboth attempted and completed meansthat institutions are required to requestand evaluate all applicable transcripts.Discussion: Whether or not aninstitution evaluates the transcripts ofall coursework taken by a student atprevious institutions is a decision left tothe institution. The Department has notrequired institutions to requesttranscripts for previously completedwork, and is not doing so now.However, in so much as credits taken atanother institution are accepted towardsthe student’s academic program underthe institution’s academic requirements,we do believe it is appropriate toinclude those credits in both theattempted and completed hours

66884 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and RegulationsWReier-Aviles on DSKGBLS3C1PROD with RULES2category when measuring pace towardscompletion for each SAP evaluationperiod.Changes: None.Comment: One commenterrecommended that the Departmentrevise § 668.34(a) to require transfercredits to be considered whendetermining progress towards maximumtimeframe, but not for purposes ofdetermining the pace of completion foreach evaluation period. This commenterstated that counting transfer creditswhen looking at each evaluation periodwould give transfer students an unfairadvantage in the pace to completioncalculation.Another commenter noted that thepractice of excluding courses that werenot degree applicable from the pacecalculation for evaluating SAP hasprompted many students to changemajors in order to retain financial aideligibility. The commenter opined thatthis practice leaves the door open toabuse of the system. Additionally, thecommenter stated that the Departmentshould require that all courses that thestudent had attempted and completed inhis entire career be included in the pacecomputation for purposes ofdetermining the student’s progresstoward program completion.Discussion: The Departmentacknowledges that transfer students mayhave a slight advantage over otherstudents when an institution calculatestheir pace toward program completion.However, this inclusion of transfercredits in the calculation of pace willallow for a more level playing field forall students, and standardize treatmentof completed credits in the SAPevaluation. This is because includingtransfer credits in the calculation ofpace means we are considering allcompleted work for all students.We also note that the Department hashad a longstanding policy thatinstitutions are free to set their own SAPpolicy that deals with major changes asthey relate to measurement of maximumtimeframe. Therefore, if an institutionwishes to limit the number of majorchanges that it will allow a student,then it is free to set a policy that doesso.Changes: None.Financial Aid Probation and FinancialAid Warning StatusesComment: Many commenters foundthe definitions of the terms financial aidwarning and financial aid probation inproposed § 668.34(b) to be helpful.These commenters stated that it wasvery useful to have standard vocabularyto use when discussing SAP. Somecommenters noted that these terms andconcepts matched their current policywhile others requested slight changes tothe terms or definitions so that theyalign more closely with their owninstitution’s policies. Severalcommenters sought clarification,however, as to whether institutions arerequired under these regulations to usethe newly defined terms of financial aidwarning and financial aid probation intheir consumer information and othercommunications with students, orwhether we would allow them tocontinue to use their currentterminology. These commentersexpressed concern that their studentsmight be confused if they changed theterminology used in this area.Discussion: The Department intendsto allow institutions to have as muchflexibility as possible in developing anappropriate SAP policy for theirinstitution as well as consumerinformation materials for their students.However, institutions must incorporatethese regulations changes into theinformation that they provide tostudents; this includes ensuring that theinformation made available by theinstitution uses the terminology used inthese regulations.Changes: None.Comment: Several commentersexpressed support for the addition ofthe concept of a financial aid warningstatus, but believed that the use of thisstatus should be available to allinstitutions, regardless of how oftenthey performed a SAP evaluation. Someof the commenters asserted that thiswould allow institutions additionalflexibility in administering SAP thatwould be beneficial for students. Somecommenters also noted that it would bean administrative burden to reviewstudents more frequently. Othersindicated that they had stable studentpopulations and did not need toevaluate more often than annually. Atleast one commenter opined thatschools with good graduation andcompletion rates should be able to usethe financial aid warning statusregardless of how often they checkedSAP. Some commenters argued that thefinancial aid warning status should bean option for all institutions to useautomatically and without intervention,and for periods as long as a year or untilthe next scheduled evaluation. Onecommenter suggested that in exchangefor allowing all institutions to use thefinancial aid warning status regardlessof how often they evaluate students’academic progress, institutions shouldbe required to remind students of theirSAP standards at the end of anypayment period in which an evaluationis not done. Some commenters wantedVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00054 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2to know if the financial aid warningstatus could be used to evaluate astudent’s progress and to help toprepare an academic plan and appealfor the student, so that the studentwould not suffer a lapse in eligibility.Discussion: While we appreciate thefact that institutions support theflexibility that the financial aid warningstatus provides, the Department feelsstrongly that this option should only beavailable when an institution evaluatesSAP each payment period. It isimportant to remember that a studentwho is on a financial aid warning statusis one who is not actually meeting SAPstandards.If an institution has a stable studentpopulation and does not believe it needsto evaluate SAP each payment period,then it is not required to do so. Werecognize that there is an additionaladministrative burden involved forinstitutions to evaluate every paymentperiod, but we also believe studentsbenefit from the early intervention ofthis approach. We believe that thisapproach will impact favorably onstudent completion rates, as well ashelp minimize student debt levels forthose that are not on track to completea program successfully. We note that,during the negotiated rulemakingprocess, several negotiators had a SAPpolicy that required checking astudent’s academic progress eachpayment period. These negotiatorsrelated numerous student successstories that resulted from earlyintervention. This demonstrated successwith this approach led to the negotiatorssupporting the proposed SAPregulations.We believe that it is important to getstudents back on track as soon aspossible, and not allow the continuedprovision of title IV, HEA aid tostudents who are not making progresstowards program completion under theinstitution’s SAP standards. Allowing afinancial aid warning status for onepayment period allows the institution toprovide an alert to that student of hisstatus, as well as provide any neededsupport services. The institution coulduse the time to meet with the studentand, if the situation means that anappeal will be necessary, to help thestudent prepare that appeal or toprepare an academic plan. The samebenefit is not realized if the studentsimply receives notice of theinstitution’s SAP policy, as he may notunderstand his individual status withregards to the policy.Changes: None.Comment: Several commentersexpressed support for the financial aidwarning and financial aid probation

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66885WReier-Aviles on DSKGBLS3C1PROD with RULES2statuses proposed in § 668.34, butrequested that the Department add tothe SAP regulations a defined term fora student who has lost eligibility for titleIV, HEA aid as a result of aninstitution’s evaluation under the SAPregulations. Several other commentersquestioned what status would beassigned to a student who wasreinstated on an academic plan and wasmaking progress under that plan. Thesecommenters wondered whether theseindividuals would still be considered tobe on financial aid probation status, orif the Department planned to defineanother term to refer to them.Discussion: A student who is notmeeting SAP is simply not eligible toreceive title IV, HEA aid, as he or shedoes not meet one of the basic studenteligibility criteria. For this reason, wedo not believe it is necessary to defineanother term to describe this individual,just as we do not have specific terms todescribe students who may not bemeeting other basic student eligibilitycriteria.A student who has been reinstated toeligibility under an academic plan andis making progress under that plan isconsidered to be an eligible student. Thestudent is not considered to be onfinancial aid warning status or financialprobation status, provided he or she isotherwise making satisfactory progress.Changes: None.Comment: A few commenters arguedthat proposed § 668.34(c) could beinterpreted to allow an institution toplace a student on financial aid warningstatus for more than one paymentperiod, and that, under thisinterpretation, the student would beable to get title IV, HEA aid for multiplepayment periods when the student is onfinancial aid warning status as long asthe student was within range of movinginto compliance with the institution’sSAP standards. These commentersstated that the language in § 668.34(c)does not need to be interpreted sonarrowly so as to limit the number ofpayment periods during which astudent could be placed on financial aidstatus to one payment period.Other commenters suggested thatstudents could develop and follow anacademic plan during the period of theirfinancial aid warning and that thisapproach would allow for students to beput on financial aid warning status formultiple periods. These commenters allopined that there was a range ofdeficiencies within any category ofstudent failure, and that students mayrequire differing amounts ofintervention to get back on track to meetthe institution’s SAP standards. Thecommenters stated that institutionsshould be able to define different bandsof need for assigning financial aidwarning statuses. Several othercommenters requested that theDepartment clarify that students may beplaced on financial aid warning orfinancial aid status for multiplepayment periods throughout theiracademic careers.Other commenters asked theDepartment to clarify whether therequirements around financial aidwarning or financial aid probationarystatuses allow students to receive titleIV, HEA aid for more than one paymentperiod. One commenter indicated thatlack of financial aid during a period inwhich the student is on financial aidprobationary status would causeproblems for students. The commenterstated that this would cause barriers forthe most needy and at-risk students.Discussion: The financial aid warningstatus and the financial aid probationarystatus are both defined in § 668.34(b). Astudent who has not made satisfactoryacademic progress and is placed underone of these statuses may continue toreceive title, IV HEA aid for onepayment period only, under veryspecific circumstances. We do notintend for the language in § 668.34(b) tobe interpreted in any other fashion. Torespond to the commenter who believedthat lack of financial support during thisperiod would disadvantage students, itis important to note that both of thesestatuses provide for one payment periodof title IV, HEA funds. It is possible forinstitutions that are able to use thefinancial aid warning status to do anysort of intervention with a student thatthey deem appropriate during theperiod of time the student is in thatstatus, including help them to preparean appeal or refer them to other studentsupport services. We do not believe thatit is appropriate, however, to continueplacing students on a financial aidwarning status for more than onepayment period because these arestudents who are not making progresstoward program completion. We do notbelieve it is appropriate to put thestudent on an academic plan and simplycontinue such a plan without anappropriate appeal. This is because webelieve that a student should berequired to file an appeal and explainthe reason that he or she has not beenable to meet the SAP standards, andwhat in his or her situation haschanged. It is important for the studentto have ownership in his or her currentsituation and the resulting academicplan, with an understanding of theconsequences the student faces if he orshe fails to follow the academic plan.We do agree with the commenters whoVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00055 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2suggest that it is possible for a studentto be subject to more than one period offinancial aid warning, or to submit morethan one appeal throughout anacademic career, if the institution’s SAPpolicy allows it.Changes: None.Comment: Numerous commentersobjected to the requirement in theproposed regulations for institutions tocheck SAP on a payment period-bypaymentperiod basis. They argued thatit is unreasonable for the Department toimpose such a requirement oninstitutions that do not have any historyof abuse in this area and that otherwisehave good SAP policies. Thesecommenters noted that it would beoverly burdensome to requireinstitutions to change their SAPprocedures to require SAP evaluationsevery payment period.Discussion: Section 668.34(a)(3) isconsistent with current§ 668.16(e)(2)(ii)(B), which requiresinstitutions to check academic progressfor programs that are longer than anacademic year at least annually. Whileinstitutions can check academicprogress for these programs morefrequently, they are not required to doso. Under these regulations, institutionsare only required to evaluate satisfactoryacademic progress more frequently ifthe program is shorter than an academicyear.Changes: None.Comment: A couple of commentersasked the Department to confirm thatthe financial aid warning and financialaid probation status would be applied tothe student’s next payment period(following the institution’sdetermination that the student is notmaintaining SAP) and not simply to thenext payment period at the institution.These commenters argued that it wasimportant to apply the status to thestudent during the next term that thestudent was actually in attendance.One commenter believed that aprogram of an academic year in lengthor shorter should not be allowed to usethe financial aid warning status becausea student in such a program wouldnever be denied title IV, HEA funds fornot making SAP.Discussion: Under these regulations,an institution would apply the financialaid warning or financial aid probationstatus to a student during the student’snext period of attendance. It is notreasonable to assume that the studentwould be considered to be on financialaid warning, for example, if he or shewere not in attendance. For shorterprograms (i.e., those that are anacademic year or less), the definition ofa payment period does not allow

66886 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and RegulationsWReier-Aviles on DSKGBLS3C1PROD with RULES2disbursement of aid until the studenthas successfully completed the previouspayment period. For such programs, ifan institution places the student onfinancial aid warning, the student willeither complete the program orwithdraw. If the student completes theprogram, then he or she has beensuccessful. If he or she withdraws, thenthe return of funds requirements in§ 668.22 will apply. In either case, thestudent received only those funds forwhich he or she was eligible. We do notplan to make any changes in this area.Changes: None.AppealsComment: Many commenters agreedwith allowing students who wouldotherwise lose eligibility for title IV,HEA aid to appeal the loss of eligibility.Some commenters expressed concernthat the requirements for an appeal weretoo prescriptive; for example, thecommenters noted that § 668.34(b)requires that students articulate whathad changed in their situation and thatstudents might not be able to complywith this requirement. Othercommenters stated that the Departmentshould make the SAP appeal regulationsmore prescriptive, including byspecifying the type of documentationrequired to be submitted with an appeal.Several commenters believed that it wastoo burdensome on institutions torequire them to address student appeals,while others stated that it was tooburdensome to require institutions todevelop or evaluate academic plans forstudents who appeal.Discussion: These SAP regulations donot require that an institution accept orevaluate student appeals ofdeterminations that the student is notmaking SAP. Moreover, the regulationsdo not require institutions to develop orprocess an academic plan for a studentwho appeals. These are merely offeredas options for institutions who wish toallow those students who are no longermeeting the SAP standards to continueto receive title IV, HEA aid. It isimportant to note that an academic planfor a student may be as complicated asa course by course plan toward degreecompletion, or as simple as amathematical calculation that specifiesthe percentage of coursework that thestudent must now complete. Academicplans need not be complicated ordetailed; the purpose of these plans ismerely to put the student on track tosuccessful program completion. Section668.34(a)(10) does require that aninstitution that does not accept appealsnotify students as to how eligibility fortitle IV, HEA aid can be regained bythose who do not meet SAP standards.An institution is free to craft a SAPpolicy that allows appeals or not, and tospecify when and how such appealswill be permitted as well as how oftenand how many times a student mayappeal. Likewise, an institution may ormay not allow an academic plan to besubmitted for a student. The SAP policyof the institution should specify theconditions under which an academicplan might be approved, or if one willbe considered at all. Becauseinstitutions have significant flexibilityin this area, the Department does notbelieve that these regulations willimpose any additional burden.Changes: None.Comment: Some commentersrequested clarification as to whenstudents on an academic plan would beevaluated. Several commentersrequested that we clarify that a studentmay submit more than one appealduring the course of his or her academiccareer. A couple of commentersinquired whether students could appealthe 150 percent completionrequirement, and exceed this maximumtimeframe if they are progressing underan approved academic plan.One commenter also asked theDepartment to clarify what is meant bythe requirement in § 668.34(c)(3)(iii)(B)and (d)(2)(iii)(B) that an academic planensure that the student meet the SAPstandards at a specific point in time.The commenter noted that the studentcould actually be able to graduate thefollowing term, and questioned whetheran appeal could be approved at thatpoint.Discussion: Under these regulations,the institution has the flexibility tospecify whether students on anacademic plan would have theiracademic progress evaluated at the sametime as other students, or whether theywould be subject to more frequent SAPevaluations. They should determinewhat is best for students and make theirpolicy clear in their SAP standards.As noted earlier in this preamble, aninstitution also retains flexibility underthese SAP regulations to allow multipleappeals by an individual student.Alternatively, an institution coulddecide not to allow appeals at all. Wenote, however, that because pace toprogram completion within 150 percentof the published length of theeducational program is required to beevaluated each SAP evaluation period,it would be reasonable to assume that astudent who is not meeting theinstitution’s SAP standards is not onschedule to complete the programwithin the required maximumtimeframe. Therefore, this component ofthe SAP standards would be subject toVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00056 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2appeal, if the institution chooses topermit appeals. Finally, we expectinstitutions to assist a student whoappeals on this basis to plot a course tosuccessful completion within a newmaximum timeframe and to thenmonitor this pace toward completion.Any academic plan would need to takeinto account the student’s progression tocompletion of his or her program, whichcould, in fact, be the next term.Changes: None.Maximum TimeframeComment: Several commenters statedthat the Department should clarify the150 percent maximum timeframerequirement. One of the commentersnoted that § 668.34(b) did not definemaximum timeframe, as applied toprograms that are a combination ofcredit and clock hours or a combinationof undergraduate and graduate work.One of the commenters argued that thefinal regulations should reinforce the150 percent maximum timeframerequirement for all programs. Anothercommenter stated that we should clarifythat the 150 percent maximumtimeframe only applies to determiningtitle IV, HEA eligibility. This commentersuggested that this maximum timeframeshould not be used for other purposes.For example, the commenter stated thatit was not appropriate for theGovernment to determine whether ornot a student should be allowed tocomplete a degree simply because titleIV, HEA eligibility had run out. Anothercommenter asked whether the 150percent maximum timeframe applied tothe student’s entire academic career oronly to the student’s current academicprogram. The commenter gave theexample of a student who had onedegree, and asked if an institutionwould include those earned creditswhen evaluating whether the studentwas progressing in his or her programwithin the maximum timeframe.Discussion: The Department believesin allowing institutions the flexibility todefine the 150 percent maximumtimeframe in the most appropriate wayfor the program in question. Inparticular, individual institutions are inthe best position to determine whethertheir combined programs, such as thosenoted by the commenters, should beevaluated as the sum of its parts (i.e.,part clock hour and part credit forexample) or as one type of programbased on the structure of the majority ofthe program.The 150 percent maximum timeframeonly applies to the student’s eligibilityto receive title IV, HEA aid. TheDepartment has never regulated whetheror not a student is able to continue on

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66887WReier-Aviles on DSKGBLS3C1PROD with RULES2to degree completion under aninstitution’s academic criteria. TheDepartment also wishes to clarify thatthe 150 percent maximum timeframeapplies only to the student’s currentprogram of study. Under theseregulations, institutions retain flexibilityto define their programs of study intheir SAP policy, as well as how theywill determine how previously takencoursework applies to the student’scurrent program of study.Changes: None.NotificationComment: Several commentersrequested clarification of thenotification requirement in§ 668.34(a)(11). Specifically, thesecommenters questioned whether thisprovision would require institutions tonotify all students or only those whowere not making SAP.Discussion: Proposed § 668.34(a)(11)only requires institutions to notifystudents of the results of their SAPevaluation if the results affect thestudent’s eligibility to receive title IV,HEA aid. Institutions are not required tonotify students who are making SAP ofthe results of the evaluation.Changes: None.Evaluating the Validity of High SchoolDiplomas (§ 668.16(p))High School Diploma (§ 668.16(p))The Department received over 100submissions about the new high schooldiploma regulation. Most of thesesupported our proposed changes, eitherwith little or no qualification, or withsuggested modifications and concerns.Others offered suggestions and concernswithout explicitly supporting theproposed regulation.We noted in the preamble to theNPRM that the Department intends toadd questions on the Free Applicationfor Federal Student Aid (FAFSA) askingfor the name of the high school thestudent graduated from and the Statewhere the school is located. The 2011–2012 FAFSA will have one questionwith three fields. Students who indicatethat they will have a high schooldiploma when they begin college for the2011–2012 year are instructed toprovide the name of the high schoolwhere they received or will receive thatdiploma and the city and state wherethe school is located. In the onlineapplication, FAFSA on the Web,students will not be allowed to skip thisquestion, though for 2011–2012 it willonly be presented to first-timeundergraduate students. There will be adrop-down list of both public andprivate high schools, populated by theNational Center for Education Statistics(NCES), within the Department ofEducation, from which most studentswill be able to select the high schoolthat awarded them a diploma. Studentswho cannot find their school and thosewho complete a paper FAFSA will writein the name, city, and State of their highschool. It is important to note that theabsence of a high school on the dropdownlist does not mean that the highschool the student indicated he or shegraduated from is not legitimate. It justmeans that the school was not includedin the NCES list. Similarly, theinclusion of a high school on the dropdownlist does not necessarily meanthat the high school is legitimate.In addition to the information in thefollowing discussions, we will providemore guidance on implementing§ 668.16(p), as necessary, in DearColleague Letters, electronicannouncements, and the FederalStudent Aid Handbook.Comment: Several commentersobserved that many institutions alreadyperform some kind of high schoolevaluation as part of their admissionprocess, and one noted that because ofthis, it is appropriate for the Departmentto establish regulations requiring thevalidation of high school diplomas. Onecommenter appreciated that proposed§ 668.16(p) would help institutionswhen they are challenged by students orhigh school diploma mills for lookinginto the validity of high schooldiplomas. Another commenter notedthat a list of ‘‘good’’ high schools wouldbe valuable for students in decidingwhether they would want to obtain adiploma from a given source. Anothercommenter opined that theidentification of suspect schoolsbenefits students.Discussion: We appreciate the supportof these commenters. The list of schoolsthat will appear on FAFSA on the Webis meant only as an aid for students incompleting the FAFSA. It is not a list of‘‘good’’ schools, and it may happen thatan institution will need to evaluate thediploma from one of these schools.Also, a school that does not appear onthe list should not be inferred to be‘‘bad.’’ The intent of new § 668.16(p) isto have institutions develop a processfor evaluating the legitimacy of astudent’s claim to have completed highschool and not to have simplypurchased a document that purportsthey completed a high schoolcurriculum. Under this provision,institutions must develop and followprocedures to evaluate the validity of astudent’s high school completion if theinstitution or the Secretary has reason tosuspect the legitimacy of the diploma.VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00057 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2Changes: None.Comment: Many commentersrequested that the Department provideinstitutions with clear guidance on howto review the validity of high schooldiplomas and that it provide thisguidance as soon as possible. Although,as noted previously, many institutionsreview high school credentials, onelarge college noted that there are nocommon practices for these types ofreviews and asked that the Departmentdelay the effective date of thisregulatory requirement if it is unable torelease the needed guidance far enoughin advance of July 1, 2011. Thiscommenter stated that such a delaywould be needed for schools to haveenough time to create their proceduresand train their employees on followingthe procedures. One commenter askedwhat the effect of this requirementwould be on the student’s eligibility fortitle IV, HEA program assistance whenan institution is unable to determinewhether a given diploma is valid.Discussion: There is no plan to delaythe implementation of § 668.16(p). Asnoted earlier in this discussion, moreguidance will be forthcoming aboutevaluating the validity of high schooldiplomas, and many institutions havebeen evaluating the validity of highschool diplomas for years. Weencourage financial aid administrators(FAAs) to consult with each other inthis matter, which can be especiallyuseful for similar types of institutions inthe same State, where differing levels ofoversight by State departments ofeducation will have a significant effecton what procedures an institution mightestablish.With respect to the comment askingabout student eligibility for title IV,HEA program assistance when aninstitution is unable to determinewhether the student’s diploma is valid,we note that there are alternatives forthe student to establish aid eligibilityunder § 668.32(e), such as passing anATB test, or completing six credits ofcollege coursework that apply to aprogram at the current school.Changes: None.Comment: Various commenters eitherrequested that we create a list offraudulent or ‘‘bad’’ high schools orasked if we planned to do so. Manycommenters asked that we makeavailable both a list of ‘‘bad’’ highschools and a list of acceptable schoolsand that we update them frequently,some suggesting at least quarterly. Somecommenters requested that the effectivedate for this regulatory provision bedelayed until at least 2012–2013 so theDepartment can have a complete list ofacceptable schools and can address

WReier-Aviles on DSKGBLS3C1PROD with RULES266888 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulationsissues such as foreign postsecondaryschools, defunct schools, and missingrecords.Finally, some commenters asked whatwe would consider acceptabledocumentation when a high school doesnot appear in the Department’s databaseof acceptable high schools.Discussion: As noted earlier in thispreamble, we are not delaying theeffective date of § 668.16(p). We believeit is an important new provision thatcan be implemented for the 2011–2012year on the basis we describe in thispreamble.To emphasize a point earlier in thispreamble, a school’s inclusion on thelist on FAFSA on the Web does notmean that it is exempt from possiblereview by an institution. Acceptabledocumentation for a review can includea high school diploma and a finaltranscript that shows all the courses thestudent completed.Changes: None.Comment: One commenter requestedthat the high school diploma validationrequired under § 668.16(p) apply only toundergraduates. Others asked forinstitutions to be able to waive diplomavalidation for students who aresubstantially older than traditionalcollege age and for students whose highschool no longer exists or cannot bereadily identified.Discussion: For 2011–2012, theDepartment will only ask first-yearundergraduate students to provide onFAFSA on the Web information aboutthe high school they graduated from.However, § 668.16(p) requiresinstitutions to review any high schooldiploma if the institution or theSecretary has reason to believe thediploma is not valid. In those instancesthe institution must evaluate thevalidity of the student’s high schoolcompletion whether the diploma wasobtained by an undergraduate or otherstudent and regardless of whether thestudent’s high school no longer exists oris not easily identified. We do notbelieve it is appropriate to limit thisrequirement to only undergraduatestudents or those whose high schoolsare not easily identified because thestudent eligibility requirement to have ahigh school diploma or its recognizedequivalent or to meet an alternativestandard applies to all students.Changes: None.Comment: Several commentersexpressed concern about the difficultyof validating high schools, not only forolder students, but also for studentswho graduated from a high school in adifferent part of the country, or inanother country. One commentersuggested that the Department permitinstitutions to use copies of foreignsecondary school credentials,attestations, and proof of entry into theUnited States after the age ofcompulsory attendance, whenevaluating the secondary schooleducation of foreign-born students.Another commenter stated that manyadmissions offices use the ‘‘credentialscore’’ for foreign countries instead ofthe name of the school, and that theDepartment should give guidance onhow institutions can use that score toevaluate diplomas from foreign schools.A couple of commenters expressedconcern that under proposed § 668.16(p)students who went to foreign schoolswould be adversely affected andpossibly denied access to postsecondaryeducation.Discussion: An institution mayconsider various kinds ofdocumentation when developing itsprocedures for evaluating the validity ofa student’s high school diploma. Forexample, there are companies thatprovide services for determining thevalidity of foreign secondary schooldiplomas; documentation from suchcompanies can inform an institution’sdiploma evaluation.Changes: None.Comment: A couple of commentersasked if there will be an appeal processfor students if an institution determinesthat their high school diploma isinvalid. Others observed that differentinstitutions may decide differentlyabout a given high school’s diploma andasked whether the Department will bethe final arbiter in these situations.Discussion: The regulations do notprovide for an appeal process forstudents if an institution determinestheir high school diploma is invalid.The Department considers institutionsto be our agents in administering thetitle IV, HEA programs and to have finalauthority in many decisions.Consequently, we do not generally haveappeal processes in place forinstitutional determinations of studenteligibility. Moreover, the Departmentwill not intervene in cases where a highschool diploma is deemed valid at oneinstitution but not another.Changes: None.Comment: Several commenters askedwhat the effect of proposed § 668.16(p)would be on homeschooling, and somecommenters noted that a home schoolcredential is different from a highschool diploma and asked that theDepartment emphasize this difference.Others asked that we provide guidanceon State-granted credentials forhomeschoolers and best practices forverifying home school credentials. Oneorganization asked that theVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00058 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2achievements of homeschoolers not beignored, and that the proposedregulations and any related FAFSAchanges recognize that graduates ofhome schools receive a diploma fromtheir program.Finally, one commenter questionedwhy the Department is so interested inthe quality of a high school diploma(which is not defined in the HEA or theDepartment’s regulations) whenhomeschooled students are taught bytheir parents, who (typically) lackcredentials and curriculum standards.Discussion: Section 668.16(p) doesnot apply to homeschooled students.For guidance pertaining tohomeschooled students, please seeChapter 1 of Volume 1 of the FederalStudent Aid Handbook.Changes: None.Comment: Many commenters asked ifthere would be, or suggested that thereshould be, a mechanism for schools andState and local agencies, accreditingbodies, and education departments tosuggest schools that should be added toany acceptable and unacceptable liststhat the Department develops inconnection with § 668.16(p). Onecommenter requested that when we askStates to provide lists of approvedschools, they provide all high schoolsand not just public high schools, whichthe commenter noted fall under moreState oversight. Another commenterrecommended referring to the CollegeEntrance Examination Board (CEEB)code for high schools to determinewhether those are acceptable, andanother suggested consulting theCollege Board and the Department ofDefense to help build the list ofacceptable high schools. A fewcommenters asked what will happenwhen an institution evaluates a diplomafrom a school not on the Department’slist of acceptable high schools and findsthat the school is acceptable. Thecommenter wondered if this will meanthat institutions will have their ownlists of acceptable schools separate fromthe Department’s.Discussion: As noted earlier in thispreamble, we intend to use informationfrom NCES to create a drop-down list inFAFSA on the Web populated by thenames of public and private highschools that NCES provides to us.Neither inclusion on the list norexclusion from it is an indication ofwhether a high school will need to bereviewed by a postsecondary institutionunder § 668.16(p).There is a procedure by which privateschools may submit their name forinclusion on the private school list.Postsecondary institutions are not

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66889WReier-Aviles on DSKGBLS3C1PROD with RULES2responsible for submitting the names ofsecondary schools.Changes: None.Comment: A couple of commentersdistinguished between a high schooldiploma and a transcript, and suggestedthat a transcript is more valuable forinstitutions to use to determine thevalidity of the student’s high schoolcompletion. Another commenter notedthat transcripts and diplomas are notinterchangeable and that theDepartment should clarify this.Discussion: We agree that a highschool transcript is not the same as adiploma. It is the latter that is requiredunder the student eligibility regulationsand the statute, not the former. Atranscript may be a valuable tool indetermining whether a high schooldiploma is valid because by listing thecourses the student completed, itdemonstrates the extent of his or hersecondary school education.Changes: None.Comment: One commenter seemed tothink that an institution would submitdocumentation to the Department forreview if a student was chosen forverification due to not answering theFAFSA questions about his or her highschool diploma.Discussion: The Department does notplan to require institutions to submitindividuals’ high school documentationfor validation. Moreover, theDepartment does not intend to selectapplicants for verification just becausethey did not complete the high schooldiploma questions on the FAFSA.Changes: None.Comment: A few commenterssuggested that institutions should not beconsidered to have reason to believethat an applicant’s high school diplomais not valid or was not obtained from anentity that provides secondary schooleducation, unless the information fromFAFSA processing suggests that. Thesecommenters argued that institutionsshould not be obligated to investigatewhether every applicant’s high schooldiploma is valid, nor should theinstitution be required, if it is aninstitution that collects diplomainformation as part of the admissionsprocess, to cross-check that informationagainst the information from the FAFSAbecause that would be too burdensome.Discussion: For the 2011–2012 awardyear, we will not provide any additionalhigh school diploma information on theInstitutional Student InformationRecord (ISIR) beyond what the studentsubmitted on the FAFSA. We will notexpect institutions to check the ISIRhigh school data for every studentagainst other information obtained bythe institution during the admissionsprocess. However, if an institution hasreason to believe (or the Secretaryindicates) that a high school diploma isnot valid, the institution must follow itsprocedures to evaluate the validity ofthe diploma.Changes: None.Comment: One commenter requestedthat the Department declare that§ 668.16(p) will not be retroactive.Discussion: This requirement willapply to institutions beginning on July1, 2011, the effective date for theseregulations. This means that institutionswill be required to follow theprocedures developed under § 668.16(p)for any applicant who completes aFAFSA beginning with the 2011–2012award year.Changes: None.Comment: Several commentersrequested that we allow FAAs to foregodiploma validation for students whohave completed six credits of collegecoursework that applies to a program ofstudy at the institution or if thestudent’s ability to be admitted to theinstitution or eligibility for title IV, HEAaid is otherwise not affected.Discussion: It is correct that a studentwithout a high school diploma would beeligible for title IV, HEA aid if he or shemeets one of the other academic criteria,such as successfully completing sixcredits or 225 clock hours of collegelevelcoursework that apply to aprogram at the current institution.However, because students have thatflexibility does not obviate therequirement that for an institution to beeligible, it must admit as regularstudents only those with a high schooldiploma, or the recognized equivalent,or who are beyond the age ofcompulsory school attendance.Changes: None.Comment: One commenter asked thatif the Department permits waivers to therequirement in § 668.16(p) to followprocedures to check the validity of ahigh school diploma, that institutions,in particular those that do not admitstudents without a diploma or theequivalent, be permitted to evaluate thevalidity of a diploma if they choose.Discussion: There will be no waiversof the requirement that an institutionmust evaluate the validity of a highschool diploma when it or the Secretaryhas reason to believe that the diplomais not valid or was not obtained from aschool that provides secondary schooleducation.Changes: None.Comment: One commenter asked thatwe interpret section 123 of the HEA (20U.S.C. 1011l) to apply to high schooldiploma mills as well as collegediploma mills.VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00059 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2Discussion: This section of the HEAprovides that the Department will,among other things, maintaininformation on its Web site to educatestudents, families, and employers aboutdiploma mills and that it willcollaborate with other Federal agenciesto broadly disseminate to the publicinformation on how to identify diplomamills. While section 105 of the HEA (20U.S.C. 1003) defines diploma mill onlyin terms of postsecondary education, weintend to examine the issue of highschool diploma mills further.Changes: None.Comment: One commenter urged theDepartment’s Office of InspectorGeneral to be actively engaged withother agencies in detecting fraud,especially given that high schooldiploma mills may adopt names oflegitimate schools.Discussion: The Department’s Officeof Inspector General will continue towork with other agencies as appropriateto detect fraud in this area.Changes: None.Comment: One institution commentedthat it finds it difficult to explain tostudents who present questionable highschool credentials why those credentialsare not sufficient for receiving title IV,HEA aid.Discussion: In a situation such as this,we believe that it would be appropriatefor the institution to explain to studentsthe concept of a high school diplomamill, i.e., an entity that offers acredential, typically for a fee, andrequires little or no academic work onthe part of the purchaser of thecredential. We believe that studentswith a credential from a diploma millwould not have a sufficient educationalfoundation for success at thepostsecondary level and should notreceive title IV, HEA aid.Changes: None.Comment: One commenter urged theDepartment to clarify that the diplomasof high schools that are not accreditedare not necessarily invalid under§ 668.16(p). Several commenters askedwhether a new high school that wasoperating but had not yet receivedaccreditation would be acceptable underthis regulation. A small private highschool expressed concern that the newprovision would hinder its studentsfrom going to college because it is notaccredited and this provision may bemisinterpreted to mean that nonaccreditedhigh schools are notacceptable. The school asked that wedisabuse the public of the mistakennotion that for students to receive titleIV, HEA aid, their high school diplomasmust be from accredited schools.

WReier-Aviles on DSKGBLS3C1PROD with RULES266890 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and RegulationsDiscussion: Diplomas issued by highschools that are not accredited (morecommon among private than publichigh schools) often meet collegeadmissions standards and are generallyacceptable for receiving title IV, HEAaid. We have noted for several years inthe Federal Student Aid Handbook thathigh schools do not need to beaccredited for their diplomas to beacceptable for title IV, HEA eligibility.The Department’s recognition ofaccreditation exists only at thepostsecondary level.Changes: None.Comment: One organizationrepresenting colleges suggested that weshould not remove a high school fromany list we create if that school closes.Discussion: We do not plan to removeclosed schools from a list.Changes: None.Comment: One commenter expressedconcern that because many for-profitcolleges do not require proof of a highschool diploma (many require only thatthe applicant provide a signed statementof high school completion), they willnot be diligent when evaluating thevalidity of their applicants’ high schooldiplomas.Discussion: Whether any institutionfails to appropriately investigate thevalidity of a student’s high schoolcompletion will be determined inprogram reviews, audits, and otherDepartment oversight processes.Changes: None.Comment: One commenter claimedthat institutions are not qualified todetermine the quality of anyone’s highschool diploma, education, or secondarylearning.Discussion: We disagree with thiscommenter. Section 668.16(p) onlyrequires that institutions develop andfollow procedures to determine thevalidity of a student’s high schoolcompletion when they or the Secretaryhave reason to believe that the highschool diploma is not valid or was notobtained from an entity that providessecondary school education. We do notbelieve that an institution will need anyunique qualifications to make thisdetermination; as noted earlier, manyinstitutions already evaluate the highschool completion of students duringthe admissions process.Changes: None.Comment: One commenter opinedthat using a list of unacceptable schoolsis a less effective method of dealingwith high school validation, and thatthe best method would be to have alarge database of all high schoolgraduation records.Discussion: While we appreciate thecommenter’s suggestion, we do notbelieve that the creation or use of asingle database of all graduation recordsfrom the entire country is feasible.Changes: None.Comment: One commenter stated thatsome institutions do not have theresources to evaluate the validity of highschool diplomas and that theDepartment should make thosedeterminations with the help ofappropriate State agencies.Discussion: We believe thatadministrators at institutions, who havedirect contact with applicants, are in thebest position to evaluate the validity ofhigh school completions. We will issuefurther guidance on how to make thoseevaluations efficient and will try tominimize the administrative burden oninstitutions.Changes: None.Comment: One commenter claimedthat the Department wants to keep thelist of acceptable high schools secret toavoid having to defend its inclusion ofthe schools on the FAFSA list.Discussion: As noted earlier in thispreamble, FAFSA on the Web willinclude a list of schools to help studentsfill out the application; it will not be alist of acceptable schools. It will beavailable to the public via FAFSA onthe Web, though whether it can beaccessed without filling out theapplication and whether it will beavailable as a separate document, suchas the Federal School Code List, are notyet decided.Changes: None.Comment: Several commentersexpressed concern that complying with§ 668.16(p) would place adisproportionate burden on institutionsand students, and that communitycolleges in particular would beburdened because of their largernumbers of immigrant and nontraditionalstudents. These commentersnoted that the FAFSA will get larger bytwo questions. One commenter notedthat the added questions are acceptableeven with the Department’s attempt tosimplify the FAFSA, while anotheropined that requiring a high schooldiploma does not seem to be asignificant hurdle.Discussion: The Department will bemindful of ways in which to limit theadditional burden § 668.16(p) willimpose. However, because one of thestatutorily defined eligibility criteria forreceiving title IV, HEA aid is that astudent completed high school, we donot consider it an unacceptable burdenon students to report on their FAFSAthe name, city, and State of the highschool that awarded them theirdiploma. Also, there are enoughalternatives to having a high schoolVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00060 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2diploma that make satisfying theacademic criterion for student eligibilityreasonable. Finally, we consider theinclusion on the FAFSA of threeadditional, easy-to-answer fields areasonable increase in the size of theFAFSA.Changes: None.Comment: One commenter noted thatthe new questions on the FAFSA willnot solve the problem of identifyingquestionable diplomas because thequestions will only determine if a highschool is on the approved list.Discussion: We agree that theDepartment’s list of schools will notsolve the problem. Section 668.16(p),however, requires institutions todevelop and follow procedures todetermine the validity of a student’shigh school completion when they orthe Secretary has reason to believe thatthe high school diploma is not valid orwas not obtained from an entity thatprovides secondary school education.Accordingly, we believe that the newFAFSA question and the requirementsin § 668.16(p) will go a long way toidentifying those schools that areproviding invalid diplomas.Changes: None.Comment: One commenter expressedthe opinion that institutions should beresponsible for verifying high schooldiplomas or General EducationDevelopment (GED) certificates with acopy of either document, or with atranscript. The commenter argued that ifstudents cannot provide thisdocumentation to the institution, theyshould be required to take an ability-tobenefit(ATB) test. Other commentersstated that all institutions should berequired to verify that every title IV,HEA aid recipient has a high schooldiploma or GED.Discussion: We do not plan to requirethat all institutions ask, in everyinstance, for a copy of a student’sdiploma or transcript. Moreover, ATBtests are not the only alternative to ahigh school diploma or GED certificatefor establishing title IV, HEA eligibility;for example, as noted earlier in thispreamble, students who complete sixcredit hours or 225 clock hours ofcollege coursework that apply to aprogram at the current institution andare beyond the age of compulsoryschool attendance do not need to havea high school diploma. Therefore, wedecline to make any changes to theregulations in response to thesecomments.Changes: None.Comment: One commenter arguedthat verifying authenticity of highschool diplomas is a waste of resourcesbecause even students who have

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66891WReier-Aviles on DSKGBLS3C1PROD with RULES2completed high school and obtained avalid high school diploma might stillnot be ready for college. The commenterstated that the Department should focusinstead on improving secondary schooleducation and not connect title IV, HEAeligibility to the high school credentialuntil the work of improving highschools has been completed.Discussion: Improving high schooleducation is an important objective ofthe Secretary; however, the Departmentdoes not consider it necessary to refrainfrom requiring institutions to developand follow procedures for evaluating thevalidity of high school diplomas untilthe task of improving high schooleducation nationwide has beencompleted. And we believe verifying thevalidity of high school diplomas isnecessary to ensuring compliance withthe eligibility requirements for thereceipt of title IV, HEA aid.Changes: None.Comment: One commenter suggestedthat because § 668.16(p) does notrequire documentation of a diploma orgraduation from an applicant’s highschool directly, the fraud surroundingthis issue will just switch to the use offraudulent diplomas or transcriptspurportedly from legitimate highschools. Also, this commenter pointedout that it will be easy for unscrupulouscollege employees to skirt thisrequirement by telling students tosimply list the name of a legitimateschool or where to get a forged diploma,just as recruiters now tell studentswhere they can buy a high schooldiploma.Discussion: Institutions are free torequest that documentation comedirectly from the high school. We alsoacknowledge that it will be impossibleto eliminate all potential fraud, yet webelieve that the extra step of requiringvalidation under § 668.16(p) will help toeliminate some of it. As we noted in thepreamble to the NPRM, the Departmenthas other avenues for addressingfraudulent activities committed at aninstitution.Changes: None.Comment: One commenter noted thatwhen an institution is evaluating thevalidity of a student’s high schooleducation and his or her diploma ortranscript is not available, it should beable to accept a certified statement fromthe student that serves asdocumentation of graduation andexplains why the student could notobtain a copy of the diploma.Discussion: A certified statement froma student is not sufficientdocumentation of this requirement. Itshould be rare that students cannotprovide a copy of either their highschool diploma or final transcript, andthere might be such instances where aninstitution can still validate a student’shigh school education without a copy ofthe diploma or transcript. But FAAsshould remember that there areestablished alternatives for a highschool diploma, such as the GEDcertificate or ATB test.Changes: None.Comment: One commenter suggestedthat the Department should determine ifa significant number of studentsindicated they had valid diplomas,when they, in fact, did not. Thecommenter recommended that theDepartment make § 668.16(p) voluntaryor require compliance through a pilotprogram because building andmaintaining an accurate database willbe difficult and students will makemistakes that could delay theireligibility for a semester, a year, or awhole degree program.Discussion: We do not plan to makecompliance with § 668.16(p) voluntaryor part of a pilot program. We expectthat delays resulting from evaluation ofhigh school diplomas will be minimalor nonexistent.Changes: None.Comment: One commenter stated thatthe new FAFSA questions on highschool completion should be requiredand that students should not be able toenter an invalid school, or leave thequestions blank.Discussion: As noted earlier, weintend to require that students whoindicate that they have a high schooldiploma also give the name of theschool that awarded the diploma andthe city and State in which the schoolis located. They will be able to select aschool from the Department’s list or beprompted to write in the name of theschool. Students will be unable tocomplete the online FAFSA unless theyprovide this information.Changes: None.Comment: Commenters noted that,even if students indicate that theirdiploma is from an acceptable school, itdoes not prove the student actuallygraduated from that school. Thesecommenters argued that proposed§ 668.16(p) is not an improvement to thecurrent practice, and that the extra steprequired under the new regulatoryprovision will not help for institutionsthat do not require a diploma foradmission.Discussion: The proposed changereflected in § 668.16(p) is designed toreduce the number of students whoindicate that they have a high schooldiploma, but who do not, or who onlypossess a credential from a ‘‘diplomamill.’’ We believe that many studentsVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00061 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2with such credentials will indicate thename of the entity they received it from,either because they honestly believethey have a legitimate high schooldiploma or because they will bereluctant to provide the name of aschool they did not graduate frombecause the financial aid office willeasily be able to determine that such astatement is false. All institutions,including those that do not require ahigh school diploma for admission, willbe subject to the requirements in§ 668.16(p) and, therefore, will need toevaluate the credentials supplied bystudents as proof of high schoolcompletion if they or the Departmenthas reason to believe the credential isnot valid. We believe that this requiredprocess will reduce the number of badcredentials.Changes: None.Comment: One commenter suggestedthat unless the Department clarifieswhat is a valid high school diploma, itshould not, as part of a program review,substitute its judgment for aninstitution’s determination. Thecommenter argued that if an institutionacted reasonably, the eligibility of astudent should not be questioned, evenif the Department, or another school,reaches a different conclusion about thehigh school the student attended.Another commenter asked that theDepartment make clear in this preamblethat institutions may change theirdeterminations about a given highschool. New information may move aschool from the ‘‘good’’ list to the ‘‘bad’’one, or vice versa. The commenterwanted to ensure that the Departmentdoes not dissuade institutions frommaking such adjustments by deemingthat a later determination indicates anearlier one was inappropriate.Discussion: We do not plan to secondguessthe decisions of collegeadministrators in these matters, such asmoving a high school from a ‘‘good’’ listto a ‘‘bad’’ list (or vice versa), as long asthey are reasonable.Changes: None.Comment: One commenter stated thatit was not fair to require students toprovide a high school diploma because,in the commenter’s experience,homeschooled students have only atranscript as proof of completing asecondary school education.Discussion: As we noted earlier in thispreamble, the procedure for determiningthe validity of homeschooled students’education is not affected by § 668.16(p).Changes: None.Comment: One commenter observedthat students in high school specialeducation programs might receive acertificate or award that is not a high

WReier-Aviles on DSKGBLS3C1PROD with RULES266892 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulationsschool diploma when they did notcomplete the required coursework toreceive an actual diploma from theschool and that these students mayincorrectly believe that the certificate oraward is a diploma.Discussion: Students who do notcomplete the required coursework toreceive a high school diploma from theirsecondary school by definition did notearn a high school diploma. Thesestudents are not eligible for title IV,HEA aid unless they meet the academicrequirement under one of thealternatives to a high school diploma in§ 668.32(e), or they are students withintellectual disabilities who are seekingPell, FSEOG, or FWS program assistanceunder § 668.233.Changes: None.Comment: One commenter asked usto clarify what would cause aninstitution to have ‘‘reason to believethat the high school diploma is not validor was not obtained from an entity thatprovides secondary school education.’’Discussion: We expect that there maybe a number of situations in which aninstitution will have reason to believethat an applicant’s high school diplomais not valid or was not obtained from anentity that provides secondary schooleducation. For example, institutionsmay come across information thatsuggests that the applicant’s diploma ortranscript was purchased with littlework expected of the student. OftenFAAs receive conflicting informationfrom students themselves, typically asremarks that cast doubt on someelement of the students’ applicationinformation. We expect the sameregarding valid high school diplomas.Moreover, institutions may have reasonto believe that a high school diploma isinvalid if they recognize the name of thehigh school as an entity that theyidentified in the past as being a highschool diploma mill.Changes: None.Comment: One commenter requestedthat we add a check box on the FAFSAfor applicants who completed secondaryschool in a foreign country and anempty space for them to fill in the nameof their secondary school. Thecommenter suggested that in thissituation, the student’s FAFSA wouldreceive a ‘‘C’’ code, not automatically,but at random, so that due diligencewould still be required by theinstitution.Discussion: When completing theFAFSA, applicants will be able to enterthe name of their high school if it is noton the Department’s drop-down list.Changes: None.Comment: One commenter expressedconcern that the wording of the secondnew question proposed for the FAFSA,as noted in the preamble to the NPRM,could be misleading and suggested thatthe Department use either of thefollowing questions instead:• In what State is the school listed inquestion #1 located? or• In what State was the school inwhich the student completed highschool located?Discussion: As we noted earlier in thispreamble, the 2011–2012 FAFSA asksfor applicants to indicate the name ofthe high school where they received orwill receive their diploma and the cityand State where the school is located.Changes: None.Return of Title IV, HEA Program Funds(§§ 668.22(a), 668.22(b), 668.22(f), and668.22(l))Treatment of Title IV, HEA ProgramFunds When a Student Withdraws FromTerm-Based Programs With Modules orCompressed Courses (§§ 668.22(a),668.22 (f) and 668.22 (l))Comment: Approximately 80commenters, mostly representinginstitutions, commented on theproposed changes to the treatment oftitle IV, HEA program funds when astudent withdraws from a programoffered in modules. Approximately 26of these commenters opposed theproposed changes, with somecommenters recommending that theDepartment not issue final regulations atthis time and instead seek further inputfrom the community.Many of these commenters believedthe proposed changes would be tooburdensome to institutions. Severalcommenters were concerned about theadditional administrative and financialburden the proposed changes wouldimpose on institutions by requiringthem to identify and process morestudents as withdrawals. A fewcommenters believed that, as a result ofthis burden, the proposed regulationswould discourage schools from offeringprograms in modules, potentiallycausing disruptive changes in courseofferings at institutions. A fewcommenters believed institutions wouldbe unable to comply with the proposedregulations because they are toocomplicated or too difficult to explain tostudents. One commenter believed theproposed regulations would force aninstitution to delay disbursements toprevent the institution or student fromhaving to return unearned title IV, HEAprogram funds if the student withdrew.Many of these commenters alsobelieved that the proposed changeswould be harmful to students becausesome students who withdrew afterVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00062 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2completing one course in one modulewould earn less title IV, HEA programfunds. In particular, some commentersbelieved it was unfair to treat as awithdrawal a student who withdrewfrom a course or courses in the paymentperiod or period of enrollment, but whowould attend courses later in the samepayment period or period of enrollment,and wanted to know how to handle titleIV, HEA program funds in such cases.A few commenters believed theproposed regulations would discouragestudents from enrolling in programsstructured in modules, includingcompressed courses to acceleratecompletion of their program, which thecommenters believed was in conflictwith the provisions for two Federal PellGrants in one award year, which wereimplemented to support and makeequitable aid available for students whowish to complete their program sooner.A few commenters were concerned thata student who would now be counted asa withdrawal would be burdened withmore debt: To the institution for anyremaining balance of tuition and fees,and to the Department for Federal loansand or grant overpayments. Onecommenter noted that treating a studentas a withdrawal also has negativeconsequences for a student under theprovisions on satisfactory academicprogress and loan repayment.A few commenters believed theproposed regulations unfairly targetedcertain programs or institutions. Someof the commenters believed theproposed changes would treat studentsin module programs inequitably whencompared to students in moretraditional programs where courses areoffered concurrently. One commenterbelieved that the proposed regulationswould have a disproportionatelynegative affect for students in careertechnical programs, as many of thoseprograms are taught in a condensed,modular form. Some commentersbelieved the proposed regulationsunfairly focused on only term-basedcredit-hour programs.Approximately 25 of the commentersexpressed an understanding of theDepartment’s concern with studentsreceiving full or large amounts of titleIV, HEA program funds for a shortperiod of attendance during a paymentperiod or period of enrollment. Acouple of those commenters agreed withthe proposed changes. Others believedthat the current guidance from DearColleague Letter of December 2000,GEN–00–24, Return of Title IV Aid-Volume #1—which provided that astudent who completed only onemodule or compressed course within aterm was not considered to have

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66893WReier-Aviles on DSKGBLS3C1PROD with RULES2withdrawn—should be incorporatedinto the regulations. These commentersbelieved that a student who has earnedcredits in a payment period or period ofenrollment who then ceases attendanceshould not be treated as a withdrawal,as the existing regulations in 34 CFR690.80(b)(2)(ii), requiring recalculationsof title IV, HEA program funds when astudent did not begin attendance in allclasses, are a sufficient safeguard againststudents receiving full or large amountsof title IV, HEA program funds for ashort period of attendance in a programoffered in modules. Two commentersbelieved that the satisfactory academicprogram provisions should be sufficientto prevent long-term abuse by studentsof title IV, HEA program funds.Several commenters suggestedalternative approaches to ensure thatstudents are not receiving title IV, HEAprogram funds for periods in which theyare not in attendance. A fewcommenters believed that a studentattending a certain percentage of thepayment period or period of enrollment(commenters suggested 60 percent)should be deemed to have completed apayment period or period of enrollment.A couple of commenters believed thatthe determination of whether a studentshould be treated as a withdrawalshould be based on credit hourscompleted, rather than days completed,meaning that a student who ceasedattendance would not be treated as awithdrawal as long as the studentcompleted the minimum number ofcredits required to be eligible for aparticular title IV, HEA program. A fewcommenters supported setting aminimum length of a module that mustbe completed, after which a studentwho ceased attendance would not beconsidered to have withdrawn. A fewcommenters suggested requiringinstitutions to award or pay title IV,HEA program funds by module, or todelay payment until a student hasearned enough credits to support theenrollment status necessary foreligibility of the aid. One commentersuggested limiting the amount of titleIV, HEA program funds that can beearned by a student to the lesser ofactual charges or the amount calculatedunder the Return of Title IV Fundsprovisions (i.e., the provisions of§ 668.22). A couple of commentersbelieved an institution should be able toexercise professional judgment or use itsown discretion to determine whether astudent has truly withdrawn from class.One commenter suggested that, forclock-hour and nonterm programs, astudent be considered to havewithdrawn if the student had not beenin attendance for 35 consecutive daysand had not completed the paymentperiod or period of enrollment.One commenter believed that theproposed changes addressingcompletion of a payment period orperiod of enrollment by students inclock-hour programs were incorrect asall determinations of title IV, HEAprogram funds earned by students whowithdraw from clock-hour programs aidare based on scheduled hours, and thechanges referred to clock hourscompleted.Discussion: We note that these finalregulations do not change howinstitutions are currently required totreat students when they withdraw fromprograms offered in modules (i.e.,sequentially) in nonterm credit-hourprograms, and some nonstandard-termcredit-hour programs. The Secretarybelieves that the approach proposed inthe NPRM treats students moreequitably across all programs byeliminating the major differences in thetreatment of students who withdrawfrom term-based and nonterm-basedprograms offered in modules and,therefore, is a better approach thanbasing the determination of completionof a payment period or period ofenrollment on completion of onecourse/module, even if a minimumlength of such a course/module wereset. In addition, this approach moreaccurately reflects the statutoryrequirement in section 484B(a)(1) of theHEA that applies the Return of Title IVFunds requirements to any recipient oftitle IV, HEA program funds who‘‘withdraws from an institution during apayment period or period of enrollmentin which the student began attendance’’and the fact that title IV, HEA programfunds are awarded for an entire paymentperiod or period of enrollment. Some ofthe alternatives suggested by thecommenters—determining completionbased on attendance of a certainpercentage of the payment period orperiod of enrollment; using credit hourscompleted, instead of days completed;delaying awarding or paying title IV,HEA program funds; equating unearnedaid to actual charges; and leaving thedetermination of completion of theperiod up to institutional discretion—are not supported by the HEA, whichrequires in section 484B(a) that studentsearn title IV, HEA program funds on apro rata basis up through the 60 percentpoint of a period based on dayscompleted, for credit-hour programs,and clock hours completed, for clockhourprograms. Completing more than60 percent of the period then entitles astudent to have earned 100 percent ofthe funds for the period. The lawVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00063 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2therefore does not permit the alternativemeasures of when a student may keep100 percent of the title IV, HEA programfunds that were suggested by thecommenters.The Secretary agrees that it isreasonable to allow an institution not totreat as a withdrawal a student whoceases attendance during a paymentperiod or period of enrollment, butintends to attend a course later in thepayment period or period of enrollment.This position is consistent with theguidance provided in the Department’sDear Colleague Letter of December 2000,GEN–00–24, Return of Title IV Aid-Volume #1, for the treatment of title IV,HEA program funds when a studentwithdraws without completing at leastone course in a payment period orperiod of enrollment. These finalregulations have been modified toincorporate this policy and provide thata student is not considered to havewithdrawn if the student ceasedattending the modules he or she wasscheduled to attend, but the institutionobtains a written confirmation from thestudent at the time of the withdrawalthat he or she will attend a module thatbegins later in the same payment periodor period of enrollment. This willprovide more flexibility for a studentwho provides the authorization. Thisconfirmation must be obtained at thetime of withdrawal, even if the studenthas already registered for subsequentcourses. However, these finalregulations provide that, for nontermand nonstandard-term programs, aconfirmation is valid only if the modulethe student plans to attend begins nolater than 45 calendar days after the endof the module the student ceasedattending. If the institution has notobtained a written confirmation that thestudent intends to return to a nontermor nonstandard-term program within 45calendar days of the end of the modulethe student ceased attending, thestudent is considered to havewithdrawn. A student who has providedwritten confirmation of his or her intentto return is permitted to change the dateof return to a module that begins evenlater in the same payment period orperiod of enrollment, provided that thestudent does so in writing prior to thereturn date that he or she hadpreviously confirmed, and, for nontermand nonstandard-term programs, thelater module that he or she will attendbegins no later than 45 calendar daysafter the end of the module the studentceased attending. If an institutionobtains a written confirmation of futureattendance but the student does notreturn as scheduled, the student is

WReier-Aviles on DSKGBLS3C1PROD with RULES266894 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulationsconsidered to have withdrawn from thepayment period or period of enrollmentand the student’s withdrawal date andthe total number of calendar days in thepayment period or period of enrollmentwould be the withdrawal date and totalnumber of calendar days that wouldhave applied if the student had notprovided written confirmation of futureattendance.Title IV, HEA program funds areawarded to a student with theexpectation that the student willcomplete the period of time for whichthe aid has been awarded. When astudent does not complete enough of hisor her education to earn all of theoriginally awarded title IV, HEAprogram funds, it is in the best interestof the taxpayer to have the unearnedFederal funds returned to thegovernment as expeditiously as possiblefor use by other students. It is also fairerto all students receiving title IV, HEAprogram funds to have the way thosefunds are earned be comparableregardless of the way their programs arestructured. In general, the Secretarybelieves that long gaps in attendanceduring a payment period or period ofenrollment are not in the best interest ofstudents and increase the likelihoodthat a student will not return to theinstitution. Should the student notreturn, the Secretary does not wish tounduly delay the return of title IV, HEAprogram funds. The Secretary agreeswith the suggestion that, for clock-hourand nonterm programs, a student beconsidered to have withdrawn if thestudent has not been in attendance fora specified period of time and has notcompleted the payment period or periodof enrollment, although the Secretarybelieves that 45 days, rather than 35days, as suggested by the commenter, isan appropriate period of time. Thus, inaddition to limiting a student’sconfirmation of return in a nonterm ornonstandard-term program to a modulethat begins no later than 45 calendardays after the end of the module thestudent ceased attending, if a student ina nonterm or nonstandard-term programis not scheduled to begin another coursewithin a payment period or period ofenrollment for more than 45 calendardays, the institution must treat thestudent as a withdrawal for title IV,HEA program fund purposes, unless thestudent is on an approved leave ofabsence, as defined in § 668.22(d).We do not believe that studentsshould be penalized if they do notconfirm an intent to return to a modulelater in the payment period or period ofenrollment, but do return to the moduleanyway, or if they are not scheduled tobegin a course within a payment periodor period of enrollment in a nonterm ornonstandard-term program for over 45days, but do return and begin a coursewithin that payment period or period ofenrollment. Thus, in these situations,we believe it is appropriate for theinstitution to ‘‘undo’’ the Return of TitleIV Funds calculation and treat thosestudents as if they had not ceasedattendance. This final regulation isconsistent with current regulations forstudents who withdraw from clock-hourprograms and nonterm credit-hourprograms. Under § 668.4(f), a studentwho returns to a nonterm credit-hourprogram or clock-hour program(regardless of whether the program isoffered in modules) within 180 daysafter withdrawing is treated as if he orshe did not cease attendance (i.e., isconsidered to remain in that samepayment period, and is eligible toreceive any title IV, HEA program fundsfor which he or she was eligible prior towithdrawal, including funds that werereturned by the institution or studentunder the provisions of § 668.22). If astudent returns to a clock-hour ornonterm credit-hour programs after 180days, the student’s withdrawal is not‘‘undone’’; he or she must begin a newpayment period and aid for that periodis determined in accordance with theprovisions of § 668.4(g). The Secretarybelieves that similar treatment iswarranted for students who withdrawfrom term-based programs offered inmodules. That is, if a student returns toa term-based credit-hour programoffered in modules prior to the end ofthe payment period or period ofenrollment, the student is treated as ifhe or she did not cease attendance, andis eligible to receive any title IV, HEAprogram funds for which he or she waseligible prior to withdrawal, includingfunds that were returned by theinstitution or student under theprovisions of § 668.22. However, theinstitution must make adjustments toreflect any changes to the student’senrollment status.While we acknowledge that requiringinstitutions to treat as withdrawalsstudents who cease attending at anypoint during the payment period orperiod of enrollment, rather than justthose students who cease attendingbefore completing at least one course, islikely to increase the number of Returnof Title IV Fund calculations aninstitution must perform for theseprograms, we note that institutions havealways had to track students in moduleprograms beyond the first course/module to determine whether a studentbegan attendance in all the courses theywere scheduled to attend, in case theVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00064 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2student’s enrollment status changedupon ceasing attendance, resulting inrequired recalculations of the title IV,HEA program funds awarded. While werecognize that some students mustwithdraw due to circumstances beyondtheir control, we are concerned with thecommenters’ contention that there willbe a substantial increase in burden dueto the number of students who ceaseattendance during a payment period orperiod of enrollment. We do not believethat it is in a student’s best interest towithdraw and we would expect thatinstitutions are doing all they can toprevent withdrawals throughcounseling, student support services,and proper enrollment procedures. Inresponse to the commenter whobelieved the proposed regulationswould force institutions to delaydisbursements to prevent the institutionor student from having to returnunearned title IV, HEA program funds ifthey withdraw, we are providing that,under amended § 668.164(i), aninstitution would be required to providea way for a Federal Pell Grant eligiblestudent to obtain or purchase requiredbooks and supplies by the seventh dayof a payment period under certainconditions if the student were to havea title IV credit balance.The commenter who noted that thedetermination of title IV, HEA programfunds that are earned by a student whowithdraws from a clock-hour programare based on scheduled hours is correctin that once it has been determined thata student has not completed thepayment period or period of enrollment,the percentage of the payment period orperiod of enrollment completed isdetermined by dividing the totalnumber of clock hours in the paymentperiod or period of enrollment into thenumber of clock hours scheduled to becompleted at the time the studentceased attending (§ 668.22(f)(1)(ii)(A)).However, a student has not completeda clock hour payment period or periodof enrollment until he or she hascompleted all the hours and all of theweeks of instructional time that he orshe was scheduled to attend in thatperiod.Because different institutions usedifferent names to refer to this type ofprogram structure, in amended§ 668.22(l)(6), we have defined the term‘‘offered in modules’’ to mean if a courseor courses in the program do not spanthe entire length of the payment periodor period of enrollment. In addition, toclarify the types of programs that areconsidered to be nonstandard-termprograms or nonterm programs, inamended § 668.22(l)(8), we have definedthe term ‘‘nonstandard-term program’’ as

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66895WReier-Aviles on DSKGBLS3C1PROD with RULES2a term-based program that does notqualify under 34 CFR 690.63(a)(1) or (2)to calculate Federal Pell Grant paymentsunder 34 CFR 690.63(b) or (c). We notethat nonterm programs include anyprogram offered in clock hours for titleIV, HEA program purposes as well asany nonterm credit-hour program.Changes: Section 668.22(a)(2) hasbeen revised to provide that, for apayment period or period of enrollmentin which courses in the program areoffered in modules, a student whowould otherwise be considered to havewithdrawn from an institution because,prior to ceasing attendance the studenthas not completed all of the days orscheduled hours he or she wasscheduled to attend, is not considered tohave withdrawn if the institutionobtains written confirmation from thestudent at the time of withdrawal thathe or she will attend a module thatbegins later in the same payment periodor period of enrollment, provided that,for a nonterm or nonstandard-termprogram, that module begins no laterthan 45 days after the end of the modulethe student ceased attending. However,if that student does not return asscheduled, the student is considered tohave withdrawn from the paymentperiod or period of enrollment and thestudent’s withdrawal date and the totalnumber of calendar days in the paymentperiod or period of enrollment would bethe withdrawal date and total number ofcalendar days that would have appliedif the student had not provided writtenconfirmation of future attendance inaccordance with § 668.22(a)(2)(ii)(A).Section 668.22(a)(2) also has beenrevised to cross-reference § 668.4(f),which provides that, if a studentwithdraws from a nonterm credit-houror clock-hour program during a paymentperiod or period of enrollment and thenreenters the same program within 180days, the student remains in that sameperiod when he or she returns and,subject to conditions established by theSecretary, is eligible to receive any titleIV, HEA program funds for which he orshe was eligible prior to withdrawal,including funds that were returned bythe institution or student under theprovisions of this section. Section668.22(a)(2) has been further revised toprovide that, if a student withdrawsfrom a term-based credit-hour programoffered in modules during a paymentperiod or period of enrollment andreenters the same program prior to theend of the period, the student remainsin the same payment period or period ofenrollment when he or she returns and,subject to conditions established by theSecretary, is eligible to receive any titleIV, HEA program funds for which he orshe was eligible prior to withdrawal,including funds that were returned bythe institution or student under theprovisions of this section.In addition, § 668.22(a)(2) has beenrevised to provide that, if a student ina nonterm or nonstandard-term programis not scheduled to begin another coursewithin a payment period or period ofenrollment for more than 45 calendardays, the institution must treat thestudent as a withdrawal for title IV,HEA program fund purposes, unless thestudent is on an approved leave ofabsence, as defined in § 668.22(d).Finally, § 668.22(a)(2) has beenrevised to clarify that a student in aclock hour program has not completeda payment period or period ofenrollment until the student hascompleted both the weeks ofinstructional time and the clock hoursscheduled to be completed in theperiod.Section 668.22(l)(6) and (8) has beenrevised to add definitions of a programthat is offered in modules and of anonstandard-term program.Comment: Approximately 40commenters asked the Department toclarify how the regulations would applyin different situations. Some of thesecommenters questioned how enrollmentstatus changes due to an institution’sadd/drop policy would be differentiatedfrom a withdrawal. For example, somecommenters asked for guidance on thehandling of title IV, HEA program fundswhen a student withdraws withoutbeginning attendance in all courses, ornotifies the institution that he or shewill not be attending a future modulethat he or she was scheduled to attend.One commenter believed that theproposed regulations would be inconflict with the Department’s guidancethat allows a Direct Loan to bedisbursed based on anticipatedenrollment during a term, such as asummer term, where a student isenrolled for two consecutive courses.The commenter’s understanding is thatif the student does not begin the secondcourse to establish half time enrollment,the student can keep the funds.Discussion: A student that beginsattending but then ceases attendance inall classes during a payment period is awithdrawal unless the institutionobtains written confirmation from thestudent that he or she plans to attend acourse that begins later in the paymentperiod or period of enrollment, asapplicable. Anytime a student beginsattendance in at least one course, butdoes not begin attendance in all thecourses he or she was scheduled toattend, regardless of whether thestudent is a withdrawal, the institutionVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00065 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2must check to see if it is necessary torecalculate the student’s eligibility forPell Grant and campus-based fundsbased on a revised enrollment statusand cost of education (34 CFR690.80(b)(2)(ii)). If the student is awithdrawal, this recalculation must bedone before performing a Return of TitleIV Funds calculation, and theinstitution must use the recalculatedamounts of aid in the Return of Title IVFunds calculation. If the student has notbegun attendance in enough courses toestablish a half-time enrollment status,the institution may not make a firstdisbursement of a Direct Loan to thestudent (34 CFR 685.303(b)(2)(i)), or asecond disbursement of Pell Grantfunds, although the funds are includedas aid that could have been disbursed inthe Return of Title IV Funds calculation.Courses that were officially droppedprior to the student ceasing attendanceare not days that the student wasscheduled to attend, unless the studentremained enrolled in other coursesoffered on those days. Correspondingly,courses that were officially added priorto the student ceasing attendance aredays the student was scheduled toattend.If a student officially drops a courseor courses he or she was scheduled toattend and doing so does not result inthe student no longer attending anycourses, the student is not a withdrawal,and the dropped courses are handled aschanges in enrollment status, asapplicable.An institution can determine whethera student in a program offered inmodules is a withdrawal by answeringthe following questions:(1) After beginning attendance in thepayment period or period of enrollment,did the student cease to attend or fail tobegin attendance in a course he or shewas scheduled to attend? If the answeris no, this is not a withdrawal. If theanswer is yes, go to question 2.(2) When the student ceased to attendor failed to begin attendance in a coursehe or she was scheduled to attend, wasthe student still attending any othercourses? If the answer is yes, this is nota withdrawal, however other regulatoryprovisions concerning recalculationmay apply. If the answer is no, go toquestion 3.(3) Did the student confirmattendance in a course in a modulebeginning later in the period (fornonterm and nonstandard termprograms, this must be no later than 45calendar days after the end of themodule the student ceased attending). Ifthe answer is yes, this is not awithdrawal, unless the student does not

WReier-Aviles on DSKGBLS3C1PROD with RULES266896 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulationsreturn. If the answer is no, this is awithdrawal.Take, for example, a student who is arecipient of title IV, HEA program fundswho is scheduled to complete twocourses in each of the first two of threemodules within the payment period.Scenario 1: The student beginsattendance in both courses in the firstmodule, but ceases to attend bothcourses after just a few days and doesnot confirm that he will return to anycourses in modules two or three. Thestudent is a withdrawal because he orshe ceased to attend courses he or shewas scheduled to attend (Yes toquestion 1); was not still attending anyother courses (No to question 2); anddid not confirm attendance in a coursein a module beginning later in theperiod (No to question 3).Scenario 2: If, however, the studentbegins attendance in both courses in thefirst module, but drops just one of thecourses after just a few days, the studentis not a withdrawal. Although thestudent ceased to attend a course he orshe was scheduled to attend (Yes toquestion 1), the student was stillattending another course (Yes toquestion 2).Scenario 3: If the student completesboth courses in module one, butofficially drops both courses in moduletwo while still attending the courses inmodule one, the student is not awithdrawal. Because the studentofficially dropped both courses inmodule two before they began, thestudent did not cease to attend or fail tobegin attendance in a course he or shewas scheduled to attend (No to question1). However, because the student didnot begin attendance in all courses,other regulatory provisions concerningrecalculation may apply.Changes: None.Comment: Several commenters askedthe Department to clarify what it meansto ‘‘complete all the days’’ or ‘‘completeall of the clock hours’’ in a paymentperiod or period of enrollment. Morespecifically, commenters asked ifstudents would be required to attendevery day of every course, or be inattendance on the last day of thepayment period or period of enrollment.Some of the commenters noted that, dueto individual student schedules,students do not attend all days in thepayment period or period of enrollment.Commenters were concerned that astudent who was not in attendance onthe last day of the payment periodwould be counted as a withdrawal. Toaddress this concern, one commentersuggested that the wording of theregulations be changed to say that astudent is considered to havewithdrawn from a payment period orperiod of enrollment if the student doesnot complete substantially all of thedays in the payment period or period ofenrollment.Some of the commenters asked howlimited absences (for example, forillness), incompletes, and leaves ofabsence would be treated. Commentersalso asked if a student is considered tohave completed a course in a paymentperiod or period of enrollment if thestudent received a grade for that courseor, for a clock-hour program, earns allthe clock hours for the course,regardless of absences. A couple of thecommenters asked if the definition ofwhat it means to complete all the daysor complete all the clock hours wouldaffect in-school deferments for title IV,HEA program loans. Some commentersasked under what circumstances aninstitution would have to prove that thestudent attended all days in a periodand what documentation wouldconstitute that proof. Commenters askedif the issue would arise only if all of astudent’s grades are Fs or if it becomesotherwise apparent that the student hasceased attendance without formallywithdrawing. A few commenterswanted to know how intersessions—aperiod of time between terms whencourses are offered—would be handled.A few commenters asked theDepartment to clarify what the length ofthe payment period or period ofenrollment is when performing a Returnof Title IV Funds calculation for awithdrawn student who was notscheduled to attend courses over theentire term and how an institutionwould determine whether the studenthas completed more than 60 percent ofthe payment period or period ofenrollment (i.e., earned all of his or hertitle IV, HEA program funds). Onecommenter believed there would be nopossible way for an institution todetermine the days the student wasscheduled to attend for an on-line classthat is self-paced as there are no‘‘scheduled days’’ in a self-pacedprogram.Discussion: Section 668.22(f)(1)(i) hasalways required an institution todetermine the days in the paymentperiod or period of enrollment that werecompleted by a student who withdrawsfrom a program offered in credit hoursin order to determine the percentage ofthe payment period or period ofenrollment completed by the student.These final regulations do not changewhat it means to complete days forcredit-hour programs, or clock hours forclock-hour programs, for purposes of thedetermination of the amount of aidearned by a student who withdrawsVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00066 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2from a program, nor do they change aninstitution’s responsibility for having aprocedure for determining whether atitle IV recipient who began attendanceduring a period completed the period orshould be treated as a withdrawal. TheDepartment does not require that aninstitution use a specific procedure formaking this determination; however, wehave provided guidance to assistinstitutions in making thesedeterminations. For example, consistentwith the Department’s guidanceprovided in its Dear Colleague Letter ofNovember 2004, GEN–04–12, Return ofTitle IV Aid, an institution maypresume a student completed the periodin a program offered in modules if thestudent did not officially withdraw fromthe institution and received a passinggrade in all courses the student wasscheduled to attend during the period.If a student in a program offered inmodules does not receive a passinggrade in the last course or courses he orshe was scheduled to attend, theinstitution must otherwise demonstratethat the student completed the period,which can sometimes be done using theinstitution’s grading policy if the failinggrades reflect whether the studentparticipated in those courses. Consistentwith current requirements, if a studentis determined to have withdrawn froman institution under § 668.22, thestudent is no longer considered to beenrolled and in attendance at aninstitution and, therefore, is ineligiblefor an in-school deferment and must bereported by the institution as awithdrawal for this purpose (34 CFR674.34(b)(1)(i) and 34 CFR685.204(b)(1)(i)(A)).Consistent with the guidanceprovided in the Department’s DearColleague Letter of December 2000,GEN–00–24, Return of Title IV Aid-Volume #1, for the treatment of title IV,HEA program funds when a studentwithdraws without completing at leastone course in a payment period orperiod of enrollment, to determinewhether the percentage of the paymentperiod or period of enrollmentcompleted for a student who withdrawsfrom a program offered in modules, theinstitution would include in thedenominator (the total number ofcalendar days in the payment period orperiod of enrollment) all the days in themodules the student was scheduled toattend, except for scheduled breaks of atleast five consecutive days and dayswhen the student was on an approvedleave of absence. The numerator wouldinclude the number of the total days inthe payment period or period ofenrollment that the student has

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66897WReier-Aviles on DSKGBLS3C1PROD with RULES2completed. For example, a student wasscheduled to attend an intersession ofthree weeks of instructional time at theend of a fall semester, and, inaccordance with the Department’s pastguidance, the institution has includedthat intersession with the fall term forpurposes of the program’s academiccalendar when determining the paymentof title IV, HEA program funds. In thiscircumstance the days in thatintersession are included in the totalnumber of days in the payment periodfor that student, except for scheduledbreaks of at least five consecutive days,and days in which the student was onan approved leave of absence. Note thatall the courses in the fall term areconsidered modules for purposes of aReturn of Title IV Funds calculationwhen the intersession is included in thepayment period.Regarding the comment that therewould be no possible way for aninstitution to determine the days thestudent was scheduled to attend for anon-line class that is self-paced, we notethat, for Title IV, HEA programpurposes, an institution is required todetermine a program schedule for apayment period or period of enrollment.Changes: Section 668.22(f)(2)(ii) hasbeen revised to clarify that, whendetermining the percentage of paymentperiod or period of enrollmentcompleted, the total number of calendardays in a payment period or period ofenrollment does not include, for apayment period or period of enrollmentin which any courses in the program areoffered in modules, any scheduledbreaks of at least five consecutive dayswhen the student is not scheduled toattend a module or other course offeredduring that period of time.Withdrawal Date for a Student WhoWithdraws From an Institution That IsRequired To Take Attendance(§§ 668.22(b) and 668.22(l))Comment: Commenters were unsureabout the effect of the proposedchanges, and a number of them askedfor clarification. A few commentersexpressed concern that the Departmentwas requiring institutions to takeattendance. Others thought that, ininstances in which individual facultymembers take attendance by choice, theentire institution would then beconsidered an institution required totake attendance. Some commentersbelieved that if an institution or anoutside entity required attendancetaking for students in some but not allprograms, then the institution would beconsidered one that has to takeattendance for students in all programs.Other commenters believed that theproposed regulations would requireinstitutions that take attendance for alimited period of time and use thoseattendance records, to continue to takeattendance beyond that point.Some commenters advocated a morerestricted definition of an institutionthat is required to take attendance,suggesting that an institution shouldonly be required to take attendance if anoutside entity collects and maintainsthose records. One commenter did notbelieve that an outside entity should beable to require an institution to takeattendance, and others opposed theprovision that institutions required byan outside entity to take attendancemust use these attendance records forthe purposes of a Return of Title IVFunds calculation.In general, we received comments onthe application of the regulations tosubpopulations of students and on theuse of attendance records during alimited period. With respect toattendance requirements forsubpopulations of students, mostcommenters did not object to thecurrent policy that if some students atthe institution are subject to attendancetaking requirements, then institutionswould have to follow the last day ofattendance regulations for thosestudents. Other commenters agreed withthis position, but believed that thiscondition should only be applied whentaking attendance is required for theentire payment period, for all classes thestudent enrolls in, and only whenimposed by an outside entity. Onecommenter disagreed with our positionon the treatment of subpopulations ofstudents, recommending that we modifythe regulations to specify that the takingattendance requirement must beimposed by an outside entity and beapplicable to the entire institution inorder for an institution to be consideredone required to take attendance.One commenter supported theproposed change that if an institutionrequires the taking of attendance for alimited period of time, then thoseattendance records must be used todetermine a withdrawal date. A fewcommenters objected to consideringinstitutions that take attendance duringa limited period of time to beinstitutions required to take attendance,even for only that limited period,suggesting that this provision shouldonly be applied when taking attendanceis required for the entire paymentperiod or period of enrollment.Discussion: The regulations do notrequire institutions to take attendance.Instead, under the regulations theDepartment considers an ‘‘institutionthat is required to take attendance’’ toVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00067 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2include not only an institution that isrequired to take attendance by anoutside entity, but also an institutionthat itself requires its faculty to takeattendance in certain circumstances.Regarding faculty attendance records,if an institution does not require facultyto take attendance, but a faculty memberchooses to take attendance, then theinstitution would not then beconsidered an institution required totake attendance. If, however, theinstitution requires its faculty to takeattendance, whether at the program,department, or institutional level, thenthose attendance records must be usedby the institution in determining astudent’s date of withdrawal.Institutions that do not require thetaking of attendance and are notrequired to take attendance by anoutside entity are not prohibited fromusing individual faculty members’attendance records in determining astudent’s date of withdrawal. TheDepartment encourages institutions touse the best information available inmaking this determination.We do not agree with commenterswho believed that if attendance taking isrequired for some students, then theinstitution would be required to takeattendance for all students. These finalregulations do not change our existingpolicy. Under our current guidance andregulations, if an outside entity requiresan institution to take attendance foronly some students, for instance, forstudents receiving financial assistanceunder a State program, the institutionmust use its attendance records todetermine a withdrawal date for thosestudents. Similarly, under these finalregulations, if the institution itselfrequires attendance taking for studentsin certain programs or departments,then the institution must use itsattendance records to determine awithdrawal date for students in thoseprograms or departments. Theseattendance taking regulations onlyapply when an institution eitherrequires the taking of attendance or isrequired by an outside entity to takeattendance, but not when a student isrequired to self-certify attendancedirectly to an outside entity. Forexample, a veterans’ benefitsrequirement that benefit recipients selfreportattendance would not result in aninstitutional requirement to takeattendance of those students unless theinstitution is required to verify thestudent’s self-certification.An institution that is required by anoutside entity to take attendance duringa limited period, or that requires itsfaculty to do so, must use anyattendance records from that limited

WReier-Aviles on DSKGBLS3C1PROD with RULES266898 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulationsperiod in determining a withdrawal datefor a student. For students in attendanceat the end of that limited period, if theinstitution is not required to takeattendance and does not require itsfaculty to do so, then the guidelines fordetermining a withdrawal date for aninstitution that is not required to takeattendance would apply. TheDepartment continues to believe that thebest data available should be used indetermining a student’s withdrawal datefrom classes, and, accordingly, if aninstitution requires the taking ofattendance or is required to takeattendance for any limited period, thenthose records must be used.Lastly, we disagree with the commentthat an outside entity should not be ableto require an institution to takeattendance. We continue to believe thatour policy that an ‘‘institution that isrequired to take attendance’’ means aninstitution that is required to takeattendance by an outside entity is areasonable interpretation of the statute.The phrase ‘‘required to takeattendance’’ presupposes that an entityhas this requirement, and under thisregulation, that entity may be either theinstitution itself or a separate entity.Changes: None.Comment: A few commentersexpressed concern about who woulddecide what ‘‘required to takeattendance means.’’ Specifically, theywere concerned that the Departmentwould determine that an institution oroutside entity had a requirement thatattendance be taken at an institution,even if the institution or outside entitydisagreed with that conclusion. Thecommenters believed that the entityrequiring the taking of attendanceshould make the determination aboutwhen attendance must be taken andwhat kind of documentation to supportattendance taking is necessary, and thatthe Department should not superimposeits view of attendance taking on thatentity. In particular, a few commentersopposed the idea that the Departmentwould consider clock-hour institutionsto be institutions required to takeattendance if an outside entity or theinstitutions themselves did not believethat they were. One commenterrecommended that we remove§ 668.22(b)(3)(i)(C), believing that aninstitution could be found innoncompliance by the Department if theinstitution or outside entity had adifferent interpretation of whethertaking attendance was required.A couple of commenters requestedclarification that, in a case where astudent must be physically present todemonstrate a competency or skill,attendance taking would not beautomatically required. Instead, theinstitution or another outside entitywould have the responsibility ofdeciding whether attendance taking wasnecessary. Further, one commentersuggested that a ‘‘requirement’’ to takeattendance should mean a writtenregulation or policy tied to determiningseat time and not a quality inherent tothe type of program.Discussion: For institutions that arerequired to measure the clock hours astudent completes in a program, theDepartment believes that this is, insubstance, a requirement for thoseinstitutions to take attendance for thoseprograms since they satisfy both therequirement of determining that astudent is present and that the studentis participating in a core academicactivity. The Department is looking atthe substance of the information that isavailable rather than the way thatinformation is described or portrayed bythe institution or outside entity. If theinstitution is required to collectinformation or record information aboutwhether a student was in attendanceduring a payment period, or during alimited period of time during a paymentperiod, that information should be usedto determine if the student ceasedattendance during that period.Changes: None.Comment: Commenters had a numberof questions about the documentationand the maintenance of attendancerecords, generally requestingclarification about how attendance mustbe documented and what constitutesattendance in an academic oracademically-related activity. Onecommenter asked for specific guidanceas to the definition of an attendancerecord, and requested clarification as tohow often attendance must be taken atan institution required to takeattendance. Another commenter askedwhat documentation would be sufficientto demonstrate attendance in cases inwhich students do not physically attendclass but watch a video or podcast of thelecture remotely. Similarly, acommenter asked whether a studentwould be considered in attendance if heor she participated in an academicallyrelatedactivity but was not physicallypresent, such as working with aninstructor by phone or e-mail. A fewcommenters requested clarification andguidance about what the Departmentbelieves constitutes attendance in adistance education context and how aninstitution should document thatattendance. One commenter requestedthat the Department ensure that theevidence required of last day ofattendance in online programs for thepurpose of a Return of Title IV FundsVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00068 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2calculation be substantially comparableto that required of traditional, face-tofaceprograms. The same commenterwas also concerned that the Departmentwould be requiring documentationbeyond that required in the past withoutproviding sufficient time for institutionsto implement this change.Discussion: In accordance with§ 668.22(b)(2) and (c)(4), an institutionmust document a student’s withdrawaldate and maintain that documentationas of the date of the institution’sdetermination that the studentwithdrew. As noted in the FederalStudent Aid Handbook (FSAHandbook), the determination of astudent’s withdrawal date is theresponsibility of the institution; astudent’s certification of attendance thatis not supported by institutionaldocumentation would not be acceptabledocumentation of the student’s last dateof attendance at an academically-relatedactivity. As with other title IV, HEAprogram records, documentation ofattendance must be retained and beavailable for examination in accordancewith the provisions of § 668.24. If aninstitution is required to take attendanceor is an institution that is not requiredto take attendance, but is using a lastdate of attendance at an academicallyrelatedactivity as a withdrawal date, itis up to the institution to ensure thataccurate records are kept for purposes ofidentifying a student’s last date ofacademic attendance or last date ofattendance at an academically-relatedactivity. An institution must alsodetermine and maintain the records thatmost accurately support itsdetermination of a student’s withdrawaldate and the institution’s use of onewithdrawal date over another if theinstitution has conflicting information.To count as attendance for title IV,HEA program purposes, attendancemust be ‘‘academic attendance’’ or‘‘attendance at an academically-relatedactivity.’’ We have defined those termsin new § 668.22(l)(7) by providingexamples of academically-relatedactivities that institutions that are notrequired to take attendance may use indetermining a student’s last date ofattendance at an academically-relatedactivity. Certainly, traditional academicattendance is acceptable, i.e., a student’sphysical attendance in a class wherethere is an opportunity for directinteraction between the instructor andstudents. Additionally, academicallyrelatedactivities may include an exam,a tutorial, computer-assisted instruction,academic counseling, academicadvising, turning in a class assignment,or attending a study group that isassigned by the institution. The

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66899WReier-Aviles on DSKGBLS3C1PROD with RULES2Department has provided furtherguidance on this policy in the FSAHandbook, specifying that living ininstitutional housing and participatingin the institution’s meal plan areexamples of activities that are notacademically-related. The Departmentfinds it acceptable for an institution thatis required to take attendance to use theinstitution’s records of attendance at theactivities listed in § 668.22(l)(7) asevidence of attendance, provided thereis no conflict with the requirements ofthe outside entity that requires theinstitution to take attendance or, ifapplicable, the institution’s ownrequirements.However, in these final regulations,we are revising the list of acceptableactivities because the Secretary nolonger considers participation inacademic counseling or advising to bean activity that demonstrates academicattendance or attendance at anacademically-related activity. TheSecretary has encountered severalinstances of abuse of this particularprovision by institutions that contactstudents who have ceased attendance,and treated that contact as ‘‘academiccounseling’’ to facilitate a laterwithdrawal date, resulting in an inflatedamount of ‘‘earned’’ title IV, HEAprogram funds. The Secretary does notview such contact as evidence ofacademic attendance, but notes that ifthe student resumed attendance andcompleted the period of enrollment noreturn calculation would be needed.Even if the student resumed attendanceand later stopped attending, thestudent’s participation in otheractivities that are already included onthe list of academic activities could beused to establish a later withdrawaldate. Thus, participation in academiccounseling or advising withoutsubsequent participation in otheracademic or academically-relatedactivities is no longer an acceptableexample of participation in anacademically related activity.With respect to what constitutesattendance in a distance educationcontext, the Department does notbelieve that documenting that a studenthas logged into an online class issufficient by itself to demonstrateacademic attendance by the studentbecause a student logging in with noparticipation thereafter may indicatethat the student is not even present atthe computer past that point. Further,there is also a potential that someoneother than the student may have loggedinto a class using the student’sinformation to create the appearance thestudent was on-line. Instead, aninstitution must demonstrate that astudent participated in class or wasotherwise engaged in an academicallyrelatedactivity, such as by contributingto an online discussion or initiatingcontact with a faculty member to ask acourse-related question. This position isconsistent with the current guidance theDepartment has provided to individualinstitutions regarding the applicabilityof the regulations to online programs.When assessing an institution’scompliance with any programrequirement, the Department looks atinformation provided by the institutionin support of the compliance of itspolicies and procedures.Changes: We have removed thereference to academic counseling andadvising in current § 668.22(c)(3)(ii) andhave added to the regulations acombined definition of academicattendance and attendance at anacademically-related activity in§ 668.22(l)(7) to clarify that bothinstitutions required to take attendanceand those that are not required to takeattendance may use institutionallydocumentedattendance at certainactivities as a student’s withdrawal date.We have also redesignated current§ 668.22(c)(3)(i) as § 668.22(c)(3) toreflect the removal of § 668.22(c)(3)(ii).We have added to the definition at§ 668.22(l)(7) both existing guidancefrom the FSA Handbook and examplesof academic attendance for onlineprograms. For additional clarity, wehave specified that physically attendinga class where there is an opportunity fordirect interaction between the instructorand students is considered academicattendance and have specified thatparticipating in academic counseling oradvising is not considered academicattendance.Comment: A number of commentersopposed the proposed changes,believing that they would imposeadditional burdens on institutions, betoo complex to administer, and provecounterproductive to the goals of theDepartment.In terms of additional burden, thecommenters argued that the proposedregulations could become too complex,noting that institutions might havedifferent attendance takingrequirements, depending on theprogram or academic department.Others suggested that it would be tooconfusing and burdensome to takeattendance for only a limited period.Two commenters did not supportadverse actions or audit findings by theDepartment against institutions that didnot demonstrate 100 percentcompliance with the attendance takingrequirements.VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00069 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2Commenters also pointed outpotential barriers to administering theseregulations properly. A few believedthat it would be difficult to ensurecomplete and accurate attendancerecords across faculty and programs,arguing that these records would notnecessarily fully reflect a student’sattendance at academically-relatedactivities. A couple of commentersquestioned the feasibility of achievingfull compliance with attendance takingpolicies across faculty. One commenterdid not believe that attendance recordsheld by individual faculty members ordepartments should constitute availabledata. One commenter believed that theadditional complexity of the regulationswould make it impossible to complete aReturn of Title IV Funds calculation inthe required timeframe.The commenters also argued that theadditional burden and complexity of theregulations would ultimately undermineattempts to mitigate the potential forfraud and abuse of Federal funds andwould hamper attempts to improvestudent success in higher education.Specifically, a number of commentersbelieved that the proposed regulationswould create an economic disincentiveto taking attendance, causing manyinstitutions that voluntarily takeattendance to stop doing so. Theyargued that this provision would makeit more difficult to identify a date onwhich a student has withdrawn fromclasses, compelling more institutions touse a mid-point date when performinga Return of Title IV Funds calculation.The commenters further asserted thatinstitutions take attendance for a varietyof reasons, and that ending this practicewould lead to lower retention andgraduation rates and, subsequently,higher student loan default rates.Due to the perceived complexity ofthis issue, two commenters requestedthat the Department delay theimplementation of these regulations.One suggested gathering additionalinput from the community to developproposed regulations, while the otherrecommended reconvening a negotiatedrulemaking committee to furtherconsider these issues.Discussion: We appreciate theconcerns of the commenters aboutpossible harms that might come fromthe proposed changes. The goal ofdetermining the amount of funds astudent earned before he or she stoppedattending should be a shared one, andthe claim that the institutions wouldstop taking attendance in order toincrease the funds a student wouldreceive beyond the point where thestudent stopped attending is troubling.The Department continues to believe

WReier-Aviles on DSKGBLS3C1PROD with RULES266900 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulationsthat institutions should use the best dataavailable in determining a student’swithdrawal date from classes.Accordingly, if an institution requiresthe taking of attendance or is requiredto take attendance for any limitedperiod of a semester or other paymentperiod, then those records should beused when determining a student’s dateof withdrawal for the purposes of aReturn of Title IV Funds calculation.With respect to comments regardingthe complexity of the regulations, theyaddress the taking attendance policiesthat are either required by an outsideparty or required by the institutionitself. Institutions would already beexpected to follow these requirements,and the regulations provide for thatattendance information to be used whenit indicates a student has stoppedattending during this limited period. Forstudents in attendance at the end of thatlimited period, the guidelines fordetermining a withdrawal date for aninstitution that is not required to takeattendance would apply until the startof the next period during whichattendance taking is required. Anyincrease in overall burden is mitigatedsince this requirement is tied to policiesfor taking attendance that are already inplace at institutions, and uses theexisting requirements for determiningthe amount of Federal funds a studentearned based upon that information.Cases of noncompliance are addressedon a case by case basis when theoccurrences are isolated, andinstitutions are expected to takeappropriate corrective actions when anerror is brought to their attention duringa self-audit, a compliance audit, or aprogram review. Accordingly, theDepartment does not believe it isnecessary to delay the implementationdate of these regulations, or to reopenthe issue for negotiation.Changes: None.Comment: A few commentersopposed the proposed changes, arguingthat the proposed regulations exceed theSecretary’s authority under the law. Thecommenters believed that Congressintentionally allowed institutions theoption to use the midpoint of thepayment period because it recognizedthat institutions have already incurredcosts when a student fails to withdrawofficially. A few commenters believedthat the definition of last day ofattendance under the statute issufficient and that the Departmentshould not make any changes to theregulations. Some commenters opposedthe proposal that an ‘‘institutionrequired to take attendance’’ includes aninstitution that takes attendancevoluntarily, arguing that the wording ofthe statute, which states ‘‘institutionsthat are required to take attendance’’ andnot ‘‘institutions that take attendance,’’indicates that Congress did not intend toinclude institutions that choose to takeattendance in that category. Othercommenters expressed strong supportfor the broadened definition.Discussion: Under the law,institutions that are required to takeattendance must use that information todetermine when students who do notcomplete a class stopped attending. It iscommon for the Department to viewrequirements established by aninstitution, such as an institutionalrefund policy, as being a requirementfor that institution. The Secretarybelieves it is reasonable to interpret thelaw to include instances where theinstitution itself is establishing therequirement to take attendance for aprogram, a department, or the entireinstitution. The regulations do notinclude instances where a facultymember would monitor studentattendance but was not required to doso by the institution. Furthermore, thereis no reason that attendance informationrequired by an institution would bedifferent in substance from attendanceinformation required by other entities. Itis the process of taking attendance itselfthat leads to the information beingavailable, regardless of whether it isrequired by the institution or an outsideentity. The law provides thatinstitutions that are required to takeattendance must use that informationfor students who stop attending, and theregulations define the term ‘‘required totake attendance’’ to include instanceswhere the institution itself isestablishing that requirement for aprogram, a subpopulation of a program,a department, or the entire institution.The Secretary also believes that thisinformation should be used when it isavailable, even if attendance is notrequired and is only taken for a limitedperiod during the payment period orperiod of enrollment.Changes: None.Comment: A number of commentersrequested clarification about whether aninstitution would be required to performa Return of Title IV Funds calculationfor students that were not in attendanceon the last day of a limited censusperiod. Specifically, a few commentersbelieved that § 668.22(b)(3)(iii)(B) couldbe interpreted in different ways. First, itcould be read to mean that aninstitution must treat a student who isnot in attendance on the last day of alimited period of attendance taking as awithdrawal, even if the studentcontinued to attend classes or wasengaged in another academically-relatedVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00070 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2activity after the end of the limitedperiod. Along these lines, a fewcommenters pointed out that it could bedifficult for an institution to ascertainwhether a student actually withdrew, orwhether the student was in fact onlyabsent for a class or two. Second, itcould be read to mean that if aninstitution has attendance recordsduring a limited period, the institutionmust use those attendance records, asthe best available source of information,in determining a student’s date ofwithdrawal. One commenter believedthat this interpretation could require aninstitution not otherwise required totake attendance to take attendancebeyond the end of the limitedattendance period to determine if thestudent came back. The commenterfurther requested clarification aboutwhen an institution in this situationwould have to determine that thestudent actually withdrew.Three commenters provided potentialmodifications to the language related totaking attendance during a limited timeperiod. The first suggested replacing thewords ‘‘in attendance at the end of thelimited period’’ with the words ‘‘inattendance during the limited period’’ toaccount for the fact that a student mighthave attended earlier in the limitedperiod but was only absent on that lastday, perhaps due to illness or anotherlegitimate reason. The secondcommenter recommended modifyingthe words ‘‘a student in attendance’’ toread ‘‘a student determined by theinstitution to be in attendance’’ in orderto give institutions the necessaryflexibility to determine that a studentactually withdrew from all courses andwas not just absent on that particularday. The third commenter suggestedreplacing the phrase ‘‘in attendance atthe end of the limited period’’ with ‘‘inattendance at the last regularlyscheduled class meeting prior to thecensus date’’ to account for courses thatdo not meet on the last day of thelimited period.One commenter believed that theDepartment should require institutionsto have a limited number of hours orcredits that a student may miss withouthaving to be considered a withdrawal.Discussion: Standing alone,information that a student was absenton the last date attendance was takenduring a limited period of time is thebest evidence that the student hasceased attendance. That presumption iseasily refuted when a student has goneon to complete the payment period,since the student will have earned agrade for the class. For a student whodid not complete the class, theinstitution may determine whether there

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66901WReier-Aviles on DSKGBLS3C1PROD with RULES2is evidence that the student wasacademically engaged in the class at apoint after the limited period whenattendance was taken. Unless aninstitution demonstrates that awithdrawn student who is not inattendance at the end of the limitedperiod of required attendance takingattended after the limited period, thestudent’s withdrawal date would bedetermined according to therequirements for an institution that isrequired to take attendance. That is, thestudent’s withdrawal date would be thelast date of academic attendance, asdetermined by the institution from itsattendance records. If the institutiondemonstrates that the student attendedpast the end of the limited period, thestudent’s withdrawal date is determinedin accordance with the requirements foran institution that is not required to takeattendance. So, for a student theinstitution has determined attended pastthe limited period and has unofficiallywithdrawn, the student’s withdrawaldate is the midpoint of the paymentperiod of period of enrollment unlessthe institution uses a later date whenthe student was academically engagedin the class. The institution thereforehas the option to document a student’slast date of attendance at anacademically-related activity, but aninstitution is not required to takeattendance past the end of the limitedperiod of attendance taking.We do not interpret a requirement totake attendance in one class for a‘‘census date’’ as taking attendance forpurposes of this regulation. Forexample, some institutions have coursesthat meet only on Mondays andWednesdays, and other courses thatmeet on Tuesdays and Thursdays. Inthose cases, a ‘‘census date’’ may betaken on two different days in order toestablish attendance in both sets ofcourses that meet on alternate days.With respect to the suggestion that aninstitution be permitted to have a policyto establish a different procedure orpresumption for a student who is absentat the end of a limited period ofattendance taking, this is addressed inpractice by having the institutiondetermine if the student participated inan academically related activity at alater point in the payment period, notby adding a regulation that otherwiseignores an absence on the last dateattendance was taken for the student.Changes: None.Comment: A few commentersbelieved that the proposed regulationswould cause a greater financial burdenfor a student who withdraws fromcourses prior to the midpoint of thesemester. A few commenters noted thatinstitutions that voluntarily maintainattendance records would now have touse those records to determine thestudent’s actual last date of attendanceinstead of using a midpoint date. In thecase of clock-hour institutions,commenters were concerned thatinstitutions would be required to use anactual last date of attendance instead ofa scheduled last date of attendance. Inthese situations, a student might receivefewer funds to cover costs incurred forthe entire payment period, even if he orshe withdrew before the end of thatpayment period.Discussion: The Departmentrecognizes that using an actual last dateof attendance instead of a midpoint ofthe semester may require an institutionto return more unearned aid; thisoutcome, however, is equitable. Forinstitutions using credit hours that aredetermined to be required to takeattendance for all or a part of the period,the regulation may establish an earlierdate of withdrawal for a student thatstops attending during a period whenattendance is taken. This outcomeprovides a more consistent treatmentwith other institutions that haveprograms where student progress istracked by measuring clock hours, andmore closely tracks the requirements inthe law that students earn title IV fundsas they progress through a period untilthey complete more than 60 percent ofthe period. Institutions are responsiblefor determining the amount of title IV,HEA program assistance that a studentearned under the applicable regulations,and unearned funds for a student mustbe returned in accordance with theprocedures in § 668.22. By establishinga more accurate date a student ceasedattendance during a period whenattendance is taken, the regulation willtend to increase the amount of unearnedfunds that are used to reduce the loanamounts students received for thatperiod under § 668.22(i).Changes: None.Comment: A number of commentersfrom cosmetology schools believed thatthe proposed regulations would putsome institutions in a position of beingunable to comply with both Federal andState regulations. Specifically, theywere concerned that the proposedregulations would require institutionsthat are credit-hour institutions tobecome clock-hour institutions if theytake attendance, forcing them,depending on individual State laws, tobe out of compliance with Staterequirements that those institutions usecredit hours.Discussion: We do not agree that theseregulations create a conflict betweenFederal and State laws. Institutions thatVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00071 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2use clock hours for a program for Statereporting or licensing purposes will betreated as institutions that are requiredto take attendance under this regulation,and the clock hours attended will beused to determine when a studentceased attendance. To the extent thatsuch an institution uses credit hours forits academic purposes, that institutionwill not be affected by this regulation.The requirement to determine theamount of aid a student earned beforeceasing attendance is separate from thequestion of whether that institution usescredit hours for academic purposes. Theclock hours are used to measure theamount of funds a student earned, thesame way that other institutions that arerequired to take attendance willmeasure earnings under this regulation.Changes: None.Comment: A few commenterssuggested modifications to theregulatory language that would requireinstitutions to use the best informationavailable in determining a student’swithdrawal date. Specifically, onecommenter recommended amending§ 668.22(c) to make the midpoint of thepayment period the ‘‘last resort’’ optionfor determining a student’s last date ofattendance when a student unofficiallywithdraws such that a school would berequired to use the midpoint of thepayment period only in the absence ofother documentation of a student’sattendance. Another commenterrecommended that we requireinstitutions to use the best availabledata when determining a withdrawaldate instead of allowing schools that arenot required to take attendance to use adefault date of the midpoint of thepayment period of period of enrollment.The commenter believed that using thislanguage would best support theDepartment’s goals.Discussion: We do not believe that thesuggested modifications are supportableunder the HEA because the requirementto use attendance information is onlyapplicable for periods when attendancetaking is required. Under section484B(c)(1) of the HEA, if a student stopsattending an institution at a point whereattendance taking is not required, theinstitution uses the midpoint of thepayment period, or may use a later datewhen the student was participating inan academically related activity.Changes: None.Comment: One commenter wasconcerned that if an institution that isrequired to take attendance did not havea valid ISIR before a student’s last dateof attendance, the student would beunintentionally penalized and unable toreceive title IV, HEA programassistance.

66902 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and RegulationsWReier-Aviles on DSKGBLS3C1PROD with RULES2Discussion: We do not agree. Aninstitution must act in accordance with§ 668.164(g), which contains therequirements for making a latedisbursement, including circumstanceswhere a student did not have a validSAR or valid ISIR on the student’s lastdate of attendance.Changes: None.Verification and Updating of StudentAid Application Information (Subpart Eof Part 668)General (§ 668.51)Comment: One commenter questionedwhether the Department woulddescribe, in the final regulations, ourplans to provide training to assistinstitutions to prepare for and complywith verification requirements reflectedin subpart E of part 668.Discussion: The Department will issueguidance through the Application andVerification Guide and other trainingmaterials, as needed. The Departmentwill also provide training through ourregional training officers. Forinformation on our current and futuretraining activities and learningresources, institutions should visit theTraining for Financial Aid ProfessionalsWeb site at http://www2.ed.gov/offices/OSFAP/training/index.html.Changes: None.Comment: Some commentersrequested that the Department delayimplementing the new verificationrequirements until the 2012–13 awardyear to give institutions sufficient timeto train their staff and make thenecessary system changes.Discussion: The Departmentrecognizes that institutions may needtime to make changes to theirinstitutional processing systems tocomply with the requirements insubpart E of part 668. Accordingly, asdescribed in the DATES section of thesefinal regulations, we will delay theeffective date of the changes to thissubpart until July 1, 2012, which meansthat it will be effective for the 2012–13award year.Changes: None.Comment: Some commenters notedthat because no new loans can becertified under the Federal FamilyEducation Loan (FFEL) Programeffective July 1, 2010, all references tothe FFEL Program and loan certificationshould be removed from the regulatorylanguage in this subpart.Discussion: We concur with thecommenters. We had not removed thereferences to FFEL in the NPRM becausethat notice was already underdevelopment when the legislativechange to end new lending under theFFEL Program was enacted. Our intentwas to make the necessary technicalcorrections in the final regulations.Changes: Throughout subpart E ofpart 668, we have removed references tothe FFEL Program and anycorresponding regulatory citations.Specifically, we have removedreferences to ‘‘Subsidized StaffordLoan,’’ ‘‘Unsubsidized Stafford Loan,’’‘‘Federal PLUS Loan,’’ and ‘‘lender’’ aswell as certifications for SubsidizedStafford loans from §§ 668.52, 668.58,and 668.60.Definitions (§ 668.52)Comment: Some commentersexpressed support for the Department’sefforts to simplify and clarify thedefinitions used throughout theverification regulations under subpart Eof part 668. One commenter noted thatchanging the defined term applicationto FAFSA, and using the term FAFSAinformation in place of the termapplication helps distinguish theFAFSA from other financial aidapplications used at many institutions.Discussion: We appreciate thecommenters’ support.Changes: None.Comment: Two commenters suggestedthat we change the names of the definedterms FAFSA information, subsidizedstudent financial assistance programs,and unsubsidized student financialassistance programs. Specifically, onecommenter suggested that we use theterm ‘‘Federal Methodology (FM) needanalysis data’’ or ‘‘ISIR data’’ rather thanFAFSA information to better reflectwhat institutions receive once the datareported on the FAFSA have beenprocessed. In addition, one commenterstated that using the terms ‘‘subsidized’’and ‘‘unsubsidized’’ to modify studentfinancial assistance programs willconfuse applicants because those termsare more commonly used when referringto loan programs. The commenter statedthat families would better understandthe type of aid we are referring to byusing the terms ‘‘need-based studentfinancial assistance programs’’ and‘‘non-need-based student financialassistance programs.’’Another commenter requested thatthe Department include in theregulations definitions for the terms‘‘applicant’’ and ‘‘timely manner.’’Discussion: While we appreciate thesuggestions, we do not believe thesuggested changes are necessary. Wealso do not agree that using the term‘‘subsidized’’ and ‘‘unsubsidized’’throughout subpart E will confuseapplicants and their families about thetype of aid we are referring to sincethese regulations are written for FAAs atVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00072 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2institutions of higher education and notapplicants and their families. Aninstitution may, when communicatingwith students and families, usewhatever terminology it believes willbest be understood by its students andfamilies.However, we did make some revisionsto the list of definitions under § 668.52.Specifically, we determined that thedefinitions for Free Application forFederal Student Aid (FAFSA),Institutional Student InformationRecord (ISIR), and Student Aid Report(SAR) would be more appropriatelyincluded in § 668.2(b) of subpart Abecause these terms are used throughoutpart 668 of the Student AssistanceGeneral Provisions regulations and notjust under subpart E.We also revised the definitions forValid Student Aid Report (valid SAR)and Valid Institutional StudentInformation Record (valid ISIR) in§ 668.2(b) to specify that a valid ISIR isan ISIR on which all the informationreported on a student’s FAFSA isaccurate and complete as of the date theapplication is signed, and a valid SARis a student aid report on which all ofthe information reported on a student’sFAFSA is accurate and complete as ofthe date the application is signed.In addition, we also changed thedefined terms from Student Aid Report(SAR) to Valid Student Aid Report(valid SAR) and Institutional StudentInformation Record (ISIR) to ValidInstitutional Student InformationRecord (valid ISIR) under §§ 668.54(b),668.58, 668.59, and 668.61. Prior tothese final regulations, an institutionwas not required to obtain a valid SARor valid ISIR in order to make adisbursement under the campus-basedprograms and the title IV, HEA loanprograms. Institutions could rely ontheir own calculations to determine anapplicant’s award amount withouthaving to submit corrections throughthe Department’s Central ProcessingSystem (CPS) and receiving thecorrected SAR or ISIR. Consistent withthe revisions to § 668.59(a), whichrequire that any change to a nondollaritem and any change to a dollar item onthe FAFSA that is $25 or more must besubmitted to the CPS for reprocessing,an institution must have a valid SAR ora valid ISIR to disburse funds from thesubsidized student financial assistanceprograms. By definition, a valid SAR orvalid ISIR can only be created afterinformation has been processed throughthe Department’s Central ProcessingSystem.Finally, we also determined that weno longer need to define the terms validSAR or valid ISIR under 34 CFR 690.2

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66903WReier-Aviles on DSKGBLS3C1PROD with RULES2of the Federal Pell Grant Programregulations as they are defined in part668 because they apply to all of the titleIV, HEA programs. For this reason, wehave removed these definitions fromthis section.Changes: The terms andcorresponding definitions for FreeApplication for Federal Student Aid(FAFSA), Institutional StudentInformation Record (ISIR), and StudentAid Report (SAR) have been removedfrom § 668.52. Instead, we now defineFree Application for Federal StudentAid (FAFSA), Institutional StudentInformation Record (ISIR), and StudentAid Report (SAR) under Generaldefinitions in § 668.2(b). We have alsorevised the definitions for validInstitutional Student InformationRecord (valid ISIR) and valid StudentAid Report (valid SAR) in § 668.2(b). Wehave removed the definitions for theterms valid Student Aid Report (validSAR) and valid Institutional StudentInformation Record (valid ISIR) from 34CFR 690.2(b) and revised the definitionof these terms under § 668.2(b) to nolonger refer to the definitions in 34 CFR690.2(b) of the Federal Pell GrantProgram regulations.Comment: One commenter asked theDepartment to clarify the meaning of theterm ‘‘applicant’’ as used throughout theverification regulations. The commentersuggested that the regulations shoulduse the term ‘‘applicant’’ to refer to astudent who is accepted for admissionat an institution, rather than to a studentwho submits a FAFSA. The commenterargued that having ‘‘applicants’’ cover allstudents who submit a FAFSA would beadministratively burdensome forinstitutions because it would requirethem to verify CPS-selected transactionsfor students who do not enroll at theinstitution.Discussion: The term ‘‘applicant,’’ asused throughout the verificationregulations, refers to an individual whoapplies for assistance under the title IV,HEA program by completing andsubmitting a FAFSA.While the term ‘‘applicant,’’ as used insubpart E of part 668 covers individualswho may not enroll at the institution,we note that § 668.54 only requires aninstitution to verify the FAFSAinformation selected by the Secretaryunder § 668.56 and any FAFSAinformation the institution has reason tobelieve is inaccurate. Therefore, onlythose applicants who are enrolled at theinstitution and whose FAFSAinformation falls into one of thesecategories are subject to verification.Changes: None.Policies and Procedures—ProfessionalJudgment (§ 668.53(c))Comment: Many commentersexpressed support for § 668.53(c), whichrequires an institution to completeverification prior to exercising theprofessional judgment authority allowedunder section 479A of the HEA. Thesecommenters indicated that thisrequirement, which is consistent withtheir policy to complete verificationfirst, is important to ensure that the datareported on the FAFSA is accuratebefore making any adjustments to it.Discussion: We appreciate thecommenters’ support.Changes: None.Comment: Some commentersquestioned the process for completingverification prior to exercisingprofessional judgment in specialcircumstances that require adependency override in order to createa valid Student Aid Report (valid SAR)or valid Institutional StudentInformation Record (valid ISIR).Discussion: The authority given toFAAs to exercise professional judgmentunder section 479A of the HEA isseparate and apart from the authoritygiven FAAs to make a dependencyoverride decision under section480(d)(1)(I) of the HEA. Section 479A ofthe HEA authorizes an FAA to makeadjustments on a case-by-case basis tothe cost of attendance or to the valuesof the data items used to calculate theEFC to allow for treatment of anindividual eligible applicant withspecial circumstances as long as theadjustments are based on adequatedocumentation.In the definition of ‘‘independentstudent’’ in section 480(d)(1)(I) of theHEA, an applicant may be considered tobe an independent student if the FAAmakes a documented determination thatthe applicant is independent by reasonof other unusual circumstances.In practice, an FAA would firstdetermine whether an otherwisedependent applicant should beconsidered an independent studentusing the FAA’s authority under section480(d)(1) of the HEA, in order to obtaina valid SAR or valid ISIR, and thenwould subsequently make anycorrections or professional judgmentadjustments to the applicant’s FAFSAinformation.We will provide guidance in theFederal Student Aid Handbook toaddress operational details as needed.Changes: None.Comment: Several commentersexpressed concern that requiring aninstitution to complete verificationbefore exercising professional judgmentVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00073 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2would make it difficult for institutionsto appropriately handle emergencysituations. The commenters noted thatdelays would occur as a result of havingto complete verification, submit anychanges to CPS, and wait for the newSAR or ISIR upon which theprofessional judgment decision wouldbe based. Some commenters suggestedmaking modifications to systemssoftware, i.e. FAA Access, to allowmultiple changes to be madesimultaneously to resolve this problem.Discussion: We appreciate thecommenters’ suggestion for improvingour operational process. We will takethis suggestion into consideration as welook for ways to improve our services toinstitutions.Currently, the CPS will processchanges to an applicant’s FAFSAinformation as a result of theverification process or a professionaljudgment determination and report theresults on a new ISIR sent to theinstitution usually the next day.However the two transactions cannot beprocessed on the same day. This isbecause after the institution receives theISIR that was created as a result ofverification, the institution would usethat ISIR transaction to makeadjustments to the applicant’s FAFSAinformation using the professionaljudgment process. While we understandthe commenters’ concerns about anydelay that may occur with having tosubmit transactions separately, webelieve that any delay will be slight. Inaddition, institutions have the option ofmaking interim disbursements, asallowed under § 668.58, until acorrected valid SAR or valid ISIR isreceived.Changes: None.Comment: One commenter askedwhether an applicant who is selected toverify the parent’s household size, butwho requests that the institution use itsprofessional judgment authority undersection 479A of the HEA to examine theparent’s income listed on the FAFSA,would be required to verify all fiveitems before the institution couldexercise its professional judgment.Another commenter argued that therequirement to complete verificationbefore exercising professional judgmentwould delay the financial aid processand would create an additional hurdlefor families in need. This commenterquestioned why institutions have to gothrough an extra step to evaluate anapplicant’s eligibility through theverification process if the institution isupdating those same fields whenexercising professional judgment torevise an applicant’s eligibility undersection 479A of the HEA.

WReier-Aviles on DSKGBLS3C1PROD with RULES266904 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and RegulationsDiscussion: Under these finalregulations, an institution must verifythe items selected for verification beforemaking any professional judgmentadjustments regardless of whether aninstitution is making adjustments to theitem being verified. Prior to the effectivedate for subpart E of part 668 of thesefinal regulations, for an applicationselected for verification, an institutionmust verify the data elements identifiedin current § 668.56 before making anyadjustments regardless of whether aninstitution is making adjustments to theitem being verified.Changes: None.Comment: One commenter askedwhether an institution must completeverification prior to exercisingprofessional judgment if the applicant’sFAFSA information is selected forverification by the institution, ratherthan by the Secretary.Discussion: To ensure that anyprofessional judgment adjustmentsmade by an institution are based onaccurate information, we believe that allFAFSA information selected forverification, whether selected by theSecretary or the institution, must beverified before the institution canexercise professional judgment. We aremaking a change to § 668.53(c) to makethis clearer.Changes: We have revised § 668.53(c)by removing the phrase ‘‘by theSecretary’’ after the words ‘‘selected forverification’’ to provide that verification,regardless of whether the FAFSAinformation to be verified is selected bythe Secretary or the institution, must becompleted prior to exercisingprofessional judgment.Selection of FAFSA Information forVerification (§ 668.54)Comment: Many commenterssupported our proposal to targetverification to those items reported onthe FAFSA that are most prone to error,based on a set of criteria that identifieswhich items are most likely to containerroneous data, instead of requiringverification of all five items listed incurrent § 668.56 for FAFSAs selected forverification.Another commenter agreed withproposed § 668.54(b)(1)(iii), whichexcludes from verification applicantswho only receive unsubsidized studentfinancial assistance. This commenterstated that this approach would be moreefficient for applicants and free up timefor institutional staff to help otherapplicants.Discussion: The Departmentappreciates the commenters’ support.Changes: None.Comment: Many commenters opposedremoving the institutional option tolimit the total number of applicants whomust be verified to 30 percent of allapplicants. They argued that removingthis limitation, which is reflected incurrent § 668.54(a)(2)(ii), would increasethe workload of FAAs already strugglingwith reductions in staff and in Statebudgets, with a multitude of regulatorychanges, and with increasedenrollments. Some commenters notedthat the Department currently targetsPell-eligible applicants for verificationand were concerned that communitycolleges would be unduly impacted ifthe 30 percent limitation were removed.Commenters stated that moreinstitutions may need to use the 30percent limit to manage their workloaddue to the large increase in applicantsapplying to institutions with openenrollment. Many commentersexpressed concern that the Departmentwould significantly increase the numberof applicants whose FAFSAs areselected for verification if a limit is notestablished in the regulations.One commenter noted that additionalstudy of the current verification processis needed to determine whichcorrections provide the most meaningfulimprovements in program integrity.A commenter recommended that weretain the 30 percent limit for at leasttwo years, during which time we canmonitor whether the proposed approachof targeting information to be verified,as reflected in § 668.56, actually reducesan institution’s burden. If, after this twoyearperiod, we have evidence to showthat burden on institutions has beenreduced, the commenter suggested thatthe limit on the percentage of applicantswhose FAFSAs must be verified shouldbe lifted or modified.Discussion: The Department reviews,studies, and analyzes verification dataon an ongoing basis. Annually, theDepartment develops a comprehensivepredictive model by applyingsophisticated statistical techniques toFAFSA application data from the mostrecent application filing years alongwith corresponding payment data fromthose same years. The model is designedto identify the characteristics of FAFSAapplications containing information thatis likely to have errors which, if notcorrected, will result in an improperpayment of title IV, HEA program funds.The model contains a series ofapplication groupings that identifiesthat application’s statistical likelihoodof error. The Department selectsapplications with the highest likelihoodof significant error for verification.We are confident that, when fullyimplemented, the targeted selection ofVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00074 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2FAFSA information to be verified willresult in a more efficient and effectiveverification process. While someinstitutions, particularly those thatenroll greater numbers of Pell Grantapplicants, have more applicants whoseFAFSA information is selected forverification, we believe that overallburden will be reduced acrossinstitutions. This is because for eachapplicant whose FAFSA information isselected, the items to be verified will belimited to specific items the Secretaryhas selected for that applicant (seeproposed § 668.56(b)) rather than all fiveitems listed in current § 668.56. Forexample, one applicant may be requiredto verify the five items required underthe current regulations (because theSecretary includes them in the FederalRegister notice published under§ 668.56(a) and specifies that thoseitems must be verified for that oneapplicant) while another applicant mayonly be required to verify adjusted grossincome (AGI) and household size(because the Secretary includes thesetwo items in the Federal Register noticepublished under § 668.56(a) andspecifies that these are the only itemsthat must be verified for this applicant).The Department also notes that it doesnot view the 30 percent limitation asapplying to its own enforcement andmonitoring activities, including programreviews and audits.Changes: None.Comment: Some commenters askedthe Department to clarify how subpart Eof part 668 will affect institutions thatare currently allowed to establish theirown verification criteria under theQuality Assurance (QA) Program.Discussion: The changes made to theverification regulations in subpart E ofpart 668 will not diminish theimportance of the QA Program. In fact,we are currently in the process ofdeveloping a plan to expand the numberof institutions that participate in the QAProgram. We are especially interested inincreasing the participation of minorityserving institutions, communitycolleges, proprietary institutions, andinstitutions that serve non-traditionalstudents or that offer instruction in nontraditionalways. Also, the changesmade to the verification regulations arenot expected to alter the way the QAProgram operates. In fact, theDepartment expects that data andresults generated from institutionsparticipating in the QA Program willhelp us assess the effectiveness of thenew verification regulations in subpartE of part 668.Changes: None.Comment: Two commenters statedthat the FAFSA information of

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66905WReier-Aviles on DSKGBLS3C1PROD with RULES2applicants who are incarcerated at thetime verification would occur andapplicants who are immigrants whorecently arrived in the United Statesshould not be subject to verification.One commenter noted that verificationin these cases would require institutionsto spend a significant amount of timeexplaining the Federal requirements tothese applicants when their eligibilityfor aid may not be affected by the datagathered to complete verification.Another commenter stated that adependent applicant whose parents aredeceased or are physically incapacitatedshould also be excluded fromverification.Discussion: We do not agree with thecommenters. Applicants who areincarcerated, recent immigrants to theUnited States, or whose parents arephysically incapacitated, should be ableto provide the documentation requiredto complete verification by providingtheir institution with the documentationthat was used to complete the FAFSA.An applicant whose parents aredeceased would be independent andtherefore there would be no verificationof parental information on anindependent student’s FAFSA.Changes: None.Comment: Several commentersexpressed concern that the new processfor verifying different FAFSA itemswould cause difficulties because, afterone instance of verification, therepotentially would be other items thatthe applicant would need to verifyduring subsequent transactions (a‘‘verification loop’’). One commentersuggested that if the Department usesthe targeted approach for verification, itshould limit verification selection toone time per applicant and accept asubsequent correction for that targeteditem as closure of the verificationprocess for that application. Onecommenter noted that repeatedverification does not currently occurbecause, under the current regulations,applicants are required to verify allitems the first time. One commenterexpressed concern that multipleverifications may occur for one studentif the institution submits corrections toCPS and the student also initiateschanges to the ISIR data. Thecommenter recommended includingsome protections for institutions thatsubmit corrections to ISIR data. Onecommenter asked for guidance on whatan institution is required to do when anapplicant is selected for verification,completes it, is then selected forverification again but fails to completethe second verification process.Discussion: As noted earlier, theDepartment has delayedimplementation of the changes tosubpart E of part 668, including§§ 668.54 and 668.56, which provide forthe targeted approach to verification,until the 2012–13 award year.Therefore, for the 2011–12 award year,institutions will continue to verify, forall FAFSAs selected for verification bythe Secretary, the five data items listedin current § 668.56. As we develop theselection criteria for determining whichFAFSA information must be verified foran individual applicant (i.e., selectioncriteria for determining which FAFSAinformation is prone to error), we willbuild into the system procedures thatlimit the possibility of any applicantbeing subject to additional FAFSA itemsneeding verification after the firstselection has been made. However if ouranalysis shows that, based onsubmissions of corrections, additionalFAFSA information should be verified,perhaps because it is inconsistent withthe ‘‘corrected information,’’ anapplicant may have to verify thoseadditional items.In the NPRM, we inadvertentlyomitted § 668.54(a)(4) from theverification regulations. Under current§ 668.54(a)(4), if an applicant is selectedfor verification by the Secretary, theinstitution must require the applicant toverify the information as specified in§ 668.56 on each additional applicationthe applicant submits for the award yearexcept for information already verifiedfor the applicable award year. We arerestoring § 668.54(a)(4) to provide that ifan applicant is selected by the Secretaryto verify his or her FAFSA information,the institution must require theapplicant to verify the information inaccordance with § 668.56 if theapplicant is selected for a subsequentverification of FAFSA information,except that applicant is not required toprovide documentation for that FAFSAinformation previously verified to theextent that the FAFSA informationpreviously verified remains unchanged.Under current regulations, anapplicant who has completedverification once, whose FAFSAinformation is selected a second time forverification, is only required to verifyFAFSA information not verifiedpreviously. When the revised§ 668.54(a)(4) becomes effective, such anapplicant would be required tocomplete the second verificationprocess if the FAFSA informationselected has changed for that awardyear. If the applicant fails to do so, heor she may forfeit eligibility for title IVaid in accordance with § 668.60(b).Changes: We have revised § 668.54 byreinstating current § 668.54(a)(4) toprovide that if an applicant is selectedVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00075 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2by the Secretary to verify his or herFAFSA information under§ 668.54(a)(1), the institution mustrequire the applicant to verify theinformation as specified in § 668.56 ifthe applicant is selected for asubsequent verification of FAFSAinformation, except that applicant is notrequired to provide documentation forthe FAFSA information previouslyverified to the extent that the FAFSAinformation previously verified remainsunchanged.Comment: Some commenterssuggested that the proposed verificationrequirements in subpart E of part 668would increase barriers for the needieststudents to apply for financial aid topursue higher education.Discussion: We do not agree. Whenthis subpart is fully implemented in the2012–13 award year, the verificationprocess is expected to be more efficientand effective for both students andinstitutions. Thus, we do not expect thatthese new requirements will add aburden or increase barriers for students,including those from low-incomebackgrounds. We have not beenpresented with any evidence to supportthat these requirements will increasebarriers for the neediest students toapply for financial aid to pursue highereducation.Changes: None.Updating Information (§ 668.55)Comment: While a few commenterssupported the requirement in§ 668.55(a)(1)(ii), which may result inmaking dependency status updates inmid-year, many stressed the difficultiesthat would arise as a result of thisrequirement. A primary concernexpressed was that this requirementwould result in a substantial increase inburden for institutions, particularlybecause a student’s financial aidpackage is affected by the student’sdependency status. One commenterclaimed that to comply with thisrequirement, institutions would need tohire extra staff, which would not bepossible in the current economy. Inaddition, some commenters noted thatthere would be undesirableconsequences for the student: One whomarries and becomes independent couldlose eligibility for the Pell Grantsalready awarded and received becausethe spouse’s financial data would betaken into account. Others stated thatstudents might get married to increasetheir Pell eligibility or that divorce,rather than marriage, would decreasePell eligibility; as one institution noted,many of its dependent students becomeeligible for more aid after they marryand become independent. Some

WReier-Aviles on DSKGBLS3C1PROD with RULES266906 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulationscommenters requested that there be nochange in this area or that FAAs bepermitted to make dependency statuschanges under certain circumstances,such as during verification, or at theirdiscretion. For example, one commentersuggested requiring the reporting of achange to dependency status until thefirst disbursement of title IV, HEA aidhas been made and that if thedependency status update results in achange in the applicant’s EFC, the lowervalue should be used. A couple ofcommenters observed that students whomarried late in the award year wouldbecome independent and need to havetheir aid repackaged for the award year.One commenter opposed all mid-yeardependency status changes because theyundermine the ‘‘snapshot’’ approach tothe application process and create alarge administrative burden. Anothercommenter noted the potential forstudents who divorced and becamedependent again to lose eligibility forthe aid they received because theirparents would refuse to provideinformation for the application. Stillanother remarked that it is hard forinstitutions to track dependency statusduring the award year because accuratetracking requires that students notify theinstitution of changes. One commenter,who stated that he appreciated thatwhen an update is due to a change inthe student’s marital status, institutionswould only be required to make theupdate if notified by the student, alsonoted that this approach can penalizethe student who is honest and reportsthe marital status change. Thiscommenter argued that such a change independency status should be reflectedin the application for the following year,as occurs under the current regulations.Another commenter suggested thatalthough the Department affirmed that itis not the institution’s responsibility toinitiate updating, this view ignores theburden imposed on institutions toresolve conflicts in information theyreceive from different sources. Thiscommenter requested relief forinstitutions so that they would onlyneed to make a dependency statuschange in ISIR information if thestudent or family was the source of theinformation supporting the dependencychange. Another commenter askedwhether institutions are required tokeep track of potential dependencystatus changes that are indicated byother campus offices when the studentdoes not report the change. Onecommenter asked that there be a cut-offdate after which an institution would nolonger be required to make dependencystatus changes. Another commenteragreed with the Department’s logic fornot having a cut-off date, and asked thatinstitutions be permitted to set theirown date based on their academiccalendar.One commenter who supported midyeardependency status changesrequested that the Department allowupdates to household size and numberin college when there is a change inmarital status. Another commenterasked for early implementation of§ 668.55(c) because students areadversely affected by the currentregulations.Discussion: We agree that mid-yearverification updates to household sizeand number in college and dependencystatus updates would be burdensome toinstitutions if they resulted from achange in a student’s marital status.Accordingly, we have revised§ 668.55(a) to provide that if anapplicant’s dependency status changesat any time during the award year, theapplicant must update his or her FAFSAinformation, except when thedependency status change is due to achange in the applicant’s marital status.Also, to reduce burden to institutionswith regard to updating information, in§ 668.55(b)(2), we specify that anapplicant is not required to providedocumentation of household size,number in college, or the financial dataof an applicant’s spouse during asubsequent verification of these dataitems if the information has notchanged. However, new paragraph (c) ofthis section would allow the institution,at its discretion, to require an applicantto update the applicant’s marital status,even if it results in a change in theapplicant’s dependency status, if theinstitution determines the update isnecessary to address an inequity or toreflect more accurately the applicant’sability to pay.In response to the comments aboutestablishing cut-off dates for makingupdates, we note that under the revisedprovisions, an institution that decides tohave marital status updated pursuant to§ 668.55(c) may also incorporate in itspolicy a cut-off date after which it willnot consider any updates to a student’smarital status.Changes: We have revised § 668.55(a)to provide that if any of the factors thatimpact an applicant’s dependencystatus changes at any time during theaward year, the applicant must updatehis or her FAFSA information, except ifthe item is the applicant’s marital status.Paragraph (b) of § 668.55 has beenrevised to provide that an applicant whois selected for verification of his or herhousehold size or number in collegemust update those items to be correct asVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00076 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2of the date of verification, except whenthe update is due to a change in theapplicant’s marital status. As revised,§ 668.55(b)(2) also provides that anapplicant is not required to providedocumentation of household size ornumber in college during a subsequentverification for the same award year ofeither item if the information has notchanged. Finally, paragraph (c) of§ 668.55 provides that an institutionmay, at its discretion, update anapplicant’s marital status, even if theupdate will result in a change in theapplicant’s dependency status if theinstitution determines the update isnecessary to address an inequity or toreflect more accurately the applicant’sability to pay.Comment: One commenter askedwhether, when a student’s marital statusis updated, the student must have his orher spouse’s income reported to the CPSfor recalculation of the student’s EFC.Another commenter requested that theDepartment clarify how to treat incomein cases when the student marries ordivorces, regardless of whetherverification was performed. A thirdcommenter wondered why thehousehold size and number in collegeitems are updated while the income andassets items are not updated for newfamily members (e.g., the stepparent ofa dependent student or the spouse of anindependent student).Discussion: As we stated earlier inthis preamble, we have revised § 668.55to provide that there is no updating ofan applicant’s dependency status basedon a change in marital status except atthe discretion of an FAA. In such caseswhere an FAA chooses to update astudent’s dependency status as a resultof a change in the student’s maritalstatus regardless of whether the studentis being verified, all of the informationmust be consistent with the change tothe marital status. This includes income(either adding the spouse’s income ordeducting a former spouse’s income) aswell as household size and number incollege. Note, however, that the revisedregulations do not allow for updatingwhen an otherwise independent studentmarries or divorces, i.e., there is nochange in dependency status and thestudent is not selected for verification.During verification, household sizeand number in college are updated, butthe income and assets of new familymembers are not typically includableitems on the FAFSA; for example, theincome or assets of a grandparent whocomes to live in the dependent student’sfamily would not be includable.Moreover, section 475(f)(3) of the HEAexcludes a stepparent’s income andassets from being reported on the

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66907WReier-Aviles on DSKGBLS3C1PROD with RULES2FAFSA when a dependent student’sparent remarries after the FAFSA wassubmitted, though we have stated forseveral years in the Application andVerification Guide that an institutionmay use professional judgment toinclude the stepparent’s financialinformation.Changes: As noted earlier in thisdiscussion, we have revised § 668.55 toprovide that applicants are not requiredto update their household size, numberin college, and dependency status whenthe update is needed as a result of achange in the student’s marital status,unless the institution chooses to updatethose items. When the institutiondetermines that updates are required asa result of a change in a student’smarital status, the student’s FAFSAinformation needs to reflect the accuratehousehold size, number in college,dependency status, and the spouse’sfinancial information.Comment: Some commentersquestioned whether, when completingthe FAFSA, students could project theirmarital status. One commenter arguedthat students should not be able toproject marital status as they projecthousehold size based on unbornchildren.Discussion: Because projected maritalstatus is prone to error, applicants maynot project their marital status whencompleting the FAFSA.Changes: None.Comment: A few commenters askedwhether the student or the institution isresponsible for updating informationthat impacts dependency status.Discussion: Students and institutionsboth are able to update information thatimpacts an applicant’s dependencystatus. Students can use FAFSACorrections on the Web (COTW) or apaper SAR to submit updates.Institutions can use FAA Access to CPSOnline or other Departmental electronicprocesses to submit updates on thestudent’s behalf.Changes: None.Comment: One commenter asked usto clarify whether an institution mustprocess a change in dependency statusif a student is no longer enrolled at theinstitution.Discussion: An institution is notrequired to process a change in anapplicant’s dependency status if thestudent does not enroll or is no longerenrolled at the institution. However, ifthe student subsequently enrolls orreenrolls for the award year, requiredupdates must be made.Changes: None.Information To Be Verified (§ 668.56)Comment: Several commentersexpressed concern that even though thenumber of items to be verified under thenew targeted approach reflected in§ 668.56 will be reduced, the newapproach will not alleviate the burdenon the applicant or the institutionbecause the institution must stillidentify and resolve discrepancies in theinformation the institution receivesfrom different sources pursuant to§ 668.16(f). For example, if a studentwere selected to verify AGI or untaxedIRA income, and the documentation forthat is the tax return, the institution willneed to check the other data on the taxreturn to ensure there are no conflictswith what was reported on the FAFSA.One of these commenters stated that itwill continue to require full verificationof all data items and to collect alldocumentation unless the applicantuses the IRS Data Retrieval Process.Another commenter suggested thatrelaxing the requirement to resolvediscrepancies in information under§ 668.16(f) would be a reasonablesolution if the Department is usinghistorical data that supports targetingspecific data elements.Discussion: Under § 668.16(f), aninstitution is required to resolvediscrepancies in the information itreceives from different sources withrespect to a student’s application forfinancial aid under the title IV, HEAprograms. Therefore, conflictinginformation between the FAFSAinformation and other information at theinstitution must be resolved, and theseregulations under subpart E do notchange this. We have no reason tobelieve that the new approach toselecting items for verification willincrease instances of conflictinginformation since any such conflictswould occur under the currentregulations where every applicantselected for verification must verifyinformation from a tax return.Changes: None.Comment: Some commentersdisagreed with the proposed targetedapproach to select items to be verifiedreflected in § 668.56 because theypredicted that it would add to theburden of institutions. One commenterstated that having verifiable itemsdifferent from the current five wouldrequire institutions to modify theirautomated correspondence and otherprocesses. This would result in the useof more paper at a time wheninstitutions are trying to reduce theircarbon footprint.Discussion: While a change in thenumber and type of verifiable items willVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00077 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2require some work by financial aidoffices, we believe that there should notnecessarily be an increase in paper useand that once systems are automated,any additional administrative burdenshould be minimized. In fact, the use ofthe IRS Data Retrieval Process willreduce the amount of FAFSAinformation that institutions arerequired to verify and decrease thedocumentation an institution mustcollect and maintain. We believe thebenefits to institutions and to studentsas a result of this process justify anyextra work that institutions and studentswill experience in the short term.As explained earlier in this preamble,we are delaying the effective date for thechanges to subpart E of part 668 untilJuly 1, 2012, the 2012–13 award year.This will allow more time forinstitutions to prepare.Changes: None.Comment: Various commentersobserved that because the items forverification will be unpredictable,institutions will not be able to informapplicants and parents before receivingthe ISIR what documentation will berequired for verification. Commentersrequested that the Department providethe expected date for publishing the setof verifiable items in the FederalRegister in advance so that institutionshave time to implement any changes inthe items to be verified. Commentersrequested advance notice as late as mid-December to as early as 5 or 6 monthsprior to the beginning of the applicationcycle each January. Commenters statedthat institutions will have difficultiessetting up complicated systems andtraining aid administrators and otherstaff to comply with the changesreflected in the new approach toverification, especially given limitedresources on so many campuses. Onecommenter asked the Department to seta maximum number of items that can beselected for verification each year. Somecommenters suggested having multiyearsets of verification items, ratherthan different ones each year, toexpedite the verification process and toallow institutions time to plan. Onecommenter asked that each year theDepartment obtain public comment onthe selection criteria the Departmentwill use to select items for verification.One commenter asked how institutionswould verify applicants’ FAFSAsconsistently for the overlap of twoprocessing years. Another commenterasked that the new regulations bedelayed until the IRS Data RetrievalProcess is fully implemented, whileanother commenter asked for a safeharbor period during crossover periodswhen institutions can use the old

66908 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and RegulationsWReier-Aviles on DSKGBLS3C1PROD with RULES2verification criteria, or adopt early thenew criteria.Discussion: While institutions willneed to wait for the receipt of the ISIRbefore requesting specific verificationdocumentation from applicants, we donot envision that this will substantiallydelay the time required for applicants tocomplete verification. During the earlyyears of implementation of the targetedapproach to verification, there will bestability in the FAFSA information theSecretary selects from year to year. Forexample, we would retain the five itemsincluded in the current regulations andsupplement them as needed. However,it is unlikely that an applicant wouldhave to verify all five data elements.We will publish in the FederalRegister the set of potential verificationitems the Department intends to verifyfor an upcoming award year four to sixmonths prior to the start of theapplication processing year (January 1,2012 for the 2012–13 award year) to giveinstitutions time to modify theirsystems. The maximum number of itemsthat could be selected for verification inany given year is the entire list of itemswe plan to publish in the FederalRegister notice for that year. Becausethe selection of verification items for aparticular award year will be basedupon a sophisticated statistical analysisof prior year and other relevant data, wedo not anticipate the Federal Registernotice providing multi-year selectioncriteria, nor, for the same reason, do weintend to solicit public comments on theverification items we select.To verify an applicant’s FAFSAinformation that overlaps twoprocessing years, the institution mustdetermine which award year’s EFC willbe used and apply the verificationcriteria established for that award year.Changes: None.Comment: Various commentersexpressed concern that the newapproach for targeting items forverification will unfairly affecttraditionally black, community, andcareer colleges. One commenterrequested that we not use theverification process to target lowincomedemographic groups and thatwe consider some kind of relief for thesegroups regarding discrepancies ininformation under § 668.16(f). Anothercommenter questioned whether the newapproach for targeting items forverification could be seen as a means ofprofiling applicants.Discussion: Historically theDepartment has used verification tofocus on those FAFSAs that are likely toinclude errors that will result inincorrect awards. It is not our intent tosingle out any demographic populationor a particular type of institution; rather,our goal is to continue to select forverification FAFSA information thatmost likely needs to be corrected.As stated earlier, § 668.16(f) requiresan institution to resolve discrepanciesin the information it receives fromdifferent sources and these regulationsunder subpart E will not change thisrequirement.Changes: None.Comment: One commenter asked ifverification should be required when astudent appeals for a professionaljudgment change to the cost ofattendance.Discussion: We do not plan to add tothe list of verification exclusions in§ 668.54(b) students who request aprofessional judgment change.Changes: None.Comment: Several commenters statedthat an exclusion from verificationcould be granted when the student orparent used the IRS Data RetrievalProcess to supply income and tax dataon the FAFSA.Discussion: Section 668.57(a)(2) of thenew regulations codifies ourdetermination that in instances when anapplicant or parent is required to havehis or her AGI, taxes paid, or incomeearned from work verified, theinstitution may consider as acceptabledocumentation the information reportedby the student on the FAFSA andreported to the institution on the ISIR ifthe Secretary has identified those itemsas having come from the IRS and ashaving not been changed. The Secretarywill so indicate by a flag on the ISIR thatthe information came directly from theIRS and was not changed. There will beseparate flags for the student’sinformation and, if applicable, for theparents’ information.Changes: None.Comment: One commenter expressedconcern that students will be confusedand will miss the verificationinformation on their SAR. Thecommenter stated that the verificationworksheet will not work anymorebecause not all items will be used foreach student and asked if institutionswill need to develop their owninterchangeable forms that will list onlythose items an applicant or parent mustverify.Discussion: Institutions have alwaysbeen able and will continue to be ableto develop and use their ownverification worksheets as long as itcaptures the essential verification items.Institutions could create a single formwith all the verification criteria for thecoming award year and select for eachstudent the pertinent items, or theycould modify their form so that eachVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00078 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2student receives an individualizedrequest for documentation. We willwork with the community to determineif there still is a need for a Departmentdevelopedverification worksheet, and,if so, how it should be formatted.Changes: None.Comment: One organization requestedthat we create unique codes on the ISIRthat correspond with each verificationitem so that institutions can automatetheir correspondence with applicantsand other processes. Anothercommenter suggested that commentsincluded on the SAR should beexpanded to assist the applicant insending the documentation to verify thespecific items selected for verification tothe institution he or she is seeking toattend.Discussion: As suggested by thecommenters, we will include on eachapplicant’s ISIR item specific flags thatwill indicate which items need to beverified. We will also providenotification to the applicant on theStudent Aid Report (SAR) of the need tohave information verified.Changes: None.Comment: One commenter asked thatthe Department be responsible forcompleting verification and that theDepartment report to institutions whenan applicant’s aid can be disbursed.Discussion: The commenter’s requesthas been suggested before, and we havedetermined that most institutions arenot interested in the Departmentperforming verification and would,notwithstanding the workload, prefer towork with students directly.Changes: None.Acceptable Documentation(§ 668.57(a)(2), (a)(4)(ii)(A), (a)(5), (a)(7),and (d))Comment: One commenter suggestedthat, for applicants and parents whohave not filed their taxes prior to fillingout the FAFSA and who indicate thatthey will be filing, the CPS shouldautomatically draw down the IRS dataand send a reprocessed ISIR, once theapplicant files the required tax returns.A commenter noted that the IRS DataRetrieval Process would not benefitapplicants and their families whocomplete the FAFSA (using estimatedincome) prior to completing theirFederal income tax return in order tomeet various State aid deadlines. Onecommenter asked whether dataretrieved from the IRS can be used tomake corrections to a FAFSA if the IRSData Retrieval Process was not used tocomplete the original FAFSA. In thissituation, the commenter asked whetherthe corrected data would be consideredverified.

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66909WReier-Aviles on DSKGBLS3C1PROD with RULES2Discussion: Under our currentagreement with the IRS, only the taxfiler, at the time he or she is completingthe FAFSA or, starting in 2011–12, atthe time he or she is making corrections,can request that IRS tax information bedisplayed and only the tax filer canchoose to have that informationimported into the applicant’s FAFSA forinitial filings or into the CPS record forcorrections. However, working with theIRS we have been able to mitigate(although not eliminate) the inherentcalendar conflicts between thebeginning of a FAFSA processing yearin January, the many State andinstitutional deadlines occurring asearly as February, and the IRS tax returnfiling timelines. Beginning with the2011–12 processing year, the IRS plansto provide applicants and their familieswith FAFSA on the Web access to taxreturn information withinapproximately 10 days of the return’sfiling date if the return was filedelectronically and within two weeks ifa paper return was filed. Also,beginning with the 2011–12 FAFSAprocessing year, applicants and parentswill be able to access IRS tax returninformation using the FAFSA COTWprocess. Thus, many applicants, who,because of their original FAFSA filingdate (or for any reason), did not use theIRS Data Retrieval Process when theyoriginally completed the FAFSA will beable to use the process to ‘‘correct’’ theoriginal FAFSA information. Likeapplicants who use the IRS DataRetrieval Process when originallycompleting the FAFSA, if applicantsand parents use the FAFSA COTWprocess to import IRS data on theFAFSA, the institution may considerthat data as acceptable documentationin accordance with § 668.57(a)(2) if thatdata was not changed. As mentionedearlier, an applicant’s ISIR will indicatethat the information came directly fromthe IRS and was not changed.Changes: None.Comment: Several commenterssupported the IRS Data RetrievalProcess, which will allow applicantsand their families to import dataobtained from the IRS to populate anapplicant’s online FAFSA. Manycommenters agreed that this processwill reduce an institution’s burden andhelp expedite the financial aid processby not requiring verification of IRSimported data; however, one commenterargued that it would be moreappropriate to eliminate FAFSAspopulated with IRS data through the IRSData Retrieval Process entirely fromverification.Discussion: The Departmentappreciates the commenters’ support.We do not agree that individuals whoretrieve income and tax data from theIRS should be exempt from theverification process because not allFAFSA information can be importedfrom the IRS database and anapplicant’s FAFSA may be selected forverification as a result of a data itemthat cannot be retrieved from the IRS.However, as discussed earlier in thispreamble, an institution may consideras acceptable documentation IRSretrieved information if the Secretaryhas identified those items as havingcome from the IRS and not having beenchanged. We are exploring a processthat would automatically exclude fromverification FAFSA items that camefrom the IRS and were not changed.Changes: Section 668.57(a)(2) hasbeen revised to clarify that aninstitution may use IRS transferred dataas acceptable documentation forverification purposes if it is limited tothe IRS data that was transferred for thespecific award year, and the Secretaryhas identified the data as having beenobtained from the IRS and not havingbeen changed.Comment: One commenter questionedwhether applicants should be allowedto use data from the second processingtax year because that data may notaccurately reflect a student’s or parent’scurrent income. The commenterasserted that the use of these data maycause confusion when completing theFAFSA and that this, in turn, willincrease burden on institutions, whichwill be responsible for responding toincreased requests for professionaljudgment reviews.Another commenter pointed out thatusing data from the second processingtax year would not benefit someCalifornia Community Colleges thathave a high population of families whohave experienced job losses.Discussion: Section 480(a) of the HEAgives the Secretary the option of usingincome and other data from the secondpreceding tax year to calculate anapplicant’s EFC. While the Departmentdoes not plan to exercise this option atthis time, we believe it is appropriate toinclude this provision in the regulationsto allow for this flexibility in the future.We are revising § 668.57(a)(1)(i),(a)(1)(ii), (a)(1)(iii) to make conformingchanges consistent with otherparagraphs under this section thatclarify the specific year that thedocumentation provided for under thissection must be submitted to theinstitution.Changes: Section 668.57 has beenrevised in paragraphs (a)(1)(i), (a)(1)(ii),(a)(1)(iii), and (a)(2) to add the phraseVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00079 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2‘‘for the specified year’’ as defined under§ 668.52.Comment: We received a number ofcomments expressing concern regardingthe operational aspect of the IRS DataRetrieval Process. For instance, a fewcommenters were unclear if anapplicant, whose marital status haschanged since filing an income taxreturn, could use the IRS Data RetrievalProcess to import only his or her datafrom an income tax return filed jointly.Another commenter asked if theappropriate fields from a marriedcouple’s separately filed tax returnwould be added together before the dataare imported into an online FAFSA.Discussion: For the reasons noted bythe commenters, the IRS Data RetrievalProcess has not and will not be offeredto an applicant (or parent) whosemarital status changed after the end ofthe tax year. Also, because the currentconfiguration of the IRS Data RetrievalProcess cannot access both tax returnswhen a married applicant or the marriedparents of a dependent student filedseparately (IRS Filing Status of ‘‘MarriedFiling Separately), our FAFSA on theWeb instructions advise such tax filersnot to use the IRS Data RetrievalProcess. Similarly the IRS Data RetrievalProcess cannot extract the income ofone individual that filed jointly. We areworking with the IRS to find aresolution to this issue. In themeantime, if an institution is aware thatsuch individuals did use the IRS DataRetrieval Process the institution mustcollect tax return information from theother spouse.Changes: None.Comment: One commenter noted thatmost Pell-eligible applicants would notbenefit from the IRS Data RetrievalProcess since they are not required tofile a Federal tax return because they donot earn enough. Therefore, thiscommenter argued that these applicantsand the institutions that serve themwould not experience the reduction inburden the IRS Data Retrieval Process isexpected to provide.Discussion: The commenter is correct.Changes: None.Comment: One commenter requestedguidance on the level of knowledgeFAAs are expected to have regarding taxfiling requirements. Specifically, thecommenter expressed concern thatFAAs may not have the knowledgenecessary to ensure that applicants arefiling their tax returns under the correcttax filing status (i.e., single, marriedfiling jointly, married filing separately,and head of household).Discussion: We do not expect FAAs tobe experts in IRS and tax filingrequirements. However, FAAs are

WReier-Aviles on DSKGBLS3C1PROD with RULES266910 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulationsexpected to have a basic understandingof relevant tax issues that canconsiderably affect an applicant’seligibility. We expect FAAs to be able toascertain whether an applicant or his orher family members identified on theapplicant’s FAFSA were required to filea tax return, what the correct filingstatus for the applicant should be, andthat an individual cannot be claimed asan exemption by more than one person.Changes: None.Comment: One commenter asked forclarification on whether institutionshave the authority to require anindividual who is required to file a U.S.tax return but who has been granted afiling extension by the IRS to submit taxdocuments before proceeding withverification. Another commenter askedwhy the Department would not requirethe actual tax return filed with the IRSto be used to complete verification fora student or parent that files a taxextension. This commenter stated that astudent should not receive any aid untilverification is completed using theactual tax return (not the documentationprovided under § 668.57(a)(4)(ii)).Another commenter supported therequirement that an applicant who isgranted an extension to file his or herincome tax return must submit a copyof the return that was filed, and theinstitution must re-verify the AGI andtaxes paid by the applicant and his orher spouse or parents.Discussion: Section 668.57(a)(4)(ii)(A)provides that an institution must accepta copy of IRS Form 4868, ‘‘Applicationfor Automatic Extension of Time to FileU.S. Individual Income Tax Return,’’that was filed with the IRS or a copy ofthe IRS’s approval for an extensionbeyond the automatic six-monthextension as acceptable documentationto verify an applicant’s FAFSAinformation for an applicant that hasbeen granted a tax filing extension. Aninstitution may request a copy of the taxreturn once filed, but it may not delayverifying an applicant’s FAFSAinformation until the tax return isreceived if the applicant provides thedocumentation approved by theSecretary under § 668.57.The Department does not require anapplicant that has been granted a taxextension to submit the actual tax returnfiled with the IRS because of theextended period of time that may elapsebefore the applicant actually files thereturn. This would delay the applicant’said, which we believe would beinappropriate. We believe the incomeinformation collected on IRS Form 4868and IRS Form W–2 should be sufficientdocumentation to verify the AGI,income earned from work, or U.S. taxespaid if those items are selected forverification. However, the regulationsdo provide that the institution mayrequire the applicant to submit theactual tax return that was filed with theIRS. If the institution receives a copy ofthe return, it must reverify the AGI andtaxes paid by the applicant and his orher spouse or parents.We believe clarification is needed forthe one commenter who appeared tointerpret § 668.57(a)(5) to mean that inall cases applicants who are granted atax extension must submit the actual taxreturn once it is filed, and that theinstitution must reverify the AGI andtaxes paid by the applicant and his orher spouse or parents once it receivesthe filed return. An applicant who filesan extension is only required to providea copy of the tax return that was filedif the institution requires a copy. Onlyif the institution requires the applicantto submit the tax return that was filedwould the institution be required toreverify the AGI and taxes paid by theapplicant and his or her spouse orparents. This differs from what occursunder the current regulations. Under thecurrent regulations, if an institutionrequired an applicant who was granteda tax filing extension to submit thereturn to the institution once it wasfiled, the institution could decidewhether or not to reverify the AGI andtaxes paid by the applicant and his orher spouse or parents.Changes: None.Comment: None.Discussion: We are making a technicalchange to § 668.57(a)(4)(iii)(B) to clarifythat an individual who is self-employedor who has filed an income tax returnwith a foreign government must providea signed statement that certifies theamount of taxes paid in addition to hisor her AGI.Changes: Section 668.57(a)(4)(iii)(B)has been revised to provide that aninstitution must accept a writtencertification of the amount of taxes paidfor an individual who is self-employedor has filed an income tax return witha foreign government.Comment: One commenter soughtclarification on § 668.57(a)(7), whichprovides that an institution may acceptin lieu of a copy of an income tax returnsigned by the filer of the return or oneof the filers of a joint return, a copy ofthe filer’s return that includes thepreparer’s Social Security Number,Employer Identification Number or thePreparer Tax Identification Number andhas been signed by the preparer of thereturn or stamped with the name andaddress of the preparer of the return.The commenter asked whether it wouldbe acceptable for the preparer to writeVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00080 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2or type his or her name on a filer’s taxreturn. The commenter noted thatguidance in the 2010–11 Applicationand Verification Guide is much broader,as it allows the preparer to stamp, type,sign, or print his or her name on a filer’stax return.Discussion: We agree with thecommenter and have revised§ 668.57(a)(7) to expand the options atax preparer has for being identified onan applicant’s tax return to make itconsistent with the guidance providedin the 2010–11 Application andVerification Guide.Changes: We have revised§ 668.57(a)(7) to provide that in additionto having the preparer’s signature orstamp on a filer’s tax return, theinstitution may accept a paper return onwhich the tax preparer has typed orprinted his or her own name.Interim Disbursements (§ 668.58(a)(3))Comment: Some commenterssupported § 668.58(a)(3), which allowsan institution to make an interimdisbursement prior to receiving thereprocessed SAR or ISIR if, afterverification, the institution determinesthat changes to the applicant’sinformation will not change the amountthe applicant would receive under atitle IV, HEA program and therequirement in § 668.59(a) that requiresinstitutions to submit all corrections tothe Department for reprocessing. Onecommenter did not support allowing aninstitution to disburse aid to a studentbefore the student’s corrected FAFSAinformation has been submitted and theinstitution receives a reprocessed SARor ISIR.Discussion: The Departmentappreciates the commenters’ supportand notes that interim disbursementsare optional, not required.Changes: None.Comment: One commenter stated thatbecause all corrections must besubmitted to the Department under§ 668.59(a), there is no need to allowinterim disbursements. This commenterrecommended that we remove from theregulations all provisions related tointerim disbursements.Discussion: We believe it is importantto continue to give institutions theflexibility to determine whether to makeinterim disbursements to individualapplicants prior to the completion ofverification to alleviate a hardship astudent may experience if there is adelay in receiving his or her financialaid. And, as noted earlier, interimdisbursements are optional, notrequired.Changes: None.

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66911WReier-Aviles on DSKGBLS3C1PROD with RULES2Comment: One commenter indicatedthat there is a problem with the crossreferencesin proposed § 668.58. Thesame commenter also expressed concernthat this provision does not make clearhow interim disbursements for the FWSProgram are treated if the student afterworking is determined to have anoverpayment.Discussion: We agree with thecommenter that there are problems withthe cross-references for interimdisbursements in proposed § 668.58.Specifically, we believe that in§ 668.58(a)(1) and (a)(3)(i), we need toclarify that corrections to the student’sFAFSA information must be made inaccordance with § 668.59(a). Inaddition, in proposed § 668.58(b) wehad an erroneous cross-reference for theinterim disbursements made under theFWS Program. Proposed § 668.58(b) alsodid not cross-reference each type ofinterim disbursement that is allowedunder certain conditions, either beforeverification is completed or afterverification is completed but before theinstitution has received the valid SARor valid ISIR reflecting the corrections.For clarity, we believe it is appropriateto revise § 668.58(b) so that it addresseseach type of interim disbursement.Further, we believe that specific crossreferencesto § 668.61 need to be addedto § 668.58(b) to clarify how institutionsmust handle any overpayments thatoccur because of an interimdisbursement such as under the FWSProgram.Changes: We have revised§ 668.58(a)(1) and (a)(3)(i) by clarifyingthat corrections to a student’s FAFSAinformation must be made inaccordance with § 668.59(a). Inaddition, we have revised § 668.58(b) tocorrectly and completely cross-referenceeach type of interim disbursement thatis allowed. Further, we have revised§ 668.58(b) to explain, with morespecificity, how institutions musthandle the recovery of each type ofoverpayment due to an interimdisbursement, including those made forthe FWS Program. We also addedspecific cross-references to § 668.61 in§ 668.58(b) to provide clarity toinstitutions on handling the recovery ofany overpayments that may occurbecause of an interim disbursement.Consequences of a Change in anApplicant’s FAFSA Information(§ 668.59)Comment: A number of commentersagreed with the proposal to remove the$400 tolerance reflected in current§ 668.59(a) and, instead, to require allchanges to an applicant’s FAFSAinformation be reported to theDepartment for reprocessing to ensure astudent’s award is based on accurateinformation.Several other commenters objected tothe proposal to remove the dollartolerance because they believed itwould increase administrative burden,particularly for larger institutions, andwould delay payments to students. Onecommenter noted that the currenttolerance allows FAAs to use their ownjudgment to determine when it wasnecessary to reprocess corrections thathave minimal impact on studenteligibility.One commenter noted that removingthe $400 tolerance will not be a problemfor institutions but, like many othercommenters, opposed requiring allchanges to an applicant’s FAFSAinformation to be submitted to theDepartment for reprocessing. Thecommenter expressed concern aboutthis requirement, especially when thestudent’s eligibility either would not beaffected or where there were minorerrors, i.e., an AGI was off by $1. Onecommenter recommended that theDepartment consider providinginstitutions with some administrativerelief in this area, given that institutionswill need to implement several otherchanges as a result of the issuance ofthese verification regulations. Manycommenters recommended that theDepartment retain the current $400tolerance or allow for a reasonabletolerance of a modest sum to allow forminor errors made by applicants andtheir families.Discussion: We appreciate theconcerns raised by commenters andacknowledge the burden associated withhaving to submit all changes to anapplicant’s FAFSA information to theDepartment for reprocessing. While ourgoal is to obtain the most accurate dataavailable to help in our efforts toidentify error-prone applications, weagree that the regulations shouldprovide a means for dealing with minorerrors in financial information reportedon an applicant’s FAFSA informationwithout requiring that these minorchanges be submitted to the Departmentfor reprocessing. While we do not agreethat it is appropriate to retain the $400tolerance from current § 668.59(a), weare revising § 668.59 to address minorerrors in financial information so thatinstitutions need not submit changesresulting from these types of errors tothe Department for reprocessing. It isimportant to note, however, thatinstitutions will still be required tosubmit all errors in nonfinancialinformation to the Department forreprocessing.VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00081 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2Specifically, we have revised§ 668.59(a) to require institutions tosubmit, for reprocessing, any change toan individual data element on anapplicant’s FAFSA that is $25 or more.For example if the difference reportedfor AGI is $24, and taxes paid is $20, theinstitution would not be required tosubmit changes to the Department forreprocessing. However, if the differencefor AGI is $25, and $20 for taxes paid,the institution would be required toupdate all changes, not just the changethat exceeded the tolerance.We also made conforming changes in§ 668.164(g)(2)(i) to reflect that anydependent student, whose parent isapplying for a Direct PLUS Loan mustcomplete a FAFSA in accordance withsection 483 of the HEA in order toobtain a SAR or ISIR with an officialEFC to meet the conditions for a latedisbursement.In addition we have amended§ 668.164(g)(4)(iv) to reflect the changesthat were made under § 668.59(a) thatrequire all changes to an applicant’sFAFSA information be submitted to theCPS System for correction, exceptfinancial data that is less than $25.Therefore, an institution may not makea late disbursement of any title IV, HEAassistance until it obtains a valid SARor valid ISIR.Changes: We have revised § 668.59(a)to provide that if an applicant’s FAFSAinformation changes as a result ofverification, the applicant or theinstitution must submit to the Secretaryany change to a nondollar item on theFAFSA and any change to a dollar itemon the FAFSA if the change to thatdollar item is $25 or more.We have revised § 668.164(g)(2)(i) torequire an applicant whose parent isapplying for a Direct PLUS loan to havea SAR or ISIR with an official EFC tomeet the conditions for a latedisbursement.We have also revised§ 668.164(g)(4)(iv) to provide that aninstitution may not make a latedisbursement of any title IV, HEAprogram assistance unless it receives avalid SAR or valid ISIR for the studentby the deadline date established by theSecretary in a Federal Register notice.Comment: One commenter stated thatit is not opposed to requiring thatinstitutions submit all corrections toCPS but expressed concern with theincreased number of applicants selectedfor verification when there is a changeto a school code or address.Discussion: It is true that, in a limitednumber of instances, verification couldbe triggered when an applicant makes acorrection to his or her address or to aschool code. This is because the

66912 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and RegulationsWReier-Aviles on DSKGBLS3C1PROD with RULES2statistical analysis that determineswhether an applicant’s record or aparticular item should be verified due tothe likelihood of error includes factorsbeyond those that are used to calculatethe EFC. We do not believe that thenumber of these instances will besignificant.Changes: None.Comment: One commenter indicatedthat the proposed regulations areconfusing with respect to the handlingof overpayments due to interimdisbursements made after an applicanthad been selected for verification, andthe handling of overpayments due todisbursements made before an applicantwas selected for verification.Discussion: We agree with thecommenter that proposed § 668.59(b),(c), and (d) may be confusing becausethese paragraphs do not clearly statehow institutions must handle anoverpayment that is the result of interimdisbursements made after the applicantis selected for verification. Further,proposed § 668.59(b), (c), and (d) mayalso be confusing because theseparagraphs do not clearly state howinstitutions must handle anoverpayment that is the result of adisbursement that is made before theapplicant is selected for verification butthat is later discovered to be anoverpayment. While proposed§ 668.59(b), (c), and (d) was intended todescribe how to handle an overpaymentin both of these situations if theapplicant is receiving aid under thesubsidized student financial assistanceprograms, we believe that furtherchanges are needed so that this sectionclearly states that an institution mustcomply with both the procedures in§ 668.61 for an interim disbursementthat is determined later to be anoverpayment, and the appropriateoverpayment requirements in theapplicable program regulations foroverpayments discovered duringverification that were due todisbursements made prior to a studentbeing selected for verification.Changes: We have revised § 668.59(b),which covers the consequences of achange in an applicant’s FAFSAinformation as the result of verificationfor the Federal Pell Grant Program, toprovide that for purposes of the FederalPell Grant Program the institution mustfollow the procedures in § 668.61 forhandling overpayments due to interimdisbursements, and the procedures in§ 690.79 for overpayments that are notthe result of interim disbursements.We have also revised § 668.59(c),which covers the consequences of achange in an applicant’s FAFSAinformation as the result of verificationfor the subsidized student financialassistance programs, excluding theFederal Pell Grant Program. Section668.59(c) also covers the DirectSubsidized Loan Program that washandled originally in proposed§ 668.59(d). As revised, § 668.59(c) nowprovides that the institution must followthe procedures in § 668.61 for handlingoverpayments due to interimdisbursements, including for the FWSProgram. Further, § 668.59(c) nowprovides that the institution must followthe procedures in § 673.5(f) for handlingoverpayments that are not the result ofinterim disbursements under theFederal Perkins Loan or FSEOGprograms. Finally, we have revised§ 668.59(c) to also provide that theinstitution must follow the proceduresin § 685.303(e) for handlingoverpayments that are not the result ofinterim disbursements under the DirectSubsidized Loan Program.The content in § 668.59(d) has beenincorporated into paragraph § 668.59(c).Deadlines for SubmittingDocumentation and the Consequencesof Failing To Provide Documentation(§ 668.60(c)(1))Comment: Two commentersconcurred with the provision underproposed § 668.60(c)(1) that allows astudent who completes verificationwhile the student is no longer enrolledto be paid based on the valid SAR orvalid ISIR. These commenters statedthat this approach was preferable tocurrent § 668.60(c)(1), which providesthat the student is paid based on thehigher of the two EFCs if the studentsubmits a valid SAR or valid ISIR whilethe student is no longer enrolled. Underthat approach, the student wouldreceive the lesser amount of a FederalPell Grant.Discussion: We appreciate thecommenters’ support.Changes: None.Comment: One commenterencouraged the Department to allowinstitutions to implement § 668.60(c)(1)prior to the 2011–12 award year.Discussion: While we appreciate thecommenter’s desire to implement thisprovision prior to the 2011–12 awardyear, we believe that allowing earlyimplementation would interfere withpolicies already in place for the 2010–11 award year, and how that mayimpact aid already disbursed, i.e., howto account for aid disbursed for asummer term that was assigned to theprior award year. As noted earlier inthis preamble, the changes to subpart Eof part 668, including § 668.60, willbecome effective on July 1, 2012, so thatVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00082 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2it will be implemented beginning withthe 2012–13 award year and forward.Changes: None.Recovery of Funds (§ 668.61)Comment: One commenter supportedthe proposed changes to § 668.61.Another commenter noted that § 668.61should only address recovery of fundsin the event of overpayments resultingfrom interim disbursements—notoverpayments that are not the result ofinterim disbursements. This commenterindicated that this section also containserroneous cross-references. In addition,this commenter stated that this sectionshould provide information on how totreat overpayments made under theFWS Program as interim disbursementsbecause the student must be paid for allhours worked.Discussion: Section 668.61 is abouthandling the recovery of overpaymentsdue to interim disbursements. Therecovery of overpayments that are notthe result of interim disbursements,including overpayments that result fromdisbursements made before an applicantwas selected for verification and laterafter selection for verification theapplicant’s SAR and ISIR must becorrected, are addressed by theappropriate overpayment requirementsin the applicable program regulations.We agree with the commenter that someof the cross-references in proposed§ 668.61 need to be corrected.We also agree with the commenterthat it would be helpful for § 668.61 toprovide details on how to handle therecovery of overpayments that occurfrom interim disbursements for studentsemployed under the FWS Program.Under § 668.58(a)(2)(ii), an institution isallowed to employ an applicant underthe FWS Program for the first 60consecutive days after the student’senrollment in that award year prior toverification, if the institution does nothave reason to believe that anapplicant’s FAFSA information isinaccurate. If an FWS overpaymentoccurs due to this interim disbursement,the institution must follow theprocedures in § 668.61(b). We haverevised § 668.61(b) to clarify that theinstitution must attempt to adjust theapplicant’s other financial aid toeliminate the overpayment due to aninterim disbursement under the FWSProgram. This revised § 668.61(b)provides that, if the institution is unableto eliminate the overpayment byadjusting the applicant’s other financialaid, the institution must reimburse theFWS Program account by makingrestitution from its own funds. Theapplicant must still be paid for all workperformed under the Federal labor laws.

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66913WReier-Aviles on DSKGBLS3C1PROD with RULES2Because the applicant was employed,the applicant must be placed on theinstitution’s own payroll account andall required employer contributions forsocial security, workers’ compensation,or any other welfare or insuranceprogram, must still be paid by theinstitution because this applicant wasan employee.In addition, the institution is allowedunder § 668.58(a)(3) to employ a studentunder the FWS Program for the first 60consecutive days prior to receiving thecorrected valid SAR or valid ISIR if,after verification, it determines that anapplicant’s information will not changethe amount that the applicant wouldreceive under that program. In§ 668.61(c), we require that if an FWSoverpayment occurs because theinstitution does not receive the validSAR or valid ISIR reflecting correctionswithin the established deadline dates,the institution must reimburse the FWSProgram account by making restitutionfrom its own funds. In § 668.61(c), weclarify that the student must still bepaid for all work performed under theinstitution’s own payroll account andthe institution must still handle allemployer requirements.Changes: We have revised § 668.61,including the section heading, to clarifythat this section is about handlingoverpayments due to interimdisbursements made under § 668.58. Wehave also corrected the cross-referencesin this section. In addition, we haverevised § 668.61(b) to provide specificprocedures for recovering funds fromany FWS overpayment that results froman interim disbursement made beforeverification is completed. We haverevised § 668.61(c) that describes theprocedures for handling overpaymentsdue to an allowable interimdisbursement of subsidized studentfinancial assistance, including anydisbursement from FWS employment,before the institution receives the validSAR or valid ISIR reflecting thecorrections. Section 668.61(c) nowmakes it clear that the applicant muststill be paid for all work performedunder the institution’s own payrollaccount.Misrepresentation (Subpart F—§§ 668.71 Through 668.75)GeneralComment: A significant number ofcommenters generally or fundamentallysupported the proposed regulations insubpart F of part 668. Severalcommenters stated that the proposedregulations on misrepresentation reflectan excellent, much-neededimprovement over current regulatorylanguage and that they will significantlyenhance the Department’s ability toaddress deceptive practices thatcompromise the ability of students tomake informed choices aboutinstitutions and the expenditure of theirresources on higher education. Onecommenter agreed, in particular, withproposed §§ 668.72 and 668.73, whichensure that all students have access andtransparent information about theireducational program and its cost. Thiscommenter noted that accuratedisclosures are needed in order toprotect students, especially in light ofthe many documented instances inwhich students have had theirexpectations regarding postsecondaryeducation outcomes (e.g., completeddegrees, good jobs and high salaries) notmet with success but with failure andmountains of debt instead. Onecommenter stated that the proposedregulations on misrepresentationprovide additional protections againstmisleading and overly aggressiveadvertising and marketing tactics.Another commenter strongly supportedthe proposals and stated that integrity inhow institutions present themselves iskey to ensuring students are not victimsof false promises or misunderstandingwhen making a decision about highereducation. Finally, we received manycomments that supported theDepartment’s mission of helpingstudents make sound decisions andmaintaining the integrity of the title IV,HEA programs but expressed concernabout some of the specific language.Discussion: We appreciate thecommenters’ support. We address thecomments and concerns on specificlanguage in the relevant sections thatfollow.Changes: None.Comment: Many commentersstrenuously opposed the proposedrevisions to the misrepresentationregulations in subpart F of part 668.Some commenters argued that, becausemisrepresentation is an issue moreappropriately addressed by the FederalTrade Commission (FTC), theDepartment should have adopted inthese regulations the language from theFTC guidelines so that those guidelineswould be applicable to all institutionsparticipating in the title IV, HEAprograms. These commenters noted thatfor-profit institutions are already subjectto the FTC guidelines and that theresults of that guidance have servedtheir students well and that othersectors of higher education should besubject to the FTC guidelines as well.Several commenters stated thatstudents would be confused by theproposed regulations dealing withVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00083 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2misrepresentation. Specifically, thecommenters expressed concern thatbecause institutions discloseinformation to many parties, includingaccrediting agencies, the Department,current and prospective students, andthe general public, information requiredto be disclosed under the title IV, HEAprogram regulations is complex and notalways easy to understand. Therefore,the commenters argued that studentswill not be able to make informeddecisions about which institution toattend because, under the title IV, HEAprogram regulations, they will beprovided different statistics and willhave difficulty understanding them.One commenter expressed concernthat while the education community isin need of clear guidance on ethicalpractices and the proposed regulationsare well-intended, they are too vagueand subjective. A few commenters urgedthe Department not to adopt theproposed regulations as final unlessthey are significantly clarified.Finally, one group of commentersstated that the proposed changes tosubpart F of part 668 are unfair to forprofitschools. Some commentersappeared to believe that the revisionsreflected in proposed subpart F of part668 would only apply to for-profitschools.Discussion: During the negotiationsthat were held during the months ofNovember 2009 through January 2010,we discussed whether to adopt the FTCguidelines in our misrepresentationregulations. Some non-Federalnegotiators strongly opposed adoptingthe FTC guidelines in the Department’sregulations because doing so, theyargued, would be duplicative andheavy-handed.The FTC only has jurisdiction overfor-profit entities, and those entities arealready subject to the FTC guidelines.The FTC guidelines do not apply todegree-granting institutions, and webelieve it would not be appropriate toadopt the FTC guidelines wholesale.Instead, we have reviewed theguidelines carefully and incorporatedonly those that we determined areappropriate for inclusion in ourregulations (i.e., those that we believeshould be applicable to all eligibleinstitutions participating in the title IV,HEA programs).With regard to the commenters whoexpressed concern for students beingconfused by these regulations, we notethat the proposed regulations apply toinstitutions participating in the title IV,HEA programs and not to students.Because students are not the intendedaudience for these regulations, we donot believe that students will be

WReier-Aviles on DSKGBLS3C1PROD with RULES266914 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulationsconfused by the regulations. If studentshave questions about the regulations,they have a variety of sources to assistthem in understanding them, includingby contacting the Department with theirquestions.We disagree with the commenterswho opined that the proposedregulations are too vague and subjective.Section 487 of the HEA provides thatinstitutions participating in the title IV,HEA programs shall not engage insubstantial misrepresentation of thenature of the institution’s educationalprogram, its financial charges, or theemployability of its graduates. Theregulations in subpart F of part 668 setforth the types of activities thatconstitute misrepresentation by aninstitution and describe the actions thatthe Secretary may take if the Secretarydetermines that an institution hasengaged in substantialmisrepresentation. The proposedchanges to the regulations strengthenthe Department’s regulatoryenforcement authority againstinstitutions that engage in substantialmisrepresentation and clarify whatconstitutes misrepresentation.The commenters who stated that theproposed regulations are unfair becausethey only apply to for-profit institutionsare incorrect. Subpart F of part 668applies to all institutions thatparticipate in the title IV, HEAprograms.Changes: None.Comment: Some commenters arguedthat the proposed regulations are legallydeficient on their face, redundant, andprovide no insight or guidance onconduct that may constitute ‘‘substantialmisrepresentation.’’ They stated that theproposed regulations do not contain anystandards of intent, harm, or materiality.In addition, some commenters statedthat the regulations are missing aquantitative element because they donot identify what exactly would triggerpenalties (e.g., a single complaint, apattern of misrepresentation, a dollaramount of title IV, HEA aid). Thesecommenters stated that a degree ofmateriality of misrepresentation shouldbe taken into account when determiningwhether to impose a sanction on aninstitution.Discussion: We disagree with thecommenters who opined that theDepartment does not have the legalauthority to regulate in this area.Current subpart F of part 668 has beenin place for over 25 years. The proposedchanges strengthen the Department’sregulatory enforcement authority overinstitutions that engage in substantialmisrepresentation and further clarifywhat constitutes misrepresentation.The U.S. Government AccountabilityOffice (GAO) was recently asked toconduct undercover testing to determinewhether for-profit colleges’representatives engaged in fraudulent,deceptive, or otherwise questionablemarketing practices. The undercovertests at 15 for-profit institutions foundthat four institutions encouragedfraudulent practices and that all 15made deceptive or otherwisequestionable statements to GAO’sundercover applicants. Institutionalpersonnel engaged in deceptivepractices, including by encouragingapplicants to falsify their FAFSAinformation, by exaggerating applicants’potential salary after graduation, and byfailing to provide clear informationabout the institution’s programduration, costs, and graduation rate. Insome instances, the undercoverapplicants received accurate and helpfulinformation from institutionalpersonnel, such as not to borrow moremoney than necessary.The information uncovered by theGAO during its investigation reinforcesthe Department’s decision to amend themisrepresentation regulations in subpartF.We disagree with commenters whoclaim the regulations are legallydeficient because they fail to establishthe need for specific intent as anelement of misrepresentation or do notdefine a requisite degree of harm beforethe Department may initiate anenforcement action.The Department has always possessedthe legal authority to initiate a sanctionunder part 668, subpart G for anyviolation of the title IV, HEA programregulations. However, the Departmenthas also always operated within a ruleof reasonableness and has not pursuedsanctions without evaluating theavailable evidence in extenuation andmitigation as well as in aggravation.The Department intends to continueto properly consider the circumstancesurrounding any misrepresentationbefore determining an appropriateresponse. Depending on the factspresented, an appropriate responsecould run the gamut from no action atall to termination of an institution’s titleIV, HEA eligibility depending upon allof the facts that are present.We disagree with the commenterswho stated that the proposedregulations are redundant. Although theFTC publishes guidelines for consumersto use to avoid deceptive advertising,promotional, marketing, and salespractices by vocational trainingproviders, the FTC guidelines areconsidered administrativeinterpretations of the statutes that theVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00084 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2FTC is charged with implementing asopposed to implementing the statutoryrequirement in section 487 of the HEA,which the Department is charged withimplementing.We disagree with the commenterswho stated that the proposedregulations do not provide guidance onwhat constitutes ‘‘substantialmisrepresentation.’’ The proposedregulations define ‘‘substantialmisrepresentation’’ as ‘‘anymisrepresentation on which the personto whom it was made could reasonablybe expected to rely, or has reasonablyrelied, to that person’s detriment.’’In determining whether an institutionhas engaged in substantialmisrepresentation and whether toimpose penalties, the Department uses arule of reasonableness and considersvarious factors.Changes: None.Comment: Some commenterssuggested that we adopt more concreteand narrowly defined terms in subpartF of part 668 to address abuses whileprotecting legitimate institutions andprograms from baseless charges. Thesecommenters stated that the proposedregulations on misrepresentationcontain a number of vague and broadphrases that leave the door wide openfor interpretation by States, accreditingagencies, and the Department. Thesecommenters expressed concern that thelack of specificity in the regulations willfuel the potential for frivolous lawsuitsbrought as class actions againstinstitutions. One commenter opinedthat the proposed regulations wouldfunction as a ‘‘perpetual employment actfor lawyers’’ because, under theregulations, routine marketing claimswould become a potential source oflawsuits and claims for years.Some commenters also expressedconcern about allegations ofmisrepresentation from disgruntledstudents and employees or formeremployees and as a result of journalistsmisreporting facts. These commentersargued that it is not appropriate for theactions of a single individual or a singleincident, whether malicious orunintended in nature, to dramaticallyaffect an institution.Discussion: We disagree with thecommenters who stated that theproposed regulations are too broad andopen for interpretation. We proposedspecific changes to the currentregulations to clarify the types of false,erroneous, or misleading statementsabout an institution’s educationalprogram, the cost of the program,financial aid available, and theemployability of its graduates thatwould be prohibited as

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66915WReier-Aviles on DSKGBLS3C1PROD with RULES2misrepresentations under subpart F ofpart 668.We understand that some commentershave concerns about baseless chargesand frivolous lawsuits that may bebrought by students and employeesincluding by dissatisfied students anddisgruntled employees as well as fearsthat ‘‘routine marketing claims’’ wouldlead to lawsuits. We do not believe thatthe proposed regulations will increaselitigation by students and employeesagainst the institution. Theseregulations do not provide an additionalavenue for litigation for students,employees and other members of thepublic. Instead, the regulations specifythe conditions under which theDepartment may determine that aninstitution has engaged in substantialmisrepresentation and the enforcementactions that the Department may chooseto pursue. As the Department does inevaluating any regulatory violation, indetermining whether an institution hasengaged in substantialmisrepresentation and the appropriateenforcement action to take, theDepartment will consider the magnitudeof the violation and whether there wasa single, isolated occurrence.Changes: None.Comment: Many commentersexpressed concern that the proposedchanges would eliminate due processprotections for institutions in the case ofsubstantial misrepresentation. Thecommenters requested that we retain theprocedures from current § 668.75,arguing that the removal of theseprocedures conflicts with the HEA andexceeds the Department’s statutoryauthority to regulate in this area.Several commenters also expressedconcern about the proposed removal ofcurrent § 668.75 because that sectionrequired the Department to reviewcomplaints and to dispose of theminformally if the complaints weredetermined to be minor and could bereadily corrected. The commentersargued that the proposed regulationswould eliminate this sensible approachin exchange for using other procedures.These commenters recommended thatwe amend § 668.71(a) to include anoption for the Department to allow aninstitution to correct minor, inadvertent,and readily correctablemisrepresentations and to makeappropriate restitution. They noted thatthese types of misrepresentations arebound to occur given the amount ofinformation institutions must report andthat simple human error should notconstitute misrepresentation. Othercommenters expressed concern that,under the proposed regulations, simplemistakes could trigger sanctions even ifan institution has no history ofmisrepresentation problems.Discussion: The Department isremoving the provisions in § 668.75because they are formulaic and havebeen proven unnecessary. TheDepartments takes its enforcementresponsibilities seriously, and its historydemonstrates that it does not overreactto single, isolated transgressions. Weintend to enforce the misrepresentationregulations with the same degree offairness that we enforce all other titleIV, HEA program requirements. To theextent the Department chooses toinitiate an action based upon a violationof the misrepresentation regulations,nothing in the proposed regulationsdiminishes the procedural rights that aninstitution otherwise possesses torespond to that action.Changes: None.Comment: Some commenters statedthat enforcement by the Department isnot necessary and is not the best way toallocate the Department’s resourcesbecause State agencies, accreditingagencies and the FTC already enforcelaws prohibiting misrepresentation. Forexample, some commenters noted thataccrediting agencies have standards oninstitutional integrity and review theways in which each institutionrepresents itself as part of theaccrediting process. The accreditingagencies perform regular reviews of alladvertising and promotional materialand publish specific guidelines forinstitutions regarding acceptablestatements by staff. The commentersrecommended that the Departmentcontinue to rely on this process, ratherthan adopting the proposed regulations,which they argue, will result in anunnecessary duplication of enforcementefforts. Another commenter asked us toclarify whether the Department—andnot State authorizing agencies—isresponsible for monitoring compliancewith the misrepresentation regulations.While a number of commentersargued that it is not appropriate for theDepartment to take enforcement actionsto prevent misrepresentation, othercommenters stated that in cases of truemisrepresentation strong enforcementsteps would go a long way ineliminating fraud and abuse andlimiting the need for other measures tocombat abuse that arises in the absenceof such enforcement.Discussion: We disagree with thecommenters who stated that theDepartment should not be responsiblefor enforcement of thesemisrepresentation regulations becauseothers, including State agencies,accrediting agencies, and the FTC arealready enforcing laws againstVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00085 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2misrepresentation. The Department isresponsible for ensuring thatinstitutions participating in the title IV,HEA programs comply with section 487of the HEA, which prohibits institutionsfrom engaging in substantialmisrepresentation of the nature of theinstitution’s educational program, itsfinancial charges, or the employabilityof its graduates. We acknowledge thatother agencies and entities also enforcevarious laws and standards that guardagainst misrepresentation and arepleased that we have partners inensuring that institutions do not makefalse, erroneous, or misleadingstatements to students, prospectivestudents, and members of the public.We agree with the commenters whosupported strong enforcement in thisarea. We believe that strengthening themisrepresentation regulations andenforcement of these regulations iscritical to maintaining the integrity ofthe title IV, HEA programs.Changes: None.Comment: Many commenters arguedthat we should revise the regulations tolink enforcement to situations in whichthe institution or its employees aremaking a conscious decision to misleadthe consumer. The commenterssuggested that the definition ofmisrepresentation be amended toinclude an element of intent to deceive;under this definition, institutions wouldface sanctions only if the Departmentdetermined that the misleadingstatement was made with the intent todeceive.Discussion: In determining whetheran institution has engaged in substantialmisrepresentation and the appropriatesanctions to impose if substantialmisrepresentation has occurred, theDepartment considers a variety offactors, including whether themisrepresentation was intentional orinadvertent.Changes: None.Comment: Some commentersexpressed concern that they will beunable to comply with themisrepresentation regulations becausethey are required to comply with somany regulations that inadvertentmisrepresentations are bound to occur.Discussion: As previously discussed,before initiating any action, theDepartment carefully evaluates all of thecircumstances surrounding an allegedmisrepresentation. However, theDepartment rejects the notion thatinstitutions are incapable of complyingwith multiple title IV, HEA programregulations, while at the same timeensuring that they do not makemisrepresentations, inadvertent orotherwise.

66916 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and RegulationsWReier-Aviles on DSKGBLS3C1PROD with RULES2Changes: None.Comment: Some commentersexpressed concern with the effect theseproposed misrepresentation regulationscould have on students. They arguedthat the regulations would conflict withState laws and create confusion in anarea long regulated by the States. Forexample, given that students filecomplaints with the State, thecommenters stated that an additionalFederal remedy would be duplicativeand would create uncertainty forstudents.Other commenters expressed concernabout institutions that require studentsto sign arbitration and confidentialityagreements as part of their enrollmentcontracts. These agreements serve tolimit access to qualified legal counselfor students who may want to pursue amisrepresentation claim. Somecommenters stated that the regulationsshould not be interpreted to create anexpress or implied private right ofaction against an institution formisrepresentation.Discussion: We disagree with thecommenters who stated that studentswill be confused by themisrepresentation regulations becausethey otherwise typically pursue claimsof misrepresentation under State law.Nothing in the proposed regulationsalters a student’s ability to pursueclaims of misrepresentation pursuant toState law and nothing in the proposedregulations creates a new Federalprivate right of action. The regulationsare intended to make sure thatinstitutions are on notice that theDepartment believes thatmisrepresentations constitute a seriousviolation of the institutions’ fiduciaryduty and that the Department willcarefully and fairly evaluate claims ofmisrepresentation before determining anappropriate course of action.Changes: None.Scope and Special Definitions (§ 668.71)Comment: Many commentersexpressed concern about the expansionof the misrepresentation regulations tocover false or misleading statementsmade by representatives of theinstitution or any ineligible institution,organization or person with whom theinstitution has an agreement. Thecommenters believed that this changewill result in holding institutionsaccountable for what is said, may besaid, or inadvertently is said, byindividuals or organizations that mayhave no official connection to aninstitution, and that institutions cannotmonitor inadvertent and unofficialcomments. Commenters argued that theproposals would expose goodinstitutions to sanctions based onactions beyond their control. Manycommenters sought clarification aboutwhich representatives of the institutionare covered by the regulations. Forexample, commenters pointed tostatements that may be made bystudents through the use of socialmedia. One commenter suggested wemodify the definition ofmisrepresentation to clarify thatinstitutions are responsible forstatements made by representatives orentities compensated by the institution.Another commenter recommended thatwe include only individuals under thedirect control of the institution,including spokespersons andenrollment management companies.We received another suggestion tolimit covered agreements to thoserelating to marketing or admissions.Many commenters expressed concernthat, without this change, the proposedregulations would apply to thehundreds of contracts a large institutionmay have with various vendors andservice providers. They suggested thatthe institution only be responsible forcommunications from and statements byindividuals or entities authorized tospeak for the institution or who haverepresentative authority to respond tothe subject in question.Commenters were particularlyconcerned about the penalties thatcould result from misinformationprovided by an entity other than theinstitution. The commenters argued thatthe institution should not be subjectedto undue penalties if the institution tooksteps to monitor and mitigate suchpossible misrepresentations, and in fact,took action upon identifying anyincidences. For example, institutionsprovide information to companies thatcompile college rankings that are oftenderided as inaccurate, incomplete orfalse. Commenters believed that anypenalties should be limited tostatements related to the relationshipbetween the institution and the entity.Discussion: As noted elsewhere inthis preamble, the Department enforcesits regulations, including those insubpart F of part 668 within a rule ofreasonableness. We strongly believe thatthe concerns voiced by manycommenters have ignored this fact. Wedo not expect, for example, to findactionable violations in the commentsmade by students and routine vendors.However, the Department acknowledgesthat the language in § 668.71 may beunnecessarily broad. For this reason, weagree to limit the reach of the ban onmaking substantial misrepresentationsto statements made by any ineligibleinstitution, organization, or person withVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00086 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2whom the eligible institution has anagreement to provide educationalprograms or those that providemarketing, advertising, recruiting, oradmissions services. We have done thisby narrowing the language in § 668.71(b)and the definition of the termmisrepresentation. As a result,statements made by students throughsocial media outlets would not becovered by these misrepresentationregulations. Also, statements made byentities that have agreements with theinstitution to provide services, such asfood service, other than educationalprograms, marketing, advertising,recruiting, or admissions services wouldnot be covered by thesemisrepresentation regulations.Changes: We have revised § 668.71(b)and the definition of the termmisrepresentation in § 668.71(c) toclarify that the ban onmisrepresentations for which aninstitution is responsible only extendsto false, erroneous, or misleadingstatements about the institution that aremade by an ineligible institution,organization, or persons with whom theinstitution has an agreement to provideeducational programs or to providemarketing, advertising, recruiting, oradmissions services.Comment: Some commenters noted aneed for the regulations to clearlydifferentiate between‘‘misrepresentation’’ and ‘‘substantialmisrepresentation.’’ Other commentersquestioned how we will determine whatconstitutes ‘‘substantialmisrepresentation.’’ These commentersasked what the standards are fordetermining what constitutes harm,materiality, or intent to misrepresent.Another commenter suggested that werevise the definition of substantialmisrepresentation to includemisrepresentations that aredisseminated—not only those that are‘‘made’’.Discussion: The Department iscomfortable with its ability to make thedistinction between a misrepresentationand a substantial misrepresentation. Webelieve that the regulatory definitionswe are establishing are clear and caneasily be used to evaluate allegedviolations of the regulations. Moreover,as previously stated, we routinelyevaluate the seriousness of title IV, HEAprogram violations before determiningwhat, if any, action is appropriate.There is nothing in the proposedmisrepresentation regulations that willalter the manner in which theDepartment reviews any violation ofpart 668, subpart F before deciding howit should respond.Changes: None.

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66917WReier-Aviles on DSKGBLS3C1PROD with RULES2Comment: Some commenterssupported the proposed definition ofmisrepresentation in § 668.71(c), which,as applied in these regulations,prohibits making false, erroneous, ormisleading statements directly orindirectly to students, prospectivestudents, or any member of the public,an accrediting agency, a State agency orthe Secretary. They stated that thesechanges provide much needed updatesto the current regulations and that theremedies give the Department neededflexibility. The commenters noted thatthe Department should not tolerateinstitutions that knowinglymisrepresent facts and providemisinformation on purpose to students,their families and the public, and thatwe should hold institutions accountablethat encourage students to enroll but failto deliver on statements regardingaccreditation and employability.Other commenters expressed concernabout broadening the list of entities towhich an institution may not make afalse, erroneous, or misleadingstatement to include accreditingagencies, State agencies or any memberof the public. These commentersremarked that the effect of thisregulatory change is that the list nowincludes anyone. The commentersargued that the determination ofwhether an institution has mademisleading statements to an accreditingagency or State agency should be madeby that agency, not the Department, andthat the agency should take appropriateaction. One commenter suggested thatthe list of entities should also includeparents who may be signing orcosigning loans.Discussion: The Department believesthat in its stewardship of the title IV,HEA programs, it is essential to monitorthe claims made by institutions not onlyto students and prospective students,but also those made to the Department’spartners who help maintain the integrityof these programs. While it is likely thatother oversight agencies will respondappropriately to any substantialmisrepresentations that are made tothem, only the Department has theoverall responsibility for preserving thepropriety of the administration of thetitle IV, HEA programs.In addition, because parents are alsomembers of the public, and most, if notall, statements made to them will alsobe made to students or prospectivestudents, the Department does notbelieve that further enumeration toinclude parents is necessary.Changes: None.Comment: Some commenters notedthat the term ‘‘misleading statement’’ isnot defined by the FTC, and opinedthat, because the term’s definitionmerely reiterates what has always beenrequired for a finding of a substantialmisrepresentation, it is unnecessary forthe Department to define the term in itsregulations. Some commenterssuggested that, instead, the Departmentfollow the FTC’s practice ofacknowledging that a finding ofmisrepresentation is a fact-specificinquiry based on a flexible standard.Many commenters appeared to beparticularly concerned about the use ofthe phrase ‘‘capacity, likelihood, ortendency to deceive or confuse’’ in thedescription of a ‘‘misleading statement’’.Some commenters stated that they donot believe that an enforceable ordefensible basis for misrepresentation iscreated by including the likelihood ofany form of communication to confuseor ‘‘have the capacity’’ to confuse astudent or potential student. Onecommenter suggested we clarify that inorder to constitute misrepresentation,the statement must have the ‘‘capacity ortendency’’ to deceive or confuse and be‘‘likely’’ to deceive or confuse. Thecommenter cited examples of statementsfrequently made in marketing materialsby institutions, such as ‘‘there is a placefor everyone at XYZ.’’ Other commentersnoted that institutions provideinformation on a variety of complexissues that students and others may findconfusing. In particular, certain terms ofart such as ‘‘cost of attendance’’ and‘‘graduation rate’’ may not be familiar tothe general public and may be confusingto them. Another commenter requestedthat we clarify that a misrepresentationis not made if confusion results from theaccurate reporting of disclosuresrequired under various laws.These commenters expressed concernthat attempts to comply with recentlypromulgated regulations on college cost,transparency, and outcomes measuresmay result in confusion and lead toreported complaints ofmisrepresentation.Several commenters argued that theDepartment needs to address the issueof misrepresentation through omissionsof important information. Onecommenter suggested that we addlanguage in the description of the termmisleading statement to include anomission, if in the absence of anaffirmative disclosure is likely to resultin a person assuming something that isincorrect.One commenter stated that oralstatements should not be included inthe definition of misrepresentation. Thecommenter questioned how theDepartment would know that an oralmisleading statement was made.VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00087 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2Many commenters expressed concernthat the proposed misrepresentationregulations will restrict their capabilityto use the Internet for fear ofmisrepresentation. These commentersnoted that their top lead source is theInternet and that Internet marketing isthe bloodline of all institutions. Thecommenters also pointed out thatInternet marketing has issues relating todomain name ownership, nameconfusion, and pirating, and that, whenthe Department enforces theseregulations, it needs to be careful inensuring that it has the correctinstitution.Discussion: The Department believesthat it is appropriate to define the termmisrepresentation in its regulations inorder to distinguish misrepresentationfrom substantial misrepresentation. Asdiscussed elsewhere in this preamble,the Department agrees that determiningwhether a misrepresentation has beenmade should be accomplished througha fact-specific inquiry and thatenforcement actions should only bebrought when reasonable.With regard to the comments whostated that the ‘‘capacity, likelihood, ortendency to deceive or confuse’’language will be confusing, we have noreason to believe that this language willhave any such effect. Moreover, we donot believe that it is necessary to revisethe regulations to state that a misleadingstatement must have both the capacityor tendency and likelihood to deceivebecause we believe that a statement thathas any of the characteristics of thecapacity, likelihood, or tendency todeceive or confuse is misleading.By adopting these proposedregulations, the Department is notseeking to create extraneous bases uponwhich it can initiate enforcementactions. Rather, we want to ensure thatthe regulations help, rather than hinder,our ability to protect students,prospective students, and others frommisleading statements made about aneligible institution, the nature of itseducational program, its financialcharges, or the employability of itsgraduates. The Department believes itcan be trusted to properly evaluatewhether a claim is confusing to a degreethat it becomes actionable. It is alsoimportant to remember that it is onlysubstantial misrepresentations that riseto the level where the Department maycontemplate action.As far as the failure of the proposedregulations to address affirmativeomissions, the Department believes thatthe purpose of these regulations is tomake sure that all statements aninstitution makes are truthful.Separately, the Department requires an

WReier-Aviles on DSKGBLS3C1PROD with RULES266918 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulationsinstitution to make a number ofdisclosures to students and to the extentthat any of these disclosures areinaccurate and constitute substantialmisrepresentation, they are actionable.The Department believes that thetotality of its regulations provides asufficient basis to protect against themaking of substantialmisrepresentations without creatinganother category of misrepresentationsthat are more logically covered withinthe context of disclosures.In addition, we disagree with thecommenter who argued that oralstatements should not be included inthe definition of the termmisrepresentation. We have seen andheard clear and unambiguous examplesof oral statements that we view asmisrepresentations in the GAO’s videoof its undercover testing.With respect to the commenters whoexpressed concern about how theseregulations may affect an institution’sability to use the Internet for marketingpurposes, we note that it should notmatter where a misrepresentation takesplace. What is important is to curb thepractice of misleading studentsregarding an eligible institution,including about the nature of itseducational program, its financialcharges, or the employability of itsgraduates. We strongly believe thatinstitutions should be able to find a wayto comply with these regulations whenusing the Internet for marketing.Finally, we understand the manycomplexities of domain nameownership, trademark infringement andthe like and will ensure that we aretargeting the correct entities in anyenforcement action we take under theseregulations.Changes: None.Comment: Several commentersobjected to including testimonials andendorsements in the definition ofmisrepresentation, because doing soholds institutions responsible forunsolicited testimonials orendorsements of any kind. Thecommenters noted that testimonials arewidely used as the most relevant formof marketing. One commenter suggestedthat we modify the regulations to referto testimonials that the institution‘‘requested’’ a student to make ‘‘as partof the student’s program’’ as opposed to‘‘required’’ the student to make ‘‘toparticipate in a program.’’ Anothercommenter believed we should expandthe definition of the termmisrepresentation to includeendorsements or testimonials for whichstudents are given incentives orrewards.Discussion: The Department disagreesthat changes to the definition ofmisrepresentation are needed. First,with respect to the commenters whostated that the definition is too broad,we note that the thrust of the definitionis that the statement must be false,erroneous, or misleading. The inclusionwithin the definition of certain studentendorsements or testimonials (i.e., thosethat are given under duress or arerequired for participation in a program)establishes the circumstances underwhich endorsements or testimonials arenecessarily considered to be false,erroneous, or misleading. We believethat including these types ofendorsements and testimonials in thedefinition of misrepresentation isappropriate because endorsements ortestimonials provided under thesecircumstances are suspect, at best.Second, we do not believe it isnecessary to expand the definition ofmisrepresentation to includeendorsements or testimonials for whichstudents are given incentives orrewards. We do not believe that anendorsement or testimonial for which astudent was given a token reward suchas a mug or t-shirt should automaticallybe considered false, erroneous, ormisleading.Changes: None.Nature of Educational Program(§ 668.72)Comment: One commenter supportedthe proposed changes to § 668.72 statingthat the changes will reduce themotivation for institutions to useaggressive and misleading recruitmenttactics to increase enrollment. Thecommenter noted that the requirementsin this section align with theirassociation’s principles of good practiceunder which members represent andpromote their schools, institutions orservices by providing preciseinformation about their academic majorand degree programs.Discussion: The Departmentappreciates this support.Changes: None.Comment: One commenter stated that§ 668.72 was inherently unclear andasked for additional clarificationwithout providing any specifics.Discussion: The Department disagreeswith this commenter and believes thatthe language in this section is clear.Moreover, because only false, erroneous,or misleading statements that constitutesubstantial misrepresentations arepotentially actionable, institutions areon notice as to what they need to do toassure themselves of compliance.Changes: None.VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00088 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2Comment: Some commentersrecommended that we add language tothis section to address specific concernsabout clinical experience. Onecommenter argued that institutionsshould be required to inform students ofany clinical experience the studentneeds to obtain a required license orcertification, whether the institution orthe student secures the appropriateclinical placement, and how the clinicalexperience relates to the ability toobtain employment. The commenterargued that the failure to inform astudent of this information shouldconstitute misrepresentation.Discussion: We believe that thelanguage in § 668.72 sufficiently coversfalse, erroneous, or misleadingstatements made by institutionsconcerning their educational programs.We further note that information such asthat suggested by the commenter ismore appropriately addressed in thestudent consumer informationdisclosures contained in subpart D ofpart 668 and note that institutions arerequired to disclose information aboutthe academic program of the institution,which would include information aboutany required clinical experience.Changes: None.Comment: One commenter suggestedthat we add language to § 668.72 tospecifically address misrepresentationrelated to whether course credits earnedat the institution are transferable towarda substantially similar degree. Thiscommenter noted that, in some cases,courses may be accepted but not counttoward a degree at the new institution.Discussion: We believe that thelanguage in § 668.72(b)(1), whichprohibits false, erroneous, or misleadingstatements about whether a student maytransfer course credits earned at theinstitution to any other institution, issufficient and provides more protectionfor students than the commenter’ssuggestion to limit the coverage tostatements related to whether coursecredits are transferable toward asubstantially similar degree.Changes: None.Comment: A few commenterssuggested that we expand § 668.72(c)(2)to include ‘‘States in which the programis offered’’ rather than merely ‘‘the Statein which the institution is located’’ sothat the requirement reaches studentswho are enrolled through distancelearning. One commenter noted thatinstitutions that offer courses onlineshould have additional responsibilitiesto students who take these courses. Thecommenter also asserted that theseinstitutions should know andcommunicate to students what theState’s requirements are to be employed

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66919WReier-Aviles on DSKGBLS3C1PROD with RULES2in that job and whether successfulcompletion of the program will qualifythem for such a job. Another commenterstated that an institution should knowState licensing requirements in all theStates in which it is providing theprogram and further opined that if theinstitution does not know therequirements, it could limit enrollmentto students residing in the States inwhich it does know.Discussion: The Department agreeswith the commenters who believeinstitutions should be responsible formaking statements that are not false,erroneous, or misleading in States inwhich the institution’s educationalprograms are offered and not only in theState where the institution is located.Changes: We have revised § 668.72(c)to prohibit false, erroneous, ormisleading statements concerningwhether completion of an educationalprogram qualifies a student for licensureor employment in the States in whichthe educational program is offered.Comment: One commenter suggestedthat we add ‘‘including the recognizedoccupations for which the programprepares students’’ at the end of§ 668.72(g) to address the proposedrequirements in § 668.6(b)(1) underwhich an institution must disclose onits Web site the occupations theprogram prepares students to enter andthat we add a new paragraph to addressmisrepresentation about the kinds ofdisclosures that will be required underproposed § 668.6.Discussion: We disagree with thecommenter’s suggestion to add languagein § 668.72 to address the proposedregulations in § 668.6. The language in§ 668.72(g) prohibits false, erroneous, ormisleading statements concerning theavailability, frequency, andappropriateness of its courses andprograms to the employment objectivesthat it states its programs are designedto meet. We believe that this languageis sufficient to guard againstmisrepresentation in the disclosuresrequired under § 668.6. For additionalinformation on those requirements,please see the section on GainfulEmployment (§ 668.6) earlier in thepreamble to these final regulations.Changes: None.Comment: Some commentersrecommended that we add language tothis section to address specific concernsabout accreditation. One commentersuggested that the regulations bemodified to require an institution toexplicitly disclose a lack of specializedprogram or institutional accreditation ifsuch accreditation is associated with theability to apply to take or to take, theexamination required for a local, State,or Federal license, or a nongovernmentalcertification generallyrequired as a precondition foremployment or to perform certainfunctions in the State in which theinstitution is located. Some commenterssuggested that misrepresentation relatedto requirements that are generallyneeded to be employed in the fields forwhich the training is provided beexpanded to include withheldinformation. The commenters cited thetestimony of Yasmine Issa who testifiedbefore the Senate Health, Education,Labor, and Pensions Committee on June24, 2010. Ms. Issa testified thatimportant information about the valueof the educational credential she waspursuing and future employability waswithheld. In particular, the program inwhich she was enrolled lackedspecialized accreditation and, as aresult, she was unable to sit for alicensing exam. The commenters arguedthat omission of important informationshould constitute misrepresentation ifsuch omission is likely to lead someoneto make incorrect assumptions ashappened with Ms. Issa.Discussion: The Department agreeswith the commenters who requestedthat we expand these regulations toprohibit the withholding of informationrelated to requirements that aregenerally needed to be employed in thefields for which the training is provided.To address circumstances such as theones experienced by Ms. Issa, theDepartment has inserted the words ‘‘orrequires specialized accreditation’’ in§ 668.72(n). As amended, this provisionnow provides that misrepresentationconcerning the nature of an eligibleinstitution’s educational programincludes any failure by an eligibleinstitution to disclose the fact that adegree has not been authorized by theappropriate State educational agency orthat it requires specialized accreditationin any advertising or promotionalmaterials that reference such degree.Changes: We have revised § 668.72(n)to include a failure to disclose that thedegree requires specializedaccreditation as misrepresentation.Employability of Graduates (§ 668.74)Comment: Some commenters raisedconcerns about misrepresentationrelated to the institution’s knowledgeabout the current or likely futureemployment conditions, compensationor opportunities in the occupation forwhich students are being prepared.Commenters argued that predictionsabout future employment orcompensation should not be deemedmisrepresentations unless suchpredictions are based on statements ofVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00089 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2fact which at the time they were madeare objectively false or themselvesmisleading. The commenters requestedconfirmation that general statements ofopinion about the benefits of enrollingin or completing a program would notbe treated as misrepresentation aboutthe future. Other commenters soughtclarification that any informationprovided by an institution that isdirectly attributable to a State or theFederal government or any direct link toa governmental Web site such as theO*NET Web site would not beconsidered misrepresentation if the dataand projections from the government oron the Web site are incorrect, confusing,or do not come true.Discussion: As noted elsewhere inthis preamble, the regulations in subpartF of part 668 only address false,erroneous, or misleading statements.Moreover, in enforcing this subpart, theDepartment intends to continue tocarefully evaluate all of the surroundingcircumstances before reaching anyconclusions regarding the occurrence ofa violation and the appropriateresponse. Predictions that are not basedon false or misleading information,general statements and opinions, andinformation provided by State andFederal governments would not be thebasis for a misrepresentation claim.Changes: None.Ability To Benefit (§ 668.32(e) andSubpart J)Student Eligibility—General(§ 668.32(e))Comment: Most commenterssupported the Department’simplementation of section 484(d)(4) ofthe HEA, which was added in 2008.This statutory change provided that astudent shall be determined by aninstitution of higher education as havingthe ability to benefit from the educationor training offered by the institution ofhigher education upon satisfactorycompletion of six credit hours, or theequivalent coursework that areapplicable toward a degree or certificateoffered by the institution. Severalcommenters expressed appreciation forthe implementation of this new optionof establishing an ability to benefit.Several of the commenters supportedthe equivalency of the six credit hoursto six semester, six trimester, six quarterhours or 225 clock hours. Onecommenter expressly supported thecontinued individual institutionaldetermination to accept any of theability-to-benefit (ATB) optionsavailable in current § 668.32(e). Onecommenter recommended that the

WReier-Aviles on DSKGBLS3C1PROD with RULES266920 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and RegulationsDepartment monitor the application ofthis ATB option.Discussion: We appreciate the supportfor these changes. With regard to thesuggestion that the Department monitorthe use of this eligibility option, we planin 2011–2012 to implement a variety ofchanges to the data that institutions willprovide to the Department that will helpus determine when title IV, HEAprogram assistance is awarded tostudents who establish their title IV,HEA eligibility on the basis of eithersuccessfully completing six credit hours(or its equivalent) that are applicabletoward a degree or certificate programoffered at that institution, or when thestudent successfully passes an approvedATB test. We believe that this data willhelp us better understand the frequencythat these options are employed and canlead to further study on theeffectiveness of these alternatives to ahigh school diploma or its recognizedequivalent.Changes: None.Comment: Some commenters offeredconditional support for the regulatorychange reflected in § 668.32(e)(5), butexpressed some concerns. For example,one commenter expressed disagreementabout the equivalency of six credithours to six semester, six trimester, sixquarter hours or 225 clock hours. Inaddition, several commenters did notagree with the application of 225 clockhours stating that this approach wouldnot benefit students at clock hourinstitutions. Finally, a few commenterssuggested that a conversion rate of 6credit hours to 180 clock hours wouldbe more reasonable.Discussion: As discussed during thenegotiated rulemaking sessions and inthe preamble to the NPRM, the statuteis silent on equivalency. TheDepartment believes that it is areasonable interpretation to use thesuccessful completion of 6 semester, 6trimester, 6 quarter or 225 clock hoursfor purposes of equivalency becausethese all would be equal to completionof one quarter of an academic year. Forthis reason, we are adopting as final thechanges we proposed in § 668.32(e).Changes: None.Comment: A few commenters askedabout the transferability of thesuccessful completion of six credits (orits equivalent) among title IV, HEAeligible institutions. One commenterexpressed concern that it appeared thatthe courses where the six credits wereinitially earned could not be collegepreparatory coursework, because theyare not applicable to an eligibleprogram. Therefore, the commenterargued, § 668.32(e)(5) would not benefitthose students for whom ATB would bemost helpful, students who may needpreparatory coursework.Discussion: Section 484(d)(4) of theHEA specifies that a student has theability to benefit from the education ortraining offered by the institution ofhigher education if the studentcompletes six credit hours or theequivalent coursework that areapplicable toward a degree or certificateoffered by the institution of highereducation. When a student who earnssix or more credits (or their equivalent)applicable toward a degree or certificateoffered by that institution of highereducation subsequently transfers toanother institution, if those credits areapplicable toward the degree orcertificate offered by the subsequentinstitution, the previously-earnedcredits meet the requirements of section484(d) of the HEA. However, we pointout that the earning of credit hoursbased upon testing out is notcomparable to taking and successfullycompleting six credit hours (or itsequivalent) and, therefore, would notsatisfy this ATB option.If the courses that a student enrolls inare considered preparatory in nature, aninstitution must first determine whetherthese preparatory courses are a part ofthe student’s program. To the extent thatthe preparatory courses are a part of thestudent’s eligible program, thesuccessful completion of six credits inthese preparatory courses would meetthis ATB standard. However, if theinstitution determines that thesepreparatory courses are not part of theeligible program, the successfulcompletion of the six credits would notmeet this ATB standard. It may beimportant to note that generallyinstitutions develop their admissionspolicies in accordance with Statelicensing and accrediting requirementsand, as a result, some institutionaladmissions requirements may requirethat all students have a high schooldiploma. In those situations, because allof the students would be required tohave a high school diploma, therecognized equivalent of a high schooldiploma option and the ATB options insection 484(d) of the HEA would beinapplicable. However, for institutionsthat admit students either with therecognized equivalent of a high schooldiploma or under one of the optionalATB standards for students who do nothave a high school diploma, thoseinstitutions cannot fail to accept, fortitle IV, HEA student eligibilitypurposes, the following—• A student’s passing of an approvedATB test;• A determination that a student hasthe ability to benefit from the educationVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00090 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2or training in accordance with anapproved State process;• A student’s successful completionof a secondary school education in ahome school setting that is treated as ahome school or private school underState law; or• The satisfactory completion of sixcredit hours (or the equivalentcoursework), that are applicable towarda degree or certificate at that institution.As such, the new ATB option addedin section 484(d)(4) of the HEA, andreflected in § 668.32(e)(5), is not theonly opportunity for a student toestablish that he or she has the abilityto benefit from the education or trainingoffered by the institution.Changes: None.Comment: One commenter expressedsupport for the inclusion of language inthe preamble to the NPRM thatindicated that the six credits or itsequivalent used to establish ATBeligibility should be applicable to aneligible program offered at that schooland suggested it should be included inthe regulatory language. Anothercommenter expressed concern about theinclusion of this language in thepreamble, opining that it went beyondthe statutory language and intent. Thiscommenter recommended that theDepartment consider removing suchlanguage in the final regulations.Discussion: We recognize that thestatute does not require that thecoursework completed for purposes ofthis ATB option be applicable to aneligible program, but we remindinstitutions that this ATB option isdesigned to allow an otherwiseineligible student to obtain title IV, HEAprogram assistance while working toobtain a certificate or degree. Therefore,we expect that the coursework beapplicable to an eligible program. Wealso acknowledge that students maychange programs throughout theirpostsecondary career. For this reason,these regulations do not require that thestudent successfully complete sixcredits or their equivalent that areapplicable to the specific degree orcertificate program in which the studentis enrolled. Instead, § 668.32(e)(5)requires only that the six credits beapplicable to a degree or certificateprogram at the institution where the sixcredits are earned.Changes: None.Comment: Several commentersexpressed opposition to the new§ 668.32(e)(5). One commenter arguedthat the ATB options under current§ 668.32(e)(2) and (e)(3) provide a bettermethod of evaluating a student’s abilityto benefit and that the new option is notneeded. One commenter stated that new

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66921WReier-Aviles on DSKGBLS3C1PROD with RULES2§ 668.32(e)(5) would cause greaterfinancial hardship for students becauseit would require students to pay forthese six credits without the benefit oftitle IV, HEA program assistance andthat this, in turn, may lead to somestudents turning to high cost privatefinancing. One commenter expresseddisappointment that the Department didnot seize the opportunity to fully reevaluatethe ATB regulations and makemore broad and sweeping changes to thestandards. Finally, some commentersexpressed concern that § 668.32(e)(5)may penalize students who are very ableto successfully perform class work anddemonstrate learned skills, but whohave difficulty taking tests and thereforemay be unable to successfully completethe requisite six credit hours (or itsequivalent), due to their inability to dowell on written tests.Discussion: Section 668.32(e)(5)incorporates the language from section484(d)(4) of the HEA. The Departmentdoes not have the authority to notrecognize this statutorily mandated ATBoption. Moreover, we recognize that thisnew standard for establishing the abilityto benefit for students who do not havea high school diploma or its recognizedequivalent may not be appropriate forall students. However, we do not viewthis as a problem, because § 668.32(e)(5)supplements—rather than replaces—thecurrent standards for establishing theability to benefit under § 668.32(e)(2)and (e)(3).Changes: None.Comment: Most of the commenterswho objected to § 668.32(e)(5) objectedto this provision at least in part becausethe Department has stated that title IV,HEA funds may not be used to pay forany portion of the payment period inwhich those credits or equivalent wereearned.Discussion: The underlying studenteligibility issue here is that a studentwithout a high school diploma or itsequivalent cannot be eligible for title IV,HEA program assistance, except underthe four circumstances described insection 484(d) of the HEA. The paymentperiod during which a studentsuccessfully earns the six credits (or itsequivalent) under section 484(d)(4) ofthe HEA and § 668.32(e)(5) is a periodwhen the student has yet to meet thisstatutory requirement or standard. Werecognize that this inability to ‘‘go back’’and establish eligibility may be fiscallyproblematic for some students orinstitutions, but we continue to believethat until a student’s eligibility isestablished, the student is ineligible fortitle IV, HEA funds. That said, in caseswhere a student is enrolled in a programthat has several modules within apayment period that are independentlycompleted and graded prior to the endof that payment period, there could bea situation where a student successfullycompletes a module and earns six ormore credits (or the equivalent) prior tothe end of the payment period. In thisscenario, an institution could make adetermination of the cost of attendancefor the remaining modules in thepayment period, and award anddisburse title IV, HEA funds for thoseremaining credits, based upon thelimited cost of attendance in thepayment period after the student hassuccessfully completed the initial sixcredits.Changes: None.Comment: One commenter stated thathe would encourage other institutions toestablish admissions policies to prohibitthe use of the earned credit ATB optionreflected in § 668.32(e)(5) because of theunique complications created with thisprovision and State licensing boards.Specifically, the commenter expressedconcern that students who do notcomplete the six credit hours (or theirequivalent) under this option may notbe able to obtain title IV, HEA programassistance to pay for their coursework.Discussion: As noted earlier in thispreamble, we recognize that the ATBoption reflected in section 484(d)(4) ofthe HEA and § 668.32(e)(5) may notmeet the needs of all students, or allinstitutions, and is simply one methodby which a student can show that he orshe has the ability to benefit from adegree or certificate program of studyand, therefore, is eligible to receive titleIV, HEA program assistance.Changes: None.Subpart J—Approval of IndependentlyAdministered Tests; Specification ofPassing Score; Approval of StateProcessSpecial Definitions (§ 668.142)Comment: In response to theDepartment’s request in the NPRM forfeedback on the appropriateness ofpermitting specified test administratorsin the assessment center to train otherindividuals at that assessment center toadminister ATB tests, severalcommenters suggested that it would notbe advisable or appropriate for seniortest administrators in an assessmentcenter to perform the required trainingof other individuals at the assessmentcenter for the administration ofapproved ATB tests.Discussion: The Department agreesthat, consistent with the definition ofthe term test administrator, anindividual must be certified by the testpublisher or State, as applicable, toVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00091 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2administer tests under subpart J of part668 in accordance with the instructionsprovided by the test publisher or State.The only practical way for a testpublisher or State to make adetermination of whether an individualhas the necessary training required inorder to certify the individual as a testadministrator is to provide the trainingthat will insure that test administratorsare cognizant of the test publisher’s orState’s written requirements. Toemphasize and add clarity that the testadministrator is required to be certifiedby the test publisher or State, asapplicable, when a test is given at anassessment center by a testadministrator who is an employee of thecenter, we have modified § 668.151(b)(1)by adding the word certified prior to thereference to test administrator.Changes: We have amended§ 668.151(b)(1) by adding the word‘‘certified’’ prior to the reference to testadministrator.Comment: One commenter objected tothe increased burden associated withthe proposed requirement that testadministrators at assessment centers becertified by the test publisher or State,as applicable.Discussion: During the negotiations,the Department was told about the highincidence of staff turnover at assessmentcenters. One test publisher participatingin the negotiations expressed concernthat new staff have been trained toadminister the approved ATB tests byother members of the assessment centerstaff and, as a result, were providingATB tests without being properlycertified by the test publisher or State.We agree that in order to meet the newdefinition of the term test administratorin § 668.142 and to meet the increasedstandards of training, knowledge, skillsand integrity, that it is vital for all testadministrators to be certified in order toadminister an approved ATB testconsistent with the requirements ofsubpart J of part 668 and the writteninstructions of the test provider.Moreover, we believe that the increasein burden falls mainly upon the testpublisher or the State, rather than theinstitution.Changes: None.Comment: One commenter suggestedthat we clarify the definition of the termindependent test administrator bymodifying it to clarify that anindependent test administrator cannothave any current or prior financialinterest in the institution, but that he orshe may earn fees for properlyadministering an approved ATB test atthat institution. Another commentersuggested that the definition of the term

WReier-Aviles on DSKGBLS3C1PROD with RULES266922 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulationstest administrator be expanded toinclude test proctors.Discussion: Section 668.142, inpertinent part, defines an independenttest administrator as a test administratorwho administers tests at a location otherthan an assessment center and who hasno current or prior financial orownership interest in the institution, itsaffiliates, or its parent corporation, otherthan the fees earned for administeringapproved ATB tests through anagreement with the test publisher orState, and has no controlling interest inany other institution and has nocontrolling interest in any otherinstitution. We agree that independenttest administrators may obtain a fee forthe administration of ATB testsgenerally through a written contractbetween the test publisher or State andthe test administrator. In order to clarifythis single type of allowable financialinterest, we have made a change to thelanguage in this definition.On the matter of expanding thedefinition of the term test administratorto include test proctors, we disagreewith this suggestion. The reason wedisagree with the commenter’ssuggestion is that subpart J of part 668specifically restricts the administrationof ATB tests to test administratorscertified by the test publisher or State toadminister their tests, as defined in theagreement between the Secretary andthe test publisher or State, as applicable.We believe it would be confusing to addtest proctors to the definition of a testadministrator because only certified testadministrators can administer ATB testsfor title IV, HEA program purposes. Webelieve certification is an appropriaterequirement because it insures that theapproved tests are administered bytrained, skilled, and knowledgeableprofessions.Changes: We have amended thedefinition of the term independent testadministrator by clarifying that anindependent test administrator musthave no current or prior financial orownership interest in the institution, itsaffiliates, or its parent corporation, otherthan the fees earned through theagreement an independent testadministrator has with the testpublisher or State to administer the test.Application for Test Approval(§ 668.144)Comment: One commenter stronglysupported the proposed change in thelanguage regarding the norming groupin §§ 668.144(c)(11)(iv)(B) and668.146(c)(4)(ii) that requires the groupto be a contemporary sample that isrepresentative of the population ofpersons who have earned a high schooldiploma in the United States.Discussion: The statute provides thata student who does not have a highschool diploma or its equivalent canbecome eligible for title IV, HEAprogram assistance if the student takesan independently administeredexamination and achieves the scorespecified by the Secretary thatdemonstrates that the student has theability to benefit from the training beingoffered. As an alternative to obtaining ahigh school diploma, it is appropriatethat the normative group used toestablish the relative placement of thetest-taker’s results should be comprisedof U.S. high school graduates ratherthan a group of persons who are beyondthe usual age of compulsory schoolattendance in the United States.However, we take this opportunity toremind institutions that a fundamentalcomponent of the definition of the terminstitution of higher education requiresthat an eligible and participatinginstitution may admit as regularstudents only persons who have a highschool diploma (or have the recognizedequivalent) or are beyond the age ofcompulsory school attendance.Therefore, it is clear that for the purposeof establishing title IV, HEA programeligibility, approved ATB tests may onlybe provided to students who are beyondthe age of compulsory schoolattendance.Changes: None.Comment: Several commenterssupported the proposal to include in thetest publisher’s or State’s screening ofpotential test administrators, theirevaluation of a test administrator’sintegrity. In response to our request inthe NPRM for feedback about how a testpublisher or a State will determine—inaccordance with §§ 668.144(c)(16)(i) and668.144(d)(7)(i)—that a testadministrator has the integrity necessaryto administer tests, we received anumber of suggestions. These includedthe following—• Requiring a prospective testadministrator to sign, under penalty ofperjury, an application indicatingwhether he or she had ever beenconvicted of fraud, breach of fiduciaryresponsibilities, or other illegal conductinvolving title IV, HEA programs;• Including a question on the testadministrator’s application askingwhether the applicant has ever beenconvicted of a crime and, if the answerto this question is ‘‘yes’’, requiring theapplicant to provide additional details;• Including a question on the testadminister application asking whetherthe applicant has ever worked at aninstitution of higher education, and ifVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00092 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2the answer to this question is ‘‘yes’’,requiring the applicant to provideadditional details; and• Requiring test publishers and Statesto perform fingerprinting andbackground checks, including a checkfor being included in any lawsuit, aswell as, checking for arrests andconvictions, for each test administer.Discussion: We appreciate thecommenters’ suggestions regarding waystest publishers and States can evaluatewhether a test administrator has theintegrity necessary to administer ATBtests. While test publishers and Statescan adopt any of the methods proposedby the commenters, we do not believeit is appropriate to require all testpublishers and States to use thosemethods to evaluate test administratorintegrity. Rather, we believe § 668.144,as proposed, will provide testpublishers and States with theflexibility they need to determine thatthe test administrator will have thenecessary training, knowledge, skillsand integrity to test students inaccordance with subpart J of part 668and the requirements of the testadministration technical manual. Under§ 668.144, test publishers and States arerequired to disclose how they will goabout making these determinations.When evaluating the informationprovided by test publishers and States,we will be looking at their processesand to what extent informationcollected by the test publisher or Statesupports their determination of whethera prospective test administrator candemonstrate his or her training,knowledge, skills and integrity. Inaddition, we will compare therequirements in the test administrationtechnical manual to the other provisionsin § 668.144 that require testadministrators to have both the abilityand facilities to keep the ATB testssecure against disclosure or release andhow those issues are explained toprospective test administrators, how anymonitoring may be achieved to insurethat the tests are being protected.Changes: None.Comment: One commenterrecommended that test publishers andStates should not be required to discloseany proprietary information, such as testanomaly analysis, to the Departmentdue to the proprietary nature of thestudy techniques. The commenter statedthat, if the Department decides that testpublishers and States must provide theirtest anomaly study procedures, theDepartment should provide assurancesthat the information will be keptconfidential.Discussion: It is important that testpublishers and States provide the

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66923WReier-Aviles on DSKGBLS3C1PROD with RULES2Department with their test anomalyanalysis because the Department needsto understand the specific test anomalyanalysis methodology employed by eachtest publisher or State, as applicable, toinsure that they have established arobust process and procedures toidentify potential test anomalies,methods to investigate test anomalies,due process in the investigation of theseanomalies, as well as, the types ofcorrective action plans and the means ofimplementation of the corrective actionplans, up to and including thedecertification of test administrators.Because the Department agrees that testanomaly analyses may be proprietary,the Department will not release thisinformation to the public and willotherwise treat the information asconfidential.Changes: None.Comment: One commenter suggestedthat the Department define the term‘‘test irregularities’’ and explain thedistinction between test irregularitiesand test score irregularities.Discussion: An ATB test irregularityoccurs when the ATB test isadministered in a manner that does notconform to the established rules for testadministration. An ATB test scoreirregularity is one type of ATB testirregularity. For example, improperseating that would allow test-takers tobe so close to one another that each testtakercould observe the test answersheets or test answers on another testtaker’scomputer screen is an example ofan ATB test score irregularity. We agreewith the commenter that a clearunderstanding of proper testadministration is needed to prevent testirregularities. For this reason, we haveadded a definition of the term ATB testirregularity to § 668.142. In addition,test publishers and States includeinstructions to the ATB testadministrator in their testadministration manuals. Section§ 668.144(c)(12) requires test publishersto include in their applications themanual they provide to testadministrators. We believe it isappropriate to also require States toinclude their test manuals in theirapplications. Accordingly, we haveadded a new § 668.144(d)(11) to requireStates to include, as part of itssubmission to the Secretary, the State’smanual for test administration.Additionally, we have determinedthat in proposed § 668.144(c)(10),regarding test-taking timedeterminations, our reference to§ 668.146(b)(2) was imprecise. Section668.146(b)(2) relates only to samplingthe major content domains, not tosampling the major content domainswith regard to test-taking time.Therefore, we have revised thisparagraph to refer to § 668.146(b)(3),which includes as a requirement for testapproval, the appropriate test-takingtime to permit adequate sampling of themajor content domains. We have alsoadded a provision to specify that a testpublisher may include with itsapplication a description of the mannerin which test-taking time wasdetermined in relation to the otherrequirements in § 668.146(b) to providethe flexibility for test publishers toinclude a more comprehensivedescription of the way in which testtakingtime was determined.Changes: In § 668.142, we havedefined an ATB test irregularity as anirregularity that results from an ATB testbeing administered in a manner thatdoes not conform to the establishedrules for test administration consistentwith the provisions of subpart J and thetest administrator’s manual. We alsohave added new § 668.144(d)(12) toinclude a requirement that a State, in itssubmission of an ATB test for approval,must include a manual provided to testadministrators containing theprocedures and instructions for testsecurity and administration.In § 668.144(c)(10), we have made atechnical correction to specificallyreference § 668.146(b)(3) rather than§ 668.146(b)(2) and added a provision tospecify that a test publisher may includewith its application a description of themanner in which test-taking time wasdetermined in relation to the otherrequirements in § 668.146(b).Test Approval Procedures (§ 668.145)Comment: One commenter requestedthat the Department provide examplesof a substantial change that would causethe Department to revoke its approvalconsistent with proposed§ 668.145(d)(1).Discussion: Section 668.144 lists thecomponents of an application that testpublishers and States must submit forthe Secretary’s approval of an ATB testas an alternative to having a high schooldiploma or its recognized equivalent.The list of required items for submissionincludes a summary of the preciseeditions, forms, levels, and sub-tests forwhich approval is being sought. Inaddition, we require that a minimum oftwo or more secure, equated, alternateforms of the test must be submitted.Moreover, the regulations require that ifa test is being submitted as a revision ofa previously approved test, the testpublisher or State, as applicable, mustalso submit an analysis of the revisions,including the reasons for the revisions,the implications of the revisions for theVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00093 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2comparability of scores on the currentlyapproved test to scores on the revisedtest, and the data from validity studiesof the revised test undertakensubsequent to the revisions. Takentogether, the regulations require the testpublisher and the State to submit theirtests, including all forms or editions ofthose tests, for approval. If the approvedtests are revised, we have addressedhow revised tests along with thesupportive data must be submitted forapproval under §§ 668.144(c)(9) and(d)(12).Examples of substantive changes are(1) when a previously approved ATBtest in a pencil and paper format isconverted to a computerized test, and(2) when a previously approved ATBtest in a pencil and paper format isconverted to a voice recorded format. Ineach of these examples, the testpublisher or State is required to submitthe list of required submissions above.An example of a non-substantivechange is a correction of a typographicalerror. We will not require analysis ofand submission for approval for nonsubstantivechanges; however, it isimportant to note that if these changesare documented and shared with theSecretary, we would be able to addressinquiries or comments from the publicregarding these changes. Recognizingthat we cannot provide an exhaustivelist that would cover every situation, weencourage test developers to contact usif they have questions about changes toan approved test and whether theproposed changes would be consideredsubstantive or non-substantive.Changes: None.Criteria for Approving Tests (§ 668.146)Comment: One commenter noted thatthe 1985 American PsychologicalAssociation (APA) edition of theStandards for Educational andPsychological Testing (Standards)addressed test construction in terms ofmeeting ‘‘primary, secondary andconditional’’ standards. The commenterpointed out that the 1999 revisededition of the Standards no longermakes these distinctions and insteadrequires test developers and users toconsider all the standards beforeoperational use and does not continuethe practice of designating levels ofimportance. As a result, the commentersuggested that we remove the referenceto the words ‘‘meeting all primary andapplicable conditional and secondarystandards for test construction’’ inproposed in § 668.146(b)(6) becausethey are confusing. The commentersuggested—as an alternative—that weadopt language that the Departmentused in 34 CFR 462.13(c)(1) (i.e., ‘‘The

66924 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and RegulationsWReier-Aviles on DSKGBLS3C1PROD with RULES2test must meet all applicable andfeasible standards for test constructionand validity provided in the 1999edition of the Standards for Educationaland Psychological Testing’’).Discussion: As discussed in the 1999edition of the Standards, each standardshould be considered to determine itsapplicability to the test beingconstructed. There may be reasons whya particular standard cannot be adopted;for example, if the test in question isrelatively new, it may not be possible tohave sufficient data for a completeanalysis. As a result of the informationin the 1999 edition of the Standards, wehave made a change to the proposedlanguage in § 668.146(b)(6) to reflectthat tests must meet all applicablestandards. However, we do not believethat we should include all ‘‘feasible’’standards in the regulatory language.We believe that where a standard is notfeasible, it would also not be applicable,as provided in the example, thus theinclusion of the word ‘‘feasible’’ isduplicative.Changes: We have revised§ 668.146(b)(6) by eliminating outdatedreferences to primary, secondary andconditional standards to make theprovision consistent with the languageused in the most recent edition of theStandards.Additional Criteria for the Approval ofCertain Tests (§ 668.148)Comment: One commenter indicatedthat their program of instruction istaught in Spanish to non-Englishspeakers with an English as a SecondLanguage (ESL) component. Thecommenter asked the Department forguidance for populations where there isno approved ATB test in the nativelanguage of the students.Discussion: Under § 668.148, if aprogram is taught in a foreign language,a test in that foreign language wouldneed to satisfy the conditions forapproval under §§ 668.146 and 668.148.Absent an approved ATB test, studentswithout a high school diploma or itsequivalent could meet the alternativeunder proposed § 668.32(e)(5), wherebya student has been determined to havethe ability to benefit from the educationor training offered by the institutionbased upon the satisfactory completionof 6 semester hours, 6 quarter hours, or225 clock hours that are applicabletoward a degree or certificate offered bythat institution where the hours wereearned. If no test is reasonably availablefor students whose native language isnot English and who are not fluent inEnglish, institutions will no longer beable to use any test that has not beenpreviously rejected for approval by theSecretary. We proposed this regulatorychange because we recognized that, inthe last 15 years, no ATB test in aforeign language has been submitted forapproval. Therefore, under the currentATB regulations, any test in a foreignlanguage became an approved ATB testregardless of whether it measured basicverbal and quantitative skills andgeneral learned abilities, whether thepassing scores related to the passingscores of other recent high schoolgraduates, or whether these tests weredeveloped in accordance with the APAstandards. We believe that the removalof this overly broad exception from thecurrent regulations will improvecompliance and works in concert withthe change reflected in § 668.32(e)(5),which allows for an exception whereability to benefit can be measuredagainst a standard (the successfulearning of six credits toward a degree orcertificate program at that institution).Changes: None.Agreement Between the Secretary and aTest Publisher or a State (§ 668.150)Comment: Under proposed§ 668.150(b)(3)(ii), the agreementbetween the Secretary and a testpublisher or a State requires thatcertified test administrators have theability and facilities to keep ATB testssecure. One commenter stated that itdoes not favor storage of ATB testsanywhere other than at the institution.Another commenter offered to workwith the Department and other testpublishers to develop guidelines thatwill improve ATB test security.Discussion: While ATB tests can beused for more than title IV, studenteligibility determination purposes (suchas for other assessment purposes),institutions, assessment center staff, aswell as, independent test administratorswill continue to have access to thesetests. Given this reality, weacknowledge that securing tests andpreventing test disclosure or release isdifficult. We established therequirement in § 668.150(b)(3)(ii) inorder to balance the need for legitimateaccess and security. We appreciate thecommenter’s offer to work with theDepartment and other test publishers todevelop guidelines to improve testsecurity.Changes: None.Comment: One commenter supportedthe requirement in proposed§ 668.150(b)(3)(iii) that only allows testadministrators to be certified when theyhave not been decertified within the lastthree years by any test publisher. Thiscommenter inquired how, other thanthrough self-reporting, a test publisheror State would have the informationVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00094 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2necessary to meet this requirement. Thecommenter also asked if we intend todevelop, implement, and maintain adatabase of decertified testadministrators.Discussion: Under proposed§ 668.144(c)(16) and (d)(7), a testpublisher and a State, respectively, mustdescribe its test administratorcertification process. The Departmentplans to evaluate each of the testpublisher’s or State’s certification plansto determine how they will obtain theinformation about test administratordecertifications by other test publishersor States. Under proposed§ 668.150(b)(2), each test administratorwill be required to provide to thepublisher or State, as appropriate, acertification statement to indicate thatthe test administrator is not currentlydecertified and that the testadministrator will notify the testpublisher or State immediately if anyother test publisher or State decertifiesthe test administrator. At this time, theDepartment does not plan to establish alist of all decertified test administrators.Changes: None.Comment: One commenter indicatedthat proposed § 668.150(b)(4), whichprovides that test administrators mustbe decertified under certaincircumstances, will require States andtest publishers to take great care whenanalyzing the facts prior to decertifyingany test administrator. Section668.150(b)(4) states that the agreementbetween the Secretary and a testpublisher or a State must require thedecertification of a test administratorwho (a) Fails to administer the test inaccordance with the test publisher’s orState’s requirements, (b) has not keptthe test secure, (c) has compromised theintegrity of the testing process, or (d)violated the test administrationrequirements in § 668.151.One commenter also expressedconcern that proposed § 668.150(b)(4)seems to remove the test publisher’s orState’s discretion about how to addresscertain violations of test administrationrules. That commenter asked whetherother corrective action is still a possibleoutcome, or whether decertification forany violation of the regulations or thetest publisher’s or State’s testadministration requirements is the onlypermissible outcome.Discussion: We understand thecomment regarding decertification oftest administrators and that testpublishers and States will need to takecare when carrying out their obligationsunder these regulations. For example,we expect that a test publisher or Statewould provide an administrator anopportunity to respond to any finding

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66925WReier-Aviles on DSKGBLS3C1PROD with RULES2warranting decertification, includingany finding based on inferences fromthe analysis required under§ 668.151(b)(13). Regarding the inquirywhether § 668.151(b)(4) removesdiscretion and requires decertificationwithout the possibility of othercorrective action, we note that Statesand publishers are required to establishappropriate test instructions that ensurethe integrity of the test and compliancewith the requirements of theregulations. Having established theappropriate instructions, we do expectStates and test publishers to decertifytest administrators that fail to follow thetest instructions or for any of the otherreasons specified in § 668.151(b)(4). Forexample, we expect a test publisher orState to decertify a test administratorwhenever it finds that a certified testadministrator—• Alters or falsifies answers or scores;• Provides a test-taker with answersto the ATB test in order to improve thetest-taker’s score; or• Allows a test-taker—other than atest-taker who is a person with adocumented disability—extra timebeyond the approved amount time asprovided by the test publisher or State.In situations where there is no evidenceor basis to conclude that one or more ofthe four reasons specified in§ 668.151(b)(4) has occurred, but thereare other irregularities of another orlesser nature, we would expect testpublishers and States to take theappropriate corrective action to protectthe proper administration of its ATBtest.Changes: None.Comment: Several commentersexpressed concern about § 668.150(b)(5),which requires the test publisher orState to reevaluate the qualifications ofa test administrator who has beendecertified by another test publisher orState, even when the test publisher orState lacks any evidence of its own thatthe test administrator has performed ina manner inconsistent with therequirements in subpart J of part 668 oras required in the test administrationmanual.Discussion: Under § 668.150(b)(2), atest administrator is required to certifythat he or she is not currentlydecertified and, in the event he or shesubsequently is decertified, that he orshe will immediately notify all othertest publishers and States who haveprovided their certification. To theextent that a test administrator, who iscertified by test publishers A, B, and C,as well as States 1 and 2, is decertifiedby State 1, the test administrator isrequired to immediately notify the othertesting organizations and make themaware that the test administrator hasbeen decertified by State 1. Uponreceipt of such notification, under§ 668.150(b)(5), each of the other testpublishers and the other State willreevaluate the qualifications of that testadministrator. While the other testingorganizations may not know the factualbasis for the decertification by State 1,§ 668.150(b)(5) requires the other testingorganizations to examine this testadministrator’s work. Based upon thetesting organization’s analysis,additional professional scrutiny, and thefacts as a result of their reevaluation, theother testing organizations must make adetermination of whether to continuethe test administrator’s certification orto decertify the test administrator forcause. The fact that a test administratorhas been decertified by one testingentity is sufficient cause to require thatall other test publishers or States bealerted both to the fact that there was aproblem of sufficient magnitude torequire decertification by the other testpublisher or State, and that they need tomake an additional review andsubsequent determination of whethertesting problems could be occurringwith the administration of their ATBtest.Changes: None.Comment: One commenterrecommended that we modify proposed§ 668.150(b)(5) to provide that testpublishers and States are not liable fordamages in the event a testadministrator is decertified wrongly.This commenter indicated thatproposed § 668.150(b)(6), whichrequires that the test publisher or Statenotify the Secretary and institutionsimmediately after decertifying a testadministrator, is overly broad and thattest publishers and States should be ableto end their relationship with a testadministrator for any reason.Discussion: We cannot indemnify testpublishers or States for actions that aformer employee may take against a testpublisher or State. This is one of thereasons it is so important to strengthenthese regulations including by requiringthat, as a part of the test developer’s (atest publisher or a State) submission, itdescribe in detail the test administratorcertification process—specifically howthe test developer will determine thatthe test administrator will have thetraining, knowledge, skills and integrityto administer the test consistent withthe regulations and the requirements asestablished by the test publisher or theState. Because the current regulationsalready require the decertification of testadministrators who fail to give the testin accordance with the test publisher’sVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00095 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2instructions, who fail to secure the tests,who compromise the test, or whoviolate the provisions of § 668.151(Administration of tests), we do notanticipate that the changes to subpart Jof part 668 reflected in these finalregulations will cause an increase inlegal actions brought by former testadministrators. However, we do expectthat these regulations will cause testpublishers and States to strengthen theirprocedures and training to ensure thatonly properly trained test administratorswill be certified by test publishers andStates.Notification of the Secretary andinstitutions when a test administrator isdecertified is required for a variety ofcompliance and other issues. TheSecretary needs to know to what extenta test publisher or State has a problemcausing the decertification of testadministrators. Recent GAO and OIGreports have reported a variety ofcompliance concerns around ATBtesting. The Secretary has aresponsibility to protect students,prospective students, institutions andtaxpayers. Through these requirements,one new compliance metric will be thenumber of decertifications by testpublishers or States, which theSecretary will monitor. Notification ofany decertification by a test publisher orState to the institution is required dueto the fact that institutions depend onthe test publisher or State to providecertified test administrators and,therefore, are completely reliant upontest publishers and States to notify theinstitution of when a test administratoris no longer certified and must not beadministering tests to students for titleIV, HEA student eligibilitydetermination purposes.Changes: None.Comment: One commenter suggestedthat when a test publisher or Statesuspends a test administrator while itconducts an investigation into apossible violation of its requirements orthe regulations, the test publisher orState should not have to immediatelyreport the suspension to the Secretaryand the institution. The commenter alsosuggested that there should be a timelimit after which notification by the testpublisher or State to the Secretary andthe institutions would not be required.Discussion: Proposed § 668.150(b)(6)requires the immediate notification ofthe Secretary and all institutions wherethe test administrator administered testsupon decertification. We assume that incases of suspected test administratorviolations, a suspension period willoccur while fact-finding, analysis, andultimately a determination will be madeto either continue the test

WReier-Aviles on DSKGBLS3C1PROD with RULES266926 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulationsadministrator’s certification or todecertify the test administrator. Thenotification requirement reflected in§ 668.150(b)(6) only appliesimmediately after a test administrator isdecertified—not during the suspensionperiod. Notification of the Secretary orothers of a test administrator’ssuspended status is voluntary, but is anaction that the Department supports.The commenter suggested that thisnotification requirement be waived aftera certain appropriate period of time. Wedo not agree. Consistent with theprovisions of §§ 682.402(e) and685.212(e), students may have their loandebt obligations discharged under afalse certification discharge if the schoolcertified the student’s eligibility for aFFEL or a William D. Ford FederalDirect Loan on the basis of ability tobenefit from its training and the studentdid not meet the applicablerequirements of subpart J of part 668.Because these loans generally have a 10-year repayment schedule (and may haverepayment plans under whichrepayment schedules can be extended to25 or more years), we do not agree tolimit the requirement to notify to theSecretary and institutions.Changes: None.Comment: One commenter stronglysupported proposed § 668.150(b)(7),which requires that all test resultsadministered by a test administratorwho the test publisher or Statedecertifies be reviewed and that adetermination be made about whichtests were improperly administered.Upon a determination of which testshad been improperly administered, thetest publisher or State must thenimmediately notify the affectedinstitutions, affected students andaffected prospective students. Thiscommenter suggested that we revise thisprovision to require that the testpublisher or State notify all studentstested by the decertified testadministrator.Another commenter suggested that weadd a time limit to § 668.150(b)(7)(i) sothat test publishers and States thatdecertify a test administrator are onlyrequired to review tests administered bythe decertified administrator during aspecified period of time.Discussion: Under proposed§ 668.150(b)(7)(ii), when adetermination of improper testadministration is made, the testpublisher or State must providenotification to all affected institutionsand students or prospective students.Under § 668.150(b)(7)(iii), the testpublisher or State must also provide areport to the Secretary on the results ofthe review of the decertified testadministrator’s previously administeredtests that may have been improperlyadministered. When a determination ismade that tests were improperlyadministered, the affected entitieswould include institutions, students,and prospective students affected bythose tests that were improperlyadministered. Under § 668.150(b)(7),notifications to those affected entitiesare required. We believe that thesenotification and reporting requirementsare adequate to inform all affectedparties, including students andprospective students. We do not believeit is necessary to notify a student whotook a test administered by a testadministrator who was subsequentlydecertified when there is no evidencethat the particular test the student tookwas improperly administered.Under proposed § 668.150(b)(7), if atest administrator was certified over along number of years, test publishersand States potentially would berequired to review many years’ worth ofpreviously administered ATB testsbecause, as proposed, this regulatoryrequirement included no limit on howfar back test publishers and Stateswould need to go when reviewing testspreviously administered by a decertifiedtest administrator. We believe that theburden on test publishers and Statesassociated with such an extensivereview should be balanced against thesignificant student loan debt thatstudents tested by the decertified testadministrator may have incurred. Forthis reason, we are modifying thelanguage in proposed § 668.150(b)(7)(i)to limit the period of the review to thefive-year period prior the date ofdecertification. We believe that a fiveyearperiod is reasonable for thefollowing reasons. First, we aredecreasing the period of time for testpublishers and States to conduct theirtest data anomaly studies from 3 yearsto 18 months. These studies, which aredesigned, in part, to analyze if there areATB test irregularities, will beconducted more frequently and can beused to identify possible instances ofimproper test administration. Second,we believe that a longer review periodwill increase the likelihood that thestudent notification efforts of testpublishers and States (in the event thattheir review reveals that previouslyadministered tests were improperlyadministered) will be ineffective, inpart, due to the low probability that thestudent address information that a testpublisher or State obtains when thestudent takes the test will remainaccurate over this period of the review.Finally, we strongly recommend thatVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00096 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2test publishers and States consideradditional disclosures to studentsasking that they update their addressinformation with test publishers andStates over time, in order for testpublishers and States to providestudents and prospective students withpotential future notifications that couldreduce their future title IV, student loanindebtedness.Changes: We have revised§ 668.150(b)(7)(i) to indicate that theperiod of the review of all the testresults of the tests administered by adecertified test administrator is 5 yearspreceding the date of decertification.Comment: One commenter, whoexpressed support for the proposedchange reflected in § 668.150(b)(13)decreasing the timeframe from 3 years to18 months for test publishers and Statesto analyze ATB test scores to determinewhether the test scores and dataproduce any irregular patterns,suggested that that the Department alsoconsider a separate metric for testadministrators who administer largenumbers of ATB test within an 18month period.Discussion: We appreciate therecommendation and acknowledge thattest publishers and States are free toadopt such a suggestion for testadministrators who are providing largenumbers of ATB test administrations ina short period of time. As some testpublishers have pointed out, testpublishers have everything to gain fromensuring that their ATB tests areproperly administered in accordancewith the regulations and their testadministration manual. To the extentthat there are high volume testadministrators, test publishers andStates can best protect their tests bydeveloping processes to help them todetermine early whether these highvolume test administrators are incompliance.Changes: None.Comment: One commenter suggestedthat the Department consider amodification to the language in§ 668.150(b)(13) to change the emphasisfrom an analysis of the test scores to ananalysis of the test data.Discussion: The purpose of proposed§ 668.150(b)(13) (in concert withproposed §§ 668.144(c)(17) and (d)(8),which require test publishers andStates, as applicable, to explain theirmethodology for identifying testirregularities) is to require testpublishers and States to collect andanalyze test data, to determine whetherthe test scores and data produce anyirregular patterns that raise an inferencethat the tests were not being properlyadministered, and to provide the

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66927WReier-Aviles on DSKGBLS3C1PROD with RULES2Secretary with a copy of the testanomaly analysis. We acknowledge thatthis type of analysis is broader than justexamining the test outcomes, i.e. the testscores. Because this type of itemanalysis, which can yield statisticalirregularities, goes beyond test scoreresults, we have modified the proposedlanguage accordingly.Changes: We have modified§ 668.150(b)(13) so that it refers to ‘‘testdata of students who take the test’’ andnot to ‘‘test scores of students who takethe test’’ to determine whether the testdata (rather than ‘‘the test scores anddata’’) produce any irregular pattern thatraises an inference that the tests werenot being properly administered.Comment: One commenter suggestedthat the Department modify proposed§ 668.150(b)(14) to require that anyrequest for information by the Secretaryor other listed agencies and entities bein writing.Discussion: Nothing in the regulationswould prevent the test publisher orState from asking the entities listed in§ 668.150(b)(14) to request theinformation in writing, and fromimplementing other safeguards toprotect the security and confidentialityof the data.Changes: None.Comment: One commenter stated that§ 668.150(b)(16), as proposed, isambiguous. The commenter suggestedthat we delete the word ‘‘other,’’ as itmodifies ‘‘criminal misconduct,’’ fromthis section.Discussion: Upon further review, wehave determined that alternativelanguage that specifically provides forboth civil and criminal fraud wouldclarify what we mean in this regulatoryprovision. The purpose of§ 668.150(b)(16) is to require testpublishers and States to immediatelyreport any credible informationindicating that a test administrator orinstitution may have engaged in fraud orother criminal misconduct. We intendfor test publishers and States to reportsuspected fraud or misconduct withoutrequiring them to ascertain whether theconduct constitutes civil fraud, criminalfraud or ‘‘other criminal misconduct.’’Changes: We have revised§ 668.150(b)(16) to require that theagreement between a test publisher or aState, as applicable, and the Secretarymust provide that the test publisher orthe State, as applicable, mustimmediately contact the Office of theInspector General of the Department ofEducation if the test publisher or theState finds any credible informationindicating that a test administrator orinstitution has engaged in civil orcriminal fraud or other misconduct.Comment: One commenter expressedgeneral support for proposed§ 668.150(b)(17), which requires testadministrators who provide an ATB testto an individual with a disability whorequires an accommodation, to report tothe test publisher or State both thedisability and the accommodation.However, the commenter recommendedthat the Department provideclarification on how test publishers andStates can exchange this information ina manner that would be compliant withthe Health Insurance Portability andAccountability Act (HIPAA).Additionally, the commenter requestedan explanation of the Department’sposition on distinguishing between anaccommodation provided for anindividual with a temporary impairmentand an accommodation required by aperson with a permanent or long-termdisability.Discussion: HIPAA is administered bythe U.S. Department of Health andHuman Services and the Department ofEducation does not provide guidance onhow entities should comply withanother agency’s requirements.However, it is our expectation that testadministrators, test publishers andStates will implement the requirementreflected in § 668.150(b)(17) consistentwith all other applicable Federalstatutes and their implementingregulations.With regard to the commentrequesting an explanation of theDepartment’s position on the differencesbetween accommodations for test-takerswith temporary impairments andaccommodations for test-takers withpermanent or long-term disabilities, wenote that the regulations do notdistinguish between types ofaccommodations. However, weacknowledge that test-takers mayrequire accommodations for eithertemporary impairments or forindividuals with disabilities. 1The following two examples areprovided:Example 1 (Temporary Impairment).If an approved ATB test is provided viapaper and pencil and the test-taker, whois normally right-handed, has a brokenright hand and, as a result, must writewith his or her left hand, the testadministrator must provide the testtakeran accommodation in accordancewith the test publisher or State’stechnical manual for testadministration. So, in this case, if the1 The use of the term ‘‘temporary impairments’’ forthe purposes of these regulations should not beconfused with the definition of disability as definedby these regulations (see § 668.142), section 504 ofthe Rehabilitation Act, or the Americans withDisabilities Act.VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00097 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2technical manual indicates that under atemporary impairment, such as, but notlimited to, a broken writing hand, thetest administrator should allow the testtakeran additional ‘‘X’’ minutes tocomplete the test, the test administratormust allow the test-taker with thebroken writing hand an extra ‘‘X’’minutes to complete the test.Example 2 (Disability). If an approvedATB test is provided via paper andpencil and the test-taker is an individualwith a disability, such as blindness. Tothe extent that the test publisher or Statehas addressed in the technical manualconsistent with the requirements of§ 668.144(c)(11)(vii) and providedadditional guidance on theinterpretation of scores resulting fromany modifications of the test forindividuals with disabilities, forexample, the use of a previouslyapproved audio recorded version wouldbe permissible. In this example, theremay or may not be scoring implications,however, an appropriateaccommodation as provided in thetechnical manual is allowable asapproved under this subpart.Absent any instructions in thetechnical manual aboutaccommodations for individuals withdisabilities or individuals withtemporary impairments, the testadministrator does not have theauthority to create or provide anaccommodation other than what isprovided in § 668.149. Historically, testpublishers have addressed types ofaccommodations available to testadministrators in their testadministration technical manual, whichthe test publisher or State provides tothe Secretary as part of its testsubmission. Once the test is approvedby the Secretary, the accommodationsindicated in the test administrationtechnical manual are the approvedaccommodations for the test. Inaddition, subsequent to the Secretary’sinitial approval of an ATB test, sometest publishers, consistent with theprovisions of § 668.144(c)(9), havedeveloped large-print versions, brailleversions, and audio-recorded versions oftheir previously-approved tests andsubmitted the alternative versions alongwith the requisite analysis of therevisions for their comparability ofscores to the previously approved test,as well as the data on the validitystudies of the revised or alternativeversion of the previously approved test.Once approved, and as published in theFederal Register, these alternativeversions of the previously approved testwould provide for certainaccommodations that may be requiredby individuals with disabilities.

66928 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and RegulationsWReier-Aviles on DSKGBLS3C1PROD with RULES2Changes: None.Administration of Tests (§ 668.151)Comment: One commenter provided anumber of suggestions regarding testadministration security, includingrequiring that (1) test publishers contactthe Department when tests are beingused for ATB and non-ATB purposes,(2) different versions of the test be usedfor different purposes so that oneversion is used exclusively for ATBpurposes, (3) ATB tests only be shippedto test administrators and not toinstitutions, and (4) ATB tests be lockedin an area that cannot be accessed bynon-certified test administrators.Discussion: Many ATB tests that havebeen submitted to the Secretary andsubsequently approved for title IV, HEAstudent eligibility purposes are alsoused for general academic placementpurposes not related to ATB. Regardingthe suggestion that test administratorsreport to the Department when a test isused for ATB purposes, beginning withthe 2011–2012 award year, we willbegin collecting information on the useof an ATB test for each student whoreceives title IV, HEA funds; thereforetest administrators will not have toprovide the information to us. In termsof requiring that approved ATB testsmust be used exclusively for this singlepurpose, that would require a statutorychange. While it has been suggested thatwe revise the regulations to allow ATBtests only be shipped to testadministrators and not to institutions,we believe that this is not feasible giventhat ATB tests are used both for title IV,HEA eligibility and non-title IVpurposes, such as for course placementpurposes. Finally, while it may bepossible that at the discretion of theinstitution’s assessment center (or as aresult of an agreement between the testpublisher or State and the institution)that ATB tests be locked in an area onlyaccessible by certified testadministrators, this may be impracticalsince these tests are used for non-title IVeligibility purposes.Changes: None.Comment: A commenter indicatedthat for computer-based tests,institutions maintain the associatedsystem components on their computers,so test administrators (particularlyindependent test administrators) cannotbe held responsible for maintaining thesecurity of these types of tests, otherthan during the test administration.For paper-and-pencil tests, thecommenter expressed strong concernsregarding independent testadministrators being held responsiblefor storing test materials. Thecommenter stated that independent testadministrators often do not have accessto secure storage, other than at thecampuses where they administer thetest. Use of their home or automobile forstorage and transportation to test sites isclearly unacceptable for security.Institutions typically have a securelocation (a locked facility to which onlythe test administrator and possibly aselect few individuals have a key) wherematerials can be stored. In addition,many institutions use the same testforms for ATB purposes and otherpurposes, and thus would already havecopies of the test forms in storage at theinstitution. The commenter argued thatmaintaining test forms at the institutionwhile emphasizing the chain of custody,under written agreements, will bettercontribute to the goal of keeping testforms secure.Discussion: We disagree. Proposed§ 668.144(c)(16) and (d)(7) require testpublishers and States, respectively, toensure not only that the testadministrator has the training,knowledge, skill and integrity to teststudents in accordance with therequirements of this subpart, and therequirements of the test administrationtechnical manual, but also, that the testadministrator has the ability andfacilities to keep the ATB tests secureagainst disclosure or release. We believethat these requirements are reasonable,and prudent, and will help ensure theintegrity of ATB tests. While at thistime, we are not prescribing how testpublishers or States must make thesedeterminations about their testadministrators, we expect that they willbase their determinations on themeasures taken by the test administratorto protect the security of the tests. Forexample, one could envision a testadministrator satisfying thisrequirement by having a secure safe inthe assessment center where onlycertified test administrators had the keyor combination to obtain the tests. In thecase of an independent testadministrator, one could envision thetest administrator satisfying therequirement by maintaining the tests ina mobile, portable safe or some othersecure device. As these examplesillustrate, test publishers and States willbe required to distinguish betweensecure and non-secure methods ofstoring ATB tests that limit access andprotect against unintended release ordisclosure if these tests are going tocontinue to be used for ATB purposes,otherwise the Secretary will considerthat the test is improperly administered.Changes: None.VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00098 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2Administration of Tests for IndividualsWhose Native Language Is Not Englishor for Individuals With Disabilities(§ 668.153)Comment: One commenter noted thatif a non-English speaking student is ina program of study which is taught inthe student’s native language and theprogram also has an ESL component orthat at least a portion of the programwill be taught in English, there are twoaspects that need to be tested, thestudent’s reading, verbal andquantitative skills in their own nativelanguage, as well as, their knowledge ofEnglish in order to understand theportion of the program taught inEnglish. The commenter expressedconcern regarding the timing of thesetests.Discussion: We appreciate thiscomment because it highlights the needto address a situation not covered by theproposed regulations. Under proposed§ 668.153(a)(1), we require institutionsto use an ATB test in the student’snative language when the student’snative language is other than Englishand the student will be enrolled in aprogram that is taught in the student’snative language. Paragraphs (a)(2) and(a)(3) of proposed § 668.153 addresssituations where individuals who arenot native speakers of English and whoare not fluent in English are enrolled (orplan to enroll) in a program (a) that istaught in English with an ESLcomponent and (b) that is taught inEnglish without an ESL component,respectively. The proposed regulationsdo not address what happens in the caseof a non-English speaker who isenrolled or plans on enrolling in aprogram that will be taught in his or hernative language that includes an ESLcomponent or a portion of the programwill be taught in English. In situationssuch as these, we believe thatinstitutions should require the studentto take an English proficiencyassessment approved under § 668.148(b)prior to when the English or ESLportion of the program commences.Changes: We have added a newparagraph (a)(5) to § 668.153 to providethat if the individual is a non-nativespeaker of English who is enrolled orplans to enroll in a program that will betaught in his or her native language andthe program includes an ESLcomponent or a portion of the programwill be taught in English, the individualmust take a test approved under§§ 668.146 and 668.148(a)(1) in thestudent’s native language. This newparagraph also provides that prior to thebeginning of the ESL component orwhen the English portion of the program

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66929WReier-Aviles on DSKGBLS3C1PROD with RULES2commences, the individual must take anEnglish proficiency test approved under§ 668.148(b).Comment: One commenter suggestedthat most test administrators do nothave the training or experience todetermine appropriate accommodationsfor students with disabilities, and thusare not qualified to identify or providean appropriate accommodation. Thiscommenter argued that test publishersand States should not be heldaccountable for training testadministrators in the intricacies of lawsregarding the rights of persons withdisabilities. The commenter stated that,to protect the privacy of the examinee,the test administrator should not needto know the specifics of the disability.This commenter argued that the testadministrator only needs to know whatthe accommodation is. For this reason,the commenter recommended that thetest administrator only be required toverify that the institution has providedthe appropriate documentation of thestudent’s disability, as described in§ 668.153(b)(4). It was the commenter’sview that the responsibility fordetermining the appropriateaccommodation for the student’sdisability lies with the institution’s staff.Discussion: We agree that testadministrators may not have extensivetraining or experience to determinewhether or not a requestedaccommodation is appropriate.However, each test must beadministered in accordance with thetest publisher’s or State’s technicalmanual. Consistent with proposed§ 668.144(c)(11)(vii) and (d)(11)(vii), thetechnical manual must includeadditional guidance on theinterpretation of scores resulting fromany modifications of the test forindividuals with disabilities. We expectthat a test publisher or State willprovide examples in the technicalmanual of the types of both allowableand non-allowable accommodationsassociated with a range of temporaryimpairments and for individuals withdisabilities in order to insure that thetest administrator has the necessaryprotocols to follow to ensure thevalidity of the test administrationprocess, while allowing for a range ofspecialized needs to be met. While theseexamples of allowable and nonallowableaccommodations cannot beexhaustive, we will expect them to beexpansive so that test administratorshave clear examples of how theapproved tests can and cannot be usedfor individuals with temporaryimpairments and for individuals withdisabilities. These protocols mayinclude, for example, the use, whenappropriate, of alternative tests (e.g.,approved audio-recorded ATB tests forindividuals who are blind) andproviding a test-taker whose vision isimpaired (as documented by aphysician) additional time to completean approved large print version of anATB test. To make this expectationclearer, we will revise§ 668.144(c)(11)(vii) and (d)(11)(vii) torequire a test’s technical manual toinclude additional guidance on thetypes of accommodations that areallowable for individuals withtemporary impairments or individualswith disabilities and the interpretationof scores resulting from anymodifications of the test for individualswith temporary impairments orindividuals with disabilities.Changes: We have modified§ 668.144(c)(11)(vii)and (d)(11)(vii) torequire the test manual to include, inaddition to guidance on theinterpretation of scores resulting frommodification of the test for individualswith temporary impairments orindividuals with disabilities, guidanceon the types of accommodations that areallowable.Disbursements (§§ 668.164(i),685.102(b), 685.301(e), 686.2(b), and686.37(b))Provisions for Books and Supplies(§ 668.164(i))Comment: Several commenters agreedwith the proposal in § 668.164(i) torequire an institution to provide, undercertain conditions, a way for a FederalPell Grant eligible student to obtain orpurchase required books and suppliesby the seventh day of a payment period.Various commenters noted theacademic importance of enablingstudents to have early access to theirbooks and supplies. However, some ofthese commenters argued that bookstorevouchers were not the most affordableoption for students, noting that undercurrent guidance an institution thatissues vouchers in lieu of cash mustdemonstrate it provides students ‘‘a realand reasonable opportunity’’ to obtainmaterials from other vendors.Two commenters requested that theregulations also apply to students whoare eligible for the Iraq and AfghanistanService Grants.Various commenters believed theproposed regulations would beadministratively difficult andburdensome to carry out. One of thecommenters stated that institutions withnonterm programs would have specialadministrative problems meeting theproposed regulations because ofdifferent start dates and differentVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00099 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2payment period completion rates forstudents. Another commenter requestedthe Department to delay implementingthe regulations so that institutions havesufficient time to make needed softwareand procedural changes. Onecommenter believed that the studentshould be required to initiate a requestto obtain or purchase books andsupplies instead of requiring aninstitution to perform this process for allFederal Pell Grant eligible students.Discussion: Because we haveidentified situations where low-costinstitutions delay disbursing funds foran extended time, or make partialdisbursements to cover costs for onlytuition and fees, the Departmentbelieves that these provisions areessential in enabling needy students topurchase books and supplies at thebeginning of the term or enrollmentperiod. Moreover, we find it troublingthat disbursement delays at someinstitutions may force very needystudents to take out private loans to payfor books and supplies that wouldotherwise be paid by Federal Pell Grantfunds.We believe that the regulations in§ 668.164(i) provide an appropriatebalance between the need for FederalPell Grant eligible students to be able topurchase or obtain books and suppliesearly in the payment period and theadministrative needs of institutions. Forexample, an institution may issue abookstore voucher, make a cashdisbursement, issue a stored-value card,or otherwise extend credit to students tomake needed purchases. The institutionhas the flexibility to choose one or moreof these methods or a similar methodbased on its administrative needs andconstraints or an evaluation of the costsand benefits of implementing one ormore of these methods.With regard to the request to expandthe scope of the regulations to includerecipients of Iraq and AfghanistanService Grants, we believe that studentswho are not eligible for a Federal PellGrant should have sufficient resources,as indicated by their higher expectedfamily contributions, to purchase booksand supplies. We note however, thatnothing in these regulations prevents aninstitution from making credit balancefunds available early in the paymentperiod to any student.In response to concerns aboutadministrative issues for nontermprograms, we note that for purposes ofthe Federal Pell Grant Program aninstitution is already responsible forknowing when a student has eithercompleted a payment period or starteda payment period. These regulations fallwithin that framework.

WReier-Aviles on DSKGBLS3C1PROD with RULES266930 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and RegulationsConcerning the request for a delay inimplementing these regulations, webelieve that an institution has ampletime to make any administrative andsoftware changes required since theregulations are not effective until the2011–2012 award year.Changes: None.Comment: Some commentersquestioned whether the anticipatedcredit balance for a student under theproposed regulations is calculated basedonly on Federal Pell Grant funds; alltitle IV, HEA program funds; or allfinancial aid funds.In determining whether an institutioncould disburse title IV, HEA programfunds to an eligible student 10 daysbefore the beginning of a paymentperiod, several commenters requestedthe Department to clarify how aninstitution treats a student who (1) Isselected for verification, (2) is subject tothe 30 day delayed disbursementprovisions for first-time, first-yearundergraduate borrowers, (3) isattending a term-based program withminisessions, (4) has a ‘‘C’’ code on theSAR or ISIR, or (5) has other unresolvedeligibility issues.Some commenters requested that theregulations provide that an institution isonly required to provide a student withthe funds or bookstore vouchers forbooks and supplies after the student hasattended at least one day of class.One commenter noted that underFederal law a bank must have acustomer identification program to helpthe government fight the funding ofterrorism. Under that program, a bankmust verify the identity of any personwho opens an account and haveprocedures in place to resolveconflicting identity data. Thecommenter was concerned that forinstitutions using bank-issued storedvaluecards or prepaid debit cards todeliver funds for books and supplies,any delays by the bank in resolving theconflicts would delay the delivery offunds to students. Consequently, thecommenter requested that theregulations allow for this type of delay.One commenter asked how theproposed regulations would applyunder a consortium agreement betweentwo eligible institutions if the student isenrolled in a course at the hostinstitution with the class starting priorto the payment period at the homeinstitution and the home institution isprocessing and paying the title IV, HEAprogram assistance. Another commenterasked what action would be required byan institution if it includes books andsupplies in the tuition and provides allof those materials to the student whenhe or she starts class.Discussion: With regard to which aidfunds are used to determine whether acredit balance would be created 10 daysbefore the beginning of a paymentperiod, an institution must consider allthe title IV, HEA program funds that astudent is eligible to receive at that time.The institution does not have toconsider aid from any other sources.To be eligible, the student must meetall the eligibility requirements insubpart C of 34 CFR part 668 at least 10days before the start of the student’spayment period. A student who has notcompleted the verification process, hasan unresolved ‘‘C’’ code on the SAR andISIR, or has unresolved conflictinginformation is not covered by theregulations if those issues have not beenresolved at least 10 days before the startof the student’s payment period. Withregard to the 30-day delayeddisbursement provisions for StaffordLoans, the institution would notconsider the amount of the loandisbursement in determining the creditbalance because the institution may notdisburse that loan 10 days before thestart of that student’s payment period.Also, the institution would not considertitle IV, HEA program assistance thathas not yet been awarded to a studentat least 10 days before the start ofclasses because the student missed afinancial aid deadline date.The amount that the institution mustprovide to a qualifying student to obtainor purchase books and supplies is thelesser of the presumed credit balance orthe amount needed by the student asdetermined by the institution. Indetermining the amount needed, aninstitution may use the actual costs ofbooks and supplies or the allowance forthose materials used in the student’scost of attendance for the paymentperiod.Since an institution has until theseventh day of a student’s paymentperiod to provide the way for thestudent to obtain or purchase the booksand supplies, the institution maydetermine whether the student hasattended classes if it has, or chooses toimplement, a process for taking ormonitoring attendance. However, by theseventh day of the payment period, thatstudent must be able to obtain booksand supplies unless the institutionknows that the student is not attending.When an institution uses a bankissuedstored-value or prepaid debitcard that is supported by a federallyinsured bank account to deliver fundsfor books and supplies, a student musthave access to the funds via the card bythe seventh day of his or her paymentperiod. If a bank delays issuing a storedvalueor prepaid debit card to theVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00100 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2student because it must resolveconflicting identity data under Federallaw, the Department will not hold theinstitution accountable as long as theinstitution exercises reasonable care anddiligence in providing in a timelymanner any identity information aboutthe student to the bank. Likewise, theinstitution is not responsible if thestudent provides inaccurate informationor delays in responding to a requestfrom the bank to resolve anydiscrepancies.Under a consortium agreementbetween two eligible institutions, if astudent is enrolled in a course at thehost institution and classes start beforethe payment period begins at the homeinstitution that is paying the title IV,HEA program assistance, the regulationsrequire that the student obtain the booksand supplies by the seventh day of thestart of the payment period of the homeinstitution. If the host institution ispaying the title IV, HEA programassistance, the student must be able toobtain the books and supplies by theseventh day of the start of the paymentperiod of the host institution.An institution that includes the costsof books and supplies in the tuitioncharged and provides all of thosematerials to the student at the start ofhis or her classes meets therequirements of these regulations.Changes: None.Comment: Several commenters wereconcerned over who would be liable foradvancing funds to a student for booksand supplies if the student fails to startall of his or her classes. Somecommenters indicated that the potentialdebt owed to an institution by studentsunder the proposed regulations is not inthe best interest of the student. A fewcommenters noted that the use ofbookstore vouchers as the way for astudent to obtain books and suppliesappears to increase the amount ofunearned title IV funds that theinstitution must return when a studentwithdraws.Discussion: These regulations do notchange the provisions under 34 CFR668.21 concerning the treatment of titleIV grant and loan funds if the recipientdoes not begin attendance at theinstitution. In the case where theinstitution has credited the student’saccount at the institution or disburseddirectly to the student any Federal PellGrant, FSEOG, Federal Perkins Loan,TEACH Grant, ACG, or NationalSMART Grant program funds and thestudent fails to begin attendance in apayment period, the institution mustreturn all of those program funds to therespective program.

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66931WReier-Aviles on DSKGBLS3C1PROD with RULES2In addition, an institution must returnany Direct Loan funds that werecredited to the student’s account at theinstitution for the payment period orperiod of enrollment. For any DirectLoan funds disbursed directly to astudent, the institution must notify theDepartment of the loan funds that areoutstanding, so that the Department canissue a 30-day demand letter to thestudent under 34 CFR 685.211. If theinstitution knew prior to disbursing anyof the Direct Loan funds directly to thestudent that he or she would not beginattendance, the institution must alsoreturn those Direct Loan funds. Thiswould apply when, for example, astudent had previously notified theinstitution that he or she would not beattending or the institution had expelledthe student before disbursing the DirectLoan directly to the student.When an institution is responsible forreturning title IV, HEA program fundsfor a student who failed to beginattendance at the institution it mustreturn those funds as soon as possible,but no later than 30 days after the datethat the institution becomes aware thatthe student will not or has not begunattendance. The funds that are requiredto be returned by the institution are nota student title IV, HEA liability and willnot affect the student’s title IV, HEAeligibility. However, institutionalcharges not paid by financial assistanceare a student liability owed to theinstitution and subject to its owncollection process.The new requirement also does notchange the regulations in 34 CFR 668.22on handling the Return of Title IV Aidwhen a student began attendance butwithdraws from the payment period orperiod of enrollment. If the institutionprovides a bookstore voucher for astudent to obtain or purchase books andsupplies, those expenses for therequired course materials are consideredinstitutional charges because thestudent does not have a real andreasonable opportunity to purchase thematerials from any other place exceptthe institution. The institution mustinclude the charges for books andsupplies from a bookstore voucher asinstitutional charges in determining theportion of unearned title IV, HEAprogram assistance that the institution isresponsible for returning. However, aninstitution does not have to select thebookstore voucher as the way to meetthe new requirement, it is just oneoption.Changes: None.Comment: One commenter opinedthat students who are not Pell Granteligible would be unfairly responsiblefor obtaining funds to purchase bookswhile others at the same institutionwould be confused about who should orshould not receive the means to obtainor purchase books and supplies at thebeginning of the term or enrollmentperiod. A few commenters suggested orasked whether a student could opt outof the way offered by an institution toobtain or purchase books and supplies.Some commenters asked if theproposed regulations were in conflictwith the current Cash Managementregulations in §§ 668.164 and 668.165.A few commenters requestedclarification on how studentauthorizations applied to the newrequirements. Some commenterssuggested that an institution should notbe required to obtain a student’sauthorization to credit his or heraccount at the institution with title IV,HEA program funds for books andsupplies, while other commentersrecommended that an institution shouldbe able to require the student’sauthorization before advancing fundsfor books and supplies.Discussion: Under § 668.16(h), aninstitution is required to provideadequate financial aid counseling toeligible students who apply for title IV,HEA program assistance and under§ 668.42, an institution is required toprovide consumer information toenrolled and prospective students that,among other things, describe themethod by which aid is determined anddisbursed, delivered, or applied to astudent’s account and the frequency ofthose disbursements. Further under§ 668.165(a)(1), before an institutiondisburses title IV, HEA funds it mustnotify a student how and when thosefunds will be disbursed. Based on theserequirements, an institution mustdescribe in its financial aid informationand its notifications provided tostudents receiving title IV, HEA fundsthe way under § 668.164(i) that itprovides for Federal Pell Grant eligiblestudents to obtain or purchase requiredbooks and supplies by the seventh dayof a payment period under certainconditions. The information mustindicate whether the institution wouldenter a charge on the student’s accountat the institution for books and suppliesor pay funds to the student directly.Institutions also routinely counselstudents about the variations in theamounts of Federal student aid or otherresources that are available to thembased upon their need and expectedfamily contribution. We believe that thiscounseling process will mitigate anyconfusion by explaining to a studentwho qualifies for funds advanced topurchase books and supplies, how theprocess is handled at the institution,VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00101 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2and how a student may opt-out of theprocess.Regardless of the way an institutionprovides for a student to obtain booksand supplies, the student may opt out.For instance, if an institution providesa bookstore voucher, the student mayopt out by not using the voucher. If theinstitution uses another way, such as abank-issued stored-value or prepaiddebit card, it must have a policy underwhich the student may opt out. Forexample, a student might have to notifythe institution by a certain date so thatthe institution does not unnecessarilyissue a check to the student or transferfunds to the student’s bank account. Inany case, if the student opts out, theinstitution may, but is not required to,offer the student another way topurchase books and supplies so long asit does not otherwise delay providingfunds to the student as a credit balance.We are amending the regulations toclarify that a student may opt out of theway that an institution provides for astudent to obtain books and supplies.In addition, to facilitate advancingfunds or credit by the seventh day ofclasses of a payment period under thisprovision, the Department considersthat a student authorizes the use of titleIV, HEA funds at the time the studentuses the method provided by theinstitution to purchase books andsupplies. This means that an institutiondoes not need to obtain a writtenauthorization under §§ 668.164(d)(1)(iv)and 668.165(b) from the student tocredit a student’s account at theinstitution for the books and suppliesthat may be provided only under§ 668.164(i). We are amending theregulations to indicate that aninstitution does not need to obtain awritten authorization from a student tocredit the student’s account at theinstitution for books and suppliesprovided under § 668.164(i).Changes: Section 668.164(i) has beenrevised to specify that an institutionmust have a policy under which aFederal Pell Grant eligible student mayopt out of the way the institutionprovides for the student to purchasebooks and supplies by the seventh dayof classes of a payment period. Inaddition, § 668.164(i) has been revisedto specify that if the Federal Pell Granteligible student uses the methodprovided by the institution to purchasebooks and supplies, the student isconsidered to have authorized the use oftitle IV, HEA funds and the institutiondoes not need to obtain a writtenauthorization under §§ 668.164(d)(1)(iv)and 668.165(b) for this purpose only.

66932 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and RegulationsWReier-Aviles on DSKGBLS3C1PROD with RULES2Reporting Disbursements, Adjustments,and Cancellations (§§ 685.102(b),685.301(e), 686.2(b), and 686.37(b))Comment: A few commenterssupported the proposed regulations toadopt the Federal Pell Grant reportingrequirements for the TEACH Grant andDirect Loan programs and to add theFederal Pell Grant definition of the termPayment Data to the two otherprograms.Discussion: We believe thatharmonizing the reporting requirementsfor the Federal Pell Grant, TEACHGrant, and Direct Loan programs inaccordance with procedures establishedby the Secretary through publication inthe Federal Register will make it easierfor institutions to administer theprograms. In addition, this flexibility toadjust the reporting requirements for allthree programs through publication inthe Federal Register will enable theSecretary to make changes in the futurethat take advantage of new technologyand improved business processes.Changes: None.Executive Order 12866Regulatory Impact AnalysisUnder Executive Order 12866, theSecretary must determine whether theregulatory action is ‘‘significant’’ andtherefore subject to the requirements ofthe Executive Order and subject toreview by the OMB. Section 3(f) ofExecutive Order 12866 defines a‘‘significant regulatory action’’ as anaction likely to result in a rule that may(1) Have an annual effect on theeconomy of $100 million or more, oradversely affect a sector of the economy,productivity, competition, jobs, theenvironment, public health or safety, orState, local or tribal governments orcommunities in a material way (alsoreferred to as an ‘‘economicallysignificant’’ rule); (2) create seriousinconsistency or otherwise interferewith an action taken or planned byanother agency; (3) materially alter thebudgetary impacts of entitlement grants,user fees, or loan programs or the rightsand obligations of recipients thereof; or(4) raise novel legal or policy issuesarising out of legal mandates, thePresident’s priorities, or the principlesset forth in the Executive order.Pursuant to the terms of the Executiveorder, we have determined thisproposed regulatory action will have anannual effect on the economy of morethan $100 million. Therefore, this actionis ‘‘economically significant’’ and subjectto OMB review under section 3(f)(1) ofExecutive Order 12866.Notwithstanding this determination, wehave assessed the potential costs andbenefits—both quantitative andqualitative—of this regulatory action.The agency believes that the benefitsjustify the costs.A detailed analysis, including theDepartment’s Regulatory Flexibility Actcertification, is found in Appendix A tothese final regulations.Paperwork Reduction Act of 1995Sections 668.6, 668.8, 668.16, 668.22,668.34, 668.43, 668.55, 668.56, 668.57,668.59, 668.144, 668.150, 668.151,668.152, and 668.164 containinformation collection requirements.Under the Paperwork Reduction Act of1995 (44 U.S.C. 3507(d)), theDepartment has submitted a copy ofthese sections to OMB for its review.Section 668.6—Gainful EmploymentThe final regulations will impose newrequirements on certain programs thatby law must, for purposes of the title IV,HEA programs, prepare students forgainful employment in a recognizedoccupation. For public and privatenonprofit institutions, a program thatdoes not lead to a degree will be subjectto the eligibility requirement that theprogram lead to gainful employment ina recognized occupation, while aprogram leading to a degree, includinga two-academic-year program fullytransferrable to a baccalaureate degree,will not be subject to this eligibilityrequirement. For proprietaryinstitutions, all eligible degree and nondegreeprograms will be required to leadto gainful employment in a recognizedoccupation, except for a liberal artsbaccalaureate program under section102(b)(1)(A)(ii) of the HEA.An institution will be required underfinal § 668.6(a) to report for eachstudent, who during an award year,began attending or completed a programunder § 668.8(c)(3) or (d), informationthat includes, at a minimum,information needed to identify thestudent and the location of theinstitution the student attended, the CIPcode of the program, the date thestudent completed the program, theamounts the student received fromprivate educational loans and theamount from institutional financingplans that the student owes theinstitution after completing theprogram, and whether the studentmatriculated to a higher credentialedprogram at the institution or anotherinstitution. We estimate that it will takethe affected 1,950 proprietaryinstitutions, on average, 12 hours todevelop the processes necessary toimplement the requirements in§ 668.6(a) for students who, during theaward year, began attending orVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00102 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2completed a program under § 668.6(c)(3)or (d). These processes include ones torecord student identifier information, torecord the CIP codes associated withthese programs, to record completiondates, to determine and record theamounts the student received fromprivate educational loans and theamount from institutional financingplans that the student owes theinstitution after completing theprogram, and to record data on studentswho matriculate to higher credentialedprograms at the same or at anotherinstitution. Therefore, burden willincrease for these affected proprietaryinstitutions by 23,400 hours.We estimate that it will take theaffected 1,736 private not-for-profitinstitutions, on average, 12 hours todevelop the processes necessary toimplement the requirements in§ 668.6(a) for students who, during theaward year, began attending orcompleted a program under § 668.6.These processes include ones to recordstudent identifier information, to recordthe CIP codes associated with theseprograms, to record completion dates, todetermine and record the amounts thestudent received from privateeducational loans and the amount frominstitutional financing plans that thestudent owes the institution aftercompleting the program, and to recorddata on students who matriculate tohigher credentialed programs at thesame or at another institution.Therefore, burden will increase for theseaffected private not-for-profitinstitutions by 20,832 hours.We estimate that it will take theaffected 1,915 public institutions, onaverage, 12 hours to develop theprocesses necessary to implement therequirements in § 668.6(a) for studentswho, during the award year, beganattending or completed a program under§ 668.6. These processes include ones torecord student identifier information, torecord the CIP codes associated withthese programs, to record completiondates, to determine and record theamounts the student received fromprivate educational loans and theamount from institutional financingplans that the student owes theinstitution after completing theprogram, and to record data on studentswho matriculate to higher credentialedprograms at the same or at anotherinstitution. Therefore, burden willincrease for these affected publicinstitutions by 22,980 hours.Collectively, we estimate that burden forinstitutions to meet these processdevelopment requirements inaccordance with procedures establishedby the Secretary will increase burden by

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66933WReier-Aviles on DSKGBLS3C1PROD with RULES267,212 hours in OMB Control Number1845–NEW1.We estimate that annually there willbe 3,499,998 students who will beginattendance in occupational programsthat train students for gainfulemployment in a recognizedoccupation. We estimate that 1,996,593of the 3,499,998 students will attend aproprietary institution. Therefore, withregard to proprietary institutions, thetotal number of affected students isestimated to be 5,989,779 students(1,996,593 times 3) for the initialreporting period that will cover the2006–2007 award year, the 2007–2008award year and the 2008–2009 awardyear. We estimate that the reporting ofstudent identifier information, thelocation of the institution the studentattended, and the CIP codes for eachbeginning student (i.e., a student whoduring the award year began attendinga program under § 668.8(c)(3) or (d))will average .03 hours (2 minutes) perstudent or 179,693 hours of increasedburden.We estimate that 161,308 of the3,499,998 students will attend a privatenot-for-profit institution. Therefore,with regard to not-for-profit institutions,the total number of affected students isestimated to be 483,924 students(161,308 times 3) for the initialreporting period that will cover the2006–2007 award year, the 2007–2008award year and the 2008–2009 awardyear. We estimate that the reporting ofstudent identifier information, thelocation of the institution the studentattended, and the CIP codes for eachbeginning student will average .03 hours(2 minutes) per student or 14,518 hoursof increased burden.We estimate that 1,342,097 of the3,499,998 students will attend a publicinstitution. Therefore, with regard topublic institutions, the total number ofaffected students is estimated to be4,026,291 students (1,342,097 times 3)for the initial reporting period that willcover the 2006–2007 award year, the2007–2008 award year and the 2008–2009 award year. We estimate that thereporting of student identifierinformation, the location of theinstitution the student attended, and theCIP codes for each beginning studentwill average .03 hours (2 minutes) perstudent or 120,789 hours of increasedburden.Collectively, we estimate that burdenfor institutions to meet these reportingrequirements for a student who duringthe award year began attending aprogram under § 668.8(c)(3) or (d) willincrease burden by 315,000 hours inOMB Control Number 1845–NEW1.We estimate that annually there willbe 567,334 students who will completetheir occupational programs that trainstudents for gainful employment in arecognized occupation. We estimate that325,416 of the 567,334 students willattend a proprietary institution.Therefore, with regard to proprietaryinstitutions, the total number of affectedstudents is estimated to be 976,248students (325,416 times 3) for the initialreporting period that will cover the2006–2007 award year, the 2007–2008award year and the 2008–2009 awardyear. We estimate that the reporting ofstudent identifier information, thelocation of the institution the studentattended, the CIP codes for eachgraduate, the date of completion, theamounts the students received fromprivate education loans and the amountfrom institutional financing plans thatthe student owes the institution aftercompleting the program, and whetherthe student matriculated to a highercredentialed program at the same oranother institution will average .08hours (5 minutes) per student or 78,100hours of increased burden.We estimate that 33,627 of the567,334 students will attend a privatenot-for-profit institution. Therefore,with regard to not-for-profit institutions,the total number of affected students isestimated to be 100,881 students (33,627times 3) for the initial reporting periodthat will cover the 2006–2007 awardyear, the 2007–2008 award year and the2008–2009 award year. We estimate thatthe reporting of student identifierinformation, the location of theinstitution the student attended, the CIPcodes for each graduate, the date ofcompletion, the amounts the studentreceived from private education loansand the amount from institutionalfinancing plans that the student owesthe institution after completing theprogram, and whether the studentmatriculated to a higher credentialedprogram at the same or anotherinstitution will average .08 hours (5minutes) per student or 8,070 hours ofincreased burden.We estimate that 208,291 of the567,334 students will attend a publicinstitution. Therefore, with regard topublic institutions, the total number ofaffected students is estimated to be624,873 students (208,291 times 3) forthe initial reporting period that willcover the 2006–2007 award year, the2007–2008 award year and the 2008–2009 award year. We estimate that thereporting of student identifierinformation, the location of theinstitution the student attended, the CIPcodes for each graduate, the date ofcompletion, the amounts the studentVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00103 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2received from private education loansand the amount from institutionalfinancing plans that the student owesthe institution after completing theprogram, and whether the studentmatriculated to a higher credentialedprogram at the same or anotherinstitution will average .08 hours (5minutes) per student or 49,990 hours ofincreased burden.Additionally, later in the initial yearof reporting, institutions will have toreport information on students whobegan attendance during the 2009–2010award year. We estimate that annuallythere will be 3,499,998 students whowill begin attendance in occupationalprograms that train students for gainfulemployment in a recognizedoccupation. As established above, weestimate that 1,996,593 of the 3,499,998students will begin occupationalprograms at proprietary institutionsduring the 2009–2010 award year. Weestimate that the reporting of studentidentifier information, the location ofthe institution the student attended, andthe CIP codes for each beginningstudent (i.e., a student who during theaward year began attending a programunder § 668.8(c)(3) or (d)) will average.03 hours (2 minutes) per student or59,898 hours of increased burden.We estimate that 161,308 of the3,499,998 students will attend a privatenot-for-profit institution. We estimatethat the reporting of student identifierinformation, the location of theinstitution the student attended, and theCIP codes for each beginning studentwill average .03 hours (2 minutes) perstudent or 4,839 hours of increasedburden.We estimate that 1,342,097 of the3,499,998 students will attend a publicinstitution. We estimate that thereporting of student identifierinformation, the location of theinstitution the student attended, and theCIP codes for each beginning studentwill average .03 hours (2 minutes) perstudent or 40,263 hours of increasedburden.Similarly, we estimate that annuallythere will be 567,334 students who willcomplete their occupational programsthat train students for gainfulemployment in a recognized occupationduring the 2009–2010 award year. Weestimate that 325,416 of the 567,334students will complete their program ata proprietary institution during the2009–2010 award year. We estimate thatthe reporting of student identifierinformation, the location of theinstitution the student attended, the CIPcodes for each graduate, the date ofcompletion, the amounts the studentsreceived from private education loans

WReier-Aviles on DSKGBLS3C1PROD with RULES266934 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulationsand the amount from institutionalfinancing plans that the student owesthe institution after completing theprogram, and whether the studentmatriculated to a higher credentialedprogram at the same or anotherinstitution will average .08 hours (5minutes) per student or 26,033 hours ofincreased burden for the 2009–2010award year.We estimate that 33,627 of the567,334 students will complete theirprogram at a private not-for-profitinstitution. We estimate that thereporting of student identifierinformation, the location of theinstitution the student attended, the CIPcodes for each graduate, the date ofcompletion, the amounts the studentreceived from private education loansand the amount from institutionalfinancing plans that the student owesthe institution after completing theprogram, and whether the studentmatriculated to a higher credentialedprogram at the same or anotherinstitution will average .08 hours (5minutes) per student or 2,690 hours ofincreased burden during the 2009–2010award year.We estimate that 208,291 of the567,334 students will complete theirprogram at a public institution duringthe 2009–2010 award year. We estimatethat the reporting of student identifierinformation, the location of theinstitution the student attended, the CIPcodes for each graduate, the date ofcompletion, the amounts the studentreceived from private education loansand the amount from institutionalfinancing plans that the student owesthe institution after completing theprogram, and whether the studentmatriculated to a higher credentialedprogram at the same or anotherinstitution will average .08 hours (5minutes) per student or 16,663 hours ofincreased burden for the 2009–2010award year.Collectively, we estimate that burdenfor institutions to meet these reportingrequirements for students who beginattendance or complete theiroccupational programs that trainstudents for gainful employment in arecognized occupation will increaseburden by 658,758 hours in OMBControl Number 1845–NEW1.Finally, under § 668.6(b) aninstitution will be required to discloseto each prospective student informationabout (1) The occupations (by namesand Standard Occupational Code (SOC)codes) that its programs preparestudents to enter, along with links tooccupational profiles on O*NET or itssuccessor site, or if the number ofoccupations related to the program onO*Net is more than ten (10), theinstitution may provide Web links to arepresentative sample of SOC codes forwhich its graduates typically findemployment within a few years aftercompleting their program; (2) the ontimegraduation rate for studentsentering the program; (3) the totalamount of tuition and fees it charges astudent for completing the programwithin normal time as defined in§ 668.41(a), the typical costs for booksand supplies, and the cost of room andboard, if applicable. The institution mayinclude information on other costs, suchas transportation and living expenses,but it must provide a Web link, oraccess, to the program cost informationthe institution makes available under§ 668.43(a); (4) beginning on July 1,2011, the placement rate for studentscompleting the program, as determinedunder the institution’s accreditingagency or State requirements, until anew placement rate methodology isdeveloped by the National Center forEducation Statistics (NCES) andreported to the institution; and (5) themedian loan debt incurred by studentswho completed the program as providedby the Secretary, as well as any otherinformation the Secretary provided tothe institution about that program. Theinstitution must identify separately themedian loan debt from title IV, HEAprograms and the median loan debtfrom private educational loans andinstitutional financing plans.We estimate that of the 5,601institutions with these occupationalprograms that 1,950, or 35%, areproprietary institutions. We estimatethat of the 5,601 with theseoccupational programs that 1,736, or31%, are private not-for-profitinstitutions. We estimate that of the5,601 with these occupational programsthat 1,915, or 34%, are publicinstitutions. Because under the reviseddisclosure requirements, institutionsmay use a representative sample of SOCcodes and use placement rate dataalready required by their accreditingagency or State, or data that will beprovided by the Department, weestimate that on average, it will take 1.5hours for an institution to obtain therequired disclosure information fromO*Net and its own programmatic costinformation and to provide thatinformation on its Web site and in itspromotional materials. Therefore, weestimate that burden for 1,950proprietary institutions will increase by2,925 hours. We estimate that burdenfor 1,736 private not-for-profitinstitutions will increase by 2,604hours. We estimate that burden forVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00104 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR21,915 public institutions will increaseby 2,873 hours.Collectively, we estimate that burdenfor institutions to meet these disclosurerequirements for prospective studentswill increase burden by 8,402 hours inOMB Control Number 1845–NEW1.We estimate the total burden underthis section to increase by 677,160 hoursin OMB Control Number 1845–NEW1.Section 668.8—Eligible ProgramUnder S668.8(l)(1), we will revise themethod of converting clock hours tocredit hours to use a ratio of theminimum clock hours in an academicyear to the minimum credit hours in anacademic year, i.e., 900 clock hours to24 semester or trimester hours or 36quarter hours. Thus, a semester ortrimester hour will be based on at least37.5 clock hours, and a quarter hourwill be based on at least 25 clock hours.Section 668.8(l)(2) will create anexception to the conversion ratio in§ 668.8(l)(1) if neither an institution’sdesignated accrediting agency nor therelevant State licensing authority forparticipation in the title IV, HEAprograms determines there are anydeficiencies in the institution’s policies,procedures, and practices forestablishing the credit hours that theinstitution awards for programs andcourses, as defined in § 600.2. Under theexception provided by § 668.8(l)(2), aninstitution will be permitted to combinestudents’ work outside of class with theclock-hours of instruction in order tomeet or exceed the numericrequirements established in§ 668.8(l)(1). However, under§ 668.8(l)(2), the institution will need touse at least 30 clock hours for a semesteror trimester hour or 20 clock hours fora quarter hour.In determining whether there isoutside work that a student mustperform, the analysis will need to takeinto account differences in courseworkand educational activities within theprogram. Some portions of a programmay require student work outside ofclass that justifies the application of§ 668.8(l)(2). In addition, the applicationof § 668.8(l)(2) could vary within aprogram depending on variances inrequired student work outside of classfor different portions of the program.Other portions of the program may nothave outside work, and § 668.8(l)(1) willneed to be applied. Of course, aninstitution applying only § 668.8(l)(1) toa program eligible for conversion fromclock hours to credit hours, without ananalysis of the program’s coursework,will be considered compliant with therequirements of § 668.8(l).

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66935WReier-Aviles on DSKGBLS3C1PROD with RULES2Section 668.8(k)(1)(ii) will modify aprovision in current regulations toprovide that a program is not subject tothe conversion formula in § 668.8(l)where each course within the programis acceptable for full credit toward adegree that is offered by the institutionand that this degree requires at least twoacademic years of study. Additionally,under § 668.8(k)(1)(ii), the institutionwill be required to demonstrate thatstudents enroll in, and graduate from,the degree program.Section 668.8(k)(2)(i) will provide thata program is considered to be a clockhourprogram if the program must bemeasured in clock hours to receiveFederal or State approval or licensure,or if completing clock hours is arequirement for graduates to apply forlicensure or the authorization topractice the occupation that the studentis intending to pursue. Under§ 668.8(k)(2)(ii) and (iii), the programwill also be considered to be offered inclock hours if the credit hours awardedfor the program are not in compliancewith the definition of a credit hour in§ 600.2, or if the institution does notprovide the clock hours that are thebasis for the credit hours awarded forthe program or each course in theprogram and, except as provided incurrent § 668.4(e), requires attendancein the clock hours that are the basis forthe credit hours awarded. The finalregulations on which tentativeagreement was reached will not includethe provision in § 668.8(k)(2)(iii) that,except as provided in current § 668.4(e),an institution must require attendancein the clock hours that are the basis forthe credit hours awarded.Section 668.8(k)(3) will provide that§ 668.8(k)(2)(i) will not apply if alimited portion of the program includesa practicum, internship, or clinicalexperience component that mustinclude a minimum number of clockhours due to a State or Federal approvalor licensure requirement.We estimate that on average, for eachaffected program it will take .5 hours (30minutes) for an institution to make thedetermination of whether the program isan affected program, to evaluate theamount of outside student work thatshould be included as final and toperform the clock hour to credit hourconversion. We further estimate that ofthe 4,587 institutions of highereducation with less than 2-yearprograms, that on average, eachinstitution has approximately 8 nondegreeprograms of study for a total of36,696 affected programs. We estimatethat there are 16,513 affected programsat proprietary institutions times .5 hours(30 minutes) which will increase burdenby 8,257 hours. We estimate that thereare 1,835 affected programs at privatenon-profit institutions times .5 hours(30 minutes) which will increase burdenby 918 hours. We estimate that there are18,348 affected programs at publicinstitutions times .5 hours (30 minutes)which will increase burden by 9,174hours.Collectively, the final regulatorychanges reflected in § 668.8 willincrease burden by 18,349 hours inOMB Control Number 1845–0022.Section 668.16—Standards ofAdministrative CapabilityUnder the final regulations, theelements of the institution’s satisfactoryacademic progress plan have beenmoved from current § 668.16(e) to§ 668.34. We also have updated theseprovisions. As a result, the estimatedburden upon institutions associatedwith measuring academic progresscurrently in OMB Control Number1845–0022 of 21,000 hours will beadministratively removed from thiscollection and transferred to OMBControl Number 1845–NEW2.Under § 668.16(p), an institution willbe required to develop and followprocedures to evaluate the validity of astudent’s high school completion if theinstitution or the Secretary has reason tobelieve that the high school diploma isnot valid or was not obtained from anentity that provides secondary schooleducation. The burden associated withthis requirement will be mitigated bythe fact that many institutions alreadyhave processes in place to collect highschool diplomas and makedeterminations about their validity.We estimate that burden will increasefor each institution by 3.5 hours for thedevelopment of a high school diplomavalidity process. We estimate that 2,086proprietary institutions will on averagetake 3.5 hours to develop the finalprocedures to evaluate the validity ofhigh school completions, which willincrease burden by 7,301 hours. Weestimate that 1,731 private non-profitinstitutions will on average take 3.5hours to develop the final procedures toevaluate the validity of high schoolcompletion, which will increase burdenby 6,059 hours. We estimate that 1,892public institutions will on average take3.5 hours to develop the finalprocedures to evaluate the validity ofhigh school completion, which willincrease burden by 6,622 hours.Additionally, we estimate that thevalidity of approximately 4,000 highschool diplomas per year will bequestioned and that these diplomas willrequire additional verification, whichwe estimate will take .5 hours (30VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00105 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2minutes) per questionable diploma. Weestimate that proprietary institutionswill have 2,000 questionable diplomas,which will result in an estimated 1,000hours of increased burden (2000diplomas multiplied by .5 hours). Weestimate that private non-profitinstitutions will have 600 questionablediplomas, which will result in anestimated 300 hours of increased burden(600 diplomas multiplied by .5 hours).We estimate that public institutions willhave 1,400 questionable, which willresult in an estimated 700 hours ofincreased burden (1400 diplomasmultiplied by .5 hours).Collectively, the final regulatorychanges reflected in § 668.16 willincrease burden by 21,982 hours inOMB Control Number 1845–0022.Section 668.22—Treatment of Title IV,HEA Program Funds When a StudentWithdrawsThe changes to § 668.22(a)(2) clarifywhen a student is considered to havewithdrawn from a payment period orperiod of enrollment. In the case of aprogram that is measured in credithours, the student will be considered tohave withdrawn if he or she does notcomplete all the days in the paymentperiod or period of enrollment that thestudent was scheduled to completeprior to withdrawing. In the case of aprogram that is measured in clockhours, the student will be considered tohave withdrawn if he or she does notcomplete all of the clock hours in thepayment period or period of enrollmentthat the student was scheduled tocomplete prior to withdrawing.Section 668.22(f)(2)(i) clarifies that,for credit hour programs, in calculatingthe percentage of the payment period orperiod of enrollment completed, it isnecessary to take into account the totalnumber of calendar days that thestudent was scheduled to completeprior to withdrawing without regard toany course completed by the studentthat is less than the length of the term.These final regulations will affect allprograms with courses that are less thanthe length of a term, including, forexample, a semester-based program thathas a summer nonstandard term withtwo consecutive six-week sessionswithin the term.We estimate that approximately425,075 students in term-basedprograms with modules or compressedcourses will withdraw prior tocompleting more than 60 percent oftheir program of study. We estimate thaton average, the burden per individualstudent who withdraws prior to the 60percent point of their term-basedprogram to be .75 hours (45 minutes)

66936 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and RegulationsWReier-Aviles on DSKGBLS3C1PROD with RULES2per affected individual which willincrease burden for the estimated425,075 students by 318,806 hours inOMB Control Number 1845–0022. Ofthese 425,075 withdrawals, we estimatethat 50 percent of the withdrawals(212,538) will occur at proprietaryinstitutions and will increase burden by1 hour per withdrawal increasingburden by 212,538 hours. We estimatethat 10 percent of the withdrawals(42,508) will occur at private non-profitinstitutions and will increase burden by1 hour per withdrawal increasingburden by 42,508 hours. We estimatethat 40 percent of the withdrawals(170,029) will occur at publicinstitutions and will increase burden by1 hour per withdrawal increasingburden by 170,029 hours. Collectively,we estimate that burden will increase by743,881 hours in OMB Control Number1845–0022, of which 318,806 hours isfor individuals and 425,075 hours is forinstitutions.Section 668.34—Satisfactory ProgressThe final regulations restructure thesatisfactory academic progressrequirements. Section 668.16(e)(Standards of administrative capability)has been revised to include only therequirement that an institutionestablish, publish and apply satisfactoryacademic progress standards that meetthe requirements of § 668.34. Theremainder of current § 668.16(e) hasbeen moved to § 668.34 such that it,alone, describes all of the requiredelements of a satisfactory academicprogress policy, as well as how aninstitution will implement such apolicy. The references in § 668.32(e)have been updated to conform thesection with the final changes we havemade to §§ 668.16(e) and 668.32.Section 668.34(a) specifies theelements an institution’s satisfactoryacademic policy must contain to beconsidered a reasonable policy. Underthese regulations, institutions willcontinue to have flexibility inestablishing their own policies;institutions that choose to measuresatisfactory academic progress morefrequently than at the minimumrequired intervals will have additionalflexibility (see § 668.34(a)(3)).All of the policy elements in thecurrent regulations under §§ 668.16(e)and 668.34 are combined in § 668.34. Inaddition, § 668.34(a)(5) makes explicitthe requirement that institutions specifythe pace at which a student mustprogress through his or her educationalprogram to ensure that the student willcomplete the program within themaximum timeframe, and provide formeasurement of a student’s pace at eachevaluation. Under § 668.34(a)(6),institutional policies will need todescribe how a student’s GPA and paceof completion are affected by transfersof credit from other institutions. Thisprovision will also require institutionsto count credit hours from anotherinstitution that are accepted toward astudent’s educational program as bothattempted and completed hours.Section 668.34(a)(7) provides that,except as permitted in § 668.34(c) and(d), the policy requires that, at the timeof each evaluation, if the student is notmaking satisfactory academic progress,the student is no longer eligible toreceive the title IV, HEA assistance.Section 668.34(a)(8) requiresinstitutions that use ‘‘financial aidwarning’’ and ‘‘financial aid probation’’statuses (concepts that are defined in§ 668.34(b)) in connection withsatisfactory academic progressevaluations to describe these statusesand how they are used in theirsatisfactory academic progress policies.Section 668.34(a)(8)(i) specifies that astudent on financial aid warning maycontinue to receive assistance under thetitle IV, HEA programs for one paymentperiod despite a determination that thestudent is not making satisfactoryacademic progress. Financial aidwarning status may be assigned withoutan appeal or other action by the student.Section 668.34(a)(8)(ii) makes clear thatan institution with a satisfactoryacademic progress policy that includesthe use of the financial aid probationstatus could require that a student onfinancial aid probation fulfill specificterms and conditions, such as taking areduced course load or enrolling inspecific courses.Section 668.34(a)(9) will require aninstitution that permits a student toappeal a determination that the studentis not making satisfactory academicprogress to describe the appeal processin its policy. The policy will need tocontain specified elements. Section668.34(a)(9)(i) will require an institutionto describe how a student may reestablishhis or her eligibility to receiveassistance under the title IV, HEAprograms.Under § 668.34(a)(9)(ii), a student willbe permitted to file an appeal based onthe death of a relative, an injury orillness of the student, or other specialcircumstances. Under § 668.34(a)(9)(iii),a student will be required to submit, aspart of the appeal, information regardingwhy the student failed to makesatisfactory academic progress, andwhat has changed in the student’ssituation that will allow the student todemonstrate satisfactory academicprogress at the next evaluation.VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00106 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2Section 668.34(a)(10) will require thesatisfactory academic progress policy ofan institution that does not permitstudents to appeal a determination thatthey are not making satisfactoryacademic progress, to describe how astudent may regain eligibility forassistance under the title IV, HEAprograms.Section 668.34(a)(11) will require thatan institution’s policy provide fornotification to students of the results ofan evaluation that impacts the student’seligibility for title IV, HEA programfunds.We estimate that, on average,institutions will take 3 hours perinstitution to review the finalregulations in § 668.34(a) andimplement any changes to theirsatisfactory academic policies to insurecompliance. We estimate that 2,086proprietary institutions will take 3hours per institution to review andimplement the final regulations, whichwill result in an estimated increase of6,258 hours in burden. We estimate that1,731 private non-profit institutions willtake 3 hours per institution to reviewand implement the final regulations,which will result in an estimatedincrease of 5,193 hours in burden. Weestimate that 1,892 public institutionswill take 3 hours per institution toreview and implement the finalregulations, which will result in anestimated increase of 5,676 hours inburden.Collectively, the final regulatorychanges reflected in § 668.34(a) willincrease burden by 17,127 hours.Section 668.34(c) and (d) will specifythat an institution’s policy may providefor disbursement of title IV, HEAprogram funds to a student who has notmet an institution’s satisfactoryacademic standards in certaincircumstances. Of the 17 millionapplicants in 2008–2009, we estimatethat 90 percent (or 15,300,000individuals) will begin attendance. Weestimate that of the 15,300,000individuals that begin attendance, that90 percent (or 13,770,000 individuals)will persist at least through the end ofthe initial payment period and,therefore, will be subject to theinstitutions’ satisfactory academicprogress consistent with the provisionsof § 668.34. We estimate that 38 percentof participating institutions willevaluate their students at the end ofeach payment period under § 668.34(c);therefore we expect 5,232,600individuals to be evaluated more thanannually (13,770,000 individualsmultiplied 38 percent). We estimate that62 percent of participating institutionswill evaluate their students once per

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66937WReier-Aviles on DSKGBLS3C1PROD with RULES2academic year under § 668.34(d);therefore, we expect 8,537,400individuals to be evaluated annually(13,770,000 individuals multiplied by62 percent).Section 668.34(c) will permit aninstitution that measures satisfactoryacademic progress at the end of eachpayment period to have a policy thatwill permit a student who is not makingsatisfactory academic progress to beplaced automatically on financial aidwarning, a newly defined term. Weestimate that, as a result of thisrequirement, the burden associated withan academic progress measurement atthe end of each payment period, andwhen required, the development of anacademic plan for the student, willincrease. We estimate that 1,936,062individuals at proprietary institutionswill require an academic review morethan once per academic year(proprietary institutions, whichcomprise 37 percent of the total numberof institutions of higher education,multiplied by 5,232,600 individuals).Given this number of individuals(1,936,062) and an average of 2 reviewsper academic year under thisrequirement, we expect theseinstitutions to conduct 3,872,124satisfactory academic progress reviews.Because these academic progressreviews are generally highly automated,we estimate that, on average, eachreview will take .02 hours (1.2 minutes)and will increase burden by 77,442hours.We estimate that 1,569,780individuals at private non-profitinstitutions will require an academicreview (private non-profit institutions,which comprise 30 percent of the totalnumber of institutions of highereducation, multiplied by 5,232,600individuals). Given this number ofindividuals (1,569,780) and an averageof 2 reviews per academic year underthis requirement, we expect theseinstitutions to conduct 3,139,560satisfactory academic progress reviews.Because these academic progressreviews are generally highly automated,we estimate that, on average, eachreview will take .02 hours (1.2 minutes)and will increase burden by 62,791hours.We estimate that 1,726,758individuals at public institutions willrequire an academic review (publicinstitutions, which comprise 33 percentof the total number of institutions ofhigher education, multiplied by5,232,600 individuals). Given thisnumber of individuals (1,726,758) andan average of 2 reviews per academicyear under this requirement, we expectthese institutions to conduct 3,453,516satisfactory academic progress reviews.Because these academic progressreviews are generally highly automated,we estimate that, on average, eachreview will take .02 hours (1.2 minutes)and will increase burden by 69,070hours.Collectively, we estimate that theburden for institutions under thisrequirement will increase by 209,303hours, in OMB Control Number 1845–NEW2.As a result of the final satisfactoryacademic progress reviews conductedby institutions, we estimate that 7percent of the 5,232,600 enrolledstudents (at institutions that reviewacademic progress more often thanannually) or 366,282 will notsuccessfully achieve satisfactoryacademic progress. For these students,institutions will need to work with eachstudent to develop an academic planand this will increase burden for theindividual and the institutions. Weestimate that under § 668.34(c), that366,282 students will, on average, take.17 hours (10 minutes) to establish anacademic plan for an increase of 62,268burden hours and re-evaluate the plan asecond time within the academic yearfor an additional increase of 62,268burden hours (2 times per academicyear), increasing burden to individualsby a total of 124,536 hours.We estimate that 1,936,062individuals at proprietary institutionswill require the development of anacademic plan as a result of notprogressing academically (proprietaryinstitutions, which comprise 37 percentof the total number of institutions ofhigher education, multiplied by5,232,600 individuals). Given thisnumber of individuals (1,936,062)multiplied by 7 percent (which is ourestimate for those who will notacademically progress), we expect that135,524 individuals will need to workwith their institutions to develop anacademic plan. We estimate that eachacademic plan will take, on average, .25hours (15 minutes) of staff time at twotimes within the academic year,increasing burden by 67,762 hours.We estimate that 1,569,780individuals at private non-profitinstitutions will require thedevelopment of an academic plan as aresult of not progressing academically(private non-profit institutions, whichcomprise 30 percent of the total numberof institutions of higher education,multiplied by 5,232,600 individuals).Given this number of individuals(1,569,780) multiplied by 7 percent(which is our estimate for those whowill not academically progress), weexpect that 109,885 individuals willVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00107 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2need to work with their institutions todevelop an academic plan. We estimatethat each academic plan will take, onaverage, .25 hours (15 minutes) of stafftime at two times within the academicyear, increasing burden by 54,943 hours.We estimate that 1,726,758individuals at public institutions willrequire the development of an academicplan as a result of not progressingacademically (public institutions, whichcomprise 33 percent of the total numberof institutions of higher education,multiplied by 5,232,600 individuals).Given this number of individuals(1,726,758) multiplied by 7 percent(which is our estimate for those whowill not academically progress), weexpect that 120,873 individuals willneed to work with their institutions todevelop an academic plan. We estimatethat each academic plan will take, onaverage, .25 hours (15 minutes) of stafftime at two times within the academicyear, increasing burden by 60,437 hours.Collectively, therefore, we estimatethat the burden for institutions willincrease by 183,142 hours, in OMBControl Number 1845–NEW2.Under § 668.34(d), at an institutionthat measures satisfactory academicprogress annually, or less frequentlythan at the end of each payment period,a student who has been determined notto be making satisfactory academicprogress will be able to receive title IV,HEA program funds only after filing anappeal and meeting one of twoconditions: (1) The institution hasdetermined that the student should beable to meet satisfactory progressstandards after the subsequent paymentperiod, or (2) the institution develops anacademic plan with the student that, iffollowed, will ensure that the student isable to meet the institution’s satisfactoryacademic progress standards by aspecific point in time.Because the final regulations willtransfer the elements of an institution’ssatisfactory academic policy from§ 668.16(e) to § 668.34, we aretransferring the current burden estimateof 21,000 hours from the current OMBControl Number 1845–0022 to OMBControl Number 1845–NEW2.We estimate that 3,158,838individuals at proprietary institutions(proprietary institutions, whichcomprise 37 percent of the total numberof institutions of higher education,multiplied by 8,537,400 individuals)will require an academic review.Because the academic progress reviewsare generally highly automated, weestimate that, on average, each reviewwill take .02 hours (1.2 minutes) andwill increase burden by 63,177 hours.We estimate that 2,561,220 individuals

66938 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and RegulationsWReier-Aviles on DSKGBLS3C1PROD with RULES2at private non-profit institutions willrequire an academic review (privatenon-profit institutions, which comprise30 percent of the total number ofinstitutions of higher education,multiplied by 8,537,400 individuals).Because the academic progress reviewsare generally highly automated, weestimate that, on average, each reviewwill take .02 hours (1.2 minutes) andwill increase burden by 51,224 hours.We estimate that 2,817,342individuals at public institutions willrequire an academic review (publicinstitutions, which comprise 33 percentof the total number of institutions ofhigher education, multiplied by8,537,400 individuals). Because theacademic progress reviews are generallyhighly automated, we estimate that, onaverage, each review will take .02 hours(1.2 minutes) and will increase burdenby 56,347 hours.Collectively, we estimate that theburden for institutions will increase by170,748 hours, in OMB Control Number1845–NEW2.As a result of the final satisfactoryacademic progress reviews conductedby the institutions, we estimate that 7percent of the 8,537,400 enrolledstudents (at institutions that reviewacademic progress annually) or 597,618will not successfully achievesatisfactory academic progress. Forthese students, institutions will need towork with each student to develop anacademic plan and this will increaseburden for the individual and theinstitutions. We estimate that under§ 668.34(d), 597,618 students will, onaverage, take .17 hours (10 minutes) toestablish an academic plan, increasingburden to individuals by 101,595 hours.We estimate that 3,158,838individuals at proprietary institutionswill require the development of anacademic plan as a result of notprogressing academically (proprietaryinstitutions, which comprise 37 percentof the total number of institutions ofhigher education, multiplied by8,537,400 individuals). Given thisnumber of individuals (3,158,838)multiplied by 7 percent (which is ourestimate for those who will notacademically progress), we expect221,119 individuals will need to workwith their institutions to develop anacademic plan. We estimate that eachacademic plan will take, on average, .25hours (15 minutes) of staff time,increasing burden by 55,280 hours.We estimate that 2,561,220individuals at private non-profitinstitutions will require thedevelopment of an academic plan as aresult of not progressing academically(private non-profit institutions, whichcomprise 30 percent of the total numberof institutions of higher education,multiplied by 8,537,400 individuals).Given this number of individuals(2,561,220) multiplied by 7 percent(which is our estimate for those whowill not academically progress), weexpect 179,285 individuals will need towork with their institutions to developan academic plan. We estimate that eachacademic plan will take, on average, .25hours (15 minutes) of staff time,increasing burden by 44,821 hours.We estimate that 2,817,342individuals at public institutions willrequire the development of an academicplan as a result of not progressingacademically (public institutions, whichcomprise 33 percent of the total numberof institutions of higher education,multiplied by 8,537,400 individuals).Given this number of individuals(2,817,342) multiplied by 7 percent (ourestimate for those who will notacademically progress), we expect197,214 individuals will need to workwith their institutions to develop anacademic plan. We estimate that eachacademic plan will take, on average, .25hours (15 minutes) of staff time,increasing burden by 49,304 hours.Collectively, we estimate that theburden for institutions will increase by149,405 hours, in OMB Control Number1845–NEW2.In total, the final regulatory changesreflected in § 668.34 will increaseburden by a total of 955,856 hours inOMB Control Number 1845–NEW2;however, when the 21,000 hours ofburden currently in OMB 1845–0022 areadministratively transferred from OMB1845–0022 to OMB 1845–NEW2, thegrand total of burden hours under thissection will increase to 976,856 in OMB1845–NEW2.Section 668.43—InstitutionalInformationThe Department has amended current§ 668.5(a) by revising and redesignatingparagraph (a) as paragraph (a)(1) andadding a new paragraph (a)(2). Section668.5(a)(1) is based on the language thatis in current § 668.5(a), but has beenmodified to make it consistent with thedefinition of an ‘‘educational program’’in 34 CFR 600.2.Section 668.5(a)(2) specifies that if awritten arrangement is between two ormore eligible institutions that are ownedor controlled by the same individual,partnership, or corporation, theinstitution that grants the degree orcertificate must provide more than 50percent of the educational program.These clarifications are also intended toensure that the institution enrolling thestudent has all necessary approvals toVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00108 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2offer an educational program in theformat in which it is being provided,such as through distance educationwhen the other institution is providinginstruction under a written agreementusing that method of delivery.Section 668.5(c)(1) includes anexpanded list of conditions that willpreclude an arrangement between aneligible institution and an ineligibleinstitution.Sections 668.5(e) and 668.43 willrequire an institution that enters into awritten arrangement to provide adescription of the arrangement toenrolled and prospective students.We estimate that 104 proprietaryinstitutions will enter into an average of1 written arrangement per institutionand that, on average, the burdenassociated with the informationcollections about written agreementsand its disclosure required under§ 668.5(e) and 668.43 will take .5 hours(30 minutes) per arrangement,increasing burden by 52 hours.We estimate that 1,731 private nonprofitinstitutions will enter into anaverage of 50 written arrangements perinstitution and that, on average, theburden associated with the finalcollection of information about writtenagreements and its disclosure will take.5 hours (30 minutes) per arrangement,increasing burden by 43,275 hours.We estimate that 1,892 publicinstitutions will enter into an average of25 written arrangements per institutionand that, on average, the burdenassociated with the final collection ofinformation about written agreementsand its disclosure will take .5 hours (30minutes) per arrangement, increasingburden by 23,650 hours.Collectively, we estimate that burdenwill increase for institutions in theirreporting of the details of writtenagreements by 66,977 hours in OMBControl Number 1845–0022.Currently, the Department requiresthat an institution must make availablefor review to any enrolled orprospective student upon request, acopy of the documents describing theinstitution’s accreditation and its State,Federal, or tribal approval or licensing.The Department requires in § 668.43(b)that the institution must also provide itsstudents or prospective students withcontact information for filingcomplaints with its accreditor and Stateapproval or licensing entity.We estimate that 1,919 (or 92 percentof all 2,086 proprietary institutions) willhave to begin providing contactinformation for filing complaints withaccreditors, approval or licensingagencies. We estimate that the other 8percent of proprietary institutions are

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66939WReier-Aviles on DSKGBLS3C1PROD with RULES2already providing this information. Weestimate that on average, this disclosurewill take .17 hours (10 minutes) perdisclosure and that it will, therefore,increase burden to proprietaryinstitutions by 326 hours.We estimate that 1,593 (or 92 percentof all 1,731 private non-profitinstitutions) will have to beginproviding contact information for filingcomplaints with accreditors, approval orlicensing agencies. We estimate that theother 8 percent of private non-profitinstitutions are already providing thisinformation. We estimate that onaverage, this disclosure will take .17hours (10 minutes) per disclosure andthat it will, therefore, increase burden toprivate non-profit institutions by 271hours.We estimate that 1,740 (or 92 percentof all 1,892 public institutions) willhave to begin providing contactinformation for filing complaints withaccreditors, approval or licensingagencies. We estimate that the other 8percent of public institutions arealready providing this information. Weestimate that on average, this disclosurewill take .17 hours (10 minutes) perdisclosure and that it will, therefore,increase burden to proprietaryinstitutions by 296 hours.Collectively, we estimate that burdenwill increase for institutions in theirreporting of the contact information forfiling complaints to accreditors andapproval or licensing agencies by 893hours in OMB Control Number 1845–0022.In total, the final regulatory changesreflected in § 668.43 will increaseburden by 67,870 hours in OMB ControlNumber 1845–0022.Section 668.55—Updating InformationSection 668.55 will require anapplicant to update all applicablechanges in dependency status that occurthroughout the award year, includingchanges in the applicant’s householdsize and the number of those householdmembers attending postsecondaryeducational institutions. We estimatethat 1,530,000 individuals will updatetheir household size or the number ofhousehold members attendingpostsecondary educational institutionsand that, on average, reporting will take.08 hours (5 minutes) per individual,increasing burden by 122,400 hours.We estimate that proprietaryinstitutions will receive updatedhousehold size or the updated numberof household members attendingpostsecondary educational institutionsfrom 566,100 applicants. We estimatethat each updated record will take.17 hours (10 minutes) to review, whichwill increase burden by 96,237 hours.We estimate that private non-profitinstitutions will receive updatedhousehold size or the updated numberof household members attendingpostsecondary educational institutionsfrom 459,000 applicants. We estimatethat each updated record will take .17hours (10 minutes) to review, whichwill increase burden by 78,030 hours.We estimate that public institutionswill receive updated household size orthe updated number of householdmembers attending postsecondaryeducational institutions from 504,900applicants. We estimate that eachupdated record will take .17 hours(10 minutes) to review, which willincrease burden by 85,833 hours.Collectively, we estimate that burdenwill increase for individuals andinstitutions as a result of being requiredto report updated household size andthe updated number of householdmembers attending postsecondaryeducational institutions by 382,500hours in OMB Control Number1845–0041, of which 122,400 hours isfor individuals and 260,100 hours is forinstitutions.This section also requires individualsto make changes to their FAFSAinformation if their marital statuschanges, but only at the discretion of thefinancial aid administrator because suchan update is necessary to address aninequity or to reflect more accuratelythe applicant’s ability to pay. As aresult, we estimate that of the 170,000individuals that will have a change ofmarital status, we expect that thisdiscretion will be applied in only tenpercent of the cases, therefore, tenpercent of the 170,000 estimated casesis 17,000 cases that on average thereporting will take .08 hours (5 minutes)per individual, increasing burden by1,360 hours.We estimate that proprietaryinstitutions will receive updated maritalstatus information from 6,290applicants. We estimate that eachupdated record will take .17 hours (10minutes) to review, which will increaseburden by 1,069 hours.We estimate that private non-profitinstitutions will receive updated maritalstatus information from 5,100applicants. We estimate that eachupdated record will take .17 hours (10minutes) to review, which will increaseburden by 867 hours.We estimate that public institutionswill receive updated marital statusinformation from 5,610 applicants. Weestimate that each updated record willtake .17 hours (10 minutes) to review,VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00109 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2which will increase burden by 954hours.Collectively, we estimate that burdenwill increase for individuals andinstitutions in their reporting updatedmarital status information by 4,250hours in OMB Control Number1845–0041.Section 668.55 will also include anumber of other changes to removelanguage that implements the maritalstatus exception in the currentregulations, including removing current§ 668.55(a)(3) and revising § 668.55(b).In total, the final regulatory changesreflected in § 668.55 will increaseburden by 386,750 hours in OMBControl Number 1845–0041.Section 668.56—Information To BeVerifiedThe Department will eliminate fromthe regulations the five items that aninstitution currently is required to verifyfor all applicants selected forverification. Instead, pursuant to§ 668.56(a), for each award year, theSecretary will specify in a FederalRegister notice the FAFSA informationand documentation that an institutionand an applicant may be required toverify. The Department will then specifyon an individual student’s SAR and ISIRwhat information must be verified forthat applicant.Currently, under OMB ControlNumber 1845–0041, there are 1,022,384hours of burden associated with theverification regulations of which1,010,072 hours of burden are a resultof the data gathering and submission byeach individual applicant selected forverification. This estimate was basedupon the number of applicants in the2002–2003 award year. Since then, thenumber of applicants has grownsignificantly to 17.4 million applicantsfor the 2008–2009 award year, of whichwe project 5.1 million individualapplicants to be selected for verification.The projected number of items to beverified under the final regulations isexpected to be reduced from the currentfive required data elements to anaverage of three items per individual.This projected reduction in items to beverified will result in a reduction ofburden per individual applicant. Also,as a result of collecting information toverify applicant data on this smalleraverage number of data elements (threeitems instead of five items), the averageamount of time for the individualapplicant to review verification forminstructions, gather the data, respond ona form and submit a form and thesupporting data will decrease from thecurrent average of .20 hours (12minutes) per individual to .12 hours (7

66940 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and RegulationsWReier-Aviles on DSKGBLS3C1PROD with RULES2minutes), thus further reducing burdenon the individual applicant.For example, when we consider theestimated 5.1 million 2008–2009applicants selected for verification at anaverage of .20 hours (12 minutes) tocollect and submit information,including supporting documentation forthe five required data elements (whichis the estimated amount of time that isassociated with the requirements incurrent § 668.56(a)), the requirements inthat section yields a total burden of1,020,000 hours added to OMB ControlNumber 1845–0041. However, under§ 668.56(b), where the number ofverification data elements will bereduced to an average of three, theestimated 5.1 million individualsselected for verification multiplied bythe reduced average of .12 minutes(7 minutes) yields an increase of612,000 hours in burden. Therefore, wewill expect the burden to be 408,000hours less than under the currentregulations.As a result, for OMB reportingpurposes, we estimate that theindividuals, as a group, will have anincrease in burden by 612,000 hours inOMB Control Number 1845–0041(rather than 1,020,000 hours).Section 668.57—AcceptableDocumentationWe have made a number of technicaland conforming changes throughout§ 668.57. We also have made thefollowing substantive changes describedin this section.Section 668.57(a)(2) will allow aninstitution to accept, in lieu of anincome tax return or an IRS form thatlists tax account information, theelectronic importation of data obtainedfrom the IRS into an applicant’s onlineFAFSA.We also have amended§ 668.57(a)(4)(ii)(A) to accurately reflectthat, upon application, the IRS grants asix-month extension beyond the April15 deadline rather than the four-monthextension currently stated in theregulations.Under § 668.57(a)(5), an institutionmay require an applicant who has beengranted an extension to file his or herincome tax return to provide a copy ofthat tax return once it has been filed. Ifthe institution requires the applicant tosubmit the tax return, it will need to reverifythe AGI and taxes paid of theapplicant and his or her spouse orparents when the institution receivesthe return.Section 668.57(a)(7) clarifies that anapplicant’s income tax return that issigned by the preparer or stamped withthe preparer’s name and address mustalso include the preparer’s SocialSecurity number, EmployerIdentification Number or the PreparerTax Identification Number.Section 668.57(b) and (c) remainsubstantively unchanged.We have deleted current § 668.57(d)regarding acceptable documentation foruntaxed income and benefits andreplaced it with a new § 668.57(d). Thisnew section provides that, if anapplicant is selected to verify otherinformation specified in an annualFederal Register notice, the applicantmust provide the documentationspecified for that information in theFederal Register notice.Currently under OMB ControlNumber 1845–0041, there are 1,022,384hours of burden associated with theverification regulations, of which 12,312hours are attributable to institutions ofhigher education to establish theirverification policies and procedures.Under § 668.57, we estimate that, onaverage, institutions will take .12 hours(7 minutes) per applicant selected forverification to review and takeappropriate action based upon theinformation provided by the applicant,which in some cases may meancorrecting applicant data or having theapplicant correct his or her data. Undercurrent § 668.57, when we consider thesignificant increase to 17.4 millionapplicants in the 2008–2009 award year,of which 5.1 million will be selected forverification at an average of .20 hours(12 minutes) per verification responsereceived from applicants by theinstitutions for review, the total increasein burden will be 1,020,000 additionalhours. However, under § 668.57, boththe average number of items to beverified will be reduced from five itemsto three items, as well as the averageamount of time to review will decreasefrom .20 hours (12 minutes) to .12 hours(7 minutes). Therefore, the burden toinstitutions will be 612,000 burdenhours (that is, 5.1 million multiplied by.12 hours (7 minutes))—rather than1,020,000 burden hours (i.e., 5.1 millionapplicants multiplied by .20 hours (12minutes)). Thus, as compared to theburden under the current regulations,using the number of applicants from2008–2009—17.4 million—there will be408,000 fewer burden hours forinstitutions.We estimate 226,440 hours ofincreased burden for proprietaryinstitutions (2,086 proprietaryinstitutions of the total 5,709 affectedinstitutions or 37 percent multiplied by5,100,000 applicants equals 1,887,000applicants multiplied by .12 hours (7minutes)).VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00110 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2We estimate 183,600 hours ofincreased burden for private non-profitinstitutions (1,731 private non-profitinstitutions of the total 5,709 affectedinstitutions or 30 percent multiplied by5,100,000 applicants equals 1,530,000applicants multiplied by .12 hours (7minutes)).We estimate 201,960 hours ofincreased burden for public institutions(1,892 public institutions of the total5,709 affected institution or 33 percentmultiplied by 5,100,000 applicantsmultiplied by .12 hours (7 minutes)).As a result, for OMB reportingpurposes, collectively there will be aprojected increase of 612,000 hours ofburden for institutions in OMB ControlNumber 1845–0041.Section 668.59—Consequences of aChange in FAFSA InformationWe have amended § 668.59 byremoving all allowable tolerances andrequiring instead that an institutionsubmit to the Department all applicablechanges to an applicant’s FAFSAinformation resulting from verificationfor those applicants receiving assistanceunder any of the subsidized studentfinancial assistance programs (see§ 668.59(a)).Under § 668.59(b), for the Federal PellGrant program, once the applicantprovides the institution with thecorrected SAR or ISIR, the institutionwill be required to recalculate theapplicant’s Federal Pell Grant anddisburse any additional funds, ifadditional funds are payable. If theapplicant’s Federal Pell Grant will bereduced as a result of verification, theinstitution will be required to eliminateany overpayment by adjustingsubsequent disbursements orreimbursing the program account byrequiring the applicant to return theoverpayment or making restitution fromits own funds (see § 668.59(b)(2)(ii)).Section 668.59(c) provides that, forthe subsidized student financialassistance programs, excluding theFederal Pell Grant Program, if anapplicant’s FAFSA information changesas a result of verification, the institutionmust recalculate the applicant’s EFCand adjust the applicant’s financial aidpackage on the basis of the EFC on thecorrected SAR or ISIR.With the exception of minor technicaledits, § 668.59(d), which describes theconsequences of a change in anapplicant’s FAFSA information, remainssubstantively the same as current§ 668.59(d).Finally, we have removed current§ 668.59(e), the provision that requiresan institution to refer to the Departmentunresolved disputes over the accuracy

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66941WReier-Aviles on DSKGBLS3C1PROD with RULES2of information provided by theapplicant if the applicant received fundson the basis of that information.Both individuals (students) andinstitutions will be making correctionsto FAFSA information as a result of theverification process. We estimate that 30percent of the 17,000,000 applicants or5,100,000 individuals (students) will beselected for verification. Of those5,100,000 individuals, students willsubmit, on average, 1.4 changes inFAFSA information as a result ofverification for 7,140,000 changes,which will take an average of .12 hours(7 minutes) per change, increasingburden to individuals by 856,800 hours.We estimate that institutions willneed to submit 10,200,000 changes inFAFSA information as a result ofverification (that is, 5,100,000individuals selected for verificationmultiplied by 2.0 changes, which iswhat we estimate will be the average perindividual).Of the estimated total 10,200,000changes, we estimate that 3,774,000changes to FAFSA information as aresult of verification will occur atproprietary institutions, which will takean average of .12 hours (7 minutes) perchange, increasing burden by 452,880hours.Of the estimated total 10,200,000changes, we estimate that 3,060,000changes to FAFSA information as aresult of verification will occur atprivate non-profit institutions, whichwill take an average of .12 hours (7minutes) per change, increasing burdenby 367,200 hours.Of the estimated total 10,200,000changes, we estimate that 3,366,000changes to FAFSA information as aresult of verification will occur at publicinstitutions, which will take an averageof .12 hours (7 minutes) per change,increasing burden by 403,920 hours.Collectively, therefore, the finalregulatory changes reflected in § 668.59will increase for individuals andinstitutions by 2,080,800 hours in OMBControl Number 1845–0041.Section 668.144—Application for TestApprovalWe have clarified and expanded therequirements in current §§ 668.143 and668.144. In addition, we haveconsolidated all of the requirements fortest approval in one section, § 668.144.Paragraphs (a) and (b) of § 668.144describe the general requirement for testpublishers and States to submit to theSecretary any test they wish to haveapproved under subpart J of part 668.Paragraph (c) of § 668.144 describes theinformation that a test publisher mustinclude with its application for approvalof a test. Paragraph (d) of § 668.144describes the information a State mustinclude with its application when itsubmits a test to the Secretary forapproval.Section 668.144(c)(16) will requiretest publishers to include in theirapplications a description of their testadministrator certification process.Under § 668.144(c)(17), we will requiretest publishers to include in theirapplications, a description of the testanomaly analysis the test publisher willconduct and submit to the Secretary.Finally, § 668.144(c)(18) will requiretest publishers to include in theirapplications a description of the typesof accommodations available forindividuals with disabilities, includinga description of the process used toidentify and report whenaccommodations for individuals withdisabilities were provided.We have added § 668.144(d) todescribe what States must include intheir test submissions to the Secretary.While this provision replaces thecontent in current § 668.143, itslanguage has been revised to be parallel,where appropriate, to the test publishersubmission requirements in current§ 668.144. In addition to making theserequirements parallel, § 668.144(d) alsoincludes the new requirements to beadded to the test publisher submissions.A description of those new provisionsfollows:Both test publishers and States will berequired to submit a description of theirtest administrator certification processthat indicates how the test publisher orState, as applicable, will determine thata test administrator has the necessarytraining, knowledge, skills and integrityto test students in accordance withrequirements and how the test publisheror the State will determine that the testadministrator has the ability andfacilities to keep its test secure againstdisclosure or release (see§ 668.144(c)(16) (test publishers) and§ 668.144(d)(7) (States)).We estimate that a test publisher andState will, on average, take 2.5 hours todevelop its process to establish that atest administrator has the necessarytraining, knowledge, skills and integrityto administer ability-to-benefit (ATB)tests and then to report that process tothe Secretary.We estimate that the burdenassociated with the currently approvedeight (8) ATB tests will increase for thetest publishers and States by 20 hours.The regulations will require both testpublishers and States to submit adescription of the test anomaly analysisthey will conduct. This descriptionmust include a description of how theyVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00111 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2will identify potential test irregularitiesand make a determination that testirregularities have occurred; anexplanation of corrective action to betaken in the event of test irregularities;and information on when and how theSecretary, test administrator, andinstitutions will be notified if a testadministrator is decertified (see§ 668.144(c)(17) (test publishers) and§ 668.144(d)(8) (States)).We estimate that each test publisherand State will, on average, take 75 hoursto develop its test anomaly process, toestablish its test anomaly analysis(where it explains its test irregularitydetection process including itsdecertification of test administratorprocess) and to establish its reportingprocess to the Secretary. We estimatethat the burden associated with thecurrently approved eight (8) ATB testswill increase for the test publishers andStates by 600 hours.Under § 668.144(c)(18) and (d)(9)respectively, both test publishers andStates will be required to describe thetypes of accommodations available forindividuals with disabilities, and theprocess for a test administrator toidentify and report to the test publisherwhen accommodations for individualswith disabilities were provided. Weestimate that test publishers and Stateswill, on average, take 1 hour to developand describe to the Secretary the typesof accommodations available toindividuals with disabilities, to describethe process the test administrator willuse to support the identification of thedisability and to develop the process toreport when accommodations will beused.We estimate that the burdenassociated with the currently approvedeight (8) ATB tests will increase for thecurrent test publishers by 8 hours.Collectively, the final regulatorychanges in § 668.144 will increaseburden for test publishers and States by628 hours in OMB 1845–0049.Section 668.150—Agreement Betweenthe Secretary and a Test-Publisher or aStateSection 668.150 provides that States,as well as test publishers, must enterinto agreements with the Secretary inorder to have their tests approved.We also have revised this section torequire both test publishers and Statesto comply with a number of newrequirements that will be added to theagreement with the Secretary.These requirements will include:Requiring the test administrators thatthey certify to provide them with certaininformation about whether they havebeen decertified (see § 668.150(b)(2)).

66942 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and RegulationsWReier-Aviles on DSKGBLS3C1PROD with RULES2We estimate that 3,774 individuals (testadministrators) will take, on average, .17hours (10 minutes) to access, read,complete and submit the writtencertification to a test publisher or State,which will increase burden by 642hours.We estimate that it will take each testpublisher or State 1 hour per testsubmission to develop its process toobtain a certification statement fromeach prospective test administrator,which will increase burden by 8 hours.We estimate that the review of thesubmitted written certifications by thetest publishers or States for the 3,774test administrators will take, on average,.08 hours (5 minutes) per certificationform, which will increase burden by 302hours.With regard to the requirement toimmediately notify the testadministrator, the Secretary, andinstitutions when the test administratoris decertified (see § 668.150(b)(6)), weestimate that 1 percent of the 3,774 testadministrators will be decertified. Weestimate that it will take test publishersand States, on average, 1 hour perdecertification to provide all of the finalnotifications, which will increaseburden for test publishers and States by38 hours.With regard to the requirement toreview test results of tests administeredby a decertified test administrator andimmediately to notify affectedinstitutions and students (see§ 668.150(b)(7)), we estimate thatburden will increase. We estimate that481,763 ATB tests will be taken for titleIV, HEA purposes annually. Of theannual total of ATB tests provided, weestimate that 1 percent will beimproperly administered and that 4,818individuals will be contacted, whichwill take, on average, .25 hours (15minutes) per individual. As a result, weestimate that burden will increase to testpublishers and States by 1,205 hours.In addition, we estimate that it willtake test publishers and States, onaverage, 5 hours per ATB test submitted,to develop the process to determinewhen ATB tests have been improperlyadministered, which for 8 approvedATB tests will increase burden by 40hours.We estimate that test publishers andStates will, on average, take .33 hours(20 minutes) for each of the 4,818estimated improperly administered ATBtests to make the final notifications toinstitutions, students and prospectivestudents, which will increase burden by1,590 hours.We estimate that 38 testadministrators (1 percent of the 3,774test administrators) will be decertified.Of the 38 decertified test administrators,we estimate that 1 previously decertifiedtest administrator (2 percent of38 test administrators) will be recertifiedafter a three-year period and,therefore, reported to the Secretary. Weestimate the burden for test publishersand States for this reporting will be 1hour. We project that it will be very rarethat a decertified test administrator willseek re-certification after the three-yeardecertification period.Under § 668.150(b)(13), testpublishers and States must providecopies of test anomaly analysis every 18months instead of every 3 years. Weestimate that it will take a test publisheror State, on average, 75 hours to conductits test anomaly analysis and report theresults to the Secretary every 18 months.We estimate the burden on testpublishers and States for the submissionof the 8 test anomaly analysis every 18months will be 600 hours.Under § 668.150(b)(15), testpublishers and States will be required toreport to the Secretary any credibleinformation indicating that a test hasbeen compromised (see§ 668.150(b)(15)). We estimate that481,763 ATB tests for title IV, HEApurposes will be given on an annualbasis. Of that total number ATB testsgiven, we estimate that 482 ATB testswill be compromised. On average, weestimate that test publishers and Stateswill take 1 hour per test to collect thecredible information to make thedetermination that a test will becompromised and report it to theSecretary. We estimate that burden willincrease by 482 hours.Section 668.150(b)(16) will requiretest publishers and States to report tothe Office of Inspector General of theDepartment of Education any credibleinformation indicating that a testadministrator or institution may haveengaged in civil or criminal fraud orother misconduct. We estimate that481,763 ATB tests for title IV, HEApurposes will be given on an annualbasis. Of that total number ATB testsgiven, we estimate that 482 ATB testswill be compromised. On average, weestimate that test publishers or Stateswill take 1 hour per test to collect thecredible information to make thedetermination that a test administratoror institution may have engaged in fraudor other misconduct and report it to theU.S. Department of Education’s Office ofthe Inspector General. We estimate that,as a result of this requirement, burdenwill increase by 482 hours.Section 668.150(b)(17) requires a testadministrator who provides a test to anindividual with a disability whorequires an accommodation in the test’sVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00112 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2administration to report to the testpublisher or the State the nature of thedisability and the accommodations thatwere provided. Census data indicatethat 12 percent of the U.S. population isseverely disabled. We estimate that 12percent of the ATB test population(481,763 ATB test takers) or 57,812 ofthe ATB test takers will be individualswith disabilities that will needaccommodations for an ATB test. Weestimate that it will take .08 hours (5minutes) to report the nature of thedisability and any accommodation thatthe test administrator made for the testtaker, increasing burden by 4,625 hours.We estimate that, on average, testpublishers and States will take 2 hoursper ATB test to develop the process forhaving test administrators report thenature of the test taker’s disability andany accommodations provided. Weexpect this to result in an increaseburden for test publishers and States by16 hours (2 hours multiplied by 8 ATBtests).Collectively, the final changesreflected in § 668.150 will increaseburden by 10,031 hours in OMB ControlNumber 1845–0049.Section 668.151—Administration ofTestsSection 668.151(g)(4) will requireinstitutions to keep a record of eachindividual who took an ATB test andthe name and address of the testadministrator who administered the testand any identifier assigned to the testadministrator by the test publisher orthe State.We estimate that 481,763 ATB testsfor title IV, HEA purposes will be givenon an annual basis. We estimate thatproprietary institutions will give173,445 tests (36 percent of those ATBtests) and that, on average, the amountof time to record the test takers’ nameand address as well as the testadministrators’ identifiers will be .08hours (5 minutes) per test, increasingburden for proprietary institutions by13,876 hours.We estimate that private non-profitinstitutions will give 149,347 tests (31percent of the total annual ATB testsgiven) and that, on average, the amountof time to record the test takers’ nameand address, as well as the testadministrators’ identifiers will be .08hours (5 minutes) per test, increasingburden for private non-profitinstitutions by 11,948 hours.We estimate that public institutionswill give 158,962 tests (33 percent of thetotal annual ATB tests given) and that,on average, the amount of time to recordthe test takers’ name and address as wellas the test administrators’ identifiers

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66943WReier-Aviles on DSKGBLS3C1PROD with RULES2will be .08 hours (5 minutes) per test,increasing burden for public institutionsby 12,717 hours.If the individual who took the test hasa disability and is unable to beevaluated by the use of an approvedATB test, or the individual requested orrequired a testing accommodation, theinstitution will be required, under§ 668.151(g)(5), to maintaindocumentation of the individual’sdisability and of the testingarrangements provided. Census dataindicate that 12 percent of the U.S.population is severely disabled. Weestimate that 12 percent of the ATB testpopulation (481,763 ATB test takers) or57,812 of the ATB test takers will beindividuals with disabilities that willneed accommodations for the ATB test.We estimate that it will take .08 hours(5 minutes) to collect and maintaindocumentation of the individual’sdisability and of the testingaccommodations provided to the testtaker.We estimate that proprietaryinstitutions will give 20,812 tests (36 ofthe total annual ATB tests given),resulting in an increase in burden forproprietary institutions by 1,665 hours(20,812 tests multiplied by .08 hours).We estimate that private non-profitinstitutions will give 17,922 tests (31percent of the total annual ATB testsgiven), resulting in an increase inburden for private non-profitinstitutions by 1,434 hours (17,922 testsmultiplied by .08 hours).We estimate that public institutionswill give 19,078 tests (33 percent of thetotal annual ATB tests given), resultingin an increase in burden for publicinstitutions by 1,526 hours (19,078 testsmultiplied by .08 hours).Collectively, the final regulatorychanges reflected in § 668.151 willincrease burden by 43,166 hours inOMB Control Number 1845–0049.Section 668.152—Administration ofTests by Assessment CentersSection 668.152(a) clarifies thatassessment centers are also required tocomply with the provisions of § 688.153(Administration of tests for individualswhose native language is not English orfor individuals with disabilities), ifapplicable.Under § 668.152(b)(2), assessmentcenters that score tests will be requiredto provide copies of completed tests orlists of test-takers’ scores to the testpublisher or the State, as applicable, ona weekly basis. Under § 668.152(b)(2)(i)and (b)(2)(ii), copies of completed testsor reports listing test-takers’ scores willbe required to include the name andaddress of the test administrator whoadministered the test and any identifierassigned to the test administrator by thetest publisher or the State.We estimate that of the 3,774 ATB testadministrators approximately one-third(.3328 times 3,774) or 1,256 of the ATBtest administrators are at test assessmentcenters. Of the 1,256 test assessmentcenters, we estimate that 18 percent or226 test assessment centers are atprivate non-profit institutions and 82percent or 1,030 test assessment centersare at public institutions. We estimatethat 92 percent of the ATB testsprovided at test assessment centers arescored by the test administrators.Therefore, under the regulations, theinstitution will be required to maintainthe scored ATB tests, to collect andsubmit copies of the completed ATBtests or a listing to the test publisher orState on a weekly basis, while the other8 percent will not be impacted by theseregulations. We estimate that, onaverage, it will take .08 hours (5minutes) per week for the testassessment center (institution) to collectand submit the final information.For the 226 test assessment centers atprivate non-profit institutions, weexpect 940 hours of increased annualburden (226 test assessment centersmultiplied by .08 hours (5 minutes) andthen multiplied by 52 weeks in a year).For the 1,030 test assessment centersat public institutions, we expect 4,285hours of increased annual burden (1,030test assessment centers multiplied by.08hours (5 minutes) and then multipliedby 52 weeks in a year).Collectively, the final regulatorychanges reflected in § 668.152 willincrease burden by 5,225 hours in OMBControl Number 1845–0049.Section 668.164—Disbursing FundsUnder § 668.164(i), an institution willprovide a way for a Federal Pell Granteligible student to obtain or purchaserequired books and supplies by theseventh day of a payment period undercertain conditions. An institution willhave to comply with this requirementonly if, 10 days before the beginning ofthe payment period, the institutioncould disburse the title IV, HEAprogram funds for which the student iseligible, and presuming that those fundswere disbursed, the student will have atitle IV, HEA credit balance under§ 668.164(e). The amount the institutionwill provide to the student for booksand supplies will be the lesser of thepresumed credit balance or the amountneeded by the student, as determined bythe institution. In determining theamount needed by the student, theinstitution could use the actual costs ofbooks and supplies or the allowance forVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00113 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2books and supplies used in the student’scost of attendance for the paymentperiod.We estimate that of the 6,321,678Federal Pell Grant recipients in the2008–2009 award year, thatapproximately 30 percent or 1,896,503will have or did have a title IV, HEAcredit balance. Of that number ofFederal Pell Grant recipients, weestimate that 25 percent or 474,126Federal Pell Grant recipients will havea presumed credit balance 10 days priorto the beginning of the payment period,and as final, that the institution willhave to provide a way for thoserecipients to either obtain or purchasetheir books and supplies within 7 daysof the beginning of the payment period.We estimate that the 2,063 proprietaryinstitutions participating in the FederalPell Grant program will take, on average3 hours per institution to analyze andmake programming change needed toidentify these recipients with presumedcredit balances, increasing burden by6,189 hours. Additionally, we estimatethat proprietary institutions will berequired to disburse the presumedcredit balance to 38 percent of the474,126 at proprietary institutions(180,168 recipients), which on average,will take .08 hours (5 minutes) perrecipient, increasing burden by 14,413hours.We estimate that the 1,523 privatenon-profit institutions participating inthe Federal Pell Grant program willtake, on average, 3 hours per institutionto analyze and make programmingchange needed to identify theserecipients with presumed creditbalances, increasing burden by 4,569hours. Additionally, we estimate thatprivate non-profit institutions will berequired to disburse the presumedcredit balance to 28 percent of the474,126 at proprietary institutions(132,755 recipients) which on average,will take .08 hours (5 minutes) perrecipient, increasing burden by 10,620hours.We estimate that the 1,883 publicinstitutions participating in the FederalPell Grant program will take, on average3 hours per institution to analyze andmake programming change needed toidentify these recipients with presumedcredit balances, increasing burden by5,649 hours. Additionally, we estimatethat proprietary institutions will berequired to disburse the presumedcredit balance to 34 percent of the474,126 at proprietary institutions(161,203 recipients) which on average,will take .08 hours (5 minutes) perrecipient, increasing burden by 12,896hours.

66944 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and RegulationsCollectively, the final regulatorychanges reflected in § 668.164 willincrease burden by 54,336 hours inOMB Control Number 1845–NEW3.WReier-Aviles on DSKGBLS3C1PROD with RULES2COLLECTION OF INFORMATIONRegulatory Section Information collection Collection668.6 ....................... This regulatory section will require institutions to report for each student whoduring an award year began attending or completed a program that preparesa student for gainful employment information needed to identify the studentand the location of the institution the student attended, the CIP code for theprogram, the date the student completed the program, the amounts the studentreceived from private educational loans and the amount from institutionalfinancing plans that the student owes the institution after completingthe program, and whether the student matriculated to a higher credentialedprogram at the same institution or another institution. Institutions will have todisclose information to prospective students about the occupations (bynames and SOC codes) that its programs prepare students to enter, alongwith links to occupational profiles on O–NET or its successor site, or if thenumber of occupations related to the programs on O–Net is more than ten(10), the institution may provide Web links to a representative sample of theSOCs for which its graduates typically find employment within a few yearsafter completing the program. In addition, the institution will also have to reportthe on-time graduation rate for students entering the program; the totalamount of tuition and fees it charges a student for completing the programwithin the normal timeframe, the typical costs for books and supplies, and thetypical costs for room and board, if applicable. The institution may include informationon other costs, such as transportation and living expenses, but itmust provide a Web link, or access, to the program cost information the institutionmakes available under § 668.43(a). Beginning July 1, 2011, the institutionmust provide prospective students with the placement rate for studentscompleting the program, as determined by the institution’s accrediting agencyor State requirements, until NCES develops and makes available a newplacement rate, and the median loan debt incurred by students who completedthe program, as provided by the Secretary, as well as other informationthe Secretary provided to the institution about the program. Separately,the institution must identify the median loan dept from title IV, HEA programloans, and the median loan debt from private educational loan and institutionalfinancing plans.668.8 ....................... This regulatory section provides for a new conversion ratio when convertingclock hours to credit hours. As finalized, this section will include an exemptionfor affected institutions if the accrediting agency or the State approvalagency finds that there are no deficiencies in the institutions policies and proceduresfor these conversions. Under the exception, the institution will use alower ratio and could consider student’s outside work in the total hours beingconverted to credit hours. Burden will increase for proprietary, not-for profitand public institutions when they measure whether certain programs whenconverted from clock hours to credit hours have sufficient credit hours to receivetitle VI, HEA funds.668.16 ..................... This regulatory section will be streamlined by moving most of the elements ofsatisfactory academic progress (SAP) from this section to § 668.34. Underthis proposal, the required elements of SAP will be expanded to providegreater institutional flexibility. Burden will increase for proprietary, not-for profitand public institutions to develop a high school diploma validity processand will increase when certain diplomas are verified.668.22 ..................... This regulatory section will consider a student to have withdrawn if the studentdoes not complete all the days in the payment period or period of enrollmentthat the student was scheduled to complete prior to withdrawing. Burden willincrease for individuals, proprietary, not-for profit and public institutions whenstudents in term-based programs with modules or compressed courses withdrawbefore completing more than 60 percent of the payment period or periodof enrollment for which a calculation will be performed to determine theearned and unearned portions of title IV, HEA program assistance.668.34 ..................... This regulatory section has been restructured and the satisfactory academicprogress requirements have been expanded to allow for more frequentmeasuring of SAP. Burden will increase for individuals and proprietary, notforprofit and public institutions for institutions to measure academic progressand when academic plans or alternatives will be provided to students who donot meet the institution’s academic standards.VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00114 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2OMB 1845–NEW1. This will be a newcollection. Separate 60-day and 30-day Federal Register notices werepublished to solicit comment. Theburden will increase by 677,160hours.OMB 1845–0022. The burden will increaseby 18,349 hours.OMB 1845–0022 and OMB 1845–NEW2. The burden hours attributableto SAP in OMB 1845–0022 will beadministratively transferred to OMB1845–NEW2. Additionally, the burdenwill increase by 21,982 hours in OMB1845–0022.OMB 1845–0022. The burden will increaseby 743,881 hours.OMB 1845–NEW2. This will be a newcollection. Separate 60-day and 30-day Federal Register notices werepublished to solicit comment. Theburden will increase by 976,856hours.

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66945COLLECTION OF INFORMATION—ContinuedRegulatory Section Information collection Collection668.43 ..................... This regulatory section will require that for institutions that enter into written arrangementswith other institutions to provide for a portion of its programs’training by the institution that is not providing the degree or certificate, the institutionproviding the degree or certificate must provide a variety of disclosuresto enrolled and prospective students about the written arrangements.Burden will increase for proprietary, not-for profit and public institutions for reportingthe details of written arrangements with other institutions offering aportion of a student’s program of study.668.55 ..................... This regulatory provision will require that all updated applicant data informationas a result of verification be reported to the Secretary via the Central ProcessingSystem. This also will cover changes made as a result of a dependentstudent becoming married during the award year when a financial aid administratorexercises their discretion to require marital status change to addressan inequity or accurately reflect the student’s ability to pay, suchchange in status due to marriage had previously been prohibited.668.56 ..................... This regulation changes from the current five mandatory items included in theverification process to a more flexible list of items that will be selected on anindividualized basis. For example, there is no need to verify data that can beobtained directly from the IRS. Burden will increase for individuals; however,the average number of data elements to be verified is expected to be reduced.668.57 ..................... This final regulatory provision will modify the requirements related to acceptabledocumentation required as a part of the verification process. It will allow forthe importation of data obtained directly from the IRS that has been unchangedand will provide other flexibilities that will reduce burden; however,due to the large increase in applicants, there will be an overall increase inburden.668.59 ..................... This provision eliminates all allowable tolerances and will require an institutionto submit to the Department all changes to an applicant’s FAFSA as a resultof verification. Burden will increase for proprietary, not-for profit and public institutionsthat will recalculate title IV, HEA awards as a result of datachanges due to verification.668.144 ................... This regulatory section expands the required elements that a test publisher or aState must submit to the Secretary for approval.668.150 ................... This provision expands the provisions of the agreement between the Secretaryand the ability to benefit test (ATB) publishers or a State. The expanded provisionsinclude requiring test administrators to certify that they have not beendecertified, notification requirements when a test administrator is decertified,and providing test anomaly studies every eighteen months rather than every36 months. Burden will increase for individuals, proprietary, not-for profit andpublic institutions for the collection and maintenance of certifications, for requirednotifications, and for submission of test anomaly studies.668.151 ................... This provision will require independent test administrators to submit completedtests for scoring to the test publisher or the State in no more than two businessdays following the test. Institutions will be required to maintain a recordof each individual who takes an ATB test and information about the test administrator.When the test taker has a disability, it will be the institution’s responsibilityto maintain documentation of the individual’s disability and anyaccommodation provided the individual.668.152 ................... This provision will require that test assessment centers provide either copies ofthe completed tests or lists of the test takers’ scores, including the test administrator’sname, address, and any other test administrator identifier to thetest publisher or State, as applicable, on a weekly basis.668.164 ................... This provision will require that institutions provide a way for Federal Pell Grantprogram recipients to obtain or purchase books and supplies by the seventhday of the payment period if certain conditions are met and a credit balanceor projected credit balance exists. Burden will increase for proprietary, not-forprofit and public institutions to identify and notify Pell recipients with a presumedcredit balance about ways to obtain or purchase books and supplies.OMB 1845–0022. The burden will increaseby 67,870 hours.OMB 1845–0041. The burden will increaseby 386,750 hours.OMB 1845–0041. The burden will increaseby 612,000 hours.OMB 1845–0041. The burden will increaseby 612,000 hours.OMB 1845–0041. The burden will increaseby 2,080,800 hours.OMB 1845–0049. The burden will increaseby 628 hours.OMB 1845–0049. The burden will increaseby 10,031 hours.OMB 1845–0049. The burden will increaseby 43,166 hours.OMB 1845–0049. The burden will increaseby 5,225 hours.OMB 1845–NEW3. This will be a newcollection. Separate 60-day and 30-day Federal Register notices werepublished to solicit comment. Theburden will increase by 54,336 hours.WReier-Aviles on DSKGBLS3C1PROD with RULES2Intergovernmental ReviewThese programs are not subject toExecutive Order 12372 and theregulations in 34 CFR part 79.Assessment of Educational ImpactIn accordance with section 411 of theGeneral Education Provisions Act, 20U.S.C. 1221e–4, and based on our ownreview, we have determined that thesefinal regulations do not requiretransmission of information that anyother agency or authority of the UnitedStates gathers or makes available.VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00115 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2Electronic Access to This DocumentYou can view this document, as wellas all other documents of thisDepartment published in the FederalRegister, in text or Adobe PortableDocument Format (PDF) on the Internetat the following site: http://www.ed.gov/news/fedregister. To use PDF, you must

66946 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulationshave Adobe Acrobat Reader, which isavailable free at this site.Note: The official version of this documentis the document published in the FederalRegister. Free Internet access to the officialedition of the Federal Register and the Codeof Federal Regulations is available on GPOAccess at: http://www.gpoaccess.gov/nara/index/html.(Catalog of Federal Domestic Assistance:84.007 FSEOG; 84.032 Federal FamilyEducation Loan Program; 84.033 FederalWork-Study Program; 84.037 Federal PerkinsLoan Program; 84.063 Federal Pell GrantProgram; 84.069 LEAP; 84.268 William D.Ford Federal Direct Loan Program; 84.376ACG/SMART; 84.379 TEACH Grant Program)List of Subjects34 CFR Part 60034 CFR Part 690Colleges and universities, Educationof disadvantaged, Grant programseducation,Reporting and recordkeepingrequirements, Student aid.34 CFR Part 691Colleges and universities, Elementaryand secondary education, Grantprograms-education, Student aid.Dated: October 18, 2010.Arne Duncan,Secretary of Education.■ For the reasons discussed in thepreamble, the Secretary amends parts600, 602, 603, 668, 682, 685, 686, 690,and 691 of title 34 of the Code ofFederal Regulations as follows:(1) Identified by a StandardOccupational Classification (SOC) codeestablished by the Office of Managementand Budget or an OccupationalInformation Network O*NET–SOC codeestablished by the Department of Laborand available at http://online.onetcenter.org or its successorsite; or(2) Determined by the Secretary inconsultation with the Secretary of Laborto be a recognized occupation.* * * * *■ 3. Section 600.4 is amended by:■ A. In paragraph (a)(3), adding thewords, ‘‘in accordance with § 600.9’’immediately after the word ‘‘located’’.■ B. Revising paragraph (a)(4)(i)(C).The revision reads as follows:WReier-Aviles on DSKGBLS3C1PROD with RULES2Colleges and universities, Foreignrelations, Grant programs-education,Loan programs-education, Reportingand recordkeeping requirements,Selective Service System, Student aid,Vocational education.34 CFR Part 602Colleges and universities, Reportingand recordkeeping requirements.34 CFR Part 603Colleges and universities, Vocationaleducation.34 CFR Part 668Administrative practice andprocedure, Aliens, Colleges anduniversities, Consumer protection,Grant programs-education,Incorporation by reference, Loanprograms-education, Reporting andrecordkeeping requirements, SelectiveService System, Student aid, Vocationaleducation.34 CFR Part 682Administrative practice andprocedure, Colleges and universities,Loan programs-education, Reportingand recordkeeping requirements,Student aid, Vocational education.34 CFR Part 685Administrative practice andprocedure, Colleges and universities,Loan programs-education, Reportingand recordkeeping requirements,Student aid, Vocational education.34 CFR Part 686Administrative practice andprocedure, Colleges and universities,Education, Elementary and secondaryeducation, Grant programs-education,Reporting and recordkeepingrequirements, Student aid.PART 600—INSTITUTIONALELIGIBILITY UNDER THE HIGHEREDUCATION ACT OF 1965, ASAMENDED■ 1. The authority citation for part 600continues to read as follows:Authority: 20 U.S.C. 1001, 1002, 1003,1088, 1091, 1094, 1099b, and 1099c, unlessotherwise noted.■ 2. Section 600.2 is amended by:■ A. Adding, in alphabetical order, thedefinition of a Credit hour.■ B. Revising the definition ofRecognized occupation.The addition and revision read asfollows:§ 600.2 Definitions.* * * * *Credit hour: Except as provided in 34CFR 668.8(k) and (l), a credit hour is anamount of work represented in intendedlearning outcomes and verified byevidence of student achievement that isan institutionally establishedequivalency that reasonablyapproximates not less than—(1) One hour of classroom or directfaculty instruction and a minimum oftwo hours of out of class student workeach week for approximately fifteenweeks for one semester or trimester hourof credit, or ten to twelve weeks for onequarter hour of credit, or the equivalentamount of work over a different amountof time; or(2) At least an equivalent amount ofwork as required in paragraph (1) of thisdefinition for other academic activitiesas established by the institutionincluding laboratory work, internships,practica, studio work, and otheracademic work leading to the award ofcredit hours.* * * * *Recognized occupation: Anoccupation that is—§ 600.4 Institution of higher education.(a) * * *(4) * * *(i) * * *(C) That is at least a one academicyear training program that leads to acertificate, or other nondegreerecognized credential, and preparesstudents for gainful employment in arecognized occupation; and* * * * *§ 600.5 [Amended]■ 4. Section 600.5(a)(4) is amended byadding the words, ‘‘in accordance with§ 600.9’’ immediately after the word‘‘located’’.§ 600.6 [Amended]VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00116 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2■ 5. Section 600.6(a)(3) is amended byadding the words, ‘‘in accordance with§ 600.9’’ immediately after the word‘‘located’’.■ 6. Section 600.9 is added to subpart Ato read as follows:§ 600.9 State authorization.(a)(1) An institution described under§§ 600.4, 600.5, and 600.6 is legallyauthorized by a State if the State has aprocess to review and appropriately acton complaints concerning theinstitution including enforcingapplicable State laws, and theinstitution meets the provisions ofparagraphs (a)(1)(i), (a)(1)(ii), or (b) ofthis section.(i)(A) The institution is established byname as an educational institution by aState through a charter, statute,constitutional provision, or other actionissued by an appropriate State agency orState entity and is authorized to operateeducational programs beyond secondaryeducation, including programs leadingto a degree or certificate.(B) The institution complies with anyapplicable State approval or licensure

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66947WReier-Aviles on DSKGBLS3C1PROD with RULES2requirements, except that the State mayexempt the institution from any Stateapproval or licensure requirementsbased on the institution’s accreditationby one or more accrediting agenciesrecognized by the Secretary or basedupon the institution being in operationfor at least 20 years.(ii) If an institution is established bya State on the basis of an authorizationto conduct business in the State or tooperate as a nonprofit charitableorganization, but not established byname as an educational institutionunder paragraph (a)(1)(i) of this section,the institution—(A) By name, must be approved orlicensed by the State to offer programsbeyond secondary education, includingprograms leading to a degree orcertificate; and(B) May not be exempt from theState’s approval or licensurerequirements based on accreditation,years in operation, or other comparableexemption.(2) The Secretary considers aninstitution to meet the provisions ofparagraph (a)(1) of this section if theinstitution is authorized by name tooffer educational programs beyondsecondary education by—(i) The Federal Government; or(ii) As defined in 25 U.S.C. 1802(2),an Indian tribe, provided that theinstitution is located on tribal lands andthe tribal government has a process toreview and appropriately act oncomplaints concerning an institutionand enforces applicable tribalrequirements or laws.(b)(1) Notwithstanding paragraph(a)(1)(i) and (ii) of this section, aninstitution is considered to be legallyauthorized to operate educationalprograms beyond secondary education ifit is exempt from State authorization asa religious institution under the Stateconstitution or by State law.(2) For purposes of paragraph (b)(1) ofthis section, a religious institution is aninstitution that—(i) Is owned, controlled, operated, andmaintained by a religious organizationlawfully operating as a nonprofitreligious corporation; and(ii) Awards only religious degrees orcertificates including, but not limited to,a certificate of Talmudic studies, anassociate of Biblical studies, a bachelorof religious studies, a master of divinity,or a doctor of divinity.(c) If an institution is offeringpostsecondary education throughdistance or correspondence education tostudents in a State in which it is notphysically located or in which it isotherwise subject to State jurisdiction asdetermined by the State, the institutionmust meet any State requirements for itto be legally offering postsecondarydistance or correspondence education inthat State. An institution must be ableto document to the Secretary the State’sapproval upon request.(Authority: 20 U.S.C. 1001 and 1002)PART 602—THE SECRETARY’SRECOGNITION OF ACCREDITINGAGENCIES■ 7. The authority citation for part 602continues to read as follows:Authority: 20 U.S.C. 1099b, unlessotherwise noted.■ 8. Section 602.24 is amended byadding a new paragraph (f) to read asfollows:§ 602.24 Additional procedures certaininstitutional accreditors must have.* * * * *(f) Credit-hour policies. Theaccrediting agency, as part of its reviewof an institution for initial accreditationor preaccreditation or renewal ofaccreditation, must conduct an effectivereview and evaluation of the reliabilityand accuracy of the institution’sassignment of credit hours.(1) The accrediting agency meets thisrequirement if—(i) It reviews the institution’s—(A) Policies and procedures fordetermining the credit hours, as definedin 34 CFR 600.2, that the institutionawards for courses and programs; and(B) The application of the institution’spolicies and procedures to its programsand coursework; and(ii) Makes a reasonable determinationof whether the institution’s assignmentof credit hours conforms to commonlyaccepted practice in higher education.(2) In reviewing and evaluating aninstitution’s policies and procedures fordetermining credit hour assignments, anaccrediting agency may use sampling orother methods in the evaluation,sufficient to comply with paragraph(f)(1)(i)(B) of this section.(3) The accrediting agency must takesuch actions that it deems appropriateto address any deficiencies that itidentifies at an institution as part of itsreviews and evaluations underparagraph (f)(1)(i) and (ii) of thissection, as it does in relation to otherdeficiencies it may identify, subject tothe requirements of this part.(4) If, following the institutionalreview process under this paragraph (f),the agency finds systemicnoncompliance with the agency’spolicies or significant noncomplianceregarding one or more programs at theVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00117 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2institution, the agency must promptlynotify the Secretary.* * * * *PART 603—SECRETARY’SRECOGNITION PROCEDURES FORSTATE AGENCIES■ 9. The authority citation for part 603is revised to read as follows:Authority: 20 U.S.C. 1001, 1002,1094(c)(4); 38 U.S.C. 3675, unless otherwisenoted.■ 10. Section 603.24 is amended byredesignating paragraph (c) as paragraph(d), adding a new paragraph (c), andrevising the authority citation afterredesignated paragraph (d) to read asfollows:§ 603.24 Criteria for State agencies.* * * * *(c) Credit-hour policies. The Stateagency, as part of its review of aninstitution for initial approval orrenewal of approval, must conduct aneffective review and evaluation of thereliability and accuracy of theinstitution’s assignment of credit hours.(1) The State agency meets thisrequirement if—(i) It reviews the institution’s—(A) Policies and procedures fordetermining the credit hours, as definedin 34 CFR 600.2, that the institutionawards for courses and programs; and(B) The application of the institution’spolicies and procedures to its programsand coursework; and(ii) Makes a reasonable determinationof whether the institution’s assignmentof credit hours conforms to commonlyaccepted practice in higher education.(2) In reviewing and evaluating aninstitution’s policies and procedures fordetermining credit hour assignments, aState agency may use sampling or othermethods in the evaluation, sufficient tocomply with paragraph (c)(1)(i)(B) ofthis section.(3) The State agency must take suchactions that it deems appropriate toaddress any deficiencies that itidentifies at an institution as part of itsreviews and evaluations underparagraph (c)(1)(i) and (ii) of thissection, as it does in relation to otherdeficiencies it may identify, subject tothe requirements of this part.(4) If, following the institutionalreview process under this paragraph (c),the agency finds systemicnoncompliance with the agency’spolicies or significant noncomplianceregarding one or more programs at theinstitution, the agency must promptlynotify the Secretary.* * * * *

WReier-Aviles on DSKGBLS3C1PROD with RULES266948 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations(Authority: 20 U.S.C. 1094(c)(4))PART 668—STUDENT ASSISTANCEGENERAL PROVISIONS■ 11. The authority citation for part 668continues to read as follows:Authority: 20 U.S.C. 1001, 1002, 1003,1070g, 1085, 1088, 1091, 1092, 1094, 1099c,and 1099c–1, unless otherwise noted.■ 12. Section 668.2 is amended by:■ A. In paragraph (a), adding, inalphabetical order, the term ‘‘Credithour’’.■ B. In paragraph (b), in the definitionof Full-time student, adding the words,‘‘including for a term-based program,repeating any coursework previouslytaken in the program but not includingeither more than one repetition of apreviously passed course, or anyrepetition of a previously passed coursedue to the student failing othercoursework’’ immediately before theperiod in the second sentence.■ C. In paragraph (b), adding, inalphabetical order, definitions of ‘‘Freeapplication for Federal student aid(FAFSA)’’, ‘‘Institutional studentinformation record (ISIR)’’, and ‘‘Studentaid report (SAR)’’.■ D. In paragraph (b), revising thedefinitions for ‘‘Valid InstitutionalStudent Information Record (validISIR)’’ and ‘‘Valid Student Aid Report(valid SAR)’’.The additions and revisions read asfollows:§ 668.2 General definitions.* * * * *(b) * * *Free application for Federal studentaid (FAFSA): The student aidapplication provided for under section483 of the HEA, which is used todetermine an applicant’s eligibility forthe title IV, HEA programs.* * * * *Institutional student informationrecord (ISIR): An electronic record thatthe Secretary transmits to an institutionthat includes an applicant’s—(1) FAFSA information; and(2) EFC.* * * * *Student aid report (SAR): A reportprovided to an applicant by theSecretary showing his or her FAFSAinformation and the amount of his orher EFC.* * * * *Valid institutional studentinformation record (valid ISIR): An ISIRon which all the information reportedon a student’s FAFSA is accurate andcomplete as of the date the applicationis signed.Valid student aid report (valid SAR):A student aid report on which all of theinformation reported on a student’sFAFSA is accurate and complete as ofthe date the application is signed.* * * * *■ 13. Section 668.5 is amended by:■ A. Revising paragraph (a).■ B. Revising paragraph (c)(1).■ C. In paragraph (c)(2), adding thewords ‘‘offered by the institution thatgrants the degree or certificate’’ after theword ‘‘program’’.■ D. In paragraph (c)(3)(i), removing thewords ‘‘not more than’’ and adding thewords ‘‘or less’’ after the word ‘‘percent’’.■ E. In paragraph (c)(3)(ii)(A), removingthe words ‘‘not more’’ and adding, intheir place, the word ‘‘less’’.■ F. Adding new paragraph (e).The addition and revisions read asfollows:§ 668.5 Written arrangements to provideeducational programs.(a) Written arrangements betweeneligible institutions. (1) Except asprovided in paragraph (a)(2) of thissection, if an eligible institution entersinto a written arrangement with anothereligible institution, or with a consortiumof eligible institutions, under which theother eligible institution or consortiumprovides part of the educationalprogram to students enrolled in the firstinstitution, the Secretary considers thateducational program to be an eligibleprogram if the educational programoffered by the institution that grants thedegree or certificate otherwise satisfiesthe requirements of § 668.8.(2) If the written arrangement isbetween two or more eligibleinstitutions that are owned or controlledby the same individual, partnership, orcorporation, the Secretary considers theeducational program to be an eligibleprogram if—(i) The educational program offeredby the institution that grants the degreeor certificate otherwise satisfies therequirements of § 668.8; and(ii) The institution that grants thedegree or certificate provides more than50 percent of the educational program.* * * * *(c) * * *(1) The ineligible institution ororganization has not—(i) Had its eligibility to participate inthe title IV, HEA programs terminatedby the Secretary;(ii) Voluntarily withdrawn fromparticipation in the title IV, HEAprograms under a termination, showcause,suspension, or similar typeproceeding initiated by the institution’sState licensing agency, accreditingagency, guarantor, or by the Secretary;VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00118 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2(iii) Had its certification to participatein the title IV, HEA programs revokedby the Secretary;(iv) Had its application for recertificationto participate in the title IV,HEA programs denied by the Secretary;or(v) Had its application for certificationto participate in the title IV, HEAprograms denied by the Secretary;* * * * *(e) Information made available tostudents. If an institution enters into awritten arrangement described inparagraph (a), (b), or (c) of this section,the institution must provide theinformation described in § 668.43(a)(12)to enrolled and prospective students.* * * * *■ 14. Section 668.6 is added to subpartA to read as follows:§ 668.6 Reporting and disclosurerequirements for programs that preparestudents for gainful employment in arecognized occupation.(a) Reporting requirements. (1) Inaccordance with procedures establishedby the Secretary an institution mustreport information that includes—(i) For each student who enrolled ina program under § 668.8(c)(3) or (d)during an award year—(A) Information needed to identify thestudent and the institution the studentattended;(B) If the student began attending aprogram during the award year, thename and the Classification ofInstructional Program (CIP) code of thatprogram; and(C) If the student completed aprogram during the award year—(1) The name and CIP code of thatprogram, and the date the studentcompleted the program;(2) The amounts the student receivedfrom private education loans and theamount from institutional financingplans that the student owes theinstitution upon completing theprogram; and(3) Whether the student matriculatedto a higher credentialed program at theinstitution or if available, evidence thatthe student transferred to a highercredentialed program at anotherinstitution; and(ii) For each program, by name andCIP code, offered by the institutionunder § 668.8(c)(3) or (d), the totalnumber of students that are enrolled inthe program at the end of each awardyear and identifying information forthose students.(2)(i) An institution must report theinformation required under paragraph(a)(1) of this section—

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66949WReier-Aviles on DSKGBLS3C1PROD with RULES2(A) No later than October 1, 2011 forinformation from the 2006–07 awardyear to the extent that the informationis available;(B) No later than October 1, 2011 forinformation from the 2007–08 through2009–10 award years; and(C) No earlier than September 30, butno later than the date established by theSecretary through a notice published inthe Federal Register, for informationfrom the most recently completed awardyear.(ii) For any award year, if aninstitution is unable to provide all orsome of the information required underparagraph (a)(1) of this section, theinstitution must provide an explanationof why the missing information is notavailable.(b) Disclosures. (1) For each programoffered by an institution under thissection, the institution must provideprospective students with—(i) The occupations (by names andSOC codes) that the program preparesstudents to enter, along with links tooccupational profiles on O*NET or itssuccessor site. If the number ofoccupations related to the program, asidentified by entering the program’s fullsix digit CIP code on the O*NETcrosswalk at http://online.onetcenter.org/crosswalk/ ismore than ten, the institution mayprovide Web links to a representativesample of the identified occupations (byname and SOC code) for which itsgraduates typically find employmentwithin a few years after completing theprogram;(ii) The on-time graduation rate forstudents completing the program, asprovided under paragraph (c) of thissection;(iii) The tuition and fees it charges astudent for completing the programwithin normal time as defined in§ 668.41(a), the typical costs for booksand supplies (unless those costs areincluded as part of tuition and fees), andthe cost of room and board, ifapplicable. The institution may includeinformation on other costs, such astransportation and living expenses, butit must provide a Web link, or access,to the program cost information theinstitutions makes available under§ 668.43(a);(iv) The placement rate for studentscompleting the program, as determinedunder a methodology developed by theNational Center for Education Statistics(NCES) when that rate is available. Inthe meantime, beginning on July 1,2011, if the institution is required by itsaccrediting agency or State to calculatea placement rate on a program basis, itmust disclose the rate under this sectionand identify the accrediting agency orState agency under whose requirementsthe rate was calculated. If theaccrediting agency or State requires aninstitution to calculate a placement rateat the institutional level or other than aprogram basis, the institution must usethe accrediting agency or Statemethodology to calculate a placementrate for the program and disclose thatrate; and(v) The median loan debt incurred bystudents who completed the program asprovided by the Secretary, as well asany other information the Secretaryprovided to the institution about thatprogram. The institution must identifyseparately the median loan debt fromtitle IV, HEA program loans, and themedian loan debt from privateeducational loans and institutionalfinancing plans.(2) For each program, the institutionmust—(i) Include the information requiredunder paragraph (b)(1) of this section inpromotional materials it makes availableto prospective students and post thisinformation on its Web site;(ii) Prominently provide theinformation required under paragraph(b)(1) of this section in a simple andmeaningful manner on the home page ofits program Web site, and provide aprominent and direct link on any otherWeb page containing general, academic,or admissions information about theprogram, to the single Web page thatcontains all the required information;(iii) Display the information requiredunder paragraph (b)(1) of this section onthe institution’s Web site in an openformat that can be retrieved,downloaded, indexed, and searched bycommonly used Web searchapplications. An open format is one thatis platform-independent, is machinereadable,and is made available to thepublic without restrictions that wouldimpede the reuse of that information;and(iv) Use the disclosure form issued bythe Secretary to provide the informationin paragraph (b)(1), and otherinformation, when that form isavailable.(c) On-time completion rate. Aninstitution calculates an on-timecompletion rate for each programsubject to this section by—(1) Determining the number ofstudents who completed the programduring the most recently completedaward year;(2) Determining the number ofstudents in paragraph (c)(1) of thissection who completed the programwithin normal time, as defined under§ 668.41(a), regardless of whether theVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00119 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2students transferred into the program orchanged programs at the institution. Forexample, the normal time to completean associate degree is two years and thistimeframe applies to all students in theprogram. If a student transfers into theprogram, regardless of the number ofcredits the institution accepts from thestudent’s attendance at the priorinstitution, those transfer credits haveno bearing on the two-year timeframe.The student would still have two yearsto complete from the date he or shebegan attending the two-year program.To be counted as completing on time, astudent who changes programs at theinstitution and begins attending thetwo-year program must complete withinthe two-year timeframe beginning fromthe date the student began attending theprior program; and(3) Dividing the number of studentswho completed the program withinnormal time, as determined underparagraph (c)(2) of this section, by thetotal number of students who completedthe program, as determined underparagraph (c)(1) of this section, andmultiplying the result by 100.(Approved by the Office of Management andBudget under control number 1845–NEW1)(Authority: 20 U.S.C 1001(b), 1002(b) and (c))■ 15. Section 668.8 is amended by:■ A. Revising paragraph (c)(3).■ B. In paragraph (d)(2)(iii), adding thewords, ‘‘as provided under § 668.6’’immediately after the word‘‘occupation.’’■ C. In paragraph (d)(3)(iii), adding thewords, ‘‘as provided under § 668.6’’immediately after the word‘‘occupation.’’■ D. Revising paragraphs (k) and (l).The revisions read as follows:§ 668.8 Eligible program.* * * * *(c) * * *(3) Be at least a one-academic-yeartraining program that leads to acertificate, or other nondegreerecognized credential, and preparesstudents for gainful employment in arecognized occupation.* * * * *(k) Undergraduate educationalprogram in credit hours. (1) Except asprovided in paragraph (k)(2) of thissection, if an institution offers anundergraduate educational program incredit hours, the institution must usethe formula contained in paragraph (l)of this section to determine whether thatprogram satisfies the requirementscontained in paragraph (c)(3) or (d) ofthis section, and the number of credithours in that educational program for

WReier-Aviles on DSKGBLS3C1PROD with RULES266950 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulationspurposes of the title IV, HEA programs,unless—(i) The program is at least twoacademic years in length and providesan associate degree, a bachelor’s degree,a professional degree, or an equivalentdegree as determined by the Secretary;or(ii) Each course within the program isacceptable for full credit toward thatinstitution’s associate degree, bachelor’sdegree, professional degree, orequivalent degree as determined by theSecretary provided that—(A) The institution’s degree requiresat least two academic years of study;and(B) The institution demonstrates thatstudents enroll in, and graduate from,the degree program.(2) A program is considered to be aclock-hour program for purposes of thetitle IV, HEA programs if—(i) Except as provided in paragraph(k)(3) of this section, a program isrequired to measure student progress inclock hours when—(A) Receiving Federal or Stateapproval or licensure to offer theprogram; or(B) Completing clock hours is arequirement for graduates to apply forlicensure or the authorization topractice the occupation that the studentis intending to pursue;(ii) The credit hours awarded for theprogram are not in compliance with thedefinition of a credit hour in 34 CFR600.2; or(iii) The institution does not providethe clock hours that are the basis for thecredit hours awarded for the program oreach course in the program and, exceptas provided in § 668.4(e), requiresattendance in the clock hours that arethe basis for the credit hours awarded.(3) The requirements of paragraph(k)(2)(i) of this section do not apply toa program if there is a State or Federalapproval or licensure requirement that alimited component of the program mustinclude a practicum, internship, orclinical experience component of theprogram that must include a minimumnumber of clock hours.(l) Formula. (1) Except as provided inparagraph (l)(2) of this section, forpurposes of determining whether aprogram described in paragraph (k) ofthis section satisfies the requirementscontained in paragraph (c)(3) or (d) ofthis section, and of determining thenumber of credit hours in thateducational program with regard to thetitle IV, HEA programs—(i) A semester hour must include atleast 37.5 clock hours of instruction;(ii) A trimester hour must include atleast 37.5 clock hours of instruction;and(iii) A quarter hour must include atleast 25 clock hours of instruction.(2) The institution’s conversions toestablish a minimum number of clockhours of instruction per credit may beless than those specified in paragraph(l)(1) of this section, if the institution’sdesignated accrediting agency, orrecognized State agency for the approvalof public postsecondary vocationalinstitutions, for participation in the titleIV, HEA programs has identified anydeficiencies with the institution’spolicies and procedures, or theirimplementation, for determining thecredit hours, as defined in 34 CFR600.2, that the institution awards forprograms and courses, in accordancewith 34 CFR 602.24(f), or, if applicable,34 CFR 603.24(c), so long as—(i) The institution’s student workoutside of class combined with theclock-hours of instruction meet orexceed the numeric requirements inparagraph (l)(1) of this section; and(ii)(A) A semester hour must includeat least 30 clock hours of instruction;(B) A trimester hour must include atleast 30 clock hours of instruction; and(C) A quarter hour must include atleast 20 hours of instruction.* * * * *■ 16. Section 668.14 is amended byrevising paragraph (b)(22) to read asfollows:§ 668.14 Program participation agreement.* * * * *(b) * * *(22)(i) It will not provide anycommission, bonus, or other incentivepayment based in any part, directly orindirectly, upon success in securingenrollments or the award of financialaid, to any person or entity who isengaged in any student recruitment oradmission activity, or in makingdecisions regarding the award of title IV,HEA program funds.(A) The restrictions in paragraph(b)(22) of this section do not apply tothe recruitment of foreign studentsresiding in foreign countries who arenot eligible to receive Federal studentassistance.(B) For the purpose of paragraph(b)(22) of this section, an employee whoreceives multiple adjustments tocompensation in a calendar year and isengaged in any student enrollment oradmission activity or in makingdecisions regarding the award of title IV,HEA program funds is considered tohave received such adjustments basedupon success in securing enrollments orVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00120 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2the award of financial aid if thoseadjustments create compensation that isbased in any part, directly or indirectly,upon success in securing enrollments orthe award of financial aid.(ii) Notwithstanding paragraph(b)(22)(i) of this section, eligibleinstitutions, organizations that arecontractors to eligible institutions, andother entities may make—(A) Merit-based adjustments toemployee compensation provided thatsuch adjustments are not based in anypart, directly or indirectly, upon successin securing enrollments or the award offinancial aid; and(B) Profit-sharing payments so long assuch payments are not provided to anyperson who is engaged in studentrecruitment or admission activity or inmaking decisions regarding the award oftitle IV, HEA program funds.(iii) As used in paragraph (b)(22) ofthis section,(A) Commission, bonus, or otherincentive payment means a sum ofmoney or something of value, other thana fixed salary or wages, paid to or givento a person or an entity for servicesrendered.(B) Securing enrollments or the awardof financial aid means activities that aperson or entity engages in at any pointin time through completion of aneducational program for the purpose ofthe admission or matriculation ofstudents for any period of time or theaward of financial aid to students.(1) These activities include contact inany form with a prospective student,such as, but not limited to—contactthrough preadmission or advisingactivities, scheduling an appointment tovisit the enrollment office or any otheroffice of the institution, attendance atsuch an appointment, or involvement ina prospective student’s signing of anenrollment agreement or financial aidapplication.(2) These activities do not includemaking a payment to a third party forthe provision of student contactinformation for prospective studentsprovided that such payment is not basedon—(i) Any additional conduct or actionby the third party or the prospectivestudents, such as participation inpreadmission or advising activities,scheduling an appointment to visit theenrollment office or any other office ofthe institution or attendance at such anappointment, or the signing, or beinginvolved in the signing, of a prospectivestudent’s enrollment agreement orfinancial aid application; or(ii) The number of students(calculated at any point in time of aneducational program) who apply for

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66951WReier-Aviles on DSKGBLS3C1PROD with RULES2enrollment, are awarded financial aid,or are enrolled for any period of time,including through completion of aneducational program.(C) Entity or person engaged in anystudent recruitment or admissionactivity or in making decisions aboutthe award of financial aid means—(1) With respect to an entity engagedin any student recruitment or admissionactivity or in making decisions aboutthe award of financial aid, anyinstitution or organization thatundertakes the recruiting or theadmitting of students or that makesdecisions about and awards title IV,HEA program funds; and(2) With respect to a person engagedin any student recruitment or admissionactivity or in making decisions aboutthe award of financial aid, anyemployee who undertakes recruiting oradmitting of students or who makesdecisions about and awards title IV,HEA program funds, and any higherlevel employee with responsibility forrecruitment or admission of students, ormaking decisions about awarding titleIV, HEA program funds.(D) Enrollment means the admissionor matriculation of a student into aneligible institution.* * * * *■ 17. Section 668.16 is amended by:■ A. Revising paragraph (e).■ B. In paragraph (n) introductory text,removing the word ‘‘and’’ that appearsafter the punctuation‘‘;’’.■ C. In paragraph (o)(2), removing thepunctuation ‘‘.’’ and adding, in its place,the punctuation and word ‘‘; and’’.■ D. Adding paragraph (p).■ E. Revising the OMB control numberat the end of the section.The revisions and addition read asfollows:§ 668.16 Standards of administrativecapability.* * * * *(e) For purposes of determiningstudent eligibility for assistance under atitle IV, HEA program, establishes,publishes, and applies reasonablestandards for measuring whether anotherwise eligible student ismaintaining satisfactory academicprogress in his or her educationalprogram. The Secretary considers aninstitution’s standards to be reasonableif the standards are in accordance withthe provisions specified in § 668.34.* * * * *(p) Develops and follows proceduresto evaluate the validity of a student’shigh school completion if the institutionor the Secretary has reason to believethat the high school diploma is not validor was not obtained from an entity thatprovides secondary school education.(Approved by the Office of Managementand Budget under control number 1845–0022)* * * * *■ 18. Section 668.22 is amended by:■ A. Redesignating paragraphs (a)(2)through (a)(5) as paragraphs (a)(3)through (a)(6), respectively.■ B. Adding new paragraph (a)(2).■ C. In newly redesignated paragraph(a)(5), removing the citation ‘‘(a)(5)’’ andadding, in its place, the citation ‘‘(a)(6)’’.■ D. In newly redesignated paragraph(a)(6)(ii)(A)(2), removing the citation‘‘(a)(5)(iii)’’ and adding, in its place, thecitation ‘‘(a)(6)(iii)’’.■ E. In newly redesignated paragraph(a)(6)(ii)(B)(2), removing the citation‘‘(a)(5)(iii)’’ and adding, in its place, thecitation ‘‘(a)(6)(iii)’’.■ F. In newly redesignated paragraph(a)(6)(ii)(B)(3), removing the citation‘‘(a)(5)(iii)’’ and adding, in its place, thecitation ‘‘(a)(6)(iii)’’.■ G. In newly redesignated paragraph(a)(6)(iii)(A)(1), removing the citation‘‘(a)(5)(ii)(A)(2)’’ and adding, in its place,the citation ‘‘(a)(6)(ii)(A)(2)’’.■ H. In newly redesignated paragraph(a)(6)(iii)(A)(5), removing the citation‘‘(a)(5)(iii)(C)’’ and adding, in its place,the citation ‘‘(a)(6)(iii)(C)’’.■ I. In newly redesignated paragraph(a)(6)(iii)(B), removing the citation‘‘(a)(5)(iii)(A)’’ and adding, in its place,the citation ‘‘(a)(6)(iii)(A)’’.■ J. In newly redesignated paragraph(a)(6)(iv), removing the citation‘‘(a)(5)(iii)’’ and adding, in its place, thecitation ‘‘(a)(6)(iii)’’.■ K. Revising paragraph (b)(3).■ L. Removing paragraph (c)(3)(ii) andredesignating paragraph (c)(3)(i) asparagraph (c)(3).■ M. Revising paragraph (f)(2).■ N. In the introductory text ofparagraph (j)(2), removing the first word‘‘An’’ and adding, in its place, the words‘‘For an institution that is not requiredto take attendance, an’’.■ O. In paragraph (l)(3), adding thewords ‘‘for an institution that is notrequired to take attendance’’ after thewords ‘‘date of the institution’sdetermination that the studentwithdrew’’.■ P. Adding paragraphs (l)(6), (l)(7), and(l)(8).The additions and revisions read asfollows:§ 668.22 Treatment of title IV funds whena student withdraws.* * * * *(a) * * *(2)(i) Except as provided inparagraphs (a)(2)(ii) and (a)(2)(iii) of thisVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00121 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2section, a student is considered to havewithdrawn from a payment period orperiod of enrollment if—(A) In the case of a program that ismeasured in credit hours, the studentdoes not complete all the days in thepayment period or period of enrollmentthat the student was scheduled tocomplete;(B) In the case of a program that ismeasured in clock hours, the studentdoes not complete all of the clock hoursand weeks of instructional time in thepayment period or period of enrollmentthat the student was scheduled tocomplete; or(C) For a student in a nonterm ornonstandard-term program, the studentis not scheduled to begin another coursewithin a payment period or period ofenrollment for more than 45 calendardays after the end of the module thestudent ceased attending, unless thestudent is on an approved leave ofabsence, as defined in paragraph (d) ofthis section.(ii)(A) Notwithstanding paragraph(a)(2)(i)(A) and (a)(2)(i)(B) of thissection, for a payment period or periodof enrollment in which courses in theprogram are offered in modules—(1) A student is not considered tohave withdrawn if the institutionobtains written confirmation from thestudent at the time that would havebeen a withdrawal of the date that he orshe will attend a module that beginslater in the same payment period orperiod of enrollment; and(2) For nonterm and nonstandardtermprograms, that module begins nolater than 45 calendar days after the endof the module the student ceasedattending.(B) If an institution has obtained thewritten confirmation of futureattendance in accordance withparagraph (a)(2)(ii)(A) of this section—(1) A student may change the date ofreturn to a module that begins later inthe same payment period or period ofenrollment, provided that the studentdoes so in writing prior to the returndate that he or she had previouslyconfirmed; and(2) For nonterm and nonstandardtermprograms, the later module that heor she will attend begins no later than45 calendar days after the end ofmodule the student ceased attending.(C) If an institution obtains writtenconfirmation of future attendance inaccordance with paragraph (a)(2)(ii)(A)and, if applicable, (a)(2)(ii)(B) of thissection, but the student does not returnas scheduled—(1) The student is considered to havewithdrawn from the payment period orperiod of enrollment; and

WReier-Aviles on DSKGBLS3C1PROD with RULES266952 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations(2) The student’s withdrawal date andthe total number of calendar days in thepayment period or period of enrollmentwould be the withdrawal date and totalnumber of calendar days that wouldhave applied if the student had notprovided written confirmation of afuture date of attendance in accordancewith paragraph (a)(2)(ii)(A) of thissection.(iii)(A) If a student withdraws from aterm-based credit-hour program offeredin modules during a payment period orperiod of enrollment and reenters thesame program prior to the end of theperiod, subject to conditions establishedby the Secretary, the student is eligibleto receive any title IV, HEA programfunds for which he or she was eligibleprior to withdrawal, including fundsthat were returned by the institution orstudent under the provisions of thissection, provided the student’senrollment status continues to supportthe full amount of those funds.(B) In accordance with § 668.4(f), if astudent withdraws from a clock-hour ornonterm credit hour program during apayment period or period of enrollmentand then reenters the same programwithin 180 calendar days, the studentremains in that same period when he orshe returns and, subject to conditionsestablished by the Secretary, is eligibleto receive any title IV, HEA programfunds for which he or she was eligibleprior to withdrawal, including fundsthat were returned by the institution orstudent under the provisions of thissection.* * * * *(b) * * *(3)(i) An institution is required to takeattendance if—(A) An outside entity (such as theinstitution’s accrediting agency or aState agency) has a requirement that theinstitution take attendance;(B) The institution itself has arequirement that its instructors takeattendance; or(C) The institution or an outsideentity has a requirement that can onlybe met by taking attendance or acomparable process, including, but notlimited to, requiring that students in aprogram demonstrate attendance in theclasses of that program, or a portion ofthat program.(ii) If, in accordance with paragraph(b)(3)(i) of this section, an institution isrequired to take attendance or requiresthat attendance be taken for only somestudents, the institution must use itsattendance records to determine awithdrawal date in accordance withparagraph (b)(1) of this section for thosestudents.(iii)(A) If, in accordance withparagraph (b)(3)(i) of this section, aninstitution is required to takeattendance, or requires that attendancebe taken, for a limited period, theinstitution must use its attendancerecords to determine a withdrawal datein accordance with paragraph (b)(3)(i) ofthis section for that limited period.(B) A student in attendance the lasttime attendance is required to be takenduring the limited period identified inparagraph (b)(3)(iii)(A) of this sectionwho subsequently stops attendingduring the payment period will betreated as a student for whom theinstitution was not required to takeattendance.(iv) If an institution is required to takeattendance or requires that attendancebe taken, on only one specified day tomeet a census reporting requirement,the institution is not considered to takeattendance.* * * * *(f) * * *(2)(i) The total number of calendardays in a payment period or period ofenrollment includes all days within theperiod that the student was scheduledto complete, except that scheduledbreaks of at least five consecutive daysare excluded from the total number ofcalendar days in a payment period orperiod of enrollment and the number ofcalendar days completed in that period.(ii) The total number of calendar daysin a payment period or period ofenrollment does not include—(A) Days in which the student was onan approved leave of absence; or(B) For a payment period or period ofenrollment in which any courses in theprogram are offered in modules, anyscheduled breaks of at least fiveconsecutive days when the student isnot scheduled to attend a module orother course offered during that periodof time.* * * * *(l) * * *(6) A program is ‘‘offered in modules’’if a course or courses in the program donot span the entire length of thepayment period or period of enrollment.(7)(i) ‘‘Academic attendance’’ and‘‘attendance at an academically-relatedactivity’’—(A) Include, but are not limited to—(1) Physically attending a class wherethere is an opportunity for directinteraction between the instructor andstudents;(2) Submitting an academicassignment;(3) Taking an exam, an interactivetutorial, or computer-assistedinstruction;VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00122 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2(4) Attending a study group that isassigned by the institution;(5) Participating in an onlinediscussion about academic matters; and(6) Initiating contact with a facultymember to ask a question about theacademic subject studied in the course;and(B) Do not include activities where astudent may be present, but notacademically engaged, such as—(1) Living in institutional housing;(2) Participating in the institution’smeal plan;(3) Logging into an online classwithout active participation; or(4) Participating in academiccounseling or advisement.(ii) A determination of ‘‘academicattendance’’ or ‘‘attendance at anacademically-related activity’’ must bemade by the institution; a student’scertification of attendance that is notsupported by institutionaldocumentation is not acceptable.(8) A program is a nonstandard-termprogram if the program is a term-basedprogram that does not qualify under 34CFR 690.63(a)(1) or (a)(2) to calculateFederal Pell Grant payments under 34CFR 690.63(b) or (c).* * * * *■ 19. Section 668.25 is amended by:■ A. In paragraph (c)(2)(v), removing theword ‘‘and’’.■ B. In paragraph (c)(2)(vi), adding theword ‘‘and’’ after the punctuation ‘‘;’’.■ C. Adding paragraph (c)(2)(vii).The addition reads as follows:§ 668.25 Contracts between an institutionand a third party servicer.* * * * *(c) * * *(2) * * *(vii) Payment of any commission,bonus, or other incentive payment basedin any part, directly or indirectly, uponsuccess in securing enrollments or theaward of financial aid to any person orentity engaged in any studentrecruitment or admission activity or inmaking decisions regarding the award oftitle IV, HEA program funds.* * * * *■ 20. Section 668.32 is amended by:■ A. In paragraph (e)(3), removing theword ‘‘or’’ that appears after thepunctuation ‘‘;’’.■ B. In paragraph (e)(4)(ii), removing thepunctuation ‘‘.’’ and adding, in its place,the punctuation and word ‘‘; or’’.■ C. Adding new paragraph (e)(5).■ D. Revising paragraph (f).The addition and revision read asfollows:§ 668.32 Student eligibility—general.* * * * *

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66953WReier-Aviles on DSKGBLS3C1PROD with RULES2(e) * * *(5) Has been determined by theinstitution to have the ability to benefitfrom the education or training offeredby the institution based on thesatisfactory completion of 6 semesterhours, 6 trimester hours, 6 quarterhours, or 225 clock hours that areapplicable toward a degree or certificateoffered by the institution.(f) Maintains satisfactory academicprogress in his or her course of studyaccording to the institution’s publishedstandards of satisfactory academicprogress that meet the requirements of§ 668.34.* * * * *■ 21. Section 668.34 is revised to readas follows:§ 668.34 Satisfactory academic progress.(a) Satisfactory academic progresspolicy. An institution must establish areasonable satisfactory academicprogress policy for determining whetheran otherwise eligible student is makingsatisfactory academic progress in his orher educational program and mayreceive assistance under the title IV,HEA programs. The Secretary considersthe institution’s policy to be reasonableif—(1) The policy is at least as strict asthe policy the institution applies to astudent who is not receiving assistanceunder the title IV, HEA programs;(2) The policy provides for consistentapplication of standards to all studentswithin categories of students, e.g., fulltime,part-time, undergraduate, andgraduate students, and educationalprograms established by the institution;(3) The policy provides that astudent’s academic progress isevaluated—(i) At the end of each payment periodif the educational program is either oneacademic year in length or shorter thanan academic year; or(ii) For all other educationalprograms, at the end of each paymentperiod or at least annually to correspondwith the end of a payment period;(4)(i) The policy specifies the gradepoint average (GPA) that a student mustachieve at each evaluation, or if a GPAis not an appropriate qualitativemeasure, a comparable assessmentmeasured against a norm; and(ii) If a student is enrolled in aneducational program of more than twoacademic years, the policy specifies thatat the end of the second academic year,the student must have a GPA of at leasta ‘‘C’’ or its equivalent, or have academicstanding consistent with theinstitution’s requirements forgraduation;(5)(i) The policy specifies the pace atwhich a student must progress throughhis or her educational program to ensurethat the student will complete theprogram within the maximumtimeframe, as defined in paragraph (b)of this section, and provides formeasurement of the student’s progressat each evaluation; and(ii) An institution calculates the paceat which the student is progressing bydividing the cumulative number ofhours the student has successfullycompleted by the cumulative number ofhours the student has attempted. Inmaking this calculation, the institutionis not required to include remedialcourses;(6) The policy describes how astudent’s GPA and pace of completionare affected by course incompletes,withdrawals, or repetitions, or transfersof credit from other institutions. Credithours from another institution that areaccepted toward the student’seducational program must count as bothattempted and completed hours;(7) Except as provided in paragraphs(c) and (d) of this section, the policyprovides that, at the time of eachevaluation, a student who has notachieved the required GPA, or who isnot successfully completing his or hereducational program at the requiredpace, is no longer eligible to receiveassistance under the title IV, HEAprograms;(8) If the institution places studentson financial aid warning, or on financialaid probation, as defined in paragraph(b) of this section, the policy describesthese statuses and that—(i) A student on financial aid warningmay continue to receive assistanceunder the title IV, HEA programs for onepayment period despite a determinationthat the student is not makingsatisfactory academic progress.Financial aid warning status may beassigned without an appeal or otheraction by the student; and(ii) A student on financial aidprobation may receive title IV, HEAprogram funds for one payment period.While a student is on financial aidprobation, the institution may requirethe student to fulfill specific terms andconditions such as taking a reducedcourse load or enrolling in specificcourses. At the end of one paymentperiod on financial aid probation, thestudent must meet the institution’ssatisfactory academic progress standardsor meet the requirements of theacademic plan developed by theinstitution and the student to qualify forfurther title IV, HEA program funds;(9) If the institution permits a studentto appeal a determination by theVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00123 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2institution that he or she is not makingsatisfactory academic progress, thepolicy describes—(i) How the student may reestablishhis or her eligibility to receiveassistance under the title IV, HEAprograms;(ii) The basis on which a student mayfile an appeal: The death of a relative,an injury or illness of the student, orother special circumstances; and(iii) Information the student mustsubmit regarding why the student failedto make satisfactory academic progress,and what has changed in the student’ssituation that will allow the student todemonstrate satisfactory academicprogress at the next evaluation;(10) If the institution does not permita student to appeal a determination bythe institution that he or she is notmaking satisfactory academic progress,the policy must describe how thestudent may reestablish his or hereligibility to receive assistance underthe title IV, HEA programs; and(11) The policy provides fornotification to students of the results ofan evaluation that impacts the student’seligibility for title IV, HEA programfunds.(b) Definitions. The followingdefinitions apply to the terms used inthis section:Appeal. Appeal means a process bywhich a student who is not meeting theinstitution’s satisfactory academicprogress standards petitions theinstitution for reconsideration of thestudent’s eligibility for title IV, HEAprogram assistance.Financial aid probation. Financial aidprobation means a status assigned by aninstitution to a student who fails tomake satisfactory academic progress andwho has appealed and has hadeligibility for aid reinstated.Financial aid warning. Financial aidwarning means a status assigned to astudent who fails to make satisfactoryacademic progress at an institution thatevaluates academic progress at the endof each payment period.Maximum timeframe. Maximumtimeframe means—(1) For an undergraduate programmeasured in credit hours, a period thatis no longer than 150 percent of thepublished length of the educationalprogram, as measured in credit hours;(2) For an undergraduate programmeasured in clock hours, a period thatis no longer than 150 percent of thepublished length of the educationalprogram, as measured by the cumulativenumber of clock hours the student isrequired to complete and expressed incalendar time; and

66954 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and RegulationsWReier-Aviles on DSKGBLS3C1PROD with RULES2(3) For a graduate program, a perioddefined by the institution that is basedon the length of the educationalprogram.(c) Institutions that evaluatesatisfactory academic progress at theend of each payment period. (1) Aninstitution that evaluates satisfactoryacademic progress at the end of eachpayment period and determines that astudent is not making progress under itspolicy may nevertheless disburse titleIV, HEA program funds to the studentunder the provisions of paragraph (c)(2),(c)(3), or (c)(4) of this section.(2) For the payment period followingthe payment period in which thestudent did not make satisfactoryacademic progress, the institutionmay—(i) Place the student on financial aidwarning, and disburse title IV, HEAprogram funds to the student; or(ii) Place a student directly onfinancial aid probation, following theprocedures outlined in paragraph (d)(2)of this section and disburse title IV,HEA program funds to the student.(3) For the payment period followinga payment period during which astudent was on financial aid warning,the institution may place the student onfinancial aid probation, and disbursetitle IV, HEA program funds to thestudent if—(i) The institution evaluates thestudent’s progress and determines thatstudent did not make satisfactoryacademic progress during the paymentperiod the student was on financial aidwarning;(ii) The student appeals thedetermination; and(iii)(A) The institution determinesthat the student should be able to meetthe institution’s satisfactory academicprogress standards by the end of thesubsequent payment period; or(B) The institution develops anacademic plan for the student that, iffollowed, will ensure that the student isable to meet the institution’s satisfactoryacademic progress standards by aspecific point in time.(4) A student on financial aidprobation for a payment period may notreceive title IV, HEA program funds forthe subsequent payment period unlessthe student makes satisfactory academicprogress or the institution determinesthat the student met the requirementsspecified by the institution in theacademic plan for the student.(d) Institutions that evaluatesatisfactory academic progress annuallyor less frequently than at the end ofeach payment period. (1) An institutionthat evaluates satisfactory academicprogress annually or less frequentlythan at the end of each payment periodand determines that a student is notmaking progress under its policy maynevertheless disburse title IV, HEAprogram funds to the student under theprovisions of paragraph (d)(2) or (d)(3)of this section.(2) The institution may place thestudent on financial aid probation andmay disburse title IV, HEA programfunds to the student for the subsequentpayment period if—(i) The institution evaluates thestudent and determines that the studentis not making satisfactory academicprogress;(ii) The student appeals thedetermination; and(iii)(A) The institution determinesthat the student should be able to bemake satisfactory academic progressduring the subsequent payment periodand meet the institution’s satisfactoryacademic progress standards at the endof that payment period; or(B) The institution develops anacademic plan for the student that, iffollowed, will ensure that the student isable to meet the institution’s satisfactoryacademic progress standards by aspecific point in time.(3) A student on financial aidprobation for a payment period may notreceive title IV, HEA program funds forthe subsequent payment period unlessthe student makes satisfactory academicprogress or the institution determinesthat the student met the requirementsspecified by the institution in theacademic plan for the student.(Authority: 20 U.S.C. 1091(d))■ 22. Section 668.43 is amended by:■ A. In paragraph (a)(10)(ii), removingthe word ‘‘and’’ that appears after thepunctuation ‘‘;’’.■ B. In paragraph (a)(11)(ii), removingthe punctuation ‘‘.’’ and adding, in itsplace, the punctuation and word ‘‘; and’’.■ C. Adding paragraph (a)(12).■ D. Revising paragraph (b).The addition and revision read asfollows:§ 668.43 Institutional information.(a) * * *(12) A description of writtenarrangements the institution has enteredinto in accordance with § 668.5,including, but not limited to,information on—(i) The portion of the educationalprogram that the institution that grantsthe degree or certificate is not providing;(ii) The name and location of theother institutions or organizations thatare providing the portion of theeducational program that the institutionthat grants the degree or certificate isnot providing;VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00124 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2(iii) The method of delivery of theportion of the educational program thatthe institution that grants the degree orcertificate is not providing; and(iv) Estimated additional costsstudents may incur as the result ofenrolling in an educational program thatis provided, in part, under the writtenarrangement.(b) The institution must makeavailable for review to any enrolled orprospective student upon request, acopy of the documents describing theinstitution’s accreditation and its State,Federal, or tribal approval or licensing.The institution must also provide itsstudents or prospective students withcontact information for filingcomplaints with its accreditor and withits State approval or licensing entity andany other relevant State official oragency that would appropriately handlea student’s complaint.* * * * *■ 23. Subpart E of part 668 is revised toread as follows:Subpart E—Verification and Updating ofStudent Aid Application InformationSec.668.51 General.668.52 Definitions.668.53 Policies and procedures.668.54 Selection of an applicant’s FAFSAinformation for verification.668.55 Updating information.668.56 Information to be verified.668.57 Acceptable documentation.668.58 Interim disbursements.668.59 Consequences of a change in anapplicant’s FAFSA information.668.60 Deadlines for submittingdocumentation and the consequences offailing to provide documentation.668.61 Recovery of funds from interimdisbursements.Subpart E—Verification and Updatingof Student Aid Application Information§ 668.51 General.(a) Scope and purpose. Theregulations in this subpart govern theverification by institutions ofinformation submitted by applicants forstudent financial assistance under thesubsidized student financial assistanceprograms.(b) Applicant responsibility. If theSecretary or the institution requestsdocuments or information from anapplicant under this subpart, theapplicant must provide the specifieddocuments or information.(c) Foreign schools. The Secretaryexempts from the provisions of thissubpart participating institutions thatare not located in a State.(Authority: 20 U.S.C. 1094)

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66955WReier-Aviles on DSKGBLS3C1PROD with RULES2§ 668.52 Definitions.The following definitions apply tothis subpart:Specified year: (1) The calendar yearpreceding the first calendar year of anaward year, i.e., the base year; or(2) The year preceding the yeardescribed in paragraph (1) of thisdefinition.Subsidized student financialassistance programs: Title IV, HEAprograms for which eligibility isdetermined on the basis of anapplicant’s EFC. These programsinclude the Federal Pell Grant, FederalSupplemental Educational OpportunityGrant (FSEOG), Federal Work-Study(FWS), Federal Perkins Loan, and DirectSubsidized Loan programs.Unsubsidized student financialassistance programs: Title IV, HEAprograms for which eligibility is notbased on an applicant’s EFC. Theseprograms include the Teacher EducationAssistance for College and HigherEducation (TEACH) Grant, DirectUnsubsidized Loan, and Direct PLUSLoan programs.(Authority: 20 U.S.C. 1094)§ 668.53 Policies and procedures.(a) An institution must establish anduse written policies and procedures forverifying an applicant’s FAFSAinformation in accordance with theprovisions of this subpart. Thesepolicies and procedures must include—(1) The time period within which anapplicant must provide anydocumentation requested by theinstitution in accordance with § 668.57;(2) The consequences of anapplicant’s failure to provide therequested documentation within thespecified time period;(3) The method by which theinstitution notifies an applicant of theresults of its verification if, as a resultof verification, the applicant’s EFCchanges and results in a change in theamount of the applicant’s assistanceunder the title IV, HEA programs;(4) The procedures the institution willfollow itself or the procedures theinstitution will require an applicant tofollow to correct FAFSA informationdetermined to be in error; and(5) The procedures for makingreferrals under § 668.16(g).(b) An institution’s procedures mustprovide that it will furnish, in a timelymanner, to each applicant whoseFAFSA information is selected forverification a clear explanation of—(1) The documentation needed tosatisfy the verification requirements;and(2) The applicant’s responsibilitieswith respect to the verification ofFAFSA information, including thedeadlines for completing any actionsrequired under this subpart and theconsequences of failing to complete anyrequired action.(c) An institution’s procedures mustprovide that an applicant whose FAFSAinformation is selected for verification isrequired to complete verification beforethe institution exercises any authorityunder section 479A(a) of the HEA tomake changes to the applicant’s cost ofattendance or to the values of the dataitems required to calculate the EFC.(Approved by the Office of Management andBudget under control number 1845–0041)(Authority: 20 U.S.C. 1094)§ 668.54 Selection of an applicant’s FAFSAinformation for verification.(a) General requirements. (1) Exceptas provided in paragraph (b) of thissection, an institution must require anapplicant whose FAFSA information isselected for verification by theSecretary, to verify the informationspecified by the Secretary pursuant to§ 668.56.(2) If an institution has reason tobelieve that an applicant’s FAFSAinformation is inaccurate, it must verifythe accuracy of that information.(3) An institution may require anapplicant to verify any FAFSAinformation that it specifies.(4) If an applicant is selected to verifyFAFSA information under paragraph(a)(1) of this section, the institutionmust require the applicant to verify theinformation as specified in § 668.56 ifthe applicant is selected for asubsequent verification of FAFSAinformation, except that the applicant isnot required to provide documentationfor the FAFSA information previouslyverified for the applicable award year tothe extent that the FAFSA informationpreviously verified remains unchanged.(b) Exclusions from verification. (1)An institution need not verify anapplicant’s FAFSA information if—(i) The applicant dies;(ii) The applicant does not receiveassistance under the title IV, HEAprograms for reasons other than failureto verify FAFSA information;(iii) The applicant is eligible toreceive only unsubsidized studentfinancial assistance; or(iv) The applicant who transfers to theinstitution, had previously completedverification at the institution fromwhich he or she transferred, and appliesfor assistance based on the same FAFSAinformation used at the previousinstitution, if the current institutionobtains a letter from the previousinstitution—VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00125 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2(A) Stating that it has verified theapplicant’s information; and(B) Providing the transaction numberof the applicable valid ISIR.(2) Unless the institution has reasonto believe that the information reportedby a dependent student is incorrect, itneed not verify the applicant’s parents’FAFSA information if—(i) The parents are residing in acountry other than the United Statesand cannot be contacted by normalmeans of communication;(ii) The parents cannot be locatedbecause their contact information isunknown and cannot be obtained by theapplicant; or(iii) Both of the applicant’s parents arementally incapacitated.(3) Unless the institution has reasonto believe that the information reportedby an independent student is incorrect,it need not verify the applicant’sspouse’s information if—(i) The spouse is deceased;(ii) The spouse is mentallyincapacitated;(iii) The spouse is residing in acountry other than the United Statesand cannot be contacted by normalmeans of communication; or(iv) The spouse cannot be locatedbecause his or her contact informationis unknown and cannot be obtained bythe applicant.(Approved by the Office of Management andBudget under control number 1845–0041)(Authority: 20 U.S.C. 1091, 1094)§ 668.55 Updating information.(a) If an applicant’s dependency statuschanges at any time during the awardyear, the applicant must update FAFSAinformation, except when the update isdue to a change in his or her maritalstatus.(b)(1) An applicant who is selected forverification of the number of persons inhis or her household (household size) orthe number of those in the householdwho are attending postsecondaryinstitutions (number in college) mustupdate those items to be correct as ofthe date of verification, except when theupdate is due to a change in his or hermarital status.(2) Notwithstanding paragraph (b)(1)of this section, an applicant is notrequired to provide documentation ofhousehold size or number in collegeduring a subsequent verification ofeither item if the information has notchanged.(c) An institution may require anapplicant to update FAFSA informationunder paragraph (a) or (b) of this sectionfor a change in the applicant’s maritalstatus if the institution determines the

WReier-Aviles on DSKGBLS3C1PROD with RULES266956 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulationsupdate is necessary to address aninequity or to reflect more accuratelythe applicant’s ability to pay.(Approved by the Office of Management andBudget under control number 1845–0041)(Authority: 20 U.S.C. 1094)§ 668.56 Information to be verified.(a) For each award year the Secretarypublishes in the Federal Register noticethe FAFSA information that aninstitution and an applicant may berequired to verify.(b) For each applicant whose FAFSAinformation is selected for verificationby the Secretary, the Secretary specifiesthe specific information underparagraph (a) of this section that theapplicant must verify.(Approved by the Office of Management andBudget under control number 1845–0041)(Authority: 20 U.S.C. 1094, 1095)§ 668.57 Acceptable documentation.If an applicant is selected to verifyany of the following information, aninstitution must obtain the specifieddocumentation.(a) Adjusted Gross Income (AGI),income earned from work, or U.S.income tax paid. (1) Except as providedin paragraphs (a)(2), (a)(3), and (a)(4) ofthis section, an institution must requirean applicant selected for verification ofAGI, income earned from work or U.S.income tax paid to submit to it—(i) A copy of the income tax return oran Internal Revenue Service (IRS) formthat lists tax account information of theapplicant, his or her spouse, or his orher parents, as applicable for thespecified year. The copy of the returnmust include the signature (which neednot be an original) of the filer of thereturn or of one of the filers of a jointreturn;(ii) For a dependent student, a copyof each IRS Form W–2 for the specifiedyear received by the parent whoseincome is being taken into account if—(A) The parents filed a joint return;and(B) The parents are divorced orseparated or one of the parents has died;and(iii) For an independent student, acopy of each IRS Form W–2 for thespecified year he or she received if theindependent student—(A) Filed a joint return; and(B) Is a widow or widower, or isdivorced or separated.(2) An institution may accept, in lieuof an income tax return or an IRS formthat lists tax account information, theinformation reported for an item on theapplicant’s FAFSA for the specified yearif the Secretary has identified that itemas having been obtained from the IRSand not having been changed.(3) An institution must accept, in lieuof an income tax return or an IRS formthat lists tax account information, thedocumentation set forth in paragraph(a)(4) of this section if the individual forthe specified year—(i) Has not filed and, under IRS rules,or other applicable government agencyrules, is not required to file an incometax return;(ii) Is required to file a U.S. tax returnand has been granted a filing extensionby the IRS; or(iii) Has requested a copy of the taxreturn or an IRS form that lists taxaccount information, and the IRS or agovernment of a U.S. territory orcommonwealth or a foreign centralgovernment cannot locate the return orprovide an IRS form that lists taxaccount information.(4) An institution must accept—(i) For an individual described inparagraph (a)(3)(i) of this section, astatement signed by that individualcertifying that he or she has not filedand is not required to file an income taxreturn for the specified year andcertifying for that year thatindividual’s—(A) Sources of income earned fromwork as stated on the FAFSA; and(B) Amounts of income from eachsource. In lieu of a certification of theseamounts of income, the applicant mayprovide a copy of his or her IRS FormW–2 for each source listed underparagraph (a)(4)(i)(A) of this section;(ii) For an individual described inparagraph (a)(3)(ii) of this section—(A) A copy of the IRS Form 4868,‘‘Application for Automatic Extension ofTime to File U.S. Individual Income TaxReturn,’’ that the individual filed withthe IRS for the specified year, or a copyof the IRS’s approval of an extensionbeyond the automatic six-monthextension if the individual requested anadditional extension of the filing time;and(B) A copy of each IRS Form W–2 thatthe individual received for the specifiedyear, or for a self-employed individual,a statement signed by the individualcertifying the amount of the AGI for thespecified year; and(iii) For an individual described inparagraph (a)(3)(iii) of this section—(A) A copy of each IRS Form W–2 thatthe individual received for the specifiedyear; or(B) For an individual who is selfemployedor has filed an income taxreturn with a government of a U. S.territory or commonwealth, or a foreigncentral government, a statement signedby the individual certifying the amountVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00126 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2of AGI and taxes paid for the specifiedyear.(5) An institution may require anindividual described in paragraph(a)(3)(ii) of this section to provide to ita copy of his or her completed andsigned income tax return when filed. Ifan institution receives the copy of thereturn, it must reverify the AGI andtaxes paid by the applicant and his orher spouse or parents.(6) If an individual who is required tosubmit an IRS Form W–2, underparagraph (a) of this section, is unableto obtain one in a timely manner, theinstitution may permit that individualto set forth, in a statement signed by theindividual, the amount of incomeearned from work, the source of thatincome, and the reason that the IRSForm W–2 is not available in a timelymanner.(7) For the purpose of this section, aninstitution may accept in lieu of a copyof an income tax return signed by thefiler of the return or one of the filers ofa joint return, a copy of the filer’s returnthat includes the preparer’s SocialSecurity Number, EmployerIdentification Number or the PreparerTax Identification Number and has beensigned, stamped, typed, or printed withthe name and address of the preparer ofthe return.(b) Number of family members inhousehold. An institution must requirean applicant selected for verification ofthe number of family members in thehousehold to submit to it a statementsigned by both the applicant and one ofthe applicant’s parents if the applicantis a dependent student, or only theapplicant if the applicant is anindependent student, listing the nameand age of each family member in thehousehold and the relationship of thathousehold member to the applicant.(c) Number of family householdmembers enrolled in eligiblepostsecondary institutions. (1) Aninstitution must require an applicantselected for verification of the numberof household members in theapplicant’s family enrolled on at least ahalf-time basis in eligible postsecondaryinstitutions to submit a statement signedby both the applicant and one of theapplicant’s parents, if the applicant is adependent student, or by only theapplicant if the applicant is anindependent student, listing—(i) The name of each family memberwho is or will be attending an eligiblepostsecondary educational institution asat least a half-time student in the awardyear;(ii) The age of each student; and(iii) The name of the institution thateach student is or will be attending.

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66957WReier-Aviles on DSKGBLS3C1PROD with RULES2(2) If the institution has reason tobelieve that an applicant’s FAFSAinformation or the statement providedunder paragraph (c)(1) of this sectionregarding the number of familyhousehold members enrolled in eligiblepostsecondary institutions is inaccurate,the institution must obtain a statementfrom each institution named by theapplicant in response to the requirementof paragraph (c)(1)(iii) of this sectionthat the household member in questionis or will be attending the institution onat least a half-time basis, unless—(i) The institution the student isattending determines that such astatement is not available because thehousehold member in question has notyet registered at the institution he or sheplans to attend; or(ii) The institution has informationindicating that the student will beattending the same institution as theapplicant.(d) Other information. If an applicantis selected to verify other informationspecified in the annual Federal Registernotice, the applicant must provide thedocumentation specified for thatinformation in the Federal Registernotice.(Approved by the Office of Management andBudget under control number 1845–0041)(Authority: 20 U.S.C. 1094)§ 668.58 Interim disbursements.(a)(1) If an institution has reason tobelieve that an applicant’s FAFSAinformation is inaccurate, until theinformation is verified and anycorrections are made in accordance with§ 668.59(a), the institution may not—(i) Disburse any Federal Pell Grant,FSEOG, or Federal Perkins LoanProgram funds to the applicant;(ii) Employ or allow an employer toemploy the applicant in its FWSProgram; or(iii) Originate a Direct SubsidizedLoan, or disburse any such loanproceeds for any previously certifiedoriginated Direct Subsidized Loan to theapplicant.(2) If an institution does not havereason to believe that an applicant’sFAFSA information is inaccurate priorto verification, the institution may—(i)(A) Withhold payment of FederalPell Grant, Federal Perkins Loan, orFSEOG Program funds for the applicant;or(B) Make one disbursement from eachof the Federal Pell Grant, FederalPerkins Loan, or FSEOG Program fundsfor the applicant’s first payment periodof the award year;(ii) Employ or allow an employer toemploy that applicant, once he or she isan eligible student, under the FWSProgram for the first 60 consecutivedays after the student’s enrollment inthat award year; or(iii)(A) Withhold origination of theapplicant’s Direct Subsidized Loan; or(B) Originate the Direct SubsidizedLoan provided that the institution doesnot disburse Subsidized Stafford Loanor Direct Subsidized Loan proceeds.(3) If, after verification, an institutiondetermines that changes to anapplicant’s information will not changethe amount the applicant would receiveunder a title IV, HEA program, theinstitution—(i) Must ensure corrections are madein accordance with § 668.59(a); and(ii) May prior to receiving thecorrected valid SAR or valid ISIR—(A) Make one disbursement from eachof the Federal Pell Grant, FederalPerkins Loan, or FSEOG Program fundsfor the applicant’s first payment periodof the award year;(B) Employ or allow an employer toemploy the applicant, once he or she isan eligible student, under the FWSProgram for the first 60 consecutivedays after the student’s enrollment inthat award year; or(C) Originate the Direct SubsidizedLoan and disburse the SubsidizedStafford Loan or Direct Subsidized Loanproceeds for the applicant.(b) If an institution chooses to makea disbursement under—(1) Paragraph (a)(2)(i)(B) of thissection, it—(i) Is liable for any overpaymentdiscovered as a result of verification tothe extent that the overpayment is notrecovered through reducing subsequentdisbursements in the award year or fromthe student; and(ii) Must recover the overpayment inaccordance with § 668.61(a);(2) Paragraph (a)(2)(ii) of this section,it—(i) Is liable for any overpaymentdiscovered as a result of verification tothe extent that the overpayment is noteliminated by adjusting other financialassistance; and(ii) Must recover the overpayment inaccordance with § 668.61(b); or(3) Paragraph (a)(3) of this section,it—(i) Is liable for any subsidized studentfinancial assistance disbursed if it doesnot receive the valid SAR or valid ISIRreflecting corrections within thedeadlines established under § 668.60;and(ii) Must recover the funds inaccordance with § 668.61(c).(Authority: 20 U.S.C. 1094)VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00127 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2§ 668.59 Consequences of a change in anapplicant’s FAFSA information.(a) For the subsidized studentfinancial assistance programs, if anapplicant’s FAFSA information changesas a result of verification, the applicantor the institution must submit to theSecretary any changes to—(1) A nondollar item; or(2) A single dollar item of $25 ormore.(b) For the Federal Pell GrantProgram, if an applicant’s FAFSAinformation changes as a result ofverification, an institution must—(1) Recalculate the applicant’s FederalPell Grant on the basis of the EFC on thecorrected valid SAR or valid ISIR; and(2)(i) Disburse any additional fundsunder that award only if the institutionreceives a corrected valid SAR or validISIR for the applicant and only to theextent that additional funds are payablebased on the recalculation;(ii) Comply with the proceduresspecified in § 668.61 for an interimdisbursement if, as a result ofverification, the Federal Pell Grantaward is reduced; or—(iii) Comply with the proceduresspecified in 34 CFR 690.79 for anoverpayment that is not an interimdisbursement if, as a result ofverification, the Federal Pell Grantaward is reduced.(c) For the subsidized studentfinancial assistance programs, excludingthe Federal Pell Grant Program, if anapplicant’s FAFSA information changesas a result of verification, the institutionmust—(1) Adjust the applicant’s financial aidpackage on the basis of the EFC on thecorrected valid SAR or valid ISIR; and(2)(i) Comply with the proceduresspecified in § 668.61 for an interimdisbursement if, as a result ofverification, the financial aid packagemust be reduced;(ii) Comply with the proceduresspecified in 34 CFR 673.5(f) for aFederal Perkins loan or an FSEOGoverpayment that is not the result of aninterim disbursement if, as a result ofverification, the financial aid packagemust be reduced; and(iii) Comply with the proceduresspecified in 34 CFR 685.303(e) for DirectSubsidized Loan excess loan proceedsthat are not the result of an interimdisbursement if, as a result ofverification, the financial aid packagemust be reduced.(Approved by the Office of Management andBudget under control number 1845–0041)(Authority: 20 U.S.C. 1094)

66958 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and RegulationsWReier-Aviles on DSKGBLS3C1PROD with RULES2§ 668.60 Deadlines for submittingdocumentation and the consequences offailing to provide documentation.(a) An institution must require anapplicant selected for verification tosubmit to it, within the period of timeit or the Secretary specifies, thedocumentation set forth in § 668.57 thatis requested by the institution.(b) For purposes of the subsidizedstudent financial assistance programs,excluding the Federal Pell GrantProgram—(1) If an applicant fails to provide therequested documentation within areasonable time period established bythe institution—(i) The institution may not—(A) Disburse any additional FederalPerkins Loan or FSEOG Program fundsto the applicant;(B) Employ, continue to employ orallow an employer to employ theapplicant under FWS; or(C) Originate the applicant’s DirectSubsidized Loan or disburse anyadditional Direct Subsidized Loanproceeds for the applicant; and(ii) The applicant must repay to theinstitution any Federal Perkins Loan orFSEOG received for that award year;(2) If the applicant provides therequested documentation after the timeperiod established by the institution, theinstitution may, at its option, disburseaid to the applicant notwithstandingparagraph (b)(1) of this section; and(3) If an institution has receivedproceeds for a Direct Subsidized Loanon behalf of an applicant, the institutionmust return all or a portion of thosefunds as provided under § 668.166(b) ifthe applicant does not completeverification within the time periodspecified.(c) For purposes of the Federal PellGrant Program—(1) An applicant may submit a validSAR to the institution or the institutionmay receive a valid ISIR after theapplicable deadline specified in 34 CFR690.61 but within an establishedadditional time period set by theSecretary through publication of anotice in the Federal Register; and(2) If the applicant does not provideto the institution the requesteddocumentation and, if necessary, a validSAR or the institution does not receivea valid ISIR, within the additional timeperiod referenced in paragraph (c)(1) ofthis section, the applicant—(i) Forfeits the Federal Pell Grant forthe award year; and(ii) Must return any Federal Pell Grantpayments previously received for thataward year.(d) The Secretary may determine notto process FAFSA information of anapplicant who has been requested toprovide documentation until theapplicant provides the documentationor the Secretary decides that there is nolonger a need for the documentation.(e) If an applicant selected forverification for an award year diesbefore the deadline for completingverification without completing thatprocess, the institution may not—(1) Make any further disbursementson behalf of that applicant;(2) Originate that applicant’s DirectSubsidized Loan, or disburse thatapplicant’s Direct Subsidized Loanproceeds; or(3) Consider any funds it disbursed tothat applicant under § 668.58(a)(2) as anoverpayment.(Authority: 20 U.S.C. 1094)§ 668.61 Recovery of funds from interimdisbursements.(a) If an institution discovers, as aresult of verification, that an applicantreceived under § 668.58(a)(2)(i)(B) morefinancial aid than the applicant waseligible to receive, the institution musteliminate the Federal Pell Grant, FederalPerkins Loan, or FSEOG overpaymentby—(1) Adjusting subsequentdisbursements in the award year inwhich the overpayment occurred; or(2) Reimbursing the appropriateprogram account by—(i) Requiring the applicant to returnthe overpayment to the institution if theinstitution cannot correct theoverpayment under paragraph (a)(1) ofthis section; or(ii) Making restitution from its ownfunds, by the earlier of the followingdates, if the applicant does not returnthe overpayment:(A) Sixty days after the applicant’slast day of attendance.(B) The last day of the award year inwhich the institution disbursed FederalPell Grant, Federal Perkins Loan, orFSEOG Program funds to the applicant.(b) If an institution discovers, as aresult of verification, that an applicantreceived under § 668.58(a)(2)(ii) morefinancial aid than the applicant waseligible to receive, the institution musteliminate the FWS overpayment by—(1) Adjusting the applicant’s otherfinancial aid; or(2) Reimbursing the FWS programaccount by making restitution from itsown funds, if the institution cannotcorrect the overpayment underparagraph (b)(1) of this section. Theapplicant must still be paid for all workperformed under the institution’s ownpayroll account.(c) If an institution disbursedsubsidized student financial assistanceVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00128 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2to an applicant under § 668.58(a)(3), anddid not receive the valid SAR or validISIR reflecting corrections within thedeadlines established under § 668.60,the institution must reimburse theappropriate program account by makingrestitution from its own funds. Theapplicant must still be paid for all workperformed under the institution’s ownpayroll account.(Approved by the Office of Management andBudget under control number 1845–0041)(Authority: 20 U.S.C. 1094)■ 24. Subpart F of part 668 is revised toread as follows:Subpart F—MisrepresentationSec.668.71 Scope and special definitions.668.72 Nature of educational program.668.73 Nature of financial charges.668.74 Employability of graduates.668.75 Relationship with the Department ofEducation.Subpart F—Misrepresentation§ 668.71 Scope and special definitions.(a) If the Secretary determines that aneligible institution has engaged insubstantial misrepresentation, theSecretary may—(1) Revoke the eligible institution’sprogram participation agreement;(2) Impose limitations on theinstitution’s participation in the title IV,HEA programs;(3) Deny participation applicationsmade on behalf of the institution; or(4) Initiate a proceeding against theeligible institution under subpart G ofthis part.(b) This subpart establishes the typesof activities that constitute substantialmisrepresentation by an eligibleinstitution. An eligible institution isdeemed to have engaged in substantialmisrepresentation when the institutionitself, one of its representatives, or anyineligible institution, organization, orperson with whom the eligibleinstitution has an agreement to provideeducational programs, marketing,advertising, recruiting or admissionsservices, makes a substantialmisrepresentation regarding the eligibleinstitution, including about the natureof its educational program, its financialcharges, or the employability of itsgraduates. Substantialmisrepresentations are prohibited in allforms, including those made in anyadvertising, promotional materials, or inthe marketing or sale of courses orprograms of instruction offered by theinstitution.(c) The following definitions apply tothis subpart:

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66959WReier-Aviles on DSKGBLS3C1PROD with RULES2Misrepresentation: Any false,erroneous or misleading statement aneligible institution, one of itsrepresentatives, or any ineligibleinstitution, organization, or person withwhom the eligible institution has anagreement to provide educationalprograms, or to provide marketing,advertising, recruiting or admissionsservices makes directly or indirectly toa student, prospective student or anymember of the public, or to anaccrediting agency, to a State agency, orto the Secretary. A misleading statementincludes any statement that has thelikelihood or tendency to deceive orconfuse. A statement is anycommunication made in writing,visually, orally, or through other means.Misrepresentation includes thedissemination of a student endorsementor testimonial that a student gives eitherunder duress or because the institutionrequired the student to make such anendorsement or testimonial toparticipate in a program.Prospective student: Any individualwho has contacted an eligibleinstitution for the purpose of requestinginformation about enrolling at theinstitution or who has been contacteddirectly by the institution or indirectlythrough advertising about enrolling atthe institution.Substantial misrepresentation: Anymisrepresentation on which the personto whom it was made could reasonablybe expected to rely, or has reasonablyrelied, to that person’s detriment.(Authority: 20 U.S.C. 1094)§ 668.72 Nature of educational program.Misrepresentation concerning thenature of an eligible institution’seducational program includes, but is notlimited to, false, erroneous ormisleading statements concerning—(a) The particular type(s), specificsource(s), nature and extent of itsinstitutional, programmatic, orspecialized accreditation;(b)(1) Whether a student may transfercourse credits earned at the institutionto any other institution;(2) Conditions under which theinstitution will accept transfer creditsearned at another institution;(c) Whether successful completion ofa course of instruction qualifies astudent—(1) For acceptance to a labor union orsimilar organization; or(2) To receive, to apply to take or totake the examination required toreceive, a local, State, or Federal license,or a nongovernmental certificationrequired as a precondition foremployment, or to perform certainfunctions in the States in which theeducational program is offered, or tomeet additional conditions that theinstitution knows or reasonably shouldknow are generally needed to secureemployment in a recognized occupationfor which the program is represented toprepare students;(d) The requirements for successfullycompleting the course of study orprogram and the circumstances thatwould constitute grounds forterminating the student’s enrollment;(e) Whether its courses arerecommended or have been the subjectof unsolicited testimonials orendorsements by—(1) Vocational counselors, highschools, colleges, educationalorganizations, employment agencies,members of a particular industry,students, former students, or others; or(2) Governmental officials forgovernmental employment;(f) Its size, location, facilities, orequipment;(g) The availability, frequency, andappropriateness of its courses andprograms to the employment objectivesthat it states its programs are designedto meet;(h) The nature, age, and availability ofits training devices or equipment andtheir appropriateness to theemployment objectives that it states itsprograms and courses are designed tomeet;(i) The number, availability, andqualifications, including the trainingand experience, of its faculty and otherpersonnel;(j) The availability of part-timeemployment or other forms of financialassistance;(k) The nature and availability of anytutorial or specialized instruction,guidance and counseling, or othersupplementary assistance it will provideits students before, during or after thecompletion of a course;(l) The nature or extent of anyprerequisites established for enrollmentin any course;(m) The subject matter, content of thecourse of study, or any other fact relatedto the degree, diploma, certificate ofcompletion, or any similar documentthat the student is to be, or is, awardedupon completion of the course of study;(n) Whether the academic,professional, or occupational degree thatthe institution will confer uponcompletion of the course of study hasbeen authorized by the appropriate Stateeducational agency. This type ofmisrepresentation includes, in the caseof a degree that has not been authorizedby the appropriate State educationalagency or that requires specializedaccreditation, any failure by an eligibleVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00129 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2institution to disclose these facts in anyadvertising or promotional materialsthat reference such degree; or(o) Any matters required to bedisclosed to prospective students under§§ 668.42 and 668.43 of this part.(Authority: 20 U.S.C. 1094)§ 668.73 Nature of financial charges.Misrepresentation concerning thenature of an eligible institution’sfinancial charges includes, but is notlimited to, false, erroneous, ormisleading statements concerning—(a) Offers of scholarships to pay all orpart of a course charge;(b) Whether a particular charge is thecustomary charge at the institution for acourse;(c) The cost of the program and theinstitution’s refund policy if the studentdoes not complete the program;(d) The availability or nature of anyfinancial assistance offered to students,including a student’s responsibility torepay any loans, regardless of whetherthe student is successful in completingthe program and obtaining employment;or(e) The student’s right to reject anyparticular type of financial aid or otherassistance, or whether the student mustapply for a particular type of financialaid, such as financing offered by theinstitution.(Authority: 20 U.S.C. 1094)§ 668.74 Employability of graduates.Misrepresentation regarding theemployability of an eligible institution’sgraduates includes, but is not limited to,false, erroneous, or misleadingstatements concerning—(a) The institution’s relationship withany organization, employment agency,or other agency providing authorizedtraining leading directly to employment;(b) The institution’s plans to maintaina placement service for graduates orotherwise assist its graduates to obtainemployment;(c) The institution’s knowledge aboutthe current or likely future conditions,compensation, or employmentopportunities in the industry oroccupation for which the students arebeing prepared;(d) Whether employment is beingoffered by the institution or that a talenthunt or contest is being conducted,including, but not limited to, throughthe use of phrases such as ‘‘Men/womenwanted to train for * * *,’’ ‘‘HelpWanted,’’ ‘‘Employment,’’ or ‘‘BusinessOpportunities’’;(e) Government job market statisticsin relation to the potential placement ofits graduates; or

66960 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and RegulationsWReier-Aviles on DSKGBLS3C1PROD with RULES2(f) Other requirements that aregenerally needed to be employed in thefields for which the training is provided,such as requirements related tocommercial driving licenses or permitsto carry firearms, and failing to disclosefactors that would prevent an applicantfrom qualifying for such requirements,such as prior criminal records orpreexisting medical conditions.(Authority: 20 U.S.C. 1094)§ 668.75 Relationship with the Departmentof Education.An eligible institution, itsrepresentatives, or any ineligibleinstitution, organization, or person withwhom the eligible institution has anagreement may not describe the eligibleinstitution’s participation in the title IV,HEA programs in a manner that suggestsapproval or endorsement by the U.S.Department of Education of the qualityof its educational programs.(Authority: 20 U.S.C. 1094)■ 25. Subpart J of part 668 is revised toread as follows:Subpart J—Approval of IndependentlyAdministered Tests; Specification ofPassing Score; Approval of State ProcessSec.668.141 Scope.668.142 Special definitions.668.143 [Reserved]668.144 Application for test approval.668.145 Test approval procedures.668.146 Criteria for approving tests.668.147 Passing scores.668.148 Additional criteria for the approvalof certain tests.668.149 Special provisions for the approvalof assessment procedures for individualswith disabilities.668.150 Agreement between the Secretaryand a test publisher or a State.668.151 Administration of tests.668.152 Administration of tests byassessment centers.668.153 Administration of tests forindividuals whose native language is notEnglish or for individuals withdisabilities.668.154 Institutional accountability.668.155 [Reserved]668.156 Approved State process.Subpart J—Approval of IndependentlyAdministered Tests; Specification ofPassing Score; Approval of StateProcess§ 668.141 Scope.(a) This subpart sets forth theprovisions under which a student whohas neither a high school diploma norits recognized equivalent may becomeeligible to receive title IV, HEA programfunds by—(1) Achieving a passing score,specified by the Secretary, on anindependently administered testapproved by the Secretary under thissubpart; or(2) Being enrolled in an eligibleinstitution that participates in a Stateprocess approved by the Secretaryunder this subpart.(b) Under this subpart, the Secretarysets forth—(1) The procedures and criteria theSecretary uses to approve tests;(2) The basis on which the Secretaryspecifies a passing score on eachapproved test;(3) The procedures and conditionsunder which the Secretary determinesthat an approved test is independentlyadministered;(4) The information that a testpublisher or a State must submit, as partof its test submission, to explain themethodology it will use for the testanomaly studies as described in§ 668.144(c)(17) and (d)(8), asappropriate;(5) The requirements that a testpublisher or a State, as appropriate—(i) Have a process to identify andfollow up on test score irregularities;(ii) Take corrective action—up to andincluding decertification of testadministrators—if the test publisher orthe State determines that test scoreirregularities have occurred; and(iii) Report to the Secretary the namesof any test administrators it decertifiesand any other action taken as a result oftest score analyses; and(6) The procedures and conditionsunder which the Secretary determinesthat a State process demonstrates thatstudents in the process have the abilityto benefit from the education andtraining being offered to them.(Authority: 20 U.S.C. 1091(d))§ 668.142 Special definitions.The following definitions apply tothis subpart:Assessment center: A facility that—(1) Is located at an eligible institutionthat provides two-year or four-yeardegrees or is a postsecondary vocationalinstitution;(2) Is responsible for gathering andevaluating information about individualstudents for multiple purposes,including appropriate course placement;(3) Is independent of the admissionsand financial aid processes at theinstitution at which it is located;(4) Is staffed by professionally trainedpersonnel;(5) Uses test administrators toadminister tests approved by theSecretary under this subpart; and(6) Does not have as its primarypurpose the administration of ability tobenefit tests.VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00130 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2ATB test irregularity: An irregularitythat results from an ATB test beingadministered in a manner that does notconform to the established rules for testadministration consistent with theprovisions of subpart J of part 668 andthe test administrator’s manual.Computer-based test: A test taken bya student on a computer and scored bya computer.General learned abilities: Cognitiveoperations, such as deductive reasoning,reading comprehension, or translationfrom graphic to numericalrepresentation, that may be learned inboth school and non-schoolenvironments.Independent test administrator: A testadministrator who administers tests at alocation other than an assessment centerand who—(1) Has no current or prior financialor ownership interest in the institution,its affiliates, or its parent corporation,other than the fees earned foradministering approved ATB teststhrough an agreement with the testpublisher or State and has nocontrolling interest in any otherinstitution;(2) Is not a current or formeremployee of or consultant to theinstitution, its affiliates, or its parentcorporation, a person in control ofanother institution, or a member of thefamily of any of these individuals;(3) Is not a current or former memberof the board of directors, a current orformer employee of or a consultant to amember of the board of directors, chiefexecutive officer, chief financial officerof the institution, its affiliates, or itsparent corporation or of any otherinstitution, or a member of the family ofany of these individuals; and(4) Is not a current or former studentof the institution.Individual with a disability: A personwho has a physical or mentalimpairment which substantially limitsone or more major life activities, has arecord of such an impairment, or isregarded as having such an impairment.Non-native speaker of English: Aperson whose first language is notEnglish and who is not fluent inEnglish.Secondary school level: As applied to‘‘content,’’ ‘‘curricula,’’ or ‘‘basic verbaland quantitative skills,’’ the basicknowledge or skills generally learned inthe 9th through 12th grades in UnitedStates secondary schools.Test: A standardized test, assessmentor instrument that has formal protocolson how it is to be administered in orderto be valid. These protocols include, forexample, the use of parallel, equatedforms; testing conditions; time allowed

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66961WReier-Aviles on DSKGBLS3C1PROD with RULES2for the test; and standardized scoring.Tests are not limited to traditional paperand pencil (or computer-administered)instruments for which forms areconstructed prior to administration toexaminees. Tests may also includeadaptive instruments that usecomputerized algorithms for selectingand administering items in real time;however, for such instruments, the sizeof the item pool and the method of itemselection must ensure negligible overlapin items across retests.Test administrator: An individualwho is certified by the test publisher (orthe State, in the case of an approvedState test or assessment) to administertests approved under this subpart inaccordance with the instructionsprovided by the test publisher or theState, as applicable, which includesprotecting the test and the test resultsfrom improper disclosure or release, andwho is not compensated on the basis oftest outcomes.Test item: A question on a test.Test publisher: An individual,organization, or agency that owns aregistered copyright of a test, or hasbeen authorized by the copyright holderto represent the copyright holder’sinterests regarding the test.(Authority: 20 U.S.C. 1091(d))§ 668.143 [Reserved]§ 668.144 Application for test approval.(a) The Secretary only reviews testsunder this subpart that are submitted bythe publisher of that test or by a State.(b) A test publisher or a State thatwishes to have its test approved by theSecretary under this subpart mustsubmit an application to the Secretary atsuch time and in such manner as theSecretary may prescribe. Theapplication must contain all theinformation necessary for the Secretaryto approve the test under this subpart,including but not limited to, theinformation contained in paragraph (c)or (d) of this section, as applicable.(c) A test publisher must include withits application—(1) A summary of the precise editions,forms, levels, and (if applicable) subtestsfor which approval is being sought;(2) The name, address, telephonenumber, and e-mail address of a contactperson to whom the Secretary mayaddress inquiries;(3) Each edition, form, level, and subtestof the test for which the testpublisher requests approval;(4) The distribution of test scores foreach edition, form, level, or sub-test forwhich approval is sought, that allowsthe Secretary to prescribe the passingscore for each test in accordance with§ 668.147;(5) Documentation of testdevelopment, including a history of thetest’s use;(6) Norming data and other evidenceused in determining the distribution oftest scores;(7) Material that defines the contentdomains addressed by the test;(8) Documentation of periodic reviewsof the content and specifications of thetest to ensure that the test reflectssecondary school level verbal andquantitative skills;(9) If a test being submitted is arevision of the most recent editionapproved by the Secretary, an analysisof the revisions, including the reasonsfor the revisions, the implications of therevisions for the comparability of scoreson the current test to scores on theprevious test, and data from validitystudies of the test undertakensubsequent to the revisions;(10) A description of the manner inwhich test-taking time was determinedin relation to the contentrepresentativeness requirements in§ 668.146(b)(3) and an analysis of theeffects of time on performance. Thisdescription may also include themanner in which test-taking time wasdetermined in relation to the otherrequirements in § 668.146(b);(11) A technical manual thatincludes—(i) An explanation of the methodologyand procedures for measuring thereliability of the test;(ii) Evidence that different forms ofthe test, including, if applicable, shortforms, are comparable in reliability;(iii) Other evidence demonstratingthat the test permits consistentassessment of individual skill andability;(iv) Evidence that the test was normedusing—(A) Groups that were of sufficient sizeto produce defensible standard errors ofthe mean and were notdisproportionately composed of anyrace or gender; and(B) A contemporary sample that isrepresentative of the population ofpersons who have earned a high schooldiploma in the United States;(v) Documentation of the level ofdifficulty of the test;(vi) Unambiguous scales and scalevalues so that standard errors ofmeasurement can be used to determinestatistically significant differences inperformance; and(vii) Additional guidance on theinterpretation of scores resulting fromany modifications of the test forindividuals with temporaryVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00131 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2impairments, individuals withdisabilities and guidance on the types ofaccommodations that are allowable;(12) The manual provided to testadministrators containing proceduresand instructions for test security andadministration, and the forwarding oftests to the test publisher;(13) An analysis of the item-content ofeach edition, form, level, and (ifapplicable) sub-test to demonstratecompliance with the required secondaryschool level criterion specified in§ 668.146(b);(14) A description of retestingprocedures and the analysis upon whichthe criteria for retesting are based;(15) Other evidence establishing thetest’s compliance with the criteria forapproval of tests as provided in§ 668.146;(16) A description of its testadministrator certification process thatprovides—(i) How the test publisher willdetermine that the test administrator hasthe necessary training, knowledge, skill,and integrity to test students inaccordance with this subpart and thetest publisher’s requirements; and(ii) How the test publisher willdetermine that the test administrator hasthe ability and facilities to keep its testsecure against disclosure or release;(17) A description of the test anomalyanalysis the test publisher will conductand submit to the Secretary thatincludes—(i) An explanation of how the testpublisher will identify potential testirregularities and make a determinationthat test irregularities have occurred;(ii) An explanation of the process andprocedures for corrective action (up toand including decertification of acertified test administrator) when thetest publisher determines that testirregularities have occurred; and(iii) Information on when and how thetest publisher will notify a testadministrator, the Secretary, and theinstitutions for which the testadministrator had previously providedtesting services for that test publisher,that the test administrator has beendecertified; and(18)(i) An explanation of anyaccessible technologies that areavailable to accommodate individualswith disabilities, and(ii) A description of the process for atest administrator to identify and reportto the test publisher whenaccommodations for individuals withdisabilities were provided, for scoringand norming purposes.(d) A State must include with itsapplication—

WReier-Aviles on DSKGBLS3C1PROD with RULES266962 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations(1) The information necessary for theSecretary to determine that the test theState uses measures a student’s skillsand abilities for the purpose ofdetermining whether the student has theskills and abilities the State expects ofa high school graduate in that State;(2) The passing scores on that test;(3) Any guidance on the interpretationof scores resulting from anymodifications of the test for individualswith disabilities;(4) A statement regarding how the testwill be kept secure;(5) A description of retestingprocedures and the analysis upon whichthe criteria for retesting are based;(6) Other evidence establishing thetest’s compliance with the criteria forapproval of tests as provided in§ 668.146;(7) A description of its testadministrator certification process thatprovides—(i) How the State will determine thatthe test administrator has the necessarytraining, knowledge, skill, and integrityto test students in accordance with theState’s requirements; and(ii) How the State will determine thatthe test administrator has the ability andfacilities to keep its test secure againstdisclosure or release;(8) A description of the test anomalyanalysis that the State will conduct andsubmit to the Secretary that includes—(i) An explanation of how the Statewill identify potential test irregularitiesand make a determination that testirregularities have occurred;(ii) An explanation of the process andprocedures for corrective action (up toand including decertification of a testadministrator) when the Statedetermines that test irregularities haveoccurred; and(iii) Information on when and how theState will notify a test administrator, theSecretary, and the institutions for whichthe test administrator had previouslyprovided testing services for that State,that the test administrator has beendecertified;(9)(i) An explanation of any accessibletechnologies that are available toaccommodate individuals withdisabilities; and(ii) A description of the process for atest administrator to identify and reportto the test publisher whenaccommodations for individuals withdisabilities were provided, for scoringand norming purposes; and(10) The name, address, telephonenumber, and e-mail address of a contactperson to whom the Secretary mayaddress inquiries.(11) A technical manual thatincludes—(i) An explanation of the methodologyand procedures for measuring thereliability of the test;(ii) Evidence that different forms ofthe test, including, if applicable, shortforms, are comparable in reliability;(iii) Other evidence demonstratingthat the test permits consistentassessment of individual skill andability;(iv) Evidence that the test was normedusing—(A) Groups that were of sufficient sizeto produce defensible standard errors ofthe mean and were notdisproportionately composed of anyrace or gender; and(B) A contemporary sample that isrepresentative of the population ofpersons who have earned a high schooldiploma in the United States;(v) Documentation of the level ofdifficulty of the test;(vi) Unambiguous scales and scalevalues so that standard errors ofmeasurement can be used to determinestatistically significant differences inperformance; and(vii) Additional guidance on theinterpretation of scores resulting fromany modifications of the test forindividuals with temporaryimpairments, individuals withdisabilities and guidance on the types ofaccommodations that are allowable;(12) the manual provided to testadministrators containing proceduresand instructions for test security andadministration, and the forwarding oftests to the State.(Approved by the Office of Management andBudget under control number 1845–0049)(Authority: 20 U.S.C. 1091(d))§ 668.145 Test approval procedures.(a)(1) When the Secretary receives acomplete application from a testpublisher or a State, the Secretaryselects one or more experts in the fieldof educational testing and assessment,who possess appropriate advanceddegrees and experience in testdevelopment or psychometric research,to determine whether the test meets therequirements for test approval containedin §§ 668.146, 668.147, 668.148, or668.149, as appropriate, and to advisethe Secretary of their determinations.(2) If the test involves a languageother than English, the Secretary selectsat least one individual who is fluent inthe language in which the test is writtento collaborate with the testing expert orexperts described in paragraph (a)(1) ofthis section and to advise the Secretaryon whether the test meets the additionalcriteria, provisions, and conditions fortest approval contained in §§ 668.148and 668.149.VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00132 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2(3) For test batteries that containmultiple sub-tests measuring contentdomains other than verbal andquantitative domains, the Secretaryreviews only those sub-tests coveringthe verbal and quantitative domains.(b)(1) If the Secretary determines thata test satisfies the criteria andrequirements for test approval, theSecretary notifies the test publisher orthe State, as applicable, of theSecretary’s decision, and publishes thename of the test and the passing scoresin the Federal Register.(2) If the Secretary determines that atest does not satisfy the criteria andrequirements for test approval, theSecretary notifies the test publisher orthe State, as applicable, of theSecretary’s decision, and the reasonswhy the test did not meet those criteriaand requirements.(3) If the Secretary determines that atest does not satisfy the criteria andrequirements for test approval, the testpublisher or the State that submitted thetest for approval may request that theSecretary reevaluate the Secretary’sdecision. Such a request must beaccompanied by—(i) Documentation and informationthat address the reasons for the nonapprovalof the test; and(ii) An analysis of why theinformation and documentationsubmitted meet the criteria andrequirements for test approvalnotwithstanding the Secretary’s earlierdecision to the contrary.(c)(1) The Secretary approves a test fora period not to exceed five years fromthe date the notice of approval of thetest is published in the Federal Register.(2) The Secretary extends theapproval period of a test to include theperiod of review if the test publisher orthe State, as applicable, re-submits thetest for review and approval under§ 668.144 at least six months before thedate on which the test approval isscheduled to expire.(d)(1) The Secretary’s approval of atest may be revoked if the Secretarydetermines that the test publisher or theState violated any terms of theagreement described in § 668.150, thatthe information the test publisher or theState submitted as a basis for approvalof the test was inaccurate, or that thetest publisher or the State substantiallychanged the test and did not resubmitthe test, as revised, for approval.(2) If the Secretary revokes approvalof a previously approved test, theSecretary publishes a notice of thatrevocation in the Federal Register. Therevocation becomes effective—

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66963WReier-Aviles on DSKGBLS3C1PROD with RULES2(i) One hundred and twenty days fromthe date the notice of revocation ispublished in the Federal Register; or(ii) An earlier date specified by theSecretary in a notice published in theFederal Register.(Approved by the Office of Management andBudget under control number 1845–0049)(Authority: 20 U.S.C. 1091(d))§ 668.146 Criteria for approving tests.(a) Except as provided in § 668.148,the Secretary approves a test under thissubpart if—(1) The test meets the criteria set forthin paragraph (b) of this section;(2) The test publisher or the Statesatisfies the requirements set forth inparagraph (c) of this section; and(3) The Secretary makes adetermination that the information thetest publisher or State submitted inaccordance with § 668.144(c)(17) or(d)(8), as applicable, provides adequateassurance that the test publisher or Statewill conduct rigorous test anomalyanalyses and take appropriate action iftest administrators do not comply withtesting procedures.(b) To be approved under this subpart,a test must—(1) Assess secondary school levelbasic verbal and quantitative skills andgeneral learned abilities;(2) Sample the major content domainsof secondary school level verbal andquantitative skills with sufficientnumbers of questions to—(i) Adequately represent each domain;and(ii) Permit meaningful analyses ofitem-level performance by students whoare representative of the contemporarypopulation beyond the age ofcompulsory school attendance and haveearned a high school diploma;(3) Require appropriate test-takingtime to permit adequate sampling of themajor content domains described inparagraph (b)(2) of this section;(4) Have all forms (including shortforms) comparable in reliability;(5) Have, in the case of a test that isrevised, new scales, scale values, andscores that are demonstrablycomparable to the old scales, scalevalues, and scores;(6) Meet all standards for testconstruction provided in the 1999edition of the Standards for Educationaland Psychological Testing, prepared bya joint committee of the AmericanEducational Research Association, theAmerican Psychological Association,and the National Council onMeasurement in Education incorporatedby reference in this section.Incorporation by reference of thisdocument has been approved by theDirector of the Office of the FederalRegister pursuant to the Director’sauthority under 5 U.S.C. 552(a) and 1CFR part 51. The incorporateddocument is on file at the Departmentof Education, Federal Student Aid, room113E2, 830 First Street, NE.,Washington, DC 20002, phone (202)377–4026, and at the National Archivesand Records Administration (NARA).For information on the availability ofthis material at NARA, call 1–866–272–6272, or go to: http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html. The document alsomay be obtained from the AmericanEducational Research Association at:http://www.aera.net; and(7) Have the test publisher’s or theState’s guidelines for retesting,including time between test-taking, bebased on empirical analyses that arepart of the studies of test reliability.(c) In order for a test to be approvedunder this subpart, a test publisher or aState must—(1) Include in the test booklet orpackage—(i) Clear, specific, and completeinstructions for test administration,including information for test takers onthe purpose, timing, and scoring of thetest; and(ii) Sample questions representative ofthe content and average difficulty of thetest;(2) Have two or more secure, equated,alternate forms of the test;(3) Except as provided in §§ 668.148and 668.149, provide tables ofdistributions of test scores which clearlyindicate the mean score and standarddeviation for high school graduates whohave taken the test within three yearsprior to the date that the test issubmitted to the Secretary for approvalunder § 668.144;(4) Norm the test with—(i) Groups that are of sufficient size toproduce defensible standard errors ofthe mean and are not disproportionatelycomposed of any race or gender; and(ii) A contemporary sample that isrepresentative of the population ofpersons who have earned a high schooldiploma in the United States; and(5) If test batteries include sub-testsassessing different verbal and/orquantitative skills, a distribution of testscores as described in paragraph (c)(3)of this section that allows the Secretaryto prescribe either—(i) A passing score for each sub-test;or(ii) One composite passing score forverbal skills and one composite passingscore for quantitative skills.VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00133 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2(Approved by the Office of Management andBudget under control number 1845–0049)(Authority: 20 U.S.C. 1091(d))§ 668.147 Passing scores.Except as provided in §§ 668.144(d),668.148, and 668.149, to demonstratethat a test taker has the ability to benefitfrom the education and training offeredby the institution, the Secretaryspecifies that the passing score on eachapproved test is one standard deviationbelow the mean score of a sample ofindividuals who have taken the testwithin the three years before the test issubmitted to the Secretary for approval.The sample must be representative ofthe population of high school graduatesin the United States.(Authority: 20 U.S.C. 1091(d))§ 668.148 Additional criteria for theapproval of certain tests.(a) In addition to satisfying the criteriain § 668.146, to be approved by theSecretary, a test must meet the followingcriteria, if applicable:(1) In the case of a test developed fora non-native speaker of English who isenrolled in a program that is taught inhis or her native language, the test mustbe—(i) Linguistically accurate andculturally sensitive to the population forwhich the test is designed, regardless ofthe language in which the test iswritten;(ii) Supported by documentationdetailing the development of normativedata;(iii) If translated from an Englishversion, supported by documentation ofprocedures to determine its reliabilityand validity with reference to thepopulation for which the translated testwas designed;(iv) Developed in accordance withguidelines provided in the 1999 editionof the ‘‘Testing Individuals of DiverseLinguistic Backgrounds’’ section of theStandards for Educational andPsychological Testing prepared by ajoint committee of the AmericanEducational Research Association, theAmerican Psychological Association,and the National Council onMeasurement in Education incorporatedby reference in this section.Incorporation by reference of thisdocument has been approved by theDirector of the Office of the FederalRegister pursuant to the Director’sauthority under 5 U.S.C. 552(a) and 1CFR part 51. The incorporateddocument is on file at the Departmentof Education, Federal Student Aid, room113E2, 830 First Street, NE.,Washington, DC 20002, phone (202)377–4026, and at the National Archives

WReier-Aviles on DSKGBLS3C1PROD with RULES266964 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulationsand Records Administration (NARA).For information on the availability ofthis material at NARA, call 1–866–272–6272, or go to: http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html. The document alsomay be obtained from the AmericanEducational Research Association at:http://www.aera.net; and(v)(A) If the test is in Spanish,accompanied by a distribution of testscores that clearly indicates the meanscore and standard deviation forSpanish-speaking students with highschool diplomas who have taken the testwithin five years before the date onwhich the test is submitted to theSecretary for approval.(B) If the test is in a language otherthan Spanish, accompanied by arecommendation for a provisionalpassing score based upon performanceof a sample of test takers representativeof non-English speaking individualswho speak a language other thanSpanish and who have a high schooldiploma. The sample upon which therecommended provisional passing scoreis based must be large enough toproduce stable norms.(2) In the case of a test that ismodified for use for individuals withdisabilities, the test publisher or Statemust—(i) Follow guidelines provided in the‘‘Testing Individuals with Disabilities’’section of the Standards for Educationaland Psychological Testing; and(ii) Provide documentation of theappropriateness and feasibility of themodifications relevant to testperformance.(3) In the case of a computer-basedtest, the test publisher or State, asapplicable, must—(i) Provide documentation to theSecretary that the test complies with thebasic principles of test construction andstandards of reliability and validity aspromulgated in the Standards forEducational and Psychological Testing;(ii) Provide test administrators withinstructions for familiarizing test takerswith computer hardware prior to testtaking;and(iii) Provide two or more parallel,equated forms of the test, or, if parallelforms are generated from an item pool,provide documentation of the methodsof item selection for alternate forms.(b) If a test is designed solely tomeasure the English languagecompetence of non-native speakers ofEnglish—(1) The test must meet the criteria setforth in § 668.146(b)(6), (c)(1), (c)(2), and(c)(4); and(2) The test publisher mustrecommend a passing score based on themean score of test takers beyond the ageof compulsory school attendance whocompleted U.S. high school equivalencyprograms, formal training programs, orbilingual vocational programs.(Approved by the Office of Management andBudget under control number 1845–0049)(Authority: 20 U.S.C. 1091(d))§ 668.149 Special provisions for theapproval of assessment procedures forindividuals with disabilities.If no test is reasonably available forindividuals with disabilities so that notest can be approved under §§ 668.146or 668.148 for these individuals, thefollowing procedures apply:(a) The Secretary considers a modifiedtest or testing procedure, or instrumentthat has been scientifically developedspecifically for the purpose ofevaluating the ability to benefit frompostsecondary training or education ofindividuals with disabilities to be anapproved test for purposes of thissubpart provided that the testingprocedure or instrument measures bothbasic verbal and quantitative skills atthe secondary school level.(b) The Secretary considers thepassing scores for these testingprocedures or instruments to be thoserecommended by the test publisher orState, as applicable.(c) The test publisher or State, asapplicable, must—(1) Maintain appropriatedocumentation, including a descriptionof the procedures or instruments, theircontent domains, technical properties,and scoring procedures; and(2) Require the test administrator to—(i) Use the procedures or instrumentsin accordance with instructionsprovided by the test publisher or State,as applicable; and(ii) Use the passing scoresrecommended by the test publisher orState, as applicable.(Approved by the Office of Management andBudget under control number 1845–0049)(Authority: 20 U.S.C. 1091(d))§ 668.150 Agreement between theSecretary and a test publisher or a State.(a) If the Secretary approves a testunder this subpart, the test publisher orthe State that submitted the test mustenter into an agreement with theSecretary that contains the provisionsset forth in paragraph (b) of this sectionbefore an institution may use the test todetermine a student’s eligibility for titleIV, HEA program funds.(b) The agreement between a testpublisher or a State, as applicable, andVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00134 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2the Secretary provides that the testpublisher or the State, as applicable,must—(1) Allow only test administrators thatit certifies to give its test;(2) Require each test administrator itcertifies to—(i) Provide the test publisher or theState, as applicable, with a certificationstatement that indicates he or she is notcurrently decertified; and(ii) Notify the test publisher or theState, as applicable, immediately if anyother test publisher or State decertifiesthe test administrator;(3) Only certify test administratorswho—(i) Have the necessary training,knowledge, and skill to test students inaccordance with the test publisher’s orthe State’s testing requirements;(ii) Have the ability and facilities tokeep its test secure against disclosure orrelease; and(iii) Have not been decertified withinthe last three years by any test publisheror State;(4) Decertify a test administrator for aperiod of three years if the test publisheror the State finds that the testadministrator—(i) Has failed to give its test inaccordance with the test publisher’s orthe State’s instructions;(ii) Has not kept the test secure;(iii) Has compromised the integrity ofthe testing process; or(iv) Has given the test in violation ofthe provisions contained in § 668.151;(5) Reevaluate the qualifications of atest administrator who has beendecertified by another test publisher orState and determine whether tocontinue the test administrator’scertification or to decertify the testadministrator;(6) Immediately notify the testadministrator, the Secretary, and theinstitutions where the test administratorpreviously administered approved testswhen the test publisher or the Statedecertifies a test administrator;(7)(i) Review the test results of thetests administered by a decertified testadministrator and determine which testsmay have been improperly administeredduring the five (5) year period precedingthe date of decertification;(ii) Immediately notify the affectedinstitutions and students or prospectivestudents; and(iii) Provide a report to the Secretaryon the results of the review and thenotifications provided to institutionsand students or prospective students;(8) Report to the Secretary if the testpublisher or the State certifies apreviously decertified test administratorafter the three year period specified inparagraph (b)(4) of this section;

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66965WReier-Aviles on DSKGBLS3C1PROD with RULES2(9) Score a test answer sheet that itreceives from a test administrator;(10) If a computer-based test is used,provide the test administrator withsoftware that will—(i) Immediately generate a score reportfor each test taker;(ii) Allow the test administrator tosend to the test publisher or the State,as applicable, a record of the test taker’sperformance on each test item and thetest taker’s test scores using a datatransfer method that is encrypted andsecure; and(iii) Prohibit any changes in test takerresponses or test scores;(11) Promptly send to the student andthe institution the student indicated heor she is attending or scheduled toattend a notice stating the student’sscore for the test and whether or not thestudent passed the test;(12) Keep each test answer sheet orelectronic record forwarded for scoringand all other documents forwarded bythe test administrator with regard to thetest for a period of three years from thedate the analysis of the tests results,described in paragraph (b)(13) of thissection, was sent to the Secretary;(13) Analyze the test scores ofstudents who take the test to determinewhether the test scores and dataproduce any irregular pattern that raisesan inference that the tests were notbeing properly administered, andprovide the Secretary with a copy of thisanalysis within 18 months after the testwas approved and every 18 monthsthereafter during the period of testapproval;(14) Upon request, give the Secretary,a State agency, an accrediting agency,and law enforcement agencies access totest records or other documents relatedto an audit, investigation, or programreview of an institution, the testpublisher, or a test administrator;(15) Immediately report to theSecretary if the test publisher or theState finds any credible informationindicating that a test has beencompromised;(16) Immediately report to the Officeof Inspector General of the Departmentof Education for investigation if the testpublisher or the State finds any credibleinformation indicating that a testadministrator or institution may haveengaged in civil or criminal fraud, orother misconduct; and(17) Require a test administrator whoprovides a test to an individual with adisability who requires anaccommodation in the test’sadministration to report to the testpublisher or the State within the timeperiod specified in § 668.151(b)(2) or§ 668.152(b)(2), as applicable, the natureof the disability and theaccommodations that were provided.(c)(1) The Secretary may terminate anagreement with a test publisher or aState, as applicable, if the test publisheror the State fails to carry out the termsof the agreement described in paragraph(b) of this section.(2) Before terminating the agreement,the Secretary gives the test publisher orthe State, as applicable, the opportunityto show that it has not failed to carry outthe terms of its agreement.(3) If the Secretary terminates anagreement with a test publisher or aState under this section, the Secretarypublishes a notice in the FederalRegister specifying when institutionsmay no longer use the test publisher’sor the State’s test(s) for purposes ofdetermining a student’s eligibility fortitle IV, HEA program funds.(Approved by the Office of Management andBudget under control number 1845–0049)(Authority: 20 U.S.C. 1091(d))§ 668.151 Administration of tests.(a)(1) To establish a student’seligibility for title IV, HEA programfunds under this subpart, an institutionmust select a test administrator to givean approved test.(2) An institution may use the resultsof an approved test it received from anapproved test publisher or assessmentcenter to determine a student’seligibility to receive title IV, HEAprogram funds if the test wasindependently administered andproperly administered in accordancewith this subpart.(b) The Secretary considers that a testis independently administered if the testis—(1) Given at an assessment center bya certified test administrator who is anemployee of the center; or(2) Given by an independent testadministrator who maintains the test ata secure location and submits the testfor scoring by the test publisher or theState or, for a computer-based test, arecord of the test scores, within twobusiness days of administering the test.(c) The Secretary considers that a testis not independently administered if aninstitution—(1) Compromises test security ortesting procedures;(2) Pays a test administrator a bonus,commission, or any other incentivebased upon the test scores or pass ratesof its students who take the test; or(3) Otherwise interferes with the testadministrator’s independence or testadministration.(d) The Secretary considers that a testis properly administered if the testadministrator—VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00135 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2(1) Is certified by the test publisher orthe State, as applicable, to give the testpublisher’s or the State’s test;(2) Administers the test in accordancewith instructions provided by the testpublisher or the State, as applicable,and in a manner that ensures theintegrity and security of the test;(3) Makes the test available only to atest-taker, and then only during aregularly scheduled test;(4) Secures the test against disclosureor release; and(5) Submits the completed test or, fora computer-based test, a record of testscores, to the test publisher or the State,as applicable, within the time periodspecified in § 668.152(b) or paragraph(b)(2) of this section, as appropriate, andin accordance with the test publisher’sor the State’s instructions.(e) An independent test administratormay not score a test.(f) An individual who fails to pass atest approved under this subpart maynot retake the same form of the test forthe period prescribed by the testpublisher or the State responsible forthe test.(g) An institution must maintain arecord for each individual who took atest under this subpart. The record mustinclude—(1) The test taken by the individual;(2) The date of the test;(3) The individual’s scores as reportedby the test publisher, an assessmentcenter, or the State;(4) The name and address of the testadministrator who administered the testand any identifier assigned to the testadministrator by the test publisher orthe State; and(5) If the individual who took the testis an individual with a disability andwas unable to be evaluated by the useof an approved ATB test or theindividual requested or required testingaccommodations, documentation of theindividual’s disability and of the testingarrangements provided in accordancewith § 668.153(b).(Approved by the Office of Managementand Budget under control number 1845–0049)(Authority: 20 U.S.C. 1091(d))§ 668.152 Administration of tests byassessment centers.(a) If a test is given by an assessmentcenter, the assessment center mustproperly administer the test asdescribed in § 668.151(d), and§ 668.153, if applicable.(b)(1) Unless an agreement between atest publisher or a State, as applicable,and an assessment center indicatesotherwise, an assessment center scores

WReier-Aviles on DSKGBLS3C1PROD with RULES266966 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulationsthe tests it gives and promptly notifiesthe institution and the student of thestudent’s score on the test and whetherthe student passed the test.(2) If the assessment center scores thetest, it must provide weekly to the testpublisher or the State, as applicable—(i) All copies of the completed test,including the name and address of thetest administrator who administered thetest and any identifier assigned to thetest administrator by the test publisheror the State, as applicable; or(ii) A report listing all test-takers’scores and institutions to which thescores were sent and the name andaddress of the test administrator whoadministered the test and any identifierassigned to the test administrator by thetest publisher or the State, as applicable.(Approved by the Office of Managementand Budget under control number 1845–0049)(Authority: 20 U.S.C. 1091(d))§ 668.153 Administration of tests forindividuals whose native language is notEnglish or for individuals with disabilities.(a) Individuals whose native languageis not English. For an individual whosenative language is not English and whois not fluent in English, the institutionmust use the following tests, asapplicable:(1) If the individual is enrolled orplans to enroll in a program conductedentirely in his or her native language,the individual must take a test approvedunder §§ 668.146 and 668.148(a)(1).(2) If the individual is enrolled orplans to enroll in a program that istaught in English with an ESLcomponent, the individual must take anEnglish language proficiency assessmentapproved under § 668.148(b) and, beforebeginning the portion of the programtaught in English, a test approved under§ 668.146.(3) If the individual is enrolled orplans to enroll in a program that istaught in English without an ESLcomponent, or the individual does notenroll in any ESL component offered,the individual must take a test inEnglish approved under § 668.146.(4) If the individual enrolls in an ESLprogram, the individual must take anESL test approved under § 668.148(b).(5) If the individual enrolls or plansto enroll in a program that is taught inthe student’s native language that eitherhas an ESL component or a portion ofthe program will be taught in English,the individual must take an Englishproficiency test approved under§ 668.148(b) prior to beginning theportion of the program taught inEnglish.(b) Individuals with disabilities. (1)For an individual with a disability whohas neither a high school diploma norits equivalent and who is applying fortitle IV, HEA program funds and seeksto show his or her ability to benefitthrough the testing procedures in thissubpart, an institution must use a testdescribed in § 668.148(a)(2) or§ 668.149(a).(2) The test must reflect theindividual’s skills and general learnedabilities.(3) The test administrator must ensurethat there is documentation to supportthe determination that the individual isan individual with a disability andrequires accommodations—such asextra time or a quiet room—for taking anapproved test, or is unable to beevaluated by the use of an approvedATB test.(4) Documentation of an individual’sdisability may be satisfied by—(i) A written determination, includinga diagnosis and information abouttesting accommodations, if suchaccommodation information isavailable, by a licensed psychologist orphysician; or(ii) A record of the disability from alocal or State educational agency, orother government agency, such as theSocial Security Administration or avocational rehabilitation agency, thatidentifies the individual’s disability.This record may, but is not required to,include a diagnosis and recommendedtesting accommodations.(Approved by the Office of Managementand Budget under control number 1845–0049)(Authority: 20 U.S.C. 1091(d))§ 668.154 Institutional accountability.An institution is liable for the title IV,HEA program funds disbursed to astudent whose eligibility is determinedunder this subpart only if—(a) The institution used a test that wasnot administered independently, inaccordance with § 668.151(b);(b) The institution or an employee ofthe institution compromised the testingprocess in any way; or(c) The institution is unable todocument that the student received apassing score on an approved test.(Authority: 20 U.S.C. 1091(d))§ 668.155 [Reserved]§ 668.156 Approved State process.(a)(1) A State that wishes theSecretary to consider its State process asan alternative to achieving a passingscore on an approved, independentlyadministered test for the purpose ofVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00136 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2determining a student’s eligibility fortitle IV, HEA program funds must applyto the Secretary for approval of thatprocess.(2) To be an approved State process,the State process does not have toinclude all the institutions located inthat State, but must indicate whichinstitutions are included.(b) The Secretary approves a State’sprocess if—(1) The State administering theprocess can demonstrate that thestudents it admits under that processwithout a high school diploma or itsequivalent, who enroll in participatinginstitutions have a success rate asdetermined under paragraph (h) of thissection that is within 95 percent of thesuccess rate of students with highschool diplomas; and(2) The State’s process satisfies therequirements contained in paragraphs(c) and (d) of this section.(c) A State process must requireinstitutions participating in the processto provide each student they admitwithout a high school diploma or itsrecognized equivalent with thefollowing services:(1) Orientation regarding theinstitution’s academic standards andrequirements, and student rights.(2) Assessment of each student’sexisting capabilities through meansother than a single standardized test.(3) Tutoring in basic verbal andquantitative skills, if appropriate.(4) Assistance in developingeducational goals.(5) Counseling, including counselingregarding the appropriate class level forthat student given the student’sindividual’s capabilities.(6) Follow-up by teachers andcounselors regarding the student’sclassroom performance and satisfactoryprogress toward program completion.(d) A State process must—(1) Monitor on an annual basis eachparticipating institution’s compliancewith the requirements and standardscontained in the State’s process;(2) Require corrective action if aninstitution is found to be innoncompliance with the State processrequirements; and(3) Terminate an institution from theState process if the institution refuses orfails to comply with the State processrequirements.(e)(1) The Secretary responds to aState’s request for approval of its State’sprocess within six months after theSecretary’s receipt of that request. If theSecretary does not respond by the endof six months, the State’s process isdeemed to be approved.(2) An approved State processbecomes effective for purposes of

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66967WReier-Aviles on DSKGBLS3C1PROD with RULES2determining student eligibility for titleIV, HEA program funds under thissubpart—(i) On the date the Secretary approvesthe process; or(ii) Six months after the date onwhich the State submits the process tothe Secretary for approval, if theSecretary neither approves nordisapproves the process during that sixmonth period.(f) The Secretary approves a Stateprocess for a period not to exceed fiveyears.(g)(1) The Secretary withdrawsapproval of a State process if theSecretary determines that the Stateprocess violated any terms of thissection or that the information that theState submitted as a basis for approvalof the State process was inaccurate.(2) The Secretary provides a Statewith the opportunity to contest afinding that the State process violatedany terms of this section or that theinformation that the State submitted asa basis for approval of the State processwas inaccurate.(h) The State must calculate thesuccess rates as referenced in paragraph(b) of this section by—(1) Determining the number ofstudents with high school diplomaswho, during the applicable award yeardescribed in paragraph (i) of thissection, enrolled in participatinginstitutions and—(i) Successfully completed educationor training programs;(ii) Remained enrolled in education ortraining programs at the end of thataward year; or(iii) Successfully transferred to andremained enrolled in another institutionat the end of that award year;(2) Determining the number ofstudents with high school diplomaswho enrolled in education or trainingprograms in participating institutionsduring that award year;(3) Determining the number ofstudents calculated in paragraph (h)(2)of this section who remained enrolledafter subtracting the number of studentswho subsequently withdrew or wereexpelled from participating institutionsand received a 100 percent refund oftheir tuition under the institutions’refund policies;(4) Dividing the number of studentsdetermined in paragraph (h)(1) of thissection by the number of studentsdetermined in paragraph (h)(3) of thissection;(5) Making the calculations describedin paragraphs (h)(1) through (h)(4) ofthis section for students without a highschool diploma or its recognizedequivalent who enrolled in participatinginstitutions.(i) For purposes of paragraph (h) ofthis section, the applicable award yearis the latest complete award year forwhich information is available thatimmediately precedes the date on whichthe State requests the Secretary toapprove its State process, except thatthe award year selected must be one ofthe latest two completed award yearspreceding that application date.(Approved by the Office of Managementand Budget under control number 1845–0049)(Authority: 20 U.S.C. 1091(d))■ 26. Section 668.164 is amended by:■ A. In paragraph (g)(2)(i), removing thewords ‘‘Except in the case of a parentPLUS loan, the’’, and adding, in theirplace, the word ‘‘The’’.■ B. In paragraph (g)(4)(iv), removingthe words ‘‘a Federal Pell Grant, anACG, or a National SMART Grant’’, andadding, in their place, the words ‘‘anytitle IV, HEA program assistance’’.■ C. Adding paragraph (i).The addition reads as follows:§ 668.164 Disbursing funds.* * * * *(i) Provisions for books and supplies.(1) An institution must provide a wayfor a Federal Pell Grant eligible studentto obtain or purchase, by the seventhday of a payment period, the books andsupplies required for the paymentperiod if, 10 days before the beginningof the payment period—(i) The institution could disburse thetitle IV, HEA program funds for whichthe student is eligible; and(ii) Presuming the funds weredisbursed, the student would have acredit balance under paragraph (e) ofthis section.(2) The amount the institutionprovides to the Federal Pell Granteligible student to obtain or purchasebooks and supplies is the lesser of thepresumed credit balance under thisparagraph or the amount needed by thestudent, as determined by theinstitution.(3) The institution must have a policyunder which a Federal Pell Granteligible student may opt out of the waythe institution provides for the studentto obtain or purchase books andsupplies under this paragraph.(4) If a Federal Pell Grant eligiblestudent uses the way provided by theinstitution to obtain or purchase booksand supplies under this paragraph, thestudent is considered to have authorizedthe use of title IV, HEA funds and theinstitution does not need to obtain awritten authorization under paragraph(d)(1)(iv) of this section and § 668.165(b)for this purpose.* * * * *PART 682—FEDERAL FAMILYEDUCATION LOAN (FFEL) PROGRAM■ 27. The authority citation for part 682is revised to read as follows:Authority: 20 U.S.C. 1071 to 1087–2,unless otherwise noted.§ 682.200 [Amended]VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00137 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2■ 28. Section 682.200(a)(2) is amendedby adding, in alphabetical order, theterm ‘‘Credit hour’’.PART 685—WILLIAM D. FORDFEDERAL DIRECT LOAN PROGRAM■ 29. The authority citation for part 685continues to read as follows:Authority: 20 U.S.C. 1070g, 1087a, et seq.,unless otherwise noted.■ 30. Section 685.102 is amended by:■ A. In paragraph (a)(2), adding, inalphabetical order, the term ‘‘Credithour’’.■ B. In paragraph (b), adding, inalphabetical order, the definition ofPayment data to read as follows:§ 685.102 Definitions.* * * * *(b) * * *Payment data: An electronic recordthat is provided to the Secretary by aninstitution showing studentdisbursement information.* * * * *■ 31. Section 685.301 is amended byrevising paragraph (e)(1) to read asfollows:§ 685.301 Origination of a loan by a DirectLoan Program school.* * * * *(e) * * *(1) The Secretary accepts a student’sPayment Data that is submitted inaccordance with procedures establishedthrough publication in the FederalRegister, and that contains informationthe Secretary considers to be accurate inlight of other available informationincluding that previously provided bythe student and the institution.* * * * *PART 686—TEACHER EDUCATIONASSISTANCE FOR COLLEGE ANDHIGHER EDUCATION (TEACH) GRANTPROGRAM■ 32. The authority citation for part 686continues to read as follows:Authority: 20 U.S.C. 1070g, et seq., unlessotherwise noted.

66968 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and RegulationsWReier-Aviles on DSKGBLS3C1PROD with RULES2■ 33. Section 686.2 is amended by:■ A. In paragraph (a), adding, inalphabetical order, the term ‘‘Credithour’’.■ B. In paragraph (d), revising thedefinition of Payment Data to read asfollows:§ 686.2 Definitions.* * * * *(d) * * *Payment Data: An electronic recordthat is provided to the Secretary by aninstitution showing studentdisbursement information.* * * * *■ 34. Section 686.37 is amended byrevising paragraph (b) to read as follows:§ 686.37 Institutional reportingrequirements.* * * * *(b) The Secretary accepts a student’sPayment Data that is submitted inaccordance with procedures establishedthrough publication in the FederalRegister, and that contains informationthe Secretary considers to be accurate inlight of other available informationincluding that previously provided bythe student and the institution.* * * * *PART 690—FEDERAL PELL GRANTPROGRAM■ 35. The authority citation for part 690continues to read as follows:Authority: 20 U.S.C. 1070a, 1070g, unlessotherwise noted.§ 690.2 [Amended]■ 36. Section 690.2 is amended by:■ A. In paragraph (a), adding, inalphabetical order, the term ‘‘Credithour’’.■ B. In paragraph (b), adding, inalphabetical order, the terms‘‘Institutional student informationrecord (ISIR)’’, ‘‘Student aid report(SAR)’’, ‘‘Valid institutional studentinformation record (valid ISIR)’’, and‘‘Valid student aid report (valid SAR)’’.■ C. In paragraph (c), by removing thedefinitions for the terms ‘‘InstitutionalStudent Information Record (ISIR)’’,‘‘Student Aid Report (SAR)’’, ‘‘ValidInstitutional Student InformationRecord (valid ISIR)’’, and ‘‘Valid StudentAid Report’’.§ 690.61 [Amended]■ 37. Section 690.61 is amended by:■ A. In the paragraph (b) heading,adding the word ‘‘Valid’’ before thewords ‘‘Student Aid Report’’ and beforethe words ‘‘Institutional StudentInformation Record’’.■ B. In the paragraph (b) introductorytext, adding the word ‘‘valid’’ before theword ‘‘SAR’’.PART 691—ACADEMICCOMPETITIVENESS GRANT (ACG)AND NATIONAL SCIENCE ANDMATHEMATICS ACCESS TO RETAINTALENT GRANT (NATIONAL SMARTGRANT) PROGRAMS■ 38. The authority citation for part 691continues to read as follows:Authority: 20 U.S.C. 1070a–1, unlessotherwise noted.§ 691.2 [Amended]■ 39. Section 691.2(a) is amended byadding, in alphabetical order, the term‘‘Credit hour’’.Note: The following appendix will notappear in the Code of Federal Regulations.Appendix A—Regulatory ImpactAnalysisExecutive Order 12866Regulatory Impact AnalysisUnder Executive Order 12866, theSecretary must determine whether theregulatory action is ‘‘significant’’ andtherefore subject to the requirements of theExecutive Order and subject to review by theOMB. Section 3(f) of Executive Order 12866defines a ‘‘significant regulatory action’’ as anaction likely to result in a rule that may (1)Have an annual effect on the economy of$100 million or more, or adversely affect asector of the economy, productivity,competition, jobs, the environment, publichealth or safety, or State, local, or tribalgovernments or communities in a materialway (also referred to as an ‘‘economicallysignificant’’ rule); (2) create seriousinconsistency or otherwise interfere with anaction taken or planned by another agency;(3) materially alter the budgetary impacts ofentitlement grants, user fees, or loanprograms or the rights and obligations ofrecipients thereof; or (4) raise novel legal orpolicy issues arising out of legal mandates,the President’s priorities, or the principles setforth in the Executive order.Pursuant to the terms of the Executiveorder, we have determined that thisregulatory action will have an annual effecton the economy of more than $100 million.Therefore, this action is ‘‘economicallysignificant’’ and subject to OMB review undersection 3(f)(1) of Executive Order 12866.Notwithstanding this determination, we haveassessed the potential costs and benefits—both quantitative and qualitative—of thisregulatory action and have determined thatthe benefits justify the costs.Need for Federal Regulatory ActionStudent debt is more prevalent andindividual borrowers are incurring more debtthan ever before. Twenty years ago, only onein six full-time freshmen at four-year publiccolleges and universities took out a Federalstudent loan; now more than half do. Today,VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00138 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2nearly two-thirds of all graduating collegeseniors carry student loan debt. Theavailability of Federal student aid allowsstudents to access post-secondaryeducational opportunities crucial forobtaining employment. It is thereforeimportant for the Department to have a strongregulatory foundation on which to build toprotect student aid funds. The fourteenprovisions described in this RegulatoryImpact Analysis represent a broad set ofregulations and definitions that strengthenthe Federal student aid programs byprotecting students from aggressive andmisleading recruiting practices, providingconsumers with better information about theeffectiveness of career college and trainingprograms, and ensuring that only eligiblestudents or programs receive title IV, HEAaid.These regulations are needed to implementprovisions of the HEA, as amended by theHEOA, particularly related to (1) Programsthat prepare students for gainfulemployment, (2) incentive compensation, (3)satisfactory academic progress policies, and(4) verification of information on student aidapplications. These regulations also wouldimplement changes made by the HEOA toprovisions related to ability to benefitoptions. A description of the regulations, thereasons for adopting them, and an analysis oftheir effects were presented in the NPRMpublished on June 18, 2010. The NPRMincluded a Regulatory Impact Analysis andthis section updates that analysis anddescribes changes to the proposedregulations that we considered in response tocomments received and our reasons foradopting or rejecting them.Regulatory Alternatives ConsideredThe Department considered a number ofregulatory alternatives as part of therulemaking process. These alternatives weredescribed in detail in the preamble to theNPRM under both the Regulatory ImpactAnalysis and the Reasons sectionsaccompanying the discussion of eachproposed regulatory provision. To the extentthat the Department has addressedalternatives in response to commentsreceived on the NPRM, these are discussedelsewhere in the preamble to these finalregulations under the Analysis of Commentsand Changes section.As discussed in the Analysis of Commentsand Changes section, these final regulationsreflect decisions reached through negotiatedrulemaking, statutory amendments includedin the HEOA, and revisions in response topublic comments. In many cases, theserevisions were technical in nature andintended to address drafting issues orprovide additional clarity.While we received many commentsrelating to the validation of high schooldiplomas and written arrangements, for thereasons we describe elsewhere in thispreamble, we did not make any changes tothose provisions.In response to comments related todisbursement of funds to Pell Grantrecipients for books and supplies,§ 668.164(i) has been revised to specify thatan institution must have a policy under

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66969WReier-Aviles on DSKGBLS3C1PROD with RULES2which a student may opt out of the way theinstitution provides for the student topurchase books and supplies by the seventhday of classes of a payment period. Inaddition, § 668.164(i) has been revised tospecify that if a Federal Pell Grant eligiblestudent uses the method provided by theinstitution to purchase books and supplies,the student is considered to have authorizedthe use of title IV, HEA funds and theinstitution does not need to obtain a writtenauthorization under § 668.164(d)(1)(iv) and§ 668.165(b) for this purpose only.We also have updated the definition of fulltimestudent to provide that a student’senrollment status for a term-based programmay include repeating any courseworkpreviously taken in the program but may notinclude more than one repetition of apreviously passed course, or any repetition ofa previously passed course due to thestudent’s failing other coursework. The onlychange we have made to the satisfactoryacademic progress provisions has been torevise § 668.34(a)(3)(ii) to provide that, forprograms longer than an academic year inlength, satisfactory academic progress ismeasured at the end of each payment periodor at least annually to correspond to the endof a payment period.As discussed in the Analysis of Commentsand Changes, the majority of the commentsrelated to the Return of Title IV, HEA fundsopposed the proposed changes or requesteda delay in the effective date of this provisionto allow further input from the community.Commenters were concerned with the burdenon institutions, the potential harm tostudents who might withdraw after onemodule but return within the same paymentperiod or period of enrollment, and thetargeting of certain programs. In response tothese comments, we revised § 668.22(a)(2) toprovide that a student is not considered tohave withdrawn if the student ceasedattending the modules he or she wasscheduled to attend, but the institutionobtains a written confirmation from thestudent at the time of the withdrawal that heor she will attend a module that begins laterin the same payment period or period ofenrollment. This will provide more flexibilityfor a student who provides the authorization.This confirmation must be obtained at thetime of withdrawal even if the student hasalready registered for subsequent courses.However, these final regulations provide that,for nonterm and nonstandard-term programs,a confirmation is valid only if the module thestudent plans to attend begins no later than45 calendar days after the end of the modulethe student ceased attending.Some additional technical and clarifyingchanges were made, including revising§ 668.22(f)(2)(ii) to clarify that, whendetermining the percentage of paymentperiod or period of enrollment completed,the total number of calendar days in apayment period or period of enrollment doesnot include, for a payment period or periodof enrollment in which any courses in theprogram are offered in modules, anyscheduled breaks of at least five consecutivedays when the student is not scheduled toattend a module or other course offeredduring that period of time. In response tocommenters’ requests, we have included inthe Analysis of Comments and Changesexamples of scenarios for return of title IV,HEA program funds.We received extensive comments on theprovisions related to the definition of a credithour. Some of these comments supported theDepartment’s efforts and pointed out thatmany institutions and others, includingStates, are already following the definition ora comparable standard that would requireonly a minimal adjustment. As described inthe Analysis of Comments and Changessection, other commenters opposed thedefinition of a credit hour and expressedconcern that it would stifle innovation,especially in delivery methods, underminethe American higher education system,emphasize ‘‘seat-time’’, and interfere in a coreacademic issue. The Department maintainsthat the credit-hour definition is intended toprovide a minimum, consistent standard forall institutions in determining the amount ofstudent work necessary to award credit hoursequitably for Federal program purposes. Inresponse to the discussion of the credit hourprovision, we have revised the definition ofcredit hour to clarify the basic principlesapplied in the proposed definition of a credithour and have specified further in thedefinition that it is the institution’sresponsibility to determine the appropriatecredit hours or equivalencies. We also haverevised the credit-hour definition to clarifythat the amount of work specified is aminimum standard with no requirement forthe standard to be exceeded.With respect to the provisions relating tomisrepresentation, we have revised§ 668.72(c) to prohibit false, erroneous, ormisleading statements concerning whethercompletion of an educational programqualifies a students for licensure oremployment in the States in which theeducational program is offered and not justthe State in which the institution is located.Additionally, we have revised § 668.72(n) tospecify that a failure to disclose that thedegree requires specialized accreditation is amisrepresentation. To address concerns overliability for third-party statements, we agreedto limit the reach of the ban on makingsubstantial misrepresentations to statementsmade by any ineligible institution,organization, or person with whom theeligible institution has an agreement toprovide educational programs or those thatprovide marketing, advertising, recruiting, oradmissions services. We revised thedefinition of misleading statement in§ 668.71(c) to remove the word ‘‘capacity’’from the phrase ‘‘capacity, likelihood, ortendency to deceive or confuse.’’We received numerous commentsregarding the incentive compensationprovisions in the NPRM. Some of thesecomments supported the proposed changesdue to the conflict of interest between anenrollment professional’s ethical obligationsand financial interest. Other commentersopposed the changes, questioning theDepartment’s legal authority to regulate,whether there was sufficient evidence tosupport the regulations, and the reasoning forthe policy changes. We maintain that theelimination of the 12 ‘‘safe harbors’’ inVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00139 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2§ 668.14(b)(22) is needed to ensure programintegrity, protect students, and aligninstitutional practices with the goalsintended by Congress. The Department didmake a few clarifying changes. For example,the changes to § 668.14(b) based oncomments include: (i) Adding ‘‘in any part’’to § 668.14(b)(22) when referring to incentivepayments to eliminate confusion that aportion of an individual’s compensation maybe based on enrollments or the award offinancial aid; (ii) revising the regulations toprovide that an employee who receivesmultiple compensation adjustments in acalendar year and is engaged in any studentenrollment or admission activity or inmaking decisions regarding the award of titleIV, HEA program funds is considered to havereceived such adjustments based on securingenrollment or the award of financial aid ifthose adjustments create compensation thatis based in any part, directly or indirectly,upon success in securing enrollments or theaward of financial aid; (iii) revising§ 668.14(b)(22)(ii) to provide that eligibleinstitutions, organizations that arecontractors to eligible institutions, and otherentities may make merit-based adjustments toemployee compensation provided that suchadjustments are not based in any part,directly or indirectly, upon success insecuring enrollments or the award offinancial aid; (iv) confirming that prohibitedincentive compensation includes anycommission, bonus, or other incentivepayment; (v) providing that profit sharingand bonuses are not prohibited as long asthey are based on an institutional goal anddistributed to all employees who haveotherwise contributed to satisfaction of aparticular institutional goal; and (vi) revisingthe definition of securing enrollments or theaward of financial aid to provide more detailand to clarify that it includes activitiesthrough the completion of an educationalprogram.The reporting and disclosure requirementsrelated to gainful employment have also beenupdated in response to comments and furtherevaluation by the Department. We confirmedthat the reporting and disclosurerequirements apply only to programs subjectto the gainful employment regulations andrevised § 668.6(a) to require the reporting ofCIP code and other information not only forprogram completers, but for all students whoattend gainful employment programs. Wealso removed proposed § 600.4(a)(4)(iii) andrevised § 600.4(a)(4)(i)(c) to clarify theprograms subject to the regulations. The timeperiod for which information has to beprovided has been changed so that aninstitution must report the requiredinformation for each student, who during theaward year beginning July 1, 2006, and forany subsequent award year, began attendingor completed a program under § 668.8(c)(3)or (d).In addition to the student identifiers, CIPcodes, program completion dates, and privateeducation loan and institutional financingamounts specified in the NPRM, institutionswill also have to report the name of theprogram and whether the studentmatriculated to a higher credentialedprogram at the institution or if available,

66970 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulationsevidence that the student transferred to ahigher credentialed program at anotherinstitution. To ensure the information isaccessible, § 668.6(b) has been revised torequire an institution to provide a prominentand direct link to information about aprogram on the home page of its Web site andon other pages where general, academic, oradmissions information is provided about theprogram. The information must also beprovided in promotional materials conveyedto prospective students. The informationmust be provided in a simple and meaningfulmanner. The information to be disclosedincludes the on-time graduation rate, thetotal amount of tuition and fees theinstitution charges a student for completingthe program within normal time, the typicalcosts for books and supplies, unless includedas part of tuition and fees, and the amountof room and board, if applicable. Theinstitution may include information on othercosts, such as transportation and livingexpenses, but must provide a Web link oraccess to the program cost information itmakes available under § 668.43(a). TheDepartment intends to develop in the futurea disclosure form and will be seeking publiccomment about the design of the formthrough the information collection processunder the Paperwork Reduction Act of 1995(PRA). Until a form is developed andapproved under the PRA process, institutionsmust comply with the disclosurerequirements independently.Another area of disclosure is providingstudents information about potentialoccupations by linking to O*Net.Commenters expressed concern that thiswould require an unwieldy amount of datafor some degree programs and the resultinginformation overload would not serve toaccurately inform students. Section 668.6(b)has been revised so that if the number ofoccupations related to the program, asidentified by entering the program’s full sixdigit CIP code on the O*NET crosswalk athttp://online.onetcenter.org/crosswalk/ ismore than ten, an institution is allowed toprovide prospective students with Web linksto a representative sample of the SOCs forwhich its graduates typically findemployment within a few years aftercompleting the program.In response to comments that the proposedplacement rate was administratively complexand overly burdensome, we decided to directthe National Center for Education Statistics(NCES) to develop a placement ratemethodology and the processes necessary fordetermining and documenting studentemployment and reporting placement data tothe Department using IPEDS no later thanJuly 1, 2012. The collaborative process usedby NCES and the opportunity for publiccomment on the proposed measure willallow for a considered review anddevelopment of a meaningful placement rate.Section 668.6(b) has been revised to specifythat an institution must disclose for eachprogram the placement rate calculated undera methodology developed by its accreditingagency, State, or NCES. The institutionwould have to disclose the accreditingagency or State-required placement ratebeginning on July 1, 2011 and to identify theaccrediting agency or State under whoserequirements the rate was calculated. TheNCES-developed rate would have to bedisclosed when the rates become available.To remove uncertainty and to ensure aconsistent calculation, we have revised§ 668.6(b) to specify how an institutioncalculates an on-time completion rate for itsprograms. This is a measure designed toprovide students meaningful informationabout the extent to which former studentscompleted the program within the publishedlength. As described elsewhere in thispreamble, the on-time completion rate willbe calculated by: (1) Determining the numberof students who completed the programduring the most recently completed calendaryear; (2) determining the number of studentsin step (1) who completed the programwithin normal time, regardless of whetherthe students transferred into the program orchanged programs at the institution; and (3)dividing the number of students whocompleted in normal time in step (2) by thetotal number of completers in step (1) andmultiplying by 100.We also received comments about the useof median loan debt, the definition of privateloans, and the treatment of debt incurred atprior programs or institutions. The examplesthat we provide earlier in this preambleclarify the treatment of loan debt from priorprograms and institutions. In general, medianloan debt for a program at an institution doesnot include debt incurred by students inattending a prior institution, unless the priorand current institutions are under commonownership or control or are otherwise relatedentities. In cases where a student changesprograms while attending an institution ormatriculates to a higher credentialed programat the institutions, the Department willassociate the total amount of debt incurred bythe student to the program the studentcompleted. In order to perform thecalculation of the median loan debt,§ 668.6(a) has been revised to provide that aninstitution must provide information aboutwhether a student matriculated to a highercredentialed program at the same institution,or, if it has evidence, that a studenttransferred to a higher credentialed programat another institution.The provisions related to Stateauthorization generated comments fromthose who supported the regulations as aneffort to address fraud and abuse in Federalprograms through State oversight and fromothers who believed the regulations infringedon States’ authority and upset the balance ofthe ‘‘Triad’’ of oversight by States, accreditingagencies, and the Federal Government. Weclarified that the final regulations do notmandate that a State create any licensingagency for purposes of Federal programeligibility as an institution may be legallyauthorized by the State based on methodssuch as State charters, State laws, Stateconstitutional provisions, or articles ofincorporation that authorize an entity to offereducational programs beyond secondaryeducation in the State.We revised § 600.9 to clarify that aninstitution’s legal authority to offerpostsecondary education in a State must beby name and, thus, it must include the nameof the institution being authorized. We haveremoved proposed § 600.9(b)(2) regardingadverse actions. In response to concernsabout the effect on distance education andreciprocity arrangements, we clarified that aninstitution must meet any State requirementsfor it to be legally offering distance orcorrespondence education in that State andmust be able to document to the Secretary theState’s approval upon request. Thus, a publicinstitution is considered to comply with§ 600.9 to the extent it is operating in itshome State, and, if operating in anotherState, it would be expected to comply withthe requirements, if any, the other Stateconsiders applicable or with any reciprocalagreement that may be applicable. In makingthese clarifications, we are not preemptingany State laws, regulations, or otherrequirements regarding reciprocalagreements, distance education, orcorrespondence study.We also have revised the Stateauthorization provisions in § 600.9 todistinguish between a legal entity that isestablished as an educational institution andone established as a business or nonprofitentity. An institution authorized as aneducational institution may be exempted byname from any State approval or licensurerequirements based on the institution’saccreditation by an accrediting agencyrecognized by the Secretary or based on theinstitution being in operation for at least 20years. An institution established as abusiness or nonprofit charitable organizationand not specifically as an educationalinstitution may not be exempted from theState’s approval or licensure requirementsbased on accreditation, years in operation, orother comparable exemption. Chart Aillustrates the basic principles of § 600.9 ofthese final regulations, with additionalexamples discussed in the preamble to theseregulations.WReier-Aviles on DSKGBLS3C1PROD with RULES2VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00140 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66971CHART A—STATE AUTHORIZATION REQUIREMENTS[Meets state authorization requirements*]Legal entity Entity description Approval or licensure processEducational institution ..................Business .......................................Charitable organization ................A public, private nonprofit, or for-profit institution establishedby name by a State through a charter,statute, or other action issued by an appropriateState agency or State entity as an educational institutionauthorized to operate educational programsbeyond secondary education, including programsleading to a degree or certificate.A for-profit entity established by the State on thebasis of an authorization or license to conductcommerce or provide services.A nonprofit entity established by the State on thebasis of an authorization or license for the publicinterest or common good.The institution must comply with any applicable Stateapproval or licensure process and be approved orlicensed by name, and may be exempted fromsuch requirement based on its accreditation, orbeing in operation at least 20 years, or use bothcriteria.The State must have a State approval or licensureprocess, and the institution must comply with theState approval or licensure process and be approvedor licensed by name.An institution in this category may not be exemptedfrom State approval or licensure based on accreditation,years in operation, or a comparable exemption.*Notes:• Federal, tribal, and religious institutions are exempt from these requirements.• A State must have a process, applicable to all institutions except tribal and Federal institutions, to review and address complaints directly orthrough referrals.• The chart does not take into requirements related to State reciprocity.WReier-Aviles on DSKGBLS3C1PROD with RULES2To maintain the State’s role in studentconsumer protection and handling studentcomplaints related to State laws, we haverevised § 668.43(b) to provide that aninstitution must make available to studentsor prospective students contact informationfor not only the State approval or licensingentities but also any other relevant Stateofficial or agency that would appropriatelyhandle a student’s complaint.Finally, we have clarified the meaning ofa religious institution for the applicability ofthe religious exemption. We also haveexpanded § 600.9(b) to provide that aninstitution is considered to be legallyauthorized by the State if it is exempt fromState authorization as a religious institutionby State law, in addition to the provision ofthe proposed regulations that an institutionbe exempt from State authorization as areligious institution under the State’sconstitution. We also have included adefinition of a religious institution providingthat an institution is considered a religiousinstitution if it is owned, controlled,operated, and maintained by a religiousorganization lawfully operating as anonprofit religious corporation and awardsonly religious degrees or religious certificatesincluding, but not limited to, a certificate ofTalmudic studies, an associate of biblicalstudies, a bachelor of religious studies, amaster of divinity, or a doctor of divinity.In response to comments, we confirmedthat tribal institutions are not subject to Stateoversight or subject to the State process forhandling complaints and revised § 600.9 toclarify the status of tribal institutions. Asnoted in the preamble discussion of StateAuthorization, we have removed proposed§ 600.9(b)(2) regarding adverse actions.Further, we are providing that, in§ 600.9(a)(2)(ii) of the final regulations, thetribal government must have a process toreview and appropriately act on complaintsconcerning a tribal institution and enforceapplicable tribal requirements or laws.Finally, while the Secretary has designatedamended § 600.9(a) and (b) as being effectiveJuly 1, 2011, we recognize that a State maybe unable to provide appropriate Stateauthorizations to its institutions by that date.We are providing that the institutions unableto obtain State authorization in that Statemay request a one-year extension of theeffective date of these final regulations to July1, 2012, and if necessary, an additional oneyearextension of the effective date to July 1,2013. To receive an extension of the effectivedate of amended § 600.9(a) and (b) forinstitutions in a State, an institution mustobtain from the State an explanation of howa one-year extension will permit the State tomodify its procedures to comply withamended § 600.9.As discussed in the preamble to theseregulations, we made a number of clarifyingchanges to the regulations regarding theadministration of ability to benefit tests. Werevised the definition of the termindependent test administrator to clarify thatan independent test administrator must haveno current or prior financial or ownershipinterest in the institution, its affiliates, or itsparent corporation, other than the fees earnedthrough the agreement to administer the test.In § 668.142, we have defined an ATB testirregularity as an irregularity that resultsfrom an ATB test being administered in amanner that does not conform to theestablished regulations for testadministration consistent with the provisionof subpart J and the test administrator’smanual. We also added a provision to specifythat a test publisher may include with itsapplication a description of the manner inwhich test-taking time was determined inrelation to the other requirements in§ 668.146(b). We have revised§ 668.150(b)(7)(i) to indicate that the periodof review of all test results of the testsadministered by a decertified testadministrator is five years preceding the dateof decertification.In response to a comment regarding testingof non-native speakers of English, we haverevised § 668.153 to provide that if a nonnativespeaker of English who is enrolled orVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00141 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2plans to enroll in a program that will betaught in his or her native language with acomponent or portion in English, theindividual must take a test approved under§§ 668.146 and 668.148(a)(1) in the student’snative language. New § 668.153(a)(5)provides that prior to the beginning of theEnglish portion of the program, theindividual must take an English proficiencytest approved under § 668.148(b). Finally, wehave modified § 668.144(c)(11)(vii) to requirethat the test manual include, in addition toguidance on the interpretation of scoresresulting from modification of the test forindividuals with disabilities, guidance on thetypes of accommodations that are allowable.This responds to concerns that testadministrators may not have extensivetraining or experience to determine if arequested accommodation is appropriate.The effect of these changes on the costestimates prepared for and discussed in theRegulatory Impact Analysis of the NPRM isdiscussed in the Costs section of thisRegulatory Impact Analysis.BenefitsAs discussed in the NPRM, benefitsprovided in these regulations includeupdated administrative procedures for theFederal student aid programs; a definitionand process to determine the validity of astudent’s high school diploma; enhancedreliability and security of ATB tests; anadditional option for students to prove abilityto benefit by successfully completing collegecoursework; increased clarity about incentivecompensation for employees at institutions ofhigher education; reporting of information onprogram completers for programs leading togainful employment, including costs, debtlevels, graduation rates, and placement rates;the establishment of minimum standards forcredit hours; greater transparency forborrowers participating in the programsoffered under written agreements betweeninstitutions; greater detail aboutmisrepresentation in marketing andrecruitment materials; a more structured and

66972 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and RegulationsWReier-Aviles on DSKGBLS3C1PROD with RULES2consistent approach to the development andimplementation of satisfactory academicprogress policies; updated and simplifiedprocedures for verifying FAFSA applicantinformation; updated regulations related tothe return of title IV, HEA funds when astudent withdraws; harmonization of DirectLoan and Teach Grant disbursementprocedures with other title IV, HEAprograms; and revised disbursementrequirements to ensure Federal Pell Grantrecipients can access funds in a timelymanner. As noted in the Regulatory ImpactAnalysis in the NPRM, these provisionsresult in no net costs to the FederalGovernment over 2011–2015.CostsAs discussed in the Regulatory ImpactAnalysis in the NPRM, many of theprovisions implemented through theseregulations will require regulated entities todevelop new disclosures and other materials,as well as accompanying disseminationprocesses. Other regulations generally willrequire discrete changes in specificparameters associated with existing guidanceand regulations—such as changes to title IV,HEA disbursement procedures, updatedprocesses for verification of FAFSAapplication information, clearer standards forthe return of title IV, HEA program fundsfollowing a student’s withdrawal, andupdated definitions and processes forconfirming the validity of a high schooldiploma—rather than wholly newrequirements. Accordingly, entities wishingto continue to participate in the title IV, HEAprograms have already absorbed many of theadministrative costs related to implementingthese regulations. Marginal costs over thisbaseline are primarily due to new proceduresthat, while possibly significant in some cases,are an unavoidable cost of continuedprogram participation.In assessing the potential impact of theseregulations, the Department recognizes thatcertain provisions are likely to increaseworkload for some program participants.This additional workload is discussed inmore detail under the Paperwork ReductionAct of 1995 section of this preamble.Additional workload would normally beexpected to result in estimated costsassociated with either the hiring of additionalemployees or opportunity costs related to thereassignment of existing staff from otheractivities. In total, these changes areestimated to increase burden on entitiesparticipating in the title IV, HEA programs by6,010,320 hours. Of this increased burden,3,862,165 hours are associated withinstitutions and 9,454 hours with ATB testpublishers, States, and ATB testadministrators. An additional 2,138,701hours are associated with borrowers,generally reflecting the time required to readnew disclosures or submit requiredinformation.As detailed in the Paperwork ReductionAct of 1995 section of these final regulations,the additional paperwork burden isattributable to several provisions, with thegreatest additional burden coming from therevised FAFSA verification process. Of the3.9 million hours of additional burdenassociated with institutions, 1.8 millionrelate to FAFSA verification. While theaverage number of items to be verified isexpected to decrease, the growth in thenumber of applicants and the requirement tosubmit all changes to the Department isestimated to increase overall burden. Otherpaperwork burden increases include thefollowing:• 750,725 hours related to academicreviews and development of academic plansunder § 668.34;• 425,075 hours related to calculation ofunearned amounts when a studentwithdraws under § 668.22;• 262,990 hours associated with updatingmarital and dependency status under§ 668.55;• 376,417 hours annually and anadditional 300,773 hours in the initialreporting period related to the gainfulemployment reporting and disclosureprovisions in § 668.6;• 48,391 hours related to ATB testadministration and reporting under§§ 668.151 and 668.152;• 67,870 hours associated with disclosureof information about an institution’s writtenagreements in § 668.43;• 54,366 hours related to disbursement offunds to Pell Grant recipients for books andsupplies under § 668.164;• 21,982 hours related to the developmentof a high school diploma validation processand the validation of questionable diplomasunder § 668.16; and• 18,349 hours related to clock hour tocredit hour conversion and the inclusion ofoutside work for program eligibility under§ 668.8.For ATB test publishers, States, andadministrators, the increased burden of 9,454hours comes from the reporting, recordkeeping,test anomaly analysis, and otherrequirements in §§ 668.144, 668.150, and668.151. The increased burden on students isconcentrated in the FAFSA verification andstatus updating processes with 1,604,800hours under §§ 668.55, 668.56, and 668.59,with additional burden associated with thewithdrawal process under § 668.22 andsatisfactory academic progress policies under§ 668.34.Thus, for the specific informationcollections listed in the Paperwork ReductionAct of 1995 section of these final regulations,the total cost estimates are as follows:• For Information Collection 1845–0041,the total cost will be $72,594,870;• For Information Collection 1845–NEW2,the total cost attributable to these regulatorychanges will be $21,834,272;• For Information Collection 1845–0022,the total cost will be $15,533,671;• For Information Collection 1845–NEW1,the total cost attributable to the regulatorychanges will be $9,543,677 annually with anadditional $7,624,784 in the initial reportingperiod;• For Information Collection 1845–0049,the total cost will be $1,300,595; and• For Information Collection 1845–NEW3,the total cost attributable to these regulatorychanges will be $1,203,799.The monetized cost of this additionalburden, using wage data developed usingVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00142 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2Bureau of Labor Statistics available athttp://www.bls.gov/ncs/ect/sp/ecsuphst.pdf,is $122,010,883, of which $86.7 million isassociated with institutions, $0.21 millionwith ATB test publishers, States, andadministrators, and $35.07 million withborrowers. For institutions, test publishers,and test administrators, an hourly rate of$22.14 was used to monetize the burden ofthese provisions. This was a blended ratebased on wages of $16.79 for office andadministrative staff and $38.20 for managers,assuming that office staff would perform 75percent of the work affected by theseregulations. For the gainful employmentprovision, an hourly rate of $25.35 was usedto reflect increased management time toestablish new data collection proceduresassociated with that provision. For students,the first quarter 2010 median weeklyearnings for full-time wage and salaryworkers were used. This was weighted toreflect the age profile of the student loanportfolio, with half at the $457 per week ofthe 20 to 24 age bracket and half at the $691per week of the 25 to 34 year old bracket.This resulted in a $16.40 hourly wage rate touse in monetizing the burden on students.Because data underlying many of theseburden estimates was limited, in the NPRM,the Department requested comments andsupporting information for use in developingmore robust estimates. In particular, weasked institutions to provide detailed data onactual staffing and system costs associatedwith implementing these regulations. Inresponse to comments that the regulationswould be costly, we reviewed the wage ratesfor more recent information and the share ofwork performed by office workers andmanagement and professional staff. Thisincreased the general wage rate from $18.63to $22.14 and the wage rate for gainfulemployment related matters from $20.71 to$25.35. The other areas that changed betweenthe NPRM published on June 18, 2010 andthese final regulations related to changes tothe disclosure requirements related to gainfulemployment that extended the reporting tostudents who began or completed programsbeginning July 1, 2006, required specifiedinformation for all students at a program, andestablished a requirement to report onstudent matriculations to higher credentialedprograms.Net Budget ImpactsThese regulations are estimated to have nonet budget impact over FY 2011–2015.Consistent with the requirements of theCredit Reform Act of 1990, budget costestimates for the student loan programsreflect the estimated net present value of allfuture non-administrative Federal costsassociated with a cohort of loans. (A cohortreflects all loans originated in a given fiscalyear.)These estimates were developed using theOffice of Management and Budget’s CreditSubsidy Calculator. This calculator will alsobe used for re-estimates of prior-year costs,which will be performed each year beginningin FY 2009. The OMB calculator takesprojected future cash flows from theDepartment’s student loan cost estimationmodel and produces discounted subsidy

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66973rates reflecting the net present value of allfuture Federal costs associated with awardsmade in a given fiscal year. Values arecalculated using a ‘‘basket of zeros’’methodology under which each cash flow isdiscounted using the interest rate of a zerocouponTreasury bond with the samematurity as that cash flow. To ensurecomparability across programs, thismethodology is incorporated into thecalculator and used governmentwide todevelop estimates of the Federal cost ofcredit programs. Accordingly, theDepartment believes it is the appropriatemethodology to use in developing estimatesfor these regulations. That said, however, indeveloping the following AccountingStatement, the Department consulted withOMB on how to integrate our discountingmethodology with the discountingmethodology traditionally used indeveloping regulatory impact analyses.Absent evidence of the impact theseregulations would have on student behavior,budget cost estimates were based on behavioras reflected in various Department data setsand longitudinal surveys listed underAssumptions, Limitations, and Data Sources.Program cost estimates were generated byrunning projected cash flows related to eachprovision through the Department’s studentloan cost estimation model. Student loan costestimates are developed across five riskcategories: Two-year proprietary institutions,two-year public and private, not-for-profitinstitutions; freshmen and sophomores atfour-year institutions, juniors and seniors atfour-year institutions, and graduate students.Risk categories have separate assumptionsbased on the historical pattern of behavior—for example, the likelihood of default or thelikelihood to use statutory deferment ordischarge benefits—of borrowers in eachcategory.The Department estimates no budgetaryimpact for most of these regulations as thereis no data indicating that the provisions willhave any impact on the volume orcomposition of the title IV, HEA programs.Assumptions, Limitations, and Data SourcesThe impact estimates provided in thepreceding section reflect a pre-statutorybaseline in which the HEOA changesimplemented in these regulations do notexist. Costs have been quantified for fiveyears.In developing these estimates, a wide rangeof data sources were used, including datafrom the National Student Loan Data System;operational and financial data fromDepartment of Education systems, includingespecially the Fiscal Operations Report andApplication to Participate (FISAP); and datafrom a range of surveys conducted by theNational Center for Education Statistics suchas the 2008 National Postsecondary StudentAid Survey, the 1994 National EducationLongitudinal Study, and the 1996 BeginningPostsecondary Student Survey. Data fromother sources, such as the U.S. CensusBureau, were also used. Data onadministrative burden at participatinginstitutions are extremely limited;accordingly, in the NPRM, the Departmentexpressed interest in receiving comments inthis area. No comments were received.Elsewhere in this SUPPLEMENTARYINFORMATION section we identify and explainburdens specifically associated withinformation collection requirements. See theheading Paperwork Reduction Act of 1995.Accounting StatementAs required by OMB Circular A–4(available at http://www.Whitehouse.gov/omb/Circulars/a004/a-4.pdf), in Table 2, wehave prepared an accounting statementshowing the classification of theexpenditures associated with the provisionsof these regulations. This table provides ourbest estimate of the changes in Federalstudent aid payments as a result of theseregulations. Expenditures are classified astransfers from the Federal Government tostudent loan borrowers.TABLE 2—ACCOUNTING STATEMENT:CLASSIFICATION OF ESTIMATED EX-PENDITURES[In millions]CategoryAnnualized MonetizedCosts.Annualized MonetizedTransfers.From Whom ToWhom?Transfers$126.1.Cost of compliancewith paperwork requirements.$0.Federal GovernmentTo Student LoanBorrowers.Regulatory Flexibility Act CertificationThe Secretary certifies that theseregulations will not have a significanteconomic impact on a substantial number ofsmall entities. These regulations will affectinstitutions that participate in title IV, HEAprograms, ATB test publishers, andindividual students and loan borrowers. TheU.S. Small Business Administration SizeStandards define for-profit institutions as‘‘small businesses’’ if they are independentlyowned and operated and not dominant intheir field of operation with total annualrevenue below $7,000,000, and defines nonprofitinstitutions as small organizations ifthey are independently owned and operatedand not dominant in their field of operation,or if they are institutions controlled bygovernmental entities with populationsbelow 50,000.Data from the Integrated PostsecondaryEducation Data System (IPEDS) indicate thatroughly 4,379 institutions participating in theFederal student assistance programs meet thedefinition of ‘‘small entities.’’ The followingtable provides the distribution of institutionsand students by revenue category andinstitutional control.RevenuecategoryNumber ofschoolsPublic Private NFP Proprietary TribalNumber ofstudentsNumber ofschoolsNumber ofstudentsNumber ofschoolsNumber ofstudentsNumber ofschoolsNumber ofstudentsWReier-Aviles on DSKGBLS3C1PROD with RULES2$0 to $500,000 43 2,124 103 13,208 510 38,774 ...................... ......................$500,000 to $1million ........... 44 7,182 81 9,806 438 61,906 1 137$1 million to $3million ........... 98 29,332 243 65,614 745 217,715 3 555$3 million to $5million ........... 75 65,442 138 60,923 303 182,362 ...................... ......................$5 million to $7million ........... 49 73,798 99 62,776 224 185,705 5 2,525$7 million to $10million ........... 78 129,079 110 84,659 228 235,888 9 4,935$10 million andabove ............ 1,585 18,480,000 1,067 4,312,010 383 1,793,951 14 18,065Total .......... 1,972 18,786,957 1,841 4,608,996 2,831 2,716,301 32 26,217Approximately two-thirds of theseinstitutions are for-profit schools subject tothe disclosure and reporting requirementsrelated to programs leading to gainfulemployment. Other affected smallinstitutions include small communitycolleges and tribally controlled schools. Forthese institutions, the new disclosure andVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00143 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2administrative requirements imposed underthe regulations could impose some new costsas described below. The impact of the

66974 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulationsregulations on individuals is not subject tothe Regulatory Flexibility Act.As discussed in the preamble to theseregulations, the program integrity regulationswere developed to update administrativeprocedures for the Federal student aidprograms and to ensure that funds areprovided to students at eligible programs andinstitutions. As detailed in the PaperworkReduction Act of 1995 section of these finalregulations, many of these regulations modifyexisting regulations and requirements. Forexample, the regulations on FAFSAverification would change the number ofitems to be verified, but do not require thecreation of a new process. The table belowsummarizes the estimated total hours, costs,and requirements applicable to small entitiesfrom these provisions on an annual basis. Inthe initial reporting period, there will be anadditional 235,866 hours and $5,979,203 ingainful employment reporting for awardyears back to 2006–07.Provision & requirementReg. sectionOMB controlNo.HoursCostsGainful Employment ................................................................................ 668.6 1845–NEW1 295,186 7,482,964Annual submission of private loan, CIP, program name, furthermatriculation, and identifying data for entrants and completersby program .................................................................................... 668.6(a) .......................... 288,597 7,315,937Disclose occupational information, graduation rates, on-time completionrates, program placement rates, and program costs ........ 668.6(b) .......................... 6,589 167,027Eligible Program ...................................................................................... 668.8 1845–0022 8,800 194,836Determine if program is affected, evaluate amount of outside studentwork that should be included, and perform credit to clockhour conversion.Standards of Administrative Capability .................................................... 668.16 1845–0022 10,543 233,412Develop a high school diploma validity process .............................. 668.16(p) .......................... 9,583 212,176Verify questionable diplomas ........................................................... 668.16(p) .......................... 959 21,237Student Withdrawal .................................................................................. 668.22 1845–0022 203,866 4,513,593Establish withdrawal date and calculate percentage of paymentperiod or period of enrollment completed.Satisfactory Academic Progress .............................................................. 668.34 1845–NEW2 349,976 7,748,471Review regulations and implement changes to ensure compliance 668.34(a) .......................... 8,214 181,860Perform academic reviews at the end of each payment period ...... 668.34(c) .......................... 100,382 2,222,451Develop academic plan for students who do not achieve satisfactoryacademic progress when reviewed at end of payment period................................................................................................ 668.34(c) .......................... 87,835 1,944,655Perform academic reviews at institutions that do so annually ......... 668.34(d) .......................... 81,891 1,813,061Develop academic plan for students who do not achieve satisfactoryacademic progress when reviewed annually ........................ 668.34(d) .......................... 71,655 1,586,434Institutional Information—Written Agreements ........................................ 668.43 1845–NEW2 32,550 720,667Disclose information about written agreements ............................... .......................... .......................... 32,122 711,185Make contact information for filing complaints to accreditor andState approval or licensing agency available to enrolled andprospective students ..................................................................... 668.43(b) .......................... 428 9,482Updating Information ............................................................................... 668.55 1845–0041 126,130 2,792,518Update household size throughout award year ............................... .......................... .......................... 124,744 2,761,831Update marital status throughout award year .................................. .......................... .......................... 1,386 30,687Acceptable Documentation ...................................................................... 668.57 1845–0041 293,515 6,498,427Review verification responses for acceptable documentation.Consequences of a change in FAFSA information ................................. 668.59 1845–0041 587,030 12,996,853Reduces tolerances and, if outside of tolerances, requires institutionsto report all changes to applicants’ FAFSA information resultingfrom verification.Recalculate applicant’s EFC if information changes fromverification.Administration of Ability to Benefit Tests ................................................. 668.151 1845–0049 20,702 458,351Keep records of individuals who take ATB tests and details aboutthe administrator ........................................................................... 668.151(g)(4) .......................... 18,484 402,242Keep documentation of individual’s disability and testing arrangementsprovided ............................................................................. 668.151(g)(5) .......................... 2,218 49,110Administration of Tests by Assessment Centers .................................... 668.152 1845–0049 2,506 55,487Maintain the scored ATB tests and collect and submit copies of completedATB tests or a listing to the test publisher or State weekly ..... .......................... .......................... 14,415 319,145Disbursing Funds ..................................................................................... 668.164 1845–NEW3 26,074 577,277Provide a way for Pell Grant recipients to obtain or purchase requiredbooks and supplies by the 7th day of a payment periodunder certain conditions.WReier-Aviles on DSKGBLS3C1PROD with RULES2To assess overall burden imposed oninstitutions meeting the definition of smallentities, the Department developed amethodology using IPEDS data and thepercentage of institutions with revenuesbelow $7 million and all non-profitinstitutions, allocating approximately 66percent of the paperwork burden to smallinstitutions. Using this methodology, theDepartment estimates the regulations willincrease total burden hours for these schoolsby 2.58 million, or roughly 590 hours perinstitution. Monetized using salary data fromthe Bureau of Labor Statistics, this burden is$58.1 million and $13,270, respectively. Ifcalculated using the distribution of studentsVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00144 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2from 2007–08, the share of the burdenallocated to small institutions would bemuch lower at approximately 21 percent,resulting in an estimated burden of 235 hoursand $5,410 per institution. Even the moreconservative estimate of $13,270 representsone percent or less of the midpoint revenue

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66975for all but the lowest revenue category, forwhich it is four percent of midpoint revenue.For institutions, an hourly rate of $22.14was used to monetize the burden of theseprovisions. This rate was a blended ratebased on wages of $16.79 for office andadministrative staff and $38.20 for managers,assuming that office staff would perform 75percent of the work affected by theseregulations. For the gainful employmentprovision, an hourly rate of $25.35 was usedto reflect increased management time toestablish new data collection proceduresassociated with that provision.These rates are the same as those used forall institutions in the Costs section of thisanalysis, reflecting the fact that the primarycost of meeting the paperwork burden is inadditional labor and that wages at smallinstitutions should not be systematicallyhigher than those at all institutions. Inresponse to comments that the regulationswould be costly, we reviewed the wage ratesfor more recent information and the share ofwork performed by office workers andmanagement and professional staff. Thisreview increased the general wage rate from$18.63 to $22.14 and the wage rate for gainfulemployment related matters from $20.71 to$25.35.The costs discussed above represent thecost of the regulations in the first year ofimplementation, beginning on July 1, 2011,but several provisions will have a longerperiod to take effect. Most importantly, theregulations contained in subpart E of part668, Verification and Updating of StudentAid Application Information, are effectiveJuly 1, 2012. These regulations account forapproximately 50 percent of the estimatedburden described above. We would expect 30percent of the verification costs to beincurred in 2011 as institutions update theirsystems for the changes, but the main part ofthose costs will occur in the second year.These costs would occur after the otherprovisions had been implemented and, whilewe do not have a split between thedevelopment and ongoing costs of eachprovision, we would expect the costs to taperoff as the institutions become familiar withthe regulations and have the systems in placeto comply. Seventy percent of the estimatedcosts for the Verification regulation wouldnot be realized in the first year, reducing theoverall projected costs for small institutionsduring the first year by approximately onethirdto approximately $8,000. Assuming a10 percent reduction in the costs of otherprovisions from reduced development costsand prior experience, full implementation in2012 would cost approximately $11,000. TheState authorization provision is also subjectto a delayed implementation, but thatimplementation is not expected to have asignificant cost effect on small entities.Additionally, the recurring costs of many ofthe provisions are based on the number ofstudents enrolled. As shown above, schoolswith small revenues have lower enrollmentsthan others classified as small entities andwould have to perform fewer verificationsand reviews on an ongoing basis. Since theyalready have some systems and processes inplace to comply with the existing regulations,once the development changes have beenmade to implement the regulatory changes,we would expect their ongoing costs to belower than the averages estimated above.Where possible, the Department hasallowed institutions flexibility to establishprocesses that fit the institution’sadministrative capabilities. For example, therequirement to distribute funds to Pell Grantrecipients for books and supplies withinseven days of the start of the payment periodallows institutions to use book vouchers ora credit to the student’s account. TheDepartment has also tried to allow more timefor all entities affected by these regulationsto establish procedures for new datacollections, such as the placement rateinformation required in the data collectionrelated to gainful employment. While thesetiming provisions are available to allinstitutions, they should permit smallinstitutions sufficient time to make thenecessary adjustments. Approximately 60percent of the paperwork burden associatedwith these regulations is in OMB 1845–0041,which relates to the updating of FAFSAapplication information and reporting allchanges resulting from verification. Theseupdated requirements will help ensureeligible students receive aid. As detailed inthe Paperwork Reduction Act of 1995 sectionof these final regulations, the increase inburden associated with the FAFSAacceptable documentation provision islargely driven by the increase in studentapplicants since the burden for theserequirements was last calculated. Given theincrease in the number of students applyingfor title IV, HEA aid, the number ofverifications is estimated to have increasedfrom 3.0 million in 2002–03 to 5.1 million in2008–09. Without the regulatory changesreflected in these regulations, which areestimated to reduce the number of items tobe verified, the paperwork burden on smallinstitutions in OMB 1845–0041 wouldincrease by an additional 195,677 hours.Based on these estimates, the Departmentbelieves the new requirements do not imposesignificant new costs on these institutions.We considered whether there would be anybenefit to allowing small institutionsadditional time to come into compliancewith the regulations and concluded that therewould be no benefit to taking such action.First and foremost, we think the risk ofdelaying implementation of these programintegrity regulations and the resultingnegative impact on students and taxpayerswould be far too high.Second, we do not believe the commentsor the facts would support such action. In theNPRM, the Secretary invited comments fromsmall institutions and other affected entitiesas to whether they believed the proposedchanges would have a significant economicimpact on them and requested evidence tosupport that belief. Several commentersindicated that the provisions would be costlyand the Department reviewed the estimatesas described above. However, commentersdid not provide us with evidence to suggestthat small institutions or entities would needadditional time beyond July 1, 2011 to comeinto compliance with the regulations.Additionally, because we did not includesuch a proposal in the NPRM, we do notbelieve we could take this type of actionwithout seeking further public comment.Finally, we note that, where possible, wehave built in additional time or flexibility forall institutions based on the nature of theprovision and the data requested.[FR Doc. 2010–26531 Filed 10–28–10; 8:45 am]BILLING CODE 4000–01–PWReier-Aviles on DSKGBLS3C1PROD with RULES2VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00145 Fmt 4701 Sfmt 9990 E:\FR\FM\29OCR2.SGM 29OCR2