[Federal Register Volume 74, Number 150 (Thursday, August 6, 2009)]
[Proposed Rules]
[Pages 39498-39533]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-18368]



[[Page 39497]]

-----------------------------------------------------------------------

Part IV





Department of Education





-----------------------------------------------------------------------







-----------------------------------------------------------------------



34 CFR Parts 600 and 602



 Institutional Eligibility Under the Higher Education Act of 1965, as 
Amended, and the Secretary's Recognition of Accrediting Agencies; 
Proposed Rule

Federal Register / Vol. 74, No. 150 / Thursday, August 6, 2009 / 
Proposed Rules

[[Page 39498]]


-----------------------------------------------------------------------

DEPARTMENT OF EDUCATION

34 CFR Parts 600 and 602

RIN 1840-AD00
[Docket ID ED-2009-OPE-0009]


Institutional Eligibility Under the Higher Education Act of 1965, 
as Amended, and the Secretary's Recognition of Accrediting Agencies

AGENCY: Office of Postsecondary Education, Department of Education.

ACTION: Notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: The Secretary proposes to amend the regulations in 34 CFR part 
600, governing institutional eligibility, and part 602, governing the 
Secretary's recognition of accrediting agencies. The Secretary is 
amending these regulations to implement changes to the Higher Education 
Act of 1965, as amended (HEA), resulting from enactment of the Higher 
Education Reconciliation Act of 2005 (HERA), Public Law 109-171, and 
the Higher Education Opportunity Act (HEOA), Public Law 110-315, and to 
clarify, improve, and update the current regulations.

DATES: We must receive your comments on or before September 8, 2009.

ADDRESSES: Submit your comments through the Federal eRulemaking Portal 
or via postal mail, commercial delivery, or hand delivery. We will not 
accept comments by fax or by e-mail. Please submit your comments only 
one time, in order to ensure that we do not receive duplicate copies. 
In addition, please include the Docket ID at the top of your comments.
    <bullet> Federal eRulemaking Portal: Go to www.regulations.gov to 
submit your comments electronically. Information on using 
Regulations.gov, including instructions for accessing agency documents, 
submitting comments, and viewing the docket, is available on the site 
under ``How to Use This Site.''
    <bullet> Postal Mail, Commercial Delivery, or Hand Delivery. If you 
mail or deliver your comments about these proposed regulations, address 
them to Ann Clough, U.S. Department of Education, 1990 K Street, NW., 
room 8043, Washington, DC 20006-8542.

    Privacy Note: The Department's policy for comments received from 
members of the public (including those comments submitted by mail, 
commercial delivery, or hand delivery) is to make these submissions 
available for public viewing in their entirety on the Federal 
eRulemaking Portal at www.regulations.gov. Therefore, commenters 
should be careful to include in their comments only information that 
they wish to make publicly available on the Internet.


FOR FURTHER INFORMATION CONTACT: Ann Clough. Telephone: (202) 502-7484 
or via the Internet at: <a href="/cdn-cgi/l/email-protection#45242b2b6b26292a30222d0520216b222a33"><span class="__cf_email__" data-cfemail="73121d1d5d101f1c06141b3316175d141c05">[email protected]</span></a>
    If you use a telecommunications device for the deaf (TDD), call the 
Federal Relay Service (FRS), toll free, at 1-800-877-8339.
    Individuals with disabilities may obtain this document in an 
accessible format (e.g., braille, large print, audiotape, or computer 
diskette) on request to the contact person listed under FOR FURTHER 
INFORMATION CONTACT.

SUPPLEMENTARY INFORMATION: 

Invitation To Comment

    We invite you to submit comments regarding these proposed 
regulations. To ensure that your comments have maximum effect in 
developing the final regulations, we urge you to identify clearly the 
specific section or sections of the proposed regulations that each of 
your comments addresses and to arrange your comments in the same order 
as the proposed regulations.
    We invite you to assist us in complying with the specific 
requirements of Executive Order 12866 and its overall requirement of 
reducing regulatory burden that might result from these proposed 
regulations. Please let us know of any further opportunities we should 
take to reduce potential costs or increase potential benefits while 
preserving the effective and efficient administration of the program.
    During and after the comment period, you may inspect all public 
comments about these proposed regulations by accessing Regulations.gov. 
You may also inspect the comments, in person, in room 8043, 1990 K 
Street, NW., Washington, DC, between the hours of 8:30 a.m. and 4 p.m., 
Eastern time, Monday through Friday of each week except Federal 
holidays.

Assistance to Individuals With Disabilities in Reviewing the Rulemaking 
Record

    On request, we will supply an appropriate aid, such as a reader or 
print magnifier, to an individual with a disability who needs 
assistance to review the comments or other documents in the public 
rulemaking record for these proposed regulations. If you want to 
schedule an appointment for this type of aid, please contact the person 
listed under FOR FURTHER INFORMATION CONTACT.

Negotiated Rulemaking

    Section 492 of the HEA requires the Secretary, before publishing 
any proposed regulations for programs authorized by title IV of the HEA 
(title IV, HEA programs), to obtain public involvement in the 
development of the proposed regulations. After obtaining advice and 
recommendations from individuals and representatives of groups involved 
in, or affected by, the Federal recognition of accrediting agencies, 
the Secretary must subject the proposed regulations for the title IV, 
HEA programs to a negotiated rulemaking process. All proposed 
regulations that the Department publishes must conform to final 
agreements resulting from that process unless the Secretary reopens the 
process or provides a written explanation to the participants in that 
process stating why the Secretary has decided to depart from the 
agreements. Further information on the negotiated rulemaking process 
may be found at: www.ed.gov/policy/highered/leg/hea08/index.html.
    On September 8, 2008, the Department published a notice in the 
Federal Register (73 FR 51990) announcing our intent to establish 
negotiated rulemaking committees to develop proposed regulations to (1) 
implement the changes made to the HEA by the HEOA, and (2) possibly 
address the provision added to section 207(c) of the HEA by the HEOA 
that requires the Secretary to submit to a negotiated rulemaking 
process any regulations the Secretary chooses to develop under amended 
section 207(b)(2) of the HEA, regarding the prohibition on a teacher 
preparation program from which the State has withdrawn approval or 
terminated financial support from accepting or enrolling any student 
who received title IV aid.
    On December 31, 2008, the Department published a notice in the 
Federal Register (73 FR 80314) announcing our intent to establish five 
negotiated rulemaking committees to prepare proposed regulations. The 
notice indicated that no requests from the public were received to 
negotiate the provision added to section 207(c) of the HEA. The five 
committees that were established were: (1) A committee on lender and 
general loan issues (Loans Team I); (2) a committee on school-based 
loan issues (Loans Team II); (3) a committee on accreditation issues; 
(4) a committee on discretionary grant programs; and (5) a committee on 
general and non-loan programmatic issues. The notice informed the 
public that, due to the large volume of changes made by the HEOA that 
needed to be implemented through negotiated rulemaking, not all 
provisions would be addressed during this round of committee meetings. 
The notice requested nominations of individuals

[[Page 39499]]

for membership on the committees who could represent the interests 
significantly affected by the proposed regulations and had demonstrated 
expertise or experience in the relevant subjects under negotiation. The 
Accreditation Committee (``the Committee'') met in three sessions to 
develop proposed regulations: session 1, March 4-6, 2009; session 2, 
April 21-23, 2009; and session 3, May 18-19, 2009. This notice of 
proposed rulemaking (NPRM) proposes regulations relating to 
accreditation that were discussed by the Committee.
    The Department developed a list of proposed regulatory changes from 
advice and recommendations submitted by individuals and organizations 
in testimony to the Department in a series of six public hearings held 
on:
    <bullet> September 19, 2008, at Texas Christian University in Fort 
Worth, Texas.
    <bullet> September 29, 2008, at the University of Rhode Island in 
Providence, Rhode Island.
    <bullet> October 2, 2008, at the Pepperdine University in Malibu, 
California.
    <bullet> October 6, 2008, at Johnson C. Smith University in 
Charlotte, North Carolina.
    <bullet> October 8, 2008, at the U.S. Department of Education in 
Washington, DC.
    <bullet> October 15, 2008, at Cuyahoga Community College in 
Warrensville Heights, Ohio.
    In addition, the Department accepted written comments on possible 
regulatory changes submitted directly to the Department by interested 
parties and organizations. All regional meetings and a summary of all 
comments received orally and in writing are posted as background 
material in the docket and may also be accessed at www.ed.gov/HEOA. 
Staff within the Department also identified issues for discussion and 
negotiation.
    The Accreditation Committee was made up of the following members:
    <bullet> Michale McComis, Accrediting Commission of Career Schools 
and Colleges of Technology, and Roger Williams (alternate), Accrediting 
Council for Continuing Education and Training.
    <bullet> Ralph Wolff, Accrediting Commission for Senior Colleges 
and Universities, Western Association of Schools and Colleges, and 
Belle Wheelan (alternate), Commission on Colleges, Southern Association 
of Colleges and Schools.
    <bullet> Sharon Tanner, The National League for Nursing Accrediting 
Commission, and Betty Horton (alternate), Association of Specialized 
and Professional Accreditors.
    <bullet> Marshall Hill, Nebraska Coordinating Commission for 
Postsecondary Education, and Kathryn Dodge (alternate), New Hampshire 
Postsecondary Education Commission.
    <bullet> Alan Mabe, University of North Carolina, and Mary Anne 
Hanner (alternate), Eastern Illinois University.
    <bullet> Sonia Jacobson, Georgetown University, and Susan Hattan 
(alternate), National Association of Independent Colleges and 
Universities.
    <bullet> Ronald Blumenthal, Kaplan Higher Education, and William 
Clohan (alternate), DeVry Inc.
    <bullet> Linda Michalowski, California Community Colleges, and Jim 
Hermes (alternate), American Association of Community Colleges.
    <bullet> Michael Offerman, Capella Education Company, and Muriel 
Oaks (alternate), Washington State University.
    <bullet> Phyllis Worthy Dawkins, Johnson C. Smith University, and 
Jos[eacute] Jaime Rivera (alternate), University of the Sacred Heart.
    <bullet> Kendal Nystedt, University of Arizona, and Jacob Littler 
(alternate), Mesabi Range College.
    <bullet> Terry Hartle, American Council on Education, and Becky 
Timmons (alternate), American Council on Education.
    <bullet> Kay Gilcher, U.S. Department of Education.
    The Committee's protocols provided that the Committee would operate 
by consensus, meaning there must be no dissent by any member in order 
for the Committee to be considered to have reached agreement. Under the 
protocols, if the Committee reaches final consensus on all issues, the 
Department will use the consensus-based language in the proposed 
regulations and members of the Committee and the organizations whom 
they represent will refrain from commenting negatively on the package, 
except where permitted by the agreed-upon protocols.
    During its meetings, the Committee reviewed and discussed drafts of 
proposed regulations. At the final meeting in May 2009, the Committee 
reached consensus on all of the proposed regulations in this NPRM. More 
information on the work of this committee may be found at: www.ed.gov/policy/highered/reg/hearulemaking/2009/accreditation.html.

Summary of Proposed Changes

    This NPRM reflects the Department's proposals to revise current 
regulations and adopt new regulations governing the recognition of 
accrediting agencies as a result of the following changes made to the 
HEA by the HERA and the HEOA:
    <bullet> The addition of a definition of ``distance education'' and 
separate references to distance education and correspondence education. 
(See section 103 of the HEA).
    <bullet> The addition of an eligible program under title IV of the 
HEA--an instructional program that uses direct assessment of a 
student's learning in lieu of credit or clock hours. (See section 
418(b)(4) of the HEA).
    <bullet> The addition of a definition of a ``teach-out plan'' and a 
new provision that agencies must require the institutions they accredit 
to submit a teach-out plan to the agency under certain circumstances. 
(See sections 487(f)(2) and 496(c)(3) of the HEA).
    <bullet> The addition of several new provisions pertaining to 
distance education and correspondence education. (See sections 
496(a)(4)(B) and 496(q) of the HEA).
    <bullet> Expanded due process requirements for agencies. (See 
section 496(a)(6) of the HEA).
    <bullet> The addition of a requirement that accrediting agencies 
confirm that institutions have transfer of credit policies. (See 
section 496(c)(9) of the HEA).
    <bullet> The addition of a requirement that accreditation team 
members be well-trained and knowledgeable about their responsibilities 
regarding distance education. (See section 496(c)(1) of the HEA).
    <bullet> The addition of requirements that agencies monitor 
enrollment growth at institutions. (See sections 496(c)(2) and 496(q) 
of the HEA).
    <bullet> Changes to agency disclosure requirements. (See section 
496(c)(7) of the HEA).
    The NPRM also reflects changes to existing regulations governing 
institutional eligibility by revising the definition of 
``correspondence course'' to be compatible with the new definition of 
``correspondence education'' in the accrediting agency recognition 
regulations.
    Further, the NPRM reflects changes to existing regulations 
governing the process for recognizing accrediting agencies, including 
the following:
    <bullet> The addition of a definition of ``recognition''.
    <bullet> Modifications to record-keeping and confidentiality 
requirements.
    <bullet> Combining current subparts C and D into one subpart in 
order to streamline procedures for agency review; establishing the 
senior Department official as the deciding official, with appeal to the 
Secretary;

[[Page 39500]]

and providing a list of the various laws regarding public requests for 
information with which the Secretary must comply.
    <bullet> Additions and modifications to existing requirements 
related to substantive change.

Significant Proposed Regulations

    We group major issues according to subject, with appropriate 
sections of the proposed regulations referenced in parentheses.

Definitions

Correspondence Course (Sec.  600.2)

    Statute: There is no definition of ``correspondence course'' in the 
HEA. Institutional eligibility requirements in section 102(a)(3) of the 
HEA generally provide that institutions offering more than 50 percent 
of their courses by correspondence, or enrolling 50 percent or more of 
their students in correspondence courses, are ineligible for title IV, 
HEA program assistance.
    Current Regulations: Current Sec.  600.2 contains a definition of 
``correspondence course''. The definition describes how a 
correspondence course is delivered to students who are not physically 
attending classes at the institution. It does not address the nature of 
the pedagogy.
    Proposed Regulations: The proposed regulations would amend the 
definition of ``correspondence course'' in Sec.  600.2 to draw a 
clearer contrast with distance education, defined in section 103 of the 
HEA. The proposed definition addresses pedagogy by noting that the 
interaction between the instructor and the student in a correspondence 
course is limited, is not regular and substantive, and is primarily 
initiated by the student. The proposed definition also notes that a 
correspondence course is typically designed so that a student proceeds 
through the course at the student's own pace.
    Reasons: Because of the different statutory treatment of distance 
education and correspondence courses, it is critical to differentiate 
between the two delivery modes. A definition of correspondence course 
that focuses exclusively on the exchange of materials between the 
institution and a student does not draw a useful distinction because 
both distance education and correspondence courses are delivered to 
students who are separated from the instructor. Given that the primary 
distinguishing factor between the two is the nature of the interaction 
between the instructor and the student, the definition must include 
information about this characteristic of the pedagogy, or instructional 
model.

Distance Education (Sec. Sec.  600.2; 602.3)

    Statute: Section 103 of the HEA defines ``distance education'' as 
education that uses one or more technologies to deliver education to 
students who are separated from the instructor and to support regular 
and substantive interaction between the students and the instructor, 
either synchronously or asynchronously. The definition contains a list 
of technologies.
    Current Regulations: Current regulations in Sec.  600.2 do not 
include a definition of ``distance education''. However, current 
regulations in Sec.  600.2 include a definition of ``telecommunications 
course'', which was previously used in the HEA and corresponding 
regulations. This definition of ``telecommunications course'' is 
essentially the same as the new definition of ``distance education'' in 
the HEA, as amended by the HEOA.
    Current regulations in Sec.  602.3 include a definition of 
``distance education'' that encompasses correspondence study.
    Proposed Regulations: The proposed regulations would add the 
statutory definition of ``distance education'' in both Sec. Sec.  600.2 
and 602.3. The definition would state that ``distance education'' means 
education that uses one or more technologies to deliver instruction to 
students who are separated from the instructor and to support regular 
and substantive interaction between the students and the instructor, 
either synchronously or asynchronously. The technologies may include 
the internet; one-way and two-way transmissions through open broadcast, 
closed circuit, cable, microwave, broadband lines, fiber optics, 
satellite, or wireless communications devices; audio conferencing; or 
video cassettes, DVDs, and CD-ROMs, if the cassettes, DVDs, or CD-ROMs 
are used in a course in conjunction with any of the other technologies 
listed.
    Reasons: The proposed regulations reflect changes made by the HEOA.

Compliance Report (Sec.  602.3)

    Statute: There is no definition of ``compliance report'' in the 
HEA. Under section 496(l) of the HEA, to continue to be recognized by 
the Secretary, an agency that has been determined by the Secretary to 
be out of compliance with any of the criteria for recognition, or to 
have failed to apply those criteria effectively, may be given no more 
than 12 months to come into compliance, except upon grant of an 
extension for good cause shown.
    Current Regulations: ``Compliance report'' is not used in the 
current regulations in part 602 governing the Secretary's recognition 
of accrediting agencies.
    Proposed Regulations: The proposed regulations would add a 
definition of ``compliance report'' in Sec.  602.3. A ``compliance 
report'' would be defined as a written report that the Department 
requires an agency to file to demonstrate that the agency has addressed 
deficiencies specified in a decision letter from the senior Department 
official or the Secretary.
    Reasons: The proposed regulations would combine former subparts C 
and D, which detail the Secretary's process for recognizing accrediting 
agencies, and the process whereby an accrediting agency's recognition 
could be limited, suspended, or terminated, into a single subpart C. 
The proposed regulations in subpart C would allow agencies to be out of 
compliance for no more than 12 months, after which time a decision on 
recognition would be made on the basis of a compliance report. The 
proposed definition of ``compliance report'' in Sec.  602.3 describes 
this key component of the recognition process.

Correspondence Education (Sec.  602.3)

    Statute: There is no definition of ``correspondence education'' in 
the HEA. Section 496(a)(4)(B) and (q) of the HEA includes references to 
correspondence education alongside references to distance education. 
Section 496(a)(4)(B) provides that if an agency has, or seeks to 
include, within its scope of recognition the evaluation of the quality 
of institutions or programs offering distance education or 
correspondence education, it must meet various requirements, which are 
specified in that section. It further provides that a recognized agency 
may add distance education or correspondence education to its scope of 
recognition by providing written notice to the Secretary. Section 
496(q) of the HEA provides that the Secretary must require a review at 
the next available National Advisory Committee on Institutional Quality 
and Integrity (``NACIQI'' or ``Advisory Committee'') meeting of a 
change in scope of an accrediting agency that expanded its scope of 
recognition to include distance education or correspondence education 
by written notice to the Secretary, if the enrollment of an institution 
accredited by that agency that offers distance education or 
correspondence education increases by 50 percent or more within any one 
institutional fiscal year.
    Current Regulations: Current regulations in Sec.  602.3 include a

[[Page 39501]]

definition of ``distance education'' that encompasses correspondence 
study as well as education delivered to students using one or more 
technologies specified in the definition.
    Proposed Regulations: The proposed regulations would add a 
definition of ``correspondence education'' in Sec.  602.3. The proposed 
definition would clearly distinguish between correspondence education 
and distance education, particularly with respect to the nature of the 
interaction between the instructor and the students. ``Correspondence 
education'' would be defined as education provided through one or more 
courses 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 
instructor. The proposed definition would specify that interaction 
between the instructor and the student is limited, is not regular and 
substantive, and is primarily initiated by the student and that 
correspondence courses are typically self-paced. The proposed 
definition would also specify that correspondence education is not 
distance education.
    Reasons: Section 496 of the HEA refers several times to ``distance 
education or correspondence education''. For example, the HEA requires 
that an agency's standards ``effectively address the quality of an 
institution's distance education or correspondence education'' and that 
an agency require ``an institution that offers distance education or 
correspondence education to have processes through which the 
institution establishes that the student who registers in a distance 
education or correspondence education course or program is the same 
student who participates in and completes the program and receives the 
academic credit.'' The separate references to these two types of 
education indicate that they are distinct from one another for HEA 
purposes.
    The Department originally proposed a definition of ``correspondence 
education'', adapted from the definition of ``correspondence course'' 
in current Sec.  600.2, that included ``home study'' and described how 
information is sent back and forth between the institution and the 
student. The non-Federal negotiators commented that the term ``home 
study'' is no longer in general use. In addition, they stated that the 
significant difference between distance education and correspondence 
education is that correspondence education generally is designed to be 
self-paced, with minimal interaction between the student and the 
instructor. The Department amended the proposed definition to remove 
the term ``home study'' and to include the concepts relating to 
pedagogy or instructional model.

Designated Federal Official (Sec.  602.3)

    Statute: The HEA does not include a definition of ``Designated 
Federal Official''. Section 10(e) and (f) of the Federal Advisory 
Committee Act (FACA), 5 U.S.C. Appdx. 1, refers to a ``designated 
officer or employee of the Federal Government'' who has 
responsibilities under FACA related to advisory committee meetings.
    Current Regulations: Current regulations do not include a 
definition of ``Designated Federal Official''.
    Proposed Regulations: The proposed regulations in Sec.  602.3 would 
define ``Designated Federal Official'' as the Federal officer 
designated under section 10(f) of FACA, 5 U.S.C. Appdx. 1.
    Reasons: Section 114(d)(2)(A) of the HEA authorizes the Chairperson 
of the NACIQI to establish the agenda for Advisory Committee meetings. 
Prior to passage of the HEOA, the Chairperson of NACIQI did not have 
this role. FACA requires that a designated officer or employee of the 
Federal Government approve the agenda for an advisory committee 
meeting. The proposed definition of ``Designated Federal Official'', 
which specifies the role of the Federal officer under FACA, is needed 
to clarify that, although the HEA now authorizes the Chairperson of the 
Advisory Committee to establish the agenda, it must still be approved 
by the Federal official designated under FACA.

Direct Assessment Program (Sec.  602.3)

    Statute: Section 481(b)(4) of the HEA stipulates that for purposes 
of title IV, HEA programs, ``eligible program'' includes an 
instructional program that uses direct assessment of student learning, 
or recognizes the direct assessment of student learning by others, in 
lieu of credit hours or clock hours as a measure of student learning. 
The assessment must be consistent with the institution's or program's 
accreditation. The HEA also provides that the Secretary will determine 
initially whether each program for which an institution proposes to use 
direct assessment is an eligible program.
    Current Regulations: There are no current regulations in part 602 
that reflect direct assessment programs. Regulations for Federal 
Student Aid Programs in 34 CFR 668.10 list the information an 
institution must provide to the Secretary in order to have a direct 
assessment program approved as an eligible program for title IV, HEA 
purposes. 34 CFR 668.10 includes a requirement that an accrediting 
agency review and approve the program for inclusion in the 
institution's grant of accreditation, and that the agency evaluate the 
institution's claim of the direct assessment program's equivalence in 
terms of credit or clock hours.
    Proposed Regulations: The proposed regulations would add a 
definition of ``direct assessment program'' in Sec.  602.3 that 
incorporates the language of the HEA and includes the accrediting 
agency role in approving a direct assessment program for title IV, HEA 
purposes, consistent with the requirements in 34 CFR 668.10. A ``direct 
assessment program'' would be defined as an instructional program that, 
in lieu of credit hours or clock hours as a measure of student 
learning, utilizes direct assessment of student learning, or recognizes 
the direct assessment of student learning by others, and meets the 
conditions of 34 CFR 668.10. For title IV, HEA purposes, the 
institution must obtain approval for the direct assessment program from 
the Secretary under 34 CFR 668.10(g) or (h), as applicable. As part of 
that approval, the accrediting agency must evaluate the programs and 
include them in the institution's grant of accreditation or 
preaccreditation; and review and approve the institution's claim of 
each direct assessment program's equivalence in terms of credit or 
clock hours.
    Reasons: The proposed definition of ``direct assessment program'' 
would restate definitional language from the HEA, refer to the section 
of the Student Assistance General Provisions regulations that relate to 
direct assessment programs, and indicate the accrediting agency role in 
approving a direct assessment program. Some of the non-Federal 
negotiators indicated their unfamiliarity with direct assessment 
programs and asked for clarification of the term and of the phrase ``or 
recognizes the direct assessment of student learning by others.'' In 
particular, they asked whether prior learning assessment, where 
students demonstrate that they possess college-level knowledge of a 
subject that has been acquired outside of a traditional classroom 
setting, such as at work, through volunteer service, or through other 
experiences, would be covered by the proposed definition. In response, 
the Department explained that, because prior learning assessment is a 
process that results in a student being granted a certain number of 
academic credits (or credit hours), prior learning does not meet the 
definition of a direct assessment program.

[[Page 39502]]

    A direct assessment program is one where the institution identifies 
a set of competencies that a student must demonstrate through 
successful performance on assessments in order to be awarded an 
academic credential. The skills and knowledge that a student has 
acquired outside of the institution may help the student to complete 
the assessments associated with one or more of the competencies more 
quickly than another student, and to accelerate completion of a full 
program. A student who is enrolled in a direct assessment program is 
not required to earn a certain number of credits, or to remain in the 
program for a specific length of time. The institution may develop the 
assessments, or it may rely upon assessments developed by others, to 
measure the student's learning.
    The Department notes that ``direct assessment program'' has no 
fixed meaning outside the context of the title IV, HEA Federal student 
aid programs. The process that an institution has to go through to gain 
approval from the Secretary for a direct assessment program to be 
eligible for title IV, HEA program purposes under 34 CFR 668.10, which 
includes reviews and actions on the part of accrediting agencies, is 
sufficient to satisfy program eligibility requirements of the HEA.

Recognition (Sec.  602.3)

    Statute: The HEA does not include a definition of ``recognition''.
    Current Regulations: There is no definition of ``recognition'' in 
the current regulations.
    Proposed Regulations: The proposed regulations would add a 
definition of ``recognition'' in Sec.  602.3. Under the proposed 
definition, ``recognition'' would mean an unappealed determination by 
the senior Department official, or a determination by the Secretary on 
appeal, that an accrediting agency complies with the criteria for 
recognition and that the agency is effective in its application of 
those criteria. As a result of that determination of compliance, an 
accrediting agency that has been given a grant of recognition by the 
Secretary is regarded as a reliable authority regarding the quality of 
education or training offered by the institutions or programs it 
accredits. The proposed definition would specify that the grant remains 
in effect for the term specified except upon a determination made in 
accordance with subpart C, as revised in these proposed regulations, 
that the agency no longer complies with the criteria for recognition or 
that it is no longer effective in its application of those criteria.
    Reasons: The proposed definition would clarify that, through 
proceedings conducted under subpart C of part 602, the Department may 
withdraw recognition before the period of recognition granted expires. 
The definition would also reflect that, although an agency that is 
recognized is deemed a reliable authority regarding the quality of 
education or training offered by the institutions or programs it 
accredits, recognition is based on a determination that the agency is 
in compliance with the statutory and regulatory criteria for 
recognition and is effective in its application of those criteria.

Scope of Recognition (Sec.  602.3)

    Statute: The HEA does not include a definition of ``scope of 
recognition''. Section 496(a)(4)(B) of the HEA requires an accrediting 
agency that has or wants to include distance education or 
correspondence education in its scope of recognition to demonstrate 
that its standards effectively address the quality of an institution's 
distance education or correspondence education.
    Current Regulations: Current regulations in Sec.  602.3 define 
``scope of recognition'' and identify five areas for which recognition 
may be granted.
    Proposed Regulations: The proposed regulations would amend the 
definition of ``scope of recognition'' in Sec.  602.3 by adding the 
phrase ``or correspondence education'' to paragraph (5), which 
addresses activities related to distance education.
    Reasons: The proposed regulations reflect changes made by the HEOA.

Teach-Out Agreement (Sec.  602.3)

    Statute: Section 496(c)(6) of the HEA requires that teach-out 
agreements between institutions be approved by the accrediting agency 
in accordance with its standards. The HEA does not provide a definition 
of ``teach-out agreement''.
    Current Regulations: Current regulations in Sec.  602.3 provide a 
definition of ``teach-out agreement'', which is a written agreement 
between institutions that provides for the equitable treatment of 
students. It applies in situations where an institution stops offering 
an educational program before all students enrolled in that program 
have completed their program of study. Under Sec.  602.24(c) of the 
current regulations, if an agency is an institutional accrediting 
agency, and its accreditation or preaccreditation enables institutions 
to obtain eligibility to participate in title IV, HEA programs, the 
agency must require an institution that enters into a teach-out 
agreement with another institution to submit that teach-out agreement 
to the agency for approval.
    Proposed Regulations: The proposed regulations would amend the 
definition of ``teach-out agreement'' by limiting its scope to 
situations where an institution, or a location of an institution that 
provides one hundred percent of at least one program offered, ceases to 
operate before all enrolled students have completed their program of 
study. In addition, the definition would require that the agreement 
provide a reasonable opportunity for affected students to complete 
their program of study. The proposed changes to current regulations in 
Sec.  602.24(c) are discussed under ``Teach-out Plans and Agreements.''
    Reasons: The Department initially proposed amending the definition 
of ``teach-out agreement'' to make it clear that the agreement should 
provide for a reasonable opportunity for students to complete their 
program of study if an institution or an institutional location that 
provides one hundred percent of at least one program, stops offering 
one or more of its programs before all students have completed their 
program of study. There was consensus with adding the language about 
providing a reasonable opportunity for students to complete their 
program of study.
    However, several of the non-Federal negotiators objected to the 
proposal that a teach-out agreement cover an institutional location 
that stops offering one or more of its programs. They noted that this 
is a common occurrence and that it is the responsibility of the 
institution to respond to the needs of its students when this happens. 
A teach-out agreement should only apply in situations where the 
institution or location providing one hundred percent of at least one 
program ceases to operate. The Department concurred.

Teach-Out Plan (Sec.  602.3)

    Statute: Section 496(c)(3) of the HEA requires an institution to 
submit for approval to the accrediting agency a teach-out plan under 
specified conditions. Section 487(f)(2) of the HEA defines a ``teach-
out plan'' as a written plan developed by an institution that provides 
for the equitable treatment of students if an institution ceases to 
operate before all students have completed their program of study, and 
may include, if required by the institution's accrediting agency, a 
teach-out agreement between institutions.
    Current Regulations: Current regulations do not include a 
definition of ``teach-out plan''.
    Proposed Regulations: The proposed regulations would add a 
definition of ``teach-out plan'' in Sec.  602.3. The

[[Page 39503]]

proposed regulations would define a ``teach-out plan'' as a written 
plan developed by an institution that provides for the equitable 
treatment of students if an institution, or an institutional location 
that provides one hundred percent of at least one program, ceases to 
operate before all students have completed their program of study, and 
may include, if required by the institution's accrediting agency, a 
teach-out agreement between institutions.
    Reasons: The Department proposes a definition that incorporates the 
statutory definition and clarifies that the requirement for an 
institution to have a teach-out plan applies when an institutional 
location that provides one hundred percent of at least one program 
ceases to operate before all students have completed their program of 
study. This is consistent with the treatment of locations under the 
closed school discharge provisions in 34 CFR 682.402(d)(1)(ii)(C) and 
685.214(a)(2)(ii). Under these provisions, a student's loan may be 
discharged if the student is not able to complete the program of study 
for which the loan was provided because the institution, or any 
location or branch the student attended, closed. The proposed language 
was acceptable to the non-Federal negotiators.

Other Major Issues

Accreditation Team Members (Sec.  602.15)

    Statute: Section 496(c)(1) of the HEA stipulates that in order to 
be recognized by the Secretary as a reliable authority as to the 
quality of education or training offered by an institution seeking to 
participate in title IV, HEA programs, the agency must perform, at 
regularly established intervals, on-site inspections and reviews of 
institutions of higher education (which may include unannounced site 
visits) with particular focus on educational quality and program 
effectiveness, and ensure that accreditation team members are well-
trained and knowledgeable with respect to their responsibilities. The 
HEOA added a reference to distance education to the HEA's requirement 
that team members be well-trained and knowledgeable with respect to 
their responsibilities.
    Current Regulations: Current regulations in Sec.  602.15(a)(2) 
require individuals serving on agency review teams and decision-making 
bodies and establishing agency policies to be competent and 
knowledgeable, qualified by education and experience in their own 
right, and trained by the agency on its standards, policies, and 
procedures.
    Proposed Regulations: Proposed Sec.  602.15(a)(2) would clarify 
that an individual's qualifications and the agency's training of that 
individual on his or her responsibilities regarding the agency's 
standards, policies, and procedures, to conduct its on-site 
evaluations, apply or establish its policies, and make its accrediting 
and preaccrediting decisions, should be appropriate for that 
individual's role. In addition, the proposed regulations would specify 
that if an agency's scope of recognition includes the evaluation of 
distance education and correspondence education, then the individuals 
must be trained in their responsibilities regarding distance education 
and correspondence education.
    Reasons: The Department noted that the statutory language included 
the new reference to ``responsibilities regarding distance education'' 
and that in several other provisions of section 496 of the HEA, 
distance education is paired with correspondence education. The 
Department's initial proposal included a reference to ``correspondence 
education'' in this section but did not limit in any way the 
requirement that individuals be trained in their responsibilities 
regarding distance education and correspondence education. Some non-
Federal negotiators asked that the requirement apply only to those 
agencies that have distance education and correspondence education in 
their scope of recognition. The Department agreed with this suggestion 
and also with the observation made during the negotiations that only 
those individuals who evaluate institutions that offer distance 
education or correspondence education would need to be qualified and 
trained accordingly.
    A non-Federal negotiator presented a revised draft for 
consideration by the negotiators, which addressed this issue and 
further clarified the requirement. This language was acceptable to all 
the negotiators and is reflected in the proposed regulations.

Record Keeping and Confidentiality (Sec. Sec.  602.15; 602.27)

    Statute: Section 496(a) of the HEA requires the Secretary to 
establish recognition criteria by which the Secretary will determine, 
for the purposes of the HEA or other Federal purposes, if an agency or 
association is a reliable authority as to the quality of education or 
training offered by the institutions or programs it accredits. These 
criteria require that the agency adhere to sound administrative 
requirements. Section 496(a)(4) provides that the Secretary's 
recognition criteria must require that recognized agencies consistently 
apply and enforce their standards for the duration of the accreditation 
period. Section 496(o) requires the Secretary to promulgate regulations 
establishing procedures for recognition. Section 496(n) requires the 
Secretary to conduct a comprehensive evaluation of accrediting agencies 
seeking recognition, including an independent evaluation of the 
information provided by the agency. Section 487(a)(15) of the HEA 
requires, as part of the institution's Program Participation Agreement 
in title IV, HEA programs, that the institution acknowledge the 
authority of the Secretary, the institution's accrediting agency, and 
others to share information pertaining to the institution's eligibility 
to participate in title IV, HEA programs, and regarding any fraud and 
abuse on the part of the institution.
    Current Regulations: Section 602.15(b)(1) of the current 
regulations requires an accrediting agency to maintain complete and 
accurate records of its last two full accreditation or preaccreditation 
reviews of each institution or program it accredits and provides a list 
of the various documents that must be included in those records. 
Section 602.27(e) of the current regulations requires agencies to 
disclose to the Department the name of any accredited institution or 
program that the agency has reason to believe is failing to meet title 
IV, HEA program responsibilities or is engaged in fraud or abuse, along 
with the agency's reasons for concern. Section 602.27(f) of the current 
regulations provides for the Secretary to ask the agency for 
information that may bear upon an institution's compliance with title 
IV, HEA program responsibilities and stipulates that the Secretary may 
ask for this information in order to assist the Department in resolving 
problems with the institution's participation in the title IV, HEA 
programs.
    Proposed Regulations: The proposed regulations in Sec.  
602.15(b)(1) would require the accrediting agency to retain its records 
of its last full accreditation or preaccreditation review of each 
institution or program it accredits. Proposed Sec.  602.15(b)(2) would 
require the agency to maintain records of all its decisions made 
throughout an institution's or program's affiliation with the agency 
regarding the accreditation and preaccreditation of the institution or 
program, which would include the accrediting agency's decisions about 
substantive changes that affect the title IV, HEA program eligibility.
    The Department proposes to restructure the regulations in Sec.  
602.27 to include a new paragraph (b) to address

[[Page 39504]]

the confidentiality of communications between the agency and the 
Department. Specifically, proposed Sec.  602.27(b) would address 
situations in which an agency has a policy relating to notification to 
an accredited institution or program of communications that occur 
between the agency and the Department pursuant to proposed Sec.  
602.27(a)(6) and (7) (i.e., current Sec.  602.27(e) and (f)). Under the 
proposed regulations, these policies would need to provide for a case-
by-case review by the agency of the contact with the Department and the 
circumstances surrounding it to assess whether that contact should 
remain confidential. The proposed regulation would further require that 
upon a specific request by the Department to keep the contact 
confidential, the agency must consider the contact confidential. 
Proposed Sec.  602.27(a)(6) would remove the language in current Sec.  
602.27(e) acknowledging that the Secretary may ask for information to 
assist in resolving problems with title IV, HEA program participation.
    Reasons: As reflected in section 496(m) of the HEA, the Department 
engages in recognition proceedings to ensure that accrediting agencies 
that serve as gatekeepers for Federal programs are reliable authorities 
as to the quality of postsecondary education provided by the 
institutions or programs they accredit. The Department has had some 
concern about accrediting agencies maintaining sufficient information 
relevant to an institution's accreditation, as is necessary for 
agencies to fulfill their gatekeeping roles. Additionally, there has 
been a significant increase over time in the number of substantive 
changes at institutions that affect an institution's title IV, HEA 
program eligibility.
    Agencies have not always been able to provide the Department with 
information related to substantive changes. While needing to ensure 
that required documentation is retained by agencies, the Department 
does not want to overly burden agencies by requiring them to retain 
multiple cycles of information, which can be voluminous. Therefore, the 
proposed regulations in Sec.  602.15(b)(1) would require that an agency 
retain all documentation of its last full accreditation or 
preaccreditation review of each institution or program. The proposed 
regulations in Sec.  602.15(b)(2) would require agencies to retain all 
decisions made throughout an institution's affiliation with the agency 
and significantly related correspondence for substantive changes as 
well as for decisions regarding the accreditation or preaccreditation 
of an institution or program. Appropriate documentation must be 
retained with all decisions.
    The non-Federal negotiators agreed with the proposed changes to 
Sec.  602.15(b)(1) to reduce the number of review cycles of information 
to be retained. None of the negotiators objected to the proposed 
requirement that agencies retain information about substantive changes. 
Several non-Federal negotiators expressed concern about the proposed 
changes related to confidentiality. Issues of confidentiality regarding 
contact between the Department and accrediting agencies have long been 
a concern to the Department.
    The Department respects the important role that collegiality and 
frank exchanges play in effective accrediting practice. However, the 
Department has found that agency policies providing for automatic 
disclosure to accredited institutions and programs of all departmental 
communications are at odds in some circumstances with both the 
gatekeeping role of recognized accreditors and the Department's 
fiduciary responsibilities to ensure that Federal programs are run 
efficiently and effectively and are protected against fraud and abuse. 
In trying to reach the proper balance, the Department has proposed 
changes to Sec.  602.27(b), including a requirement for agencies with 
policies regarding notification to an institution or program of contact 
with the Department to review each contact on a case-by-case basis to 
properly assess whether confidentiality should be maintained. In 
addition, if the Department specifically requests that a contact it has 
with an agency remain confidential, then the agency is required to 
consider that contact confidential. The Department believes these 
provisions strike the appropriate balance, and are necessary to ensure 
that the Federal fiscal interest and the interests of students and 
institutions are fully protected. The sentence in current Sec.  
602.27(e) referring to the Secretary's authority to request information 
from accrediting agencies to resolve problems with title IV, HEA 
program participation would be removed as extraneous.
    Non-Federal negotiators expressed concern about the Department's 
initial proposal in this area, which would have prohibited an agency 
from establishing a policy of providing notification to an institution 
regarding contact with the Department. The Department revised its 
proposed approach in response, to permit agencies to have policies 
within the limits described above, and the non-Federal negotiators did 
not object to the revised language.

Student Achievement (Sec.  602.16)

    Statute: Section 496(a)(5)(A) of the HEA provides that an 
accrediting agency's standard by which it assesses an institution's 
success with respect to student achievement in relation to the 
institution's mission may include different standards for different 
institutions or programs, as established by the institution including, 
as appropriate, consideration of State licensing examinations, course 
completion, and job placement rates. The phrase ``which may include 
different standards for different institutions or programs, as 
established by the institution'' was added by the HEOA.
    The Rule of Construction in section 496(p) of the HEA, added by the 
HEOA, stipulates that an accrediting agency is not restricted from 
setting, with the involvement of its members, and applying, 
accreditation standards for or to institutions or programs that seek 
review by the agency. In addition, the Rule of Construction stipulates 
that an institution is not restricted from developing and using 
institutional standards to show its success with respect to student 
achievement, which achievement may be considered as part of any 
accreditation review.
    Current Regulations: Current regulations in Sec.  602.16(a)(1)(i) 
replicate the statutory language in section 496(a)(5)(A) of the HEA, 
except that they do not include the phrase that was added by the HEOA.
    Proposed Regulations: The proposed regulations in Sec.  
602.16(a)(1)(i) would replicate the new statutory language in section 
496(a)(5)(A) of the HEA. The proposed regulations in Sec.  602.16(e) 
would replicate the Rule of Construction in section 496(p).
    Reasons: While section 496(g) of the HEA, as amended by the HEOA, 
prohibits the Secretary from establishing any criteria that specify, 
define, or prescribe the standards that accrediting agencies use to 
assess any institution's success with respect to student achievement, 
the Secretary is obligated to amend the current regulations that do not 
reflect the new language in the HEA regarding the kind of student 
achievement standards recognized agencies must have.
    The Department's initial proposed regulations did not include the 
Rule of Construction from the statute. Several non-Federal negotiators 
asked that the Rule of Construction be incorporated into the 
regulations. The Department included in the proposed regulations

[[Page 39505]]

the Rule of Construction from the statute. The non-Federal negotiators 
agreed with the Department that an accrediting agency would need to 
make a judgment about whether an institution developed and used 
reasonable standards to show its success with respect to student 
achievement.

Distance Education and Correspondence Education (Sec. Sec.  602.16; 
602.17; 602.18; 602.27)

    Statute: Section 496(a)(4)(B) of the HEA, as amended by the HEOA, 
specifies that if an agency has or seeks to include within its scope of 
recognition the evaluation of the quality of institutions or programs 
offering distance education or correspondence education, the agency 
must, in addition to meeting the other requirements, demonstrate that 
its standards effectively address the quality of an institution's 
distance education or correspondence education with respect to the 
standards specified in section 496(a)(5). However, the statute provides 
that the agency is not required to have separate standards, procedures, 
or policies for the evaluation of distance education or correspondence 
education in order to meet the requirements of section 496(a)(4)(B). 
Section 496(a)(4)(B) of the HEA, as amended by the HEOA, also provides 
that if an accrediting agency that accredits institutions is already 
recognized by the Secretary, it will not be required to obtain the 
approval of the Secretary to expand its scope of recognition to include 
distance education or correspondence education, provided that the 
agency notifies the Secretary in writing of the change in scope.
    Section 496(a)(4)(B) further specifies that an agency must require 
an institution that offers distance education or correspondence 
education to have processes through which the institution establishes 
that the student who registers in a distance education or 
correspondence education course or program is the same student who 
participates in and completes the program and receives the academic 
credit.
    Section 496(q) of the HEA specifies that the Secretary shall 
require a review, at the next available Advisory Committee meeting, of 
any recognized accrediting agency that has included distance education 
or correspondence education in its scope of recognition through written 
notice to the Secretary, if the enrollment of an institution the agency 
accredits that offers distance education or correspondence education 
has increased by 50 percent or more within any one institutional fiscal 
year.
    Current Regulations: Current regulations require an agency to 
submit to the Secretary any proposed change in its policies, 
procedures, or accreditation or preaccreditation standards that might 
alter its scope of recognition. Current regulations do not include any 
requirement for verifying the identity of students enrolled in distance 
education or correspondence education courses and programs.
    Proposed Regulations: The Department proposes to restructure Sec.  
602.16 and add a new paragraph (c). The new paragraph would provide 
that if an agency has or seeks to include within its scope of 
recognition the evaluation of the quality of institutions or programs 
that offer distance education or correspondence education, the agency's 
standards must effectively address the quality of its institutions' 
distance education or correspondence education in the specified areas. 
The agency would not be required to have separate standards, 
procedures, or policies for the evaluation of distance education or 
correspondence education.
    Section 602.17, which requires the application of accrediting 
standards in reaching an accrediting agency decision, would be amended 
by adding a new paragraph (g) to implement the new student verification 
requirements. The proposed regulations would provide that agencies 
require institutions that offer distance education or correspondence 
education to have processes in place through which the institution 
would establish that the student who registers in a distance education 
or correspondence education course or program is the same student who 
participates in and completes the course or program and receives the 
academic credit. The agency would meet this requirement if it requires 
institutions to verify the identity of a student who participates in 
class or coursework by using methods such as a secure login and pass 
code or proctored examinations, and new or other technologies and 
practices that are effective in verifying student identity. The agency 
would also be required to make clear, in writing, that institutions 
must use processes that protect student privacy and must notify 
students at the time of registration or enrollment of any projected 
additional student charges associated with the verification of student 
identity.
    Section 602.18 would be amended to reflect changes made by the HEOA 
to section 496(a)(4) regarding an institution's application and 
enforcement of standards that respect its stated mission, including 
religious mission.
    As noted in the discussion of record-keeping and confidentiality, 
Sec.  602.27 would be restructured. The proposed regulations would add 
a new paragraph (5) to redesignated paragraph (a) that would provide 
for notification to the Secretary that an agency is expanding its scope 
of recognition to include distance education or correspondence 
education as provided for in section 496(a)(4)(B)(i)(I) of the HEA, as 
amended by the HEOA. The proposed regulations would specify that the 
expansion of scope would be effective on the date the Department 
receives the notification.
    Reasons: The proposed changes to the regulations reflect changes to 
the HEA made by the HEOA. The proposed regulations would require an 
agency's standards to address distance education and correspondence 
education effectively if the agency evaluates institutions offering 
distance education or correspondence education.
    Some of the non-Federal negotiators asked whether an agency whose 
scope of recognition already includes distance education would be 
required to notify the Secretary if it wanted to expand its scope to 
include correspondence education, now that correspondence education is 
specified separately in the law. The Department's position is that, as 
the definition of distance education in the current regulations 
includes correspondence study, any previous grant of a scope of 
recognition that included distance education automatically encompassed 
correspondence education, and there is no need for further action on 
the part of agencies currently recognized for distance education by the 
Department. If the proposed regulations are finalized as drafted, the 
Department contemplates including on its Web site listing of recognized 
accrediting agencies a notation that agencies having a scope of 
recognition that included distance education as of the August 14, 2008, 
enactment of the HEOA are also recognized for correspondence education 
pending re-evaluation of each agency as it comes before the Department 
for renewal of recognition. Once the regulations become effective, 
agencies whose scope includes distance education that come up for 
renewal of their recognition would be expected to demonstrate how they 
evaluate both distance education and correspondence education in 
accordance with proposed Sec.  602.16(c). An agency that accredits 
institutions and does not already include distance education or 
correspondence education in its scope of recognition but that desires 
to do so would need to either submit a

[[Page 39506]]

notification of expansion of scope (for distance education, 
correspondence education, or both), or request an expansion of scope to 
include these in applying for renewal of recognition, and in either 
event, in subsequent reviews for renewal of recognition, demonstrate 
how it evaluates these modes of education in accordance with proposed 
Sec.  602.16(c). An agency that accredits only programs could not 
expand its scope by notification because section 496(q) of the HEA 
limits this option to institutional accreditors. Because of the 
limitation, programmatic accreditors would be required to apply for an 
expansion of scope to include distance education, correspondence 
education, or both. The Department proposes to include programmatic 
accreditors that accredit stand-alone institutions in the set of 
agencies that may expand their scope by notification.
    In addition to the changes the Department initially proposed for 
Sec.  602.27(a)(5) to reflect the substance of the new statutory 
provision for including distance education or correspondence education 
in an agency's scope of recognition upon written notice by a recognized 
agency to the Secretary, the non-Federal negotiators requested that the 
Department include the applicable statutory citation in the proposed 
regulation. The Department agreed. The Department also included a 
provision specifying the effective date of such a notification so it 
would be clear to both agencies and the Department when the change in 
scope was effective.
    Much of the discussion regarding distance education at the 
negotiated rulemaking sessions centered on the new requirement to 
verify student identity. Some of the non-Federal negotiators expressed 
concern about the cost of implementing the new provisions, saying they 
wanted to ensure that the requirements would be affordable. They were 
reluctant to include requirements that would be considered ``forward-
looking'' in that they would address new or emerging technologies for 
verifying student identity. The Department's initial position was that 
the concern about forward-looking requirements could be addressed by 
specifying that new identification technologies and practices would 
have to be adopted only as they become widely accepted, reasoning that 
a technology or practice would not become widely accepted and used 
unless it was affordable. Nevertheless, several non-Federal negotiators 
were concerned about including the ``widely accepted'' language and 
proposed revising the draft regulation to require instead use of ``new 
or other technologies and practices that are effective in verifying 
student identity,'' in addition to secure logins and pass codes and 
proctored examinations. As one of the non-Federal negotiators 
explained, peer reviewers conducting on-site reviews will assess an 
institution's use of technology and verification practices in relation 
to those technologies and practices that are widely used and are 
affordable, and if an institution is using ineffective methods of 
identification verification, they will note that finding. The non-
Federal negotiators also wanted to make it explicit that the methods 
used to verify the identity of students would be determined by the 
institution. As the draft language provided that the methods chosen 
must be effective in verifying student identification, the Department 
accepted the changes proposed by the non-Federal negotiators.
    The Department originally proposed specifying that institutions 
should not use or rely on technologies that interfere with student 
privacy. Several non-Federal negotiators recommended retaining this 
concept, but rephrasing the language to present the concept more 
positively. Non-Federal negotiators also suggested including language 
about processes or methods, which would be broader than referring to 
technologies. For these reasons, the proposed requirement related to 
student privacy was restated to require that institutions make clear in 
writing that institutions must use processes that protect student 
privacy. To address the concern of several non-Federal negotiators that 
students be made aware in advance of any additional charges associated 
with administering distance education or correspondence education 
examinations, the proposed regulations would require institutions to 
notify students at the time of registration or enrollment of any 
projected additional charges associated with verification of student 
identity.

Due Process (Sec. Sec.  602.18; 602.23; 602.25)

    Statute: The HEOA amended section 496(a)(6) of the HEA to include 
expanded due process requirements with which agencies must comply. The 
new provisions require that an agency establish and apply review 
procedures throughout the accrediting process, including evaluation and 
withdrawal proceedings, which comply with specified due process 
procedures. The agency must provide adequate written specification of 
requirements, including clear standards for an institution of higher 
education or program to be accredited, and clearly identify any 
deficiencies at the institution or program examined. In evaluation and 
withdrawal proceedings, the procedures must provide sufficient 
opportunity for a written response by an institution or program 
regarding any deficiencies identified by the agency, to be considered 
by the agency within a timeframe determined by the agency and prior to 
final action.
    Upon written request of an institution or program, the agency must 
provide an opportunity for the appeal of any adverse action, including 
denial, withdrawal, suspension, or termination of accreditation, taken 
against the institution or program, prior to such action becoming final 
at a hearing before an appeals panel. The appeals panel will not 
include current members of the agency's underlying decision-making body 
that made the adverse decision, and its members must be subject to a 
conflict of interest policy. The agency's due process procedures must 
provide for the right of an institution or program to representation 
and participation by counsel during an appeal of an adverse action.
    The due process procedures must also provide for a process, in 
accordance with written procedures developed by the agency, through 
which an institution or program, before a final adverse action based 
solely upon a failure to meet a standard or criterion pertaining to 
finances, may on one occasion seek review of significant financial 
information that was unavailable to the institution or program prior to 
the determination of the adverse action, and that bears materially on 
the financial deficiencies identified by the agency. If the agency 
determines that the new financial information submitted by the 
institution or program meets the criteria of significance and 
materiality, the agency must consider the new financial information 
prior to the adverse action becoming final. Any determination by the 
agency with respect to the new financial information is not separately 
appealable by the institution or program.
    Current Regulations: Current due process regulations in Sec.  
602.25 require that an agency have procedures that afford an 
institution or program a reasonable period of time to comply with an 
agency's requests for information and documents. An agency must notify 
an institution or program in writing of any adverse action or action to 
place the institution or program on probation or show cause and the 
basis for the action. Institutions or programs must be permitted to 
appeal an adverse action, and they have the right to be

[[Page 39507]]

represented by counsel during the appeal. The agency must notify the 
institution or program in writing of the result of its appeal and the 
basis for the decision.
    Proposed Regulations: The proposed regulations would amend the due 
process provisions in Sec.  602.25, and two other sections, Sec. Sec.  
602.18 and 602.23, that bear on due process requirements.
    Section 602.18, ``Ensuring consistency in decision-making,'' would 
be amended to include a new paragraph (a) that would require an agency 
to have written specification of the requirements for accreditation and 
preaccreditation that includes clear standards for an institution or 
program to be accredited. The proposed regulations in Sec.  602.18 
would also include a new paragraph (e) that would require an agency to 
provide an institution or program with a detailed written report that 
clearly identifies any deficiencies in the institution's or program's 
compliance with agency standards.
    Section 602.23, ``Operating procedures all agencies must have,'' 
would be amended by removing the phrase ``upon request'' from the 
requirement in paragraph (a) that an agency must maintain and make 
available to the public certain written materials. The current 
regulations would also be changed by adding at the end of current 
paragraph (c)(1), which concerns the review of complaints, a 
stipulation that an agency may not complete its review and make a 
decision regarding a complaint against an institution unless, in 
accordance with published procedures, it ensures that the institution 
or program has sufficient opportunity to provide a response to the 
complaint.
    The proposed regulations would restructure Sec.  602.25 of the 
current regulations to accommodate the appropriate placement of several 
new statutory requirements by redesignating several current paragraphs, 
removing current paragraph (c) and adding several new paragraphs. New 
paragraph (a) would require an agency to provide adequate written 
specification of its requirements, including clear standards, for an 
institution or program to be accredited or preaccredited. New paragraph 
(c) would require an agency to provide written specification of any 
deficiencies identified at the institution or program examined. New 
paragraph (d) would require an agency to provide sufficient opportunity 
for a written response by an institution or program regarding any 
deficiencies identified by the agency, to be considered by the agency 
within a timeframe determined by the agency and before any adverse 
action is taken.
    Some of the information in current paragraph (c) would be included 
in a new paragraph (f), including the requirement that an agency 
provide an opportunity, upon written request of an institution or 
program, for the institution or program to appeal any adverse action 
prior to the action becoming final. New paragraph (f) would also 
provide that the appeal must take place before an appeals panel that 
may not include current members of the agency's decision-making body 
that took the initial adverse action and is subject to a conflict of 
interest policy. The appeals panel would affirm, amend, or reverse the 
adverse action. At the option of the agency, either the appeals panel 
or the original decision-making body would be responsible for 
implementing the decision of the appeals panel.
    Under the proposed regulations in paragraph (f)(2), the agency 
would be required to recognize the right of the institution or program 
to employ counsel to represent the institution or program during its 
appeal, and this would include making any presentation that the agency 
permits the institution or program to make on its own during the 
appeal.
    The proposed regulations in paragraph (h)(1) would require an 
agency to provide a process, in accordance with written procedures, 
through which an institution or program may seek review of new 
financial information if all of the following conditions are met: (1) 
The financial information was not available to the institution or 
program until after the decision that is subject to appeal was made; 
(2) the financial information provided is significant and bears 
materially on the financial deficiencies identified by the agency (the 
criteria of significance and materiality would be determined by the 
agency); and (3) the only remaining deficiency cited by the agency in 
support of a final adverse action decision is the institution's or 
program's failure to meet an agency standard pertaining to finances. 
Under proposed paragraph (h)(2), a review of new financial information 
would be permitted only one time, and a determination by the agency 
with respect to the new information provided would not provide the 
basis of an appeal.
    Reasons: The Department proposes changes to all of the sections of 
the regulations that have a bearing on due process to implement the new 
HEA requirements contained in the HEOA. With respect to ensuring 
consistency in agency decisions, the Department initially proposed 
requiring that agencies provide institutions or programs with a written 
report that assessed the institution's or program's compliance with the 
agency's standards, including any deficiencies identified by the 
agency. Some of the non-Federal negotiators suggested changing the 
language to require that agencies provide institutions or programs with 
reports that clearly identify any deficiencies in the institution's or 
program's compliance with agency standards. The Department agreed to 
adopt the alternate language proposed by the non-Federal negotiators.
    The additional provisions on an agency's handling of complaints 
were proposed to make it clear that institutions or programs must be 
given sufficient opportunity to provide a response to a complaint 
before the agency takes any action.
    There was considerable discussion during the negotiated rulemaking 
sessions about the proposed new language in Sec.  602.25. Some of the 
non-Federal negotiators described their current appeals process, and 
indicated that when an appeal is received, it is reviewed by a separate 
appeals panel that then makes a recommendation to the board or 
commission, which in turn makes the decision on the appeal. It became 
clear during the discussion that even though the appeals panel might 
have members who did not serve on the original decision-making body, 
the appeals panel made a recommendation, rather than a decision, and 
the original decision-making body was under no obligation to accept the 
recommendation. This is problematic because, if an appeals panel 
conclusion is not the final decision, the effect of a successful appeal 
may be negated.
    The Department proposed requiring that the appeals panel be a 
decision-making body, noting that the statute calls for an opportunity 
to appeal an action ``prior to such action becoming final at a hearing 
before an appeals panel * * * .'' The Department also noted that the 
reference to the original decision being made by the agency's 
``underlying decisionmaking body'' made clear that the appeals panel 
was a decision-making body. Otherwise, there would be no need to refer 
to the original body as the ``underlying'' decision-making body. This 
proposal generated a significant amount of discussion and concern. 
Several non-Federal negotiators expressed concern that if the appeals 
panel were a separate decision-making body that made an accreditation 
decision, it would need to comply with all the requirements for an 
agency decision-making body, including

[[Page 39508]]

having as one of its members a member of the public, and would result 
in a decision being made by a smaller and less diverse body than the 
board or commission.
    Other non-Federal negotiators stated that, in some cases, an 
appeals panel might need additional information and need to solicit 
information from the original decision-making body. In other cases, an 
appeals panel might determine that the original decision did not take 
into account all the necessary information, and therefore should be 
reversed or amended. In some cases, a successful appeal would identify 
a procedural error made in earlier proceedings, but would not involve 
an inquiry into substantive issues for purposes of making the 
accreditation decision. In a circumstance where the appeals panel 
determined that some citations of deficiencies were supported and 
others were not, there would need to be a new decision on 
accreditation, but the appeals panel might not be in a position to make 
that decision. Upon consideration of these scenarios, the Department 
proposed having the appeals panel affirm, amend, or reverse the adverse 
action, but permitting either the appeals panel or the original 
decision-making body to implement the decision of the appeals panel. 
This would provide agencies with some flexibility. However, to make it 
clear that the original decision-making body could not disregard a 
decision made by the appeals panel, the proposed regulations include a 
provision that if the original decision-making body is responsible for 
implementing the decision, it must act in a manner consistent with the 
appeals panel's decision. The proposed regulations would not require 
agencies to provide institutions or programs with a continual 
opportunity to appeal.
    There was also discussion during negotiated rulemaking about 
whether the new financial information that may now be provided would 
have to be reviewed during an appeal, or whether it could be reviewed 
at an earlier time. The Department revised the proposed regulations to 
allow for flexibility in handling the new financial information. The 
new financial information could be reviewed during an appeal or at an 
earlier stage. In either case the agency could exercise discretion to 
designate in its procedures which group of people will conduct the 
review. Under the proposed provisions, it would be possible to stay an 
appeal while a separate body reviewed the financial information.
    Finally, there was extensive discussion about the circumstances 
under which an agency should be deemed to be taking a final adverse 
action based solely on failure to comply with financial criteria. Some 
of the non-Federal negotiators expressed their belief that to trigger 
the new provision that allows for new financial information to be 
considered an institution or program must have been cited initially 
only on deficiencies related to financial criteria. The Department's 
position, reflecting the language in the statute, is that an 
institution or program could have been cited initially for multiple 
issues, but that if all of the issues involving non-financial criteria 
were resolved, new financial information could be brought forward for 
review before the adverse action became final. This position is 
reflected in the proposed regulations.

Monitoring and Reevaluation of Accredited Institutions and Programs 
(Sec.  602.19)

    Statute: Section 496(c)(1) of the HEA requires accrediting agencies 
to perform on-site inspections and reviews of institutions of higher 
education at regularly established intervals. Section 496(c)(2) of the 
HEA includes a requirement that accrediting agencies monitor the growth 
of programs at institutions experiencing significant enrollment growth. 
Section 496(a)(4)(A) requires agencies to consistently apply and 
enforce standards that ensure that the courses or programs offered are 
of sufficient quality to achieve their stated objectives for the 
duration of the accreditation period.
    Section 496(a)(4)(B)(i)(II) of the HEA permits a recognized agency 
to expand its scope of recognition to include distance education or 
correspondence education by notifying the Secretary of that change in 
writing. This eliminates the need for a recognized agency to obtain 
separate approval from the Secretary for the change. However, section 
496(q) of the HEA requires review by the NACIQI of an agency that 
changed its scope through written notice to the Secretary if the 
enrollment of an institution that offers distance education or 
correspondence education that is accredited by that agency increases by 
50 percent or more within any one institutional fiscal year.
    Current Regulations: Current regulations in Sec.  602.19 require an 
accrediting agency to evaluate, at regularly established intervals, the 
institutions or programs it has accredited or preaccredited. The agency 
is required to monitor institutions or programs throughout their 
accreditation or preaccreditation period to ensure that they remain in 
compliance with agency standards. Current regulations require agencies 
to conduct special evaluations or site visits as necessary.
    Proposed Regulations: The proposed regulations would amend Sec.  
602.19(b) by requiring that an agency demonstrate it has, and 
effectively applies, a set of monitoring and evaluation approaches that 
enables the agency to identify problems with an institution's or 
program's compliance with agency standards, and that takes into account 
institutional program strengths and stability. Proposed Sec.  602.19(b) 
would require that these approaches to monitoring include periodic 
reports, and collection and analysis of key data and indicators 
identified by the agency, including, but not limited to, fiscal 
information and measures of student achievement. This section of the 
proposed regulations would include a cross-reference to Sec.  602.16(f) 
to clarify that an agency is not precluded from setting and applying 
its own accreditation standards; nor are institutions of higher 
education precluded from developing and using institutional standards 
to show their success with respect to student achievement.
    The proposed regulations would add new paragraphs (c) through (e) 
to this section. Section 602.19(c) of the proposed regulations would 
require an agency to monitor the overall growth of the institutions or 
programs it accredits and to collect information on headcount 
enrollment at least annually. Section 602.19(d) of the proposed 
regulations would add a requirement for institutional accrediting 
agencies to monitor the growth of programs at institutions experiencing 
significant enrollment growth and would provide that the determination 
of what is significant growth would be made by the agency. Finally, the 
proposed regulations, in Sec.  602.19(e), would require an agency that 
has notified the Secretary in writing of an expanded scope, as provided 
in section 496(a)(4)(B)(i)(II) of the HEA, to monitor the headcount 
enrollment of each institution it has accredited that offers distance 
education or correspondence education. If any of those institutions 
experiences an increase in headcount enrollment of 50 percent or more 
within one institutional fiscal year, the agency would be required to 
report that information to the Secretary within 30 days of acquiring 
that information.
    Reasons: Many of the proposed regulations would implement changes 
required by the HEOA. These changes include the requirements that 
agencies monitor growth of programs at institutions experiencing 
significant

[[Page 39509]]

enrollment growth and monitor headcount enrollment at institutions the 
agency accredits that offer distance or correspondence education. Other 
changes to the current regulations are being proposed, as a result of 
discussions both during the negotiated rulemaking process and within 
the Department, in an effort to ensure that the regulations properly 
reflect statutory requirements and provide for greater consistency 
while accommodating differences across institutions. The Department 
believes the current regulatory requirement regarding an agency's 
monitoring to ensure compliance with all of an agency's standards is 
too broad in scope and too limiting in method. Therefore the proposed 
regulations would stipulate that an agency monitor an institution to 
identify specific problems with the institution's or program's 
compliance with accrediting agency standards and provide more 
flexibility for agencies as to how they manage the review.
    The Department's initial proposal for this section of the 
regulations would have required an agency to collect and analyze key 
data and performance indicators, and included an illustrative list of 
the data an agency might collect and analyze when monitoring 
institutions or programs. Some non-Federal negotiators expressed 
concerns about the illustrative list in the proposed regulations. Some 
stated their belief that certain items on that list encroached on areas 
where the Secretary is prohibited from regulating, while others wanted 
the list eliminated altogether because it could be interpreted as a 
requirement that agencies collect all the information included on the 
list and, thus, could increase institutional burdens. It was also noted 
that programmatic accrediting agencies do not collect specific 
financial data, such as audits. A few non-Federal negotiators objected 
to the use of the term ``performance indicators'' because they stated 
that this could lead to a requirement that an agency establish ``bright 
lines'' for assessing these indicators. Still other negotiators 
indicated that they had no objections to including an illustrative list 
in the regulations.
    The Department clarified that the goal was not to be prescriptive, 
and that the list was intended to be illustrative, as shown by the use 
of the words ``these may include but are not limited to.'' The 
Department also reminded the non-Federal negotiators that much of the 
proposed language was already in the standards section of the statute 
and current regulations. In addition, the Department noted that this 
section of the regulations concerns monitoring--the agency's 
application and enforcement of its standards, policies, and 
procedures--rather than the substance of agency accrediting standards, 
as to which the Secretary is prohibited from regulating.
    Based on the discussions with negotiators and among Department 
staff, as well as a shared goal of all participants to ensure proper 
monitoring of institutions and programs, the proposed language in Sec.  
602.19(b) was modified. The modifications reflect a proposal made by 
the non-Federal negotiators to combine some of the paragraphs from the 
initial proposal and to eliminate redundancy.
    The proposed language would provide accrediting agencies with 
flexibility regarding their monitoring of institutions and programs and 
at the same time ensure they will review and analyze key data and 
indicators, including fiscal information and measures of student 
achievement. The Department expects agencies to examine and take 
appropriate action based on the fiscal, student achievement, and other 
data collected through the monitoring process. The Department noted 
that this is an area of great importance and that the Department's 
responsibility to ensure effective and efficient monitoring takes place 
is fundamental. The Department made clear that it accepted the 
proposals by the non-Federal negotiators because the proposals 
adequately reflect these principles.

Substantive Change (Sec.  602.22)

    Statute: Section 496(a) of the HEA requires the Secretary to 
establish recognition criteria to determine if an accrediting agency is 
a reliable authority as to the quality of education or training offered 
by an institution or program it accredits.
    Section 496(a)(1) of the HEA requires an agency to demonstrate the 
ability and experience to operate as an accrediting agency. Section 
496(a)(4) of the HEA requires an agency to consistently apply and 
enforce standards that ensure courses or programs are of sufficient 
quality to achieve the stated objectives for which they are offered 
throughout the duration of the accreditation period. Section 496(a)(5) 
of the HEA requires the agency to have standards that address the 
quality of an institution or program in a number of areas. The first 
area is an institution's or program's success with respect to student 
achievement in relation to an institution's mission, including, as 
appropriate, consideration of course completion, consideration of State 
licensing examinations, and job placement rates. In addition, standards 
must address an institution's or program's curricula; faculty; 
facilities, equipment, and supplies; fiscal and administrative 
capacity; recruiting and admissions practices, academic calendars, 
catalogs, publications, grading, and advertising; measures of program 
length and the objectives of the degrees or credentials offered; record 
of student complaints; and record of compliance with an institution's 
program responsibilities under title IV of the HEA. Finally, section 
496(c) of the HEA requires the agency to follow various operating 
procedures, including, but not limited to, conducting regular on-site 
visits to institutions it accredits, monitoring the growth of programs 
at institutions with significant enrollment growth, reviewing an 
institution's plans for the addition of new branch campuses, and 
conducting visits to new branch campuses and to institutions following 
a change of ownership.
    Current Regulations: Section 602.22 of the current regulations 
requires an agency to maintain an adequate substantive change policy 
that ensures any substantive change to the educational mission or 
program or programs of an institution after it has been accredited does 
not adversely affect the capacity of the institution to continue to 
meet the agency's standards. Section 602.22(a)(2) lists seven types of 
changes that, at the least, must be included in the agency's definition 
of substantive change. Section 602.22(b) of the current regulations 
allows the agency to establish procedures to grant prior approval of a 
substantive change. Section 602.22(c) provides that if the agency's 
accreditation of an institution enables the institution to participate 
in title IV, HEA programs, the agency's procedures for approval of an 
additional location must include certain processes.
    Proposed Regulations: The proposed regulations would amend the list 
of events that would constitute a substantive change. Proposed Sec.  
602.22(a)(2)(iii) would include the addition of courses or programs 
that represent a significant departure ``from the existing offerings of 
educational programs,'' in place of the current language regarding a 
significant departure ``in content.'' Proposed Sec.  602.22(a)(2)(iv) 
would be amended to clarify that the addition of programs of study at a 
degree or credential level different from, rather than only those above 
the level already included in the institution's accreditation, would be 
considered a substantive change. (The meaning of ``program of study'' 
is elaborated on further within this

[[Page 39510]]

preamble in the discussion of Sec.  602.24, teach-out plans and 
agreements.)
    The proposed regulations would add to the list of substantive 
changes, a provision to implement the requirement in 34 CFR 
668.5(c)(3)(ii)(C) that an eligible institution's accrediting agency 
determine that an institution's arrangement to contract out more than 
25 percent of an educational program to entities that are not eligible 
on their own to participate in title IV, HEA programs meets the 
agency's standards for the contracting out of educational services.
    The proposed regulations would further modify Sec.  602.22(a)(2) by 
adding a new paragraph (viii) to provide greater flexibility to 
accrediting agencies in granting prior approval of additional locations 
where at least 50 percent of an educational program is offered. The new 
flexibility would apply to institutions that, according to agency 
criteria, have demonstrated sufficient capacity to add locations, and 
no longer need prior agency approval for each addition. These criteria 
would require an institution to provide satisfactory evidence that it 
has: A system to ensure quality across a distributed enterprise that 
includes clearly identified academic control; regular evaluation of the 
locations; adequate faculty, facilities, resources and academic and 
student support systems; financial stability; and long-range planning 
for expansion. To qualify for these preapprovals, an institution must 
also have successfully completed at least one cycle of accreditation of 
maximum length offered by the agency and one renewal, or been 
accredited for at least ten years, and already have at least three 
additional locations that the agency has approved. The agency must 
require timely reporting by the institution to the agency of each 
additional location established under the agency's approval and the 
agency's preapproval may not extend longer than five years. The 
proposed regulations would not allow the agency to preapprove an 
institution's addition of locations under this process after the 
institution undergoes a change in ownership until and unless the 
institution demonstrates it meets the conditions outlined in this 
section of the proposed regulations under its new ownership. Further, 
agencies would be required to have an effective mechanism for visiting 
a representative sample of additional locations approved under 
paragraph (a)(2)(viii) at reasonable intervals.
    The proposed regulations in new paragraphs Sec.  602.22(a)(2)(ix) 
and (x) would also require that agencies include as substantive changes 
the acquisition of any other institution or program or location of 
another institution, and the addition of a permanent location at the 
site of a teach-out the institution is conducting.
    The proposed changes to Sec.  602.22(a) also would include the 
addition of a new paragraph (3) requiring an agency to define, as part 
of its substantive change policy, when changes made at or proposed by 
an institution are considered sufficiently extensive to require the 
agency to conduct a new comprehensive review of that institution.
    Proposed changes to Sec.  602.22(b) would retain the agency's 
ability to determine its own procedures for granting prior approval of 
a substantive change. However, those procedures must specify an 
effective date on which the change would be included in the program's 
or institution's accreditation. The proposed regulations would require 
that the effective date not be retroactive, with a limited exception 
for changes of ownership.
    Finally, a proposed addition to Sec.  602.22(c) would clarify the 
requirement that an agency have an effective mechanism for conducting 
visits to additional locations of institutions that operate more than 
three additional locations. The proposed regulations specify that the 
agency must visit a representative sample of those locations at 
reasonable intervals.
    Reasons: In recognition of the pace at which change is occurring 
within the higher education community, including the addition of new 
locations of institutions, the development of new curricula, and 
ownership changes, the Department believed that it was important to 
bring these issues to the negotiators for discussion. The Department 
sought to ensure continued effective compliance with the statute in 
developing regulations that recognize the changing nature of higher 
education, while maintaining fiduciary responsibility.
    Many institutions now operate as distributed enterprises. That 
business model is one that encompasses the establishment of multiple 
locations operated within the context of a single administrative 
system. The current regulations pertaining to substantive change do not 
accommodate this type of innovative model, because an accrediting 
agency must focus on individual additional locations of an institution. 
The current regulations do not allow an agency to determine if an 
institution has a system to ensure quality across a distributed 
enterprise and to consider the unit of analysis to be the system as a 
whole rather than each individual location.
    The Department's approach to address new types of institutional 
organizational structures was to use the substantive change provisions 
to modify and clarify the additional location approval requirements 
that apply to traditional institutions, and those that apply to 
institutions that operate on a model where the establishment of 
locations is a standard practice that is carried out in a manner that 
ensures quality across all of the individual locations. Initial 
language proposed by the Department to the negotiators did not, in the 
opinion of some non-Federal negotiators, provide the appropriate 
clarity, and some non-Federal negotiators questioned the proposed use 
of the phrase ``addition of multiple locations'' rather than simply 
using ``the addition of locations'' noting that a change in the 
phrasing may lead to some confusion. Some non-Federal negotiators 
stated that the Department's proposed restructuring of the regulations 
was difficult to follow and that the two headings the Department 
initially proposed to add in order to draw a distinction between types 
of institutions were misleading. The Department agreed to review the 
language and redrafted the proposed regulations by further 
restructuring the language, and removing the headings. However, the 
Department retained use of the phrase ``distributed enterprise'' 
because it describes the concept intended without unduly limiting the 
business models covered.
    Some non-Federal negotiators raised a concern about the language 
initially proposed in Sec.  602.22(a)(2)(iii) regarding a change in 
academic content, while appreciating the intent of the language, and 
asked the Department to amend the language to provide clarity. The 
revised language discussed with and agreed to by the negotiators would 
provide for a substantive change to include the addition of courses or 
programs that represent a significant departure from the existing 
offerings of educational programs, or methods of delivery, from those 
that were offered when the agency last evaluated the institution. There 
was further discussion about what constituted a ``significant 
departure'' from existing offerings. Several non-Federal negotiators 
raised examples such as changing individual courses within a program, 
altering the syllabus from one year to the next, or changing text books 
for a course or program, and asked the Department if those would 
constitute a significant departure in existing offerings of educational 
programs, or method of delivery. The

[[Page 39511]]

Department clarified that a significant departure from the existing 
offerings of educational programs, while determined by the agency, 
would not result from an individual course or text book change, or from 
the change in some faculty members. However, an agency might consider 
it significant if an entire department of faculty members left an 
institution or, as one non-Federal negotiator pointed out as an 
example, if an institution or program began delivering courses through 
distance education that were not previously available at the 
institution.

Teach-out Plans and Agreements (Sec.  602.24)

    Statute: Section 496(c)(3) of the HEA, added by the HEOA, specifies 
that, among other requirements, to be recognized by the Secretary as a 
reliable authority as to the quality of education or training offered 
by an institution seeking to participate in title IV, HEA programs, an 
accrediting agency must require an institution it accredits to submit a 
teach-out plan for approval by the accrediting agency if any of three 
events occurs: (1) The Department notifies the accrediting agency of an 
action against the institution pursuant to section 487(f) of the HEA; 
(2) the accrediting agency acts to withdraw, terminate or suspend the 
accreditation of an institution; or (3) the institution notifies the 
accrediting agency that the institution intends to cease operations.
    Section 487(f) of the HEA defines ``teach-out plan'' and adds an 
institutional requirement that in the event the Secretary initiates a 
limitation, suspension, or termination of the participation of an 
institution of higher education in any program under title IV under the 
authority of section 487(c)(1)(F) of the HEA, or initiates an emergency 
action under the authority of section 487(c)(1)(G) of the HEA, and its 
prescribed regulations, the institution is required to prepare a teach-
out plan for submission to the institution's accrediting agency in 
compliance with section 496(c) of the HEA, the Secretary's regulations 
on teach-out plans, and the standards of the institution's accrediting 
agency.
    Current Regulations: The current regulations specify that if an 
agency's accreditation enables an institution to obtain eligibility to 
participate in the title IV, HEA programs, the agency must require the 
institution to submit any teach-out agreement the institution enters 
into with another institution for agency approval. ``Teach-out 
agreement'' is defined in the current regulations in Sec.  602.3.
    Proposed Regulations: The proposed regulations would restructure 
Sec.  602.24(c) of the current regulations to include teach-out plans 
as well as teach-out agreements. The proposed regulations would expand 
accrediting agency responsibilities by providing that agencies require 
the institutions they accredit or preaccredit to submit a teach-out 
plan to the agency for approval upon the occurrence of any of four 
events: (1) The Secretary notifies the agency that the Secretary has 
initiated an emergency action against an institution in accordance with 
section 487(c)(1)(G) of the HEA, or has initiated a limitation, 
suspension, or termination of the participation of an institution of 
higher education in any title IV, HEA program, in accordance with 
section 487(c)(1)(F) of the HEA, and that a teach-out plan is required; 
(2) the agency acts to withdraw, terminate or suspend the accreditation 
or preaccreditation of the institution; (3) the institution notifies 
the agency that it intends to cease operations entirely or close a 
location that provides one hundred percent of at least one program; or 
(4) a State licensing or authorizing agency notifies the agency that an 
institution's license or legal authorization to provide an educational 
program has been or will be revoked.
    The proposed regulations would require an agency to evaluate each 
teach-out plan to ensure it provides for the equitable treatment of 
students under criteria established by the agency, specifies additional 
charges, if any, and provides for notification to the students of any 
additional charges. An agency that approves a teach-out plan that 
includes a program that is accredited by another recognized accrediting 
agency would be required to notify that accrediting agency of its 
approval. The proposed regulations would also specify that an agency 
may require an institution it accredits or preaccredits to enter into a 
teach-out agreement with another institution of higher education as 
part of its teach-out plan.
    The proposed regulations would also amend the current requirement 
with respect to the submission of any teach-out agreement by an 
institution to an agency to clarify that the agreement must be 
submitted for agency approval whether it was entered into at the 
institution's own volition or at the request of the agency.
    Current regulations would also be amended to add additional 
specificity to the requirement that the agency approve a teach-out 
agreement only if it provides for the equitable treatment of students. 
Under the proposed regulations, the agency's obligation would pertain 
to circumstances in which either an entire institution, or one of its 
locations at which it provides one hundred percent of at least one 
program offered, ceased operations, and would include requiring that 
the teach-out institution have the necessary experience, resources, and 
support services to remain stable, carry out its mission, and meet all 
obligations to existing students. The proposed regulations would also 
require that a teach-out institution provide students with information 
about additional charges, if any.
    The proposed regulations would also amend paragraph (d) in the 
current regulations in Sec.  602.24 to specify that if an institution 
the agency accredits or preaccredits closes without a teach-out plan or 
agreement, the agency must work with the Department and appropriate 
State agency, to the extent feasible, to assist students in finding 
reasonable opportunities to complete their education without additional 
charges.
    Reasons: The Department proposes to specify that a teach-out plan 
would be required in the three circumstances specified in the statute: 
The Department initiates an emergency action or an action to limit, 
suspend or terminate an institution's participation in the title IV, 
HEA programs; the accrediting agency acts to withdraw, terminate or 
suspend the institution; or the institution indicates it intends to 
cease operations. The Department initially proposed referencing the 
subpart of the Student Assistance General Provisions regulations that 
contain the regulations governing limitation, suspension, termination, 
and emergency actions. Some of the non-Federal negotiators stated that 
requiring a teach-out plan if the Secretary initiates an emergency 
action, or an action to limit, suspend, or terminate an institution in 
accordance with subpart G of 34 CFR part 668, might result in confusion 
and application of the teach-out requirements beyond the intent of the 
statute, because subpart G is broad and refers to requirements such as 
posting of surety. They stated that requiring teach-out plans when the 
Department requires letters of credit or places an institution on 
heightened cash monitoring is not mandated under the statute and should 
be avoided. The Department agrees that a requirement that an 
institution post a letter of credit, or be subject to heightened cash 
monitoring, imposed outside of a subpart G proceeding, should not, on 
its own, trigger a requirement that the institution submit a teach-out 
plan to its accrediting agency for approval. The Department agreed to 
modify the language it

[[Page 39512]]

originally proposed by adding a reference to the statutory provisions 
governing emergency actions and actions to limit, suspend, or terminate 
the participation of an institution in the title IV, HEA programs. In 
addition, to reduce any confusion over when agency action is required, 
the proposed regulation was further revised to specify that when the 
Department notifies an institution and its accrediting agency that the 
Department is initiating an emergency, limitation, suspension, or 
termination action, it will also indicate in the notice that a teach-
out plan is required.
    The proposed regulations also provide that an accrediting agency 
must require submission of a teach-out plan when a State licensing or 
authorizing agency notifies the agency that an institution's license or 
legal authorization to provide an educational program has been or will 
be revoked. This provision was added because loss of State licensing 
leads directly to the loss of accreditation and institutional 
eligibility, and may well be followed by closure. There was support 
from the non-Federal negotiators for including this provision.
    The addition of a provision in proposed Sec.  602.24(c)(3) that, if 
an agency approves a teach-out plan that includes a program that is 
accredited by another recognized accrediting agency, it must notify 
that agency of its approval, was made to ensure appropriate sharing of 
important information. The new provision in proposed Sec.  602.24(c)(4) 
that an agency may require an institution to enter into a teach-out 
agreement as part of its teach-out plan was added to reflect new 
statutory language in section 487(f) of the HEA. In view of this new 
language, the proposed regulations would also modify the requirement 
for submission of teach-out agreements for agency approval (found in 
proposed Sec.  602.24(c)(5) as restructured), to clarify that the 
agreements must be submitted for approval regardless of whether the 
institution enters into the agreement on its own, or at the request of 
the agency.
    There was extensive discussion about what the statutory definition 
of ``teach-out plan'' in section 487(f)(2) of the HEA means in 
requiring a teach-out plan or agreement when an institution ceases to 
operate before all students complete their ``program of study.'' 
Whereas ``program'' is defined in the regulations in Sec.  602.3 to 
mean a postsecondary educational program that leads to an academic or 
professional degree, certificate, or other recognized educational 
credential, there is no definition of ``program of study.'' In order to 
implement a teach-out plan or agreement, however, it is necessary to 
understand the concept of a ``program of study.'' The Department 
understands a program of study to be the specific area of study, or 
major, within the context of a degree or certificate program. Thus, to 
characterize an English major at a four-year institution, the student 
would be enrolled in a baccalaureate program with English as the 
program of study. What is important, and the reason for the distinction 
between ``program'' and ``program of study'' with respect to teach-
outs, is that students need to be provided with the opportunity to 
complete their specific program of study when an institution or 
location offering 100 percent of at least one program ceases to 
operate. Thus, a student in a baccalaureate degree program who is 
preparing to become a teacher must be able to complete all the teacher 
education courses needed for a degree in that major.
    The Department initially proposed that agencies evaluate a teach-
out plan to ensure it provides for the equitable treatment of students 
under criteria established by the agency and does not result in 
duplicative or increased costs. The Department was concerned that 
students not be charged additional money for a program for which they 
had already paid tuition and fees. Moreover, the concept of accrediting 
agencies working with the Department and the State licensing agency, to 
the extent feasible, to ensure that students whose institution has 
closed have reasonable opportunities to complete their programs without 
additional charges is included in the current regulations.
    Some of the non-Federal negotiators noted that institutions that 
take on responsibility for teach-outs often lose substantial money to 
ensure that students are taught out properly. Sometimes, the closing 
institution did not provide its students with an adequate education, 
and the students being taught out need additional education or training 
to enable them to complete their program and be successful. Sometimes 
this involves students re-taking a course. Hence, prohibiting 
``duplicative charges'' through teach-out approval requirements cannot 
be presumed to be in students' best interests. The institution 
conducting a teach-out must have flexibility, and placing too many 
prohibitions or prescriptions on the teach-out plan may preclude the 
establishment of appropriate teach-out arrangements. The non-Federal 
negotiators agreed that it would be better to require that the teach-
out plan ensure students are notified of any additional charges that 
the teach-out will entail. The Department agreed with the non-Federal 
negotiators. It should be noted that the Department's expectations are 
that students will not incur additional or duplicative charges for 
participating in a teach-out to complete their programs of study. If, 
as the exception, and not the rule, an institution serving as a teach-
out institution must charge the students, it should ensure that any 
charges are reasonable, taking into consideration the impact on the 
student. Further, the Department believes it is important for a teach-
out plan to specify if there are additional charges. To be approved, a 
teach-out plan must provide for notification to the students of any 
additional charges.
    Several non-Federal negotiators raised a question about what 
constitutes closure of an institution or location. They noted that 
there have been situations in which an institution or location moved, 
and did not close, but the Department deemed the institution to have 
closed. During the discussion, the Department clarified that normally a 
move of an institution or location across the street would be viewed as 
a change of address, and would not constitute closure. However if, for 
example, an institution or location moved 20 miles, there would have to 
be an examination of the circumstances. A 20-mile move in a rural area 
might not have a major impact on the majority of an institution's 
students, whereas a 20-mile move in an urban area could disadvantage an 
institution's students to the point where they could no longer attend 
the institution. In ascertaining whether an institution or location has 
closed or moved, key considerations are whether the institution's 
faculty, staff and students move with the institution or location.
    Under the proposed regulations, the requirement that agencies work 
with the Department regarding closed schools would apply to those 
schools that close without a teach-out plan or agreement. The 
Department proposed to require that students be given reasonable 
opportunities to complete their education ``without duplicative or 
increased charges.'' Several negotiators presented various points of 
view on the proposal regarding closed institutions and locations when 
there is no teach-out plan or agreement. Some non-Federal negotiators 
suggested focusing on what was being done to protect the students and 
noted that what is best for the students must be evaluated on a case-
by-case basis. Other non-Federal negotiators expressed concern that the 
proposed language could be read to imply that the accrediting agency 
would

[[Page 39513]]

be required to assume a financial obligation for teaching out the 
students in such circumstances. However, a non-Federal negotiator 
stated a belief that, while it is understandable that accrediting 
agencies do not want the regulations to imply that they have any 
liability for the educational expenses of students when an institution 
or location closes without a teach-out plan or agreement in place, it 
is likely that accrediting agencies will incur ordinary in-kind 
expenses, such as some expenditure of staff time, in complying with the 
recognition criteria pertaining to teach-outs and school closures.
    The Department agrees that it expects agencies to expend staff time 
and make other ordinary and customary commitments of agency resources 
in the course of assisting students in finding reasonable opportunities 
to complete their programs of study, but that agencies are not expected 
to pay for the educational expenses of students in this situation. In 
addition, to avoid the appearance that the Department is creating any 
new or unusual financial obligations for agencies, the Department 
agreed to remove the references to ``ensuring'' that students do not 
incur ``additional or duplicative charges'' in favor of language simply 
requiring that agencies ``assist students'' in finding reasonable 
opportunities to complete their programs ``without additional charge.''

Transfer of Credit (Sec.  602.24)

    Statute: As amended by the HEOA, section 496(c)(9) of the HEA 
specifies, among other requirements, that to be recognized by the 
Secretary as a reliable authority as to the quality of education or 
training offered by an institution seeking to participate in title IV, 
HEA programs, an accrediting agency must confirm, as part of the 
agency's review for initial or renewal of accreditation, that an 
institution has transfer of credit policies that are publicly disclosed 
and that include a statement of the criteria established by the 
institution regarding the transfer of credit earned at another 
institution of higher education.
    Section 485(h) of the HEA contains a new HEOA requirement that 
institutions publicly disclose their transfer of credit policies in a 
readable and comprehensible manner. This section also specifies that 
neither the Secretary nor the NACIQI is authorized to require 
particular policies, procedures, or practices by institutions with 
respect to transfer of credit.
    Current Regulations: There are no current regulations addressing 
transfer of credit.
    Proposed Regulations: Proposed Sec.  602.24(e) would incorporate 
the provisions of the HEA regarding the new requirement in the HEOA 
that accrediting agencies confirm that institutions have transfer of 
credit policies that are publicly disclosed and include a statement of 
the criteria established by the institution regarding the transfer of 
credit earned at another institution of higher education. The proposed 
regulations include a cross-reference to the paragraph in 34 CFR 668.43 
that the Department plans to include in a final rule to reflect the 
HEOA's new institutional disclosure requirement regarding transfer of 
credit policies. In the final regulations governing accrediting 
agencies, the complete cross-reference will be inserted in Sec.  
602.24.
    Reasons: The new paragraph would implement the new statutory 
provisions contained in the HEOA. Some of the non-Federal negotiators 
expressed concern about a perceived lack of clarity regarding 
availability of information and were interested in having a definition 
of ``publicly disclosed'' to make it clear that the information must be 
readily available to students and their advisors. To address this 
concern, the proposed regulations provide a reference to the new 
institutional disclosure requirement that will require institutions to 
disclose the information specified regarding transfer of credit in a 
readable and comprehensible manner.
    Some non-Federal negotiators wanted to add language requiring that 
the criteria established by the institution regarding the transfer of 
credit earned at another institution of higher education be fair. These 
negotiators stated that the issue of transfer of credit is a serious 
one and that full disclosure of this kind of information is needed so 
students can assess the fairness of an institution's policies and can 
decide whether to apply to the institution. Other non-Federal 
negotiators said there was a problem with expanding the statutory 
language, noting the Rule of Construction in section 485 of the HEA 
that constrains the Secretary from elaborating on the requirement. In 
addition, the regulations governing accrediting agencies require only 
that the agencies confirm that institutions being reviewed publicly 
disclose their transfer of credit policies. The more specific 
requirements on transfer of credit in section 485 of the HEA govern 
institutions, not accrediting agencies. The proposed regulations 
reflect the statutory language, but include a cross-reference to the 
institutional transfer of credit provisions to address some of the non-
Federal negotiators' concerns.

Summary of Agency Actions (Sec.  602.26)

    Statute: Section 496(c)(7) of the HEA specifies that, among other 
requirements, to be recognized by the Secretary as a reliable authority 
as to the quality of education or training offered by an institution 
seeking to participate in title IV, HEA programs, an accrediting agency 
must make available to the public and the State licensing or 
authorizing agency, and submit to the Secretary, a summary of agency 
actions including the accreditation or renewal of accreditation of an 
institution; the final denial, withdrawal, suspension, or termination 
of accreditation of an institution; any findings made in connection 
with the action taken, together with the official comments of the 
affected institution; and any other adverse action taken with respect 
to an institution or placement on probation of an institution.
    Current Regulations: Section 602.26(b) of the current regulations 
requires an agency to provide written notice of (1) a final decision to 
place an institution or program on probation or an equivalent status, 
and (2) a final decision to deny, withdraw, suspend, revoke, or 
terminate the accreditation or preaccreditation of an institution or 
program. The notice must be provided to the Secretary, the appropriate 
State licensing or authorizing agency, and appropriate accrediting 
agencies at the same time the accrediting agency notifies the 
institution, but no later than 30 days after the decision.
    Section 602.26(c) of the current regulations requires an 
accrediting agency to provide written notice to the public of the 
decisions identified in Sec.  602.26(b)(1) and (b)(2) within 24 hours 
of its notice to the institution or program.
    Section 602.26(d) of the current regulations requires that with 
respect to any decision listed in Sec.  602.26(b)(2), the agency must 
make available to the Secretary, the appropriate State licensing or 
authorizing agency, and the public upon request, no later than 60 days 
after the decision, a brief statement summarizing the reasons for the 
agency's decision and the comments, if any, that the affected 
institution or program might wish to make with regard to that decision.
    Proposed Regulations: The proposed regulations regarding disclosure 
of accrediting agency actions would require accrediting agencies to 
provide written notice of a final decision to take any other adverse 
action not listed in Sec.  602.26(b)(2), as defined by the agency, to 
the Secretary and the State licensing or authorizing agency. The 
proposed

[[Page 39514]]

regulations would also add a cross-reference to require agencies to 
provide written notice to the public within 24 hours of their notice to 
the institution or program of any other adverse action.
    Finally, the proposed regulations would specify in new paragraph 
(d) that the accrediting agency, in addition to providing to the public 
a brief statement summarizing the reasons for the agency's decision, 
must provide the official comments of the affected institution or 
program, or evidence that the institution or program was offered the 
opportunity to provide official comments. The information must be 
provided to the public whether or not the agency receives a request for 
the information.
    Reasons: Many of the new provisions in the HEA are already 
addressed by current regulations. During negotiated rulemaking, the 
non-Federal negotiators requested that the accrediting agencies be 
permitted to define the other adverse actions, not specified in the 
regulations, about which the agencies would be required to provide 
information. The non-Federal negotiators also requested that the 
regulations clarify that agencies need provide only official comments 
of an institution or program or, if there are no official comments, 
evidence that the institution or program was offered an opportunity to 
provide official comments. The Department agreed with the non-Federal 
negotiators.

Recognition of Agencies by the Secretary (Subpart C)

    Statute: Section 496(o) of the HEA authorizes the Secretary to 
develop regulations that provide procedures for the recognition of 
accrediting agencies and for administrative appeals. Section 
496(l)(1)(B) of the HEA specifies the 12-month timeframe by which 
noncompliant agencies must take appropriate action to come into 
compliance, absent an extension of the timeframe by the Secretary upon 
good cause shown. Section 496(d) of the HEA stipulates that the period 
of recognition not exceed five years. Section 114 of the HEA, as 
amended by the HEOA, restructures the NACIQI and provides for the 
establishment of the NACIQI meeting agenda by the Chairperson of 
NACIQI; under the FACA, 5 U.S.C. Appdx. 1, approval of the meeting 
agenda by the Secretary's designated Federal official is also required. 
Section 496(q) of the HEA requires a review, at the next available 
NACIQI meeting, of an agency that has included distance education or 
correspondence education in its scope of recognition through written 
notice to the Secretary, if the enrollment of an accredited institution 
that offers distance education or correspondence education has 
increased by 50 percent or more within any one institutional fiscal 
year. Section 496(a) and (c) of the HEA describes various kinds of 
institutional and agency information that must be made available to the 
public, the Secretary or the State licensing or authorizing agency, as 
applicable. Along with HEA requirements, the Department must comply 
with requirements in the Freedom of Information Act, 5 U.S.C. Sec.  
552; the Trade Secrets Act, 18 U.S.C. Sec.  1905; the Privacy Act of 
1974, as amended, 5 U.S.C. Sec.  552a; the FACA, 5 U.S.C. Appdx. 1; and 
all other applicable laws, in considering whether and when information 
obtained from accrediting agencies may, or must, be disclosed to the 
public.
    Current Regulations: There are two sets of recognition procedures 
in the current regulations. Subpart C provides review procedures only 
for an agency's application for initial or continued recognition, and 
does not stipulate procedures for other types of Departmental review 
pertaining to recognition proceedings. Subpart D provides procedures 
for limitation, suspension, or termination of recognition. Under 
subparts C and D, the Secretary has the authority to make a decision 
regarding an accrediting agency's recognition, as well as for any 
appeal the accrediting agency may bring related to that decision.
    Section 602.30(c) of the current regulations states that the 
Secretary does not make available to the public any confidential agency 
materials Department staff review during the evaluation of an agency's 
application for recognition or compliance with the criteria for 
recognition.
    Proposed Regulations: The proposed regulations would reflect 
changes made by the HEOA regarding the review of distance education and 
correspondence education, and the role of the Chairperson of the 
Advisory Committee in establishing the meeting agenda. Under the FACA, 
approval of the meeting agenda by the Secretary's designated Federal 
official is also required; ``Designated Federal Official'' is defined 
in proposed Sec.  602.3.
    The proposed regulations would combine subparts C and D, thereby 
streamlining agency review and establishing procedures for the 
following activities: Applications for an expansion of scope; 
submission and review of compliance reports, as defined in proposed 
Sec.  602.3; reviews of increases in headcount enrollment described in 
proposed Sec.  602.19(e); and staff analyses based on reviews of 
agencies during their period of recognition. The proposed regulations 
would establish the senior Department official as the decision-maker on 
recognition proceedings and the Secretary as the decision-maker on 
appeals. Proposed subpart C would also make explicit the authority of 
the senior Department official to make a decision in a recognition 
proceeding in the event that the statutory authority or appropriations 
for the Advisory Committee ends or that there are fewer duly appointed 
Advisory Committee members than needed to constitute a quorum, and 
under extraordinary circumstances when there are serious questions 
about an agency's compliance that require prompt attention. Proposed 
subpart C would clarify that an agency may be given no more than 12 
months to address identified deficiencies, after which time a decision 
on recognition would be made on the basis of a compliance report, 
unless the senior Department official (or Secretary, on appeal), on 
review of the report, determines good cause exists to extend that 
timeframe.
    Proposed Sec.  602.31 would identify laws governing the Secretary's 
processing and decision-making on requests for public disclosure of 
information obtained during agency recognition proceedings. Proposed 
Sec.  602.31 would also provide procedures that an agency may follow in 
seeking to protect the confidentiality of trade secrets and commercial 
or financial information that is privileged or confidential in 
documents submitted to the Department in recognition proceedings. 
Section 602.31(f)(1) of the proposed regulations would provide the 
citations of the various laws to which the Secretary's release of 
information is subject, including the Freedom of Information Act 
(FOIA); the Trade Secrets Act; the Privacy Act of 1974, as amended; and 
the Federal Advisory Committee Act.
    The proposed regulations would add a set of procedures an agency 
may follow when submitting documents to the Department for recognition 
proceedings in order to assist the Department in its efforts to avoid 
disclosing those materials that are entitled to protection from 
disclosure under applicable law. These procedures include: Allowing the 
agency to redact information that would identify individuals or 
institutions and is not essential to the Department's review of the 
agency; specifying that the agency make a good faith effort to 
designate all business information within the submission that the 
agency believes would be exempt from disclosure under

[[Page 39515]]

exemption 4 of FOIA; identifying any other material the agency believes 
would be exempt from public disclosure, the factual basis for the 
request, and any legal basis the agency has identified for withholding 
the document from disclosure; and ensuring that the documents submitted 
are only those required for Department review or as specifically 
requested by the Department. The proposed regulations would also make 
clear that a blanket designation of material submitted as meeting the 
exemptions in FOIA will not be considered to be in good faith and will 
be disregarded. Finally, the proposed regulations would clarify that 
the Secretary processes all FOIA requests in accordance with 34 CFR 
part 5 and that all documents provided to the Advisory Committee are 
available to the public.
    Reasons: The Department proposes to combine subparts C and D to 
establish consistent procedures that govern the recognition process. 
The intent behind current regulations in subpart D--which establishes a 
separate process that involves subcommittees of the Advisory Committee 
for all limitation, suspension and termination actions--was to expedite 
these types of actions. However, in practice, scheduling and logistical 
issues have made it cumbersome for Department staff and the Advisory 
Committee to manage two processes.
    Proposed subpart C would make clear the parallel processes by which 
the Department staff and the Advisory Committee make recommendations on 
recognition that are forwarded, along with the complete record, to the 
senior Department official for a decision. The Department clarified 
during negotiated rulemaking that the NACIQI is, by definition, an 
advisory committee that makes recommendations and is not a decision-
making body. Current regulations in Sec.  602.33 that provide 
procedures for appealing NACIQI's recommendation are confusing given 
that an appeal suggests that a decision has been made, whereas in fact, 
NACIQI is only making a recommendation.
    In lieu of current Sec.  602.33, proposed Sec.  602.35 would 
provide a process by which the agency and Department staff may respond 
to the Advisory Committee's recommendation before the senior Department 
official makes his or her recognition decision. Under the proposed 
regulations, decision-making authority would reside with the senior 
Department official, whose decisions would be appealable by the agency 
to the Secretary under proposed Sec.  602.37. The proposed changes to 
establish the senior Department official as the decision-maker on 
recognition and the Secretary as the decision-maker on appeals would 
strengthen due process by ensuring that the appeal is not adjudicated 
by the initial decision-maker. Under the current regulations, the 
decision-making authority on both recognition and appeals resides with 
the Secretary.
    The proposed regulations in Sec. Sec.  602.32, 602.34, and 602.36 
would increase transparency and efficiency, and implement HEOA 
provisions regarding distance and correspondence education. These 
proposed regulations would detail proceedings for staff and Advisory 
Committee review of applications for recognition or renewal of 
recognition, expansions of scope, compliance reports, and reviews of 
increases in headcount enrollment described in proposed Sec.  
602.19(e). Proposed Sec.  602.33 would provide procedures for reviews 
of agencies during the period of recognition. Timeframes for various 
stages of the review process would be specified to strengthen due 
process for agencies.
    The Department's initial proposed language in subpart C 
incorporated the concept that an agency's compliance with the criteria 
for recognition includes the requirement that an agency ``is effective 
in its performance with respect to those criteria.'' Some non-Federal 
negotiators expressed concern regarding the word ``performance'' 
because they believed that term is difficult to define. They suggested 
that the language be amended to incorporate the statutory concept of 
``effective application'' of the criteria. The Department agreed to 
replace the language regarding ``performance'' with the phrase 
``effectively applies those criteria.'' While addressing non-Federal 
negotiators' concerns regarding the word ``performance,'' the proposed 
language would retain the statutory concept of ``effectiveness'' and 
the judgment associated with how an agency applies its standards.
    During the discussions regarding proposed Sec.  602.37, which would 
specify procedures for appealing the senior Department official's 
decision to the Secretary, some non-Federal negotiators expressed 
concerns regarding provisions for the consideration by the Secretary of 
additional information not contained in the record. In response, the 
Department added language specifying that the information be ``relevant 
and material'' and ``pertaining to an agency's compliance with 
recognition criteria.'' A parallel change was made to proposed Sec.  
602.36 which outlines procedures for review and decision by the senior 
Department official. Current regulations are silent about procedures in 
instances when new and relevant information becomes available after the 
NACIQI meeting but prior to the decision being made. In the interest of 
transparency and due process, the Department decided to make explicit 
in the proposed regulations the senior Department official's and the 
Secretary's authority to review all relevant information prior to 
making a decision on recognition. Proposed Sec. Sec.  602.36 and 602.37 
would outline procedures by which the senior Department official and 
the Secretary, respectively, may proceed in such cases.
    Proposed Sec.  602.33 would establish a procedure for review of 
agencies during the period of recognition so that the Department may 
ensure an agency's continued compliance with subpart B, and initiate 
action as necessary. Some non-Federal negotiators expressed concern 
that the Department not act arbitrarily and provide adequate notice to 
and communication with the agency when conducting a review during an 
agency's period of recognition. In response to concerns expressed by 
non-Federal negotiators, the Department added language to reflect the 
consultation between Department staff and the agency, and the provision 
to the agency of the documentation concerning the inquiry.
    Proposed Sec.  602.36(b) would make explicit the senior Department 
official's authority to make a decision in a recognition proceeding in 
the event that statutory authority or appropriations for the Advisory 
Committee ends, or there are fewer duly appointed Advisory Committee 
members than needed to constitute a quorum. The intent behind proposed 
Sec.  602.36(b) is to allow the Department to act expeditiously and 
responsibly in the absence of an Advisory Committee when the Department 
has concerns regarding an agency's continued compliance with subpart B. 
Some non-Federal negotiators suggested that the senior Department 
official only exercise this authority in extraordinary circumstances. 
In response to non-Federal negotiators' concerns, the Department added 
language to proposed Sec.  602.36(b), which would specify that the 
senior Department official would make a decision in the absence of an 
Advisory Committee only in extraordinary circumstances when the 
Department has serious concerns regarding an agency's compliance with 
subpart B that require prompt attention.
    One non-Federal negotiator expressed concern that the Secretary 
could withhold appointments to NACIQI in order to prevent the 
constitution of a

[[Page 39516]]

quorum so that the senior Department official could exercise the 
authority to make a decision without NACIQI review of the matter. The 
Department clarified that this was not the intent of the provision and 
further stated that the withholding of appointments by the Secretary 
alone would not prevent a quorum.
    The Secretary is obligated to comply with the HEA and other 
applicable statutes, including FOIA and FACA. Current regulations do 
not accurately reflect the Secretary's disclosure obligations under 
FOIA and other statutes and must be revised to reflect the applicable 
law. In revising the regulations, the Department is attempting to spell 
out the options available to agencies when submitting material that the 
agencies view as confidential to the Department for review in 
recognition proceedings.
    There was extensive discussion among the negotiators about what 
material is to be considered confidential. Several non-Federal 
negotiators expressed concern about how to safeguard confidentiality, 
ensure the integrity of the process, and preserve the relationship 
between the agency and the institution. In particular, they expressed 
concern that if the agency were unable to provide guarantees of 
confidentiality to its institutions, this would undermine the 
relationship between the agency and its accredited institutions or 
programs and indeed the entire accreditation process.
    The Department acknowledged the importance of confidentiality for 
agencies and institutions, but at the same time, wanted to make the 
agencies and institutions fully aware of the requirements with which 
the Secretary must comply in the event a request for disclosure is made 
under FOIA or FACA. The Department also clarified that should the 
Inspector General or any other Federal entity seek to review an agency 
or an institution, proposed procedures under subpart C for redacting 
information and marking documents confidential will not apply, as these 
proposed regulations pertain only to the recognition process.
    Several non-Federal negotiators suggested that the Department could 
review required documents on a secure Web site and thereby not take 
possession of them. Others suggested the Department send staff to the 
agency to review documents, but leave them in the agency's possession. 
The Department explained that it needed to have a complete and accurate 
record of the documents in its possession to substantiate the 
Department's review, and would, therefore, not be able to utilize a 
secure Web site or an on-site review of documents. The Department's 
control of the documents reviewed further protects the integrity of the 
review process. For example, if the Department needed to retrieve a 
reviewed document in the future, and had to rely on obtaining the 
document from a Web site, it would have no way to ensure that the 
document on the Web site was the same document it had originally 
reviewed.
    Another non-Federal negotiator raised concerns about complaints 
being released to the public before they could be substantiated. The 
Department clarified that FOIA pertains to all documents submitted to 
the Department and other Federal Government agencies.
    Finally, some non-Federal negotiators expressed concerns about the 
conduct of unannounced site visits by Department staff to an 
institution or program as part of the review of an agency. This 
provision exists in both current Sec.  602.31(b)(1) and proposed Sec.  
602.31(e)(1). Some non-Federal negotiators stated that this was in 
conflict with their responsibilities under the Health Insurance 
Portability and Accountability Act (HIPAA). The Department reviewed 
HIPAA materials and found nothing that precludes the Department from 
performing unannounced site visits. Nevertheless, the Department will 
cooperate with health care providers and their business associates with 
respect to applicable procedures required by HIPAA.

Executive Order 12866

Regulatory Impact Analysis

    Under Executive Order 12866, the Secretary must determine whether 
the regulatory action is ``significant'' and therefore subject to the 
requirements of the Executive Order and subject to review by the Office 
of Management and Budget (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 set forth in the Executive Order.
    Pursuant to the terms of the Executive Order, it has been 
determined that this proposed regulatory action would not have an 
annual effect on the economy of more than $100 million. Therefore, this 
action is not ``economically significant'' and not subject to OMB 
review under section 3(f)(1) of Executive Order 12866. Notwithstanding 
this determination, the Secretary has assessed the potential costs and 
benefits of this regulatory action and has determined that the benefits 
justify the costs.

Need for Federal Regulatory Action

    As discussed in this NPRM, these proposed regulations are needed to 
implement the provisions of the HEA, as amended. In particular, these 
proposed regulations address the provisions related to the recognition 
of accrediting agencies by the Secretary.
    In addition, these proposed regulations are needed to ensure that 
the Department fulfills its fiduciary responsibility regarding the 
appropriate use of Federal funds made available by the Department to 
institutions of higher education under title IV of the HEA. The 
Secretary grants recognition to accrediting agencies that are 
considered by the Department to be reliable authorities regarding the 
quality of education or training offered by the institutions or 
programs they accredit. Congress requires that an institution of higher 
education be accredited by an accrediting agency recognized by the 
Secretary in order to receive Federal funds authorized under title IV, 
HEA programs.
    Section 492 of the HEA requires the Secretary, before publishing 
any proposed regulations for programs authorized by title IV of the 
HEA, to obtain public involvement in the development of the proposed 
regulations. After obtaining advice and recommendations from 
individuals and representatives from relevant constituent groups, the 
Secretary must subject the proposed regulations for the title IV, HEA 
programs to a negotiated rulemaking process. All proposed regulations 
that the Department publishes must conform to final agreements 
resulting from that process unless the Secretary reopens the process or 
provides a written explanation to the participants in that process 
stating why the Secretary has decided to depart from the agreements. 
The 2009 negotiated rulemaking committee for accreditation reached 
consensus on the proposed regulatory language contained in this

[[Page 39517]]

NPRM. A summary of the proposed regulatory language agreed upon by 
negotiators is available in the Significant Proposed Regulations 
section.

Regulatory Alternatives Considered

    The following section addresses the alternatives that the 
Department considered in implementing the discretionary portions of the 
HEOA provisions. These alternatives are also discussed in more detail 
in the Reasons sections of this NPRM related to the specific proposed 
regulatory provisions.
    A broad range of alternatives to these proposed regulations was 
considered as part of the negotiated rulemaking process. These 
alternatives were reviewed in detail in the preamble to this NPRM under 
both the Regulatory Impact Analysis and the Reasons sections 
accompanying the discussion of each proposed regulatory provision. 
However, the Department is interested in receiving comments related to 
other alternatives to the proposed regulations. To send any comments 
that concern alternatives to these proposed regulations, see the 
instructions in the ADDRESSES section of this NPRM.

Benefit-Cost Analysis

Benefits
    The benefits of these proposed regulations would include: Ensuring 
that accrediting agencies are reliable authorities as to the quality of 
education or training offered by an institution or program they 
accredit; ensuring that the Department fulfills its fiduciary 
responsibility for institutional funding under title IV, HEA programs; 
and establishing consistency between statutory language and regulatory 
language. An additional benefit of the proposed regulations would be 
providing accrediting agencies with greater clarity on regulations 
regarding the following: Distance and correspondence education; 
accreditation team members; transfer of credit; teach-out plan 
approval; definition of recognition; demonstration of compliance; 
recognition procedures, including procedures for NACIQI; direct 
assessment programs; monitoring; substantive change; record keeping and 
confidentiality; and due process and appeals. However, it is difficult 
to quantify benefits related to the proposed regulations. The 
Department is interested in receiving comments or data that would 
support a more rigorous analysis of the benefits of these provisions.
Costs
    Many of the statutory provisions implemented through this NPRM 
would not require accrediting agencies and institutions to develop new 
disclosures, materials, or accompanying dissemination processes. Other 
proposed regulations generally would require discrete changes in 
specific parameters associated with existing guidance rather than 
wholly new requirements. Accordingly, accrediting agencies wishing to 
continue to be recognized by the Secretary and institutions wishing to 
continue to participate in title IV, HEA programs are estimated to have 
already absorbed most of the administrative costs related to 
implementing these proposed regulations.
    In assessing the potential impact of these proposed regulations, 
the Department recognizes that certain provisions are likely to 
increase workload for some program participants. This additional 
workload is discussed in more detail under the Paperwork Reduction Act 
of 1995 section of this preamble. Additional workload would normally be 
expected to result in estimated costs associated with either the hiring 
of additional employees or opportunity costs related to the 
reassignment of existing staff from other activities. Given the limited 
data available, the Department is particularly interested in comments 
and supporting information related to possible administrative burden to 
accrediting agencies and institutions stemming from the proposed 
regulations. Estimates included in this notice will be reevaluated 
based on any information received during the public comment period.
    Two new statutory concepts reflected in proposed Sec.  602.25 do 
not exist in current regulations: (1) An institution's or program's 
right to appeal adverse accrediting agency actions to an appeals panel 
that is subject to a conflict of interest policy and that does not 
contain members of the underlying decision-making body; and (2) an 
institution's or program's right to review of new financial 
information, if the institution or agency meets certain conditions, 
before the accrediting agency takes a final adverse action.
    Although accrediting agencies must be prepared to respond to 
appeals and to requests for review of new financial information, 
institutions or programs decide whether to undertake these appeals and 
make these requests. We do not expect the new provisions to affect the 
number of institutions or programs that appeal an accrediting agency 
adverse action; therefore, there would be no additional costs to 
institutions or programs. Based on the discussion on this issue at 
negotiated rulemaking and historical data on appeals, it is likely that 
no more than five institutions per year will be able to meet the 
qualifications to be considered under the new provision for review of 
new financial information and will seek such a review. The proposed 
regulations would also require that an accrediting agency confirm, as 
part of the agency's review for initial or renewal of accreditation, 
that institutions that participate in title IV, HEA programs have 
transfer of credit policies that are publicly disclosed and that 
include statements of the criteria established by the institutions 
regarding the transfer of credit earned at another institution of 
higher education. As accrediting agencies are already required to 
review various policies and procedures at the institutions they 
accredit, we expect the addition of this provision will add a few 
minutes to an accreditation review. We do not have the data to provide 
a more refined estimate at this time. As indicated above, we will 
adjust the estimate based on any comments received.
    In addition, the proposed regulations would require an agency that 
has or seeks to include the evaluation of distance education or 
correspondence education within its scope of recognition to require 
participating institutions that offer distance education or 
correspondence education to have processes in place through which the 
institutions establish that the student who registers in a distance 
education or correspondence education course or program is the same 
student who participates in and completes the course or program and 
receives the academic credit. It is standard practice for institutions 
that offer distance or correspondence education to have processes that 
verify the identity of students; therefore, this provision will not 
have an impact on institutions. Some accrediting agencies that evaluate 
distance education or correspondence already review those processes 
when they conduct accreditation reviews. For those agencies that will 
have to add a step to their evaluation process, the time added to the 
review process is expected to minimal. We will refine our estimate if 
we receive comments that would enable us calculate any additional costs 
associated with this provision.
    Finally, the proposed regulations would require participating 
institutions to submit a teach-out plan to their accrediting agency 
upon the occurrence of any of the following: An emergency

[[Page 39518]]

action of the Secretary against an institution, or an action by the 
Secretary to limit, suspend, or terminate an institution's 
participation in any title IV, HEA program; an agency action to 
withdraw, terminate, or suspend the accreditation or preaccreditation 
of the institution; the institution notifies the accrediting agency 
that it intends to cease operations entirely or close a location that 
provides one hundred percent of at least one program; or a State 
licensing or authorizing agency notifies the accrediting agency that an 
institution's license or legal authorization to provide an educational 
program has been or will be revoked. As indicated in the Paperwork 
Reduction Act section, we expect the average time needed to develop a 
teach-out plan is four hours. Based on historical data that show the 
number of institutions that are subject to Department action, lose 
institutional eligibility, or close, and an estimate of the number of 
locations that offer one hundred percent of a program, we estimate that 
approximately 70 institutions per year will be required to submit a 
teach-out plan to their accrediting agency. Most of the institutions 
and locations that close offer only one or two programs. For some 
institutions, the plan will be very simple: the institution will teach 
out its students. For other institutions, preparing a plan may involve 
doing research to determine what nearby schools offer similar programs; 
in most cases, the institution will already know, as the nearby schools 
will have been their competitors. In a few cases, more work may be 
needed to develop the teach-out plan. This is likely to occur when the 
affected institution or location has offered several different 
programs. Given the wide variety of situations, our best estimate is 
that the average amount of time needed to complete a teach-out plan is 
four hours. Using May 2009 Bureau of Labor information that the average 
hourly wage for private, non-agricultural workers is $18.54, the total 
estimated cost for carrying out this provision is $5,191 (70 
institutions x 4 hours/institution x $18.54/hour).

Net Budget Impacts

    In general, these estimates should be considered preliminary; they 
will be reevaluated in light of any comments or information received by 
the Department prior to the publication of the final regulations. The 
final regulations will incorporate this information in a revised 
analysis.
    The net budget impact of these proposed regulations on accrediting 
agencies and institutions of higher education is estimated to be 
minimal. As previously mentioned, many of the statutory provisions 
implemented through this NPRM will not require accrediting agencies and 
institutions to develop new disclosures, materials, or accompanying 
dissemination processes. In addition, the Department takes steps in 
these proposed regulations to limit the administrative burden on 
accrediting agencies and institutions. The Department believes that 
most of the administrative costs related to implementing these proposed 
regulations have already been absorbed by accrediting agencies and 
institutions. As noted in the chart in the Paperwork Reduction Act 
section of the preamble, the net effect on the work of accrediting 
agencies and institutions is estimated to be 3,212 hours. Assuming that 
the employee cost of implementing the new requirements is $18.54/hour 
(based on average wage information from the Bureau of Labor 
Statistics), the net budget impact of these proposed regulations is 
estimated to be $59,550. The net budget impact of these proposed 
regulations on the Department is also estimated to be minimal. Primary 
additional costs would be incurred for administering these regulations 
should NACIQI decide to convene more than two national meetings 
annually. Because the HEOA provisions afford the NACIQI chair the 
authority to set the agenda for NACIQI meetings with the approval of 
the designated Federal official, it is conceivable that NACIQI may 
choose to meet more often than twice a year. Should this occur, the 
Department would incur additional administrative costs resulting from 
convening one or more additional meetings. The estimated cost to the 
Department of convening another NACIQI meeting is $55,300. No 
additional costs to the Department resulting from these proposed 
regulations are anticipated.
    In analyzing the net budget impacts of these proposed regulations, 
feedback was received from non-Federal negotiators during negotiated 
rulemaking and from Department staff. However, data on administrative 
burden at participating accrediting agencies and institutions are 
extremely limited; accordingly, as noted above, the Department is 
particularly interested in comments in this area.
    Elsewhere in this SUPPLEMENTARY INFORMATION section we identify and 
explain burdens specifically associated with information collection 
requirements. See the heading Paperwork Reduction Act of 1995.

Assumptions, Limitations, and Data Sources

    Because these proposed regulations would largely restate statutory 
requirements that would be self-implementing in the absence of 
regulatory action, impact estimates provided in the preceding section 
reflect a pre-statutory baseline in which the HEOA changes implemented 
in these proposed regulations do not exist. In general, these estimates 
should be considered preliminary; they will be reevaluated in light of 
any comments or information received by the Department prior to the 
publication of the final regulations. The final regulations will 
incorporate this information in a revised analysis.

Clarity of the Regulations

    Executive Order 12866 and the Presidential memorandum ``Plain 
Language in Government Writing'' require each agency to write 
regulations that are easy to understand.
    The Secretary invites comments on how to make these proposed 
regulations easier to understand, including answers to questions such 
as the following:
    <bullet> Are the requirements in the proposed regulations clearly 
stated?
    <bullet> Do the proposed regulations contain technical terms or 
other wording that interferes with their clarity?
    <bullet> Does the format of the proposed regulations (grouping and 
order of sections, use of headings, paragraphing, etc.) aid or reduce 
their clarity?
    <bullet> Would the proposed regulations be easier to understand if 
we divided them into more (but shorter) sections? (A ``section'' is 
preceded by the symbol ``Sec. '' and a numbered heading; for example, 
Sec.  600.2.)
    <bullet> Could the description of the proposed regulations in the 
``Supplementary Information'' section of this preamble be more helpful 
in making the proposed regulations easier to understand? If so, how?
    <bullet> What else could we do to make the proposed regulations 
easier to understand?
    To send any comments that concern how the Department could make 
these proposed regulations easier to understand, see the instructions 
in the ADDRESSES section of this preamble.

Regulatory Flexibility Act Certification

    The Secretary certifies that these proposed regulations would not 
have a significant economic impact on a substantial number of small 
entities. These proposed regulations would directly affect accrediting 
agencies and institutions of higher education that

[[Page 39519]]

participate in title IV, HEA programs. The U.S. Small Business 
Administration Size Standards define organizations as ``small 
entities'' if they are for-profit or nonprofit organizations with total 
annual revenue below $5,000,000 or if they are organizations controlled 
by governmental entities with populations below 50,000.
    A significant percentage of the accrediting agencies and 
institutions participating in title IV, HEA programs meet the 
definition of ``small entities''. The Department estimates that 
approximately 40 accrediting agencies and 2,310 postsecondary 
institutions meet the definition of ``small entity''.
    The proposed regulatory action would not substantively change 
regulations governing institutional eligibility and the Secretary's 
recognition of accrediting agencies in a way that would result in a 
material increase or decrease in the number of institutions 
participating in title IV of the HEA or in the number of accrediting 
agencies recognized by the Secretary. For these accrediting agencies 
and institutions, the new requirements under the proposed regulations 
are not expected to impose significant new costs. Although the proposed 
regulations contain some new requirements, many agencies and 
institutions have policies in place that are similar to the new 
requirements. The Department estimates that costs attributable to 
complying with the new requirements are likely to be small.
    As noted in the Paperwork Reduction Act section of this NPRM, the 
net effect on the work of accrediting agencies and institutions is 
estimated to be 3,212 hours. For the approximately 2,350 small entities 
covered by the proposed regulations, the net budget impact is estimated 
to be 1,851 hours. Using the May 2009 Bureau of Labor data for the 
average hourly wage of private, non-agricultural workers, $18.54 per 
hour, the estimated cost of the new provisions to small entities is 
$34,318.
    The impact of the proposed regulations on individuals is not 
subject to the Regulatory Flexibility Act.
    The Secretary invites comments from small accrediting agencies and 
institutions as to whether they believe the proposed changes would have 
a significant economic impact on them and, if so, requests evidence to 
support that belief.

Paperwork Reduction Act of 1995

    Proposed Sec. Sec.  602.15, 602.19, 602.24, 602.25, 602.26, 602.27, 
602.31, and 602.32 contain information collection requirements. Under 
the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)), the Department 
of Education has submitted a copy of these sections to OMB for its 
review.

Section 602.15--Administrative and Fiscal Responsibilities

    Proposed Sec.  602.15 would require accrediting agencies to 
demonstrate certain administrative responsibilities, including 
maintenance of all accrediting documentation for each institution from 
the last full accreditation or preaccreditation review. Under the 
current regulations, agencies are required to maintain this 
documentation for the previous two accreditation or preaccreditation 
reviews. Accrediting agencies must maintain documents regarding 
substantive change decisions under this requirement in the current 
regulations. The proposed regulation would reduce the administrative 
burden to maintenance of only one full accreditation or 
preaccreditation review. Although this represents a reduction of the 
burden on agencies under OMB Control Number 1840-0788, the reduced 
hours for maintaining only one complete review cycle are negligible 
because the agencies already collect the information.

Section 602.19--Monitoring and Reevaluation of Accredited Institutions 
and Programs

    Proposed Sec.  602.19(b) would require agencies to collect data to 
ensure that the institutions they accredit remain in compliance with 
their regulations. This proposed regulation would clarify the language 
in the current regulation regarding the data that agencies must collect 
to ensure that institutions and programs remain in compliance with 
their accrediting standards. Because the current regulation requires 
agencies to collect this information, the proposed regulatory language 
change would not represent any additional reporting burden under OMB 
Control Number 1840-0788.
    Proposed Sec.  602.19(c) would require agencies to monitor the 
enrollment growth of institutions or programs they accredit each year. 
This proposed regulation would represent a change in the information 
that accrediting agencies must collect currently. It would require that 
agencies collect information to monitor enrollment growth for the 
institutions or programs that they accredit. The Department believes 
that institutions already collect enrollment data, but estimates that 
this regulation would increase the burden to each of the 61 recognized 
accrediting agencies by a total of 122 hours under OMB Control Number 
1840-0788.
    Proposed Sec.  602.19(e) would require accrediting agencies that 
expanded their scope to include distance education or correspondence 
education by notice to the Secretary to monitor enrollment growth of 
the institutions they accredit that offer distance education or 
correspondence education. These agencies must report to the Department, 
within 30 days, any institution that experiences enrollment growth of 
50 percent or more during a fiscal year. The content of the report is 
described in Sec.  602.31(d).
    Proposed Sec.  602.19(e) would represent a change in the 
information that some accrediting agencies must collect. The proposed 
regulation would only affect institutional accrediting agencies and 
programmatic accrediting agencies that accredit freestanding 
institutions that currently do not have distance education in their 
scope of recognition. Department staff review of currently recognized 
accrediting agencies shows that 27 agencies would not be affected by 
this proposed regulation. However 15 of the remaining recognized 
agencies may be affected if any decide to include distance education in 
their scope of recognition in the future. The Department estimates that 
the additional reporting requirement would increase the burden to 
accrediting agencies by a total of 60 hours under OMB Control Number 
1840-0788 if all 15 agencies decided to add distance education or 
correspondence education to their scope of recognition.

Section 602.24--Additional Procedures Certain Institutional Accreditors 
Must Have

    Proposed Sec.  602.24 would mandate that an accrediting agency 
require an institution it accredits to submit a teach-out plan for 
approval by the accrediting agency if any of following events occurs: 
The Department initiates an emergency action against an institution, or 
an action by the Secretary to limit, suspend, or terminate an 
institution participating in any title IV, HEA program; the accrediting 
agency acts to withdraw, terminate, or suspend the accreditation or 
preaccreditation of the institution; the institution notifies the 
agency that it intends to cease operations entirely or close a location 
that provides one hundred percent of at least one program; or a State 
licensing or authorizing agency notifies the agency that an 
institution's license or legal authorization to provide an educational 
program has been or will be revoked. If the teach-out plan requires a 
teach-out agreement, proposed Sec.  602.24 would also identify the 
components of the teach-out agreement. The

[[Page 39520]]

Department estimates that the proposed regulation would place an 
additional burden on 70 institutions each year for a total of 280 hours 
under OMB Control Number 1840-0788.

Section 602.25---Due Process

    Proposed Sec.  602.25 would include two new statutory concepts. 
Proposed Sec.  602.25(f) would provide for an institution's or 
program's right to appeal any adverse accrediting agency action before 
an appeals panel that is subject to a conflict of interest policy and 
does not contain members of the underlying decision-making body. 
Proposed Sec.  602.25(h) would provide for an institution's or 
program's right for the review of new financial information, if it 
meets certain conditions, before the accrediting agency takes a final 
adverse action.
    Although accrediting agencies must be prepared to respond to 
appeals and to requests for review of new financial information, the 
decision to undertake these actions is a voluntary one on the part of 
an institution. The new provisions are not expected to have any effect 
on the number of institutions that appeal an accrediting agency adverse 
action, and therefore, there would be not additional costs to 
institutions. Based on the discussion on this issue at negotiated 
rulemaking, and historical data on appeals, it is likely that no more 
than five institutions per year will be able to meet the qualifications 
to be considered under the new provision for review of new financial 
information and will seek such a review.
    Agencies are already required to have an appeal process; the burden 
associated with revising existing procedures to conform with the new 
requirements is estimated to be 610 hours, which is based on 61 
accrediting agencies x 10 hours. The estimated burden is associated 
primarily with implementing the regulation in the initial year as 
agencies establish new procedures. The burden is estimated to be 2,440 
hours, based on 61 accrediting agencies x 40 hours. The burden for 
maintaining this process in subsequent years is expected to be minimal, 
given that we expect no more than five agencies will meet the 
requirements for such a review.

Section 602.26--Notification of Accrediting Decisions

    Proposed Sec.  602.26(b) would require agencies to provide a 
written notice to the Secretary of any final decision that is 
considered by the agency to be an adverse action and of final decisions 
withdrawing, suspending, revoking, or terminating an institution's or 
program's accreditation or preaccreditation. Proposed Sec.  602.26(d) 
would require agencies to make available to the Secretary and the 
public a statement regarding the reasons for withdrawing, suspending, 
revoking, or terminating an institution's or program's accreditation or 
preaccreditation. The statement must include either comments from the 
affected institution or program regarding that decision or evidence 
that the affected institution or program was offered the opportunity to 
provide comments. The proposed change would clarify existing language 
and would require that the statement provide evidence that the affected 
institution or program was offered an opportunity to provide comments 
if no comments were received. The proposed changes do not constitute 
any new reporting requirements and, therefore, do not represent any 
additional burden on accrediting agencies under OMB Control Number 
1840-0788.

Section 602.27--Other Information an Agency Must Provide the Department

    Proposed Sec.  602.27(a) would require an accrediting agency to 
provide to the Secretary a copy of any annual report it prepares, an 
updated directory of its accredited institutions and programs, any 
proposed changes to its policies, procedures, or accreditation 
standards that might alter its scope of recognition or compliance with 
the Criteria for Recognition, and a notification if it is changing its 
scope of recognition to include distance education or correspondence 
education. Further, if requested by the Secretary, an agency must 
provide a summary of the major accrediting activities conducted during 
the year. The proposed regulation also would require an accrediting 
agency to provide to the Department, if the Secretary requests, any 
information regarding an institution's compliance with its title IV, 
HEA program responsibilities.
    Although the proposed changes would primarily clarify language in 
the current regulations, the changes would also affect the reporting 
requirement regarding adding distance education or correspondence 
education to an agency's scope of recognition. The proposed regulation 
would remove the requirement for institutional accrediting agencies, 
and programmatic accrediting agencies that accredit freestanding 
institutions, to submit an application to the Department if an agency 
wished to add distance education or correspondence education to its 
scope of recognition; the proposed changes would only require agencies 
to notify the Department that its scope has been changed to include 
distance education or correspondence education. Therefore, the proposed 
changes to the regulation would not impose any new burden on 
accrediting agencies and, in the case of adding distance education or 
correspondence education to a scope of recognition, it would reduce the 
burden on agencies. Department staff estimates the burden on the 15 
agencies that would be affected by the proposed regulation would be 
reduced by 300 hours under OMB Control Number 1840-0788 if all the 
agencies decided to add distance education or correspondence education 
to their scope of recognition.

Section 602.31--Agency Submissions to the Department

    Proposed Sec.  602.31(a) would require accrediting agencies to 
submit an application for recognition or renewal of recognition at the 
end of the period of recognition granted by the Secretary, generally 
every five years. The application would be required to demonstrate that 
the agency complies with the Department's Criteria for Recognition as 
defined in CFR 34 part 602. The proposed regulation would clarify what 
documents should be provided with an agency's application for 
recognition. The language of the proposed regulation would not impose a 
new reporting burden on agencies under OMB Control Number 1840-0788.
    Proposed Sec.  602.31(b) would require accrediting agencies that 
wish to expand their scope of recognition to submit an application to 
the Secretary. The proposed language would not place any additional 
reporting burden on accrediting agencies because the current 
regulations also require the submission of an application when an 
agency seeks to expand its scope of recognition. The language of the 
proposed regulation would not impose a new reporting burden on agencies 
under OMB Control Number 1840-0788.
    Proposed Sec.  602.31(c) would require that agencies provide a 
compliance report when it has been determined that they do not fully 
comply with the criteria for recognition or are ineffective in applying 
those criteria. In order for the Secretary to determine that agencies 
are reliable authorities regarding the quality of education or training 
offered by their accredited institutions or programs, agencies must 
demonstrate that they fully comply with 34 part 602, subpart B. 
Therefore, while no requirement to submit a compliance report exists in 
the current regulations, the proposed language reflects the existing 
practice of the Department. The proposed changes to the regulation

[[Page 39521]]

would not impose a new reporting burden on agencies under OMB Control 
Number 1840-0788.
    Proposed Sec.  602.31(d) would require agencies that notify the 
Department that they are changing their scope of recognition to include 
distance education or correspondence education to annually monitor 
enrollment growth of the institutions they accredit that offer distance 
education. A report would be required to be sent to the Department for 
each institution that reports a 50 percent or higher increase of 
headcount enrollment during a fiscal year. The report must address the 
capacity of each institution to accommodate significant growth in 
enrollment and to maintain educational quality; the circumstances that 
led to the growth; and any other applicable information affecting 
compliance with the regulation. As noted in the discussion of proposed 
Sec.  602.19(e), this section of the regulation would only affect the 
15 institutional accrediting agencies and programmatic accrediting 
agencies that accredit freestanding institutions that currently do not 
have distance education in their scope of recognition. Based on the 
Department's previous experience with institutions that have 
experienced significant growth, this provision may affect no more than 
3 institutions per year. Therefore, the proposed changes would increase 
the burden to the 15 affected accrediting agencies by 60 hours under 
OMB Control Number 1840-0788 if they all add distance education to 
their scope of recognition.

Section 602.32--Procedures for Department Review of Applications for 
Recognition or for Change in Scope, Compliance Reports, and Increases 
in Enrollment

    Proposed Sec.  602.32(f) would require the Department to forward to 
the agency a draft analysis of an agency's application for recognition 
that includes any identified areas of non-compliance, the proposed 
recognition recommendation, and a copy of all third-party comments that 
the Department received. The agency could then provide a written 
response to the draft staff analysis and the third-party comments. The 
proposed change would simplify the language of the current regulation 
in that it combines several paragraphs of the current regulation into a 
single paragraph. The current regulations also require that the 
Department invite accrediting agencies to provide a written response to 
all draft analyses developed by Department staff as well as all third-
party comments received by the Department. Therefore, the proposed 
changes would not impose a new reporting burden on agencies under OMB 
Control Number 1840-0788.
    Consistent with the discussion above, the following chart describes 
the sections of the proposed regulations involving information 
collection, the information being collected, and the collection that 
the Department will submit to the Office of Management and Budget for 
approval and public comment under the Paperwork Reduction Act.

------------------------------------------------------------------------
      Regulatory section          Information section       Collection
------------------------------------------------------------------------
Sec.   602.15................  Accrediting agencies      OMB 1840-0788
                                must demonstrate          Although this
                                certain administrative    represents a
                                responsibilities,         reduction of
                                including maintenance     the burden on
                                of all accrediting        agencies under
                                documentation for each    OMB Control
                                institution from the      Number 1840-
                                last full accreditation   0788, since
                                or preaccreditation       the agencies
                                review. Previously,       already
                                agencies were required    collect the
                                to maintain this          information,
                                information covering      the reduced
                                the previous two          hours for
                                accreditation or          maintaining
                                preaccreditation          only one
                                reviews. Although the     complete
                                current regulation does   review cycle
                                not explicitly mention    is negligible.
                                documents relating to
                                substantive change
                                decisions, the
                                requirement for
                                agencies to maintain
                                these documents was
                                covered under the
                                current regulation's
                                requirement to maintain
                                all documents related
                                to accrediting
                                decisions and special
                                reports. A substantive
                                change request would be
                                considered a special
                                report that had to be
                                submitted to the agency
                                for a decision.
                                Further, an agency's
                                decision regarding the
                                substantive change
                                request was, in fact,
                                an accreditation
                                decision and was
                                reflected in a decision
                                letter that either
                                allowed the substantive
                                change to be covered
                                under the agency's
                                grant of accreditation
                                or denied the request
                                and did not allow the
                                change to be covered
                                under the agency's
                                grant of accreditation.
                                Section 496(c)(1)of the
                                HEA.
Sec.   602.19(b).............  Agencies must collect     OMB 1840-0788
                                data to ensure that the   There is no
                                institutions they         additional
                                accredit remain in        paperwork
                                compliance with their     burden
                                regulations. This         associated
                                proposed regulation       with this
                                would clarify the         section of the
                                language in the current   regulation.
                                regulation regarding
                                the data agencies
                                should collect to
                                ensure that
                                institutions and
                                programs remain in
                                compliance with their
                                accrediting standards.
                                Section 496(a)(4)(A) of
                                the HEA.
Sec.   602.19(c).............  Agencies must monitor     OMB 1840-0788
                                the enrollment growth     It is
                                of institutions each      estimated that
                                year. This proposed       this
                                regulation would          regulation
                                represent a change in     would increase
                                the information that      the burden to
                                accrediting agencies      the 61
                                must collect. It would    recognized
                                require that agencies     accrediting
                                collect information to    agencies by
                                monitor enrollment        122 hours.
                                growth for the
                                institutions or
                                programs that they
                                accredit. Section
                                496(c)(2) of the HEA.
Sec.   602.19(e).............  Accrediting agencies      OMB 1840-0788
                                that expand their scope   It is
                                to include distance       estimated that
                                education or              this
                                correspondence            regulation
                                education by notice to    would increase
                                the Secretary must        the burden for
                                monitor enrollment        15 of the
                                growth of institutions    remaining
                                that offer distance       recognized
                                education or              agencies by 60
                                correspondence            hours if all
                                education and report to   decided to
                                the Department, within    include
                                30 days, any              distance
                                institution that          education in
                                experiences enrollment    their scope of
                                growth of 50 percent or   recognition in
                                more during a fiscal      the future.
                                year. Section 496(q) of
                                the HEA.

[[Page 39522]]

 
Sec.   602.24................  Approximately 70          OMB 1840-0788
                                institutions per year     It is
                                will be required to       estimated that
                                submit a teach-out plan   this
                                to their accrediting      regulation
                                agency. Most of the       would increase
                                institutions and          the burden on
                                locations that close      70
                                offer only one or two     institutions
                                programs. For some        each year for
                                institutions, the plan    a total of 280
                                will be very simple:      hours.
                                The institution will
                                teach out its students.
                                For other institutions,
                                preparing a plan may
                                involve doing some
                                research to determine
                                what nearby schools
                                offer similar programs
                                but in most cases, the
                                institution will
                                already know, as the
                                nearby schools will
                                have been their
                                competitors. In a few
                                cases, more work may be
                                needed to develop a
                                plan. Given the wide
                                variety of situations,
                                our best estimate is
                                that the average amount
                                of time needed to
                                complete a plan is 4
                                hours. Therefore, the
                                total amount of time is
                                280 hours (70
                                institutions x 4
                                hours). Section
                                496(c)(3) of the HEA.
Sec.   602.25(f).............  Section 602.25(f)         OMB 1840-0788
                                includes the new          It is
                                statutory concept of an   estimated that
                                institution's or          this
                                program's right to        regulation
                                appeal any adverse        would increase
                                accrediting agency        the burden on
                                action before an          61 accrediting
                                appeals panel that is     agencies
                                subject to a conflict     primarily in
                                of interest policy and    the first year
                                does not contain          of
                                members of the            implementation
                                underlying decision-      for a total of
                                making body.              610 hours.
                               Agencies are already
                                required to have an
                                appeal process; the
                                negligible burden is
                                estimated to be 610
                                hours, which is based
                                on 61 accrediting
                                agencies x 10 hours.
                                Section 496(a)(6) of
                                the HEA.
Sec.   602.25(h).............  Section 602.25(h)         OMB 1840-0788
                                includes the new          It is
                                statutory concept of an   estimated that
                                institution's or          this
                                program's right to        regulation
                                review new financial      would increase
                                information, if it        the burden on
                                meets current             61 accrediting
                                provisions, before the    agencies
                                accrediting agency        primarily in
                                takes a final adverse     the first year
                                action.                   of
                                                          implementation
                                                          for a total of
                                                          2440 hours.
                               The estimated burden is
                                associated primarily
                                with implementing the
                                regulation in the
                                initial year as
                                agencies establish new
                                procedures. The time is
                                estimated to be 2440
                                hours, based on 61
                                accrediting agencies x
                                40 hours. Section
                                496(a)(6) of the HEA.
Sec.   602.26(b).............  Agencies must provide a   OMB 1840-0788
                                written notice to the     There is no
                                Secretary of any final    additional
                                decision that is          paperwork
                                considered by the         burden
                                agency to be an adverse   associated
                                action as well as final   with this
                                decisions withdrawing,    section of the
                                suspending, revoking,     regulation.
                                or terminating an
                                institution's or
                                program's accreditation
                                or preaccreditation.
                                Section 496(c)(7) of
                                the HEA.
Sec.   602.26(d).............  Requires agencies to      OMB 1840-0788
                                make available to the     There is no
                                Secretary and the         additional
                                public a statement        paperwork
                                regarding the reasons     burden
                                for withdrawing,          associated
                                suspending, revoking,     with this
                                or terminating an         section of the
                                institution's or          regulation.
                                program's accreditation
                                or preaccreditation.
                                The statement must
                                include any comments
                                that affected
                                institutions or
                                programs want to make
                                with regard to that
                                decision or evidence
                                that the institution or
                                program was offered the
                                opportunity to provide
                                comments. The proposed
                                changes provide
                                clarifying language and
                                add that the statement
                                must provide evidence
                                that an institution or
                                program was offered an
                                opportunity to provide
                                comments if no comments
                                were received. Section
                                496(c)(7) of the HEA.
Sec.   602.27(a).............  Requires agencies to      OMB 1840-0788
                                provide to the            It is
                                Secretary a copy of any   estimated that
                                annual report it          burden on the
                                prepares, an updated      15 agencies
                                directory of its          that would be
                                accredited institutions   affected by
                                and programs, any         the proposed
                                proposed changes in an    regulation
                                agency's policies         would be
                                procedures or             reduced by 300
                                accreditation standards   hours if all
                                that might alter its      the agencies
                                scope of recognition or   decided to add
                                compliance with the       distance
                                Criteria for              education or
                                Recognition, and a        correspondence
                                notification if it is     education to
                                changing its scope of     their scope of
                                recognition to include    recognition.
                                distance education or
                                correspondence
                                education. Further, if
                                requested by the
                                Secretary, agencies
                                must provide a summary
                                of the major
                                accrediting activities
                                conducted during the
                                year. It also would
                                require agencies to
                                provide to the
                                Department, if the
                                Secretary requests, any
                                information regarding
                                an institution's
                                compliance with its
                                title IV, HEA program
                                responsibilities.
                                Although the proposed
                                changes to the
                                regulation primarily
                                clarify language that
                                is in the current
                                regulation, the changes
                                would impact the
                                reporting requirement
                                regarding adding
                                distance education or
                                correspondence
                                education to an
                                agency's scope of
                                recognition. The
                                proposed regulation
                                would remove the
                                requirement for
                                institutional
                                accrediting agencies to
                                submit an application
                                to the Department if an
                                agency wished to add
                                distance education or
                                correspondence
                                education to its scope
                                of recognition and only
                                require agencies to
                                notify the Department
                                that its scope has been
                                changed to include
                                distance education or
                                correspondence
                                education. Sections
                                496(a)(4) and
                                487(a)(15) of the HEA.
Sec.   602.31(a).............  Requires accrediting      OMB 1840-0788
                                agencies to submit an     There is no
                                application for           additional
                                recognition or renewal    paperwork
                                of recognition at the     burden
                                end of the period of      associated
                                recognition granted by    with this
                                the Secretary,            section of the
                                generally every five      regulation.
                                years. The application
                                must demonstrate that
                                the agency complies
                                with the Department's
                                Criteria for
                                Recognition as defined
                                in CFR 34 Part 602. The
                                proposed regulation
                                clarifies what
                                documents should be
                                provided with an
                                agency's application
                                for recognition.
                                Section 496(d) of the
                                HEA.

[[Page 39523]]

 
Sec.   602.31(b).............  Requires accrediting      OMB 1840-0788
                                agencies that wish to     There is no
                                expand their scope of     additional
                                recognition to submit     paperwork
                                an application to the     burden
                                Secretary. The proposed   associated
                                language would not        with this
                                place any additional      section of the
                                reporting burden on       regulation.
                                accrediting agencies
                                since the current
                                regulations also
                                require the submission
                                of an application when
                                an agency seeks to
                                expand its scope of
                                recognition. Section
                                496(a)(4)(B) of the HEA.
Sec.   602.31(c).............  Requires agencies to      OMB 1840-0788
                                provide a compliance      There is no
                                report when it has been   additional
                                determined that they do   paperwork
                                not fully comply with     burden
                                the criteria for          associated
                                recognition or are        with this
                                ineffective in applying   section of the
                                those criteria. In        regulation.
                                order for the Secretary
                                to determine that
                                agencies are reliable
                                authorities regarding
                                the quality of
                                education or training
                                offered through their
                                accredited institutions
                                or programs, agencies
                                must demonstrate that
                                they fully comply with
                                34 part 602 subpart B.
                                Therefore, while the
                                requirement to submit a
                                compliance report is
                                not identified in the
                                current regulation, the
                                proposed language would
                                place in writing what
                                has been the practice
                                of the Department in
                                order to comply with
                                Higher Education Act,
                                as amended. Sections
                                496(a) and (c) of the
                                HEA.
Sec.   602.31(d).............  Requires agencies that    OMB 1840-0788
                                notify the Department     It is
                                that they are changing    estimated that
                                their scope of            this
                                recognition to include    regulation
                                distance education or     would increase
                                correspondence            the burden of
                                education to annually     15 of the
                                monitor enrollment        remaining
                                growth of the             recognized
                                institutions they         agencies by 60
                                accredit that offer       hours if all
                                distance education. A     decided to
                                report would be           include
                                required to be sent to    distance
                                the Department for each   education in
                                institution that          their scope of
                                reports a 50 percent or   recognition in
                                higher increase of        the future.
                                headcount enrollment      Based on prior
                                during a fiscal year.     experiences
                                The report must address   with
                                the capacity of each      institutions
                                institution to            experiencing
                                accommodate significant   significant
                                growth in enrollment      growth, the
                                and to maintain           burden is
                                educational quality;      estimated to
                                the circumstances that    apply to 3
                                led to the growth; and    institutions
                                any other applicable      per year.
                                information affecting
                                compliance with the
                                regulation. As noted in
                                the discussion of
                                proposed Sec.
                                602.19(e) this section
                                of the regulation would
                                only affect the 15
                                institutional
                                accrediting agencies
                                and programmatic
                                accrediting agencies
                                that accredit
                                freestanding
                                institutions that
                                currently do not have
                                distance education in
                                their scope of
                                recognition. Section
                                496(a)(4)(B) and (q) of
                                the HEA.
Sec.   602.32................  Requires the Department   OMB 1840-0788
                                to forward to the         There is no
                                agency a draft analysis   additional
                                of an agency's            paperwork
                                application for           burden
                                recognition that          associated
                                includes any identified   with this
                                areas of non-             section of the
                                compliance, the           regulation.
                                proposed recognition
                                recommendation, and a
                                copy of all third-party
                                comments that the
                                Department received.
                                The agency could then
                                provide a written
                                response to the draft
                                staff analysis and the
                                third-party comments.
                                The proposed change
                                would simplify the
                                language of the current
                                regulation in that it
                                combines several
                                paragraphs of the
                                current regulation into
                                a single paragraph. The
                                current regulations
                                also require that the
                                Department invite
                                accrediting agencies to
                                provide a written
                                response to all draft
                                analyses developed by
                                Department staff as
                                well as all third-party
                                comments received by
                                the Department. Section
                                496(o) of the HEA.
------------------------------------------------------------------------

    If you want to comment on the proposed information collection 
requirements, please send your comments to the Office of Information 
and Regulatory Affairs, OMB, Attention: Desk Officer for U.S. 
Department of Education. Send these comments by e-mail to <a href="/cdn-cgi/l/email-protection#743b3d26352b303b373f3120341b19165a111b045a131b02"><span class="__cf_email__" data-cfemail="e0afa9b2a1bfa4afa3aba5b4a08f8d82ce858f90ce878f96">[email protected]</span></a> or by fax to (202) 395-6974. You may also send a 
copy of these comments to the Department contact named in the ADDRESSES 
section of this preamble.
    We consider your comments on these proposed collections of 
information in--
    <bullet> Deciding whether the proposed collections are necessary 
for the proper performance of our functions, including whether the 
information will have practical use;
    <bullet> Evaluating the accuracy of our estimate of the burden of 
the proposed collections, including the validity of our methodology and 
assumptions;
    <bullet> Enhancing the quality, usefulness, and clarity of the 
information we collect; and
    <bullet> Minimizing the burden on those who must respond. This 
includes exploring the use of appropriate automated, electronic, 
mechanical, or other technological collection techniques or other forms 
of information technology; e.g., permitting electronic submission of 
responses.
    OMB is required to make a decision concerning the collections of 
information contained in these proposed regulations between 30 and 60 
days after publication of this document in the Federal Register. 
Therefore, to ensure that OMB gives your comments full consideration, 
it is important that OMB receives the comments within 30 days of 
publication. This does not affect the deadline for your comments to us 
on the proposed regulations.

Intergovernmental Review

    This program is not subject to Executive Order 12372 and the 
regulations in 34 CFR part 79.

Assessment of Educational Impact

    In accordance with section 411 of the General Education Provisions 
Act, 20 U.S.C. 1221e-4, the Secretary particularly requests comments on 
whether these proposed regulations would require transmission of 
information that any other agency or authority of the United States 
gathers or makes available.

Electronic Access to This Document

    You may view this document, as well as all other Department of 
Education documents published in the Federal Register, in text or Adobe 
Portable Document Format (PDF) on the Internet at the following site: 
www.ed.gov/news/fedregister.
    To use PDF you must have Adobe Acrobat Reader, which is available 
free at this site. If you have questions about using PDF, call the U.S. 
Government Printing Office (GPO), toll free, at 1-888-293-6498; or in 
the Washington, DC, area at (202) 512-1530.


[[Page 39524]]


    Note: The official version of this document is the document 
published in the Federal Register. Free Internet access to the 
official edition of the Federal Register and the Code of Federal 
Regulations is available on GPO Access at: www.gpoaccess.gov/nara/index.html.

(Catalog of Federal Domestic Assistance Number does not apply.)

List of Subjects in 34 CFR 600 and 34 CFR 602

    Colleges and universities, Education, Reporting and recordkeeping 
requirements.

    Dated: July 28, 2009.
Arne Duncan,
Secretary of Education.
    For the reasons discussed in the preamble, the Secretary proposes 
to amend parts 600 and 602 of title 34 of the Code of Federal 
Regulations as follows:

PART 600--INSTITUTIONAL ELIGIBILITY 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. Revising the definition of Correspondence course.
    B. Adding in alphabetical order a new definition of Distance 
education.
    C. Removing the definition of Telecommunications course.
    The addition and revision read as follows:


Sec.  600.2   Definitions.

* * * * *
    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 instructor. Interaction between the 
instructor and student is limited, is not regular and substantive, and 
is primarily initiated by the student. Correspondence courses are 
typically self-paced.
    (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.
* * * * *
    Distance education means education that uses one or more of the 
technologies listed in paragraphs (1) through (4) of this definition to 
deliver instruction to students who are separated from the instructor 
and to support regular and substantive interaction between the students 
and the instructor, either synchronously or asynchronously. The 
technologies may include--
    (1) The internet;
    (2) One-way and two-way transmissions through open broadcast, 
closed circuit, cable, microwave, broadband lines, fiber optics, 
satellite, or wireless communications devices;
    (3) Audio conferencing; or
    (4) Video cassettes, DVDs, and CD-ROMs, if the cassettes, DVDs, or 
CD-ROMs are used in a course in conjunction with any of the 
technologies listed in paragraphs (1) through (3) of this definition.
* * * * *

PART 602--THE SECRETARY'S RECOGNITION OF ACCREDITING AGENCIES

    3. The authority citation for part 602 continues to read as 
follows:

    Authority:  20 U.S.C. 1099b, unless otherwise noted.

    4. Section 602.3 is amended by:
    A. Adding in alphabetical order a new definition of Compliance 
report.
    B. Adding in alphabetical order a new definition of Correspondence 
education.
    C. Adding in alphabetical order a new definition of Designated 
Federal Official.
    D. Adding in alphabetical order a new definition of Direct 
assessment program.
    E. Revising the definition of Distance education.
    F. Adding in alphabetical order a new definition of Recognition.
    G. Revising paragraph (5) of the definition of Scope of 
recognition.
    H. Revising the definition of Teach-out agreement.
    I. Adding in alphabetical order a new definition of Teach-out plan.
    The additions and revisions read as follows:


Sec.  602.3   What definitions apply to this part?

* * * * *
    Compliance report means a written report that the Department 
requires an agency to file to demonstrate that the agency has addressed 
deficiencies specified in a decision letter from the senior Department 
official or the Secretary.
    Correspondence education means:
    (1) Education provided through one or more courses 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 instructor.
    (2) Interaction between the instructor and the student is limited, 
is not regular and substantive, and is primarily initiated by the 
student.
    (3) Correspondence courses are typically self-paced.
    (4) Correspondence education is not distance education.
    Designated Federal Official means the Federal officer designated 
under section 10(f) of the Federal Advisory Committee Act, 5 U.S.C. 
Appdx. 1.
    Direct assessment program means an instructional program that, in 
lieu of credit hours or clock hours as a measure of student learning, 
utilizes direct assessment of student learning, or recognizes the 
direct assessment of student learning by others, and meets the 
conditions of 34 CFR 668.10. For title IV, HEA purposes, the 
institution must obtain approval for the direct assessment program from 
the Secretary under 34 CFR 668.10(g) or (h) as applicable. As part of 
that approval, the accrediting agency must--
    (1) Evaluate the program(s) and include them in the institution's 
grant of accreditation or preaccreditation; and
    (2) Review and approve the institution's claim of each direct 
assessment program's equivalence in terms of credit or clock hours.
    Distance education means education that uses one or more of the 
technologies listed in paragraphs (1) through (4) of this definition to 
deliver instruction to students who are separated from the instructor 
and to support regular and substantive interaction between the students 
and the instructor, either synchronously or asynchronously. The 
technologies may include--
    (1) The internet;
    (2) One-way and two-way transmissions through open broadcast, 
closed circuit, cable, microwave, broadband lines, fiber optics, 
satellite, or wireless communications devices;
    (3) Audio conferencing; or
    (4) Video cassettes, DVDs, and CD-ROMs, if the cassettes, DVDs, or 
CD-ROMs are used in a course in conjunction with any of the 
technologies listed in paragraphs (1) through (3) of this definition.
* * * * *
    Recognition means an unappealed determination by the senior 
Department official under Sec.  602.36, or a determination by the 
Secretary on appeal under Sec.  602.37, that an accrediting agency 
complies with the criteria for recognition listed in subpart B of this 
part and that the agency is

[[Page 39525]]

effective in its application of those criteria. A grant of recognition 
to an agency as a reliable authority regarding the quality of education 
or training offered by institutions or programs it accredits remains in 
effect for the term granted except upon a determination made in 
accordance with subpart C of this part that the agency no longer 
complies with the subpart B criteria or that it has become ineffective 
in its application of those criteria.
* * * * *
    Scope of recognition or scope * * *
    (5) Coverage of accrediting activities related to distance 
education or correspondence education.
* * * * *
    Teach-out agreement means a written agreement between institutions 
that provides for the equitable treatment of students and a reasonable 
opportunity for students to complete their program of study if an 
institution, or an institutional location that provides one hundred 
percent of at least one program offered, ceases to operate before all 
enrolled students have completed their program of study.
    Teach-out plan means a written plan developed by an institution 
that provides for the equitable treatment of students if an 
institution, or an institutional location that provides one hundred 
percent of at least one program, ceases to operate before all students 
have completed their program of study, and may include, if required by 
the institution's accrediting agency, a teach-out agreement between 
institutions.
* * * * *
    5. Section 602.15 is amended by:
    A. Revising paragraph (a)(2).
    B. In paragraph (b)(1), removing the word ``two'' and removing the 
letter ``s'' from the word ``reviews'' the first time it appears.
    C. Revising paragraph (b)(2).
    The revisions read as follows:


Sec.  602.15   Administrative and fiscal responsibilities.

* * * * *
    (a) * * *
    (2) Competent and knowledgeable individuals, qualified by education 
and experience in their own right and trained by the agency on their 
responsibilities, as appropriate for their roles, regarding the 
agency's standards, policies, and procedures, to conduct its on-site 
evaluations, apply or establish its policies, and make its accrediting 
and preaccrediting decisions, including, if applicable to the agency's 
scope, their responsibilities regarding distance education and 
correspondence education;
* * * * *
    (b) * * *
    (2) All decisions made throughout an institution's or program's 
affiliation with the agency regarding the accreditation and 
preaccreditation of any institution or program and substantive changes, 
including all correspondence that is significantly related to those 
decisions.
* * * * *
    6. Section 602.16 by amended by:
    A. Redesignating paragraphs (c) and (d) as paragraphs (d) and (e), 
respectively.
    B. Revising paragraph (a)(1)(i).
    C. Adding new paragraphs (c) and (f).
    The additions and revision read as follows:


Sec.  602.16  Accreditation and preaccreditation standards.

    (a) * * *
    (1) * * *
    (i) Success with respect to student achievement in relation to the 
institution's mission, which may include different standards for 
different institutions or programs, as established by the institution, 
including, as appropriate, consideration of State licensing 
examinations, course completion, and job placement rates.
* * * * *
    (c) If the agency has or seeks to include within its scope of 
recognition the evaluation of the quality of institutions or programs 
offering distance education or correspondence education, the agency's 
standards must effectively address the quality of an institution's 
distance education or correspondence education in the areas identified 
in paragraph (a)(1) of this section. The agency is not required to have 
separate standards, procedures, or policies for the evaluation of 
distance education or correspondence education.
* * * * *
    (f) Nothing in paragraph (a) of this section restricts--
    (1) An accrediting agency from setting, with the involvement of its 
members, and applying accreditation standards for or to institutions or 
programs that seek review by the agency; or
    (2) An institution from developing and using institutional 
standards to show its success with respect to student achievement, 
which achievement may be considered as part of any accreditation 
review.
* * * * *
    7. Section 602.17 is amended by:
    A. In paragraph (e), removing the word ``and'' at the end of the 
paragraph.
    B. In paragraph (f), removing the punctuation ``.'' and adding, in 
its place, the words ``; and''.
    C. Adding a new paragraph (g).
    The addition reads as follows:


Sec.  602.17  Application of standards in reaching an accrediting 
decision.

* * * * *
    (g) Requires institutions that offer distance education or 
correspondence education to have processes in place through which the 
institution establishes that the student who registers in a distance 
education or correspondence education course or program is the same 
student who participates in and completes the course or program and 
receives the academic credit. The agency meets this requirement if it--
    (1) Requires institutions to verify the identity of a student who 
participates in class or coursework by using, at the option of the 
institution, methods such as--
    (i) A secure login and pass code;
    (ii) Proctored examinations; and
    (iii) New or other technologies and practices that are effective in 
verifying student identification; and
    (2) Makes clear in writing that institutions must use processes 
that protect student privacy and notify students of any projected 
additional student charges associated with the verification of student 
identity at the time of registration or enrollment.
* * * * *
    8. Section 602.18 is amended by:
    A. Revising the introductory text.
    B. Redesignating paragraphs (a), (b), and (c) as paragraphs (b), 
(c), and (d), respectively.
    C. In newly redesignated paragraph (c), removing the word ``and'' 
at the end of the paragraph.
    D. In newly redesignated paragraph (d), removing the punctuation 
``.'' and adding, in its place, the words ``; and''.
    E. Adding new paragraphs (a) and (e).
    The additions and revision read as follows:


Sec.  602.18  Ensuring consistency in decision-making.

    The agency must consistently apply and enforce standards that 
respect the stated mission of the institution, including religious 
mission, and that ensure that the education or training offered by an 
institution or program, including any offered through distance 
education or correspondence education, is of sufficient quality to 
achieve its stated objective for the duration of any accreditation or 
preaccreditation period granted by the agency. The agency meets this 
requirement if the agency--
    (a) Has written specification of the requirements for accreditation 
and preaccreditation that include clear

[[Page 39526]]

standards for an institution or program to be accredited;
* * * * *
    (e) Provides the institution or program with a detailed written 
report that clearly identifies any deficiencies in the institution's or 
program's compliance with the agency's standards.
* * * * *
    9. Section 602.19 is amended by:
    A. Revising paragraph (b).
    B. Adding new paragraphs (c), (d), and (e).
    The revision and additions read as follows:


Sec.  602.19  Monitoring and reevaluation of accredited institutions 
and programs.

* * * * *
    (b) The agency must demonstrate it has, and effectively applies, a 
set of monitoring and evaluation approaches that enables the agency to 
identify problems with an institution's or program's continued 
compliance with agency standards and that takes into account 
institutional or program strengths and stability. These approaches must 
include periodic reports, and collection and analysis of key data and 
indicators, identified by the agency, including, but not limited to, 
fiscal information and measures of student achievement, consistent with 
the provisions of Sec.  602.16(f). This provision does not require 
institutions or programs to provide annual reports on each specific 
accreditation criterion.
    (c) Each agency must monitor overall growth of the institutions or 
programs it accredits and, at least annually, collect headcount 
enrollment data from those institutions or programs.
    (d) Institutional accrediting agencies must monitor the growth of 
programs at institutions experiencing significant enrollment growth, as 
reasonably defined by the agency.
    (e) Any agency that has notified the Secretary of a change in its 
scope in accordance with Sec.  602.27(a)(5) must monitor the headcount 
enrollment of each institution it has accredited that offers distance 
education or correspondence education. If any such institution has 
experienced an increase in headcount enrollment of 50 percent or more 
within one institutional fiscal year, the agency must report that 
information to the Secretary within 30 days of acquiring such data.
* * * * *
    10. Section 602.22 is amended by:
    A. In paragraph (a)(2)(iii), removing the words ``, in either 
content'' and adding, in their place, the words ``from the existing 
offerings of educational programs,''.
    B. In paragraph (a)(2)(iv), removing the words ``courses or'', 
adding the words ``of study'' after the word ``programs'' the first 
time it appears, and removing the word ``above'' and adding, in its 
place, the words ``different from''.
    C. Revising paragraph (a)(2)(vii).
    D. Adding new paragraphs (a)(2)(viii), (a)(2)(ix), and (a)(2)(x).
    E. Adding a new paragraph (a)(3).
    F. Revising paragraph (b).
    G. Revising paragraph (c), introductory text.
    H. In paragraph (c)(2), adding the words ``a representative sample 
of'' immediately after the words ``visits to''.
    The additions and revisions read as follows:


Sec.  602.22  Substantive change.

    (a) * * *
    (2) * * *
    (vii) If the agency's accreditation of an institution enables the 
institution to seek eligibility to participate in title IV, HEA 
programs, the entering into a contract under which an institution or 
organization not certified to participate in the title IV, HEA programs 
offers more than 25 percent of one or more of the accredited 
institution's educational programs.
    (viii)(A) If the agency's accreditation of an institution enables 
it to seek eligibility to participate in title IV, HEA programs, the 
establishment of an additional location at which the institution offers 
at least 50 percent of an educational program. The addition of such a 
location must be approved by the agency in accordance with paragraph 
(c) of this section unless the accrediting agency determines, and 
issues a written determination stating that the institution has--
    (1) Successfully completed at least one cycle of accreditation of 
maximum length offered by the agency and one renewal, or has been 
accredited for at least ten years;
    (2) At least three additional locations that the agency has 
approved; and
    (3) Met criteria established by the agency indicating sufficient 
capacity to add additional locations without individual prior 
approvals, including at a minimum satisfactory evidence of a system to 
ensure quality across a distributed enterprise that includes--
    (i) Clearly identified academic control;
    (ii) Regular evaluation of the locations;
    (iii) Adequate faculty, facilities, resources, and academic and 
student support systems;
    (iv) Financial stability; and
    (v) Long-range planning for expansion.
    (B) The agency's procedures for approval of an additional location, 
pursuant to paragraph (a)(2)(viii)(A) of this section, must require 
timely reporting to the agency of every additional location established 
under this approval.
    (C) Each agency determination or redetermination to preapprove an 
institution's addition of locations under paragraph (a)(2)(viii)(A) of 
this section may not exceed five years.
    (D) The agency may not preapprove an institution's addition of 
locations under paragraph (a)(2)(viii)(A) of this section after the 
institution undergoes a change in ownership resulting in a change in 
control as defined in 34 CFR 600.31 until the institution demonstrates 
that it meets the conditions for the agency to preapprove additional 
locations described in this paragraph.
    (E) The agency must have an effective mechanism for conducting, at 
reasonable intervals, visits to a representative sample of additional 
locations approved under paragraph (a)(2)(viii)(A) of this section.
    (ix) The acquisition of any other institution or any program or 
location of another institution.
    (x) The addition of a permanent location at a site at which the 
institution is conducting a teach-out for students of another 
institution that has ceased operating before all students have 
completed their program of study.
    (3) The agency's substantive change policy must define when the 
changes made or proposed by an institution are or would be sufficiently 
extensive to require the agency to conduct a new comprehensive 
evaluation of that institution.
    (b) The agency may determine the procedures it uses to grant prior 
approval of the substantive change. However, these procedures must 
specify an effective date, which is not retroactive, on which the 
change is included in the program's or institution's accreditation. An 
agency may designate the date of a change in ownership as the effective 
date of its approval of that substantive change if the accreditation 
decision is made within 30 days of the change in ownership. Except as 
provided in paragraph (c) of this section, these procedures may, but 
need not, require a visit by the agency.
    (c) Except as provided in paragraph (a)(2)(viii)(A) of this 
section, if the agency's accreditation of an institution enables the 
institution to seek eligibility to participate in title IV, HEA 
programs, the agency's procedures for the approval of an additional 
location where at least

[[Page 39527]]

50 percent of an educational program is offered must provide for a 
determination of the institution's fiscal and administrative capacity 
to operate the additional location. In addition, the agency's 
procedures must include--
* * * * *
    11. Section 602.23 is amended by:
    A. Revising paragraph (a) introductory text.
    B. Revising paragraph (c)(1).
    The revisions read as follows:


Sec.  602.23  Operating procedures all agencies must have.

    (a) The agency must maintain and make available to the public 
written materials describing--
* * * * *
    (c) * * *
    (1) Review in a timely, fair, and equitable manner any complaint it 
receives against an accredited institution or program that is related 
to the agency's standards or procedures. The agency may not complete 
its review and make a decision regarding a complaint unless, in 
accordance with published procedures, it ensures that the institution 
or program has sufficient opportunity to provide a response to the 
complaint;
* * * * *
    12. Section 602.24 is amended by:
    A. Revising paragraph (c).
    B. Adding new paragraphs (d) and (e).
    The addition and revision read as follows:


Sec.  602.24  Additional procedures certain institutional accreditors 
must have.

* * * * *
    (c) Teach-out plans and agreements. (1) The agency must require an 
institution it accredits or preaccredits to submit a teach-out plan to 
the agency for approval upon the occurrence of any of the following 
events:
    (i) The Secretary notifies the agency that the Secretary has 
initiated an emergency action against an institution, in accordance 
with section 487(c)(1)(G) of the HEA, or an action to limit, suspend, 
or terminate an institution participating in any title IV, HEA program, 
in accordance with section 487(c)(1)(F) of the HEA, and that a teach-
out plan is required.
    (ii) The agency acts to withdraw, terminate, or suspend the 
accreditation or preaccreditation of the institution.
    (iii) The institution notifies the agency that it intends to cease 
operations entirely or close a location that provides one hundred 
percent of at least one program.
    (iv) A State licensing or authorizing agency notifies the agency 
that an institution's license or legal authorization to provide an 
educational program has been or will be revoked.
    (2) The agency must evaluate the teach-out plan to ensure it 
provides for the equitable treatment of students under criteria 
established by the agency, specifies additional charges, if any, and 
provides for notification to the students of any additional charges.
    (3) If the agency approves a teach-out plan that includes a program 
that is accredited by another recognized accrediting agency, it must 
notify that accrediting agency of its approval.
    (4) The agency may require an institution it accredits or 
preaccredits to enter into a teach-out agreement as part of its teach-
out plan.
    (5) The agency must require an institution it accredits or 
preaccredits that enters into a teach-out agreement, either on its own 
or at the request of the agency, to submit that teach-out agreement for 
approval. The agency may approve the teach-out agreement only if the 
agreement is between institutions that are accredited or preaccredited 
by a nationally recognized accrediting agency, is consistent with 
applicable standards and regulations, and provides for the equitable 
treatment of students by ensuring that--
    (i) The teach-out institution has the necessary experience, 
resources, and support services to--
    (A) Provide an educational program that is of acceptable quality 
and reasonably similar in content, structure, and scheduling to that 
provided by the institution that is ceasing operations either entirely 
or at one of its locations; and
    (B) Remain stable, carry out its mission, and meet all obligations 
to existing students; and
    (ii) The teach-out institution demonstrates that it can provide 
students access to the program and services without requiring them to 
move or travel substantial distances and that it will provide students 
with information about additional charges, if any.
    (d) Closed institution. If an institution the agency accredits or 
preaccredits closes without a teach-out plan or agreement, the agency 
must work with the Department and the appropriate State agency, to the 
extent feasible, to assist students in finding reasonable opportunities 
to complete their education without additional charges.
    (e) Transfer of credit policies. The accrediting agency must 
confirm, as part of its review for initial accreditation or 
preaccreditation, or renewal of accreditation, that the institution has 
transfer of credit policies that--
    (1) Are publicly disclosed in accordance with Sec.  668.43(x); and
    (2) Include a statement of the criteria established by the 
institution regarding the transfer of credit earned at another 
institution of higher education.
* * * * *
    13. Section 602.25 is revised to read as follows:


Sec.  602.25  Due process.

    The agency must demonstrate that the procedures it uses throughout 
the accrediting process satisfy due process. The agency meets this 
requirement if the agency does the following:
    (a) Provides adequate written specification of its requirements, 
including clear standards, for an institution or program to be 
accredited or preaccredited.
    (b) Uses procedures that afford an institution or program a 
reasonable period of time to comply with the agency's requests for 
information and documents.
    (c) Provides written specification of any deficiencies identified 
at the institution or program examined.
    (d) Provides sufficient opportunity for a written response by an 
institution or program regarding any deficiencies identified by the 
agency, to be considered by the agency within a timeframe determined by 
the agency, and before any adverse action is taken.
    (e) Notifies the institution or program in writing of any adverse 
accrediting action or an action to place the institution or program on 
probation or show cause. The notice describes the basis for the action.
    (f) Provides an opportunity, upon written request of an institution 
or program, for the institution or program to appeal any adverse action 
prior to the action becoming final.
    (1) The appeal must take place at a hearing before an appeals panel 
that--
    (i) May not include current members of the agency's decision-making 
body that took the initial adverse action;
    (ii) Is subject to a conflict of interest policy; and
    (iii) Affirms, amends, or reverses the adverse action, which will 
be implemented by the appeals panel or by the original decision-making 
body, at the agency's option. If the original decision-making body is 
responsible for implementing the appeals panel's decision, that body 
must act regarding the institution's or program's accreditation status 
in a manner consistent with the appeals panel's decision.
    (2) The agency must recognize the right of the institution or 
program to employ counsel to represent the

[[Page 39528]]

institution or program during its appeal, including to make any 
presentation that the agency permits the institution or program to make 
on its own during the appeal.
    (g) The agency notifies the institution or program in writing of 
the result of its appeal and the basis for that result.
    (h)(1) The agency must provide for a process, in accordance with 
written procedures, through which an institution or program may, before 
the agency reaches a final adverse action decision, seek review of new 
financial information if all of the following conditions are met:
    (i) The financial information was unavailable to the institution or 
program until after the decision subject to appeal was made.
    (ii) The financial information is significant and bears materially 
on the financial deficiencies identified by the agency. The criteria of 
significance and materiality are determined by the agency.
    (iii) The only remaining deficiency cited by the agency in support 
of a final adverse action decision is the institution's or program's 
failure to meet an agency standard pertaining to finances.
    (2) An institution or program may seek the review of new financial 
information described in paragraph (h)(1) of this section only once and 
any determination by the agency made with respect to that review does 
not provide a basis for an appeal.

(Authority: 20 U.S.C. 1099b)


    14. Section 602.26 is amended by:
    A. In paragraph (b)(2), removing the punctuation ``;'' and adding, 
in its place, the punctuation ``.''.
    B. Adding a new paragraph (b)(3).
    C. In paragraph (c), removing the words ``(b)(1) and (b)(2)'' and 
adding, in their place, the words ``(b)(1), (b)(2), and (b)(3)''.
    D. Revising paragraph (d).
    The addition and revision read as follows:


Sec.  602.26  Notification of accrediting decisions.

* * * * *
    (b) * * *
    (3) A final decision to take any other adverse action, as defined 
by the agency, not listed in paragraph (b)(2) of this section;
* * * * *
    (d) For any decision listed in paragraph (b)(2) of this section, 
makes available to the Secretary, the appropriate State licensing or 
authorizing agency, and the public, no later than 60 days after the 
decision, a brief statement summarizing the reasons for the agency's 
decision and the official comments that the affected institution or 
program may wish to make with regard to that decision, or evidence that 
the affected institution has been offered the opportunity to provide 
official comment;
* * * * *
    15. Section 602.27 is revised to read as follows:


Sec.  602.27  Other information an agency must provide the Department.

    (a) The agency must submit to the Department--
    (1) A copy of any annual report it prepares;
    (2) A copy, updated annually, of its directory of accredited and 
preaccredited institutions and programs;
    (3) A summary of the agency's major accrediting activities during 
the previous year (an annual data summary), if requested by the 
Secretary to carry out the Secretary's responsibilities related to this 
part;
    (4) Any proposed change in the agency's policies, procedures, or 
accreditation or preaccreditation standards that might alter its--
    (i) Scope of recognition, except as provided in paragraph (a)(5) of 
this section; or
    (ii) Compliance with the criteria for recognition;
    (5) Notification that the agency has expanded its scope of 
recognition to include distance education or correspondence education 
as provided in section 496(a)(4)(B)(i)(I) of the HEA. Such an expansion 
of scope is effective on the date the Department receives the 
notification;
    (6) The name of any institution or program it accredits that the 
agency has reason to believe is failing to meet its title IV, HEA 
program responsibilities or is engaged in fraud or abuse, along with 
the agency's reasons for concern about the institution or program; and
    (7) If the Secretary requests, information that may bear upon an 
accredited or preaccredited institution's compliance with its title IV, 
HEA program responsibilities, including the eligibility of the 
institution or program to participate in title IV, HEA programs.
    (b) If an agency has a policy regarding notification to an 
institution or program of contact with the Department in accordance 
with paragraph (a)(6) or (a)(7) of this section, it must provide for a 
case-by-case review of the circumstances surrounding the contact, and 
the need for the confidentiality of that contact. Upon a specific 
request by the Department, the agency must consider that contact 
confidential.

(Authority: 20 U.S.C. 1099b)


    16. Subpart C is revised to read as follows:
Subpart C--The Recognition Process

Application and Review by Department Staff

Sec.
602.30 Activities covered by recognition procedures.
602.31 Agency submissions to the Department.
602.32 Procedures for Department review of applications for 
recognition or for change in scope, compliance reports, and 
increases in enrollment.
602.33 Procedures for review of agencies during the period of 
recognition.

Review by the National Advisory Committee on Institutional Quality and 
Integrity

602.34 Advisory Committee meetings.
602.35 Responding to the Advisory Committee's recommendation.

Review and Decision by the Senior Department Official

602.36 Senior Department official's decision.

Appeal Rights and Procedures

602.37 Appealing the senior Department official's decision to the 
Secretary.
602.38 Contesting the Secretary's final decision to deny, limit, 
suspend, or terminate an agency's recognition.

Subpart C--The Recognition Process

Application and Review by Department Staff


Sec.  602.30  Activities covered by recognition procedures.

    Recognition proceedings are administrative actions taken on any of 
the following matters:
    (a) Applications for initial or continued recognition submitted 
under Sec.  602.31(a).
    (b) Applications for an expansion of scope submitted under Sec.  
602.31(b).
    (c) Compliance reports submitted under Sec.  602.31(c).
    (d) Reviews of agencies that have expanded their scope of 
recognition by notice, following receipt by the Department of 
information of an increase in headcount enrollment described in Sec.  
602.19(e).
    (e) Staff analyses identifying areas of non-compliance based on a 
review conducted under Sec.  602.33. (Authority: 20 U.S.C. 1099b)


Sec.  602.31  Agency submissions to the Department.

    (a) Applications for recognition or renewal of recognition. An 
accrediting agency seeking initial or continued recognition must submit 
a written application to the Secretary. Each accrediting agency must 
submit an application for continued recognition at

[[Page 39529]]

least once every five years, or within a shorter time period specified 
in the final recognition decision. The application must consist of--
    (1) A statement of the agency's requested scope of recognition;
    (2) Evidence, including documentation, that the agency complies 
with the criteria for recognition listed in subpart B of this part and 
effectively applies those criteria; and
    (3) Evidence, including documentation, of how an agency that 
includes or seeks to include distance education or correspondence 
education in its scope of recognition applies its standards in 
evaluating programs and institutions it accredits that offer distance 
education or correspondence education.
    (b) Applications for expansions of scope. An agency seeking an 
expansion of scope by application must submit a written application to 
the Secretary. The application must--
    (1) Specify the scope requested;
    (2) Include documentation of experience in accordance with Sec.  
602.12(b); and
    (3) Provide copies of any relevant standards, policies, or 
procedures developed and applied by the agency and documentation of the 
application of these standards, policies, or procedures.
    (c) Compliance reports. If an agency is required to submit a 
compliance report, it must do so within 30 days following the end of 
the period for achieving compliance as specified in the decision of the 
senior Department official or Secretary, as applicable.
    (d) Review following an increase in headcount enrollment. If an 
agency that has notified the Secretary in writing of its change in 
scope to include distance education or correspondence education in 
accordance with Sec.  602.27(a)(5) reports an increase in headcount 
enrollment in accordance with Sec.  602.19(e) for an institution it 
accredits, or if the Department notifies the agency of such an increase 
at one of the agency's accredited institutions, the agency must, within 
45 days of reporting the increase or receiving notice of the increase 
from the Department, as applicable, submit a report explaining--
    (1) How the agency evaluates the capacity of the institutions or 
programs it accredits to accommodate significant growth in enrollment 
and to maintain educational quality;
    (2) The specific circumstances regarding the growth at the 
institution(s) or programs(s) that triggered the review and the results 
of any evaluation conducted by the agency; and
    (3) Any other information that the agency deems appropriate to 
demonstrate the effective application of the criteria for recognition 
or that the Department may require.
    (e) Consent to sharing of information. By submitting an application 
for recognition, the agency authorizes Department staff throughout the 
application process and during any period of recognition--
    (1) To observe its site visits to one or more of the institutions 
or programs it accredits or preaccredits, on an announced or 
unannounced basis;
    (2) To visit locations where agency activities such as training, 
review and evaluation panel meetings, and decision meetings take place, 
on an announced or unannounced basis;
    (3) To obtain copies of all documents the staff deems necessary to 
complete its review of the agency; and
    (4) To gain access to agency records, personnel, and facilities.
    (f) Public availability of agency records obtained by the 
Department. (1) The Secretary's processing and decision making on 
requests for public disclosure of agency materials reviewed under this 
part are governed by the Freedom of Information Act, 5 U.S.C. 552; the 
Trade Secrets Act, 18 U.S.C. 1905; the Privacy Act of 1974, as amended, 
5 U.S.C 552a; the Federal Advisory Committee Act, 5 U.S.C. Appdx. 1; 
and all other applicable laws. In recognition proceedings, agencies 
may--
    (i) Redact information that would identify individuals or 
institutions that is not essential to the Department's review of the 
agency;
    (ii) Make a good faith effort to designate all business information 
within agency submissions that the agency believes would be exempt from 
disclosure under exemption 4 of the Freedom of Information Act (FOIA), 
5 U.S.C. Sec.  552(b)(4). A blanket designation of all information 
contained within a submission, or of a category of documents, as 
meeting this exemption will not be considered a good faith effort and 
will be disregarded;
    (iii) Identify any other material the agency believes would be 
exempt from public disclosure under FOIA, the factual basis for the 
request, and any legal basis the agency has identified for withholding 
the document from disclosure; and
    (iv) Ensure documents submitted are only those required for 
Department review or as requested by Department officials.
    (2) The Secretary processes FOIA requests in accordance with 34 CFR 
part 5 and makes all documents provided to the Advisory Committee 
available to the public.

(Authority: 20 U.S.C. 1099b)

Sec.  602.32   Procedures for Department review of applications for 
recognition or for change in scope, compliance reports, and increases 
in enrollment.

    (a) After receipt of an agency's application for initial or 
continued recognition, or change in scope, or an agency's compliance 
report, or an agency's report submitted under Sec.  602.31(d), 
Department staff publishes a notice of the agency's application or 
report in the Federal Register inviting the public to comment on the 
agency's compliance with the criteria for recognition and establishing 
a deadline for receipt of public comment.
    (b) The Department staff analyzes the agency's application for 
initial or renewal of recognition, compliance report, or report 
submitted under Sec.  602.31(d) to determine whether the agency 
satisfies the criteria for recognition, taking into account all 
available relevant information concerning the compliance of the agency 
with those criteria and in the agency's effectiveness in applying the 
criteria. The analysis of an application for recognition and, as 
appropriate, of a compliance report, or of a report required under 
Sec.  602.31(d), includes--
    (1) Observations from site visit(s), on an announced or unannounced 
basis, to the agency or to a location where agency activities such as 
training, review and evaluation panel meetings, and decision meetings 
take place and to one or more of the institutions or programs it 
accredits or preaccredits;
    (2) Review of the public comments and other third-party information 
the Department staff receives by the established deadline, and the 
agency's responses to the third-party comments, as appropriate, as well 
as any other information Department staff assembles for purposes of 
evaluating the agency under this part; and
    (3) Review of complaints or legal actions involving the agency.
    (c) The Department staff analyzes the materials submitted in 
support of an application for expansion of scope to ensure that the 
agency has the requisite experience, policies that comply with subpart 
B of this part, capacity, and performance record to support the 
request.
    (d) Department staff's evaluation of an agency may also include a 
review of information directly related to institutions or programs 
accredited or preaccredited by the agency relative to their compliance 
with the agency's standards, the effectiveness of the

[[Page 39530]]

standards, and the agency's application of those standards.
    (e) If, at any point in its evaluation of an agency seeking initial 
recognition, Department staff determines that the agency fails to 
demonstrate compliance with the basic eligibility requirements in 
Sec. Sec.  602.10 through 602.13, the staff--
    (1) Returns the agency's application and provides the agency with 
an explanation of the deficiencies that caused staff to take that 
action; and
    (2) Recommends that the agency withdraw its application and reapply 
when the agency can demonstrate compliance.
    (f) Except with respect to an application that has been returned or 
is withdrawn under paragraph (e) of this section, when Department staff 
completes its evaluation of the agency, the staff--
    (1) Prepares a written draft analysis of the agency;
    (2) Sends the draft analysis including any identified areas of non-
compliance and a proposed recognition recommendation, and all 
supporting documentation, including all third-party comments the 
Department received by the established deadline, to the agency;
    (3) Invites the agency to provide a written response to the draft 
analysis and proposed recognition recommendation and third-party 
comments, specifying a deadline that provides at least 30 days for the 
agency's response;
    (4) Reviews the response to the draft analysis the agency submits, 
if any, and prepares the written final analysis. The final analysis 
includes a recognition recommendation to the senior Department 
official, as the Department staff deems appropriate, including, but not 
limited to, a recommendation to approve, deny, limit, suspend, or 
terminate recognition, require the submission of a compliance report 
and continue recognition pending a final decision on compliance, 
approve or deny a request for expansion of scope, or revise or affirm 
the scope of the agency; and
    (5) Provides to the agency, no later than seven days before the 
Advisory Committee meeting, the final staff analysis and any other 
available information provided to the Advisory Committee under Sec.  
602.34(c).
    (g) The agency may request that the Advisory Committee defer acting 
on an application at that Advisory Committee meeting if Department 
staff fails to provide the agency with the materials described, and 
within the timeframes provided, in paragraphs (f)(3) and (f)(5) of this 
section. If the Department staff's failure to send the materials in 
accordance with the timeframe described in paragraph (f)(3) or (f)(5) 
of this section is due to the failure of the agency to submit reports 
to the Department, other information the Secretary requested, or its 
response to the draft analysis, by the deadline established by the 
Secretary, the agency forfeits its right to request a deferral of its 
application.

(Authority: 20 U.S.C. 1099b)

Sec.  602.33   Procedures for review of agencies during the period of 
recognition.

    (a) Department staff may review the compliance of a recognized 
agency with the criteria for recognition at any time--
    (1) At the request of the Advisory Committee; or
    (2) Based on any information that, as determined by Department 
staff, appears credible and raises issues relevant to recognition.
    (b) The review may include, but need not be limited to, any of the 
activities described in Sec.  602.32(b) and (d).
    (c) If, in the course of the review, and after provision to the 
agency of the documentation concerning the inquiry and consultation 
with the agency, Department staff notes that one or more deficiencies 
may exist in the agency's compliance with the criteria for recognition 
or in the agency's effective application of those criteria, it--
    (1) Prepares a written draft analysis of the agency's compliance 
with the criteria of concern. The draft analysis reflects the results 
of the review, and includes a recommendation regarding what action to 
take with respect to recognition. Possible recommendations include, but 
are not limited to, a recommendation to limit, suspend, or terminate 
recognition, or require the submission of a compliance report and to 
continue recognition pending a final decision on compliance;
    (2) Sends the draft analysis including any identified areas of non-
compliance, and a proposed recognition recommendation, and all 
supporting documentation to the agency; and
    (3) Invites the agency to provide a written response to the draft 
analysis and proposed recognition recommendation, specifying a deadline 
that provides at least 30 days for the agency's response.
    (d) If, after review of the agency's response to the draft 
analysis, Department staff concludes that the agency has demonstrated 
compliance with the criteria for recognition, the staff notifies the 
agency in writing of the results of the review. If the review was 
requested by the Advisory Committee, staff also provides the Advisory 
Committee with the results of the review.
    (e) If, after review of the agency's response to the draft 
analysis, Department staff concludes that the agency has not 
demonstrated compliance, the staff--
    (1) Notifies the agency that the draft analysis will be finalized 
for presentation to the Advisory Committee;
    (2) Publishes a notice in the Federal Register including, if 
practicable, an invitation to the public to comment on the agency's 
compliance with the criteria in question and establishing a deadline 
for receipt of public comment;
    (3) Provides the agency with a copy of all public comments received 
and, if practicable, invites a written response from the agency;
    (4) Finalizes the staff analysis as necessary to reflect its review 
of any agency response and any public comment received; and
    (5) Provides to the agency, no later than seven days before the 
Advisory Committee meeting, the final staff analysis and a recognition 
recommendation and any other information provided to the Advisory 
Committee under Sec.  602.34(c).
    (f) The Advisory Committee reviews the matter in accordance with 
Sec.  602.34.

(Authority: 20 U.S.C. 1099b)

Review by the National Advisory Committee on Institutional Quality and 
Integrity


Sec.  602.34   Advisory Committee meetings.

    (a) Department staff submits a proposed schedule to the Chairperson 
of the Advisory Committee based on anticipated completion of staff 
analyses.
    (b) The Chairperson of the Advisory Committee establishes an agenda 
for the next meeting and, in accordance with the Federal Advisory 
Committee Act, presents it to the Designated Federal Official for 
approval.
    (c) Before the Advisory Committee meeting, Department staff 
provides the Advisory Committee with--
    (1) The agency's application for recognition or for expansion of 
scope, the agency's compliance report, or the agency's report submitted 
under Sec.  602.31(d), and supporting documentation;
    (2) The final Department staff analysis of the agency developed in 
accordance with Sec.  602.32 or Sec.  602.33, and any supporting 
documentation;
    (3) At the request of the agency, the agency's response to the 
draft analysis;
    (4) Any written third-party comments the Department received about 
the agency on or before the established deadline;

[[Page 39531]]

    (5) Any agency response to third-party comments; and
    (6) Any other information Department staff relied upon in 
developing its analysis.
    (d) At least 30 days before the Advisory Committee meeting, the 
Department publishes a notice of the meeting in the Federal Register 
inviting interested parties, including those who submitted third-party 
comments concerning the agency's compliance with the criteria for 
recognition, to make oral presentations before the Advisory Committee.
    (e) The Advisory Committee considers the materials provided under 
paragraph (c) of this section in a public meeting and invites 
Department staff, the agency, and other interested parties to make oral 
presentations during the meeting. A transcript is made of all Advisory 
Committee meetings.
    (f) The written motion adopted by the Advisory Committee regarding 
each agency's recognition will be made available during the Advisory 
Committee meeting. The Department will provide each agency, upon 
request, with a copy of the motion on recognition at the meeting. Each 
agency that was reviewed will be sent an electronic copy of the motion 
relative to that agency as soon as practicable after the meeting.
    (g) After each meeting of the Advisory Committee at which a review 
of agencies occurs, the Advisory Committee forwards to the senior 
Department official its recommendation with respect to each agency, 
which may include, but is not limited to, a recommendation to approve, 
deny, limit, suspend, or terminate recognition, to grant or deny a 
request for expansion of scope, to revise or affirm the scope of the 
agency, or to require the agency to submit a compliance report and to 
continue recognition pending a final decision on compliance.

(Authority: 20 U.S.C. 1099b)

Sec.  602.35   Responding to the Advisory Committee's recommendation.

    (a) Within ten days following the Advisory Committee meeting, the 
agency and Department staff may submit written comments to the senior 
Department official on the Advisory Committee's recommendation. The 
agency must simultaneously submit a copy of its written comments, if 
any, to Department staff. Department staff must simultaneously submit a 
copy of its written comments, if any, to the agency.
    (b) Comments must be limited to--
    (1) Any Advisory Committee recommendation that the agency or 
Department staff believes is not supported by the record;
    (2) Any incomplete Advisory Committee recommendation based on the 
agency's application; and
    (3) The inclusion of any recommendation or draft proposed decision 
for the senior Department official's consideration.
    (c)(1) Neither the Department staff nor the agency may submit 
additional documentary evidence with its comments unless the Advisory 
Committee's recognition recommendation proposes finding the agency 
noncompliant with, or ineffective in its application of, a criterion or 
criteria for recognition not identified in the final Department staff 
analysis provided to the Advisory Committee.
    (2) Within ten days of receipt by the Department staff of an 
agency's comments or new evidence, if applicable, or of receipt by the 
agency of the Department staff's comments, Department staff, the 
agency, or both, as applicable, may submit a response to the senior 
Department official. Simultaneously with submission, the agency must 
provide a copy of any response to the Department staff. Simultaneously 
with submission, Department staff must provide a copy of any response 
to the agency.

(Authority: 20 U.S.C. 1099b)

Review and Decision by the Senior Department Official


Sec.  602.36  Senior Department official's decision.

    (a) The senior Department official makes a decision regarding 
recognition of an agency based on the record compiled under Sec. Sec.  
602.32, 602.33, 602.34, and 602.35 including, as applicable, the 
following:
    (1) The materials provided to the Advisory Committee under Sec.  
602.34(c).
    (2) The transcript of the Advisory Committee meeting.
    (3) The recommendation of the Advisory Committee.
    (4) Written comments and responses submitted under Sec.  602.35.
    (5) New evidence submitted in accordance with Sec.  602.35(c)(1).
    (6) A communication from the Secretary referring an issue to the 
senior Department official's consideration under Sec.  602.37(e).
    (b) In the event that statutory authority or appropriations for the 
Advisory Committee ends, or there are fewer duly appointed Advisory 
Committee members than needed to constitute a quorum, and under 
extraordinary circumstances when there are serious concerns about an 
agency's compliance with subpart B of this part that require prompt 
attention, the senior Department official may make a decision in a 
recognition proceeding based on the record compiled under Sec.  602.32 
or Sec.  602.33 after providing the agency with an opportunity to 
respond to the final staff analysis. Any decision made by the senior 
Department official absent a recommendation from the Advisory Committee 
may be appealed to the Secretary as provided in Sec.  602.37.
    (c) Following consideration of an agency's recognition under this 
section, the senior Department official issues a recognition decision.
    (d) Except with respect to decisions made under paragraph (f) or 
(g) of this section and matters referred to the senior Department 
official under Sec.  602.37(e) or (f), the senior Department official 
notifies the agency in writing of the senior Department official's 
decision regarding the agency's recognition within 90 days of the 
Advisory Committee meeting or conclusion of the review under paragraph 
(b) of this section.
    (e) The senior Department official's decision may include, but is 
not limited to, approving, denying, limiting, suspending, or 
terminating recognition, granting or denying an application for an 
expansion of scope, revising or affirming the scope of the agency, or 
continuing recognition pending submission and review of a compliance 
report under Sec. Sec.  602.32 and 602.34 and review of the report by 
the senior Department official under this section.
    (1)(i) The senior Department official approves recognition if the 
agency complies with the criteria for recognition listed in subpart B 
of this part and if the agency effectively applies those criteria.
    (ii) If the senior Department official approves recognition, the 
recognition decision defines the scope of recognition and the 
recognition period. The recognition period does not exceed five years, 
including any time during which recognition was continued to permit 
submission and review of a compliance report.
    (iii) If the scope or period of recognition is less than that 
requested by the agency, the senior Department official explains the 
reasons for approving a lesser scope or recognition period.
    (2)(i) Except as provided in paragraph (e)(3) of this section, if 
the agency either fails to comply with the criteria for recognition 
listed in subpart B of this part, or to apply those criteria 
effectively, the senior Department

[[Page 39532]]

official denies, limits, suspends, or terminates recognition.
    (ii) If the senior Department official denies, limits, suspends, or 
terminates recognition, the senior Department official specifies the 
reasons for this decision, including all criteria the agency fails to 
meet and all criteria the agency has failed to apply effectively.
    (3)(i) Except as provided in paragraph (e)(3)(ii) of this section, 
if a recognized agency fails to demonstrate compliance with or 
effective application of a criterion or criteria, but the senior 
Department official concludes that the agency will demonstrate or 
achieve compliance with the criteria for recognition and effective 
application of those criteria within 12 months or less, the senior 
Department official may continue the agency's recognition, pending 
submission by the agency of a compliance report, review of the report 
under Sec. Sec.  602.32 and 602.34, and review of the report by the 
senior Department official under this section. In such a case, the 
senior Department official specifies the criteria the compliance report 
must address, and a time period, not longer than 12 months, during 
which the agency must achieve compliance and effectively apply the 
criteria. The compliance report documenting compliance and effective 
application of criteria is due not later than 30 days after the end of 
the period specified in the senior Department official's decision.
    (ii) If the record includes a compliance report, and the senior 
Department official determines that an agency has not complied with the 
criteria for recognition, or has not effectively applied those 
criteria, during the time period specified by the senior Department 
official in accordance with paragraph (e)(3)(i) of this section, the 
senior Department official denies, limits, suspends, or terminates 
recognition, except, in extraordinary circumstances, upon a showing of 
good cause for an extension of time as determined by the senior 
Department official and detailed in the senior Department official's 
decision. If the senior Department official determines good cause for 
an extension has been shown, the senior Department official specifies 
the length of the extension and what the agency must do during it to 
merit a renewal of recognition.
    (f) If the senior Department official determines, based on the 
record, that a decision to deny, limit, suspend, or terminate an 
agency's recognition may be warranted based on a finding that the 
agency is noncompliant with, or ineffective in its application of, a 
criterion or criteria of recognition not identified earlier in the 
proceedings as an area of noncompliance, the senior Department official 
provides--
    (1) The agency with an opportunity to submit a written response and 
documentary evidence addressing the finding; and
    (2) The staff with an opportunity to present its analysis in 
writing.
    (g) If relevant and material information pertaining to an agency's 
compliance with recognition criteria, but not contained in the record, 
comes to the senior Department official's attention while a decision 
regarding the agency's recognition is pending before the senior 
Department official, and if the senior Department official concludes 
the recognition decision should not be made without consideration of 
the information, the senior Department official either--
    (1)(i) Does not make a decision regarding recognition of the 
agency; and
    (ii) Refers the matter to Department staff for review and analysis 
under Sec.  602.32 or Sec.  602.33, as appropriate, and consideration 
by the Advisory Committee under Sec.  602.34; or
    (2)(i) Provides the information to the agency and Department staff;
    (ii) Permits the agency to respond to the senior Department 
official and the Department staff in writing, and to include additional 
evidence relevant to the issue, and specifies a deadline;
    (iii) Provides Department staff with an opportunity to respond in 
writing to the agency's submission under paragraph (g)(2)(ii) of this 
section, specifying a deadline; and
    (iv) Issues a recognition decision based on the record described in 
paragraph (a) of this section, as supplemented by the information 
provided under this paragraph.
    (h) No agency may submit information to the senior Department 
official, or ask others to submit information on its behalf, for 
purposes of invoking paragraph (g) of this section. Before invoking 
paragraph (g) of this section, the senior Department official will take 
into account whether the information, if submitted by a third party, 
could have been submitted in accordance with Sec.  602.32(a) or Sec.  
602.33(e)(2).
    (i) If the senior Department official does not reach a final 
decision to approve, deny, limit, suspend, or terminate an agency's 
recognition before the expiration of its recognition period, the senior 
Department official automatically extends the recognition period until 
a final decision is reached.
    (j) Unless appealed in accordance with Sec.  602.37, the senior 
Department official's decision is the final decision of the Secretary.

(Authority: 20 U.S.C. 1099b)

Appeal Rights and Procedures


Sec.  602.37  Appealing the senior Department official's decision to 
the Secretary.

    (a) The agency may appeal the senior Department official's decision 
to the Secretary. Such appeal stays the decision of the senior 
Department official until final disposition of the appeal. If an agency 
wishes to appeal, the agency must--
    (1) Notify the Secretary and the senior Department official in 
writing of its intent to appeal the decision of the senior Department 
official, no later than ten days after receipt of the decision;
    (2) Submit its appeal to the Secretary in writing no later than 30 
days after receipt of the decision; and
    (3) Provide the senior Department official with a copy of the 
appeal at the same time it submits the appeal to the Secretary.
    (b) The senior Department official may file a written response to 
the appeal. To do so, the senior Department official must--
    (1) Submit a response to the Secretary no later than 30 days after 
receipt of a copy of the appeal; and
    (2) Provide the agency with a copy of the senior Department 
official's response at the same time it is submitted to the Secretary.
    (c) Neither the agency nor the senior Department official may 
include in its submission any new evidence it did not submit previously 
in the proceeding.
    (d) On appeal, the Secretary makes a recognition decision, as 
described in Sec.  602.36(e). If the decision requires a compliance 
report, the report is due within 30 days after the end of the period 
specified in the Secretary's decision. The Secretary renders a final 
decision after taking into account the senior Department official's 
decision, the agency's written submissions on appeal, the senior 
Department official's response to the appeal, if any, and the entire 
record before the senior Department official. The Secretary notifies 
the agency in writing of the Secretary's decision regarding the 
agency's recognition.
    (e) The Secretary may determine, based on the record, that a 
decision to deny, limit, suspend, or terminate an agency's recognition 
may be warranted based on a finding that the agency is noncompliant 
with, or ineffective in its application with respect to, a criterion or 
criteria for recognition not identified as an area of noncompliance 
earlier in the proceedings. In that case, the

[[Page 39533]]

Secretary, without further consideration of the appeal, refers the 
matter to the senior Department official for consideration of the issue 
under Sec.  602.36(f). After the senior Department official makes a 
decision, the agency may, if desired, appeal that decision to the 
Secretary.
    (f) If relevant and material information pertaining to an agency's 
compliance with recognition criteria, but not contained in the record, 
comes to the Secretary's attention while a decision regarding the 
agency's recognition is pending before the Secretary, and if the 
Secretary concludes the recognition decision should not be made without 
consideration of the information, the Secretary either--
    (1)(i) Does not make a decision regarding recognition of the 
agency; and
    (ii) Refers the matter to Department staff for review and analysis 
under Sec.  602.32 or Sec.  602.33, as appropriate, and review by the 
Advisory Committee under Sec.  602.34; and consideration by the senior 
Department official under Sec.  602.36; or
    (2)(i) Provides the information to the agency and the senior 
Department official;
    (ii) Permits the agency to respond to the Secretary and the senior 
Department official in writing, and to include additional evidence 
relevant to the issue, and specifies a deadline;
    (iii) Provides the senior Department official with an opportunity 
to respond in writing to the agency's submission under paragraph 
(f)(2)(ii) of this section, specifying a deadline; and
    (iv) Issues a recognition decision based on all the materials 
described in paragraphs (d) and (f) of this section.
    (g) No agency may submit information to the Secretary, or ask 
others to submit information on its behalf, for purposes of invoking 
paragraph (f) of this section. Before invoking paragraph (f) of this 
section, the Secretary will take into account whether the information, 
if submitted by a third party, could have been submitted in accordance 
with Sec.  602.32(a) or Sec.  602.33(e)(2).
    (h) If the Secretary does not reach a final decision on appeal to 
approve, deny, limit, suspend, or terminate an agency's recognition 
before the expiration of its recognition period, the Secretary 
automatically extends the recognition period until a final decision is 
reached.

(Authority: 20 U.S.C. 1099b)

Sec.  602.38  Contesting the Secretary's final decision to deny, limit, 
suspend, or terminate an agency's recognition.

    An agency may contest the Secretary's decision under this part in 
the Federal courts as a final decision in accordance with applicable 
Federal law. Unless otherwise directed by the court, a decision of the 
Secretary to deny, limit, suspend, or terminate the agency's 
recognition is not stayed during an appeal in the Federal courts.

(Authority: 20 U.S.C. 1099b)

    17. Subpart D is removed in its entirety.
    18. Subpart E is redesignated as subpart D.

[FR Doc. E9-18368 Filed 8-5-09; 8:45 am]
BILLING CODE 4000-01-P


</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>