1

4000-01-U

DEPARTMENT OF EDUCATION

34 CFR Parts 600, 602, and 668

[Docket ID ED-2018-OPE-0076]

RIN 1840-AD38

Distance Education and Innovation

AGENCY: Office of Postsecondary Education, Department of 

Education.

ACTION: Final regulations.

SUMMARY: The Secretary amends the general, establishing 

eligibility, maintaining eligibility, and losing eligibility

sections of the Institutional Eligibility regulations issued 

under the Higher Education Act of 1965, as amended (HEA),

related to distance education and innovation. In addition, the 

Secretary amends the Student Assistance General Provisions 

regulations issued under the HEA.

DATES: These regulations are effective July 1, 2021.

Implementation date: For the implementation dates of the 

included regulatory provisions, see the Implementation Date of 

These Regulations section of this document.

FOR FURTHER INFORMATION CONTACT: For information on these 

Distance Education and Innovation regulations, please contact 

Note: The official version of this document is the document published in 

the Federal Register.
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Greg Martin at (202) 453-7535 or by email at 

gregory.martin@ed.gov.

If you use a telecommunications device for the deaf (TDD) 

or a text telephone (TTY), call the Federal Relay Service (FRS), 

toll free, at (800) 877-8339.

SUPPLEMENTARY INFORMATION:

Executive Summary:

Purpose of This Regulatory Action: Through this regulatory 

action, the Department of Education (Department or we)

amends the general, establishing eligibility, maintaining 

eligibility, and losing eligibility sections of the 

Institutional Eligibility regulations issued under the Higher 

Education Act of 1965, as amended (HEA), related to distance 

education and innovation. In addition, the Secretary amends the 

Student Assistance General Provisions regulations issued under 

the HEA. A more detailed summary can be found in the Summary of 

the Major Provisions of This Regulatory Action section.

Summary of the Major Provisions of This Regulatory Action:

These regulations--

• Clarify that when calculating the number of correspondence 

students, a student is considered “enrolled in 

correspondence courses” if correspondence courses 
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constitute 50 percent or more of the courses in which the 

student enrolled during an award year;

• Limit the requirement for the Secretary’s approval to an 

institution’s first direct assessment program at each

credential level;

• Require institutions to report to the Secretary when they 

add a second or subsequent direct assessment program or 

establish a written arrangement for an ineligible 

institution or organization to provide more than 25 

percent, but no more than 50 percent, of a program;

• Require prompt Department action on any application an 

institution submits to the Secretary seeking a 

determination that it qualifies as an eligible institution 

and on any reapplications for a determination that the 

institution continues to meet the requirements to be an 

eligible institution for HEA programs;

• Allow students enrolled in eligible foreign institutions to 

complete up to 25 percent of an eligible program at an 

eligible institution in the United States; and clarify 

that, notwithstanding this provision, an eligible foreign 

institution may permit a Direct Loan borrower to perform 

research in the United States for not more than one 
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academic year if the research is conducted during the 

dissertation phase of a doctoral program;

• Clarify the conditions under which a participating foreign 

institution may enter into a written arrangement with an 

entity that does not participate in the title IV, HEA 

programs;

• Provide flexibility to institutions to modify their 

curricula at the recommendations of industry advisory 

boards and without relying on a traditional faculty-led 

decision-making process;

• Provide flexibility to institutions when conducting clockto-credit hour conversions to eliminate confusion about the

inclusion of homework time in the clock-hour determination.

• Clarify the eligibility requirements for a direct 

assessment program;

• Clarify, in consideration of the challenges to institutions 

posed by minimum program length standards associated with 

occupational licensing requirements, which vary from State 

to State, that an institution may demonstrate a reasonable 

relationship between the length of a program, as defined in 

20 U.S.C. 1001(b)(1), and the entry-level requirements of 

the occupation for which that program prepares students;
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• Clarify that a student is not considered to have withdrawn 

for purposes of determining the amount of title IV grant or 

loan assistance that the student earned if the student

completes all the requirements for graduation for a nonterm program or a subscription-based program, if the 

student completes one or more modules that comprise 49

percent or more of the number of days in the payment 

period, or if the institution obtains written confirmation 

that the student will resume attendance in a subscriptionbased or non-term program;

• Remove provisions pertaining to the use and calculation of 

the Net Present Value of institutional loans for the 

calculation of the 90/10 ratio for proprietary 

institutions, because the provisions are no longer 

applicable;

• Clarify the satisfactory academic progress requirements for 

non-term credit or clock programs, term-based programs that 

are not a subscription-based program, and subscriptionbased programs;

• Clarify that the Secretary will rely on the requirements 

established by an institution’s accrediting agency or State 

authorizing agency to evaluate an institution’s appeal of a 
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final audit or program review determination that includes a 

finding about the institution’s classification of a course 

or program as distance education, or the institution’s 

assignment of credit hours;

• Clarify that the Secretary may deny an institution’s 

certification or recertification application to participate 

in the title IV, HEA programs if an institution is not 

financially responsible or does not submit its audits in a 

timely manner; and

• Clarify that an institution is not financially responsible 

if a person who exercises substantial ownership or control 

over an institution also exercised substantial ownership or 

control over another institution that closed without 

executing a viable teach-out plan or agreement.

Costs and Benefits:

As further detailed in the Regulatory Impact Analysis, the 

benefits of the regulations include--

(1) Updating and clarifying definitions of key terms 

related to distance education, correspondence courses, 

direct assessment, and competency-based programs to support 

the continued development of these innovative educational 

methods; 
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(2) Identifying a disbursement process for a subscription 

model for competency-based education so schools know how 

their students can access title IV aid for them, removing 

one potential barrier to growth of such programs; and 

(3) Eliminating references to outdated technologies and 

making the regulations flexible enough to accommodate 

further technological advancements.

Institutions that choose to offer these programs will

benefit from the clarifications of terms and processes involved 

in establishing and administering direct assessment programs and 

reduced barriers to entry. While those currently offering such 

programs or competency-based courses will be best positioned to 

offer new programs in the near-term, we expect additional 

institutions to take advantage of the opportunities to offer new 

programs. While it is more a function of continued evolution in 

the postsecondary market, removing the barriers to entry will 

increase competition and some institutions could face a cost 

associated with losing students to those that offer appealing 

new programs.

The emphasis on flexibility, workforce development, and 

innovative educational approaches will be beneficial to 

students. Students, especially non-traditional students that 

find the existing competency-based or distance education 
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programs to be appealing for various reasons, can benefit from 

flexible pacing and different models for assessing progress. 

Additionally, while competency-based models are a relatively new 

segment of the postsecondary market, some evidence suggests that 

the self-pacing model and other efforts by institutions to 

accommodate other scheduling demands students have, and to 

recognize knowledge and skills gained elsewhere, may allow 

students to graduate with lower debt. 1 However, it is not clear 

how students will respond, and whether more traditional students 

will also be attracted to competency based programs as more 

institutions develop them.

These regulations involve a significant amount of monetary 

transfers among the Federal government, students, and 

institutions through increased Pell Grants and Federal student 

loans. The Department assumes students in the existing baseline 

who switch from one program to another will receive similar 

amounts of Federal aid, thus these changes will not have a 

significant budget impact. We estimate that new students 

attracted to new competency-based or other programs developed,

in part, because of the clarity created by these regulations 

will have a net Federal budget impact over the 2020-2029 loan 

1 www.texaspolicy.com/new-study-less-expensive-competency-based-educationprograms-just-as-good-as-traditional-programs/
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cohorts of $[-237] million in outlays in the primary estimate 

scenario and an increase in Pell Grant outlays of $1,021 million 

over 10 years, for a total net impact of $784 million. The 

Department provides additional detail related to budget 

estimates in the Regulatory Impact Analysis section and provides 

burden estimates in the Paperwork Reduction Act section.

Implementation Date of These Regulations: Section 482(c) 

of the HEA requires that we publish regulations affecting 

programs under title IV of the HEA in final form by November 1, 

prior to the start of the award year (July 1) to which they 

apply. However, that section also permits the Secretary to 

designate any regulation as one that an entity subject to the 

regulations may choose to implement earlier and the conditions 

for early implementation.

The Secretary is exercising her authority under section 

482(c) of the HEA to designate the regulatory changes to

regulations at title 34, parts 600, 602, and 668 of the Code of 

Federal Regulations included in this document for early 

implementation beginning on [INSERT DATE OF PUBLICATION IN 

FEDERAL REGISTER], at the discretion of each institution, or 

each agency, as appropriate. The Department will implement the 

regulations as soon as possible after the implementation date 

and will publish a separate notice announcing the timing of the 
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implementation. Otherwise, the final regulations included in 

this document are effective July 1, 2021.

ANALYSIS OF COMMENTS AND CHANGES:

We developed these regulations through negotiated 

rulemaking. Section 492 of the HEA requires that, before 

publishing any proposed regulations to implement programs under

title IV of the HEA, the Secretary must obtain public 

involvement in the development of the proposed regulations. 

After obtaining advice and recommendations, the Secretary must 

conduct a negotiated rulemaking process to develop the proposed 

regulations. The negotiated rulemaking committee reached 

consensus on the proposed regulations that we published on April

2, 2020. The Secretary invited comments on the proposed 

regulations by May 4, 2020, and 238 parties submitted comments. 

An analysis of the comments and of the changes in the 

regulations since publication of the Notice of Proposed 

Rulemaking (NPRM)2 follows.

We group major issues according to subject, with 

appropriate sections of the regulations referenced in 

parentheses. We discuss other substantive issues under the 

sections of the regulations to which they pertain. Generally, 

2 85 FR 18638
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we do not address minor changes, technical changes, nonsubstantive changes, recommended changes that the law does not 

authorize the Secretary to make, or comments pertaining to 

operational processes. We also do not typically address 

comments pertaining to issues that were not within the scope of 

the NPRM.

General Support

Comments: Many commenters expressed support for the regulations 

and urged the Department not to modify them in a way that would 

weaken student protections. These commenters, including several 

students, expressed that they supported the regulation as a 

means of both reducing barriers to innovation and achieving 

greater responsiveness to workforce needs. Stating that the 

Department’s regulations have not kept up with changing 

technologies, many commenters underscored the importance of 

these regulations considering the sudden move to distance 

education due to COVID-19.

Several students supporting the rule also urged 

instructors, institutions, accrediting agencies, or the Federal 

government to do more to keep up with changing technologies,

suggesting that the lessons learned during the pandemic would 

pay dividends in terms of better and more responsive academic 

programs after it is over. Several commenters said the 
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regulations would reduce administrative burden, complement the 

changes made in the accreditation final rule,3 and properly 

balance support for innovation with protections for students 

and/or taxpayers.

A few commenters also--

(1) praised the move to a focus on competencies and skills, 

rather than seat time; 

(2) suggested the regulation would have the benefit of 

reducing costs for students; 

(3) acknowledged that distance education does not 

necessarily make a course high- or low-quality but suggested 

that outdated technology and teaching methods can be to blame 

for lower outcomes; 

(4) asserted the rule would protect students from bad 

actors, especially during the pandemic, and noted approvingly 

that even the American Bar Association, which is typically 

resistant to distance education, has been forced by the pandemic 

to embrace distance learning, along with other flexibilities; 

and 

(5) suggested more innovative learning methods could close 

educational disparities and, by extension, wealth disparities, 

3 84 FR 58834
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which could lead to more American innovation, including patents 

and other ideas that could benefit humanity.

However, one commenter expressed that while many will see 

the benefits of distance education after the pandemic is over, 

that commenter cautioned that some programs would not be 

appropriate to conduct fully online and that flexibility should 

remain for blended learning along with research to evaluate 

efficacy.

Other commenters supported the rule, generally noting that 

they-- (1) appreciated the safeguards to ensure regular 

interaction, which would reduce the need for instructors to 

assign “largely pointless work” to satisfy the standard; (2) 

praised the clarity of the regulations, particularly the 

definitions; and (3) suggested the regulations will benefit the 

education system by allowing programs to be more specifically 

tailored to each student’s individual needs.

One commenter said the rule would expand access to highquality, affordable education options to a broader segment of 

students and that the proposals were generally fair to students, 

incentivized rather than punished innovation, focused quality 

assurance on outcomes, simplified eligibility requirements, and 

protected student and taxpayer investments.
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One commenter supported the Department’s effort to realign 

the roles and responsibilities of the regulatory triad in 

postsecondary education: the Federal government, State 

authorizing agencies, and accrediting agencies.

Another commenter noted that institutions have been slow to 

adopt competency-based education (CBE) programs, often due to 

Federal regulations, and further suggested these programs could 

particularly benefit veterans and military-connected students 

and hoped institutions would develop new CBE programs because of 

these regulations.

Discussion: The Department thanks these commenters for their 

support for these regulations, including the greater clarity 

provided in a number of definitions. We appreciate hearing from 

student commenters who shared their perspectives, especially as 

they relate to the impact of the COVID-19 pandemic on their 

educational experience, and we appreciate their efforts to 

embrace innovation, and the optimism they expressed that these 

regulations will help them and students to follow. The 

Department agrees with many commenters that it is best to allow 

institutions to better serve students utilizing the latest 

technology and to do so now, given the challenges many students 

and institutions are facing.
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The Department agrees that the proposed rule appropriately 

balances the need for innovation with strong protections for 

students and taxpayers. We also agree with the commenter who 

suggested that some disciplines may require at least some inperson instruction and noted that instructors, institutions, and 

accrediting agencies are in the best position to determine 

whether distance, blended, or ground-based instruction is most 

appropriate. The Department agrees that additional research 

could help it make even more informed decisions in the future. 

We also agree that veterans, military-connected students, and 

many other students can benefit from CBE programs and that more 

students will benefit from these programs because of these 

regulations.

Changes: None.

Comments: One commenter praised the negotiation process, 

calling it open, engaging, thorough, and fair, resulting in 

regulations that provide better clarity and protections for 

students. The commenter stated that the subcommittee, which 

made a complete set of recommendations to the main committee, 

engaged in active and informed interaction.

One commenter supported the Department’s effort to select 

negotiators representing diverse perspectives. The commenter 

expressed gratitude for the significant time and effort 
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negotiators spent on this rulemaking. This commenter and 

several others also praised the work of the negotiators and the 

Department in reaching consensus.

One commenter supported the consensus agreement and the 

proposed rule for clarifying and reaffirming the appropriate 

role of accrediting agencies in ensuring the integrity of 

distance education programs. The commenter also asked that the 

Department not include additional provisions that were not 

negotiated.

Discussion: We appreciate the support from commenters and agree 

that one benefit of these regulations is to ensure clarity of 

the role of accrediting agencies in matters related to distance 

education. We note that the Administrative Procedure Act (APA) 

does not permit us to include additional provisions that were 

not subject to the rulemaking effort.

Changes: None.

Comments: Many commenters urged the Department to maintain 

consensus language in the final rule and not make changes that 

would weaken protections for students.

Discussion: We appreciate these commenters’ suggestion and 

agree that the final rule should maintain the consensus language 

to the greatest extent practicable. The Department is leaving 

most of the consensus language in the proposed rule unchanged. 
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As discussed elsewhere, the Department is making some changes at 

the request of commenters, including to permit the use of 

asynchronous clock hours offered through distance education and 

subscription-based disbursement for programs not offered through

direct assessment programs. As discussed in this document, the 

Department believes the benefits of these changes outweigh any 

risks. However, the Department believes the final rule will 

maintain the important protections for students presented in the 

NPRM.

Changes: None.

Comments: Several commenters acknowledged that the COVID-19 

pandemic necessitates some flexibility in the short-term but 

greater oversight in the long-term regarding distance education.

Discussion: The Department believes, as detailed elsewhere, 

that the regulations appropriately consider both protections for 

consumers and taxpayers as well as the need for innovation. 

While we did not know during rulemaking sessions that a pandemic 

was in our future, these regulations address the needs of both 

institutions and students in response to COVID-19 and serve as 

additional evidence that the rulemaking effort resulted in a 

needed and meaningful modernization of our prior regulations. 

The Department also believes that there need not be a tradeoff 

between consumer protection and innovation.
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Changes: None.

Comments: Several commenters supported many of the provisions 

of the proposed rule while suggesting that the lack of 

safeguards generally, or with regard to distance education in 

particular, may have downsides that necessitate strong consumer 

protections to protect students and some groups of students in 

particular (including veterans and military-connected students, 

low-income students, students of color, and those lacking 

academic preparation).

Additionally, several commenters suggested that proprietary 

institutions would be especially likely to treat students 

unfairly.

Discussion: The Department agrees that students should select 

programs that align well with their prior academic preparation, 

their learning style, and their lifestyle. Additionally, we 

believe that all educational programs must continue to have 

proper oversight by the Department, States, and accrediting 

agencies. While protections for all students are important, the 

benefits of a program should not be denied to some students 

simply because the program is not the right choice for others. 

The Department notes that the growth of adaptive learning and 

artificial intelligence tools in recent years have allowed 

institutions to provide more personalized academic supports, at 
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scale, that may be even better than what would be available in a 

traditional classroom, particularly in traditional large lecture 

courses. These technologies may facilitate more regular and 

effective faculty-student interaction than a traditional 

classroom format enables. 

The Department believes the enforcement of provisions 

protecting students is vital and should occur without regard to

the tax status of the institution in question unless Congress 

directs the Department otherwise. The Department takes all 

allegations of harm to students seriously and does not condone 

improper conduct by any type of institution whether public, 

private non-profit, or proprietary. 

Changes: None.

Comments: One commenter urged the Department to avoid 

provisions that would create unintended consequences for 

osteopathic clinical education programs, including students 

completing out-of-State clinical rotations. The commenter 

further requested that the Department avoid new financial and 

administrative burdens during the COVID-19 pandemic.

Discussion: The Department considered clinical education 

programs in this rulemaking as well as the accreditation 

rulemaking, which covered issues related to State authorization 

of distance education and are effective July 1, 2020. These
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distance education and innovation regulations become effective 

July 1, 2021, allowing institutions and others adequate time to 

plan for their implementation. Early implementation is 

optional. We do not anticipate that these regulations will 

create unique burdens on osteopathic clinical education

programs, which may elect to not integrate or expand distance 

learning opportunities within those programs. The Department 

sought to reduce financial and regulatory burden overall during 

this rulemaking. The Regulatory Impact Analysis and Paperwork 

Reduction Act sections of this final rule contain additional 

information about cost and burden.

Changes: None.

General Opposition

Comments: Several commenters expressed opposition to the final 

regulations because of concerns over whether they would weaken 

existing regulatory requirements on distance education programs.

Other commenters opposed the final regulations because they 

worried about the potential negative impacts on colleges, 

universities, and the learning environments of all students. 

One of these commenters suggested that the cumulative effect of 

the proposed rule would allow for drastic and unnecessary 

changes in the name of efficiency and innovation, while 

sacrificing students’ learning and protection in the process, 
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leading to further damage to students and taxpayers. Many of 

these commenters expressed similar concerns that the proposed 

changes would expose students and taxpayer-funded Federal aid 

dollars to undue risk.

Discussion: We thank the commenters for expressing their 

concerns, and we have considered their objections. We do not 

share their apprehension about the predicted consequences of

these final regulations. In fact, we believe that this final 

rule properly balances the need to protect student interests and 

guard taxpayer dollars, while also providing innovators the 

tools to deliver high-quality, distance education for students 

in the 21st century. We do not believe these goals must 

necessarily come at the expense of one another.

Changes: None.

Comments: Some commenters stated that the Department should 

rescind the proposed regulations and redraft new regulations

that protect educational quality, the interests of students and 

taxpayers, and the general higher education community.

Another commenter agreed that the proposed regulations 

should be rescinded, in part, because the Department did not 

conduct reasoned rulemaking as required by the APA. This 

commenter suggested that some negotiators did not understand the 

rules and that the Department “stacked the deck” with an 
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unmanageable agenda, created negotiating committees stacked 

heavily in favor of industry, and starved the committee of any 

real data or information to inform the rulemaking. Further, the 

commenter stated that the Department “bullied” negotiators who 

“dared to oppose the Department’s proposals and threatened

others with promises of worse regulations if they refused to 

accede.” The commenter concluded that the result was an 

“illegitimate” vote of consensus. The same commenter added that 

the Department reneged on its historic consensus and changed the 

final regulations without sufficient factual justification. The 

commenter stated that the Department relied on “little more than 

anecdotes, industry proposals, and ideology” in its original 

proposals. The commenter also added that the Distance Education 

subcommittee should have more fully included student and 

taxpayer voices and interests and that the Department failed to 

follow its own agreed to protocols by not providing a preamble 

to members to review and comment on prior to publication. 

Similarly, a different commenter remarked that student veterans 

were not sufficiently represented, and more similar individuals 

should have been added to the negotiating committees.

Another commenter argued that the livestreaming was not 

open to the public and that the consensus vote on the 

regulations could not be considered either valid or indicative 
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of general support from any of the communities around the 

negotiation table. Further, the commenter stated that the data 

provided to the negotiators was disjointed and insufficient and 

that the Department should incorporate additional reporting 

requirements for distance education purposes, specifically 

reporting about the distance education status of students who 

take Federal loans.

A group of commenters objected to the rulemaking process,

stating that the Department appointed negotiators who appeared 

to have been selected, not for their subject-matter expertise, 

but for their ties to the for-profit college industry.

Discussion: As we stated in the final regulations on student 

assistance general provisions, the Secretary's recognition of 

accrediting agencies, and the Secretary's recognition procedures 

for State agencies published on November 1, 2019, we disagree 

with the commenters who said that the Department’s rulemaking 

process was flawed.4 It is not uncommon for the Department to 

address multiple topics with a single negotiated rulemaking 

committee, nor was this the first time that the Department 

utilized non-voting subcommittees to delve into a specific topic 

and provide recommendations to the main committee. The 

4 See: 84 FR 58836.
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subcommittee’s recommendations were not binding on the members 

of the main committee, who were free to discuss the issues in as 

much detail as they required to come to a consensus agreement. 

The Department notes that we added an additional negotiator, and

an additional negotiating session at the request of negotiators, 

to represent all relevant constituencies and in hope of reaching

consensus. 

The Department disagrees with the commenter that our

efforts to achieve consensus were inappropriate. Contrary to 

the commenter’s assertions, the Department compromised countless 

times, moved away from its initial proposals, and accepted 

negotiators’ request for substantially more time to negotiate. 

Regarding the makeup of the subcommittee, the process of

negotiated rulemaking ensures that we consider a broad range of 

interests in the development of regulations. Specifically, 

negotiated rulemaking is designed to enhance the rulemaking 

process through the involvement of all parties significantly 

affected by the topics for which we will develop the 

regulations.

Accordingly, section 492(b)(1) of the HEA, 20 U.S.C. 

1098a(b)(1), requires that the Department choose negotiators 

from groups representing many different constituencies. The 

Department selected individuals with demonstrated expertise or 
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experience in the relevant subjects under negotiation, 

reflecting the diversity of higher education interests and 

stakeholder groups, large and small, national, State, and local. 

In addition, the Department selected negotiators with the goal 

of providing adequate representation for the affected parties 

while keeping the size of the committee manageable. At the 

request of negotiators, the Department agreed to add a 

representative of State Higher Education Executive Officers on 

the main committee. In addition, a representative of the New 

York Attorney General was added as a member to the subcommittee.

Students and consumer protection advocates were represented 

by non-Federal negotiators on the full committee and the 

subcommittee-–student veterans were well-represented on the full 

committee-—with primary and alternate representatives for each 

of these constituencies. Moreover, the Department conducted 

three public hearings before the negotiated rulemaking began and 

provided time for public comment on each of the 12 days that the 

main committee convened.

We disagree with the commenters who stated that the 

Department failed to provide data or evidence, or stated that 

the data was disjointed or insufficient, to support the need for 

the proposed regulatory changes during negotiated rulemaking. 

The Department was unable to fulfill several data requests made 
26

by negotiators because the information was not available, but we 

do not believe the absence of those data prevented negotiators 

from considering reasoned proposals. 

We appreciate the commenter’s proposal to add reporting 

requirements to the final regulations, but we do not adopt their 

proposal. The Department is comfortable with the current regime 

of reporting requirements for distance education and does not 

wish to create new burden on institutions that rely on or 

integrate distance education technology in their education 

programs.

We acknowledge that there were temporary connectivity 

issues with the livestreaming of the distance education 

subcommittee. While we regret the interruption, the Department 

worked quickly to restore the connection to ensure that 

interested parties could view the discussion. The sessions were 

also recorded and can be viewed on the Department’s YouTube 

channel.5 The proceedings of the main committee can be viewed at 

edstream.ed.gov.

We based the proposed regulatory changes on many factors, 

including public feedback, research outlined in greater detail 

in the NPRM, and emerging trends in postsecondary education. 

5 U.S. Department of Education YouTube page,

www.youtube.com/user/usedgov/videos.
27

Specifically, the Department developed a list of proposed 

regulatory provisions based on advice and recommendations 

submitted by individuals and organizations as testimony in a 

series of three public hearings in September of 2018, as well as 

written comments submitted directly to the Department. 

Changes: None.

Comments: One commenter provided statistics showing the types 

of institutions that are active in the online education industry 

and on the growing expansion of online education. This 

commenter concluded that growth has not correlated with 

increased access to minority and non-traditional students or 

more quality programs. The commenter also referenced lawsuits 

against online education providers and outlined arguments 

against distance education.

Discussion: We appreciate the information provided by the 

commenter, as well as the outline of the arguments against 

distance education. We note, however, that institutions from 

all sectors-regardless of whether they provide online or inperson classroom instruction-have been the subject of lawsuits 

and borrower defense claims. We reaffirm that legal action and 
28

the borrower defense process remain available to all students, 

notwithstanding these distance education regulations.6

The Department acknowledges the commenter’s reference to 

litigation against online education providers, but those legal 

actions do not direct the Department’s regulatory work. We also 

acknowledge the arguments against distance education, but the 

Department does not advocate for one type of education delivery 

system over any other. The Department supports education

innovation that is rigorous, meets students’ needs, and assists 

students in achieving their educational goals. These final 

regulations assist in removing unnecessary barriers to that 

innovation, while also assuring that online programs remain 

academically rigorous, well-planned, and appropriate.

Changes: None.

Comments: One commenter remarked that the Department has led 

taxpayers to believe that changes to the distance education 

regulations will allow students to “fast-track their education 

and save money” and that the taxpayer will eventually pay the 

bill. The commenter also wrote that CBE and career technology 

training is the “adult version of Common Core.” 

6 84 FR 49788.
29

Another commenter stated the proposed regulations are

intended to create tax breaks and ease burdens on wealthy 

taxpayers.

Discussion: The Department is confused by the commenter who 

suggested that the intended purpose of the final rule was to 

create tax breaks and ease the burden on wealthy taxpayers. The 

Department is not empowered to create tax breaks.

We are similarly confused by the commenter who stated that 

CBE and career technology training is the “adult version of 

Common Core.” The Department is not attempting to dictate 

academic content or establish national content standards, so we 

are unclear on any similarity to a set of elementary and 

secondary English language arts and mathematics standards. 

While some students may be able to complete their program more 

quickly, the Department disagrees that this will result in some 

sort of “balance” that must be covered by taxpayers. The 

Department also never stated that the final rule would allow 

students to “fast-track” their education. We believe that 

students should be able to access educational services that are 

appropriate to their needs, provide them with high-quality 

training and education, and meet the requirements of the HEA, as 

amended. 

Changes: None.
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Comments: One commenter stated that any weakening of the 

protections included in the consensus language would present a 

serious risk to all students, especially Latino students, who, 

according to the commenter, are overrepresented at institutions 

that, on average, produce worse outcomes for students. Another 

commenter similarly remarked that non-traditional students would 

be negatively impacted by the final regulations.

Discussion: We appreciate the commenters’ submissions and share 

their desire for all students—men, women, minorities, underrepresented populations, and non-traditional populations—to have

access to high-quality education services.

The Department rejects the notion that student protections 

are weakened in the proposed rule or that any such weakening 

disproportionately impacts one student population over another. 

As we stated in the Program Integrity: Gainful Employment final 

regulations, the Department believes that more must be done to 

improve outcomes for high-risk students, and more options must 

be made available to students for whom college—and, especially, 

the traditional college experience—is not the best or preferred 

option.7 We believe that high-quality distance education 

programs, like the ones envisioned by the members of the 

7 84 FR 31433.
31

subcommittee, can and do meet students’ unique needs and expand 

educational opportunities to students previously underserved.

Changes: None.

Comments: A group of commenters stated that the Department is 

attempting to use its deregulatory agenda to override 

congressional intent to ensure program quality and to protect 

students, taxpayers, and the integrity of the Federal financial 

aid programs. The commenters also suggest that the Department 

abused its rulemaking authority by rolling back legislative

protections that guard the integrity of the student financial 

aid system. The commenters argued that the Department’s actions

further jeopardize students’ opportunities to access a higher 

education system that promotes economic mobility. Finally, the 

commenters concluded that the Department’s agenda is proof of 

its intent to disregard its obligation to responsibly administer 

Federal Student Aid (FSA) programs.

Discussion: The Department thanks the commenters for their 

submission. We share their concern for protecting students, 

taxpayers, and the integrity of Federal financial aid programs. 

The consensus language reflects that concern. The Department 

notes that it is not within our regulatory authority to roll 

back legislative protections; our regulations—and these final 
32

regulations specifically—must fall within the parameters

authorized by statute.

We disagree with commenter’s suggestion that the final 

regulations jeopardize opportunities to access higher education. 

This final rule promotes more high-quality, distance education

opportunities for students who are not otherwise capable of 

attending traditional classroom-based courses. In fact, much of 

our work is animated by the desire to expand opportunities 

through education for economic mobility and advancement.

The Department takes its responsibility to administer the 

title IV programs seriously and strenuously seeks to guard 

taxpayers’ dollars in the operation of those programs. We 

disagree with the commenters’ suggestions otherwise.

Finally, legislators have the ability to further clarify 

their intent through future legislative action. We look forward 

to working with Congress on any such actions to promote 

educational opportunities for all students.

Changes: None.

Comments: One commenter wrote that the intent of the final 

regulations is to loosen the restrictions on institutions 

offering distance learning. The commenter stated that allowing 

schools to have more latitude over certain rules leaves room for 

schools to cut corners to save money at the expense of quality. 
33

The commenter added that the Department's contention that the 

reduction in regulation will increase the number of programs 

offered by institutions is exactly what predatory, for-profit, 

and fraudulent institutions want and that it will inevitably 

make it easier for such institutions to access financial aid 

funds at the cost of the students and taxpayers. Finally, the 

commenter said that loosening restrictions would allow a school 

to recycle pre-recorded lectures, give the student a test, and 

issue unwarranted degrees if the student passes. The commenter 

was concerned that such an outcome would greatly impact 

instructors’ financial well-being and the quality of the 

workforce.

Discussion: The intent of the final regulations is not to 

loosen restrictions on any type of institution. The Department 

will continue to hold all education providers accountable. The 

Department does not condone the behavior of those who wrongfully

cut corners to save money, take advantage of students,

misrepresent the selectivity of their online programs, engage in 

pay-to-play admissions schemes, engage in predatory

advertisement or enrollment activities, or fraudulently 

misrepresent their educational programs-and likely student 

outcomes. We will take necessary actions to hold institutions 
34

accountable, regardless of their tax status or organizational 

structure.

The Department appreciates the commenters concerns and 

addresses the point regarding the use of recycled or prerecorded lectures in the appropriate sections below. However, 

we note that such a concern is not limited to distance learning 

modalities. 

Changes: None.

Comments: Many commenters asked the Department to rescind the 

proposed rule or, alternatively, delay its implementation, to 

maintain existing rules protecting the role of faculty and 

student interaction and restricting outsourcing. This would

allow Congress and the public to better assess the needs of 

students and institutions. One of these commenters wrote that 

the Department has a responsibility to avoid making changes to 

distance education that would open the door to instruction 

without interaction between students and faculty, leaving 

students entirely reliant on software, apps, games, and 

prerecorded video. This commenter also wrote that the proposed 

rules would “undermine meaningful instruction by replacing it 

with standardized exams.” The commenter concluded that further 

deregulation in the distance education environment did not make 

sense and that it would be dangerous to students and faculty who 
35

are trying to design high-quality programs to weaken the 

consensus language by expanding CBE programs.

Discussion: The Department disagrees with the commenter’s 

suggestion. We see no compelling reason, nor has one been 

provided through the public comment process, to rescind or delay 

the final regulations. We also note that reauthorization of the 

HEA is many years overdue, and statute currently references

technologies that are sorely outdated. Therefore, we cannot 

rely solely on Congress to respond to the need for higher 

education to adapt and evolve to serve the needs of students.

While we understand that some may oppose the growth of 

distance education, largely because of concerns about what this 

means to the job prospects of current and future educators, 

those concerns are misplaced. The role of the instructor is 

critical in high-quality distance education, as explained in the 

appropriate section below, and these regulations reaffirm the 

importance of regular and substantive interaction as a key 

element that distinguishes between distance learning and 

correspondence education. 

We do not agree that the proposed rule would undermine 

meaningful instruction by replacing it with standardized exams

and are confident that these final regulations do the opposite.

Changes: None.
36

Comments: One commenter suggested that the Department should 

only allow some types of programs to offer distance education 

courses. The commenter advocated for a rigid classification, 

reviewed by the Department, of subject matter areas that would 

be eligible for remote classes. The commenter stated that the 

basis for such a proposal is that some careers, such as nursing 

and teaching, require real world experiences and that the value 

that professors bring to their students is not the same in an 

online program.

Discussion: The Department thanks the commenter for this

proposal, but we do not adopt this change. While we recognize 

that the experiences of online learning and traditional

classroom learning can be very different, the Department 

believes that high-quality learning is possible in both 

environments. We do not wish to forestall students interested

in nursing and teaching to be kept out of those fields because 

they are not able to attend traditional, in-person classes. In 

many instances, distance learning opportunities are limited to 

students who are already working in fields such as teaching or 

nursing, and who do not need additional hands-on experiences. 

In many instances, distance learning enables practicing 

professionals to complete post-graduate certificates or graduate 

degrees. Moreover, for many occupations, accrediting agencies
37

and State licensing boards restrict the use of distance learning

within certain programs. 

As we have seen during the COVID-19 pandemic, some 

accrediting agencies and State licensing boards are beginning to 

recognize the opportunities presented by distance learning and 

are permitting certain portions of programs to be provided 

through distance modalities. We will continue to rely on 

accrediting agencies and State licensing boards to determine 

when and if distance learning opportunities meet the education 

and training needs of students in particular fields.

Changes: None.

Comments: Many commenters referenced COVID-19 in their 

submissions to the Department and remarked upon the expanded

prevalence of distance education.

One commenter suggested that the proposed rule should be 

deliberated and commented on after the pandemic is over because 

the “last thing on American’s [sic] minds” is the accreditation 

of online schools.

Many commenters concluded that a 30-day comment period 

during a pandemic was not sufficient to thoroughly review the 

proposed rules. These commenters requested that the Department 

delay the implementation of the proposed rules. 
38

A group of commenters stated that, at this pivotal moment 

and informed by institutions’ experiences during the pandemic, 

any weakening of strong protections for students and taxpayers 

would open the door for predatory actors to repeat past abuses, 

putting the most vulnerable students at even greater risk. 

One commenter stated that the Department cannot, in good 

faith, move forward with any of the issues in the final 

regulations without first grappling with the massive changes 

that the COVID-19 crisis will bring to online education. 

A group of commenters proposed that the Department reopen 

the rulemaking process or postpone the enactment of the final 

regulations to allow for additional comments. Many of these 

commenters noted potential difficulty in responding to the NPRM 

because of COVID-19. One commenter suggested that military and 

veterans’ communities should be allotted extra time to provide 

comments. Another commenter noted the need for the Department 

to put the needs of our nation’s college students before the 

needs of “distance education opportunists.”

Discussion: While we acknowledge that the NPRM may not have 

been top-of-mind for most Americans during the COVID-19 

pandemic, the Department is confident that the 30-day public 

comment period was an adequate time period for interested 

parties to submit comments. Because we reached consensus during 
39

negotiated rulemaking, the proposed regulatory language was 

available to the public at the conclusion of the final 

negotiating session approximately one full year before the 

comment period began, which afforded interested parties 

additional time to begin formulating their comments. 

Prior to issuing the proposed regulations, the Department 

conducted three public hearings and four negotiated rulemaking 

sessions, where stakeholders and members of the public had an 

opportunity to weigh in on the development of much of the 

language reflected in the proposed regulations. 

In addition, the 30-day public comment period was necessary 

to allow us to meet the HEA’s master calendar requirements. 

Under those requirements, the Department must publish final 

regulations by November 1, 2020, for them to be effective on 

July 1, 2021. Delaying the effective date of these regulations 

would unnecessarily delay the realization of the benefits 

associated with these changes.

Changes: None.

Correspondence Courses: Definition and Limitations (§§ 600.2 and 

600.7)

Comments: Two commenters expressed support for the proposed 

definition of the term “correspondence course.” One of those 

commenters specifically supported the elimination of the 
40

reference to self-pacing in the previous definition of 

“correspondence course” and indicated that the proposed 

definition makes it clearer that self-paced programs are not 

necessarily correspondence programs. One commenter also 

expressed support for the clarification regarding the definition 

of a “correspondence student” in proposed §600.7(b)(2), 

indicating that the specificity in the new definition would 

support new and innovative academic models.

Discussion: The Department thanks the commenters for their 

support.

Changes: None.

Comments: Several commenters opposed the Department’s proposed 

changes to the definition of “correspondence course,” arguing 

that the changes would make the distinction between distance 

education and correspondence courses less clear. These 

commenters stressed the importance of maintaining that 

distinction given the more limited amount of support by 

qualified instructors in correspondence courses and past abuses 

associated with correspondence study. Another commenter 

indicated that the existing definition of “correspondence 

course” already adequately distinguished correspondence 

education from distance education and did not need to be 

changed.
41

Discussion: We agree with the commenter about the importance of

support by qualified instructors, especially given the emphasis 

of that concept in the statutory definition of “distance 

education,” which requires “regular and substantive interaction” 

between students and instructors. We also agree that it is 

important for the regulatory definitions of distance education 

and correspondence courses to be sufficiently distinct, both to 

implement the statutory distinction between the terms and to 

ensure that institutions are able to design programs in a way 

that maintains compliance and avoids audit or program review 

findings with respect to their online programs. However, we 

disagree that the proposed changes will blur the distinction 

between the two terms.

The most significant change made to the definition of 

“correspondence course” in these regulations is the removal of 

the concept of self-pacing, which is not vital to the 

distinction between correspondence courses and distance 

education. The HEA also does not mention the concept of selfpacing, nor does it express that such a condition would require 

a course to be treated as offered through correspondence 

education rather than through distance education. We believe 

that the aspects of the definition of “correspondence course” 

that have been maintained in the definition--for example, that 
42

interaction in such a course is limited, not regular and 

substantive, and primarily initiated by the student--are more 

than adequate to preserve the important regulatory distinction 

between distance education and correspondence courses.

Changes: None.

Comments: One commenter objected to the proposed definition of 

“correspondence student” under proposed § 600.7(b)(2), asserting 

that the definition weakens the distinction between distance 

education and correspondence courses and could result in a 

larger number of participating institutions and students 

engaging in correspondence study.

Discussion: We disagree that the proposed changes to §

600.7(b)(2) will weaken the distinction between distance 

education and correspondence courses or result in a greater 

number of institutions or students engaging in correspondence 

study. The only impact of the changes is to clarify how to 

calculate the number of correspondence students for the purpose 

of determining whether an institution has exceeded the statutory 

limitation on the number of correspondence students that may be 

enrolled at an eligible institution during an award year. The 

other relevant statutory and regulatory restrictions on 

correspondence study that discourage institutions from offering 

correspondence programs--for example, the institutional 
43

eligibility limitations, the restriction to half-time enrollment 

status for purposes of calculating Pell Grant disbursement 

amounts, and the limitations on the components of cost of 

attendance for students enrolled solely in correspondence study-

-would remain unchanged.

Changes: None.

Definition of Academic Engagement (§ 600.2)

Comments: Many commenters supported the Department’s proposed 

definition of “academic engagement.” Several commenters noted 

that by moving key concepts on attendance and academic 

activities from the Return of title IV funds (R2T4) regulations 

(under § 668.22) to a new definition of “academic engagement” in 

§ 600.2, the Department emphasizes the importance of active 

student participation in other parts of the regulations. One 

commenter also noted that the definition would expand academic 

quality and accountability. Two commenters specifically 

stressed their support of the Department’s acknowledgement 

within the definition that student academic engagement can take 

on different forms, including interactive online courses and 

computer instruction.

Two commenters specifically expressed support for the 

Department’s inclusion of § 600.2(2)(iv), “Participating in an 

interactive tutorial, webinar, or other interactive computer-
44

assisted instruction,” in the definition. The commenters 

indicated that they believe this inclusion will help clarify the 

role adaptive learning and other technologies can play in 

providing academic engagement.

Discussion: The Department thanks the commenters for their 

support.

Changes: None.

Comments: Several commenters requested that the Department 

include new categories of activities under the definition of 

“academic engagement.” Two commenters asked that the Department 

add a category for education offered through virtual and 

augmented reality because those modalities are becoming more 

commonly used in higher education.

One commenter suggested that the Department include as a 

category under “academic engagement” instruction through

computer-mediated adaptive instruction that alters the learning 

experience for each student based on that student’s needs.

Another commenter requested that the Department clarify that 

instructor interaction does not have to occur exclusively with a 

human instructor.

Discussion: As the Department discussed in the preamble to the 

NPRM (85 FR 18638 – 18702), we consider “other interactive 

computer-assisted instruction” to include the use of artificial 
45

intelligence or other adaptive learning tools where the student 

is receiving feedback from technology-mediated instruction.

Computer-assisted instruction would also include instruction 

through virtual or augmented reality, or any other form of 

instruction in which a student actively participates in a 

computer-based or computer-mediated learning environment, with 

or without the presence of a human instructor. An explicit goal 

of this rulemaking has been to reduce the need for updates to 

regulation when new technologies are developed, and so this 

definition is also inclusive of technologies that are in their 

infancy or not yet invented as long as they meet the 

regulation’s other requirements. Therefore, because the types 

of learning described by the commenters (and others) are already 

accommodated in the proposed definition of “academic 

engagement,” we do not believe it is necessary to add additional 

categories.

Changes: None.

Comments: One commenter expressed concern that the proposed 

definition of “academic engagement” would require more than 

simply actively logging into a website. The commenter indicated 

that this could cause undue burden for students who were unable 

to academically engage during normal hours or afford the 
46

technologies required by institutions to demonstrate academic 

engagement as defined.

Another commenter voiced a concern that paragraph (3)(iv) 

of the proposed definition, which states that academic 

engagement does not include participating in academic counseling 

or advisement, could discourage instructors from taking the time 

to speak with students about their academic future or 

professional goals. The commenter mentioned that depending on 

the nature of the course, it may be difficult at times for 

instructors to differentiate between interacting with students 

about “academic matters,” which qualify as academic engagement, 

and “academic counseling and advisement,” which does not 

qualify. The commenter requested that the Department remove the 

exclusion of academic counseling or advisement from the 

definition of academic engagement.

Discussion: We disagree that the definition of “academic 

engagement” causes undue burden for students. Many institutions 

previously believed that, under the Department’s prior

regulations, students were required to not only log in, but 

engage in an activity weekly for which the institution maintains 

documentation to prove that the student was engaged every couple 

of days. This was identified as a burdensome requirement that 

significantly exceeds requirements for ground-based instruction, 
47

and that often requires students enrolled in distance education

to make time for what is otherwise viewed as “busy work.” The 

new regulation clarifies that engagement must be meaningful in 

order to be used as the basis for complying with the 

Department’s related requirements (such as identifying a 

student’s withdrawal date), but does not require, for example,

students to post a non-substantive blog post each week simply to 

“check the box” on documenting participation.

The definition does not require a student to log in or 

participate in a course or learning environment at a particular 

time, nor does it require or incentivize institutions to demand 

the use of expensive technologies to demonstrate academic 

engagement. The definition does rely on the concept of active 

participation by a student in his or her learning, which the 

Department believes is a necessary requirement for academic 

engagement. This concept of active participation––which cannot 

be demonstrated merely by documenting that a student has logged 

into an online system––is also vital to other regulatory 

requirements, including for purposes of determining a student’s 

withdrawal date under the R2T4 regulations.

For similar reasons, we also decline to remove the 

exclusion of academic counseling and advisement from the 

definition of “academic engagement.” While the Department views 
48

advisory activities related to a student’s academic or career 

trajectory as an important component of many postsecondary 

programs, such advising by itself does not demonstrate that a 

student is participating or engaged in his or her academic 

program. Negotiators agreed that to the extent a qualified 

instructor is providing advising relevant to a specific course –

for example, explaining where a student can find answers to 

content-related questions, or recommending a particular approach 

to a writing assignment for the course – academic engagement is 

taking place. However, general academic or technical advising 

that is provided outside of a specific course, and that is often 

provided by someone who does not qualify as an instructor for 

the course in which the student must be academically engaged –

for example, guidance regarding which classes the student plans 

to take in the future, or technical support with instructional 

technology––does not constitute academic engagement. 

Changes: None.

Comments: Several commenters asked the Department to clarify 

its position regarding asynchronous academic engagement. The 

commenters indicated that while the Department specifically 

mentions synchronous instruction in the definition, it does not 

mention asynchronous instruction even though asynchronous 

instruction is referenced elsewhere, both in the “distance 
49

education” definition in § 600.2 and as part of the new “week of 

instruction” definition in § 668.3. One commenter specifically 

suggested including “or asynchronous” after “synchronous” in 

paragraph (2)(i) of the definition to clarify that asynchronous 

attendance and participation in the classroom is included when 

documenting academic engagement in an online program. Another 

commenter asserted that though certain asynchronous activities, 

such as engagement in interactive forms of computer-assisted 

instruction, might be read into the listed activities in 

paragraph (2)(iv) of the definition, the omission of a direct 

reference to asynchronous instruction makes it difficult to have 

confidence in such an interpretation.

Discussion: The Department’s intent was not to exclude 

asynchronous participation in learning activities from the 

definition of academic engagement. Asynchronous academic 

engagement could occur under any of the categories described in 

the definition except for the category described under paragraph 

(2)(i) that describes attendance at a synchronous lecture, 

recitation, or field or laboratory activity. For example, a 

student can work on an academic assignment—described under 

paragraph (2)(ii) of the definition—at the time of his or her 

choosing, and submission of that assignment is an asynchronous 

learning activity that does not require real-time interaction 
50

with an instructor. Similarly, a student could demonstrate 

academic engagement under paragraph (2)(iv), “participating in 

an interactive tutorial, webinar, or other interactive computerassisted instruction,” by engaging in a presentation through a 

virtual or augmented reality system or by participating in an 

online learning activity that uses artificial intelligence or 

adaptive learning. We do not believe that it is necessary to 

add the word “asynchronous” to the definition given the 

incorporation of this concept in each of these activities. We 

also decline to remove the word “synchronous” from paragraph 

(2)(i), since in that context it is used to describe a 

particular type of learning activity that is performed in real 

time with an instructor.

Changes: None.

Definition of Additional Location (§ 600.2)

Comments: One commenter requested clarification about the 

addition of a definition of “additional location.”

Discussion: We did not seek comment on the “additional 

location” definition in the NPRM that we address in this final 

rule. Instead, we sought comments on that definition in an NPRM 

published in the Federal Register on June 12, 2019 (84 FR 

27404). That NPRM included Accreditation-related definitions, 

including the definition of “additional location.” We published 
51

a final rule that included the definition of “additional 

location” in the Federal Register on November 1, 2019 (84 FR 

58834) in which we addressed comments we received related to the 

definition.

Changes: None.

Definition of a Clock Hour (§ 600.2)

Comments: Numerous commenters voiced disagreement with the 

provisions in the Department’s proposed definition of the term 

“clock hour” that require each clock hour in a distance 

education program to include synchronous instruction where 

students have an opportunity to interact with instructors and 

asked the Department to reconsider this requirement.

Several commenters indicated that the proposed clock hour 

definition regarding distance education was too restrictive and

should conform to the Department’s definition of “distance 

education,” which allows for “regular and substantive 

interaction between the students and the instructor or 

instructors, either synchronously or asynchronously.” The 

commenters asked the Department to reconsider whether clock 

hours could be earned through asynchronous instruction, noting 

that several educational platforms are already capable of 

monitoring a student’s participation and clocking the student 

out if active engagement ceases.
52

One commenter noted the Department’s reluctance to support 

asynchronous distance education (ADE) instruction within the 

clock hour definition was most likely due to the concern as to 

whether a clock hour student’s required “seat time”––50 minutes 

in a 60-minute period––could be validated. The commenter 

indicated that current technology already provides effective 

tools which, if properly incorporated into an asynchronous 

distance education platform, marry effective program instruction 

with effective “seat time” validation. As explained by the 

commenter, an electronic synchronous distance education platform 

would include such components as sign-in assurance, time 

monitoring through trackable digital media assets, automated 

sign-off for inactivity, live student to student and student to 

instructor activities and automated Q & A, and testing 

processes. Based on this information, the commenter requested 

that the Department modify its proposed definition of a “clock 

hour” to permit instruction provided via electronic synchronous 

distance education.

One commenter stressed that permitting the development of 

asynchronous instruction in clock hour programs allows for the 

kind of instructional flexibility needed for career and 

technical education providers to use new methods of simulated, 
53

technology-mediated instruction without constraint or fear of 

compliance findings.

Several commenters voiced a strong desire to afford the 

same flexibilities to students enrolled in clock hour distance 

education courses as students enrolled in credit hour distance 

education programs. To that end, one commenter indicated that 

program structure (clock hours or credit hours) is often based 

on institutional or State governance and has no relationship to 

the quality or content of a program. The commenters asserted 

that students enrolled in clock hour programs should not be 

penalized merely due to institutional structure.

Another commenter stated that limiting clock hour distance 

education coursework to synchronous online classes would limit 

the convenience and flexibility to students of access to course 

content at any time or place. Several commenters expressed

concerns that limiting distance education clock hour eligibility 

to synchronous activities could limit innovation and discourage 

institutions from creating more flexible and accessible learning 

experiences which could reduce potential barriers to access and 

completion of postsecondary programs and promote a more diverse 

student population.

Several commenters stressed that the Department authorizes 

postsecondary institutions to offer eligible postsecondary 
54

programs in a distance learning format as approved by the 

institution’s accrediting agency and that the exact same 

standards, quality assurance, integrity and accountability 

measures used to approve traditional on-campus programs are also 

applied to the distance education programs approved by the 

accrediting bodies.

Several more commenters indicated that current technology 

in higher education attendance monitoring provides systems that 

monitor participation, proctor exams, verify attendance and 

provide tools for students to interact with instructors at the 

time and place of their choosing. The commenters further 

explained that online content is most often used to supplement 

in-person training or lab work and that asynchronous instruction 

can now be monitored by a school through many educational 

platforms, students can be clocked out for inactivity, and 

instructors and students have a variety of ways to interact with 

each other and review various course materials. Many commenters 

expressed a belief that current technology available to students 

and educators allow for the same objectives to be met in an 

asynchronous format, while allowing for more flexibility to 

overcome challenges related to geography, learning preferences, 

work or family obligations, disabilities, or resources. One 

commenter suggested asynchronous learning could include the 
55

recording of classes to be viewed within a specified time with 

periodic class meetings to answer questions.

Several commenters urged the Department to allow asynchronous 

instruction via distance education if approved by State and 

accrediting agencies as long as an institution could clearly 

demonstrate instructor engagement with the student during each 

clock hour through a variety of means, which could include 

technology such as adaptive learning and artificial intelligence.

Two commenters indicated that the synchronous format 

described in the proposed definition is too limiting and would 

not be broad enough to allow students to engage in certain types 

of projects or assignments such as reviewing written or recorded 

lectures outside of regular classroom hours. Another commenter 

stated that the critical variable is not coordinated schedules 

or designated time, but a learning environment with diverse and 

engaging learning activities and faculty involvement.

Two commenters supported the inclusion of distance 

education into the Department’s clock hour definition, arguing 

that distance learning technology has sufficiently advanced to 

permit institutions to conduct remotely synchronous instruction 

with students and to monitor the exact amount of time that 

students spend participating in these learning sessions. 

However, the commenters urged the Department to provide more 
56

clarification and greater flexibility under paragraph (3) of the 

clock hour definition which states that an institution must be 

capable of monitoring a student’s attendance in 50 out of 60 

minutes for each clock hour. Specifically, the commenters 

requested that the Department clarify that the new clock hour 

definition not require an institution to have live instructor 

involvement with a student each hour, so long as the institution 

can monitor a student’s participation during 50 minutes of each 

hour and the institution can otherwise demonstrate academic 

engagement (per the Department’s definition) by utilizing 

suitable technology as demonstrated to the appropriate State and 

accrediting agency. The commenters stressed that requiring 

“face-to-face” contact each hour or at least one live touch by 

an instructor per clock hour for synchronous or asynchronous 

instruction would ignore the direction that the Department’s 

Proposed Rule is heading to expand recognition of the 

capabilities of technological advances to monitor student 

academic engagement and impose an undue hardship on students who 

need maximum scheduling flexibility in completing clock hours by 

means of distance education.

One commenter objected to the proposed clock hour 

definition and suggested the definition be reworded to account 

for students who may have relocated to a different time zone 
57

from their institution, and therefore might not be able to 

attend a class session in real time or interact with the 

instructor during the normal period of attendance. The 

commenter indicated that they currently attend a class in a 

different time zone and often have to watch recordings of the 

class and do not want these types of situations to be excluded 

from being counted towards a student’s academic progress.

One commenter requested that the Department clarify if it 

indeed intended to limit distance education clock-hour 

eligibility to only synchronous learning experiences but instead 

grant more flexibility to correspondence courses. The commenter 

was concerned that, given the limitations on correspondence 

students and courses applied to correspondence education, 

institutions would prefer to designate courses as distance 

education rather than correspondence whenever appropriate.

One commenter urged the Department to extend the temporary 

flexibilities for online instruction for clock hour programs due 

to the current coronavirus crisis as outlined in the 

Department’s guidance for COVID-19. The commenter noted that 

the Department’s temporary flexibility allows schools to offer 

synchronous or asynchronous online clock hour programs as long 

as the school can demonstrate student academic engagement 

through various online learning platforms and systems or based 
58

on school data or the instructor’s own knowledge. The commenter 

indicated that extending these flexibilities would allow 

institutions to determine on a local basis how to transition 

back to on-ground education and clarify that clock hour schools 

are permitted to offer hybrid programs––partially on-ground and 

partially online––through this period to provide maximum 

flexibility to meet the health and safety needs of employees and 

students.

Several commenters specifically requested that the 

Department modify paragraph (1)(iv) of the proposed clock hour 

definition to include both attendance in a synchronous or 

asynchronous class for distance education coursework, while one 

commenter asked the Department to include “participation through 

asynchronous academic engagement” or similar language to the 

distance education eligibility criteria in paragraph (1)(iv) of 

the clock hour definition.

In addition, several commenters asked the Department to 

consider modifying paragraph (1)(iv) to read, “In distance 

education, 50 to 60 minutes in a 60-minute period of attendance 

in a ‘computer-assisted’ class, lecture, or recitation where 

there is opportunity for direct interaction between the 

instructor and students”, while other commenters simply 

requested that the word “synchronous” be removed from paragraph 
59

(1)(iv). The commenters explained that removing the word 

synchronous from the definition would allow institutions who 

wish to offer clock hour programs synchronously or 

asynchronously, or a combination of both, the flexibility and 

opportunity to prepare the twenty-first century workforce in 

engaging and innovative ways.

Discussion: We are persuaded by the comments that preventing 

institutions from offering instruction by asynchronous means is 

unnecessarily restrictive and counter to the purposes of this 

rulemaking. The emergence of the COVID-19 pandemic has 

illustrated the need for institutional and student flexibility 

with regard to the time and place that coursework is completed, 

and a number of licensing agencies are also creating new 

flexibilities for the use of asynchronous learning in clock hour 

programs. Asynchronous learning allows students to design their 

own learning schedules around the demands of work and family 

that often interfere with class activities offered only at 

prescribed times. This flexibility can also greatly benefit 

students with health concerns for whom participation is 

contingent upon treatment schedules and feeling well enough to 

perform required tasks. The individual pacing made possible by 

asynchronous learning allows for a more tailored educational

experience that promotes mastery of subject matter over 
60

attendance in scheduled activities. Moreover, the availability 

of asynchronous learning allows for mixed model learning 

reflective of non-title IV eligible programming with theory 

learned asynchronously and specific practical tasks through 

synchronous instruction.

The Department does not wish to impede technological innovations 

at institutions that can help students overcome barriers to 

access and completion. 

The existence of the “regular and substantive interaction” 

requirement related to clock hours offered through distance 

education and the requirement that clock hours meet the 

requirements of an institution’s accrediting agency and State 

provide the safeguards that ensure that students have access to 

quality instruction and instructor support. Given these 

baseline requirements, it is not necessary to require students 

to interact with instructors synchronously to earn clock hours.

We also believe that commenters have made a strong case 

that, given current technology, clock hours completed 

asynchronously can be adequately supervised and monitored, 

provided the institution maintains the appropriate technological 

resources and internal controls. We disagree with commenters 

who indicated that learning technology is not yet capable of 

monitoring student engagement in this manner, especially since 
61

the Department has already reviewed and approved clock hour 

programs that used online learning platforms that are capable of 

the required monitoring.

The Department remains concerned about the possibility that 

clock hours offered asynchronously could be used as a means to 

complete unsupervised homework assignments rather than 

coursework that otherwise would have occurred in the classroom, 

which is prohibited under the Department’s longstanding policy 

for clock-hour programs. Our position is that the requirement 

for supervision of a clock hour in an asynchronous learning 

environment is met when the institution is capable of 

documenting the specific form of academic engagement associated 

with the activity—for example, asynchronous participation in an 

interactive tutorial or webinar online or a learning activity 

involving adaptive learning or artificial intelligence—and the 

institution has technological resources and policies and 

procedures that are sufficient to monitor and document the time 

each student spends performing that activity. If either of 

these conditions are not met, an institution would not be 

permitted to include time spent on an online activity toward 

completion of a clock hour for purposes of the title IV, HEA 

programs.
62

We also agree with the commenters who argued that clock 

hours offered asynchronously should involve academic engagement, 

as defined elsewhere in these regulations, since that concept 

involves active participation in learning activities rather than 

passive consumption of knowledge or merely logging into an 

online system. An institution should establish, in accordance 

with its policies and those of its accrediting agency or State, 

what it considers to be academic engagement in a clock hour 

program in order to clearly demonstrate that students have spent 

the recorded time performing an activity.

Institutions are permitted to offer clock hour programs 

both through correspondence or distance education, and the 

Department declines to opine on which type of program is most 

appropriate or best suited to the needs of individual students. 

However, institutions offering clock hour programs using 

distance education continue to be subject to the general 

requirements in the definition of “distance education,” which 

requires regular and substantive interaction between students 

and instructors. In such programs, some, but not all, clock 

hours would need to involve substantive interaction between 

students and instructors.

Changes: We have modified paragraph (1)(iv) of the “clock hour” 

definition to express that a clock hour includes a synchronous 
63

or asynchronous class, lecture, or recitation where there is an 

opportunity for direct interaction between instructors and 

students. We also added a new subparagraph to include, as part 

of the definition of a clock hour, 50 to 60 minutes of active 

participation in an asynchronous learning activity involving 

academic engagement in which a student interacts with technology 

that can monitor and document the amount of time that the 

student participates in the activity.

Comments: One commenter urged the Department to provide 

flexibility to institutions with distance education clock hour 

programs, whether taught in synchronous or asynchronous learning 

environments, such that when monitoring clock hours, the 

institutions be given the flexibility to assign clock hours 

based upon the assignments provided to students as long as there 

is adequate communication between the instructor and students. 

The commenter mentioned that providing the flexibility to 

monitor that instructors are providing relevant assignments 

equal to the number of clock hours for which a student is 

enrolled would be adequate since the quality of the educational 

program has been reviewed and monitored by the school’s 

accrediting agency.

Two commenters indicated that monitoring each student’s 

time spent on academic engagement would be challenging given the 
64

cost and availability of current technology. One of those 

commenters indicated that it is currently impossible to properly 

monitor and track a student’s attendance in 50 out of 60 minutes 

for each clock hour via distance education due to a lack of 

institutional means and technological uniformity. In addition, 

the commenter expressed a concern that the notion that 

technology has sufficiently advanced to permit institutions to 

conduct remotely synchronous, face-to-face instruction with 

students and to monitor the exact amount of time students 

participate in learning sessions is flawed because it is based 

on the premise that both the instructors and students can 

obtain, operate, and monitor the required devices needed to 

properly conduct distance education learning. The commenter 

asserted that the Department would be best served by dropping 

the new clock hour definition and instead, focusing on ensuring 

that an adequate amount of work is being completed rather than 

mandating a set amount of time be spent on coursework.

Discussion: While we agree that it should be possible for a 

student to earn clock hours through participation in 

asynchronous online learning activities, we disagree that an 

institution can measure such clock hours without monitoring a 

student’s actual participation in those activities. A clock 

hour is a period of 50 to 60 minutes in a 60-minute period spent 
65

receiving instruction or actively participating in a particular 

educational activity, and institutions are responsible for 

measuring the amount of time that students spend in such 

activities. The Department has never permitted institutions to 

award clock hours based on estimates of completed work and does 

not intend to do so for clock hour programs offered through 

distance education. We also disagree with the commenter that 

the technology needed to perform this monitoring does not exist 

or that it cannot be obtained by institutions and students. The 

Department has seen demonstrations of such technology by 

institutions that offer clock hour programs and was convinced 

that the technology was both viable and appropriate for use in 

monitoring clock hours completed asynchronously.

Changes: None.

Comments: One commenter asserted that the Department’s proposed 

clock hour definition fell short of its stated goal in the NPRM 

“to remove barriers that institutions face when trying to create 

and implement new and innovative ways of providing education to 

students.” Specifically, the commenter suggested that the 

modern-day use of a calculation of seat time to measure student 

learning and progress is grounded on a false premise, especially 

considering today’s online technologies, including artificial 

intelligence and adaptive learning tools. The commenter opined
66

that since the definition of a “clock hour” is not defined in 

title IV, the Department should consider removing the definition 

of “clock hour” from § 600.2 and instead, rely on accrediting 

agencies, as the entities that set standards on academic 

quality, to provide academic oversight of institutions’ policies 

relating to the measurement of student learning and progress.

Discussion: We disagree that the use of clock hours to measure 

a student’s progress for purposes of the title IV, HEA programs

prevents institutions from using innovative technology or 

instructional methods. We believe that it is vital for 

institutions to be able to award and disburse title IV, HEA 

assistance using clock hours as a measurement of student 

progress because that form of measurement still aligns with many 

Federal and State licensure requirements for a variety of 

professions. This alignment ensures that institutions that are 

already required to monitor and document a student’s successful 

completion of clock hours for other purposes can use that 

monitoring to demonstrate that the student has made progress for 

purposes of the title IV, HEA programs rather than requiring 

such institutions to perform a cumbersome and potentially 

burdensome conversion of clock hours to credit hours or some 

other equivalent measure. 

Changes: None.
67

Comments: One commenter expressed concern that the clock hour 

definition does not define student seat time precisely enough. 

The commenter pronounced that a vague seat time requirement may 

cause undue challenges for an institution with rigorous 

accrediting agencies at the regional and/or professional level.

Discussion: The Department does not establish academic 

requirements for educational programs, including clock hour 

programs. Under the Department of Education Organization Act, 

such requirements remain within the purview of accrediting 

agencies and States, which are free to set requirements they 

feel appropriate for what is considered successful completion of 

a clock hour in each program8. This longstanding approach to the 

oversight of academic requirements recognizes the autonomy of 

postsecondary institutions and the unique qualifications of 

their accrediting agencies and States to respond to issues of 

academic quality.

Changes: None.

Comments: One commenter urged the Department to maintain the 

requirements listed under paragraph (3) requiring programs to 

meet all clock hour limitations or criteria established by 

school accrediting agencies, States, and applicable licensure 

8 See 20 U.S.C. § 3403(b)
68

bodies. The commenter also expressed support for limiting clock 

hours via distance education to synchronous programs in the 

final rule because monitoring a student’s completion of a clock 

hour in an asynchronous program would be virtually impossible. 

The commenter stated that monitoring asynchronous learning 

would diverge too much from the proposed clock hour definition 

and the Department would most likely be unable to assess the 

minimum technology needed for institutions to adequately monitor 

asynchronous distance education learning.

Discussion: We do not believe that it would be impossible for 

an institution to maintain the appropriate technology and 

procedures to monitor and document clock hours earned based on

completing asynchronous educational activities. However, we 

agree that it is important to ensure that institutions comply 

with any requirements set by accrediting agencies or State 

licensing or approval agencies regarding clock hours and intend 

to retain that component of the clock hour definition.

Changes: None.

Definition of Credit Hour (§ 600.2)

Comments: Numerous commenters expressed their overall support 

for the proposed changes to the definition of a credit hour, 

with several of those commenters specifically asking that the 

Department make no changes to the consensus language agreed to 
69

by negotiators. Some of this support was qualified to varying 

degrees, ranging from observations that the credit hour is a 

less than ideal measure of student progress to a request on the 

part of two commenters concerned about the rule’s enforceability 

that the Department restore the requirements in § 602.24(f) and 

§ 603.24(c) (84 FR 58931) requiring that accreditors and State 

agencies respectively, conduct review and evaluation of the 

reliability and accuracy of the institution’s assignment of 

credit hours. 

One commenter expressed opposition to the revised 

definition of “credit hour” based on concerns that changing the 

definition of “credit hour” to focus on student learning time 

may pose new risks to students and their privacy. The commenter 

offered that if recording of individual learning time becomes 

desirable initially for credit hour validation, it may become 

desirable for individual student measurement, and that the 

potential consequences of this should be available for public 

review.

Another commenter asserted that the Department should 

maintain the definition of “credit hour” in the NPRM but that 

the Department made proposals to change the definition without 

any evidentiary basis or support, rendering them legally 

insufficient under the APA. The commenter asserted that by 
70

failing to present evidence during the negotiated rulemaking 

that would justify a change, and by failing to suggest in the 

NPRM that the Department has support to justify those original 

proposals now, the Department has no choice but to maintain the

consensus definitions included in the NPRM.

Concerned that the proposed definition of “credit hour” 

does not adequately account for transfer credits, one commenter 

offered revisions to the amendatory text in the NPRM that would 

change the characterization of a credit hour as, “an amount of 

student work” to “work by a student with average, but 

appropriate, preparation...” and include recognition and 

consideration of the importance and widespread usage of credit 

transfer among institutions. The commenter also suggested that 

the Department address a perceived disparity between workload 

expectations of students in on-campus courses versus those 

offered through distance education. The commenter proposed to

stipulate the equivalent amount of work as required in paragraph 

(1)(i) of the definition of “credit hour” for other academic 

activities as established by the institution be consistent, by 

institution and course, between requirements for on-campus and 

on-line monitoring of student work.

Discussion: We appreciate the general support for our proposal 

to broaden the definition of “credit hour” in a way that focuses 
71

on student learning rather than seat time and is flexible enough 

to account for innovations in the delivery models used by 

institutions. Even among those commenters whose support was 

tempered with reservations over the proposed definition of a 

“credit hour” either adhering too closely to the current 

definition or broadening it too much, there was strong agreement 

that no changes should be made to the consensus language in the 

NPRM.

In response to those commenters who expressed support for 

the proposed changes to the definition of “credit hour” but 

asked that the Department restore the requirements in current 

§ 602.24(f) and § 603.24(c), as previously explained in the 

preamble to the November 1, 2019 Final Rule on State 

Authorization and Accreditation (84 FR 58875), we continue to 

believe the agency review requirements are unnecessarily 

prescriptive and administratively burdensome without 

significantly improving accountability or protection for 

students or taxpayers. However, we note that the “credit hour”

definition in both current and proposed § 600.2 requires that 

the amount of student work determined by an institution to 

comprise a credit hour be approved by the institution’s 

accrediting agency or State approval agency. Moreover, nothing 

precludes an accrediting agency or State authorizing agency from 
72

examining or questioning an institution’s credit hour policies 

either as part of a routine evaluation of that institution’s 

academic programs or as the result of specific concerns.

We disagree with the commenter who opposed the changes to 

the definition of “credit hour” proposed in the NPRM on the 

basis that an increased focus on student learning time may pose 

new risks to students and their privacy. The definition of 

“credit hour” as proposed in the NPRM does not place an 

increased emphasis on learning time. Time-based requirements 

relative to classroom instruction and other academic activities 

included in the proposed definition of “credit hour” are those 

found in the current definition. Additional language in the 

proposed definition clarifies that, in determining the amount of 

work associated with a credit hour, an institution may consider 

a variety of delivery methods, measurements of student work, 

academic calendars, disciplines, and degree levels. This new 

language actually deemphasizes the strict measure of learning 

time.

Although the Department takes seriously any identified risk 

to student privacy, the commenter was not specific as to what 

those risks are. Finally, with respect to the potential 

consequences of these proposed rules being available for public 
73

review, we believe the comment period following publication of 

the NPRM in the Federal Register provided such an opportunity. 

We further disagree with the commenter who asserted that 

the Department made proposals to change the definition of 

“credit hour” without any evidentiary basis or support, 

rendering them legally insufficient under the APA, or that it 

failed to present evidence during the negotiated rulemaking that 

would justify changing the definition of “credit hour.” In 

preparation for the subcommittee meetings on distance learning 

and innovation, the Department produced several position papers 

outlining its reasons and justifications for all proposed rule 

changes under consideration by that subcommittee, including 

those related to the definition of a credit hour. The proposed 

definition was discussed at length in the subcommittee and again 

at the negotiating table. A detailed, written discussion of the 

Department’s reasons for proposing these changes is contained in 

the April 2, 2020 NPRM on pages 18646 and 18647. However, we 

appreciate the commenter’s overall support for the consensus 

language.

In response to the commenter who expressed concern that the 

proposed definition of “credit hour” does not account for 

transfer hours, we note that credit hours, as they pertain to 

the title IV, HEA programs, are a measure of student workload 
74

necessary to determine enrollment status and award amounts. 

Credit hours that an institution accepts on transfer have no 

effect on making these determinations and are, therefore, not 

integral to the definition of a credit hour for title IV 

purposes. The commenter identified several problems with 

respect to transfer hours, including the disparity among 

institutions in how transfer hours are considered and accepted. 

While we agree on the need to address challenges regarding 

transfer of credit, we do not believe that this definition is 

the appropriate place to do so or that the revisions to the 

proposed definition of “credit hour” suggested by the commenter 

would change the way transfer hours are treated by institutions. 

With regard to any disparities that may exist between what is 

expected of students taking classes offered through distance 

education and what is expected of students enrolled in classes 

offered on campus, we do not agree with the commenter that these 

can be addressed by revising the proposed definition of “credit 

hour.” Institutions themselves set the academic standards for 

their programs. The definition of “credit hour” merely 

establishes a reasonable measure of student workload. We 

believe that the amendatory text, agreed to by negotiators, 

permitting an institution, in determining the amount of work 

associated with a credit hour, to take into account a variety of 
75

delivery methods, measurements of student work, academic 

calendars, disciplines, and degree levels, accommodates a 

variety of modalities, including distance education.

Changes: None.

Definition of Distance Education

Comments: Numerous commenters expressed their support for the 

Department’s proposed definition of “distance education.” Many 

commenters thanked the Department for providing greater clarity 

and specificity to the definition. One commenter highlighted 

several recent audits by the Department’s Office of Inspector 

General (OIG) focusing on the requirements for regular and 

substantive interaction and pointed to the large amount of 

proposed liabilities in those audits as a reason that the 

definition of “distance education” needed to be clarified. 

Another commenter asserted that the changes modernize the 

definition and permits more flexibility for postsecondary 

institutions to offer educational programs.

Several commenters were appreciative of the Department’s 

efforts to eliminate references to outdated technology such as 

CD-ROMs. Other commenters indicated that the definition holds 

institutions accountable for providing students in distance 

education programs with communication and engagement with 

qualified instructors on a predictable and regular basis.
76

Many commenters supported the addition of the concept of 

“qualified instructors” who meet the instructional requirements 

of an institution’s accrediting agency. One commenter stated 

that the proposed definition would provide institutions with a 

single, clear definition of “instructor” for financial aid 

purposes, that could help prevent confusion during audits about 

which staff members can be classified as instructors. One 

commenter also expressed support for the Department’s use of the 

plural “instructors” rather than “the instructor” because it 

would enable more people to teach as a team and provide more 

individualized attention to students.

Several commenters supported the Department’s proposed 

requirements for substantive interaction, indicating that the 

definition supports a variety of activities needed for teaching 

and learning. One commenter indicated that defining and 

clarifying what constitutes “substantive interaction” between 

students and faculty would give institutions the ability to 

innovate without fear of the loss of Federal student aid 

eligibility. Another commenter indicated that the requirements 

for substantive interaction are appropriately adaptable because 

they allow accrediting agencies to approve different types of 

instructional activities. One other commenter was supportive of 

the consensus language relating to substantive interactions, 
77

noting that while the Department’s original proposal had defined 

substantive interaction as an interaction that simply related to 

course material under discussion, negotiators opposed this 

language because it did not specifically address teaching and 

learning in the way that the consensus language does.

Several commenters also supported the Department’s 

requirements for regular interaction. One commenter indicated 

that the flexibility of the definition was important given 

variability across a wide range of program types and topics and 

helped limit administrative burden. Another commenter supported 

the ability for institutions to determine the number of 

substantive interactions that are appropriate based on the 

length and amount of content associated with a course. One 

commenter expressed strong support for requiring both 

predictable opportunities for interaction and the prompt and 

proactive monitoring of student engagement, indicating that the 

requirements would result in more affordable and accessible 

pathways for students while ensuring high-quality instruction.

Discussion: The Department thanks the commenters for their 

support.

Changes: None.

Comments: Many commenters urged the Department to maintain the 

regulatory language agreed upon in consensus with non-Federal 
78

negotiators for regular and substantive interaction and the 

requirements for instructors in distance education programs. 

Several commenters pointed out that the consensus agreement for 

the proposed definition of “distance education” reflected a 

thoroughly discussed compromise among negotiators.

Several commenters contended that it is imperative to 

clearly distinguish between distance education and 

correspondence courses and ensure that quality standards exist 

for distance education programs, especially given the history of 

abuses related to correspondence courses. The commenters 

asserted that diluting the proposed definition could result in 

online programs becoming eligible for Federal student aid even 

when the programs do not offer the same quality of education or 

degree of connection between students and qualified instructors. 

One of those commenters urged the Department not to revert to 

its original proposal to allow accrediting agencies alone to 

articulate requirements for regular and substantive interaction 

and instructors with minimal Federal guidelines. One commenter 

asserted that the Department’s original proposals for changing 

the definition, later rejected in the consensus language, would 

have undermined the requirements for regular and substantive 

interaction and for the qualifications for an instructor and 

urged the Department not to return to those proposals.
79

Other commenters pointed out that the requirements for 

regular and substantive interaction exist in law because of past 

abuses in correspondence programs, particularly of veterans 

seeking to use educational benefits. One of these commenters 

noted that after passage of the 1944 Servicemen's Readjustment 

Act of 1944 (commonly known as the “GI Bill”) hundreds of 

thousands of servicemen used their education benefits under that 

law to enroll in correspondence courses, but only approximately 

10.7 percent of those veterans completed their programs. That 

commenter also pointed out that Congress acted in the early 

1990s to address similar types of abuses in correspondence 

courses related to the title IV, HEA programs. Another 

commenter noted that the OIG has repeatedly raised concerns 

about distance education and has characterized it as an area 

that poses significant risk to the integrity of the FSA

programs.

One commenter referred to research that shows that Latino 

students enrolled in online education have lower academic and 

attainment outcomes than in face-to-face courses and that 

interviews with such students highlight the absence of a 

meaningful student-instructor relationship as a contributing 

factor to those poor outcomes. Another commenter referenced 

research that suggests faculty-student interaction plays a key 
80

role in a quality online education and that underprepared and 

disadvantaged students tend to underperform and, on average, 

experience poor outcomes in such programs. That commenter also 

referenced research that suggests online students desire greater 

interaction with their instructors and that, in general, online 

education has not improved affordability, frequently costs more, 

and does not produce a positive return on investment. One 

commenter asserted that if the requirement for regular and 

substantive interaction is weakened, there is a risk that 

inequities will increase between those students who have access 

to substantive interaction with instructors and those who do 

not. That commenter expressed that this is an even more 

critical issue now that institutions are moving online because 

of the COVID-19 emergency.

Discussion: We agree that it is important for the regulations 

to clearly distinguish between the definitions of “distance 

education” and “correspondence courses” and believe that the 

proposed definitions accomplish that goal. Whereas the 

definition of a correspondence course describes interaction 

between students and instructors in such the course as 

“limited...not regular and substantive, and...primarily 

initiated by the student,” the definition of distance education 

requires regular and substantive interaction between students 
81

and instructors and clearly explains the requirements for each 

component of that definition. We also agree that it is 

important to adhere to the agreed-upon language of the members 

of the subcommittee and full committee, who were able to reach 

agreement on the definition of the term despite strong initial 

differences of opinion on the matter. We agree with the

commenters who referenced the importance of regular and 

substantive interaction between students and instructors, 

particularly for students who are underprepared, and believe 

that the requirements for such interaction expressed in the 

definition strike the appropriate balance between assuring 

interaction with qualified instructors and allowing institutions 

the flexibility to offer programs using innovative, studentoriented pedagogical techniques.

Changes: None.

Comments: Several commenters opined on whether the Department 

should incorporate the concept of an “instructional team” into 

the definition of “distance education.”

One of these commenters described the use of instructional 

teams as a practice that occurs in on-campus settings across 

various fields of study and that provides exceptional 

opportunity to students by allowing them to interact with 

several experts in a given course. Another commenter argued 
82

that explicitly addressing the concept of instructional teams in 

the definition would acknowledge the reality that distance 

education is an instructional team endeavor that does not rely 

upon arbitrary distinctions between an instructor and someone 

involved in facilitating the delivery of course content who is 

not considered an instructor.

One commenter argued that team-based instructional models 

could be complicated if substantive interactions could only be 

provided by individuals that met an accrediting agency’s 

requirements for instruction and noted that some types of 

interactions described under paragraph (3) of the definition, 

including assessing or providing feedback on a student’s 

coursework, could be provided by assessment specialists who do 

not meet the definition’s requirements for a qualified 

instructor.

Conversely, one commenter objected to the Department’s 

proposal to use the term “instructors” rather than “the 

instructor,” arguing that doing so would allow quasiprofessionals to teach more advanced subject matter as part of a 

team. The commenter asserted that this situation could result 

in such instructors only tangentially monitoring student 

discussion rather than substantively engaging with students. 
83

Discussion: The Department does not object to the use of 

instructional teams, regardless of the modality of the 

coursework. Indeed, we support innovative educational models 

that provide additional support, both academic and otherwise, to 

support student success. However, we believe that the current 

regulatory language accommodates the use of instructional teams 

and no change is necessary in order further encourage their use.

Regardless of the composition of an instructional team, the 

Department expects that such a team would include qualified 

individuals with subject matter expertise who are expected to 

instruct, guide, or otherwise respond to questions from students 

about the subject matter of a course or competency. Such 

individuals, assuming they meet accrediting agency requirements 

for instruction, are the staff members whose substantive 

interaction with students can fulfill the requirements of the 

“distance education” definition for regular and substantive 

interaction between students and instructors. Note that 

accrediting agencies can choose to designate individuals as 

instructors who do not meet the traditional criteria for 

faculty, and many already do in instances, for example, where 

workforce experience may be more important to teaching and 

learning than an advanced degree. Accreditors are also 

permitted to designate an individual as an “instructor” meeting 
84

its requirements only in specific situations, for example, where 

a less-experienced individual is teaching in a team setting with 

an experienced instructor of record having responsibility for 

the course in general. Given this degree of flexibility, we 

believe that the regulation as written provides ample 

opportunity for distance education to occur with the use of 

instructional teams, but only when such use conforms with the 

requirements of an instruction’s accrediting agency.

Changes: None

Comments: Several commenters expressed concern with the 

Department’s proposal to replace the list of technologies in the 

definition of “distance education” with the phrase “other 

media.”

Two commenters indicated that the word “media” was not 

specific enough to limit the types of modalities that could be 

used in distance education. One of those commenters recommended 

that the Department add the phrase “and other types of media” 

after listing each type of technology. The other commenter 

recommended that the Department continue to add new media types 

to the definition rather than removing the existing types that 

were listed.

One commenter suggested that the Department eliminate the 

list of technologies that could be used to offer a program 
85

through distance education unless we plan to update the 

appropriate formats on a regular basis (for example, annually).

Another commenter expressed concern that replacing 

references to types of media with the phrase “other media” could 

cause institutional officials to interpret the phrase as the use 

of one type of media.

Discussion: We appreciate the commenters’ suggestions, but we 

do not plan to update the list of acceptable technologies at 

this time. The HEA currently prescribes the types of 

technologies that may be used for distance education, and in 

this rulemaking the Department is not making changes to the 

statutory requirement, but is instead simplifying this list in 

the regulations by referring to “other media” rather than 

including all of the types of media that may be used to deliver 

distance education.

Changes: None.

Comments: One commenter suggested that the Department define 

“instruction” rather than “instructor” and use the definition of 

the former to inform requirements for the latter.

Discussion: The Department chose to clarify the requirements 

for an instructor for purposes of the definition of “distance 

education” because the term is specifically used in statute with 

reference to distance education. Moreover, we believe that it 
86

is beyond our purview to define the term “instruction” given its 

broad application in postsecondary education and the 

restrictions on the Department’s oversight of academic quality 

in the Department of Education Organization Act.

Changes: None.

Comments: One commenter expressed concern about the variability 

between accrediting agencies regarding their requirements for an 

instructor in the context of the definition of “distance 

education.” The commenter stated that each accrediting agency 

should have a strong definition of a quality instructor that 

includes requirements for qualifications to teach in the 

relevant competencies. Two commenters also recommended that in 

cases where students have multiple instructors, the students 

should be informed of which instructor is the instructor of 

record.

Discussion: We believe that accrediting agencies are the 

appropriate arbiters of academic quality for postsecondary 

education, including regarding the appropriate requirements for 

instructors. The Department is prohibited from creating 

regulations or other requirements regarding the academic quality 

of educational programs under the Department of Education 

Organization Act. Furthermore, while it is true that there may 

be variation among accrediting agencies regarding requirements 
87

for instructors, we believe this is appropriate given the 

different types of qualifications that may be needed depending 

on the types of programs and degree levels offered.

Changes: None.

Comments: Several commenters sought clarification regarding the 

Department’s requirements for “regular interaction.”

One commenter indicated that interactions in asynchronous 

courses may not be predictable and asked the Department to 

clarify by providing a specific length of time that it 

considered to be “regular” for purposes of this definition.

Another commenter asked how institutions would monitor a 

student’s engagement in distance education, particularly when an 

interaction occurs during a videoconference where the instructor 

is working to develop the student’s understanding of a 

particular topic while also attempting to monitor the student’s 

engagement.

One commenter expressed concern that the regulations only 

require the opportunity for interactions with instructors when 

needed. The commenter indicated that this lack of mandatory 

proactive instruction, when combined with a lack of emphasis on 

faculty involvement, could lead to confusion about the 

distinction between distance education and correspondence 

courses. The commenter recommended that the Department delete 
88

the words “the opportunity” from paragraph (5)(i) of the 

definition and delete “when needed” from paragraph (5)(ii) in 

order to require proactive substantive interaction for every 

student.

Several commenters noted that the regulations describing 

“regular interaction” included a requirement for the interaction 

to be “regular,” which the commenters felt was redundant. Three 

of those commenters recommended that the Department replace the 

phrase “regular and predictable basis” with the phrase 

“scheduled and predictable basis.”

Discussion: Given the variety of distance education programs, 

coursework, instructional modalities, and course schedules, we 

do not believe it is practical to offer a specific timeframe for 

regular interaction. The Distance Learning and Innovation 

subcommittee strongly disagreed with that approach when it was 

presented, arguing that establishing such a timeframe would 

either be overly prescriptive or excessively complex. 

Similarly, an institution cannot be expected to ensure perfect 

attendance by students at each opportunity for interaction with 

an instructor, which is why the Department, the subcommittee, 

and the negotiating committee agreed to frame the requirement as 

an “opportunity” for interaction rather than a required 

interaction. This approach has the added benefit of allowing 
89

institutions to demonstrate compliance with the requirements at 

the program design level without documenting each and every 

interaction between students and instructors.

The requirements for regular interaction include monitoring 

a student’s “academic engagement and success” with respect to a 

course or competency. This requirement is not intended to 

mandate that instructors personally monitor each student’s 

engagement throughout each class session while also instructing, 

facilitating discussion, or responding to questions from 

students. Instead, the requirement is intended to ensure that 

instructors are generally monitoring whether a student is 

engaged and successful throughout a given course or competency 

and takes appropriate action as needed. Such monitoring could 

include evaluating a student’s level of participation in 

synchronous class sessions, but it could also involve monitoring 

the student’s activity on course websites or materials; 

considering the quality of the student’s assignments or 

responses to questions about course materials; evaluating the 

level of the student’s understanding of course materials during 

conversations with instructors or performance on exams; or other 

forms of monitoring the student’s engagement and success in the 

course or competency.
90

We agree with the commenters that the word “scheduled” is 

more descriptive and provides greater clarity than the word 

“regular” for purposes of describing “regular interaction.” 

Furthermore, the Department believes that the word “scheduled” 

more clearly reflects the intent of the Distance Learning and 

Innovation subcommittee and the full negotiating committee to 

ensure that students are provided scheduled opportunities to 

interact with instructors for which the students can prepare in 

advance.

Changes: We have replaced the phrase “predictable and regular 

basis” with the phrase “predictable and scheduled basis” in

paragraph (5)(i) of the definition.

Comments: One commenter explained that there are two types of 

distance education models that higher education has developed –

synchronous and asynchronous – and that the asynchronous model 

better reflects the realities of working adults, differing 

levels of preparation, and the importance of assessment. The 

commenter pointed out that many new students in higher education 

are “non-traditional” and include a large number of veterans and 

students with families. The commenter asserted that these 

students have schedules that they cannot control and are better 

served by asynchronous courses that support their needs for 

flexibility, while the institution ensures that each student is 
91

evaluated based on the student’s demonstration of mastery of the 

competency or course. The commenter recommended that the 

requirements for regular interaction point to interactions that 

are appropriate to the course modality and consistent with 

student success.

Discussion: We agree with the commenter that distance education 

may, in many cases, have the capability to address the needs of 

non-traditional students better than traditional classroom 

courses. However, we disagree that the regulatory definition 

needs to include a reference to the appropriateness of 

interactions with respect to course modality and student success 

for institutions to offer programs that are sufficiently 

flexible. Though the definition of “distance education” 

establishes certain requirements for interaction in online 

programs, the Department defers to institutions and their 

accrediting agencies regarding whether a program’s design 

involves interactions that are appropriate and tailored to the 

needs of students.

Changes: None.

Comments: A few commenters asked questions about the 

relationship between the Department’s final regulations and the 

COVID-19 pandemic.
92

One commenter asked the Department how its proposed 

definition of distance education would prepare institutions for 

future pandemics and whether institutions should be required to 

implement distance education training programs so that they are 

prepared to shift to an online modality if and when a pandemic 

prevents in-person instruction once again. The commenter 

asserted that new options for learning modalities would not 

prompt an increase in the number of students enrolling in 

distance education courses and asked how the Department’s 

proposal would reduce barriers to access for students given 

those trends.

Another commenter pointed out that the Department’s recent 

guidance for distance education related to the COVID-19 pandemic 

were inconsistent with the regulatory requirements for distance 

education in the proposed rule.

Discussion: Many institutions with limited distance education 

offerings at the time of the initial COVID-19 outbreak were 

unprepared for the impacts of the pandemic and did not have 

adequate resources or the expertise to quickly shift to an 

online learning modality. Though many institutions were able to 

shift to an entirely new modality, many were still faced with a 

complicated and confusing regulatory framework for distance 

education that they had never encountered before. The 
93

Department’s hope is that clarifying and expanding the 

definition of “distance education” will offer a degree of 

certainty to institutions both familiar and unfamiliar with 

online learning and will make it easier for institutions to 

shift to an online modality in the event of a pandemic in the 

future.

The Department’s recent COVID-19 distance education 

guidance for institutions related to COVID-19 was intended to be 

temporary and was necessary to address the urgent need to shift 

instructional operations online very quickly. The Department 

has established a specific timeframe for that guidance and will 

expect institutions to again comply with regulatory and 

statutory requirements when the waivers and flexibility related 

to COVID-19 expire. 

Changes: None.

Comments: Many commenters asked questions about the 

Department’s requirements for “substantive interaction” under 

the definition of “distance education.”

A few commenters asked the Department to clarify whether 

substantive interaction was required to occur regularly at the 

“instructor level” or the “course-competency level.” Two of 

those commenters expressed concern that if the definition were 

applied at the instructor level and not the course-competency 
94

level, it could exclude some aspects of an “unbundled” 

instructional model. One commenter offered the example of 

assessment experts whose skills and expertise are tailored 

toward developing and scoring assessment, as well as providing 

students with feedback, but who might not be considered to be 

“faculty.” That commenter argued that the Department should 

indicate that its intent was for substantive interaction to 

occur at the course/competency level.

Several commenters asked the Department to explain the 

interaction between the regulations requiring at least two types 

of substantive interactions and the requirements for such 

interactions to be “regular.” One commenter asked whether both 

types of substantive interaction were required throughout a 

semester, or whether an institution could engage in one or the 

other activities at any time to meet the requirements. A 

separate commenter asked whether the two forms of substantive 

interaction needed to be alternated on a regular basis or 

whether both forms of interaction were required in the same 

class session. That commenter recommended that the Department 

either clarify this point or strike the requirement for more 

than one form of substantive interaction, asserting that it 

could cause implementation challenges. Another commenter 

requested that the Department remove the requirement for at 
95

least two types of substantive interaction because it was 

unclear how often each type of interaction needed to occur and 

such ambiguity could cause considerable confusion for 

institutions attempting to implement the requirements. 

One commenter asked how instructors would calculate the 

time that they spend on substantive interaction when one of the 

categories of such interaction includes responding to questions 

about the content of a class.

Discussion: The Department’s requirements for regular and 

substantive interaction between instructors and students occurs 

at the course or competency level. The Department’s intent with 

this definition is to ensure that, for a given unit of study 

(for example, a class such as English 101 or a competency such 

as the ability to perform statistical analysis) a student has 

ample opportunity to substantively interact with an instructor 

and the instructor (or instructors) monitor the student’s 

engagement and performance, and provide scheduled opportunities

for interaction with the student as needed on the basis of that 

monitoring. Additionally, the regulations must apply at the 

course or competency level because they are designed to 

distinguish distance education from correspondence courses for 

purposes of exempting distance education from the limitations on 

the percentage of correspondence courses that an institution may 
96

offer. Applying the regulatory requirements for distance 

education at the instructional unit level ensures that any 

online course or competency that is misclassified as distance 

education can be included in the calculation of the percentage 

of correspondence courses that the institution offers for 

purposes of the institutional eligibility requirements under 34 

CFR 600.7.

The Department also applies the requirement for a 

substantive interaction to include at least two types of 

activities listed in the definition at the course or competency 

level. The definition of “distance education” lists several 

different types of interaction that can fulfill the requirements 

for “substantive interaction,” including direct instruction, 

assessment, responding to questions about the course materials, 

facilitating a group discussion regarding the course content, or 

other instructional activities approved by the institution’s 

accrediting agency. The definition requires an institution to 

perform at least two of those activities, and since we apply the 

regulation at the course or competency level, we also require an 

institution to perform at least two of those activities over the 

period of time that the student completes the course or 

competency. We believe that requiring a specific timeframe, 

sequence, or frequency that the activities need to occur within 
97

that timeframe would be impractical and would extend beyond our 

purview under the Department of Education Organization Act.

The Department does not expect an institution to measure or 

document the exact amount of time that it or its students spend

on any particular type of substantive interaction. An 

institution is expected to maintain academic policies or 

procedures that create expectations for faculty to substantively 

interact with students on a predictable and scheduled basis and 

to monitor each student’s engagement and success and follow up 

with the student as needed.

Changes: None.

Comments: One commenter recommended that the Department add 

language requiring that institutions using distance education 

ensure the accessibility of the learning materials and remain 

compliant with Section 508 of the Rehabilitation Act. The 

commenter argued that technology can be a limiting factor for 

individuals with disabilities if the systems used are not 

accessible.

The commenter also asked the Department to add a 

requirement for instructors to be “flexible and work with the 

student to determine the most appropriate communication mode to 

maximize the student’s ability to participate.” The commenter 

indicated that because some students struggled with 
98

communication technology, instructors should customize their 

online programs to ensure that students are being evaluated for 

their knowledge of content rather than their ability to access 

technology. 

Discussion: The Department does not believe it is appropriate 

to regulate the Rehabilitation Act using the definition of 

“distance education,” which is derived from the HEA. That said, 

we strongly support the intent of the Rehabilitation Act and 

expect every institution with a distance education program to 

adhere to that law’s statutory and regulatory requirements. 

Changes: None.

Comments: Many commenters requested that the Department replace 

the “and” between paragraphs (5)(i) and (5)(ii) of the 

definition with “or” in order to allow an institution to fulfill 

the requirement by taking either of the actions in paragraph 

(5)--providing the opportunity for substantive interactions with 

the student on a predictable and regular basis or monitoring the 

student’s academic engagement and success and ensuring that an 

instructor is responsible for promptly and proactively engaging 

with the student-–as opposed to requiring the institution to 

take both of those actions. One of these commenters argued that 

the proposed regulations would require institutions to adhere to 

a time-bound model that may not be appropriate for the 
99

institution’s instructional modality or its students. Two other 

commenters indicated that the intent of the Distance Learning 

and Innovation subcommittee was to allow institutions to choose 

the type of “regular” interaction that best suited the academic 

program and recognized that some institutions have sophisticated 

technologies that monitor student engagement and success and 

alert instructors when students are not engaged or are 

struggling with material. These and other commenters also 

cautioned that requiring both components of the definition could 

result in a requirement that institutions adhere to a strict, 

time-bound schedule, which is counter to the format in many 

competency-based education programs. Many commenters also 

argued that many institutions lack the technology or resources 

needed to monitor a student’s engagement and success. Another 

commenter indicated that the “and” would limit the variety of 

instructional approaches that could be available to institutions 

if one or the other action fulfilled the requirement. One 

commenter also noted that reverting to “or” between those 

paragraphs would recognize the importance of a team approach to 

instruction and co-curricular activities. Several commenters 

argued that reverting to “or” would set expectations for 

distance education, including monitoring each student’s 

engagement, beyond what is expected or required for on-campus 
100

instruction. Several commenters also asserted that the change 

to “and” could push institutions to adopt learning analytics 

tools to track student progress, which could increase the cost 

of educating students and introduce privacy or other ethical 

concerns. One commenter pointed out that requiring institutions 

to implement both components of the requirements for regular 

interaction could prevent them from adjusting quickly to market 

demands and emerging technology. Finally, one commenter pointed 

out that the Department’s OIG would rely upon the new regulatory 

definition of “distance education” when assessing an 

institution’s compliance, suggesting that additional flexibility 

in the definition was therefore preferable.

Discussion: As one commenter noted, the Distance Learning and 

Innovation subcommittee’s recommendation was to allow an 

institution to fulfill the requirement for regular interaction 

by either maintaining predictable and scheduled opportunities 

for interaction or by maintaining a system for evaluating a 

student’s engagement and progress and ensuring that an 

instructor followed up when appropriate. The subcommittee’s 

intent was to allow institutions with self-paced programs to use 

other techniques other than scheduling planned interactions, 

which in the past had led to perfunctory mandatory phone calls 
101

or class sessions that did not provide great benefit to 

students.

Despite the subcommittee’s concerns about requiring 

predictable opportunities for interaction, the full negotiating 

committee decided that it was important for both conditions to 

be met. The committee believed that the proposed definition, 

requiring both predictable interactions and student monitoring, 

offered sufficient flexibility regarding the number and 

frequency of scheduled interactions based upon the length and 

intensity of the student’s coursework. In a self-paced course 

or competency in which a student approaches the coursework at 

his or her own pace, the institution is not required to 

schedule, for example, weekly opportunities for interaction. 

Instead, the institution may decide that the appropriate 

timeframe for scheduled opportunities for interactions is biweekly or monthly, or a different frequency. Furthermore, by 

not requiring mandated interactions, the definition does not 

impose a bureaucratic requirement for a scheduled course 

session, but instead simply ensures that students are aware that 

there will be planned occasions that they will be able to 

interact with an instructor about course content.

Similar concerns were also raised by commenters about 

requiring more traditional class-based online programs to 
102

maintain a system for monitoring student engagement and 

interacting with the students on that basis. We disagree with

several commenters that institutions would need to purchase 

expensive software to track and monitor each student’s online 

activities to determine whether the student was sufficiently 

engaged. While such software would meet the requirement if it 

were part of a system for monitoring and interacting with 

students when the need arose, it is not a required element for 

regular and substantive interaction. The Department’s 

expectation is that instructors take a proactive approach to 

determining when students need assistance and then offering that 

assistance, and this could be done either using sophisticated 

systems for monitoring student activity or more traditional 

person-to-person evaluation or through the use of tests and 

quizzes. The required “monitoring” could consist of evaluating 

each student’s performance in regular online class sessions or 

in regular assignments that have been turned in. This type of 

monitoring is common to nearly all postsecondary programs and 

has been performed since before the internet existed.

Given all of these factors and the level of importance 

accorded by the negotiating committee to the use of “and” 

between paragraphs (5)(i) and (ii) of the definition, we decline 

to revert to the word “or” between those paragraphs.
103

Changes: None.

Comments: One commenter proposed that the Department should 

provide an outline of the new definition of “distance education” 

to offer clarity to government officials and citizens about the 

changes to the definition.

Discussion: We thank the commenter for this suggestion and

agree that an outline could make the changes clearer. We plan 

to publish a clear description of each of the changes to the 

definition of “distance education” in the FSA Handbook after the 

changes become effective. 

Changes: None.

Comments: Several commenters asked the Department to clarify 

whether interactions that were initiated by a student would meet 

the requirements for regular and substantive interaction between 

students and instructors. One of those commenters sought 

clarification regarding whether the Department intends to 

require evidence of instructor-initiated interaction, studentinitiated interaction, or both.

Discussion: The Department does not consider substantive 

interactions initiated by students to meet the requirements for 

regular interaction in the definition of “distance education.” 

An institution meets the requirement for regular interaction 

between students and instructors by, in part, providing the 
104

opportunity for substantive interactions with the student on a 

scheduled and predictable basis commensurate with the length of

time and the amount of content in the course or competency. 

This requirement could be met if instructors made themselves 

available at a specific scheduled time and through a specific 

modality (e.g., an online chat or videoconference) for students 

to interact about the course material, regardless of whether the 

students chose to make use of this opportunity or interact with 

the instructor at the scheduled time. However, if an 

institution does not offer such opportunities for interaction on 

a regular and scheduled basis in an online program and instead 

relies solely upon students to initiate interactions with 

instructors, it would not meet the requirements for regular and 

substantive interaction between students and instructors and the 

online program would be considered to be taught using 

correspondence courses.

Changes: None.

Comments: Several commenters asked how the Department would 

oversee various aspects of the definition of distance education. 

One commenter asked how the Department would assess whether an 

institution’s instructional activities were approved by the 

institution’s or program’s accrediting agency in audits or 

program reviews. The commenter also asked whether accrediting 
105

agencies would be required to create a list of approved 

instructional activities or whether the Department would allow 

agencies to have more ambiguous standards that are applied on a 

case-by-case basis, which could result in most or all 

institutions meeting the requirements. Another commenter asked 

what oversight mechanisms the Department would use to verify the 

amount of substantive interaction reported by institutions.

Discussion: The Department’s oversight of the requirements 

for regular and substantive interaction between students and 

instructors will focus on five critical factors that 

differentiate distance education from correspondence courses. 

The Department will seek to determine whether--

• The institution’s online instruction is delivered through 

an appropriate form of media;

• The instructors with whom students regularly and 

substantively interact meet the requirements of the 

institution’s accrediting agency for instruction in the 

subject matter;

• Instructors engage in at least two forms of substantive 

interaction meeting the regulatory requirements for the 

course or competency;
106

• The institution has established scheduled and predictable 

opportunities for substantive interaction between students 

and instructors and create expectations for instructors to 

monitor each student’s engagement and substantively engage 

with students on the basis of that monitoring; and

• Instructors are responsive to students’ requests for 

instructional support.

The Department will evaluate whether an instructor meets an 

accrediting agency’s requirements by reviewing the agency’s 

written standards and any communication between the agency and 

the institution regarding the agency’s requirements or whether 

the instructors in question met such requirements. If the 

Department is unable to determine whether the instructor meets 

the agency’s requirements by reviewing such written materials, 

it may contact the agency to seek a determination on the matter.

The Department does not require an institution to monitor 

or document every interaction between an instructor and a 

student to demonstrate that it has fulfilled the requirements 

for regular and substantive interaction. However, we encourage 

institutions to consider whether they have adequate means of 

monitoring online programs to ensure that they continue to meet 

all the conditions of the definition. In overseeing the 
107

requirements for regular and substantive interaction with 

instructors, the Department will determine whether an 

institution has established sufficient internal controls to 

demonstrate that it has established (1) appropriate academic 

policies and procedures for its instructors to implement these 

provisions; and (2) a system for monitoring or periodically 

evaluating its online programs to ensure that its instructors 

continue to observe such policies over time.

Comments: One commenter, arguing that direct instruction was at 

the core of higher education, recommended that the Department 

require “substantive interaction” to include direct instruction 

in addition to two other elements. 

Discussion: The required elements for substantive interaction 

were determined in consensus with the negotiating committee, and 

the Department does not believe it would be appropriate to 

diverge from that agreement to narrow the types of program 

offerings that would meet the Department’s definition of 

“distance education.” Furthermore, we do not believe it is 

advisable to require regular direct instruction in all distance 

education programs given the proliferation of promising new 

educational models that do not rely on regularly scheduled 

instructional sessions. The Department wishes to remind the 

commenter that in the case of in-person classroom-based 
108

instruction, most schools are not required to take attendance. 

It the case of credit hour programs, it is the job of the 

institution to provide the opportunity and it is the job of the 

student to take it.

Changes: None.

Comments: One commenter expressed dissatisfaction with the 

Department’s proposed definitions of “correspondence course” and 

“distance education,” stating that the requirement for “constant 

communication” initiated by the instructor in distance education 

was unfair and would hinder students who need flexibility with 

respect to the time and place that they interact with their 

instructors.

Discussion: The proposed definition of “distance education” 

does not require constant communication between students and 

instructors and in fact only requires scheduled opportunities 

for interaction with qualified instructors and a system for 

monitoring student engagement and success. We believe these 

requirements are reasonable and will permit substantial 

flexibility for institutions to create new educational models 

that place the student, rather than the instructor or the 

institution, at the center of the learning exercise.

Changes: None.
109

Comments: Several commenters emphasized the importance of 

improving the quality of information and oversight related to 

distance education.

One commenter said that while some information exists about 

distance education in the Integrated Postsecondary Education 

Data System (IPEDS), the data are not current and include only

the number of students enrolled in distance education courses 

and completing distance education programs. The commenter also 

indicated that the National Center for Education Statistics 

(NCES) sample surveys collect some information about engagement 

with distance education, but because those surveys are based on 

samples and are not conducted annually, their usefulness in 

answering policy and research questions is limited. The 

commenter argued that the Department should improve timely data 

collection about distance education given the significant number 

of students who enroll in that format, the uncertainty about 

future reliance on distance education options, and the 

importance of evaluating regulations related to distance 

education. The commenter suggested adding a field for the 

distance education status of enrolled title IV recipients in the 

National Student Loan Data System (NSLDS). Another commenter 

suggested that the Department require institutions to establish 

a new location with the Department for exclusively online 
110

students. That commenter also reiterated a proposal that had 

been proposed by one of the non-Federal negotiators during 

negotiated rulemaking: that the Department require institutions 

to report, for students who are enrolled in programs in which at 

least one course can be completed online, whether each recipient 

of title IV, HEA assistance is enrolled exclusively online, 

exclusively as a brick-and-mortar student, or as a hybrid 

student in both online and brick-and-mortar instruction. One

commenter called for a demonstration program for competencybased education authorized by Congress that would test 

replacements for the credit hour and allow institutions to 

reasonably experiment with different models of interaction with 

students, but argued that in lieu of such a program no changes 

should be made to the consensus regulations.

Discussion: We agree with the commenters who suggested that 

additional data regarding the use of distance education would be 

helpful; however, we do not believe that collecting such data 

through the National Student Loan Data system is the appropriate 

vehicle for that data collection to occur. We will consider the 

feasibility of the other suggestions offered by commenters for 

collecting data related to students who are enrolled in distance 

education. The Department does not have the authority without 

action by Congress to develop a demonstration program with 
111

waivers that exceed the Department’s authority under the 

Experimental Sites Initiative. 

Changes: None.

Comments: One commenter recommended that the Department 

eliminate the regulatory definition of “regular and substantive 

interaction” for distance education entirely, arguing that there 

is no reason to impose additional requirements beyond what is in 

the statute given advances in technology that permit detailed 

monitoring of a student’s online activities. The commenter 

suggested that the Department is not obligated to define 

“regular and substantive interaction” in a way that would 

prevent many on-ground courses from meeting those requirements. 

The commenter further advised that the Department’s definition 

of “academic engagement” was sufficient to eliminate any 

confusion that had arisen about distance education because it is 

widely understood that “regular and substantive interaction” is 

a descriptive term for “academic engagement.” Finally, the 

commenter noted that the Department is not required to follow or 

defer to its prior sub-regulatory guidance, in particular Dear 

Colleague Letter GEN-14-23, which provides additional 

explanation regarding the meaning of “regular and substantive 

interaction” with respect to distance education.
112

Discussion: We disagree that the statutory requirements for 

“regular and substantive interaction” for a distance education 

program are sufficiently clear that a regulatory definition is 

not needed. For more than a decade since the statutory 

definition of “distance education” was first created, 

institutions have expressed confusion about the practical 

meaning of the term and have argued that the ambiguity of what 

constitutes regular and substantive interaction have hampered 

innovation as a result of fears of non-compliance and audit or 

program review findings. Moreover, the concept of “regular and 

substantive interaction” is an important differentiating factor 

between distance education and correspondence courses, which, if 

improperly understood, could result in institutional 

ineligibility for an institution that suddenly becomes aware 

that it has been offering more than half of its courses or 

enrolling more than half of its students through correspondence 

courses. We also disagree that the definition, as currently 

written, would be impossible to meet if it were offered in a 

classroom setting, since scheduling class sessions and 

performing ongoing monitoring of each student’s performance and 

engagement in class are traditional teaching functions that do 

not require the use of sophisticated software systems.
113

We also disagree that the definition of “academic 

engagement” necessarily includes regular and substantive 

interaction between students and instructors and can be used in 

lieu of a description of those requirements in the regulations. 

While substantive interaction with an instructor related to a 

student’s coursework is certainly a form of academic engagement, 

it is not synonymous with the broader concept of academic 

engagement.

Finally, the Department agrees that it is not required by 

law to continue to abide by the guidance in Dear Colleague 

Letter GEN-14-23, and plans to retract and revise aspects of 

that guidance as well as guidance in Dear Colleague Letter GEN13-10, related to the application process for direct assessment 

programs, that will no longer apply upon the implementation of 

these regulations.

Changes: None.

Comments: One commenter recommended that the Department include 

the concept of “co-curricular” education in the definition of 

distance education, in particular with regard to the 

requirements for substantive interaction. The commenter 

proposed that the definition be revised to express that distance 

education could be either curricular or co-curricular. 
114

The commenter asserted that such revisions would recognize the 

importance of co-curricular activities, which the commenter 

defined as activities associated with and complementary of the 

curriculum. The commenter argued that, for many students who 

enroll in distance education programs, particularly adult 

learners, co-curricular learning plays a critical role in 

enhancing the student experience and helping to ensure student 

persistence and success and that such learning has also played a 

similar role in ground-based programs.

Discussion: The Department agrees with the commenter that cocurricular activities –- which are generally aligned with and

designed to complement the academic curriculum -- are useful and 

often vital components of a postsecondary program that support 

student persistence and success. Because of the close ties 

between academic coursework and co-curricular activities, we 

believe that there may be occasions in which such activities are 

designated by an institution’s accrediting agency as types of 

substantive interaction under paragraph (4)(v) of the definition 

of “distance education.” If an accrediting agency designates a 

co-curricular activity as a type of substantive interaction, 

interactions involving that activity would meet the requirements 

of the definition. However, we believe that including the 

concept of co-curricular activities in the definition would 
115

increase the scope of activities more broadly than intended by 

the negotiating committee, and therefore decline to add the 

suggested language to the text of the definition.

Changes: None.

Comments: Two commenters offered conflicting opinions on 

whether the Department should emphasize the concept of “faculty” 

rather than “instructors” in the definition of “distance 

education.

One commenter argued that the current requirements for 

instructors left too much discretion to institutions and 

accrediting agencies. The commenter recommended that the 

Department should emphasize to accrediting agencies that faculty 

should be the primary “instructors” in postsecondary education, 

regardless of modality. The commenter was supportive of 

innovation and the use of artificial intelligence or other 

innovative technologies but indicated that innovation could 

occur in the context of faculty interaction with students. The 

commenter expressed concern that the requirements for distance 

education in the proposed definition would not be the same as 

those for other modalities.

Another commenter expressed the opposite view, arguing that 

the Department’s OIG had raised concerns about replacing the 

word “instructor” with the word “faculty” in the “Promoting Real 
116

Opportunity, Success, and Prosperity through Education Reform 

Act” (PROSPER Act), which was introduced in 2017. The commenter 

noted that the OIG believed that using the word “faculty” in the 

statutory definition of “distance education” would allow a 

school to qualify for full participation in the FSA programs 

based on email contact between students and faculty on matters 

unrelated to the subject matter of a program.

Discussion: Though we do not agree with the level of concern 

that was raised by the Department’s OIG regarding the use of the 

word “faculty,” or that the use of that word in lieu of 

“instructor” would substantially undermine the definition of 

“distance education,” we believe that the word “instructor” is 

more appropriate in this context. Given the use of the word 

“instructor” in the statutory definition of “distance 

education,” we believe that it is appropriate to focus on a 

staff member’s instructional function, rather than that person’s 

faculty role, when making a determination about whether the 

staff person can fulfill the requirement for regular and 

substantive interaction with students. The function of 

instruction and the role of faculty are not necessarily 

synonymous; for example, many institutions hire research faculty 

that do not have teaching responsibilities.

Changes: None.
117

Comments: One commenter indicated that the proposed 

requirements for substantive interaction did not appear to 

require any direct instruction or group discussion. The 

commenter asked whether it would be possible for an institution 

to fulfill the requirements for substantive interaction without 

human engagement, e.g., through assessment and responses to 

students’ questions through software or other non-human means. 

The commenter recommended that the Department include 

requirements for “engagement between students and instructors” 

rather than merely a reference to “engaging students” to make it 

clear that interactions need to be with human beings to meet the 

requirements.

Discussion: Only individuals responsible for delivering course 

content and who meet the qualifications for instruction

established by an institution’s accrediting agency can fulfill 

the requirements for regular and substantive interaction with 

students. The Department does not prohibit other forms of 

substantive interaction that do not involve qualified 

instructors, but under the statutory definition such interaction 

cannot meet the requirements in the definition of “distance 

education.” Interactions with artificial intelligence, adaptive 

learning systems, or other forms of interactive computerassisted instructional tools qualify as types of “academic 
118

engagement,” but in this limited context those forms of 

engagement do not meet the statutory requirements for regular 

and substantive interaction between students and instructors.

While we agree with the commenter about the importance of 

human interaction in this definition, we do not believe the 

commenter’s proposed changes are necessary because the 

definition currently requires regular and substantive 

interaction between students and instructors; substantive 

interactions with machines or other forms of technology that do 

not involve instructor would therefore not qualify.

Changes: None.

Comments: One commenter asked the Department to reconsider the 

need for the specific language regarding distance education in 

an accrediting agency’s scope of recognition and, in doing so,

recognize that distance education is a more global term 

regarding instructional delivery provided which can include 

online delivery of instruction and internships and field 

experiences, such as clinical rotations.

Discussion: While the Department recognizes that the term 

“distance education” is used to describe a wide variety of 

activities in higher education, the HEA requires a distance 

education program to be evaluated and approved by an accrediting 
119

agency with approval of distance education in the scope of its 

recognition by the Secretary. 

Changes: None

Definition of Juvenile Justice Facility (§ 668.2)

Comment: One commenter supported the new definition of a 

juvenile justice facility to ensure that an otherwise eligible 

student is not prohibited from receiving a Federal Pell Grant 

solely because of confinement in such a facility.

Discussion: We appreciate the support from the commenter. The 

Department has received questions in the past about whether 

these facilities are correctional institutions and whether 

students in the facilities are eligible for Federal Pell Grants. 

Neither the HEA nor our regulations previously defined the term 

“juvenile justice facility.” Therefore, we proposed to define

this term in the regulations to codify sub-regulatory guidance 

published on December 8, 2014 (Dear Colleague Letter GEN 14–21). 

We also sought to clarify the term as referenced in the 

Department’s regulations and materials, including in the 

definition of “incarcerated student.” Accordingly, we aimed to 

clarify that students in juvenile justice facilities may receive 

a Federal Pell Grant if they are otherwise eligible.

Changes: None.
120

Comment: One commenter provided both support and opposition to 

the definition of “juvenile justice facility.” The commenter 

stated that the HEA does not allow those who are incarcerated in 

a Federal or State prison to receive a Federal Pell Grant and 

quoted the statutory language. This commenter then noted that 

our proposed HEA change would define “juvenile justice facility”

as being included among the list of correctional facilities in 

the definition of “incarcerated student” for the purposes of 

Pell Grant availability. The commenter favored extending Pell 

Grants to students in juvenile justice facilities but opposed 

including juvenile justice facilities under the correctional 

institutions in the “incarcerated student” definition. The 

commenter believed that the Department’s proposed definition

caused confusion about what constitutes an incarcerated student 

by including juvenile justice facilities within the 

“incarcerated student” definition. Finally, this commenter also 

noted that the Department did not include any evidence or 

studies from appropriate prison education experts on how this 

change would clarify the availability of Pell Grants to students 

in juvenile justice facilities.

Discussion: We proposed this new definition to clarify that a 

person incarcerated in a juvenile justice facility is not 

considered to be incarcerated in a Federal or State penal 
121

institution, regardless of who operates or has jurisdiction over 

the facility. This definition clarifies that students 

incarcerated in a juvenile justice facility continue to be 

eligible for Federal Pell Grants. We believe the commenter was 

mistaken. These regulations do not change or contravene the 

HEA. Additionally, the Department is unaware of available 

research on the interpretation of this term and is merely 

codifying current practice.

Changes: None.

Definition of Incarcerated Student (§ 668.2)

Comments: A couple of commenters expressed support for the 

revised definition of an incarcerated student. One commenter 

supported the emphasis on access to Federal Pell Grants while in 

a juvenile justice facility, noting the importance of funding to 

complete postsecondary education coursework and potentially 

obtain an academic credential. The commenter believed this 

change would not only help those in juvenile justice facilities,

but society as a whole because education increases the 

likelihood of positive outcomes when students are released and 

reduces the likelihood those students will reoffend.

Another commenter who supported the proposed change suggested 

that adding the term “juvenile justice facility” to the 

incarcerated student definition might imply that the Department 
122

is barring access to Federal Pell Grants to students serving in 

such a facility.

Discussion: We appreciate the commenters’ support for the 

revised “incarcerated student” definition. We do not agree that 

the revised definition implies a prohibition on eligibility for 

a Federal Pell Grant for those in a juvenile justice facility. 

In fact, we amended the definition of incarcerated student to 

clarify that those held in a juvenile justice facility are not 

considered to be incarcerated to ensure that these students 

continue to be eligible for Federal Pell Grants.

Changes: None.

Comment: One commenter indicated that some criminal juvenile 

activity and related records may be confidential and pointed out 

that individuals may be in a juvenile facility voluntarily or 

without a court requirement. The commenter suggested that 

privacy concerns call for the Department to reconsider adding 

“juvenile justice facility” to the incarcerated student 

definition. This commenter further noted that the Free 

Application for Federal Student Aid (FAFSA) does not include a 

question about incarceration and assumed that the Department 

would seek such information. The commenter asserted that 

continuing to exclude the phrase would simplify the regulation 

and avoid excluding necessary exceptions.
123

Discussion: The changes to the definition of “incarcerated 

student” do not substantively change our current practice. We 

revised this definition for clarity and to ensure access to 

Federal Pell Grants for those in a “juvenile justice facility.” 

We do not believe this revised definition requires access to 

confidential records or poses a privacy risk, nor are we aware 

of any needed exceptions to the regulatory definition. As we 

will not exclude those in a “juvenile justice facility” from 

receiving the Federal Pell Grant, this change would not require 

an additional FAFSA question or the need for other information.

Changes: None.

Direct Assessment Programs (§§ 600.10 and 668.10)

Comments: Numerous commenters supported the proposed changes 

intended to simplify and clarify regulations for direct 

assessment programs. Commonly expressed among those writing in 

support, was the belief that the proposed changes strike an 

appropriate balance between supporting innovation, along with 

reducing the administrative burden on institutions, and ensuring 

a level of oversight necessary to promote program integrity. 

Discussion: We appreciate the commenters’ support for these 

proposed changes.

Changes: None.
124

Comments: Several commenters expressed opposition to the 

proposed changes in § 600.10 requiring an institution to seek 

and obtain the Department’s approval of a direct assessment 

program only when the institution adds such a program for the 

first time, and when the institution offers the first direct 

assessment program at each level of offering (e.g., a first 

direct assessment master’s degree program or bachelor’s degree 

program) than what the Secretary had previously approved. 

Overwhelmingly, these commenters asserted that, in proposing not 

to require institutions to obtain approval for all direct 

assessment programs, the Department is acting contrary to the 

intent of Congress as expressed in section 481(b)(4) of the HEA 

and exceeding its statutory authority. In the opinion of the 

commenters, this will result in diminished oversight protection,

which currently ensures that new direct assessment programs 

receive adequate scrutiny and that each new eligible direct 

assessment program is approved by the Secretary. One commenter 

further suggested the Department was attempting to “rewrite 

statute through regulation,” with another commenter offering 

that, “The Department does not have the authority to grant the 

Secretary discretion to approve some direct assessment programs 

and not others,” while another commenter expressed the opinion 
125

that in proposing these changes, the Department has acted 

without supporting evidence or basis in law. 

Conveying disagreement with the Department’s position, 

expressed in the NPRM, that once an institution demonstrates it 

can capably administer a direct assessment program, there is 

little risk that the same institution would not properly 

administer other direct assessment programs, a few commenters 

noted that programs of all types at the same institution, within 

the same credential level, can vary in quality and value, making 

it crucial for the Department maintain its oversight 

responsibilities consistent with its statutory obligations. One 

of those commenters also took issue with the Department’s 

reasoning that, it “will review the institution's processes 

related to title IV aid administration but will not evaluate the 

academic content or academic quality of programs, except to 

confirm that an accrediting agency has specifically approved 

each program,” arguing that the Department’s accreditation 

regulations, published in November 2019, weaken the accreditor’s 

review and allow an accreditor’s senior staff, rather than the 

accreditor’s appointed board of commissioners, to review, 

approve, and monitor substantive changes to direct assessment 

programs. 
126

The same commenter offered that the Department failed to 

consider its OIG audits of accreditors of competency-based 

education programs that demonstrated why accreditors cannot be 

solely responsible for the evaluation and oversight of direct 

assessment programs. In the opinion of the commenter, the 

Department further failed to consider the OIG audits during the 

negotiated rulemaking or ask for public comment on how the audit 

findings may demonstrate whether accreditors’ senior staff alone 

will be able to adequately assess the administration and 

effectiveness of direct assessment programs without the 

Department’s review, as mandated by statute. Finally, 

referencing case law (Connecticut Light & Power Co. v. Nuclear 

Reg. Comm., 673 F.2d 525, 528 (D.C. Cir. 1982)), the commenter 

suggested that, the Department has failed to provide an accurate 

picture of the reasoning that has led to the proposed rule, 

resulting in interested parties being unable to comment 

meaningfully upon the agency's proposals. The commenter 

additionally cited Portland Cement Ass’n v. Ruckelshaus, 486 

F.2d 375, 393 (D.C.Cir.1973) for the proposition that, “It is 

not consonant with the purpose of a rulemaking proceeding to 

promulgate rules on the basis of inadequate data, or on data 

that, [in] critical degree, is known only to the agency.”
127

A few commenters, in addition to asserting that the 

Department has a statutory obligation to approve each new direct 

assessment program, expressed the belief that direct assessment 

programs have access to a separate financing model from other 

types of credit-hour or clock-hour-based programs. This 

supports (in the opinion of the commenters) heightened oversight 

of direct assessment programs, achieved through requiring 

institutions to obtain Department approval for each such 

program.

One commenter maintained that the current regulations for 

determining direct assessment program eligibility should be 

unaltered because direct assessment programs are exempt from 

limitations on written arrangements. The commenter explained 

that, per § 668.10(e), direct assessment programs are exempt 

from the restriction that limits the percentage of learning 

resources that are provided by other entities, making the risks 

of inadequate oversight associated with such programs greater 

than they might otherwise be. In the commenter’s opinion, under 

the Department’s proposed regulations an institution that has 

already received approval for a direct assessment program at a 

given credential level would be able to stand up subsequent 

direct assessment programs at the same credential level where up 

to 100 percent of those programs is offered by outside entities 
128

without review from the Department regarding the program’s 

eligibility.

Discussion: We disagree with the commenters who assert that the 

Department did not have adequate legal authority to require the 

Department’s approval of a direct assessment program only when 

the institution adds such a program for the first time, and when 

the institution offers the first direct assessment program at 

each level of offering than what was previously approved. 

Section 481(b)(4) of the HEA states that “In the case of a 

program being determined eligible for the first time...such 

determination shall be made by the Secretary before such program 

is considered to be an eligible program.” While Congress 

clearly intended for the Department to undertake an evaluation 

and approval of an institution’s offering of direct assessment, 

whether or not the requirement applies on a program-by-program 

basis is not prescribed and, therefore, left to the Department.

We also disagree that requiring the Department’s approval 

only for the first direct assessment program that an institution 

offers (or the first such program at a new level of offering) 

will result in diminished oversight or undermine the integrity 

of the title IV, HEA programs. As we indicated in the preamble 

to the NPRM, the Department does not evaluate academic content 

or academic quality of programs, but instead focuses its review 
129

of a direct assessment program on the institution’s title IV aid 

administration in such programs. Institutions typically use 

information provided by the Department in response to their 

initial approvals to inform subsequent applications for direct 

assessment programs. Thus, multiple evaluations of direct 

assessment at the same institution often results in the 

institution providing nearly the same information for each 

subsequent program, and results in an approval process that 

yields little value to students, the institution, or taxpayers. 

Moreover, the Department’s regulations under § 668.10(a)(5) will 

still require an institution’s accrediting agency to review and 

approve each direct assessment program and an institution’s 

credit or clock hour equivalency methodology and institutions 

will be required to report new direct assessment programs to the 

Department in accordance with new § 600.21(a)(12), which will 

provide the Department with an opportunity to ensure that such 

programs have been appropriately reviewed and approved by an 

institution’s accrediting agency.

The commenter who asserted that the Department did not 

consider the findings of its OIG when proposing the changes to 

the direct assessment programs is incorrect. In developing 

proposed regulations relating to direct assessment programs, we 

considered the findings in several of the Inspector General’s 
130

audits9 over the past decade relating to direct assessment 

programs. In those audits, the Inspector General made a number 

of recommendations that have already been adopted by the 

Department’s Office of Postsecondary Education and FSA, 

including ensuring that School Participation Division managers 

are fully informed of issues raised during the review of direct 

assessment program applications, monitoring and evaluating 

accrediting agency approvals of direct assessment programs, and 

referring concerns about accrediting agency reviews of direct 

assessment programs to the Office of Postsecondary Education’s 

Accreditation Group. The Department also included a new 

provision in these regulations, in consensus with negotiators,

to require institutions to address how they avoid paying title 

IV, HEA program funds for credit that might be given students on 

the basis of prior learning or life experience in their direct 

assessment applications. We agree with the OIG that payment of 

title IV aid for credit earned through prior learning remains an 

9 “Direct Assessment Programs: Processes for Identifying Risks and Evaluating 

Applications for Title IV Eligibility Need Strengthening to Better Mitigate 

Risks Posed to the Title IV Programs,” published September 30, 2014; “The 

Higher Learning Commission Could Improve Its Evaluation of Competency-Based 

Education Programs to Help the Department Ensure the Programs Are Properly 

Classified for Title IV Purposes,” published September 30, 2015; and “The 

Western Association of Schools and Colleges Senior College and University 

Commission Could Improve Its Evaluation of Competency-Based Education 

Programs to Help the Department Ensure Programs Are Properly Classified for 

Title IV Purposes,” published August 2, 2016.
131

ongoing risk that requires ongoing oversight and mitigation. We 

recognize that institutions offering direct assessment programs 

may use financing models that differ from credit hour versions 

of the same program; however, we believe that the risks 

associated with these models can be addressed in the 

institution’s first direct assessment application and in 

requirements for institutions to report subsequent direct 

assessment programs to the Department. Furthermore, many 

competency-based programs, including direct assessment programs, 

use subscription-based financing models that are specifically 

addressed by the Department’s proposed completion-based approach 

to disbursement of title IV, HEA program funds in subscriptionbased programs. The Department plans to continue monitoring use 

of the subscription-based disbursement system to determine 

whether additional changes are needed in the future.

Finally, the commenter who indicated that direct assessment 

programs are exempt from the restriction on the percentage of 

learning resources that are provided by other entities is 

correct, but we disagree that this exemption should prevent the 

Department from making the changes to the regulations agreed 

upon by the negotiating committee. The commenter argues that 

the Department will have no oversight over subsequent direct 

assessment programs added by an institution after its initial 
132

application, but that is inaccurate. Institutions will still be 

required to submit materials related to their direct assessment 

programs through the Department’s reporting process under §

600.21(a)(12). This reporting requirement will permit the 

Department to continue to monitor the types of direct assessment 

programs that are offered by an institution after its initial 

application and take action if it determines that there are 

irregularities with a particular program or programs.

Changes: None.

Comments: One commenter objected to the use of the word 

“abilities” in the definition of “direct assessment,” arguing 

that using the word "abilities" in this context poses new risks 

to students and their privacy. The commenter explained that 

abilities might include psychological information that is 

confidential and governed by healthcare information protection 

laws. Citing the need to legally protect psychological 

abilities data in ways that might differ from the information 

protection protocols applicable to other education data, the 

commenter suggested that the potential consequences be provided 

for public review and comment before the Department moves to 

make the change final.

Discussion: Nothing in the Department’s regulations would 

permit an institution to violate applicable privacy laws, 
133

including healthcare laws, with respect to a student’s 

psychological or cognitive abilities. The word “abilities” in 

these regulations refers only to the things that a student must 

demonstrate that he or she can do related to the competencies 

required in a direct assessment program.

Changes: None.

Comments: A few commenters, one of whom asserted that the NPRM 

failed to discuss reasonable alternatives, offered modifications 

they urged the Department to consider. One of these proposed the 

creation of a two-tier application process. The first tier 

would include all new programs and apply all of the application 

elements in the evaluation; the second tier would include 

additional programs offered at the same credential level, 

requiring only descriptions of the program under consideration 

and an explanation of how learning objectives are set and 

evaluated, without the necessity for the institution to provide 

information on the methodology for determining an equivalent 

number of credit or clock hours. Another suggested modification 

to what was proposed in the NPRM was that the Department require 

accreditors to utilize the C-BEN Quality Framework for 

Competency-Based Educational Programs in evaluating direct 

assessment programs so that both students and policymakers can 

be confident the program has been designed to meet quality 
134

standards. A further recommendation was the inclusion of 

additional language in the regulation which would require 

institutions to notify the Department and seek approval for 

substantively changed processes or policies within the approved 

direct assessment model for the institution.

Discussion: We thank the commenter for the suggestion regarding 

a two-tier process for the Department’s approval of direct 

assessment programs. Though we decline to adopt the suggestion, 

the process for the Department’s evaluation of an institution’s 

first and subsequent direct assessment programs will proceed in 

a similar fashion. An institution’s first application for 

direct assessment, or its first application at a new level of 

offering, will undergo the Department’s full approval process 

and the institution will not be permitted to disburse title IV, 

HEA program funds until it has received the Department’s 

approval. Subsequent programs at the same level(s) of offering 

will be reported to the Department under new § 600.21(a)(12), 

and this reporting process will require the institution to 

submit to the Department a description of the program and 

evidence that its accrediting agency has approved the program 

and the institution’s methodology for determining credit or 

clock hour equivalency for the program.
135

We also appreciate the commenter’s suggestion regarding a 

requirement for an institution to notify the Department and seek 

approval for changed processes or policies for the institutions 

direct assessment offerings. Though we believe that it would be 

too burdensome to implement this suggestion any time such a 

change occurred, the Department will evaluate such changes, and 

all regulatory requirements for an institution’s direct 

assessment programs, during an institution’s application for 

recertification.

There was no discussion during negotiated rulemaking 

regarding a requirement for accrediting agencies to the use of 

Competency-Based Network’s (C-BEN) Quality Framework for 

Competency-Based Educational Programs10 (Quality Framework) when 

approving new direct assessment programs, and we do not feel it 

is appropriate to introduce new requirements for accrediting 

agencies at this stage given that the Department has already 

published its final rule on accreditation. Additionally, though 

the Quality Framework includes helpful principles for the design 

and implementation of high-quality competency-based programs and 

we encourage institutions to consider these principles when 

planning to offer competency-based education programs, the 

10 www.cbenetwork.org/wp-content/uploads/2018/09/Quality-Framework-forCompetency-Based-Education-Programs-Updated.pdf
136

principles may not be appropriate for all accrediting agencies 

in all circumstances and imposing them on all accrediting 

agencies could undermine the autonomy of those entities and 

their oversight of academic quality, which is protected by the 

HEA. Therefore, we decline at this time to include a 

requirement for accrediting agencies to use the standards 

described in the Quality Framework when approving competencybased education programs, including direct assessment programs.

Changes: None.

Comments: A few commenters indicated concerns over the proposed 

requirement for an institution to establish a methodology to 

reasonably equate each module in the direct assessment program 

to either credit or clock hours. Expressing disappointment at 

the Department’s continued reliance on clock or credit-hour 

equivalencies, one of those commenters stressed the very nature 

of direct assessment programs in utilizing direct assessment of 

student learning or recognizing the direct assessment of student 

learning by others in lieu of credit or clock hours as the 

measure of student learning, and offered that the Department’s 

focus on equating each module in the direct assessment program 

to either credit or clock hours is inconsistent with the HEA,

which merely requires that any such assessment is consistent 

with the accreditation of the institution or program utilizing 
137

the results of the assessment (20 U.S.C. § 1088(b)(4)). The 

same commenter further asserted that requiring institutions to 

craft, implement, and explain methodologies for creating credit 

or clock hour equivalences is administratively burdensome and 

shifts the program’s focus away from student learning in favor 

of seat time.

Another commenter suggested that the use of the term 

“module” in § 668.10(a)(3) as the period measure of learning in 

direct assessment programs is confusing since it is already used 

in § 668.22, and in this NPRM further limited to describe 

courses in standard and nonstandard-term programs in relation to 

the return to title IV funds. In order to avoid this confusion 

the commenter recommended that the Department remove the term 

“module” in the direct assessment context and instead require in 

§ 668.10(a)(3) that “An institution must establish a methodology 

to reasonably equate each of its stated measures of learning in 

the direct assessment program to either credit hours or clock 

hours...” (85 FR 18698). This change, the commenter argues, 

would not alter the substance and meaning of the amendments in 

any way. 

Discussion: We disagree with the commenters who asserted that 

it is not necessary for the Department to require an institution 

to clearly describe its methodology for developing credit or 
138

clock hour equivalencies for its direct assessment programs. 

This requirement is vital to the integrity of the title IV, HEA 

programs because the requirements for calculating awards and 

disbursement amounts under those programs is still performed 

using credit or clock hours. Though we acknowledge that the 

credit hour is an outdated method of measuring a student’s 

workload based on seat time and that developing an equivalency 

system involves administrative burden, there is currently no 

widely-accepted alternative “currency” for learning and 

workload.11 Without such an alternative, the Department will 

continue to use credit or clock hour equivalencies in order to 

ensure that an institution’s choice of a unit of measurement for 

a direct assessment program does not result in an unfair or 

inflated determination of a student’s eligibility for title IV, 

HEA funds. Such a “currency” is also important in enabling 

students to transfer credits between institutions. 

The Department encourages institutions and accrediting 

agencies to consider options for measures of student learning 

and workload that do not rely on credit hours but can be widely 

accepted and understood by practitioners and adopted by 

accrediting agencies. If the use of such a measure becomes 

11 www.luminafoundation.org/files/resources/cracking-the-credit-hour.pdf
139

prevalent in postsecondary education, the Department will 

consider allowing institutions to rely upon that measure for 

competency rather than requiring an equivalency to credit or 

clock hours.

Though we agree with the commenter who indicated that it 

was possible that the use of the term “module” in this section 

could be conflated with the different usage of the term in the 

R2T4 regulations under § 668.22, we decline to make a change in 

this case. We believe that replacing the word “module” would 

require the use of another term that may result in a 

substantively different approach in the direct assessment 

regulations. Because we did not discuss such an approach with 

the negotiating committee, nor include discussion of the issue 

in the NPRM, we decline to make the change at this time.

Additionally, we do not believe that any confusion regarding the 

word “module” will undermine the requirements in either § 668.10 

or § 668.22 because of the different context for the usage of 

the word in each section.

Changes: None.

Comments: One commenter offered that, while the proposed 

regulation states that title IV, HEA funds cannot be utilized 

for the portion of the direct assessment program that the 

student is awarded based on prior learning, it does not define 
140

what activities comprise prior learning. In the opinion of the 

commenter, this leaves the proposed regulation open to a variety 

of interpretations and may result in miscommunication and 

confusion between the Department and institutions. The 

commenter proposes that “prior learning” and “prior learning 

assessment” be defined as follows:

• Prior Learning – Learning obtained outside of an academic 

context (experiential, personal, professional, workplace, 

etc.) that has not been officially awarded as academic 

credit.

• Prior Learning Assessment – is the process that evaluates 

and recognizes prior learning and awards the appropriate 

level of academic credit based on established 

institutional/organizational standards. Assessment of 

prior learning may occur before and during (concurrently) 

credit bearing (title IV eligible) course and programs.

Discussion: We thank the commenter for the suggestions 

regarding how to define prior learning in the context of the 

direct assessment regulations. When the term “prior learning” 

is used in these regulations, it means learning that occurred 

prior to the student’s enrollment at the institution or in a 

context other than the curriculum in which the student is 
141

enrolled (for example, the student’s workplace or another 

academic institution). Prior learning includes learning 

associated with the transfer of credit from a prior institution, 

since the credits earned through transfer cannot be included in 

a student’s enrollment status for purposes of calculating 

eligibility for title IV, HEA assistance. We agree with the 

commenter’s definition of “prior learning assessment,” which 

means a process for evaluating and recognizing prior learning 

and awarding the appropriate level of academic credit based on 

established institutional/organizational standards. We also 

agree that assessment of prior learning may occur prior to and 

during a student’s enrollment at the institution.

Changes: None.

Comments: One commenter suggested that competency-based 

education, as a less mature field, may not be ready for 

expansion. However, the commenter indicated that it is 

important to make data available that might help researchers, 

practitioners, and others understand the field better and 

provide research and information that help future efforts by the 

Department or Congress to enable innovation while protecting 

students and taxpayers. The commenter offered several 

suggestions for the Department to collect and share data about 

direct assessment programs that have been approved directly by 
142

the Department, including publication of a list of institutions 

that have been approved for direct assessment and collecting 

information about tuition, retention rates, and completion rates

for each direct assessment program. The commenter also 

suggested disaggregating and identifying these programs on the 

College Scorecard. The commenter recommended against requiring 

the collection or sharing of data related to course-based 

competency-based education programs that do not require

Department approval given the potential for increased burden.

Discussion: We thank the commenter for their suggestions 

regarding how to improve data on direct assessment programs and 

institutional accountability. We believe that the commenter’s 

suggestion of publishing a list of approved direct assessment 

programs and the institutions that offer them is reasonable and 

we will evaluate whether it is possible to post a public list of 

such programs. However, because the number of direct assessment 

programs remains small, we do not believe that we should collect 

data for such programs exceeding what is collected for other 

types of programs, nor do we currently intend to provide data on 

the College Scorecard specifically related to direct assessment 

programs. We will consider doing so in the future if the number 

of direct assessment programs increases substantially.
143

We agree with the commenter that additional data is not 

needed for course-based competency-based programs. Because 

there is no consistent statutory definition of a competencybased program that does not use direct assessment, the 

Department does not feel that it is practical or useful to 

attempt to collect data about such programs, since the data 

would reflect a wide range of programs, many of which have in 

common only the competency-based learning modality.

Changes: None.

New Program Approval (§ 600.20)

Comments: Many commenters supported the removal of §

600.20(d)(1)(ii)(B), which provides that an institution that is 

submitting a notice in accordance with § 600.20(d)(1)(ii)(A) is 

not required to obtain approval to offer the additional program 

unless notified by the Secretary at least 30 days before the 

first day of class that the program must be approved. The 

commenters stated that these current regulations create an 

unnecessary burden, make it more difficult to quickly respond to 

the needs of employers, and duplicate the oversight of programs 

by State authorizing agencies and accrediting agencies. The 

commenters also supported the addition of provisions requiring 

that the Department take prompt action on any materially 

complete application under §600.20(a) or (b). Two commenters 
144

also noted that it is very difficult for institutions to be 

expected to wait until 30 days prior to the start of the program 

to advertise or enroll students in the program. One commenter 

also underscored the benefits of reduced redundancy while 

supporting the effort to minimize the impact of delays by the 

Department in the program approval process.

Discussion: The Department agrees with the commenters. 

Removing § 600.20(d)(1)(ii)(B) will ease the process of 

approving new programs and allow institutions to offer new 

programs in a timely manner to meet both student demand and 

workforce needs. The Department agrees that the current 

provision creates significant uncertainty about whether an 

institution will be allowed to offer a program until the program 

has nearly begun, without a tangible benefit in terms of 

oversight. It is not reasonable to expect institutions to 

either enroll students in a program that may not be allowed to 

operate or expect students to wait to enroll in these programs 

until 30 days prior to the start of the program. The Department 

seeks to conduct proper oversight in a timely manner without 

undue impact to institutions or students. As many commenters 

noted, this oversight role may also be duplicative of what is 

overseen by accrediting agencies and State authorizing agencies.

Changes: None.
145

Comments: One commenter encouraged the Department to consider 

streamlining the proposed regulations and processes for 

institutions on provisional status. The commenter suggested the 

Department either modify the regulations or use its discretion 

to streamline approvals for institutions with a strong record of 

compliance and stability. The commenter emphasized that the 

COVID-19 crisis may force an increasing number of institutions 

to be placed on provisional status and that such institutions 

may need quick assistance starting new and innovative programs.

Discussion: The Department thanks the commenter for the 

suggestion. The Department has already proposed important 

regulatory flexibilities without jeopardizing proper oversight. 

Further regulatory changes would risk violating the consensus 

agreement and weakening important oversight of program reviews. 

The Department currently considers the past record of an 

institution in these reviews but agrees that some administrative 

processes could be improved to provide more timely responses, 

better communication, and more consistent decisions. The 

Department has already evaluated what it would take to make such 

improvements and hopes to implement them soon but declines to 

make further regulatory changes as the commenters suggest. The 

Department also thanks the commenters for the suggestion on 

streamlining processes in regard to COVID-19, but we believe the
146

impacts COVID-19 has on schools will not necessarily result in a 

larger number of institutions that are placed on provisional 

status.

Changes: None.

Comments: Several commenters disagreed with the Department’s 

contention that the changes in § 600.20 restore functions 

related to program quality to accrediting agencies and State 

authorizing agencies. Instead, these commenters say that the 

approval process relates to the requirements related to access 

to title IV aid. Therefore, the commenters say, institutions 

should be required to report their intent to establish new 

programs to protect students and taxpayer funds. The commenters 

also assert that the elimination of the list of elements the 

Secretary will consider when reviewing an application under this 

section was not part of the consensus language nor was it 

explained in the NPRM and therefore the change should be 

reverted to the consensus language in the final rule.

Discussion: The Department disagrees with the assertions made 

by the commenters. While they are correct that the provisions 

of § 600.20 broadly relate to the Department’s oversight of 

access to title IV aid, the overwhelming majority of these 

provisions are left unchanged. Institutions continue to be

required to notify the Secretary of their intent to offer an 
147

additional educational program. The proposed regulations simply 

require the Department to act promptly and remove restrictions 

that unnecessarily prevent an institution from quickly 

developing new programs in response to requests by students, 

employers, or others. It is to the benefit of both students and 

institutions that there be certainty well in advance that a 

planned program will be able to operate. The Department 

intended that the amendatory instructions in the NPRM would be 

consistent with the consensus language adopted during the 

negotiated rulemaking. The amendatory instructions that were 

published, however, contained errors, which the Department has 

corrected in this final rule. The description of the changes to 

§ 600.20 in the preamble to the NPRM accurately reflected the 

consensus language. 

Changes: None.

Comment: One commenter noted that the amendatory language 

appeared to contain drafting errors or changes that were not 

appropriately described, which differed from consensus language. 

The commenter urged the Department to reopen the NPRM for 

additional comment. The commenter noted that the proposed 

amendatory language would delete current § 600.20(d)(1)(ii)(E), 

a change that they would oppose on the basis that the elements 

in that section are important for any approvals the Secretary 
148

may consider. The commenter urged the Department to maintain 

current § 600.20(d)(1)(ii)(E) (which is redesignated as § 

600.20(d)(1)(ii)(D)) and revise the reference in that section to 

paragraph (d)(1)(ii)(B), which was deleted in the consensus 

language, to instead refer to paragraph (d)(1)(ii)(C), which 

relates to the Secretary’s approval of an additional educational 

program. 

Discussion: The Department appreciates the commenter’s close 

review of the proposed amendatory language. We did not intend 

to deviate from the consensus language of § 600.20 and 

identified and discussed each of the intended revisions in the 

preamble to the NPRM. We agree that the proposed amendatory 

language contained errors, especially related to the revised 

numbering of paragraphs in § 600.20(d)(1) and believe that the 

commenter’s suggested revisions are reasonable. 

Changes: We have revised the amendatory language to reflect the 

consensus language, and also revised the reference in 

redesignated paragraph (d)(1)(ii)(D) to refer to paragraph 

(d)(1)(ii)(C).

Subscription Period Disbursement (§§ 668.2 and 668.164)

Comments: Many commenters supported the Department’s definition 

of a subscription-based program model within § 668.2. Two 

commenters indicated that the subscription-based model addresses 
149

the unique nature of competency-based and other self-paced 

programs of study and further encourages institutions of higher 

education to innovate by creating learning modalities that allow 

students to learn at their own pace while remaining eligible for 

title IV, HEA program assistance. Another commenter opined that 

the proposed subscription-based system supports postsecondary 

access and affordability for working adults. One commenter 

stated that the proposed subscription-based model balances 

flexible timelines for students with completion requirements 

that maintain the integrity of the title IV, HEA programs. 

Another commenter was supportive of the changes in timeframes 

associated with disbursements for subscription-based programs 

and indicated appreciation for the ability for institutions to 

offer early disbursements in such programs, asserting that the 

model’s completion requirements would be essential to 

encouraging and supporting students to complete their programs 

on time. Another commenter supported the changes because it 

would permit self-paced coursework to “float” beyond the end of 

a term until a student masters the learning objectives for that 

coursework. Several commenters expressed support for proposed 

definition of a “full-time student” under § 668.2 as it relates 

to subscription-based programs; one of those commenters

indicated that it made sense to prevent a student from receiving 
150

a disbursement based on retaken coursework in a subscriptionbased program, and another stated that to do otherwise would be 

nonsensical.

Discussion: The Department thanks the commenters for their 

support.

Changes: None 

Comments: Two commenters, while supportive of the Department’s 

proposed regulations regarding subscription-based programs, 

urged the Department to rely more heavily on data and evidence 

to oversee such programs. One of those commenters noted that 

the Department has not yet produced any findings from its CBE

Experiment and asked the Department to produce the statutorilymandated reports detailing the findings of its experiments.12 

This commenter also encouraged the Department to improve the 

collection of data from participating institutions in the future 

so that CBE experiments will be more useful in the future. The 

other commenter emphasized the importance of focusing on student 

outcomes to evaluate institutions and their impacts on students 

and the nation’s ability to develop the talent needed to address 

economic and social challenges. The commenter expressed that 

shifting to a more transparent, outcomes-focused accountability 

12 experimentalsites.ed.gov/exp/approved.html
151

system depends on the ability of existing and new entities to 

access and use better data and emphasized the importance of 

equity and quality in any such system.

Discussion: We agree with commenters about the importance of 

using data and evidence in the Department’s oversight of 

subscription-based programs, and that such information is an 

important component of an outcomes-based accountability 

framework. To those ends, the Department plans to monitor which 

programs use the subscription-based model and will evaluate 

student-level data, such as disbursement amounts, debt levels, 

and withdrawal rates for students who are enrolled in such 

programs. This evaluation will take the place of the 

Department’s CBE Experiment, which will end on June 30, 2020. 

The Department will also publish a final report on the CBE

Experiment that will offer more information to the public about 

the results of that experiment related to subscription-based 

programs.

Changes: None.

Comments: One commenter, while acknowledging appreciation for 

the Department’s attempt to balance the subscription-based 

model’s completion requirements with the likelihood that some 

students could struggle to make progress during a specific 

period, indicated concern that the lack of alignment between 
152

disbursements and payment periods could cause confusion amongst 

students, families, and (at least initially) institutions.

Discussion: We disagree that the subscription-based 

disbursement model is excessively complicated. Though the model 

does require an institution to carefully monitor a student’s 

progress in order to ensure that he or she does not receive 

subsequent disbursements of title IV, HEA program assistance, 

each institution has the ability to clearly express to students 

the number of credits (or the equivalent) that must be completed 

by a given date in order to receive aid in the future. This 

facet of the subscription-based disbursement model has already 

been successfully implemented for many non-term programs under 

the existing disbursement system for such programs.

Changes: None.

Comments: Several commenters asked the Department to allow the 

subscription-based model to be used for programs that are not 

offered using direct assessment. One of those commenters asked 

that the Department extend the ability to use the subscriptionbased disbursement model to any self-paced postsecondary 

program, arguing that doing so would provide for greater 

innovation while still tying access to Federal aid with student 

achievement. The commenter suggested that such a change would 
153

likely increase interest among institutions and software vendors 

to support innovation by using the new model.

Two commenters expressed a related concern about 

institutions that had been participating in the Department’s CBE

Experiment and asked if such institutions offering credit-hour 

CBE programs would transition following the end of that 

experiment, which had allowed institutions to use a form of this 

model on a limited basis.

One commenter, while supportive of the Department’s

proposed regulations for subscription-based programs, urged the 

Department not to expand the definition or weaken the 

flexibilities provided by such programs. The commenter noted 

that subscription-based systems are not without risk to 

students, since in such programs students are effectively 

committed to a single price based on the number of courses they 

expected to complete at the start of the semester, and this 

means that students who do not complete their programs quickly 

could overpay for an education that the student does not benefit 

from. The commenter emphasized that because tuition in 

subscription-based programs will be largely financed with 

student debts, students who do poorly in subscription-based 

programs could be at risk.
154

Discussion: The Department agrees with commenters who argue 

that the subscription-based method for disbursing title IV, HEA 

program assistance should be extended to programs other than 

direct assessment programs. The Department had originally 

intended to limit the applicability of those provisions to 

direct assessment programs in order to ensure that the 

disbursement method was used only in programs offered by CBE. 

However, many CBE programs are not offered using direct 

assessment and would thus be prevented from using the 

subscription-based model.

Commenters also make a strong argument that limiting the 

applicability of the requirements to direct assessment programs 

would sharply limit the use of the model and would discourage 

software providers from creating technology that assists 

institutions in disbursing title IV, HEA funds using this 

method. This, in turn, would prevent the model from being 

effectively scaled at most institutions given the cost of 

incorporating the model into existing technology supporting the 

administration of title IV, HEA program funds.

Moreover, we did not intend to hamper or limit flexibility 

in disbursement of title IV, HEA assistance for institutions 

that had previously been participants in the Department’s CBE

Experiment, but recognize that many of those institutions 
155

measure student progress using credit hours rather than direct 

assessment, which would have precluded them from using the 

subscription-based disbursement model under the proposed rule. 

We believe that expanding the use of the subscription-based 

model to any institution using subscription pricing will permit 

institutions with CBE programs using such pricing to transition 

more easily into full regulatory compliance following the end of 

the CBE Experiment.

Finally, the Department believes that the subscriptionbased model includes safeguards for both students and taxpayers 

that limit the risk of expanding the use of the model more 

broadly. The model protects taxpayers by requiring students to 

complete courses or competencies before receiving subsequent 

disbursements of title IV, HEA program funds. The model also 

improves upon the existing non-term disbursement system for 

students by allowing students to switch between full-time and 

less-than-full-time versions of a program in order to limit the 

number of courses they are required to complete in order to 

receive subsequent disbursements of title IV, HEA program funds.

We share commenters’ concerns that students in 

subscription-based programs could quickly accrue debt while 

falling behind in their coursework. This risk was specifically

why we designed the model to require students to complete 
156

coursework before receiving subsequent disbursements of title 

IV, HEA program funds. Institutions and students will both have 

a strong incentive to act if a student finds a subscriptionbased program too challenging or fails to make progress. Faced 

with the possibility of a student losing access to aid, an 

institution may provide additional assistance or resources to 

the student or encourage the student to transfer into a version 

of the program at a reduced enrollment status better suited to 

the student’s rate of progress. Similarly, the student may 

decide to seek additional support or transfer into a different 

program. In either case, the model’s completion requirements 

prevent a student from taking on too much debt if the student is 

unable to complete coursework in the program.

Finally, use of the model would still be limited to 

institutions that charge students on a subscription basis, a 

practice which is rare and primarily used by competency-based 

programs. The Department will evaluate the effectiveness of,

and monitor risks associated with, the model as it begins to be 

used more broadly and will make any changes necessary to protect 

students and the integrity of the title IV, HEA programs.

Changes: We have removed the words “direct assessment” from the 

first sentence in the definition of “subscription-based 

program.”
157

Comments: One commenter requested a correction to the 

definition of a subscription-based program by adding “(or the 

equivalent)” following “credit hours” in the first sentence of 

the definition paragraph. The commenter contends this would 

align the first sentence to the third and last sentences of the 

same paragraph where the parenthetical already exists.

Discussion: We agree with the commenter that referring to the 

equivalent of credit hour in the specified location would 

improve the consistency of the definition. 

Changes: We have added the words “(or the equivalent)” 

following the words “credit hours” in the first sentence of the 

definition of “subscription-based program.”

Comments: One commenter expressed support for the Department’s 

decision to provide a student with some control over the pace of 

learning in his or her subscription-based program by selecting a 

program version at a specific enrollment status. The commenter 

indicated that allowing a student to change to different program 

versions no more often than once per year supports student 

flexibility and results in a manageable level of administrative 

burden. Conversely, another commenter asserted that the 

Department had not provided sufficient justification for 

preventing students from switching between versions of a 

subscription-based program no more than once per academic year.
158

Discussion: The limitation on the number of times that a 

student is permitted to switch between versions of a 

subscription-based program was agreed upon by the Distance 

Learning and Innovation subcommittee as a condition for the 

Department to waive the requirement for an institution to 

evaluate a student’s pace for satisfactory academic progress 

purposes in a subscription-based program. We believe that 

evaluating a student’s pace is unnecessary if the program 

requires a particular rate of completion in order for the 

student to continue receiving title IV, HEA program assistance 

over time. This condition is met if the subscription-based 

program both requires the student to maintain a consistent 

enrollment status (e.g. half-time or full-time) and the student 

does not regularly change that enrollment status, which in turn 

would adjust the number of credits the student was required to 

complete before receiving subsequent disbursements.

Allowing a student to frequently adjust enrollment status 

(e.g., by switching between versions of the same program) would 

mean that, without requiring the institution to evaluate the 

student’s pace toward completion of the program, the Department 

would have no mechanism for ensuring that the student completes 

his or her program in a timely manner. We believe that the 

greater flexibility associated with the ability to switch 
159

enrollment status would be offset by the substantially greater 

complexity associated with measuring a student’s pace for 

satisfactory academic progress purposes. Therefore, the 

Department believes that not requiring pace evaluations, but 

limiting students to switching between versions of the same 

subscription-based program once per year, is the most 

appropriate way to ensure that the student maintains an 

appropriate pace (in the judgment of the institution) toward 

program completion.

Changes: None.

Comments: One commenter asked whether a student enrolled in a 

subscription-based program would be required to complete credits 

associated with a payment period that the student did not attend 

in order to receive subsequent disbursements of title IV, HEA 

program assistance.

Discussion: A student in a subscription-based program is not 

required to complete credit hours (or the equivalent) associated 

with a payment period the student did not attend. In a 

subscription-based program, the number of credit hours (or the 

equivalent) that a student is required to complete accrue only 

for payment periods in which the student attends at least one 

day. If an institution determines that a student did not attend 

a given payment period, the credit hours (or the equivalent) 
160

associated with that payment period would not accrue toward the 

student’s future completion requirements.

Changes: None.

Comments: One commenter requested clarification regarding how a 

student would switch between versions of the same subscriptionbased program with different enrollment status requirements. 

The commenter inquired whether a student would be held 

accountable for incomplete credits associated with one 

enrollment level after changing to a different enrollment level 

and asked whether the Department would leave this to the 

discretion of institutional policy.

To illustrate the question, the commenter sought the 

Department’s viewpoint on an example of a student making such a 

change. In the commenter’s example, a full-time student has 

completed six subscription periods, each of which is associated 

with 12 credit hours. Thus, the student would be required to 

have completed at least 60 credit hours (12 credit hours 

multiplied by five terms, excluding the first one that the 

student attended) before receiving title IV, HEA assistance for 

a future payment period. However, at the end of the sixth 

payment period, the student has only completed 52 credit hours. 

At that time, the student switches to a half-time version of the 

same subscription-based program. The commenter asked whether 
161

the student would still need to complete eight more credit hours 

(more than the six hours associated with half-time enrollment 

status) before receiving another disbursement of title IV, HEA 

funds in the next payment period.

Discussion: In the situation described, the student would be 

required to complete eight more credit hours before receiving a 

disbursement at half-time enrollment status for the following 

payment period. Such a student would then be required to 

complete a further six credit hours (in addition to the eight 

credit hours needed to gain eligibility for the next 

disbursement) in order to receive the following disbursement of 

title IV, HEA program funds for the payment period after that.

Any time that a student begins attendance in a payment 

period in a subscription-based program, the student must 

complete the credit hours (or the equivalent) associated with 

that payment period (except for the first payment period that 

the student attends) before receiving title IV, HEA program 

funds for the following payment period. When a student 

transfers between versions of the same subscription-based 

program, the student must first complete the hours associated 

with the student’s enrollment status in the previous version of 

the program. Because the completion requirement in a 

subscription-based program is based on the number of payment 
162

periods that a student has attended, a student in such a program 

may only change his or her enrollment status at the beginning of 

a payment period, and when doing so must complete all the hours 

accrued for that program before receiving a subsequent 

disbursement of title IV, HEA funds.

Note that a student who transfers from a subscription-based 

program to a non-term program, or a term-based program that does 

not use subscription periods, is not required to complete 

additional credit hours before receiving a disbursement in his 

or her new program. This includes cases in which the student 

transfers from a subscription-based version of a program to a 

version of the same program that does not use subscription 

periods.

Changes: None.

Comments: One commenter asked whether a student’s Pell Grant 

enrollment status would need to be adjusted at the end of a 

subscription period to exclude any coursework for which the 

student did not begin attendance. The same commenter asked the 

Department to clarify whether a student could begin coursework 

used to establish the Pell Grant enrollment status after the 

subscription period for which the student was paid had ended.

Discussion: Normally, a student in a term-based program is 

required to attend each class that the institution uses to 
163

establish the student’s Pell Grant enrollment status under the 

Pell Grant regulations under § 690.80(b)(2)(ii). Similar to a 

student enrolled in a nonterm program, a student in a 

subscription-based program is not required to attend all of the 

courses in a payment period that comprise the student’s 

enrollment status. This is because the Department presumes that 

the student must attend a sufficient number of classes or 

demonstrate a sufficient number of competencies in order to earn 

the credit hours (or the equivalent) before receiving subsequent 

disbursements of title IV, HEA program funds.

Note that because a student in a subscription-based program 

is always treated as having the same enrollment status, there is 

also no need for an institution to establish a Pell Grant 

recalculation date under § 690.80(b)(2)(i).

Changes: None.

Comments: Two commenters asked the Department to clarify 

whether the use of the subscription-based disbursement model 

will be optional or required for an institution that offers a 

program that is billed by subscription period. Both commenters 

requested that an institution be given the option to use other 

disbursement methods—such as for standard term, nonstandard 

term, or nonterm programs—if the institution otherwise meets the 

requirements to use those alternative disbursement methods. One 
164

of those commenters asked that institutions be permitted to 

continue using their current method for delivering title IV, HEA 

program funds while developing student-friendly plans to convert 

from one model to another and allowing software vendors to 

design, develop, and test the complex new disbursement model. 

The commenter argued that such flexibility would provide options 

for institutions wishing to “teach out” students who were 

already receiving title IV, HEA program funds using one of the 

existing disbursement systems. 

Another commenter interpreted the proposed definitions of 

the terms “subscription-based program” and “full-time student”

to require institutions that use a subscription-based pricing 

model to also use the subscription-based model for disbursing 

title IV, HEA program funds. The commenter disagreed with this 

perceived approach, explaining that an institution could use 

subscription pricing in a program that otherwise meets the 

requirements to be treated as a traditional term-based program. 

The commenter recommended that the Department allow an 

institution the flexibility to choose the type of disbursement 

method that best suits it even if it uses a subscription pricing 

model.

Discussion: The Department views the use of the subscriptionbased model for disbursing title IV, HEA programs funds as 
165

entirely optional. All programs that meet the requirements for 

the subscription-based disbursement model would also be 

permitted to use the existing framework for disbursing funds in 

a non-term program. Additionally, if a subscription-based 

program also meets the requirements for a term-based program—for 

example, students are required to begin and end all courses or 

competencies within the term start and end dates—the institution 

can disburse funds using standard terms or non-standard terms 

(as applicable) instead of the subscription-based format.

When the final rule is effective, an institution that 

wishes to adopt the subscription-based format may “teach out” 

students who had previously been provided aid under the existing 

term-based or non-term disbursement systems. The institution 

would then be permitted to begin enrolling new cohorts of 

students using the subscription-based format. An institution 

could also choose to withdraw students from their term-based or 

non-term programs and enroll the students under the 

subscription-based model. Students who transfer from a termbased or non-term program into a subscription-based program will 

be treated like all other students who first enroll in 

subscription-based programs, i.e., they will not be required to 

complete the credit hours (or the equivalent) associated with 

the first payment period of their enrollment in the program and 
166

will be required to complete the appropriate number of hours to 

receive subsequent disbursements thereafter. Note that students 

who transfer from one subscription-based program to another at 

the same institution, including transfers between versions of 

the same program, will not receive a “free” payment period when 

they transfer and must complete all the credit hours (or the 

equivalent) that have accrued in the prior program before 

receiving a disbursement in the program to which the student 

transferred.

Changes: None.

Comments: One commenter opposed the requirement for a student 

to complete a specific number of credit hours (or the 

equivalent) in order to receive subsequent disbursements of 

title IV, HEA program funds in a subscription-based program. 

The commenter also contended that institutions using innovative 

learning models rarely originate single-term loans, and that the 

requirement to make two equal disbursements of a single-term 

loan is difficult to understand and results in a frustrating 

student experience just prior to a student’s completion of a 

program. The commenter recommended that the Department allow 

one disbursement of a single term loan for single term loans 

with loan periods exceeding four and a half months in a 

subscription-based program.
167

Discussion: We appreciate the comments and the recommendation 

but do not plan to change requirements under the Direct Loan 

regulations, because those regulations were not discussed during 

negotiated rulemaking, nor published for comment in the NPRM. 

Additionally, the completion requirements are integral to the 

subscription-based disbursement system and help to ensure that 

students are making adequate progress in their programs. The 

requirements were agreed upon by both the Distance Learning and 

Innovation subcommittee and the full negotiating committee, and 

we do not plan to eliminate those completion requirements for 

students in subscription-based programs.

Changes: None.

Definition of Weeks of Instructional Time (§ 668.3)

Comments: Commenters expressed overwhelming support for the 

Department’s definition of a week of instructional time related 

to an academic year under § 668.3(a)(2)(ii) to include programs 

that use asynchronous coursework through distance education or 

correspondence. Several commenters acknowledged the 

Department’s efforts to create a definition that accounts for 

innovative non-traditional programs that are offered 

asynchronously, reflecting the unique nature of distance 

education modalities. Several commenters also noted that while 

time continues to be an important factor in awarding and 
168

disbursing title IV, HEA program funds, the new definition was a 

step away from a rigid conception of time-based, scheduled 

instruction, and a positive step toward emphasizing learning 

over time. One commenter also indicated that the new definition 

would provide clarity and transparency regarding regulatory 

thresholds for a week of instructional time.

Discussion: The Department thanks the commenters for their 

support.

Changes: None.

Comments: One commenter indicated that changing the definition 

of “a week of instructional time” is not necessary, because 

accrediting agencies are responsible for the content of 

instruction.

Discussion: We agree that accrediting agencies have authority 

over instructional quality at postsecondary institutions. 

However, we do not believe that such authority precludes or 

obviates the need for changes to the definition of a week of 

instructional time.

Changes: None.

Written Arrangements at Domestic Institutions (§ 668.5)

Comments: A few commenters supported the proposed changes to 

written arrangements because they believe the changes will 

promote innovation and workforce responsiveness. One commenter 
169

said the changes will provide students with access to more highquality programs. Another commenter said the changes will align 

the needs of graduates with those of employers and allow 

institutions to offer timely, relevant educational program 

offerings they may be unable to provide on their own, allowing 

them to better attract and retain students. One commenter 

supported the proposal, citing an improved ability for employers 

to engage with institutions to reduce skills gaps and 

personalize learning.

Discussion: The Department appreciates the support for the 

proposed changes.

Changes: None.

Comments: Many commenters supported the consensus language, 

including the requirement in both current regulation and the 

proposed regulation that an ineligible institution or

organization may provide up to 25 percent of a program (or up to 

50 percent with accrediting agency approval). Several of these 

commenters urged the Department not to go beyond the 25 percent 

and 50 percent limits because doing so could pose risks to 

students and taxpayers, and particularly disadvantaged groups of 

students, especially if an outside entity could provide more 

than half of a program. They stated in various ways that going 

above 50 percent would risk, or outright permit, institutions to 
170

lend their accreditation or title IV eligibility status to 

others. One of these commenters worried that the motivation for 

abuse could be more acute given potentially declining revenues 

during and after the COVID-19 pandemic if the Department went 

beyond 25 and 50 percent limits. These commenters cited 

discussion at negotiated rulemaking, including negotiators’ 

rejection of proposals that would have allowed institutions to 

go beyond these limits. One of these commenters suggested that 

the current limit of 50 percent would allow for sufficient 

flexibility for institutions while ensuring they pass 

accountability measures.

Discussion: The Department appreciates the support for 

consensus language from these commenters and acknowledges 

concerns about written arrangements, especially if the 25 and 50 

percent limits were lifted. This topic received extensive 

discussion during negotiated rulemaking, both from negotiators 

and subcommittee members. The Department agrees that using 

written arrangements for all or nearly all of a program could 

raise questions about which entity confers the credential. 

Anything beyond 75 percent may trigger restrictions from 

accrediting agencies who require the institution conferring the 

credential to deliver at least 25 percent of the program. While 

the consensus agreement would not allow institutions to go 
171

beyond 50 percent, the Department maintains that written 

arrangements beyond 50 percent theoretically could be used 

responsibly.

The Department disagrees with the implication from many 

commenters that written arrangements are somehow inherently 

dangerous for students or that the risk for abuse is greater for 

disadvantaged groups of students or considering the COVID-19 

pandemic. Instead, the Department sees written arrangements as 

a tool that can provide more opportunity for students 

(especially for the groups or in the circumstances cited by 

commenters), because even the most well-resourced institutions 

may not be able to provide every conceivable course or 

instructional resource. In fact, many well-resourced 

institutions struggle to keep up with the latest practices of 

their students’ future employers and written arrangements can 

help. Such tools can, of course, be misused and the Department 

encourages accrediting agencies to support written arrangements 

where they offer benefits to students, but be wary of them if 

they merely serve as a lifeline to institutions that could not 

otherwise meet the accrediting agency’s requirements for fiscal 

and administrative capacity (or other standards) under § 602.16. 

However, we agree with commenters who noted that the proposed 

language, which streamlines approvals but maintains the 25 and 
172

50 percent limits, was the product of an extensively discussed 

consensus agreement and, as a result ,the Department declines to 

make changes.

Changes: None.

Comments: One commenter was generally supportive of the 

provisions in this section, but opposed the 50 percent cap and 

suggested at least moving it to 75 percent, believing the 

Department is not sufficiently promoting innovative workforce 

partnerships, especially given the COVID-19 pandemic’s impact on 

the economy.

Discussion: As noted elsewhere in this section, the Department 

would have preferred greater flexibility for institutions to use 

written arrangements and believes such allowance could have been 

used responsibly. However, we agree with commenters who noted 

that the proposed language, which streamlines approvals but 

maintains the 25 and 50 percent limits, was the product of an

extensively discussed consensus agreement and so the Department 

declines to make changes.

Changes: None.

Comments: One commenter supported the provisions of § 668.5(f) 

that clarify the ability of institutions utilizing written 

arrangements to modify their curriculum to meet workforce needs, 

but opposed the provisions that clarify the ability of 
173

institutions to make governance or decision-making changes as an 

alternative to faculty control or approval. This commenter

argued that advisory boards should not have greater authority 

than faculty and that faculty expertise should be used to inform 

program design. Another commenter also opposed the latter 

provision citing their institution’s shared governance model. 

One commenter suggested that faculty support must be a 

prerequisite to any academic or administrative change and 

believed that the Department is taking away the opportunity for 

faculty and staff to be involved in administrative changes.

Discussion: The Department agrees that faculty perform an 

important role in any institution, but strongly disagrees that 

faculty should have veto authority over virtually every academic 

or administrative decision. Institutions use written 

arrangements to benefit from outside expertise, to better align 

a program with workforce needs, or for other purposes. The 

Department thanks the commenter for supporting this goal but 

notes that alignment with workforce needs can be achieved in 

different ways, including ways that are recommended by expert 

advisory boards that may have more direct experience in the 

workforce and better understand contemporary needs. To achieve 

this goal, many institutions understandably wish to act quickly 

in such cases for the benefit of their students. Institutions 
174

may be hamstrung if they must ask permission from different 

parties. Institutions may use traditional governance models. 

However, the Department sought to clarify that institutions may 

determine the level of faculty input that should be provided on 

decisions relating to written arrangements. The Department 

disagrees with the commenter’s suggestion that the proposed rule 

affirmatively takes away the opportunity for faculty and staff 

involvement in administrative changes due to the diversity of 

existing governance arrangements.

Changes: None.

Comments: Several commenters related their concern about 

written arrangements to concerns about the extent to which 

institutions utilize online program managers (OPM) or other 

similar third parties that assist institutions with various 

functions not related to the actual provision of academic 

instruction. One commenter stated that the exclusion of issues 

related to OPMs from this rulemaking has prevented proper 

oversight of distance education programs, but generally 

supported the addition of language to clarify how to calculate 

the percentage of a program that is part of a written 

arrangement. This commenter believed that agreements with OPMs 

covering issues such as course development, instructor training, 

and student recruitment should be treated as written 
175

arrangements because they are distinct from other types of 

agreements such as food service where the institution may not 

have expertise. The commenter opposed tuition-sharing 

arrangements as being a source of risk. One commenter expressed 

appreciation for the Department’s mention in the NPRM that 

written arrangements do not apply to such third-party services. 

One commenter suggested the proposed rule could incorrectly be 

read to imply that a written arrangement would be required if an 

outside entity provides design or administration but not 

instruction. One commenter implored the Department not to “gut 

the meaning of college.” Other commenters raised concerns with 

OPMs or other arrangements such as the acquisition of a 

proprietary institution by a public institution that do not 

relate to the proposed rule.

Discussion: Although mentioned briefly in the NPRM, the

Department wishes to expand upon its long-standing position that 

written arrangements do not generally apply to contracts with 

OPMs. Use of the word “design” or “administration” in §

668.5(g) may refer to one or more of the following--

establishing the requirements for successful completion of the 

course; delivering instruction in the course; or assessing 

student learning. One example of this would be if an ineligible 

entity provides instructors and delivers instruction via a 
176

ground-based or online program separate from what the eligible 

institution would normally provide. This would not include, as 

the commenter worries some might infer, a course’s “platform or 

method of delivery, technical support, or student services.” In 

fact, institutions frequently utilize employer advisory boards 

or other outside expertise to develop courses or use a variety 

of methods to recruit students without written arrangements. In 

addition, just as in elementary and secondary schools, outside 

providers are frequently used to provide training and 

professional development to instructors in postsecondary 

education. Requiring a written arrangement for these core 

functions could grind the basic functions of an institution to a 

halt. Instead, the Department believes § 668.5(h) is a nonexhaustive list of activities that do not require written 

arrangements, but many others from contracting for food service,

or with OPMs, or facilitating ground-based instruction through 

upkeep to facilities—should be assumed to not require a written 

arrangement either, in accordance with longstanding practice. 

We further question one commenter’s premise that written 

arrangements should only be for functions where the institution 

would not have expertise, such as food service. The diversity 

of institutional expertise is one reason the Department does not 

use such criteria to distinguish between agreements requiring 
177

written arrangements from those that do not. Instead, the 

regulations state that they are required if an ineligible entity 

provides “part of the educational program,” which means actual 

delivery of instruction using outside instructors and 

facilities. The Department assures one commenter that it is not 

changing and could not “gut” the meaning of college.

Changes: None.

Comments: Two commenters noted that a limited number of 

institutions were permitted to go above the 50 percent limit to 

partner with ineligible providers as part of the Department’s 

Educational Quality through Innovative Partnerships (EQUIP)

experiment. These commenters said that participants have 

struggled to meet Department benchmarks necessary to launch 

their programs and, as a result, data has been quite limited and 

so should not be used to justify changes to written 

arrangements. One commenter further suggested that some 

participants in the program engaged in practices that were 

harmful to students, noting one was cited by its State for 

deceptive advertising, and another precipitously closed. As a 

result, they asserted that not enough information is known about 

whether these types of programs can be successful.
178

Discussion: EQUIP was launched under the Department’s 

Experimental Sites Initiative.13 We acknowledge the limitations

of the experiment.14 The Department believes there were multiple 

design flaws in that experiment, many unrelated to flexibility 

for written arrangements. As the commenters acknowledge, most 

potential participants were unable to start-up their programs 

and begin utilizing the waivers. This was at least in part due 

to the experiment’s requirements, written under the prior 

administration, were so burdensome and complex that many 

institutions expressing interest did not ultimately apply, and 

those that applied, have slowly dropped out at various stages in 

the years-long process of attempting to obtain approval for and 

launch these programs. Much of this complexity relates to 

burdensome reporting requirements, the requirement for a thirdparty quality assurance entity to oversee program outcomes (in 

addition to the accrediting agency), and other issues (some 

quite similar to suggestions made at the negotiating table and 

by commenters). While these mechanisms were designed to protect 

students, promote transparency, allow for a rigorous evaluation, 

and other laudable goals, the Department believes that they were 

13 80 FR 62047

14 ed.gov/news/press-releases/expanding-pathways-success-after-high-school-usdepartment-education-approves-first-innovative-equip-experiment
179

ultimately too burdensome and costly to justify the potential 

benefits of participation, which may have ultimately denied 

students the opportunity to benefit from innovative programs 

that were potentially quite valuable. In short, the Department 

believes that the most significant lesson from EQUIP is that 

burden must be weighed against safeguards in order to support 

innovation while protecting students. . This was one of the 

reasons that the Department undertook this rulemaking and made 

the changes to § 668.5 and other sections.

Changes: None.

Comments: Several commenters urged the Department to rescind

changes made to § 602.22 in the accreditation rulemaking that 

allow senior staff of an accrediting agency to review several 

types of substantive change requests, including those relating 

to written arrangements, rather than requiring the agency’s 

decision-making body to make the decision. One commenter also 

suggested removing a change that would require expedited 

approval by accrediting agencies of written arrangements, adding 

other reporting and data collection requirements, and closely 

reviewing written arrangements approved by accrediting agencies 

during recognition reviews. Another commenter suggested seeking 

data on the use of written arrangements from institutions and 

accrediting agencies.
180

Discussion: The changes to § 602.22 were made in a separate 

rulemaking effort and the Department declines to rescind the 

change it made months ago. However, the Department reminds 

these commenters, some of whom are strongly urging the 

Department to stick with the consensus agreement’s limits of 25 

and 50 percent in § 668.5(c), that the Department and others 

agreed that maintaining these limits would not impede 

innovation, as long as approvals by accrediting agencies could 

be streamlined and take less time. We continue to believe that 

the consensus language strikes the right balance between 

enabling innovation and protecting students and taxpayers. The 

Department will uphold the consensus language regarding the 25 

and 50 percent limits in § 668.5(c), as well as regarding the 

efforts to streamline approvals in § 602.22 either. The 

Department believes that these changes reduce burden on 

accrediting agencies and streamline institutions’ ability to 

respond to workforce needs, as outlined in greater detail in the

Department’s NPRM and final rule on accreditation.15 As 

discussed during negotiated rulemaking, the Department declines 

to add further burdensome reporting requirements; however,

according to § 668.43(a)(12), institutions are required to 

15 84 FR 27404 and 84 FR 58834, respectively
181

disclose written arrangements to students, which is an added

requirement included in the Accreditation and State 

Authorization final rule to improve transparency.

Changes: None.

Comments: Several commenters responded to the question posed by

the Department in the NPRM, which asked whether the requirement 

for non-accredited entities to demonstrate prior experience and 

effectiveness prior to engaging in a written arrangement would 

be too difficult to meet. These commenters suggested that it 

would be too difficult for most third-party providers to meet a 

requirement to “demonstrate experience” before being given the 

opportunity to do so. One commenter added that institutions are 

sufficiently motivated to ensure academic rigor when using 

written arrangements and thoroughly vet them before signing a 

contract. This commenter noted that the content provided by the 

ineligible provider must still meet standards for accreditation 

and said that new entrants often have the most advanced and 

desirable content. The commenter questioned what type of 

information would be sufficient to demonstrate experience if the 

provision remained. Another commenter added that the 

“experience” requirement would intrude into matters overseen by 

accrediting agencies. And one commenter believed the 

requirement was ambiguous while restraining innovation.
182

Discussion: The Department agrees with the commenters who 

uncovered serious flaws in a requirement to demonstrate prior 

experience and effectiveness. The Department does not change 

consensus language without a good reason, especially in a 

provision so vigorously debated during negotiations. However, 

after negotiations, the Department noted similarity between the 

experience requirement in § 668.5(c)(1)(i) and provisions 

removed in the accreditation regulations, especially those in §

602.12, which previously required accrediting agencies to 

demonstrate prior experience in a given area before the 

Department would allow an expansion of scope to conduct 

accreditation activities in those areas. We removed such 

provisions because they could have had an anticompetitive effect 

and created a sometimes-impossible standard requiring an entity 

to demonstrate experience doing something they are legally 

barred from doing. The Department was unable to find, and 

commenters did not suggest, a workable alternative that would 

have maintained the language while avoiding similar problems. 

The Department does not believe a viable alternative exists that 

would provide meaningful protection without having an 

anticompetitive effect, being overly burdensome, or being 

unenforceable. In addition, the Department believes the 

requirement that the provider be effective in meeting stated 
183

learning objectives is vague, likely unenforceable, may be 

deemed arbitrary and capricious, and may violate 20 U.S.C. 

3403(b), which prohibits the Secretary from exercising authority 

over curriculum, administration, and personnel of educational 

institutions. The Department believes that commenters made a 

compelling case that the proposed provision could interfere into 

areas overseen by accrediting agencies.

Changes: The Department concurs with the commenters. We have 

deleted § 668.5(c)(1)(i) and renumbered the section accordingly.

Comments: One commenter supported the proposed removal of 

language that previously required the certificate or degreegranting institution to provide more than 50 percent of the 

educational program in a written arrangement between two or more 

eligible institutions owned or controlled by the same 

individual, partnership, or corporation.

One commenter opposed this change and stated that there may 

be differences in quality or the student experience between 

institutions sharing ownership, which could lead to students 

being misled about the nature of their education. The commenter 

suggested students may be required to take more courses online 

through one affiliated institution when they expected to be 

taking ground-based courses from the other. The commenter 
184

suggested the Department has provided insufficient evidence to 

support the change.

Discussion: The Department thanks the commenter for supporting 

removal of this restrictive provision. The Department maintains 

that there is value in maintaining flexibility to achieve 

synergies between two or more eligible institutions owned or 

controlled by the same individual, partnership, or corporation.

The COVID-19 pandemic highlights a worst-case scenario, 

where institutions had to quickly move students online and 

expand any remote learning infrastructure they had at their 

disposal. However, a local or national economic shift that 

quickly necessitates more training in one area and less in 

another may be a more common example. The Department notes that 

many accrediting agencies require at least 25 percent of the 

program to be delivered by the institution conferring the 

credential and defers to accrediting agencies in this area. The 

Department does not believe this provision, which applies to a 

very small subset of institutions and students, exposes those 

students to meaningful additional risk and notes that any 

misrepresentation or fraud of the kind the commenter fears may 

be addressed through existing enforcement means. As noted 

elsewhere, we not only maintained the requirement to disclose 

these arrangements to students in § 668.43(a)(12), but we 
185

actually strengthened those requirements in the accreditation 

final rule, which was developed though a consensus agreement as 

part of the same negotiated rulemaking as this regulation.16

Students may enroll in a program they choose. However, 

options are finite and may be unexpectedly limited, regardless 

of the use of a written arrangement. Unavailability of faculty 

or facilities, insufficient demand to offer a certain course 

during any given term, or other factors could limit students’ 

options. In most cases, despite the commenter’s assertions, the 

Department believes this provision is likely to increase (rather 

than decrease) available options to students. The risk of fraud 

is always present any time Federal funds are involved. The 

Department prefers strong enforcement of a limited number of 

important and straightforward safeguards rather than diverting 

resources to maintaining numerous low-risk restrictions that 

could deny benefits to students.

Changes: None.

Clock to Credit Hour Conversion (§ 668.8)

Comments: One commenter expressed support for the proposed 

changes to § 668.8(k), noting that the changes eliminate 

16 84 FR 58834
186

confusion about the inclusion of homework time in the clock-hour 

determination.

Another commenter asserted that compliance with these 

regulatory changes would, in addition to having negative 

financial effects, be potentially burdensome, and conflict with 

accreditor expectations. The commenter further offered that 

credit hours are more suitable than clock hours for evaluating 

satisfactory academic progress and the current regulation (§ 

668.8(k) and (l)) is more reflective of the levels of learning 

at their institution. Finally, the commenter expressed concern 

over the effect the proposed changes might have on the 

institution’s ability to provide the same levels of contact for 

online and in-person courses.

One commenter noted that the Department neglected in the 

NPRM to address the proposed change to § 668.8(k)(2)(ii), 

removing the requirement that an institution demonstrate 

students enroll in and graduate from degree programs and 

replacing it with a requirement that the institution demonstrate 

that at least one student was enrolled in the program during the 

current or most recently completed award year. The commenter 

asserted that the proposed rule would allow institutions to 

effectively invent a nonexistent program to use as a back-door 
187

way to avoid the conversion formula, thus compromising program 

integrity.

Discussion: The actual scope of what was proposed in the NPRM 

is essentially a revision to the conversion formula. The 

applicability of clock-to-credit-hour conversion is not expanded 

as a result of these changes. Under current regulations, any 

program that is at least two academic years in length and 

provides an associate or bachelor’s degree (presumably the 

overwhelming majority of those programs offered at four-year 

public and private, degree-granting institutions) is not subject 

to clock-to-credit-hour conversion. This would not change under 

what was proposed in the NPRM. It should further be noted that 

there are no Department rules requiring the use of clock hours 

as opposed to credit hours in measuring students’ progress.

We inadvertently omitted from the NPRM any discussion of 

proposed § 668.8(k)(2)(ii), which removes the requirement that 

an institution demonstrate students enroll in and graduate from 

degree programs and replaces it with a requirement that the 

institution demonstrate that at least one student was enrolled 

in the program during the current or most recently completed 

award year, and thank the commenter who brought this omission to 

our attention. This change was made at the request of 

negotiators who expressed the concern that programs with small 
188

numbers of students may not produce graduates in a given year, 

or even over a couple of years, raising the prospect of those 

programs being found in violation of § 668.8(k)(2)(ii). The 

change was included in amendatory text on which consensus was 

reached.

While appreciative of those negotiators’ concerns, we are 

persuaded that removal of the requirement for institutions to 

demonstrate that students enroll in and graduate from the 

program would make it possible for an unscrupulous institution 

to stand-up nonexistent programs that do not actually graduate 

anyone, effectively circumventing the clock-to credit-hour 

conversion requirement.

With respect to degree programs with limited numbers of 

students, we note that current § 668.8(k)(2)(ii) makes no 

mention of the frequency with which students must be shown to 

graduate from the degree program that courses from the program 

that would otherwise be subject to clock-to-credit hour 

conversion are acceptable toward; and a year where no student 

graduates from the degree program is not, in and of itself, an 

indicator of noncompliance. Accordingly, we are revising § 

668.8(k)(2)(ii) to clarify that an institution must be able to 

demonstrate that at least one student graduated from the program 

during the current award year or the two preceding award years. 
189

We continue to believe that the exception in § 668.8(k)(2) is 

appropriately limited to programs that consistently produce 

graduates. Even where an institution is not attempting to 

deliberately circumvent clock-to-credit-hour requirements, a 

circumstance where no student graduates from the degree-granting 

program over multiple years legitimately calls into question 

whether that program is truly meeting the requirements for the 

exception found in § 668.8(k)(2). Therefore, because the 

exemption requirement only applies when an institution offers a 

program that leads to a degree, and the shortest degree programs 

are generally no less than two years in length, the Department 

believes that a two-year look-back period would be sufficient to 

identify programs that could fulfill this requirement for an 

exemption from the clock-to-credit conversion requirements. If 

no student graduates from a program during the entire expected 

timeframe for completion of that program, it calls into question 

whether the transferability of credits into such a program is in 

fact useful to a student enrolled in a non-degree programs, 

which is the essence of the exemption in the first place.

Changes: We have revised § 668.8(k)(2)(ii) to clarify that in 

meeting the clock-to-credit hour exemption, an institution must

demonstrate that at least one student graduated from the program 

during the current award year or the two preceding award years.
190

Certification procedures (§ 668.13)

Comments: Several commenters stated their support for language 

providing that if the Secretary does not make a decision to 

grant or deny certification within 12 months of an institution’s 

expiration date of its current period of participation, the 

Department will grant the institution an automatic 

recertification, which may be provisional. The commenters 

supported this change for the increased certainty and 

transparency it provides to institutions that would otherwise 

receive month-to-month extensions of their eligibility. The

commenters also believed that such changes properly balance this 

increased certainty for institutions with Department oversight 

on behalf of students and taxpayers. One commenter added that 

the change will allow institutions to move forward with new 

programs in a timely and responsive manner. 

Discussion: The Department thanks the commenters for their 

support and agrees that the changes provide for increased 

certainty and transparency while balancing the need to protect 

students and taxpayers.

Changes: None.

Comment: One commenter opposed automatic certification renewal 

when the Secretary does not decide to grant or deny within 12 

months of an institution’s expiration date. The commenter 
191

claimed that this change contradicts the HEA and circumvents the 

Secretary’s obligations under the Act. The commenter asserted

that this change would undo the Secretary’s obligation under 20 

U.S.C. 1099c(a) to evaluate the institution’s legal authority to 

operate within a State, accreditation status, administrative 

capability, and financial responsibility. The commenter also 

claimed that the Department provided no evidence of the 

uncertainty experienced by institutions because of the current 

practice. The commenter suggested that there could be good 

reason for the Department to delay its review, including if it 

is investigating the institution. The commenter believed that, 

due to the lack of evidence or reasoning, the proposed change is 

both arbitrary and capricious and that the Department would 

violate the APA by making the proposed change. The commenter 

further stated that the Department failed to consider reasonable 

alternatives and that it has a legal obligation to do so. The 

commenter suggested that the Department instead seek additional 

funding for staff to review recertification applications to 

ensure a prompt review and decision. The commenter also 

proposed providing a shorter extension of, perhaps, three or six 

months while the Department continues its review.

Discussion: The Department appreciates the commenter’s interest 

in this topic. Certification decisions can have major 
192

implications for institutions and students. We agree that more 

must be done at the administrative level to provide more timely 

responses and better communication. However, we believe those 

steps alone are insufficient. Further, we believe it is in the 

best interest of students and taxpayers for the Department to 

timely identify deficiencies and take appropriate action.

The Department appreciates the suggestion that the 

Department grant three- or six-month extensions instead of a 

month-to-month extension. However, institutions must make 

important budgetary and academic decisions annually. The 

Department believes those proposals would have the same 

drawbacks and present the same uncertainty to institutions as 

the status quo. An extension longer than one year would not 

give the Department sufficient oversight to revisit a decision 

in the short term if needed.

The Department disagrees that it has failed to provide a 

proper justification for this change and did not deviate from 

the consensus language on this topic. As discussed during 

negotiated rulemaking and as other commenters have noted, 

delaying decisions causes significant uncertainty. The 

Department believes that 12 months beyond the expiration date 

of the institution’s current certification is more than 

sufficient time, especially since the institution is required to 
193

submit the application for recertification no less than 90 days 

prior to the expiration of its current certification. The 

Department’s review usually begins more than a month before the 

expiration date, adding additional time to the process. If an 

investigation is underway, the Department has other options at 

its disposal. The Department can provisionally certify the 

institution for as little as one year or can deny the 

recertification if justified. If the Department must issue 

sanctions, it may do so at any time. This change does not 

reduce the Department’s enforcement power. Instead, it 

encourages the Department to process applications promptly, 

which provides timely feedback for institutions, helps the 

Department to properly oversee institutions, and can allow 

speedier remedies if deficiencies are identified. As such, and 

contrary to the assertion made by this commenter, the 

certification renewal process outlined in § 668.13 is neither 

arbitrary and capricious nor would it constitute an 

impermissible abdication of the Secretary’s responsibility to 

determine an institution’s legal authority to operate within a 

State, its accreditation status, and its administrative 

capability and financial responsibility when determining the 

institution’s eligibility to participate in title IV, HEA 

programs.
194

Changes: None.

Limitation on number of clock hours based on minimum state 

requirements (§ 668.14(b)(26))

Comments: Many commenters supported the proposed requirement 

that eligible short-term programs demonstrate reasonable program 

length. These commenters acknowledged the trade-off between 

setting proper safeguards to ensure program length is not 

inflated and ensuring students are able to meet States’ 

occupational licensure requirements. The commenters believed 

that the Department struck a proper balance, which will promote 

worker mobility across State lines and reduce barriers to 

employment, especially in regional economies that cross State 

boundaries.

Several other commenters underscored that the negotiating 

committee compromised on the provisions related to program 

length and suggested that the provisions would protect students 

from fraud. One of these commenters noted the proposed rule 

provided balance and an acute positive impact on student 

veterans and military-connected students.

Several commenters said they preferred the proposed rule’s 

provision over other options discussed during negotiated 

rulemaking, especially the Department’s initial proposal 

allowing program length of 100 percent of the longest minimum 
195

requirement in any State. These commenters urged the Department 

to maintain the consensus agreement contained in the proposed 

rule.

One commenter praised the changes to this provision and the 

positive impact they will have on veterans and their spouses, 

who frequently move across State lines.

One commenter suggested that the proposed provision did not 

go far enough to prevent institutions from lengthening their 

programs in ways that do not benefit students, including if 

labor markets do not significantly overlap two States’ borders. 

They cited past statements, including from the Department’s OIG, 

of institutions that the commenters say falsified their program 

length. Instead, this commenter suggested that we allow 

institutions to lengthen their program based on an adjacent 

State’s requirement only if the institution is within a 

metropolitan statistical area (MSA) that includes another State. 

The commenter also suggested an alternative, that the

institution instead attest to, and demonstrate if asked, that it 

has enrolled a student who lived in that State within the 

preceding three years or that recent graduates are gainfully 

employed in that State.
196

One commenter supported the proposed rule in this area and 

cited a need for greater occupational licensure reciprocity 

across State lines.

Discussion: We appreciate the support from commenters on this

issue and acknowledge that setting the right balance on this 

issue is difficult for reasons outlined in the NPRM, most 

notably that individuals often move from one State to another or 

live, work, and learn in different States at the same time.

The Department appreciates the concern from the commenter 

who suggested the proposed rule would not go far enough to 

prevent institutions from artificially increasing program 

length. We have serious concerns any time an institution, 

accrediting agency, or State takes steps to artificially limit 

access to a profession. The Department will continue to speak 

out against such policies and take steps where possible to 

prevent credential inflation and related barriers to 

opportunity. However, as outlined in the NPRM and supported by 

many commenters, the Department believes this language strikes a 

reasonable balance between supporting students who must qualify 

for State licensure and preventing abuse. If abuse rises to the 

level of falsification of documents, as the commenter suggests, 

we will use existing enforcement methods.
197

The Department thanks the commenter for the suggestion 

about tying requirements to out-of-State MSAs or past success at 

finding students employment in a neighboring State. However, we 

believe this would hamper mobility across State lines and impose 

burdens on institutions and the Department. The tie to MSAs 

would only benefit areas that are more heavily populated or 

where MSAs cross State lines (they frequently do not) so the 

proposal does not seem to be a viable alternative.17

We also do not agree that institutions should be required 

to demonstrate that their graduates have been successful at 

finding employment in another State when the institution’s 

programs, under our current regulations, may be unable to meet 

the requirements of preparing individuals to be licensed in that 

State.

The Department appreciates the support of the commenter who 

noted that reciprocity for occupational licensure is a helpful, 

but incomplete, step States can take to lower barriers for 

individuals. Time-based requirements that may not be tied to 

employer needs can be harmful and deny opportunity to 

individuals looking to build a better life.

Changes: None.

17 www2.census.gov/geo/maps/metroarea/us_wall/Sep2018/CBSA_WallMap_Sep2018.pdf
198

Comments: A few commenters supported the proposed provision and 

asked that the Department define “adjacent State” to include 

States whose border is within 100 miles of the State in which 

the institution is located to allow for greater flexibility for 

regional economies.

Discussion: Although the Department appreciates the suggestion 

to define an “adjacent State” as one whose border is within 100 

miles of the State in which the institution is located, such a 

change would not align with the consensus agreement or the 

definition of the word “adjacent” in this context, which means 

“having a common endpoint or border.”18 The Department wishes to 

maximize opportunity and minimize barriers and appreciates 

hearing from institutions with students that may benefit from 

this provision. However, many States have “statutory language 

allowing reciprocity or endorsement agreements for licenses” 

including for cosmetology and, as already mentioned, States have 

opportunities to lower the barriers they have erected in these 

areas.19 As many commenters have noted, the consensus agreement 

in this area involved genuine compromise and balancing of 

competing priorities. While a small number of students may be 

18 merriam-webster.com/dictionary/adjacent

19 ncsl.org/research/labor-and-employment/occupational-licensing-statutedatabase.aspx
199

willing to travel up to 100 miles and cross two State borders to 

work or learn, the Department does not believe this benefit is 

outweighed by the risk of institutions using a significantly 

longer requirement two States away in order to lengthen their 

programs for all students.

Changes: None.

Comments: A few commenters requested that the Department use 

its authority to allow voluntary early implementation of this 

provision.

Discussion: The Department will allow voluntary early 

implementation on the entire rule, including this provision.

Changes: None.

Return of Title IV Funds (R2T4) (§ 668.22)

Comments: Numerous commenters expressed support for the 

proposed changes in the treatment of title IV funds when a 

student withdraws. One of those commenters stated that the 

changes regarding which students are considered withdrawn for 

R2T4 calculation are a welcome attempt to resolve technical 

problems in the current rules existing for students enrolled in 

self-paced instruction and in modules, whose treatment with 

respect to R2T4 sometimes does not reflect their actual level of 

coursework completion. Another commenter expressed appreciation 

for the Department’s attention in considering the inequities 
200

that currently exist for students withdrawing from a program 

delivered in modules. Pointing out the unfairness of penalizing

a student by requiring an R2T4 calculation and the potential 

return of funds solely because that student completed her 

program on a more aggressive timeline than originally

anticipated, other commenters thanked the Department for 

removing the requirement to conduct an R2T4 calculation in cases 

where a student has completed graduation requirements. 

Discussion: We appreciate the support of these commenters.

Changes: None.

Comments: Several commenters requested clarification on the 

proposed rule, which does not consider a student withdrawn from 

a program offered in modules if the student completes: 

• One module that includes 50 percent or more of the number of 

days in the payment period,

• A combination of modules that when combined contain 50 percent 

or more of the number of days in the payment period, or 

• Coursework equal to or greater than the coursework required 

for the institution’s definition of a half-time student under 

§ 668.2 for the payment period.

The commenters identified various ways in which application 

of the proposed rule as written might result in inequitable 

treatment of students who withdraw from programs taught in 
201

modules. One commenter offered the example of a 102-day term 

consisting of two modules, the first module 50 days in length 

and ending on a Friday and the second comprising the remaining 

52 days and beginning the following Monday. Students who 

complete only the first module could be treated as withdrawn, 

because their first module included a scheduled break or did not 

include a weekend. 

Another commenter provided the example of a program offered 

in standard semesters, each comprised of two, 8-week modules. 

Both modules of the fall semester, each 54 days in length, are 

separated by a weekend and there are no breaks of five or more 

days in the semester. The spring semester contains a spring 

break of nine days occurring between the first and second 

modules (each 54 days in length) of the semester. A student 

enrolls in five credits in the first module of the fall semester 

and six credits in the second module of that term, successfully 

completing the first module but opting not to return for the 

second module. With the break included, the fall semester is 

110 days in length, 54 days, or 49 percent of which the student 

completed, meaning he or she would be considered withdrawn. 

Another student enrolls in the same pattern during the spring 

semester, again completing the first module of 54 days but not 

returning for the second module, also 54 days in length. 
202

However, with the spring break excluded from the number of the 

number of days in the semester, this student has completed 54 of 

108 days or 50 percent of the spring semester and is not 

considered withdrawn. Both students completed the same five 

credits and 54 days in the payment period, but in the case of 

the first student the institution is required to perform the 

R2T4 calculation due to the break between the modules being less 

than five days (i.e., a weekend).

Finally, one commenter explained that in a standard term 

program where the total days in the payment period is an odd 

number and the first of two modules offered over the semester is 

one day shorter than the second, a student enrolling in both 

modules but completing only the first module would complete only 

49 percent of the payment period. The commenter offered that 

this could result in students, who for all intents and purposes 

completed a module lasting half of the term, being considered 

withdrawn for lack of one day.

To address these issues, commenters variously suggested 

counting only days of instruction (excluding both breaks and 

weekends) instead of calendar days, excluding scheduled breaks 

of less than 5 days between modules from the number of calendar 

days to address the issue of weekends between modules, and 
203

changing the minimum completion percentage from “50 percent or 

more” to “49 percent or more.”

Discussion: We agree with the commenters that additional 

clarifications to the proposed changes in § 668.22 are necessary 

to avoid the potential unintended consequences identified above. 

As expressed in the preamble of the NPRM, the Department’s

intent in proposing modifications to the treatment of modules in 

the R2T4 was that a student would be considered to have 

completed the period if he or she completed coursework 

constituting at least half of the days in the period, not 

including the days in scheduled breaks. It is not our intent in 

these final rules that students who have otherwise met that 

standard be considered withdrawn due to minor differences in the 

number of days that constitute 50 percent of a term, resulting 

from weekends falling between modules, the absence of breaks of 

five days or more, or terms with uneven numbers of days etc. 

Accordingly, we are revising proposed §

668.22(a)(2)(ii)(A)(2)(i)and (ii) to reflect that a student who 

withdraws from a program offered in modules who completes one 

module that includes 49 percent or more of the number of days in 

a payment period or a combination of modules that when combined 

contain 49 percent or more of the number of days in the payment 

period, will not be considered withdrawn. This change will 
204

ensure that a day or two difference in the number of days in 

each module does not become the determining factor in whether a 

student is considered withdrawn. We are further revising § 

668.22(a)(2)(ii)(A)(2)(i)and (ii) to exclude scheduled breaks of 

five or more consecutive days and all days between modules from 

the number of days in the payment period used to calculate 

whether the module(s) completed by the student comprise 49 

percent of the payment period.

Changes: We have revised § 668.22(a)(2)(ii)(A)(2)(i) and (ii) 

to reflect that a student who completes all the requirements for 

graduation from his or her program before completing the days or 

hours in the period that he or she was scheduled to complete is 

not considered to have withdrawn from a program offered in 

modules if the student successfully completes one module that 

includes 49 percent or more of the number of days in the payment 

period, excluding scheduled breaks of five or more consecutive 

days and all days between modules or combination of modules that 

when combined contain 49 percent or more of the number of days 

in the payment period, excluding scheduled breaks of five or 

more consecutive days and all days between modules.

Comments: One commenter referenced the Department’s proposal in 

the preamble of the NPRM to amend § 668.22(l)(6) to clarify that 

a program is “offered in modules” if the program uses a standard 
205

term or nonstandard-term academic calendar, is not a 

subscription-based program, and a course or courses in the 

program do not span the entire length of the payment period or 

period of enrollment. The preamble also stated that non-term 

programs would no longer be considered programs “offered in 

modules” in any circumstances. Specifically, the commenter 

requested the Department clarify whether a student who completes 

at least a half-time coursework in a subscription period before 

ceasing enrollment will be considered to have withdrawn from the 

payment period for purposes of R2T4.

Another commenter expressed overall support for the 

proposed changes to § 668.22(l)(6), clarifying that a program is 

“offered in modules” if the program uses a standard-term or 

nonstandard-term academic calendar, is not a subscription-based 

program, and a course or courses in the program do not span the 

entire length of the payment period or period of enrollment.

However, the commenter noted that the change, while discussed in 

the preamble, is not included in the amendatory text of the 

NPRM. The same commenter offered that, given these changes, use 

of the term “module” in § 668.10(a)(3), relevant to direct 

assessment programs, is confusing and an alternative term should 

be found to replace it.
206

Discussion: We appreciate the commenter bringing the omission 

of proposed § 668.22(l)(6) from the preamble to our attention.

A student in a subscription-based or nonterm program is not 

considered to have completed a payment period if the student 

completed at least half-time coursework in that payment period 

because the Department does not consider a nonterm program or a 

subscription-based program to be “offered in modules.” The 

nature of such programs—which are not required to set limits on 

the timeframes for students to complete coursework—are not 

suited to the use of modules, which presume a clear start and 

end date for the coursework that a student is attempting during 

a payment period. Such a timeframe is crucial to the 

incorporation of modules into the Department’s framework for the 

R2T4 calculations because the number of days in the modules that 

a student is scheduled to complete in a payment period or period 

of enrollment comprise the denominator of the calculation that 

determines the amount of title IV, HEA program funds that the 

student earns for the period.

During meetings of the Distance Learning and Innovation 

subcommittee, the Department specifically expressed its intent 

to make changes to § 668.22 that would exclude non-term and 

subscription-based programs from the types of programs that are 

considered “offered in modules” and eliminate regulations 
207

specific to subscription-based and nonterm programs that 

previously incorporated the concept of modules. As noted above, 

these changes are discussed in the preamble to the NPRM but are 

not reflected in the amendatory text. The Department therefore 

believes that it is necessary to make a change to § 668.22(l)(6) 

in order to fully implement its proposed approach, which was 

approved by both the Distance Learning and Innovation 

subcommittee and the full negotiated rulemaking committee.

Finally, regarding the reference to modules in § 668.10, we 

believe the term is used correctly in that section and does not 

prejudice the amendatory text in § 668.22(l)(6). Proposed 

§ 668.10(a)(3) requires an institution to establish a 

methodology to reasonably equate each module in the direct 

assessment program to either credit hours or clock hours. If it 

were the case that all direct assessment programs were 

subscription-based, this might be a source of confusion. 

However, many direct assessment programs are offered in terms 

using modules. We believe the clear statement in 

§ 668.22(l)(6) that a program offered in modules is not 

considered to be a subscription-based program is sufficient to 

avoid any confusion between these two sections.

Changes: We have revised § 668.22(l)(6) to clarify that a 

program is “offered in modules” if the program uses a standard 
208

term or nonstandard-term academic calendar, is not a 

subscription-based program, and a course or courses in the 

program do not span the entire length of the payment period or 

period of enrollment. The amendatory text in the final rule 

includes § 668.22(l)(6) which was inadvertently omitted in the 

NPRM.

Comments: One commenter requested that the Department clarify 

whether a completed module is one the student successfully 

completed, or simply one the student attended all the way 

through, i.e., the module end date is in the past, the student 

began attendance and did not withdraw or stop attending; the 

module grade(s) could be earned failing grades or incompletes.

Discussion: As discussed in the NPRM, the Department proposed 

to revise its approach to the treatment of students who complete 

some, but not all, of the coursework they were scheduled to 

attend during a payment period to ensure more equitable 

treatment of such students while maintaining the integrity of 

the title IV, HEA programs. In achieving that balance, the 

Department believes it is reasonable to require that a student 

successfully complete the module(s) comprising 49 percent of the 

payment period or half-time enrollment. This standard will have 

the added benefit of reducing confusion for institutions that 

are not required to take attendance, since passing grades will 
209

necessarily be the determining factor in whether a student is 

treated as a completer rather than a withdrawal. Successful 

completion of a module requires the student receive at least one 

passing grade for that module. Successful completion of 

coursework equal to or greater than the coursework necessary for 

half-time enrollment requires that the student receive a passing 

grade in a sufficient number of credits to comprise half-time 

enrollment status (as defined by the institution under 

applicable regulations) for the payment period.

A student who completes a module but receives all 

incomplete grades, or a combination of course incompletes and 

failing grades is not considered to have successfully completed 

that module unless at least one course incomplete converts to a 

passing grade before the deadline by which the institution must 

otherwise perform an R2T4 calculation for that student. 

Likewise, a student receiving all course incompletes or a 

combination of course incompletes and failing grades is not 

considered to have successfully completed the number of credits 

necessary to establish half-time enrollment unless a number of 

course incompletes sufficient to comprise half-time enrollment 

convert to passing grades before the deadline by which the 

institution must otherwise perform an R2T4 calculation for that 

student.
210

Changes: We have revised the provisions of 

§ 668.22(a)(2)(ii)(A)(2) to reflect that a student who is 

enrolled in a program offered in modules is not considered to 

have withdrawn if the student successfully completes one module 

that includes 49 percent or more of the number of days in the 

payment period, excluding scheduled breaks of five or more 

consecutive days, and all days between modules or combination of 

modules that when combined contain 49 percent or more of the 

number of days in the payment period, excluding scheduled breaks 

of five or more consecutive days and all days between modules.

Comments: One commenter noted that proposed §

668.22(a)(2)(i)(C) states, “For a student in a standard or 

nonstandard-term program, excluding a subscription-based 

program, the student is not scheduled to begin another course 

within a payment period or period of enrollment for more than 45 

calendar days after the end of the module the student ceased 

attending, unless the student is on approved leave of absence, 

as defined in paragraph (d) of this section.” However, §

668.22(a)(2)(i)(D), which states, “For a student in a non-term 

program or a subscription-based program, the student is unable 

to resume attendance within a payment period or period of 

enrollment for more than 60 calendar days after ceasing 

attendance,” lacks a similar qualifier clarifying that a student 
211

who is unable to resume attendance within the prescribed period 

is not considered withdrawn if on an approved leave of absence.

Discussion: We appreciate the commenter bringing this 

unintentional discrepancy to our attention and clarify that no 

student on an approved leave of absence is ever considered to be 

withdrawn.

Changes: We have revised § 668.22(a)(2)(i)(D) to clarify that a 

student who is unable to resume attendance in a non-term or 

subscription-based program within a payment period or period of 

enrollment within 60 calendar days after ceasing enrollment is, 

nevertheless, not considered withdrawn if on an approved leave 

of absence.

Comments: One commenter asked the Department to consider 

whether, in view of the November 5, 2019 electronic announcement 

(EA) extending the maximum length of a semester to 21 weeks, 

proposed changes to § 668.22(a)(3)(ii) requiring students 

enrolled in programs offered in standard terms to confirm that 

they will enroll in another module within 45 days of ceasing 

enrollment to avoid being treated as withdrawn is still 

justified. The commenter observed that prior to the 

Department’s revised policy for standard term length issued on 

November 5, 2019, it was uncommon for a module in a standard 

term program to begin more than 45 days following the end of a 
212

prior module. However, the new guidance that allows a standard 

term to be as long as 21 weeks, increases the likelihood that 

more than 45 days would elapse.

Discussion: While the commenter is correct in asserting that a 

standard term of 21 weeks, as permitted by the November 5, 2019 

EA, increases the potential for a student to be scheduled to 

return to a course that begins more than 45 days after the end 

of the module the student ceased attending, we are not persuaded 

that this obviates the reasons for which the Department proposed 

the changes to § 668.22(a)(3)(ii). As explained in the preamble 

of the NPRM, the Department maintains the same concerns about 

long periods of non-attendance for standard term programs as it 

does for nonstandard-term and non-term programs and believes 

that students should be treated consistently in these 

situations. The increased likelihood for these extended periods 

of non-attendance to occur with longer standard terms, we 

believe, argues in favor of this requirement.

Changes: None.

Comments: Under proposed § 668.22(l)(9), a student in a program 

offered in modules is scheduled to complete the days in a module 

if the student’s coursework in that module was used to determine 

the amount of the student’s eligibility for title IV, HEA funds 

for the payment period or period of enrollment. One commenter 
213

requested that the Department clarify whether the most recent 

determination of enrollment status would be used for this 

purpose or whether the Department is referring to a specific 

initial or “census” date, or whether this can be a matter of 

institutional policy. The commenter asked, if the latter, will 

institutions have the latitude to implement a policy with 

multiple points of determination during the term much like 

existing policies with multiple Pell recalculation dates?

Discussion: In the preamble to the NPRM, the Department 

proposed to use the student’s schedule at a fixed point to 

determine the number of days the student is scheduled to attend 

during the period for R2T4 purposes. Using this approach, 

subsequent fluctuations in the student’s enrollment would have 

no effect on the number of days in the denominator of the R2T4

calculation if the student withdraws, resulting in a greater 

degree of certainty for students, a diminished likelihood of 

improper payments, and reduced administrative burden for 

institutions performing such calculations. In order to allow 

institutions flexibility in adopting a policy that is practical 

for their program(s), we are not prescribing a specific date 

that institutions must use as the fixed point for determining 

the number of days the student is scheduled to attend. A Pell 

recalculation date or census date is an allowable option, as 
214

would be some other date determined by the institution. An 

institutional policy that includes multiple dates, such as is 

permitted for Pell recalculation dates, is acceptable.

Changes: None.

Comments: One commenter noted that the proposed amendatory text 

in § 668.22(a)(2)(ii)(A)(3), addressing written confirmation for 

a payment period or period of enrollment in which courses in the 

program are offered in modules, specifically allows “electronic 

confirmation,” whereas § 668.22(a)(ii)(A)(4) and (5) pertaining 

to subscription-based programs and non-term programs 

respectively, make no reference to the use of electronic 

confirmation.

Discussion: We thank the commenter for bringing this 

inconsistency to our attention. It is the Department’s 

longstanding policy that, in the absence of regulations 

specifically requiring that a notification or authorization be 

sent via U.S. mail, a school may provide notices or receive 

authorizations electronically. It is further permissible to use 

an electronic process to provide required notices and make 

disclosures by directing students to a secure website that 

contains the required notifications and disclosures. Because of 

this, we believe specific mention, in any regulation, of the 

option to distribute required notifications and disclosures, or 
215

collect required authorizations and confirmations through 

electronic means, is redundant and may cause confusion.

Changes: We have revised § 668.22(a)(2)(ii)(A)(3) to remove the 

reference to “electronic confirmation.”

Satisfactory Academic Progress (§ 668.34)

Comments: Several commenters expressed general support for the 

proposed changes to satisfactory academic progress (SAP). 

However, some of those commenters asked that the Department 

consider amending the proposed rule to account for enrollment 

status in determining whether a student is meeting maximum 

timeframe requirements as measured in calendar time. One 

commenter objected to allowing institutions to measure maximum 

timeframe in calendar time because it could negatively affect 

students for whom life challenges preclude ongoing full-time 

attendance. The commenter suggested an alternative of allowing 

a maximum timeframe of 200 percent of program length. The 

commenter also suggested grandfathering students under existing 

standards as another alternative.

Discussion: We appreciate the support for our proposals to 

eliminate redundancy and provide greater flexibility in the 

application of SAP requirements. In response to those 

commenters who suggested that the definition of “maximum 

timeframe,” as measured in calendar time, accommodate 
216

differences in enrollment status, we note that the limitation on 

maximum timeframe of 150 percent of the published length of the 

program (for an undergraduate program) is an intentionally 

static measure designed to ensure completion of that program 

within a reasonable time. For example, a four-year, 120 credit 

Bachelor of Arts program may have a maximum timeframe of 180 

attempted credits or six years. Measuring maximum timeframe for 

the program in credit hours, with pace determined by dividing 

the cumulative number of successfully completed credit hours by 

the cumulative number of attempted hours, does account for 

variances in enrollment status. However, this is because credit 

hours are measured only as attempted, not because students who 

attend part-time are permitted additional hours beyond 180. 

Calendar time elapses at a constant rate regardless of how many 

credit hours a student attempts or completes. As a result, 

maximum time frame expressed in calendar time is, necessarily, 

less flexible with respect to variances in enrollment status. 

Factoring part-time enrollment into the measurement of students’ 

pace would potentially result in a maximum timeframe, as 

expressed in calendar time, of greater than 150 percent of 

published program length.

We do not agree that allowing institutions to measure 

maximum timeframe in calendar time will negatively affect 
217

students whose personal situations preclude full-time attendance 

in a program. First, this flexibility was not proposed with the 

expectation that large numbers of institutions would adopt 

calendar time in lieu of credit hours. Most institutions will 

continue to express maximum timeframe for their programs in 

credit hours which, as described above, does account for 

differing enrollment statuses throughout a student’s 

matriculation. Those institutions opting to measure in calendar 

time will likely do so having determined that it makes better 

sense for the type of programs they offer, e.g., competencybased programs or programs requiring a prescribed set of courses 

in each term for all students. Last, we remind commenters that 

a student who fails to meet SAP, including for reasons related 

to maximum timeframe, may file a SAP appeal (if the 

institution’s SAP policy permits such appeals).

Changes: None.

Foreign Schools (§§ 600.52 and 600.54)

Comments: Two commenters supported retaining the current 

exception for independent research done by an individual student 

in the United States. The provision permits not more than one 

academic year of research conducted during the dissertation 

phase of a doctoral program (and where the research can only be 

performed at a facility in the United States). The provision 
218

also permits an eligible foreign institution to enter into a 

written arrangement with an eligible institution within the 

United States to provide no more than 25 percent of the courses 

required for a student’s eligible program. However, both 

commenters requested that the proposed regulation be broadened 

such that a doctoral student, having already completed 25 

percent of his or her eligible program by taking coursework in 

the United States, would be permitted an additional full 

academic year to conduct independent research there. One of 

those commenters opined that the research phase of a doctoral 

program can take years and should not be subject to an 

artificial time limit that could preclude students from pursuing 

a program that provides insights into their chosen field. The 

commenter concluded that since the research phase of a doctoral 

program is separate and distinct from the classroom phase, it is 

both logical and equitable that students be permitted to 

undertake research in the United States without regard to 

whether or not they have taken a portion of their classroom 

study in that country.

Responding to the Department’s request for comments on 

whether written arrangements for students studying in the U.S. 

should include organizations that are not eligible institutions, 

one commenter replied in the affirmative. The commenter 
219

explained that a student’s home institution is responsible for 

designing and supervising its students and that any written 

arrangement involving another entity, whether an eligible 

institution or not, is ultimately subject to the approval and 

review of the home, eligible institution. The eligible 

institution must itself be approved to offer postsecondary 

education by a recognized authority in its home country that 

provides oversight that is the equivalent of that provided in 

the United States. The commenter further stressed that, as 

proposed, the rules regarding written arrangements would 

circumscribe the ability of eligible foreign institutions to 

offer diverse programs that include partnerships with other 

universities that specialize in certain topics, and entities 

which provide unique experiences within a student’s program of 

study, as well as access to career-enhancing internships.

One commenter supported the proposed revisions to 

§ 600.54(c) that would permit written arrangements between an 

eligible foreign institution and an ineligible entity, provided 

the ineligible entity is an institution that satisfies the 

definition in paragraphs (1)(iii) and (iv) of “foreign 

institution” and the ineligible foreign institution provides 25 

percent or less of the educational program. The same commenter 

requested that, given the potential for ongoing ramifications 
220

related to the COVID-19 pandemic, the Department increase the 

percentage of study permitted at recognized ineligible foreign 

institutions to as much as 50 percent. This, it was suggested, 

would provide students the flexibility to navigate the changing 

situation without having to appeal for special dispensation in 

future circumstances that are impossible to predict.

Two commenters asked that the Department reconsider the 

prohibition on foreign institutions offering any portion of an 

eligible program through distance education found in current 

§ 600.51(d). One of those commenters suggested that there is 

sufficient ambiguity in the applicable statute on which to base

permitting some use of distance education, especially in view of 

the temporary flexibilities extended under the Coronavirus Aid, 

Relief, and Economic Security Act (CARES) Act.20 Another 

commenter expressed the opinion that temporary flexibility, 

under the CARES Act, for foreign institutions to use distance 

education is tacit acknowledgement by Congress of the 

difficulties American students face as a result of the ban on 

distance education. In view of this, the commenter asked that

the Department modify its regulations to permit American 

20 S. 3548, 116th Congress (2020).
221

students to take up to 25 percent of their program of study via 

distance education.

Finally, one commenter rejected the proposal to allow 

students enrolled in foreign institutions to complete up to 25 

percent of a program in the United States based on concerns 

that, in conjunction with other Department rule changes, there 

would be no way to determine the fiscal and academic quality of 

such foreign institutions, and the potential for the change to 

result in opening the door to millions of students receiving 

degrees without completing the requirements deemed necessary by 

academic and industry leaders. The commenter further expressed 

opposition to foreign institutions gaining access to, and 

leveraging control over title IV financial aid, explaining that

this would be a direct and overtly questionable act, 

constituting an ethical breach, and not in the best interest of 

the Department, American higher education institutions, or our 

nation’s students.

Discussion: We appreciate the commenters’ concerns over the 

need for universities to make flexible and diverse research 

opportunities available for doctoral candidates whose 

specialized research often takes place over several years, and 

requires travel to specific locations, including in the United 

States. However, the Department is not convinced that providing 
222

those opportunities necessitates or warrants allowing students 

who have already completed 25 percent of their programs in the 

United States to spend an additional year conducting research in 

the United States. This “stacking” would create the potential 

for a student enrolled in a four-year doctoral program at an 

eligible foreign institution to complete half of that program in 

the United States. As explained in the preamble of the NPRM, 

the Department’s intention in proposing these rules is to 

enhance the range of educational opportunities available to U.S. 

students enrolled in eligible foreign institutions, aligning 

them with those enjoyed by students attending domestic 

institutions, while adhering to the basic principle that U.S. 

students borrowing from the Direct Loan program for enrollment 

in a program at an eligible foreign institution should reside in 

the country where that institution is located. We believe this 

balance to be equally necessary at the graduate and 

undergraduate level.

The Department is declining to permit stacking of the 

allowance for a student to complete up to 25 percent of their

program at an eligible institution in the United States under 

proposed § 600.52. However, an exception is permitted for 

independent research done by an individual student in the United 

States for not more than one academic year for research 
223

conducted during the dissertation phase of a doctoral program

(where the research can only be performed at a facility in the 

United States) under current § 600.51. Nevertheless, we wish to 

clarify that the proposed changes to § 600.52 do not preclude an 

institution from allowing doctoral students to study and/or 

conduct research in the United States using the flexibilities 

provided in each section. The examples below illustrate the 

practical application of both provisions.

Example 1

A student in the dissertation phase of her three-year 

doctoral program requests permission from the institution to 

conduct research in the United States. The student has not 

completed any portion of her program in the United States. 

Having concurred that her research can only be performed at a 

facility located there, the institution approves one year of 

research time in the United States.

Example 2

A student enrolled in a three-year doctoral program 

requests to study at an institution in the United States under a 

written arrangement. The home institution approves her request 

to take 12 credits at the PhD level over two 16-week semesters, 

24 percent of the length of the program as determined under 

proposed § 668.5(g) (i.e., dividing the number of semester, 
224

trimester, or quarter credit hours, clock hours, or the 

equivalent that are provided by the eligible U.S. institution by 

the total number of semester, trimester, or quarter credit 

hours, clock hours, or the equivalent required for completion of 

the program). Subsequently, while in the dissertation phase of 

her program, the student requests to conduct research in the 

United States. Because the one-year limit on the amount of time 

a doctoral student may remain in the United States in order to

conduct research is measured in calendar time, it is necessary 

for the institution to consider any time the student has already 

spent studying or conducting research there. With 32 weeks of 

previous study factored in, the student is approved for an 

additional period of research in the United States of up to 20 

weeks. 

We thank the commenter who responded to our request for 

comments on whether written arrangements for students studying 

in the U.S. should include organizations that are not eligible 

institutions. With respect to internships, we agree with the 

commenter that limiting these to eligible institutions would 

circumscribe opportunities for U.S. students attending eligible 

foreign institutions in a way that is contrary to the intent of 

proposed regulations. The preponderance of internship 

opportunities is not at eligible postsecondary institutions but 
225

rather with corporations, other businesses, and non-profit 

organizations other than postsecondary institutions. Given the 

extent to which relevant internship experience can enhance a 

student’s educational experience and affect a graduate’s 

employment prospects, we are convinced that U.S. students 

attending eligible foreign institutions should not be placed at 

a disadvantage relative to their counterparts attending domestic 

institutions, and should have the same opportunities to pursue 

internships in any country including the United States. 

While appreciative of the commenter’s position that 

increased latitude be accorded coursework as well, we are not 

similarly persuaded of the need to allow U.S. students attending 

eligible foreign institutions to take coursework in the United 

States, as part of their eligible program, at any entity other 

than an eligible institution. Unlike the situation in foreign 

countries, where another eligible institution may not exist or 

be within a reasonable travel distance for ground-based 

instruction, there is no lack of eligible institutions in the 

United States with which to execute a written arrangement. We 

believe the partnerships with other universities in specialized 

topics and unique student experiences referred to by the 

commenter can readily be secured through written arrangements 

with one or more of the 6,000 plus eligible institutions in the 
226

United States. In addition, we are concerned that an 

institution in a foreign country may not have sufficient 

opportunity to enforce elements of a written arrangement with a 

non-eligible entity located in the U.S., making such 

arrangements inherently risky. 

As a result, we are amending proposed § 600.52 (Foreign 

institution) to remove internships and externships from the list 

of program-related activities that may only be performed in the 

United States at an eligible institution, and specifying that 

internships and externships may be provided by an ineligible 

organization as described in proposed 

§ 668.5(h)(2). Proposed § 668.5(h)(2) clarifies that the 

limitations on written arrangements are not applicable to the 

internship or externship portion of a program if the internship

or externship is governed by the standards of an outside 

oversight entity, such as an accrediting agency or government 

entity, that require the oversight and supervision of the 

institution, where the institution is responsible for the 

internship or externship and students are monitored by qualified 

institutional personnel.

We thank the commenter for writing in support of the 

proposed revisions to § 600.54(c) that would permit written 

arrangements between an eligible foreign institution and an 
227

ineligible entity (other than in the United States), provided 

the ineligible entity is an institution that satisfies the 

definition in paragraphs (1)(iii) and (iv) of “foreign 

institution” and the ineligible foreign institution provides 25 

percent or less of the educational program. However, we 

disagree with the commenter that the percentage of a program 

that is provided by the ineligible entity should be increased to 

50 percent. Domestic institutions entering into a written 

arrangement with an ineligible entity to offer more than 25 

percent, but less than 50 percent of an eligible program, must 

obtain accreditor approval. No similar protocol exists for 

foreign institutions. Requiring that a non-eligible entity 

satisfy the regulatory definition of “foreign institution” does 

reasonably assure some degree of program integrity. However, 

the Department is not persuaded that this is an adequate 

substitute for accreditor approval where the percentage of the 

eligible program offered by an ineligible entity would be 

greater than 25 percent. Moreover, it would create a standard 

for eligible foreign institutions lower than that applied to 

domestic institutions.

In response to the commenters who asked that the Department 

reconsider the prohibition on foreign institutions offering any 

portion of an eligible program through distance education 
228

reflected in current § 600.51(d), we note that this prohibition 

(sec. 481(b)(3) of the HEA) is statutory and provides no 

flexibility. Although the CARES Act does authorize the use of 

distance education by eligible foreign institutions, and we 

believe that students benefit from having access to distance 

learning opportunities, including while enrolled at a foreign 

institution, that authority is temporary and tied to the 

national emergency declared on March 13, 2020.

We disagree with the commenter who objected to allowing 

students enrolled in foreign institutions to complete up to 25 

percent of a program in the United States, and asserted that the 

Department would be unable--(1) to determine the fiscal and 

academic quality of such foreign institutions; or (2) to prevent 

millions of students from receiving degrees without completing 

the requirements deemed necessary by academic and industry 

leaders. We further disagree that these changes facilitate 

foreign institutions gaining access to or leveraging control 

over title IV financial aid. First, eligible foreign 

institutions already participate in the Direct Loan program. 

The changes proposed in the NPRM do not, in any way, increase 

the scope of foreign institutions’ participation in the title IV

programs, nor do they loosen the existing financial 

responsibility standards that eligible foreign institutions must 
229

adhere to. Regarding academic quality and the potential for 

students to receive degrees that their work does not merit, we 

note that the proposed regulations make no changes to the 

current rules governing institutional eligibility. Lastly, we 

are uncertain of what the commenter means with reference to 

foreign institutions gaining access to or leveraging control 

over the title IV programs. As previously discussed, eligible 

foreign institutions already participate in the Direct Loan 

program, and the title IV, HEA programs are not structured in 

such a way that it is possible for any institution, foreign or 

domestic, to leverage control over them.

Changes: The definition of Foreign institution in proposed 

§ 600.52 (Foreign institution (C)(1)) is changed to remove 

internships and externships from the list of program-related 

activities that may only be performed in the United States at an 

eligible institution. Paragraph (C)(2) is added to allow 

participation in an internship or externship provided by an 

ineligible organization as described in § 668.5(h)(2).

Request for Review (§ 668.113)

Comments: One commenter expressed strong support for the 

proposed changes to § 668.113, establishing that if a final 

audit determination or final program review determination 

includes liabilities resulting from the institution’s 
230

classification of a course or program as distance education, or 

the institution’s assignment of credit hours, the Secretary 

would rely on the requirements of the institution’s accrediting 

agency or State approval agency regarding qualifications for 

instruction and whether the work associated with the 

institution’s credit hours is consistent with commonly accepted 

practices in higher education.

Another commenter, offering qualified support for the 

proposed changes, suggested that the Department clarify which 

fields would be suitable for distance education as the criteria 

for applying the standards in § 668.113. To make these 

determinations, the commenter offered that the Department should 

analyze whether the use of distance education is appropriate for 

and sustains the quality of instruction in those online programs 

where a final program review or audit determination has assessed 

liabilities.

Discussion: We thank the commenter who expressed strong support 

for these proposed changes. In response to the commenter who 

suggested the Department clarify which fields are suitable for 

distance education and make determinations regarding the 

appropriateness of that mode of instruction for individual 

programs, we note that the applicable statute and regulations 

place no constraints on the fields of study in which an 
231

institution may offer instruction using distance education, nor 

do they grant the Department authority to make such 

determinations. Assessing the quality of an educational program 

offered by an eligible postsecondary institution or establishing 

if that program may be offered using distance education is 

entirely within the purview of the institution’s accrediting 

agency and, in some cases, the State agency with oversight 

responsibilities. Were an institution to offer a program 

through distance education that its accrediting agency or State 

agency had determined may not be taught using that modality, the 

Department would hold the institution potentially liable for all 

of the title IV funds disbursed to students enrolled in that 

program. The proposed changes to § 668.113 do not, in any way, 

compromise the Department’s oversight authority in this area 

and, if anything, clarify that institutions are accountable to 

accreditor and State agency requirements in offering programs 

through distance education.

Changes: None.

Past Performance (§ 668.174)

Comments: Several commenters agreed that the proposal that an 

institution is not financially responsible if a person who 

exercises substantial ownership or control over an institution 

also exercised substantial ownership or control over another 
232

institution that closed without a viable teach-out plan approved 

by that institution’s accrediting agency and/or state regulatory 

body. The commenters believed the proposal change will help to 

protect students attending institutions that close and ensure 

that individuals affiliated with an institution that closed 

without a viable teach out plan, will not participate again in 

the title IV programs.

Discussion: The Secretary thanks the commenters for their 

support.

Changes: None

Factors of Financial Responsibility (§ 668.15, 668.171-668.175)

Comments: One commenter questioned the need for, and 

implications of, the proposal to apply the financial standards 

in § 668.15 to institutions that undergo a change of ownership 

and control. The commenter noted that historically, the 

Department has used only two of the financial measures in this 

section–the acid test ratio and positive tangible net worth or 

positive unrestricted net asset standards– to evaluate 

institutions that changed ownership and control. The commenter 

argued that applying, or potentially applying, all of § 668.15 

to changes in ownership would constitute a significant change in 

Department practice that would more appropriately call for a 

substantive rulemaking to clarify the relationship between the 
233

two sections of the regulations that address financial 

responsibility--§ 668.15 and §§ 668.171-175. In addition, the 

commenter stated that the proposed change to the title and 

applicability of this section was presented during negotiated 

rulemaking as a technical update rather than a substantive 

change.

Given the significant concern of many institutions and 

others for the Department to initiate a rulemaking on financial 

responsibility standards and the composite score, the commenter 

urged the Department to withdraw this proposed change and defer 

making revisions to changes of ownership standards to a broader 

rulemaking discussion. 

Discussion: In as much as the Department intended to clarify 

that § 668.15 applies only to institutions that undergo a change 

of ownership and control, we agree with the commenter that a 

broader discussion is warranted, particularly since the 

Department intends to conduct future negotiated rulemaking for 

the financial responsibility standards, including those 

applicable to changes of ownership.

Changes: We have withdrawn the proposed changes to § 668.15.

Executive Orders 12866, 13563, and 13771 

Regulatory Impact Analysis
234

Under Executive Order 12866, the Office of Management and 

Budget (OMB) determines whether this regulatory action is 

“significant” and, therefore, subject to the requirements of the 

Executive order and subject to review by OMB. Section 3(f) of 

Executive Order 12866 defines a “significant regulatory action” 

as an action likely to result in a rule that may--

(1) Have an annual effect on the economy of $100 million 

or more, or adversely affect a sector of the economy, 

productivity, competition, jobs, the environment, public health 

or safety, or State, local, or Tribal governments or communities 

in a material way (also referred to as an “economically 

significant” rule);

(2) Create serious inconsistency or otherwise interfere 

with an action taken or planned by another agency;

(3) Materially alter the budgetary impacts of entitlement 

grants, user fees, or loan programs or the rights and 

obligations of recipients thereof; or

(4) Raise novel legal or policy issues arising out of 

legal mandates, the President's priorities, or the principles 

stated in the Executive order. 

OMB has determined that this rule is an economically 

significant action and would have an annual effect on the 

economy of more than $100 million. This regulation will enable 
235

institutions to harness the power of innovation to expand 

postsecondary options, leverage advances in technology to 

improve student learning, and allow students to progress by 

demonstrating competencies rather than seat time. According to 

the Department's FY 2020 Budget Summary, Federal Direct Loans and 

Pell Grants accounted for almost $124 billion in new aid 

available in 2018. Given this scale of Federal student aid 

amounts disbursed yearly, the addition of even small percentage 

changes could result in transfers between the Federal government 

and students of more than $100 million on an annualized basis. 

Pursuant to the Congressional Review Act (5 U.S.C. 801 et 

seq.), the Office of Information and Regulatory Affairs 

designated this rule as a “major rule,” as defined by 5 U.S.C. 

804(2). 

Under Executive Order 13771, for each new regulation that 

the Department proposes for notice and comment or otherwise 

promulgates that is a significant regulatory action under 

Executive Order 12866, and that imposes total costs greater than 

zero, it must identify two deregulatory actions. For FY 2020, 

any new incremental costs associated with a new regulation must 

be fully offset by the elimination of existing costs through 

deregulatory actions. The rule is considered an EO 13771 

deregulatory action. We believe the effect of this regulation 
236

will be to remove barriers for development of distance and 

direct assessment programs and their participation in title IV, 

HEA funding, reduce the Department’s role in approving programs, 

and promote innovation in higher education. We believe this 

regulatory action will be, in sum, deregulatory.

As required by Executive Order 13563, the Department has 

assessed the potential costs and benefits, both quantitative and 

qualitative, of this regulatory action, and we are issuing these 

regulations only on a reasoned determination that their benefits 

justify their costs. In choosing among alternative regulatory 

approaches, we selected those approaches that maximize net 

benefits. Based on the analysis that follows, the Department 

believes that the regulations are consistent with the principles 

in Executive Order 13563.

We also have determined that this regulatory action will

not unduly interfere with State, local, or Tribal governments in 

the exercise of their governmental functions.

In accordance with the Executive orders, the Department has 

assessed, both quantitatively and qualitatively, the potential 

costs and benefits of this regulatory action. 

In this regulatory impact analysis, we discuss the need for 

regulatory action, the potential costs and benefits, net budget 

impacts, and regulatory alternatives we considered.
237

Elsewhere in this section, under Paperwork Reduction Act of 

1995, we identify and explain burdens specifically associated 

with information collection requirements.

Need for Regulatory Action

The emphasis in the regulations is on clarifying the 

distinctions between distance education and correspondence 

courses, affirming the permissibility of team teaching models, 

improving worker mobility by accommodating differences in 

licensure requirements across State lines, simplifying 

conversions between clock and credit hours to enable students to 

meet licensure requirements while also earning credits more 

likely to transfer to other institutions, establishing 

regulations regarding subscription-based programs so that 

institutions can confidently implement programs that measure 

competencies rather than seat time, and reducing barriers that 

limit the number of direct assessment programs available to 

students. 

These changes benefit institutions by enabling them to 

employ innovative methods and models without undue risk of 

inadvertently violating title IV requirements. These options 

benefit students by expanding the number of postsecondary 

education opportunities available to them, including those who 

may have been poorly served by more traditional “seat-time” 
238

instructional models. By providing a larger variety of 

postsecondary options and strategies such as blended learning, 

adaptive learning, and competency-based education, students may 

be much more likely to persist in and complete their programs 

and institutions will be much more equipped to drive student 

success.2122￼ The regulations define or clarify terms such as 

“correspondence course,” “distance education,” and “regular and 

substantive interaction,” and would streamline the current 

regulations to reduce the complexity of performing clock-tocredit hour conversions, disbursing aid to students enrolled in 

subscription-based programs, and ensuring that programs align 

with program length restrictions, while improving worker 

mobility across State lines. In some instances, the definitions 

clarify terms used in, but not defined by, the HEA. In other 

cases, the regulations codify program administration 

requirements that had previously been communicated only through 

sub-regulatory guidance, to give institutions the certainty they 

need to expand the postsecondary education options that they 

make available to students.

21 www2.deloitte.com/us/en/insights/industry/public-sector/improving-studentsuccess-in-higher-education.html

22 www.texaspolicy.com/new-study-less-expensive-competency-based-educationprograms-just-as-good-as-traditional-programs/
239

For instance, while CBE programs using direct assessment 

have been permitted by statute since 2006, most institutions 

continue to evaluate progress in CBE programs based on measures 

of time (or time equivalency) rather than a student’s 

demonstration of competency. This is largely due to 

uncertainties regarding how to disburse and calculate return-totitle IV for students enrolled in programs that measure 

competencies rather than time. 

As a result, the potential benefits of CBE programs, such 

as accelerated learning and completion as well as providing 

better assurances to employers that graduates are prepared for 

workplace demands, were mitigated because programs still were 

required to adhere to time-based title IV disbursement 

methodologies.23 These regulations provide needed certainty to 

institutions about how to disburse aid to students enrolled in 

CBE programs. The regulations also eliminate a significant 

legal obstacle to the adoption of direct assessment CBE programs 

by permitting title IV-eligible programs to be offered partly 

through direct assessment and partly using credit or clock 

hours. Eliminating this restriction makes it easier for 

institutions to experiment with direct assessment without having 

23 www2.deloitte.com/us/en/insights/industry/public-sector/improving-studentsuccess-in-higher-education.html
240

to immediately establish and implement a program offered 

entirely through direct assessment. 

The regulations acknowledge that subscription-based 

programs are permissible and provide instructions to 

institutions about how to disburse aid and evaluate satisfactory 

academic progress for students enrolled in these programs. 

These regulations also reduce the steps involved in gaining 

approval for direct assessment programs, which reduces the 

burden associated with administering these programs and reduces

the risk that an institution could invest resources in designing 

a high-quality program that the Department denies or 

unnecessarily delays. Institutions that better understand the 

rules for administering Federal student aid in circumstances 

that depart from traditional delivery models are more likely to 

invest in developing one of those models, and administering it

properly, thus avoiding improper payments and improving the 

student experience. 

The regulations also acknowledge that, given the cost of 

developing sophisticated technology-driven instructional tools 

or building specialized facilities on college campuses, a 

rational approach may be to rely on a third-party provider with 

a much broader reach than an individual institution or on 

industry partners who have other incentives to maintain state-
241

of-the-art facilities and equipment. Until institutions fully 

understand what is permissible in the development and 

implementation of innovative delivery models, institutional 

leaders will remain largely risk averse, and solutions that 

would otherwise help large numbers of students will not be made 

available to them. 

Finally, the regulations change the return of title IV 

funds and satisfactory academic progress provisions to reduce 

administrative burden and increase flexibility for many 

postsecondary institutions offering innovative programs.

Reducing the amount of burden and expense associated with the 

administration of the title IV, HEA programs for unique or nontraditional programs will also encourage institutions to offer 

programs that do not fit into the traditional mold and improve 

the available offerings for students.

The Department believes this regulatory action will have an 

annual effect on the economy of more than $100 million. If 

students have more postsecondary options to select from and if 

more students persist to completion, the number of students who 

enroll for the full duration of a program may increase. For 

example, although extremely limited in availability now, if 

there were fewer barriers to starting a direct assessment 

program, there could be an increase in the number available, and 
242

perhaps adult learners would find this to be a more satisfying 

way to learn, or the only way they can juggle the demands of 

work, school, and family. 

While a limited number of experienced institutions with 

established direct assessment programs may increase their 

program offerings, it is difficult to predict whether larger 

numbers of students will be attracted to higher education, in 

general, or if the current number of students would be 

distributed differently across the landscape of available 

programs. Direct assessment programs may be considerably more 

attractive to busy adult learners who would get credit for what 

they know from prior work or life experience.24 

The demand for distance education programs has visibly 

increased in recent years. In 2003-04, 15.6 percent of 

undergraduate students took at least one distance education 

class and only 4.9 percent of students were exclusively in 

distance education while by 2015-16, 43 percent of undergraduate 

students took at least one distance education class and 

approximately 11 percent were in exclusively distance programs.25

24 onlinelibrary.wiley.com/doi/full/10.1002/cbe2.1008

25 U.S. Department of Education, National Center for Education Statistics, 

Digest of Education Statistics 2018, 

Table 311.22. Number and percentage of undergraduate students enrolled in 

distance education or online classes and degree programs, by selected 

characteristics: Selected years, 2003-04 through 2015-16. Available at 

nces.ed.gov/programs/digest/d18/tables/dt18_311.22.asp
243

In many cases, more students are taking at least one online 

class while enrolled in a traditional ground-based program. 

Correspondingly, there has also been significant growth in the 

number of students who are enrolled in exclusively online 

programs.26 We have also seen significant redistribution of 

online enrollments as some large non-profit and public 

institutions have increased their market share, while at the 

same time some proprietary schools that once dominated distance 

education delivery are suffering sizeable enrollment losses and 

even closures. Overall, growth in the number of students 

enrolled exclusively online has been moderate, increasing 22

percent between 2013 and 2018. The number of students taking at 

least one online class has increased 28 percent between 2013 and 

2018.27 28 29

While current providers of CBE and direct assessment 

learning do so through distance learning modalities, it is 

possible that, as regulatory requirements become clearer, those 

26 www.insidehighered.com/digital-learning/article/2019/12/11/more-studentsstudy-online-rate-growth-slowed-2018

27 nces.ed.gov/programs/digest/d18/tables/dt18_311.15.asp

28 nces.ed.gov/programs/digest/d14/tables/dt14_311.15.asp

29 U.S. Department of Education, National Center for Education Statistics, 

IPEDS, Spring 2019, Fall Enrollment component (provisional data)., Number and 

percentage distribution of students enrolled at title IV institutions, by 

control of institution, student level, level of institution, distance 

education status of student, and distance education status of institution: 

United States, fall 2018. 
244

institutions that primarily provide ground-based education will 

also develop and implement CBE and direct assessment programs. 

On the other hand, programs that lead to licensure may be slower 

to introduce CBE or direct assessment models since licensing 

boards may resist change––although in the wake of COVID-19 we 

are seeing greater receptivity among licensing boards to 

distance learning.30

As can be seen in Table 1 below, which is based on data 

collected by the National Center for Education Statistics 

(NCES), while the percentage of students who are enrolled 

exclusively in online programs has increased slightly between 

2013 and 2018, the largest growth has been in the percentage of 

students who take at least one, but not all, of their classes 

online. The number of students engaged in online learning grew 

between 2013 and 2018 from approximately 5.5 million to 6.9 

million. This suggests that learning modalities will change as 

innovation creates a broader range of options. However, despite 

the increase in enrollments in online options, the total number 

of postsecondary enrollments has been in decline for the last 

several years. Therefore, it is clear that an increase in the 

percentage of students who enroll in online classes will, alone,

30 ij.org/wp-content/themes/ijorg/images/ltw2/License_to_Work_2nd_Edition.pdf
245

not likely result in overall increases in postsecondary 

enrollments. College enrollments are most dependent upon 

economic cycles, so changes in delivery models may be less 

important than macroeconomic conditions in determining total 

enrollments.

Table 1: 

All 

Institutions

Total 

Students 

(#) 

Nodistance 

education 

courses 

(%)

At least 

one 

distance 

course, 

not all 

(%)

All-distance 

education 

courses (%)

2018 20,008,434 65.3 18.4 16.3

2017 19,765,598 66.3 18.0 15.7

2015 19,977,270 70.2 15.4 14.4

2013 20,375,789 72.9 14.1 13.1

4-year 

(total)

Total 

Student No 

No-dist 

%

At least 

one, not 

all % All-dist %

2018 13,901,011 64.3 18.0 17.6

2017 13,823,640 65.8 17.3 16.9

2015 13,486,342 69.7 14.4 15.9

2013 13,407,050 73.0 12.2 14.8
246

2-year 

(total)

Total 

Student No 

No-dist 

%

At least 

one, not 

all % All-dist %

2018 6,107,423 67.6 19.2 13.2

2017 5,941,958 67.5 19.5 13.0

2015 6,490,928 71.2 17.6 11.2

2013 6,968,739 72.7 17.6 9.8

Public

Total 

Student No 

No-dist 

%

At least 

one, not 

all % All-dist %

2018 14,639,681 66.1 21.5 12.3

2017 14,560,155 67.8 20.8 11.4

2015 14,568,103 72.0 18.0 10.0

2013 14,745,558 74.6 16.7 8.7

Private NonProfitTotal 

Student No 

No-dist 

%

At least 

one, not 

all % All-dist %

2018 4,147,604 69.7 10.1 20.2

2017 4,106,477 71.3 9.5 19.2

2015 4,063,372 75.0 8.5 16.5

2013 3,974,004 80.0 6.9 13.1

Private ForProfitTotal 

Student No 

No-dist 

%

At least 

one, not 

all % All-dist %

2018 1,221,149 41.0 8.6 50.4

2017 1,098,966 29.0 11.1 59.9

2015 1,345,795 35.9 8.6 55.5

2013 1,656,227 40.7 7.6 51.7

Growth in the number and percentage of online learners was 

especially strong among private not-for-profit institutions, 

where students who took all courses through distance education 

increased over 54 percent, from 13.1 to 20.2 percentage points. 
247

At 2-year institutions, the percentage of students taking all 

courses online increased from 9.8 to 13.2 percentage points, 

almost a 35-percent jump from 2013 to 2018. However, total 

enrollments at 2-year institutions during that same time period 

decreased by over 850,000 students. 

While the percentage of students enrolled exclusively in 

distance learning is highest among proprietary institutions (60 

percent), relatively few students are enrolled at these 

institutions (only approximately 1 million of the nearly 20 

million enrolled in postsecondary education in 2017 were 

enrolled at proprietary institutions). There have been sizable 

decreases in total enrollments at proprietary institutions 

between 2013 and 2017, and in 2017 only 659,379 students were 

enrolled exclusively online at proprietary institutions as 

compared to 821,296 students who were enrolled exclusively 

online at private non-profit institutions and 1.6 million who 

were enrolled exclusively in online programs at public 

institutions. These data suggest that increases in enrollments 

among exclusively online courses do not necessarily result in 

increased number of total postsecondary enrollments.

The information about the number and distribution of 

distance education programs and students has clearly been 

temporarily altered in 2020 because of COVID-19 and the 
248

disruption of ground-based campus operations during times of 

mandatory or recommended quarantine. While some students may 

have withdrawn because of COVID-19 related circumstances, the 

Department believes that most students continued their program, 

albeit at least temporarily in a distance format. The extent to 

which this transformation continues in the remainder of 2020 and 

beyond will depend on the further developments with respect to 

COVID-19, the experience students have in their distance 

education courses and the value they place on campus activities, 

and the decisions institutions make about resuming on-campus 

programs. Additionally, as noted by the commenter, adverse 

economic conditions have been associated with increases in 

postsecondary enrollment, particularly for programs with an 

emphasis on career training and development. Postsecondary 

enrollment increased substantially from 2007-08 to 2010-11 as 

students responded to the recession during that time.31 Table 2 

reflects this increase and the significant growth in proprietary 

31 Foote, A. & Grosz, M. (2019). The Effect of Local Labor Market Downturns on Postsecondary Enrollment and 

Program Choice. MIT Press Journals.

Schmidt, Erik, “Postsecondary Enrollment Before, During, and Since the Great Recession,” P20- 580, Current 

Population Reports, U.S. Census Bureau, Washington, DC, 2018. 

(https://www.census.gov/content/dam/Census/library/publications/2018/demo/P20-580.pdf)

Barr, Andrew, and Sarah Turner. 2012. “Out of a Job and into School: Labor Market Policies and College Enrollment 

during the Great Recession.” Working Paper, University of Virginia.
249

enrollment during this period. The shape of the economic 

recovery from COVID-19 and the experience and outcomes of those 

who pursued postsecondary credentials during the last recession 

may affect how big an increase is seen in future postsecondary 

enrollment. The Department believes it is reasonable to expect 

some additional increase in new distance education students, the 

possibility of which is incorporated into the cost estimate in 

the Net Budget Impact section of this RIA.

Table 232: Trends in Fall Enrollment 2007-2013 by Control of 

Institution

Public Private Proprietary Total

Year # % # % # % # %

2007 13,603,772 3,595,466 1,478,231 18,677,469

2008 14,090,863 3.6% 3,684,190 2.5% 1,778,731 20.3% 19,553,784 4.7%

2009 14,936,402 6.0% 3,793,751 3.0% 2,123,270 19.4% 20,853,423 6.6%

2010 15,279,455 2.3% 3,881,630 2.3% 2,430,657 14.5% 21,591,742 3.5%

2011 15,251,185 -0.2% 3,954,173 1.9% 2,368,440 -2.6% 21,573,798 -0.1%

2012 15,000,302 -1.6% 3,973,422 0.5% 2,174,457 -8.2% 21,148,181 -2.0%

2013 14,856,309 -1.0% 3,990,858 0.4% 2,000,883 -8.0% 20,848,050 -1.4%

The CBE marketplace overall has also seen significant 

attention from within the postsecondary education community and 

general public, but the direct assessment component of CBE has 

32 U.S. Department of Education, National Center for Education Statistics, 

Digest of Education Statistics 2018, Table 303.20: Total fall enrollment in 

all postsecondary institutions participating in title IV programs and annual 

percentage change in enrollment, by degree-granting status and control of 

institution: 1995 through 2017. Available at 

https://nces.ed.gov/programs/digest/d18/tables/dt18_303.20.asp. Last Accessed 

May 26, 2020.
250

not, potentially because of the length of time it takes for the 

Department to review applications for direct assessment 

programs, and because several audits by the Department’s OIG in 

the past decade have been sharply critical of the oversight of 

direct assessment by the Department and accrediting agencies.33 34

35 The Department also believes that another recent report by 

the Department’s Inspector General, which found one 

institution’s team teaching model did not comply with title IV, 

HEA requirements, may have deterred other institutions that were 

considering the development of CBE programs. Even the threat of 

an audit finding recommending the return of hundreds of millions 

of dollars in title IV funds could dissuade institutions from 

pursuing such innovations. This may still be the case even if 

audit recommendations are not accepted by the Department.36

The Department’s data does not break out information about 

competency-based education students to the same extent as it 

does for distance education students, but a number of surveys 

and articles provide some background on existing programs. 

According to the 2018 National Survey of Postsecondary 

Competency-Based Education (NSPCBE), co-authored by American 

33 www2.ed.gov/about/offices/list/oig/auditreports/fy2014/a05n0004.pdf

34 www2.ed.gov/about/offices/list/oig/auditreports/fy2015/a05o0010.pdf

35 www2.ed.gov/about/offices/list/oig/auditreports/fy2016/a05p0013.pdf

36 www2.ed.gov/documents/press-releases/20190111-wgu-audit.pdf
251

Institutes of Research (AIR) and Eduventures, a majority of 

respondents believe that CBE will experience strong growth 

although they also perceive that a number of barriers to 

implementation remain.37 The survey was sent to over 3,000 

institutions including primarily 2- and 4-year institutions 

listed in the Integrated Postsecondary Education Data System 

(IPEDS). About 69 percent of respondents were 4-year 

institutions and 31 percent were 2-year institutions. A total 

of 501 institutions replied to the survey, representing a survey 

response rate of 16 percent. It is possible that the survey may 

suffer from selection bias if the institutions that completed 

the survey were more likely to be those institutions considering

adding CBE programs, which would mean that the survey results 

could not be accurately projected to the full postsecondary 

system.

Four-hundred-thirty of the 501 respondents reported being 

interested in, or in the process of, implementing CBE programs, 

while 71 indicated no interest. Some 57 institutions stated 

that they were currently offering at least one CBE program, with 

these institutions, in aggregate, offering a total of 512 CBE 

programs. The largest portion of programs (427 of 512) was at 

37 www.air.org/sites/default/files/National-Survey-of-Postsec-CBE-2018-AIREduventures-Jan-2019.pdf.
252

the undergraduate level with 85 at the graduate level. The 

highest concentration of CBE programs was in the fields of 

nursing and computer science. Given the requirement for nursing 

students to participate in clinical rotations, it is likely that 

CBE programs in nursing were designed to target students who are 

already registered nurses (with an associate degree) and now 

wish to complete a bachelor’s degree.

Over 50 percent of institutions reported CBE undergraduate 

enrollments of no more than 50 students per program while only a 

small number of institutions (approximately 4 percent) enrolled 

more than 1,000 undergraduate students in CBE programs at their 

institution. Thus, assuming these findings are characteristic 

of the overall CBE landscape, it appears that most institutions 

are still in the early stages of implementing CBE programs with 

only a handful of institutions operating large-scale programs.

Similar results were described in the 2019 survey that had 

602 respondents with 54 percent from public institutions, 42 

percent from private, nonprofit institutions and 4 percent were 

from proprietary institutions.38 Of the 588 programs offered by 

38 American Institutes for Research, State of the Field – Findings from the 

2019 National Survey of Postsecondary Competency-Based Education, available 

at www.air.org/sites/default/files/National-Survey-of-Postsecondary-CBELumina-October-2019-rev.pdf
253

64 institutions, 84 percent were undergraduate and 16 percent 

were graduate programs. The majority of existing programs 

remain small, with 53 percent with enrollment under 50 

students.39 As in the 2018 survey, popular fields for competencybased programs include nursing, computer and information 

sciences, and business administration.40 Seventy-seven percent 

of responding institutions with competency-based programs 

reported that they are eligible for Federal financial aid. Of 

those, 75 percent report they maintain that eligibility by using 

a course structure to map to credit hours.41

One of the three top barriers to implementing CBE programs, 

as cited by over 50 percent of the responding institutions, was

“Federal student aid regulations.” The other two key barriers 

to entry included the need to change business processes and the 

high costs associated with start-up. While the survey results 

point to a guarded optimism on the growth of CBE programs, this 

optimism is tempered by a perception that the regulatory climate 

needs to be flexible and conducive to expansion of CBE programs; 

however, the report suggests that it is crucial to preserve 

consumer protections.

39 Id., p. 25.

40 Id., p.26.

41 Id, p.31.
254

The Department agrees with this theme, as we noted in the 

executive summary of the NPRM that “the purpose of these 

distance education and innovation regulations is to reduce 

barriers to innovation in the way institutions deliver 

educational materials and opportunities to students, and assess 

their knowledge and understanding, while providing reasonable 

safeguards to limit the risks to students and taxpayers.” 

Therefore, these final regulations send a signal to the 

higher education community that the Department is committed to 

reducing regulatory burden to make way for responsible 

innovations, such as CBE programs and direct assessment 

programs. Further, the regulations would enable institutions to 

develop new title IV disbursement models, such as subscriptionbased programs, to align the delivery of aid with programs that 

allow students to complete as many classes as possible during a 

given period of time, but to also pace themselves appropriately 

based on other demands and learning needs. 

While technology has transformed the way almost every 

industry in America does business, it may have not fundamentally 

transformed the way we educate students, monitor their progress, 

or diagnose when and what kind of additional support services a 

student needs. Many institutions are educating postsecondary 

students today in a very similar manner to methods and practices 
255

used a hundred years ago. Nonetheless, there have been some 

early innovators who have made advances despite the Department’s 

lagging in this area. In that regard, this rule represents the 

Department’s effort to catch up with innovations that are 

already taking place at forward-looking institutions. We seek 

to promote continuing innovation, both in distance learning and 

ground-based education. The regulations update our definitions 

of “distance education” and “correspondence courses” to 

acknowledge that as a result of CBE and direct assessment, many 

students enrolled in distance education progress at their own 

pace, which is a characteristic that in the past was determinant 

of a correspondence course. With the introduction of adaptive 

learning and other technologies, a student enrolled in distance 

education is likely to be learning at his or her own pace, 

although that learner continues to have regular and substantive 

interactions with the instructor(s). The regulations 

acknowledge that adaptive learning can play an important role in 

a student’s educational experience and can facilitate regular 

and substantive interaction between students and instructors by 

providing students with continuous feedback regarding their 

learning. The Department appreciates the considerable effort of 

negotiators to recommend and agree to regulatory changes that 

promote and enable flexibility, while at the same time ensuring 
256

the preservation of student protections and the responsible 

distribution of title IV, HEA assistance.

It is the combination of changes addressed in these final

regulations that cumulatively would have sufficient impact on

the economy to warrant classifying this regulation as 

economically significant. Specifically, while there could be 

increases in the number of students seeking title IV, HEA 

assistance, or the number of students who persist to completion, 

these increased Federal expenditures could result in the 

preparation of a more capable workforce and a better-educated 

citizenry. As more adults are required to obtain additional 

postsecondary courses or credentials throughout their 

professional lifetime, the availability of more efficient 

learning opportunities, such as CBE and direct assessment 

learning, will enable more adults to evolve in their careers. 

Summary of Comments and Changes from NPRM

As described throughout this preamble, the Department 

considered a number of comments and made some technical 

corrections and changes in these final regulations. One comment 

focused on the RIA analysis and emphasized that the Department 

should have accounted for the effects of COVID-19 and the 

resulting increase in distance education. The commenter noted 

that previous recessions had resulted in significant increases 
257

in postsecondary enrollment and that the specifics of the COVID19 situation would likely result in students choosing distance 

education options over traditional, campus-based programs. The 

commenter also pointed out that distance education and 

competency-based programs are often attractive to veterans, 

students of color, low-income students, students who are 

parents, or working students who are disproportionately affected 

by the COVID-19 health effects and economic disruption. The 

commenter encouraged the Department to rescind the rule, open a 

new round of negotiated rulemaking in light of COVID-19, or, at 

least to redo the cost estimates and regulatory analysis for 

these final regulations to take COVID-19 impacts into account.

The Department appreciates the comment and recognizes that 

the NPRM was published on April 2, 2020, when we were still

understanding the impact that COVID-19 could have on enrollments 

in distance learning. The rapid transformation of the 

postsecondary educational landscape as a result of COVID-19 

supports the Department’s point that the creation of innovative 

postsecondary programs, including distance education and 

competency-based programs, will be driven by student demands and 

other events that generate demand. The changes in these final 

regulations allow those student-driven program development 
258

decisions to be implemented more efficiently while maintaining 

appropriate safeguards for students.

Another consideration is that the cost estimate for the 

NPRM and these final regulations is intended to capture the 

impacts of the regulatory changes. The rapid transformation to 

distance education occurred independent of these final 

regulations, although the Department did waive several 

provisions in line with the proposed changes in these final 

regulations to facilitate the response to COVID-19. For example, 

the Department waived preapproval requirements that would have 

otherwise delayed institutions in their efforts to move to 

distance learning, and it permitted accreditors to develop 

policies and procedures to enable rapid transition to distance 

learning without going through the regular policy-making process 

that would have taken months to accomplish. In addition, the 

Department permitted students enrolled at foreign institutions 

to complete up to 25 percent of their program at an eligible 

U.S. institution or an ineligible foreign institution so that 

students whose primary institution suspended operations could 

continue their education elsewhere without jeopardizing their 

continued participate in title IV programs. The consequences 

of COVID-19 and subsequent economic disruption are part of the 

conditions and environment within which these regulations will 
259

have an impact, and while it may be impossible to definitively

distinguish between the effects of the regulations versus the 

effects of COVID-19 on the transition to distance learning, we 

attempt in this RIA to do so. In light of the recent, COVID-19

related transformation in postsecondary education, the 

Department has updated some of the information about such 

programs and has considered how the experience over the past 

months may increase or accelerate institutions’ plans to develop 

additional distance or competency-based programs. This is 

addressed in the Net Budget Impact section of this RIA. 

Costs, Benefits, and Transfers

The Department anticipates that the regulations would

affect students, IHEs, accrediting agencies, and the Federal 

government. State government may also be impacted in some 

instances. Table 2 refers to key changes described in the 

identified preamble sections and summarizes potential impacts.

Table 2: Summary of Key Changes

Change Affected 

Parties

Impacts

Reg Section 600.2 – Definitions
260

Create definition 

for “academic 

engagement.”

Students/

Institutions/

Federal 

Government

Clarifies and expands the types of 

activities that verify student 

enrollment for the purpose of 

performing return to title IV funds

calculations while standardizing the 

Department’s definition of “academic 

engagement” for use elsewhere in the 

regulations. Prevents improper 

payment of title IV funds to students 

who are not legitimately engaged in 

postsecondary learning.

Defines "clock hour" 

for distance 

education.

Students/Inst

itutions/Fede

ral 

Government/Ac

crediting 

Agencies

Codifies current policy allowing 

institutions to record clock hours 

earned through distance education but 

requires such hours to be taught 

through synchronous or, as permitted 

by these final regulations, 

asynchronous instruction by the 

instructor. Clock hours may be earned 

through distance education only when 

permitted by licensing boards or other 

regulatory entities that require 

enrollment to be measured in clock 

hours. Regulatory clarity may 

encourage greater use of distance 

education to provide the didactic 

portion of occupationally focused 

programs, thus expanding access to 

students who are working, raising 

families, or live far from campus. As 

described in the preamble and further 

discussed after this table, potential 

concerns with allowing asynchronous 

instruction include a lack of direct 

interaction and the use of the hours

for the completion of homework.

Modifies definitions 

of "correspondence 

course" and 

“distance education” 

to clarify that it 

is permissible to 

employ a team 

approach to 

instruction and 

clarifies that the 

requirements for 

regular interaction 

are met if the 

institution provides 

opportunities for 

interaction, even if 

each student does 

Students/

Institutions/

Federal 

Government/

Accrediting 

Agencies

Benefits students by encouraging the 

development of programs taught by 

instructional teams consisting of 

experts in the various elements of 

high-quality instruction, as opposed 

to a more traditional model that 

relies on a single faculty member to 

meet all of the student’s learning 

needs. Benefits students and 

institutions by potentially reducing 

some of the costs of instruction. 

Reduces the need for institutions to 

require students to engage in less 

substantive work solely for the 

purpose of documenting that regular 

and substantive interaction took place 

in order to document that a course is 
261

not take advantage 

of each opportunity. 

Removes self-pacing 

from definition of 

“correspondence 

course” as it is not 

a necessary 

characteristic for 

such courses.

offered using distance education and 

is not a correspondence course. 

Refines definition 

of "credit hour" to 

reflect current subregulatory guidance 

in DCL GEN-11-06 

that references a 

variety of delivery 

methods.

Students/

Institutions/

Federal 

Government

Maintains time-based standard to 

ensure consistency among institutions 

regarding the awarding of academic 

credit, while also creating the 

necessary flexibility to consider that 

many new educational delivery models 

are not based on seat time. Codifies 

flexibility provided in sub-regulatory 

guidance under the Department’s Dear 

Colleague Letter GEN-11-06.

Amends definition of 

"distance education" 

by removing 

references to 

specific kinds of 

electronic media 

used in providing 

instruction, 

relegating the 

determination of 

instructor 

qualifications to 

accrediting 

agencies, including 

the use of 

interactive 

technologies to meet 

the requirements for 

“substantive 

interaction,” and 

establishing 

standards for 

“regular 

interaction” that 

include predictable 

opportunities for 

interaction and 

monitoring of 

student engagement.

Students/

Institutions/

Federal 

Government/

Accrediting 

Agency

Updates regulations to remove 

references to outdated forms of 

electronic media and to ensure that 

new forms of electronic media will be 

covered by the regulations in the 

future. Acknowledges that the use of 

interactive learning technologies can 

facilitate regular and substantive 

interaction between students and 

instructors. Benefits institutions by 

more clearly explaining regulatory 

compliance requirements for 

educational innovations, thus reducing 

risk and potential financial penalties 

for those institutions pursuing 

educational innovation. Benefits 

students by expanding learning 

opportunities and flexibilities, 

including personalized learning, 

without unnecessary bureaucratic 

hurdles for the purpose of meeting 

title IV requirements for regular 

participation. Benefits the Federal 

government by ensuring that students 

are receiving high-quality education 

when using Federal student aid to pay 

for that education. Benefits students 

by ensuring that online learning 

includes meaningful interactions with 

qualified instructors who can monitor 

and improve student learning. 
262

Clarifies 

definitions of 

"incarcerated 

student" and 

“juvenile justice 

facilities.”

Students/

Institutions/

Federal 

Government

Reflects current practice and subregulatory guidance and clarifies that 

individuals in certain correctional 

facilities may be eligible for Pell 

grants, but limits the use of Pell 

grants to appropriate instructional 

expenses. 

Amends definition of 

"nonprofit 

institution" to 

delete reference to 

501(c)(3) tax 

status.

Institutions Redundant language removed; no impact 

anticipated.

Reg Section 600.7 - Conditions of Institutional Eligibility

Establishes that a 

student is not 

considered to be 

“enrolled in 

correspondence 

courses” until at 

least 50 percent of 

the student’s 

classes are 

correspondence 

courses.

Students/

Institutions

Impact minimal based on the small 

number of correspondence courses 

operating in the country. Potential 

benefit to institutions and students 

is that enrollment in a single or 

small number of correspondence courses 

does not cause a student to be counted 

against the institution for 

eligibility purposes. Provides 

greater flexibilities for students who 

are managing multiple life demands or 

for whom travel to the campus is 

difficult or for whom technology 

access is limited, by allowing them to 

participate in a small number of 

correspondence courses without putting 

title IV participation for the 

institution at risk.

Reg Section 600.10 - Date, Extent, Duration, and Consequences of Eligibility
263

Limits Secretary's 

approval of direct 

assessment programs 

at the same academic 

levels to the first 

such program at an 

institution.

Students/

Institutions/

Federal 

Government

Acknowledges that the Department’s 

role in approving direct assessment 

programs is limited to ensuring the 

integrity of the title IV, HEA 

programs, and assumes that if an 

institution can disburse aid properly 

to students in one program at a given 

academic level, it is likely to be 

able to do so for additional programs. 

Ensures that an institution that 

creates a first new direct assessment 

program at a new academic level is 

reviewed by the Department to ensure 

appropriate administration of title IV 

funds. Encourages institutions that 

have demonstrated the ability to 

design and operate a direct assessment 

program to expand that model of 

instruction and enables institutions 

to respond more quickly to student and 

workforce needs. Reduces a potential 

barrier or reduces time required to 

establish a direct assessment program. 

A consequence of eliminating the 

requirement that the Secretary approve 

each new direct assessment program at 

the same academic level is that it may 

lead to the rapid expansion a direct 

assessment programs without the 

guardrail of the Department’s review. 

Reg Section 600.20 - Notice and application procedures for establishing, 

reestablishing, maintaining, or expanding institutional eligibility and 

certification

Requires the 

Secretary to provide 

timely review of new 

program applications 

and enables 

institutions to 

start advertising 

programs early 

enough to enroll a 

full cohort of 

students.

Students/ 

Institutions/

Federal 

Government

Benefits institutions and students by 

allowing faster development of new 

programs, especially those responsive 

to workforce development needs. 

Reflects role of accreditors in 

assessing program quality and 

Department's intent to rely on 

accreditor's assessment except in rare 

circumstances related to the 

Department's statutory and regulatory 

requirements or specific requirements 

of the institution's PPA. Protects an 

institution from Department’s failure 

to act on an application for new 

program approval and reduces the 

likelihood that delays on the 

Department’s part will require an 

institution to navigate the State and 

accreditor approval process a second 

time.
264

Reg Section 600.21 -Updating Application Information

Adds reporting 

requirements for (1) 

the addition of 

second and 

subsequent direct 

assessment programs 

at the same academic 

level.

Institutions/

Federal 

Government

With the elimination of the 

requirement for the Department to 

approve subsequent programs, this 

allows the Department to monitor the 

growth and development of direct 

assessment programs. Also allows 

cross-checking with accreditors to be 

sure program or arrangement has 

approval. 

Reg Section 600.52 and 600.54 (related to Foreign Institutions)

Amended to permit 

written arrangements 

with an eligible 

institution in the 

United States to 

provide no more than 

25 percent of a 

student's program.

Students/

Institutions/

Federal 

Government

Benefits students by allowing them to 

take Federal student loans to enroll 

at certain foreign institutions but 

retain the ability to take a limited 

number of courses in the U.S., such as 

during summer breaks. Also enables 

title IV-participating students 

enrolled at foreign institutions to 

pursue qualifying internships or 

externships in the United States at 

entities other than eligible 

institutions. Benefits students by 

allowing them to find internships or 

externships in a variety of settings

in which they may wish to pursue a 

career. 

Amended to permit 

written arrangements 

between a foreign 

institution and an 

ineligible entity 

for no more than 25

percent of a 

student's program; 

provided that the 

ineligible entity 

satisfies definition 

of “foreign 

institution.”

Students/

Foreign 

Institutions/

Federal 

Government

Allows students at eligible foreign 

institutions to take courses at other 

approved foreign institutions in that 

country, thus benefiting from the same 

opportunities as their international 

peers enrolled at foreign schools. 

Broadens educational opportunities 

available to U.S. students at foreign 

institutions while maintaining 

reasonably equivalent quality. 

However, while the regulations require 

the ineligible institution to meet the 

requirements of the foreign country in 

which it is located, these 

arrangements would not be overseen by 

a recognized accrediting agency or the 

Department, outside of the regulatory 

requirements, which may make it 

difficult to ensure academic quality 
265

of the coursework offered by the 

ineligible foreign institution.

Reg Section 668.2 - Definitions

Eliminates 

definition of 

Academic 

Competitiveness 

Grant (ACG).

None ACG program is no longer authorized by 

HEA. Removing definition has no 

impact on students or institutions. 

Amends "full-time 

student" to define 

requirements for 

subscription-based 

programs and to 

prevent an 

institution offering 

such a program from 

including repeated 

courses for which a 

student has already 

received a passing 

grade in a student’s 

enrollment status.

Students/

Institutions/

Federal 

Government

Provides clarity for institutions 

regarding subscription-based models 

and how they can be structured to 

permit students to receive title IV, 

HEA assistance. 

Defines 

"subscription-based 

program" for title 

IV disbursement 

purposes as standard 

or non-standard term 

program for which an 

institution charges 

a student for a term 

with the expectation 

that the student 

completes a 

specified number of 

credit hours within 

the term. Clarifies 

that no specific 

timeframe applies 

for the terms and 

that students must 

complete a 

cumulative number of 

credit hours (or the 

Students/

Institutions/

Federal 

Government

Revision from NPRM expands use of 

subscription-based model to all types 

of programs, not just direct 

assessment programs. Benefits all 

parties by clarifying how title IV aid 

disbursements work for subscriptionbased programs. Provides flexibility 

for students to take advantage of 

self-pacing inherent in this program 

model while limiting potential for 

abuse by requiring completion before 

subsequent disbursements of aid. Some 

protection for students with 

possibility of one single subscription 

period for catch-up work before loss 

of title IV eligibility. Clarity 

provided by definition may increase 

the establishment of direct assessment 

programs or other programs that could 

benefit from this approach, to the 

benefit of the institutions that offer 

them, and as options for students, 
266

equivalent) during 

or following the 

term before 

receiving another 

disbursement of 

title IV funds. 

including the non-traditional students 

that have taken advantage of existing 

CBE programs. Provides an opportunity 

for students who fall behind in a 

subscription-based program to catch up 

and get back on track. A potential

risk of expanding subscription-based 

model beyond direct assessment 

programs include the possibility that 

students in subscription-based 

programs will quickly accrue debt

early in their programs while falling 

behind in their coursework.

Requires 

institutions to 

establish a single 

enrollment status 

that applies to a 

student throughout 

his or her 

enrollment in a 

subscription-based 

program, with the 

student able to 

change their 

enrollment status 

once in an academic 

year.

Students/

Institutions/

Federal 

Government

Provides consistency for students 

regarding expectations for completion 

of coursework in a subscription-based 

program. Offers clarity to 

institutions regarding requirements 

for structuring such programs to 

ensure access to Federal aid. Improves 

program integrity by limiting options 

for students to avoid completion 

requirements through changes in 

enrollment status. 

Explains method for 

determining number 

of credit hours (or 

the equivalent) that 

must be completed 

before subsequent 

disbursements of 

title IV aid.

Students/

Institutions/

Federal 

Government

Benefits institutions by clarifying 

how to match disbursements to pace of 

each student's progress. Benefits the 

Federal government by establishing a 

clear completion standard for students 

to meet before they receive subsequent 

disbursements of Federal aid. Benefits 

students by allowing for an additional 

term to “catch-up” on coursework 

before losing title IV eligibility. 

Modifies definition 

of "third party 

servicer" to use 

"originating loans" 

instead of 

"certifying loan 

applications." 

None Reflects current practices and 

terminology. No impact anticipated on 

any party.

Reg Section 668.3 - Academic Year
267

Revises definition 

of "week of 

instructional time" 

as it pertains to an 

institution's 

"academic year." 

One part of the 

definition would 

cover traditional 

postsecondary 

programs and remain 

unchanged and the 

other would cover 

programs using 

asynchronous 

coursework through 

distance education 

or correspondence 

courses. For these 

courses, defines it 

as a week in which 

the institution 

"makes available the 

instructional 

material, other 

resources, and 

instructor support 

necessary for 

academic engagement 

and completion of 

course objectives.”

Students/

Institutions/

Federal 

Government

Benefits institutions by clarifying 

requirements for building 

instructional calendars in programs 

offered asynchronously through 

distance education and may spur 

additional innovation given better 

understanding of compliance 

thresholds. Benefits students and the 

Federal government by ensuring that 

institutions make appropriate 

instructional materials and support 

available during instructional periods 

in exchange for Federal student aid. 

As noted by commenters, the 

interactions in asynchronous courses 

may not be predictable. 

Reg Section 668.5 - Written Arrangements to Provide Educational Programs

Clarifies that 

institutions using 

written arrangements 

may align or modify 

their curriculum to 

meet requirements of 

industry advisory 

boards or other 

industry-recognized 

credentialing bodies 

rather than going 

through a mandatory, 

and typically 

lengthy, shared 

governance decisionmaking process.

Institutions/

Faculty/

Students/

Accrediting 

Agencies

Enables institutions to keep pace with 

changing needs of employers and 

protects non-accredited providers from 

having their educational programs or 

technologies manipulated by others. 

This is important since providers 

through written arrangements must 

prove the efficacy of their programs, 

so outsiders should not be allowed to 

modify or change the program in a way 

that could influence those results. 

Ensures that students are better 

prepared for entry to the workforce in 

certain occupations. Could create 

tension with faculty and reduce their 

influence over certain aspects of the 

curriculum but could require proper 

oversight by partnering institutions 

and accreditors to reduce risk of harm 

to students.
268

Clarifies 

calculation of 

percentage of 

program that could 

be provided by an 

ineligible 

institution. 

Students/

Institutions/

Accreditors/

Ineligible 

Entities 

involved in 

Written 

Arrangements

Ensures that degree-granting 

institutions retain academic control

of a program and maintain the 

responsibility for delivering at least 

half of an academic program. Setting 

out a clear methodology makes clear 

when and how written arrangements may 

be used but ensures that colleges and 

universities are not simply 

outsourcing instructional 

responsibilities to non-accredited 

providers. Benefits institutions by 

improving speed with which accrediting 

agencies review and approve such 

arrangements. While the accrediting 

agency can deny the request for a 

written arrangement, increasing the 

speed for review and expanding the 

options for staff that can review 

these arrangements could make for a 

less robust or rigorous review. 

Benefits students and institutions by 

allowing institutions to engage other 

providers, such as unions and 

apprenticeship providers, who may have 

specialized facilities and uniquely 

trained employees who can serve as 

teachers and mentors. Benefits 

institutions by allowing them to offer 

educational opportunities or 

technologies that are developed by 

outside providers who may be better 

situated to invest in new technologies 

due to their opportunities to deliver 

them to a larger population of 

students than are typically at a 

single institution.

Clarifies that 

written arrangements 

are not necessary 

for certain other 

interactions with 

outside entities. 

Specifically, the 

limitations in 

§668.5 do not apply 

to the transfer of 

credits, use of 

prior learning 

assessment or other 

non-traditional 

methods of providing 

Institutions/

Students

Offers clarity for institutions to 

ensure that use of written 

arrangements does not result in fewer 

credits being accepted through 

transfer or awarded through prior 

learning assessment. Benefits 

students by reducing costs and time to 

completion for those who bring preexisting knowledge and skills to the 

classroom. 
269

academic credit, or 

the internship or 

externship portion 

of a program.

Removes 50 percent 

limitation on 

written arrangements 

between two or more 

eligible 

institutions under 

joint ownership. 

Institutions Allows greater opportunities for 

institutions to share administrative 

or instructional resources when under 

shared ownership.

Ineligible entities 

would not, as was

proposed in the 

NPRM, have to

demonstrate 

experience in 

delivery and 

assessment of the 

program or portion 

the ineligible 

entity delivers and 

that the programs 

have been successful 

in meeting stated 

learning objectives.

Institutions Allows institutions to use third 

parties to deliver portions of 

programs, to integrate advanced 

technologies, enable student access to 

specialized facilities and experts, 

expand the number of learning options 

available to students and potentially 

increase the number of students an 

institution can responsibly serve. 

While written arrangements may reduce 

the cost of delivering certain kinds 

of instruction, constructing 

specialized facilities, or developing 

new technologies, the written 

arrangement will have associated costs 

that could reduce revenue. Students 

could have access to newer 

technologies or higher quality 

instruction than could be provided by 

the institution. In the final 

regulations, ineligible entities will 

not be required to demonstrate prior 

experience and success in meeting 

learning objectives for portions of 

programs they deliver. However, there 

are potential risks inherent in 

contracting with an ineligible entity 

that lacks demonstrable experience.

The outside provider could be of lower 

quality, have less of a vested 

interest in the student’s success, or 

lack the necessary resources to 

provide the educational services 

agreed upon in the written 

arrangement.

Reg Section 668.8 – Eligible Programs
270

Eliminates 

consideration of 

“out-of-class” hours 

for purposes of 

performing clock-tocredit conversions 

for non-degree 

programs that are 

subject to those 

requirements.

Institutions Aligns the Department’s requirements 

with those of most licensing boards 

and simplifies the conversion process. 

Enables students to meet licensure 

requirements in programs that are 

title IV eligible and helps 

institutions by allowing them to 

comply with the reasonable length 

requirements while also allowing 

credit hour to clock hour conversions. 

May result in additional title IV 

funds expenditures for programs 

currently lacking any out-of-class 

components.

Reg Section 668.10 - Direct Assessment Programs

Revises definition 

of "direct 

assessment" and 

eliminates separate 

definitions of key 

terms for direct 

assessment programs, 

referring instead to 

requirements 

elsewhere in 

regulations.

Institutions Simplifies and clarifies requirements 

related to direct assessment programs.

Eliminates certain 

prohibitions on 

types of coursework 

that can be offered 

through direct 

assessment, 

including remedial 

coursework, and 

enables “hybrid” 

programs to provide 

students options to 

take some direct 

assessment courses 

and some traditional 

or distance learning 

courses. 

Students/

Institutions/

Federal 

Government

Allows institutions to provide 

students with more options so that 

learners can select the learning 

modality that best meets their needs. 

Allows students to take some 

traditional courses even if some of 

their other courses are direct 

assessment courses. Recognizes that 

co-remediation is a promising 

practice, and direct assessment 

classes may increase the number of 

students who can participate in coremediation programs while taking 

other classes. 

Codifies current 

policy by adding 

prohibition on 

paying title IV, HEA 

funds for credit 

earned solely 

through prior 

learning assessment.

Students/

Institutions/

Federal 

Government

Benefits students and taxpayers by 

discouraging institutions from 

charging excessive fees for conducting 

prior learning assessment and ensures 

that taxpayer dollars are not being 

used to pay institutions for 

instruction that they are not 

providing.
271

Reg Section 668.13-Certification Procedures

Automatic renewal of 

an institution's 

certification if the 

Secretary does not 

make a decision on 

an application for 

recertification 

submitted no later 

than 90 calendar 

days before its PPA 

expires within 12 

months.

Institutions Benefits institutions by setting a 

time limit for the uncertainty of 

month-to-month eligibility. With the 

option of provisional recertification, 

the Department retains sufficient 

control over recertification process 

but cannot use certification delays to 

prevent institutions from starting new 

programs or making other necessary 

changes.

Reg Section 668.14-Program Participation Agreement

Clarifies 

requirements related 

to making data 

available to 

prospective students 

about the most 

recent employment 

statistics, 

graduation 

statistics, or other 

information to 

substantiate the 

truthfulness of its 

advertising that 

uses job placement 

rates to attract 

students.

Institutions Benefits institutions by reducing the 

amount of information that must be 

disclosed to students to enable 

institutions to include graduation 

rates or employment statistics in 

their marketing materials. Benefits 

students by improving the accuracy and 

truthfulness of published outcomes 

data, and by making an appropriate 

amount of information available to 

students without overwhelming them 

with extraneous data. Maintains the 

requirement for institutions to make 

available any information needed to 

substantiate the truthfulness of the 

institution’s advertisements about job 

placement or graduation rates.

Eliminates 

requirements to 

provide the source 

of such statistics, 

associated 

timeframes, and 

methodology.

Considered redundant to requirement to 

provide data and other information to 

substantiate truth in the 

institution's advertising.

Aligns program 

length to 

occupational 

requirements. 

Limits program 

length to 150 

percent of minimum 

program length for 

the State in which 

the institution is 

located or 100 

percent of the 

Students/ 

institutions

Allows institutions to create programs 

that meet professional licensure 

requirements in multiple States, thus 

expanding the potential pool of 

students served and the number of job 

opportunities available to graduates. 

Students benefit by increased 

occupational mobility and, in some 

cases, being able to go to school in a 

lower cost State but work upon 

graduation in a different State where 

wages are higher. Conversely, if an 
272

minimum program 

hours for licensure 

in an adjoining 

State.

institution increases program length, 

a student may have to pay more to meet 

requirements of a State in which the 

student does not plan to work.

Requires updates to 

teach-out plans 

after specified 

negative events.

Students/ 

Institutions/ 

Accrediting 

Agencies

Allows accrediting agencies to gather 

more information from institutions 

that will be helpful to triad partners 

in assisting students find transfer 

and teach-out opportunities, and 

retain access to their academic 

records, when a school closure occurs. 

Requires institutions to update teachout plans in instances where risk of 

closure increases. 

Reg Section 668.22-Treatment of title IV Funds When a Student Withdraws

Adds several 

exceptions to 

determination a 

student has 

withdrawn, including 

early completion of 

requirements for 

graduation, 

completion of 

module(s) containing 

49 percent or more 

of the days in the 

payment period, or 

completion of 

coursework equal to 

or greater than the 

institution's 

requirements for a 

half-time student.

Students/ 

Institutions

Benefits institutions by not requiring 

them to return title IV funds simply 

because a student is a faster learner. 

Benefits students by allowing them to 

complete courses at a quicker pace and 

still retain full title IV 

eligibility. Could improve completion 

rates and reduce time to completion if 

students are not required to 

participate in busy work if they 

finish the legitimate work required by 

the course more quickly than other 

students. 

Applies 45-day time 

limit on delaying 

withdrawal for 

students who cease 

attendance to 

standard term 

programs. Eliminates 

references to 

modules for nonterm 

programs and revises 

timeframes for 

allowing students to 

provide written 

confirmation of 

Students/Inst

itutions

Improves consistency of regulations as 

they apply to programs with different 

types of academic calendars and 

addresses concerns about long periods 

of non-attendance by students. Ensures 

that institutions perform return of 

title IV calculations when students 

cease attendance for long periods of 

time without beginning an approved 

leave of absence.
273

intent to return 

without beginning an 

approved leave of 

absence.

Clarifies 

requirements for 

determining the 

number of days in 

the payment period 

or period of 

enrollment for a 

student who is 

enrolled in a 

program offered 

using modules. 

Requires an 

institution to 

include all the days 

in modules that 

included coursework 

used to determine 

the student’s 

eligibility for 

title IV, HEA 

assistance.

Institutions/

Federal 

Government

Simplifies and clarifies requirements 

for establishing the denominator of 

the return of title IV funds 

calculation when a student is enrolled 

in a program that uses modules. May 

result in a greater amount of title IV 

funds being returned for a limited 

number of students who enroll in 

numerous modules during a payment 

period or period of enrollment but 

fail to attend those modules.

Eliminates 

references to 

programs under which 

financial aid is no 

longer disbursed. 

Adds Iraq and

Afghanistan Service 

Grants to types of 

aid subject to the 

return of title IV 

funds calculation 

and clarifies order 

for application of 

returned funds.

No impact anticipated for technical 

changes incorporating current policy.

Reg Section 668.28-Non-title IV Revenue (90/10)

Removes references 

to net present value 

when including 

institutional loans 

in the 90/10 

calculation.

No impact anticipated for technical 

changes .

Reg Section 668.34-Satisfactory Academic Progress
274

Eliminates pace 

requirements for 

satisfactory 

academic progress 

for subscriptionbased programs.

Students/

Institutions/

Federal 

Government

Reduces burden on institutions for 

making pace-based title IV 

calculations for students in 

subscription-based programs. Improves 

flexibility for students by allowing 

them to determine the pace of their 

learning without certain limits. 

Allows maximum 

timeframe for 

undergraduate 

programs measured in 

credit hours to be 

expressed in 

calendar time in 

addition to current 

credit hour 

measurement. 

Limited to 150 

percent of published 

length of program.

Students/

Institutions/

Federal 

Government

Increases flexibility for institutions 

and students and provides new options 

for monitoring student progress when 

traditional semester-based time 

constraints conflict with a student’s 

work or life responsibilities. 

However, sets outer limit for use of 

aid to ensure that students are 

progressing through their program and 

using Federal student aid funds 

efficiently. 

Reg Section 668.111-Scope and Purpose and 668.113 - Request for Review

Indicates that, for 

final audit or 

program review 

determinations 

related to 

classification of a 

program as distance 

education or the 

assignment of credit 

hours, the Secretary 

will rely on 

institution's 

accrediting agency 

or State agency 

requirements.

Institutions/

Federal 

Government

Conforms with changes to definitions 

of “distance education” and “credit 

hour” and provides regulatory clarity 

that accreditors are the triad member 

given the responsibility of monitoring 

program quality and establishing 

standards for academic quality, 

faculty credentials, and effective 

distance learning. 

Reg Section 668.164- Disbursing Funds

Establishes 

disbursement 

requirements 

specific to 

subscription-based 

programs. Sets the 

later of 10 days 

before the first day 

of classes in the 

payment period or 

the date the student 

completed the 

cumulative number of 

Students/

Institutions/

Federal 

Government

Conforming change with disbursement 

pattern for subscription-based 

programs in §668.2 to enforce 

requirement that no disbursements be 

made until the student has completed 

the appropriate credit hours.
275

credit hours 

associated with 

student's enrollment 

status in all prior 

terms attended.

Reg Section 668.171- General

Allows the Secretary 

to determine an 

institution is not 

financially 

responsible if the 

institution does not 

submit its financial 

and compliance 

audits by the date 

permitted and manner 

required under 

§668.23.

Institutions/

Federal 

Government

Codifies current practice; no impact 

expected.

Reg Section 668.174- Past Performance

Adds the term 

“entity” or 

“entities” to 

various provisions 

as ownership may be 

vested in an entity 

or an individual.

Institutions/

Federal 

Government

Allows the Department to consider more 

ownership structures when evaluating 

past performance.

Clarifies that 

institution is not 

financially 

responsible if a 

person who exercises 

substantial 

ownership or control 

over the institution 

also exercised 

substantial 

ownership or control 

over another 

institution that 

closed without a 

viable teach-out 

plan or agreement 

approved by the 

institution’s 

accrediting agency 

and faithfully 

Institutions/

Federal 

Government

Allows the Department to consider 

whether a person or entity affiliated 

with an institution has overseen the 

precipitous closure of another 

institution with the goal of 

preventing an institution from being 

substantially owned or controlled by 

persons or entities that would cause 

the institution to be financially 

irresponsible and close without 

providing to students a plan to finish 

their education in place or at another 

institution.
276

executed by the 

institution

Reg Section 668.175- Alternative Standards and Requirements

Eliminates reference 

to fax transmission.

None Change to recognize technological 

advancements. No impact.

A key change that would result from this regulation is 

greater certainty among institutions about how to implement 

innovative programs without running afoul of title IV 

disbursement requirements. Institutions are not inherently 

opposed to regulations, but instead crave information that will 

enable them to be sure they are complying with regulations that 

are otherwise difficult to interpret. The new definitions 

ensure a shared understanding of the various kinds of programs 

an institution can provide and the rules for disbursing title IV 

aid to students enrolled in those programs. Greater clarity in 

our regulations will reduce the likelihood that student and 

taxpayer dollars will be wasted or that institutions will face 

undeserved negative program review findings and financial 

liabilities that could have devastating consequences to the 

institution and its students. 

Significant changes in the final regulation from the 

proposed regulations include: (1) the expansion of the

subscription-based disbursement model to all programs, not just 
277

direct assessment; (2) modification of the clock hour definition 

to include clock hours in which instruction occurs 

asynchronously; (3) clarification that internships and 

externships of students at foreign institutions can be completed 

at entities in the United States that are not eligible 

institutions; (4) elimination of the prior experience 

requirement for ineligible entities involved in a written 

agreement; and (5) withdrawal of the proposed provisions 

regarding change of ownership in § 668.15.

Students

Students will benefit from the expanded program options 

available when institutions understand the ground rules for 

offering new kinds of programs and when they do not fear 

surprises at a program review. Despite being permitted by the 

HEA for decades, there are relatively few competency-based 

programs available to students, and even fewer direct assessment 

programs. Yet these types of programs may be very appealing to 

adult learners who bring considerable knowledge and skills to 

their programs. Expansion of subscription-based programs 

provides students with the scheduling flexibility they may need 

if managing responsibilities from school, work, and family. A 

clearer framework for administering title IV aid to students 

enrolled in competency-based programs on a subscription basis 
278

may increase institutions’ willingness to develop new programs. 

To the extent that institutions determine that this funding 

model fits other types of programs, the expansion of this 

disbursement model beyond direct assessment programs in these 

final regulations increases the flexibility and options for 

students. Students will have to evaluate if programs using this 

model meet their schedule and educational objectives.

The regulations eliminate the financial penalties that 

students and institutions would otherwise face when a student 

progresses quickly through a course and completes it early. 

Students, especially non-traditional students, could benefit 

from the flexible pacing and different model for assessing 

progress offered by this type of program. The emphasis on 

flexibility, workforce development, and innovative educational 

approaches could be beneficial to students and the national 

economy. 

According to U.S Census data,42 for the civilian noninstitutionalized population, there were approximately 44 

million adults between the ages of 25 and 49 with high school or 

some college as their highest educational level in 2018. Even a 

42 U.S. Census Bureau, Table 1. Educational Attainment of the Population 18 

Years and Over, by Age, Sex, Race, and Hispanic Origin: 2018. Available at 

www.census.gov/data/tables/2018/demo/education-attainment/cps-detailedtables.html. Last accessed November 29, 2019.
279

small percentage of that group represents a sizeable potential 

market for expansion of competency-based or other distance 

education programs. Additionally, students outside that age 

range and those with a degree may want to pursue competencybased graduate certificates or degrees to enhance their careers. 

While a variety of factors may explain individual education 

attainment, to the extent that traditional programs were not 

suitable for some students’ academic and employment goals, 

competency-based programs may provide an appealing option. 

However, evaluating the quality of new programs may be 

challenging, and it could be difficult to determine how much a 

student should learn to be awarded a certain amount of credit, 

as opposed to more traditional delivery models that award aid 

and mark progress by the number of hours during which a student 

is scheduled to be in class (many institutions do not take 

attendance, and therefore do not monitor how much time an 

individual student actually is in class). As with all programs, 

students would need to carefully consider if specific 

competency-based or distance education programs are appropriate 

for their objectives and learning. Distance learning, 

subscription-based programs, and other self-paced options 

require a higher degree of academic discipline on the part of 

students, which may pose challenges to students who are already 
280

burdened by work and family responsibilities.43 For those who 

are so motivated, they could complete their program more 

quickly. For those who struggle to stay engaged, innovative 

learning models emphasizing coach or mentor support may improve

retention and completion in online programs where students with 

poor self-directed learning skills might otherwise fail.4445

Another potential benefit for students in competency-based 

programs could be reduced costs to obtain a postsecondary 

credential. Western Governors University (WGU), for example, is 

known for its success in adopting this instructional approach, 

although it still disburses aid using a time-based model. In 

its 2018 annual report, WGU states that the average time to a 

bachelor’s degree completion among its students is 2.5 years, 

which could generate substantial savings to students and 

taxpayers. An analysis done by Robert Kelchen46 based on 14 cost 

structures at 13 institutions for credits earned through 

43 California Community College Chancellor’s Office, 2017 Distance Education 

Report, 2017, http://californiacommunitycolleges. 

cccco.edu/Portals/0/Reports/2017-DE-Report-Final-ADA.pdf

44 www.texaspolicy.com/new-study-less-expensive-competency-based-educationprograms-just-as-good-as-traditional-programs/

45 Xu, D. and Xu, Y. March 2019. The Promises and Limits of Online Higher 

Education: Understanding How Distance Education Affects Access, Cost, and 

Quality. American Enterprise Institute. 

46 Robert Kelchen, The Landscape of Competency-Based Education – Enrollments, 

Demographics, and Affordability, January 2015. Center for Higher Education 

Reform, American Enterprise Institute AEI Series on Competency-Based Higher 

Education. Available at www.aei.org/wp-content/uploads/2015/04/Competencybased-education-landscape-Kelchen-2015.pdf
281

portfolio or prior learning assessment found that significant 

savings could be generated, but they vary substantially among 

colleges. Potential savings for 3 credits varied from $127 to 

$1,27047. The fee structure, amount of credits allowed to be 

obtained through these methods, the availability of Federal aid, 

and the ability of students to pass those assessments with 

limited attempts all contribute to determining whether a 

competency-based approach would generate savings for a given 

student. The other pricing model, one that is supported by the 

regulations, is subscription based pricing in which the 

potential savings relate to the number of credits a student 

completes during a subscription period and student’s eligibility 

for financial aid in their specific program. Kelchen calculates 

the number of credits needed in a subscription period for 

students who receive a full Pell Grant and non-aided students to 

break even with traditional pricing models at 5 institutions 

that offer a subscription pricing option. These range from 6 

credits for a non-aided student to 27 credits for a student in a 

bachelor’s degree program who receives a full Pell Grant48. The 

subscription periods and prices vary by institution and pricing 

47 Id, p. 11, Table 4 Cost Structures of Portfolio and Prior Learning 

Assessment Programs

48 Id, p.14. Table 5 Costs of Subscription-Based CBE Programs Compared to 

Other Online Providers
282

policies may have been updated since the time of this analysis, 

but that idea that subscription pricing may result in cost 

savings for students depending upon the speed of their progress 

is still valid. 49

While more difficult to quantify, the Department also 

expects students would find benefits in programs they can 

complete more quickly in terms of reduced opportunity costs, 

which include wages lost when the student is in school rather 

than in the job for which the student is preparing. Also, since 

student retention declines as time to degree completion expands, 

programs that enable students to finish more quickly are likely 

to increase credential completion. 

Of course, it could be the unique attributes of WGU, or the 

students attracted to the institution, that contribute to these 

results, and it is not yet known if the results would be

replicated by other institutions that adopt the WGU model. A 

number of factors, including a given student’s anticipated pace 

of learning, likelihood of completion, desired employment 

outcomes, personal motivation, and the range of options 

49 Western Governors University, WGU 2018 Annual Report, p. 17. Available at 

www.wgu.edu/content/dam/western-governors/documents/annual-report/annualreport-2018.pdf.
283

available to them will influence the return the student enjoys 

on their educational investment. 

Students will also benefit from the changes to the

definition of a week of instruction. Under the regulations, 

institutions would be less likely to assign less substantive

work to students (such as posting a blog or responding to a 

chat) simply to meet title IV requirements. Where these 

activities are substantive, they will likely continue to take 

place, but in many instances, these activities have been 

integrated into courses simply to provide evidence of “regular 

and substantive” interaction. Students who may otherwise be 

successful in distance learning can become frustrated if they 

are not allowed to move at their own pace because of 

requirements to post blogs, participate in chats, or answer 

questions that do not actually enhance learning. 

The inclusion of asynchronous coursework that provides for 

direct interaction between students and instructors in the 

definition of clock-hours could expand the options for students 

in such programs. Asynchronous coursework has the advantage of 

being able to facilitate an individualized learning experience 

for each student in a way that cannot be accomplished through 

scheduled meetings or lectures. Students can access lectures 

and other class activities as their schedules permit, spending 
284

as much time as is necessary to master a particular task or 

concept. New technologies permit lectures to be combined with 

videos and other resources enabling students to pause at any 

point to reinforce mastery of subject matter. Moreover, the 

availability of asynchronous learning allows for mixed model 

learning reflective of non-title IV eligible programming with 

theory learned asynchronously and specific practical tasks 

through synchronous instruction.

Adjustments made for COVID-19 conditions have demonstrated 

to institutions, accrediting agencies, and licensing agencies 

that at least some parts of certain clock-hour programs can be 

delivered effectively through asynchronous coursework. While 

this will need to be monitored on an ongoing basis, this 

development will benefit students involved in these programs.

The Department provides additional detail related to burden 

estimates in the Paperwork Reduction Act section of this NPRM

and none of the burden is assigned to students in that 

analysis.

Institutions

Institutions should benefit from the regulatory 

clarifications, especially those institutions that seek to 

expand competency-based and direct assessment learning options 

but are uncertain as to the Department’s requirements for 
285

disbursing aid to students enrolled in those programs. A 

significant barrier to entry for institutions seeking to provide 

direct assessment programs is a lack of clarity regarding what 

the Department expects of these programs in order to approve 

them, and the slowness with which the Department has made 

decisions on applications submitted by institutions. Only six

institutions, as of 2020, have been approved by the Department 

to offer direct assessment programs. This indicates that there 

could be a lack of interest in offering direct assessment 

programs, or institutions are hesitant to invest in their

development because approval requirements are too burdensome or 

uncertainties too great about what the Department and 

accreditors require. The regulations will reduce burden and 

provide clarity to encourage more institutions to experiment 

with direct assessment programs. Under the rule, the Department 

is required to approve the first direct assessment program 

offered by an institution at a given credential level, but after 

that, only the accreditor would be required to review the 

program to ensure academic quality. Some institutions may 

aggressively seek approval for more direct assessment programs, 

while others may take a wait-and-see attitude until other 

institutions have forged new ground. 
286

In the short term, it is likely that institutions already 

approved to offer at least one direct assessment program will

expand offerings since their experience well positions them to 

do so. According to the Department’s data, there are only six 

institutions that have established direct assessment programs. 

Although these institutions may expand the number of direct 

assessment programs available, the Department anticipates that 

these programs would mostly attract students away from more 

traditional distance learning programs, but may not add 

significantly to the total number of students enrolled in 

postsecondary education. Students looking for a flexible 

postsecondary program can find many advantages through distance 

education already but may gravitate to direct assessment 

programs because of added advantages, including in pacing and 

format. The Department’s assumptions about potential student 

growth related to the regulations are described in the Net 

Budget Impact section of this analysis.

However, over time, additional institutions may develop new 

direct assessment programs, especially if early adopters create 

demand among students for this new form of education. The 

Department projects that if new institutions engage in direct 

assessment, and those already approved to offer direct 

assessment programs launch new programs, there could be shifting 
287

of students from other programs to self-paced direct assessment 

programs. It is also possible that students not interested in 

current pedagogical models will find direct assessment programs 

to be attractive and will decide to enroll in a postsecondary 

program. This could increase the number of students who would 

qualify for Pell Grants or take Federal Direct Loans. While 

increased interest in direct assessment could result in higher 

title IV participation, it is possible that students enrolled in 

direct assessment programs would finish their programs more 

quickly, therefore reducing the amount of financial aid a 

student uses to complete his or her program. 

Changes to the limitations on the ability of clock hour 

programs to offer didactic instruction through distance learning 

may enable more individuals to enroll in these programs. The 

inclusion of asynchronous coursework with sufficient monitoring 

of participation and direct interaction between instructors and 

students in the definition of clock hour in these final 

regulations could expand institutions’ program offerings. In 

turn, this could increase the number of individuals qualified 

for State licensure or certification, and thus gainful 

employment, in licensed occupations. There are very few clockhour programs that use distance learning to provide portions of 

the program since there are few State or professional licensing 
288

boards that permit distance learning for clock-hour programs. 

However, for clock-hour programs permitted to incorporate 

distance learning, it is possible that more students will be 

served or that more students will persist to completion. 

The regulations more clearly define what constitutes a 

reasonable length for clock-hour programs and allow institutions 

to meet the licensure requirements of surrounding States, thus 

enabling greater student and workforce mobility. There are only 

a few States that have licensure requirements that are 

significantly longer than other States, but if programs in 

surrounding States increase their clock hours to meet those 

requirements, there could be small increases in cost and 

utilization of title IV, HEA assistance. On the other hand, if 

programs can be structured to ensure that students can work if 

they cross State lines, there could be cost savings since, under 

the status quo, a student who moves from one State to another 

may be required to start their program over in order to meet the 

clock-hour requirements since shorter-term “completer programs” 

are not typically approved by those States. Therefore, this 

regulation could reduce the cost of education for students who 

move from one State to the next and could increase worker 
289

mobility in fields that employ large numbers of workers, such as 

cosmetology and massage therapy.50 51 

Institutions will also benefit from simplifications to the 

formula for clock-to-credit hour conversions. The regulations 

would eliminate the need for institutions to consider the number 

of homework hours associated with each credit hour in programs 

that are subject to the conversion. This change reduce 

administrative burden while allowing institutions to offer 

programs in credit hours that are more likely to transfer to 

other schools than clock hours, but still meet the clock-hour 

requirements of licensing boards by calculating clock-hour 

equivalencies.

Institutions will also benefit from the options allowed in 

these final regulations with respect to asynchronous coursework 

in clock-hour programs and the expansion of subscription-based 

disbursement beyond direct assessment programs. Institutions 

considering asynchronous coursework would have to invest in 

systems to monitor active engagement, but several such 

technologies are available. Expanding subscription-based 

disbursement could lead to economies of scale that make it 

50www.bls.gov/ooh/personal-care-and-service/barbers-hairstylists-andcosmetologists.htm

51www.bls.gov/ooh/healthcare/massage-therapists.htm
290

worthwhile for institutions to develop such subscription-based 

pricing plans. These changes from the NPRM give institutions 

additional options in designing their programs. This could also 

result in additional competition from expanded course offerings 

at other institutions. 

As discussed further in the Paperwork Reduction Act of 1995

section of this preamble, the regulations are expected to result 

in a net reduction in burden for institutions. In estimating 

costs and savings associated with these changes in burden, we 

assume that these activities are conducted by postsecondary 

administrators, which earn an average wage of $53.47.52 

Throughout, to estimate the total costs and savings associated 

with these changes, we multiply wage rates by two to account for 

overhead and benefits. The elimination of the Net Present Value 

calculation related to the 90/10 rule is estimated to save -

2,808 hours, which would generate cost savings of approximately 

$300,000 annually. The regulations also impose burden related to 

reporting subsequent direct assessment programs estimated to 

impose 18 hours of burden annually for a cost of $1,926 using 

the same hourly rate of $53.47 multiplied by two for overhead 

and benefits for a rate of $106.94. Together, the estimated net 

52 www.bls.gov/oes/current/oes119033.htm
291

reduction in burden for institutions is -2,790 hours and $-

298,363. 

Accrediting Agencies

The regulations recognize the primary role that accrediting 

agencies play in evaluating the quality of new programs and 

approving institutions to offer them. Although the Department’s 

review of direct assessment programs focuses on an institution’s 

technical ability to calculate and disburse title IV aid to 

students enrolled in these programs, accreditors have always 

had--and will continue to have--the responsibility of ensuring 

that these programs are rigorous and of high quality. In 

conjunction with the recently published Accreditation and State 

Authorization Regulations, one or more existing or new 

accrediting agencies may step forward to become a leader in the 

field for assessing and approving direct assessment programs, 

which could lead to more rapid expansion of direct assessment 

programs. Accrediting agencies will continue to play an 

important role in approving written arrangements covering 

between 25 and 50 percent of a program; however, changes already 

published in the accreditation regulations to allow these 

approvals to take place at the staff level, and requirements for 

accrediting agencies to approve or deny them within 90 days, 
292

could encourage more institutions to consider entering into 

written arrangements. 

Accrediting agencies play an important role in evaluating 

the quality of academic programs, including distance education 

programs, and will continue to play that role. These 

regulations do not create new responsibilities in this regard; 

however, until accrediting agencies have more experience in 

reviewing and approving competency-based and direct assessment 

programs, the approval process could be somewhat more 

burdensome. Some agencies may also need to develop new 

standards to facilitate the evaluation of these programs, but 

many already have such standards in place. If growth in 

competency-based programs is more significant than anticipated, 

there could be an increase in accrediting agency workload, but 

it is possible that demand for approval of traditional programs 

would decline as interest shifts to competency-based or direct 

assessment programs. 

The Department provides additional detail related to burden 

estimates in the Paperwork Reduction Act section of this NPRM

and does not estimate any additional burden to accrediting 

agencies from the regulations.

Federal Government
293

In The regulations, the Federal government is reducing some 

of the complexity of administering Federal student aid and 

calculating return-to-title IV obligations. These regulations 

also reaffirm that it is accreditors--and not the Department--

who are authorized by the HEA to establish and evaluate 

compliance with education quality standards, including when 

innovative delivery models challenge the status quo. The 

regulations require the Secretary to provide a timely review of 

new program applications and limit the Secretary’s approval of 

direct assessment programs at the same academic level to the 

first such program at an institution, both provisions designed 

to support the expansion of innovative educational programs.

NET BUDGET IMPACT

We estimate that these regulations will have a net Federal 

budget impact for Federal student loan cohorts between 2020-

2029, of $[-54] million in outlays in the primary estimate 

scenario and an increase in Pell Grant outlays of $1,163 million 

over 10 years, for a total net impact of $1,109 million. A 

cohort reflects all loans originated in a given fiscal year. 

Consistent with the requirements of the Credit Reform Act of 

1990, budget cost estimates for the student loan programs 

reflect the estimated net present value of all future nonadministrative Federal costs associated with a cohort of loans. 
294

The Net Budget Impact is compared to a modified version of the 

2020 President's Budget baseline (PB2021) that adjusts for the 

publication of the final Borrower Defense, Gainful Employment,

and Accreditation and State Authorization rules.

The Department emphasizes that its estimates of 

transformations in higher education delivery that could occur as 

a result of these regulations are uncertain. Similarly, the 

Department is constrained in its budget estimates by the limited 

data available to it. We estimate how institutions and students 

would respond to the regulatory changes, and we present 

alternative scenarios to capture the potential range of impacts 

on Federal student aid transfers. Similarly, we do not attempt 

to estimate effects based on evidence cited in this preamble 

that students enrolled in similar programs have persisted

longer, completed at higher rates, and finished in a shorter 

period of time with less debt. While increased enrollment and 

persistence could result in increased transfers to students in 

the form of Federal student aid grants and loans, it could also 

produce graduates better prepared to succeed in the workplace 

and encourage robust economic growth. The Administration’s

emphasis on workforce development may encourage more 

institutions to implement competency-based educational programs, 
295

which could improve employment outcomes and loan repayment 

performance. 

There is anecdotal evidence that competency-based education 

programs may have strong loan repayment performance. Looking 

again to WGU, an institution that has been an early adopter of 

competency-based learning, we note that its three-year cohort 

default rates of 4.6 percent for 2014, 4.1 percent for 2015, and 

4.2 percent for 201653 are below the national average of 10.1 

percent overall in 2016 (6.6 percent for private, 9.6 percent 

for public, and 15.2 percent for proprietary institutions).54 

Comparatively, Capella University, another leader in competencybased education, had a cohort default rate of 6.5 percent in 

2015 and 6.8 percent in 2016.55 Factors that could lead to lower 

defaults among institutions employing innovative learning 

models--and in particular when those models are used to provide 

graduate education--may be that they would attract older 

students who are employed and are seeking specific credentials 

53 U.S. Department of Education, Official Cohort Default Rates for Schools, 

PEPS300.xls available at 

www2.ed.gov/offices/OSFAP/defaultmanagement/cdr.html. 

54 U.S. Department of Education, Comparison of FY 2016 Official National 

Cohort Default Rates to Prior Two Official Cohort Default Rates available at 

www2.ed.gov/offices/OSFAP/defaultmanagement/schooltyperates.pdf. Accessed 

February 21, 2020. 

55 U.S. Department of Education, Official Cohort Default Rates for Schools, 

PEPS300.xls available at 

www2.ed.gov/offices/OSFAP/defaultmanagement/cdr.html.
296

for advancement or a career change. These individuals may be 

more likely to have resources (including those provided by 

current employers) to reduce the need to borrow and to repay any 

loans they need to take. On the other hand, the non-traditional 

students that may be the primary market for competency-based 

learning or direct assessment may have employment and family 

obligations that could make them less likely to complete their 

programs, potentially increasing their default risk. 

An additional complicating factor in developing these 

estimates are the related regulatory changes on which the 

committee reached consensus in this negotiated rulemaking that 

we addressed in separate notices of rulemaking. The budget 

impacts estimated here are in addition to the potential 

increases attributed to the accreditation changes promulgated in 

the final rule published November 1, 2019 that are reflected in 

the PB 2021 baseline.56

The main budget impacts estimated from these final 

regulations come from changes in loan volumes and Pell Grants 

disbursed to students if these new delivery models were to 

attract an increased number of students who receive title IV, 

HEA funds. The Department believes that much of the growth in 

56 84 FR 58834
297

this area will come from future students that shift from more 

traditional ground-based or distance learning programs to those 

offered using competency-based learning or direct assessment 

methods. In developing the primary estimate, the Department

does not estimate the types of programs and institutions 

students who choose competency-based education may come from or 

the potential cost differential between those programs, as 

further discussed after Table 4. Instead, we assume that the 

growth associated with programs that are developed or expanded 

in part because the regulations make it easier to administer 

title IV aid to such programs comes from students who would not 

otherwise have borrowed to attend a different type of program 

and apply an average level of borrowing to each estimated

enrollee. The Department believes that many of the students who 

enroll in CBE will do so as a substitute for a different type of 

program for which they likely would receive some form of title 

IV aid, but there will be some small increase in enrollment from 

students who either not have pursued postsecondary education or 

who would not have received title IV aid for their program. 

Additionally, the alternate budget scenarios consider the 

possibility that the implementation of new pedagogical and 

delivery models could result in more or fewer new students being 

interested in pursuing a postsecondary credential. Expansion of 
298

subscription-based programs, provisions in these regulations 

that would encourage innovation, the growth of workforce 

development programs, and the new methods of delivery may 

particularly appeal to non-traditional students. Tables 3.A to 

3.E illustrate the changes in title IV grant and loan volume 

developed for use in estimating the net budget impact of these 

regulations for the primary scenario, with discussion about 

underlying assumptions following the tables.

In order to have a common basis for the Pell Grant and loan 

assumptions and to facilitate comment, we started the estimate 

with an assumption about the number of additional programs that 

would be established because of the combined effect of the

regulations. As noted in response to the comment about the RIA 

in the NPRM, the expansion of distance education in response to 

COVID-19 disruptions is not a response to these regulations, and 

the extent to which the transformation will persist is unknown. 

Instead, the response to COVID-19 has provided evidence that 

additional flexibilities are necessary and appropriate to enable 

institutions to adapt to the changing needs of students and 

society.

We did not increase the estimated number of students to 

reflect the current shift of campus-based students to distance 

learning, nor did we attribute to the regulation the possibility 
299

that some students may prefer that distance programs or 

alternative types of programs like CBE after their experience 

during the COVID-19 shutdown. Additionally, any COVID-19 

related economic downturn will be reflected in future baseline 

updates, with the potential increase in enrollment and related 

financial aid as a reaction to economic conditions and not 

driven by the changes in these final regulations. However, we 

did recognize that institutions’ experience in shifting programs 

to distance platforms may encourage them to accelerate the 

development of distance of CBE programs. Students may also 

decide that distance learning is a good approach for them and 

consider it for furthering their education or for future 

programs. This is reflected in an increase in programs in Table 

3A to 968 compared to 864 in the NPRM, leading to an estimated 

60,379 additional Pell Grant recipients. On the other hand, 

because the rapid shift to distance may provide students with 

sub-optimal experiences, there could also be a negative backlash 

in which students will resist engaging in distance learning if 

their experience during the COVID-19 necessitated transition was 

less than satisfactory.

Table 3.A: Assumptions about Cumulative Number of Additional 

Programs by Size of Program
300

Size of 

Program 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

25 24 72 95 150 225 275 325 375 420 450

75 12 20 40 60 90 110 135 150 175 200

150 10 18 26 40 68 75 90 113 120 128

350 8 15 25 30 38 50 60 70 80 90

750 3 8 14 20 30 38 48 56 65 70

1500 1 4 7 10 14 18 20 25 28 30

As seen in Table 3.A, we expect the current trends of 

distance education programs capturing an increasing share of 

students to continue, and perhaps to accelerate as institutions 

and accreditors become more experienced in establishing or 

evaluating these programs. We also expect more institutions to 

engage in competency-based learning and direct assessment, which 

may or may not be delivered online. The initial distribution of 

programs by enrollment size uses information from the 2018 AIR 

survey and the 2019 survey57; however, we acknowledge that the 

results of that survey may be biased in that we expect the small 

proportion of institutions interested in starting CBE or direct 

assessment programs were more likely to respond. Nonetheless, 

these are the best data available to us, and we projected the 

results of that survey onto the postsecondary system as a whole. 

57 American Institutes for Research, State of the Field – Findings from the 

2019 National Survey of Postsecondary Competency-Based Education, available 

at www.air.org/sites/default/files/National-Survey-of-Postsecondary-CBELumina-October-2019-rev.pdf.
301

We assumed, based on the 2018 and 2019 survey data, that the 

majority of programs will be small, but assumed that over time 

larger programs would evolve. 

In addition, as institutions become more comfortable with 

using written agreements to access facilities and experts that 

private sector organizations and unions make available, there 

could be growth in career and technical education programs that 

are currently limited due to the high cost of constructing 

facilities, procuring equipment and hiring faculty qualified to 

teach in those programs.58 As more hospitals and health care 

facilities require nurses to have bachelor’s degrees, we expect 

to see continued growth of RN to BSN programs, which can be 

delivered using CBE or direct assessment because students in 

these programs are typically required to be working in the 

field, thus negating the need for the institution to provide 

clinical placements. 

Other factors that support the increase in programs are 

recent regulatory developments with respect to accreditation and 

no requirement for approval of new delivery methods as a 

substantive change. The provisions requiring the Secretary to 

58 Shulock, N., Lewis, J., & Tan, C. (2013). Workforce Investments: State 

Strategies to Preserve Higher-Cost Career Education Programs in Community and 

Technical Colleges. California State University: Sacramento. Institute for 

Higher Education Leadership & Policy.
302

provide a timely review of new program applications and to limit 

the Secretary’s review to the first competency-based education 

program at a given academic level could also accelerate the 

process of establishing programs. 

We then had to develop an assumption for how many of the 

additional programs would be undergraduate or graduate programs 

for the purposes of determining how many would potentially serve 

Pell recipients and subsidized loan borrowers. Of the 512 

programs described in the 2018 survey, approximately 17 percent 

were identified as graduate programs and of the 588 programs 

described in the 2019 survey, 16 percent were graduate programs. 

However, competency-based programs could be a good fit for 

working adults wanting a self-paced program to earn a graduate 

credential, so we assumed that that the distribution of 

undergraduate versus graduate programs would change over time, 

especially among smaller programs, as shown in Table 3.B.

Table 3.B: Undergraduate Share of Cumulative Additional 

Programs

Size of 

Program 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

25 83% 78% 70% 65% 60% 55% 50% 50% 45% 45%

75 83% 78% 70% 65% 60% 60% 60% 60% 60% 60%

150 83% 78% 70% 65% 60% 60% 60% 60% 60% 60%

350 83% 80% 75% 75% 75% 70% 70% 70% 70% 70%

750 83% 80% 80% 80% 75% 75% 75% 75% 75% 75%

1500 83% 83% 80% 80% 78% 78% 75% 75% 75% 75%
303

This resulted in an assumed number of additional 

undergraduate and graduate students who may receive Pell Grants 

or take loans.

Table 3.C: Number of Additional Undergraduate Students

Size 

of 

Progr

am 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

25

 

498 

 

1,404 

 

1,663 

 

2,438 

 

3,375 

 

3,781 

 

4,063 

 

4,688 

 

4,725 

 

5,063 

75

 

747 

 

1,170 

 

2,100 

 

2,925 

 

4,050 

 

4,950 

 

6,075 

 

6,750 

 

7,875 

 

9,000 

150

 

1,245 

 

2,106 

 

2,730 

 

3,900 

 

6,075 

 

6,750 

 

8,100 

 

10,125 

 

10,800 

 

11,520 

350

 

2,324 

 

4,200 

 

6,563 

 

7,875 

 

9,975 

 

12,250 

 

14,700 

 

17,150 

 

19,600 

 

22,050 

750

 

1,743 

 

4,800 

 

8,400 

 

12,000 

 

16,875 

 

21,375 

 

27,000 

 

31,500 

 

36,563 

 

39,375 

1500

 

1,245 

 

4,980 

 

8,400 

 

12,000 

 

16,380 

 

21,060 

 

22,500 

 

28,125 

 

31,500 

 

33,750 

Total

 

7,802 

 

18,660 

 

29,855 

 

41,138 

 

56,730 

 

70,166 

 

82,438 

 

98,338 

 

111,063 

 

120,758 

Table 3.D: Number of Additional Graduate Students

Size of 

Program 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

 

25 

 

100 

 

400 

 

710 

 

1,310 

 

2,250 

 

3,090 

 

4,060 

 

4,690 

 

5,780 

 

6,190 

 

75 

 

150 

 

330 

 

900 

 

1,580 

 

2,700 

 

3,300 

 

4,050 

 

4,500 

 

5,250 

 

6,000 

 

150 

 

260 

 

590 

 

1,170 

 

2,100 

 

4,050 

 

4,500 

 

5,400 

 

6,750 

 

7,200 

 

7,680 

 

350 

 

480 

 

1,050 

 

2,190 

 

2,630 

 

3,330 

 

5,250 

 

6,300 

 

7,350 

 

8,400 

 

9,450 

 

750 

 

360 

 

1,200 

 

2,100 

 

3,000 

 

5,630 

 

7,130 

 

9,000 

 

10,500 

 

12,190 

 

13,130 

 

1,500 

 

260 

 

1,020 

 

2,100 

 

3,000 

 

4,620 

 

5,940 

 

7,500 

 

9,380 

 

10,500 

 

11,250 
304

Total 

 

1,610 

 

4,590 

 

9,170 

 

13,620 

 

22,580 

 

29,210 

 

36,310 

 

43,170 

 

49,320 

 

53,700 

The next assumption involved the percent of those 

additional students who would receive Pell Grants and would take 

out different types of loans. For existing programs, the 

percent of undergraduates with Pell Grants is approximately 39 

percent overall,59 but this varies significantly by institution 

and program type. One motivating factor for competency-based 

programs is to expand opportunities for non-traditional 

students, who typically qualify for Pell grants at higher rates; 

in the 2018-19 award year 54% of dependent applicants had a Pell 

eligible EFC, while 85% of independent applicants met that 

threshold. However, independent applicants are often ineligible 

for Pell at relatively moderate incomes— in AY 2018-19 88 

percent of the eligible independent applicants with dependents 

had family incomes under $50,000 and 96 percent of the eligible 

independent applicants without dependents had family incomes 

under $25,000. If programs attract more students from lower 

income brackets, Pell Grant costs will increase. On the 

other hand, CBE and distance learning programs, including direct 

59 U.S. Department of Education, The FY 2021 Justification of Appropriations 

Estimates to Congress Vol. II: Student Financial Assistance, p. p-11.

Available at www2.ed.gov/about/overview/budget/budget21/justifications/psfa.pdf.
305

assessment programs, may be more attractive to working adults, 

who may be less likely to qualify for Pell grants given their 

earnings. Evidence is mixed from existing programs, both 

because the data does not always distinguish students in CBE 

programs from those in traditional programs at the institution 

and the percentage of students receiving Pell Grants does vary 

among institutions with at least some CBE programs. In 2017-18 

IPEDS student financial assistance data, the percent of 

undergraduates receiving a Pell Grant at some institutions known 

for at least some CBE programs was 30 percent for Western 

Governor’s University, 33 percent for Sinclair Community 

College, 35 percent for Northern Arizona University, 43 percent 

for Capella University, 45 percent for the University of 

Wisconsin Flex program, and 47 percent for Southern New 

Hampshire University. Nonetheless, we assumed that the 

percentage of students who may be eligible for Pell Grants 

increases to 50 percent, resulting in the estimated number of 

additional Pell recipients shown in Table 3.E.

Table 3.E: Estimated Additional Pell Recipients

Size of 

Program 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

25

 

249 

 

702 

 

831 

 

1,219 

 

1,688 

 

1,891 

 

2,031 

 

2,344 

 

2,363 

 

2,531 
306

75

 

374 

 

585 

 

1,050 

 

1,463 

 

2,025 

 

2,475 

 

3,038 

 

3,375 

 

3,938 

 

4,500 

150

 

623 

 

1,053 

 

1,365 

 

1,950 

 

3,038 

 

3,375 

 

4,050 

 

5,063 

 

5,400 

 

5,760 

350

 

1,162 

 

2,100 

 

3,281 

 

3,938 

 

4,988 

 

6,125 

 

7,350 

 

8,575 

 

9,800 

 

11,025 

750

 

872 

 

2,400 

 

4,200 

 

6,000 

 

8,438 

 

10,688 

 

13,500 

 

15,750 

 

18,281 

 

19,688 

1500

 

623 

 

2,490 

 

4,200 

 

6,000 

 

8,190 

 

10,530 

 

11,250 

 

14,063 

 

15,750 

 

16,875 

Total

 

3,901 

 

9,330 

 

14,928 

 

20,569 

 

28,365 

 

35,083 

 

41,219 

 

49,169 

 

55,531 

 

60,379 

We also assumed a distribution of Pell recipients based on 

expected growth in programs by type and control of institutions, 

as shown in Table 3.F. However, the share of programs reflected 

in Table 3.F does not necessarily reflect the share of students 

at each type of institution. 

Table 3.F: Assumed Distribution of New Programs by Institutional 

Category

Share of 

Programs

4-year public 22%

2-year public 30%

4 year private 15%

2 year private 8%

Proprietary 25%
307

We recognize that competency-based and direct assessment 

programs, in particular, are a relatively new and developing 

part of the postsecondary market and it is not clear what 

institutions will pursue opportunities in this area or how the 

size and scope of programs offered will develop. Estimated 

program costs for Pell Grants range from $30.1 billion in AY 

2021-22 to $36.1 billion in AY 2030-31, with a 10-year total 

estimate of $329.0 billion. On average, the FY 2021 President's 

Budget projects a baseline increase in Pell Grant recipients 

from 2021 to 2030 of approximately 150,000 annually. The 

increase in Pell Grant recipients estimated due to these 

regulations ranges from about 6 percent in 2022 to approximately 

41 percent by 2030 of the projected annual increase that would 

otherwise occur. The additional 60,379 recipients estimated for 

2030 would account for under 1 percent of all estimated 8.25 

million Pell recipients in 2030-31 and result in an increase in 

program costs of approximately $1,397 million, a 0.4 percent 

increase in estimated 10-year Pell Grant program costs of $329.0

billion.

For the loan programs, we used the estimated split between 

graduate and undergraduate programs to develop additional volume 

estimates by loan type and student loan model risk-group. Table 
308

3.G presents the assumed borrowing rate by loan type of the 

additional students.

Table 3.G: Estimated Borrowing Rates by Loan Type

2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Subsidized 45% 45% 45% 45% 45% 45% 45% 45% 45% 45%

Unsubsidized 55% 55% 55% 55% 55% 55% 55% 55% 55% 55%

Parent PLUS 10% 10% 10% 10% 10% 10% 10% 10% 10% 10%

Grad Unsubsidized 35% 35% 35% 35% 35% 35% 35% 35% 35% 35%

Grad PLUS 25% 25% 25% 25% 25% 25% 25% 25% 25% 25%

We then used estimated average loans by loan type as projected 

for the PB2021 estimates to estimate a total increase in volume 

by loan type, as shown in Tables 3.H and 3.I.

Table 3.H: Estimated Average Amounts per Borrower by Loan Type

Average Loan 2021 2022 2023 2024 2025 2026 2027 2028 2

Subsidized 4,240 4,240 4,240 4,250 4,250 4,260 4,260 4,270 4

Unsubsidized 4,630 4,660 4,700 4,720 4,760 4,780 4,820 4,830 4

PLUS 18,550 18,880 19,290 19,620 19,920 20,440 20,780 21,070 21

Grad 

Unsubsidized 20,660 20,910 21,120 21,230 21,330 21,590 21,810 22,080 22

Grad PLUS 25,990 26,760 27,510 28,130 28,640 29,330 30,100 30,870 31

Table 3.I: Estimated Additional Loan Volume by Loan Type

Additional Loan 

Volume 2021 2022 2023 2024 2025

Subsidized

 

14,886,216 35,603,280 56,963,340 78,675,469 108,496,125 

Unsubsidized

 

19,867,793 47,825,580 77,175,175 106,792,950 148,519,140 

Parent PLUS

 

14,472,710 35,230,080 57,590,295 80,711,775 113,006,160 
309

Grad Unsubsidized

 

11,641,910 33,591,915 67,784,640 101,203,410 168,570,990 

Grad PLUS

 

10,460,975 30,707,100 63,066,675 95,782,650 161,672,800 

Additional 

Loan Volume 2026 2027 2028 2029 2030

Subsidized 134,508,701 158,032,688 188,955,506 213,906,375 233,122,354 

Unsubsidized 184,467,071 218,541,813 261,233,569 296,870,063 324,113,130 

Parent PLUS 143,419,815 171,305,125 207,197,113 238,340,125 263,975,895 

Grad Unsubsidized 220,725,365 277,172,385 333,617,760 384,769,980 422,887,500 

Grad PLUS 214,182,325 273,232,750 333,164,475 391,600,800 438,460,500 

Clearly, the large average borrowing amounts of graduate 

students contribute significantly to the loan volume estimates, 

so a different mix of programs or a different borrowing level 

would affect the estimated impact of the regulations, so we 

adjust this factor in the alternate scenarios to identify a 

range of possible impacts. 

As subsidy rates differ by risk group and loan type, the 

Department assumed a distribution of the undergraduate loans as 

shown in Table 3-J. This distribution is based on the PB2021 

distribution of loan volume by risk group, but reduces the share 

in the 4-year Junior/Senior risk group by 10-15 percentage 

points and the 4-year Freshman/Sophomore risk group by 

approximately 5 percentage points and increases the share in the 

2-year risk groups. All graduate loans are in the graduate risk 

group.
310

Table 3-J: Assumed Distribution of Additional Loan Volumes by 

Risk Group

Subsidized Unsubsidized

Parent 

PLUS

2-year Proprietary 18% 15% 10%

2-year Not-for-Profit 20% 15% 10%

4-year 

Freshman/Sophomore 32% 35% 42%

4-year Junior/Senior 30% 35% 38%

The resulting additional loan volumes are generated by 

simple multiplication of the estimated additional undergraduate 

students by the percent borrowing and average amount per 

borrower by loan type, and then by the distribution by risk 

group. The same process occurred for graduate students. 

As seen from the approximately $100 billion total annual 

loan volume, even small changes would result in a significant 

amount of additional loan transfers. We update loan volume 

estimates regularly; for PB2021 the total non-consolidated loan 

volume estimates between FY2021 and FY2030 range from $94

billion to $107 billion. The assumed changes in loan volume 

would result in a small savings that represents the net impact 

of offsetting subsidy changes by loan type and risk group due to 

positive subsidy rates for Subsidized and Unsubsidized Stafford 

loans and negative subsidy rates for PLUS Loans. Given the 

higher loan amounts associated with PLUS loans and loans to 
311

graduate students, the negative subsidy rates that range from -

20.57 in 2021 to -16.60 in 2028 generate significant savings ($-

427 mn in outlays) to offset the increased costs in other loan 

types. In Alternate 2, the higher non-consolidated loan volume 

eventually results in higher consolidated loan volume, that, 

combined with the other positive subsidy categories results in a 

net cost in that scenario. 

We do not assume any changes in subsidy rates from the 

potential creation of new programs or the other changes 

reflected in the regulations. We are uncertain to what extent 

and in what direction the performance of programs that expand or 

develop under the regulations will shift relative to current 

programs. As indicated previously, several institutions known 

for competency-based programs have default performance that is 

as good as or better than national averages, but it is not clear 

that most programs that will be created in the future will 

achieve that result. Depending on how programs are configured, 

the market demand for them, and their quality, key subsidy 

components such as defaults, prepayments, and repayment plan 

choice may vary and affect the cost estimates. 

Table 4 summarizes the Pell and loan effects for the Main, 

Alt1, and Alt2 scenarios over a 10-year period. Each column 

reflects a scenario showing estimated changes to Pell Grants and 
312

Direct Loans under those conditions. Therefore, the overall 

amounts reflect the sum of outlay changes occurring under each 

scenario for Pell Grants and Direct Loans when combined.

Table 4: Estimated Net Impact of Pell Grant and Loan Changes2021-2030 Outlays ($mns)

Main Alt 1 Alt 2

Pell 

Grants

1,163 465 1,804

Loans -54 -26 107

Overall 1,109 439 1,911

The cost estimates presented above do not attempt to 

account for several factors that could ultimately result in a 

different net budget impact than the primary estimate presented 

in Table 4, including potential cost differences among programs 

and relative repayment performance As discussed previously, one 

potential benefit of competency based programs is reduced costs 

for students relative to other programs. If a large share of 

students would have attended a different program or completed 

faster, their Pell Grant or borrowing may be lower than assumed 

in the PB2021 baseline. However, without more significant 

evidence, we are not estimating any savings from that 

possibility. Other provisions that we do not include in the 

budget estimate because of limited information on the potential 
313

significance include the treatment of out-of-class hours and the 

reasonable length provisions related to clock hour programs. 

As discussed previously, the uncertainty around several 

factors affected by the changes led the Department to develop 

some alternative scenarios for the potential impacts. The 

extent to which institutions invest in making direct assessment 

programs work and try to enroll additional students as opposed 

to converting some portion of existing enrollments to this type 

of program is unclear. In the AIR survey about competency-based 

education, approximately 40 percent of the 501 institutional 

respondents indicated CBE is in their institutions’ strategic 

plans in a “minor way” and 16 percent in a “major way”.60 It is 

also unclear if the size and type of existing CBE programs is 

representative of future CBE programs, especially direct 

assessment programs. 

In order to capture the effect of changing some of the key 

assumptions associated with the primary budget estimate, the 

Department developed the Alternate Scenarios presented in Table 

5. Alternate 1 is a low impact scenario that reduces the number 

of additional programs and students and lowers the average 

amount borrowed and the percentage of students eligible for Pell 

60 www.air.org/sites/default/files/National-Survey-of-Postsec-CBE-2018-AIREduventures-Jan-2019.pdf.
314

Grants. Alternate 2, the high impact scenario, increases 

programs and student growth, the percentage of Pell recipients, 

and amounts borrowed.

Table 5: Alternate Scenarios

Alternate 1 – Low 

Impact

Alternate 2 -High 

Impact

Program Growth Eliminate half the 

programs per cell 

for 3 smallest 

categories and onethird of programs in 

3 largest size 

categories

+ 20 programs per 

cell for 3 smallest 

categories; +5 

programs per cell 

for 3 largest size 

categories through 

2025 and +10 per 

cell for 2026 to 

2029

Undergraduate 

Program Share

+15 percent -15 percent

Percent of Pell 

Recipients

30 percent 75 percent

Distribution of Pell 

Recipients by 

4-yr Public 10%

4-yr Private 5%

2-yr Public 38%

4-yr Public 30%

4-yr Private 24%

2-yr Public 20%
315

Institutional 

Category

2-yr Private 10%

Proprietary 37%

2-yr Private 5%

Proprietary 21%

Borrowing Rates Subsidized -10%

Unsubsidized -15%

Plus -5%

Grad Unsub -15%

Grad Plus -15%

Subsidized +5%

Unsubsidized +10%

Plus +5%

Grad Unsub +10%

Grad Plus +10%

Average Loan Amount Decrease 20 percent Increase 10 percent

Distribution by Risk 

Group (Subsidized 

and Unsubsidized)

2-yr Prop -10%

2-yr NFP -5%

4-yr FRSO +10%

4-yr JRSR +5%

GRAD No change

2-yr Prop +15%

2-yr NFP +10%

4-yr FRSO -15%

4-yr JRSR -10%

GRAD No change

Distribution by Risk 

Group (PLUS)

2-yr Prop -6%

2-yr NFP -3%

4-yr FRSO +6%

4-yr JRSR +3%

GRAD No change

2-yr Prop +12%

2-yr NFP +8%

4-yr FRSO -12%

4-yr JRSR -8%

GRAD No change

Accounting Statement

As required by OMB Circular A-4 (available at 

www.whitehouse.gov/sites/default/files/omb/assets/omb/circulars/
316

a004/a-4.pdf), in the following table we have prepared an 

accounting statement showing the classification of the 

expenditures associated with the provisions of these final 

regulations. This table provides our best estimate of the 

changes in annual monetized transfers as a result of these final 

regulations. Expenditures are classified as transfers from the 

Federal Government to affected student loan borrowers and Pell 

Grant recipients.

Table 6: Accounting Statement: Classification of Estimated 

Expenditures (in millions)

Category Benefits

Clarification of terms and processes related 

to establishing programs and administering 

title IV aid to encourage development of new 

programs.

Not Quantified

Net Reduction in Paperwork Burden on 

Institutions, primarily due to elimination of 

Net Present Value calculation related to the 

90/10 rule.

7%

$-0.30

3%

$-0.30

Not Quantified

Category Costs

Category Transfers

Increased transfers of Pell Grants 7%

$101.2

3%

$109.6

Increased transfers of loans to students in 

additional programs established, in part, due 

to the regulations

$-6.9 $-6.1

Alternatives Considered
317

Several proposals were considered on various sections of 

the regulations as the negotiated rulemaking committee moved 

toward consensus. Some key alternatives that were considered 

are summarized in Table 76.

Table 76: Key Alternatives Considered

Topic Alternative

Proposal

Reasons Rejected

Definition of 

Credit Hour

Eliminate timebased 

requirements

Retain definition for some 

consistency across higher 

education

Subscriptionbased programsDisbursement 

based on 

attempted 

programs, not 

completed ones.

Include a 

competency in 

student’s 

enrollment status 

more than once if 

it overlapped 

more than one 

subscription 

period

Concern for potential abuse 

leading to paying title IV aid 

for same course twice

Written 

Arrangement

No limitation on 

percentage of 

program that 

could be provided 

by written 

arrangement with 

ineligible entity

Goal was to facilitate 

partnerships with organizations 

using trade experts in workplace 

environment. Committee found 

sufficient flexibility with 

existing limit and changes would 

call into question whether the 

eligible institution was really 

offering the program.

Program Length Allow limiting 

program length to 

100 percent of 

the requirements 

in any State and 

Concern that changes would 

encourage institutions to add 

hours beyond what is necessary 

for student to become employed.
318

then 100 percent 

required for 

licensure in an 

adjoining State.

Regulatory Flexibility Act Analysis

These final regulations are expected to have a significant 

impact on institutions, many of which are considered to be small 

entities. The analysis presented below evaluates the impact of 

the final regulations on these small entities.

Description of the Reasons that Action by the Agency Is Being 

Considered

The Department is regulating to reflect the development in 

postsecondary education delivery models, including those 

facilitated by technology and those that are based on the 

demonstration of competencies rather than seat time, to help 

institutions understand regulatory requirements for such 

programs and to facilitate further innovations in such areas. 

The regulations provide or clarify definitions of terms such as 

correspondence course, distance education, subscription-based 

program, and clock hour, where the HEA provides no definition.

The regulations send a signal to the higher education 

community that the Department is committed to supporting 
319

educational innovations such as subscription-based and direct 

assessment programs as well as new technology-driven delivery 

mechanisms, such as adaptive learning. The regulations also 

seek to clarify definitions used to differentiate between 

distance education and correspondence courses, while at the same 

time preserving student protections and title IV financial aid

distribution.

Succinct Statement of the Objectives of, and Legal Basis for, 

the Regulations

These final regulations amend the Institutional Eligibility 

regulations issued under the HEA, related to distance education 

and innovation in 34 CFR part 600. In addition, these 

regulations amend the Student Assistance General Provisions 

regulations issued under the HEA in 34 CFR parts 602 and 668. 

The changes to part 600 are authorized by 20 U.S.C. 1001, 1002, 

1003, 1088, 1091, 1094, 1099b, and 1099c. The change to part 

602, removing the definition of “Distance education” (now 

defined in part 600), is authorized by 20 U.S.C. 1099b while the 

changes to part 668 are authorized by 20 U.S.C. 1001-1003, 

1070a, 1070g, 1085, 1087b, 1087d, 1087e, 1088, 1091, 1092, 1094, 

1099c, 1099c-1, 1221e-3, and 3474.

Through the final regulations, we attempt to remove 

barriers that institutions face when trying to create and 
320

implement new and innovative ways of providing education to 

students, and also provide sufficient flexibility to ensure that 

future innovations we cannot yet anticipate have an opportunity 

to move forward. 

 The regulations are also designed to protect students and 

taxpayers from unreasonable risks. Inadequate consumer 

information could result in students enrolling in programs that 

will not help them meet their goals. In addition, institutions 

adopting innovative methods of educating students may expend 

taxpayer funds in ways that were not contemplated by Congress or 

the Department, resulting in greater risk to the taxpayers of 

waste, fraud, and abuse and to the institution of undeserved 

negative program review findings. These regulations attempt to 

limit risks to students and taxpayers resulting from innovation 

by delegating various oversight functions to the bodies best 

suited to conduct that oversight--States and accreditors. This 

delegation of authority through the higher education regulatory 

triad entrusts oversight of most consumer protections to States, 

assurance of academic quality to accrediting agencies, and 

protection of taxpayer funds to the Department. 

Description of and, Where Feasible, an Estimate of the Number of 

Small Entities to which the Regulations Will Apply
321

Of the entities that the final regulations will affect, we 

consider many institutions to be small. The Department recently 

proposed a size classification based on enrollment using IPEDS 

data that established the percentage of institutions in various 

sectors considered to be small entities, as shown in Table 8. 

We described this size classification in the NPRM published in 

the Federal Register on July 31, 2018 for the borrower defense 

rule (83 FR 37242, 37302). The Department discussed the

proposed standard with the Chief Counsel for Advocacy of the 

Small Business Administration, and while no change has been 

finalized, the Department continues to believe this approach 

most accurately reflects a common basis for determining size 

categories that is linked to the provision of educational 

services.

Table 861: Small Entities Under Enrollment 

Based Definition

Level Type Small Total Percent

2-year Public 342 1,240 28%

2-year Private 219 259 85%

2-year Proprietary 2,147 2,463 87%

4-year Public 64 759 8%

4-year Private 799 1,672 48%

4-year Proprietary 425 558 76%

Total 3,996 6,951 57%

61 U.S. Department of Education analysis of IPEDs 2015-16 enrollment data.
322

The regulations would provide needed clarity around title 

IV eligibility for distance education, correspondence courses, 

subscription-based programs, and direct assessment programs. 

They would also provide greater clarity regarding how the 

Department determines whether a program is of reasonable length. 

The effect on small entities would vary by the extent they 

currently participate in such programs or that they choose to do 

so going forward. Introducing competency-based programs in 

areas with strong demand could be an opportunity for some small 

entities to maintain or expand their business. On the other 

hand, small entities could be vulnerable to competition from 

other institutions, large or small, that are capturing an 

increasing share of the postsecondary market with distance or 

competency-based programs. Developing and implementing new 

programs and delivery models, and especially those that require 

sophisticated technology, may be impractical for small 

institutions that cannot distribute the cost among a population 

of enough size to result in favorable return-on-investment. We 

expect that the development of the first direct assessment 

program at an institution would be a multi-stage and multi-year 

process involving choosing the subject areas appropriate for 

this model, developing competencies, modifying course materials 
323

and teaching approaches, reaching out to potential future 

employers to build acceptance of the credential, and getting 

approval from accreditors and the Department, and recruiting 

students. The Department does not have a detailed understanding 

of the costs and timeframe involved with establishing these 

programs, especially for small entities and we welcome such 

information. Small institutions may be more inclined to rely on 

consortia arrangements with other, larger institutions, to make 

distance learning and competency-based education available to 

their students. The regulations would remove many barriers to 

innovation that currently restrain institutions, including small 

ones, and may accelerate innovations, but these innovations were 

likely to take place in postsecondary education anyway given the 

call for new, more efficient delivery models for the growing 

population of non-traditional students and the likelihood that 

adults will be engaged in postsecondary education throughout 

their lifetime. 

Description of the Projected Reporting, Recordkeeping, and Other 

Compliance Requirements of the Regulations, Including an 

Estimate of the Classes of Small Entities that Will Be Subject 

to the Requirement and the Type of Professional Skills Necessary 

for Preparation of the Report or Record
324

The Department provides additional detail related to burden 

estimates in the Paperwork Reduction Act section of this final 

rule. Overall, the Department estimates $300,288 in reduced 

paperwork burden associated with the elimination of the net 

present value calculation related to the 90/10 rule. This 

affects proprietary institutions, of which approximately 85 

percent are considered small according to Table 8 (2,572/3,021), 

so most of that burden reduction ($300,288*85 percent = 

$255,245) will be enjoyed by small entities. The Department is 

unable to estimate the effect of this change on the profits of 

institutions, including those considered to be small entities. 

No mechanism exists to track profits at institutions. The only 

way to obtain data on profits would be through a manual review 

of financial statements submitted by each institution. Even 

with that information, the effect of this change on profits 

could not be estimated with any degree of accuracy. First, it 

would be necessary to determine which schools used (NPV), which 

was optional per our regulations. Second, it would have to be 

known, for the period that an institution used NPV, what revenue 

from institutional loans would have been had that revenue 

included only loan payments received by the institution during 

the fiscal year. Also, despite the estimated cost savings due 

to paperwork burden reduction, the full time equivalent of those 
325

employees who calculated NPV most likely remains a salary 

expense. Finally, any savings identified that would benefit 

profits would have to be offset by the corresponding reduction 

in revenue resulting from no longer being able to apply NPV. 

Regarding overall economic impact, it would be negligible given 

that total savings of $255,245 is spread over 85% of the nearly 

3,000 participating for-profit institutions. There are also 

some small increases in burden related to reporting about direct 

assessment programs that is expected to increase burden on small 

entities by approximately 10 hours, a small increase for those 

small institutions that choose to participate in direct 

assessment programs or written arrangements. 

Identification, to the Extent Practicable, of All Relevant 

Federal Regulations that May Duplicate, Overlap, or Conflict 

with the Regulations

The regulations are unlikely to conflict with or duplicate 

existing Federal regulations.

Alternatives Considered

As described above, the Department participated in 

negotiated rulemaking when developing the regulations and 

considered several options for some of the provisions. These 

included: (1) eliminating time-based requirements for credit 

hours; (2) no limitation on the percentage of a program that 
326

could be offered through written arrangement with an ineligible 

entity; (3) allowing limiting program length to 100 percent of 

the requirements in any State and then 100 percent required for 

licensure in an adjoining State, (4) disbursing funds in 

subscription-based programs based on attempted competencies, not 

completed ones; and (5) including a competency that overlaps 

subscription periods in a student’s enrollment status more than 

once. In proposing to remove limits on the portion of a 

program that may be offered through a written arrangement with 

an ineligible entity, the Department sought to make a wider 

range of occupationally-related educational resources available 

to students than could be reasonably provided by the 

institutions they attend. It was the Department’s belief that 

this change would particularly benefit smaller institutions 

whose resources are typically more limited than those of larger 

entities.

Paperwork Reduction Act of 1995

As part of its continuing effort to reduce paperwork and 

respondent burden, the Department provides the general public 

and Federal agencies with an opportunity to comment on proposed 

and continuing collections of information in accordance with the 

Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3506(c)(2)(A)). 

This helps ensure that the public understands the Department’s 
327

collection instructions, respondents can provide the requested 

data in the desired format, reporting burden (time and financial 

resources) is minimized, collection instruments are clearly 

understood, and the Department can properly assess the impact of 

collection requirements on respondents.

A Federal agency may not conduct or sponsor a collection of 

information unless OMB approves the collection under the PRA and 

the corresponding information collection instrument displays a 

currently valid OMB control number.

Notwithstanding any other provision of law, no person is 

required to comply with, or is subject to penalty for failure to 

comply with, a collection of information if the collection 

instrument does not display a currently valid OMB control 

number.

Section 600.21 – Updating application information.

Requirements: The regulations in §600.21 require the 

institution to only report the addition of a second or 

subsequent direct assessment program without the review and 

approval of the Department when it previously has such approval. 

The regulations also require an institution to report the 

establishment of a written arrangement between the eligible 

institution and an ineligible institution or organization in 

which the ineligible institution or organization will provide 
328

more than 25 percent of a program. We also intend to request 

that institutions report additional information related to the 

use of asynchronous distance education in clock hour programs 

and would incorporate this change in the Department’s system for 

reporting information related to the eligibility of academic 

programs. We would meet all applicable Paperwork Reduction Act 

of 1995 (44 U.S.C. 3501-3520) requirements before collecting 

this information.

Burden Calculation: We believe that the reporting of written 

arrangements will impose burden on institutions. We estimate 

that 36 institutions will need to report such activities. We 

anticipate that an institution will require an average of .5 

hours (30 minutes) to report such activities for a total 

estimated burden of 18 hours under OMB Control Number 1845-NEW1. 

 We estimate that there are 12 proprietary institutions that 

will be required to report this information for 6 burden hours 

(12 institutions x .5 hours = 6 hours). We estimate that there 

are 11 private institutions that will be required to report this 

information for 5 burden hours (11 institutions x .5 hours = 5 

hours). We estimate that there are 13 public institutions that 

will be required to report this information for 7 burden hours 

(13 institutions x .5 hours = 7 hours). 
329

600.21 – Updating application information – 1845-NEW1

Institution 

Type

Respondents Responses Time 

Factor

Burden 

Hours

Cost 

$106.94

Proprietary 12 12 .5 hours 6 hours $642

Private 11 11 .5 hours 5 hours $538

Public 13 13 .5 hours 7 hours $749

TOTAL 36 36 18 hours $1,926

 

Section 668.5 – Written arrangements to provide education

programs.

Requirements: The proposed regulations in §668.5 which required

an eligible institution to demonstrate how an ineligible 

institution has the experience in the delivery and assessment of 

the program or portions thereof that the ineligible institution 

would be contracted to deliver under the terms of the written 

arrangement has been removed from the final rule.

Burden Calculation: The proposed burden of 120 hours in the 

information collection 1845-NEW2 is being withdrawn.

Section 668.28 – Non-title IV revenue (90/10).

Requirements: The regulations in §668.28 remove the Net Present 

Value calculation currently in the regulations.

Burden Calculation: This regulatory language change will remove 

burden from the institution. Based on the explanation provided 

in the preamble, the regulations in 668.28(b) no longer applies 

to the calculation of the treatment of revenue. Therefore, the 

current burden applied under OMB Control Number 1845-0096 will 
330

be eliminated. Upon the effective date of these regulation, the 

currently assessed 2,808 burden hours will be discontinued.

Section 668.28 – Non-title IV revenue (90/10). – 1845-0096

Institution 

Type

Respondents Responses Time 

Factor

Burden 

Hours

Cost 

Savings

$106.94 

/hour

Proprietary -936 -936 2 hours -1,872 

hours

$-200,192

Proprietary -936 -936 1 hour -936 

hours

$-100,096

TOTAL -1,872 -1,872 -2,808 

hours

$-300,288

The estimated cost to institutions is $53.47 per hour based on 

the 2018 mean hourly information from the Bureau of Labor 

Statistics Occupational Employment Statistics for Postsecondary 

Education Administrators62 X 2 to account for benefits and 

expenses for a total per hour cost of $106.94. As 85 percent of 

for-profit institutions are considered to be small entities, 

most of the reduction and corresponding cost savings will accrue 

to those institutions.

Regulatory 

Section

Information 

Collection

OMB Control 

Number & 

estimated 

burden 

(change in 

burden)

Estimated 

costs 

$106.94/hour

§600.21 

Updating 

The regulations in 

§600.21 require the 

1845-NEW1

18 hours

$1,926

62 www.bls.gov/oes/current/oes119033.htm
331

application 

information.

institution to only 

report the addition 

of a second or 

subsequent direct 

assessment program 

without the review 

and approval of the 

Department when it 

previously been 

awarded such 

approval. The 

regulations also 

require an 

institution to report 

the establishment of 

a written arrangement 

between the eligible 

institution and an 

ineligible 

institution or 

organization in which 

the ineligible 

institution or 

organization would 

provide more than 25 

percent of a program.

§668.5 –

Written 

arrangements 

to provide 

education 

programs.

The regulations in 

§668.5 requiring the 

eligible institution 

to demonstrate how 

the ineligible 

institution has the 

experience in the 

delivery and 

assessment of the 

program or portions 

thereof that the 

ineligible 

institution would be 

contracted to deliver 

under the terms of 

the written

arrangement has been 

1845-NEW2

0 hours

$0
332

removed from the 

final rule and this 

estimated burden is 

withdrawn.

§668.28 Nontitle IV 

revenue 

(90/10).

The regulations in 

§668.28 removes the 

Net Present Value 

calculation currently 

in the regulations.

-2,808 ($300,288)

Collection of Information

The total burden hours and change in the burden hours associated 

with each OMB control number affected by the regulations 

follows:

OMB Control Number Total burden hours. change in burden 

hours.

1845-NEW1 + 18 hours + 18 hours

1845-NEW2 0 hours 0 hours

1845-0096 -2,808 hours -2,808 hours

TOTAL -2,790 hours -2,790 hours

Intergovernmental Review

These regulations are not subject to Executive Order 12372 

and the regulations in 34 CFR part 79.

Assessment of Educational Impact

Based on the response to the NPRM and on our review, we 

have determined that these final regulations do not require 

transmission of information that any other agency or authority 

of the United States gathers or makes available. 
333

Federalism

Executive Order 13132 requires us to ensure meaningful and 

timely input by State and local elected officials in the 

development of regulatory policies that have federalism 

implications. “Federalism implications” means substantial 

direct effects on the States, on the relationship between the 

National Government and the States, or on the distribution of 

power and responsibilities among the various levels of 

government. In the NPRM we noted that §§ 600 and 668 may have 

federalism implications and encouraged State and local elected 

officials to review and provide comments on these final 

regulations. In the Public Comment section of this preamble, we 

discuss any comments we received on this subject. 

Accessible Format: Individuals with disabilities can obtain 

this document in an accessible format (e.g., braille, large 

print, audiotape, or compact disc) on request to the person 

listed under FOR FURTHER INFORMATION CONTACT.

Electronic Access to This Document: The official version of 

this document is the document published in the Federal Register. 

You may access the official edition of the Federal Register and 

the Code of Federal Regulations at www.govinfo.gov. At this 

site you can view this document, as well as all other documents 

of this Department published in the Federal Register, in text or 
334

Adobe Portable Document Format (PDF). To use PDF, you must have 

Adobe Acrobat Reader, which is available free at the site.

You may also access documents of the Department published 

in the Federal Register by using the article search feature at: 

www.federalregister.gov. Specifically, through the advanced 

search feature at this site, you can limit your search to 

documents published by the Department.

List of Subjects

34 CFR Part 600

Colleges and universities, grant programs-education, loan 

programs-education, reporting and recordkeeping requirements, 

student aid, vocational education.

34 CFR Part 668

Administrative practice and procedure, colleges and 

universities, consumer protection, grant programs-education, 

loan programs-education, reporting and recordkeeping 

requirements, student aid, vocational education.

 ______________________ 

 Betsy DeVos,

 Secretary of Education.
335

For the reasons discussed in the preamble, the Secretary 

proposes to amend parts 600 and 668, of title 34 of the Code of 

Federal Regulations as follows:

PART 600-INSTITUTIONAL ELIGIBILTY UNDER THE HIGHER EDUCATION ACT 

OF 1965, AS AMENDED 

1. The authority citation for part 600 continues to read 

as follows: 

AUTHORITY: 20 U.S.C. 1001, 1002, 1003, 1088, 1091, 1094, 1099b, 

and 1099c, unless otherwise noted.

2. Section 600.2 is amended by:

a. Adding, in alphabetical order, a definition for

“academic engagement”.

b. Revising the definitions of “clock hour”,

“correspondence course”, “credit hour”, “distance education”,

and “incarcerated student”, and “nonprofit institution”.

c. Adding, in alphabetical order, a definition for 

“juvenile justice facility”. 

The additions and revisions read as follows:

§600.2 Definitions.

* * * * *

Academic engagement: Active participation by a student in 

an instructional activity related to the student’s course of 
336

study that--

(1) Is defined by the institution in accordance with any 

applicable requirements of its State or accrediting agency;

(2) Includes, but is not limited to--

(i) Attending a synchronous class, lecture, recitation, or 

field or laboratory activity, physically or online, where there 

is an opportunity for interaction between the instructor and 

students;

(ii) Submitting an academic assignment;

(iii) Taking an assessment or an exam;

(iv) Participating in an interactive tutorial, webinar, or 

other interactive computer-assisted instruction;

(v) Participating in a study group, group project, or an 

online discussion that is assigned by the institution; or

(vi) Interacting with an instructor about academic 

matters; and

(3) Does not include, for example--

(i) Living in institutional housing;

(ii) Participating in the institution’s meal plan;

(iii) Logging into an online class or tutorial without any 

further participation; or 

(iv) Participating in academic counseling or advisement.

* * * * *
337

Clock hour: (1) A period of time consisting of--

(i) A 50- to 60-minute class, lecture, or recitation in a 

60-minute period;

(ii) A 50- to 60-minute faculty-supervised laboratory, 

shop training, or internship in a 60-minute period;

(iii) Sixty minutes of preparation in a correspondence 

course; or

(iv) In distance education, 50 to 60 minutes in a 60-

minute period of attendance in-–

(A) A synchronous or asynchronous class, lecture, or 

recitation where there is opportunity for direct interaction 

between the instructor and students; or

(B) An asynchronous learning activity involving academic 

engagement in which the student interacts with technology that 

can monitor and document the amount of time that the student 

participates in the activity.

(2) A clock hour in a distance education program does not 

meet the requirements of this definition if it does not meet all 

accrediting agency and State requirements or if it exceeds an 

agency’s or State’s restrictions on the number of clock hours in 

a program that may be offered through distance education.

(3) An institution must be capable of monitoring a 
338

student’s attendance in 50 out of 60 minutes for each clock hour 

under this definition.

* * * * *

Correspondence course: (1) A course provided by an 

institution under which the institution provides instructional 

materials, by mail or electronic transmission, including 

examinations on the materials, to students who are separated 

from the instructors. Interaction between instructors and 

students in a correspondence course is limited, is not regular 

and substantive, and is primarily initiated by the student.

(2) If a course is part correspondence and part 

residential training, the Secretary considers the course to be a 

correspondence course.

(3) A correspondence course is not distance education.

Credit hour: Except as provided in 34 CFR 668.8(k) and 

(l), a credit hour is an amount of student work defined by an 

institution, as approved by the institution’s accrediting agency 

or State approval agency, that is consistent with commonly 

accepted practice in postsecondary education and that--

(1) Reasonably approximates not less than--

(i) One hour of classroom or direct faculty instruction 

and a minimum of two hours of out-of-class student work each 

week for approximately fifteen weeks for one semester or 
339

trimester hour of credit, or ten to twelve weeks for one quarter 

hour of credit, or the equivalent amount of work over a 

different period of time; or

(ii) At least an equivalent amount of work as required in 

paragraph (1)(i) of this definition for other academic 

activities as established by the institution, including 

laboratory work, internships, practica, studio work, and other 

academic work leading to the award of credit hours; and

(2) Permits an institution, in determining the amount of 

work associated with a credit hour, to take into account a 

variety of delivery methods, measurements of student work, 

academic calendars, disciplines, and degree levels.

* * * * *

Distance education: (1) Education that uses one or more 

of the technologies listed in paragraphs (2)(i) through (iv) of 

this definition to deliver instruction to students who are 

separated from the instructor or instructors and to support 

regular and substantive interaction between the students and the 

instructor or instructors, either synchronously or 

asynchronously.

(2) The technologies that may be used to offer distance 

education include--

(i) The internet;
340

(ii) One-way and two-way transmissions through open 

broadcast, closed circuit, cable, microwave, broadband lines, 

fiber optics, satellite, or wireless communications devices; 

(iii) Audio conference; or

(iv) Other media used in a course in conjunction with any 

of the technologies listed in paragraph (2)(i) through (iii) of 

this definition.

(3) For purposes of this definition, an instructor is an 

individual responsible for delivering course content and who 

meets the qualifications for instruction established by an 

institution’s accrediting agency.

(4) For purposes of this definition, substantive 

interaction is engaging students in teaching, learning, and 

assessment, consistent with the content under discussion, and 

also includes at least two of the following--

(i) Providing direct instruction;

(ii) Assessing or providing feedback on a student’s 

coursework;

(iii) Providing information or responding to questions 

about the content of a course or competency;

(iv) Facilitating a group discussion regarding the 

content of a course or competency; or

(v) Other instructional activities approved by the 
341

institution’s or program’s accrediting agency.

(5) An institution ensures regular interaction between a 

student and an instructor or instructors by, prior to the 

student’s completion of a course or competency--

(i) Providing the opportunity for substantive 

interactions with the student on a predictable and regular basis 

commensurate with the length of time and the amount of content 

in the course or competency; and

(ii) Monitoring the student’s academic engagement and 

success and ensuring that an instructor is responsible for 

promptly and proactively engaging in substantive interaction 

with the student when needed on the basis of such monitoring, or 

upon request by the student.

* * * * *

Incarcerated student: A student who is serving a criminal 

sentence in a Federal, State, or local penitentiary, prison, 

jail, reformatory, work farm, juvenile justice facility, or 

other similar correctional institution. A student is not 

considered incarcerated if that student is in a half-way house 

or home detention or is sentenced to serve only weekends. For 

purposes of Pell Grant eligibility under 34 CFR 

668.32(c)(2)(ii), a student who is incarcerated in a juvenile 

justice facility, or in a local or county facility, is not 
342

considered to be incarcerated in a Federal or State penal 

institution, regardless of which governmental entity operates or 

has jurisdiction over the facility, including the Federal 

government or a State, but is considered incarcerated for the 

purposes of determining costs of attendance under section 472 of 

the HEA in determining eligibility for and the amount of the 

Pell Grant.

Juvenile justice facility: A public or private residential 

facility that is operated primarily for the care and 

rehabilitation of youth who, under State juvenile justice laws--

(1) Are accused of committing a delinquent act;

(2) Have been adjudicated delinquent; or

(3) Are determined to be in need of supervision.

Nonprofit institution: An institution that--

(1)(i) Is owned and operated by one of more nonprofit 

corporations or associations, no part of the net earnings of 

which benefits any private shareholder or individual;

(ii)Is legally authorized to operate as a nonprofit 

organization by each State in which it is physically located; 

and

(iii) Is determined by the U.S. Internal Revenue Service to 

be an organization to which contributions are tax-deductible in 

accordance with section 501(c)(3) of the Internal Revenue Code 
343

(26 U.S.C. 501(c)(3)); OR

(2) For a foreign institution--

(i) An institution that is owned and operated only by one 

or more nonprofit corporations or associations; and

(ii)(A) If a recognized tax authority of the institution’s 

home country is recognized by the Secretary for purposes of 

making determinations of an institution’s nonprofit status for 

title IV purposes, is determined by that tax authority to be a 

nonprofit educational institution; or

(B) If no recognized tax authority of the institution’s 

home country is recognized by the Secretary for purposes of 

making determinations of an institution’s nonprofit status for 

title IV purposes, the foreign institution demonstrates to the 

satisfaction of the Secretary that it is a nonprofit educational 

institution.

* * * * *

3. Section 600.7 is amended by:

a. Redesignating paragraph (b)(2) as (b)(3). 

b. Adding new paragraph (b)(2).

The addition reads as follows:

§600.7 Conditions of institutional eligibility.

* * * * *

(b) * * *
344

(2) Calculating the number of correspondence students. 

For purposes of paragraph (a)(1)(ii) of this section, a student 

is considered “enrolled in correspondence courses” if the 

student’s enrollment in correspondence courses constituted more 

than 50 percent of the courses in which the student enrolled 

during an award year. 

* * * * *

4. Section 600.10 is amended by revising paragraph 

(c)(1)(iii) to read as follows:

§600.10 Date, extent, duration, and consequence of eligibility.

* * * * *

(c) * * *

(1) * * * 

(iii) For a first direct assessment program under 34 CFR 

668.10, the first direct assessment program offered at each 

credential level, and for a comprehensive transition and 

postsecondary program under 34 CFR 668.232, obtain the 

Secretary’s approval.

* * * * *

5. Section 600.20 is revised to read as follows:

§600.20 Notice and application procedures for establishing, 

reestablishing, maintaining, or expanding institutional 

eligibility and certification.
345

(a) Initial eligibility application. (1) An institution 

that wishes to establish its eligibility to participate in any 

HEA program must submit an application to the Secretary for a 

determination that it qualifies as an eligible institution under 

this part. The Secretary must ensure prompt action is taken by 

the Department on any materially complete application required 

under this section. 

(2) If the institution also wishes to be certified to 

participate in the title IV, HEA programs, it must indicate that 

intent on the application, and submit all the documentation 

indicated on the application to enable the Secretary to 

determine that it satisfies the relevant certification 

requirements contained in 34 CFR part 668, subparts B and L.

(3) A freestanding foreign graduate medical school, or a

foreign institution that includes a foreign graduate medical 

school, must include in its application to participate—

(i)(A) A list of all medical school educational sites and 

where they are located, including all sites at which its 

students receive clinical training, except those clinical 

training sites that are not used regularly, but instead are 

chosen by individual students who take no more than two 

electives at the location for no more than a total of eight 

weeks; and
346

(B) The type of clinical training (core, required clinical 

rotation, not required clinical rotation) offered at each site 

listed on the application in accordance with paragraph 

(a)(3)(i)(A) of this section; and

(ii) Whether the school offers—

(A) Only post-baccalaureate/equivalent medical programs, as 

defined in §600.52;

(B) Other types of programs that lead to employment as a 

doctor of osteopathic medicine or doctor of medicine; or

(C) Both; and

(iii) Copies of the formal affiliation agreements with 

hospitals or clinics providing all or a portion of a clinical 

training program required under §600.55(e)(1).

(b) Reapplication. (1) A currently designated eligible 

institution that is not participating in the title IV, HEA 

programs must apply to the Secretary for a determination that 

the institution continues to meet the requirements in this part 

if the Secretary requests the institution to reapply. If the 

institution chooses to be certified to participate in the title 

IV, HEA programs, it must submit an application to the Secretary 

and must submit all the supporting documentation indicated on 

the application to enable the Secretary to determine that it 

satisfies the relevant certification requirements contained in 
347

subparts B and L of 34 CFR part 668. 

(2)(i) A currently designated eligible institution that 

participates in the title IV, HEA programs must apply to the 

Secretary for a determination that the institution continues to 

meet the requirements in this part and in 34 CFR part 668 if the 

institution chooses to—

(A) Continue to participate in the title IV, HEA programs 

beyond the scheduled expiration of the institution's current 

eligibility and certification designation;

(B) Reestablish eligibility and certification as a private 

nonprofit, private for-profit, or public institution following a 

change in ownership that results in a change in control as 

described in §600.31; or

(C) Reestablish eligibility and certification after the 

institution changes its status as a proprietary, nonprofit, or 

public institution.

(ii) The Secretary must ensure prompt action is taken by 

the Department on any materially complete application required 

under 600.20(a)(2)(i). 

(3) A freestanding foreign graduate medical school, or a 

foreign institution that includes a foreign graduate medical 

school, must include in its reapplication to participate—

(i)(A) A list of all of the foreign graduate medical 
348

school's educational sites and where they are located, including 

all sites at which its students receive clinical training, 

except those clinical training sites that are not used 

regularly, but instead are chosen by individual students who 

take no more than two electives at the location for no more than 

a total of eight weeks; and

(B) The type of clinical training (core, required clinical 

rotation, not required clinical rotation) offered at each site 

listed on the application in accordance with paragraph 

(b)(3)(i)(A) of this section; and

(ii) Whether the school offers—

(A) Only post-baccalaureate/equivalent medical programs, as 

defined in §600.52;

(B) Other types of programs that lead to employment as a 

doctor of osteopathic medicine or doctor of medicine; or

(C) Both; and

(iii) Copies of the formal affiliation agreements with 

hospitals or clinics providing all or a portion of a clinical 

training program required under §600.55(e)(1).

(c) Application to expand eligibility. A currently 

designated eligible institution that wishes to expand the scope 

of its eligibility and certification and disburse title IV, HEA 

Program funds to students enrolled in that expanded scope must 
349

apply to the Secretary and wait for approval to—

(1) Add an educational program or a location at which the 

institution offers or will offer 50 percent or more of an 

educational program if one of the following conditions applies, 

otherwise it must report to the Secretary under §600.21:

(i) The institution participates in the title IV, HEA 

programs under a provisional certification, as provided in 34 

CFR 668.13.

(ii) The institution receives title IV, HEA program funds 

under the reimbursement or cash monitoring payment method, as 

provided in 34 CFR part 668, subpart K.

(iii) The institution acquires the assets of another 

institution that provided educational programs at that location 

during the preceding year and participated in the title IV, HEA 

programs during that year.

(iv) The institution would be subject to a loss of 

eligibility under 34 CFR 668.188 if it adds that location.

(v) The Secretary notifies, or has notified, the 

institution that it must apply for approval of an additional 

educational program or a location under §600.10(c).

(2) Increase its level of program offering (e.g., adding 

graduate degree programs when it previously offered only 

baccalaureate degree programs);
350

(3) Add an educational program if the institution is 

required to apply to the Secretary for approval under 

§600.10(c);

(4) Add a branch campus at a location that is not currently 

included in the institution's eligibility and certification 

designation;

(5) For a freestanding foreign graduate medical school, or 

a foreign institution that includes a foreign graduate medical 

school, add a location that offers all or a portion of the 

foreign graduate medical school's core clinical training or 

required clinical rotations, except for those locations that are 

included in the accreditation of a medical program accredited by 

the Liaison Committee on Medical Education (LCME) or the 

American Osteopathic Association (AOA); or

(6) Convert an eligible location to a branch campus.

(d) Notice and application.

(1) Notice and application procedures.

(i) To satisfy the requirements of paragraphs (a), (b), and 

(c) of this section, an institution must notify the Secretary of 

its intent to offer an additional educational program, or 

provide an application to expand its eligibility, in a format 

prescribed by the Secretary and provide all the information and 

documentation requested by the Secretary to make a determination 
351

of its eligibility and certification.

(ii)(A) An institution that notifies the Secretary of its 

intent to offer an educational program under paragraph (c)(3) of 

this section must ensure that the Secretary receives the notice 

described in paragraph (d)(2) of this section at least 90 days 

before the first day of class of the educational program.

(B) If an institution does not provide timely notice in 

accordance with paragraph (d)(1)(ii)(A) of this section, the 

institution must obtain approval of the additional educational 

program from the Secretary for title IV, HEA program purposes.

(C) If an additional educational program is required to be 

approved by the Secretary for title IV, HEA program purposes 

under paragraph (d)(1)(ii)(B) of this section, the Secretary may 

grant approval, or request further information prior to making a 

determination of whether to approve or deny the additional 

educational program.

(D) When reviewing an application under paragraph 

(d)(1)(ii)(C) of this section, the Secretary will take into 

consideration the following:

(1) The institution's demonstrated financial responsibility 

and administrative capability in operating its existing 

programs.

(2) Whether the additional educational program is one of 
352

several new programs that will replace similar programs 

currently provided by the institution, as opposed to 

supplementing or expanding the current programs provided by the 

institution.

(3) Whether the number of additional educational programs 

being added is inconsistent with the institution's historic 

program offerings, growth, and operations.

(4) Whether the process and determination by the 

institution to offer an additional educational program that 

leads to gainful employment in a recognized occupation is 

sufficient.

(E)(1) If the Secretary denies an application from an 

institution to offer an additional educational program, the 

denial will be based on the factors described in paragraphs 

(d)(1)(ii)(D)(2) and (3) of this section, and the Secretary will 

explain in the denial how the institution failed to demonstrate 

that the program is likely to lead to gainful employment in a 

recognized occupation.

(2) If the Secretary denies the institution's application 

to add an additional educational program, the Secretary will 

permit the institution to respond to the reasons for the denial 

and request reconsideration of the denial.

(2) Notice format. An institution that notifies the 
353

Secretary of its intent to offer an additional educational 

program under paragraph (c)(3) of this section must at a 

minimum—

(i) Describe in the notice how the institution determined 

the need for the program and how the program was designed to 

meet local market needs, or for an online program, regional or 

national market needs. This description must contain any wage 

analysis the institution may have performed, including any 

consideration of Bureau of Labor Statistics data related to the 

program;

(ii) Describe in the notice how the program was reviewed or 

approved by, or developed in conjunction with, business advisory 

committees, program integrity boards, public or private 

oversight or regulatory agencies, and businesses that would 

likely employ graduates of the program;

(iii) Submit documentation that the program has been 

approved by its accrediting agency or is otherwise included in 

the institution's accreditation by its accrediting agency, or 

comparable documentation if the institution is a public 

postsecondary vocational institution approved by a recognized 

State agency for the approval of public postsecondary vocational 

education in lieu of accreditation; and

(iv) Provide the date of the first day of class of the new 
354

program.

(e) Secretary's response to applications. (1) If the 

Secretary receives an application under paragraph (a) or (b)(1) 

of this section, the Secretary notifies the institution—

(i) Whether the applicant institution qualifies in whole or 

in part as an eligible institution under the appropriate 

provisions in §§600.4 through 600.7; and

(ii) Of the locations and educational programs that qualify 

as the eligible institution if only a portion of the applicant 

qualifies as an eligible institution;

(2) If the Secretary receives an application under 

paragraphs (a) or (b) of this section and that institution 

applies to participate in the title IV, HEA programs, the 

Secretary notifies the institution—

(i) Whether the institution is certified to participate in 

those programs;

(ii) Of the title IV, HEA programs in which it is eligible 

to participate;

(iii) Of the title IV, HEA programs in which it is eligible 

to apply for funds;

(iv) Of the effective date of its eligibility to 

participate in those programs; and

(v) Of the conditions under which it may participate in 
355

those programs;

(3) If the Secretary receives an application under 

paragraph (b)(2) of this section, the Secretary notifies the 

institution whether it continues to be certified, or whether it 

reestablished its eligibility and certification to participate 

in the title IV, HEA programs and the scope of such approval.

(4) If the Secretary receives an application under 

paragraph (c)(1) of this section for an additional location, the 

Secretary notifies the institution whether the location is 

eligible or ineligible to participate in the title IV, HEA 

programs, and the date of eligibility if the location is 

determined eligible;

(5) If the Secretary receives an application under 

paragraph (c)(2) of this section for an increase in the level of 

program offering, or for an additional educational program under 

paragraph (c)(3) of this section, the Secretary notifies the 

institution whether the program qualifies as an eligible 

program, and if the program qualifies, the date of eligibility; 

and

(6) If the Secretary receives an application under 

paragraphs (c)(4) or (c)(5) of this section to have a branch 

campus certified to participate in the title IV, HEA programs as 

a branch campus, the Secretary notifies the institution whether 
356

that branch campus is certified to participate and the date that 

the branch campus is eligible to begin participation.

6. Amend §600.21 by revising paragraph (a)(11) and adding 

paragraphs (a)(12) and (13) to read as follows:

§600.21 Updating application information.

(a) * * *

(11) For any program that is required to provide training 

that prepares a student for gainful employment in a recognized 

occupation-—

(i) Establishing the eligibility or reestablishing the 

eligibility of the program;

(ii) Discontinuing the program's eligibility;

(iii) Ceasing to provide the program for at least 12 

consecutive months;

(iv) Losing program eligibility under §600.40; or

(v) Changing the program's name, CIP code or credential 

level.

(12) Its addition of a second or subsequent direct 

assessment program.

(13) Its establishment of a written arrangement for an 

ineligible institution or organization to provide more than 25 

percent of a program pursuant to §668.5(c). 

* * * * *
357

7. Section 600.52 is amended by revising the definition of 

“foreign institution” to read as follows:

§600.52 Definitions.

* * * * *

Foreign institution: (1) For the purposes of students who 

receive title IV aid, an institution that--

(i) Is not located in the United States;

(ii) Except as provided with respect to clinical training 

offered under §600.55(h)(1), §600.56(b), or §600.57(a)(2)--

(A) Has no U.S. location;

(B) Has no written arrangements, within the meaning of 

§668.5, with institutions or organizations located in the United 

States for those institutions or organizations to provide a 

portion of an eligible program, as defined under §668.8, except 

for written arrangements for no more than 25 percent of the 

courses required by the program to be provided by eligible 

institutions located in the United States; and

(C) Does not permit students to complete an eligible 

program by enrolling in courses offered in the United States, 

except that it may permit students to complete up to 25 percent 

of the program by--
358

(1) Enrolling in the coursework, research, work, or special 

studies offered by an eligible institution in the United States;

or

(2) Participating in an internship or externship provided 

by an ineligible organization as described in §668.5(h)(2).

(iii) Is legally authorized by the education ministry, 

council, or equivalent agency of the country in which the 

institution is located to provide an educational program beyond 

the secondary education level; and

(iv) Awards degrees, certificates, or other recognized 

educational credentials in accordance with §600.54(e) that are 

officially recognized by the country in which the institution is 

located.

(2) Notwithstanding paragraph (1)(ii)(C) of this 

definition, independent research done by an individual student 

in the United States for not more than one academic year is 

permitted, if it is conducted during the dissertation phase of a 

doctoral program under the guidance of faculty, and the research 

is performed only in a facility in the United States.

(3) If the educational enterprise enrolls students both 

within the United States and outside the United States, and the 

number of students who would be eligible to receive title IV, 

HEA program funds attending locations outside the United States
359

is at least twice the number of students enrolled within the 

United States, the locations outside the United States must 

apply to participate as one or more foreign institutions and 

must meet all requirements of paragraph (1) of this definition, 

and the other requirements of this part. For the purposes of 

this paragraph, an educational enterprise consists of two or 

more locations offering all or part of an educational program 

that are directly or indirectly under common ownership.

* * * * *

8. Section 600.54 is amended by revising paragraph (c) to

read as follows:

§600.54 Criteria for determining whether a foreign institution 

is eligible to apply to participate in the Direct Loan Program.

* * * * *

(c)(1) Notwithstanding §668.5, written arrangements between 

an eligible foreign institution and an ineligible entity are 

limited to those under which--

(i) The ineligible entity is an institution that meets the 

requirements in paragraphs (1)(iii) and (iv) of the definition 

of “foreign institution” in §600.52; and

(ii) The ineligible foreign institution provides 25 

percent or less of the educational program.
360

(2) For the purpose of this paragraph (c), written 

arrangements do not include affiliation agreements for the 

provision of clinical training for foreign medical, veterinary, 

and nursing schools.

* * * * *

Part 602—THE SECRETARY’S RECOGNITION OF ACCREDITING AGENCIES

9. The authority citation for part 602 continues to read as 

follows:

Authority: 20 U.S.C. 1099b, unless otherwise noted.

10. Section 602.3 is amended by:

a. In paragraph (a), adding the words “Distance Education”

in alphabetical order.

b. In paragraph (b), removing the definition of “Distance 

education.”

* * * * *

Part 668-STUDENT ASSISTANCE GENERAL PROVISIONS

11. The authority citation for part 668 continues to read 

as follows:

Authority: 20 U.S.C. 1001-1003, 1070a, 1070g, 1085, 1087b, 

1087d, 1087e, 1088, 1091, 1092, 1094, 1099c, 1099c-1, 1221e-3, 

and 3474, unless otherwise noted.
361

12. Section 668.1 is amended by revising paragraph (b)

introductory text to read as follows:

§668.1 Scope.

* * * * *

(b) As used in this part, an “institution,” unless 

otherwise specified, includes--

* * * * *

13. Section 668.2 is amended by: 

a. Adding in alphabetical order in the list of definitions 

in paragraph (a) the words “Direct assessment program”,

“Distance education”, “Religious mission”, “Teach-out”, “Teachout agreement”, and “Teach-out plan”.

b. In paragraph (a):

i. Removing from the list of definitions the words

“Telecommunications course”; and

ii. Adding in alphabetical order in the list of definitions 

the words “Title IV, HEA program”.

c. In paragraph (b):

i. Removing the definition of “Academic Competitiveness 

Grant (ACG)”;

ii. Revising the definition of “full-time student”;

iii. Adding in alphabetical order the definition of 

“subscription-based program”; and
362

iv. In the definition of “Third-party servicer”, in 

paragraph (1)(i)(D), removing the words “Certifying loan 

applications” and adding in their place the words “Originating 

loans”.

The additions and revisions read as follows:

§668.2 General definitions.

* * * * *

(b) * * *

Full-time student: An enrolled student who is carrying a 

full-time academic workload, as determined by the institution, 

under a standard applicable to all students enrolled in a 

particular educational program. The student’s workload may 

include any combination of courses, work, research, or special 

studies that the institution considers sufficient to classify 

the student as a full-time student. For a term-based program 

that is not subscription-based, the student’s workload may 

include repeating any coursework previously taken in the 

program; however, the workload may not include more than one 

repetition of a previously passed course. For an undergraduate 

student, an institution’s minimum standard must equal or exceed 

one of the following minimum requirements, based on the type of 

program:
363

(1) For a program that measures progress in credit hours 

and uses standard terms (semesters, trimesters, or quarters), 12 

semester hours or 12 quarter hours per academic term.

(2) For a program that measures progress in credit hours 

and does not use terms, 24 semester hours or 36 quarter hours 

over the weeks of instructional time in the academic year, or 

the prorated equivalent if the program is less than one academic 

year.

(3) For a program that measures progress in credit hours 

and uses nonstandard-terms (terms other than semesters, 

trimesters, or quarters) the number of credits determined by--

(i) Dividing the number of weeks of instructional time in 

the term by the number of weeks of instructional time in the 

program’s academic year; and

(ii) Multiplying the fraction determined under paragraph 

(3)(i) of this definition by the number of credit hours in the 

program’s academic year.

(4) For a program that measures progress in clock hours, 

24 clock hours per week.

(5) A series of courses or seminars that equals 12 

semester hours or 12 quarter hours in a maximum of 18 weeks.
364

(6) The work portion of a cooperative education program in 

which the amount of work performed is equivalent to the academic 

workload of a full-time student.

(7) For correspondence coursework--

(i) A full-time course load must be commensurate with the 

requirements listed in paragraphs (1) through (6) of this 

definition; and

(ii) At least one-half of the coursework must be made up 

of non-correspondence coursework that meets one-half of the 

institution’s requirement for full-time students.

(8) For a subscription-based program, completion of a fulltime course load commensurate with the requirements in 

paragraphs (1), (3), and (5) through (7) of this definition.

* * * * *

Subscription-based program: A standard or nonstandardterm program in which the institution charges a student for each 

term on a subscription basis with the expectation that the 

student completes a specified number of credit hours (or the 

equivalent) during that term. Coursework in a subscriptionbased program is not required to begin or end within a specific 

timeframe in each term. Students in subscription-based programs 

must complete a cumulative number of credit hours (or the 

equivalent) during or following the end of each term before 
365

receiving subsequent disbursements of title IV, HEA program 

funds. An institution establishes an enrollment status (for 

example, full-time or half-time) that will apply to a student 

throughout the student’s enrollment in the program, except that 

a student may change his or her enrollment status no more often 

than once per academic year. The number of credit hours (or the 

equivalent) a student must complete before receiving subsequent 

disbursements is calculated by--

(1) Determining for each term the number of credit hours 

(or the equivalent) associated with the institution’s minimum 

standard for the student’s enrollment status (for example, fulltime, three-quarter time, or half-time) for that period 

commensurate with paragraph (8) in the definition of “full-time 

student,” adjusted for less than full-time students in light of 

the definitions of “half-time student” and “three-quarter time 

student,” and adjusted to at least one credit (or the 

equivalent) for a student who is enrolled less than half-time; 

and

(2) Adding together the number of credit hours (or the 

equivalent) determined under paragraph (1) for each term in 

which the student was enrolled in and attended that program, 

excluding the current and most recently attended terms.

* * * * *
366

12. Section 668.3 is amended by revising paragraphs (b)(2) 

and (3) to read as follows:

§668.3 Academic year.

* * * * *

(b) * * *

(2) A week of instructional time is any week in which--

(i) At least one day of regularly scheduled instruction or 

examinations occurs, or, after the last scheduled day of classes 

for a term or payment period, at least one day of study for 

final examinations occurs; or

(ii)(A) In a program offered using asynchronous coursework 

through distance education or correspondence courses, the 

institution makes available the instructional materials, other 

resources, and instructor support necessary for academic 

engagement and completion of course objectives; and

(B) In a program using asynchronous coursework through 

distance education, the institution expects enrolled students to 

perform educational activities demonstrating academic engagement 

during the week; and

(3) Instructional time does not include any scheduled 

breaks and activities not included in the definition of 

“academic engagement” in §600.2, or periods of orientation or 

counseling.
367

* * * * *

14. Section 668.5 is amended by:

a. Revising paragraphs (a), (c), and (d)(1).

b. Adding paragraphs (f), (g) and (h).

The revisions and additions read as follows:

§668.5 Written arrangements to provide educational programs.

(a) Written arrangements between eligible institutions.

(1) Except as provided in paragraph (a)(2) of this section, if 

an eligible institution enters into a written arrangement with 

another eligible institution, or with a consortium of eligible 

institutions, under which the other eligible institution or 

consortium provides part of the educational program to students 

enrolled in the first institution, the Secretary considers that 

educational program to be an eligible program if the educational 

program offered by the institution that grants the degree, 

certificate, or other recognized educational credential 

otherwise satisfies the requirements of §668.8.

(2) If the written arrangement is between two or more 

eligible institutions that are owned or controlled by the same 

individual, partnership, or corporation, the Secretary considers 

the educational program to be an eligible program if the 

educational program offered by the institution that grants the 
368

degree, certificate, or other recognized educational credential 

otherwise satisfies the requirements of §668.8.

* * * * *

(c) Written arrangements between an eligible institution 

and an ineligible institution or organization. Except as 

provided in paragraph (d) of this section, if an eligible 

institution enters into a written arrangement with an 

institution or organization that is not an eligible institution 

under which the ineligible institution or organization provides 

part of the educational program of students enrolled in the 

eligible institution, the Secretary considers that educational 

program to be an eligible program if--

(1) The ineligible institution or organization has not--

(i) Had its eligibility to participate in the title IV, 

HEA programs terminated by the Secretary;

(ii) Voluntarily withdrawn from participation in the title 

IV, HEA programs under a termination, show-cause, suspension, or 

similar type proceeding initiated by the institution’s State 

licensing agency, accrediting agency, or guarantor, or by the 

Secretary;

(iii) Had its certification to participate in the title 

IV, HEA programs revoked by the Secretary;
369

(iv) Had its application for recertification to 

participate in the title IV, HEA programs denied by the 

Secretary; or

(v) Had its application for certification to participate 

in the title IV, HEA programs denied by the Secretary;

(2) The educational program offered by the institution 

that grants the degree, certificate, or other recognized 

educational credential otherwise satisfies the requirements of 

§668.8; and

(3)(i) The ineligible institution or organization provides 

25 percent or less of the educational program, including in 

accordance with §602.22(b)(4); or

(ii)(A) The ineligible institution or organization 

provides more than 25 percent but less than 50 percent of the 

educational program, in accordance with §602.22(a)(1)(ii)(J);

(B) The eligible institution and the ineligible 

institution or organization are not owned or controlled by the 

same individual, partnership, or corporation; and

(C) The eligible institution’s accrediting agency or, if 

the institution is a public postsecondary vocational educational 

institution, the State agency listed in the Federal Register in 

accordance with 34 CFR part 603 has specifically determined that 

the institution’s arrangement meets the agency’s standards for 
370

executing a written arrangement with an ineligible institution 

or organization.

(d) Administration of title IV, HEA programs. (1) If an 

institution enters into a written arrangement as described in 

paragraph (a), (b), or (c) of this section, or provides 

coursework as provided in paragraph (h)(2) of this section, 

except as provided in paragraph (d)(2) of this section, the 

institution at which the student is enrolled as a regular 

student must determine the student’s eligibility for the title 

IV, HEA program funds, and must calculate and disburse those 

funds to that student.

* * * * *

(f) Workforce responsiveness. Nothing in this or any 

other section prohibits an institution utilizing written 

arrangements from aligning or modifying its curriculum or 

academic requirements in order to meet the recommendations or 

requirements of industry advisory boards that include employers 

who hire program graduates, widely recognized industry standards 

and organizations, or industry-recognized credentialing bodies, 

including making governance or decision-making changes as an 

alternative to allowing or requiring faculty control or approval 

or integrating industry-recognized credentials into existing 

degree programs.
371

(g) Calculation of percentage of program. When 

determining the percentage of the program that is provided by an 

ineligible institution or organization under paragraph (c) of 

this section, the institution divides the number of semester, 

trimester, or quarter credit hours, clock hours, or the 

equivalent that are provided by the ineligible organization or 

organizations by the total number of semester, trimester, or 

quarter credit hours, clock hours, or the equivalent required 

for completion of the program. A course is provided by an 

ineligible institution or organization if the organization with 

which the institution has a written arrangement has authority 

over the design, administration, or instruction in the course, 

including, but not limited to--

(1) Establishing the requirements for successful 

completion of the course;

(2) Delivering instruction in the course; or

(3) Assessing student learning.

(h) Non-applicability to other interactions with outside 

entities. Written arrangements are not necessary for, and the 

limitations in this section do not apply to--

(1) Acceptance by the institution of transfer credits or 

use of prior learning assessment or other non-traditional 

methods of providing academic credit; or
372

(2) The internship or externship portion of a program if 

the internship or externship is governed by accrediting agency 

standards, or, in the case of an eligible foreign institution, 

the standards of an outside oversight entity, such as an 

accrediting agency or government entity, that require the 

oversight and supervision of the institution, where the 

institution is responsible for the internship or externship and 

students are monitored by qualified institutional personnel.

* * * * *

15. Section 668.8 is amended by revising paragraphs

(e)(1)(iii), (k)(2), and (l) to read as follows:

§668.8 Eligible program.

* * * * *

(e) *** (1) * * *

(iii) The institution can demonstrate reasonable program 

length, in accordance with 34 CFR 668.14(b)(26); and

* * * * *

(k) * * *

(2) Each course within the program is acceptable for full 

credit toward completion of an eligible program offered by the 

institution that provides an associate degree, bachelor’s 

degree, professional degree, or equivalent degree as determined 

by the Secretary, provided that--
373

(i) The eligible program requires at least two academic 

years of study; and

(ii) The institution can demonstrate that least one 

student graduated from the program during the current award year 

or the two preceding award years.

(l) Formula. For purposes of determining whether a 

program described in paragraph (h) of this section satisfies the 

requirements contained in paragraph (c)(3) or (d) of this 

section, and the number of credit hours in that educational 

program for the purposes of the title IV, HEA programs--

(1) A semester or trimester hour must include at least 30 

clock hours of instruction; and 

(2) A quarter hour must include at least 20 clock hours of 

instruction.

* * * * *

16. Section 668.10 is revised to read as follows:

§668.10 Direct assessment programs.

(a)(1) A direct assessment program is a program that, in 

lieu of credit or clock hours as the measure of student 

learning, utilizes direct assessment of student learning, or 

recognizes the direct assessment of student learning by others. 

The assessment must be consistent with the accreditation of the 

institution or program utilizing the results of the assessment.
374

(2) Direct assessment of student learning means a measure 

of a student’s knowledge, skills, and abilities designed to 

provide evidence of the student’s proficiency in the relevant 

subject area.

(3) An institution must establish a methodology to 

reasonably equate each module in the direct assessment program 

to either credit hours or clock hours. This methodology must be 

consistent with the requirements of the institution’s 

accrediting agency or State approval agency.

(4) All regulatory requirements in this chapter that refer 

to credit or clock hours as a measurement apply to direct 

assessment programs according to whether they use credit or 

clock hour equivalencies, respectively.

(5) A direct assessment program that is not consistent 

with the requirements of the institution’s accrediting agency or 

State approval agency is not an eligible program as provided 

under §668.8. In order for any direct assessment program to

qualify as an eligible program, the accrediting agency must 

have--

(i) Evaluated the program based on the agency’s 

accreditation standards and criteria, and included it in the 

institution’s grant of accreditation or preaccreditation; and 
375

(ii) Reviewed and approved the institution’s claim of each 

direct assessment program’s equivalence in terms of credit or 

clock hours.

(b)(1) An institution that wishes to offer a direct 

assessment program must apply to the Secretary to have its 

direct assessment program or programs determined to be eligible 

programs for title IV, HEA program purposes. Following the 

Secretary’s initial approval of a direct assessment program, 

additional direct assessment programs at an equivalent or lower 

academic level may be determined to be eligible without further 

approvals from the Secretary except as required by 

§600.10(c)(1)(iii), §600.20(c)(1), or §600.21(a), as applicable, 

if such programs are consistent with the institution’s 

accreditation or its State approval agency. 

(2) The institution’s direct assessment application must 

provide information satisfactory to the Secretary that includes-

-

(i) A description of the educational program, including 

the educational credential offered (degree level or certificate) 

and the field of study;

(ii) A description of how the direct assessment program is 

structured, including information about how and when the 

institution determines on an individual basis what each student 
376

enrolled in the program needs to learn and how the institution 

excludes from consideration of a student’s eligibility for title 

IV, HEA program funds any credits or competencies earned on the 

basis of prior learning;

(iii) A description of how learning is assessed and how 

the institution assists students in gaining the knowledge needed 

to pass the assessments; 

(iv) The number of semester, trimester, or quarter credit 

hours, or clock hours, that are equivalent to the amount of 

student learning being directly assessed for the certificate or 

degree;

(v) The methodology the institution uses to determine the 

number of credit or clock hours to which the program or programs 

are equivalent; and 

(vi) Documentation from the institution’s accrediting 

agency or State approval agency indicating that the agency has 

evaluated the institution’s offering of direct assessment 

program(s) and has included the program(s) in the institution’s 

grant of accreditation and approval documentation from the 

accrediting agency or State approval agency indicating agreement 

with the institutions methodology for determining the direct 

assessment program’s equivalence in terms of credit or clock 

hours.
377

(vii) Notwithstanding paragraphs (a) and (b) of this 

section, no program offered by a foreign institution that 

involves direct assessment will be considered to be an eligible 

program under §668.8.

(c) A direct assessment program may use learning resources 

(e.g., courses or portions of courses) that are provided by 

entities other than the institution providing the direct 

assessment program without regard to the limitations on 

contracting for part of an educational program in §668.5(c)(3).

(d) Title IV, HEA program funds may be used to support 

instruction provided, or overseen, by the institution, except 

for the portion of the program that the student is awarded based 

on prior learning.

(e) Unless an institution has received initial approval 

from the Secretary to offer direct assessment programs, and the 

institution’s offering of direct assessment coursework is 

consistent with the institution’s accreditation and State 

authorization, if applicable, title IV, HEA program funds may 

not be used for--

(1) The course of study described in §668.32(a)(1)(ii) and 

(iii) and (a)(2)(i)(B), if offered using direct assessment; or

(2) Remedial coursework described in §668.20, if offered 

using direct assessment.
378

(f) Student progress in a direct assessment program may be 

measured using a combination of--

(1) Credit hours and credit hour equivalencies; or

(2) Clock hours and clock hour equivalencies.

17. Section 668.13 is amended by:

a. Redesignating paragraph (a)(1) as paragraph (a)(1)(i).

b. Adding paragraph (a)(1)(ii).

c. Adding paragraph (b)(3).

d. Removing the word “or” at the end of paragraph 

(c)(1)(i)(D).

e. Removing the period and adding in its place “; or”, at 

the end of paragraph (c)(1)(i)(E).

f. Adding paragraph (c)(1)(i)(F).

g. Removing the word “facsimile” and adding in its place 

the word “electronic” in paragraphs (d)(3)(i) and (d)(3)(ii)(C).

h. Revising paragraph (d)(3)(iii).

i. Removing paragraph (d)(3)(iv).

j. Revising paragraph (d)(5).

The additions and revisions read as follows:

§668.13 Certification procedures.

(a)*** (1)(i) * * *

(ii) On application from the institution, the Secretary 

certifies a location of an institution that meets the 
379

requirements of 34 CFR 668.13(a)(1)(i) as a branch if it 

satisfies the definition of “branch” in 34 CFR 600.2.

* * * * *

(b) * * *

(3) In the event that the Secretary does not make a 

determination to grant or deny certification within 12 months of 

the expiration of its current period of participation, the 

institution will automatically be granted renewal of 

certification, which may be provisional.

(c) *** (1)(i) * * *

(F) The institution is a participating institution that 

has been provisionally recertified under the automatic 

recertification requirement in paragraph (b)(3) of this section.

* * * * *

(d) * * *

(3) * * *

(iii) Documents filed by electronic transmission must be 

transmitted to the Secretary in accordance with instructions 

provided by the Secretary in the notice of revocation.

* * * * *

(5) The mailing date of a notice of revocation or a 

request for reconsideration of a revocation is the date 

evidenced on the original receipt of mailing from the U.S. 
380

Postal Service or another service that provides delivery 

confirmation for that document.

* * * * *

18. Section 668.14 is amended by revising paragraphs

(b)(10), (26), and the introductory text to paragraph (31) to

read as follows:

§668.14 Program participation agreement.

* * * * *

(b) * * *

(10) In the case of an institution that advertises job 

placement rates as a means of attracting students to enroll in 

the institution, the institution will make available to 

prospective students, at or before the time that those students 

apply for enrollment--

(i) The most recent available data concerning employment 

statistics, graduation statistics, and any other information 

necessary to substantiate the truthfulness of the 

advertisements; and

(ii) Relevant State licensing requirements of the State in 

which the institution is located for any job for which the 

course of instruction is designed to prepare such prospective 

students, as provided in 34 CFR 668.43(a)(5)(v);

* * * * *
381

(26) If an educational program offered by the institution 

is required to prepare a student for gainful employment in a 

recognized occupation, the institution must--

(i) Demonstrate a reasonable relationship between the 

length of the program and entry level requirements for the 

recognized occupation for which the program prepares the 

student. The Secretary considers the relationship to be 

reasonable if the number of clock hours provided in the program 

does not exceed the greater of--

(A) One hundred and fifty percent of the minimum number of 

clock hours required for training in the recognized occupation 

for which the program prepares the student, as established by 

the State in which the institution is located, if the State has 

established such a requirement, or as established by any Federal 

agency; or

(B) The minimum number of clock hours required for 

training in the recognized occupation for which the program 

prepares the student as established in a State adjacent to the 

State in which the institution is located; and

(ii) Establish the need for the training for the student 

to obtain employment in the recognized occupation for which the 

program prepares the student.

* * * * *
382

(31) The institution will submit a teach-out plan to its 

accrediting agency in compliance with §602.24(c) and the 

standards of the institution’s accrediting agency. The 

institution will update its teach-out plan upon the occurrence 

of any of the following events:

* * * * *

19. Section 668.22 is amended by:

a. Removing the word “or” at the end of paragraph 

(a)(2)(i)(B).

b. Revising paragraph (a)(2)(i)(C).

c. Adding paragraph (a)(2)(i)(D).

d. Revising paragraph (a)(2)(ii).

e. Removing the word “nonterm” and adding in its place the 

word “non-term” in paragraph (a)(2)(iii)(B).

f. Revising paragraph (a)(3).

g. Removing the citation “§668.164(g)” at the end of 

paragraph (a)(5) and adding in its place the citation 

“§668.164(i)”.

h. Revising paragraphs (a)(6)(ii)(A), (d)(1)(vii), and

(i).

i. Removing the citation “§668.164(g)” in paragraph (l)(1)

and adding in its place the citation “§668.164(j)”.
383

j. Removing the citation “§668.164(g)(2)” in paragraph 

(l)(4) and adding in its place the citation “§668.164(j)(2)”.

k. Adding the phrase “the program uses a standard term or 

nonstandard-term academic calendar, is not a subscription-based 

program, and” after the word “if” in paragraph (l)(6).

l. Revising paragraph (l)(7).

m. Adding paragraph (l)(9).

The additions and revisions read as follows:

§668.22 Treatment of title IV funds when a student withdraws.

(a) * * *

(2)(i) * * *

(C) For a student in a standard or nonstandard-term 

program, excluding a subscription-based program, the student is 

not scheduled to begin another course within a payment period or 

period of enrollment for more than 45 calendar days after the 

end of the module the student ceased attending, unless the 

student is on approved leave of absence, as defined in paragraph 

(d) of this section; or

(D) For a student in a non-term program or a subscriptionbased program, the student is unable to resume attendance within 

a payment period or period of enrollment for more than 60 

calendar days after ceasing attendance, unless the student is on 
384

an approved leave of absence, as defined in paragraph (d) of 

this section.

(ii)(A) Notwithstanding paragraph (a)(2)(i) of this 

section--

(1) A student who completes all the requirements for 

graduation from his or her program before completing the days or 

hours in the period that he or she was scheduled to complete is 

not considered to have withdrawn;

(2) In a program offered in modules, a student is not 

considered to have withdrawn if the student successfully 

completes--

(i) One module that includes 49 percent or more of the 

number of days in the payment period, excluding scheduled breaks 

of five or more consecutive days and all days between modules;

(ii) A combination of modules that when combined contain 

49 percent or more of the number of days in the payment period, 

excluding scheduled breaks of five or more consecutive days and 

all days between modules; or

(iii) Coursework equal to or greater than the coursework 

required for the institution’s definition of a half-time student 

under §668.2 for the payment period;

(3) For a payment period or period of enrollment in which 

courses in the program are offered in modules--
385

(i) A student is not considered to have withdrawn if the 

institution obtains written confirmation from the student at the 

time that would have been a withdrawal of the date that he or 

she will attend a module that begins later in the same payment 

period or period of enrollment; and

(ii) For standard and nonstandard-term programs, excluding 

subscription-based programs, that module begins no later than 45 

calendar days after the end of the module the student ceased 

attending; 

(4) For a subscription-based program, a student is not 

considered to have withdrawn if the institution obtains written 

confirmation from the student at the time that would have been a 

withdrawal of the date that he or she will resume attendance, 

and that date occurs within the same payment period or period of 

enrollment and is no later than 60 calendar days after the 

student ceased attendance; and

(5) For a non-term program, a student is not considered to 

have withdrawn if the institution obtains written confirmation 

from the student at the time that would have been a withdrawal 

of the date that he or she will resume attendance, and that date 

is no later than 60 calendar days after the student ceased 

attendance.
386

(B) If an institution has obtained the written 

confirmation of future attendance in accordance with paragraph 

(a)(2)(ii)(A) of this section--

(1) A student may change the date of return that begins 

later in the same payment period or period of enrollment, 

provided that the student does so in writing prior to the return 

date that he or she had previously confirmed;

(2) For standard and nonstandard-term programs, excluding 

subscription-based programs the later module that he or she will 

attend begins no later than 45 calendar days after the end of 

the module the student ceased attending; and 

(3) For non-term and subscription-based programs, the 

student’s program permits the student to resume attendance no 

later than 60 calendar days after the student ceased attendance.

(C) If an institution obtains written confirmation of 

future attendance in accordance with paragraph (a)(2)(ii)(A) 

and, if applicable, (a)(2)(ii)(B) of this section, but the 

student does not return as scheduled--

(1) The student is considered to have withdrawn from the 

payment period or period of enrollment; and

(2) The student’s withdrawal date and the total number of 

calendar days in the payment period or period of enrollment 

would be the withdrawal date and total number of calendar days 
387

that would have applied if the student had not provided written 

confirmation of a future date of attendance in accordance with 

paragraph (a)(2)(ii)(A) of this section.

* * * * *

(3) For purposes of this section, “title IV grant or loan 

assistance” includes only assistance from the Direct Loan, 

Federal Pell Grant, Iraq and Afghanistan Service Grant, TEACH 

Grant, and FSEOG programs, not including the non-Federal share 

of FSEOG awards if an institution meets its FSEOG matching share 

by the individual recipient method or the aggregate method.

* * * * * 

(6) * * *

(ii)(A) If outstanding charges exist on the student’s 

account, the institution may credit the student’s account up to 

the amount of outstanding charges in accordance with §668.164(c) 

with all or a portion of any--

(1) Grant funds that make up the post-withdrawal 

disbursement; and

(2) Loan funds that make up the post-withdrawal 

disbursement only after obtaining confirmation from the student,

or parent in the case of a parent PLUS loan, that they still 

wish to have the loan funds disbursed in accordance with 

paragraph (a)(6)(iii) of this section.
388

* * * * *

(d)(1) * * *

(vii) Except for a clock hour or non-term credit hour 

program, or a subscription-based program, upon the student’s 

return from the leave of absence, the student is permitted to 

complete the coursework he or she began prior to the leave of 

absence; and

* * * * *

(i) Order of return of title IV funds--(1) Loans. Unearned 

funds returned by the institution or the student, as 

appropriate, in accordance with paragraph (g) or (h) of this 

section respectively, must be credited to outstanding balances 

on title IV loans made to the student or on behalf of the 

student for the payment period or period of enrollment for which 

a return of funds is required. Those funds must be credited to 

outstanding balances for the payment period or period of 

enrollment for which a return of funds is required in the 

following order:

(i) Unsubsidized Federal Direct Stafford loans.

(ii) Subsidized Federal Direct Stafford loans.

(iii) Federal Direct PLUS received on behalf of the 

student.
389

(2) Remaining funds. If unearned funds remain to be 

returned after repayment of all outstanding loan amounts, the 

remaining excess must be credited to any amount awarded for the 

payment period or period of enrollment for which a return of 

funds is required in the following order:

(i) Federal Pell Grants.

(ii) Iraq and Afghanistan Service Grants.

(iii) FSEOG Program aid.

(iv) TEACH Grants.

* * * * *

(l) * * *

(6) A program is “offered in modules” if the program uses a 

standard term or nonstandard-term academic calendar, is not a 

subscription-based program, and a course or courses in the 

program do not span the entire length of the payment period or 

period of enrollment.

(7)(i) “Academic attendance” and “attendance at an 

academically-related activity” must include academic engagement 

as defined under §600.2.

(ii) A determination of “academic attendance” or 

“attendance at an academically-related activity” must be made by 

the institution; a student’s certification of attendance that is 

not supported by institutional documentation is not acceptable.
390

* * * * *

(9) A student in a program offered in modules is scheduled 

to complete the days in a module if the student’s coursework in

that module was used to determine the amount of the student’s 

eligibility for title IV, HEA funds for the payment period or 

period of enrollment.

* * * * *

§668.28 [Amended]

20. Section 668.28 is amended by removing and reserving 

paragraph (b).

21. Section 668.34 is amended by:

a. Revising paragraph (a)(5).

b. Adding the phrase “or expressed in calendar time” after 

the phrase “credit hours” in paragraph (1) in the definition for 

“maximum timeframe” in paragraph (b).

The revision reads as follows:

§668.34 Satisfactory academic progress.

(a) * * *

(1) * * *

(5) The policy specifies--

(i) For all programs, the maximum timeframe as defined in 

paragraph (b) of this section; and
391

(ii) For a credit hour program using standard or 

nonstandard terms that is not a subscription-based program, the 

pace, measured at each evaluation, at which a student must 

progress through his or her educational program to ensure that 

the student will complete the program within the maximum 

timeframe, calculated by either dividing the cumulative number 

of hours the student has successfully completed by the 

cumulative number of hours the student has attempted or by 

determining the number of hours that the student should have 

completed by the evaluation point in order to complete the 

program within the maximum timeframe. In making this 

calculation, the institution is not required to include remedial 

courses.

* * * * *

(b) * * *

Maximum timeframe. Maximum timeframe means--

(1) For an undergraduate program measured in credit hours, a 

period that is no longer than 150 percent of the published 

length of the educational program, as measured in credit 

hours, or expressed in calendar time;

* * * * *

§668.111 [Amended]
392

22. Section 668.111 is amended by adding the phrase 

“issuance by the Department of and” after the phrase 

“establishes rules governing the” in the first sentence of 

paragraph (a).

23. Section 668.113 is amended by:

a. Replacing the word “shall” with the word “must” in both 

instances it is used in paragraph (c) introductory language.

b. Redesignating paragraphs (d)(1) and (2) as paragraphs

(d)(2) and (3).

c. Adding new paragraph (d)(1).

The addition reads as follows:

§668.113 Request for review.

* * * * *

(d)(1) If the final audit determination or final program 

review determination in paragraph (a) of this section results 

from the institution’s classification of a course or program as 

distance education, or the institution’s assignment of credit 

hours, the Secretary relies upon the requirements of the 

institution’s accrediting agency or State approval agency 

regarding qualifications for instruction and whether the amount 

of work associated with the institution’s credit hours is 

consistent with commonly accepted practice in postsecondary 
393

education, in applying the definitions of “distance education” 

and “credit hour” in §600.2.

* * * * *

24. Section 668.164 is amended by:

a. Adding the phrase “that is not a subscription-based 

program” after the phrase “equal in length” in paragraphs 

(i)(1)(i) and (i)(1)(ii).

b. Removing the word “or” at the end of paragraph 

(i)(1)(i).

c. Removing the period and adding in its place the 

punctuation and the word “; or” in paragraph (i)(1)(ii)(B).

d. Adding paragraph (i)(1)(iii).

The addition reads as follows:

§668.164 Disbursing funds.

* * * * *

(i)(1) * * *

(iii) If the student is enrolled in a subscription-based 

program, the later of--

(A) Ten days before the first day of classes of a payment 

period; or

(B) The date the student completed the cumulative number 

of credit hours associated with the student’s enrollment status 
394

in all prior terms that the student attended under the 

definition of a subscription-based program in §668.2.

* * * * *

25. Section 668.171 is amended by:

a. Removing the word “or” at the end of paragraph (i)(1).

b. Removing the period and adding in its place the 

punctuation and the word “; or”, in paragraph (i)(2).

c. Adding paragraph (i)(3).

The additions reads as follows:

§668.171 General.

* * * * *

(i) * * *

(3) Deny the institution’s application for certification 

or recertification to participate in the title IV, HEA programs.

* * * * *

26. Section 668.174 is amended by:

a. Revising paragraph (b)(1)(i) introductory text.

b. Adding the phrase “ownership or” after the word 

“substantial” and removing the word “or” at the end of paragraph 

(b)(1)(i)(A). 

c. Redesignating paragraph (b)(1)(i)(B) as paragraph 

(b)(1)(i)(C).

d. Adding a new paragraph (b)(1)(i)(B).
395

e. Adding the word “entity” and a comma after the phrase 

“That person,” in paragraph (b)(1)(ii).

f. Adding the phrase “or entity” after the word “person” 

in paragraphs (b)(2)(i) and (ii).

g. Adding the word “entity” and a comma afterward after 

the phrase “owes the liability by that” in paragraph 

(b)(2)(ii)(A).

h. Adding the word “entity” and a comma afterward after 

the phrase “owes the liability that the” in paragraph 

(b)(2)(ii)(B).

i. Adding the phrase “or entity” after the phrase “The

person” in paragraphs (b)(2)(iv)(A) and (B).

j. Adding the phrase “or entity” after both uses of the 

word “person” in paragraph (c)(3) introductory language.

The revisions and additions read as follows:

§668.174 Past performance.

* * * * *

(b) Past performance of persons or entities affiliated 

with an institution. (1)(i) Except as provided in paragraph 

(b)(2) of this section, an institution is not financially 

responsible if a person or entity who exercises substantial 

ownership or control over the institution, as described under 
396

§600.31, or any member or members of that person’s family alone 

or together--

(A) * * *

(B) Exercised substantial ownership or control over 

another institution that closed without a viable teach-out plan 

or agreement approved by the institution’s accrediting agency 

and faithfully executed by the institution; or

* * * * *