`[Federal Register Volume 90, Number 2 (Friday, January 3, 2025)]
[Rules and Regulations]
[Pages 470-504]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-31031]



[[Page 469]]

Vol. 90

Friday,

No. 2

January 3, 2025

Part III





Department of Education





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34 CFR Parts 600, 643, 644, et al.





Program Integrity and Institutional Quality: Distance Education and 
Return of Title IV, HEA Funds; Final Rule

  Federal Register / Vol. 90, No. 2 / Friday, January 3, 2025 / Rules 
and Regulations  

[[Page 470]]


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DEPARTMENT OF EDUCATION

34 CFR Parts 600, 643, 644, 645, 647, and 668

[Docket ED-2024-OPE-0050]
RIN 1840-AD85 and 1840-AD92


Program Integrity and Institutional Quality: Distance Education 
and Return of Title IV, HEA Funds

AGENCY: Office of Postsecondary Education, Department of Education.

ACTION: Final regulations.

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SUMMARY: The Secretary amends the Student Assistance General Provisions 
regulations governing participation in the student financial assistance 
programs authorized under title IV of the Higher Education Act of 1965, 
as amended (HEA), to promote program integrity and institutional 
quality. These regulations clarify, update, and consolidate certain 
provisions that apply to distance education and the return of title IV, 
HEA funds. They also make technical changes to the TRIO program 
regulations to reflect the current status of the Republic of Palau as a 
member of the Freely Associated States. This document provides notice 
that the Department fully closes out the Program Integrity and 
Institutional Quality: Distance Education and Return of Title IV, HEA 
Funds notice of proposed rulemaking. That is, we will not be finalizing 
the remainder of the Federal TRIO program provisions but may promulgate 
through future rulemaking efforts.

DATES: The regulations are effective July 1, 2026. For the 
implementation dates of the regulatory provisions, see the 
Implementation Date of These Regulations in SUPPLEMENTARY INFORMATION.

FOR FURTHER INFORMATION CONTACT: For distance education: Brian 
Schelling. Telephone: (202) 987-0443. Email: [email protected]. 
For return of title IV funds: Aaron Washington. Telephone: (202) 987-
0911. 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.
    A brief summary of these final regulations are available at 
www.regulations.gov/docket/ED-2024-OPE-0050.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Abbreviations
II. Executive Summary
    1. Purpose of Regulatory Action
    2. Authority for the Regulatory Action
III. Summary of Major Provisions
IV. Summary of Costs and Benefits
V. Implementation Date of These Regulations
VI. The NPRM and Public Comment
VII. Analysis of Public Comment and Changes
    1. Process for Out of Scope Comments
    2. Public Comment Period
    3. Distance Education
    4. Return of Title IV Funds
    5. Federal TRIO Programs
VIII. Regulatory Impact Analysis
    1. Congressional Review Act
    2. Need for Regulatory Action
    3. Summary of Comments and Changes From the NPRM
    4. Discussion of Costs, Benefits, and Transfers
    5. Accounting Statement
    6. Alternatives Considered
    7. Regulatory Flexibility Act
IX. Paperwork Reduction Act of 1995

I. Abbreviations

CFR: Code of Federal Regulations
CIP Code: Classification of Instructional Programs Code
DEOA: Department of Education Organization Act
EOC: Educational Opportunity Centers
FFEL: Federal Family Education Loan program
FSA: Federal Student Aid
Freely Associated States: the Republic of Palau, the Federated 
States of Micronesia, and the Republic of the Marshall Islands
HEA: Higher Education Act of 1965, as amended
McNair: Ronald E. McNair Postbaccalaureate Achievement Program
PEP: Eligible prison education program
PRWORA: Personal Responsibility and Work Opportunity Reconciliation 
Act
R2T4: Return of title IV funds
RIA: Regulatory Impact Analysis
SSS: Student Support Services Program
Title IV, HEA Programs: Student financial assistance programs 
authorized under title IV of the HEA
TRIO: Federal outreach and student services programs designed to 
identify and provide services for individuals from disadvantaged 
backgrounds
TS: Talent Search
UB: Upward Bound

II. Executive Summary

1. Purpose of This Regulatory Action

    These final regulations address two substantive areas: distance 
education and return of title IV funds (R2T4). Additionally, this 
document makes technical changes to the TRIO program regulations to 
reflect the current status of the Republic of Palau as a member of the 
Freely Associated States and removes references to the Trust Territory 
of the Pacific Islands. As noted above, we will not be finalizing the 
remainder Federal TRIO provisions but may consider them in a future 
rulemaking efforts.
    The Department is addressing these areas to help ensure students 
are well served by the eligible institutions they attend and ensure 
that Federal Student Aid (FSA) programs work in the best interests of 
students. As the two distinct topics are structured and addressed 
independently in this final rule, the Department generally intends the 
rule's provisions to be severable from each other. If any provision of 
a particular subpart or its application to any person, act, or practice 
is held invalid, the remainder of the subpart or the application of its 
provisions to any other person, act, or practice will not be affected 
thereby.
    The distance education final regulations help the Department 
improve its oversight of distance education and correspondence 
programs. To accomplish this, the distance education regulations 
improve the information available about students in such programs who 
receive title IV, HEA funds by adding a definition of distance 
education course, and requiring institutions to report their students' 
distance education status.
    The R2T4 final regulations increase the accuracy and simplicity of 
performing R2T4 calculations; address unique circumstances for what 
constitutes a withdrawal; and codify longstanding policies into 
regulation.
    The July 24, 2024, Notice of Proposed Rulemaking (NPRM), 89 FR 
60256, for the Federal TRIO programs proposed to expand student 
eligibility under certain TRIO programs for students who have enrolled 
in or who seek to enroll in a high school in the United States, 
territories, or Freely Associated States. After reviewing comments 
received on the proposed rulemaking for TRIO, the Department has 
decided not to finalize the Federal TRIO provisions other than the 
technical change mentioned above, to reconsider how best to ensure that 
the TRIO programs are able to reach all populations of disadvantaged 
students. The Department may consider the remaining Federal TRIO 
provisions in a future rulemaking effort.

2. Authority for This Regulatory Action

    The legal basis for these final regulations is title IV of the 
Higher Education Act of 1965, as amended (HEA), which authorizes the 
Federal government's major student financial aid programs that are the 
primary source of direct Federal support to students pursuing 
postsecondary education. 20 U.S.C. 1070-1099d (sections 400-499 of the 
HEA). Institutions participating in the title IV, HEA programs must 
satisfy certain threshold and ongoing requirements, see id., and the 
Secretary

[[Page 471]]

is given broad authority to carry out program requirements. 20 U.S.C. 
1070(b) (section 400(b) of the HEA). As part of its oversight 
responsibilities under title IV, the Department seeks to promote 
program integrity and institutional quality. See generally 20 U.S.C. 
1099c, 1099c-1, 1099c-2 (sections 498, 498A, and 498B of the HEA). To 
this end, the Department's Student Assistance General Provisions 
regulations establish threshold requirements for institutions to 
participate and to continue participation in student financial 
assistance programs. See generally 34 CFR parts 600-603, 642-647, 668, 
673-676, 682-694. These final regulations update, consolidate, and 
revise requirements in two distinct title IV areas: distance education 
and the return of title IV, HEA funds, impacting 34 CFR parts 600 and 
668. The Department's specific legal authority in these areas is set 
forth below.
    Distance Education. Section 103(7) of the HEA defines ``distance 
education,'' and section 484(l) sets forth rules relating to courses 
offered through distance education.
    Return of Title IV, HEA Funds. Section 484B of the HEA outlines the 
process that an institution must follow if a title IV, HEA aid 
recipient withdraws from the institution during a payment period or 
period of enrollment (also known as R2T4). The Department's various 
changes to the R2T4 regulations benefit both institutions and students.

III. Summary of the Major Provisions of This Regulatory Action

    These final regulations make the following changes.

Distance Education (Sec. Sec.  600.2, 668.3, 668.41)

     Amend Sec.  600.2 to add a definition for distance 
education course.
     Add Sec.  668.41(h) to require institutions to report 
student enrollment in distance education or correspondence courses 
using a procedure that would be determined by the Department.

Return of Title IV Funds (Sec. Sec.  668.21, 668.22)

     Amend Sec.  668.22(a)(2)(ii)(A)(6) to exempt institutions 
from performing an R2T4 calculation if: (1) a student is treated as 
never having begun attendance; (2) the institution returns all title 
IV, HEA assistance disbursed to the student for that payment period or 
period of enrollment; (3) the institution refunds all institutional 
charges to the student for that payment period or period of enrollment; 
and (4) the institution writes off or cancels any payment period or 
period of enrollment balance owed by the student to the institution due 
to the institution's returning of title IV, HEA funds to the 
Department.
     Amend Sec.  668.22(b)(2) to codify longstanding guidance 
(since the 2005-06 award year \1\) that an institution that is required 
to take attendance must document the date of the institution's 
determination that the student withdrew no later than 14 days after the 
student's last date of attendance as determined by the institution from 
its attendance records.
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    \1\ 2005-06 FSA Handbook--(page 5-32)--chrome--https://fsapartners.ed.gov/sites/default/files/2021-03/2005-2006%20Volume%205%20Master%20File.pdf.
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     Amend Sec.  668.22(d)(1)(vii) to allow a confined or 
incarcerated individual, in a term-based setting, to return at a 
different point in their eligible prison education program (PEP) than 
the point at which the student left off.
     Amend Sec.  668.22(f)(1)(ii)(A) to streamline and make 
consistent institutions' calculation of the percentage of the payment 
period completed for a clock-hour program.
     Amend Sec.  668.22(l)(9) to consider a module part of the 
payment period used in the denominator of the R2T4 calculation only 
when a student begins attendance in the module.

IV. Summary of Costs and Benefits

    As further detailed in the Regulatory Impact Analysis, the 
Department estimates net present value costs of $27,349,749 over ten 
years at a 2 percent discount rate. This is equivalent to an annualized 
cost of $3,044,753 over ten years. Additionally, we estimate annualized 
quantified costs of $9,423,657 related to paperwork burden.
    As also further detailed in the RIA, these final regulations will 
have benefits, including, ensuring students are well served by the 
institutions of higher education they attend and that Federal Student 
Aid programs work in the best interests of students. New regulations 
for distance education will help the Department better measure and 
account for student outcomes, improve oversight over distance 
education, and ensure students are receiving effective education by 
requiring students' distance education enrollment status. The R2T4 
final regulations will increase the accuracy and simplicity of 
performing R2TV calculations, add additional clarity to institutions on 
reporting, and codify longstanding policies.

V. Implementation Date of These Regulations

    These regulations are effective on July 1, 2026. Section 482(c)(1) 
\2\ of the HEA requires that regulations affecting programs under title 
IV of the HEA be published in final form by November 1 prior to the 
start of the award year (July 1) to which they apply. HEA section 
482(c)(2) \3\ also permits the Secretary to designate any regulation as 
one that an entity subject to the regulations may choose to implement 
earlier and outline the conditions for early implementation.
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    \2\ 20 U.S.C. 1089(c)(1).
    \3\ 20 U.S.C. 1089(c)(2).
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    The Secretary is exercising his authority under HEA section 482(c) 
to designate certain regulatory changes to part 668 in this document 
for early implementation beginning February 3, 2025. The Secretary has 
designated the following provisions for early implementation: allow an 
incarcerated student enrolled in a term-based program who takes a leave 
of absence to return without resuming coursework at the same point, and 
exempting institutions from performing an R2T4 calculation under the 
withdrawal exemption in Sec.  668.22(a)(2)(ii)(A)(6).

VI. The NPRM and Public Comments

    On July 24, 2024, the Secretary published a NPRM for these 
regulations in the Federal Register. These final regulations contain 
changes from the NPRM, which we explain in the Analysis of Comments and 
Changes section of this document. The NPRM included proposed 
regulations on three topics: distance education, R2T4, and the Federal 
TRIO programs.
    We developed these regulations through negotiated rulemaking. 
Section 492 of the HEA requires that, before publishing any proposed 
regulations to implement programs under title IV of the HEA, the 
Secretary must obtain public involvement in the development of the 
proposed regulations. After obtaining advice and recommendations, the 
Secretary must conduct a negotiated rulemaking process to develop the 
proposed regulations. The Department negotiated in good faith with all 
parties with the goal of reaching consensus. The Committee reached 
consensus on TRIO but did not reach consensus on the provisions under 
Distance Education and R2T4. However, after reviewing the comments 
received on the NPRM, the Department has determined not to finalize the 
Federal TRIO provisions other than the technical change mentioned 
above, to reconsider how best to ensure that the TRIO programs are able 
to reach all

[[Page 472]]

populations of disadvantaged students. The Department may consider the 
remainder of the Federal TRIO provisions in future rulemaking efforts.
    In response to our invitation in the NPRM, 454 parties submitted 
comments. We discuss substantive issues under the sections of the 
regulations to which they pertain.

VII. Analysis of Public Comment and Changes

    In this section, we have grouped issues according to subject, with 
appropriate sections of the regulations referenced. We discuss other 
substantive issues under the sections of the regulations to which they 
pertain. In instances where individual submissions appeared to be 
duplicates or near duplicates of comments prepared as part of a write-
in campaign, the Department posted one representative sample comment 
along with the total comment count for that campaign to 
Regulations.gov. We considered these comments along with all other 
comments received. In instances where individual submissions were 
bundled together (submitted as a single document or packaged together), 
the Department posted all the substantive comments included in the 
submissions along with the total comment count for that document or 
package to Regulations.gov. Generally, we do not address minor, non-
substantive changes (such as renumbering paragraphs, adding a word, or 
typographical errors). Additionally, we generally do not address 
changes recommended by commenters that the statute does not authorize 
the Secretary to make or comments pertaining to operational processes.

1. Process for Out-of-Scope Comments

    We do not address comments that are out of scope. For purposes of 
this NFR, out-of-scope comments are those that are beyond the scope of 
the NPRM altogether. Generally, comments that are outside of the scope 
of the NPRM are comments that do not discuss the content or impact of 
the proposed regulations or the Department's evidence or reasons for 
the proposed regulations. Analysis of the comments and of any changes 
in the regulations since publication of the NPRM follows.

2. Public Comment Period

    Comments: Several commenters argued that the 30-day comment period 
denied the public their right to provide adequate comment. These 
commenters recommend extending the comment period for an additional 30 
days for what they said would be a more comprehensive and thoughtful 
review of the proposed rulemaking. A few commenters mentioned that 
institutions have several tasks to balance, including challenges 
related to the FAFSA simplification rollout, the beginning of the 
semester, new regulations, and increased reporting requirements. One 
commenter noted that while they understand that a final rule must be 
published by November 1 for the rule to take effect the following 
academic year, they are frustrated that 30 days has become a routine 
timeframe at the Department because it is generally insufficient time 
to prepare a response reflective of the regulation's impact. One 
commenter stated that there was no reason for the Department to give 
this rule a shorter comment period compared to other NPRMs and that 
doing so goes against the Administrative Procedure Act. One commenter 
asserts that Executive Orders (E.O.) 12866 and 13563 support their 
claims of a 30-day comment period being too short. The commenter states 
that E.O. 13563 instructs every agency to provide the public with a 
meaningful opportunity to comment on a proposed regulation and the 
comment period should generally be at least 60 days. The commenter 
points out that E.O. 12866 includes similar language.
    Discussion: The public comment period is consistent with the 
Department's obligations under the Administrative Procedure Act and the 
Executive Orders cited by the commenters, and, given the extensive 
opportunity for comment provided over the course of the negotiated 
rulemaking process, the Department declines the suggestion to extend 
the public comment period for another 30 days. Contrary to the 
commenter's assertion, the comment period for this NPRM is not shorter 
compared to other recent NPRMs, and the Department believes 30 days 
gave the public sufficient time to prepare a response to the proposed 
regulations. Over 450 individuals and entities commented on the NPRM, 
and many provided detailed and lengthy comments. Those comments have 
helped the Department identify areas for improvements and clarification 
that have resulted in improved final regulations.
    Additionally, the negotiated rulemaking process, which began in the 
Spring of 2023, provided significantly more opportunity for public 
engagement and feedback than standard notice-and-comment rulemaking, 
which does not include multiple negotiation sessions. For example:
     The Department began the rulemaking process by inviting 
public input over 3 days of public hearings from April 11-13, 2023; all 
who requested to speak were accommodated during the hearings on April 
11 and 12, which led the Department to cancel the hearing scheduled for 
April 13. We received 60 public comments as part of the public hearing 
process.
     Following the public hearings, the Department sought non-
Federal negotiators for the negotiated rulemaking committee who 
represented constituencies that would be affected by our rules. As part 
of these non-Federal negotiators' work on the rulemaking committee, the 
Department asked that they reach out to their broader constituencies 
for feedback during the negotiation process.
     During each of the three negotiated rulemaking sessions, 
we provided opportunities for the public to comment, including after 
seeing draft regulatory text, which was available prior to the first, 
second, and third sessions. The Department and the non-Federal 
negotiators considered those comments to inform further discussion at 
the negotiating sessions, and we used the information to create our 
proposed rules.
    Furthermore, while the Executive Orders cited by the commenter 
recommend an appropriate time for public comment, they do not require 
more than 30 days, nor do they take into account the significant 
additional public input garnered through the mandated negotiated 
rulemaking process under the HEA.
    Changes: None.

3. Distance Education (Sec. Sec.  600.2, 668.3, 668.41)

General Support
    Comments: There were several commenters who supported the 
Department's proposed rules on distance education. They cited the 
increasing role of distance education in higher education and the 
associated need for better measurement of the effectiveness of that 
instruction by looking at student outcomes. They agreed that the new 
definitions and reporting requirements will make such oversight easier 
through the collection of needed data.
    Discussion: The Department appreciates the feedback from 
commenters.
    Changes: None.
General Opposition
    Comments: Many commenters expressed concern that the new 
regulations would impose an administrative burden on institutions.

[[Page 473]]

Some felt that the proposed rules evinced a bias against distance 
education as being of inferior quality to traditional in-person 
education.
    Discussion: In general, we believe that the administrative burden 
will be less than some commenters raised, both due to clarifying some 
areas of confusion as well as the decision to not finalize some 
proposals that were in the NPRM. The benefit from the remaining burden 
is acceptable because it will help the Department in its administration 
of the title IV, HEA programs. We provide greater detail on the 
provisions that are not being finalized in the relevant sections that 
discuss comments related to those provisions.
    Changes: None.
    Comments: A few commenters suggested the proposed regulations will 
stifle innovation in distance education that has occurred in the wake 
of the pandemic. The commenters stated that, in their view, the 
distance education practices established during that national emergency 
are not what prevails now; rather, according to the commenters, 
distance education has only improved and is constantly becoming more 
rigorous, and therefore the Department should be more restrained in 
writing new rules.
    Discussion: While the Department agrees that distance education has 
continued to expand since the pandemic, we disagree that the final 
regulations will hamper its development. Additionally, rather than 
limiting innovation and improvement in the distance education sector, 
the Department's efforts to improve data-gathering related to distance 
education will eventually result in improved research on outcomes for 
students enrolled in distance education programs and provide new data 
for institutions to use to improve their programs. To the extent this 
comment was referring to proposals related to the treatment of 
asynchronous clock hours, we note that proposal will not be finalized 
but may be addressed through future rulemaking efforts.
    Changes: None.
    Comments: Some commenters noted that the timeline for 
implementation is too short and that institutions will need more time 
to be able to incorporate the changes. A couple requested that the 
Department set aside the current rulemaking and instead continue with 
negotiations on distance education topics with more qualified 
negotiators who have sufficient background to adequately advise on and 
advocate for distance education.
    Discussion: The Department acknowledges commenters' concerns that 
additional time will be needed for institutions to adapt their systems 
and procedures to implement these new regulations. Since these rules 
are being published after November 1, 2024, the effective date will not 
be until July 1, 2026, with the provision on distance education 
reporting extended to July 1, 2027. This provides the institutions a 
full additional year to make any adjustments that are necessary for 
implementation than if the rules had been finalized prior to November 
1, 2024. Given the approximately 18 months afforded to institutions to 
implement these provisions, the Department does not believe further 
adjustments to the implementation date are necessary.
    We do not agree with the commenters who suggested that the 
negotiated rulemaking committee lacked appropriate expertise, and we 
decline the suggestion to restart rulemaking with a differently 
constituted committee. The primary negotiator from the for-profit 
sector has extensive experience in online education and also 
participated on the committee for the Distance Education and Innovation 
regulations published in 2020. The primary negotiator for school 
business officers is from an institution that has robust and well-
regarded distance education coursework and has been offering online 
bachelor's degree programs since 2003-2004.\4\ The alternate negotiator 
for private nonprofit institutions, who was active during negotiations, 
is from a distance learning school that was among the first to offer 
online courses in the 2000's.\5\ The primary negotiator for financial 
aid administrators is from a college that offers 26 associate degrees 
and 34 certificates 100 percent online in a variety of disciplines.\6\ 
This is only a partial list of negotiators with experience with 
distance education. Contrary to the commentor's suggestion, there was 
clearly sufficient experience on the panel for negotiators to put forth 
informed opinions and suggestions regarding the Department's distance 
education proposals.
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    \4\ https://www.usnews.com/education/online-education/marist-college-2765/bachelors.
    \5\ https://www.excelsior.edu/about/.
    \6\ https://www.sanjac.edu/programs/online.
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    Changes: None.
    Comments: Commenters contended that various parts of the distance 
education provisions violate the Supreme Court's ruling in Loper Bright 
Enterprises v. Raimondo, 144 S. Ct. 2244 (2024), which they claim 
affirms that agencies are not at liberty to expound via regulation 
where the law is already clear.
    Discussion: As a general matter, the Department notes that the 
Loper Bright decision does not preclude an agency from regulating where 
statutory language is clear. Rather, the decision requires an agency's 
regulation to be consistent with the plain language and best reading of 
an authorizing statute. See, e.g., Loper Bright, 144 S. Ct. at 2266, 
2271. As addressed in the specific sections below, the revised 
regulations satisfy that standard.
Establishment of Virtual Locations
    Comments: Several commenters agreed with the Department's proposed 
definition of virtual location in Sec.  600.2 because it will allow for 
better tracking and oversight of distance education as well as loan 
discharges when a virtual location closes. The commenters indicated 
that such oversight would permit comparison of student outcomes in 
programs using different modalities within institutions as well as 
programs across institutions. One commenter also noted that it may 
increase the demand for online education because, the commenter stated, 
schools could formally expand and market their virtual campuses and 
possibly reduce the operating costs of maintaining physical locations.
    Discussion: The Department appreciates the commenters' support.
    Changes: None.
    Comments: Commenters raised a number of concerns about the new 
virtual location definition, including about its scope, the additional 
administrative costs of coordination across programs, the impact of the 
residency requirement on low-residency programs, and the potential 
burden on accreditors to ``visit'' such programs. Others requested 
delayed implementation of this provision or delay until other 
independent accreditation regulations go into effect. Still others 
asserted that the Department did not have the authority to treat a 
virtual location as a completely separate entity for purposes of loan 
discharge.
    Some commenters stated that the data the Department seeks can be 
effectively collected through existing reporting systems such as the 
National Student Loan Data System (NSLDS) and the Common Origination 
and Disbursement (COD) system or the Integrated Postsecondary Education 
Data System (IPEDS). The commenters assert that it is redundant and 
impractical to redefine a modality as a location.
    Discussion: As noted in the NPRM, the Department proposed the 
addition of a virtual location because we have

[[Page 474]]

been hampered in the ability to fully understand students' 
participation in distance education, account for differences in 
outcomes and conduct oversight, accurately measure taxpayer 
expenditures on distance education programs, and gauge the success of 
such education (89 FR 60256). The Department had initially proposed the 
creation of a virtual additional location because we believed that 
would accomplish our goals at a lower burden to institutions. Under 
this proposal, institutions would report only programs that were fully 
distance-based at a single virtual location.
    During negotiated rulemaking, the Department agreed to collect 
distance education enrollment information for students receiving title 
IV, HEA assistance through NSLDS. Non-Federal negotiators believed that 
such information would permit a more granular understanding of outcomes 
for students enrolled in distance education or correspondence courses.
    In considering both the virtual location proposal and the proposal 
for NSLDS reporting, we have determined that it is not necessary to 
include both proposals. Given the greater support from institutions for 
the NSLDS reporting, as well as concerns about potential implications 
for site visits and other issues identified above, we have decided to 
not move forward with the proposal for a virtual location. We will 
instead collect the relevant information through NSLDS. The NSLDS data 
collection does not have any effect on closed school loan discharges.
    Changes: We have removed the definition of a virtual additional 
location from Sec.  600.2.
Asynchronous Instruction and Clock Hours (Definition of ``Clock Hour'' 
in Sec.  600.2)
    Comments: There were several commenters who supported the 
Department's proposal to prevent completion of asynchronous distance 
education coursework from counting as clock hours in clock-hour 
programs, by modifying the definition of ``clock hour'' in Sec.  600.2, 
even though this change will remove some options from affected schools 
and students. They agreed with the Department's rationale for making 
this change. One commenter pointed to how, during the open comment 
periods of the negotiated rulemaking sessions, multiple students 
testified about using their financial aid to pay for expensive clock-
hour programs that consisted solely of YouTube videos that were free to 
the public, with little to no interaction with instructors, and that 
none of these students received any hands-on training, typically 
required by clock-hour programs, and none of them learned the skills 
necessary to succeed in the professions for which they trained.
    Discussion: The Department appreciates the support from commenters. 
As discussed in the NPRM (89 FR 60259), the Department has heard 
similar concerns from students through complaints and in program 
reviews.
    Changes: None.
    Comments: Several commenters suggested that the Department's 
proposal exceeds its authority, asserting that it completely removes a 
form of education delivery provided in the HEA and ignores the 
Department of Education Organization Act (DEOA). Commenters asserted 
that the HEA does not give the Department the authority to treat 
asynchronous clock- and credit-hour programs differently, and that the 
HEA definition of distance education in section 103(7) specifically 
allows for this mode of instruction when it states that distance 
technologies are ``to support regular and substantive interaction 
between the students and the instructor, synchronously or 
asynchronously.'' One commenter observed that there is no statutory 
distinction between clock- and credit-hour programs in distance 
education, that section 481(b)(3) of the HEA (20 U.S.C. 1088) only 
requires an ``eligible program'' to have the capability to effectively 
deliver distance education, and that section 481(b)(4) of the HEA 
acknowledges that an ``eligible program'' can include credit hours or 
clock hours. One commenter asserted that the Department's citation of 
section 400(b) of the HEA for the broad authority to regulate in this 
area is unwarranted, especially in the wake of the Supreme Court's 
recent Loper Bright decision, which removed the Chevron deference that 
previously was accorded to Federal agencies (section 400(b) of the HEA 
states that the Department will ``carry out programs to achieve the 
purposes of this part.'') The commenter noted that section 400(b) of 
the HEA is about title IV grant and benefit programs, not asynchronous 
instruction, and asserted that the Department is trying to assume 
authority it no longer has.
    Commenters also asserted that the Department did not sufficiently 
explain why it reversed the stance it took in the 2020 final rule, 
which the commenters believed was the product of rulemaking consensus, 
and that the proposed regulation was thus in violation of the 
Administrative Procedure Act. One commenter asserted that the 2024 
proposed regulation moves backward what the commenter believed was a 
consensus position in 2020. Another commenter pointed out that the 
Department agreed with the testimonials of commenters in 2020 about the 
efficacy of asynchronous delivery and confirmed in the final rule that 
it was acceptable. The commenter also asserted that most schools did 
not start using asynchronous delivery until 2022, so it is too soon to 
determine that it is ineffective.
    Discussion: The Loper Bright decision does not prohibit an agency 
from regulating; rather, it requires the rules to be consistent with 
the plain language and best reading of the authorizing statute.
    Congress authorized the Department to promulgate regulations 
governing applicable programs and gave the Department broad authority 
to carry out the purposes of the various title IV programs. See 20 
U.S.C. 1070(b)(HEA section 400(b)); 1082(a)(1)(HEA section 432(a)); 
1087a(b)(HEA section 451(b)).\7\ Contrary to the commenters' claim, 
these general provisions provide the Department the ability to ensure 
that any general provisions, such as those related to distance 
education, are promulgated fulfill the purpose of the grant and loan 
programs, which is to meet the needs of the student beneficiaries.
---------------------------------------------------------------------------

    \7\ In outlining its legal authority for the rules set forth in 
the NPRM, the Department inadvertently omitted the general authority 
provision at 20 USCS 1221e-3, and the general loan provisions at 20 
USCS 1082(a)(1), 1087a(b). The Department is rectifying those 
omissions here.
---------------------------------------------------------------------------

    In defining an eligible title IV program, Congress recognized that 
clock hours and credit hours are two separate and distinct forms of 
instruction. See 20 U.S.C. 1088(b). While the HEA does not define a 
clock hour, the regulatory definition of a clock hour was first adopted 
in November 1974 (39 FR 39412). That definition stated that a clock 
hour was measured based upon spending 50 to 60 minutes in direct 
instruction or in a faculty-supervised learning opportunity such as a 
laboratory, shop, or internship. Until 2020, that definition went 
largely unchanged except for the inclusion of a definition for 
correspondence courses.
    The longstanding interpretation of a clock hour also followed the 
plain meaning of the term--it is an hour as measured by the 60 minutes 
displayed for one rotation of the minute hand on a clock. In contrast, 
the concept of a credit hour is based on a combination of both learning 
with an instructor and learning outside of the classroom, as

[[Page 475]]

described in the definition of a credit hour in Sec.  600.2.\8\ Nothing 
in these regulations affects an institution's ability to offer 
asynchronous instruction as part of a credit-hour program.
---------------------------------------------------------------------------

    \8\ In these regulations a credit hour is defined as one that 
reasonably approximates one hour of ``classroom or direct faculty 
instruction'' and two hours of ``out-of-class student work'' per 
week, or an equivalent amount of work for other academic activities.
---------------------------------------------------------------------------

    The decades-long definition of a clock hour never included the 
concept of out-of-class work. It also does not turn on whether a 
program is offered virtually. This definition predated the creation of 
the internet, and it remained in place for nearly 15 years after fully 
online programs were allowed in the title IV HEA programs. Congress 
also did not change this interpretation in the last full 
reauthorization of the Higher Education Act in 2008.
    The distinct nature of clock-hour programs and the Department's 
longstanding interpretation of the term must be considered when 
interpreting the statutory language providing that distance education 
can be provided synchronously or asynchronously. The concepts of credit 
hours and clock hours had been well-established for many years when 
Congress amended the law to create the definition of ``distance 
education'' providing for both synchronous and asynchronous online 
education.\10\ There is no reason to believe that Congress intended to 
overturn the traditional concept of a clock hour as an hour of 
supervised instruction because of the addition of the word 
``asynchronous'' in that new definition. At that time, the vast 
majority of programs using distance education were offered through 
credit hours, especially given the hands-on nature of clock hour 
programs. The revised regulation preserves the unique nature of clock-
hour programs and ensures the requirement for 50-60 minutes of 
supervised instruction is met. Moreover, there is no statutory 
prohibition against treating the two differently for specified 
purposes.
    In an effort to clarify the definition of a clock hour and allow 
for greater innovation in clock-hour programs, the Department included 
changes to the definition in negotiated rulemaking in 2019. During 
negotiated rulemaking, the Distance Learning and Educational Innovation 
subcommittee raised concerns about allowing clock hours to count toward 
title IV, HEA eligibility if they did not involve direct synchronous 
instruction. The subcommittee specifically noted that asynchronous 
clock hours would be more akin to homework, which cannot be counted 
toward title IV, HEA eligibility in brick-and-mortar clock-hour 
programs, which would create an unfair inconsistency between programs 
using different modalities. Commenters are thus mistaken that the 
provision in the final 2020 rule was the product of consensus. In fact, 
in 2020, the change to asynchronous learning for clock-hour programs 
was not part of that consensus language. Rather, consensus was reached 
on a version of the rule in which asynchronous clock hours were not 
permitted for title IV, HEA purposes, the same principle the Department 
proposed in 2024, and that consensus version was in the 2020 NPRM. The 
final 2020 rule departed from such consensus in response to public 
comments, largely from cosmetology schools. The adoption of this 
changed position was not motivated by an underlying change in the 
statute. Nor did the final rule include any analysis or research of the 
specific innovations that merited the upending of more than four 
decades of agency precedent.
    In the preamble to those regulations (85 FR 54752), we specifically 
noted our continued concern that clock hours offered asynchronously 
could be used as a means to complete unsupervised homework. The 
Department was attempting to allow for alternative educational 
approaches while attempting to maintain the longstanding position that, 
aside from correspondence courses, clock hours may only be counted for 
coursework that occurs in the classroom or through clinical or hands-on 
activities, whereas time spent outside of the classroom with supporting 
materials, including reading or passive consumption of videos, cannot 
be counted toward a student's title IV, HEA eligibility. See, e.g., 
paragraphs (1)(i) and (ii) of the definition of a clock hour in Sec.  
600.2, both of which predate the distance education definition 
established in 2020.\9\ Specifically, in the 2020 final rule we stated 
that: ``The Department remains concerned about the possibility that 
clock hours offered asynchronously could be used as a means to complete 
unsupervised homework assignments rather than coursework that otherwise 
would have occurred in the classroom, which is prohibited under the 
Department's longstanding policy for clock-hour programs'' (85 FR 
54742).
---------------------------------------------------------------------------

    \9\ https://www.ecfr.gov/current/title-34/part-600/section-600.2#p-600.2(Clock%20hour).
---------------------------------------------------------------------------

    However, in light of the range of public comments, the Department 
revisited this provision in the 2024 NPRM and ultimately has decided to 
not finalize it. We will continue to conduct oversight on how 
institutions offer any asynchronous clock hour programs and may revisit 
this issue at a later date through a future rulemaking effort if we 
find continued evidence of widespread problems.
    Because we are not finalizing this proposal, the Department 
maintains the position taken in 2020 that any distance education clock 
hour program delivered in whole or in part through asynchronous methods 
must involve regular and substantive interaction with an instructor, as 
defined in the definition of ``distance education'' in 34 CFR 600.2. 
Ensuring regular and substantive interaction includes continuous and 
active monitoring of student academic engagement. Additionally, these 
programs cannot count toward a student's title IV, HEA eligibility time 
that is more comparable to homework, such as reading or watching 
videos, and they must ensure that active engagement occurs during hours 
that are included in a student's eligibility. Institutions wishing to 
offer asynchronous clock hour programs must ensure they have the 
technological solutions in place necessary to make these kinds of 
assessments. Failure to do so could result in institutions owing 
liabilities to the Department or facing other administrative actions. 
If the Department continues to encounter non-compliance with these 
requirements, we may propose additional protective or restrictive 
measures on clock hours offered asynchronously, or once again propose a 
full ban as proposed in the NPRM.
    With respect to the assertion that the Department ignored the DEOA, 
the commenter did not indicate how or why they felt the DEOA was 
ignored, and therefore the Department is unable to respond to that 
comment.
    Changes: We have removed the changes to Sec.  668.3(b)(2)(ii)(A) 
and (B) that would have limited asynchronous coursework that can count 
toward an institution's definition of an academic year to coursework 
offered in credit-hour programs.
    Comments: Multiple commenters asserted that the Department did not 
provide sufficient evidence that asynchronous instruction is a problem. 
According to the commenters, it was not sufficient for the Department 
to rely on its stated experience in program reviews as well as student 
complaints when it has not made such documents public. One commenter 
went on to state that unspecified and unexplained reasoning does not 
satisfy the Supreme Court's standard for an examination of the relevant 
data and a reliance upon

[[Page 476]]

factual findings and thus renders the regulation arbitrary and 
capricious. Commenters also felt it was overbroad to prohibit all 
asynchronous instruction in clock-hour courses and that it was 
inaccurate to imply that all synchronous and in-person classes are of 
higher quality.
    Several commenters suggested there is research (in some instances 
providing citations) that demonstrates asynchronous learning is 
effective and therefore should be permitted to count as clock hours.
    Discussion: As discussed above, the Department has decided to not 
finalize the proposed change to prohibit asynchronous clock hour 
programs.
    In considering the decision to not finalize this provision the 
Department reviewed the studies cited by the commenters. We did not 
find any of them persuasive in the decision to not finalize this 
provision. We found that the studies cited have little to no bearing on 
asynchronous clock-hour programs offered by American institutions of 
higher education because they focus on international contexts, credit-
hour programs, non-career and technical programs, graduate programs, 
comparisons to in-person as opposed to synchronous virtual instruction, 
or outcomes that are not tied to learning and course performance. We 
acknowledge that the literature on the specific question of the value 
of asynchronous clock hours is undeveloped, but that does not justify 
comparisons to unrelated contexts. We explain the limitations of 
specific studies cited by commenters below.
    One study cited by commenters is a meta-analysis of 225 studies 
published in 2014.\10\ This study looked at other studies that examined 
the benefits of active learning versus lecture settings. However, it 
focused on undergraduate instruction in science, technology, 
engineering, and mathematics. Those are all historically credit-hour 
areas of learning, and there is no attempt in the study or by the 
commenters to connect these findings to clock-hour programs. Moreover, 
neither the commenters nor the study considers how clock-hour programs 
are already designed to be more hands-on than a traditional lecture-
based format. We also note this piece was published prior to the 2020 
rule that allowed for the offering of asynchronous learning in clock-
hour programs and was never cited or considered as part of the decision 
to make that change, suggesting that its findings are not relevant to 
the specific issue at hand here: whether asynchronous learning is 
appropriate in clock-hour programs.
---------------------------------------------------------------------------

    \10\ https://pubmed.ncbi.nlm.nih.gov/24821756/.
---------------------------------------------------------------------------

    Similar limitations exist for another study cited by 
commenters.\11\ This study only considers 27 undergraduate and graduate 
students at a university, which has little bearing on clock-hour 
programs since they are not offered by this type of institution of 
higher education. The study also focuses on student satisfaction 
outcomes instead of the more relevant outcomes of student performance 
and learning.
---------------------------------------------------------------------------

    \11\ A Pilot Study Exploring Interaction and Student 
Satisfaction in Asynchronous Courses in Higher Education [verbar] 
TechTrends.
---------------------------------------------------------------------------

    Commenters also cited a study published in an Iranian medical 
journal in 2018.\12\ It looks at students participating in a practical 
pathology program for one semester in 2016. It compared traditional 
lecture instruction to distance learning. A single semester's results 
from a foreign country's medical education is not informative on the 
question of whether clock hour programs in a U.S. setting can be 
offered asynchronously. Training medical doctors already entails 
expectations for significant out-of-class work and addresses a group of 
students very different from those generally pursuing clock hours.
---------------------------------------------------------------------------

    \12\ https://www.semanticscholar.org/reader/e12a9dfea127f0d7c287453a848ce2378ed28fdc.
---------------------------------------------------------------------------

    Issues of comparability appeared in many of the other studies 
cited. For example, commenters pointed to a 2020 study looking at 
graduate medical education in the wake of the COVID-19 pandemic.\13\ 
Again, the level of education considered is significantly different 
from asynchronous clock-hour programs and already presumes significant 
work conducted by students outside of the classroom. It considers 
curricular design options for asynchronous learning as well as virtual 
learning. The study also notes ``We do not recommend transitioning your 
entire curriculum to an asynchronous platform.'' \14\ The study did not 
consider any sort of trial to explore potential learning outcomes.
---------------------------------------------------------------------------

    \13\ https://pmc.ncbi.nlm.nih.gov/articles/PMC8043318/pdf/ats-scholar.2020-0046PS.pdf.
    \14\ See id.
---------------------------------------------------------------------------

    Many other studies cited ran into the same issue of focusing on 
instruction in foreign countries that does not appear to be based in 
clock hours. Commenters cited a 2021 meta-analysis of 36 studies 
published in an Indonesian journal that focused on the teaching of 
English as a foreign language.\15\ It considers the relative merits of 
synchronous versus asynchronous learning for this specific subject 
matter. These are all distinct from what is offered through clock hours 
for title IV, HEA funds. While the conclusions are not relevant for the 
considerations of this final regulation, the study did find that, for 
asynchronous learning, ``[t]he weaknesses involve lack of interaction, 
low mastery of content, dull class, connection issues, and network 
issues.'' \16\
---------------------------------------------------------------------------

    \15\ https://www.researchgate.net/publication/356349861_BLENDED_ONLINE_LEARNING_COMBINING_THE_STRENGTHS_OF_SYNCHRONOUS_AND_ASYNCHRONOUS_ONLINE_LEARNING_IN_EFL_CONTEXT.
    \16\ See id.
---------------------------------------------------------------------------

    A 2024 study cited by commenters considering virtual learning for 
training dentists in China faced similar issues.\17\ It asked 157 
fourth-year students and 54 teachers their opinions on online learning 
using a questionnaire. The study found that the ``skill operation 
score'' of the students taught with some virtual learning was lower 
than that of those taught traditionally, though the difference was not 
statistically significant. As with other studies cited, the study 
looked at levels of education distinct from what the vast majority of 
asynchronous clock hour programs offer in the United States.
---------------------------------------------------------------------------

    \17\ https://link.springer.com/article/10.1186/s12909-024-05171-1.
---------------------------------------------------------------------------

    In some cases, the studies cited considered just a single meeting 
of a course. For instance, commenters cited a 2024 Taiwanese study that 
looked at 170 fourth-year students attending a single dermatology 
lecture.\18\ This is again an instance where students are already 
expected to conduct significant work out-of-class in a program that in 
the United States would be offered in credit hours. A study cited by 
commenters of 20 residents or orthopedic surgeons in Mexico taking an 
asynchronous course to diagnose ankle fractures has the same 
challenge--it is dealing with one lesson given to graduate level 
students who already have significant training in the given area.\19\ 
While a 2019 study cited by commenters did focus on second-year 
students, it related to 66 second-year students in an Indian university 
who were quizzed on what the authors describe as ``low backache.'' \20\ 
They looked at pre- and post-test scores on a multiple-choice quiz. 
While the Department does not think this study bears on this final 
regulation, we do note the authors stated: ``Furthermore, since the 
undergraduates are introduced to new topics each day and have huge

[[Page 477]]

syllabi, they may get lost if live interactions are replaced with 
asynchronous teaching. There may be a gradual decline in motivation due 
to lack of active peer and student-teacher interactions.''
---------------------------------------------------------------------------

    \18\ https://pmc.ncbi.nlm.nih.gov/articles/PMC10960437/.
    \19\ https://www.medigraphic.com/pdfs/ortope/or-2023/or232c.pdf.
    \20\ https://pmc.ncbi.nlm.nih.gov/articles/PMC6477961/.
---------------------------------------------------------------------------

    None of these studies looks at issues comparable to clock-hour 
programs in the United States that are eligible for title IV, HEA 
funds. Extending findings from one lecture, quiz, or portion of a 
course for a few dozen people in another country does not provide 
persuasive evidence to guide the potential awarding of millions if not 
billions of dollars in title IV, HEA funds.
    Other studies did not involve formal postsecondary environments at 
all. Commenters cited a 2022 Argentinian study looking at the content 
of just under 300 posts on Facebook discussing diabetes self-care (the 
researchers excluded posts ``based only on emoticons/GIFs, such as 
clapping hands or smiley faces expressing joy.'') \21\ This kind of 
analysis may be useful in the public health context, but it has little 
relevance to what criteria formal postsecondary programs should meet to 
be supported by taxpayer dollars. Similarly, a 2019 Nigerian study 
focused on the use of asynchronous learning to teach word processing 
skills to 70 secondary school students.\22\ Again, those types of 
skills can be valuable, but they are not relevant to title IV, HEA 
programs.
---------------------------------------------------------------------------

    \21\ https://formative.jmir.org/2022/11/e38862.
    \22\ https://www.sajournalofeducation.co.za/index.php/saje/article/view/1383/868.
---------------------------------------------------------------------------

    The studies cited that appeared in U.S. journals or publications 
generally were older, focused on a limited number of people, were only 
theoretical, or had some combination of those issues. For instance, 
commenters cited a 2008 piece in a quarterly publication from a U.S. 
nonprofit focused on the use of technology in higher education.\23\ It 
focused on two online seminars of eight and 19 students, respectively. 
There are no other specifics provided around the level of postsecondary 
program, but the courses were taught by the author who in 2008 was 
focused on computer and systems sciences at a university in Sweden. 
Again, the comparison is not specific to clock-hour programs, and 
focusing on different types of credit-hour experiences fails to 
consider the differences between that type of coursework and clock-hour 
programs.
---------------------------------------------------------------------------

    \23\ http://elearning.fit.hcmup.edu.vn/~longld/
References%20for%20TeachingMethod&EduTechnology%20-
%20Tai%20lieu%20PPDH%20&%20Cong%20Nghe%20Day%20Hoc/(Book)%20-
%20Sach%20tham%20khao%20-%20eLearning/e-Learning%20Concepts/
Asynchronous%20&%20Synchronous%20e-Learning%20(Hrastinski-2008).pdf.
---------------------------------------------------------------------------

    A 2004 piece, meanwhile, looked at perceptions of the role of the 
instructor in online learning.\24\ This study predates the ability of 
institutions to offer fully online courses that are eligible for title 
IV, HEA funds. This study looked at courses to help teachers or 
administrators with preparing for online learning, with almost two-
thirds of participants holding a master's degree. The age of the study, 
the fact that it was focused on professional development for students 
already with advanced degrees, and the lack of a connection to clock-
hour programs all make it irrelevant for this final regulation. On a 
similarly theoretical basis is a 2009 study raised by commenters that 
looked at instructional design strategies.\25\ It also was not used or 
cited by the Department in the 2020 policy change despite being 
available at that time, which suggests its limited relevance to the 
specific issue in both the 2020 and 2024 regulations: the 
appropriateness of asynchronous learning in clock-hour programs. Though 
more recent, a 2020 article cited by commenters considered how to 
handle emergency transitions to online learning due to the pandemic, 
without any evaluative component.\26\ Those considerations are not 
relevant for the lasting policy change discussed in this final 
regulation.
---------------------------------------------------------------------------

    \24\ https://www.ncolr.org/jiol/issues/pdf/3.1.5.pdf.
    \25\ https://www.tandfonline.com/doi/epdf/10.1080/08923649409526853?needAccess=true.
    \26\ https://er.educause.edu/articles/2020/3/the-difference-between-emergency-remote-teaching-and-online-learning.
---------------------------------------------------------------------------

    The studies presented by commenters thus did not factor into our 
decision to not finalize the provision. Our reasons for not finalizing 
the provision are discussed elsewhere in this preamble.
    Changes: We have removed the changes to Sec.  668.3(b)(2)(ii)(A) 
and (B) that would have limited asynchronous coursework that can count 
toward an institution's definition of an academic year to coursework 
offered in credit-hour programs.
    Comments: Commenters did not feel that the two studies cited by the 
Department in support of the prohibition on asynchronous clock-hour 
learning were valid and relevant. One commenter noted that both studies 
occurred when remote learning was imposed during COVID, which the 
commenter characterized as an atypical remote learning experience. The 
commenter noted that one study was an analysis of another 
organization's student satisfaction survey, which, according to the 
commenter, addressed student responses to programs that took place 
during the time of remote learning due to COVID without a clear 
explanation of the educational experience. The commenter stated that it 
is not surprising that students forced into emergency remote learning 
during COVID would lament the lack of hands-on training, and that this 
experience does not reflect the planned online programs that keep tasks 
that require hands-on experience intact while using asynchronous 
learning only for didactic instruction. The commenter found the second 
study unreliable because it also occurred during COVID-era instruction. 
While the commenter acknowledged that this study focused on outcomes 
and not just student satisfaction, the commenter pointed out that it 
was of one class at one institution with only 33 students and that, 
according to the commenter, the asynchronous instructional methodology 
described in the study does not appear to be typical but rather 
something that may have been adapted for emergency remote COVID-era 
instruction, which does not represent the student experience in planned 
online instruction.
    Discussion: As discussed above, the Department has decided to not 
finalize the proposal to prevent title IV aid at asynchronous clock-
hour programs. We note the cited studies questioned by commenters were 
not the primary basis for the proposal in the NPRM nor the choice to 
not finalize this provision. That said, we do agree that the study that 
focused on delivering lectures both asynchronously and synchronously 
has many of the same issues with the reports cited by commenters--they 
focus on graduate-level education in a foreign setting and are thus not 
comparable to clock-hour offerings.\27\
---------------------------------------------------------------------------

    \27\ https://journals.lww.com/jehp/fulltext/2021/10000/why_people_are_becoming_addicted_to_social_media_.223.aspx#.
---------------------------------------------------------------------------

    We note that the findings from student satisfaction surveys in the 
other study questioned by commenters highlight student concerns that 
they need hands-on training to succeed in certain environments and 
often do not receive it. While this survey also does not directly 
consider clock-hour programs in synchronous or asynchronous learning 
environments, it looks at a U.S. setting and considers types of 
workforce training that are more similar to U.S. clock-hour programs. 
We will continue to monitor the research in this area as we weigh 
options going forward.
    Changes: We have removed the changes to Sec.  668.3(b)(2)(ii)(A) 
and (B) that would have limited asynchronous coursework that can count 
toward an

[[Page 478]]

institution's definition of an academic year to coursework offered in 
credit-hour programs.
    Comments: Commenters were concerned that removing asynchronous 
clock hours could remove flexibility for students who might have 
difficulty accessing synchronous instruction, such as those that must 
work or care for others, who are in rural areas, and students who 
cannot attend school synchronously, including veterans and those 
currently in the military. Others were concerned that disallowing 
asynchronous clock-hour learning would impact programs addressing 
shortage areas, such as nursing, EMT, or public safety.
    Others asserted that some asynchronous learning works as well or 
better than synchronous learning. One association asserted that its 
member schools report higher levels of completion, licensure, and 
placement rates in programs using asynchronous distance learning. 
Commenters assured that schools are successfully using tracking 
technology, which can be very robust in its capabilities to monitor 
students, provide them with learning opportunities, and keep them on 
track. One commenter asserted that the Department acknowledged in 2020 
that adequate technology existed, and it has only improved since then, 
and wondered what had changed to cause the Department to change its 
mind. One association commenter noted that investments by its members 
in the technology for asynchronous education are reported to be as much 
as $450,000 to $500,000 per institution and that these investments will 
be lost if the rule goes into effect as proposed. The association also 
asserted that institutional investments cannot simply be converted to 
synchronous learning. Others felt that the Department should have 
provided statistics on non-compliance as part of a comprehensive 
assessment of asynchronous learning. Commenters asserted that, instead 
of harming these institutions that have adequately provided 
asynchronous instruction combined with hands-on training as a part of 
clock-hour programs, the Department should focus on providing clearer 
guidance and standards for non-compliant schools and allow them time to 
come into compliance.
    Some commenters suggested that, rather than completely removing 
asynchronous instruction from clock-hour programs, the Department 
should limit asynchronous education to a certain percentage (several 
suggested 50 percent) or number of hours of a program (one suggested a 
percentage of the programs offered) or to didactic components of 
programs. Some commenters noted that many programs offering 
asynchronous instruction already limit the amount of the program that 
is offered asynchronously or have pared it back since the end of the 
COVID pandemic and have gone back to programs that consist primarily of 
in-person instruction with a smaller asynchronous component. One 
commenter posited that only about half of states have authorized 
asynchronous delivery and that in those States it has been limited to 
didactic portions and no more than 50 percent of all clock hours. That 
commenter suggested that the Department could require schools to 
demonstrate that the asynchronous methods are comparable to synchronous 
methods on ``student engagement, objectives, effectiveness, and 
educational outcomes.''
    Some commenters noted that institutions are already required by the 
regulations to ensure regular and substantive interaction between 
students and faculty and that this is a sufficient check on substandard 
instruction. Some asserted that accreditors and State regulators are 
tasked with the job of assuring that programs provide adequate 
education, and those oversight bodies have accounted for asynchronous 
learning with adequate measures, such as by limiting the percentage of 
program hours of such learning that can occur. A few suggested that 
there be a specialized accreditation or that some existing oversight 
mechanism be used, such as the Peer Online Course Review, that would 
ensure the quality of asynchronous programs.
    One commenter observed that in many States, career and technical 
education (CTE) accredited programs offered in clock hours provide the 
same content as nearby credit-hour programs but will be negatively 
affected solely because of their institutional structure. As a 
solution, one commenter suggested not eliminating such asynchronous 
education in clock-hour programs but treating it as correspondence 
coursework, which offers limited access to title IV, HEA funds.
    Multiple commenters asked that the Department delay the 
implementation of the modification to the definition of ``clock hour'' 
in Sec.  600.2, if it proceeds with the regulation change, with one 
asking for a delay until at least 2027. Commenters also sought clarity 
about the impact of the regulations on students who are already 
enrolled in affected programs.
    A couple commenters noticed that, by specifying in the definition 
of a ``week of instructional time'' in proposed Sec.  668.3(b)(2) that 
asynchronous coursework occurs in credit-hour programs, we have, 
perhaps inadvertently, prevented direct assessment programs from using 
asynchronous coursework.
    One community college system commenter anticipated that the 
colleges in its system will review their clock-hour programs with the 
intention of converting them to credit hours, which will be burdensome.
    Discussion: As discussed above, the Department is not finalizing 
the provision to prevent asynchronous clock-hour programs from being 
eligible for title IV, HEA funds. Because this provision is not being 
finalized, the concerns from the commenters are no longer relevant.
    Changes: We have removed the changes to Sec.  668.3(b)(2)(ii)(A) 
and (B) that would have limited asynchronous coursework that can count 
toward an institution's definition of an academic year to coursework 
offered in credit-hour programs.
    Comments: One community college commenter suggested the Department 
should permit clock-hour programs to be offered through distance 
education during periods of emergency situations, such as natural 
disasters.
    Discussion: The Department does permit colleges to offer clock-hour 
programs via distance education during a federally declared emergency, 
such as a hurricane, fire, or pandemic, and still receive Federal 
student aid funding, but certain conditions must be met. For example, 
the Department provided guidance allowing institutions to transition 
clock-hour programs to distance education during the COVID-19 emergency 
under specific temporary waivers.
    Changes: None.
Definition of Distance Education Course
    Comments: Several commenters supported the definition of a distance 
education course as consisting entirely of distance instruction 
notwithstanding in-person non-instructional requirements because they 
stated it would clarify the scope of such courses, assess their 
effectiveness, and ensure consistency across institutions. The 
commenters also stated that it would, as noted in the NPRM (89 FR 
60262), assist institutions considering when they need to seek 
additional accreditor approval for passing the 50 percent threshold for 
the number of distance education courses or number of students enrolled 
in distance education.
    Discussion: The Department appreciates the commenters' support for

[[Page 479]]

provisions we believe will help with consistency and oversight of such 
coursework.
    Changes: None.
    Comments: There were concerns from several commenters that the 
addition of a definition of distance education course and other 
reporting requirements would create a student unit record system, which 
is explicitly proscribed in the HEA.
    Discussion: The commenter appears to be referring to section 134 of 
the HEA, which prohibits, with certain exceptions, the development of a 
database containing personally identifiable information on individuals 
receiving title IV Federal financial assistance. Section 134(b)(1) of 
the HEA specifically provides an exception for, among others, the title 
IV programs, so section 134 is inapplicable to these regulations.
    Changes: None.
    Comments: A few commenters observed that the proposed definition of 
distance education course includes residency experiences, which can 
vary greatly in length, or could allow for some in-person instruction. 
One commenter asked how long a residency experience could be while 
still meeting the new definition; for example, whether an offering 
would qualify as a distance education course if there were a single 
lecture or two and the balance of the class consists of online work. 
The commenter also asked whether there was a threshold for a hybrid 
class to be considered a distance education course. The commenter 
pointed out that the difference between the IPEDS definition of 
distance education course and the one in these regulations is the 
residency experience, and inquired as to how the Department would 
reconcile the two definitions. Another commenter asked that the 
Department add clarity pertaining to clinical rotations, which often 
occur away from the school's campus. The commenter stated, for example, 
that students complete some of their requirements virtually for the 
didactic components of the course but receive in-person instruction 
from preceptors during the hands-on part of their rotation; the 
commenter asserted that such rotations should not count as distance 
education courses. One commenter suggested that the definition of 
distance education course be further separated, such as by 
distinguishing between synchronous and asynchronous instruction.
    Discussion: We have removed the phrase ``residency experiences'' 
from the definition of a distance education course, in part due to the 
concerns expressed by commenters regarding the inconsistency of this 
definition with the IPEDS definition and the complexity created by an 
undefined period for in-person coursework that could be included in a 
particular class. This resolves most of the concerns presented by the 
commenters.
    Regarding clinical rotations, if the hands-on portions count as 
essential parts of a course, such a course would not fall under the 
definition, but if no required part of a course is in-person, the 
course would fall under the definition of distance education. For 
example, if a student in a medical rotation takes one class that 
involved the actual praxis part of the rotation as well as one virtual 
class in biology that has no in-person component, the student is 
enrolled in one class that is not a distance education course (praxis) 
and one that is (biology). Also, hybrid courses in which any portion is 
in-person instruction, no matter how small, would not be distance 
education courses. Finally, there is no plan to distinguish between 
types of distance education courses because we believe that the 
categorization as proposed is sufficient.
    Changes: The phrase ``residency experiences'' has been removed from 
the definition of distance education course.
    Comments: Some commenters stated that the proposed addition of 
distance education course inaccurately characterizes residency 
experiences as non-instructional, but not only are residency 
experiences instructional and allow students to apply knowledge from 
their coursework, they are sometimes required to satisfy accreditation 
and state licensure standards. The commenter noted that during 
negotiations the Department supported moving the phrase ``residency 
experiences'' before ``non-instructional'' in the definition, but it 
did not do so in the NPRM.
    Discussion: We agree with the commenter. However, as described 
above, we have eliminated the phrase ``residency experiences'' from the 
definition of distance education course.
    Changes: The phrase ``residency experiences'' has been removed from 
the definition of distance education course.
    Comments: Several commenters were concerned that the Department's 
proposed definition of a distance education course might not align with 
other definitions used by institutions and that the Department's 
changes may prompt unwarranted regulatory scrutiny of distance 
education programs. They suggested that any amended definitions or new 
reporting requirements should consistently promote strong student 
outcomes across all modalities of learning.
    Discussion: The Department considers the new definitions to be 
straightforward and disagrees that they will cause undue and 
unspecified regulatory misalignment or scrutiny of distance education 
programs. To the contrary, the changes will instead facilitate what the 
commenters are seeking: stronger student outcomes across all modalities 
of learning by providing necessary information pertaining to those 
modalities.
    Changes: None.
    Comments: One commenter felt that the Department's definition of 
distance education course conflicted with section 484(l)(1)(A) of the 
HEA. Specifically, the commenter asserted that there was a conflict 
between the HEA, which considers distance education to include courses 
offered ``principally'' through distance education, and the 
Department's proposed definition, which restricts the definition to 
courses offered ``exclusively'' through distance education.
    Discussion: The commenter appears to have misunderstood the meaning 
of section 484(l)(1)(A) of the HEA. The two cited provisions serve 
different functions and are not in conflict. Unlike the regulation at 
issue here in Sec.  600.2, the statutory text does not, and is not 
intended to, define distance education. Instead, it is designed to 
determine who is enrolled in correspondence courses, stating that a 
student in a ``course of instruction'' leading to a degree or 
certificate that occurs principally via distance education must not be 
considered enrolled in correspondence courses.
    Changes: None.
Reporting Enrollment in Distance Education or Correspondence Courses 
(Sec.  668.41)
    Comments: There were several commenters who supported the 
Department's intention to gather the enrollment status of students, 
whether they are fully in-person, fully online, or in a hybrid 
situation. They agreed with the Department that this will be useful 
data for better understanding the effectiveness of the instruction 
modalities and appreciated the extended time (which will be delayed 
further, until July 1, 2027) for implementation of this reporting.
    Discussion: The Department thanks those commenters for their 
support.
    Changes: None.
    Comments: Numerous commenters thought that the collection of 
student

[[Page 480]]

enrollment status would add too much burden on schools. In addition, 
the commenters indicated that some schools already collect data 
pertaining to how instruction is carried out, so the new requirement 
would be redundant for them. Commenters asserted that because students 
so often engage in different modalities, including within a term, 
collection of such data will be difficult and will lack utility. They 
queried how a student who is enrolled in 100% distance education 
courses in one semester and 100% in-person the following semester would 
be reported, and they asserted that, since the Department already 
collects distance education information via IPEDS, it should use that 
for its proposed purposes rather than add unnecessary requirements. 
Some predicted that while the Department is ostensibly only asking for 
limited enrollment information about students, this could lead to 
broader, more burdensome requests for data. Some expected that the 
proposal would entail the Department creating an ad hoc portal or a 
costly system for reporting the information, which would require more 
personnel by schools, and would be a problem for the Department and 
schools to implement. One group of schools estimated that the data 
reporting would cost approximately $2 million for some of its colleges 
and requested that the requirement be delayed until 2027. One commenter 
suggested that the topic be discussed in further negotiations with 
negotiators who have the necessary experience.
    Discussion: While individual institutions might collect such data, 
the new reporting will allow the Department to gather such data from 
all schools participating in the title IV, HEA programs. At least one 
commenter who supported the proposed change felt that institutions that 
do not already track and evaluate this data by modality will benefit 
from collecting and analyzing this data, which will help inform 
institutional decision-making about program offerings, allocation of 
resources, and selection of outside partners to develop and operate 
online programs. And as noted in the NPRM (89 FR 60263), although this 
will increase burden for institutions by requiring them to report an 
additional layer of enrollment information, we do not anticipate that 
this additional datum about a student's enrollment status will cause 
undue burden or require that institutions have to implement new systems 
of reporting because the Department is incorporating the change into 
its existing enrollment reporting process in NSLDS. As to the choices 
students make with regard to modality, the reporting will capture that, 
whether they are enrolled in classes that offer mixed modality or those 
that are purely distance or in-person education, without the 
complication commenters envision. A student who is enrolled in 100% 
distance education courses in one semester and 100% in-person courses 
the following semester would be reported as distance education the 
first semester and in-person in the second. A student who is enrolled 
in even one class that allows for distance education, attending 
remotely as the student chooses throughout the semester for example, 
would be in a hybrid status. The IPEDS information collection does not 
provide student-level data and is therefore not sufficient for the 
Department's intended purposes. Also, the Department proposed only the 
stated request for student enrollment in distance education and 
correspondence courses, as requested by negotiators and institutions 
during negotiations. Any additional mandates for data would need to be 
negotiated in future rulemaking sessions and would be subject to public 
comment. Finally, we expect to incorporate the reporting of this 
information into an existing data stream; no additional portal or 
interface between schools and the Department will be needed, and the 
cost for such reporting will not be in the millions of dollars. In the 
interest of allowing institutions ample time for implementation, we 
have decided to delay this reporting requirement until 2027.
    Changes: Institutions will not be required to report this 
information until July 1, 2027.
    Comments: Some commenters suggested it would be unfair to compare 
distance education data with in-person instruction data because such a 
comparison would fail to account for differences in the student 
populations attending different modalities. The commenters felt that 
outcomes will be different for the distance education student 
population, which, they state, generally has less time and flexibility 
to devote to school.
    Discussion: It is unclear from the comments whether the commenters 
are opposed to the collection of data or are concerned about the use of 
the data after collection. To the extent that the commenters are 
opposing the collection of the data because there may be differences in 
the demographics, life circumstances, and outcomes of students enrolled 
in distance education versus those enrolled in in-person instruction, 
the Department disagrees that those potential differences should 
prevent the Department from collecting this important data. As set 
forth in the NPRM (89 FR 60263), the reporting provision was added at 
the request of negotiators and was intended to provide the Department 
and institutions, students, and the public expanded information 
necessary to make informed decisions when developing policies regarding 
distance education and to provide students additional information for 
enrollment choices. The concerns raised by the commenters regarding the 
differences in demographics of distance education students does not 
negate the need for the collection of the data.
    With respect to the use after collection, the Department would not 
evaluate information about distance education in a vacuum. The 
Department maintains other data about recipients of title IV, HEA 
funds--such as their age, family size, marital status, employment 
status, and high school completion status, as well as whether students 
have dependents they are supporting. These factors would also be taken 
into account when developing policies around distance education. 
Although the Department cannot speak to how institutions will use the 
distance education data, it can note that during negotiations 
institutional representatives voiced a desire for the information in 
order to better develop distance education courses that meet student 
needs. It is the Department's belief that all parties--the Department, 
Congress, researchers, institutions, students, and the general public--
can benefit when they have program outcome data by modality when making 
decisions.
    Changes: None.
    Comments: Several commenters pointed out that there is often no 
sharp distinction between distance and in-person education, that 
students often enroll in both at the same time, that such enrollment 
will be difficult to track, and that trying to make distinctions in 
such a blended environment will, in their view, lead to inaccurate 
assessments of students and programs. The commenters asserted that 
flexible instructional modality is beneficial to students because it 
allows them to enroll in coursework in the way that is most 
advantageous to them and singling out 100% distance education for 
tracking could create unintended consequences due to a false binary 
approach and be misleading at a time when the interaction between 
distance and in-person instruction is becoming more varied.
    Discussion: Regarding commenters' concerns that the proposed data

[[Page 481]]

requirements may be difficult to implement, given that some students 
enroll in courses offered in several different modalities, the 
Department notes that the level of detail required by Sec.  668.41(h) 
of the final regulations was added in response to specific requests 
from non-Federal negotiators. The Department altered its proposed 
regulations during negotiated rulemaking to require institutions to 
report students' enrollment in distance, in-person, or hybrid 
education, in addition to requiring the reporting of virtual locations. 
The Department ultimately agreed with non-Federal negotiators that the 
benefits of collecting such additional data outweighed the costs and 
burdens for institutions.
    The Department disagrees with the commenters who suggested that the 
data on distance education and correspondence course enrollment is 
misleading or creates a ``false binary'' approach. In fact, the 
Department accounts for the fact that students will be enrolled in 
various education modalities: in-person, distance, and hybrid. The 
changes will allow us to gather information on each modality and 
distinguish between them. The new information will not prohibit schools 
from combining and using the modalities as they currently do.
    The Department also asserts that programs offered entirely or 
nearly entirely using distance education or correspondence courses have 
several unique characteristics that distinguish them from other 
programs, including the ability to enroll students from a significantly 
larger geographic area and a necessarily greater reliance on technology 
as the medium for instruction and coursework. These characteristics 
merit analyzing fully online programs separate from other types of 
programs.
    Changes: None.
    Comments: Some commenters remarked that combining distance 
education with correspondence coursework would not allow for accurate 
assessments given that these are distinct and separately regulated 
modalities. The commenters felt that data from the two should be 
separately collected. One suggested the following alternative 
regulatory language: ``For each recipient of title IV, HEA assistance 
at the institution, the institution must report to the Secretary, in 
accordance with procedures established by the Secretary, the 
recipient's enrollment status as exclusively through distance 
education, exclusively through in-person instruction, or through a mix 
of distance education and in-person instruction. The procedures 
established by the Secretary will distinguish between enrollment in 
distance education and enrollment in correspondence courses.'' Another 
commenter opined that the E-App system (which schools use to apply for 
designation as eligible title IV institutions and for recertification) 
is not designed for such reporting and should not be used for it.
    Discussion: As noted in the NPRM (89 FR 60286), the system details 
for the reporting requirement we are establishing in Sec.  668.41 will 
be clarified in future guidance and instructions, but we do anticipate 
distinguishing between the two modalities of distance education and 
correspondence courses to allow for a comparison between them. We thus 
decline as unnecessary the commenter's suggested alternative language. 
Also, unlike the virtual location requirement described elsewhere, we 
do not expect the E-App to be involved in this reporting process.
    Changes: None.
    Comments: A commenter suggested that the details of this reporting 
under Sec.  668.41 should be at the student level, not at the course 
level. Currently enrollment reporting is done at the student and 
program level by campus via NSLDS, and, according to the commenter, 
continuing with this method would be the most efficient and effective 
way of reporting. This reporting occurs every 60 days, which schools 
are already required to follow and, according to the commenter, this 
should be frequent enough. The commenter noted that adding one field to 
the existing NSLDS enrollment reporting process would be efficient and 
not burdensome.
    Discussion: While the Department has not yet determined the details 
of this reporting, we agree that the process described by the commenter 
appears to be an efficient method of implementing the reporting 
requirement and anticipate that the Department likely will adopt a 
process similar to the one described. We also agree that reporting 
should occur at the student level and will not be collecting data at 
the course level.
    Changes: None.
    Comments: One commenter suggested expanding the proposed status 
reporting categories in Sec.  668.41 from three to four: fully in-
person, and at a distance, as proposed, but then splitting hybrid 
status into majority distance and majority in-person.
    Discussion: The Department believes that the three enrollment 
statuses will allow for easy classification of students and will 
provide adequate information for the intended purposes, so the 
Department does not currently plan to expand that number to four.
    Changes: None.
    Comments: One commenter asked how often the new reporting will 
occur and what students will be involved.
    Discussion: Modality of instruction will be reported for all 
students on whom the institution would otherwise be required to report 
enrollment. The Department intends to align the frequency of this 
reporting (though that has not yet been determined) with other existing 
reporting requirements, such as occurring every 60 days, which as noted 
above is already the interval for NSLDS enrollment reporting.
    Changes: None.

4. Treatment of Title IV Funds When a Student Never Attends or Attends 
and Then Withdraws/Return of Title IV Funds (R2T4) (Sec. Sec.  668.21 
and 668.22 )

General Support
    Comments: Many commenters offered support for the Department's 
proposed regulations regarding the requirements applicable to the 
return of title IV, HEA funds (R2T4). Several of these commenters noted 
the rules received broad support during negotiated rulemaking and the 
regulations will result in better stewardship of taxpayer funds and the 
integrity of the title IV, HEA programs. As one commenter noted, the 
regulations collectively are logical and reasonable measures to ensure 
accuracy of R2T4 calculations.
    Many commenters agreed the regulations will simplify the R2T4 
process for institutions and provide positive benefits to their campus 
community. One commenter noted the R2T4 regulations are so complex for 
institutions to navigate that the regulations are consistently in the 
Department's top annual compliance findings. One commenter noted that 
simplification of R2T4 calculations will encourage students to re-
enroll and reduce the burden on financial aid offices when supporting 
those students' re-engagement. Another commenter states the 
Department's proposal is an important step in modernizing financial aid 
policies to reflect the growing prevalence and success of distance 
education.
    Many commenters agreed the proposed changes will benefit students, 
including incarcerated individuals and student loan borrowers. Several 
of these commenters noted allowing students to repay Direct Loan funds 
owed to the Department after withdrawing or not beginning attendance 
through the terms of their Master Promissory Note better recognizes the 
financial realities these

[[Page 482]]

students face. Several commenters noted these borrowers often cannot 
pay the full amount owed immediately and faced penalties such as 
negative credit reporting and collections. Some of these commenters 
believe the proposed rules would incentivize institutions to 
voluntarily institute refund policies that will reduce the 
institutions' burden in performing R2T4 calculations, while at the same 
time making it easier for students to re-enroll in the future by 
reducing unpaid debts owed to either the institution or the Federal 
government. One commenter noted these changes will support student 
success regardless of their financial situation or academic challenges.
    Some commenters supported changes that ensure fewer opportunities 
for institutions to retain title IV, HEA funds to which they are not 
entitled. One commenter noted attendance-taking requirements for the 
purposes of R2T4 for courses offered entirely through distance 
education will better support accurate withdrawal dates.
    Discussion: We thank the many commenters for their support. We 
believe these final regulations will reduce burden on institutions and 
students while also providing reasonable and appropriate safeguards for 
taxpayer dollars. As explained in greater detail below, we have decided 
not to move forward with two proposals from the NRPM in this area.
    Changes: None.
General Opposition
    Comments: One commenter stated that the Department has not taken 
into account the U.S. Supreme Court's 2024 Loper Bright decision, 
which, according to the commenter, eliminated Chevron deference and 
discontinued judges' ability to defer to Federal agency interpretations 
of the statutes they enforce.
    Discussion: These regulations do not run afoul of Loper Bright. The 
NPRM highlighted our direct statutory authority to make the regulatory 
changes, in section V--Authority for This Regulatory Action (89 FR 
60258), and these regulations reflect the best reading of the plain 
text of that authority. We also note that, to the extent this comment 
was focused on concerns about the proposed changes to attendance taking 
requirements for distance education courses or the treatment of student 
aid funds if the recipient does not begin attendance at the 
institution, the Department has decided to not move forward with those 
proposals at this time. The final regulations thus increase the 
accuracy and simplicity of performing R2T4 calculations for 
institutions, address unique circumstances for what constitutes a 
withdrawal, and codify longstanding policies into regulation.
    Changes: None.
    Comments: Some commenters stated that the proposed changes to the 
R2T4 regulations may lead to stringent and inflexible institutional 
refund policies, which could disproportionately affect low-income and 
vulnerable students, making it more difficult for them to re-enroll and 
complete their education.
    Discussion: The Department disagrees that the regulations will lead 
to more stringent and inflexible institutional refund policies that 
will harm students. In fact, the Department's focus for many of the 
changes was to provide flexibilities that would benefit students. For 
example, the Department provided flexibility to institutions to 
consider a student who stops attending very early in a term as never 
attending which would require the institution to refund charges and 
cancel any balances owed. Additionally, the leave of absence allowance 
for eligible prison education programs (PEPs) will offer greater 
flexibility to confined or incarcerated individuals when they are 
impacted by a situation in the correctional facility outside of their 
control. Lastly, as described elsewhere, the Department has decided to 
not finalize the requirement for institutions to take attendance in 
distance education courses, which was the primary source of concern for 
many commenters.
    Changes: None.
    Comments: Some commenters argued that the proposed R2T4 rules could 
force institutions to hire additional staff to manage the increased 
documentation and compliance workload and that institutional resources 
will be redirected from student support services to administration and 
data collection.
    Discussion: We do not believe that the R2T4 regulatory changes will 
require significant institutional staffing changes or a redirection of 
substantial institutional resources from student services to 
administrative services. In fact, the regulations are designed to 
improve and simplify the process in some areas. For example, the 
changes to the R2T4 calculation for modules will eliminate the need for 
institutions to consider which types of aid a student received to 
determine the number of days in the R2T4 calculation. Additionally, the 
new R2T4 exemption for students who are treated as never having 
enrolled will reduce the number of R2T4 calculations that are performed 
at some institutions. Finally, we note that to the extent the comments 
were addressing potential increased costs to implement the proposal 
requiring attendance taking in distance education courses, that 
provision is not being finalized. Institutions will thus not face any 
costs related to that provision.
    Changes: The Department is not finalizing the proposal for 
attendance taking in distance education courses.
    Comments: One commenter recommended that the Department not move 
forward with any of the changes and instead exempt any postsecondary 
institution from R2T4 that qualifies for Title III or Title V waivers, 
or if the institution is designated as a Minority Serving Institution. 
The commenter believes that their proposal would provide flexibility to 
utilize resources differently to marginalized populations.
    Discussion: The Department lacks the statutory authority to exempt 
all or a subset of postsecondary institutions that participate in the 
title IV, HEA programs from the R2T4 requirements.
    Changes: None.
    Comments: One commenter asked that the Department delay 
implementation of these regulations until 2026 or 2027 to allow 
institutions time to work on internal systems, third party vendors, and 
administrative reporting mechanisms, train instructors, and make other 
logistical changes.
    Discussion: The regulations will not be effective until July 1, 
2026. We believe that provides sufficient time to make necessary 
adjustments.
    Changes: None.
    Comments: One commenter stated that the proposed changes will 
disrupt the timely delivery of title IV, HEA funding to all students. 
The commenter stated that institutions will break up disbursements as 
students' progress through the term to avoid overpayments, and that 
multiple disbursements hinder students from using their title IV, HEA 
credit balances for educationally related expenses such as housing and 
food, which are benefits that are intended to be available to students 
under current regulations.
    Discussion: We appreciate the commenter's concern for students. 
However, nothing in this regulation requires an institution to break up 
a disbursement into smaller payments. That is simply an allowable 
option if the institution determines it best meets the needs of the 
students. Further, we do not believe that these regulations create any 
additional incentive for institutions to adopt that approach, primarily 
because the amount of effort needed to shift to a multiple disbursement 
model would significantly outweigh the increase in burden imposed by 
these regulations. This is especially true because, although shifting 
to such a

[[Page 483]]

model might reduce the frequency of returns under the R2T4 regulations, 
it will not obviate the need to amend R2T4 policies and procedures in 
accordance with these new regulations. The regulations will still apply 
to all students who cease attendance during a payment period or period 
of enrollment even if a school makes multiple disbursements during a 
payment period.
    Changes: None.
    Comments: One commenter asked for the official definition of 
attendance for R2T4 purposes.
    Discussion: For R2T4 purposes, under Sec.  668.22(l)(7), ``academic 
attendance'' and ``attendance at an academically related activity'' 
must include ``academic engagement,'' as defined in Sec.  600.2.
Treatment of Title IV Grant and Loan Funds if the Recipient Does Not 
Begin Attendance at the Institution (Sec.  668.21)
    Comments: The Department received many comments supporting the 
proposal in Sec.  668.21(a)(2)(ii) to allow a student who received a 
loan disbursement as part of a title IV credit balance, but never began 
attendance in a payment period or period of enrollment, to repay loan 
funds they received under the terms and conditions of their promissory 
note. Many commenters agreed the proposed changes better recognize the 
financial realities these students face. Several commenters noted the 
proposed rules will prevent borrowers from defaulting on their debts, 
as these borrowers often cannot pay the full amount owed immediately 
and would face penalties, such as negative credit reporting and 
collections. Others noted the proposed changes will help students who 
have likely already spent their credit balances on things like housing, 
childcare and other necessary expenses and therefore cannot make a lump 
sum payment. Others agreed the changes would strengthen the borrower's 
financial health and could have positive economic impacts.
    Discussion: We thank the commenters for their support. However, as 
explained below, we have decided to not move forward with this 
proposal.
    Changes: None.
    Comments: A few commenters stated that the rule will allow abuse 
because a borrower could have their loans forgiven under Public Service 
Loan Forgiveness (PSLF) or forgiven as a possible result of enrolling 
in an Income Driven Repayment (IDR) plan after having never 
participated in any postsecondary coursework. One commenter stated that 
the Department is creating a ``perverse incentive'' that will encourage 
individuals to enroll in a program only to receive a credit balance, 
subsequently withdraw, and then allow them to pay the loan back over 
the course of many years.
    One of the dissenting commenters offered several alternative 
solutions other than eliminating the proposed regulation: (1) the 
Department require that postsecondary institutions return all of the 
title IV, HEA funds for a period of non-attendance, and (2) require a 
30-day delay in any subsequent disbursements to the borrower if the 
borrower seeks to enroll at a different institution.
    Another alternative offered by a commenter is for the student to 
repay, upon demand, all funds except those already spent on necessary 
education-related expenses, which could be repaid under the terms and 
conditions of the promissory note or during a shortened yet adequate 
period of time.
    Discussion: In the Department's experience through interactions 
with institutions and program reviews, individuals seeking to abuse the 
title IV, HEA programs overwhelmingly target grant programs rather than 
loan programs. However, we do not want to create the perception of 
possible loopholes in the Federal aid programs. Accordingly, we will 
not move forward with this change at this point. The Department will 
continue to look carefully at the individuals who do not begin 
attendance to determine whether revisiting this policy in the future 
may be merited.
    Regarding the alternate proposals, we believe adding a requirement 
that a postsecondary institution return all of the title IV, HEA funds 
for a period of non-attendance by a student is unreasonably burdensome. 
We also decline to incorporate a 30-day delay on subsequent 
disbursements to a student that sought to reenroll. The Department is 
not making changes to disbursement rules with these final regulations.
    Regarding the final alternative offered by the commenters, 
requiring a student to immediately repay all funds except those already 
spent on necessary education-related expenses, the HEA requires that a 
student spend all of their title IV credit balance funds on allowable 
education related expenses. If this alternative, as suggested by the 
commenter, were implemented, institutions would be obligated to 
document the exact amount of funds a student spent, and categorize that 
spending, to determine compliance with the requirement. The additional 
burden placed on institutions to determine how the title IV, HEA credit 
balance funds were spent would be extensive and unreasonable.
    Changes: We have removed the proposed changes to Sec.  668.21 to 
allow a student who received a loan disbursement as part of a title IV 
credit balance, but never began attendance in a payment period or 
period of enrollment, to repay loan funds they received under the terms 
of their promissory note.
    Comments: One commenter requested that, in light of the new 
regulatory language, the Department update the language on the 
promissory note, which currently requires a student to agree to 
immediately repay any loan money that is not used for authorized 
educational expenses. The commenter also asked how to determine that a 
student ceased to be enrolled half-time if they never began attendance.
    That commenter, and others, questioned the validity of providing a 
grace period for individuals who do not begin attendance, and suggested 
that the students should be required to request a forbearance. The 
commenter believes that allowing the borrower to retain funds for six 
months may do the borrower harm by encouraging the borrower to spend 
the funds.
    One commenter believes that by not attending, the student broke 
their contract with the Department, and therefore, the Department 
should not maintain the broken contract through the terms of the 
promissory note. Another commenter similarly stated that the Department 
should not allow students to borrow without ever having attended and 
that this change could reduce resources available to fund other 
students' educations.
    Discussion: As described above, the Department is not moving 
forward with this proposal. However, we note that under Sec.  
668.164(i)(1), the regulations intentionally permit the disbursement of 
loans up to 10 days prior to the start of classes to allow students to 
cover necessary education expenses, such as housing and books. The 
Department's longstanding position is that this policy is necessary so 
that students are fully prepared for the start of their programs. 
Permitting these disbursements does not reduce the amount of funding 
available to fund other students' educations, because the HEA dictates 
the amount of title IV, HEA loan funds available to students on an 
individual basis, without a cap on the total amount that can be lent 
across all students, and the amount of loans received by one student 
does not affect the amounts a different student can receive.
    Changes: We have removed the proposed changes to Sec.  668.21 to 
allow

[[Page 484]]

a student who received a loan disbursement as part of a title IV credit 
balance, but never began attendance in a payment period or period of 
enrollment, to repay loan funds they received under the terms of their 
promissory note.
    Comments: One commenter stated that institutions must already 
confirm attendance before making loan disbursements.
    Discussion: We remind the commenter that under Sec.  668.164(i)(1), 
in certain situations, a postsecondary institution may be able to make 
an early disbursement of title IV, HEA aid up to 10 days before the 
first day of classes of a payment period and there would be no 
confirmation of attendance at that time. Ultimately, institutions must 
confirm attendance for students to retain eligibility for some or all 
of the title IV, HEA funds they received during the payment period, but 
attendance confirmation does not have to occur prior to this initial 
disbursement.
    Changes: None.
Treatment of Title IV Funds When a Student Withdraws (Sec.  668.22)
Withdrawal Exemption (Sec.  668.22(a)(2)(ii)(A)(6))
    Comments: Several commenters supported the optional withdrawal 
exemption under Sec.  668.22(a)(2)(ii)(A)(6), stating that it will 
reduce administrative burden and prevent unnecessary financial 
penalties on students who withdraw early. Commenters also stated that 
it will decrease the institutional cost and complexity of compliance 
with title IV regulations, and it may also encourage institutions to 
adopt generous refund policies which will help students maintain 
financial stability.
    Discussion: We thank the commenters for their support.
    Changes: None.
    Comments: One commenter asked how a student granted a withdrawal 
exemption be reflected in enrollment reporting, particularly regarding 
medical withdrawals. The commenter noted that often requests for 
medical withdrawals are granted late in the semester or well after the 
semester is over, and this likely means the student will already have 
been reported as being in attendance at least half-time. Where the 
school grants the medical withdrawal, the commenter sought 
clarification on how this ``non-withdrawal'' would be reported to 
NSLDS.
    Discussion: The Department will issue guidance regarding the 
procedure for reporting students, who have been granted the withdrawal 
exemption in Sec.  668.22(a)(2)(ii)(A)(6), to NSLDS as part of 
enrollment reporting. We will provide guidance on reporting statuses, 
reporting requirements, and any applicable dates (such as grace period 
dates) following the publication of these regulations.
    Please note that, for institutions that utilize the withdrawal 
exemption, borrowers will be treated as having never attended and the 
grace period will begin the day after the last date of attendance in 
the prior payment period.
    Changes: None.
    Comments: One commenter stated that many community colleges cannot 
afford to implement the optional withdrawal exemption. The commenter 
offered several examples, including that most community colleges do not 
offer housing and have low tuition; therefore, many students receive 
larger title IV, HEA credit balances. The commenter stated that a 
community college would not be able to write off large amounts for 
multiple students.
    Discussion: We reiterate that the withdrawal exemption is optional. 
This will permit institutions that wish to maintain or create generous 
tuition refund policies to be exempt from performing an R2T4 
calculation in cases where students are made financially whole after 
withdrawing. Use of these generous tuition refund policies will be at 
the discretion of the institution. The Department hopes that the 
reduced burden resulting from this exemption from the R2T4 process 
encourages institutions to maintain or create these policies for their 
students.
    Changes: None.
    Comments: One commenter asked whether the optional withdrawal 
exemption could be applied on a case-by-case basis or whether 
institutions that choose to implement the withdrawal exemption must 
apply it to all students who withdraw. The commenter also expressed 
concern about the requirement that ``the institution's records treat a 
student as having never attended courses for that payment period or 
period of enrollment.'' The commenter stated that their institution 
wants to retain a record of course attendance to justify title IV, HEA 
disbursements that were made during the payment period or period of 
enrollment.
    Discussion: Institutions can implement the withdrawal exemption on 
a case-by-case basis according to the institution's policy. We agree 
with the commenter that an institution must keep a record of a 
student's eligibility to receive title IV, HEA funds. Additionally, the 
institution must document the use of the withdrawal exemption for a 
particular student. The regulations do not require an institution to 
eliminate all record of a student's attendance for a payment period in 
which they qualify for this exemption. Instead, they require the 
institution to document that the institution's policies treat the 
student similarly to other students who did not attend, for example 
with regard to satisfactory academic progress or grading policies.
    Changes: None.
    Comments: A few commenters recommended that under paragraph Sec.  
668.22(a)(2)(ii)(A)(6)(iv) the Department change ``current year'' to 
``payment period.'' The commenters noted that paragraphs (i)-(iii) of 
the withdrawal exemption are tied to the payment period or period of 
enrollment, while provision (iv) is not.
    Discussion: The Department is persuaded by the commenters' argument 
that the various subsections should contain identical language since 
that was the intended purpose of the regulatory change.
    Changes: We have updated Sec.  668.22(a)(2)(ii)(A)(6)(iv) to 
replace ``any current year balance'' with ``any payment period or 
period of enrollment balance'' owed by the student to the institution 
due to the institution's returning of title IV, HEA funds to the 
Department.
    Comments: One commenter requested that the regulation define 
institutional charges as exclusive of institutional housing and meals 
based on a direct proration of use for the payment period. The 
commenter stated that while tuition refund policies are under the 
institution's purview, additional charges for the use of services such 
as housing are considered auxiliary and not at the discretion of the 
central campus to limit or control. Further, it places students who 
live in institutionally owned housing at a disadvantage as compared to 
students who may rent from a private third party. Though both are 
incurring living costs, the latter would be permitted the flexibility, 
assuming the campus reverses or writes off all other institutional 
charges, whereas the former would require an R2T4 calculation resulting 
in an outstanding debt.
    Discussion: We decline to take the commenter's suggestion. We 
acknowledge that students with institutionally provided food and 
housing may be treated differently from students with non-
institutionally provided food and housing. Students without 
institutionally provided housing and food are more likely to have 
larger credit balances, which will make this a more challenging

[[Page 485]]

requirement for some institutions, since the provision in (iv) requires 
that the institution not recoup or collect any title IV, HEA funds 
returned to the Department due to the implementation of this exemption. 
This exemption is an optional exemption to be used by institutions when 
they determine it is advantageous to do so. Further, we believe the 
commenter may have misinterpreted the optional withdrawal exemption. An 
R2T4 calculation is not required if the exemption is applied, since all 
title IV, HEA funds are returned in that instance.
    We will amend the proposed regulation to clarify that this 
requirement includes title IV, HEA funds that were provided to the 
student or parent, that were disbursed for that payment period or 
period of enrollment.
    Changes: We amended Sec.  668.22(a)(2)(ii)(A)(6)(ii) to state that 
``The institution returns all the title IV grant or loan assistance, 
including all title IV credit balances provided to the student or 
parent, that were disbursed for that payment period or period of 
enrollment.''
    Comments: One commenter asked the Department to extend the current 
withdrawal exemption for graduates/completers to students that are not 
enrolled in programs offered in modules.
    Discussion: Currently a student meets the withdrawal exemption for 
graduates/completers in Sec.  668.22(a)(2)(ii)(A)(1) if they complete 
all of the academic requirements for their program and are able to 
graduate before completing all of the days or clock hours in the period 
they were scheduled to complete. This withdrawal exemption can apply to 
any type of program, including those with or without modules. Since the 
exemption that the commenter suggests already applies to non-modular 
programs, the Department declines the proposed revision as unnecessary.
    Changes: None.
    Comments: One commenter stated that R2T4 calculations are for 
students who officially or unofficially fully withdraw. The commenter 
asserted that, if the student does not begin attendance, their aid must 
be cancelled for that course.
    Discussion: It appears the commenter is not differentiating between 
students who may be eligible for the exemption described in Sec.  
668.22(a)(6) and are treated as if they never enrolled versus students 
who never begin attendance in any class (Sec.  668.21). We remind the 
commenter that Sec.  668.22(a)(6) is an exemption from performing an 
R2T4 calculation that would otherwise apply. By contrast, Sec.  668.21 
addresses the situation where a student never actually begins 
attendance in any class, which would not require an R2T4 calculation.
    Changes: None.
    Comments: One commenter asked that the Department confirm that the 
withdrawal exemption in Sec.  668.22(a)(6) is optional.
    Discussion: The withdrawal exemption in Sec.  668.22(a)(6) is 
optional and applies to all types of programs, including those with or 
without modules.
    Changes: None.
Determination of Withdrawal Status (Sec.  668.22(b)(2))
    Comments: Several commenters expressed general support for the 
Department's proposals to establish more timely and accurate data to 
complete R2T4 calculations, but most had reservations regarding certain 
elements of the proposed requirements. One specific commenter indicated 
that the proposed regulation aligned with their current process.
    Discussion: We thank the commenters for their support and address 
their specific reservations in the discussions below.
    Changes: None.
    Comments: Many commenters opposed the provision that requires an 
institution that is required to take attendance to document the 
student's withdrawal date within 14 days of a student's last date of 
attendance. Many commenters suggested longer time frames, with several 
suggesting a 28-day period as a maximum timeframe in which to 
officially determine that a student who has not attended for some time 
is, in fact, a withdrawn student. This opposition included one 
commenter who believed that the Department's primary motivation for 
this regulatory requirement was to prevent students from ``cheating the 
system.'' Other commenters interpreted the proposed provision to mean 
that a postsecondary institution must administratively withdraw a 
student after 14 days of nonattendance.
    Discussion: We disagree with the commenter who stated that the 
provision was intended to prevent students from cheating the system. 
The primary motivation of this regulatory provision is to ensure 
timelier and more accurate R2T4 calculations. Further, as set forth in 
longstanding guidance, the Department does not require an institution 
to administratively withdraw a student on the 14th day, but to 
establish the date of determination for purposes of the R2T4 
calculation. The institution then has an additional 45 days before any 
calculated return must be made to determine whether the student 
continues with his/her enrollment. If the student does return within 
the 45-day timeframe, then no further action is required. This 14-day 
time frame only applies to institutions required to take attendance 
under current Sec.  668.22(b)(3).
    Changes: None.
    Comments: Several commenters opined that the Department is 
redefining the definition of distance education in Sec.  600.2 by 
applying a de facto 14-day timeframe to regular and substantive 
interaction. Some commenters pointed out that the Department agreed in 
the preamble to the 2020 Distance Education and Innovation Final Rule 
\28\ that a timeframe should not be mandated for regular and 
substantive interaction.
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    \28\ Distance Education and Innovation--https://www.federalregister.gov/documents/2020/09/02/2020-18636/distance-education-and-innovation.
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    Discussion: We disagree with the commenters. The regulatory change 
in Sec.  668.22(b)(2) establishes a regulatory timeframe to document a 
student's withdrawal status for R2T4 purposes. The timeframe for 
assessing a student's status, and for determining that the student has 
withdrawn, does not impose any timeframe for regular and substantive 
interaction. As noted in the Summary of the Major Provisions of this 
Regulatory Action, the Department is simply codifying into regulation 
what has been our guidance for institutions required to take attendance 
since the 2005-06 award year. The requirement also applies to all 
students for whom the institution is required to take attendance, which 
could include on campus students that are not subject to the definition 
of distance education.
    Changes: None.
    Comments: Several commenters were concerned that the requirement to 
determine a student's withdrawal status within a set timeframe could 
negatively impact students who accelerate within their program by 
working ahead in one or more individual courses. The commenters were 
concerned that they might have to administratively withdraw a student 
who had 14 days of inactivity due to course acceleration. One commenter 
asked if this regulation eliminated the option for a student to 
accelerate in their coursework.
    Discussion: As noted above, an institution is required to document 
its determination of a student's withdrawal within 14 days of the 
student's last date of attendance for purposes of the R2T4 calculation; 
however, the institution is not required to administratively

[[Page 486]]

withdraw the student on that date and has an additional 45 days before 
it has to pay any return resulting from the withdrawal. It is unlikely 
that students who accelerate work will not resume activity within this 
time frame. Further, this additional time before payment provides ample 
opportunity for the institution to reach out to the student to ensure 
they plan to remain enrolled and to ensure the student continues 
academic engagement.
    Where a student is enrolled in multiple courses in a program and 
has accelerated in one or more courses, the student will not be 
considered withdrawn as long as the institution has determined that the 
student is still attending coursework for that payment period or period 
of enrollment. The requirement to determine a withdrawal date for a 
student is when that student has completely withdrawn from the 
institution or otherwise stopped attending all coursework. Nothing in 
this regulatory provision eliminates an acceleration option for 
students.
    Changes: None.
    Comments: A few commenters asked if it is the Department's 
expectation that institutions will begin documenting all exceptions 
granted by individual faculty members to students if the exception 
allows for a temporary cessation of academic activity for a period that 
exceeds 14 days. In addition, commenters provided examples of extreme 
flexibility with student coursework without stating whether the 
programs were term based or nonterm based. In some of the examples, it 
appeared that nonterm flexibilities were being used in term-based 
academic calendars.
    Discussion: For R2T4 purposes, the treatment of exceptions granted 
to students by individual faculty members depends on whether the 
exception is applied to all of the program's coursework in a payment 
period being pursued by the student or only applied to a portion of the 
student's coursework in a payment period. If the student has an 
exceptional situation that requires a complete cessation of all 
coursework in a payment period, the student will be withdrawn unless 
the institution grants an approved leave of absence. However, if the 
exceptional situation extends to only a portion of the student's 
coursework in a payment period, and the institution assesses that the 
student is still attending coursework in the payment period or period 
of enrollment, there is no requirement for the institution to withdraw 
the student at that time. In addition, nothing in this final regulation 
infringes on the institution's discretion under existing policies and 
procedures to provide grades of incomplete to students when the 
institution determines that it is appropriate. Some of the commenters 
described existing situations that appeared to be extremely flexible 
without stating whether the programs being described were term-based or 
nonterm based. We remind the commenters that the use of a term-based 
academic calendar, standard or nonstandard, may limit coursework 
flexibility in ways that a nonterm calendar does not, because an 
academic term has a defined end date.
    Changes: None.
    Comments: Many commenters were concerned that an administrative 
withdrawal after 14 days of inactivity would not serve students 
enrolled in short nonstandard terms (e.g., 5, 6, or 8 weeks) or modules 
of a similar length that are part of a standard term. The commenters 
stated that the 14-day requirement appears to have the historic quarter 
or semester terms in mind. For periods of time that are less than 
standard terms, the commenters argued that 14 days is too long, and a 
shorter, proportional amount of time would be more appropriate.
    Discussion: We disagree with the commenters. The commenters' 
concern appears to be based on the incorrect assumption that, under the 
regulations, an institution cannot administratively withdraw a student 
until after 14 days of nonattendance; however, nothing prohibits an 
institution from identifying a withdrawn student earlier than 14 days 
after the last date of attendance.
    Changes: None.
    Comments: Several commenters wondered if the 14-day timeframe in 
Sec.  668.22(b)(2) includes calendar days, weekdays, holiday/spring 
breaks, single-day college or university holidays, or snow (or other 
emergency) days.
    Discussion: The 14-day date of determination timeframe, which has 
been added to Sec.  668.22(b)(2), counts all calendar days regardless 
if they are weekend days, holidays, or other scheduled breaks. For days 
that are associated with emergencies or disasters, institutions should 
refer to the guidance in Dear Colleague Letter GEN 17-08, Guidance for 
Helping Title IV Participants Affected by a Major Disaster.
    Changes: None.
    Comments: A few commenters asked what documentation is required for 
an approved leave of absence.
    Discussion: The Department does not specify what documentation must 
be gathered to support an approved leave of absence at the 
institutional level. For a complete listing of the procedures and 
necessary information for a leave of absence to be approved for title 
IV, HEA purposes, please see the requirements in Sec.  668.22(d), which 
are further explained in the FSA Handbook, Volume 5.\29\
---------------------------------------------------------------------------

    \29\ FSA Handbook--https://fsapartners.ed.gov/knowledge-center/fsa-handbook.
---------------------------------------------------------------------------

    Changes: None.
    Comments: One commenter was concerned with how to deal with a 
student who was withdrawn for failing to engage in academic activity 
for 14 days and then sought reinstatement at some point following the 
withdrawal but within the same payment period. The commenter observed 
that these students often successfully complete the course following 
the reinstatement. The commenter believed that it is unclear from the 
proposed regulatory language whether reinstatement practices would be 
permissible moving forward, noting that it would be detrimental to 
students if they were prohibited from being reinstated.
    Discussion: As we have outlined above, the institution has up to 14 
days after the student's last date of attendance to document the 
student's withdrawal date, not necessarily to administratively withdraw 
the student, since the institution has time to determine a student's 
enrollment or withdrawal status. The institution ultimately must ensure 
that the R2T4 calculation be completed no later than 30 days following 
the date of determination and any funds be returned to the Department 
no later than 45 days following the date of determination.
    If the institution must ultimately withdraw the student, there is 
nothing in this final regulation prohibiting the student from being 
reinstated according to the institution's reinstatement policies and 
procedures. We remind commenters that guidance regarding student 
reinstatements and the ability to undo an R2T4 can be found in the FSA 
Handbook Volume 5.\30\
---------------------------------------------------------------------------

    \30\ FSA Handbook--https://fsapartners.ed.gov/knowledge-center/fsa-handbook.
---------------------------------------------------------------------------

    Changes: None.
    Comments: Several commenters were concerned about students who may 
be in academic activities that, by design, do not include regular 
interaction between the student and instructor for more than 14 days. 
Commenters offered an example of instructors evaluating students' field 
work in the community through authentic assessment. Commenters 
requested clarification about the institutional requirements under 
Sec.  668.22(b)(2) in these types of situations.
    Discussion: Section 668.22(b)(2) requires an institution to 
document

[[Page 487]]

whether a student should be withdrawn no later than 14 days after the 
student's last date of attendance. As we have stated, this is not a 
requirement that a student be withdrawn after 14 days of nonattendance. 
An institution must still comply with Sec.  668.22(b)(2), even if it 
has chosen a method of academic engagement that, by design, creates 
periods where student activity is not being monitored/tracked at least 
every 14 days. Institutions might reach out to student in a variety of 
ways including, but not limited to, using text messages, emails, and 
telephone calls.
    Changes: None.
    Comment: One commenter believed that the Department did not have 
the authority to require that institutions determine a student's 
withdrawal status no later than 14 days after the last date of 
attendance (LDA) (Sec.  668.22(b)(2)). The commenter generally cited to 
the caselaw and factors that courts apply when assessing agency action, 
including that an agency must demonstrate that it has examined relevant 
data and articulated a satisfactory explanation for its action, and 
that an agency action is arbitrary and capricious if the agency fails 
to consider an important aspect of a problem or offers an explanation 
that runs counter to the evidence before the agency. The commenter did 
not specify how it thought the Department failed to satisfy this 
standard.
    Discussion: Congress provided the general framework for title IV 
returns in 20 U.S.C. 1091b, and the Department is tasked with 
implementing those provisions. Among those provisions is the 
requirement that an institution ``return no later than 45 days from the 
determination of withdrawal'' the amount of unearned title IV funds 
disbursed to the student. 20 U.S.C. 1091b(b). Congress goes on to 
provide how that withdrawal date should be determined. 20 U.S.C. 
1091b(c). The codification of the Department's longstanding guidance, 
for institutions that are required to take attendance, that the 
institution must determine the withdrawal date no later than 14 days 
after a student's last date of attendance, represents the Department's 
mechanism for ensuring that institutions meet the 45-day refund 
deadline set forth in the statute. With respect to the remaining 
arguments raised in the comment, the Department provided a detailed 
explanation in the NPRM (89 FR 60264) of the reasons for the provision.
    Changes: None.
Attendance Taking in Distance Education Courses (Sec.  
668.22(b)(3)(ii))
    Comments: Several commenters agreed with the proposed requirement 
that an institution take attendance for each course offered entirely 
through distance education, except for dissertation research courses 
that are part of a doctoral program. Comments of support include:
     The state of technology and learning management systems in 
online education allows for attendance to be taken;
     The rule reinforces the importance of providing regular 
and substantive interactions between students and faculty in online 
coursework;
     This regulation addresses longstanding inaccuracies in 
tracking withdrawals;
     The rule is an important backstop for vulnerable students 
who have been preyed upon by predatory schools;
     It will be more difficult for institutions to not properly 
perform R2T4 calculations for distance education students who withdraw 
and help ensure that borrowers have the documents necessary to prove 
their eligibility where they seek a loan discharge due to the 
institution not returning Direct Loan funds as required.
    Discussion: The Department thanks the commenters for their support. 
As discussed further below, however, in this final regulation we will 
not be finalizing the proposal in Sec.  668.22(b)(3)(ii) to require 
attendance taking in distance education courses.
    Changes: None.
    Comments: Several commenters opposed this provision. Objections 
included that the Department lacked legal authority to adopt the 
provision; the Department failed to provide data to support the change; 
that the provision would increase costs, take instructors away from 
teaching, and inhibit academic freedom; and that it would be difficult 
to implement for students taking asynchronous courses or those enrolled 
in competency-based programs. Commenters were worried about how the 
provision would be implemented and requested guidance on various 
aspects of the provision.
    Discussion: The Department is statutorily required to ensure the 
proper return of title IV HEA funds when a student withdraws before 
completing a payment period or period of enrollment. Attendance taking 
is specifically provided for in the statute and is crucial for the 
Department to carry out its statutory responsibilities. We remain 
concerned about ensuring that withdrawals are properly tracked in a 
fully online environment, where we have observed that institutions have 
greater tools available to them for tracking student engagement than 
exist when offering in-person classes. An accurate withdrawal date is 
critical to ensure that the right amount of unearned title IV aid is 
returned, and students' accounts are properly reduced. However, we are 
persuaded by concerns about the need for continued development in these 
tools to make them consistently effective for this purpose, including 
the need for system interoperability. As such, we will not be 
finalizing this provision to provide more time to evaluate 
technological changes that can better track student engagement. The 
Department will continue to monitor the state of this tracking and may 
revisit this issue at a later date. In the meantime, we remind 
institutions of their obligation to retain adequate documentation to 
support their R2T4 calculations when students withdraw, and we 
encourage institutions to continue enhancing their systems to capture 
accurate student engagement for the purposes of determining if students 
are continuing enrollment at the institution.
    Changes: The Department removes the provision under Sec.  
668.22(b)(3)(ii) for required attendance taking in distance education 
courses.
Leave of Absence (Sec.  668.22(d)(1)(vii))
    Comments: Several commenters supported the leave of absence 
provision in Sec.  668.22(d)(1)(vii) that provides additional 
flexibility for students enrolled in eligible prison education programs 
and stated that that it will reduce barriers to reenrollment and 
college completion for students who are faced with withdrawals during 
their studies.
    Discussion: We agree with the commenters and thank them for their 
support.
    Changes: None.
    Comments: One commenter opposed the leave of absence provision. The 
commenter stated that their institution participates in the Second 
Chance Pell experiment under the Experimental Sites Initiative \31\ and 
stated that the provision will create administrative burden and add 
more complexity. The commenter stated that if an institution offers a 
leave of absence, the confined or incarcerated student still may not be 
able to return within 180 days and would therefore need to be withdrawn 
in any event under the normal requirements for approved leaves of 
absence.
---------------------------------------------------------------------------

    \31\ Experimental Sites--https://experimentalsites.ed.gov/exp/approved.html.
---------------------------------------------------------------------------

    Discussion: We remind the commenter that Sec.  668.22(d)(1)(vii) 
does not require an institution to grant a leave of absence to the 
confined or

[[Page 488]]

incarcerated individual. If the institution determines that a leave of 
absence would not be appropriate, it may take a more immediate 
approach, including an administrative withdrawal.
    Changes: None.
    Comments: One commenter stated that involuntary transfers of 
confined or incarcerated individuals often happen with no warning, 
giving those students no opportunity to request a leave of absence in 
advance. Since leaves of absence are often granted on the reasonable 
expectation that the student will return, this makes it unlikely that 
many requests will be approved by the educational institution. For this 
and other reasons, the commenter suggested that the Department allow 
for an exemption to R2T4 for confined or incarcerated students that 
experience involuntary transfers to another facility that result in an 
interruption to their programs.
    Discussion: The Department acknowledges that the leave of absence 
provision may not be able to be utilized by all confined or 
incarcerated students who need it. However, for those who meet the 
requirements for such leave, the regulation will provide additional 
flexibility for them to resume their academic program at any point upon 
their return from the leave of absence. During negotiated rulemaking, 
the Department initially discussed a proposal to exempt confined or 
incarcerated individuals from R2T4 if the students withdrew from a 
program due to circumstances outside of their control, such as a 
correctional facility-wide lockdown or an involuntary transfer to a 
different facility. Upon further review, we determined that we do not 
have the legal authority to waive R2T4 requirements for a targeted 
group of students. In addition to our lack of legal authority, the 
Department heard concerns from several negotiators opposed to such an 
exemption. They pointed out that such an exemption may cause confined 
or incarcerated individuals to reach their Pell grant lifetime 
eligibility used (LEU) threshold faster, without obtaining academic 
credit. Also, the Department heard from negotiators that some 
postsecondary institutions have already established policies that 
account for involuntary breaks in prison education programs, such as 
waiving all charges related to the affected payment period, and an 
exemption might cause institutions to revise or remove beneficial 
student policies already in place. We thus decline the commenter's 
suggestion to include an exemption to R2T4 for confined or incarcerated 
students in these regulations.
    Changes: None.
    Comments: One commenter stated that students in community colleges 
often work, have families and unexpected events are likely to occur, 
and therefore they may not be able to request a leave of absence in 
advance.
    Discussion: The Department believes the commenter may have 
misinterpreted the proposed revisions to Sec.  668.22(d)(1)(vii). The 
only change to this provision is that a confined or incarcerated 
individual, in a term-based setting, will not have to come back from a 
leave of absence and resume where the student left off, and instead, 
the individual will be allowed to return at a different point in their 
prison education program. No other leave of absence provisions in this 
regulation were modified.
    Changes: None.
Clock-Hour Programs (Sec.  668.22(f)(1)(ii))
    Comments: One commenter disagreed with the Department's proposal to 
streamline and make consistent an institution's calculation of the 
percentage of the payment period completed for a clock-hour program. 
The commenter requested that the Department retain the current 
regulatory language that allows for two distinct methodologies: the 
cumulative method and the payment period method.\32\
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    \32\ NPRM--https://www.federalregister.gov/documents/2024/07/24/2024-16102/program-integrity-and-institutional-quality-distance-education-return-of-title-iv-hea-funds-and.
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    Discussion: The Department declines to adopt the commenter's 
suggestion. We have observed that many times, when an institution uses 
the cumulative method, the percentage of funds earned by the 
institution is much larger than the time the student actually attended. 
This results in a much smaller return of title IV, HEA funds, which 
ultimately hurts a student who had to withdraw from a program. Less 
money returned to the Department means the student has used more of 
their lifetime Pell eligibility and allowable loan amounts without 
successfully completing coursework, see the example in Issue Paper 4: 
Withdrawals and Return of Title IV Funds,\33\ and the Department does 
not believe this is a desirable result.
---------------------------------------------------------------------------

    \33\ Issue Paper 4--https://www.ed.gov/sites/ed/files/policy/highered/reg/hearulemaking/2023/program-integrity-and-institutional-quality-session-1-issue-paper-r2t4-final.pdf.
---------------------------------------------------------------------------

    Because we determined that the payment period method leads to more 
accurate R2T4 calculations because it better aligns the R2T4 
regulations with the regulatory definition of a clock-hour payment 
period under Sec.  668.4(c), and promotes consistency across all 
calculations, the Department chose in Sec.  668.22(f)(1)(ii) to 
standardize how institutions determine the percentage of the payment 
period completed for a clock-hour program by using only the payment 
period method. Providing a single more accurate and consistent way to 
calculate the percentage of the payment period completed will simplify 
R2T4 policy, reduce complexity and confusion, ensure that students are 
treated consistently, and eliminate an area of potential abuse.
    Changes: None.
Modules (Sec.  668.22(l)(9))
    Comments: Several commenters supported the provision in Sec.  
668.22(l)(9) to consider a module part of the payment period used in 
the denominator of the R2T4 calculation only when a student begins 
attendance in the module. Commenters believed that the change 
simplifies the R2T4 calculation, reduces burden, and minimizes errors. 
A few commenters were also pleased that this change eliminates the 
complexity of the ``freeze date'' \34\ policy. One commenter requested 
that the Department early implement this change.
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    \34\ For discussion of the ``freeze date,'' see 89 FR 60265; 
https://www.federalregister.gov/documents/2024/07/24/2024-16102/program-integrity-and-institutional-quality-distance-education-return-of-title-iv-hea-funds-and.
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    Discussion: We thank the commenters for their support. Any 
regulations eligible for early implementation are listed in the 
Implementation Date of These Regulations section of these final 
regulations.
    Changes: None.
    Comments: Several commenters stated that the change in how modules 
factor into the R2T4 calculation in Sec.  668.22(l)(9) will make it 
easier for students to obtain and institutions to retain large amounts 
of student loans through minimal participation, which will result in a 
gaming of the system. Commenters stated that the change could 
artificially increase the ``percentage earned'' component of the R2T4 
calculation, resulting in student over-borrowing and excessive student 
loan burdens.
    Some commenters provided examples to support their claims:
     If a student successfully completes a module, but fails to 
begin attendance in the second module, the R2T4 calculation will result 
in 100% of aid earned; and
     If a student withdraws during the first module and does 
not attend the second module, the denominator is only the days 
contained in the first module.

[[Page 489]]

The student attends 5 weeks (35 days) of the first 8-week module (56 
days). The fraction 35/56 translates to 62.5%. As this is greater than 
60%, the student is considered to have earned 100% of the Title IV aid 
for the full 16-week term.
    The commenters provided several alternatives to the Department's 
proposal, including: (1) prohibiting institutions from making 
subsequent disbursements to students in modules within the same payment 
period if the student does not attend the module; (2) including in the 
R2T4 calculation denominator the days for all modules for which the 
student began attendance, and all modules the student did not attend in 
which the student enrolled before the date of withdrawal and did not 
withdraw before the date of withdrawal; or (3) rescinding the proposed 
regulation.
    Discussion: We disagree with the commenters that the change will 
result in a gaming of title IV, HEA aid. We acknowledge that, in the 
examples shared by the commenters, this change will produce outcomes 
that may prove more beneficial to students than our current 
requirements. However, we believe the reduction in administrative 
burden created by this regulatory change will more than outweigh the 
potential for students to receive more Federal student aid than they 
would have under the previous requirements. We note that students 
enrolled in modular programs still are required to comply with title IV 
requirements that are not impacted by this regulatory change, such as 
mandatory Pell recalculations. For a more detailed discussion on the 
R2T4 process, please refer to Volume 5 of the 2024-25 Federal Student 
Aid Handbook.\35\ We plan to release guidance to help institutions 
understand and implement these changes.
---------------------------------------------------------------------------

    \35\ Federal Student Aid Handbook--https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2024-2025/vol5.
---------------------------------------------------------------------------

    We remind institutions that it is possible for an institution to 
break up title IV, HEA disbursements into smaller increments (by 
module, for example) to best meet the needs of the student, as long as 
the disbursement practices do not violate Sec.  668.16(s). In breaking 
up title IV, HEA disbursements into smaller increments, a student may 
not be eligible for a future disbursement for a module that the student 
did not attend because the student did not successfully complete the 
period for which the loan was intended. In such situations, the 
concerns raised by the commenter about excessive awarding of aid 
relative to time spent attending would not occur.
    We appreciate the commenters' alternative suggestions. We decline 
the first suggestion, because while these regulations modify how 
modules factor into the R2T4 calculation, the rulemaking did not extend 
to changing the manner in which title IV, HEA aid is disbursed within a 
payment period or period of enrollment. We decline the second suggested 
alternative, because it appears to restate existing requirements, which 
these final regulations seek to simplify. Finally, for all of the 
reasons set forth in the NPRM and in this preamble, see, e.g., 89 FR 
60256, we have determined this new provision is appropriate and 
improves administration of the title IV, HEA programs, and we thus 
decline to rescind it.
    Changes: None.

5. Federal TRIO Programs (Sec. Sec.  643.3, 644.3, 645.3, 646.3, 647.3)

General Support and Requests for Expansion
    Comments: Many commenters supported the proposed amendments to the 
TRIO regulations, and a group of commenters stated that there is 
substantial and enthusiastic support to expand eligibility among TRIO 
counselors and practitioners. These commenters believe that the 
proposed expansion of eligibility would help certain noncitizen 
students included within that proposed definition to access vital 
educational services, close the achievement gap, and promote equity in 
education.
    However, the Department received additional, vocal feedback from 
several commenters who repeatedly emphasized that it is important that 
all students, notwithstanding their immigration status, have equitable 
access to education. Additionally, many commenters advocated for the 
Department to expand student eligibility across all TRIO programs, and 
not just those three TRIO programs included within the Department's 
proposed rule. These commenters note the importance of providing 
students with support while in college to increase the students' 
chances of graduating and gaining the skills necessary to be successful 
in the workforce, support which can be more directly provided by the 
SSS and McNair programs. Several of these commenters also argued that 
including the SSS and McNair programs would help undocumented students 
receive the support and services necessary to be successful in college 
and motivate more of these students to pursue graduate education. Still 
other commenters provided suggested language for modifying the proposed 
regulatory changes to include other noncitizens who have previously 
attended high school in the U.S., territories, or Freely Associated 
States. Furthermore, the Department received feedback noting that there 
is no statutory restriction that requires TRIO providers to offer 
services only to students who are citizens, and that the HEA makes no 
mention of such a prohibition for the TRIO programs.
    Discussion: We thank the commenters for their support. As these 
commenters have pointed out, many noncitizens (including undocumented 
students) would greatly benefit from TRIO services based on their 
status as a disadvantaged group facing challenges in postsecondary 
enrollment and completion. We are persuaded by commenters that the 
proposed expansion of student eligibility for TRIO programs under the 
NPRM, which was focused on noncitizen students enrolled or seeking to 
enroll in a high school under TS, UB and EOC, was too narrow both in 
scope of additional populations to be served, as well as in its 
omission of the SSS and McNair programs. We agree with those commenters 
who noted that the HEA does not limit participation in the TRIO 
programs based on immigration status and find that the proposed rule 
was restrictive in its continued consideration of immigration status as 
a barrier to participation in the TRIO programs. We are also persuaded 
that an expansion of student eligibility under only certain TRIO 
programs would create confusion, as many grantees administer grants 
under more than one TRIO program. Additionally, expanding student 
eligibility for only certain TRIO programs would increase 
administrative burden by requiring grantees to deny similarly situated 
noncitizens from participating under certain TRIO programs, but not 
others.
    As the TRIO programs provide a pipeline of services for eligible 
participants, we believe it would frustrate the purpose of the TS, UB 
and EOC programs to not provide (at minimum) a correlating extension of 
student eligibility under the SSS and McNair programs. However, as 
noted above, the Department now recognizes that the proposed rule's 
focus on ``disadvantaged students who have enrolled or seek to enroll 
in a high school in the United States, territories, or Freely 
Associated States'' would continue to perpetuate consideration of 
immigration status as a barrier to participation in the TRIO programs 
in a

[[Page 490]]

manner that is not supported by the text of the HEA itself. For the 
foregoing reasons, the Department has decided not to finalize the 
Federal TRIO provisions, to reconsider how best to ensure that the TRIO 
programs are able to reach all populations of disadvantaged students, 
irrespective of immigration status.
    Changes: The Department is not finalizing the TRIO provisions 
except for the technical change mentioned above and may reconsider TRIO 
student eligibility through future rulemaking efforts.
    Comments: Two commenters were supportive of the changes but were 
concerned that expanding eligibility could bring some political tension 
and put TRIO's funding in jeopardy.
    Discussion: The TRIO programs have been around for over 60 years, 
making these programs one of the oldest grant programs authorized under 
the HEA. These programs continue to exist because they are still needed 
and must continue to evolve to meet the needs of those students that 
the Secretary identifies as disadvantaged in postsecondary access and 
attainment. We are confident that these programs will continue to serve 
students and adapt to serve new groups of qualified individuals from 
disadvantaged backgrounds.
    Changes: The Department removes the TRIO provisions except for the 
technical change mentioned above and may reconsider TRIO student 
eligibility through future rulemaking efforts.
Requests To Remove the Proposed Prohibition on Direct Cash Stipends in 
the Upward Bound Program
    Comments: A few commenters were disappointed that the NPRM limited 
the availability of cash stipends to UB participants by immigration 
status, noting that the limitation would run counter to the 
Department's stated goal of expanding access to higher education. 
Another commenter noted that these restrictions would place a burden on 
program administrators to track differences in eligibility among 
students within the program and create privacy concerns for students as 
they disclose their legal status to determine eligibility for the 
stipend.
    Discussion: As noted in the proposed rule, PRWORA prohibits 
``Federal public benefits'' from being awarded to persons who are not 
able to demonstrate certain types of eligible noncitizen statuses as a 
``qualified alien'' under 8 U.S.C. 1641(b). The general definition of a 
``federal public benefit'' is provided under U.S.C. 1611(c)(1). Federal 
agencies are generally responsible for identifying which of their 
programs provide Federal public benefits. The Department stated its 
determination within the NPRM that the direct cash stipends provided 
under the UB program likely represent a ``similar benefit'' to those 
enumerated benefits under 8 U.S.C. 1611(c)(1)(B) for which, where 
payment is provided to an ``individual, household, or family 
eligibility unit[,]'' falls under the restrictions of PRWORA. 
Therefore, while the Department is not finalizing this provision, 
compliance for PRWORA restrictions operates independent of these 
rulemaking efforts.
    Changes: The Department is not finalizing the TRIO provisions and 
may reconsider TRIO student eligibility through future rulemaking 
efforts.
Clarifying Who Is Eligible for the TRIO Programs
    Comments: Certain commenters sought clarity on which individuals 
would be eligible under the Department's proposed rule, including 
income requirements, potential eligibility of middle school students, 
and whether only a certain percentage of noncitizens would be eligible 
to participate under the proposed rule.
    Discussion: Because the Department is not finalizing this 
provision, we decline to provide guidance as to how these changes would 
have been operationalized. However, we note that section 402A of the 
HEA outlines the documentation requirements for low-income individuals 
under the TRIO programs.
    Changes: The Department does not finalize the TRIO provisions and 
may reconsider TRIO student eligibility through future rulemaking 
efforts.
Suggested Technical Edits for Students From Territories and Freely 
Associated States
    Comments: One commenter points out that there are multiple 
instances in the proposed TRIO regulations where American Samoa is 
omitted while other Pacific territories are explicitly named. 
Additionally, the commenter notes that the regulatory text includes 
outdated references to the Republic of Palau, which is no longer part 
of the Pacific Trust Territory, but instead a Freely Associated State.
    Discussion: The Department notes that Natives of American Samoa are 
eligible to participate in the TRIO sections as a ``national of the 
United States.'' Therefore, no change is needed to ensure the continued 
TRIO program participation of these individuals.
    The suggested change of listing the Republic of Palau as among the 
``Freely Associated States'' in the EOC and TS programs is well taken 
as the U.S.-Palau Compact of Free Association was ratified in 1993 and 
came into effect on October 1, 1994. In addition to listing the 
Republic of Palau among the ``Freely Associated States'' in the EOC and 
TS programs, we will also remove references to the ``Trust Territory of 
the Pacific Islands'' in the TRIO regulations, as this agreement 
dissolved in 1990. The Department considers these to be technical 
changes to update outdated language. Another technical change we will 
be making in the UB program is removing the periods at the end of 
paragraphs Sec.  645.3 (a)(1) through (4) and adding, in each place, 
``; or'' for consistency purposes.
    Changes: We have added ``Republic of Palau'' to the list of 
residents in the Freely Associated States that are currently eligible 
to participate under Sec. Sec.  643.3(a)(1)(v) and 644.3(a)(1)(v). We 
have removed ``Trust Territory of the Pacific Islands (Palau)'' from 
Sec. Sec.  643.3(a)(1)(iv) and 644.3(a)(1)(v). We have removed ``Trust 
Territory of the Pacific Islands'' from Sec. Sec.  645.3(a)(4) and 
647.3(a)(4). We have also removed the periods at the end of paragraphs 
Sec.  645.3 (a)(1) through (4) and added, in each place, ``; or''.
Opposition to Expanding Eligibility
    Comments: A group of commenters argued that the Department's 
proposed rule would be contrary to the legislative intent of the HEA, 
and that these changes would siphon resources away from currently 
eligible low-income American citizens. The commenters also asserted 
that the proposed rule incorrectly cited requirements under Plyler v. 
Doe and programs under the Elementary and Secondary Education Act 
(ESEA) as a parallel for TRIO programs. These commenters also expressed 
a concern that grantees in states with more newly eligible noncitizens 
would vie for a larger share of the existing TRIO funding, and thereby 
reduce available funding for grantees in other states.
    An additional commenter believed the Department's proposal to make 
noncitizens who are enrolled in or seeking to enroll in a U.S. high 
school eligible for the TRIO programs would be in contrast with Federal 
immigration policy and certain statements of Congress in 8 U.S.C. 1601.
    Finally, one commenter argued that the amendments to the Federal 
TRIO programs might undermine their flexibility and effectiveness. The 
commenter believes regulatory changes should be carefully considered to 
ensure they do not inadvertently reduce the

[[Page 491]]

availability or effectiveness of services provided to TRIO program 
participants.
    Discussion: Although the Department is not finalizing this 
provision to reconsider how best to ensure that the TRIO programs are 
able to reach all populations of disadvantaged students, the Department 
disagrees with the comments of opposition on several grounds. As a 
factual matter, the Department's NPRM did not state that TRIO is 
governed by ESEA, nor did the NPRM cite Plyler v. Doe in the 
Department's rationale for the proposed changes. Regarding the 
commenters' concerns about newly eligible noncitizens taking resources 
away from currently eligible low-income American citizens, the TRIO 
programs provide services to several groups from disadvantaged 
backgrounds and this work would continue in the event of an expansion 
of student eligibility. Additionally, we disagree with the commenters' 
concerns that TRIO funding could be diverted to grantees in states with 
a higher distribution of newly eligible students, as the existing 
procedures for selecting and distributing funding amongst eligible 
grantees help to safeguard against an inequitable distribution of 
resources across grantees.
    In response to the commenter who raised concerns regarding 
noncitizens receiving any public resources under TRIO, the Department 
reiterates that not all benefits or services provided are the type of 
``Federal public benefits'' Congress sought to restrict in enacting 
PRWORA. Indeed, Congress specifically exempted several Federal public 
benefit programs in PRWORA in order to allow these programs to provide 
services to all individuals regardless of their immigration status, 
thereby directly undercutting the commenter's position that certain 
noncitizens should be entirely deprived of aid and assistance of aid 
from the Federal government.\36\ The fact that a Federal program was 
not specifically included amongst those specifically excluded benefit 
programs does not necessitate the conclusion that it provides ``Federal 
public benefits'' for purposes of PRWORA. Rather, providers of Federal 
benefits, such as the Department of Education, are required to 
``determine whether the particular program they are administering 
provides a `federal public benefit[.]' '' \37\ Additionally, ``[i]f one 
program provides several public benefits, [PRWORA's] requirements apply 
only to those benefits that are non-exempted federal public benefits 
under [PRWORA].'' \38\ The Department also clarifies its stated 
reasoning, in the proposed rule, noting that the Department's stated 
position on 89 FR print page 60267 of the Federal Register should have 
read ``the Department believes that TRIO grant programs providing 
student support services in the secondary context do not constitute the 
type of ``incentive for illegal immigration provided by the 
availability of public benefits'' that PRWORA was enacted to 
discourage.'' The Department believes this position would be consistent 
with the omission of other programs that provide non-postsecondary 
services from the requirements of PRWORA, such as Head Start and 
elementary and secondary education, as noted within the proposed rule. 
While the Department has determined not to finalize its proposed 
provisions, the Department nevertheless stands by its stated position 
that not all benefits and services provided under the TRIO programs are 
subject to restriction under PRWORA.
---------------------------------------------------------------------------

    \36\ 8 U.S.C. 1611(b).
    \37\ Department of Justice, Interim Guidance on Verification of 
Citizenship, Qualified Alien Status and Eligibility Under Title IV 
of the Personal Responsibility and Work Opportunity Reconciliation 
Act of 1996, 62 FR 61344 (Nov. 17, 1997).
    \38\ Id. at 61346.
---------------------------------------------------------------------------

    Changes: The Department does not finalize the proposed TRIO 
provisions and may reconsider TRIO student eligibility through future 
rulemaking efforts.

VIII. Regulatory Impact Analysis

Executive Orders 12866, 13563, and 14094

    Under Executive Order 12866, the Office of Management and Budget 
(OMB) must determine 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, as 
amended by Executive Order 14094, 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 $200 million or more 
(adjusted every three years by the Administrator of the Office of 
Information and Regulatory Affairs (OIRA) for changes in gross domestic 
product); or adversely affect in a material way the economy, a sector 
of the economy, productivity, competition, jobs, the environment, 
public health or safety, or State, local, territorial, or Tribal 
governments or communities;
    (2) Create serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) Materially alter the budgetary impacts of entitlements, grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or
    (4) Raise legal or policy issues for which centralized review would 
meaningfully further the President's priorities, or the principles set 
forth in the Executive Order, as specifically authorized in a timely 
manner by the Administrator of OIRA in each case.
    This final regulatory action is a significant regulatory action 
subject to review by OMB under section 3(f)(4) of Executive Order 
12866, as amended by Executive Order 14094. The Department estimates 
present value net cost of $27,349,749 over ten years at a 2 percent 
discount rate. This is equivalent to an annualized net cost of 
$3,044,753 over ten years. Additionally, we estimate annualized 
quantified costs of $9,423,657 related to paperwork burden. 
Notwithstanding this determination, based on our assessment of the 
potential costs and benefits (quantitative and qualitative), the 
Department has determined that the benefits of this final regulatory 
action would justify the costs.
    The Department has also reviewed the regulations 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 on 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.

[[Page 492]]

    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.''
    The Department issues these final regulations only on a reasoned 
determination that their benefits would justify their costs. In 
choosing among alternative regulatory approaches, the Department 
selected those approaches that maximize net benefits. Based on the 
analysis that follows, the Department believes that these regulations 
are consistent with the principles in Executive Order 13563.
    The Department has also determined that this regulatory action does 
not unduly interfere with State, local, territorial, or Tribal 
governments in the exercise of their governmental functions.
    As required by OMB Circular A-4, the Department compared the final 
regulations to the current regulations. In this regulatory impact 
analysis, the Department discusses the need for regulatory action, 
responds to comments related to the RIA in the NPRM, discusses the 
potential costs and benefits, and the regulatory alternatives we 
considered. Elsewhere in this section under Paperwork Reduction Act of 
1995, the Department identifies and explains burdens specifically 
associated with information collection requirements.

1. Congressional Review Act

    Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), 
OIRA has found that this rule does not meet the criteria in 5 U.S.C. 
804(2).

2. Need for Regulatory Action

    The Department has identified a significant need for regulatory 
action to address inadequate protections for students and taxpayers in 
the current regulations.
Distance Education
    The HEA and the Department's regulations provide that institutions 
of higher education may offer programs through distance education. 
Currently, however, the Department has very limited data about students 
enrolled in distance education, which limits the Department's ability 
to answer important questions about student pathways and outcomes 
through in-person, distance, and hybrid education. For example, an 
institution may offer a program that is provided on campus and a 
related program of the same CIP code that is provided online. The 
Department is currently unable to distinguish between those two 
programs in the data it currently receives, which limits its capacity 
to provide helpful and reliable information to students, families, 
institutions, and the public. A notable example is the Department is 
unable to distinguish between two such programs for College Scorecard 
program-level data including debt, earnings, and completion. The 
Department is also unable to determine whether institutions have 
reached the 50 percent threshold for distance education enrollment 
announced in Dear Colleague Letter GEN-23-09.\39\ This is important 
because institutions must obtain further accreditor approval beyond the 
initial approval to deliver distance education programs when they 
enroll at least 50 percent of their students in distance education or 
offer at least 50 percent of their courses (or 50 percent of a program) 
via distance education.
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    \39\ https://fsapartners.ed.gov/knowledge-center/library/dear-colleague-letters/2023-05-18/accreditation-and-eligibility-requirements-distance-education.
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    The final regulations for distance education change institutional 
reporting requirements to specify a student's distance education 
enrollment status.
    This change enables the Department to obtain better data and more 
meaningfully compare the outcomes of students, particularly for those 
who are enrolled in similar programs that are delivered using different 
modalities. It also allows the Department to better monitor and oversee 
the aid programs and institutional accrediting agencies by ensuring 
institutions are receiving appropriate review and approval of distance 
education offerings.\40\
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    \40\ https://fsapartners.ed.gov/knowledge-center/library/dear-colleague-letters/2023-05-18/accreditation-and-eligibility-requirements-distance-education.
---------------------------------------------------------------------------

R2T4
    The R2T4 regulations govern the process institutions must conduct 
when a title IV, HEA recipient ceases attendance during a payment 
period or a period of enrollment. An R2T4 calculation determines, based 
on the proportion of a payment period or period of enrollment a student 
completed, whether funds must be returned by the school and/or student, 
or whether the student is eligible for a post-withdrawal disbursement. 
R2T4 calculations differ based on academic calendars and program 
format, including the use of clock hours or credit hours and the use of 
module courses within terms. R2T4 consistently ranks among the top ten 
compliance findings for institutions, is the subject of an entire 
volume of sub-regulatory guidance in the FSA Handbook and yields 
complex and challenging questions. Therefore, the Department believes 
that there is a need to take regulatory action immediately to update 
and clarify the regulations.
Withdrawal Exemption
    For some institutions, the R2T4 process is complex, with a high 
likelihood of errors, including issues such as incorrectly determining 
the withdrawal date or the number of days in a payment period. To 
simplify the process for institutions, these regulations establish a 
withdrawal exemption in which an institution does not need to conduct 
an R2T4 calculation if the following conditions are met: (1) the 
student is treated as never having begun attendance; (2) the 
institution returns all title IV, HEA aid disbursed to the student 
including any title IV credit balance for that payment period or period 
of enrollment; (3) the institution refunds all institutional charges to 
the student for that payment period or period of enrollment; and (4) 
the institution writes off or cancels any payment period or period of 
enrollment balance owed by the student to the institution due to the 
institution's returning of title IV funds to the Department.
    The final withdrawal exemption reduces the likelihood that a 
student owes money back to the school, allows the student to not 
exhaust annual and aggregate subsidized aid, including Pell Grants, and 
reduces the likelihood the student will have a loan balance associated 
with a program they may not finish.
Determination of Withdrawal Status
    This provision requires that an institution that is required to 
take attendance must, within 14 days of a student's last date of 
attendance, document a student's withdrawal date and maintain the 
documentation as of the date of the institution's determination that 
the student withdrew. We reiterate that this is not a requirement that 
the student be administratively withdrawn or that an R2T4 calculation 
be completed at that time. If the student subsequently begins 
attendance within 30 days of the date of determination, then there is 
nothing further an institution must do as it relates to the R2T4 
calculation (30 days)

[[Page 493]]

or the return of funds to the Department (45 days).
Leave of Absence
    On July 1, 2023, the Department published final regulations that 
detailed Pell Grant eligibility for confined or incarcerated 
individuals in PEPs.\41\ These regulations did not address students who 
are incarcerated and who face involuntary interruptions to their 
academic programs. For example, an entire correctional facility may be 
locked down due to a security issue, interrupting a student's progress 
in their PEP.
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    \41\ https://www.federalregister.gov/documents/2022/10/28/2022-23078/pell-grants-for-prison-education-programs-determining-the-amount-of-federal-education-assistance.
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    With these final regulations the Department makes changes to the 
regulations governing leave of absence to allow a student who is 
incarcerated to not have to return from the leave of absence where the 
student left off, and instead, the individual could return to a 
different point in their PEP. This applies to programs of any 
structure, including term-based programs. This change increases 
flexibility for institutions and will help boost student retention in 
PEPs.
Clock-Hour Programs
    As a part of the R2T4 calculation, institutions must determine the 
percentage of the payment period or period of enrollment the student 
completed based on scheduled clock hours if enrolled in a clock-hour 
program. There are currently two ways that institutions can make this 
determination: the payment period method and the cumulative method. The 
cumulative method (as described in the Analysis of Public Comment and 
Changes section) usually results in a significant amount of aid earned 
by the student compared to the actual time the student attended during 
the payment period. With these final regulations the Department has 
streamlined this calculation so that the payment period method is the 
single, standardized method across all clock-hour programs.
R2T4 and Modules
    In 2021, the Department published final regulations outlining 
several changes to R2T4 and modules.\42\ The regulations immediately 
raised a question about how an institution determines whether the days 
in a module are included in the R2T4 calculation. The answer is complex 
and depends on several variables, including whether the institution 
uses an R2T4 freeze date and the type(s) of title IV, HEA aid for which 
the student was eligible during the payment period or period of 
enrollment.
---------------------------------------------------------------------------

    \42\ Distance Education and Innovation-final regulations: 
https://www.federalregister.gov/documents/2020/09/02/2020-18636/distance-education-and-innovation.
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    With these final regulations the Department simplifies the 
determination by only including days in the module if the student 
actually attends the module. This change reduces complexity and errors 
as institutions will no longer need to use a freeze date or 
differentiate between Pell Grant and Direct Loan recipients.

3. Summary of Comments and Changes From the NPRM

       Table 3.1--Summary of Key Changes in the Final Regulations
------------------------------------------------------------------------
                                    Regulatory    Description of final
            Provision                section            provision
------------------------------------------------------------------------
                           Distance education
------------------------------------------------------------------------
Definition of distance education         600.2  Removes the phrase
 course.                                         ``residency
                                                 experiences'' from the
                                                 definition.
Definition of additional location        600.2  Does not finalize the
                                                 definition related to a
                                                 virtual location.
Definition of a week of                  668.3  Does not finalize the
 instructional time.                             limitation on
                                                 asynchronous clock-hour
                                                 programs being offered
                                                 through distance
                                                 education.
Reporting enrollment in distance        668.41  Updates the effective
 education or correspondence                     date from July 1, 2026,
 courses.                                        to July 1, 2027.
------------------------------------------------------------------------
                           Return to title IV
------------------------------------------------------------------------
Treatment of Title IV Grant and         668.21  Does not finalize the
 Loan Funds if the Recipient does                provision to allow a
 not Begin Attendance at the                     student who received a
 Institution (Sec.   668.21).                    loan disbursement as
                                                 part of a title IV
                                                 credit balance, but
                                                 never began attendance
                                                 in a payment period or
                                                 period of enrollment,
                                                 to repay loan funds
                                                 they received under the
                                                 terms of their
                                                 promissory note.
Withdrawal Exemption.............       668.22  Updates Sec.
                                                 668.22(a)(2)(ii)(A)(6)(
                                                 iv) to replace ``any
                                                 current year balance''
                                                 with ``any payment
                                                 period or period of
                                                 enrollment balance''
                                                 owed by the student to
                                                 the institution due to
                                                 the institution's
                                                 returning of title IV,
                                                 HEA funds to the
                                                 Department. Also
                                                 include references to
                                                 funds received by a
                                                 parent so they are
                                                 covered by this
                                                 exemption as well.
Required attendance taking in           668.22  Does not finalize the
 distance education courses.                     proposal require
                                                 attendance taking in
                                                 distance education
                                                 courses.
------------------------------------------------------------------------
                          Federal TRIO Programs
------------------------------------------------------------------------
Talent Search program............        643.3  Does not finalize the
                                                 proposed changes to
                                                 this provision.
Educational Opportunity Centers          644.3  Does not finalize the
 program.                                        proposed changes to
                                                 this provision.
Upward Bound programs (Regular,          645.3  Does not finalize the
 or Math and Science).                           proposed changes to
                                                 this provision.
------------------------------------------------------------------------

General Comments
    Comments: One commenter claimed that the Department significantly 
underestimated the compliance costs for this regulatory package, which 
will necessitate significant changes to institutional policies and 
processes, will involve large-scale duplicative reporting, and will 
require

[[Page 494]]

redevelopment of information systems to support the new requirements, 
all of which will ultimately increase costs for students.
    Discussion: While the commenters did not provide any data to 
justify their assertions, after careful review of the final 
regulations, and based on the Department's administrative experience, 
the Department increased burden estimates as described in the Distance 
Education cost analysis section of the RIA. In the NPRM, we estimated a 
cost burden of $381,560 in the first year across all impacted 
institutions under Sec.  668.41 to require institutions to report the 
enrollment status of students in distance education or correspondence 
courses. In the NPRM, the Department did not estimate a cost for 
transitioning to synchronous instruction for affected clock-hour 
programs. In these final regulations, the Department has removed 
several provisions, which reduce levels of burden from what was 
included in the NPRM. This includes not finalizing the provision 
related to synchronous clock hour programs.
    Additionally, the Department has not finalized the provision under 
Sec.  668.22(b)(3)(ii) for required attendance taking in distance 
education courses, which reduces burden associated with that previously 
proposed requirement.
    Changes: In total, the Department now estimates reviewing and 
revising these procedures will cost approximately $10,057,889 in the 
first year across all impacted institutions.
    Comments: One commenter noted that the proposed provisions could 
force institutions to hire additional staff to manage an increased 
documentation and compliance workload.
    Discussion: The Department acknowledges that some institutions may 
need to increase or re-allocate staff duties and responsibilities to 
comply with these final regulations. The costs described in the RIA 
account for potential increased costs for institutions as a result of 
these final regulations. In the NPRM, we estimated a cost burden of 
$381,560 in the first year across all impacted institutions under Sec.  
668.41 to require institutions to report the enrollment status of 
students in distance education or correspondence courses. In the NPRM, 
the Department did not estimate a cost for transitioning to synchronous 
instruction for affected clock-hour programs. In these final 
regulations, the Department has removed several provisions, which 
reduce levels of burden from what was included in the NPRM. This 
includes not finalizing the provision related to synchronous clock hour 
programs.
    Changes: In total, the Department now estimates reviewing and 
revising these procedures will cost approximately $10,057,889 in the 
first year across all impacted institutions.
Asynchronous Distance Education in Clock-Hour Programs
    Comments: One commenter alleged that the Department has not 
sufficiently identified the proportion of asynchronous learning 
activities that do not meet the Department's standard. This commenter 
argued that a reasoned analysis must include an estimate of the cost to 
students and institutions of removing asynchronous distance education 
instruction in clock-hour programs and a comparison to any benefits 
from those proposed changes. The commenter further opined that failing 
to provide such an estimate would render the provision arbitrary and 
capricious. Another commenter opined that the proposed regulations 
would disproportionately increase administrative burden on institutions 
that serve students exclusively through distance education. One 
commenter estimated that at least 75 percent of asynchronous activities 
would be disallowed under the proposed regulations but are of 
sufficient quality to merit equal treatment with synchronous 
activities, forecasted that the value of asynchronous learning will 
increase over time, and predicted that the costs to institutions and 
students for disallowing asynchronous distance education in clock-hour 
programs would therefore also rise over time. One commenter noted that 
faculty offering asynchronous coursework via distance education in 
clock-hour programs may experience increased workload and potential 
dissatisfaction because of the need to redesign their courses.
    One commenter noted that it is the responsibility of the 
Department, not public commenters, to provide reasoned burden and cost 
estimates for the Department's proposed regulatory provisions, and that 
it is inappropriate for the Department to avoid such necessary 
calculations merely because commenters have not offered their own 
calculations.
    Discussion: When developing cost and benefit analysis of proposed 
rules, the Department relies on its own data sources, publicly 
available data sources, and the administrative experience of Department 
staff. In instances where there is a lack of certainty, the Department 
may rely, in part, on data or evidence provided to the Department 
through public comment on the NPRM. That is why, in section 3.A.3 of 
the NPRM, the Department invited comments from the public on its 
estimates contained in the NPRM. The Department requested comments to 
ensure that the NPRM's estimates accurately reflected realistic 
assumptions about the average burdens that the regulations would impose 
on affected entities. The Department believes that the cost analysis 
included in the RIA fully considers the potential costs and benefits of 
the final regulations based on the Department's own data sources, 
publicly available data sources, and the administrative experience of 
Department staff. Additionally, for these final regulations, the 
Department revised its cost estimates upward partly in response to 
high-quality comments from the public. While these high-quality 
comments did not provide specific data, they did provide convincing 
qualitative information that led the Department to further consider 
potential costs, based on the Department's administrative experience, 
under the final regulations.
    Changes: The Department removed limitations on asynchronous 
distance education in clock hour programs. In total, the Department now 
estimates reviewing and revising these procedures will cost 
approximately $10,057,889 in the first year across all impacted 
institutions.
    Comments: One commenter estimated costs between $1.5 and $2.4 
million for 113 community colleges ($12,500 to $20,500 per institution) 
resulting from the proposed regulations because these institutions 
would need to review their clock-hour programs to determine which 
should be converted into credit-hour programs, as well as update 
relevant course assignments, classroom lectures, and learning 
materials. This commenter requested an implementation date no earlier 
than 2027, noting that curriculum changes require local faculty review, 
employer input, and statewide approval which can take approximately 18 
months to complete.
    One commenter predicted that cost and burden from the proposed 
elimination of asynchronous instruction for clock-hour programs would 
divert educational resources and disproportionately impact first-
generation, adult, and marginalized students.
    Discussion: When developing cost and benefit analysis of proposed 
rules, the Department relies on its own data sources, publicly 
available data sources, and the administrative experience of Department 
staff. In instances where there is a lack of certainty, the Department 
may rely, in part, on data or evidence provided to the Department

[[Page 495]]

through public comment on the NPRM. That is why, in section 3.A.3 of 
the NPRM, the Department invited comments from the public on its 
estimates contained in the NPRM. The Department requested comments to 
ensure that the NPRM's estimates accurately reflected realistic 
assumptions about the average burdens that the regulations would impose 
on affected entities.
    As described in the preamble to these final regulations, the 
Department has decided not to finalize the proposal to limit 
asynchronous clock hour programs from accessing title IV, HEA funds. By 
not finalizing this provision there is no longer any burden associated 
with this provision in the final rule. It also means the concerns 
brought up by the commenters are no longer relevant. The Department 
believes that the cost analysis included in the RIA fully considers the 
potential costs and benefits of the final regulations based on the 
Department's own data sources, publicly available data sources, and the 
administrative experience of Department staff.
    Changes: None.
Attendance Taking for Distance Education Courses
    Comments: We received many comments that stated the Department 
underestimated the administrative and financial burden to postsecondary 
institutions, including community colleges, by requiring attendance 
taking for distance education courses; including the significant 
investment in new technologies. Commenters believed that the analysis 
was not properly justified and also lacked reference to the negative 
impact this may have on other stakeholders like instructors and 
students.
    Discussion: As discussed in the preamble, the Department is 
statutorily required to ensure the proper return of title IV, HEA funds 
when a student withdraws before completing a payment period or period 
of enrollment. Attendance taking is specifically provided for in the 
statute and is crucial for the Department to carry out its statutory 
responsibilities. We remain concerned about ensuring that withdrawals 
are properly tracked in a fully online environment, where we have 
observed that institutions have greater tools available to them for 
tracking student engagement than exist when offering in-person classes. 
An accurate withdrawal date is critical to ensure that the right amount 
of unearned title IV, HEA aid is returned, and students' accounts are 
properly reduced. However, we are persuaded by concerns about the need 
for continued development in these tools to make them consistently 
effective for this purpose, including the need for system 
interoperability. As such, we are not finalizing this provision to 
provide more time to evaluate technological changes that can better 
track student engagement.
    Because the Department is not finalizing the provision under Sec.  
668.22(b)(3)(ii), the concerns about burden raised by commenters are no 
longer relevant. Institutions will not be required to take attendance 
in a distance education course unless there are other existing reasons 
for why they must do so. As such, there are no added burden costs from 
this withdrawn provision. We have updated the relevant parts of the RIA 
to remove any burden estimates from this proposed provision.
    Changes: The Department does not finalize the proposal under Sec.  
668.22(b)(3)(ii) for required attendance taking in distance education 
courses. We also removed the associated burden from the estimated costs 
of these final regulations.
Distance Education Reporting
    Comments: A few commenters claimed that the Department understated 
the costs associated with the proposed reporting requirements for 
distance education. One commenter further observed that institutions 
would pass these costs along to students. One commenter estimated one-
time costs in the low thousands of dollars for updating data collection 
procedures, which would amount to approximately $2 million to $2.5 
million across their system of institutions. This commenter requested 
an implementation date no sooner than 2027 to provide institutions time 
to update their data collection systems.
    Discussion: Upon further review, the Department agrees that the 
NPRM did not fully account for costs that may be expected to result 
from the distance education reporting requirements; however, the 
Department strongly disagrees that this final regulation would result 
in increased costs for students. The Department estimates that costs 
resulting from these requirements would primarily result from increased 
labor hours and would only occur in the first year after the 
promulgation of this final regulation. In light of comments received 
from the public on the cost estimates included in the NPRM, the 
Department reconsidered the potential burden of this final regulation, 
and after reviewing additional data submitted by commenters and data 
maintained by the Department, revised cost estimates for this final 
regulation to more fully account for the cost of increased staff labor 
hours to update data collection policies and procedures. We were able 
to incorporate this additional information in this final regulation to 
update the estimated burden. As noted earlier, this provision will not 
begin until July 1, 2027. We believe this date provides institutions 
with sufficient time to prepare for implementation of this final 
regulation.
    Changes: As described in the RIA, in the NPRM the Department 
initially estimated a cost burden for distance education reporting of 
$381,560 in the first year across all impacted institutions. The 
Department estimates costs of $10,057,889 in the first year for 
impacted institutions.
    Comments: Several commenters raised concerns about the costs, in 
dollars and in administrative time, associated with reporting a virtual 
location for distance learning courses, particularly for students 
enrolled in a combination of in-person and distance-education courses, 
and that such reporting could potentially impact the quality of 
services available to students.
    One commenter opined that the Department's analysis in the NPRM did 
not account for the costs associated with declaring a virtual location 
for all distance education courses. The commenter further noted that 
online learning is especially important in rural states, citing data 
from the New Mexico Legislative Finance Committee that Native Americans 
and Hispanics earn 43 and 49.6 percent of their credits, respectively, 
via distance education, and that these online students are 
predominantly women, older, and non-white, which suggests that the 
proposed changes would disproportionately impact these populations.
    Discussion: As discussed in the preamble above, the Department has 
decided not to move forward with the reporting of a virtual location. 
There is thus no burden associated with this provision in the final 
regulations.
    Changes: We have removed the burden associated with virtual 
location reporting.
    Comments: One commenter observed that NSLDS enrollment reporting 
findings consistently rank among the top 10 audit and program review 
findings, with respective findings rates of 16.8 percent and 8.8 
percent, which suggests that the Department underestimated the labor 
and costs of reporting given longstanding structural deficiencies with 
NSLDS that reflect a faulty and overly complex reporting process.

[[Page 496]]

    Discussion: Upon further review, the Department agrees that the 
NPRM cost estimates for Distance Education reporting underestimated 
burden for Distance Education reporting. The Department increased 
burden estimates as a result of further review.
    Changes: The Department increased the burden estimate from $381,560 
to $10,057,889 in the first year across all impacted institutions for 
distance education reporting.
Failure To Begin Attendance
    Comments: One commenter noted that it is currently unclear which, 
if any, of the Department's loan forgiveness initiatives will withstand 
litigation, casting uncertainty on the costs associated with allowing 
students who fail to begin attendance to repay loans under the terms 
and conditions of the promissory note as proposed at Sec.  
668.21(a)(2)(ii). This commenter further asserted that the estimates 
the Department included in the NPRM relative to this provision are no 
longer accurate, in part because the Saving Against a Valuable 
Education (SAVE) repayment plan will likely continue to fail in ongoing 
legal proceedings.
    One commenter argued that the Department's cost estimate for this 
provision, in only considering compliance costs for loan services, did 
not account for: (1) an increased number of persons seeking loans; (2) 
the resulting increased costs and transfers; or (3) transfers from the 
government to borrowers for allowing these borrowers to repay over time 
rather than immediately upon demand. The commenter questioned whether 
the benefits of allowing repayment over time for students who 
legitimately planned to attend would justify the costs from those that 
would enroll only to obtain loans.
    Discussion: As explained elsewhere, the Department has chosen not 
to move forward with this provision in these final regulations. As a 
result, there is no cost associated with this provision.
    Changes: The Department removed the change in Sec.  668.21 to allow 
a student who received a loan disbursement as part of a title IV credit 
balance, but never began attendance in a payment period or period of 
enrollment, to repay loan funds they received under the terms of their 
promissory note.

4. Discussion of Costs, Benefits, and Transfers

    The Department has analyzed the costs and benefits of complying 
with these regulations. Although many of the associated costs and 
benefits are not easily quantifiable, the Department currently believes 
that the benefits derived from the regulations outweigh the associated 
costs, as discussed in sections 4.B. and 4.C. below.
    The regulations, which will apply to over 6,000 postsecondary 
institutions, will help ensure students are well served by the 
institutions of higher education they attend and ensure that the 
Federal Student Aid programs work in the best interests of students. 
These final regulations will also reduce the likelihood of reporting 
errors in R2T4 and will standardize and simplify related processes and 
calculations.
    Due to the large number of affected recipients (5,898, as discussed 
more fully in the discussion of Establishing the Baseline (Section 
4.A)), the variation in likely responses to any regulatory change, and 
the limited information available about current practices, the 
Department is not able to precisely estimate the likely costs, 
benefits, and other effects of the regulations. Despite these 
limitations and based on the best available evidence as explained in 
the discussion of Establishing a Baseline (Section 4.A), the Department 
estimates net present value costs of $27,349,749 over ten years at a 2 
percent discount rate. This is equivalent to an annualized cost of 
$3,044,753 over ten years. The regulations are expected to result in 
estimated costs of $27,896,744 in the first year following publication 
of these final regulations.

             Table 4.1--Net Annual Costs, Years 1 Through 10
------------------------------------------------------------------------
                        Year                           Net annual costs
------------------------------------------------------------------------
Year 1..............................................         $27,896,744
Year 2..............................................                   0
Year 3..............................................                   0
Year 4..............................................                   0
Year 5..............................................                   0
Year 6..............................................                   0
Year 7..............................................                   0
Year 8..............................................                   0
Year 9..............................................                   0
Year 10.............................................                   0
                                                     -------------------
    Total Net Present Value (NPV), 2 percent........          27,349,749
                                                     -------------------
    Annualized, 2 percent...........................           3,044,753
------------------------------------------------------------------------

    As discussed in the Cost Estimates section (Section 4.B), the Year 
1 costs include one-time costs associated with reviewing and making 
necessary changes to policies, procedures, and training to implement 
the regulations.
    The assumptions, data, methodology, and other relevant materials, 
as applicable, on which the Department relied in developing its 
estimates are described throughout this Regulatory Impact Analysis 
(RIA).
4.A. Establishing a Baseline
4.A.1. Number of Affected Entities
    Institutions of higher education will be subject to the final 
regulations. For purposes of establishing a baseline, this includes the 
number of institutions of higher education participating in programs 
under title IV of the HEA (such as Direct Loans, Federal Work Study, 
and Pell Grants).
    For purposes of this analysis, the Department bases its analysis of 
``postsecondary entities'' on ``institutions of higher education'' as 
defined in section 102 of the HEA. It is assumed that 5,898 
postsecondary institutions will be impacted by the regulations. Among 
postsecondary institutions, institutions range from small, private, 
professional schools with fewer than 5 students enrolled in the fall of 
2023 to large, public research universities with enrollments of more 
than 71,000 students and institutions operating mostly virtually with

[[Page 497]]

enrollments in excess of 156,000 students.
    It is important to note that, across postsecondary institutions, 
there is wide variation in the number of students served, the number of 
employees, administrative structure, and annual revenue. This wide 
variation makes estimating the effects of the regulations challenging, 
and the Department notes that the estimates provided are intended to 
reflect the average burden across the full spectrum of affected 
entities. As a result, estimates may be lower than the actual burden 
realized by, for example, larger institutions or institutions with more 
complex administrative structures, and larger than those actually 
realized by smaller institutions with less complex administrative 
structures.
4.A.2. Wage Rates
    Unless otherwise specified, the Department's model uses mean hourly 
wages for personnel employed in the education sector as reported by the 
Bureau of Labor Statistics (BLS) \43\ and a loading factor of 2.0 to 
account for the employer cost of employee compensation and benefits and 
indirect costs (e.g., physical space, equipment, and technology costs). 
When appropriate, the Department identifies the specific occupation 
used by the BLS in its tables to support the reader's analysis. The 
Department assumes that inflation-adjusted wage rates remain constant 
for the duration of the time horizon.
---------------------------------------------------------------------------

    \43\ U.S. Bureau of Labor Statistics, May 2023 National 
Industry-Specific Occupational Employment and Wage Estimates, Sector 
61--Educational Services, https://www.bls.gov/oes/current/oes_nat.htm (last modified Apr. 3, 2024).
---------------------------------------------------------------------------

4.A.3. Other Information
    In addition, throughout this RIA, some described calculations have 
results that are fractions. To improve readability, the Department 
presents these results as rounded totals in the text (e.g., 1.95 or 
3,450 instead of 1.9478 or 3,449.6786), but retains the unrounded value 
for purposes of its underlying calculations.
4.B. Costs of the Final Regulations
    In this section, the Department estimates monetized cost burdens 
associated with the final regulations. To assist the public in 
reviewing these estimates, the Department has subdivided this analysis, 
when appropriate, into the relevant subparts. As described below, the 
Department estimates a first-year cost of $27,896,744. The Department 
estimates the changes will result in a total annualized cost of 
$3,044,753.
    The Department estimates that, upon promulgation of the 
regulations, all affected entities will need time to read and 
understand the rule. Based on the Department's administrative 
experience, we assume this will require, on average, six hours from an 
education administrator (educational administrator (postsecondary), 
loaded wage rate of $117.32/hour) and six hours from a lawyer 
(postsecondary, loaded wage rate of $172.76/hour) for each of the 5,898 
IHEs. In total, the Department estimates that reading and understanding 
the rule will have a one-time cumulative cost of approximately 
$10,265,351 across all institutions of higher education.
Distance Education--Reporting and Disclosure of Information
    As a result of changes to Sec.  668.41 to require institutions to 
report the enrollment status of students in distance education or 
correspondence courses, the Department estimates that each IHE will 
need to review and revise reporting policies and procedures. In 
response to comments on this section of the NPRM RIA, we increase the 
number of hours it would take to review and revise reporting policies 
and procedures. We assume this will require 20 hours from an education 
administrator and 8 hours from an administrative assistant (loaded wage 
rate of $43.58/hour) for each of the 3,732 IHEs \44\ that reported 
offering at least one distance education course. In the NPRM we 
estimated a cost burden of $381,560 in the first year across all 
impacted institutions. In total, the Department now estimates reviewing 
and revising these procedures will cost approximately $10,057,889 in 
the first year across all impacted institutions.
---------------------------------------------------------------------------

    \44\ Based on internal data available to FSA.
---------------------------------------------------------------------------

Return of Title IV Funds--When Student Withdraws
    The addition of Sec.  668.22(a)(2)(ii)(A)(6) will exempt 
institutions from performing an R2T4 calculation resulting from a 
student withdrawal by providing flexibility in conducting R2T4 
calculations when certain conditions are met. The Department assumes 
that institutions will need to review and revise their R2T4 policies 
and procedures. The Department estimates that the change will require 
eight hours from an education administrator and two hours from a lawyer 
for each IHE for a total first year cost of approximately $7,573,504 
across all 5,898 institutions.
4. C. Non-Monetized Benefits
Distance Education
    Changes to provide better data on student outcomes for students 
enrolled in distance education will provide benefits for students in 
allowing reporting and evaluations of outcomes for students depending 
on their enrollment in distance education, traditional on-site 
instruction, or a combination of the two. Such analysis is increasingly 
advantageous to determine the educational and cost effectiveness of 
postsecondary instruction as it becomes more available at a distance.
R2T4
Benefits to Students
    If institutions choose to implement the optional withdrawal 
exemption, students who withdraw will not owe any balance related to 
any returned title IV, HEA aid to the Department or the institution. 
This will alleviate students from the burden of having to repay title 
IV, HEA dollars or owing an institutional debt related to a payment 
period or period of enrollment that they did not complete.
    Students who are incarcerated at times may need to (or be forced 
to) take a break in their PEP, including activities out of their 
control such as prison-wide lockdowns or involuntary transfers to other 
facilities. The regulations will benefit incarcerated students by 
allowing them to not have to come back from the leave of absence where 
they left off (as current regulations require), and instead, the 
student could come back at a different point in their eligible prison 
education program, affording greater flexibility in their academic 
progression.
Benefits to Institutions
    Institutions will benefit under several of these final regulations. 
Currently, an institution offering clock-hour programs may use two 
methods to determine the percentage of the payment period completed: 
cumulative, and by payment period. These regulations will require 
institutions to use the payment period method when calculating the 
number of scheduled hours completed in clock-hour programs. This change 
will reduce the complexity of the R2T4 calculations and the 
inconsistency in the manner in which the calculation is done for clock-
hour programs at different institutions.
    Currently institutions implement complex sub-regulatory guidance to 
determine the number of days in the payment period for a program 
offered in modules, even if the student did not attend the module. 
These regulations will benefit institutions through the

[[Page 498]]

requirement that the student actually attend the module for the days in 
the module to be included in the payment period. It will also eliminate 
the need for a ``freeze date,'' further reducing complexity.
Benefits to the Taxpayer
    Overall, we believe that the more accurate calculations and 
reductions in complexity will benefit the taxpayer by reducing errors 
in R2T4 calculations, resulting in more accurate amounts being returned 
to the Department and further supporting the integrity of the title IV, 
HEA programs. R2T4 consistently ranks in the Top 10 compliance 
findings,\45\ costing the Federal government time and money to provide 
assistance through training and conducting program reviews in an effort 
to identify and correct R2T4 errors committed by institutions. We 
believe the changes will also help alleviate some compliance issues 
related to R2T4.
---------------------------------------------------------------------------

    \45\ Annual Top Ten School Findings and School Fine Reports: 
https://studentaid.gov/data-center/school/fines-and-findings.
---------------------------------------------------------------------------

5. Accounting Statement

    As required by OMB Circular A-4, in the following table, the 
Department has prepared an accounting statement showing the 
classification of the expenditures associated with the provisions of 
these final regulations. This table provides the best estimate of the 
changes in annual monetized benefits and costs of these final 
regulations.

            Table 5.1--Accounting Statement Annualized Costs
------------------------------------------------------------------------
                                                       Annualized costs
                                                       2% discount rate
------------------------------------------------------------------------
Reading and Understanding the New Rule..............          $1,120,398
Distance Education--Reporting and disclosure of                1,097,755
 information........................................
R2T4--Student withdrawal............................             826,600
                                                     -------------------
    Total...........................................           3,044,753
------------------------------------------------------------------------

6. Alternatives Considered

    The Department considered the following items in response to public 
comments submitted on the NPRM. Many of these are also discussed in the 
preamble to these final regulations.
6.1 Distance Education
    As already noted above, there were some requests for the Department 
to consider a limitation, such as a percentage of a program's length, 
on the amount of asynchronous coursework that could count toward clock 
hours required in clock-hour programs, but for the reasons we adduced 
above, we decided to not finalize this proposal instead.
6.2 R2T4
    The Department received a significant number of comments expressing 
concern regarding the administrative burden associated with the entire 
proposal on R2T4. The Department considered all comments and decided 
against abandoning the proposal altogether. We did amend this final 
regulation to not finalize the attendance taking requirement for 
distance education programs, to provide more time to evaluate 
technological changes that can better track student engagement. This is 
explained in greater detail in the preamble.
    Several commenters had concerns with the provision under (Sec.  
668.22(l)(9) to consider a module part of the payment period used in 
the denominator of the R2T4 calculation only when a student begins 
attendance in the module. Commentors stated that this change will make 
it easier to obtain and retain large amounts of student loans through 
minimal participation which will result in a gaming of the system. The 
Department considered the comments and ultimately determined that we do 
not believe that the change will result in a gaming of title IV, HEA 
aid. We believe the reduction in administrative burden created by this 
regulatory change will more than outweigh the potential for students to 
receive more federal student aid than they would have under the 
previous requirements. We note that students enrolled in modular 
programs still are required to comply with title IV requirements that 
are not impacted by this regulatory change such as mandatory Pell 
recalculations. Further, institutions may break up title IV 
disbursements into smaller increments (by module for example) to best 
meet the needs of the student, as long as the disbursement practices do 
not violate Sec.  668.16(s).
    During rulemaking the Department originally proposed to exempt 
confined or incarcerated individuals from R2T4 if the withdrawal were 
due to circumstances outside of their control, such as a prison-wide 
lock down. After further internal review, we determined that the 
Department does not have the authority under the HEA to exempt specific 
groups from R2T4. In the NPRM, we amended the proposal under Sec.  
668.22(d)(1)(vii) to provide more flexibility to postsecondary 
institutions in their leave of absence policies for confined or 
incarcerated individuals. Several commenters had concerns with this 
proposal. For example, one commenter stated that incarcerated students 
still may not be able to return within 180 days and would therefore 
need to be withdrawn in any event under the normal requirements for 
approved leaves of absence. Another commenter requested that the 
Department return to its original proposal of exempting confined or 
incarcerated students from R2T4. We again discussed the legality of 
exempting confined or incarcerated students from R2T4 and determined 
that we do not have that authority under the HEA.
6.3 TRIO
    We considered expanding TRIO student eligibility to all five TRIO 
student support programs as requested by many commenters, but 
ultimately decided to not finalize the proposed TRIO provisions to 
reconsider how best to ensure that the TRIO programs are able to reach 
all populations of disadvantaged students.

7. Regulatory Flexibility Act

    This section considers the effects that the final regulations may 
have on small entities in the educational sector as required by the 
Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq. The purpose of 
the RFA is to establish as a principle of regulation that agencies

[[Page 499]]

should tailor regulatory and informational requirements to the size of 
entities, consistent with the objectives of a particular regulation and 
applicable statutes. The RFA generally requires an agency to prepare a 
regulatory flexibility analysis of any rule subject to notice and 
comment rulemaking requirements under the Administrative Procedure Act 
or any other statute unless the agency certifies that the rule will not 
have a ``significant impact on a substantial number of small 
entities.'' As noted in the RIA, the Department does not expect that 
the regulatory action will have a significant budgetary impact, but 
there are some costs to small institutions that are described in this 
Final Regulatory Flexibility Analysis.
Description of the Reasons for Agency Action
    The Secretary is implementing final regulations to ensure students 
are well served by the institutions of higher education they attend and 
ensure that Federal Student Aid programs work in the best interests of 
students. New regulations for distance education will help the 
Department better measure and account for student outcomes, improve 
oversight over distance education, and ensure students are receiving 
effective education by requiring students' distance education 
enrollment status. The R2T4 final regulations will increase the 
accuracy and simplicity of performing R2T4 calculations, add additional 
clarity to institutions on reporting, and codify longstanding policies. 
The Department has also not finalized several proposals that were 
included in the NPRM related to distance education, R2T4, and TRIO. Not 
finalizing these provisions significantly reduces estimated burden on 
small institutions.
Succinct Statement of the Objectives of, and Legal Basis for, the 
Regulations
    Through these final regulations, the Department aims to address 
inadequate protections for students to ensure the Federal Student Aid 
programs work to accomplish postsecondary access and completion. This 
includes ensuring the Department, students, and families have the 
information needed to answer important questions about enrollment in 
and success with distance education.
    The Department's authority to issue these regulations stems 
primarily from multiple statutory enactments: first, 20 U.S.C. 1070-
1099d (sections 400-499 of the HEA), which authorize the Federal 
government's major student financial aid programs; second, 20 U.S.C. 
1070(b) (section 400(b) of the HEA), which outlines the Secretary's 
broad authority to carry out program requirements; third, the sections 
that govern the Department's oversight responsibility under title IV 20 
U.S.C. 1099c, 1099c-1, 1099c-2 (sections 498, 498A, and 498B of the 
HEA); fourth, 20 U.S.C. 1001-1003, which established higher education 
definitions under the HEA; and fifth, 20 U.S.C. 1221e-3 and 1231a, 
which establish the general authority and responsibilities of the 
Secretary of Education.
Description of and, Where Feasible, an Estimate of the Number of Small 
Entities to Which the Regulations Will Apply
    The SBA defines ``small institution'' using data on revenue, market 
dominance, tax filing status, governing body, and population. All 
entities to which the Office of Postsecondary Education's regulations 
apply are postsecondary institutions, however, which do not report such 
data to the Department. As a result, for purposes of these final 
regulations, the Department continues to define ``small entities'' by 
reference to enrollment, as it has done in other rulemakings, to allow 
meaningful comparison of regulatory impact across all types of higher 
education institutions in the for-profit, non-profit, and public 
sectors.\46\ The Department notes that enrollment and revenue are 
correlated for all IHES and that IHEs with higher enrollment tend to 
have the resources and infrastructure in place to more easily comply 
with the Department's regulations in general and these final 
regulations in particular. Since enrollment data are more readily 
available to the Department for all IHEs, the Department has used 
enrollment as the basis to identify small IHEs in prior rulemakings and 
continues to use enrollment to identify small IHEs in these final 
regulations. This approach also allows the Department to use the same 
metric to identify small IHEs across the for-profit, non-profit, and 
public sectors, and it treats public IHEs operated at the behest of 
jurisdictions with a population of more than 50,000 but with low 
enrollment as small, which the SBA's standard would not treat as small. 
Lastly, the North American Industry Classification System (NAICS), 
under which SBA's revenue standards in 13 CFR 121.201 are generally 
established, set different revenue thresholds for IHEs that provide 
different areas of instruction (e.g., cosmetology, computer training, 
and similar programs) and there is no existing data that aligns those 
different revenue standards to the different types of regulated 
institutions. Similarly, where an institution provides instruction in 
several of these areas, it is unclear which revenue threshold to apply 
for purposes of the Department's RFA analysis.
---------------------------------------------------------------------------

    \46\ For additional background on the Department's justification 
for using an enrollment-based size standard, see ``Student 
Assistance General Provisions, Federal Perkins Loan Program, Federal 
Family Education Loan Program, and William D. Ford Federal Direct 
Loan Program'' proposed rule, published in the Federal Register on 
July 31, 2018, 83 FR 37242, and final rule, published in the Federal 
Register on September 23, 2019, 84 FR 49788; and ``Gainful 
Employment'' final rule published in the Federal Register on July 1, 
2019, 84 FR 31392. The Department notes that the alternative size 
standards that are used in these final regulations are identical to 
the alternative size standards used in the GE regulations published 
in the Federal Register on October 10, 2023. See 88 FR 70175.
---------------------------------------------------------------------------

    As explained above, the enrollment-based size standard remains the 
most relevant standard for identifying all IHEs subject to these 
regulations. Therefore, instead of the SBA's revenue-based size 
standard, which applies only to proprietary IHEs, the Department has 
defined ``small IHE'' as (1) a less-than-two-year institution with an 
enrollment of fewer than 750 students, or (2) an at-least two-year but 
less-than-four-year institution, or a four-year institution, with 
enrollment of fewer than 1,000 students.\47\ As a result of discussions 
with the SBA Office of Advocacy, this is an update from the standard 
used in some prior rules, such as the ``Financial Value Transparency 
and Gainful Employment (GE), Financial Responsibility, Administrative 
Capability, Certification Procedures, Ability to Benefit (ATB),'' 
published in the Federal Register on May 19, 2023, 88 FR 32300, 
``Improving Income Driven Repayment for the William D. Ford Federal 
Direct Loan Program and the Federal Family Education Loan (FFEL) 
Program, published in the Federal Register on July 10, 2023, 88 FR 
43820, and the final regulations, ``Pell Grants

[[Page 500]]

for Prison Education Programs; Determining the Amount of Federal 
Education Assistance Funds Received by Institutions of Higher Education 
(90/10); Change in Ownership and Change in Control,'' published in the 
Federal Register on October 28, 2022, 87 FR 65426. Those prior 
regulations applied an enrollment standard for a small two-year 
institution of less than 500 full-time-equivalent (FTE) students and 
for a small 4-year institution, less than 1,000 FTE students.\48\ The 
Department consulted with the SBA Office of Advocacy on the alternative 
standard for this rulemaking. The Department continues to believe this 
approach most accurately reflects a common basis for determining size 
categories that is linked to the provision of educational services and 
that it captures a similar universe of small entities as the SBA's 
revenue standard.
---------------------------------------------------------------------------

    \47\ In regulations prior to 2016, the Department categorized 
small businesses based on tax status. Those regulations defined 
``nonprofit organizations'' as ``small organizations'' if they were 
independently owned and operated and not dominant in their field of 
operation, or as ``small entities'' if they were institutions 
controlled by governmental entities with populations below 50,000. 
Those definitions resulted in the categorization of all private 
nonprofit organizations as small and no public institutions as 
small. Under the previous definition, proprietary institutions were 
considered small if they are independently owned and operated and 
not dominant in their field of operation with total annual revenue 
below $7,000,000. Using FY 2017 IPEDs finance data for proprietary 
institutions, 50 percent of 4-year and 90 percent of 2-year or less 
proprietary institutions would be considered small. By contrast, an 
enrollment-based definition applies the same metric to all types of 
institutions, allowing consistent comparison across all types.
    \48\ In those prior rules, at least two-year but less-than-four-
years institutions were considered in the broader two-year category. 
In this proposed rule, after consulting with the SBA Office of 
Advocacy, we separate this group into its own category. Based on 
this consultation, we have also increased the enrollment threshold 
for less-than-two-year institutions from 500 to 750 in order to 
treat a similar number of institutions as small under the 
alternative enrollment standard as would be captured under a revenue 
standard.
---------------------------------------------------------------------------

    We note that the Department's revised alternative size standard and 
the SBA's revenue standard identify a similar number of total 
proprietary IHEs, with greater than 93 percent agreement between the 
two standards. Using the Department's revised alternative size 
standard, approximately 61 percent of all IHEs would be classified as 
small for these purposes. Based on data from NCES, in 2022, small IHEs 
had an average enrollment of approximately 289 students. In contrast, 
all other IHEs had an average enrollment of approximately 5,509 
students.

                     Table 1--Number of Small Institutions Under Enrollment-Based Definition
----------------------------------------------------------------------------------------------------------------
                                                                       Small           Total          Percent
----------------------------------------------------------------------------------------------------------------
Proprietary.....................................................           2,072           2,285              91
    2-year......................................................           1,835           1,951              94
    4-year......................................................             237             334              71
Private not-for-profit..........................................             990           1,818              54
    2-year......................................................             180             187              96
    4-year......................................................             810           1,631              50
Public..........................................................             535           1,933              28
    2-year......................................................             453           1,128              40
    4-year......................................................              82             805              10
                                                                 -----------------------------------------------
        Total...................................................           3,597           6,036              60
----------------------------------------------------------------------------------------------------------------
Source: 2022 IPEDS data reported to the Department.

    In addition, the following tables show the breakdown of this 93 
percent agreement, using institutional-level data relating to the 2,285 
private for-profit IHEs that were identified using 2022 IPEDS data.\49\ 
The enrollment size standard identifies 2,072 for-profit IHEs as small, 
and the revenue size standard identifies 2,043 for-profit IHEs as 
small, with a core of the same 1,917 for-profit IHEs identified as 
small under both standards. There are 156 IHEs that are only identified 
as small under the enrollment standard and 126 IHEs that are only 
identified as small under the revenue standard. Below are descriptive 
statistics of those for-profit IHEs identified as small by only one of 
the measures.
---------------------------------------------------------------------------

    \49\ 2022 IPEDS downloaded from https://nces.ed.gov/ipeds/datacenter/DataFiles.aspx.
---------------------------------------------------------------------------

    Table 2 shows the distribution of revenues and the average 
enrollments of the 156 for-profit IHEs identified as small under only 
the enrollment size standard. A large majority of these for-profit IHEs 
do not have revenue data available in IPEDS. The average enrollment for 
this group with no revenue data available is 210 students.

         Table 2--Small IHEs Under Enrollment Size Standard Only
------------------------------------------------------------------------
        Revenue category           Number of IHEs    Average enrollment
------------------------------------------------------------------------
No Data........................                149                   210
$35-40 million.................                  4                   580
$41-55 million.................                  2                   696
Above $55 million..............                  1                   320
                                ----------------------------------------
    Total......................                156                   226
------------------------------------------------------------------------

    Table 3 shows the distribution of enrollments and the average 
revenues of the 127 for-profit IHEs identified as small under only the 
revenue size standard. Six of these 127 IHEs do not have enrollment 
data available through IPEDS. There are 57 IHEs in the bin of ``1,000-
1,249 students'', which is closest to the enrollment threshold for for-
profits, and average revenue for these IHEs is $13.3 million. To the 
extent that the final alternative size standard covers for-profit IHEs 
that would not otherwise be covered (and the revenue standard covers 
for-profit IHEs that would not be covered by the enrollment standard), 
the Department treats certain for-profit IHEs as small and others as 
not small because of the reasons for proposing an alternative size 
standard explained in this section above.

[[Page 501]]



          Table 3--Small IHEs Under Revenue Size Standard Only
------------------------------------------------------------------------
      Enrollment category          Number of IHEs      Average revenue
------------------------------------------------------------------------
No Data........................                  6           $ 1,206,508
1,000-1,249 students...........                 57            13,269,753
1,250-1,499 students...........                 23            19,122,831
1,500-1,749 students...........                 13            19,247,730
1,750-1,999 students...........                 14            23,287,464
Above 2,000 students...........                 14            23,527,952
                                ----------------------------------------
    Total......................                127            16,606,901
------------------------------------------------------------------------

    Tables 4 and 5 show the distribution of institution levels for for-
profit IHEs identified as small by the enrollment size standard only 
and by the revenue size standard only, respectively.

     Table 4--Level of For-Profit IHEs Identified as Small Under the
                      Enrollment Size Standard Only
------------------------------------------------------------------------
                        Level                           Number of IHEs
------------------------------------------------------------------------
Less than 2 years (below associate).................                  73
At least 2 but less than 4 years....................                  45
Four or more years..................................                  38
                                                     -------------------
    Total...........................................                 156
------------------------------------------------------------------------


 Table 5--Level of For-Profit IHEs Identified as Small Under the Revenue
                           Size Standard Only
------------------------------------------------------------------------
                        Level                           Number of IHEs
------------------------------------------------------------------------
Less than 2 years (below associate).................                  50
At least 2 but less than 4 years....................                  47
Four or more years..................................                  29
                                                     -------------------
    Total...........................................                 126
------------------------------------------------------------------------

    Notably, the five states with the most IHEs that are identified as 
small under only the enrollment standard are California (34), Texas 
(15), Florida (13), New Jersey (7), and Puerto Rico (7). The five 
states with the most IHEs that are identified as small under only the 
revenue standard are California (28), Florida (18), Texas (11), Arizona 
(8), and Illinois (6).
Description of the Projected Reporting, Recordkeeping, and Other 
Compliance Requirements of the Regulations, Including of the Classes of 
Small Entities That Will Be Subject to the Requirement and the Type of 
Professional Skills Necessary for Preparation of the Report or Record
    Based on the model described in the discussion of RIA, an IHE will 
see a minimum net increase in costs of approximately $4,729 in year 1 
for all IHEs, as explained in more detail in the 4.B. COSTS OF THE 
FINAL REGULATIONS section of this Regulatory Impact Analysis and 
included in the table below. We note that all these amounts are reduced 
from the NPRM due to the decision not to finalize several provisions.

                Table 6--Estimated Net Increase in Costs
------------------------------------------------------------------------
            Category                 Year 1
------------------------------------------------------------------------
Reading and Understanding the            $1,740  Total cost of
 New Rule.                                        $10,265,351 divided by
                                                  the total
                                                  institutions.
Distance Education--Reporting             1,705  Total cost of
 and Disclosure of Information.                   $10,057,889 divided by
                                                  the total
                                                  institutions.
Return of Title IV Funds When a           1,284  Total cost of
 Student Withdraws.                               $7,573,504 divided by
                                                  the total
                                                  institutions.
                                ----------------------------------------
    Total......................           4,729  .......................
------------------------------------------------------------------------

    For purposes of assessing the impacts on small entities, the 
Department defines a ``small IHE'' as a less than two-year IHE with an 
enrollment of less than 750 FTE and two-year or four-year IHEs with an 
enrollment of less than 1,000 FTE, based on official 2022 FTE 
enrollment. According to data from the IPEDS, in FY 2022, small IHEs 
had, on average, total revenues of approximately $8,691,634.\50\ 
Therefore, the Department estimates that the regulations will generate 
a net cost for small IHEs equal to approximately 0.5 percent of annual 
revenue.
---------------------------------------------------------------------------

    \50\ Based on data reported for FY 2022 for ``total revenue and 
other additions'' for public institutions and ``total revenues and 
investment return'' for private not-for-profit and private for-
profit institutions.

[[Page 502]]



                                    Table 7--Estimated Net Increase in Costs
----------------------------------------------------------------------------------------------------------------
                                                                     Number of     Average total     Net cost
                       Entities by sector                          institutions       revenue       percentage
----------------------------------------------------------------------------------------------------------------
Private for-profit, 2-year......................................             473      $4,923,011            0.09
Private for-profit, 4-year or above.............................             237       9,204,127            0.05
Private for-profit, less-than 2-year............................            1362       1,845,117             0.3
Private not-for-profit, 2-year..................................             123       3,810,573             0.1
Private not-for-profit, 4-year or above.........................             810      13,268,232            0.03
Private not-for-profit, less-than 2-year........................              57       2,030,589             0.2
Public, 2-year..................................................             234      14,804,670            0.03
Public, 4-year or above.........................................              82      26,692,438            0.02
Public, less-than 2-year........................................             219       3,477,191             0.1
                                                                 -----------------------------------------------
    Grand Total.................................................           3,597       6,792,743            0.07
----------------------------------------------------------------------------------------------------------------

    According to data from IPEDS, approximately 371 small IHEs had 
total reported annual revenues of less than $472,900 for which the 
costs estimated above will potentially exceed 1 percent of total 
revenues. The average enrollment across these 371 small IHEs was 46 
students.
Identification, to the Extent Practicable, of All Relevant Federal 
Regulations That May Duplicate, Overlap, or Conflict With the 
Regulations
    The regulations will not conflict with or duplicate existing 
Federal regulations.
Alternatives Considered
    As described in section 5 of the RIA above, in ``Alternatives 
Considered'', the Department considered several alternative provisions 
and approaches but rejected those alternatives for the reasons 
considered above. Most relevant to small entities were the alternatives 
to limit regulatory changes. For example, under R2T4, the Department 
proposed removing the 49 percent withdrawal exemption, which would in 
part eliminate observed confusion between this figure and the 60 
percent completion requirement under the R2T4 calculation and eliminate 
the continued need for significant guidance and training on how to 
determine whether a student qualifies for the exemption, thereby 
reducing institutional burden. Negotiators disagreed, however, stating 
that institutions had already updated systems and policies to account 
for the exemption and that it was serving students well. As a result, 
the Department eliminated the proposal.

IX. Paperwork Reduction Act of 1995

    As part of its continuing effort to reduce paperwork and respondent 
burden, the Department provides the general public and Federal agencies 
with an opportunity to comment on proposed and continuing collections 
of information in accordance with the Paperwork Reduction Act of 1995 
(PRA) (44 U.S.C. 3506(c)(2)(A)). This helps ensure that the public 
understands the Department's collection instructions, respondents can 
provide the requested data in the desired format, reporting burden 
(time and financial resources) is minimized, collection instruments are 
clearly understood, and the Department can properly assess the impact 
of collection requirements on respondents.
    With the decision to not finalize the proposed amendments to the 
Federal TRIO programs and the proposal for institutions to take 
attendance in their distance education courses from these final 
regulations, we have determined that there are no new PRA implications 
for those provisions.
    Section 668.41 contains information collection requirements. Under 
the PRA, the Department has or will at the required time submit a copy 
of this section and Information Collection request to OMB for its 
review. A Federal agency may not conduct or sponsor a collection of 
information unless OMB approves the collection under the PRA and the 
corresponding information collection instrument displays a currently 
valid OMB control number. Notwithstanding any other provision of law, 
no person is required to comply with, or is subject to penalty for 
failure to comply with, a collection of information if the collection 
instrument does not display a currently valid OMB control number. In 
these final regulations, we display the control numbers assigned by OMB 
to any information collection requirements proposed in the NPRM and 
adopted in these final regulations.

Section 668.22 Treatment of Title IV Funds When a Student Withdraws

    As described in the preamble, Sec.  668.22(b)(3)(ii) is not being 
finalized. There is no longer any burden associated with this 
regulation. The burden for the information collection 1845-0022 will 
not be changed based on these final regulations.

Section 668.41 Reporting and Disclosure of Information

    Requirements: The Department added a new paragraph Sec.  668.41(h) 
that requires institutions to report their enrollment in distance 
education or correspondence courses. The Department expects that this 
provision will be implemented July 1, 2027. This change will provide 
the Department with expanded information to better answer questions 
about college access, persistence, and success, and to better inform 
student-centered policies. This reporting requirement also improves the 
Department's ability to determine whether institutions have reached the 
50 percent threshold for distance education enrollment. When 
institutions enroll at least 50 percent of their students in distance 
education, offer at least 50 percent of their courses, or 50 percent of 
a program via distance education, they must obtain further accreditor 
approval beyond the initial approval to deliver distance education 
programs.
    Burden Hours: The final regulatory change adds burden for 
institutions. Because we expect to delay implementation of this new 
requirement until July 1, 2027, we are not estimating the burden for 
implementation of these regulations at this time. As development of the 
reporting mechanism progresses, a separate information collection will 
be submitted for full public comment closer to implementation of the 
data collection, incorporating more useful and specific information.
    Consistent with the discussions above, the following chart 
describes the sections of the final regulations involving information 
collections, the information being collected and the collections that 
the Department will submit to OMB for approval and public comment under 
the PRA, and the estimated costs associated with the

[[Page 503]]

information collections. The monetized net cost of the increased burden 
for institutions, lenders, guaranty agencies and students, using wage 
data developed using Bureau of Labor Statistics (BLS) data. For 
institutions the Department is using the median hourly wage for 
Education Administrators, Postsecondary, $49.33 per hour according to 
BLS. https://www.bls.gov/oes/current/oes119033.htm.

                                            Collection of Information
----------------------------------------------------------------------------------------------------------------
                                                              OMB control No. and     Estimated cost $49.33 per
       Regulatory section          Information collection       estimated burden                entity
----------------------------------------------------------------------------------------------------------------
Sec.   668.41...................  The Department adds a     None--will develop
                                   new paragraph (h) that    closer to
                                   requires institutions     implementation.
                                   to report their
                                   enrollment in distance
                                   education or
                                   correspondence courses.
                                   The Department plans to
                                   implement this
                                   provision July 1, 2027.
----------------------------------------------------------------------------------------------------------------

Intergovernmental Review

    This program is subject to Executive Order 12372 and the 
regulations in 34 CFR part 79. One of the objectives of the Executive 
Order is to foster an intergovernmental partnership and a strengthened 
Federalism. The Executive order relies on processes developed by State 
and local governments for coordination and review of final Federal 
financial assistance.
    This document provides early notification of our specific plans and 
actions for this program.

Assessment of Education Impact

    In the NPRM we requested comments on whether the proposed 
regulations would require transmission of information that any other 
agency or authority of the United States gathers or makes available. 
Based on the response to the NPRM and on our review, we have determined 
that these final regulations do not require transmission of information 
that any other agency or authority of the United States gathers or 
makes available.

Federalism

    Executive Order 13132 requires us to provide meaningful and timely 
input by State and local elected officials in the development of 
regulatory policies that have Federalism implications. ``Federalism 
implications'' means substantial direct effects on the States, on the 
relationship between the National Government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government. These final regulations do not have Federalism 
implications.
    Accessible Format: On request to one of the program contact persons 
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 in Portable Document Format (PDF). To use 
PDF you must have Adobe Acrobat Reader, which is available at no cost 
to the user 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.

List of Subjects

34 CFR Part 600

    Colleges and universities, Foreign relations, Grant programs--
education, Loan programs--education, Reporting and recordkeeping 
requirements, Selective Service System, Student aid, Vocational 
education.

34 CFR Parts 643 and 644

    Colleges and universities, Education of disadvantaged, Elementary 
and secondary education, Grant programs--education, Reporting and 
recordkeeping requirements, Student aid.

34 CFR Part 645

    Colleges and universities, Education of disadvantaged, Elementary 
and secondary education, Grant programs--education, Reporting and 
recordkeeping requirements, Veterans.

34 CFR Parts 647

    Colleges and universities, Education of disadvantaged, Grant 
programs--education, Reporting and recordkeeping requirements.

34 CFR Part 668

    Administrative practice and procedure, Aliens, Colleges and 
universities, Consumer protection, Grant programs--education, Loan 
programs--education, Reporting and recordkeeping requirements, 
Selective Service System, Student aid, Vocational education.

Miguel Cardona,
Secretary of Education.

    For the reasons discussed in the preamble, the Secretary of 
Education amends parts 600, 643, 644, 645, 647, and 668 of title 34 of 
the Code of Federal Regulations as follows:

PART 600--INSTITUTIONAL ELIGIBILITY UNDER THE HIGHER EDUCATION ACT 
OF 1965, AS AMENDED

0
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.


0
2. Amend Sec.  600.2 by adding, in alphabetical order, a definition of 
``Distance education course'' to read as follows:


Sec.  600.2  Definitions.

* * * * *
    Distance education course: A course in which instruction takes 
place exclusively as described in the definition of distance education 
in this section notwithstanding in-person non-instructional 
requirements, including orientation, testing, and academic support 
services.
* * * * *

[[Page 504]]

PART 643--TALENT SEARCH

0
3. The authority citation for part 643 continues to read as follows:

    Authority:  20 U.S.C. 1070a-11 and 1070a-12, unless otherwise 
noted.


0
4. Amend Sec.  643.3 by revising paragraphs (a)(1)(iv) and (v) to read 
as follows:


Sec.  643.3  Who is eligible to participate in a project?

    (a) * * *
    (1) * * *
    (iv) Is a permanent resident of Guam, or the Northern Mariana 
Islands; or
    (v) Is a resident of the Freely Associated States--the Federated 
States of Micronesia, the Republic of the Marshall Islands, or the 
Republic of Palau.
* * * * *

PART 644--EDUCATIONAL OPPORTUNITY CENTERS

0
5. The authority citation for part 644 continues to read as follows:

    Authority:  20 U.S.C. 1070a-11 and 1070a-16, unless otherwise 
noted.


0
6. Amend Sec.  644.3 by revising paragraphs (a)(1)(iv) and (v) to read 
as follows:


Sec.  644.3  Who is eligible to participate in a project?

    (a) * * *
    (1) * * *
    (iv) Is a permanent resident of Guam, or the Northern Mariana 
Islands; or
    (v) Is a resident of the Freely Associated States--the Federated 
States of Micronesia, the Republic of the Marshall Islands, or the 
Republic of Palau.
* * * * *

PART 645--UPWARD BOUND PROGRAM

0
7. The authority citation for part 645 continues to read as follows:

    Authority:  20 U.S.C. 1070a-11 and 1070a-13, unless otherwise 
noted.


0
8. Amend Sec.  645.3 by:
0
a. Removing the periods at the end of paragraphs (a)(1) through (3) and 
adding, in each place, ``; or''.
0
b. Revising paragraph (a)(4).
    The revision reads as follows:


Sec.  645.3  Who is eligible to participate in an Upward Bound project?

* * * * *
    (a) * * *
    (4) Is a permanent resident of Guam, or the Northern Mariana 
Islands; or
* * * * *

PART 647--RONALD E. MCNAIR POSTBACCALAUREATE ACHIEVEMENT PROGRAM

0
9. The authority citation for part 647 continues to read as follows:

    Authority:  20 U.S.C. 1070a-11 and 1070a-15, unless otherwise 
noted.


0
10. Amend Sec.  647.3 by revising paragraph (a)(4) to read as follows:


Sec.  647.3  Who is eligible to participate in a McNair project?

* * * * *
    (a) * * *
    (4) Is a permanent resident of Guam, or the Northern Mariana 
Islands; or
* * * * *

PART 668--STUDENT ASSISTANCE GENERAL PROVISIONS

0
11. The authority citation for part 668 continues to read as follows:

    Authority:  20 U.S.C. 1001-1003, 1070g, 1085, 1088, 1091, 1092, 
1094, 1099c, 1099c-1, 1221e-3, and 1231a, unless otherwise noted.


0
12. Amend Sec.  668.22 by:
0
a. Removing ``and'' at the end of paragraph (a)(2)(ii)(A)(4).
0
b. Removing the period at the end of paragraph (a)(2)(ii)(A)(5) and 
adding, in its place, ``; and''.
0
c. Adding new paragraph (a)(2)(ii)(A)(6).
0
d. Revising paragraph (b)(2).
0
e. Revising paragraphs (d)(1)(vii) and (f)(1)(ii)(A).
0
f. Revising paragraph (l)(9).
    The revisions and addition read as follows:


Sec.  668.22  Treatment of title IV funds when a student withdraws.

    (a) * * *
    (2) * * *
    (ii) * * *
    (A) * * *
    (6) A student is not considered to have withdrawn if--
    (i) The institution's records treat a student as having never 
attended courses for that payment period or period of enrollment;
    (ii) The institution returns all the title IV grant or loan 
assistance, including all title IV credit balances provided to the 
student or parent, that were disbursed for that payment period or 
period of enrollment;
    (iii) The institution refunds all institutional charges to the 
student for the payment period or period of enrollment; and
    (iv) The institution writes off or cancels any payment period or 
period of enrollment balance owed by the student to the institution due 
to the institution's returning of title IV funds to the Department.
* * * * *
    (b) * * *
    (2) An institution must, within 14 days of a student's last date of 
attendance, document a student's withdrawal date determined in 
accordance with paragraph (b)(1) of this section and maintain the 
documentation as of the date of the institution's determination that 
the student withdrew.
* * * * *
    (d) * * *
    (1) * * *
    (vii) Except for a clock-hour or non-term credit hour program, a 
subscription-based program, or an eligible prison education program, 
upon the student's return from the leave of absence, the student is 
permitted to complete the coursework he or she began prior to the leave 
of absence; and
* * * * *
    (f) * * *
    (1) * * *
    (ii) * * *
    (A) In the case of a program that is measured in clock hours, by 
dividing the total number of clock hours in the payment period or 
period of enrollment into the number of clock hours scheduled to be 
completed since the student began attendance in the payment period or 
period of enrollment as of the student's withdrawal date.
* * * * *
    (l) * * *
    (9) A student in a program offered in modules is scheduled to 
complete the days in a module only when a student begins attendance in 
the module.
* * * * *

0
13. Amend Sec.  668.41 by adding paragraph (h) to read as follows:


Sec.  668.41  Reporting and disclosure of information.

* * * * *
    (h) Reporting of student enrollment in distance education or 
correspondence courses. For each recipient of title IV, HEA assistance 
at the institution, the institution must report to the Secretary, in 
accordance with procedures established by the Secretary, the 
recipient's enrollment in distance education or correspondence courses.

[FR Doc. 2024-31031 Filed 12-30-24; 8:45 am]
BILLING CODE 4000-01-P`