1

Issue Paper 4

Session 3: March 12-15, 2018

Issue: Sanctions for Programs Based on D/E Rates

Statutory cites: 20 U.S.C. § 1221e-3; 20 U.S.C. § 3474; 20 U.S.C. § 1231a; 20 U.S.C. 

§§ 1001(b)(1), 1002(b)(1)(A)(i), (c)(1)(A); 20 U.S.C. § 1088(b); 20 

U.S.C. § 1082; 20 U.S.C. § 1092; 20 U.S.C. §1094

Regulatory cites: 34 CFR §§ 668.16, 668.403, 668.409, and 668.410

Summary of

Changes: Summary of Changes Since Session 2: We propose to tie sanctions for 

poor performance under the D/E rates and loan repayment rate measures to standards of 

administrative capability. The potential sanctions on a program may be limitations on an 

institution’s ability to expand programs by more than 10 percent for programs that do not meet 

benchmarks, or to start new programs in similar occupations to the programs that do not meet 

benchmarks without prior approval of the Department or a program review conducted by the 

Department. We also propose some clarifications on when notifications must be made in nonEnglish languages. We expect that programs that are not taught in English or use non-English 

promotional materials provide notifications in the language of instruction or promotional 

materials.

Summary of Changes Provided Before Session 2: We propose to eliminate the loss of eligibility 

to participate in title IV, HEA programs as a possible sanction under the D/E rates measure, as 

well as restrictions on starting new programs that are similar to low-performing programs. We 

propose that notifications would be provided to students and prospective students for any year an 

educational program is determined by the Secretary to be low performing. We propose to add a 

requirement to notify students/prospective students that the institution has made or is making 

changes to the program to improve its outcomes. We propose to remove a requirement that the 

institution receive acknowledgment from the student that they have received the notification. 

For prospective students, we propose that they receive the notification on first contact with the 

institution, but not again prior to enrollment.

Notes: While the Department agrees it is important to hold poorly performing programs 

accountable, which we believe will be accomplished with the proposed language below, the 

Department would like additional and focused feedback from the negotiators on the following 

issues potentially raised by this accountability framework.

 The Department would also like additional feedback on an appropriate threshold for 

taking administrative action against a program. There are many factors that the current 

regulation does not take into account, such as demographic and economic variables that 

may impact a student’s success and future earnings more than the D/E rates can 
2

demonstrate. How can the Department better ensure when the Department does take 

action against a program, it is doing so for reasons that are within a program’s or 

institution’s ability to fix and not from mitigating factors that a program cannot control?

668.16 Standards of administrative capability.

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

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

program under each of the standards established in this section. The Secretary considers an 

institution to have that administrative capability if the institution—

****

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

completion if the institution or the Secretary has reason to believe that the high school diploma is 

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

(q) Offers undergraduate educational programs that meets benchmarks as measured under

both the D/E rates benchmark and the loan repayment rate benchmark under 34 CFR 668.403. If 

one or more of the institution’s undergraduate educational programs meets neither the D/E rates 

benchmarks nor the loan repayment rate benchmark, the Secretary may determine that the 

institution’s administrative capability is impaired and may limit an institution’s ability to expand 

programs that do not meet benchmarks by more than 10 percent, or to start new programs that 

share the same four-digit CIP code to the programs that do not meet benchmarks without prior 

approval of the Department or schedule a program review.

§668.409 Final determination of the D/E rates and loan repayment rate measure.
3

(a) Notice of determination. For each award year for which the Secretary calculates a 

D/E rates and a loan repayment rate measure for a GEan undergraduate educational program, the 

Secretary issues a notice of determination informing the institution of the following:

(1) The final D/E rates for the program as determined under §§§668.404, § and 668.405, 

and the final loan repayment rate as determined under, if applicable, §668.406;.

(2) The final determination by the Secretary of whether the program meets benchmarks 

or does not meet benchmarks is passing, failing, in the zone, or ineligible,” acceptable or lowperforming under the D/E rates measure and under the loan repayment rate measure, as described 

in §668.403., and the loan repayment rate, as described in §668.406, and the consequences of 

thoseat determinations;

(3) Whether the program could become ineligible based on its final D/E rates for the next 

award year for which D/E rates are calculated for the program;

(4) (3) Whether the institution is required to provide the student warninga notification

under §668.410(a); and).

(5) If the program's final D/E rates are failing or in the zone, instructions on how it may 

make an alternate earnings appeal pursuant to §668.406.

(b) Effective date of Secretary's final determination. The Secretary's determination as 

to the D/E rates and loan repayment rate measure is effective on the date that is specified in the 

notice of determination. The determination, including, as applicable, the determination with 

respect to an appeal under §668.406, constitutes the final decision of the Secretary with respect 
4

to the D/E rates and the loan repayment rate measure and the Secretary provides for no further 

appeal of that determination.

(Authority: 20 U.S.C. 1001, 1002, 1088, 1094)

§668.410 Consequences of Notification for low-performing programs that do not meet 

benchmarks.

(a) General. For any year in which an undergraduate educational program is determined 

by the Secretary to not meet benchmarks be low performing under the D/E rates and loan 

repayment measures., the institution must provide a notification to students and prospective 

students.

(a) Student warning—(1) Events requiring a warning to students and prospective 

students. The institution must provide a warning with respect to a GE program to students and to 

prospective students for any year for which the Secretary notifies an institution that the program 

could become ineligible based on its final D/E rates measure for the next award year.

(2) (b) Content of warning. notification. Unless otherwise specified by the Secretary in a 

notice published in the Federal Register, the warningnotification must—-- 

(i)1) The notification must (A) s State that: “The performance of this program is below

standards established by the U.S. Department of Education regarding the debt-to-income ratios 

and loan repayment performance of prior graduates. The Department based these standards on 

the amounts students borrow for enrollment in this program and their reported earnings. If in the 

future the program does not pass the standards, students who are then enrolled may not be able to 

use federal student grants or loans to pay for the program, and may have to find other ways, such 

as private loans, to pay for the program.”;the reported earnings that were reported to the Internal 
5

Revenue Service. These graduates are not making sufficient payments to actively pay down the 

balance of their student loans. Students should take this into account when selecting a program 

for enrollment or in determining how much they should borrow to complete the program based 

on likely earnings upon completion.”;

(2B) An institution, if appropriate, may include in the notification: “Please note, 

however, that the schoolinstitution believes that this program measurethe earnings couldmay be 

affected ifby a significant number of students who completed our program graduates and did not 

report all of their income, such as tip income, or who were self-employed and had business 

expenses that reduced the earnings being reported, or who selected to work -part- time or take 

time out of the workforce, including to care for dependents or other family members.”; and

(3) An institution, if appropriate, may also include in the notification: “The institution 

believes that the data used here may not reflect the earnings potential in your geographic location 

because the institution enrolls students nationally and wages can vary significantly from one part 

of the country to another.”

(ii)2) Refer students and prospective students to (and include a link for) College 

Navigator, its successor site, or another similar Federal resource, for information about other 

similar programs.; and

(iii)3) For warningsa notification provided to enrolled students—--

(A)i) Describe the academic and financial options available to students to continue their 

education in another program at the institution, including whether the students could transfer 

credits earned in the program to another program at the institution and which course credits 

would transfer, in the event that the program loses eligibility for title IV, HEA program funds;; 

and
6

(B)ii) Indicate whether or not the institution will—

(1) Continue has made, or is making, changes to provide instruction in the undergraduate

educational program that are designed to allow students to complete the program;improve its 

outcomes, and provide details about those changes.

(2) Refund the tuition, fees, and other required charges paid to the institution by, or on behalf of, 

students for enrollment in the program; and

(C) Explain whether the students could transfer credits earned in the program to another 

institution.

(3) Consumer testing. The Secretary will conduct consumer testing to determine how to make the 

student warning as meaningful as possible.

(c) Alternative languages. To the extent practicable, the institution must provide 

alternatives to the English-language student warning for those students and prospective students 

for whom English is not their first language. Programs that are not taught in English or that use 

non-English promotional materials shouldmust provide notifications in the language of the 

program instruction or the promotional materials.

(5) (d) Delivery to students. (i) (1) An institution must provide the warningnotification

required under this section in writing to each student enrolled in the program no later than 30 

days after the date of the Secretary's notice of determination under §668.409 by—--

(A)i) Hand-delivering the warningnotification as a separate document to the student 

individually or as part of a group presentation; or
7

(B)ii) Sending the warningnotification to the primary email address used by the 

institution for communicating with the student about the program.

(ii) (2) If the institution sends the warningnotification by email, the institution must—--

(A) (i) Ensure that the warningnotification is the only substantive content in the email;

(B) Receive electronic or other written acknowledgement from the student that the student 

has received the email;

(C) (ii) Send the warningnotification using a different address or method of delivery if the 

institution receives a response that the email could not be delivered; and

(D) (iii) Maintain records of its efforts to provide the warningsnotification required by this 

section. 

(6) e) Delivery to prospective students — (i) — (1) General. An institution must 

provide any warningnotification required under this section to each prospective student or to 

each third party acting on behalf of the prospective student at the first contact about the program 

between the institution and the student or the third party acting on behalf of the student by—--

(A)i) Hand-delivering the warningnotification as a separate document to the prospective 

student or third party individually, or as part of a group presentation;

(B)ii) Sending the warning notification to the primary email address used by the 

institution for communicating with the prospective student or third party about the program; or

(C)iii) Providing the prospective student or third party a copy of the disclosure template 

as required by §668.412(e) that includes the student warningnotification required by this section; 

or
8

(D)iv) Providing the warningnotification orally to the student or third party if the contact 

is by telephone.

(ii) Special warning requirements before enrolling a prospective student. (A) Before an 

institution enrolls, registers, or enters into a financial commitment with a prospective student 

with respect to the program, the institution must provide any warning required under this section 

to the prospective student in the manner prescribed in paragraph (a)(6)(i)(A) through (C) of this 

section.

(B) An institution may not enroll, register, or enter into a financial commitment with the 

prospective student with respect to the program earlier than—

(1) Three business days after the institution first provides the student warning to the 

prospective student; or

(2) If more than 30 days have passed from the date the institution first provided the student 

warning to the prospective student, three business days after the institution provides another 

warning as required by this paragraph.

(iii) Email delivery and acknowledgement. If the institution sendsprovides the 

warningnotification to the prospective student or the third party by email, including by providing 

the prospective student or third party an electronic copy of the disclosure template, the institution 

must—--

(A)i) Ensure that the warningnotification is the only substantive content in the email;
9

(B) Receive electronic or other written acknowledgement from the prospective student or 

third party that the student or third party has received the email;

(C) (ii) Send the warningnotification using a different address or method of delivery if the 

institution receives a response that the email could not be delivered; and

(D)iii) Maintain records of its efforts to provide the warning required under this 

section.notification. 

(7) f) Disclosure template. Within 30 days of receiving notice from the Secretary that 

the institution must provide a student warning for the programnotification under this section, the 

institution must update the undergraduate educational program’s disclosure template described in 

§668.412 to include the warningnotification in paragraph (a)(2b) of this section or such other 

warningnotification specified by the Secretary in a notice published in the Federal Register. 

(b) Restrictions—(1) Ineligible program. Except as provided in §668.26(d), an institution 

may not disburse title IV, HEA program funds to students enrolled in an ineligible program.

(2) Period of ineligibility. (i) An institution may not seek to reestablish the eligibility of a 

failing or zone program that it discontinued voluntarily, reestablish the eligibility of a program 

that is ineligible under the D/E rates measure, or establish the eligibility of a program that is 

substantially similar to the discontinued or ineligible program, until three years following the 

date specified in the notice of determination informing the institution of the program's 

ineligibility or the date the institution discontinued the failing or zone program.
10

(ii) An institution may not seek to reestablish the eligibility of a program that it 

discontinued voluntarily after receiving draft D/E rates that are failing or in the zone, or establish 

the eligibility of a program that is substantially similar to the discontinued program, until—

(A) Final D/E rates that are passing are issued for the program for that award year; or

(B) If the final D/E rates for the program for that award year are failing or in the zone, three 

years following the date the institution discontinued the program.

(iii) For the purposes of this section, an institution voluntarily discontinues a program on the 

date the institution provides written notice to the Secretary that it relinquishes the title IV, HEA 

program eligibility of that program.

(iv) For the purposes of this subpart, a program is substantially similar to another program if 

the two programs share the same four-digit CIP code. The Secretary presumes a program is not 

substantially similar to another program if the two programs have different four-digit CIP codes 

but the institution must provide an explanation of how the new program is not substantially 

similar to the ineligible or voluntarily discontinued program with its certification under 

§668.414.

(3) Restoring eligibility. An ineligible program, or a failing or zone program that an 

institution voluntarily discontinues, remains ineligible until the institution establishes the 

eligibility of that program under §668.414(c).

(Authority: 20 U.S.C. 1001, 1002, 1088, 1094, 1099c)