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Issue Paper #1 

Team I – Program Integrity Issues 

 

Issue: Definition of High School Diploma for the Purpose of Establishing 

Institutional Eligibility to Participate in the Title IV Programs, and 

Student Eligibility to Receive Title IV Aid 

Statutory cites: HEA sections 101(a)(1), 101 (b)(2), 102(b)(1)(B), 102(b)(2), 

102(c)(1)(B), 102(c)(2), and 484(d) 

Regulatory cites: 34 CFR 600.2, 600.4(a)(2), 600.5(a)(3), 600.6(a)(2), and 668.32(e) 

Summary question(s): How can we develop regulations that define a ―high school 

diploma‖ for the purpose of establishing eligibility to participate in the Federal student 

aid programs and to ensure that only eligible students receive Federal student aid; and 

what steps should we take to combat the use of diplomas obtained through diploma mills? 

Summary of issue: The Higher Education Act of 1965, as amended, requires an 

institution of higher education participating in the Federal student aid programs to admit 

as regular students only persons who have obtained a high school diploma or its 

recognized equivalent (or are beyond the age of compulsory school attendance). In order 

to be eligible to receive Title IV aid, a student must have a high school diploma or its 

recognized equivalent, have completed secondary school in a home school setting or pass 

an independently administered examination approved by the Secretary. Receipt of a high 

school diploma or its recognized equivalent or completion of secondary schooling 

through home schooling provides an indication that the student is qualified to begin study 

at the postsecondary level. There is a regulatory definition of the ―recognized equivalent 

of a high school diploma,‖ but the term ―high school diploma‖ is not defined in 

regulations. 

A student may self-certify on the FAFSA that he has received a high school diploma or 

GED or that he has completed secondary school through homeschooling as defined by 

state law. Basically, if a student does not have a high school diploma or GED and has not 

completed secondary school through home schooling, the student will have to pass an 

Ability-to-Benefit test to qualify for student aid. If a student indicates that he has a 

diploma or GED, the postsecondary institution isn’t required to ask for a copy. If, 

however, the institution requires one for admission, the institution must rely on that copy 

of the diploma or GED and not on the student’s certification alone. Confirming the 

authenticity of a student’s high school experience has become more difficult in part due 

to the proliferation of high school diploma mills. Institutions that have concerns about 

the validity of a diploma from a particular school often check with the department of 

education for the state in which the school is located. If the department has jurisdiction 

over the high school, it can confirm whether a diploma from the school (which does not 

have to be accredited) is recognized by the state. However, some states do not have a 
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means of recognizing even all the legitimate high schools operating in their state, 

particularly private high schools. 

Comments and questions: Institutions of higher education are concerned about several 

issues. One involves the administrative burden related to researching the legitimacy of 

the high school diploma a student presents. An additional concern relates to situations in 

which Title IV participating institutions direct students without high school diplomas to 

high schools with which they appear to have a business relationship. 

The Government Accountability Office, in an August 2009 report, recommends that the 

Department have a clearer, official policy about high school diploma mills. This could 

take the form of revised regulations. Furthermore, GAO recommends that the 

Department use information that is already available, such as lists published by States, to 

provide guidance to institutions of higher education in confirming the validity of high 

school diplomas. 

 How can institutions best confirm the authenticity of a student's high school 

experience whether it be through the receipt of a high school diploma, 

homeschooling credentials, diplomas obtained from online training or private 

schools? Should a high school’s recognition by a State agency be required? 

Should accreditation play any role? 

 If States are relied upon to determine a school’s legitimacy, how can the 

Department assist colleges in confirming a diploma’s authenticity and the 

school’s approval by a state?

 How can institutions determine the equivalency of high school diplomas received 

at foreign schools to those obtained in the US? 

 Is the FAFSA self certification regarding the receipt of a high school diploma 

adequate or should it be strengthened? 

 Are there certain types of relationships between colleges and high schools that 

should be prohibited, at least as far as diploma recognition is concerned? 
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Issue Paper #2 

Team I – Program Integrity Issues 

Issue: Ability to Benefit 

Statutory cites: HEA section 484(d) 

Regulatory cites: 34 CFR 668.32(e)(2) and subpart J 

Summary question(s): How do we address concerns raised by the Government 

Accountability Office (GAO) about the analyses ability-to–benefit (ATB) test publishers 

prepare and submit to the Department? What should we consider as we implement a new 

ATB provision included in the Higher Education Opportunity Act (HEOA)? 

Summary of issue: Students who have neither a high school diploma nor its equivalent 

may demonstrate their ability to benefit from the education provided, and receive Federal 

student financial aid funds, by taking a Department-approved ATB test or, as added by 

the HEOA, by satisfactorily completing six credits of college work that are applicable to 

a degree or certificate offered by the institution. 

ATB Test Requirements

The Department is responsible for overseeing the ATB test publishers, who are 

responsible for certifying and monitoring test administrators to ensure the independent 

and proper administration of ATB tests. Test publishers are required to conduct and 

submit an analysis of test scores every three years to identify any test irregularities that 

would suggest ATB tests are not being administered in accordance with test rules. 

In August 2009, GAO issued a report which cited the Department for weak 

oversight of the ATB test requirements and recommended that the ATB regulations be 

revised to strengthen controls over the ATB testing process. GAO identified the 

following problems with the current regulations: 

(1) The regulations require test publishers to conduct test score analyses only 

every three years. This means it is possible for test administrators who are administering 

tests improperly to go undetected for up to three years. 

(2) The regulations do not specifically require test publishers to follow up on test 

score irregularities or report any corrective actions to the Department. Therefore, the 

Department has no way of knowing whether actual violations occurred or how the test 

publishers dealt with any violations they identified. 

(3) While the current regulations require that test publishers decertify test 

administrators who fail to administer tests properly, the regulations do not require test 

publishers to report to the Department on implementation of their decertification process. 

This means the Department has no assurance that test administrators who violate test 

rules are decertified. Further, the Department has no way of determining if test 

administrators decertified by one publisher are administering tests for other publishers. 

Unlike ATB tests submitted for approval by test publishers, if a State submits its 

ATB test and the Secretary approves it, the test is approved for use until that approval is 
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revoked. In addition, under current regulations, States are not required to submit 3-year 

test anomaly studies in the same way that test publishers are. 

States also have the option of seeking approval from the Secretary for a State 

process that is an alternative to achieving a passing score on an approved, independently 

administered test. Once a State has had its process approved, there is no requirement that 

the State’s process be reevaluated. 

It has been fourteen years since subpart J was published. In the intervening time, 

some of the terminology used in the subpart has changed, and we are using technology to 

a larger extent. We have also identified some definitions which should be modified to 

reflect statutory changes to other laws, such as the Individuals with Disabilities Education 

Act (IDEA). We plan to incorporate necessary updates to reflect these changes. 

Completion of Six Credit Hours

The HEOA added a second method for students to show that they have the ability 

to benefit. Students who satisfactorily complete six credits of college work, or the 

equivalent amounts of coursework, that are applicable to a degree or certificate offered by 

the school qualify to receive title IV aid. 

For the purpose of implementing this provision, there needs to be a determination 

of the appropriate number of clock hours a student in a clock hour program needs to 

complete that is equivalent to six credit hours. There are at least two ways of 

determining equivalency: 

225 hours: 6 credit hours is one-fourth of the minimum 24 credit hours that 

qualifies as full-time enrollment over one academic year. The minimum clock 

hours for a full academic year is 900. One-fourth of 900 is 225 hours. 

180 hours: Under the clock hour/credit hour conversion formula one semester 

credit equals 30 clock hours. Multiplying six units times 30 yields 180 hours. 

Comments and questions: 

 Should more frequent reports be required of ATB test publishers? 

 Should State ATB tests also be submitted for periodic review instead of being 

approved indefinitely? How frequently? 

 Should the requirement that test publishers submit 3-year test anomaly studies be 

extended to include State ATB tests, as well? 

 Is there adequate assurance that test administrators are sufficiently independent 

from the schools that use their services? 

 In addition to determining the clock-hour conversion, what additional 

clarifications are needed to effectively implement the six-credit provision? 
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Issue Paper #3 

Team I – Program Integrity Issues 

 

Issue: Misrepresentation of Information to Students and Prospective 

Students 

Statutory cites: HEA section 487

Regulatory cites: 34 CFR 668.71-75

Summary question(s): Should the Department revise the regulations or provide 

additional guidance about the types of statements and communication that could 

constitute “misrepresentation”? 

Summary of issue: Choosing a college or job training program is increasingly a highstakes decision for consumers. The choice can be costly both in terms of the prospective 

student’s time as well as the tuition, fees and other expenses incurred. Furthermore, the 

student may be taking on debt that will be more burdensome if the education or training 

does not meet the student’s expectations or fails to lead to hoped-for employment. 

ED regulations currently prohibit any “substantial misrepresentation made by [an] 

institution regarding the nature of its educational program, its financial charges or the 

employability of its graduates.” Additional detail in the rule provides further guidance to 

institutions. 

The Federal Trade Commission (FTC) publishes guidelines for consumers to use to avoid 

deceptive advertising and promotional, marketing, and sales practices by vocational 

training providers, at 16 CFR 254. The FTC Guides, which include references to other 

guidelines, such as those regarding the use of endorsements and testimonials, are 

considered administrative interpretations of the statutes that the FTC is charged with 

implementing. Conduct that is inconsistent with the Guides may result in corrective 

action by the FTC if a school is found to be in violation of the law. For example, the 

provisions caution industry members against engaging in any activities such as using any 

name, label, logo, etc. that would mislead a student as to the nature of the school, its 

accreditation, programs, or methods of teaching. The FTC updates its Guides 

periodically. 

The Federal Register notice requesting public comments on the Federal Trade 

Commission Guides is located at 16 CFR Part 245: 

http://www.ftc.gov/os/fedreg/2009/july/090730privatevocationalschool.pdf

While the Guides are helpful, the FTC has jurisdiction over only for-profit entities and it 

does not extend to degree-granting institutions. 
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Comments and questions: The Department anticipates that the FTC Guides will be 

included as part of the discussion as it develops a regulatory approach to address 

misrepresentation of consumer information. 

Current regulations describe the parties to whom false, erroneous or misleading 

statements may not be made. The parties include prospective and enrolled students or 

their families, or the Secretary. Should the parties be expanded, to possibly include state 

agencies or accreditors? 

To what extent should the Department’s regulations on misrepresentation be harmonized 

with the FTC’s guidelines?

Are there other clarifications that should be considered? 
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Issue Paper #4 

Team I – Program Integrity Issues 

Issue: Incentive Compensation

Statutory cites: HEA section 487(a)(20)

Regulatory cites: 34 CFR 668.14(b)(22) 

Summary question(s): Should the ―safe harbors‖ be reexamined?

Summary of issue: The HEA provides that to be eligible to participate in the Federal 

student financial aid programs authorized under title IV, an institution must enter into a 

program participation agreement with the Secretary. The agreement includes a number 

of conditions with which an institution must comply to be granted initial and continuing 

eligibility to participate. Among those conditions is a prohibition on institutions 

providing any commission, bonus, or other incentive payment based directly or indirectly 

on success in securing enrollments or financial aid to any individual or entity engaged in 

recruiting or admission activities or in making decisions regarding the award of title IV, 

HEA program funds. This prohibition does not apply to the recruitment of foreign 

students residing in foreign countries who are not eligible to receive title IV funds. 

The regulations implementing this provision of the HEA specify 12 types of 

payment and compensation plans that do not violate this statutory prohibition. The first 

safe harbor explains the conditions under which an institution may adjust compensation 

without that compensation being considered an incentive payment. 

The remaining 11 safe harbors describe the conditions under which payments that 

could potentially be construed as based upon securing enrollments or financial aid are 

nonetheless not covered by the statutory prohibition. 

The payment or compensation plans covered by the safe harbors cover the following 

subjects: 

1. Adjustments to employee compensation. Under this safe harbor, an institution 

may make up to two adjustments (upward or downward) to a covered employee’s 

annual salary or fixed hourly wage rate within any 12-month period without the 

adjustment being considered an incentive payment, provided that no adjustment is 

based solely on the number of students recruited, admitted, enrolled, or awarded 

financial aid. One cost-of-living increase that is paid to all or substantially all of 

the institution’s full-time employees will not be considered an adjustment under 

this safe harbor. In addition, with regard to overtime, if the basic compensation of 

an employee is not an incentive payment, neither is overtime pay required under 

the Federal Fair Labor Standards Act. 

2. Enrollment in programs that are not eligible for title IV, HEA program funds. An 

institution may provide incentive compensation to recruiters based upon their 
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recruitment of students who enroll only in programs that are not eligible for title 

IV, HEA program funds. 

3. Contracts with employers to provide training. This safe harbor addresses 

payments to recruiters who arrange contracts between an institution and an 

employer, where the employer pays the tuition and fees for its employees (either 

directly to the institution or by reimbursement to the employee). As long as there 

is no direct contact by the institution's representative with prospective students, 

and as long as the employer is paying at least 50% of the training costs, incentive 

payments to recruiters who arrange for such contracts are not covered by the 

incentive payment prohibition, provided that the incentive payments are not based 

on the number of employees who enroll, or the amount of revenue generated by 

those employees. 

4. Profit-sharing bonus plans. Profit-sharing and bonus payments to all or 

substantially all of an institution's full-time employees are not incentive payments 

based on success in securing enrollments or awarding financial aid. As long as the 

profit-sharing or bonus payments are substantially the same amount or the same 

percentage of salary or wages, and as long as the payments are made to all or 

substantially all of the institution’s full-time professional and administrative staff, 

compensation paid as part of a profit-sharing or bonus plan is not considered a 

violation of the incentive payment prohibition. In addition, such payments can be 

limited to all or substantially all of the full-time employees at one or more 

organizational levels at the institution, except that an organizational level may not 

consist predominantly of recruiters, the admissions staff, or the financial aid staff. 

5. Compensation based upon program completion. Compensation that is based upon 

students successfully completing their educational programs, or one academic 

year of their educational programs, whichever is shorter, does not violate the 

incentive compensation prohibition. Successful completion of an academic year 

means that the student has earned at least 24 semester or trimester credit hours or 

36 quarter credit hours, or has successfully completed at least 900 clock hours of 

instruction at the institution. (Time may not be substituted for credits earned.) In 

addition, the 30 weeks of instructional time element of the definition of an 

academic year does not apply to this safe harbor. Therefore, this safe harbor 

applies when a student earns, for example, 24 semester credits, no matter how 

short or long a time that takes. 

6. Pre-enrollment activities. Generally, clerical pre-enrollment activities are not 

considered recruitment or admission activities. Accordingly, an institution may 

make incentive payments to individuals whose responsibilities are limited to preenrollment activities that are clerical in nature. However, soliciting students for 

interviews is a recruitment activity, not a pre-enrollment activity, and individuals 

may not receive incentive compensation based on their success in soliciting 

students for interviews. In addition, since a recruiter’s job description is to recruit, 

it would be very difficult for an institution to document that it was paying a bonus 

to a recruiter solely for clerical pre-enrollment activities. 

7. Managerial and supervisory employees. This safe harbor recognizes that the 

incentive payment prohibition applies only to individuals who perform activities 

related to recruitment, admissions, enrollment, or the financial aid awarding 
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process and their immediate supervisors. Direct supervisors are included in this 

prohibition because their actions generally have a direct and immediate impact on 

the individuals who carry out these covered activities. 

8. Token gifts. Under this safe harbor, the regulations provide that a token gift not 

to exceed $100 may be provided to an alumnus or student provided that the gift is 

not in the form of money and no more than one gift is provided annually to an 

individual. The cost basis of a token noncash gift is what the institution paid for 

it. The value is the fair market value of the item. The fair market value of an item 

might be considerably greater than its cost. A high value item for which the 

institution paid a minimal cost would not be considered a token gift. 

9. Profit distributions. Profit distributions to owners are not payments based on 

success in securing enrollments or awarding financial aid. Therefore any owner, 

whether an employee or not, is entitled to a share of the organization’s profits to 

the extent they represent a proportionate share of the profits based upon the 

employee’s ownership interest.

10. Internet-based activities. This safe harbor permits an institution to award 

incentive compensation for Internet-based recruitment and admission activities 

that provide information about the institution to prospective students, refer 

prospective students to the institution, or permit prospective students to apply for 

admission online. 

11. Payments to third parties for non-recruitment activities. This safe harbor 

recognizes that the incentive payment prohibition applies only to activities dealing 

with recruiting, admissions, enrollment, and financial aid. Therefore, an 

institution may make incentive payments to third parties for other types of 

services, including tuition sharing arrangements, marketing, and advertising that 

are not covered by the incentive compensation prohibition. 

12. Payments to third parties for recruitment activities. If an institution uses an 

outside entity to perform activities for it, including covered activities, the 

institution may make incentive payments to the third party without violating the 

incentive payment prohibition as long as the individuals performing the covered 

activities are not compensated in a way that is prohibited by the incentive 

payment compensation rule. For example, if an institution established a group of 

employees who provided the institution with a series of services, and one of those 

services was recruiting, the incentive compensation prohibition would preclude 

only the individuals doing the recruiting from being paid on an incentive basis. If 

that institution hired a contractor to provide these services, the same rules would 

apply. The outside entity could not pay the individuals performing the recruiting 

services on an incentive basis, but it could pay the other employees performing 

non-recruiting activities on an incentive basis. 

Comments and questions 

The Department has received complaints from students and enrollment advisors 

about the high-pressure sales tactics of some postsecondary institutions. Some argue 

that tying staff compensation to the number of students enrolled is an inherent 

conflict of interest and that the safe harbors undermine the statutory ban on incentive 
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compensation. The Department has also heard from a number of educational 

institutions that the lack of clear guidance prior to establishment of the safe harbors 

made it very difficult for institutions to be confident of their compliance with the rule. 

Should the safe harbors be maintained, amended, or eliminated in whole or in part from 

the regulations? 
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Issue Paper #5 

Team I – Program Integrity Issues 

Issue: State authorization as a component of institutional eligibility

Statutory cites: HEA sections 101(a)(2); 102(b)(1)(B); 102(c)(1)(B) 

Regulatory cites: §600.4(a)(3); §600.5(a)(4); §600.6(a)(3) 

Summary of issue: To begin and continue to participate in the title IV student aid 

programs, the HEA requires an institution (with the exception of a foreign institution) to 

be legally authorized to provide a postsecondary educational program within the State in 

which it is located. 

The State’s legal authorization is the legal status granted to an institution through 

a charter, license, or other written document issued by an appropriate agency or official 

of the State in which the institution is located. It may be provided by a licensing board or 

educational agency. In some cases, the institution’s charter is its legal authorization. An 

institution must have evidence that it has the authority to operate in a State at the time the 

institution applies to be certified or recertified to participate in the title IV programs. 

State law governs the licensure or authorization of institutions that operate in the 

State. States structure their oversight and regulatory agencies in various ways, and may 

have significantly different requirements that institutions must meet to be legally 

authorized to provide an educational program. (One indicator of this variation in State 

requirements is the penchant of substandard institutions and diploma mills to move from 

State to State in response to changing requirements. These entities set up operation in 

States that provide very little oversight, and if a State strengthens its licensure law, they 

simply move to another State and begin operation there.) 

Over 35 years ago, the Department determined that institutions were authorized 

by the State by virtue of the State’s decision not to have any oversight over them. This 

precedent was called into play when a situation emerged more recently in California. 

California's Bureau for Private Postsecondary and Vocational Education serves as the 

State's oversight and regulatory agency for private proprietary postsecondary institutions. 

Disputes led to an impasse over the continued existence of the Bureau. Because the 

Department informed the State that the institutions in question would remain eligible for 

Federal aid even if the Bureau was eliminated (based on the earlier precedent), there was 

no pressure for the State to maintain its role. The establishing legislation for the Bureau, 

the Private Postsecondary and Vocational Education Reform Act, became inoperative on 

June 30, 2007 and was repealed on January 1, 2008. Recently, California created a new 

State bureau with oversight responsibility for private postsecondary institutions. During 

the period when there was no State agency authorizing private postsecondary institutions, 

they continued to participate in the Federal student aid programs. 

A second issue is that some States are deferring to accrediting agencies for 

approval of educational institutions or are providing exemptions for a subset of 

institutions for other reasons. Since accrediting agencies generally require that an 
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institution be legally operating in the State, the checks and balances provided by 

accreditation and State legal authorization are undermined. For example, institutions in 

California that are accredited by the Western Association of Schools and Colleges had a 

complete exemption from the now-expired California law, and proposed legislation in 

California for a new licensing regime contains the same exemption. 

The Veteran's Administration relies upon State Approving Agencies (SAA) to 

review, evaluate and approve quality programs of education and training under State and 

Federal criteria for the veterans' education benefits programs it oversees. The SAAs are 

funded through the Post-9/11 G.I. Bill. Each State approaches this responsibility in its 

own way. Some States have one agency to approve all programs in postsecondary 

educational institutions, another agency to approve all on-the-job training programs, and 

then possibly a third agency to approve flight schools. In general, the VA requires 

programs offered by institutions of higher education to be accredited by an accrediting 

agency recognized by the Secretary of Education. 

Comments and questions 

 Should institutions be allowed to participate in the title IV programs if a State 

does not license or otherwise authorize an institution to offer postsecondary 

programs in the State? 

What should constitute State authorization? Should there be any minimum standards for 

State authorization for purposes of determining institutional eligibility to participate in 

the title IV programs? Is it adequate for title IV purposes for a State agency to rely solely 

on accreditation as the determinant of State authorization? 
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Issue Paper #6 

Team I – Program Integrity Issues 

Issue: Gainful Employment in a Recognized Occupation 

Statutory cites: HEA sections 101(b)(1); 102(b)(1)(A)(i); 102(c)(1)(A)

Regulatory cites: §600.2; §600.4(a)(4)(iii); §600.5(a)(5); §600.6(a)(4); 

§668.8(c)(3); §668.8(c)(3); §668.8(d)(1)(iii); §668.8(d)(2)(iii); 

§668.8(d)(3)(iii); §668.8(g)(1)(ii); §668.8(g)(2) 

Summary of issue: Some programs and institutions are eligible for Federal financial aid 

by virtue of the fact that they “prepare students for gainful employment in a recognized 

occupation.” The regulations currently define a recognized occupation as an occupation 

listed in the latest edition of the Dictionary of Occupational Titles published by the 

Department of Labor (DOL). This dictionary has been replaced by DOL’s on-line 

Occupational Information Network (O*NET) (http://online.onetcenter.org/) that relies on 

DOL’s Standard Occupational Classification (SOC) system. The Department of 

Education has not, in the past, worked with the DOL to make the link between 

institutions’ programs and the occupations recognized by the Secretary of Labor. 

Furthermore, there is no standard for what constitutes “gainful employment.” 

 To better link programs with occupations, one approach could be to require 

institutions offering occupational training programs to provide the Department and 

prospective students with the occupation names and SOC codes 

(http://www.bls.gov/oes/current/oes_stru.htm). Institutions could link directly to the 

occupational profile (for example, see the overview of the job tasks and salary for energy 

auditors) at http://online.onetcenter.org/link/summary/13-1199.01. 

In considering possible definitions for ―gainful employment,‖ the relationship of 

student debt levels of recent graduates of an institution or program to expected earnings 

could be a consideration in determining a program’s eligibility. Alternatively, a 

reasonable relationship between the tuition costs incurred by students and expected 

earnings could be considered. 

Comments and questions 

 Should the Department require that institutions cite the occupational names and 

codes for occupational training programs, and if so, how should the disclosure be 

made? 

Should ―gainful employment‖ be defined? And if so, what should be the relationship 

between tuition and fee charges (and/or loan debt) and expected earnings? For programs 

where this relationship is not reasonable, when and how should the Department no longer 

consider the program to be an eligible program for title IV purposes? 
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Issue Paper #7 

Proposed Regulatory Language 

 Team I – Program Integrity Issues 

Issue: Definition of a credit hour 

Statutory cites: HEA Sec. 481(a)(2) definition of academic year; 481(b) definition 

of eligible program; 484(b)(3) and (4) and 401 requirement to be 

enrolled half-time for loan eligibility; 496(a)(5)(H) accreditation 

standards

Regulatory cites: 34 CFR 668.2(b) definition of full-time student and definition of 

half-time student; 668.4 Payment period; 686.22 Calculation of a 

TEACH Grant for payment period; 690.63 Calculation of a Federal 

Pell Grant for a payment period; 691.63 Calculation of an ACG or 

National SMART Grant for payment period; 668.8(k) and (l) 

Clock hour/credit hour conversions

Summary of issue: Credit hours are used to measure degree completion and to award 

title IV aid, but there is no commonly accepted definition of a 

credit hour 

A credit hour is a unit that gives weighting to the value, level, or time 

requirements of an academic course taken at an educational institution. At its most basic, 

a credit hour is a proxy measure of student learning. A credit hour is not consistently 

related to time or workload within institutions or between different types of institutions. 

Most postsecondary institutions do not have policies or even criteria that explain the basis 

for assigning credit hours to course work. When the measure is defined, it is usually as a 

measure combining a student's seat time in the classroom and outside-of-class work. 

Commonly used definitions are: one hour per week in class plus another two hours of 

study outside of class for 15 weeks equals one semester hours of credit; 12 hours per 

week in class equals a minimum full-time load; 120 credit hours equals a baccalaureate 

degree at an institution that uses semester hours. Although the metric purports to gauge 

faculty effort and student accomplishment, it does not measure learning based on specific 

goals or results. 

The United States does not currently have any common frameworks for defining 

student outcomes for various degree levels (e.g., the associate, baccalaureate, masters and 

doctorate). Accrediting agencies and States to varying extents establish standards and 

criteria for degree levels. The HEA and implementing regulations require that, to be 

recognized by the Secretary, an accrediting agency must have standards to evaluate an 

institution's or program's "measures of program length and the objectives of the degrees 

or credentials offered." The Department has relied on accrediting agencies to make a 

judgment about program length and the amount of credit an institution or program grants 

for course work. Accrediting agency standards related to program length differ 

significantly in their specificity and their standards generally do not define what a credit 

hour is. This lack of specificity in standards covering student achievement and program 

length has inherent limitations. The lack of a definition of a credit hour may be the basis 

for abuse by institutions in determining sufficient course content for a credit hour. Such 
15 

abuse is likely to be encouraged by the availability to a student of two Federal Pell Grants 

in an award year. 

Over the last seven years, the Department's Office of the Inspector General (OIG) 

has conducted a number of reviews of accrediting agencies' standards for program length. 

These reviews have led the OIG to be concerned about the Department's total reliance on 

accrediting agencies for assessment of a factor that is a component of Title IV aid. 

However, if the Department does decide to define a credit hour for the purposes of Title 

IV aid, the definition cannot involve determinations of academic quality, as that is an area 

in which the relevant statutes look to accrediting agencies and exclude the Department. 

The credit hour is used for Title IV purposes to define an eligible program, and 

academic year; and to determine enrollment status and the amount of student financial aid 

that may be disbursed per payment period. Neither the HEA nor implementing 

regulations include a definition of credit hour, though there are numerous references to 

credit hours and program length in both the statute and regulations. The HEA and 

regulations define "academic year" and "eligible program" in relation to credit hours or 

clock hours. 

Section 481 of the HEA defines an academic year as requiring a minimum of (a) 

30 weeks of instructional time for a course of study that measures its program length in 

credit hours; or a minimum of 26 weeks of instructional time for a course of study that 

measures its program length in clock hours; and (b) for an undergraduate course of study, 

24 semester or trimester hours or 36 quarter credit hours in a course of study that 

measures academic progress in credit hours or 900 clock hours in a course of study that 

measures academic progress in clock hours. For most student financial aid programs, 

section 481 of the HEA defines an eligible program as a program of at least 

 600 clock hours, 16 semester hours, or 24 quarter hours, offered during a 

minimum of 15 weeks, in the case of a program that—

o provides a program of training to prepare students for gainful employment 

in a recognized profession; and 

o admits students who have not completed the equivalent of an associate 

degree; or 

 300 clock hours, 8 semester hours, or 12 quarter hours, offered during a minimum 

of 10 weeks, in the case of an undergraduate program that requires the equivalent 

of an associate degree for admissions; or a graduate or professional program. 

The regulations do provide formulas for the conversion of clock hours to credit 

hours. A school must determine if an undergraduate program qualifies as an eligible 

program after using the required formulas unless the school offers an undergraduate 

program in credit hours, and the program is at least two academic years in length and 

provides an associate degree, a bachelor’s degree, a professional degree; or each course 

within the program is acceptable for full credit toward that institution’s associate degree, 

bachelor’s degree, professional degree, and the degree offered by the school requires at 

least two academic years of study. The regulations were adopted prior to the change in 

the definition of an academic year for clock-hour programs to provide for a minimum of 
16 

26 weeks of instructional time as opposed to the 30 weeks of instructional time required 

for credit-hour programs. 

Many American colleges and universities have developed weekend programs, 

accelerated programs, and other innovative ways to serve students for whom the more 

traditional calendar is not convenient. Distance education and other non-traditional 

modes of instruction, such as competency-based learning, are increasingly prevalent 

across postsecondary education. These ways of structuring and delivering education 

challenge the concept of "seat time" measures associated with credit hours. 

In contrast to the United States, the Europeans have a way of awarding credits 

that is linked to student learning and is worth examining. The European Credit Transfer 

and Accumulation System (ECTS) is a standard for comparing the study attainment and 

performance of students of higher education across the European Union and other 

collaborating European countries. For successfully completed studies, ECTS credits are 

awarded. One academic year corresponds to 60 ECTS-credits that are equivalent to 

1500–1800 hours of study in all countries irrespective of standard or qualification type 

and is used to facilitate transfer and progression toward a degree throughout the Union. 

The ECTS must be placed within the context of the ongoing Bologna Process, 

which is the process of creating the European Higher Education Area (EHEA) and is 

based on cooperation between ministries, higher education institutions, students and staff 

from 46 countries, with the participation of international organizations. A key component 

of the effort is the establishment of qualifications frameworks at two levels. National 

qualifications frameworks describe what learners should know, understand, and be able 

to do on the basis of a given qualification, as well as how learners can move from one 

qualification to another within a system. National qualifications frameworks are 

developed to be compatible with the overarching framework of qualifications of the 

European Higher Education Area, which was adopted in 2005 and consists of three cycles 

(e.g. bachelor, master, doctorate). The overarching framework makes recognition of 

qualifications easier since specific qualifications can be related to a common framework. 

Comments and Questions

Several commenters urged the Department to establish minimum standards to 

define a credit hour for title IV purposes. Some expressed concern that the definition not 

be so narrow as to stem the tide of important innovations such as weekend courses, 

distance learning, and a variety of alternative schedules. Others strongly argued that 

accrediting agencies can best determine whether academic outcomes are being achieved 

and that they should be relied upon for determining whether an institution is 

appropriately awarding credits. 

Should there be a regulatory definition of a credit hour for title IV purposes? Would a 

different definition be needed for postsecondary vocational education, for undergraduate 

education, and for graduate study? What about for distance education and other 

nontraditional programs? What relationship would such a title IV definition have to 

accrediting agencies standards for program length? 
17 

Issue Paper #8 

Team I – Program Integrity Issues 

Issue: Agreements between Institutions of Higher Education 

Statutory cites: N/A 

Regulatory cites: 34 CFR 668.5 

Summary question(s): Should the provisions on agreements between two eligible 

institutions of higher education be changed to limit the amount of instruction that may be 

offered away from the ―home‖ institution? Should additional limitations be placed on 

such agreements involving an ineligible institution? 

Summary of issue: Two or more institutions may enter into a consortium or contractual 

agreement so that a student can continue to receive title IV funds while studying at an 

institution or organization other than his or her ―home‖ institution, or while enrolled in a 

program that is offered in part by another institution at the student's "home" institution. 

The current regulations cover written agreements between institutions in three 

different situations: (1) consortium agreements, which are written arrangements between 

eligible institutions; (2) contractual agreements, which are written arrangements between 

an eligible institution and an ineligible institution or organization; and (3) study abroad 

arrangements, which involve either a written contractual or consortium agreement 

between two or more institutions. The underlying assumption of all these agreements is 

that the home institution has found the other institution’s or organization’s academic 

standards to be equivalent to its own, and an acceptable substitute for its own instruction. 

For institutions that enter into a contractual agreement, i.e., an agreement between 

an eligible institution and an ineligible institution or organization, there is a limit on the 

portion of the program that can be provided by the ineligible entity. If both the ―home‖ 

institution and the ineligible institution or organization are owned or controlled by the 

same individual, partnership, or corporation, no more than 25% of the educational 

program may be provided by the ineligible entity. If the eligible institution and ineligible 

entity are separately owned or controlled, the ineligible institution or organization may 

provide up to 50 percent of the educational program. However, the ―home‖ institution’s 

accrediting agency or state agency (in the case of a public postsecondary vocational 

institution) must determine and confirm in writing that the agreement meets its standards 

for contracting out educational services. 

In a consortium agreement, i.e., a written arrangement between eligible 

institutions, there is no limit on the portion of the educational program that may be 

provided by eligible institutions other than the ―home‖ institution. The current 

regulations provide that under a consortium agreement, eligible institutions other than the 

―home‖ institution may provide all or part of the educational program, and the Secretary 

considers that educational program to be an eligible program as long as it satisfies the 

definition of an eligible program under §668.8. 
18 

Comments and questions: 

 Should an institution be permitted to confer a degree or certificate bearing its 

name when it has provided none of the instruction and conducted none of the 

evaluations to determine if the student has satisfied the requirements of the 

program? 

 Should institutions be required to provide a least a minimum portion of a program 

if they are to award the degree or certificate? 

 Should accrediting agencies be required to review consortium agreements if all or 

a majority of an educational program is being provided by institutions other than 

the ―home‖ institution? 

 If the arrangement is between an institution that has not been approved by its 

accrediting agency to offer distance education programs and one that has been 

approved for distance education, should the first institution be allowed to offer a 

distance education program? 

 Should different limitations be imposed when both institutions are under the same 

ownership? 
19 

Issue Paper #9 

Team I – Program Integrity Issues 

 

Issue: Verification of Information Included on Student Aid Applications 

Statutory cites: HEA, Title IV, Part F 

Regulatory cites: 34 CFR 668, Subpart E (§§668.51 through 668.61) 

Summary question(s): How can the current verification regulations be modified to align 

them with recent changes to the need analysis provisions in the statute and with 

operational improvements in the application processing system. 

Under current regulations, an institution is required to verify the application 

information of no more than 30 percent of its total number of applicants for assistance 

under the Federal Pell Grant, ACG, National SMART Grant, Federal Direct 

Stafford/Ford Loan, campus-based, and Federal Stafford Loan programs in an award year 

that are selected by the Secretary based on edits specified by the Secretary to ensure that 

Federal aid applicants have accurately submitted the information used to determine their 

eligibility for financial aid. An institution may only include those applicants selected for 

verification by the Secretary in its calculation of 30 percent of total applicants. 

Complying with the verification provisions does not reduce or remove the requirement 

that an institution resolve conflicting information before it disburses aid. An institution 

may choose to verify more than 30 percent of its applicants. 

An institution must require an applicant selected for verification to submit 

acceptable documentation that will verify or update the following information used to 

determine the applicant's EFC: 

(1) Adjusted gross income (AGI) for the base year if base year data was used in 

determining eligibility, or income earned from work, for a non-tax filer. 

(2) U.S. income tax paid for the base year if base year data was used in determining 

eligibility. 

(3) The aggregate number of family members in the household. 

(4) The number of family members in the household who are enrolled as at least halftime students in postsecondary educational institutions if that number is greater than one. 

(5) Untaxed income and benefits for the base year if base year data was used in 

determining eligibility. 

An institution or the Secretary may require an applicant to verify any data 

elements that the institution or the Secretary specifies. 
20 

The Department believes that simplifying the FAFSA and permitting data 

importation from the IRS make a comprehensive review of the verification process 

advisable at this time. Because it will take some time for some changes to be effective 

and for some systems changes to be made, it makes sense, in revising the verification 

regulations, to write them so they are flexible enough to accommodate ongoing changes 

and yet also provide an acceptable level of assurance that the students who are receiving 

Federal funds are eligible to receive them. Although many changes on the horizon may 

permit a reduction in items verified, Department experience with inappropriate 

designations of dependency status and other concerns suggests that perhaps there should 

be additions to the verification requirements in addition to possible deletions or 

restructuring of requirements. 

Comments and questions: During the public hearings held last summer, and in written 

comments submitted to the Department, some in the financial aid community expressed 

concern that the verification process is complicated, difficult to understand and invasive 

for many families. One area that poses particular challenges to the successful 

completion of the verification process is the level of expertise relating to the federal tax 

code that financial aid officers are expected to have in order to resolve discrepancies such 

as determining whether the student and his or her family filed their income taxes properly 

if required to file. Many of the financial aid administrators who testified or provided 

comments said that tax filing status, and appropriate reporting of income pose particular 

problems. If the applicant needs to file or amend a tax return before verification can 

proceed, it can be a very lengthy process. 

There was also concern expressed that requiring large numbers of students to go 

through an extensive verification process can reduce the odds of the students completing 

the process and receiving aid in a timely manner. Low income students are frequently 

chosen for verification because they have more difficultly completing the application; to 

the extent that they do not complete the process and do not enroll, the aid programs are 

not serving their intended purpose. 

It was pointed out that simplification of the FAFSA is one important way to 

reduce the number of items that require verification. In simplifying the FAFSA, the 

Department can carefully examine each data element to determine whether it is really 

necessary in order to determine eligibility for student financial aid funds. 

Another commenter stated that the Higher Education Opportunity Act (HEOA) of 

2008 authorizes the Secretary to pre-populate the FAFSA with tax data from the Internal 

Revenue Service (IRS) with the applicant’s consent. This would relieve applicants of the 

burden of reviewing, correcting and resubmitting much of the most error-prone 

information on the FAFSA, while reducing and simplifying the verification process for 

schools. Beginning in January 2010, applicants will have the ability to import IRS tax 

data into their electronic FAFSA which eliminates the need to verify those data elements 

imported. 
21 

Clearly, setting appropriate verification policy means addressing conflicting goals: 

ensuring that the right students receive the right amount of money at the right time while 

reducing improper payments to ineligible students. In consideration of these multiple, 

sometimes conflicting goals, and building on the comments received during the hearings 

and comment process, the following questions are offered as a starting point for 

discussion. 

 Instead of specifying that five items, as applicable, must be verified for each 

applicant, should the regulations be revised to say that the Secretary will specify 

the items that must be verified for an applicant on the applicant’s ISIR? The five 

items in current regulations might be listed, but wording changed to allow for the 

following changes in policy and procedures: 

o The AGI and income taxes need not be verified for those applicants who 

have imported IRS data without modification. 

o At such time as the Department is able to isolate the particular item or 

combination of items that suggested a potential problem and triggered a 

verification request, such as number in household or number in 

postsecondary education, the verification requirement could be limited to 

one or two items. 

o If assets are eliminated from the computation, but students and families 

above a certain net worth threshold are ineligible for Federal need-based 

aid, it may be necessary to leave a door open for some kind of verification. 

Until there is a statute to implement, this provision is necessarily 

nebulous. But it speaks to the need to allow for flexibility in tailoring 

items to be verified. 

 Should additional potential verification items, such as dependency status, which 

has generated some concern since it was eliminated as a verification item, be 

added to the list? 

 Should some general language be added requiring verification of other items, as 

identified by the Secretary? 

 Should all first time applicants be verified? This might help first time students 

through the process and reduce the need for verifying their applications in future 

years. 

 The provision that institutions are required to verify no more than 30% of 

applicants was originally based on a statutory provision that has since been 

removed. Should the 30% limitation be revisited? 
22 

If the regulations are restructured so that institutions are required to verify fewer data 

elements, should institutions be required to verify a higher percentage of applicants? 
23 

Issue Paper #10 

Team I – Program Integrity Issues 

 

Issue: Satisfactory Academic Progress 

Statutory cites: HEA sections 484(a)(2), 484(c)

Regulatory cites: 34 CFR 668.16(e), 668.32(f), and 668.34 

Summary question(s): Should we modify and strengthen the satisfactory academic 

progress (SAP) regulations to ensure that students who are receiving Title IV aid are truly 

progressing in their academic program in a reasonable time period? 

Summary of issue: To be eligible for Federal financial aid, a student must make 

satisfactory academic progress, and the school must have a published policy for 

monitoring that progress. A SAP policy is considered reasonable if it contains both 

qualitative (grade-based) and quantitative (time-related) standards. It must apply the 

policy consistently to all educational programs and to all students within categories e.g., 

full-time, part-time, undergraduate, and graduate students. The policy must be at least as 

strict as the school’s standard for students enrolled in the same educational program who 

are not receiving Title IV aid. It must provide for schools to check qualitative and 

quantitative components of the standards at the end of increments that cannot be longer 

than half the program or one academic year, whichever is less. Increments generally 

coincide with payment periods. The policy must provide specific procedures under 

which a student may appeal a determination that the student is not making satisfactory 

progress. This is not to say that a school must provide for appeals; a school’s policy may 

be that it does not entertain appeals. The policy must also provide specific procedures for 

a student to re-establish that the student is making satisfactory progress. Review of 

institutional policies shows that an institution can have a policy that meets all of our 

criteria, but due to automatic probationary periods, a student may receive aid for as long 

as 24 months without further review of his progress. 

Comments and questions

Effect of retaking courses on meeting qualitative standards. Under current regulations, 

the school’s written policy must explain how it handles course repetitions, such as 

whether only the highest or most recent grade counts. While the school can exclude 

grades for prior attempts (repeat/delete) when calculating a student’s GPA, the school 

must include the credits from all attempts when assessing if the student meets the 

quantitative SAP standard. Should this provision be reconsidered? Should students be 

permitted to use title IV funds to retake courses to get a better grade? 

Increments. Some schools monitor SAP on an annual basis. Many of the individuals 

who provided public comments on SAP recommended that regulations governing SAP be 

changed to require SAP reviews more frequently than once each year. 
24 

Cumulative completion and GPA requirements. We need to make it clear that the 

standards must lead to successful completion of the program in the timeframe. 

Requiring a ―C‖ average of all students. The only reference to a ―C‖ average in 

regulations is in §668.34(c). The requirement currently applies only to students enrolled 

in programs of two years or longer. If there is a change made in the frequency of SAP 

review, should this provision be revisited as well? 

Probationary periods. The current regulations do not require a school’s SAP policy to 

specify if and how probationary periods will be accommodated. As a result, some 

students are permitted to remain on probation continuously even if their cumulative GPA 

and/or completion rate does not meet standards. One question for consideration is 

whether to add some specificity to the regulations regarding probationary periods. 

Appeals. Under current regulations, a school enrolled in programs of less than two years 

may have an appeal process under which an appeal is granted for any reason as long as 

the student completed the process. Should §668.16(e) be amended to require schools’ 

appeal policies comport with §668.34(c)? 

Graduate programs. The current regulations are written primarily for undergraduate 

programs. What changes are needed to ensure that SAP standards for graduate programs 

are sufficient? 
25 

Issue Paper #11 

Team I – Program Integrity Issues 

Issue: Retaking Coursework 

Statutory cites: N/A 

Regulatory cites: §668.4(f) 

Summary of issue: There are no program regulations that specifically govern retaking 

coursework but the Department is examining inconsistencies in this area as they relate to 

the treatment of students who are enrolled in certain clock-hour or nonterm credit-hour 

programs. The provisions of the payment period definition in §668.4(f) relate to retaking 

coursework in a clock-hour or nonterm credit-hour program in the case of readmissions 

and transfer students. 

Students in term-based credit-hour programs may retake courses that they fail and 

get paid for retaking those courses as long as: 

 The credits are in addition to, not as a replacement for previously earned credits, 

e.g., repeating a failed course, and 

 The students meet the institution’s overall satisfactory academic progress 

standards. 

Students in other programs (e.g., clock-hour programs and nonterm credit-hour 

programs) generally must successfully complete (i.e., pass) the coursework for which 

they are paid before becoming eligible for a subsequent payment. Students are generally 

not allowed to be paid for retaking courses that they have already passed – for example 

for retaking courses for which they have received a passing grade, but for which they 

wish to retake to get a higher grade. Under the payment period definition, in some 

instances, a student may be paid for repeating coursework. 

Although students cannot be paid to retake part of a clock-hour or nonterm credithour program that they have already successfully completed, they are allowed to be paid 

for retaking an entire program that has already been successfully completed. This 

circumstance might occur when a student needs to retake an entire program after having 

been out of the field for a number of years during which the knowledge base of the 

program has changed. However, we have not established any minimum length of time 

that must transpire between the completion of the program and the retaking of the 

program. 

Comments and questions: Should the Department harmonize the treatment for retaking 

coursework between term-based credit hour programs and other programs? If so, we 

should consider not paying for repeating coursework for any program. This approach 

may affect the payment period definition. As an alternative, we could codify current 

guidance. 

Should the Department require schools to assess a student before the student is 

allowed to repeat coursework after an extended absence? 
26 

How should the Department treat a student enrolled in a term-based program that 

is treated as a nonterm program for purposes of FFEL and Direct Loans? 

What is the impact on nonterm programs of the reenrollment requirements for clock-hour 

and nonterm credit-hour programs in the payment period definition? 
27 

Issue Paper #12 

Team I – Program Integrity Issues 

Issue: Return of Title IV Funds: Term-based programs with modules or 

compressed courses 

Statutory cites: None 

Regulatory cites: The regulations do not specifically address the treatment of termbased module programs under the return of title IV funds calculation. However, Dear 

Colleague Letter GEN-00-24 addresses the issue of whether a student is considered to 

have withdrawn from a standard term-based module program for purposes of the return 

calculation in §668.22. We have also extended this guidance to certain nonstandard term 

programs.

Summary of issue: Should we modify our policy that a student who completes only one 

module or compressed course, in a term in which he or she is expected to continue 

attendance in additional coursework, is not considered to have withdrawn for purposes of 

the return calculation? 

When a recipient of title IV aid withdraws from an institution, the institution must 

determine the amount of title IV aid that the student earned for the period the student has 

attended. For term-based programs, a student is paid aid for each term. The regulations 

address the institution’s and the student’s responsibilities when a student does not finish 

the term (i.e., withdraws from all courses in the term) and how much aid the student has 

earned for attendance for the part of the term attended prior to withdrawal. Typically in a 

term-based program, a student takes several courses concurrently throughout each term 

and, thus, can drop all courses but one and not be considered to have withdrawn from the 

term. 

However, in some programs with modules or compressed coursework, courses are 

offered over periods of time that cover less than the length of the term. The courses may 

be taken in a consecutive fashion where each course is taken and completed in a module 

before a subsequent course is taken in a subsequent module or in overlapping timeframes. 

In some of these programs the institution will group several modules or courses together 

to make up a term. In these term-based programs with modules or compressed courses, 

we have established a policy that equates the completion of one course or module to the 

completion of one course taken over an entire term in a term-based program where 

courses are taken concurrently over the span of the term. In other words, when a student 

is scheduled to take several courses in one of these programs and drops out before the 

term has ended (for example after 5 weeks of a 15-week term) but has completed one 

course, we have not traditionally viewed that student as having withdrawn from the term. 

Thus, while we require the school to recalculate the student’s enrollment status under 

§690.80(b)(2)(ii) for his or her Federal Pell Grant payment when he or she does not begin 

courses in subsequent modules, we have not required that there be a return calculation for 

that student under §668.22 when the student has completed at least one course. We have 

viewed the completion of one course taken in a term-based program with courses offered 

as modules or compressed courses to be equivalent to completing one course in a term-
28 

based program based on the fact that a student has completed the same amount of 

education in each instance in the term in which the student was enrolled. We have taken 

this position despite the fact that the student in the term-based module program may have 

attended only 5 weeks (or less) out of the 15-week term, while the student in the termbased program has attended for the full 15 weeks of the term. 

Comments and questions: For a number of reasons, we might want to reconsider this 

position. First, a student’s aid for a term is based on, and intended to cover, in whole or 

in part, not only tuition and fees for the term, but the student’s living expenses for the 

term. Second, a student in a module-based term who only attends one module and then 

ceases to be enrolled without attending other modules or courses he or she is expected to 

attend in the term really is withdrawing before the term is completed. And third, there is 

more than the potential for some abuse as a number of institutions have structured 

module-based term programs where the first module is very short, with perhaps only a 

one credit course taken in it. 

The result of this policy is that a student who attends only a week or two of a 15-week 

term and then withdraws from the term can end up with a completed (one-credit) course 

for the term. This position then, under our current withdrawal policy, translates into a 

determination that the student has not withdrawn from the term, and allows the institution 

and/or student to keep aid intended for a 15-week period of time when the student has 

only attended school for as little as one week. 
29 

Issue Paper #13 

Team I – Program Integrity Issues 

Issue: Return of Title IV Funds: taking attendance 

Statutory cites: HEA section 484B(c)(1) 

Regulatory cites: §668.22(b) and (c) 

Summary question(s): Are modifications needed to the requirements for return of title 

IV funds related to taking attendance? 

Summary of issue: Generally, the HEA requires institutions and students to return 

unearned portions of title IV grant or loan assistance (other than funds received under the 

Federal Work-Study Program) when a student withdraws during a payment period or 

period of enrollment. The statute defines the term “the day the student withdrew” to be 

the date the institution determines: 

(A)(i) The student began the withdrawal process prescribed by the institution; 

(ii) The student otherwise provided official notification to the institution of the 

intent to withdraw; or 

(iii) In the case of a student who does not begin the withdrawal process or 

otherwise notify the institution of the intent to withdraw, the date that is the mid-point of 

the payment period for which assistance under this title was disbursed or a later date 

documented by the institution; or 

(B) For institutions required to take attendance, is determined by the institution 

from such attendance records. 

The regulations further specify the distinction between (1) the withdrawal date for 

a student attending an institution that is required to take attendance and (2) the 

withdrawal date of a student attending an institution that is not required to take 

attendance. 

Under the current regulations, an institution is required to take attendance if an 

outside entity, such as the institution’s accrediting agency or a State agency, requires that 

the institution take attendance. If this is the case, the student’s withdrawal date is the last 

date of academic attendance, as determined by the institution from its attendance records. 

By contrast, at institutions not required to take attendance, the student’s 

withdrawal date may be: 

- The date, as determined by the institution, that the student began the 

institutionally prescribed withdrawal process; 

- The date, as determined by the institution, that the student otherwise provided 

official notification to the institution of his or her intent to withdraw; 

- If the student failed to provide official notification to the institution of an intent to 

withdraw, the mid-point of the payment period of period of enrollment; 
30 

- If a circumstance beyond the student’s control (such as an illness or accident) 

precludes a student or an individual acting on the student’s behalf from initiating 

the institution’s withdrawal process or otherwise providing official notification of 

the student’s intent to withdraw, the date, as determined by the institution, that is 

related to that circumstance; 

- If the student does not return from an approved leave of absence, the date, as 

determined by the institution, that the student began the leave of absence; or 

- If the student takes a leave of absence that does not meet the requirements of 

§668.22(d), the date that the student began the leave of absence. 

In lieu of any of the above, the institution may use the student’s last date of 

attendance at an academically-related activity, if the institution documents both that the 

activity is academically related and the student’s attendance at the activity.

Comments and questions: The withdrawal date for institutions that are not required to 

take attendance can be much less precise than the withdrawal date at an institution that is 

required to take attendance, potentially leading to an abuse of Federal funds. For 

example, at an institution that is not required to take attendance, for a student who 

withdraws without providing notification, the withdrawal date may be assumed to be the 

50 percent point, even if the institution has attendance records and knows exactly when 

the student last attended. Thus, a student could earn 50 percent of his or her aid when the 

school knows that there was only one day of attendance. It would be more equitable to 

require schools that have attendance records to use them, rather than allowing institutions 

to choose a different date, despite having these records. Pursuant to the statute, we 

cannot require the school to use its attendance records if it is not “required to take 

attendance.” However, we can remove from the regulations the provision that an 

institution must take attendance only if it is required to by an outside entity. We can also 

consider that an institution is required to take attendance if it is required to document that 

a student complete a certain number of clock hours and the institution cannot demonstrate 

that it can comply with that requirement in some way other than taking attendance. 
31 

Issue Paper #14 

 Team I – Program Integrity Issues 

Issue: Disbursements of Title IV funds 

Statutory cites: HEA sections: 401(a); 420M(b); 428G; 452(c) 

Regulatory cites: §668.164; §668.165; §685.301(e); §686.37(b); §690.76 

Summary of issue: Should we establish disbursement procedures that limit how long an 

institution may delay disbursing Federal Pell Grant funds? 

 Should we revise the disbursement reporting requirements of the Direct Loan and 

TEACH Grant programs?

Delayed Federal Pell Grant disbursements

Although the regulations permit an institution to disburse Federal Pell Grant funds in a 

manner that best meets the needs of the student, we have identified situations where 

institutions delay disbursing funds for an extended time (some wait until the student has 

earned all the Federal Pell Grant funds for the payment period), make partial 

disbursements that cover specific costs, or condition the timely receipt of funds. In these 

instances, because students do not have the benefit of those funds in a timely manner, 

they may have to pay for educational costs with loans or personal funds that would 

otherwise be paid by Federal Pell Grant funds, or do without needed items (for example, 

books and supplies) or services until the institution makes the funds available. The delay 

in disbursing Federal Pell Grant funds has resulted in students withdrawing, receiving 

only loans after the calculation of the return of title IV, and not being eligible for any 

postwithdrawal disbursement of their Federal Pell Grants. These practices do not 

comport with either the intent of the program or with the intent of the regulations that 

allow an institution to budget a student’s funds to best meet the needs of the student. 

COD reporting requirement

The Direct Loan and TEACH Grant regulations currently require institutions to 

submit a record to the Common Origination and Disbursement system (COD) no later 

than 30 days after making a disbursement, adjustment, or cancellation of a Direct Loan or 

TEACH Grant. We could replace this requirement with a provision to publish the COD 

reporting requirements in a Federal Register notice. Changing this provision would bring 

the Direct Loan and TEACH Grant programs in line with the other title IV programs that 

report student-level disbursement data. This change would give the Department 

administrative flexibility in adjusting the reporting requirements to take advantage of 

changing technology and to improve funds management. 
32 

Comments and questions 

Delayed Federal Pell Grant disbursements

● Should the regulations provide that an initial Federal Pell Grant disbursement 

to an eligible student must be made no later than the first week of a term or payment 

period? For, example, the initial disbursement amount could be, at a minimum, the 

amount of the allowance included in the student’s cost of attendance for books and 

supplies. Subsequently, the remaining funds could be paid no later than, for example, the 

end of the drop/add period for all students in a term-based program with a drop/add 

period no greater than 14 calendar days after the start of classes or 14 calendar days after 

the start of classes for other programs including clock-hour or nonterm credit-hour 

programs. 

● Should the regulations establish time points during a payment period where a 

minimum or pro rata portion of a Federal Pell Grant must be paid to a student? For 

example, an institution could be required to pay not less than one-third of the Federal Pell 

Grant funds at the beginning of a payment period, one-third no later than the end of the 

first 25 percent of the calendar time of the payment period, and the remaining third no 

later than the 50 percent of the calendar time in the payment period. 

● Should the regulations provide that an institution must disburse all of the title 

IV funds a student is eligible to receive at or before the beginning of a payment period? 

Of course, this requirement would not include disbursements that the student is not yet 

eligible to receive. 

COD reporting requirement

Should the Direct Loan and TEACH Grant programs be subject to the same requirements 

as other title IV programs reporting student-level data?