UNITED STATES DEPARTMENT OF EDUCATION

OFFICE OF POSTSECONDARY EDUCATION

Issue Paper 2: Standards of Administrative Capability

Session 1: January 18-21, 2022

Issue: Standards of Administrative Capability

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

Regulatory cites: 34 CFR 668.16

Summary of issues:

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

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

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

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

administrative capability regulations.

Proposal:

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

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

within institutions.

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

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

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

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

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

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

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

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

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

services.

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

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

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

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

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

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

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

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

for extended periods of time.

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

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

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

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

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

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

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

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

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

disbursements, disbursements being delayed until after the withdrawal date requirements

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

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

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

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

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

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

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

administrative capability.

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

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

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

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

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

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

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

Proposed Regulations Redline

§ 668.16 Standards of administrative capability.

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

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

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

that administrative capability if the institution -

* * *

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

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

whether its counseling includes information regarding -

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

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

and

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

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

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

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

(i) Provides adequate the entire range of any career services it has publicized through direct or 

indirect means to eligible students who received Title IV, HEA program assistance in enrollment 

periods that such services were publicized. In determining whether an institution provides adequate

the career services it has publicized, the Secretary may considers –

(1) All institutional advertising, the contents of printed and web-based promotions, recordings of 

recruitment and admissions telephone conversations, the institution’s website and bulletin, any 

representations about partnerships with employers, and any other evidence of career-related 

representations regarding placement of its graduates and the nature, duration, and quality of its 

career advising and career services to its students.

(1)(2) The share placement of students enrolled in programs designed to prepare students for gainful 

employment in arecognized occupation; and

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

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

hire graduates of the institution.

(j) Makes a reasonable effort to pProvides all students who graduate with the appropriate clinical or 

externship opportunities required for completion of the credential or licensure in a recognized

occupation within 45 days of the completion ofrequired coursework.

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

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

delays in disbursements, disbursements delayed until after the withdrawal date requirements in 34 CFR

668.22(b)and (c), disbursements delayed with the effect of ensuring an institution passes the 90/10 

ratio, or othermethods.

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

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

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

as defined in subpart R of this part.

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

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

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

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

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

postsecondary education, or any other law enforcement agency; or

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

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

CFR parts 180 and 3485) that is -

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

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

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

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

subpart 9.4; or

Formatted: Font: Bold

Formatted: Font: Bold

Formatted: Font: Bold

Formatted: Font: Bold

Formatted: Font: Bold

Formatted: Font: Bold

Formatted: Font: Bold, No underline, Underline color:

Auto, Font color: Auto

Commented [B1]: New language

Formatted: Font: Bold

Formatted: Font: Bold

Commented [B2]: h/t to Jamie Studley

Formatted: Font: Bold
Standards of Administrative Capability 4

(2)(3) A former director, officer, executive, or principal of an institution whose misconduct or closure 

resulted in losses to the federal government in excess of 5 percent of its student aid volume during 

the period in which such losses originated.

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

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

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

latest completed award year, except those students who, during that period -

Commented [B3]: new language
Standards of Administrative Capability 5

(1) Withdrew from, dropped out of, or were expelled from the institution;

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

and fees;

(qm)

(1) Has a cohort default rate -

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

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

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

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

and

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

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

(2)

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

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

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

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

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

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

section.

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

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

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

of this section -

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

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

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

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

and the appeal is either pending or successful; or

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

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

appeal is either pending or successful; or

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

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

successful.

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

paragraph (m)(2)(i) of this section by submitting an erroneous data appeal in writing to the
Standards of Administrative Capability 6

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

applicable;

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

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

certify it solely based on cohort default rates;

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

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

not provisionally certify it solely based on cohort default rates;

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

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

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

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

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

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

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

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

include--

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

high schooldiploma, including at least one of the following—

(A) TranscriptsEvidence of accreditation by a recognized authority;

(B) Written descriptions of course requirementsEvidence that the high school meets the 

requirements established by the appropriate State or local education agency that 

regulates and overseas secondary education; or

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

highschool attesting to the rigor and quality of coursework at the high

schoolEvidence that the school has a sufficient number of qualified faculty, 

that it offers a general high school curriculum and actual instruction 

commensurable with the curriculum it offers, and that it it conducts regular 

assessments as a condition of grade-level advancement and graduation. ; and 

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

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

established by that agencySuch additional efforts by the institution as may be necessary to

to establish the legitimacy of the high school in question if there are press reports, credible 

allegations, or circumstances that would reasonably cast doubt on the entity’s 

representation of itself as a high school;.

(ii)

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

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

the appropriate State or local education agency in the jurisdiction

which where the high school is located;

Commented [B4]: new language in this subsection

Formatted: Font: Bold

Formatted: Font: Bold

Formatted: Font: Bold

Formatted: Indent: First line: 0", Space Before: 0.35 pt

Formatted: Font: Bold

Formatted: Font: Bold

Formatted: No underline, Underline color: Auto, Font

color: Auto

Formatted: Font: Bold
Standards of Administrative Capability 7

(ii) Has been determined to be invalid by the Department, the appropriate State or local 

education agency in the jurisdiction where whichthe high school was located, or through a court

proceeding;

(ii)(iii) Was granted by an unaccredited private high school with a financial relationship with 

the institution or its affiliates; or

(iv) Was obtained from an entity that requires little or no instruction education or

coursework to obtain a high school diploma, including through a test that does not meet the 

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

(iii)(3) If there are any reasons to doubt the validity of a high school diploma from a legitimate 

high school, the institution must obtain an official transcript as a condition of enrollment.

Formatted: No underline, Underline color: Auto, Font

color: Auto, Not Expanded by / Condensed by

Formatted: Underline, Font color: Custom

Color(RGB(209,52,56))

Formatted: Indent: Left: 0.57", Right: 0", Space Before:

 7.95 pt, Line spacing: single, No bullets or

numbering, Tab stops: Not at 0.77"

Formatted: Font: Bold

Formatted: Font: Bold

Formatted: Font: Bold

Formatted: No underline, Underline color: Auto, Font

color: Auto

Formatted: Indent: Left: 0.57", Right: 0", Space Before:

 7.95 pt, Line spacing: single, No bullets or

numbering, Tab stops: Not at 0.81"

Formatted: Font: Bold

Formatted