31296 Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Rules and Regulations 

DEPARTMENT OF EDUCATION 

34 CFR Parts 600 and 668 

[Docket ID ED–2018–OPE–0041] 

RIN 1840–AD39 

Program Integrity and Improvement 

AGENCY: Office of Postsecondary 

Education, Department of Education. 

ACTION: Final rule; delay of effective 

date. 

SUMMARY: The Secretary delays, until 

July 1, 2020, the effective date of 

selected provisions of the final 

regulations entitled Program Integrity 

and Improvement published in the 

Federal Register on December 19, 2016 

(the 2016 final regulations). The 

Secretary is delaying the effective date 

of selected provisions of the 2016 final 

regulations based on concerns recently 

raised by regulated parties and to ensure 

that there is adequate time to conduct 

negotiated rulemaking to reconsider 

selected provisions of 2016 final 

regulations and, as necessary, develop 

revised regulations. The provisions for 

which the effective date is being 

delayed are listed in the SUPPLEMENTARY

INFORMATION section of this document. 

DATES: Effective June 29, 2018, the 

effective date for the amendments to 34 

CFR 600.2, 600.9(c), 668.2, and the 

addition of 34 CFR 668.50, published 

December 19, 2016, at 81 FR 92236, is 

delayed until July 1, 2020. 

FOR FURTHER INFORMATION CONTACT: 

Sophia McArdle, Ph.D., U.S. 

Department of Education, 400 Maryland 

Ave. SW, Mail Stop 290–44, 

Washington, DC 20202. Telephone: 

(202) 453–6318. Email: 

sophia.mcardle@ed.gov. 

If you use a telecommunications 

device for the deaf (TDD) or a text 

telephone (TTY), call the Federal Relay 

Service (FRS), toll free, at 1–800–877– 

8339. 

SUPPLEMENTARY INFORMATION: Based on 

concerns recently raised by regulated 

parties related to implementation of the 

2016 final regulations, the Secretary 

delays, until July 1, 2020, the effective 

date of selected provisions of the 2016 

final regulations (81 FR 92236). The 

Department is implementing this delay 

to hear from the regulated community 

and students about these concerns and 

to consider, through negotiated 

rulemaking, possible revisions to 

selected provisions of the 2016 final 

regulations. 

Two letters in particular prompted 

this delay. The Department received a 

letter dated February 6, 2018 (February 

6 letter), from the American Council on 

Education (www.acenet.edu/news-room/ 

Documents/ACE-Letter-on-StateAuthorization-Concern.pdf), which 

represents nearly 1,800 college 

university presidents from all types of 

U.S. accredited, degree-granting 

institutions and the executives at related 

associations. The February 6 letter 

stated that, ‘‘students who are residents 

of certain states may be ineligible for 

federal financial aid if they are studying 

online at institutions located outside 

their states. This is related to the 

requirement imposed by the state 

authorization regulations that mandates 

institutions disclose to students the 

appropriate state complaint process for 

their state of residence. A number of 

states, including California, do not 

currently have complaint processes for 

all out-of-state institutions.’’ 

On February 7, 2018, the Department 

received a letter from the Western 

Interstate Commission for Higher 

Education (WICHE) Cooperative for 

Educational Technologies, the National 

Council for State Authorization 

Reciprocity, and the Distance Education 

Accrediting Commission, all of which 

represent regulated parties (February 7 

letter). In the letter, these entities stated 

that there is widespread concern and 

confusion in the higher education 

community regarding the 

implementation of the 2016 final 

regulations, particularly with respect to 

State authorization of distance 

education and related disclosures. The 

authors of the February 7 letter argued 

that the 2016 final regulations would be 

costly and burdensome for most colleges 

and universities that offer distance 

education and that some States have not 

implemented the student complaint 

policies and procedures required by the 

regulations. The authors also expressed 

that institutions need additional 

information from the Department to 

better understand how to comply with 

the 2016 final regulations. They stated, 

for instance, that the definition of 

‘‘residence’’ in the preamble of the 2016 

final regulations may conflict with State 

laws and common practice among 

students for establishing residency. 

The authors of the two letters also 

asked the Department to clarify the 

format in which they should make 

public and individualized disclosures of 

the State authorization status for every 

State, the complaint resolution 

processes for every State, and details on 

State licensure eligibility for every 

discipline that requires a license to 

enter a profession. The authors 

suggested that the Department should 

delay the effective date of the 2016 final 

regulations and submit the issues to 

additional negotiated rulemaking or, 

alternatively, clarify the final 

regulations through guidance. We 

believe that these disclosure issues, 

particularly those regarding 

individualized student disclosures, also 

require further review and the 

consideration of whether more detailed 

requirements are necessary for proper 

implementation. Issues that need further 

consideration and clarification include 

the disclosures that may need to be 

made to a student when the student 

changes his or her residence, what 

factors would allow an institution to 

become aware that a student has 

changed his or her residence so that 

individualized disclosures could be 

made, and the length of time a student 

must reside at the new address to be 

considered a resident of that State for 

the purposes of State authorization 

disclosures. These clarifications are 

necessary because the handling of these 

situations may vary State by State and 

be further complicated by the fact that 

each State’s definition of ‘‘residence’’ 

may have been originally developed for 

other purposes. Other issues in need of 

further clarification include what 

happens in the case of a student who 

enrolls in a program that meets the 

licensure requirements of the State in 

which the student was living at the 

time, but then relocates to a new State 

where the program does not fulfill the 

requirements for licensure as well as the 

obligation of the university if the 

program no longer meets the licensure 

requirements, due to the student’s 

move, not a change in the program. 

Finally, to add further complexity, 

students may not always notify their 

institution if they change addresses, or 

if they relocate temporarily to another 

State. While the preamble of the 2016 

final regulations stated that an 

institution may rely on a student’s selfdetermination of residency unless it has 

information to the contrary, there may 

need to be additional clarification or 

safeguards for institutions in the event 

that a student does not notify the 

institution of a change in residency. 

The rule, as currently drafted, does 

not account for these complexities. 

Therefore, we believe that, among other 

things, a more precise definition of 

‘‘residence’’—which can be defined by 

States in different ways for different 

purposes—should be established 

through rulemaking to ensure 

institutions have the clarity needed to 

determine a student’s residence. We 

believe that we will need to provide 

institutions with significantly more 

detail to properly operationalize this 

term and will need to work with 

impacted stakeholders to determine 


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1Available at: https://ifap.ed.gov/dpcletters/ 

GEN1213.html. 

how best to address a concern that is 

complex and potentially costly to 

institutions and students. 

For both of the residency and 

disclosure issues, guidance is not the 

appropriate vehicle to provide the 

clarifications needed. Due to the 

complexity of these issues, we believe 

that it is important to solicit the input 

of stakeholders who have been engaged 

in meeting these requirements in 

developing workable solutions. Further, 

guidance is non-binding and, therefore, 

could not be used to establish any new 

requirements. Lastly, the necessary 

changes may affect the burden on some 

regulated parties, which would require 

an updated estimate of regulatory 

impact. The Department therefore 

believes that the clarifications requested 

are so substantive that they would 

require further rulemaking including 

negotiated rulemaking under the Higher 

Education Act of 1965, as amended 

(HEA). 

We believe that delaying the effective 

date of selected provisions of the 2016 

final regulations will benefit students. 

The 2016 final regulations are 

currently scheduled to go into effect in 

July. Many institutions and students 

ordinarily not significantly involved in 

distance education provide and take 

online courses in the summer. We 

believe the delay will especially benefit 

those students who are planning to take 

coursework via online programs during 

the summer months, or who may be 

making plans to participate in 

internships in other States. If the 

selected provisions of 2016 final 

regulations were to go into effect on July 

1, 2018, an institution may be hesitant 

to offer these courses outside the State 

in which the institution is located, 

because the uncertainty of how to 

determine students’ residency, and the 

associated requirements, may make a 

State unwilling to pursue State 

authorization in all of the possible 

locations its students may reside during 

the summer. 

If selected provisions of 2016 final 

regulations were to go into effect on July 

1, 2018, some institutions, especially 

those with limited resources, could 

determine that the costs of obtaining 

State authorization, ensuring the 

relevant States have complaint 

procedures, and assessing licensure 

requirements, are not worth the benefit 

of eligibility for title IV aid if only a 

small number of students enroll online 

from a particular State, and therefore 

may not obtain State authorization for 

all applicable States. Thus, some 

students might not be able to continue 

their education during the summer if 

during those months they must relocate 

to a State in which the institution does 

not have the required State 

authorization. Thus, if we did not delay 

selected provisions of the 2016 final 

regulations, students would potentially 

lose the opportunity to use title IV aid 

for these courses. Institutions that 

routinely provide distance education to 

large numbers of students from all 50 

States may have already obtained State 

authorization and assessed the 

complaint systems and licensure 

requirements since the cost-benefit ratio 

favors such an action. As a result, the 

delay will not have any significant effect 

on students attending those institutions. 

Further, the Department has provided 

guidance regarding student complaints 

and student consumer disclosures as 

related to distance education in a Dear 

Colleague letter issued on July 27, 2012 

(DCL GEN–12–13),1 ensuring that 

during this delay of selected provisions 

of the final regulations institutions will 

be aware of their existing obligations 

and that students will receive these 

protections. Under 34 CFR 668.43(b), an 

institution is required to provide to 

students its State approval or licensing 

and the contact information for filing 

complaints. In DCL GEN–12–13, in 

Questions and Answers (Q&A) 9 

through 13, we provide guidance on 

how institutions may meet this 

requirement with respect to distance 

education. In Q&A 9, we clarify that an 

institution offering distance education 

in multiple States can satisfy the 

provisions of 34 CFR 668.43(b) requiring 

that it provide State contact information 

for filing complaints by providing a link 

to a noninstitutional website that 

identifies the contact information for 

multiple States so long as the link is 

accessible from the institution’s website 

and the link is prominently displayed 

and accurately described. Q&A 9 also 

states that the institution should ensure 

the website link is functioning and 

accurate. Q&A 10 clarifies that, if an 

institution offering distance education 

in a State has only one student in that 

State, the institution must still provide 

contact information for that State. In 

Q&A 12, we make clear that if a student 

taking a program by distance education 

moves to another State, and the 

institution is aware of the move, the 

institution must ensure that the student 

has access to the State contact 

information or filing complaints in that 

State. Finally, in Q&A 13, we note that 

for a student who is taking distance 

education and is in the military, the 

contact information for the institution’s 

main location is considered sufficient 

contact information when the student is 

given an assignment outside of the 

United States. 

Based on the above considerations, 

the Department delays until July 1, 

2020, the effective date of selected 

provisions of the final regulations in 

title 34 of the Code of Federal 

Regulations (CFR): 

• § 600.2 Definitions (definition of 

‘‘State authorization reciprocity 

agreement’’). 

• § 600.9(c) (State authorization 

distance education regulations). 

• § 668.2 (definition of ‘‘Distance 

education’’). 

• § 668.50 (institutional disclosures 

for distance or correspondence 

programs regulations). 

Public Comment: In response to our 

invitation in the notice of proposed 

rulemaking published in the Federal 

Register on May 25, 2018 (83 FR 24250) 

(NPRM), 39 parties submitted comments 

on the delay of the effective date. We do 

not discuss comments or 

recommendations that are beyond the 

scope of this regulatory action or that 

would require statutory change. 

Analysis of Comments and Changes 

An analysis of the comments and of 

any changes since publication of the 

NPRM follows. 

Comment: Many commenters 

supported the proposed rule to delay 

the effective date of the 2016 final 

regulations until July 1, 2020, because 

they believed that non-regulatory 

guidance from the Department is 

unlikely to address the current gap 

between institutional understanding of 

the final regulations and the 

Department’s expectations for 

compliance. Commenters supported the 

Department’s plan to refer the 2016 final 

regulations to the review and 

consideration afforded by the negotiated 

rulemaking process. Commenters also 

stated that the delay is prudent given 

the potential impact on institutions, 

learners, and the State authorization 

process, and will make it possible to 

resolve any confusion for students, 

institutions, States, and accreditors 

about the requirements of the 2016 final 

regulations. One commenter noted that 

some parts of the 2016 final regulations 

are very onerous and expensive for 

institutions to implement and a delay 

would give institutions more time to 

plan and budget for the changes. 

Discussion: We appreciate the 

commenters’ support. 

Changes: None. 

Comment: Many commenters opposed 

delaying the effective date of the 2016 

final regulations because of the potential 


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harm to students, as well as on 

procedural grounds. 

Harm to Students 

Comment: Commenters stated that 

delaying the effective date of the 2016 

final regulations would negatively 

impact students because the consumer 

protections and disclosures that would 

have been available to students under 

the 2016 final regulations will not be 

available to students. A few commenters 

expressed concern that students’ ability 

to file complaints against institutions 

would be impeded by delaying the 

effective date of the provisions in the 

2016 final regulations related to the 

State complaint process. 

Discussion: While we do not have 

specific data with regard to how many 

schools and States have come into 

compliance with the 2016 final 

regulations, based on the information 

we do have, we expect that many 

students will still receive disclosures 

regarding distance education programs 

during the period of the delay due to 

steps institutions have already taken. In 

addition, as also previously noted, DCL 

GEN–12–13 provides guidance 

regarding student complaints and 

student consumer disclosures as related 

to distance education, ensuring that 

during the delay institutions will be 

aware of their existing obligations and 

that students will receive the contact 

information needed in order to file a 

complaint against the institution. Under 

34 CFR 668.43(b), an institution is 

required to provide to students its State 

approval or licensing and the contact 

information for filing complaints. DCL 

GEN–12–13 clarifies this requirement 

with respect to distance education as 

discussed above. We believe that these 

requirements will offer students 

protection during the delay. 

With respect to other disclosures, we 

acknowledged in the NPRM that, as a 

result of the proposed delay, it is 

possible that students might not receive 

disclosures of adverse actions taken 

against a particular institution or 

program. Students also may not receive 

other information about an institution, 

such as information about refund 

policies or whether a program meets 

certain State licensure requirements. 

This information could help students 

identify programs that offer credentials 

that potential employers recognize and 

value; delaying the requirement to 

provide these disclosures may require 

students that desire this information to 

obtain it from another source or may 

lead students to choose sub-optimal 

programs for their preferred courses of 

study. We note, however, that the 

Department has never required groundbased campuses to provide this 

information to students, including 

campuses that enroll large numbers of 

students from other States. Thus, for 

students who attend on-ground 

campuses, the program they completed 

may meet licensure requirements in the 

State in which the campus is located but 

not licensure requirements in other 

States. 

Changes: None. 

Comment: Commenters also noted 

that the 2016 final regulations require 

State and Federal oversight of American 

institutions receiving Federal financial 

aid but operating in foreign locations, 

thereby ensuring core protections for 

students enrolled in campuses abroad, 

but that the Department offers no 

rationale for delaying the effective date 

of this component of the rule. Thus, the 

commenters believed that the effective 

date of these final regulations should 

not be delayed. 

Discussion: We are persuaded by the 

commenters and, for the reasons they 

specify, are not delaying § 600.9(d) 

(State authorization of foreign locations 

of domestic institution regulations). 

Changes: We are not delaying 

§ 600.9(d) (State authorization of foreign 

locations of domestic institution 

regulations). These regulations will go 

into effect July 1, 2018. 

Comment: Commenters also noted 

that the 2016 final regulations 

strengthen States’ oversight capacity by 

ensuring that States that sought to 

regulate distance education would be 

able to identify and regulate schools 

offering distance education in their 

State. These commenters argued that 

delaying the effective date of the 2016 

final regulations would undermine this 

State oversight of distance education 

programs and permit schools to use 

Federal funds for programs that operate 

outside of the oversight of State 

regulators. Some commenters noted that 

State approval boards and regulatory 

schemes vary from State to State and 

that States should be able to reject 

institutions that do not meet a State’s 

higher standards. Some commenters 

also stated that a delay of the effective 

date of the 2016 final regulations would 

impede States from ensuring that 

distance education students have the 

same State-level protections as students 

enrolled at brick-and-mortar 

institutions, and limit States’ ability to 

bring enforcement actions against 

schools offering online programs in 

their States. 

Discussion: We believe that concerns 

about undermining State regulatory and 

enforcement efforts may be overstated. 

A State already has the authority to 

administer legal authorization to operate 

in the State as the State sees fit, whether 

it be to approve an institution to operate 

in-State, regardless of the physical 

location of the institution, or require an 

institution that is operating without 

approval in the State to cease such 

operations regardless of the physical 

location of the institution. There is also 

no requirement that a State join a 

reciprocity agreement, whether it is a 

State-to-State reciprocity agreement or a 

reciprocity agreement that is 

administered by a non-State entity. A 

State can also decide to leave any 

reciprocity agreement it had previously 

joined. States do not need additional 

Federal regulations in order to enforce 

their own laws if they choose to do so. 

Changes: None. 

Comment: Some commenters stated 

that the definition of ‘‘State 

authorization reciprocity agreement’’ in 

the 2016 final regulations is confusing, 

and noted particular concern about the 

part of the definition that says that such 

an agreement ‘‘does not prohibit any 

State in the agreement from enforcing its 

own statutes and regulations, whether 

general or specifically directed at all or 

a subgroup of educational institutions.’’ 

They stated that some entities are 

interpreting this text to mean that a 

State authorization reciprocity 

agreement that is acceptable to the 

Department must allow a State that is a 

member of the agreement to enforce its 

own statutes and regulations even if 

those statutes and regulations conflict 

with the provisions of an agreement into 

which the State entered. The 

commenters contended that delaying 

the effective date of the 2016 final 

regulations would undermine the ability 

of States to protect their residents 

because the States would no longer be 

able to enforce their own statutes and 

regulations if doing so were prohibited 

by a State authorization reciprocity 

agreement. Other commenters indicated 

that it was unclear whether this part of 

the definition allows enforcement of 

State regulations that conflict with the 

provisions of a reciprocity agreement. 

Discussion: We view the confusion 

and concern about what constitutes a 

State authorization reciprocity 

agreement under the 2016 final 

regulations and how that current 

definition is meant to be operationalized 

to be additional reasons to delay the 

effective date of selected provisions of 

the 2016 final regulations so that this 

issue can be clarified. 

Changes: None. 

Procedural Concerns 

Comment: Some commenters 

expressed concerns about procedural 

issues surrounding the proposed delay, 


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contending that the 15-day comment 

period does not allow enough time for 

meaningful comments. Commenters 

further stated that the Department did 

not provide adequate justification for 

delaying the effective date of the 2016 

final regulations and that the 

Department could issue guidance, rather 

than delay the effective date. Some 

commenters also asserted that the 

Department must conduct negotiated 

rulemaking under the HEA to 

implement the proposed delay. They 

argued that the Department did not meet 

the criteria for an exemption from such 

rulemaking under the Administrative 

Procedure Act (APA), believing that the 

Department did not establish ‘‘good 

cause’’ to waive negotiated rulemaking. 

Commenters also opined that 

institutions have worked over the past 

18 months to implement the 2016 final 

regulations, and their investments 

should not be wasted now by an 

unnecessary delay of the consumer 

protections and disclosures. Some 

commenters also stated that the 

proposed delay is overly broad and that 

since the Department justifies the delay 

based on only three issues, the 

Department should have proposed to 

delay only those three parts of the 2016 

final regulations. 

Discussion: The APA, 5 U.S.C. 553(c), 

requires an agency to provide interested 

parties an opportunity to comment on 

proposed regulations, but does not 

stipulate the length of the comment 

period. A 15-day comment period was 

necessary because the selected 

provisions of the 2016 rule are 

scheduled to take effect on July 1, 2018, 

and a final rule delaying the effective 

date must be published prior to that 

date. A longer comment period would 

not have allowed sufficient time for the 

Department to review and respond to 

comments, and publish a final rule. 

We believe that we have adequately 

justified our decision to delay the 

effective date of selected provisions of 

the 2016 final regulations and that it 

would be inappropriate to issue 

guidance, rather than implement the 

delay. Guidance is not the appropriate 

vehicle to provide the clarifications 

needed related to the residency and 

disclosure issues. Guidance is nonbinding and, therefore, could not be 

used to establish any new requirements. 

More importantly, due to the 

complexity of the issues and the 

substantive nature of the necessary 

clarifications, we believe that, in 

developing workable solutions, it is 

important to conduct negotiated 

rulemaking under the HEA in order to 

solicit the input of stakeholders who 

have been engaged in meeting these 

requirements. Additionally, the 

necessary changes may affect the burden 

on regulated parties, which would 

require an updated estimate of 

regulatory impact. 

With regard to waiver of negotiated 

rulemaking, section 492(b)(2) of the 

HEA provides that the Secretary may 

waive negotiated rulemaking if she 

determines that there is good cause to 

do so, and publishes the basis for such 

determination in the Federal Register at 

the same time as the proposed 

regulations are first published. 

Negotiated rulemaking requires a 

number of steps that typically take the 

Department well over 12 months to 

complete. The Department could not 

have completed the negotiated 

rulemaking process between February 6, 

2018 (the date the Department received 

the first of the two letters that were the 

catalyst for the delay) and the July 1, 

2018, effective date . Thus, the 

Department has good cause to waive the 

negotiated rulemaking requirement with 

regard to this delay the effective date of 

the final regulations to July 1, 2020. 

As stated, negotiated rulemaking 

requires a number of steps that typically 

take the Department well over 12 

months to complete. First, the HEA 

requires the Department to hold public 

hearings before commencing any 

negotiations. Based upon the feedback 

the Department receives during the 

hearings, the Department then identifies 

those issues on which it will conduct 

negotiated rulemaking, announces 

those, and solicits nominations for nonFederal negotiators. Negotiations 

themselves are typically held over a 

three-month period. Following the 

negotiations, the Department prepares a 

notice of proposed rulemaking and 

submits the proposed rule to the Office 

of Management and Budget (OMB) for 

review. The proposed rule is then open 

for public comment for 30 to 60 days. 

Following the receipt of public 

comments, the Department considers 

those comments and prepares final 

regulations that are reviewed by OMB 

before publication. Accordingly, we 

would not be able to complete the 

negotiated rulemaking process until 

2019, so regulations resulting from that 

process will not be effective before July 

1, 2020 per section 482 of the HEA (20 

U.S.C. 1089), also known as the ‘‘master 

calendar requirement.’’ The master 

calendar requirement specifies provides 

that a regulatory change that has been 

published in final form on or before 

November 1 prior to the start of an 

award year—which begins on July 1 of 

any given year—may take effect only at 

the beginning of the next award year, or, 

in other words, on July 1 of the next 

year. 

In this instance, the catalysts for the 

delay are the February 6 and February 

7 letters. While some commenters stated 

that the Department was aware of the 

same issues raised in these letters 

during the 2016 rulemaking and heard 

about these same issues in August and 

October 2017, we only more recently 

determined that further consultation in 

the form of negotiated rulemaking was 

the appropriate vehicle by which to 

clarify the 2016 final regulations, and it 

was the cited letters that changed our 

understanding of the extent of 

stakeholder concerns. Thus, based on 

this further understanding, we believe 

that negotiated rulemaking is necessary 

in order to make important, substantive 

clarifications, and that it is in the 

interests of institutions, States, and 

students for the effective date of the 

selected provisions of the final 

regulations to be delayed and the 

regulations reconsidered. The 

Department could not have completed 

the 12-month negotiated rulemaking 

process between February 6, 2018, and 

the July 1, 2018, effective date. Thus, 

the Department has good cause to waive 

the negotiated rulemaking requirement 

with regard to its proposal to delay the 

effective date of selected provisions of 

the final regulations to July 1, 2020, in 

order to complete a new negotiated 

rulemaking proceeding to address the 

concerns identified by some of the 

regulated parties in the higher education 

community. It would be confusing and 

counterproductive for the selected 

provisions of the 2016 final regulations 

to go into effect before the conclusion of 

this reconsideration process. 

We do not believe the proposed delay 

is overly broad and that because the 

delay discussion only addressed three 

issues, the Department should only 

delay the effective date of those three 

parts of the 2016 final regulations. We 

have agreed with the commenters that 

§ 600.9(d) (State authorization of foreign 

locations of domestic institution 

regulations) should not be delayed. 

Otherwise, it is unclear what parts of 

the regulations will be impacted by 

negotiated rulemaking and how these 

provisions could impact other parts of 

the regulations. 

With respect to the comments that 

institutions have worked over the past 

18 months to implement the 2016 final 

regulations, and their investments 

should not be wasted now by an 

unnecessary delay of the consumer 

protections and disclosures, we do not 

believe that these investments were a 

waste, as the results of these efforts will 

be helpful to students and information 


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31300 Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Rules and Regulations 

from institutions that made those 

changes can inform the upcoming 

negotiated rulemaking process. 

Changes: None. 

Executive Orders 12866, 13563, and 

13771 

Regulatory Impact Analysis 

Under Executive Order 12866, it must 

be determined whether this regulatory 

action is ‘‘significant’’ and, therefore, 

subject to the requirements of the 

Executive order and subject to review by 

OMB. Section 3(f) of Executive Order 

12866 defines a ‘‘significant regulatory 

action’’ as an action likely to result in 

a rule that may— 

(1) Have an annual effect on the 

economy of $100 million or more, or 

adversely affect a sector of the economy, 

productivity, competition, jobs, the 

environment, public health or safety, or 

State, local, or Tribal governments or 

communities in a material way (also 

referred to as an ‘‘economically 

significant’’ rule); 

(2) Create serious inconsistency or 

otherwise interfere with an action taken 

or planned by another agency; 

(3) Materially alter the budgetary 

impacts of entitlement grants, user fees, 

or loan programs or the rights and 

obligations of recipients thereof; or 

(4) Raise novel legal or policy issues 

arising out of legal mandates, the 

President’s priorities, or the principles 

stated in the Executive order. 

This regulatory action is a significant 

regulatory action subject to review by 

OMB under section 3(f)(4) of Executive 

Order 12866. The quantified economic 

effects and net budget impact associated 

with the delayed effective date are not 

expected to be economically significant. 

Institutions will be relieved of an 

expected Paperwork Reduction Act 

burden of approximately $364,419 in 

annualized cost savings or $5.2 million 

in present value terms for the delay 

period; though it is possible some 

institutions have already incurred these 

costs preparing for the current effective 

date. 

We have also reviewed this final rule 

under Executive Order 13563, which 

supplements and explicitly reaffirms the 

principles, structures, and definitions 

governing regulatory review established 

in Executive Order 12866. To the extent 

permitted by law, Executive Order 

13563 requires that an agency: 

(1) Propose or adopt regulations only 

upon a reasoned determination that 

their benefits justify their costs 

(recognizing that some benefits and 

costs are difficult to quantify); 

(2) Tailor its regulations to impose the 

least burden on society, consistent with 

obtaining regulatory objectives and 

taking into account—among other things 

and to the extent practicable—the costs 

of cumulative regulations; 

(3) In choosing among alternative 

regulatory approaches, select those 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety, 

and other advantages; distributive 

impacts; and equity); 

(4) To the extent feasible, specify 

performance objectives, rather than the 

behavior or manner of compliance a 

regulated entity must adopt; and 

(5) Identify and assess available 

alternatives to direct regulation, 

including economic incentives—such as 

user fees or marketable permits—to 

encourage the desired behavior, or 

provide information that enables the 

public to make choices. 

Executive Order 13563 also requires 

an agency ‘‘to use the best available 

techniques to quantify anticipated 

present and future benefits and costs as 

accurately as possible.’’ The Office of 

Information and Regulatory Affairs of 

OMB has emphasized that these 

techniques may include ‘‘identifying 

changing future compliance costs that 

might result from technological 

innovation or anticipated behavioral 

changes.’’ 

In choosing among alternative 

regulatory approaches, we selected the 

approach that would maximize net 

benefits. In particular, the Department 

believes avoiding the compliance costs 

for institutions and the potential 

unintended harm to students if 

institutions decide not to offer distance 

education courses to students who 

switch locations for a semester or do not 

allow students to receive title IV aid for 

such courses because the definition of 

‘‘residency’’ needs clarification 

outweighs any negative effect of the 

delayed disclosures. Based on the 

analysis that follows, the Department 

believes that this delay of the effective 

date of selected provisions of the 2016 

final regulations is consistent with the 

principles in Executive Order 13563. 

Consistent with Executive Order 

13771 (82 FR 9339, February 3, 2017), 

we have estimated that this final rule 

has a potential upper bound effect of 

estimated annualized cost savings of 

$705,737, or $10,081,963 in present 

value terms, using a 7 percent discount 

rate over a perpetual time horizon, in 

administrative and information 

disclosure costs. This is an upper bound 

estimate of these cost savings, since 

some institutions may have begun 

development of disclosures to meet the 

requirements of the 2016 final 

regulations. As a central estimate, the 

Department estimates institutions will 

be relieved of an expected Paperwork 

Reduction Act burden of approximately 

$364,419 in annualized cost savings or 

$5.2 million in present value terms for 

the delay period; though it is possible 

some States have already incurred these 

costs preparing for the current effective 

date. 

Because of these savings, this final 

rule is considered an Executive Order 

13771 deregulatory action. In the NPRM 

published May 25, 2018, the 

Department explicitly requested 

comments on whether these 

administrative cost savings and foregone 

benefits calculations and discussions 

are accurate and fully capture the 

impacts of this final rule. Some 

commenters disagreed with the 

Department’s estimates, especially of 

the costs to borrowers of not receiving 

certain disclosures and protections, and 

those comments are summarized in the 

Effects of Delay section. 

Effects of Delay 

The Regulatory Impact Analysis of the 

2016 final regulations stated that the 

regulations would have the following 

primary benefits: (1) Updated and 

clarified requirements for State 

authorization of distance education and 

foreign additional locations, (2) a 

process for students to access complaint 

resolution in either the State in which 

the institution is authorized or the State 

in which they reside, and (3) increased 

transparency and access to institutional 

and program information. In the NPRM, 

we acknowledged that the delay would 

result in students not receiving certain 

disclosures about licensure and adverse 

actions against programs, as well as 

information about a process for 

submitting complaints in their State. 

The Department also estimated that 

institutions would benefit from the 

delay by having more time before 

incurring the costs of compliance and 

an opportunity to get more clarity on the 

details of the State authorization 

requirements and how they fit their 

programs. 

Several commenters responded to the 

Department’s analysis, both from an 

institutional and a borrower and 

consumer advocate perspective. Several 

commenters representing various 

institutions, many of which supported 

the delay, appreciated the Department’s 

willingness to reopen the issue and 

clarify requirements that institutions 

find unclear. They also reiterated that 

the December 2016 final regulations 

underestimated the costs of obtaining 

State authorization and complying with 

that rule, but did not specify what 

additional costs there would be or what 


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Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Rules and Regulations 31301 

assumptions the Department should 

change to more accurately capture 

institutional costs. Therefore, we are not 

changing our estimates of institutional 

costs in the NPRM analysis, but reiterate 

our acknowledgement that these are 

representative cost estimates and the 

specific costs to individual institutions 

will vary based on the extent of their 

participation in distance education, 

their systems and staffing, and the way 

they pursue State authorization. 

Another set of comments focused on 

the potential harms to students from the 

delay, noting that online education is 

the fastest growing segment of the 

postsecondary market and that most of 

the largest providers are proprietary 

institutions, several with recent or 

ongoing investigations. Several 

commenters offered a variety of 

statistics consistent with the 

Department’s own information that 

proprietary institutions are key players 

in the distance education market. For 

example, one commenter noted that 

proprietary schools in the top 12 

providers in 2016 accounted for 

approximately 40 percent of distance 

education students. Several commenters 

pointed to the higher cost of distanceeducation-only programs at proprietary 

institutions, citing a cumulative average 

Federal student loan debt for graduates 

of proprietary institutions of $31,298.60 

compared to $28,482.20 across all 

sectors and $21,525.60 for those in 

programs that are not entirely online. 

Commenters also pointed out that 

770,000 of the 2.1 million students 

enrolled online in 2015 attended 

programs outside their State of 

residence and deserve the same 

protections as students at campus-based 

programs. Several commenters noted 

that proprietary institutions have a 

greater share of their students who are 

low-income, minority, or firstgeneration students, something the 

Department has recognized, so delaying 

the disclosures would have a 

detrimental impact on students with 

potentially less resources to seek out 

information from other sources. 

The Department appreciates the 

comments and analysis submitted. We 

recognize that the burden of the delay 

does fall on students and believe that 

the description of the effects of the 

delay reflects this. However, as noted in 

the Analysis of Comments section in 

this preamble, many students will still 

receive sufficient disclosures regarding 

distance education programs during the 

period of the delay due to steps 

institutions have already taken to 

comply with the 2016 final regulations. 

In addition, as also previously noted, 

DCL GEN–12–13 provides guidance 

regarding student complaints and 

student consumer disclosures as related 

to distance education, ensuring that 

during the delay institutions will be 

aware of their existing obligations and 

that students will receive these 

protections. The Department maintains 

its position that, in allowing 

reconsideration of the 2016 final 

regulations to provide institutions 

greater clarity on key issues, the benefits 

of the delay of the selected provisions 

are greater than the potential costs to 

students of the delayed disclosures and 

complaint processes that could already 

be accessible from other sources. The 

Department has modified its decision to 

delay the effective date of the 2018 final 

regulations and has decided not to delay 

§ 600.9(d) (State authorization of foreign 

locations of domestic institution 

regulations).The analysis of the effects 

of the delay for the selected provisions 

has not changed substantially and is 

included below. 

As a result of the delay, students 

might not receive disclosures of adverse 

actions taken against a particular 

institution or program. Students also 

may not receive other information about 

an institution, such as information 

about refund policies or whether a 

program meets certain State licensure 

requirements. Increased access to such 

information could help students 

identify programs that offer credentials 

that potential employers recognize and 

value, so delaying the effective date of 

the requirement to provide these 

disclosures may require students to 

obtain this information from another 

source or may lead students to choose 

sub-optimal programs for their preferred 

courses of study. 

Additionally, the delay of the 

disclosures related to the complaints 

resolution process could make it harder 

for students to access available 

consumer protections. Some students 

may be aware of Federal Student Aid’s 

Ombudsman Group, State Attorneys 

General offices, or other resources for 

potential assistance, but the disclosure 

would help affected students be aware 

of these options. 

The Department also believes that, as 

a result of uncertainty as to the 

definition of ‘‘residency’’ and other 

aspects of the 2016 final regulations, 

institutions may refuse enrollment or 

title IV aid to distance education 

students as a safeguard against 

unintentional non-compliance—an 

unintended potential effect. For 

example, if a student pursues a summer 

internship and relocates to another State 

for the summer semester, institutions 

may choose not to allow them to take 

courses online because their residency 

is unclear. A student who is unable to 

take classes during the summer months 

may be unable to complete his or her 

program on time, especially if the 

student is working or raising children 

and cannot manage a 15-credit course 

load during the regular academic terms. 

The Department believes the possibility 

of this outcome and the disruption it 

could have to students’ education plans 

supports delaying the effective date of 

the 2016 final regulations to prevent 

institutions from taking such actions 

while the Department conducts 

negotiated rulemaking to develop 

clearer regulations. 

Delay may, however, better allow 

institutions to address the costs of 

complying with the 2016 final 

regulations. In promulgating those 

regulations, the Department recognized 

that institutions could face compliance 

costs associated with obtaining State 

authorization for distance education 

programs or operating foreign locations. 

But the Department did not ascribe 

specific costs to the State authorization 

regulations and associated definitions 

because it presumed that institutions 

were already complying with applicable 

State authorization requirements and 

because the 2016 final regulations do 

not require institutions to have distance 

education programs. 

Although the Department did not 

ascribe specific costs to the State 

authorization regulations, it provided 

examples of costs ranging from $5,000 

to $16,000 depending on institution 

size, for a total estimated annual cost for 

all institutions of $19.3 million. Several 

commenters stated that the Department 

underestimated the costs of compliance 

with the regulations, noting that 

extensive research may be required for 

each program in each State. One 

institution reported that it costs $23,520 

to obtain authorization for a program 

with an internship in all 50 States and 

$3,650 to obtain authorization for a new 

100 percent online program in all 50 

States. To renew the authorization for 

its existing programs, this institution 

estimated a cost of $75,000 annually, 

including fees, costs for surety bonds, 

and accounting services, and noted 

these costs have been increasing in 

recent years. The Department believes 

this institution’s estimate is credible; 

however, we requested comment on 

whether this example provides a typical 

or accurate level of expected 

compliance costs across a representative 

population, and the extent to which 

institutions have already incurred these 

costs. As discussed previously, several 

commenters mentioned that the 2016 

final regulations underestimated the 

cost for institutions but did not include 


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31302 Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Rules and Regulations 

2 2017 Digest of Education Statistics Table 311.15: 

Number and percentage of students enrolled in 

degree-granting postsecondary institutions, by 

distance education participation, location of 

student, level of enrollment, and control and level 

of institution: Fall 2015 and Fall 2016. Available at 

https://nces.ed.gov/programs/digest/d17/tables/ 

dt17_311.15.asp?current=yes. 

specific numbers with which to update 

the estimate or discuss whether the 

$75,000 cost provided by the earlier 

commenter was in line with other 

institutions’ costs. In practice, actual 

costs to institutions vary based on a 

number of factors including an 

institution’s size, the extent to which an 

institution provides distance education, 

and whether it participates in a State 

authorization reciprocity agreement or 

chooses to obtain authorization in 

specific States. 

Delay may also allow institutions to 

postpone incurring costs associated 

with the disclosure requirements. As 

indicated in the Paperwork Reduction 

Act of 1995 section of the 2016 final 

regulations, those costs were estimated 

to be 152,405 hours and $5,570,403 

annually. 

Net Budget Impact 

As noted in the 2016 final regulations, 

in the absence of evidence that the 

regulations would significantly change 

the size and nature of the student loan 

borrower population, the Department 

estimated no significant net budget 

impact from the 2016 final regulations. 

While the updated requirements for 

State authorization and the option to 

use State authorization reciprocity 

agreements may expand the availability 

of distance education, student loan 

volume will not necessarily expand 

greatly. Additional distance education 

could provide convenient options for 

students to pursue their educations and 

loan funding may shift from physical to 

online campuses. Distance education 

has expanded significantly already and 

the 2016 final regulations are only one 

factor in institutions’ plans within this 

field. The distribution of title IV, HEA 

program funding could continue to 

evolve, but the overall volume is also 

driven by demographic and economic 

conditions that are not affected by the 

2016 final regulations and State 

authorization requirements were not 

expected to change loan volumes in a 

way that would result in a significant 

net budget impact. This analysis is 

limited to the effect of delaying the 

effective date of the selected provisions 

of the 2016 final regulations to July 1, 

2020, and does not account for any 

potential future substantive changes in 

the upcoming regulations. 

Regulatory Flexibility Analysis 

This final rule would affect 

institutions that participate in the title 

IV, HEA programs, many of which are 

considered small entities. The U.S. 

Small Business Administration (SBA) 

Size Standards define ‘‘for-profit 

institutions’’ as ‘‘small businesses’’ if 

they are independently owned and 

operated and not dominant in their field 

of operation with total annual revenue 

below $7 million. The SBA Size 

Standards define ‘‘not-for-profit 

institutions’’ as ‘‘small organizations’’ if 

they are independently owned and 

operated and not dominant in their field 

of operation, or as ‘‘small entities’’ if 

they are institutions controlled by 

governmental entities with populations 

below 50,000. Under these definitions, 

approximately 4,267 of the institutions 

of higher education (IHEs) that would be 

subject to the paperwork compliance 

provisions of the 2016 final regulations 

are small entities. Accordingly, we have 

reviewed the estimates from the 2016 

final regulations and prepared this 

regulatory flexibility analysis to present 

an estimate of the effect on small 

entities of the delay of the effective date 

of the 2016 final regulations. 

In the Regulatory Flexibility Analysis 

for the 2016 final regulations, the 

Department estimated that 4,267 of the 

6,890 IHEs participating in the title IV, 

HEA programs were considered small 

entities—1,878 are not-for-profit 

institutions, 2,099 are for-profit 

institutions with programs of two years 

or less, and 290 are for-profit 

institutions with four-year programs. 

Using the definition described above, 

approximately 60 percent of IHEs 

qualify as small entities, even if the 

range of revenues at the not-for-profit 

institutions varies greatly. Many small 

institutions may focus on local 

provision of specific programs and 

would not be significantly affected by 

the delay of the effective date of the 

2016 final regulations because they do 

not offer distance education. As 

described in the analysis of the 2016 

final regulations, distance education is a 

growing area with potentially significant 

effects on the postsecondary education 

market and the small entities that 

participated in it, providing an 

opportunity to expand and serve more 

students than their physical locations 

can accommodate but also increasing 

competitive pressure from online 

options. Overall, as of Fall 2016, 

approximately 15 percent of students 

receive their education exclusively 

through distance education while 68.3 

percent took no distance education 

courses. However, at proprietary 

institutions almost 59.2 percent of 

students were exclusively distance 

education students and 30.4 percent had 

not enrolled in any distance education 

courses.2 The delay of selected 

provisions of the effective date of the 

2016 final regulations, and the resulting 

uncertainty regarding State 

authorization requirements for distance 

education, may slow the reshuffling of 

the postsecondary education market or 

the increased participation of small 

entities in distance education, but that 

is not necessarily the case. Distance 

education has expanded over recent 

years even in the absence of a clear State 

authorization regime. 

In the analysis of the 2016 final 

regulations, we noted that the 

Department estimated total State 

Authorization Reciprocity Agreement 

(SARA) fees and additional State fees of 

approximately $7 million annually for 

small entities, but acknowledged that 

costs could vary significantly by type of 

institution and institutions’ resources 

and that these considerations may 

influence the extent to which small 

entities operate distance education 

programs. Small entities that do 

participate in the distance education 

sector may benefit from avoiding these 

fees during the delay period. If 50 

percent of small entities offer distance 

education, the average annual cost 

savings per small entity during the 

delay would be approximately $3,280, 

but that would increase to $6,560 if 

distance education was only offered by 

25 percent of small entities. This 

estimate assumes small entities have not 

already taken steps to comply with the 

State authorization requirements in the 

2016 final regulations. In the NPRM, the 

Department welcomed comments on the 

distribution of small entities offering 

distance education, the estimated costs 

to obtain State authorization for their 

programs, and the extent to which small 

entities have already incurred costs to 

comply with the 2016 final regulations. 

One comment indicated that of the 

1,800 institutions that participate in 

SARA (and thus are likely to offer 

distance education programs), 45 

percent (810) enroll less than 2,500 

students. That enrollment figure does 

not correspond to the Department’s 

definition of a ‘‘small entity,’’ but it 

does indicate that many smaller 

institutions are participating in distance 

education programs, even if a significant 

share of students are enrolled in 

programs offered by large institutions. 

The Department also estimated that 

small entities would incur 13,981 hours 

of burden in connection with 

information collection requirements 

with an estimated cost of $510,991 


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Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Rules and Regulations 31303 

annually. Small entities may be able to 

avoid some of the anticipated burden 

during the delay. To the extent small 

entities would need to spend funds to 

comply with State authorization 

requirements for distance education, the 

proposed delay would allow them to 

postpone incurring those costs. And 

although institutions may have incurred 

some of the $510,991 annual costs to 

prepare for the information collection 

requirements, it is possible that 

institutions could avoid up to that 

amount during the period of the delay. 

Paperwork Reduction Act of 1995 

As indicated in the Paperwork 

Reduction Act section published in the 

2016 final regulations, the assessed 

estimated burden was 152,565 hours 

affecting institutions with an estimated 

cost of $5,576,251 for Sections 600.9 

and 668.50. This final rule delays the 

effective date of selected provisions of 

the cited regulations. 

Section 600.9(d) will go into effect on 

July 1, 2018, with an assessed burden of 

160 hours and $5,848 in institutional 

costs. The maximum potential reduction 

in burden hours and costs from the 

delay are the 152,405 hours and 

$5,570,403 associated with sections 

668.50(b) and (c). 

The table below identifies the 

regulatory sections, OMB Control 

Numbers, estimated burden hours, and 

estimated costs of those final regulations 

that have not been delayed. 

Regulatory section OMB Control 

No. Burden hours 

Estimated cost 

$36.55/hour 

institution 

668.50(b) ...................................................................................................................................... 1845–0145 151,715 5,545183 

668.50(c) ...................................................................................................................................... 1845–0145 690 25,220 

Total ...................................................................................................................................... ........................ 152,405 5,570,403 

Cost savings due to delayed effective date.

This final rule delays the effective 

date of selected provisions of the cited 

regulations. 

Accessible Format: Individuals with 

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request to the contact person listed 

under FOR FURTHER INFORMATION

CONTACT. 

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the document published in the Federal 

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official edition of the Federal Register 

and the Code of Federal Regulations is 

available via the Federal Digital System 

at: www.gpo.gov/fdsys. At this site, you 

can view this document, as well as all 

other documents of this Department 

published in the Federal Register, in 

text or Portable Document Format 

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List of Subjects 

34 CFR Part 600 

Colleges and universities, Foreign 

relations, Grant programs—education, 

Loan programs—education, Reporting 

and recordkeeping requirements, 

Student aid, Vocational education. 

34 CFR Part 668 

Administrative practice and 

procedure, Colleges and universities, 

Consumer protection, Grant programseducation, Loan programs-education, 

Reporting and recordkeeping 

requirements, Selective Service System, 

Student aid, Vocational education. 

■ Accordingly, the effective date for the 

amendments to 34 CFR 600.2, 600.9, 

668.2, and the addition of 34 CFR 

668.50, published December 19, 2016, at 

81 FR 92236, is delayed until July 1, 

2020. 

Dated: June 28, 2018. 

Betsy DeVos, 

Secretary of Education. 

[FR Doc. 2018–14373 Filed 6–29–18; 4:15 pm] 

BILLING CODE 4000–01–P 


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