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[Federal Register Volume 89, Number 247 (Thursday, December 26, 2024)]
[Proposed Rules]
[Pages 104937-104939]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-30919]

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DEPARTMENT OF EDUCATION

34 CFR Parts 600, 602, and 668

[Docket ID ED-2022-OPE-0050]
RIN 1840-AD82, 1840-AD83, 1840-AD86

Program Integrity and Institutional Quality: State Authorization, 
Cash Management, Accreditation and Related Issues

AGENCY: Office of Postsecondary Education, Department of Education.

ACTION: Termination of negotiated rulemaking process for State 
Authorization, Cash Management, Accreditation and Related Issues.

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SUMMARY: The U.S. Department of Education (Department) announces the 
termination of the negotiated rulemaking process for three Program 
Integrity and Institutional Quality issues that were undertaken as part 
of a larger negotiated rulemaking process for

[[Page 104938]]

Federal programs authorized under title IV of the Higher Education Act 
of 1965, as amended (HEA): State Authorization, Cash Management, 
Accreditation and Related Issues (Accreditation).

DATES: The negotiated rulemaking process for State Authorization, Cash 
Management, and Accreditation and Related Issues is terminated as of 
December 20, 2024.

FOR FURTHER INFORMATION CONTACT: Scott Prince, U.S. Department of 
Education, Office of Postsecondary Education, 400 Maryland Avenue SW, 
5th Floor, Washington, DC 20202. Telephone: (202)453-5568. Email: 
[email protected].
    If you are deaf, hard of hearing, or have a speech disability and 
wish to access telecommunications relay services, please dial 7-1-1.

SUPPLEMENTARY INFORMATION: 

Background

    On March 24, 2023, the Department published a notification in the 
Federal Register announcing our intent to establish a negotiated 
rulemaking committee to prepare proposed regulations for the Federal 
Student Aid programs authorized under title IV of the HEA. See 88 FR 
17777.
    On April 11-13, 2023, the Department held a virtual public hearing 
at which individuals and representatives of interested organizations 
provided advice and recommendations relating to the issues identified 
in the March 24 notification. We also took written public comments from 
March 24, 2023, through April 24, 2023.
    On November 29, 2023, the Department published a negotiated 
rulemaking in the Federal Register announcing its intent to establish a 
negotiated rulemaking committee and soliciting nominations for 
individual negotiators to represent key stakeholder constituencies for 
the issues to be negotiated to serve on the rulemaking committee. See 
88 FR 83365. The document covered six issues:
    (1) The Federal TRIO programs, including improvements to 
programmatic eligibility and operations under 34 CFR parts 642 through 
647;
    (2) The Secretary's recognition of accrediting agencies in 34 CFR 
part 602 and related parts;
    (3) Institutional eligibility under 34 CFR 600.2, including State 
authorization as a component of such eligibility under 34 CFR 600.9;
    (4) Return of title IV funds, to address requirements for 
participating institutions to return unearned title IV funds in a 
manner that protects students and taxpayers while easing administrative 
burden for institutions of higher education under 34 CFR 668.22;
    (5) Cash management, to address timely student access to 
disbursements of title IV, HEA Federal student financial assistance and 
provisions related to credit balances, escheatment, or loss of such 
funds under 34 CFR part 668, subpart K; and
    (6) The definition of ``distance education'' under 34 CFR 600.2 as 
it pertains to clock hour programs and reporting for students who 
enroll primarily online.
    The Department held three negotiated rulemaking sessions of four 
days each. During each daily negotiated rulemaking session, we provided 
an opportunity for public comment and expanded that time to one hour 
for the second and third sessions. Additionally, non-Federal 
negotiators shared feedback from their stakeholders with the 
negotiating committee.
    On July 24, 2024, the Department published in the Federal Register 
a Notice of Proposed Rulemaking (NPRM) proposing to amend the Student 
Assistance General Provisions regulations to promote program integrity 
and institutional quality in three of the six negotiated rulemaking 
issues: (1) distance education; (2) the return of title IV, HEA funds; 
and (3) the Federal TRIO programs. See 89 FR 60256. This document does 
not apply to the issues covered in the July 24, 2024, NPRM, which will 
be addressed through that separate rulemaking.
    This document pertains to the three remaining issues included in 
the November 29, 2023, notification establishing the negotiated 
rulemaking committee: accreditation, state authorization, and cash 
management. For the reasons discussed below, the Department is 
terminating the negotiated rulemaking process for these issues.

Termination of the Negotiated Rulemaking Process for State 
Authorization, Cash Management, Accreditation and Related Issues

    The Department began the rulemaking efforts described above to 
amend 34 CFR parts 600, 602, and 668 to create more student-friendly 
policies relating to the use and receipt of Federal student financial 
aid and to hold institutions accountable for providing high-quality 
educational opportunities. However, the Department has decided not to 
make any regulatory changes on the issues of accreditation, state 
authorization, and cash management at this time, to allow for 
additional evaluation of recent changes in other regulations and 
industry practices. This decision reflects the Department's commitment 
to deliberative policymaking and consideration of feedback received 
during the negotiated rulemaking process, which highlighted the need 
for additional time and further study. Terminating the negotiated 
rulemaking process at this time will allow the agency to gather 
additional data, assess evolving industry practices, and evaluate 
whether existing regulations remain necessary or require modification.
    The Department considered several factors in reaching the decision 
to terminate the negotiated rulemaking process on these remaining three 
identified issues. We considered that two of the areas--state 
authorization and accreditation--have recently undergone significant 
changes, as explained below, that continue to affect the field even 
after the conclusion of negotiated rulemaking, and we decided it is 
preferable to wait and see the effectiveness of those changes before 
issuing further regulations. Waiting to assess the effects of these 
changes will allow the Department to better identify any needed future 
alterations and improve the evidentiary base for future rulemaking.
    Regarding state authorization, the Department decided to terminate 
the negotiated rulemaking process so we could observe the effects of 
two recent policy changes. One is a change to Sec.  668.14(b)(32)(iii) 
that went into effect on July 1, 2024. See 88 FR 74568. The new 
regulation requires institutions to certify to the Department that they 
are in compliance with all State laws related to closure of 
postsecondary institutions, including record retention, teach-out plans 
or agreements, and tuition recovery funds or surety bonds. That change 
addressed one of the major concerns the Department had related to state 
authorization--ensuring that States were not limited in their ability 
to manage the effects of closure on students living within their 
borders, even if the college is located in a different state. Given 
that the change to Sec.  668.14(b)(32)(iii) only took effect a few 
months ago, evaluating its effect as closures occur will help the 
Department understand whether further modifications may be necessary.
    The Department also believes it is worth evaluating how State-led 
efforts at improving state authorization proceed before making further 
regulatory changes. This particularly involves the policy modification 
process adopted by the National Council for State Authorization 
Reciprocity Agreements (NC-SARA), an organization formed in partnership 
with four regional compacts

[[Page 104939]]

in which almost all states across the country participate for purposes 
of providing state authorization and reciprocity. NC-SARA first started 
using a policy modification process in January 2023 to create a formal 
mechanism for addressing issues with state authorization and 
reciprocity.\1\ That process continues to be refined. As many 
commenters noted during the public hearings and negotiated rulemaking 
sessions on state authorization, allowing this policy modification 
process to continue is one way to address the Department's goals.
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    \1\ https://www.nc-sara.org/sara-policy-modification-process.
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    Regarding accreditation, the Department adopted a series of final 
regulations in this area that went into effect on July 1, 2020. See 84 
FR 58834. These regulations made significant changes to the 
Department's process for reviewing and recognizing accrediting 
agencies. Although these regulations went into effect four years ago, 
the Department is still in the midst of the first cycle of implementing 
these changes across all accrediting agencies. That is a result of the 
five-year timeframe on renewal of recognition for accrediting agencies, 
as well as the requirements that agencies submit applications for 
renewal two years before their deadline for renewal and the additional 
periods institutions have for submitting compliance or monitoring 
reports. Allowing a full 5-year review cycle under the 2020 regulations 
for all accrediting agencies provides a greater opportunity to 
demonstrate the effectiveness of the existing rules and evaluate 
outcomes before making other changes to the process. This also allows 
Department staff to focus on existing reviews instead of directing 
focus away from these key activities. Seeing the effects across a full 
cycle will help us better identify any needed modifications.
    The Department also has decided to terminate the negotiated 
rulemaking process on the third remaining regulatory area, cash 
management. While we discussed several regulatory changes to this 
topic, the most significant was a proposal addressing textbook billing 
practices. That issue generated significant discussion during 
negotiated rulemaking and from public commenters, among all the cash 
management proposals. We are persuaded by concerns raised during the 
negotiated rulemaking sessions about the need to gather additional 
data, assess evolving industry practices, and evaluate how policies 
related to the costs of books and supplies as part of tuition and fees 
best serve students and their use of financial aid. The current 
provisions are in Sec.  668.164(c) and (m). The Department received 
public feedback during the negotiated rulemaking process articulating 
the benefits of these policies. The Department also acknowledges 
concerns from commenters, including from students who have experience 
navigating these products, that these policies may not always deliver 
costs to students that are below market rates or may not give students 
a true opportunity to opt out. Given this mix of input, we believe 
further research to assess the benefits or drawbacks of this way of 
billing for textbooks is needed before proceeding with rulemaking. 
Additionally, because textbook billing is the most significant issue 
related to cash management addressed by the committee, we do not 
believe exploring further regulatory changes in this part of the 
regulations is the best use of limited Department resources at this 
time. Any institution that includes the costs of books and supplies as 
part of tuition and fees as described in 668.164(c) must ensure they 
have a clearly communicated and actionable policy under which the 
student may opt out of the method the institution provides for students 
to obtain books and supplies. If the Department continues to find that 
institutions are not complying with the current requirements in Sec.  
668.164(c) and (m), we may propose additional protective or restrictive 
measures to ensure that students have access to books or supplies at 
below competitive market rates.
    For the reasons described above, at this time the Secretary 
exercises his discretion to terminate the negotiated rulemaking process 
for issues related to accreditation, state authorization, and cash 
management. Were the Department to issue a regulation in this area in 
the future, it would be bound by the requirements of Section 492(a) and 
(b) of the HEA, 20 U.S.C. 1098a(a) and (b).
    Accessible Format: On request to the program contact person listed 
under FOR FURTHER INFORMATION CONTACT, individuals with disabilities 
can obtain this document in an accessible format. The Department will 
provide the requestor with an accessible format that may include Rich 
Text Format (RTF) or text format (txt), a thumb drive, an MP3 file, 
braille, large print, audiotape, compact disc, or other accessible 
format.
    Electronic Access to This Document: The official version of this 
document is the document published in the Federal Register. You may 
access the official edition of the Federal Register and the Code of 
Federal Regulations at www.govinfo.gov. At this site you can view this 
document, as well as all other Department documents published in the 
Federal Register, in text or Portable Document Format (PDF). To use PDF 
you must have Adobe Acrobat Reader, which is available free at the 
site.
    You may also access Department documents published in the Federal 
Register by using the article search feature at 
www.federalregister.gov. Specifically, through the advanced search 
feature at this site, you can limit your search to documents published 
by the Department.

Miguel Cardona,
Secretary of Education.
[FR Doc. 2024-30919 Filed 12-20-24; 2:00 pm]
BILLING CODE 4000-01-P
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