UNITED STATES DEPARTMENT OF EDUCATION

OFFICE OF POSTSECONDARY EDUCATION

Issue Paper 2: Standards of Administrative Capability

Session 1: January 18-21, 2022

Issue: Standards of Administrative Capability

Statutory cites: §498(a) of the Higher Education Act of 1965, as amended 

Regulatory cites: 34 CFR 668.16

Summary of issues: 

The statute requires that institutions of higher education (institutions) be administratively capable in 

order to retain eligibility for Title IV federal financial aid. However, while current administrative 

capability regulations include a host of requirements, the Department is aware of some compliance 

concerns and activities that are not reflected in those rules. Accordingly, we propose to revise the 

administrative capability regulations.

Proposal: 

We propose to include several additional standards in the administrative capability rules to ensure that 

they provide the capacity for appropriate response to ongoing problems the Department observes 

within institutions.

The additional proposed administrative capability standards would require an institution to:

1. Provide adequate career services to eligible students who receive Title IV, HEA program 

assistance. Determination of adequacy would be made based on the share of students enrolled 

in programs designed to prepare students for gainful employment in a recognized occupation, 

the number and distribution of career services staff, and the presence of institutional 

partnerships with recruiters and employers who regularly hire graduates of the institution. It is 

important that institutions help students identify career opportunities and access well-paying 

jobs after completing their programs; however, some institutions do not provide adequate 

support. Thus, the Department proposes to establish these requirements for adequate career 

services.

2. Make a reasonable effort to provide students with clinical or externship opportunities 

required for completion of a credential or licensure in the recognized occupation, as 

applicable, within 45 days after the completion of required coursework. Although many 

recognized occupations require the completion of clinicals or externships, some institutions do 

not make adequate arrangements broadly accessible to students, even when these are required 

to earn a degree or certificate. Thus, students may be left to identify their own externships, are 

only offered externships that are geographically distant and/or do not meet the credential or 

licensure requirements, or, in some cases, are not provided with any externship opportunities

for extended periods of time.

3. Disburse funds to students in a timely manner consistent with the students’ needs. Some 

institutions substantially delay disbursements to students. In some cases, this results in students 
Standards of Administrative Capability 2

not receiving funding until long after tuition payments are due and living costs are incurred,

which may affect students’ ability to remain in school, and ultimately graduate. Thus, the 

Department proposes that an institution shall not be considered administratively capable if the 

Secretary determines that it failed to make timely disbursements in ways that “best meet the 

student’s needs,” as is already required for delaying disbursements under the Pell, SEOG, and 

TEACH Grant programs (34 CFR 690.76(a), 676.16(a)(3), and 686.33(a)). Violations may be 

determined based on student complaints, high rates of withdrawals attributable to delays in 

disbursements, disbursements being delayed until after the withdrawal date requirements 

established in 34 CFR 668.22(b) and (c), disbursements being delayed with the effect of ensuring 

an institution passes the 90/10 ratio, or other information available to the Secretary.

4. Not engage in misrepresentations as defined in 34 CFR Subpart F or aggressive recruitment as 

defined in proposed 34 CFR Subpart [R]. Because both misrepresentation and aggressive 

recruitment increase risk to students and taxpayers, particularly with respect to borrower 

defense claims, the Department proposed in recent negotiations to further define each of these 

terms, and we propose to incorporate them as a requirement prohibited into the standards of

administrative capability.

5. Develop and follow procedures to evaluate the validity of a student's high school completion,

including the collection and maintenance of appropriate documentation of such completion. 

While institutions are currently required to verify high school completion status for students 

they suspect may not have the appropriate credential, some institutions have avoided verifying 

high school completion even when they had suspicions and the Department later determined 

the student did not have the appropriate credentials. The Department proposes to strengthen 

this requirement by specifying the types of documentation that will be required.

Proposed Regulations Redline

§ 668.16 Standards of administrative capability.

To begin and to continue to participate in any Title IV, HEA program, an institution shall must

demonstrate to the Secretary that the institution is capable of adequately administering that program 

under each of the standards established in this section. The Secretary considers an institution to have 

that administrative capability if the institution -

* * *

(h) Provides adequate financial aid counseling to eligible students who apply for Title IV, HEA program 

assistance. In determining whether an institution provides adequate counseling, the Secretary considers 

whether its counseling includes information regarding -

(1) The source and amount of each type of aid offered;

(2) The method by which aid is determined and disbursed, delivered, or applied to a student's account; 

and

(3) The rights and responsibilities of the student with respect to enrollment at the institution and receipt 

of financial aid. This information includes the institution's refund policy, the requirements for the 

treatment of title IV, HEA program funds when a student withdraws under § 668.22, its standards of 

satisfactory progress, and other conditions that may alter the student's aid package;
Standards of Administrative Capability 3

(i) Provides adequate career services to eligible students who receive Title IV, HEA program assistance. 

In determining whether an institution provides adequate career services, the Secretary considers –

(1) The share of students enrolled in programs designed to prepare students for gainful employment in a 

recognized occupation;

(2) The number and distribution of career services staff; and

(3) The presence of institutional partnerships with recruiters and employers who regularly hire 

graduates of the institution.

(j) Makes a reasonable effort to provide students with clinical or externship opportunities required for 

completion of the credential or licensure in a recognized occupation within 45 days of the completion of 

required coursework.

(k) Disburses funds to students in a timely manner consistent with the student’s needs, violations of 

which may be assessed using student complaints, high rates of withdrawals attributable to delays in 

disbursements, disbursements delayed until after the withdrawal date requirements in 34 CFR 668.22(b) 

and (c), disbursements delayed with the effect of ensuring an institution passes the 90/10 ratio, or other 

methods. 

(ji) Has provided all program and fiscal reports and financial statements required for compliance with 

the provisions of this part and the individual program regulations in a timely manner;

(m) Does not engage in misrepresentations as defined in subpart F of this part or aggressive recruitment 

as defined in subpart R of this part.

(jn) Shows no evidence of significant problems that affect, as determined by the Secretary, the 

institution's ability to administer a Title IV, HEA program and that are identified in -

(1) Reviews of the institution conducted by the Secretary, the Department of Education's Office of 

Inspector General, nationally recognized accrediting agencies, guaranty agencies as defined in 34 CFR 

part 682, the State agency or official by whose authority the institution is legally authorized to provide 

postsecondary education, or any other law enforcement agency; or

(2) Any findings made in any criminal, civil, or administrative proceeding;

(ko) Is not, and does not have any principal or affiliate of the institution (as those terms are defined in 2

CFR parts 180 and 3485) that is -

(1) Debarred or suspended under Executive Order 12549 (3 CFR, 1986 Comp., p. 189) or the Federal 

Acquisition Regulations (FAR), 48 CFR part 9, subpart 9.4; or

(2) Engaging in any activity that is a cause under 2 CFR 180.700 or 180.800, as adopted at 2 CFR 3485.12, 

for debarment or suspension under E.O. 12549 (3 CFR, 1986 Comp., p. 189) or the FAR, 48 CFR part 9, 

subpart 9.4;

(lp) For an institution that seeks initial participation in a Title IV, HEA program, does not have more than 

33 percent of its undergraduate regular students withdraw from the institution during the institution's 

latest completed award year. The institution must count all regular students who are enrolled during the 

latest completed award year, except those students who, during that period -
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(1) Withdrew from, dropped out of, or were expelled from the institution; 

(2) Were entitled to and actually received in a timely manner, a refund of 100 percent of their tuition 

and fees;

(qm)

(1) Has a cohort default rate -

(i) That is less than 25 percent for each of the three most recent fiscal years during which rates 

have been issued, to the extent those rates are calculated under subpart M of this part;

(ii) On or after 2014, that is less than 30 percent for at least two of the three most recent fiscal 

years during which the Secretary has issued rates for the institution under subpart N of this part; 

and

(iii) As defined in 34 CFR 674.5, on loans made under the Federal Perkins Loan Program to 

students for attendance at that institution that does not exceed 15 percent.

(2)

(i) However, if the Secretary determines that an institution's administrative capability is 

impaired solely because the institution fails to comply with paragraph (m)(1) of this section, and 

the institution is not subject to a loss of eligibility under §§ 668.187(a) or 668.206(a), the 

Secretary allows the institution to continue to participate in the Title IV, HEA programs. In such a 

case, the Secretary may provisionally certify the institution in accordance with § 668.13(c) 

except as provided in paragraphs (mq)(2)(ii), (qm)(2)(iii), (mq)(2)(iv), and (mq)(2)(v) of this 

section.

(ii) An institution that fails to meet the standard of administrative capability under paragraph 

(m)(1)(ii) based on two cohort default rates that are greater than or equal to 30 percent but less 

than or equal to 40 percent is not placed on provisional certification under paragraph (m)(2)(i)

of this section -

(A) If it has timely filed a request for adjustment or appeal under §§ 668.209, 668.210, 

or 668.212 with respect to the second such rate, and the request for adjustment or 

appeal is either pending or succeeds in reducing the rate below 30 percent; or

(B) If it has timely filed an appeal under § 668.213 after receiving the second such rate, 

and the appeal is either pending or successful; or

(C)(1) If it has timely filed a participation rate index challenge or appeal under § 

668.204(c) or § 668.214 from either or both of the two rates, and the challenge or 

appeal is either pending or successful; or

(2) If the second rate is the most recent draft rate, and the institution has timely 

filed a participation rate challenge to that draft rate that is either pending or 

successful.

(iii) The institution may appeal the loss of full participation in a Title IV, HEA program under 

paragraph (m)(2)(i) of this section by submitting an erroneous data appeal in writing to the 
Standards of Administrative Capability 5

Secretary in accordance with and on the grounds specified in §§ 668.192 or 668.211 as 

applicable;

(iv) If the institution has 30 or fewer borrowers in the three most recent cohorts of borrowers 

used to calculate its cohort default rate under subpart N of this part, we will not provisionally 

certify it solely based on cohort default rates;

(v) If a rate that would otherwise potentially subject the institution to provisional certification 

under paragraphs (m)(1)(ii) and (m)(2)(i) of this section is calculated as an average rate, we will 

not provisionally certify it solely based on cohort default rates;

(rn) Does not otherwise appear to lack the ability to administer the Title IV, HEA programs competently;

(so) Participates in the electronic processes that the Secretary -

(1) Provides at no substantial charge to the institution; and

(2) Identifies through a notice published in the Federal Register; and

(tp) Develops and follows adequate procedures to evaluate the validity of a student's high school 

completion if the institution or the Secretary has reason to believe that the high school diploma is not 

valid or was not obtained from an entity that provides secondary school education.

(1) Adequate procedures to evaluate the validity of a student’s high school completion must include--

(i) Obtaining documentation from the high school that confirms the validity of the high school 

diploma, including at least one of the following—

(A) Transcripts;

(B) Written descriptions of course requirements; or

(C) Written and signed statements by principals or executive officers at the high 

school attesting to the rigor and quality of coursework at the high school; and

(ii) If the high school is regulated or overseen by a State agency, confirming with or receiving 

documentation from that agency that the high school is recognized or meets requirements 

established by that agency.

(2) A high school diploma is not valid if it—

(i) Is not recognized or does not meet the requirements established by 

the appropriate State agency in which the high school is located;

(ii) Has been determined to be invalid by the Department, the appropriate State agency in which 

the high school was located, or through a court proceeding; or

(iii) Was obtained from an entity that requires little or no education or coursework to obtain a 

high school diploma, including through a test that does not meet the requirements for a 

recognized equivalent of a high school diploma under 34 CFR 600.2.