66832 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations 

DEPARTMENT OF EDUCATION 

34 CFR Parts 600, 602, 603, 668, 682, 

685, 686, 690, and 691 

[Docket ID ED–2010–OPE–0004] 

RIN 1840–AD02 

Program Integrity Issues 

AGENCY: Office of Postsecondary 

Education, Department of Education. 

ACTION: Final regulations. 

SUMMARY: The Secretary is improving 

integrity in the programs authorized 

under title IV of the Higher Education 

Act of 1965, as amended (HEA), by 

amending the regulations for 

Institutional Eligibility Under the HEA, 

the Secretary’s Recognition of 

Accrediting Agencies, the Secretary’s 

Recognition Procedures for State 

Agencies, the Student Assistance 

General Provisions, the Federal Family 

Education Loan (FFEL) Program, the 

William D. Ford Federal Direct Loan 

Program, the Teacher Education 

Assistance for College and Higher 

Education (TEACH) Grant Program in 

part 686, the Federal Pell Grant 

Program, and the Academic 

Competitiveness Grant (AGC) and 

National Science and Mathematics 

Access to Retain Talent Grant (National 

Smart Grant) Programs. 

DATES: These regulations are effective 

July 1, 2011 with the exception of the 

revision of subpart E of part 668, 

Verification and Updating of Student 

Aid Application Information. Revised 

subpart E of part 668 is effective July 1, 

2012. The incorporation by reference of 

certain publications listed in the rule is 

approved by the Director of the Federal 

Register as of July 1, 2011. 

FOR FURTHER INFORMATION CONTACT: For 

information related to the provisions on 

high school diplomas and verification of 

information on the Free Application for 

Federal Student Aid (FAFSA), 

Jacquelyn Butler. Telephone: (202) 502– 

7890 or via the Internet at: 

Jacquelyn.Butler@ed.gov. 

For information related to the return 

of title IV, HEA funds calculation 

provisions for term-based modules or 

taking attendance, Jessica Finkel or 

Wendy Macias. Telephone: (202) 502– 

7647 or via the Internet at: 

Jessica.Finkel@ed.gov. Telephone: (202) 

502–7526 or via the Internet at: 

Wendy.Macias@ed.gov. 

For information related to the 

provisions on retaking coursework, 

Vanessa Freeman. Telephone: (202) 

502–7523 or via the Internet at: 

Vanessa.Freeman@ed.gov. 

For information on the provisions 

related to incentive compensation, 

Marty Guthrie. Telephone: (202) 219– 

7031 or via the Internet at: 

Marty.Guthrie@ed.gov. 

For information related to the 

provisions on satisfactory academic 

progress, Marty Guthrie or Marianna 

Deeken. Telephone: (202) 219–7031 or 

via the Internet at: 

Marty.Guthrie@ed.gov. Telephone: (206) 

615–2583 or via the Internet at: 

Marianna.Deeken@ed.gov. 

For information related to the 

provisions on ability to benefit, Dan 

Klock. Telephone: (202) 377–4026 or via 

the Internet at Dan.Klock@ed.gov. 

For information related to gainful 

employment in a recognized 

occupation, John Kolotos. Telephone: 

(202) 502–7762 or via the Internet at: 

John.Kolotos@ed.gov. 

For information related to the 

provisions for written agreements 

between institutions, Carney 

McCullough. Telephone: (202) 502– 

7639 or via the Internet at: 

Carney.McCullough@ed.gov. 

For information related to the 

provisions on misrepresentation, Carney 

McCullough or Vanessa Freeman. 

Telephone: (202) 502–7639 or via the 

Internet at: Carney.McCullough@ed.gov. 

Telephone: (202) 502–7523 or via the 

Internet at: Vanessa.Freeman@ed.gov. 

For information related to the 

provisions on timeliness and method of 

disbursement, Harold McCullough. 

Telephone: (202) 377–4030 or via the 

Internet at: Harold.McCullough@ed.gov. 

For information related to the 

provisions related to the definition of 

credit hour, Fred Sellers. Telephone: 

(202) 502–7502 or via the Internet at: 

Fred.Sellers@ed.gov. 

For information related to provisions 

on State authorization, Fred Sellers. 

Telephone: (202) 502–7502 or via the 

Internet at: Fred.Sellers@ed.gov. 

If you use a telecommunications 

device for the deaf (TDD), call the 

Federal Relay Service (FRS), toll free, at 

1–800–877–8339. 

Individuals with disabilities can 

obtain this document in an accessible 

format (e.g., braille, large print, 

audiotape, or computer diskette) on 

request to one of the contact persons 

listed under FOR FURTHER INFORMATION

CONTACT. 

SUPPLEMENTARY INFORMATION: On June 

18, 2010, the Secretary published a 

notice of proposed rulemaking (NPRM) 

for program integrity issues in the 

Federal Register (75 FR 34806). 

In the preamble to the NPRM, the 

Secretary discussed on pages 34808 

through 34848 the major regulations 

proposed in that document to 

strengthen and improve the 

administration of programs authorized 

under the HEA. These proposed 

regulations included the following: 

• Requiring institutions to develop 

and follow procedures to evaluate the 

validity of a student’s high school 

diploma if the institution or the 

Secretary has reason to believe that the 

diploma is not valid or was not obtained 

from an entity that provides secondary 

school education; 

• Expanding eligibility for title IV, 

HEA program assistance to students 

who demonstrate they have the ability 

to benefit by satisfactorily completing 

six credits of college work, or the 

equivalent amounts of coursework, that 

are applicable toward a degree or 

certificate offered by an institution; 

• Amending and adding definitions 

of terms related to ability to benefit 

testing, including ‘‘assessment center,’’ 

‘‘independent test administrator,’’ 

‘‘individual with a disability,’’ ‘‘test,’’ 

‘‘test administrator,’’ and ‘‘test 

publisher’’; 

• Consolidating into a single 

regulatory provision the approval 

processes for ability to benefit tests 

developed by test publishers and States; 

• Establishing requirements under 

which test publishers and States must 

provide descriptions of processes for 

identifying and handling test score 

abnormalities, ensuring the integrity of 

the testing environment, and certifying 

and decertifying test administrators; 

• Requiring test publishers and States 

to describe any accommodations 

available for individuals with 

disabilities, as well as the process a test 

administrator would use to identify and 

report to the test publisher instances in 

which these accommodations were 

used; 

• Revising the test approval 

procedures and criteria for ability to 

benefit tests, including procedures 

related to the approval of tests for 

speakers of foreign languages and 

individuals with disabilities; 

• Revising the definitions and 

provisions that describe the activities 

that constitute substantial 

misrepresentation by an institution of 

the nature of its educational program, its 

financial charges, or the employability 

of its graduates; 

• Removing the ‘‘safe harbor’’ 

provisions related to incentive 

compensation for any person or entity 

engaged in any student recruitment or 

admission activity, including making 

decisions regarding the award of title IV, 

HEA program assistance; 

• Clarifying what is required for an 

institution of higher education, a 

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proprietary institution of higher 

education, and a postsecondary 

vocational institution to be considered 

legally authorized by the State; 

• Defining a credit hour and 

establishing procedures that certain 

institutional accrediting agencies must 

have in place to determine whether an 

institution’s assignment of a credit hour 

is acceptable; 

• Modifying provisions to clarify 

whether and when an institution must 

award student financial assistance based 

on clock or credit hours and the 

standards for credit-to-clock-hour 

conversions; 

• Modifying the provisions related to 

written arrangements between two or 

more eligible institutions that are owned 

or controlled by the same person or 

entity so that the percentage of the 

educational program that may be 

provided by the institution that does not 

grant the degree or certificate under the 

arrangement may not exceed 50 percent; 

• Prohibiting written arrangements 

between an eligible institution and an 

ineligible institution that has had its 

certification to participate in title IV, 

HEA programs revoked or its 

application for recertification denied; 

• Expanding provisions related to the 

information that an institution with a 

written arrangement must disclose to a 

student enrolled in a program affected 

by the arrangement, including, for 

example, the portion of the educational 

program that the institution that grants 

the degree or certificate is not providing; 

• Revising the definition of 

unsubsidized student financial aid 

programs to include TEACH Grants, 

Federal PLUS Loans, and Direct PLUS 

Loans; 

• Codifying current policy that an 

institution must complete verification 

before the institution may exercise its 

professional judgment authority; 

• Eliminating the 30 percent 

verification cap; 

• Retaining the ability of institutions 

to select additional applicants for 

verification; 

• Replacing the five verification items 

for all selected applicants with a 

targeted selection from items included 

in an annual Federal Register notice 

published by the Secretary; 

• Allowing interim disbursements 

when changes to an applicant’s FAFSA 

information would not change the 

amount that the student would receive 

under a title IV, HEA program; 

• Codifying the Department’s IRS 

Data Retrieval System Process, which 

allows an applicant to import income 

and other data from the IRS into an 

online FAFSA; 

• Requiring the processing of changes 

and corrections to an applicant’s FAFSA 

information; 

• Modifying the provisions related to 

institutional satisfactory academic 

progress policies and the impact these 

policies have on a student’s eligibility 

for title IV, HEA program assistance; 

• Expanding the definition of fulltime student to allow, for a term-based 

program, repeated coursework taken in 

the program to count towards a full-time 

workload; 

• Clarifying when a student is 

considered to have withdrawn from a 

payment period or period of enrollment 

for the purpose of calculating a return 

of title IV, HEA program funds; 

• Clarifying the circumstances under 

which an institution is required to take 

attendance for the purpose of 

calculating a return of title IV, HEA 

program funds; 

• Modifying the provisions for 

disbursing title IV, HEA program funds 

to ensure that certain students can 

obtain or purchase books and supplies 

by the seventh day of a payment period; 

• Updating the definition of the term 

recognized occupation to reflect current 

usage; 

• Establishing requirements for 

institutions to submit information on 

students who attend or complete 

programs that prepare students for 

gainful employment in recognized 

occupations; and 

• Establishing requirements for 

institutions to disclose on their Web site 

and in promotional materials to 

prospective students, the on-time 

completion rate, placement rate, median 

loan debt, program cost, and other 

information for programs that prepare 

students for gainful employment in 

recognized occupations. 

Implementation Date of These 

Regulations 

Section 482(c) 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. However, that section also 

permits the Secretary to designate any 

regulation as one that an entity subject 

to the regulation may choose to 

implement earlier and to specify the 

conditions under which the entity may 

implement the provisions early. 

The Secretary has not designated any 

of the provisions in these final 

regulations for early implementation. As 

indicated in the DATES section, the 

regulations contained in subpart E of 

part 668, Verification and Updating of 

Student Aid Application Information 

are effective July 1, 2012. 

While the Secretary has designated 

amended § 600.9(a) and (b) as being 

effective July 1, 2011, we recognize that 

a State may be unable to provide 

appropriate State authorizations to its 

institutions by that date. We are 

providing that the institutions unable to 

obtain State authorization in that State 

may request a one-year extension of the 

effective date of these final regulations 

to July 1, 2012, and if necessary, an 

additional one-year extension of the 

effective date to July 1, 2013. To receive 

an extension of the effective date of 

amended § 600.9(a) and (b) for 

institutions in a State, an institution 

must obtain from the State an 

explanation of how a one-year extension 

will permit the State to modify its 

procedures to comply with amended 

§ 600.9. 

Analysis of Comments and Changes 

The regulations in this document 

were developed through the use of 

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 negotiated 

rulemaking committee did not reach 

consensus on the proposed regulations 

that were published on June 18, 2010. 

The Secretary invited comments on the 

proposed regulations by August 2, 2010. 

Approximately 1,180 parties submitted 

comments, a number of which were 

substantially similar. An analysis of the 

comments and of the changes in the 

regulations since publication of the 

NPRM follows. 

We group major issues according to 

subject, with appropriate sections of the 

regulations referenced in parentheses. 

We discuss other substantive issues 

under the sections of the regulations to 

which they pertain. Generally, we do 

not address minor, nonsubstantive 

changes, recommended changes that the 

law does not authorize the Secretary to 

make, or comments pertaining to 

operational processes. We also do not 

address comments pertaining to issues 

that were not within the scope of the 

NPRM. 

General Comments 

Comment: We received a significant 

number of comments that expressed 

support for the Secretary’s proposed 

regulations. Many of the commenters 

noted that the proposed regulations 

would protect taxpayer investments in 

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higher education by helping to curtail 

fraud and abuse and would protect the 

interests of a diverse population of 

students who are seeking higher 

education for personal and professional 

growth. Some of the commenters also 

stated that the Secretary’s proposed 

regulations would provide a level 

playing field that benefits the majority 

of institutions of higher education that 

are committed to sound academic and 

administrative practices. 

Discussion: The Department 

appreciates the numerous comments we 

received in support of the proposed 

regulations. 

Changes: None. 

Comment: Several commenters 

disagreed with the process by which the 

Department developed the proposed 

regulations. The commenters believe 

that the Department did not negotiate in 

good faith and did not follow faithfully 

the Federal negotiated rulemaking 

process. These commenters believed 

that the Department excluded important 

members of the proprietary school 

sector from the process and failed to 

provide adequate time for review of and 

comment on the proposed regulations. 

Because of the complexity of the 

proposed regulations, these same 

commenters also requested that the 

Department delay the effective date for 

implementation of the final regulations. 

Several other commenters believed that 

before negotiating proposed regulations 

with such a broad scope, the 

Department should have conducted 

studies to assess the impact the 

proposed regulations would have on 

affected institutions. Lastly, one 

commenter expressed the view that the 

Department began negotiations without 

presenting examples of abuse or data 

that supported additional regulation and 

that many of the Department’s concerns 

about program integrity could have been 

better addressed by enforcing current 

regulations. 

Discussion: We disagree with the 

commenters who said that the 

Department did not act in good faith in 

negotiating the proposed regulations or 

that we did not follow the negotiated 

rulemaking process. In conducting the 

negotiated rulemaking for these 

proposed regulations, the Department 

followed the requirements in section 

492 of the HEA, which govern the 

negotiated rulemaking process and 

require the Department to choose nonFederal negotiators from the groups 

involved in the student financial 

assistance programs authorized by title 

IV of the HEA. As addressed earlier in 

this preamble, all of these groups were 

represented during the negotiations. 

We believe that the 45-day public 

comment period was an adequate period 

of time for interested parties to submit 

comments, especially in light of the fact 

that prior to issuing the proposed 

regulations, the Department conducted 

public hearings and three negotiated 

rulemaking sessions, where 

stakeholders and members of the public 

had an opportunity to weigh in on the 

development of much of the language 

reflected in the proposed regulations. In 

addition, we believe that the 45-day 

public comment period is necessary in 

light of the HEA’s master calendar 

requirements. Under those 

requirements, the Department must 

publish final regulations by November 

1, 2010, in order for them to be effective 

on July 1, 2011. The Department must 

adhere to the master calendar set forth 

by Congress and does not have the 

statutory authority to amend it. 

We also do not agree that, except for 

certain provisions of the regulations 

such as those that may involve systems 

changes that require adequate lead time 

to make, implementation of the final 

regulations should be delayed. For 

example, the proposed regulations on 

FAFSA verification cannot be 

implemented by the July 1, 2011 

effective date because the changes 

would require system updates that will 

not be in place by that date. We discuss 

the implementation delay of regulations 

that involve these system changes 

elsewhere in this preamble. Absent 

these system-related or similar issues, 

however, we believe a delay in 

implementing the final regulations will 

undermine the Department’s goal of 

protecting taxpayers and students by 

ensuring the integrity of the title IV, 

HEA programs. 

Lastly, we disagree with the 

commenters who stated that the 

Department should have conducted a 

study to assess the impact of the 

proposed regulations on institutions of 

higher education before negotiating the 

proposed changes and those 

commenters who stated that the 

Department did not present examples of 

abuse or data to support the proposed 

regulations. The Department’s decision 

to improve program integrity by 

strengthening the regulations was based 

on many factors, including feedback we 

received from the public. Specifically, 

the Department developed a list of 

proposed regulatory provisions based on 

advice and recommendations submitted 

by individuals and organizations as 

testimony in a series of three public 

hearings in June of 2009, as well as 

written comments submitted directly to 

the Department. Department staff also 

identified issues for discussion and 

negotiation. The proposed regulations 

that were negotiated during negotiated 

rulemaking and included in the 

proposed regulations were developed 

for one or more of the following reasons: 

• To implement provisions of the 

HEA, as amended by the Higher 

Education Opportunity Act of 2008 

(HEOA). 

• To update current regulations that 

had not been updated in some time so 

that they more accurately reflect the 

state of the law as well as the 

Department’s current practices and 

policies (e.g., aligning the regulations 

with the Department’s FAFSA 

simplification initiative). 

• To respond to problems identified 

by students and financial aid advisors 

about the aggressive sales tactics used 

by some institutions. 

• To respond to a report from the 

United States Government 

Accountability Office published in 

August of 2009 that raised concerns 

about proprietary institutions and 

recommended stronger Department 

oversight to ensure that only eligible 

students receive Federal student aid. 

We believe that all of these factors 

provided ample support for the 

Department to immediately propose 

stronger regulations to protect students 

and prevent fraud and abuse in the title 

IV, HEA programs. 

Changes: None. 

Comment: Many commenters 

expressed concern about what they 

argued would be a negative impact of 

the proposed regulations on institutions 

of higher education, particularly 

proprietary institutions. These 

commenters stated that the proposed 

regulations are too complex and too 

broad in scope and that, as a result, they 

would disproportionately impose 

burdens on the institutions that serve 

many of the students who need the most 

financial assistance. Other commenters 

stated that, in these trying economic 

times, institutions simply do not have 

the resources to administer the 

disclosure, reporting, and 

implementation requirements included 

in the proposed regulations. Some of 

these commenters stated that they 

feared that the cost of compliance with 

these regulations, which many argued 

were ambiguous or inconsistent, would 

drive their small proprietary institutions 

out of business. 

Several commenters stated that the 

proposed regulations target the entire 

proprietary school sector of higher 

education, while the actions of only a 

few proprietary institutions are cause 

for concern. These commenters decried 

the Department’s ‘‘one-size-fits-all’’ 

approach to ensuring program integrity. 

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Lastly, one commenter requested that 

the Department indicate in each section 

of the final regulations the types of 

institutions to which that specific 

section applies. 

Discussion: The Department is aware 

that some institutions may have limited 

resources to implement some provisions 

of the final regulations and is committed 

to assisting these institutions in every 

way possible to ensure that all 

institutions can comply with program 

requirements. Several of the changes are 

to discrete areas of existing regulations 

rather than wholly new requirements. 

As such, institutions wishing to 

continue to participate in the title IV, 

HEA programs have already absorbed 

many of the administrative costs related 

to implementing these final regulations. 

Any additional costs are primarily due 

to new procedures that, while possibly 

significant in some cases, are a cost of 

continued program participation. 

The Department believes that the 

benefits of these regulations for 

students, consumers, and taxpayers 

justify the burdens of institutional 

compliance, as discussed, in the 

Regulatory Impact Analysis in 

Appendix A. These regulations 

strengthen the Federal student aid 

programs by protecting students from 

aggressive or misleading recruiting 

practices and clarifying State oversight 

responsibilities, providing consumers 

with better information about the 

effectiveness of career colleges and 

training programs, and ensuring that 

only eligible students or programs 

receive aid. 

We do not believe it is necessary to 

specifically indicate in each section 

which institutions are covered by a 

particular regulation because all 

provisions of these regulations apply to 

all postsecondary institutions, unless 

otherwise specified. 

Changes: None. 

Comment: A number of commenters 

stated that the proposed regulations 

would harm students who are already 

disadvantaged, underserved, and not 

adequately represented in 

postsecondary institutions because they 

would limit their choice of educational 

programs and their chances of getting a 

quality education. Other commenters 

noted that the proposed regulations 

could become a barrier to access for 

needy students, as well as adult 

students who work full-time, because 

aid may be discontinued for programs 

that do not meet new regulatory 

requirements. Finally, one commenter 

urged the Department to ensure that the 

final regulations further the objectives of 

student access and success, and 

promote quality educational programs. 

Discussion: We are confident that the 

regulations strengthening program 

integrity are in the best interest of 

students, consumers, and taxpayers, and 

will improve the quality of the programs 

offered at institutions by ensuring that 

all programs meet a threshold of quality. 

We believe that students, particularly 

disadvantaged, high-need students who 

are the most vulnerable, are not well 

served by enrollment in programs that 

leave them with limited or low-paying 

job prospects and with crushing debt 

that they are unable to repay. Students 

who complete their educational 

programs should not expect results that 

leave them in a worse situation than 

when they began their educational 

programs. We believe the regulations 

will hold institutions accountable and 

ensure that students can have 

confidence in the quality of the 

educational programs in which they 

invest their time, energy, and money. 

The Department has a fiscal 

responsibility to American taxpayers to 

ensure the value of education provided 

by all institutions and programs that are 

eligible for Federal student aid, 

regardless of whether they are public, 

private nonprofit, or proprietary 

institutions, and these regulations will 

aid the Department in achieving the best 

possible return on taxpayers’ 

investment. 

Changes: None. 

Gainful Employment in a Recognized 

Occupation (§§ 600.2, 600.4, 600.5, 

600.0, 668.6, and 668.8) Gainful 

Employment Reporting and Disclosure 

Requirements (§ 668.6) 

General 

Comment: Many commenters believed 

that the proposed reporting and 

disclosure requirements should apply to 

all programs, regardless of the type of 

institution or credential awarded, or 

whether the programs are otherwise 

subject to the gainful employment 

provisions. Alternatively, other 

commenters maintained that since these 

requirements were targeted to prevent 

known abuses in the for-profit sector, 

they should apply only to those 

institutions. 

A number of commenters supported 

the proposed requirements and Webbased disclosure approach. Some of the 

commenters urged the Department to 

require institutions to provide the 

information under § 668.6(b) in a clear, 

prominent, user-friendly, and easily 

understood manner. The commenters 

also recommended that this information 

be given directly to prospective students 

prior to enrolling or making a verbal or 

written commitment to enroll. Other 

commenters made similar suggestions 

including making the information 

available in a prominent, clear, and 

conspicuous location in the first 

promotional materials conveyed to 

prospective students. Another 

commenter believed that disclosures 

could be helpful if they are offered early 

in the process and are clear and 

conspicuous. However, the commenter 

opined that there is virtually no 

evidence that disclosures impact 

consumer decision making in a 

meaningful way. The commenter further 

stated that the fiction that disclosures 

are sufficient to regulate markets is 

especially apparent for low-literate 

consumers, citing an example where a 

client was pressured to enroll in a 

medical assisting program at a for-profit 

institution even though she dropped out 

of school in the 9th grade and had a 6th 

grade reading level. The student did not 

complete the program, never found 

work, and defaulted on her loans. The 

commenter concluded that disclosures 

are not an adequate counterweight to 

school overreaching and are useful only 

in conjunction with substantive 

standards. 

Discussion: As we noted in the NPRM 

for these regulations (75 FR 34808– 

34809), the reporting and disclosure 

requirements in § 668.6 apply only to 

programs that prepare students for 

gainful employment, as provided under 

sections 102(b) and (c) and 101(b)(1) of 

the HEA. 

With regard to the comments on how 

an institution should disclose on its 

Web site the information required in 

§ 668.6(b), and when it would be most 

beneficial to students to receive this 

information, we expect institutions to 

abide by the intent of the provisions— 

to enable students to make an informed 

choice about a program—by making the 

disclosures in a clear, timely, and 

meaningful manner. To this end, and to 

help ensure that the disclosures are 

easily accessible, an institution must 

prominently provide the required 

information on the home page of its 

program Web site and provide a 

prominent and direct link to this page 

on any other Web page about a program. 

The information displayed must be in 

an open format that can be retrieved, 

downloaded, indexed, and searched by 

commonly used Web search 

applications. An open format is one that 

is platform-independent, is machinereadable, and is made available to the 

public without restrictions that would 

impede the reuse of that information. 

In addition, we agree with the 

suggestion that an institution should be 

required to make this information 

available in the promotional materials 

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66836 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations 

conveyed to prospective students. To 

promote the goal of facilitating informed 

choice, the disclosure must be simple 

and meaningful. 

The Department intends to develop in 

the future a disclosure form and will be 

seeking public comment about the 

design of the form through the 

information collection process under 

the Paperwork Reduction Act of 1995 

(PRA). While the form will be 

developed through that process, the 

regulations require institutions to 

provide clear and prominent notice, 

delivered to students at appropriate 

times and in promotional materials 

prior to enrollment. Until a form is 

developed and approved under the PRA 

process, institutions must comply with 

these disclosure requirements 

independently. In addition, we agree 

with the comments that disclosures 

alone are likely to be inadequate and 

have proposed to establish program 

performance standards in our NPRM on 

Program Integrity—Gainful Employment 

that was published in the Federal 

Register on July 26, 2010 (75 FR 43616). 

Changes: Section 668.6(b) has been 

revised to provide that an institution 

must prominently provide the 

information it is required to disclose 

about a program in a simple and 

meaningful manner on the home page of 

its program Web site, and provide 

prominent and direct links to this page 

on any other Web page containing 

general, academic, or admissions 

information about the program. The 

revised provision also states that an 

institution must use the disclosure form 

developed by the Secretary when it 

becomes available and the disclosure 

information must be displayed on the 

institution’s Web site in an open format 

that can be retrieved, downloaded, 

indexed, and searched by commonly 

use Web search applications. An open 

format is one that is platformindependent, is machine-readable, and 

is made available to the public without 

restrictions that would impede the reuse 

of that information. 

Finally, § 668.6(b) has been revised to 

provide that an institution must make 

the information available in the 

promotional materials conveyed to 

prospective students. 

Placement Rates 

Comment: Many commenters objected 

to using the placement rate calculation 

in § 668.8(g) arguing that it is overly 

burdensome and administratively 

complex. The commenters opined that 

tracking a student for 180 days after 

graduation for a period of 13 weeks was 

too long and believed that it would be 

virtually impossible for the Department 

or any other auditor to affirm the 

accuracy of the placement data because 

the tracking period represents nothing 

more than a snap-shot of how many 

students were employed for 13 weeks at 

the time the data was collected. The 

commenters asserted that if the 

Department requires placement 

information to be disclosed to students, 

the information that an institution 

currently provides to its accrediting 

agency, which routinely assesses that 

information, would be more accurate. In 

addition, the commenters were 

concerned about potential conflicts with 

the misrepresentation provisions in 

subpart F of part 668 on the grounds 

that any placement rate disclosed to 

students would be obsolete as soon as 

it was posted to an institution’s Web 

site. Some of the same commenters 

objected to the proposed alternative of 

relying on State-sponsored workforce 

data systems arguing that there is no 

consistency between the States that 

maintain employment outcome data, 

and that in many cases the data 

collected fails to provide a full and 

accurate depiction of the demand, 

growth, and earnings of key 

occupations. 

A number of commenters opposed 

using the placement rate calculation in 

§ 668.8(g) arguing that it is a highly 

restrictive measure developed solely for 

extremely short programs offered by a 

few institutions. The commenters noted 

that an institution is already required 

under § 668.41(d)(5) to disclose any 

placement rates it calculates and that it 

would be confusing to students to 

disclose any additional rates beyond 

those that it is required to calculate 

under accrediting agency or State 

requirements. Some of these 

commenters suggested that in cases 

where an institution is not required by 

its accrediting agency to calculate 

placement rates, the institution should 

calculate the rates using a methodology 

from a national accrediting agency or 

the State in which the institution is 

authorized to operate. Under either the 

agency or State methodology, the 

commenters requested flexibility in 

determining the rates for degree 

programs because employment 

opportunities for graduates of degree 

programs are much more diverse than 

for graduates of occupationally specific 

training programs. 

One commenter stated that its 

institution’s mission of educating 

working adults is at odds with the 

concept of placement rates—many of 

the institution’s students are already 

employed and enroll to enhance their 

careers through further education. In 

addition, the commenter stated that it 

would be impractical to administer a job 

placement regime for students taking 

online programs who reside throughout 

the world. The commenter 

recommended that placement rates be 

calculated in accordance with an 

institution’s accrediting agency or State 

requirements, but that the proposed 

disclosures should not apply where 

there are no agency or State 

requirements. As an alternative, the 

commenter suggested that regionally 

accredited institutions, which are not 

required to track employment outcomes, 

conduct post graduation surveys asking 

program graduates if they are working in 

their field. An affirmative response 

would count as a ‘‘placement’’ even if 

the graduate maintained the same 

employment he or she had while 

attending the institution. Along the 

same lines, another commenter 

suggested that the Department allow an 

institution that is not required by an 

outside agency to calculate placement 

rates, to develop and implement a 

method that best reflects the make-up of 

its student body, including surveys, 

collecting employer documentation, or 

other methods. 

One commenter objected to using the 

placement rate calculation intended for 

short-term programs in § 668.8(g) 

because all of its programs were at or 

above the baccalaureate level. While the 

commenter stated that requiring public 

disclosure of relevant outcomes puts 

pressure on an institution to ensure that 

it is providing a good education to its 

students, the commenter suggested that 

unless an institution’s accrediting 

agency or State requires it to disclose 

placement rates, the institution should 

only disclose rates that it calculates on 

an annual basis for internal purposes or 

any employment or placement 

information it receives from surveying 

its students. Another commenter made 

the same suggestions and asked the 

Department to clarify that placement 

rates would only need to be updated 

annually. 

Another commenter argued that the 

placement rate methodology in 

§ 668.8(g) was never intended for 

gainful employment purposes and made 

several recommendations including: 

(1) Excluding from the total number of 

students who completed a program 

during an award year, the students who 

are unable to seek employment due to 

a medical condition, active military 

duty, international status, continuing 

education, incarceration, or death. In 

addition, an institution could exclude 

those graduates who certify they are not 

seeking employment or those that it is 

unable to locate. The commenter 

specified the documentation an 

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institution would have to obtain for 

each of these exclusions. 

(2) Removing the requirement in 

§ 668.8(g)(1)(iii) that a student must be 

employed, or have been employed, for 

13 weeks and allowing students to find 

employment within 6 months from the 

last graduation date in the award year. 

(3) Replacing the employer 

certification, income tax form, and 

Social Security provisions in 

§ 668.8(g)(3) with other ways that an 

institution would verify that a student 

obtained gainful employment. 

Several commenters suggested using 

the methodology developed by a 

national accrediting agency because the 

proposed method in § 668.8(g) does not 

take into consideration circumstances 

that would prevent graduates from 

seeking employment, such as health 

issues, military deployment or 

continuing education, or practical issues 

related to the employment of 

international or foreign students. 

Several commenters stated it would 

be difficult, if not impossible, for these 

institutions to obtain the data needed to 

calculate placement rates. Some of these 

commenters supported the use of Statesponsored workforce data systems, but 

cautioned that many community 

colleges would not be able to obtain 

sufficiently detailed placement 

information through data matches with 

these systems to satisfy the proposed 

requirements. Other commenters noted 

that some States do not have workforce 

data systems, so institutions in those 

States would have to use the non 

preferred placement rate methodology 

under § 668.8(g). Many of the 

commenters believed the requirement to 

document employment on a case-bycase basis under § 668.8(g)(2) would be 

overly burdensome and labor intensive. 

Others opined that the placement 

provisions are counterproductive, 

claiming that a substantial number of 

community colleges eschewed 

participating in programs under the 

Workforce Investment Act because of 

placement rate requirements. On the 

other hand, another commenter 

supported the placement rate provisions 

and recommended that all institutions 

in a State participate in a workforce data 

system, if the State has one. The 

commenter asked the Department to 

clarify how the data obtained from a 

workforce data system would be used to 

meet the placement rate requirements 

and the timeline for reporting those 

rates. In addition, the commenter 

suggested revising the placement rate 

provisions in § 668.8(g) to more closely 

align those provisions with practices 

used by State data systems. 

One commenter stated that in order to 

receive Federal funding under the Carl 

D. Perkins Career and Technical 

Education Act, a program must receive 

State approval that entails a review of 

documentation requiring that the 

program be high demand, high wage or 

in an emerging field. As part of the State 

review, the institution provides 

documentation of potential placement. 

The commenter recommended that the 

Department waive the gainful 

employment provisions for all 

certificate programs approved by the 

State under this review process. 

A commenter supported disclosing 

placement rate data, but noted that the 

institution would only be able to report 

on graduates who are employed in the 

State or continued their education. The 

institution would not be able to provide 

occupationally specific placement data, 

or data about graduates who find 

employment outside the State, because 

the State’s labor data base only tracks (1) 

the type of business a graduate is 

employed by, not the occupation of the 

graduate, and (2) graduates who are 

employed in the State. 

Several other commenters supported 

the proposed placement rate 

disclosures, but believed that the 

provisions in § 668.8(g) were 

inadequate. The commenters made 

several suggestions, including: 

(1) Expanding the category of students 

who complete a program (currently in 

§ 668.8(g)(1)(i)) to include students who 

are eligible for a degree or certificate. 

The commenters stated they are aware 

of institutions that delay providing the 

degree or certificate to students, which 

omits these students from the placement 

rate calculation. 

(2) Specifying that the time standards 

in § 668.8(g) (employment within 180 

days of completing a program and 

employment for 13 weeks) also apply to 

rates calculated from State workforce 

data systems. 

(3) Specifying that employment must 

be paid. The commenters stated they are 

aware of institutions that have counted 

students in unpaid internships as being 

employed. 

(4) To be counted in the placement 

rate, providing that a student must find 

employment in one of the SOC codes 

identified for the program unless the 

student finds a job that pays more than 

any of the identified SOC codes. The 

commenters believed that some 

institutions stretch the concept of a 

‘‘related’’ comparable job as currently 

provided in § 668.8(g)(1)(ii). For 

example, an institution might include 

any job at a hospital, including the 

lowest paying jobs, when the student 

was trained for a skilled job such as an 

x-ray technician. The higher earnings 

recommendation would condition a 

successful placement but allow an 

institution to count a student employed 

in an unrelated SOC. 

(5) To address the situation where a 

student cannot qualify for employment 

until he or she passes a licensing or 

certification examination, providing that 

the 180-day period during which the 

student would otherwise have to find 

employment should start after the 

results of the examination are available. 

(6) To be counted in the placement 

rate, specifying that a student must 

work for at least 32 hours per week. The 

commenters stated that they are aware 

of institutions that include as successful 

placements any student that works at 

any time during a week, even if it is 

only for a few hours per week. 

(7) Specifying that institutions must 

use a State data system if it is available 

to ensure accurate reporting. 

(8) If the institution chooses to 

demonstrate placement rates by salary, 

providing that documentation must 

include signed copies of tax returns, 

W–4s or paystubs to document earnings. 

(9) To more thoroughly substantiate 

placement rates, requiring the auditor 

who performs the institution’s 

compliance audit under § 668.23 to 

directly contact former students and 

employers whose statements were 

obtained by the institution. 

Discussion: We are persuaded by the 

comments that using the methodology 

in § 668.8(g) may not be the most 

appropriate method for determining the 

placement rate for the majority of the 

programs that are subject to the gainful 

employment provisions. Moreover, in 

view of the varied suggestions for how 

the rate should be calculated, 

documented, and verified, in early 2011 

we will begin the process for developing 

the method to calculate placement rates 

for institutions through the National 

Center for Education Statistics (NCES). 

These final regulations establish some 

reporting requirements using existing 

placement data as explained below, 

with a transition in a later period for 

institutions to disclose placement rates 

obtained from the NCES methodology. 

NCES will develop a placement rate 

methodology and the processes 

necessary for determining and 

documenting student employment and 

reporting placement data to the 

Department using the Integrated 

Postsecondary Education Data System 

(IPEDS). 

NCES employs a collaborative process 

that affords the public significant 

opportunities to participate in making, 

and commenting on, potential changes 

to IPEDS. Potential changes are 

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examined by the IPEDS Technical 

Review Panel (TRP), which is a peer 

review panel that includes individuals 

representing institutions, education 

associations, data users, State 

governments, the Federal government, 

and other groups. The TRP meets to 

discuss and review IPEDS-related plans 

and looks at the feasibility and timing 

of the collection of proposed new items, 

added institutional burden, and possible 

implementation strategies. After each 

meeting, a meeting report and 

suggestions summary is posted to the 

IPEDS Web site. The postsecondary 

education community then has 30 days 

to submit comments on the meeting 

report and summary. After those 

comments are considered, the 

Department requests the Office of 

Management and Budget (OMB) to 

include the changes in the next IPEDS 

data collection. This request for forms 

clearance is required by the Paperwork 

Reduction Act of 1995, as amended. A 

description of the changes and the 

associated institutional reporting 

burden is included in the request which 

is then published by OMB as a notice in 

the Federal Register, initiating a 60-day 

public comment period. After that, a 

second notice is published in the 

Federal Register, initiating a 30-day 

public comment period. Issues raised by 

commenters are resolved, and then 

OMB determines whether to grant forms 

clearance. Only OMB cleared items are 

added to the IPEDS data collection. 

Although we agree with the 

commenters that the data maintained or 

processes used by workforce data 

systems may vary State by State, and 

that the data systems are not available 

to all institutions or in all States, we 

continue to believe that these data 

systems afford participating institutions 

an efficient and accurate way of 

obtaining employment outcome 

information. However, because of Stateto-State variances and in response to 

comments about how employment 

outcome data translate to a placement 

rate, NCES will develop the methods 

needed to use State employment data to 

calculate placement rates under its 

deliberative process for IPEDS. 

Until the IPEDS-developed placement 

rate methodology is implemented, an 

institution that is required by its 

accrediting agency or State to calculate 

a placement rate, or that otherwise 

calculates a placement rate, must 

disclose that rate under the current 

provisions in § 668.41(d)(5). However, 

under new § 668.6(b), the institution 

must disclose on its Web site and 

promotional materials the placement 

rate for each program that is subject to 

the gainful employment provisions if 

that information is available or can be 

determined from institutional 

placement rate calculations. 

Consequently, to satisfy the new 

disclosure requirements, an institution 

that calculates a placement rate for one 

or more programs would disclose that 

rate under § 668.6(b) by identifying the 

accrediting agency or State agency 

under whose requirements the rate was 

calculated. Otherwise, if an accrediting 

agency or State requires an institution to 

calculate a placement rate only at the 

institutional level, the institution must 

use the agency or State methodology to 

calculate the placement rate for each of 

its programs from information it already 

collects and must disclose the programspecific placement rates in accordance 

with § 668.6(b). 

Changes: Section 668.6(b) has been 

revised to specify that an institution 

must disclose for each program the 

placement rate calculated under a 

methodology developed by its 

accrediting agency, State, or the 

National Center for Education Statistics 

(NCES). The institution must disclose 

the accrediting agency or State-required 

placement rate beginning on July 1, 

2011 and must identify the accrediting 

agency or State agency under whose 

requirements the rate was calculated. 

The NCES-developed placement rate 

would have to be disclosed when the 

rates become available. 

On-Time Completion Rate 

Comment: Many commenters asked 

the Department to clarify the meaning of 

‘‘on-time’’ completion rate. Other 

commenters assumed that ‘‘on-time’’ 

completion referred to the graduation 

rate currently calculated under the 

Student Right to Know requirements in 

§ 668.45, or encouraged the Department 

to either (1) adopt the current 

requirements in § 668.45 for gainful 

employment purposes, or (2) use a 

completion rate methodology from an 

accrediting agency or State, to minimize 

confusion among students and burden 

on institutions. One of the commenters 

suggested that if the Department 

intended ‘‘on-time’’ to mean 100 percent 

of normal time for completion, then the 

proposed rate should be calculated in 

the same manner as the completion rate 

in § 668.45 for normal time and 

incorporate the exclusions for students 

transferring out of programs and other 

exceptions identified in § 668.45(c) and 

(d). Another commenter opined that 

absent significant enforcement to ensure 

that all institutions consistently use the 

same definition of ‘‘on-time’’ completion 

rate, students will be unfairly led to 

believe that institutions who report 

conservatively have less favorable 

outcomes than institutions who report 

aggressively. One commenter cautioned 

that it may be misleading to focus 

heavily on graduation and placement 

rates, particularly for institutions whose 

students are employed while seeking a 

degree. 

A number of commenters supported 

the ‘‘on-time’’ completion requirement, 

and in general all of the proposed 

disclosures, stating that providing 

outcome data would allow prospective 

students to make more informed 

decisions. The commenters believed 

that better outcome data will help to 

ensure that the taxpayer investment is 

well spent, and that students are 

protected from programs that overcharge 

and under-deliver. 

A commenter stated that under State 

licensing requirements for cosmetology 

schools a student must be present, 

typically for 1,500 hours, to qualify for 

graduation and to complete the 

program. Taking attendance and 

ensuring that a student is present for 

these hours is typically required. The 

commenter reasoned that for a student 

to complete the program ‘‘on-time’’ the 

student could not miss a single day or 

even be late for classes as opposed to a 

credit hour program where a student 

does not have to attend classes 100 

percent of the time but will still be 

considered to satisfy the on-time 

requirement. To mitigate the difference 

between clock and credit hour programs 

and account for legitimate 

circumstances where a student would 

miss classes, the commenter suggested 

that the standard for ‘‘on-time’’ 

incorporate the concept of a maximum 

timeframe under the satisfactory 

academic progress provisions that allow 

a student to complete a program at a 

specified rate. 

Discussion: In proposing the on-time 

completion rate requirement, the 

Department intended to include all 

students who started a program to 

determine the portion of those students 

who completed the program no later 

than its published length. This approach 

differed significantly in two ways from 

the completion rate under the Student 

Right to Know (SRK) provisions in 

§ 668.45. First, in calculating the 

completion rate the SRK methodology 

includes in the cohort only full-time, 

first-time undergraduate students, not 

all students. Second, the SRK rate is 

based on 150 percent of normal time, 

not the actual length of the program. 

However, in view of the comments 

suggesting that we use the SRK 

methodology, or a modified version, we 

examined whether the cohort of 

students under SRK could be expanded 

to include all students and from that, 

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whether a completion rate could be 

calculated based on normal time, as 

defined in § 668.41(a). We concluded 

that doing this would be difficult and 

too complex for institutions and the 

Department. 

We believe prospective students 

should know the extent to which former 

students completed a program on time, 

not only to ground their expectations 

but to plan for the time they will likely 

be attending the program—an important 

consideration for many students who 

cannot afford to continue their 

education without earnings from 

employment. Therefore, to minimize 

burden on institutions while providing 

meaningful information to prospective 

students, an institution must calculate 

an on-time completion rate for each 

program subject to the gainful 

employment provisions by: 

(1) Determining the number of 

students who completed the program 

during the most recently completed 

award year. 

(2) Determining the number of 

students in step (1) who completed the 

program within normal time, regardless 

of whether the students transferred into 

the program or changed programs at the 

institution. For example, the normal 

time to complete an associate degree is 

two years. The two-year timeframe 

would apply to all students who enroll 

in the program. In other words, if a 

student transfers into the program, 

regardless of the number of credits the 

institution accepts from the student’s 

attendance at the prior institution, the 

transfer credits have no bearing on the 

two-year timeframe. This student would 

still have two years to complete from 

the date he or she began attending the 

two-year program. To be counted as 

completing on time, a student who 

enrolls in the two-year program from 

another program at the institution 

would have to complete the two-year 

program in normal time beginning from 

the date the student started attending 

the prior program. 

(3) Dividing the number of students 

who completed within normal time in 

step (2) by the total number of 

completers in step (1) and multiplying 

by 100. 

With regard to the commenter who 

believed that a student could not miss 

a single day of classes to complete a 

program on time, we note that under 

§ 668.4(e) a student can be excused from 

attending classes. Under this section, a 

student may be excused for an amount 

of time that does not exceed the lesser 

of (1) any thresholds established by the 

institution’s accrediting agency or State 

agency, or (2) 10 percent of the clock 

hours in a payment period. Absent any 

State or accrediting agency 

requirements, for a typical payment 

period of 450 clock hours a student 

could miss 45 hours. In the commenter’s 

example of a 1,500 clock hour program, 

the student could miss 150 hours and 

still complete on time for this 

requirement. Also, under § 668.41(a), 

normal time for a certificate program is 

the time published in the institution’s 

catalog and that time may include makeup days. So, an institution could 

schedule make-up days, as part of 

normal time, to enable students who 

missed classes to complete the number 

of hours required for State licensing 

purposes. 

Changes: Section 668.6(b) has been 

revised to specify how an institution 

calculates an on-time completion rate 

for its programs. 

Median Loan Debt 

Comment: Many commenters objected 

strongly to the requirement in proposed 

§ 668.6(a)(4) that an institution report 

annually to the Department, for each 

student attending a program that leads 

to gainful employment, the amount each 

student received from private education 

loans and institutional financing plans. 

With regard to private education loans 

taken out by students, the commenters 

argued that because the loans are selfcertified, in many cases an institution is 

not aware of the loans and should only 

have to report the amount of the private 

loans it knows about or the amount of 

those loans that were paid directly to 

the institution. Commenters 

representing students and consumer 

advocacy groups contended that most 

institutions have preferred lender lists, 

help students arrange private loans, 

recommend a lender, receive student 

payments from a lender, or otherwise 

have information about the lender. 

Consequently, to clarify that an 

institution cannot avoid reporting on 

private loans by feigned ignorance, the 

commenters suggested that an 

institution report any private loan it 

knows about or should reasonably know 

about. To clarify the meaning of ‘‘private 

education loan’’ one commenter 

suggested that the Department reference 

the definition in § 601.2. 

With regard to institutional financing 

plans, many commenters, argued that an 

institution should only be required to 

report the amount of any remaining 

institutional loans or debt obligations 

owed by a student after he or she 

completes the program, not the amount 

of the loan or credit extended to the 

student at the start of, or during, the 

program. 

Many commenters asked the 

Department to clarify whether median 

loan debt would include only loan debt 

incurred by students who completed a 

particular program or loan debt incurred 

from previously attended programs or 

institutions. Some of the commenters 

argued that it would be difficult to 

determine the relevant loan debt of 

students who enroll in 

postbaccalaureate certificate programs 

and end up concurrently pursuing an 

associated master’s degree. The 

commenters argued that extracting the 

portion of debt that applies to the 

certificate would be difficult, but 

reporting based on the total debt 

accumulated during the graduate-level 

enrollment period would overstate the 

amount borrowed if the intent was to 

report on the certificate program. They 

also believed that an institution would 

have to track loan debt pertaining to 

credits accepted for a program that were 

not necessarily earned by students who 

continue in a graduate program, 

including transfer credits accepted from 

other institutions. In addition, the 

commenters believed that for any 

undergraduate work that ‘‘transfers up,’’ 

the portion of the loan debt from that 

period would have to be identified. In 

view of these complexities and 

considering that two-year transfer 

programs are excluded from the 

reporting requirements, the commenters 

requested a similar exclusion for 

graduate certificate programs where the 

credits apply directly to a graduate 

degree. Along the same lines, other 

commenters requested that 

postbaccalaureate certificate programs 

or courses such as a certification as a 

school principal, district 

superintendent, or director of 

instruction be exempted from these 

regulations. 

A commenter requested an exemption 

for four-year degree-granting institutions 

stating that such institutions only have 

a handful of certificate programs that 

would be of no concern to the 

Department. 

A few commenters believed that 

institutions should either (1) be allowed 

to disclose separately the amount of 

loan debt students accumulate for 

institutional charges and the amount 

incurred for living expenses, or (2) not 

be required to disclose loan debt 

incurred for living expenses because 

that debt is incurred at the student’s 

discretion and not be required to 

disclose loan debt incurred by a student 

at prior, unrelated institutions. 

Other commenters urged the 

Department to use the mean instead of 

the median loan debt arguing that using 

median debt would unjustly penalize 

students attending institutions with 

larger numbers of borrowers by 

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providing a competitive advantage to 

institutions with smaller populations of 

student loan borrowers. 

Many commenters supported the 

proposed requirement for disclosing the 

median debt of students who complete 

a program, but suggested that 

institutions should also disclose the 

median debt of noncompleters. The 

commenters stated that it was one thing 

for students to be told that 40 percent 

graduate with $20,000 in loan debt, but 

it’s another for them to understand that 

the majority of students who don’t 

complete have $15,000 in loan debt they 

would have to repay. The commenters 

believed that separating the disclosures 

by completers and noncompleters 

would enable better comparisons 

between programs, and would not create 

the appearance of low median debt for 

programs with low completion rates. In 

addition, to minimize burden the 

commenters suggested that collecting 

the data needed to calculate the median 

loan debt could appropriately be limited 

to programs in which a significant share 

of students borrow. According to the 

commenters, this approach would 

ensure that potential students and the 

Department know when a program has 

high student borrowing rates and low 

completion rates. 

Discussion: We agree with the 

commenters that the debt an institution 

reports under § 668.6(a)(4) for 

institutional financing plans is the 

amount a student is obligated to repay 

upon completing the program. Under 

this same section, an institution must 

also report the amount of any private 

education loans it knows that students 

received. 

The HEOA amended both the HEA 

and the Truth-in-Lending Act (TILA) to 

require significant new disclosures for 

borrowers of private education loans. 

The HEOA also requires private 

education lenders to obtain a private 

loan self-certification form from every 

borrower of such a loan before the 

lender may disburse the private 

education loan. 

Although the term ‘‘private education 

lender’’ is defined in the TILA, the 

Federal Reserve Board considers an 

entity to be a private education lender, 

including an institution of higher 

education, if it meets the definition of 

‘‘creditor.’’ The term ‘‘creditor’’ is defined 

by the Federal Reserve Board in 12 CFR 

226.2(a)(17) as a person who regularly 

extends consumer credit that is subject 

to a finance charge or is payable by 

written agreement in more than four 

installments (not including a down 

payment), and to whom the obligation is 

initially payable, either on the face of 

the note or contract, or by agreement 

when there is no note or contract. A 

person regularly extends consumer 

credit only if it extended credit more 

than 25 times (or more than 5 times for 

transactions secured by a dwelling) in 

the preceding calendar year. If a person 

did not meet these numerical standards 

in the preceding calendar year, the 

numerical standards must be applied to 

the current calendar year. 

The term private education loan is 

defined in 12 CFR 226.46(b)(5) as an 

extension of credit that: 

• Is not made, insured, or guaranteed 

under title IV of the HEA; 

• Is extended to a consumer 

expressly, in whole or in part, for 

postsecondary educational expenses, 

regardless of whether the loan is 

provided by the educational institution 

that the student attends; 

• Does not include open-end credit or 

any loan that is secured by real property 

or a dwelling; and 

• Does not include an extension of 

credit in which the covered educational 

institution is the creditor if (1) the term 

of the extension of credit is 90 days or 

less (short-term emergency loans) or (2) 

an interest rate will not be applied to 

the credit balance and the term of the 

extension of credit is one year or less, 

even if the credit is payable in more 

than four installments (institutional 

billing plans). 

Examples of private education loans 

include, but are not limited to, loans 

made expressly for educational 

expenses by financial institutions, credit 

unions, institutions of higher education 

or their affiliates, States and localities, 

and guarantee agencies. 

As noted previously, the HEOA 

requires that before a creditor may 

consummate a private education loan, it 

must obtain a self-certification form 

from the borrower. The Department, in 

consultation with the Federal Reserve 

Board, developed and disseminated the 

private loan self-certification form in 

Dear Colleague Letter GEN 10–01 

published in February of 2010. 

The Department’s regulations in 34 

CFR 601.11(d), published on October 

28, 2009, require an institution to 

provide the self-certification form and 

the information needed to complete the 

form upon an enrolled or admitted 

student applicant’s request. An 

institution must provide the private 

loan self-certification form to the 

borrower even if the institution already 

certifies the loan directly to the private 

education lender as part of an existing 

process. An institution must also 

provide the self-certification form to a 

private education loan borrower if the 

institution itself is the creditor. Once 

the private loan self-certification form 

and the information needed to complete 

the form are disseminated by the 

institution, there is no requirement that 

the institution track the status of a 

borrower’s private education loan. 

The Federal Reserve Board, in 12 CFR 

226.48, built some flexibility into the 

process of obtaining the selfcertification form for a private education 

lender. The private education lender 

may receive the form directly from the 

consumer, the private education lender 

may receive the form from the consumer 

through the institution of higher 

education, or the lender may provide 

the form, and the information the 

consumer will require to complete the 

form, directly to the borrower. However, 

in all cases the information needed to 

complete the form, whether obtained by 

the borrower or by the private education 

lender, must come directly from the 

institution. 

Thus, even though an institution is 

not required to track the status of its 

student borrowers’ private education 

loans, the institution will know about 

all the private education loans a student 

borrower receives, with the exception of 

direct-to-consumer private education 

loans, because most private education 

loans are packaged and disbursed 

through the institution’s financial aid 

office. The institution must report these 

loans under § 668.6(a)(4). Direct-toconsumer private education loans are 

disbursed directly to a borrower, not to 

the school. An institution is not 

involved in a certification process for 

this type of loan. 

We wish to make clear that any loan, 

extension of credit, payment plan, or 

other financing mechanism that would 

otherwise not be considered a private 

education loan but that results in a debt 

obligation that a student must pay to an 

institution after completing a program, 

is considered a loan debt arising from an 

institutional financing plan and must be 

reported as such under § 668.6(a)(4). 

The Department will use the debt 

reported for institutional financing 

plans and private education loans along 

with any FFEL or Direct Loan debt from 

NSLDS that was incurred by students 

who completed a program to determine 

the median loan debt for the program. 

In general, median loan debt for a 

program at an institution does not 

include debt incurred by students who 

attended a prior institution, unless the 

prior and current institutions are under 

common ownership or control, or are 

otherwise related entities. In cases 

where a student changes programs 

while attending an institution or 

matriculates to a higher credentialed 

program at the institution, the 

Department will associate the total 

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amount of debt incurred by the student 

to the program the student completed. 

So, in the commenter’s example where 

a student enrolls in a postbaccalaureate 

certificate program and is concurrently 

pursuing a master’s degree, the debt the 

student incurs for the certificate 

program would be included as part of 

the debt the student incurs for 

completing the program leading to a 

master’s degree. If the student does not 

complete the master’s degree program, 

but completes the certificate program, 

then only the debt incurred by the 

student for the certificate program 

would be used in determining the 

certificate program’s median loan debt. 

The Department will provide the 

median loan debt to an institution for 

each of its programs, along with the 

median loan debt identified separately 

for FFEL and Direct Loans, and for 

private education loans and 

institutional financing plans. The 

institution would then disclose these 

debt amounts, as well as any other 

information the Department provides to 

the institution about its gainful 

employment programs, on its Web site 

and in its promotional materials to 

satisfy the requirements in § 668.6(b)(5). 

While we generally agree with the 

suggestion that disclosing the median 

loan debt for students who do not 

complete a program may be helpful to 

prospective students, determining when 

or whether students do not complete is 

problematic for many programs even for 

students who withdraw or stop 

attending during a payment period— 

those students may return the following 

payment period. Because further review 

and analysis are needed before we could 

propose a requirement along these lines, 

institutions will need to report the CIP 

code for every student who attends a 

program subject to the gainful 

employment provisions and the total 

number of students who are enrolled in 

each of its programs at the end of an 

award year. 

In cases where a student matriculates 

from one program to a higher 

credentialed program at the same 

institution, the Department will 

associate all the loan debt incurred by 

the student at the institution to the 

highest credentialed program completed 

by the student. To do this, the 

institution must inform the Department 

that even though a student completed a 

program, the student is continuing his 

or her education at the institution in 

another program. We wish to make clear 

that an institution would still need to 

provide the information under § 668.6(a) 

about each program the student 

completes. The Department will include 

the student’s loan debt in calculating 

the median loan debt for the program 

the student most recently completed, or 

delay including the student’s associated 

loan debt in calculating the median loan 

debt for the higher credentialed 

program. The Department will include 

the student’s associated debt for the 

higher credentialed program when the 

student completes that program. If the 

student does not complete the higher 

credentialed program, then only the 

loan debt incurred by the student for 

completing the first program would be 

used in calculating the median loan 

debt for the first program. 

Similarly, in cases where a student 

transfers from school A to school B, the 

Department will delay including the 

loan debt incurred by a student 

attending a program at school A 

pending the student’s success at school 

B. If the student completes a higher 

credentialed program at school B, the 

median loan debt for that program 

includes only the student’s loan debt 

incurred at school B. If the student does 

not complete the program at school B, 

then only the student’s loan debt 

incurred for completing the program at 

school A is included in calculating the 

median loan debt for the program at 

school A. In other words, a student who 

completes a program and continues his 

or her education at the same institution 

or at another institution is considered to 

be in an in-school status and we will 

delay using the student’s loan debt until 

the student completes a higher 

credentialed program or stops attending. 

The following chart and discussion 

illustrate this process. 

School A School B 

Student Loan debt Loan debt 

Certificate $3,000 Completed Degree $4,000 Completed Gainful 

Employment 

Program? 

1 ........................... ............................ ................ Yes ..................... ............................ ................ Yes ..................... Yes. 

2 ........................... ............................ ................ Yes ..................... ............................ ................ No ....................... Yes. 

3 ........................... ............................ ................ Yes ..................... ............................ ................ Yes ..................... No. 

Same School 

4 ........................... ............................ ................ Yes ..................... ............................ ................ Yes ..................... Yes. 

5 ........................... ............................ ................ Yes ..................... ............................ ................ No ....................... Yes. 

6 ........................... ............................ ................ Yes ..................... ............................ ................ Yes ..................... No. 

Student 1. Student is in an in-school 

status until the degree program is 

completed at School B. School A and B 

would report loan debt for each of their 

programs. Only the $4,000 debt incurred 

by the student at School B would be 

included in the median loan debt 

calculation for the degree program 

(highest credential completed). The 

student’s loan debt at School A would 

not be included in calculating the 

median loan debt for the certificate 

program. 

Student 2. Student is in an in-school 

status while attending School B, but 

does not complete the degree program. 

Only the $3,000 debt incurred by the 

student at School A would be included 

in the median loan debt calculation for 

the certificate program. The student’s 

loan debt at School B would not be 

included in calculating the median loan 

debt for the degree program because the 

student did not complete that program. 

Student 3. Student is in an in-school 

status while attending School B, but the 

degree program at School B is not 

subject to the gainful employment 

provisions. When the student completes 

the degree program, none of the 

student’s debt would be included in the 

median loan debt calculation for the 

certificate program and no calculation 

would be performed for the degree 

program because it is not subject to the 

gainful employment provisions. 

Student 4. Student is in an in-school 

status until the degree program is 

completed. All of the student’s debt at 

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the school is associated to the degree 

program and included in the median 

loan debt calculation for the degree 

program. None of the student’s debt is 

included in calculating the median loan 

debt of the certificate program. 

Student 5. Student is in an in-school 

status while attending the degree 

program, but does not complete that 

program. Only the $3,000 debt incurred 

by the student for completing the 

certificate program would be included 

in the median loan debt calculation for 

that program. None of the student’s debt 

would be included in the median loan 

debt calculation for the degree program 

because the student did not complete 

that program. 

Student 6. Student is in an in-school 

status while attending the degree 

program, but the degree program is not 

subject to the gainful employment 

provisions. When the student completes 

the degree program, none of the 

student’s debt would be included in the 

median loan debt calculation for the 

certificate program and no calculation 

would be performed for the degree 

program because it is not subject to the 

gainful employment provisions. 

The Department disagrees with the 

suggestions that an institution should 

not be required to disclose loan debt 

incurred by students for living expenses 

because many students cannot afford to 

enroll in a program without borrowing 

to pay for living expenses and other 

education-related costs. Identifying only 

a portion of the loan debt that a student 

is likely to incur not only defeats the 

purpose of the disclosure but also may 

be misleading. With respect to the 

comments that loan debt related to 

living expenses should be disclosed 

separately from loan debt tied directly 

to institutional charges, we are 

concerned about how institutions would 

make or portray these disclosures and 

believe that separating the debt amounts 

would be confusing to prospective 

students. 

We find little merit in the argument 

that using median loan debt, instead of 

mean loan debt, would provide a 

competitive advantage to institutions 

with fewer student loan borrowers. 

Assuming that an institution with fewer 

borrowers has the same enrollment as 

an institution with a large number of 

borrowers, then regardless of whether 

the mean or the median is used, the loan 

debt will be lower for an institution 

with fewer borrowers because all of the 

students who do not borrow would 

reduce its mean or median loan debt. 

When these regulations take effect on 

July 1, 2011, the Department will 

require institutions to report no later 

than October 1, 2011 the information 

described in § 668.6(a) for the 2006–07, 

2007–08, and 2008–09 award years. In 

accordance with the record retention 

requirements under § 668.24(e), most 

institutions should have the required 

information. We note that many 

institutions may have an existing 

practice of keeping student records for 

longer periods, or do so for State or 

accrediting purposes. If an institution 

has the records for the earlier periods, 

it must report the information described 

in § 668.6(a). Institutions that are not 

otherwise required to maintain the 

information for the 2006–07 award year 

described in § 668.6(a) at the time this 

regulation goes into effect on July 1, 

2011, should consider doing so for their 

own purposes. In any case, if an 

institution is unable to report all or 

some the required information, it must 

provide an explanation of why the 

missing information is not available. 

Changes: Section 668.6(a) has been 

revised to provide that in accordance 

with procedures established by the 

Secretary, an institution must provide 

(1) information for the award year 

beginning on July 1, 2006 and 

subsequent award years, (2) information 

about whether a student matriculated to 

a higher credentialed program at the 

institution, (3) if it has evidence, 

information that a student transferred to 

a higher credentialed program at 

another institution, and (4) if the 

institution is unable to report required 

information, an explanation of why the 

missing information is not available. 

Student Information Database 

Comment: Several commenters 

questioned the Department’s ability to 

collect data under section 134 of the 

HEA which prohibits the Department 

from developing, implementing, or 

maintaining a Federal database of 

personally identifiable information. The 

commenters claimed that obtaining 

identifying information on program 

completers by CIP code and program 

completion date would constitute a 

violation of section 134 of the HEA. 

Some of the commenters suggested that 

institutions provide only aggregate 

information for individuals by CIP code 

and opined that the completion date 

was not necessary and should be 

removed. These commenters reasoned 

that the Department should use existing 

information, such as enrollment and 

loan repayment data in NSLDS and in 

any other systems, to determine when 

students are enrolled or have completed 

their program. Another commenter cited 

section 134 of the HEA as a reason why 

an institution should not be required to 

provide information on private or 

institutional loans. 

Because section 134 of the HEA 

exempts existing systems that are 

needed to operate the student aid 

programs, some commenters asked the 

Department to clarify which current 

systems would be used to gather the 

information requested under proposed 

§ 668.6(a). Several of the commenters 

did not believe that institutions should 

have to collect and report information 

for students who completed their 

programs in the past three years and 

requested that the information be 

prospective (students who begin 

attending a program after July 1, 2011). 

Discussion: Section 134 of the HEA 

places restrictions on the Department’s 

ability to develop, implement, or 

maintain a new database of personally 

identifiable information about 

individuals attending institutions and 

receiving title IV, HEA program funds, 

including systems that track individual 

students over time. It does not prohibit 

the Department from including such 

information in an existing system that is 

necessary for the operation of the 

Federal student aid programs. In this 

case, the information being reported is 

already a part of the information that is 

maintained by institutions in their 

student financial aid and academic 

records, and is subject to compliance 

and program reviews. Institutions 

reporting that students have started or 

completed a program for which those 

students received title IV, HEA program 

funds will augment the existing 

information in the Department’s systems 

that are used to monitor and maintain 

the operations for the title IV, HEA 

programs. The information is also being 

compiled to create aggregate 

information to evaluate whether a 

program demonstrates that it leads to 

gainful employment for its students, 

rather than to monitor the individual 

students attending those programs over 

time. For those reasons, the reporting 

and use of this information is not 

prohibited under the law. 

Changes: None. 

Links to O*Net 

Comment: Several commenters agreed 

it was important to inform students and 

the public about possible job 

opportunities that could result from 

enrolling in a program, but were 

concerned that the proposed 

requirement would not serve to 

accurately inform students. Some of the 

commenters believed that the proposed 

requirements might work for some 

programs like teaching and nursing. 

However, for graduate-level programs, 

like MBAs and PhDs in Psychology, 

institutions would be required to 

provide an unwieldy amount of data. 

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For example, it would be impossible for 

an institution to identify and disclose 

the full range and number of job 

opportunities that might exist for MBA 

graduates. As an alternative, the 

commenters suggested that the 

Department require schools to disclose 

the types of employment found by their 

graduates in the preceding three years. 

Other commenters had similar concerns 

and suggested that instead of disclosing 

all occupations by name and SOC code, 

the Department should allow an 

institution to disclose a sampling or 

representative set of links for the 

occupations stemming from its 

programs. Otherwise, the commenters 

were concerned that an institution 

would run afoul of the 

misrepresentation provisions unless it 

fully and completely listed all of the 

SOC and O*NET codes related to each 

program offered at the institution. 

Another commenter suggested that an 

institution should only list those 

occupations in which a majority of its 

program completers were placed. 

A commenter claimed that it would 

be confusing and misleading to provide 

information on hundreds of jobs. To 

illustrate this point, the commenter 

stated that entering a CIP code of 52 for 

‘‘Business, Management, Marketing and 

Related Support Services’’ would lead to 

86 codes representing more than 300 

occupational profiles. To avoid 

confusing students, the commenter 

suggested that an institution provide 

links only to those careers where its 

students have typically found 

employment. 

One commenter thought that the link 

to O*Net was unnecessary because 

students could use search engines to 

research potential jobs. 

Another commenter supported the 

O*NET disclosures because the 

additional administrative burden was 

not significant and the change was long 

overdue. 

Discussion: In general, we do not 

believe that the links to O*NET will 

lead to an unwieldy amount of 

information when the full 6-digit CIP 

code is entered on the SOC crosswalk at 

http://online.onetcenter.org/crosswalk/. 

For example, entering the full 6 digit 

CIP code, 52.9999, for Business, 

Management, Marketing and Related 

Support Services, identifies only nine 

related occupations (SOCs). As shown 

below, it is these links to, and the names 

of, the nine occupations that an 

institution must post on its Web site. 

52.9999 Business, Management, 

Marketing, & Related Support 

Services, Other 

11–9151.00 Social and Community 

Service Managers 

11–9199.00 Managers, All Other 

13–1199.00 Business Operations 

Specialists, All Other 

41–1011.00 First-Line Supervisors/ 

Managers of Retail Sales Workers 

41–1012.00 First-Line Supervisors/ 

Managers of Non-Retail Sales Workers 

41–3099.00 Sales Representatives, 

Services, All Other 

41–4011.00 Sales Representatives, 

Wholesale and Manufacturing, 

Technical and Scientific Products 

41–4012.00 Sales Representatives, 

Wholesale and Manufacturing, Except 

Technical and Scientific Products 

41–9099.00 Sales and Related 

Workers, All Other 

However, for 6-digit CIP codes that 

yield more than ten occupations, an 

institution may, in lieu of providing 

links to all the identified SOCs, provide 

links to a representative sample of the 

SOCs for which its graduates typically 

find employment within a few years 

after completing a program. 

Changes: Section 668.6(b) has been 

revised to allow an institution to 

provide prospective students with Web 

links to a representative sample of the 

SOCs for which its graduates typically 

find employment within a few years 

after completing the program. 

Disclosing Program Costs 

Comment: Many commenters 

supported the proposal to disclose 

program costs. The commenters lauded 

this information as more useful to 

students than disclosing costs by credit 

hour or by semester and several 

commenters encouraged the Department 

to make this section of the regulations 

effective as soon as possible. 

Some commenters indicated that the 

program costs in proposed § 668.6(b)(2) 

differ from the costs an institution 

makes available under § 668.43(g). The 

commenters suggested that all costs that 

a student may incur should be disclosed 

including charges for full-time and parttime students, estimates of costs for 

necessary books and supplies as well as 

estimated transportation costs. Other 

commenters asked the Department to 

clarify how program costs under the 

proposed Web site disclosures would be 

calculated differently than those 

required in the student consumer 

information section of the regulations. 

In addition, some of these commenters 

noted that although § 668.43 requires an 

institution to disclose program cost 

upon request, many students do not 

know to ask for it, or the information is 

not currently presented in a clear 

manner. Another commenter noted that 

the phrase ‘‘institutional costs’’ could be 

interpreted to mean only those costs 

payable to the institution and 

recommended that the phrase be 

changed to ‘‘cost of attendance.’’ 

Several commenters opined that 

providing program costs would confuse 

students. One of the commenters 

recommended using just the net price 

calculator as that would also ease 

institutional burden. 

Discussion: Although we recently 

revised § 668.43(a) to provide that an 

institution must make program cost 

information readily available, not just 

upon the request of a student, that 

section does not require the institution 

to disclose program costs on its Web 

site. All of the disclosures in § 668.6(b), 

including the disclosure of program 

costs, must be on the same Web page to 

enable a prospective student to easily 

obtain pertinent information about a 

program and compare programs. Along 

these lines, and in view of the recent 

GAO investigation (see http:// 

www.gao.gov/new.items/d10948t.pdf) 

raising concerns over program cost 

information, § 668.6(b) specifically 

requires an institution to disclose on the 

same Web page (1) Links to O*NET 

identifying the occupations stemming 

from a program or Web links to a 

representative sample of the SOCs for 

which its graduates typically find 

employment within a few years after 

completing the program, (2) the on-time 

graduation rate of students completing 

the program, (3) the placement rate for 

students completing the program, (4) the 

median loan debt incurred by students 

completing the program, and (5) the 

costs of that program. The institution 

must disclose the total amount of tuition 

and fees it charges a student for 

completing the program within normal 

time, the typical costs for books and 

supplies (unless those costs are 

included as part of tuition and fees), and 

the cost of room and board if the 

institution provides it. The institution 

may include information on other costs, 

such as transportation and living 

expenses, but in all cases must provide 

a Web link, or access, to the 

institutional information it is required 

to provide under § 668.43(a). 

Changes: Section 668.6(b) has been 

revised to provide that an institution 

must disclose, for each program, all of 

the required information in its 

promotional materials and on a single 

Web page. The institution must provide 

a prominent and direct link to this page 

on the program home page of its Web 

site or from any other page containing 

general, academic, or admissions 

information about the program. In 

addition, this section is revised to 

specify that an institution must disclose 

the total amount of tuition and fees it 

charges a student for completing the 

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program within normal time, the typical 

costs for books and supplies (unless 

those costs are included as part of 

tuition and fees), and the amount of 

room and board, if applicable. The 

institution may include information on 

other costs, such as transportation and 

living expenses, but must provide a Web 

link, or access, to the program cost 

information it makes available under 

§ 668.43(a). 

One-Year Program 

Comment: A commenter supported 

removing references to degree programs 

in proposed § 600.4(a)(4)(iii) believing it 

would avoid confusion and 

misrepresentation of the programs 

subject to the proposed regulations on 

gainful employment. Another 

commenter noted that for technical 

reasons the Department should have 

instead revised § 600.4(a)(4)(i)(C). 

To better understand which programs 

would be subject to the reporting and 

disclosure requirements in proposed 

§ 668.6, another commenter asked the 

Department to clarify whether the 

phrase ‘‘fully transferable to a 

baccalaureate degree’’ means that every 

credit must be transferable to that 

degree. 

Discussion: A program is fully 

transferable to a baccalaureate degree if 

it meets the requirements in 

§ 668.8(b)(1)(ii) and qualifies a student 

for admission into a third year of a 

bachelors degree program. 

We agree that proposed 

§ 600.4(a)(4)(iii) should be removed in 

order to avoid confusion and 

misrepresentation of the programs 

subject to the regulations on gainful 

employment. We also agree that 

§ 600.4(a)(4)(i)(C) should be revised to 

state that an institution of higher 

education provides an educational 

program that is at least a one academic 

year training program that leads to a 

certificate, or other nondegree 

recognized credential, and prepares 

students for gainful employment in a 

recognized occupation. 

Changes: Proposed § 600.4(a)(4)(iii) 

has been removed and § 600.4(a)(4)(i)(C) 

has been revised as noted in the 

discussion above. 

Definition of a Credit Hour (§§ 600.2, 

602.24, 603.24, and 668.8) 

General 

Comment: Several commenters 

supported the Secretary’s proposed 

definition of a credit hour, including a 

commenter representing institutional 

registrars and admissions officers. A few 

commenters believed that institutions 

are already using this definition. One 

commenter believed that the Secretary’s 

definition aligned with New York 

State’s regulatory definition of a 

semester hour. 

Discussion: We appreciate the support 

of those commenters who approved of 

the definition of a credit hour. Like 

some commenters, we believe that many 

institutions and others, including States, 

are already following the definition of a 

credit hour or a reasonably comparable 

standard that would require minimal or 

no adjustment for purposes of 

participating in Federal programs. 

Changes: None. 

Comment: Several commenters 

believed that during the negotiated 

rulemaking process, Federal and nonFederal negotiators reached tentative 

agreement on proposed credit-hour 

regulations that did not include a 

definition of a credit hour. A few 

commenters believed that during the 

negotiated rulemaking process, most 

non-Federal negotiators were opposed 

to a Federal credit-hour definition. 

Several of these commenters believed 

that the Department should adhere to 

the proposed regulations agreed upon 

during the negotiated rulemaking 

process and should remove the credithour definition from the regulations. 

Other commenters believed that the 

Federal and non-Federal negotiators 

agreed to proposed regulations that 

relied more heavily on accrediting 

agencies and institutions to determine 

credit assignment policies. These 

commenters believed that the proposed 

regulations did not appropriately reflect 

this position. 

Discussion: The commenters are 

correct in noting that during the 

negotiated rulemaking process tentative 

agreement was reached on the proposal 

related to credit hours that did not 

include a definition of a credit hour as 

proposed by the Department. Tentative 

agreement was reached by removing the 

definition from the proposals to satisfy 

one non-Federal negotiator. The Federal 

and non-Federal negotiators tentatively 

agreed to proposed credit hour 

regulations that relied heavily on 

accrediting agencies and institutions in 

determining the appropriate credit 

hours that represented a student’s 

academic work. We also agree with the 

commenters who proposed continuing 

this reliance to a significant degree, and 

we believe that this reliance is reflected 

in the final regulations. We note that 

tentative agreements reached during the 

negotiated rulemaking meetings are not 

binding on the Department in form or 

substance. It is not unusual for most if 

not all of the substance of a tentative 

agreement to be included in a proposed 

regulation because the Department sees 

the benefits that are realized through the 

discussion process. In some cases, 

though, changes may be made upon 

further reflection, or to reinstate 

concepts that may have been removed 

in furtherance of an overall consensus 

that was not achieved. In the case of the 

definition of a credit hour we 

determined that the proposed definition 

of a credit hour is necessary to establish 

a basis for measuring eligibility for 

Federal funding. This standard measure 

will provide increased assurance that a 

credit hour has the necessary 

educational content to support the 

amounts of Federal funds that are 

awarded to participants in Federal 

funding programs and that students at 

different institutions are treated 

equitably in the awarding of those 

funds. 

Changes: None. 

Institutional Determination and 

Flexibility 

Comment: Many commenters believed 

that institutions and accrediting 

agencies should have the ultimate 

responsibility for determining academic 

credit. Several commenters believed 

that institutions must have the 

discretion to use their existing systems 

of self-review and faculty involvement 

to determine the appropriate credit to 

assign to academic activities. Some of 

these commenters also believed that 

institutional processes are solely 

capable of considering the unique 

qualities of each class, program, 

professor, and institution. Two 

commenters believed that any problems 

with credit assignment can be addressed 

through existing institutional review 

procedures. 

A few commenters agreed with the 

provision in proposed paragraph (3) of 

the credit-hour definition allowing 

institutions to provide reasonable 

‘‘equivalencies’’ for the amount of work 

specified in proposed paragraph (1) of 

the definition. Two of these commenters 

believed that this provision allows 

institutions to use alternative methods 

of instruction and measures of credit 

that are more appropriate for 

institutions with nontraditional 

students entering the modern workforce. 

These commenters suggested making 

proposed paragraph (3) the first 

paragraph in the credit-hour definition 

in § 600.2. Another of these commenters 

believed that this provision would allow 

institutions the flexibility to use and 

develop innovative forms of course 

content delivery. 

Several commenters believed that a 

Federal definition of a credit hour 

would undermine the integrity of the 

American higher education system 

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which they believed has been effective 

at assigning credit for over 100 years. 

One commenter noted that the 

education community has been able to 

reach consensus on credit 

determinations despite the lack of a 

uniform definition. 

Many commenters believed that credit 

hours are fundamentally measurements 

of academic achievement and others 

believed that the Secretary’s only reason 

for defining a credit hour is to have a 

standard measure for determining 

eligibility for and distribution of title IV, 

HEA program funds. The commenters 

believed that credit hours should not be 

treated as fiscal units. One of these 

commenters contended that the systems 

of assigning academic credit and 

determining the distribution of title IV, 

HEA program funds are different and 

should be kept separate. Another 

commenter expressed concern that 

treating credit hours as fiscal units 

would cause the Federal Government to 

give consideration to fiscal matters 

above all others. 

Several commenters believed that the 

Secretary’s proposed definition of a 

credit hour is too restrictive and does 

not account for institutional or 

programmatic variances. These 

commenters believed that a Federal 

credit-hour definition is inapplicable to 

a diverse educational system composed 

of different types of institutions, 

programs, and course formats. 

One commenter expressed concern 

that the proposed credit-hour definition 

did not account for events that may 

occur within institutions’ academic 

calendars, such as Federal and religious 

holidays, natural disasters, or campus 

safety issues. This commenter believed 

that these events may prohibit 

institutions’ compliance with proposed 

paragraph (1) of the credit-hour 

definition because institutions may not 

meet the requirements for classroom 

instruction or minimum weeks in a 

semester. 

A few commenters believed that the 

proposed credit-hour definition needed 

more specificity in proposed paragraph 

(1) with regard to the quantity of time 

that constitutes a credit hour. One 

commenter suggested revising the 

proposed definition to specifically state 

that a credit hour consists of 50 minutes 

of instructor contact for every credit 

earned in a 16 week semester and two 

hours of out-of-class work for each 

credit. Another commenter suggested 

defining a credit hour in proposed 

paragraph (1) of the definition in terms 

of clock hours. 

One commenter suggested 

generalizing the proposed definition of 

a credit hour to state: (1) A credit hour 

is a unit of measure associated with the 

achievement of prescribed learning 

outcomes for a particular course of 

study, regardless of instructional 

delivery, (2) each institution 

participating in title IV, HEA programs 

must define, document, and 

consistently apply its process for the 

determination of credit for the 

achievement of learning outcomes, and 

(3) some institutions may also adhere to 

a standard academic credit conversion 

rate as defined by their accrediting 

agency or State agency. 

One commenter believed that all 

accrediting agencies should be required 

to use a more general definition of a 

credit hour wherein a semester hour 

consists of at least 15 hours of classroom 

contact; 30 hours of supervised 

laboratory instruction, shop instruction, 

or documented independent study 

activities; or not fewer than 45 hours of 

externship, internship, or work related 

experience. This commenter believed 

that a quarter hour should consist of at 

least 10 hours of classroom contact; 20 

hours of supervised laboratory 

instruction, shop instruction, or 

documented independent study 

activities; or not fewer than 30 hours of 

externship, internship, or work related 

experience. 

One commenter believed that the 

proposed credit-hour definition 

provided institutions with too much 

autonomy to determine an equivalent 

amount of work as defined in proposed 

paragraph (1) because there are no 

standard measures for student learning 

outcomes. This commenter suggested 

revising proposed paragraph (1) to 

equate classroom time with direct 

faculty instruction and three hours of 

laboratory work with one hour of 

classroom time and two hours of out-ofclass work. The commenter also 

suggested revising proposed paragraphs 

(2) and (3) to require institutions to 

establish and document academic 

activities equivalent to the work defined 

in proposed paragraph (1) and revising 

proposed paragraph (3) to require 

institutions to compare student 

achievement to the intended outcomes 

assigned and student achievement 

attained for credit hours measured 

under proposed paragraph (1). 

Discussion: The credit-hour definition 

in § 600.2 and the provisions in 

§§ 602.24(f) and 603.24(c) were 

designed to preserve the integrity of the 

higher education system by providing 

institutions, accrediting agencies, and 

State agencies recognized under 34 CFR 

part 603 with the responsibility for 

determining the appropriate assignment 

of credit hours to student work. Under 

proposed §§ 602.24(f) and 603.24(c), the 

institution’s accrediting agency, or 

recognized State agency if, in lieu of 

accreditation, the institution is 

approved by one of the four State 

agencies recognized under 34 CFR part 

603, would be responsible for reviewing 

and evaluating the reliability and 

accuracy of an institution’s assignment 

of credit hours in accordance with the 

definition of credit hour in § 600.2. 

These final regulations employ these 

basic principles of reliance on 

institutions and on accrediting agencies 

or, if appropriate, recognized State 

agencies, for ensuring institutions’ 

appropriate determinations of the credit 

hours applicable to students’ 

coursework. 

The credit-hour definition in § 600.2 

is intended to establish a quantifiable, 

minimum basis for a credit hour that, by 

law, is used in determining eligibility 

for, and the amount of, Federal program 

funds that a student or institution may 

receive. We believe that the definition of 

a credit hour in § 600.2 is consistent 

with general practice, provides for the 

necessary flexibilities, and may be used 

by institutions in their academic 

decision-making processes and 

accrediting agencies and recognized 

State agencies in their evaluation of 

institutions’ credit assignments. 

We note, however, that institutions, 

accrediting agencies recognized under 

34 CFR part 602, and State agencies 

recognized under 34 CFR part 603 are 

required to use the definition in § 600.2 

for Federal program purposes such as 

determining institutional eligibility, 

program eligibility, and student 

enrollment status and eligibility. We 

believe that in most instances the 

definition will generally require no or 

minimal change in institutional practice 

to the extent an institution adopts the 

definition for its academic purposes 

rather than maintaining a separate 

academic standard. 

The provisions in §§ 600.2, 602.24, 

and 603.24 neither limit nor prescribe 

the method or manner in which 

institutions may assign credits to their 

courses for academic or other purposes 

apart from Federal programs. These 

regulations do not require institutions to 

adopt the definition of a credit hour in 

§ 600.2 in lieu of existing institutional 

measurements of academic 

achievement, but rather to quantify 

academic activity for purposes of 

determining Federal funding. An 

institution will be able to continue 

using the long-standing creditassignment practices that it has found to 

be most effective for determining credit 

hours or equivalent measures for 

academic purposes, so long as it either 

ensures conformity, or uses a different 

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measure, for determining credit hours 

for Federal purposes. This position is 

consistent with the application of other 

Federal program requirements. For 

example, an institution may choose to 

define full-time enrollment status in a 

semester for academic purposes as 15 

semester hours while it defines full-time 

for title IV, HEA program purposes as 12 

semester hours under the minimum 

requirements of the definition of fulltime in § 668.2. 

We do not agree that the proposed 

definition is too restrictive or is 

inapplicable in a diverse educational 

system. Nor do we believe that the 

definition would prevent institutions 

from taking into consideration events 

such as Federal and religious holidays 

or campus safety issues. In the event of 

natural disasters, the Department has 

consistently provided guidance on how 

the regulations may be applied in such 

exceptional circumstances. The credithour definition allows an institution to 

establish an academic calendar that 

meets its needs and its students’ needs, 

while ensuring a consistent measure of 

students’ academic engagement for 

Federal purposes. 

We do not agree with the commenters 

that paragraph (1) of the proposed 

credit-hour definition needs more 

specificity of the term ‘‘one hour.’’ We 

believe that it is unnecessary to define 

one hour as either 50 minutes or one 

clock hour because the primary purpose 

of paragraph (1) of the proposed credithour definition is to provide institutions 

with a baseline, not an absolute value, 

for determining reasonable 

equivalencies or approximations for the 

amount of academic activity defined in 

the paragraph. 

We do not agree that the proposed 

definition should be more generalized 

or that differing standards should be 

adopted. A credit hour is a basic unit for 

determining the eligibility of recipients 

for, and the amount of, Federal 

assistance that may be provided to 

parties participating in Federal 

programs. We believe the proposed 

definition provides a consistent basis for 

the equitable treatment of participants 

and recipients. 

Changes: We have revised the 

definition of credit hour to clarify the 

basic principles applied in the proposed 

definition of a credit hour to delineate 

further that it is an institution’s 

responsibility to determine the 

appropriate credit hours or 

equivalencies. The revision requires 

that, except as provided in § 668.8(k) 

and (l), an institution determines the 

credit hours applicable to an amount of 

work represented in intended learning 

outcomes and verified by evidence of 

student achievement that reasonably 

approximates not less than the amount 

of work described in paragraph (1) or (2) 

of the definition of credit hour in 

§ 600.2 of the final regulations. The final 

regulations also continue to provide that 

institutions may establish other 

measures that approximate the 

minimum standards in paragraph (1) or 

(2) of the definition in § 600.2, thus 

permitting each institution to consider 

the unique characteristics of its course 

and program offerings, as well as, its 

distinctive student populations. 

Comment: Many commenters believed 

that credit hours do not represent a 

reasonable assessment of student 

learning. Many commenters believed 

that the Secretary’s proposed definition 

of a credit hour dictates that the 

outdated concept of ‘‘seat time’’ is the 

main metric by which program 

substance should be judged rather than 

the appropriate focus on student 

learning outcomes. 

A few commenters believed that a 

credit hour, and in particular, the 

Carnegie Unit, does not account for 

academic rigor. These commenters 

believed that a student’s completion of 

a specified number of hours of direct 

instruction and out-of-class work does 

not provide assurance that the student 

has acquired a certain level of 

competency. 

Two commenters believed that the 

proposed credit-hour definition does 

not consider the actual behavior of 

students in American higher education. 

One commenter believed that the 

typical student does not spend two 

hours on out-of-class work for every 

hour of instruction. The other 

commenter believed that there has not 

been enough research into the amount 

of time that students are engaged in 

academic activities. 

One commenter believed that the 

Secretary’s proposed credit-hour 

definition put too much emphasis on 

work outside of class instead of student 

learning outcomes. 

A few commenters believed that 

credit hours are measurements of 

educational inputs. One commenter 

stated that credit hours, when used to 

determine eligibility for financial aid, 

are only proximate preconditions for 

student learning and are equivalent to 

other input measures such as scores on 

standardized tests, high school GPAs, or 

faculty degrees. 

One commenter believed that the 

credit-hour definition would force 

institutions to treat all students the 

same, regardless of ability, as long as 

they are in class for the specified 

number of hours. 

One commenter expressed concern 

that the Secretary’s proposed credithour definition does not consider 

current efforts in higher education to 

increase institutional accountability. 

This commenter believed that the 

proposed credit-hour definition would 

undermine institutional efforts to assess 

student learning outcomes. 

Discussion: We do not agree with the 

commenters that the credit-hour 

definition emphasizes the concept of 

‘‘seat-time’’ as the primary metric for 

determining student work. We believe 

that the definition of a credit hour in 

§ 600.2 in these final regulations 

emphasizes that institutions may award 

credit to courses for an amount of work 

represented by verifiable student 

achievement of institutionally 

established learning outcomes. 

Eligibility for Federal programs 

requires that institutions are able to 

demonstrate that the amount of work in 

a course assigned credit for Federal 

purposes will constitute a reasonable 

approximation of the amount of 

academic activity defined in paragraph 

(1) of the definition of credit hour in 

§ 600.2. Institutions are responsible and 

accountable for demonstrating that each 

course has the appropriate amount of 

educational content to receive credit for 

Federal program purposes and for 

students to achieve the level of 

competency defined by institutionally 

established course objectives. 

Changes: None. 

Comment: Many commenters believed 

that a Federal credit-hour definition will 

stifle institutions’ ability to develop new 

and innovative education models, 

especially with regard to delivery 

methods. Several commenters believed 

that institutions’ ability to respond 

creatively to changing pedagogies, 

circumstances, and student needs 

would be limited under the proposed 

credit-hour definition. 

A few commenters believed that the 

proposed credit-hour definition would 

limit innovation in education at a 

critical time. One of these commenters 

believed that because of the economic 

recession, institutions need to be more 

innovative in developing alternative 

delivery methods. One commenter 

believed that institutions must be able 

to respond to the rapidly changing 

education sector. Another commenter 

believed that other nations are currently 

developing new educational models and 

the United States will fall behind these 

nations in education. 

Many commenters believed that the 

Secretary’s proposed credit-hour 

definition would have a negative impact 

on alternative delivery methods such as 

compressed and accelerated programs, 

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online and distance education 

programs, and hybrid programs with 

online and in-class components. A few 

commenters believed that the proposed 

credit-hour definition would 

particularly suppress innovation of 

delivery methods because institutions 

would be focused on ensuring they meet 

the Federal definition of a credit hour 

and not on the desired academic 

outcomes. These commenters believed 

that institutions would not be able to 

respond to changing student 

populations by diversifying delivery 

methods. A few commenters noted that 

minority students and nontraditional 

students such as veterans, active 

military personnel, and working adults 

would be particularly harmed because 

they rely on programs offered through 

alternative delivery methods. 

Several commenters believed that the 

proposed credit-hour definition is not 

applicable to alternative delivery 

methods. A few commenters believed 

that credit hours are not compatible 

with technological advancements in 

education. These commenters believed 

that the proposed credit-hour definition 

would minimize the use of technology 

in education. Some commenters 

believed that proposed paragraph (1) 

assumed a classroom or lecture based 

model of instruction and was not 

applicable to online or hybrid programs. 

A few commenters questioned how to 

measure direct faculty instruction with 

regard to an online or hybrid program 

when no physical classroom exists. Two 

commenters noted that in distance 

education and hybrid programs, the 

concept of contact hours does not apply. 

The commenters recommended 

expanding paragraph (3) of the proposed 

definition to specifically address that 

institutions offering nontraditional 

programs including distance delivery 

programs and accelerated programs may 

provide institutionally established 

equivalencies for the amount of work 

required in paragraph (1) within the 

discretion of the institution. 

Several commenters believed that the 

Secretary’s proposed credit-hour 

definition would negatively impact how 

earned credits are calculated for online 

and hybrid courses. 

One commenter believed that the 

Secretary’s proposed credit-hour 

definition represented an effort by the 

Secretary to reinstate a regulation that 

had been removed in 2002 which 

required higher education programs that 

did not operate in a standard semester, 

trimester, or quarter system to offer a 

minimum of 12 hours of course work 

per week to maintain eligibility for title 

IV, HEA program funds. 

Two commenters believed that the 

Secretary’s proposed credit-hour 

regulations would legitimize 

institutions’ use of the Carnegie Unit, 

which generally consists of a ratio of 

two hours of work outside of class for 

every hour of classroom time, and 

increase scrutiny on institutions that do 

not currently use the Carnegie Unit. 

These commenters believed that under 

the proposed regulations, an 

institutional credit system that is not 

currently based on the Carnegie Unit 

would be undervalued because these 

institutions would have a significant 

burden to develop and demonstrate 

student achievement of learning 

outcomes that their peers using the 

Carnegie Unit would not have. 

Discussion: We do not agree with the 

commenters that the credit-hour 

definition in § 600.2 will limit 

institutions’ flexibility to creatively 

respond to innovations in educational 

delivery methods and changing student 

needs. A fundamental component of the 

credit-hour definition in § 600.2 

provides that institutions must 

determine the academic activity that 

approximates the amount of work 

defined in paragraph (1) based on 

institutionally established learning 

outcomes and verifiable student 

achievement. The definition allows 

institutions that have alternative 

delivery methods, measurements of 

student work, or academic calendars to 

determine intended learning outcomes 

and verify evidence of student 

achievement. 

All institutions participating in title 

IV, HEA programs have a responsibility 

to ensure appropriate treatment of 

Federal funds, regardless of course 

format or educational delivery method. 

The definition in § 600.2 provides 

institutions with a baseline for 

determining the amount of student work 

necessary for title IV, HEA program 

eligibility, but does not specify the 

particular program formats or delivery 

methods that institutions must use. 

The credit-hour definition is not a 

reinstatement of the old ‘‘12-hour rule,’’ 

that was removed from the Department’s 

regulations in 2002. The 12-hour rule 

required programs that did not operate 

in standard semester-, trimester-, or 

quarter-term systems to offer a 

minimum of 12 hours of course work 

per week to maintain eligibility for 

Federal programs. The credit-hour 

definition in these final regulations 

applies to all institutions, regardless of 

whether they operate on a standard-term 

academic calendar. In addition, while 

the old 12-hour rule required 12 hours 

of instruction, examination, or 

preparation offered by an institution per 

week, the credit-hour provisions in 

§ 600.2 require institutions to provide 

students with an amount of work 

equivalent to the amount of work 

described in paragraph (1) of the credithour definition. 

Changes: None. 

Comment: Several commenters 

objected to proposed paragraph (3) of 

the credit-hour definition. A few 

commenters believed that paragraph (3) 

of the proposed credit-hour definition is 

vague regarding the entity responsible 

for determining ‘‘reasonable 

equivalencies.’’ A few commenters 

believed that the proposed credit-hour 

provisions did not provide enough 

guidance on what academic activities 

the Department would accept as 

reasonable equivalencies for the amount 

of work defined in proposed paragraph 

(1). A few commenters believed that the 

term ‘‘reasonable’’ put the Department in 

the position of final arbiter on the 

determination of reasonable 

equivalencies. 

One commenter believed that 

proposed paragraph (3) created 

uncertainty and the potential for 

litigation related to whether an 

institution’s proposed equivalency for 

the work defined in paragraph (1) is 

reasonable. This commenter expressed 

concern that institutions would be liable 

for using equivalencies that the 

Department viewed as unacceptable. 

One commenter asked for clarification 

on the types of corrective actions that 

the Department can take to enforce the 

provisions of the credit-hour definition 

in proposed § 600.2. 

Discussion: Institutions have a 

responsibility to ensure that the use of 

Federal program funds is in accordance 

with applicable regulations. In addition, 

the Department has the oversight 

responsibility to determine that 

institutions are acting in accordance 

with the definition of a credit hour in 

these final regulations to ensure the 

appropriate use of Federal program 

funds. It is therefore necessary and 

appropriate for the Secretary to review 

an institution’s assignment of credit for 

Federal purposes and an accrediting 

agencies’ or State agencies’ evaluations 

of an institution’s credit polices and 

their implementation to determine 

whether an institution is assigning 

credit hours for Federal program 

purposes in accordance with these final 

regulations. If an institution is found to 

be out of compliance for Federal 

program purposes with the credit-hour 

definition in § 600.2, the amount or 

Title IV, HEA funds awarded under the 

incorrect assignment of credit hours 

may be recalculated to establish a 

repayment liability owed by the 

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institution. In cases where the amount 

of credit hours assigned to a program is 

significantly overstated, the Secretary 

may fine the institution or limit, 

suspend, or terminate its participation 

in Federal programs. 

Changes: None. 

Comment: Some commenters believed 

that the proposed credit-hour definition 

would alter institutions’ current credit 

assignments and courses. A few of these 

commenters believed that a Federal 

definition of a credit hour sets an 

expectation that institutions should 

assign additional credit to courses if the 

work exceeds the amount defined in the 

proposed definition. One commenter 

believed that the proposed definition 

would increase the amount of class time 

that students are required to complete in 

order to earn credit. Another commenter 

believed that the proposed definition 

could cause institutions to increase 

courses’ lecture or theory content and 

decrease hands-on training. 

One commenter believed that the 

proposed credit-hour definition would 

force accrediting agencies to impose 

homework requirements on vocational 

institutions. 

Discussion: The credit-hour definition 

does not require institutions to alter 

their assignment of credit to courses for 

academic purposes; however, 

institutions have the responsibility to 

demonstrate that credit hours assigned 

to courses for Federal program purposes 

adhere to the minimum standards of the 

credit-hour definition in § 600.2. If an 

institution determines that its current 

assignment of credits to its programs for 

Federal program purposes does not 

satisfy the minimum standards in the 

regulation, the institution will either 

have to reduce the credits associated 

with the program, increase the work 

required for the program, or both. 

There is no requirement for 

institutions to assign additional credit to 

courses if the amount of work exceeds 

the amount described in paragraph (1) 

of the credit-hour definition. We have 

revised the credit-hour definition in 

§ 600.2 to clarify that the amount of 

work described in paragraph (1) 

represents a minimum acceptable level 

of academic activity for which credit 

can be awarded to constitute a credit 

hour for Federal purposes. Institutions 

may use their discretion to assign 

additional credit if the amount of work 

for a course justifies such an assignment 

of credit in accordance with § 600.2. 

There is no requirement under the 

credit-hour definition that would force 

accrediting agencies to impose 

homework requirements on vocational 

institutions. In general, institutions will 

be assessed to determine if they have 

established credit hours for title IV, 

HEA program purposes that meet at 

least the minimum standards in the 

regulation. Unless the program is 

subject to the credit-to-clock-hour 

conversion requirements in § 668.8(l) 

and (k), an institution would be 

required to determine the appropriate 

credit hours in accordance with 

paragraphs (1) and (2) of the credit-hour 

definition in § 600.2 of these final 

regulations for a program or coursework 

in a program that has no student work 

outside the classroom. 

Changes: We have revised the credithour definition in § 600.2 to clarify that 

the amount of work specified in 

paragraph (1) is a minimum standard 

and that there is no requirement for the 

standard to be exceeded. 

Comment: One commenter believed 

that the proposed provisions in § 600.2 

did not appropriately address faculty 

workloads or faculty time in class. 

Discussion: We do not believe that 

§ 600.2 should address faculty 

workloads or faculty time in class as 

these issues are institutional 

administrative considerations outside 

the scope of these final regulations 

which set minimum standards for the 

measurement of credit hours. 

Changes: None. 

Comment: One commenter questioned 

why the proposed credit-hour 

regulations did not address § 668.9 

which provides in paragraph (b) that a 

public or private nonprofit hospitalbased school of nursing that awards a 

diploma at the completion of the 

school’s program of education is not 

required to apply the formula contained 

in § 668.8(l) to determine the number of 

semester, trimester, or quarter hours in 

that program for purposes of calculating 

Title IV, HEA program funds. This 

commenter questioned whether forprofit hospital-based nursing programs 

would be subject to the proposed 

provisions in § 668.8(k) and (l). 

Discussion: Section 481A of the HEA 

and § 668.9(b) specify that any 

regulations promulgated by the 

Secretary concerning the relationship 

between clock hours and semester, 

trimester, or quarter hours in calculating 

student grant, loan, or work assistance 

under the title IV, HEA programs do not 

apply to a public or private nonprofit 

hospital-based school of nursing that 

awards a diploma at the completion of 

the school’s program of education. 

Changes: None. 

Comment: One commenter believed 

that institutions would need an 

accrediting or State agency’s review of 

their programs’ compliance with the 

proposed credit-hour definition in 

§ 600.2. The commenter believed that 

the regulations are unclear on how 

programs should operate in the interim. 

One commenter expressed concern 

that waiting for accrediting agencies to 

revise their standards after the proposed 

regulations are finalized would be 

detrimental to institutions offering 

programs in alternative formats. 

One commenter believed that 

institutions will be developing new 

credit policies and should be afforded 

an adjustment period to receive and 

react to guidance from State agencies on 

their credit assignment policies. 

Discussion: The provisions in 

§§ 602.24 and 603.24 provide that an 

institution must have a process for 

assigning credit that meets its 

accrediting agency’s or State agency’s 

standards, as well as, the credit-hour 

definition in § 600.2. An institution’s 

credit assignment process is subject to 

review by its accrediting agency or, in 

some cases, a State agency recognized 

under 34 CFR part 603. We believe that 

institutions already have processes for 

assigning credit and, to the extent that 

these existing processes do not comply 

with these final regulations, institutions 

will need to revise their credit 

assignments to comply with the credithour definition in these final regulations 

for Federal program purposes. During 

the interim period between the effective 

date of these regulations and an 

accrediting agency’s or State agency’s 

review of institutions’ compliance with 

the credit-hour definition in § 600.2, an 

institution is responsible and 

accountable for ensuring that its credithour assignments conform to the 

provisions of the credit-hour definition 

in § 600.2 of these final regulations and 

that its processes are in accord with its 

designated accrediting agency’s or 

recognized State agency’s requirements. 

Changes: None. 

Out-of-Class Student Work 

Comment: Several commenters did 

not agree with the component of 

proposed paragraph (1) of the credithour definition related to student work 

outside of class. A few commenters 

believed that an institution cannot 

determine how much time students 

spend on work outside of class and that 

quantifying work outside of the class 

does not account for variations in 

students’ learning abilities and styles. 

One commenter believed that the 

Secretary’s proposed credit-hour 

definition did not take into account the 

nature of different courses. This 

commenter believed that certain courses 

require more direct faculty instruction 

and supervision while other courses 

may require more study outside of the 

classroom. 

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Two commenters did not agree with 

the Secretary’s proposed credit-hour 

definition with regard to the ratio of 

classroom time to time outside of class 

and suggested revising the proposed 

definition to allow for more direct 

classroom instruction. These 

commenters recommended revising 

proposed paragraph (1) to define a 

credit hour as one hour of classroom or 

direct faculty instruction and a 

minimum of two hours of student work 

in or out of the classroom. 

One commenter recommended that 

the Department distinguish class time 

from time outside of class by making 

explicit in the proposed definition that 

class time refers to instruction. 

One commenter asked for clarification 

of proposed paragraph (2) regarding 

whether a credit hour awarded for 

laboratory work must consist of onehour work in the laboratory and two 

hours outside the laboratory performing 

either preparation or follow up 

activities. 

Discussion: Institutions must 

demonstrate that the credit hours 

awarded for the amount of academic 

work necessary for Federal program 

purposes approximates the amount of 

work defined in paragraph (1) of the 

definition of credit hour in § 600.2. The 

credit-hour definition in § 600.2 sets a 

minimum standard and institutions may 

offer additional hours of instructional 

time to courses or provide for additional 

student work outside of class beyond 

what is specified in paragraph (1) of the 

definition at their discretion. We do not 

believe it is necessary to decrease the 

amount of out-of-class time specified in 

paragraph (1) of the definition. 

We do not want to limit the 

interpretation of class time only to 

direct instruction in order to take into 

consideration other in-class activities 

such as examinations. Similarly, the 

provisions related to laboratory work in 

paragraph (2) of the definition do not 

require one hour of work in the 

laboratory and two hours of out-of-class 

work related to the laboratory. 

Paragraph (2) of the credit-hour 

definition allows institutions to use 

their discretion to determine the in-class 

and out-of-class components for 

laboratory work to the extent the credit 

awarded reasonably approximates the 

requirements of paragraph (1) of the 

credit-hour definition in § 600.2. An 

institution’s basis for making this 

determination would be subject to 

review by its accrediting agency, the 

State agency recognized under 34 part 

603, and the Department in order to 

demonstrate that it was reasonable. 

Changes: None. 

Authority and Need To Regulate 

Comment: Several commenters 

believed that the Secretary does not 

have the legal authority to promulgate 

the proposed regulations in §§ 600.2, 

602.24, 603.24, and 668.8. These 

commenters believed the credit-hour 

definition in proposed § 600.2 

represented a Federal intrusion into 

academic matters. A few commenters 

believed that the General Education 

Provisions Act (20 U.S.C. 1232a) and the 

Department of Education Organization 

Act (20 U.S.C. 3403) prohibit the 

Secretary from exercising undue control 

of curricula, programs, administration, 

and personnel of educational 

institutions. These commenters believed 

that the Secretary needs explicit 

Congressional authorization to 

promulgate regulations that intrude in 

the academic decision-making process 

at institutions. Two commenters 

recommended including language in the 

final regulations reaffirming that it is 

appropriate for institutions and 

accrediting agencies to address student 

achievement, but that it is not within 

the Secretary’s authority. 

Many commenters believed that a 

Federal definition of a credit hour 

represents a Federal intrusion into a 

core academic issue and the academic 

decision-making process. A few of these 

commenters expressed concern that a 

Federal definition of a credit hour 

would set a precedent for Federal 

interference in other academic matters. 

One commenter representing 

institutional registrars and admissions 

officers believed the proposed definition 

of a credit hour should be revised to 

require an institution to make a 

reasonable determination of whether the 

institution’s assignment of credit hours 

conforms to commonly accepted 

practice in higher education as 

demonstrated in the portability of such 

credits to other institutions of higher 

education offering similar programs. 

One commenter believed that the 

Secretary is not authorized to make 

academic decisions and did not want 

institutions to be subject to any adverse 

administrative action by the Department 

if the Department did not concur with 

an institution’s or accrediting agency’s 

determination of appropriate credit. 

This commenter suggested that the final 

regulations specify that the credit hours 

awarded for a program shall be deemed 

in compliance with the definition of a 

credit hour as defined in § 600.2, where 

the credit hours awarded have been 

approved by the institution’s accrediting 

agency based upon a review performed 

in accordance with § 602.24(f). 

Several commenters believed that the 

Secretary’s proposed credit-hour 

definition was incongruent with 

existing Federal laws, State regulations, 

or accrediting agency policies. 

One commenter believed that the 

proposed credit-hour definition in 

§ 600.2 could conflict with the 

Americans with Disabilities Act of 1990, 

as amended, which requires entities 

such as institutions of higher education 

to make reasonable accommodations for 

students with disabilities. 

Several commenters believed that the 

proposed credit-hour definition would 

force some institutions that use credit 

hours to use clock hours. These 

commenters believed that this change 

would conflict with some State 

regulations and is not required by any 

other Federal agency. 

A few commenters believed that the 

proposed credit-hour regulations were 

harmful to institutions that had been 

required to convert from clock hours to 

credit hours by State mandates. These 

commenters believed that these 

institutions would be at a disadvantage 

compared to institutions that were 

previously using credit hours. One 

commenter recommended that the 

Department allow institutions that have 

converted to credit hours based on State 

mandates to use State-mandated clockto-credit-hour conversion rates to 

determine Federal program eligibility. 

Several commenters believed that the 

proposed credit-hour definition may 

directly violate some State regulations 

because it inherently requires that 

institutions take attendance. 

Discussion: The Secretary is 

authorized under 20 U.S.C. 1221e–3, to 

make, promulgate, issue, rescind, and 

amend rules and regulations governing 

the manner of operation of, and 

governing the applicable programs 

administered by, the Department. The 

intent of the regulations in §§ 600.2, 

602.24, 603.24, and 668.8 is not to 

interfere with the academic decisionmaking processes at institutions, 

accrediting agencies, and recognized 

State agencies, but to rely on these 

processes to ensure the integrity of the 

Federal programs, including the title IV, 

HEA programs. Fundamental to these 

decision-making processes is the 

measurement of the credit used to 

determine the amounts of title IV, HEA 

program funds provided to eligible 

students who are enrolled in eligible 

programs. Since the regulations 

establish a minimum standard, and 

institutions may choose to include more 

work for their credit hours than the 

minimum amount, credit hours at one 

institution will not necessarily equate to 

credit hours at another institution for a 

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similar program. Thus, we do not agree 

with the recommendation that an 

institution should be required to 

demonstrate the portability of such 

credits to other institutions of higher 

education offering similar programs as 

we believe such a requirement would, 

in fact, interfere with the academic 

decision-making processes at 

institutions. 

These regulations should not be 

inconsistent with current Federal laws, 

State regulations, and accrediting 

agencies’ policies because of their 

intended narrow application to the 

determination of eligibility for, and 

distribution of, Federal program funds. 

Therefore, to the extent an institution 

determines that it may be necessary to 

use a current credit assignment system, 

for example, to comply with other 

requirements such as State mandates, an 

institution may continue using its 

current system for purposes unrelated to 

Federal programs. 

We do not agree with the commenter 

that the credit-hour definition in § 600.2 

conflicts with the Americans with 

Disabilities Act of 1990, as amended. 

The credit-hour definition in § 600.2 

does not prohibit institutions from 

developing policies for academically 

accommodating students with 

disabilities in accordance with the 

Americans with Disabilities Act of 1990, 

as amended. The credit-hour definition 

provides institutions with the flexibility 

to determine the appropriate credit 

hours or equivalencies to award for 

student work. 

Changes: None. 

Comment: Several commenters 

believed that a Federal definition of a 

credit hour is unnecessary. Many of 

these commenters noted that there has 

been no history of fraudulent practices 

in credit assignment by institutions in 

the nonprofit sector and that any fraud 

or abuses identified have been in the 

for-profit sector. Some of these 

commenters believed that it is unfair to 

apply a Federal definition of a credit 

hour to all institutions. One commenter 

suggested that the credit-hour definition 

apply only to institutions that are not 

accredited by regional or specialized 

accreditors. 

A few commenters believed that the 

Secretary’s only motive to define a 

credit hour stemmed from a report from 

the Department’s Inspector General 

regarding one regional accrediting 

agency’s accreditation of a for-profit 

institution it found to have 

inappropriate credit-hour policies. One 

commenter believed that although there 

have been problems reported with some 

institutions’ assignment of credit hours, 

these problems were primarily related to 

two regional accrediting agencies’ 

evaluation of degree programs and not 

with vocational career education 

programs. 

One commenter expressed concern 

that enforcement of institutions’ 

compliance with the credit-hour 

definition would be directed primarily 

at for-profit institutions even though 

there have been inappropriate credit 

awarding practices at nonprofit 

institutions as well. 

A few commenters believed that 

institutional credit assignment problems 

identified in the nonprofit sector are 

effectively resolved through the existing 

processes of accreditation and 

institutional self-review. 

One commenter suggested that 

instead of establishing a Federal credithour definition, the Department should 

require institutions to describe their 

credit assignment policies in their 

catalogs and promotional materials. 

Discussion: The Secretary did not 

intend to define a credit hour for 

Federal program purposes as a punitive 

measure against institutions in a 

particular sector or institutions that 

have engaged in inappropriate credit 

awarding practices in the past. Instead, 

the revised credit-hour definition is 

intended to provide a minimum, 

consistent standard for all institutions 

regardless of State, sector, or accreditor 

in determining the amount of student 

work necessary to award credit hours 

equitably for Federal program purposes. 

Changes: None. 

Comment: A few commenters 

believed that a Federal credit-hour 

definition is unnecessary because State 

agencies already review institutions’ 

credit-hour policies within their general 

oversight of an institution’s integrity. 

Discussion: We do not agree. Many 

State agencies do not perform such 

oversight activities nor do they use a 

uniform standard that would assure the 

equitable administration of Federal 

programs. 

Changes: None. 

Administrative Burden 

Comment: Several commenters 

believed that the proposed credit-hour 

provisions would cause an undue 

administrative and financial burden on 

institutions. A few commenters believed 

that institutions would be forced to 

focus their administrative resources on 

ensuring that their programs and 

courses conform to the Federal credithour definition and remain eligible for 

title IV, HEA program funds instead of 

other important academic matters such 

as ensuring program integrity. Other 

commenters believed that in order to 

comply with the proposed credit-hour 

definition, institutions would be 

burdened with administrative tasks 

such as reevaluating and significantly 

restructuring their credit-assignment 

systems, ensuring compliance with their 

accrediting agency’s standards, 

reconfiguring the use of classroom 

space, and recalculating students’ 

financial aid packages. 

One commenter believed that State 

agencies and accrediting agencies will 

be burdened by the requirement to focus 

on institutions at a more detailed level 

and will need to increase their staffs and 

costs to account for the increased 

workload. This commenter believed that 

increased costs would be passed to 

institutions, and subsequently, to 

students. 

Discussion: We do not believe that 

assigning credit to courses in 

accordance with the definition of credit 

hour in § 600.2 for Federal program 

purposes will cause any significant 

increase in administrative or financial 

burden on institutions. Institutions 

participating in Federal programs such 

as title IV, HEA programs are already 

responsible for ensuring the appropriate 

treatment of Federal funds, including 

accurate distribution of Federal funds to 

students. Institutions will not be 

required to change their current systems 

of awarding credit for academic 

purposes which in many instances will 

already be compliant with these final 

regulations, but some institutions will 

be required to make the necessary 

changes to ensure accurate and 

equitable credit assignments for Federal 

program purposes. 

We do not believe that the credit-hour 

definition will cause any significant 

increase in the administrative burden on 

accrediting agencies or State agencies 

recognized under 34 CFR part 603. 

Section 496(a)(5) of the HEA requires 

accrediting agencies recognized by the 

Secretary to evaluate an institution’s or 

program’s ‘‘measures of program length 

and the objectives of the degrees or 

credentials offered’’ which inherently 

requires accrediting agencies to evaluate 

the courses that constitute institutions’ 

programs. 

Changes: None. 

Accrediting Agency Procedures 

(§ 602.24(f)) 

Comment: Several commenters 

supported the addition of § 602.24(f). 

These commenters believed that 

accrediting agencies are the appropriate 

entities to ensure institutions’ 

compliance with the credit-hour 

provisions in § 600.2. 

Many other commenters believed that 

the proposed provisions in § 602.24(f) 

are unnecessary. These commenters 

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believed that the integrity of 

institutions’ assignment of credit hours 

is already reviewed and evaluated by 

accrediting agencies through a system of 

peer review. These commenters also 

believed that the peer-review system is 

capable of recognizing how credit hours 

are defined in different settings. A few 

commenters noted that the Secretary has 

already permitted accrediting agencies 

to perform this function and that 

accreditors have been diligent in their 

duties. One commenter believed that the 

Secretary could tighten Federal 

regulatory control over institutions’ 

credit-hour policies by revising the 

existing accrediting agency recognition 

regulations in 34 CFR part 602. 

One commenter believed that 

accrediting agencies have long-standing 

practices, or in the case of some national 

accrediting agencies, formulas that 

provide reasonable measures of credit 

hours. 

Discussion: We agree with the 

commenters who believed that 

accrediting agencies’ peer-review 

systems are structured to evaluate the 

appropriateness of institutions’ credit 

policies and assignments in diverse 

educational settings. Amending § 602.24 

to add § 602.24(f) initially was a 

proposal of the non-Federal negotiators 

representing accrediting agencies to 

clarify their role in overseeing the 

assignment of credit hours by 

institutions as it relates to Federal 

program requirements. With the 

addition of the credit-hour definition in 

§ 600.2, we added § 602.24(f) regarding 

an accrediting agency’s review of an 

institution’s policies and procedures for 

assigning credit hours, and the 

institution’s application of these 

policies because this addition indicates 

how those requirements fit together and 

makes the two regulations consistent. 

We note that these provisions relate 

solely to an accrediting agency’s 

consideration of an institution’s 

implementation of the credit-hour 

definition for Federal program purposes. 

The regulations do not require the 

accrediting agency to use the definition 

of credit hour in § 600.2 for non-Federal 

purposes nor do the regulations prohibit 

an accrediting agency from only using 

the definition of credit hour in § 600.2. 

We believe that § 602.24(f) is the 

appropriate place to define accrediting 

agencies’ responsibilities for reviewing 

institutions’ processes for assigning 

credit for title IV, HEA program 

purposes because § 602.24 defines the 

procedures institutional accreditors 

must have if the institutions they 

accredit participate in title IV, HEA 

programs. 

Changes: None. 

Comment: Several commenters did 

not support the addition of § 602.24(f) 

because they believed the proposed 

provisions would allow the Department 

to indirectly regulate academic matters. 

A few of these commenters requested 

that the Department add language to the 

regulations making it clear that no 

provision in § 602.24 would permit the 

Secretary to establish any criteria that 

specifies, defines, or prescribes the 

procedures that accrediting agencies 

shall use to assess any institution’s 

credit-hour policies or procedures. 

One commenter believed that by 

requiring accrediting agencies to ensure 

institutions’ compliance with the 

proposed credit-hour definition in 

§ 600.2, the Department would be 

placing accrediting agencies into a 

quasi-regulatory role for which they are 

neither designed nor intended. This 

commenter believed that over time 

accrediting agencies’ regulatory role will 

be seen as their most important role and 

accrediting agencies will in effect 

become government agents. Another 

commenter believed that proposed 

§ 602.24(f) would cause accrediting 

agencies to focus on institutions’ 

assignment of credit hours instead of 

other valuable areas of review. 

One commenter requested 

clarification of whether § 602.24(f) 

would allow the Department to rely 

exclusively on an accrediting agency’s 

determination of an institution’s 

definition and assignment of credit, or 

whether the Department would have 

separate authority under the regulations 

to evaluate and regulate an institution’s 

definition or assignment of credit for 

title IV, HEA program eligibility 

purposes. 

One commenter believed that an 

accrediting agency found to be 

permitting inappropriate credit 

assignment activities at institutions 

should be cited and forced to address 

the identified issues. Another 

commenter believed that institutions’ 

policies for assigning credit are 

extremely diverse, and that the 

Department is not capable of properly 

determining whether an accrediting 

agency has appropriately evaluated the 

variety of institutional policies. 

One commenter believed the 

provisions in § 602.24(f) are 

unnecessary because section 

496(a)(5)(H) of the HEA requires 

accrediting agencies to assess 

institutions’ measures of program length 

but does not mandate any quantitative 

requirements establishing the 

components necessary for the measure 

of credit. 

Discussion: The provisions in 

§ 602.24(f) reflect that accrediting 

agencies are the oversight bodies 

responsible for evaluating the 

appropriateness of institutions’ policies 

and procedures for assigning credit that 

is consistent with Federal program 

purposes. This role is in accordance 

with the provisions of the HEA under 

which accrediting agencies have the 

primary responsibility, as part of the 

oversight triad with the Federal 

Government and State agencies, to 

determine whether institutions 

participating in Federal programs such 

as the title IV, HEA programs, meet 

minimum standards of educational 

quality. The provisions in § 602.24(f) 

further support accrediting agencies in 

fulfilling these responsibilities but do 

not prescribe the methods by which 

accrediting agencies must perform these 

evaluations. 

If the Secretary determines that a 

recognized accrediting agency does not 

comply with the provisions in 

§ 602.24(f) for purposes of Federal 

programs, or is not effective in its 

performance with respect to these 

provisions, then the Secretary may 

restrict or remove the agency’s 

recognition in accordance with 34 CFR 

part 602, subpart C. 

We do not agree that the provisions in 

§ 602.24(f) are unnecessary. While 

section 496(a)(5)(H) of the HEA requires 

accrediting agencies to assess 

institutions’ measures of program 

length, we believe the provisions in 

§ 602.24(f) provide necessary 

clarification regarding the means of 

evaluating an institution’s assignment of 

credit hours. 

Changes: None. 

Comment: A few commenters 

believed that the provisions in 

§ 602.24(f) were not specific enough 

with regard to the requirements for 

accrediting agencies. 

One commenter proposed that the 

Department require accrediting agencies 

to base their evaluations of the validity 

of institutions’ credit-hour assignments 

on the manner in which other 

institutions offering similar programs 

assess and accept credits for purposes of 

evaluating credit for transfer. 

One commenter asked the Department 

to revise proposed § 602.24(f)(1)(ii) to 

specify that accrediting agencies must 

make a determination of whether an 

institution’s assignment of credit hours 

conforms to the provisions in proposed 

§ 600.2. 

One commenter recommended that 

the Department require accrediting 

agencies to prescribe clearly the 

methodologies and equivalencies that 

will be utilized by institutions to 

determine the amount of work specified 

by the credit assigned to courses as 

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represented through stated student 

learning outcomes and demonstrated 

achievement of those outcomes, 

regardless of the delivery method. 

One commenter recommended 

revising the proposed accrediting 

agency requirements in § 602.24(f) to 

state that in the case of competencybased programs that do not use clock 

hours or classroom time as a basis for 

credit, an accrediting agency must 

determine the appropriate assignment of 

credit by reviewing a well-substantiated 

list of competencies and assessing 

documented evidence of student 

achievement of competencies. 

A few commenters requested that the 

Department revise proposed 

§ 602.24(f)(2) to clarify that accrediting 

agencies have the authority and 

autonomy to determine review 

methodologies and techniques. 

One commenter believed that it 

would be appropriate for an accrediting 

agency to review a sample of an 

institution’s curriculum to determine 

whether the credit assignment policies 

were being appropriately applied by an 

institution, but it would not be 

appropriate for an accrediting agency to 

employ an unspecified sample of other 

institutions to determine whether or not 

the credits awarded for a particular 

course or program conformed to 

commonly accepted practice in higher 

education. This commenter suggested 

revising proposed paragraph 

§ 602.24(f)(2) to specify that the agency 

must sample courses within an 

institution’s program of study. 

One commenter suggested that 

accrediting agencies review annual 

institutional submissions of data, 

policies, and procedures for assigning 

credit hours. 

Discussion: We do not believe that 

further specificity is appropriate or 

necessary in § 602.24(f). Accrediting 

agencies must have the flexibility to 

review institutional credit-assignment 

processes that may vary widely in their 

policies and implementation and may 

have differing methods for measuring 

student work such as direct assessment. 

We believe that accrediting agencies are 

capable of developing appropriate 

methods for evaluating institutional 

credit processes without providing 

further specificity in the regulations. We 

note that accrediting agencies must 

demonstrate their ability to 

appropriately review these areas in 

order to receive recognition by the 

Secretary as reliable authorities on the 

quality of education or training offered 

by the institutions and programs they 

accredit, and that evaluation by the 

Secretary continues during periodic 

reviews of accrediting agencies. 

We believe that it is not necessary to 

specify how an accrediting agency 

should review a competency-based 

program that does not use credit hours 

or clock hours as a basis for credit. In 

the case of a competency-based 

program, the institution may either base 

the assignment of credit on the time it 

takes most students to complete the 

program, or the program must meet the 

definition of a direct assessment 

program in § 668.10. In the first 

scenario, the institution’s accrediting 

agency would review the institution’s 

compliance with the provisions in 

§ 600.2 or § 668.8(k) and (l) as 

applicable. In the second scenario, the 

institution’s accrediting agency must 

review and approve each of the 

institution’s direct assessment 

program’s equivalencies in terms of 

credit hours or clock hours. 

Changes: None. 

Comment: A few commenters 

opposed the proposed provisions in 

§ 602.24(f)(1)(i)(A) and (B) requiring 

accrediting agencies to evaluate an 

institution’s policies and procedures for 

determining credit hours in accordance 

with proposed § 600.2 and to evaluate 

an institution’s application of those 

policies and procedures to its programs 

and courses. Two commenters suggested 

that the provisions should not require 

accrediting agencies to evaluate 

compliance with proposed § 600.2 but 

should permit institutions to justify the 

manner in which credit hours are 

assigned and permit accrediting 

agencies to determine whether an 

institution’s application of its policies 

and procedures are appropriate. These 

commenters believed that the proposed 

provisions require accrediting agencies 

to instruct institutions to follow a 

specific approach to assigning credit 

hours. 

A few commenters suggested that the 

cross reference to the proposed credithour definition in § 600.2 be stricken 

from proposed § 602.24(f)(1)(i)(A) and 

replaced with a provision requiring 

accrediting agencies to conduct their 

review of an institution’s assignment of 

credit hours consistent with the 

provisions of § 602.16(f). 

Discussion: We do not believe that the 

provisions in proposed § 602.24(f) 

require accrediting agencies to mandate 

specific policies for institutions with 

regard to assigning credit hours to 

programs and coursework. However, we 

do believe that it is necessary to specify 

in § 602.24(f) that accrediting agencies 

must review an institution’s policies 

and procedures for determining credit 

hours, and the application of those 

policies and procedures to programs 

and coursework in accordance with 

§ 600.2 for title IV, HEA program 

purposes. Accreditation by an 

accrediting agency recognized by the 

Secretary is an institutional and 

programmatic requirement for eligibility 

for the title IV, HEA programs. 

It is appropriate to specify the 

responsibilities of an accrediting agency 

in reviewing institutions’ processes for 

assigning credit hours in § 602.24, and 

not § 602.16. The provisions in § 602.24 

are related specifically to procedures 

accrediting agencies must have for 

institutions they accredit to obtain 

eligibility to participate in title IV, HEA 

programs. The provisions in § 602.16(f) 

address the processes used by 

accrediting agencies in setting standards 

in statutorily-defined areas required for 

agencies to be recognized by the 

Secretary. 

Changes: None. 

Comment: A few commenters 

expressed concern about proposed 

§ 602.24(f)(1)(ii), which requires 

accrediting agencies to determine 

whether an institution’s assignment of 

credit hours conforms to commonly 

accepted practice in higher education. 

A few commenters believed that this 

proposal was inconsistent with the 

proposed credit-hour definition in 

§ 600.2 and expressed a preference for 

the language in proposed 

§ 602.24(f)(1)(ii). 

One commenter suggested striking 

this proposed provision from the 

regulations and including this 

information in the ‘‘Guide to the 

Accrediting Agency Recognition 

Process’’ issued by the Department. This 

guide was issued in August 2010 under 

the title ‘‘Guidelines for Preparing/ 

Reviewing Petitions and Compliance 

Reports.’’ 

One commenter suggested revising 

proposed § 602.24(f)(1)(ii) to require 

accrediting agencies to evaluate 

institutions’ assignment of credit hours 

based on a comparative study of similar 

institutions. 

Discussion: We do not agree that the 

provisions in §§ 600.2 and 

602.24(f)(1)(ii) are inconsistent. The 

provisions in § 600.2 establish a title IV, 

HEA program requirement for 

institutions to award credit hours for an 

amount of academic work that is a 

reasonable equivalency to the amount of 

work defined in paragraph (1) of the 

credit-hour definition. By comparison, 

the reference to ‘‘commonly accepted 

practice in higher education’’ in 

§ 602.24(f)(1)(ii) establishes the 

parameters for accrediting agencies to 

determine whether institutions establish 

reasonable equivalences for the amount 

of work in paragraph (1) of the credithour definition within the framework of 

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acceptable institutional practices at 

comparable institutions of higher 

education. 

We believe that it is necessary to 

include § 602.24(f)(1)(ii) in the 

regulations, rather than solely in the 

Department’s ‘‘Guidelines for Preparing/ 

Reviewing Petitions and Compliance 

Reports.’’ The regulations provide the 

requirements for accrediting agencies 

recognized by the Secretary whereas the 

‘‘Guidelines for Preparing/Reviewing 

Petitions and Compliance Reports’’ 

provides guidance to accrediting 

agencies seeking the Secretary’s 

recognition and does not have the force 

of regulations. We will rely upon the 

accrediting agencies to choose the 

methods used to evaluate institutions’ 

processes for assigning credit hours. 

Changes: None. 

Comment: One commenter expressed 

concern that the reference to ‘‘commonly 

accepted practice in higher education’’ 

in proposed § 602.24(f)(1)(ii) may 

require institutions that primarily use 

clock hours to adopt credit-hour 

assignment policies that were developed 

by traditional four-year degree granting 

institutions, but are unsuitable for 

specialized institutions. 

Discussion: The reference to 

‘‘commonly accepted practice in higher 

education’’ in § 602.24(f)(1)(ii) is not a 

requirement for clock-hour institutions 

to convert to credit hours. 

Changes: None. 

Notification Requirements 

Comment: Several commenters 

opposed proposed § 602.24(f)(4) that 

would require an accrediting agency, 

that identifies noncompliance with the 

agency’s policies regarding an 

institution’s credit assignments during a 

review under proposed § 602.24(f), to 

notify the Secretary of the identified 

deficiencies. A few commenters 

believed that proposed § 602.24(f)(4) 

lacked due process provisions. Some of 

these commenters believed that the 

notification requirement would force 

accrediting agencies to report minor or 

trivial credit-hour problems to the 

Department. One commenter believed 

that institutions would not be afforded 

an opportunity to respond to allegations 

or attempt immediate corrective actions 

which may lead to delayed resolutions 

to credit assignment problems. 

A few commenters believed that 

proposed § 602.24(f)(4) was redundant 

with regard to the existing notification 

requirements in § 602.27. These 

commenters suggested removing 

proposed paragraph § 602.24(f)(4) and 

cross-referencing § 602.27. 

One commenter believed that 

proposed § 602.24(f)(4) contradicts the 

requirements of proposed § 602.24(f)(3) 

which requires an accrediting agency to 

take appropriate action to address any 

institutional deficiencies it identifies as 

part of its review under proposed 

§ 602.24(f)(1)(i). 

A few commenters believed that the 

terms ‘‘systemic noncompliance’’ and 

‘‘significant noncompliance’’ in 

proposed § 602.24(f)(4) need 

clarification. One commenter suggested 

specifying that if an accrediting agency 

has any reason to believe that an 

institution is failing to meet its title IV, 

HEA program responsibilities, or is 

engaged in fraud or abuse, then that 

agency must notify the Department in 

accordance with existing regulations. 

Another commenter suggested 

specifying that if an accrediting agency 

determines that an institution does not 

develop and adhere to an acceptable 

credit assignment policy, then the 

agency must promptly notify the 

Secretary. This commenter also 

suggested that because institutions will 

be developing new credit policies, they 

should be afforded an adjustment period 

to receive and react to guidance from 

accrediting agencies on their credit 

assignment policies prior to being 

reported to the Secretary. 

Discussion: We agree with the 

commenters that § 602.24(f)(4) does not 

specify due process provisions for 

institutions. Section 602.24(f)(4) only 

requires an accrediting agency to report 

its findings and an agency’s process of 

establishing and reporting a finding will 

rely upon the agency’s own procedures. 

The Secretary recognition process 

ensures that accrediting agency 

procedures provide due process. 

Further, we believe § 602.24(f)(4) is 

needed because it corresponds to the 

provisions in § 602.27 that require an 

accrediting agency to submit 

information upon request from the 

Secretary about an accredited or 

preaccredited institution’s compliance 

with its title IV, HEA program 

responsibilities. The provisions in 

§ 602.24(f)(4) specify the agency’s 

existing responsibility under § 602.27 

with regard to inappropriate 

institutional processes for assigning 

credits. 

We do not agree with the commenter 

who believed that § 602.24(f)(3) and 

(f)(4) is contradictory. The provisions in 

§ 602.24(f)(3) require an accrediting 

agency to take appropriate action to 

address any institutional deficiencies it 

identifies as part of its review under 

§ 602.24(f)(1)(i). Section 602.24(f)(4), 

however, requires an accrediting agency 

to notify the Secretary of any severe 

deficiencies such as systemic or 

significant noncompliance with the 

agency’s policies identified at an 

institution during a review under 

§ 602.24(f). 

The terms ‘‘systemic noncompliance’’ 

and ‘‘significant noncompliance’’ do not 

encompass trivial or minor deficiencies. 

The term ‘‘systemic noncompliance’’ 

refers to an institutional process for 

awarding credits that is fundamentally 

flawed with regard to assigning credit 

hours in accordance with the credithour definition in § 600.2 and its 

accrediting agencies policies. The term 

‘‘significant noncompliance’’ refers to 

institutional assignment of credit hours 

to individual courses or programs that 

are particularly egregious with regard to 

the compliance with § 600.2. 

We do not believe that it is necessary 

to delay the effective date of the 

definition of a credit hour in § 600.2 or 

§ 602.24(f) in these final regulations. An 

institution must implement the 

definition of a credit hour regardless of 

whether its accrediting agency has 

issued guidance on the implementation 

of § 602.24(f). While an accrediting 

agency is required to implement 

§ 602.24(f) effective July 1, 2011, we will 

review on a case-by-case basis, based on 

an adequate justification as determined 

by the Secretary, any reasonable request 

from an accrediting agency for a delayed 

implementation date. 

Changes: None. 

State Agency Procedures (§ 603.24(c)) 

General 

Comment: Several commenters 

opposed proposed § 603.24(c). A few 

commenters believed that the proposed 

provisions would be confusing for State 

agencies and that State agencies do not 

have the administrative capabilities to 

review institutions’ credit-hour policies. 

One commenter believed that the 

proposed provisions would lead to 

inconsistencies and inequalities 

between States based on States’ reviews 

of institutions’ credit policies and 

enforcement of institutions’ compliance 

with the proposed credit-hour definition 

at § 600.2. 

One commenter believed that some 

State agencies, such as those in Iowa, 

would not be able to comply with 

proposed § 603.24(c) because the 

agencies may operate within the defined 

scope authorized by the State code and 

compliance would require changes in 

State law. This commenter also believed 

that some State agencies would not have 

the expertise to evaluate institutions’ 

credit policies. 

One commenter suggested specifying 

that if a State agency determines that an 

institution does not develop and adhere 

to an acceptable credit assignment 

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policy, the agency must promptly notify 

the Secretary. 

One commenter believed that with 

regard to proposed § 603.24(c)(2), it 

would be appropriate for a State agency 

to review a sample of an institution’s 

curriculum to determine whether the 

credit assignment policies were being 

appropriately applied by an institution, 

but it would not be appropriate for a 

State agency to employ an unspecified 

sample of other institutions to 

determine whether the credits awarded 

for a particular course or program 

conformed to commonly accepted 

practice in higher education. This 

commenter suggested revising proposed 

§ 603.24(c)(1) to require State agencies 

to evaluate an institution’s assignment 

of credit hours based on a comparative 

study of similar institutions, and to 

revise proposed § 603.24(c)(2) to specify 

that the agency must sample courses 

within an institution’s program of study. 

Discussion: We do not agree with the 

commenters who believed that State 

agencies subject to the recognition 

criteria in 34 CFR part 603 will be 

confused by § 603.24(c) or will lack the 

administrative resources to meet these 

requirements. To be subject to 

§ 603.24(c), a State agency must be an 

agency recognized by the Secretary 

under 34 CFR part 603 as a reliable 

authority regarding the quality of public 

postsecondary vocational education in 

its State. The only States that currently 

have recognized State agencies under 34 

CFR part 603 are New York, 

Pennsylvania, Oklahoma, and Puerto 

Rico. 

As with accrediting agencies that are 

recognized by the Secretary, we do not 

believe it is necessary to define the 

specific methods that State agencies 

recognized by the Secretary should use 

to evaluate institutions’ processes for 

assigning credit hours. 

We believe that § 603.24(c)(4) 

provides the necessary level of 

specificity with regard to a recognized 

State agency’s notification to the 

Secretary in case of institutional 

noncompliance with the credit-hour 

definition in § 600.2. 

Changes: None. 

Program Eligibility: Clock-to-CreditHour Conversion (§ 668.8) 

Comment: One commenter questioned 

whether it is necessary to have a clockto-credit-hour conversion if a credit 

hour is defined in the regulations and 

accrediting agencies are required to 

review institutional policies for 

awarding credits to ensure compliance. 

Two commenters believed that 

proposed §§ 600.2 and 668.8(l) define a 

credit hour in two different ways and 

are therefore inconsistent. These 

commenters believed that it is illogical 

to define credit hours for purposes of 

the title IV, HEA programs in different 

ways depending on whether or not a 

program is subject to the clock-hour-tocredit-hour conversion. 

Discussion: On October 1, 1990, the 

Secretary published proposed 

regulations (55 FR 40148–40150) to 

establish standards for clock-to-credithour-conversion for undergraduate 

vocational training programs and on 

July 23, 1993, the Secretary published 

final regulations (58 FR 39618–39623) 

based on the public comments. The 

Secretary published the regulations to 

address significant abuse in the title IV, 

HEA programs, citing, for example, a 

309 clock-hour program that was 

converted to a 27.7 quarter-credit 

program. We believe that the potential 

for such abuse continues to exist and 

that § 668.8(k) and (l) continues to be 

essential to the administrative integrity 

of the title IV, HEA programs. In 

§ 668.8(l)(2) of the final regulations, we 

have included consideration by an 

institution’s accrediting agency of the 

institution’s policies and procedures, 

and their implementation, for 

determining credit hours in a program if 

an institution seeks to establish any 

conversions that are less than the 

conversion rate specified in 

§ 668.8(l)(1). 

Due to the separate conversion 

formula in new § 668.8(l), programs that 

are subject to the clock-to-credit-hour 

conversion in § 668.8(l) are exempted 

from using the credit-hour definition in 

§ 600.2. Therefore, we do not believe 

there is any inconsistency between the 

definition in § 600.2 and the provisions 

of § 668.8(l). 

Changes: None. 

Comment: One commenter asked for 

clarification regarding whether an 

institution that was recently approved 

for a degree program must wait for 

students to graduate from the program 

before it utilizes the exemption, in 

proposed § 668.8(k)(1)(ii), from the 

requirements to perform a clock-tocredit-hour conversion under the 

provisions in proposed § 668.8(l) with 

regard to students in a diploma program 

in which all credits are fully 

transferable to the new degree program. 

Discussion: Section 668.8(k)(1)(ii) 

provides that an institution’s shorter 

length program is not subject to the 

conversion formula in § 668.8(l) if each 

course within the shorter program is 

acceptable for full credit toward a 

degree that is offered by the institution 

that requires at least two academic years 

of study. Additionally, under 

§ 668.8(k)(1)(ii), an institution would be 

required to demonstrate that students 

enroll in, and graduate from, the longer 

length degree program. Thus, for a 

recently approved degree program that 

is at least two academic years in length, 

an institution must use clock hours for 

its title IV, HEA programs that are fully 

accepted for transfer into the new 

degree program until students graduate 

from the new degree program unless the 

institution offers other degree programs, 

each with graduates, and all the 

coursework in the first year of the 

program is acceptable for full credit 

toward one or more of these other 

degree programs. After students 

graduate from the new degree program, 

the programs at the institutions that are 

fully accepted for transfer into the new 

degree program will qualify under the 

exception in § 668.8(k)(1)(ii). We believe 

that it is essential that an institution is 

able to demonstrate that students 

graduate from the longer length degree 

program to ensure that the exception 

provided in § 668.8(k)(1)(ii) is being 

appropriately applied. We note that in 

an instance where a student is enrolled 

in a new degree program in which the 

first year of study may lead to a 

certificate or diploma and the second 

year provides an associate’s degree, any 

student in the first year must have 

eligibility for title IV, HEA programs 

determined on a clock-hour basis until 

students graduate from the program 

with a degree after completing the 

second year. 

Changes: None. 

Comment: Several commenters did 

not agree with the provisions in 

proposed § 668.8(k)(2)(i)(A) and (B), 

which provide for when a program is 

required to measure student progress in 

clock hours. 

Two commenters believed that if an 

institution’s State licensing board or 

accrediting agency approve a credential 

to be awarded in credit hours, then that 

approval should be sufficient to award 

title IV, HEA program funds based on 

credit hours. These commenters 

believed that the provisions in 

§ 668.8(k)(2)(i)(A) and (B) create an 

unnecessary duplication of services 

provided by these approving entities. 

One commenter believed that this 

provision would be detrimental to 

institutions that have received licensing, 

accrediting, or Federal approval to use 

credit hours because these institutions 

would need to convert to clock hours. 

A few commenters believed that 

proposed § 668.8(k)(2)(i)(A) is unclear 

on the requirement to measure student 

progress in clock hours. These 

commenters believed that State 

agencies’ disclosure and calculation 

requirements may involve clock hours 

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but do not necessarily require that an 

institution measure student progress in 

clock hours. These commenters 

recommended revising proposed 

§ 668.8(k)(2)(i)(A) so that an institution 

is not required to measure student 

progress in clock hours unless the 

Federal or State authority requires the 

institution to measure student progress 

exclusively in clock hours. One 

commenter believed that many 

accrediting agencies and State agencies 

require institutions to include a clockto-credit-hour conversion rate as part of 

the new program submission process, 

but it is not the agencies’ intent to 

consider these credit-hour programs as 

clock-hour programs. The commenter 

suggested adding a provision to 

proposed § 668.8(k)(2)(i)(A) so that it 

does not apply to institutions that are 

required to include a clock-to-credithour conversion rate in their accrediting 

agency or State application for a new 

program. 

One commenter believed that 

accrediting agencies’ standards vary 

with regard to requirements for 

programs offering a certain number of 

clock hours in order for a graduate to be 

eligible to take a certification or 

licensure exam and students’ 

requirement to attend the programs’ 

clock hours. This commenter believed 

that there should be no requirement for 

a program to be a clock-hour program 

unless an accrediting agency specifies 

that students must attend the clock 

hours to take the certification or 

licensure exam. 

A few commenters believed that 

credit-hour programs are more 

recognized by employers and 

institutions. These commenters believed 

that it is difficult for students in clockhour programs to transfer to credit-hour 

programs. The commenters also 

believed that employer-paid or 

employer-reimbursed tuition programs 

are generally administered based on 

credit hours. 

One commenter believed that the 

proposed clock-to-credit-hour 

conversion provisions that only use 

credit hours were not consistent 

concerning States throughout the 

proposed regulations. 

Discussion: The provisions in 

§ 668.8(k)(2)(i)(A) provide that a 

program must be considered a clockhour program for title IV, HEA program 

purposes if the program is required to 

measure student progress in clock hours 

for Federal or State approval or 

licensure. We believe that any 

requirement for a program to be 

measured in clock hours to receive 

Federal or State approval or licensure, 

and any requirement for a graduate to 

complete clock hours to apply for 

licensure or authorization to practice an 

occupation demonstrates that a program 

is fundamentally a clock-hour program, 

regardless of whether the program has 

received Federal, State, or accrediting 

approval to offer the program in credit 

hours. As clock-hour programs, these 

programs are required to measure 

student progress in clock hours for title 

IV, HEA program purposes. In these 

circumstances where a requirement 

exists for the program to be measured in 

clock hours, this becomes the 

fundamental measure of that program 

for title IV, HEA program purposes. This 

outcome is not changed for such a 

program when an institution’s State 

licensing board or accrediting agency 

also allows the institution to award a 

credential based upon credit hours, or 

when a State licensing board may 

require that a program be measured in 

clock hours but the program is approved 

by the institution’s accrediting agency 

in credit hours. Further, because the 

institution is already required to report 

or otherwise establish the underlying 

clock hours of a program, we do not 

agree that provisions in 

§ 668.8(k)(2)(i)(A) and (B) create an 

unnecessary duplication of services 

provided by these approving entities. 

We also do not believe that using clock 

hours for title IV, HEA program 

purposes will be detrimental to 

institutions that have received licensing, 

accrediting, or Federal approval to use 

credit hours for academic purposes. In 

the case of institutions that are required 

to include a clock-to-credit-hour 

conversion rate in their accrediting 

agency or State application for a new 

program, we do not believe those 

accrediting agency or State requirements 

would affect the application of the 

provisions of § 668.8(k)(2)(i)(A) and (B) 

because the institution is clearly 

required to establish the clock hours in 

the program to receive approval. 

With regard to the commenters who 

believed that credit-hour programs are 

more recognized and accepted by 

employers and institutions, there are no 

provisions in § 668.8(k) and (l) that 

would prevent a program that must be 

considered a clock-hour program for 

title IV, HEA program purposes from 

also being offered in credit hours for 

academic or other purposes. We agree 

there was an inconsistency in proposed 

§ 668.8(l)(2) with State requirements. 

Proposed § 668.8(l)(2) incorrectly 

referred to an institution’s relevant State 

licensing authority when it should have 

referred to an institution’s recognized 

State agency for the approval of public 

postsecondary vocational institutions 

that approves the institution in lieu of 

accreditation by a nationally recognized 

accrediting agency. This has been 

corrected. 

Changes: Section 668.8(l)(2) has been 

modified to remove the reference from 

proposed § 668.8(l)(2) to an institution’s 

relevant State licensing authority and 

now refers to an institution’s recognized 

State agency for the approval of public 

postsecondary vocational institutions. 

Comment: Several commenters did 

not agree with proposed 

§ 668.8(k)(2)(iii) that provides that an 

institution must require attendance in 

the clock hours that are the basis for 

credit hours awarded, except as 

provided in current § 668.4(e). 

Some of these commenters questioned 

the effect this provision would have on 

institutions’ attendance policies and 

asked that the Department clarify 

whether institutions are required to take 

attendance and have attendance policies 

that prohibit students from having 

absences. Two commenters believed 

that institutions would be required to 

take attendance in clock hours and 

credit hours. A few commenters noted 

that institutions that recently converted 

to systems using credit hours instead of 

clock hours, but that do not take 

attendance, would be particularly 

burdened. 

A few commenters believed that the 

Department did not address how 

institutions should handle typical 

classroom absences or extended leaves 

of absence when calculating clock hours 

completed or converting credit hours to 

clock hours. One commenter expressed 

concern that this provision in proposed 

§ 668.8(k)(2)(iii) would decrease 

institutions’ ability to address students’ 

needs in regard to absences. A few 

commenters asked whether a student 

must attend 100 percent of the clock 

hours in a course in order to receive 

credit for the course. 

One commenter believed that the 

proposed provision is impractical 

because most institutions use a 50- 

minute instructional hour instead of a 

60-minute clock hour. This commenter 

also believed that the provision was 

unclear on whether the relevant clock 

hours would be considered to be 

provided if no instructor appeared for 

the clock hour. 

One commenter believed that the 

Department should clearly state in the 

final regulations that § 668.8(k)(2)(iii) is 

not intended to be a test of the 

reasonable equivalencies that 

institutions can develop with regard to 

determining credit hours as that term is 

defined in proposed § 600.2. 

Discussion: We believe it is essential 

for an institution to require students to 

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complete the clock hours that are the 

basis for the credit hours awarded in a 

program even when an institution 

converts a program to credit hours 

under the provisions of § 668.8(k) and 

(l). These programs are still required to 

contain the clock hours that support the 

conversion under the regulations, and 

institutions are expected to make sure 

that those clock hours are completed by 

the students, subject to the institution’s 

existing policies for excused absences 

and make-up classes. 

We do not agree with the commenters 

who believe that § 668.8(k)(2)(iii) does 

not provide for excused absences or 

would require 100 percent attendance, 

because the regulations for clock hour 

programs already account for excused 

absences. Section 668.8(k)(2)(iii) 

specifically accounts for excused 

absences in accordance with the current 

regulations in § 668.4(e) which provides 

guidance on when an institution, in 

determining whether a student has 

successfully completed the clock hours 

in a payment period, may include clock 

hours for which the student has an 

excused absence. An institution should 

ensure that students taking a program in 

credit hours are still completing the 

clock hours associated with the 

conversion, and excused absences from 

the classes should be within the 

tolerance permitted in the clock hour 

regulations. With regard to a leave of 

absence, an institution is expected to 

ensure that a student returning from an 

approved leave of absence still 

completes the clock hours that are 

needed to support the conversion for the 

program. 

We do not agree with the commenter 

who believed that § 668.8(k)(2)(iii) is 

impractical because most institutions 

use a 50-minute instructional hour 

instead of a 60-minute clock hour. A 

clock hour is currently defined in 

§ 600.2 as (1) a 50- to 60-minute class, 

lecture, or recitation in a 60-minute 

period; (2) a 50- to 60-minute facultysupervised laboratory, shop training, or 

internship in a 60-minute period; or (3) 

sixty minutes of preparation in a 

correspondence course. We also do not 

agree with this commenter’s belief that 

the provision is unclear on whether the 

relevant clock hours would be 

considered to be provided if no 

instructor appeared for the clock hour. 

If a student is unable to complete a 

clock hour because the instructor is not 

present, there is no clock hour to be 

counted towards meeting the required 

clock hours unless it may be counted as 

an approved absence. 

Changes: None. 

Comment: One commenter believed 

that the Department should clearly state 

in the final regulations that 

§ 668.8(k)(2)(iii) is not intended to be a 

test of the reasonable equivalencies that 

institutions can develop with regard to 

determining credit hours as that term is 

defined in § 600.2. 

Discussion: We do not believe it is 

necessary to amend § 668.8(k)(2)(iii) to 

state that the provision is not intended 

to be a test of the reasonable 

equivalencies that institutions can 

develop with regard to determining 

credit hours as defined in § 600.2. The 

credit-hour definition in § 600.2 

specifically excludes its applicability to 

a program subject to the conversion 

formula in § 668.8(l). 

Changes: None. 

Comment: Many commenters believed 

that proposed § 668.8(l) would decrease 

students’ eligibility for title IV, HEA 

program funds. These commenters 

believed that students enrolled in shortterm and nondegree programs measured 

in credit hours would unjustly 

experience a decrease in their eligibility 

for title IV, HEA program funds because 

the proposed clock-to-credit-hour 

conversion would require institutions to 

use 900 clock hours instead of the 

current 720 clock hours to support the 

same amount of credit hours. 

These commenters believed that 

students’ decreased eligibility would 

force them to withdraw from short-term 

and nondegree programs or rely on 

loans which would increase their debt. 

One of these commenters expressed 

concern that the decreased eligibility for 

title IV, HEA program funds would 

disproportionately impact 

nontraditional and financially 

disadvantaged students. 

Discussion: We do not agree with the 

commenters who believed that students 

currently enrolled in short-term or 

nondegree programs would unjustly 

experience a decrease in their eligibility 

for title IV, HEA program funds nor do 

we believe that the conversion formula 

inappropriately impacts students’ title 

IV, HEA program eligibility. We do not 

believe that the clock-to-credit-hour 

conversion rate in current § 668.8(l) 

provides equitable outcomes for 

students taking similar programs 

measured in clock-hours and credit 

hours. The current regulations result in 

students in some credit hour programs 

having greater eligibility based on a 

conversion from clock hours to credit 

hours that assumed student work 

outside of class is always present in the 

same ratio to the time the students 

spend in class. The changes to the 

conversion formula in § 668.8(l) of these 

final regulations provide for a more 

equitable accounting for student work 

outside of class. New § 668.8(l)(2) would 

provide for conversion based on the 

varying rates of work outside class for 

particular educational activities within 

a student’s courses or program rather 

than mandating the use of a constant 

ratio that may be incorrect. An 

institution applying the appropriate 

conversion rate to a program in 

accordance with § 668.8(l)(1) would be 

considered compliant with § 668.8(l). 

Changes: None. 

Comment: Many commenters believed 

that the proposed clock-to-credit-hour 

conversion formula would force 

institutions to increase the lengths of 

their programs or offer associate’s 

degrees in order to retain their eligibility 

for title IV, HEA program funds. Several 

of these commenters believed that 

increasing program lengths would cause 

financial hardships for students by 

delaying students’ entry into workforce 

and increasing tuition. A few 

commenters believed that many 

programs would be potentially 

eliminated because of the institutional 

burden of unnecessarily extending 

program lengths. 

Discussion: We do not agree with 

these commenters. Under the current 

regulations in § 668.8(d), public and 

private nonprofit institutions and 

proprietary institutions offering 

undergraduate programs may have 

eligible programs with a minimum of 

600 clock hours, 16 semester or 

trimester hours, or 24 quarter hours. To 

the extent that any short-term programs 

would not have been eligible for title IV, 

HEA program funds in the past due to 

the inequitable clock-to-credit-hour 

conversion rate, we believe that 

students enrolled in these programs 

should not have been eligible for title 

IV, HEA program funds. Short-term 

programs offered in credit hours that 

contained outside work that met or 

exceeded the assumed outside work that 

was implicit in the conversion should 

be in compliance with the new 

requirements and unaffected by the 

change. 

Changes: None. 

Comment: A few commenters 

questioned how proposed § 668.8(l) 

would affect institutional credit 

policies. One commenter believed that 

programs that were designed to be 

compliant with the clock-to-credit-hour 

conversion ratio for a semester hour in 

current § 668.8(l) cannot be easily or 

quickly changed because using the ratio 

alters the delivery, design, and 

curricular structure of the programs. 

One commenter requested 

clarification of how the conversion 

should be applied when one program 

has courses that require outside work 

and other courses that do not. 

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Discussion: We do not believe that it 

is necessary for programs to change 

their structure or credit assignments for 

academic purposes if they are subject to 

the conversion formula in new 

§ 668.8(l); however, institutions are 

responsible for ensuring that the credit 

hours awarded for title IV, HEA program 

purposes comply with the provisions in 

§ 668.8(l). In some instances, there may 

be no discernable difference between 

institutions’ determinations of credit 

hours for academic purposes and title 

IV, HEA program purposes depending 

on the outcome of determinations of 

work outside of class and instructional 

periods within a program. Some 

institutions may currently award fewer 

credits then the existing regulations 

allow or would be allowed under the 

final regulations. 

The provisions in § 668.8(l)(2) provide 

an exception to the minimum standard 

for converting clock hours to credit 

hours in § 668.8(l)(1) for coursework in 

a program that qualifies for a lesser rate 

of conversion based on additional 

student work outside of class. In a case 

where a program offers courses with 

work outside of class, an institution 

must use the standards in § 668.8(l)(1) 

for the courses without the work outside 

of class and may apply the exception in 

§ 668.8(l)(2) to courses with work 

outside of class. 

Changes: None. 

Comment: One commenter supported 

proposed § 668.8(l)(2) because it 

provides institutions the ability to 

account for work outside of class. One 

commenter supported the provision, but 

recommended that the Department 

specify when an institution is eligible to 

use work outside of class as part of the 

total clock-hour calculation. 

A few commenters asked for 

clarification regarding proposed 

§ 668.8(l)(2) and the work outside of 

class that may be combined with clock 

hours of instruction in order to meet or 

exceed the numeric requirements 

established in § 668.8(l)(1). These 

commenters requested clarification on 

how institutions should measure 

student’s completion of work outside of 

class, whether work outside of class 

should be identified in course syllabi, 

whether work outside of class should be 

graded, and what entity should 

determine that a program is suited to 

include work outside of class. 

Discussion: Under § 668.8(l)(2), an 

institution may use a determination of 

appropriate amounts of work outside of 

class for various educational activities 

in a course or program in determining 

the appropriate conversion rate from 

clock hours to credit hours for each 

educational activity in the course or 

program. However, we do not believe 

that it is appropriate for the Department 

to provide more specificity for 

determining the appropriate conversion 

rates for various educational activities 

in a course or program. An institution, 

in accordance with the requirements of 

its designated accrediting agency, or 

State agency for the approval of public 

postsecondary vocational institutions, 

recognized under 34 CFR 603, is 

responsible for making determinations 

of the appropriate credit hours under 

proposed § 668.8(l)(2). If an institution 

is unsure of how to apply the provisions 

of § 668.8(l)(2) to a program, it would be 

considered compliant if it uses the 

appropriate conversion ratio specified 

in § 668.8(l)(1). 

Changes: None. 

Comment: One commenter suggested 

eliminating the provision in proposed 

§ 668.8(k)(2)(ii) that requires institutions 

to measure student progress in clock 

hours in any program if the credit hours 

awarded for the program are not in 

compliance with the definition of credit 

hour in § 600.2. The commenter 

believed the Secretary’s proposed 

credit-hour definition in § 600.2 allowed 

the Secretary to interfere in academic 

matters. 

Discussion: The definition of credit 

hour in § 600.2 is intended to establish 

a quantifiable, minimum basis for a 

credit hour for Federal program 

purposes, including the title IV, HEA 

programs. We believe that it is necessary 

to establish the standards by which a 

program that awards credit hours that 

are not in compliance with the 

definition of credit hour in § 600.2 may 

still be eligible for title IV, HEA program 

funds. Thus, § 668.8(k)(2)(ii) provides 

that a program that does not award 

credit hours in compliance with § 600.2 

may still be eligible for title IV, HEA 

programs using the underlying clockhours of the program. 

Changes: None. 

Comment: A few commenters 

requested clarification on how to 

address students that are already 

enrolled in programs that may change 

the measurement of student progress to 

comply with proposed § 668.8(k) and (l). 

A few of these commenters also 

requested additional time to comply 

with the proposed regulations in these 

sections. One commenter requested that 

current students should be permitted to 

complete their programs using the 

current conversion ratio. One 

commenter asked that the Secretary 

allow institutions that offered credithour programs in the 2010–11 academic 

year, but will need to measure student 

progress in clock hours under proposed 

§ 668.8(k)(2)(i)(B), to continue 

measuring student progress in these 

programs using credit hours. 

One commenter asked whether 

institutions are required to execute 

revised Enrollment Agreements with 

currently enrolled students when the 

new regulations take effect. 

One commenter suggested that the 

conversation rate in § 668.8(l) should 

not be applied to existing programs for 

at least one year from July 1, 2011 to 

allow for accrediting agencies to create 

procedures for assessing institutions’ 

assignment of credit hours. This 

commenter added that only new 

programs should be required to use the 

proposed conversion rate. 

One commenter requested that the 

proposed provisions in § 668.8(l)(2)(i) 

not take effect for two award years in 

order for institutions that use clock 

hours to have time to redesign their 

programs. 

Discussion: We agree with the 

commenters’ concerns regarding the 

applicability of the changes to § 668.8(k) 

and (l) to students enrolled prior to the 

effective date of these regulations in 

programs affected by the changes in the 

requirements. We agree that for students 

enrolled in programs subject to the 

provisions in § 668.8(k) and (l) as of the 

July 1, 2011 effective date of these final 

regulations, an institution may choose 

to apply the regulations in current 

§ 668.8(k) and (l) until these students 

complete the program or to apply 

amended § 668.8(k) and (l) in these final 

regulations for all students enrolled in 

payment periods or assigned to the 

2011–12 and subsequent award years. 

For students who enroll or reenroll on 

or after July 1, 2011 in programs affected 

by changes in § 668.8(k) and (l), 

institutions must determine title IV, 

HEA eligibility using § 668.8(k) and (l) 

in these final regulations. 

We do not agree that a delay in the 

effective date is needed for institutions 

to allow institutions more time to bring 

their existing programs into compliance. 

If an institution’s accrediting agency, or 

State agency, is not yet compliant with 

the provisions of § 602.24(f) for an 

accrediting agency, or § 603.24(c) for a 

State agency, the institution must use 

the conversion formula in § 668.8(l)(1) 

of these final regulations until the State 

agency and accrediting agency are 

compliant. 

Changes: None. 

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State Authorization (§§ 600.4(a)(3), 

600.5(a)(4), 600.6(a)(3), 600.9, and 

668.43(b)) 

General—No Mandate for a State 

Licensing Agency 

Comment: Several commenters 

believed the proposed regulations 

would create mandates for States to 

create new State oversight bodies or 

licensing agencies, or compel States to 

create bureaucratic structures that 

would further strain higher education 

resources. Some commenters believed 

that a majority of the States would have 

to modify licensing requirements or 

adopt new legislation and that the 

regulations would cause a major shift in 

State responsibility. 

Discussion: These final regulations do 

not mandate that a State create any 

licensing agency for purposes of Federal 

program eligibility. Under the final 

regulations, an institution may be 

legally authorized by the State based on 

methods such as State charters, State 

laws, State constitutional provisions, or 

articles of incorporation that authorize 

an entity to offer educational programs 

beyond secondary education in the 

State. If the State had an additional 

approval or licensure requirement, the 

institution must comply with those 

requirements. In the case of an entity 

established as a business or nonprofit 

charitable organization, i.e., not as an 

educational institution, the entity would 

be required to have authorization from 

the State to offer educational programs 

beyond secondary education. While 

these final regulations require the 

creation of a State licensing agency, a 

State may choose to rely on such an 

agency to legally authorize institutions 

to offer postsecondary education in the 

State for purposes of Federal program 

eligibility. 

Changes: None. 

Comment: Several commenters 

supported the proposed regulations as 

an effort to address fraud and abuse in 

Federal programs through State 

oversight. An association representing 

State higher education officials noted 

that despite differences in State 

practice, all the States, within our 

Federal system, have responsibilities to 

protect the interests of students and the 

public in postsecondary education and 

supported the basic elements of 

proposed § 600.9. A State agency official 

praised the Department’s proposed 

regulations but suggested that the 

Department insert ‘‘by name’’ in the 

proposed § 600.9(a)(1) to provide some 

protection against recurrence of 

situations such as the one in California 

when the State licensing agency lapsed 

prior to the State renewing the agency 

or a successor to the agency and no 

State approval was in place that named 

an institution as licensed or authorized 

to operate in the State. 

Discussion: We appreciate the support 

of the commenters. We agree with the 

commenter that a State’s authorization 

should name the institution being 

authorized. We believe that by naming 

the institution in its authorization for 

the institution to offer postsecondary 

education in the State, the State is 

providing the necessary positive 

authorization expected under § 600.9. 

Changes: We are amending proposed 

§ 600.9, where appropriate, to recognize 

that an institution authorized by name 

in a State will meet the State 

authorization requirements as discussed 

further in response to other comments. 

Comment: Some commenters believed 

that the proposed regulations exceeded 

the Department’s authority and 

infringed on the States’ authority. One 

commenter requested that the proposed 

regulations be eliminated because 

private institutions are authorized 

through various unique authorizations. 

Another commenter believed that the 

proposed regulations upset the balance 

of the ‘‘Triad’’ of oversight by States, 

accrediting agencies, and the Federal 

Government. One commenter 

questioned whether the Department 

could impose conditions restricting a 

State’s freedom of action in determining 

which institutions are authorized by the 

State by requiring that a State’s 

authorization must be subject to, for 

example, adverse actions and provision 

for reviewing complaints. The 

commenter believed that there was no 

intent to have the Department impose 

such conditions. Another commenter 

believed that proposed § 600.9 

unnecessarily intruded on each State’s 

prerogative to determine its own laws 

and regulations relative to the 

authorization of higher education 

institutions and to define the conditions 

for its own regulations. One commenter 

suggested that the Department only 

apply proposed § 600.9 to the problem 

areas that the commenter identified as 

substandard schools, diploma mills, and 

private proprietary institutions. 

One commenter believed that the 

proposed regulations would infringe 

upon the States’ sovereignty by 

commanding state governments to 

implement legislation enacted by 

Congress. Specifically, the commenter 

noted that under the proposed 

regulations the States must adopt 

legislation or rules that expressly 

authorize institutions to offer 

postsecondary programs and further 

make such an authorization subject to 

adverse action by the State and that the 

proposed regulations would require that 

States establish a process to act on 

complaints about the institution and 

enforce State laws against the 

institution. The commenter believed 

that the Department would improperly 

direct State officials to participate in the 

administration of a federally enacted 

regulatory scheme in violation of State 

Sovereignty. By doing so, the 

commenter believed that the Federal 

Government would be forcing State 

governments to absorb the financial 

burden of implementing a Federal 

regulatory program, while allowing the 

Federal government to take credit for 

‘‘solving’’ problems without having to 

ask their constituents to pay for the 

solutions with higher Federal taxes. The 

commenter believed that the 

Department cannot construe the HEA to 

require a State to regulate according to 

the Department’s wishes. The 

commenter believed that such a 

construction would exceed the 

Department’s authority under the HEA 

and violate the States’ rights under the 

Tenth Amendment. 

Discussion: We disagree with the 

commenters that the proposed 

regulations exceed the Department’s 

authority and infringe on States’ 

authority. Under the provisions of the 

HEA and the institutional eligibility 

regulations, the Department is required 

to determine whether an institution is 

legally authorized by a State to offer 

postsecondary education if the 

institution is to meet the definition of an 

institution of higher education, 

proprietary institution of higher 

education, or postsecondary vocational 

institution (20 U.S.C. 1001 and 1002) as 

those terms are defined in §§ 600.4, 

600.5, and 600.6 of the institutional 

eligibility regulations. In accordance 

with the provisions of the HEA, the 

Department is establishing minimum 

standards to determine whether an 

institution is legally authorized to offer 

postsecondary education by a State for 

purposes of Federal programs. The 

proposed regulations do not seek to 

regulate what a State must do, but 

instead considers whether a State 

authorization is sufficient for an 

institution that participates, or seeks to 

participate, in Federal programs. 

Contrary to the commenter’s 

suggestion that the Department is 

upsetting the Triad, we believe these 

regulations clarify the role of the States, 

a key participant in the Triad, in 

establishing an institution’s eligibility 

for Federal programs. Further, the 

Department believes that clarifying the 

State role in the Triad will address some 

of the oversight concerns raised by 

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another commenter regarding problem 

areas with certain types of institutions. 

Changes: None. 

Comment: Several commenters 

questioned the need for proposed 

§ 600.9. For example, several 

commenters questioned whether the 

Department’s concern that the failure of 

California to reinstate a State regulatory 

agency was justified. Commenters 

believed that the regulations would not 

have prevented the concerns the 

Department identified in the case of the 

lapsing of the California State agency. 

One commenter believed the California 

issue was resolved and that 

accreditation and student financial aid 

processes worked. Some commenters 

believed that the current State 

regulatory bodies or other authorization 

methods were sufficient. One 

commenter stated that authorizations 

are spelled out in State statutes, and 

there is no need for the regulations. 

Some commenters believed that 

additional information is needed, such 

as a State-by-State review of the impact 

of proposed § 600.9, or the States with 

adequate or inadequate oversight. 

Several commenters were concerned 

that proposed § 600.9 would 

unnecessarily impact small States 

without discernable problems. Some 

commenters believed there is no 

evidence of marginal institutions 

moving to States with lower standards 

and that there is no danger to title IV, 

HEA program funds. One commenter 

believed that proposed § 600.9 should 

be eliminated because the commenter 

believed that its full effect is not known 

and that it will be chaotic if 

implemented. Another commenter 

believed that proposed § 600.9 would be 

burdensome, is not economically 

feasible, and would leave an institution 

at the mercy of the State. One 

commenter believed that proposed 

§ 600.9 would encourage for-profit 

institutions to undermine State agencies 

such as through lobbying to underfund 

an agency and would stall 

reconsideration of legislation. 

Some commenters believed that the 

Department’s concerns were valid. One 

of these commenters believed that, in 

the absence of regulations, many States 

have forfeited their public 

responsibilities to accrediting agencies. 

In the case of the interim lapse of the 

State regulatory agency in California, 

the commenter believed that we do not 

know yet the extent of the mischief that 

may have occurred or may still occur, 

but the commenter has received reports 

that schools began operating in the gap 

period and are being allowed to 

continue to operate without State 

approval until the new agency is 

operational. The commenter understood 

that at least one of those schools closed 

abruptly, leaving many students with 

debts owed and no credential to show 

for their efforts. 

Some commenters believed that the 

proposed regulations would not address 

issues with degree mills as they are not 

accredited. Some commenters urged the 

Department to offer leadership and 

support of Federal legislation and 

funding to combat diploma mills. 

One commenter recommended that 

the Department use Federal funds for 

oversight. Another commenter 

suggested that the Department 

encourage the Federal Government to 

provide incentives to the States. 

Discussion: We do not agree with the 

commenters who believe that proposed 

§ 600.9 should be eliminated. For 

example, we believe these regulations 

may have prevented the situation in 

California from occurring or would have 

greatly reduced the period of time 

during which the State failed to provide 

adequate oversight. While it may appear 

that the California situation was 

satisfactorily resolved as some 

commenters suggested, the absence of a 

regulation created uncertainty. As one 

commenter noted, during the period 

when the State failed to act, it appears 

that problems did occur, and that no 

process existed for new institutions to 

obtain State authorization after the 

dissolution of the State agency. We are 

concerned that States have not 

consistently provided adequate 

oversight, and thus we believe Federal 

funds and students are at risk as we 

have anecdotally observed institutions 

shopping for States with little or no 

oversight. As a corollary effect of 

establishing some minimal requirements 

for State authorization for purposes of 

Federal programs, we believe the public 

will benefit by reducing the possibilities 

for degree mills to operate, without the 

need for additional Federal intervention 

or funding. We do not believe that 

additional information is needed to 

support § 600.9 in these final 

regulations as § 600.9 only requires an 

institution demonstrate that it meets a 

minimal level of authorization by the 

State to offer postsecondary education. 

Because the provisions of § 600.9 are 

minimal, we believe that many States 

will already satisfy these requirements, 

and we anticipate institutions in all 

States will be able to meet the 

requirements under the regulations over 

time. This requirement will also bring 

greater clarity to State authorization 

processes as part of the Triad. Since the 

final regulations only establish minimal 

standards for institutions to qualify as 

legally authorized by a State, we believe 

that, in most instances they do not 

impose significant burden or costs. 

States are also given numerous options 

to meet these minimum requirements if 

they do not already do so, and this 

flexibility may lead to some States using 

different authorizations for different 

types of institutions in order to 

minimize burden and provide better 

oversight. The question of whether these 

regulations will impact the ability of 

any group to seek changes to a State’s 

requirements is beyond the purview of 

these final regulations. As one 

commenter requested, we will continue 

to support oversight functions as 

provided under Federal law, and we 

believe that these final regulations will 

provide the necessary incentives to the 

States to assure a minimal level of State 

oversight. 

Changes: None. 

Comment: Some commenters 

questioned how the Department would 

enforce the proposed regulations. One 

commenter stated that the Department 

has no mechanism to enforce the 

proposed regulations and asks how they 

will improve program integrity. One 

commenter questioned why an 

institution may be held accountable for 

the actions of the State over which it has 

no direct control. 

Discussion: Any institution applying 

to participate in a Federal program 

under the HEA must demonstrate that it 

has the legal authority to offer 

postsecondary education in accordance 

with § 600.9 of these final regulations. If 

a State declines to provide an institution 

with legal authorization to offer 

postsecondary education in accordance 

with these regulations, the institution 

will not be eligible to participate in 

Federal programs. 

As to an institution’s inability to 

control the actions of a State, we do not 

believe such a circumstance is any 

different than an institution failing to 

comply with an accreditation 

requirement that results in the 

institution’s loss of accredited status. 

We believe that in any circumstance in 

which an institution is unable to qualify 

as legally authorized under § 600.9 of 

these final regulations, the institution 

and State will take the necessary actions 

to meet the requirements of § 600.9 of 

these final regulations. 

Changes: None. 

Comment: One commenter believed 

that proposed § 600.9 would result in an 

unfunded mandate by the Federal 

Government. Another commenter stated 

that many States may see proposed 

§ 600.9 as a revenue-generating 

opportunity and pass the costs of this 

requirement on to institutions, which 

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would have no choice but to pass that 

cost on to students. 

Discussion: We do not agree that 

§ 600.9 of these final regulations will 

result in an unfunded mandate by the 

Federal Government, since many States 

will already be compliant and options 

are available that should permit other 

States to come into compliance with 

only minimal changes in procedures or 

requirements if they want to provide 

acceptable State authorizations for 

institutions. The regulations also 

include a process for an institution to 

request additional time to become 

compliant. Furthermore, if a State is 

unwilling to become compliant with 

§ 600.9, there is no requirement that it 

do so. We also do not agree that States 

will see coming into compliance with 

§ 600.9 as a revenue-generating 

opportunity, since any required changes 

are likely to be minimal. 

Changes: None. 

Implementation 

Comment: Some commenters believed 

that the proposed regulations are 

ambiguous in meaning and application 

or are vague in identifying which State 

policies are sufficient. For example, one 

State higher education official suggested 

that proposed § 600.9 should be 

amended to differentiate among 

authorities to operate arising from 

administrative authorization of private 

institutions from legislation and from 

constitutional provisions assigning 

responsibility to operate public 

institutions. The commenter believed 

that proposed § 600.9 obfuscated the 

various means of establishing State 

authorization and the fundamental roles 

of State legislatures and State 

constitutions and recommended that 

these means of authorization and roles 

of State entities should be clarified. 

Several commenters questioned what 

authorizing an institution to offer 

postsecondary programs entails. A few 

commenters pointed out that there is a 

wide array of State approval methods 

and many institutions were founded 

before the creation of State licensing 

agencies. An association representing 

State higher education officials urged 

that ample discretionary authority 

explicitly be left to the States. One 

commenter indicated that proposed 

§ 600.9 failed to address when more 

than one State entity is responsible for 

a portion of the oversight in States 

where dual or multiple certifications are 

required. Another commenter believed 

that proposed § 600.9 did not 

adequately address the affect an 

institution’s compliance with proposed 

§ 600.9 would have if one of two 

different State approvals lapsed and 

both were necessary to be authorized to 

operate in the State or if the State ceased 

to have a process for handling 

complaints but the institutions 

continued to be licensed to offer 

postsecondary education. Some 

commenters asked whether specific 

State regulatory frameworks would meet 

the provisions of the proposed 

regulations. For example, one 

commenter believed that, under State 

law and practice in the commenter’s 

State, the private institutions in the 

State already met the requirements in 

proposed § 600.9 that the commenter 

believed included: (1) The institution 

being authorized by a State through a 

charter, license, approval, or other 

document issued by an appropriate 

State government agency or State entity; 

(2) the institution being authorized 

specifically as an educational 

institution, not merely as a business or 

an eleemosynary organization; (3) the 

institution’s authorization being subject 

to adverse action by the State; and (4) 

the State having a process to review and 

appropriately act on complaints 

concerning an institution. The 

commenter noted that all postsecondary 

institutions in the State must either 

have a ‘‘universal charter’’ awarded by 

the legislature or be approved to offer 

postsecondary programs. The 

commenter noted that these institutions 

are authorized as educational 

institutions, not as businesses. In 

another example, a commenter from 

another State believed that current law 

in the commenter’s State addresses and 

covers many of the requirements 

outlined in proposed § 600.9. The 

commenter noted that many of the State 

laws are enforced by the State’s 

Attorney General and attempt to protect 

individuals from fraud and abuse in the 

State’s system of higher education. 

However, the commenter believed that 

it remained unclear whether the State 

would be required to create an oversight 

board for independent institutions like 

the commenter’s institution or would be 

subject to State licensure requirements 

via the State licensure agency. The 

commenter believed that either option 

would erode the autonomy of the 

commenter’s institution and add layers 

of bureaucracy to address issues 

currently covered by State and Federal 

laws. 

One commenter suggested that 

proposed § 600.9(a)(1) be amended to 

provide that authorization may be based 

on other documents issued by an 

appropriate State government agency 

and delete the reference to ‘‘state entity.’’ 

The commenter believed that the 

documents would affirm or convey the 

authority to the institution to operate 

educational programs beyond secondary 

education by duly enacted State 

legislation establishing an institution 

and defining its mission to provide such 

educational programs or by duly 

adopted State constitutional provisions 

assigning authority to operate 

institutions offering such educational 

programs. 

Some commenters questioned 

whether there were any factors that a 

State may not consider when granting 

legal authorization. One commenter 

requested confirmation that under the 

proposed regulations authorization does 

not typically include State regulation of 

an institution’s operations nor does it 

include continual oversight. A few 

commenters expressed concern 

regarding the involvement of the States 

in authorization and that a State’s role 

may extend into defining, for example, 

curriculum, teaching methods, subject 

matter content, faculty qualifications, 

and learning outcomes. One commenter 

was concerned that proposed § 600.9 

would create fiscal constraints on an 

institution due to, for example, 

additional reporting requirements or 

would impose homogeneity upon 

institutions that would compromise 

their unique missions. One commenter 

stated that the Department does not 

have the authority to review issues of 

academic freedom or curriculum 

content. 

One commenter wanted assurances 

that the Department does not intend to 

use the proposed regulations to 

strengthen State oversight of colleges 

beyond current practices. One 

commenter was concerned that States 

could exercise greater and more 

intrusive oversight of private colleges. 

One commenter suggested that the 

Department grandfather all institutions 

currently operating under a State’s 

regulatory authority without a 

determination of its adequacy. Another 

indicated that private colleges and 

universities operating under a Stateapproved charter issued prior to 1972 

are already subject to State regulation, 

even as they are exempt from State 

licensing. One commenter believed that 

the Department should accept State 

laws and regulations that can be 

reasonably interpreted as meeting the 

regulatory requirements. 

Discussion: We agree with the 

commenters who were concerned that 

proposed § 600.9 may be viewed as 

ambiguous in describing a minimal 

standard for establishing State legal 

authorization. We agree, in principle, 

with the State higher education official 

who suggested that proposed § 600.9 

should be amended to differentiate the 

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types of State authorizations for 

institutions to operate, but not based 

upon whether the source of the 

authorization is administrative or 

legislative. We believe the distinction 

for purposes of Federal programs is 

whether the legal entities are 

specifically established under State 

requirements as educational institutions 

or instead are established as business or 

nonprofit charitable organizations that 

may operate without being specifically 

established as educational institutions. 

We believe this clarification addresses 

the concerns of whether specific States’ 

requirements were compliant with 

§ 600.9 as provided in these final 

regulations. 

We continue to view State 

authorization to offer postsecondary 

educational programs as a substantive 

requirement where the State takes an 

active role in authorizing an institution 

to offer postsecondary education. This 

view means that a State may choose a 

number of ways to authorize an 

institution either as an educational 

institution or as a business or nonprofit 

charitable organization without specific 

authorization by the State to offer 

postsecondary educational programs. 

These legal means include provisions of 

a State’s constitution or law, State 

charter, or articles of incorporation that 

name the institution as established to 

offer postsecondary education. In 

addition, such an institution also may 

be subject to approval or licensure by 

State boards or State agencies that 

license or approve the institution to 

offer postsecondary education. If a legal 

entity is established by a State as a 

business or a nonprofit charitable 

organization and not specifically as an 

educational institution, it may be 

subject to approval or licensure by State 

boards or State agencies that license or 

approve the institution to offer 

postsecondary education. The key issue 

is whether the legal authorization the 

institution receives through these means 

is for the purpose of offering 

postsecondary education in the State. 

In some instances, as one commenter 

noted, a State may have multiple State 

entities that must authorize an 

institution to offer postsecondary 

programs. In this circumstance, to 

comply with § 600.9, we would expect 

that the institution would demonstrate 

that it was authorized to offer 

postsecondary programs by all of the 

relevant State entities that conferred 

such authorizations to that type of 

institution. 

We do not believe it is relevant that 

an institution may have been 

established prior to any State oversight. 

We are concerned that institutions 

currently be authorized by a State to 

offer postsecondary education, although 

we recognize that a State’s current 

approval for an institution may be based 

on historical facts. We therefore do not 

believe it is necessary to grandfather 

institutions currently operating under a 

State’s regulations or statutes nor are we 

making any determination of the 

adequacy of a State’s methods of 

authorizing postsecondary education 

apart from meeting the basic provisions 

of § 600.9 in these final regulations. If a 

private college or university is operating 

under a State-approved charter 

specifically authorizing the institution 

by name to offer postsecondary 

education in the State, a State may 

exempt an institution from any further 

State licensure process. The 

requirement to be named specifically in 

a State action also applies if the 

institution is exempt from State 

licensure based upon another condition, 

such as its accreditation by a nationally 

recognized accrediting agency or years 

in operation. 

Further, these regulations only require 

changes where a State does not have any 

authorizing mechanisms for institutions 

other than an approval to operate as a 

business entity, or does not have a 

mechanism to review complaints 

against institutions. We anticipate that 

many States already meet these 

requirements, and will have time to 

make any necessary adjustments to meet 

the needs of the institutions. 

With regard to the commenters who 

were concerned with the potential scope 

of a State’s authority, we note that the 

Department does not limit a State’s 

oversight of institutions, and only sets 

minimum requirements for institutions 

to show they are legally authorized by 

a State to provide educational programs 

above the secondary level. These 

regulations neither increase nor limit a 

State’s authority to authorize, approve, 

or license institutions operating in the 

State to offer postsecondary education. 

Further, nothing in these final 

regulations limits a State’s authority to 

revoke the authorization, approval, or 

license of such institutions. Section 

600.9 ensures that an institution 

qualifies for Federal programs based on 

its authorization by the State to offer 

postsecondary education. 

Changes: We are amending proposed 

§ 600.9 to distinguish the type of State 

approvals that are acceptable for an 

institution to demonstrate that it is 

authorized by the State to offer 

educational programs beyond the 

secondary level. 

An institution is legally authorized by 

the State if the State establishes the 

institution by name as an educational 

institution through a charter, statute, 

constitutional provision, or other action 

to operate educational programs beyond 

secondary education, including 

programs leading to a degree or 

certificate. If, in addition, the State has 

an applicable State approval or 

licensure process, the institution must 

also comply with that process to be 

considered legally authorized. However, 

an institution created by the State may 

be exempted by name from any State 

approval or licensure requirements 

based on the institution’s accreditation 

by an accrediting agency recognized by 

the Secretary or based upon the 

institution being in operation for at least 

20 years. 

If the legal entity is established by a 

State as a business or a nonprofit 

charitable organization and not 

specifically as an educational 

institution, the State must have a 

separate procedure to approve or license 

the entity by name to operate programs 

beyond secondary education, including 

programs leading to a degree or 

certificate. For an institution authorized 

under these circumstances, the State 

may not exempt the entity from the 

State’s approval or licensure 

requirements based on accreditation, 

years in operation, or other comparable 

exemption. 

The following chart and examples 

illustrate the basic principles of 

amended § 600.9: 

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MEETS STATE AUTHORIZATION REQUIREMENTS*

Legal entity Entity description Approval or licensure process 

Educational institution ....................... A public, private nonprofit, or for-profit institution established by name by a State through a charter, 

statute, or other action issued by an appropriate 

State agency or State entity as an educational institution authorized to operate educational programs beyond secondary education, including 

programs leading to a degree or certificate.

The institution must comply with any applicable 

State approval or licensure process and be approved or licensed by name, and may be exempted from such requirement based on its accreditation, or being in operation at least 20 

years, or use both criteria. 

Business ........................................... A for-profit entity established by the State on the 

basis of an authorization or license to conduct 

commerce or provide services.

The State must have a State approval or licensure 

process, and the institution must comply with the 

State approval or licensure process and be approved or licensed by name. 

Charitable organization ..................... A nonprofit entity established by the State on the 

basis of an authorization or license for the public 

interest or common good.

An institution in this category may not be exempted 

from State approval or licensure based on accreditation, years in operation, or a comparable 

exemption 

*Notes: 

• Federal, tribal, and religious institutions are exempt from these requirements. 

• A State must have a process, applicable to all institutions except tribal and Federal institutions, to review and address complaints directly or 

through referrals. 

• The chart does not take into requirements related to State reciprocity. 

Examples 

Institutions considered legally 

authorized under amended § 600.9: 

• A college has a royal charter from 

the colonial period recognized by the 

State as authorizing the institution by 

name to offer postsecondary programs. 

The State has no licensure or approval 

process. 

• A community college meets the 

requirements based upon its status as a 

public institution. 

• A nonprofit institution has State 

constitutional authorization by name as 

a postsecondary institution; State does 

not apply a licensure or approval 

process. 

• A nonprofit institution has a State 

charter as a postsecondary institution. 

State law, without naming the 

institution, considers the institution to 

be authorized to operate in lieu of State 

licensure based on accreditation by a 

regional accrediting agency. 

• An individual institution is owned 

by a publically traded corporation that 

is incorporated in a different State from 

where the institution is located. The 

institution is licensed to provide 

educational programs beyond the 

secondary level in the State where it is 

located. 

• An institution is owned by a 

publicly traded corporation established 

as a business without the articles of 

incorporation specifying that the 

institution is authorized to offer 

postsecondary education, but the 

institution is licensed by the State to 

operate postsecondary education 

programs. 

• An individual institution is owned 

by a publically traded corporation that 

is incorporated in a different State from 

where the institution is located. The 

State licenses the institution by name as 

a postsecondary institution. 

• Rabbinical school awarding only a 

certificate of Talmudic studies has 

exemption as a religious institution 

offering only religious programs. 

• Tribal institution is chartered by the 

tribal government. 

Institutions not considered legally 

authorized under amended § 600.9: 

• An institution is a publicly traded 

corporation established as a business 

without the articles of incorporation 

specifying that it is authorized to offer 

postsecondary education, and the State 

has no process to license or approve the 

institution to offer postsecondary 

education. 

• A nonprofit institution is chartered 

as a postsecondary institution. A State 

law considers the institution to be 

authorized based on accreditation in 

lieu of State licensure but the institution 

is not named in the State law and does 

not have a certification by an 

appropriate State official, e.g., State 

Secretary of Education or State Attorney 

General, that it is in compliance with 

the exemption for State licensure 

requirements. 

• An institution is established as a 

nonprofit entity without specific 

authorization to offer postsecondary 

education, but State law considers the 

institution to be authorized based on it 

being in operation for over 30 years. The 

State Secretary of Education issues a 

certificate of good standing to the 

institution naming it as authorized to 

offer postsecondary education based on 

its years in operation. 

• A Bible college is chartered as a 

religious institution and offers liberal 

arts and business programs as well as 

Bible studies. It is exempted by State 

law from State licensure requirements 

but does not meet the definition of a 

religious institution exempt from State 

licensure for Federal purposes because 

it offers other programs in addition to 

religious programs. 

• An institution is authorized based 

solely on a business license, and the 

State considers the institution to be 

authorized to offer postsecondary 

programs based on regional 

accreditation. 

Comment: One commenter provided 

proposed wording to amend proposed 

§ 600.9(a)(1) to clarify that the State 

entity would include a State’s legal 

predecessor. The commenter believed 

that the change was necessary to ensure 

that colonial charters would satisfy the 

State authorization requirement. 

Discussion: If a State considers an 

institution authorized to offer 

postsecondary education programs in 

the State based on a colonial charter that 

established the entity as an educational 

institution offering programs beyond the 

secondary level, the institution would 

be considered to meet the provisions of 

§ 600.09(a)(1)(i) of these final 

regulations so long as the institution 

also meets any additional licensure 

requirements or approvals required by 

the State. 

Changes: None. 

Comment: Several commenters 

expressed concern that all institutions 

within a State could lose title IV, HEA 

program eligibility at once and that the 

regulations put students at risk of harm 

through something neither they nor the 

institution can control. 

One commenter was concerned with 

how the Department would specifically 

assess State compliance with proposed 

§ 600.9. Another commenter believed 

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that the Department should accept State 

laws and regulations that can be 

reasonably interpreted as meeting the 

requirements of § 600.9 especially if 

State officials interpret their laws and 

regulations in such a manner. 

One commenter requested that the 

Department explain how it would 

address currently enrolled students if a 

State is deemed not to provide sufficient 

oversight in accordance with Federal 

regulatory requirements. Another 

commenter asked how the Department 

will avoid such negative consequences 

as granting closed school loan 

discharges for large numbers of enrolled 

students. One commenter requested that 

the Department provide for seamless 

reinstatement of full institutional 

eligibility when a State meets all 

eligibility requirements after losing 

eligibility. 

Discussion: We do not anticipate that 

all institutions in a State will lose title 

IV, HEA program assistance due to any 

State failing to provide authorization to 

its institutions under the regulations, 

because States may meet this 

requirement in a number of ways, and 

also with different ways for different 

types of institutions. If a State were to 

undergo a change that limited or 

removed a type of State approval that 

had previously been in place, it would 

generally relate to a particular set of 

institutions within a State. For example, 

a licensing agency for truck driving 

schools could lapse or be closed at a 

State Department of Transportation 

without providing another means of 

authorizing postsecondary truck driving 

programs. Only the eligibility of truck 

driving schools in the State would be 

affected under § 600.9 while the State 

could continue to be compliant for all 

other institutions in the State. It also 

seems likely that the State would 

consider alternate ways to provide State 

authorization for any institutions 

affected by such a change. 

We believe that the provisions in 

amended § 600.9 are so basic that State 

compliance will be easily established 

for most institutions. The determination 

of whether an institution has acceptable 

State authorization for Federal program 

purposes will be made by the 

Department. We also note that the 

regulations permit a delayed effective 

date for this requirement under certain 

circumstances discussed below, and this 

delay will also limit the disruption to 

some institutions within a State. 

If an institution ceased to qualify as 

an eligible institution because its State 

legal authorization was no longer 

compliant with amended § 600.9, the 

institution and its students would be 

subject to the requirements for loss of 

eligibility in subpart D of part 600 and 

an institution would also be subject to 

§ 668.26 regarding the end of its 

participation in those programs. If an 

institution’s State legal authorization 

subsequently became compliant with 

amended § 600.9, the institution could 

then apply to the Department to resume 

participation in the title IV, HEA 

program. 

Changes: None. 

Comment: Several commenters were 

concerned that students may lose 

eligibility for title IV, HEA program 

funds if a State is not compliant with 

proposed § 600.9. Some commenters 

noted that States may have to take steps 

to comply, which may include making 

significant statutory changes, and the 

regulations therefore need to allow 

adequate time for such changes, 

reflecting the various State legislative 

calendars. In some cases, the 

commenters believed a State’s 

noncompliance would be because the 

State could no longer afford to meet the 

provisions of proposed § 600.9. One 

commenter believed that alternative 

pathways should be allowed for meeting 

State authorization and that States that 

exempt or grant waivers from licensing 

should be considered to fulfill 

requirements of proposed § 600.9 and 

another questioned whether a State that 

is not in compliance would have an 

opportunity to cure perceived problems 

before all institutions operating in the 

State lost institutional eligibility. 

Discussion: We recognize that a State 

may not already provide appropriate 

authorizations as required by § 600.9 for 

every type of institution within the 

State. However, we believe the 

framework in § 600.9 is sound and 

provides a State with different ways to 

meet these requirements. Unless a State 

provides at least this minimal level of 

review, we do not believe it should be 

considered as authorizing an institution 

to offer an education program beyond 

secondary education. 

If a State is not compliant with § 600.9 

for a type or sector of institutions in a 

State, we believe the State and affected 

institutions will create the necessary 

means of establishing legal 

authorization to offer postsecondary 

education in the State in accordance 

with amended § 600.9. However, in the 

event a State is unable to provide 

appropriate State authorizations to its 

institutions by the July 1, 2011 effective 

date of amended § 600.9(a) and (b), we 

are providing that the institutions 

unable to obtain State authorization in 

that State may request a one-year 

extension of the effective date of these 

final regulations to July 1, 2012, and if 

necessary, an additional one-extension 

of the effective date to July 1, 2013. As 

described in the section of the preamble 

entitled ‘‘Implementation Date of These 

Regulations,’’ to receive an extension of 

the effective date of amended § 600.9(a) 

and (b) for institutions in a State, an 

institution must obtain from the State an 

explanation of how a one-year extension 

will permit the State to modify its 

procedures to comply with amended 

§ 600.9. 

Changes: None. 

Comment: A few commenters 

requested that the Department identify, 

publish, and maintain a list of States 

that meet or do not meet the 

requirements. One commenter cited an 

analysis that estimated that 13 States 

would comply with the proposed 

regulations upon implementation; 6 

States would clearly not be in 

compliance; and 37 States would likely 

have to amend, repeal, or otherwise 

modify their laws. One commenter 

requested data to be provided by the 

Department for each sector of 

postsecondary education, including 

how many States are out of compliance, 

how many institutions are within those 

States, and how many students are 

enrolled at those institutions. 

Discussion: We do not believe that 

there is a need to maintain and publish 

a list of States that meet, or fail to meet 

the requirements. States generally 

employ more than one method of 

authorizing postsecondary education. 

For example, a State may authorize a 

private nonprofit university through 

issuing a charter to establish the 

university, another private nonprofit 

college through an act of the State 

legislature, a for-profit business school 

through a State postsecondary education 

licensing agency, a cosmetology school 

through a State cosmetology board, and 

a truck-driving school through the 

State’s Department of Transportation. 

We believe that an institution of 

whatever sector and type already is 

aware of the appropriate State 

authorizing method or methods that 

would establish the institution’s legal 

authorization to offer postsecondary 

education and publication of any list is 

unnecessary. 

Changes: None. 

Comment: One commenter expressed 

concern with whether a State must 

regulate the activities of institutions and 

exercise continual oversight over 

institutions. 

Discussion: While a State must have 

a process to handle student complaints 

under amended § 600.9(a) for all 

institutions in the State except Federal 

and tribal institutions, the regulations 

do not require, nor do they prohibit, any 

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process that would lead to continual 

oversight by a State. 

Changes: None. 

Comment: Several commenters 

expressed concern regarding the 

financial burden on the States to make 

changes in State laws and the amount of 

time that would be needed to make the 

necessary changes. Commenters feared 

that the States would most likely have 

to reduce further State tax subsidies 

provided to public institutions. As a 

result, costs will be increased for 

students at public institutions to cover 

lost revenues and increase costs for the 

title IV, HEA programs. One commenter 

stated that schools could delay progress 

of degree completion at State funded 

universities because they will be forced 

to reduce offerings. 

Discussion: We do not believe that it 

would impose an undue financial 

burden on States to comply with the 

provisions in § 600.9. In most instances 

we believe that a State will already be 

compliant for most institutions in the 

State or will need to make minimal 

changes to come into compliance. Thus, 

we do not agree with commenters who 

believed that the regulations would 

generally impact the funding of public 

institutions in a State or would 

necessitate a reduction in the offerings 

at public institutions. 

Changes: None. 

Exemptions: Accreditation and Years of 

Operation 

Comment: Several commenters 

supported the existing practice by 

which a State bases an institution’s legal 

authorization to offer postsecondary 

education upon its accreditation by a 

nationally recognized accrediting 

agency, i.e., an accrediting agency 

recognized by the Secretary. The 

commenters believed that proposed 

§ 600.9 should be revised or clarified to 

permit existing practices allowing 

exemption by accreditation. Another 

commenter indicated that several States 

have exempted accredited institutions 

from State oversight unless those 

institutions run afoul of their 

accreditors’ requirements. One 

commenter believed that proposed 

§ 600.9 would require the creation of 

unnecessary, duplicative, and 

unaffordable new bureaucracies, and 

recommended that its State should 

continue its partial reliance on 

nationally recognized accrediting 

agencies. Another commenter believed 

it appropriate that a State delegate some 

or all of its licensure function to a 

nationally recognized accrediting 

agency provided that the State enters 

into a written agreement with the 

accrediting agency. 

One commenter stated that the 

Department should eliminate the 

ambiguity about how much a State may 

rely on accrediting agencies. Several 

commenters stated that the regulations 

are confusing as to which exemptions 

are permissible and which are not. One 

commenter believed that the 

Department should make it clear that 

although a State is not prohibited from 

relying on accrediting agencies for 

quality assessments, the essential duties 

of State authorization cannot be 

collapsed into the separate requirement 

for accreditation. 

Some commenters noted that an 

institution’s legal authorization may be 

based on a minimum number of years 

that an institution has been operating. 

One of the commenters cited a 

minimum number of years used by 

States that ranged as low as 10 years of 

operation while two other commenters 

noted that institutions had been 

exempted in their State because they 

had been in operation over 100 years 

and were accredited. The commenters 

believed that the Department should 

consider it acceptable for a State to rely 

on the number of years an institution 

has been operating. 

Some commenters did not think that 

States should be allowed to defer 

authorization to accrediting agencies. 

One of these commenters believed that 

basing State authorization on 

accreditation was contrary to law. One 

commenter believed that existing law 

makes clear that institutional eligibility 

for title IV, HEA programs is based on 

the Triad of accreditation, State 

authorization, and the Federal 

requirements for administrative 

capability and financial responsibility. 

As a result the commenter believed that 

the extent to which States may rely on 

accrediting agencies should be clear and 

limited. Along the same lines, another 

commenter believed strongly that 

accrediting agencies should never be 

allowed to grant authorization to 

operate in a State, and that further 

clarifications about the ways in which 

accrediting agencies may substitute for 

State agencies is necessary. One 

commenter encouraged the Department 

to study more carefully the role of State 

entities and accreditation agencies. 

Another commenter believed that 

relying on accrediting agencies to be 

surrogates for State authorization is 

inappropriate and should not be the sole 

determinant for authorization. One 

commenter stated that accreditation 

may not be accepted as a sufficient basis 

for granting or continuing authorization 

to operate and that the authorization 

process must be independent of any 

accreditation process or decision. 

One commenter believed that 

proposed § 600.9 would undermine the 

role of accreditation and the publicprivate partnership and would call for 

States to intrude into academic areas. 

The commenter believed that the 

proposed regulations would move 

toward establishing accreditation as a 

State actor, a role that is incompatible 

with accreditation’s commitment to selfregulation and peer and professional 

review. Another commenter believed 

that the Department should make it 

clear that although a State is not 

prohibited from relying on accrediting 

agencies for quality assessments, the 

essential duties of State authorization 

cannot be collapsed into the separate 

requirement for accreditation. If an 

institution’s State and accrediting 

agency have different standards, one 

commenter was concerned regarding 

which entity’s standards would be 

applied. 

Discussion: While we recognize and 

share the concerns of some commenters 

that States should not be allowed to 

defer authorization to accrediting 

agencies, we believe that such a practice 

would be permissible so long as it does 

not eliminate State oversight and clearly 

distinguishes the responsibilities of the 

State and accreditor under such an 

arrangement. We also do not agree that 

additional study is needed of the roles 

of State entities and accrediting agencies 

as we believe these relationships are 

well understood. 

We believe that accreditation may be 

used to exempt an institution from other 

State approval or licensing requirements 

if the entity has been established by 

name as an educational institution 

through a charter, statute, constitutional 

provision, or other action issued by an 

appropriate State entity to operate 

educational programs beyond secondary 

education, including programs leading 

to a degree or certificate. For such an 

educational institution, a State could 

rely on accreditation to exempt the 

institution from further approval or 

licensing requirements, but could not do 

so based upon a preaccredited or 

candidacy status. 

We also agree with the commenters 

that States may utilize an institution’s 

years in operation to exempt it from 

State licensure requirements, but only, 

as with accreditation, for a legal entity 

that the State establishes as an 

educational institution authorized to 

offer postsecondary education. 

However, we believe that there should 

be a minimum standard for allowing 

years of operation to exempt an 

institution to ensure that this exemption 

is not set to a short period of time that 

would not provide a historical basis to 

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evaluate the institution. Based on our 

consideration of the public comment, 

we believe that standard should be at 

least 20 years of operation. As in the 

case of accreditation, such an exemption 

could only be used if the State has 

established the entity as an educational 

institution. As noted above, a State may 

use a separate process to recognize by 

name the entity as an educational 

institution that offers programs beyond 

the secondary level if an institution was 

not authorized by name to offer 

educational programs in its approval as 

a legal entity within a State. We note 

that a State may also base a licensing 

exemption on a combination of 

accreditation and the number of years 

an institution has been in operation, as 

long as the State requirements meet or 

exceed at least one of the two minimum 

requirements, that is, an institution 

must be fully accredited or must have 

been operating for at least 20 years. 

If an institution is established as a 

legal entity to operate as a business or 

charitable organization but lacks 

authorization to operate by name as an 

educational institution that offers 

postsecondary education, the institution 

may not be exempted from State 

licensing or approval based on 

accreditation, years in operation, or 

comparable exemption from State 

licensure or approval. 

We do not believe that permitting 

such exemptions from State licensing 

requirements will distort the oversight 

roles of the State and an accrediting 

agency. We believe these comments are 

based on a misunderstanding of the role 

of a State agency recognized by the 

Secretary under 34 CFR part 603 as a 

reliable authority regarding the quality 

of public postsecondary vocational 

education in its State. Public 

postsecondary vocational institutions 

are approved by these agencies in lieu 

of accreditation by a nationally 

recognized accrediting agency. As noted 

in the comments, there are overlapping 

interests among all members of the 

Triad in ensuring that an educational 

institution is operating soundly and 

serving its students, and a State may 

establish licensing requirements that 

rely upon accreditation in some 

circumstances. 

If an institution’s State and 

accrediting agency have different 

standards, there is no conflict for 

purposes of the institution’s legal 

authorization by the State, as the 

institution must establish its legal 

authorization in accordance with the 

State’s requirements. 

Changes: We have amended proposed 

§ 600.9 to provide that, if an institution 

is an entity that is established by name 

as an educational institution by the 

State and the State further requires 

compliance with applicable State 

approval or licensure requirements for 

the institution to qualify as legally 

authorized by the State for Federal 

program purposes, the State may 

exempt the institution by name from the 

State approval or licensure requirements 

based on the institution’s accreditation 

by one or more accrediting agencies 

recognized by the Secretary or based 

upon the institution being in operation 

for at least 20 years. If an institution is 

established by a State as a business or 

a nonprofit charitable organization, for 

the institution to qualify as legally 

authorized by the State for Federal 

program purposes, the State may not 

exempt the institution from the State’s 

approval or licensure requirements 

based on accreditation, years in 

operation, or other comparable 

exemption. 

Complaints 

Comment: An association of State 

higher education officials recommended 

that the States, through their respective 

agencies or attorneys general, should 

retain the primary role and 

responsibility for student consumer 

protection against fraudulent or abusive 

practices by postsecondary institutions. 

The commenter stated that handling 

complaints is not a role that can or 

should be delegated to nongovernmental 

agencies such as accrediting agencies, 

nor should it be centralized in the 

Federal Government. Another 

commenter asked about the role of State 

enforcement of laws unrelated to 

postsecondary institutions licensure 

such as a law related to fraud or false 

advertising. A few commenters asked 

for clarification as to whether State 

consumer protection agencies or State 

Attorneys General could retain the 

primary role for student consumer 

protection and handling student 

complaints. One commenter believed 

that the proposed regulations failed to 

address circumstances where the State 

licensure or approval agency and the 

agency handling complaints are 

different agencies. 

Several commenters recommended 

that the Department allow States to rely 

on accrediting agencies but require a 

memorandum of understanding with the 

accrediting association that would 

include, at a minimum, procedures for 

periodic reports on actions taken by the 

association and procedures for handling 

student complaints. One commenter 

strongly believed that accrediting 

agencies should never be allowed to 

handle complaints in lieu of the State. 

One commenter expressed concern 

that the Department is requiring States 

to serve as an additional check on 

institutional integrity, but believed that 

there would be no check on the State. 

One commenter from an accrediting 

agency believed that proposed 

§ 600.9(b)(3) is an unnecessary use of 

limited public resources, is impractical, 

and would be impractical and chaotic to 

administer. Several other commenters 

expressed concern that requiring States 

to act on complaints would be 

duplicative because 34 CFR 602.23 

already requires accrediting agencies to 

have a process to respond to complaints 

regarding their accredited institutions. 

One commenter requested that the 

Department exempt public 

postsecondary institutions from the 

complaint processes. Otherwise, the 

commenter asked that the Department 

clarify that a State is permitted to 

determine whether an institution within 

its borders is sufficiently accountable 

through institutional complaint and 

sanctioning processes. One commenter 

requested that the Department clarify 

that student complaints unrelated to 

violations of State or Federal law are not 

subject to State process or reviewing 

and acting on State laws, instead the 

commenter believed that student 

complaints are appropriately addressed 

at the institutional level. A commenter 

questioned how the requirements for 

State review of complaints relate to 

student complaints about day-to-day 

instruction or operations and whether 

the potential review process represents 

an expansion of State authority. The 

commenter believes that student 

complaints that are unrelated to 

violations of State or Federal law are 

appropriately addressed at the 

institutional level and thus not subject 

to the process for review of complaints 

included as part of proposed § 600.9. 

One commenter suggested that the 

Department’s Office of Ombudsman 

respond to student complaints as an 

alternative if a State does not have a 

process for complaints. 

Discussion: We agree with the 

commenters who believed that the 

States should retain the primary role 

and responsibility for student consumer 

protection against fraudulent or abusive 

practices by some postsecondary 

institutions. For an institution to be 

considered to be legally authorized to 

offer postsecondary programs, a State 

would be expected to handle complaints 

regarding not only laws related to 

licensure and approval to operate but 

also any other State laws including, for 

example, laws related to fraud or false 

advertising. We agree that a State may 

fulfill this role through a State agency or 

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the State Attorney General as well as 

other appropriate State officials. A State 

may choose to have a single agency or 

official handle complaints regarding 

institutions or may use a combination of 

agencies and State officials. All relevant 

officials or agencies must be included in 

an institution’s institutional information 

under § 668.43(b). Directly relying on an 

institution’s accrediting agency would 

not comply with § 600.9(a)(1) of these 

final regulations; however, to the extent 

a complaint relates to an institution’s 

quality of education or other issue 

appropriate to consideration by an 

institution’s accrediting agency, a State 

may refer a complaint to the 

institution’s accrediting agency for 

resolution. We do not believe it is 

necessary to prescribe memoranda of 

understanding or similar mechanisms if 

a State chooses to rely on an 

institution’s accrediting agency as the 

State remains responsible for the 

appropriate resolution of a complaint. 

Section 600.9(a)(1) requires an 

institution to be authorized by a State, 

thus providing an additional check on 

institutional integrity; however, we do 

not believe there are inadequate checks 

on State officials and agencies as they 

are subject to audit, review, and State 

legislative action. 

We do not agree with the commenters 

that proposed § 600.9(b)(3) would 

unnecessarily use State resources, be 

impractical, or be chaotic to administer. 

There are complaints that only a State 

can appropriately handle, including 

enforcing any applicable State law or 

regulations. We do not agree that public 

institutions should be exempt from this 

requirement as a complainant must have 

a process, independent of any 

institution—public or private, to have 

his or her complaint considered by the 

State. The State is not permitted to rely 

on institutional complaint and 

sanctioning processes in resolving 

complaints it receives as these do not 

provide the necessary independent 

process for reviewing a complaint. A 

State may, however, monitor an 

institution’s complaint resolution 

process to determine whether it is 

addressing the concerns that are raised 

within it. 

We do not agree with the suggestions 

that the Department’s Student Loan 

Ombudsman is an appropriate 

alternative to a State complaints 

process. The Ombudsman is charged, 

under the HEA, with the informal 

resolution only of complaints by 

borrowers under the title IV, HEA loan 

programs. By comparison, a State’s 

complaint resolution process would 

cover the breadth of issues that arise 

under its laws or regulations. 

Changes: We have amended proposed 

§ 668.43(b) to provide that an institution 

must make available to a student or 

prospective student contact information 

for filing complaints with its accreditor 

and with its State approval or licensing 

entity and any other relevant State 

official or agency that would 

appropriately handle a student’s 

complaint. 

Comment: One commenter believed 

that proposed § 668.43(b) under which 

an institution must provide to students 

and prospective students the contact 

information for filing complaints with 

the institution’s State approval or 

licensing entity should make allowance 

for situations in which a State has no 

process for complaints, or defers to the 

accrediting agency to receive and 

resolve complaints. Another commenter 

believed that, in the case of distance 

education, the institution should be 

responsible for responding to 

complaints. Instead of providing 

students and prospective students, 

under proposed § 668.43(b), the contact 

information for filing complaints with 

the institution’s accrediting agency and 

State approval or licensing entity, the 

commenter recommended that the 

institution provide students with the 

institution’s name, location, and Web 

site to file complaints. 

Discussion: We do not agree that 

proposed § 668.43(b) needs to make 

allowance for an institution in a State 

without a process for complaints, since 

every State is charged with enforcing its 

own laws and no institution is exempt 

from complying with State laws. If no 

complaint process existed, the 

institution would not be considered to 

be legally authorized. With respect to an 

institution offering distance education 

programs, the institution must provide, 

under § 668.43(b), not only the contact 

information for the State or States in 

which it is physically located, but also 

the contact information for States in 

which it provides distance education to 

the extent that the State has any 

licensure or approval processes for an 

institution outside the State providing 

distance education in the State. 

Changes: None. 

Reciprocity and Distance Education 

Comment: In general, commenters 

expressed concerns regarding legal 

authorization by a State in 

circumstances where an institution is 

physically located across State lines as 

well as when an institution is operating 

in another State from its physical 

location through distance education or 

online learning. One commenter urged 

the Department to include clarifying 

language regarding a State’s ability to 

rely on other States’ authorization in the 

final regulation rather than in the 

preamble. Several commenters 

requested that the Department limit the 

State authorization requirement in 

§ 600.9 to the State in which the 

institution is physically located. One 

commenter believed that a State should 

only be allowed to rely on another 

State’s determination if the school has 

no physical presence in the State and 

the other State’s laws, authority, and 

oversight are at least as protective of 

students and taxpayers. One commenter 

asked whether the phrase ‘‘the State in 

which the institution operates’’ is the 

same as ‘‘where the institution is 

domiciled’’. The commenter asked for 

clarification of the meaning of ‘‘operate’’ 

including whether it means where 

online students are located, where 

student recruiting occurs, where an 

instructor is located, or where 

fundraising activity is undertaken. One 

commenter requested that the 

Department clarify and affirm that 

reciprocity agreements that exist 

between States with respect to public 

institutions operating campuses or 

programs in multiple States are not 

impacted by these regulations. Another 

commenter believed that the 

Department should issue regulations 

rather than merely provide in the 

preamble of the NPRM that a State is 

allowed to enter into an agreement with 

another State. One commenter asked 

whether an institution that operates in 

more than one State can rely on an 

authorization from a State that does not 

meet the authorization requirements. 

One commenter urged the Department 

to clarify that States may rely on the 

authorization by other States, 

particularly as it relates to distance 

education. One commenter stated that 

the proposed regulations would be 

highly problematic for students who 

transfer between different States. 

Another commenter feared that large 

proprietary schools that are regional or 

national in scope would likely lobby 

States to turn over their oversight to 

another State where laws, regulations, 

and oversight are more lax. Another 

commenter was concerned that forprofit institutions may lobby a State to 

relinquish its responsibilities to a State 

of those institutions’ choosing. This 

situation could result in a State with 

little regulation that is home to a large 

for-profit institution actually controlling 

policies in many States where the 

corporation does business. One 

commenter suggested that if an 

institution is not physically located in a 

State, the State could enter into an 

agreement with other States where the 

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institution does have physical locations 

to rely on the information the other 

States relied on in granting authority. In 

this case, the commenter recommended 

that the oversight be at least as 

protective of students and the public as 

those of the State, and the State should 

consider any relevant information it 

receives from other sources. However, 

the commenter thought the State should 

retain authority to take independent 

adverse action including revoking the 

authority to offer postsecondary 

programs in the State. Another 

commenter expressed concern that the 

proposed regulations would confuse 

and burden the States and institutions 

because they are not clear regarding 

whether a State can continue to rely on 

the authorization of another State. The 

commenter believed that without 

clarification, an institution that offers 

education to students located in other 

States might be needlessly burdened 

with seeking authorization from each of 

those States. Another commenter 

expressed concern that the proposed 

regulations could potentially require an 

institution offering distance education 

courses in 50 different States to obtain 

authorization in each State, which 

would be an administrative burden that 

could result in increased tuition fees for 

students. Another commenter stated 

that during the negotiations, the 

Department indicated it was not its 

intent to require authorization in every 

State. Therefore, the commenter urged 

the Department to include this policy 

expressly in the final regulations. 

Discussion: We agree with the 

commenters that further clarification is 

needed regarding legal authorization 

across State lines in relation to 

reciprocity between States and to 

distance education and correspondence 

study. In making these clarifications, we 

are in no way preempting any State 

laws, regulations, or other requirements 

established by any State regarding 

reciprocal agreements, distance 

education, or correspondence study. 

To demonstrate that an institution is 

legally authorized to operate in another 

State in which it has a physical 

presence or is otherwise subject to State 

approval or licensure, the institution 

must demonstrate that it is legally 

authorized by the other State in 

accordance with § 600.9. We continue to 

believe that we do not need to regulate 

or specifically authorize reciprocal 

agreements. If both States provide 

authorizations for institutions that 

comply with § 600.9 and they have an 

agreement to recognize each other’s 

authorization, we would consider the 

institution legally authorized in both 

States as long as the institution 

provided appropriate documentation of 

authorization from the home State and 

of the reciprocal agreement. In addition, 

the institution must provide the 

complaint contact information under 34 

CFR 668.43(b) for both States. 

If an institution is offering 

postsecondary education through 

distance or correspondence education in 

a State in which it is not physically 

located, the institution must meet any 

State requirements for it to be legally 

offering distance or correspondence 

education in that State. An institution 

must be able to document upon request 

from the Department that it has such 

State approval. 

A public institution is considered to 

comply with § 600.9 to the extent it is 

operating in its home State. If it is 

operating in another State, we would 

expect it to comply with the 

requirements, if any, the other State 

considers applicable or with any 

reciprocal agreement between the States 

that may be applicable. 

Changes: We have revised § 600.9 to 

clarify in paragraph (c) that, if an 

institution is offering postsecondary 

education through distance or 

correspondence education to students in 

a State in which it is not physically 

located, the institution must meet any 

State requirements for it to be legally 

offering postsecondary distance or 

correspondence education in that State. 

We are further providing that an 

institution must be able to document 

upon request by the Department that it 

has the applicable State approval. 

State Institutions 

Comment: Many commenters 

requested that public institutions be 

exempted from the proposed 

regulations. They were concerned that 

requiring States to reexamine their State 

authorization for public colleges would 

not be a good use of resources. One 

commenter requested that the 

Department explicitly state that public 

institutions are by definition agents of 

the State and thus need no further 

authorization. One commenter from a 

State university system believed that the 

Federal Government should not impose 

a uniform model with ‘‘one size fits all 

States.’’ Another commenter noted that 

a State may not have legal power over 

decisions made by authorities given 

under the State’s constitution for 

oversight of certain public 

postsecondary institutions. One 

commenter believed that public 

institutions should be exempt from the 

proposed requirements for adverse 

actions and complaint processes. 

Discussion: As instrumentalities of a 

State government, State institutions are 

by definition compliant with 

§ 600.9(a)(1)(i), and no exemption from 

the provisions of § 600.9 of these final 

regulations is necessary. We do not 

agree that State institutions should be 

exempt from the requirement that a 

State have a process to review and 

appropriately act on complaints 

concerning an institution. We believe 

that students, their families, and the 

public should have a process to lodge 

complaints that is independent of an 

institution. 

Changes: None. 

Religious Institutions 

Comment: Two commenters requested 

a definition of the term religious 

institution. One of these commenters 

felt strongly that a religious exemption 

must be tailored to prevent loopholes 

for abuse but needed to offer an 

alternative for religious institutions so 

that changes to a State’s constitution 

would not be necessary. The commenter 

suggested that a religious institution 

should be exempted if the institution is 

owned, controlled, operated, and 

maintained by a religious organization 

lawfully operating as a nonprofit 

religious corporation pursuant to the 

Internal Revenue Code and meets the 

following requirements: 

• Instruction is limited to the 

principles of that religious organization. 

• A diploma or degree awarded by 

the institution is limited to evidence of 

completion of that education. 

• The institution offers degrees and 

diplomas only in the beliefs and 

practices of the church, religious 

denomination, or religious organization. 

• The institution does not award 

degrees in any area of physical science. 

• Any degree or diploma granted by 

the institution contains on its face, in 

the written description of the title of the 

degree being conferred, a reference to 

the theological or religious aspect of the 

degree’s subject area. 

• A degree awarded by the institution 

reflects the nature of the degree title, 

such as ‘‘associate of religious studies,’’ 

‘‘bachelor of religious studies,’’ ‘‘master 

of divinity,’’ or ‘‘doctor of divinity.’’ 

Discussion: We agree with the 

commenters that a definition of a 

religious institution is needed to clarify 

the applicability of a religious 

exemption. We also agree that a 

modification to the proposed 

regulations is needed to allow a State to 

provide an exemption to religious 

institutions without requiring the State 

to change its constitution. 

Changes: We have expanded 

§ 600.9(b) to provide that an institution 

is considered to be legally authorized by 

the State if it is exempt from State 

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authorization as a religious institution 

by State law in addition to the provision 

of the proposed regulations that the 

exemption by law, or exempt under the 

State’s constitution. We have also 

included a definition of a religious 

institution, which provides that an 

institution is considered a religious 

institution if it is owned, controlled, 

operated, and maintained by a religious 

organization lawfully operating as a 

nonprofit religious corporation and 

awards only religious degrees or 

religious certificates including, but not 

limited to, a certificate of Talmudic 

studies, an associate of biblical studies, 

a bachelor of religious studies, a master 

of divinity, or a doctor of divinity. We 

note, however, that a religious 

institution is still subject to the 

requirement in § 600.9(a)(1) of these 

final regulations that, for the institution 

to be considered to be legally authorized 

in the State, the State must have a 

process to review and appropriately act 

on complaints concerning the 

institution. 

Tribal Institutions 

Comment: One commenter suggested 

the Department should exempt from 

State authorization any institution 

established and operated by tribal 

governments. Three commenters stated 

that the Department should recognize 

that tribal institutions would not be 

subject to State oversight but instead the 

tribe would exercise oversight. One of 

those commenters suggested amending 

the regulations to add ‘‘tribal authority’’ 

wherever State authority is mentioned 

in the proposed regulations. 

Discussion: We agree that tribal 

institutions are not subject to State 

oversight for institutions operating 

within tribal lands. Proposed 

§ 600.9(a)(2) provided that a tribal 

college would be considered to meet the 

basic provisions of proposed 

§ 600.9(a)(1) if it was authorized to offer 

educational programs beyond secondary 

education by an Indian tribe as defined 

in 25 U.S.C. 1802(2). However, 

proposed § 600.9(b), could be read as 

inappropriately making a tribal 

institution subject to adverse actions by 

the State and a State process for 

handling student complaints. We did 

not intend to make a tribal institution 

subject to any State process for handling 

complaints and have clarified the 

language in § 600.9. If a tribal college is 

located outside tribal lands within a 

State, or has a physical presence or 

offers programs to students that are 

located outside tribal lands in a State, 

the tribal college must demonstrate that 

it has the applicable State approvals 

needed in those circumstances. 

Changes: Section 600.9 has been 

revised to clarify the status of tribal 

institutions. As noted elsewhere in this 

preamble, we have removed proposed 

§ 600.9(b)(2) regarding adverse actions. 

Further, we are providing that, in 

§ 600.9(a)(2)(ii) of the final regulations, 

the tribal government must have a 

process to review and appropriately act 

on complaints concerning a tribal 

institution and enforce applicable tribal 

requirements or laws. 

Part 668 Student Assistance General 

Provisions Retaking Coursework 

(§ 668.2) 

Comment: Many commenters agreed 

with the Secretary’s proposal to amend 

the definition of full-time student in 

§ 668.2(b) to allow repeated coursework 

to count towards a student’s enrollment 

status in term-based programs. The 

commenters believed the change would 

alleviate the administrative burden 

related to tracking student coursework 

to prevent payment based on repeated 

coursework, as is currently required. 

Discussion: The Department agrees 

with the commenters that amending the 

definition of full-time student in 

§ 668.2(b) will be beneficial for students 

who retake coursework. 

Changes: None. 

Comment: Several commenters asked 

the Department to clarify whether 

amending the definition of full-time 

student will apply to all students, 

regardless of their enrollment status, 

including less-than-half-time, half-time, 

and three-quarter-time enrollment 

statuses. 

Discussion: Less-than-half-time, halftime, and three-quarter-time statuses are 

generally defined in relation to the 

definition of a full-time student. In 

§ 668.2 half-time and three-quarter-time 

statuses generally are defined as at least 

one-half and three quarters of the 

academic workload of a full-time 

student, respectively. Less-than-halftime status is not defined, as the term 

is self-explanatory in its relationship to 

half-time and full-time statuses. Thus, 

including this provision in the 

definition of full-time student will apply 

to less-than-full-time students who are 

enrolled in term-based programs. 

Changes: None. 

Comment: Some commenters asked 

the Department to allow early 

implementation of this retaking 

coursework provision, because the 

Department’s current guidance in the 

Federal Student Aid Handbook does not 

provide for this benefit. 

Discussion: We have determined, as a 

general policy, that no provisions of 

these final regulations should be 

designated for early implementation. 

We will update the Handbook for the 

2011–2012 award year to reflect the 

amended definition of full-time student 

in these final regulations. 

Changes: None. 

Comment: Some commenters 

questioned whether institutions may 

continue to set their own policy in 

regards to retaking coursework and 

awarding credits for repeated 

coursework. One commenter asked the 

Department to clarify if the proposed 

regulation on retaking coursework 

would allow a student to repeat courses 

already passed to achieve a higher 

grade. Another commenter asked the 

Department to clarify whether a student 

who has already earned the maximum 

number of remedial courses allowed 

could be paid to retake coursework if 

the student repeats more remedial 

courses. 

Discussion: In general, the regulations 

do not affect an institution’s policies 

governing whether a student may retake 

coursework in term-based programs, 

including repeating courses to achieve a 

higher grade, as these regulations apply 

only to determining enrollment status 

for title IV, HEA program purposes. 

Moreover, the regulations do not limit 

an institution’s ability to establish 

policies for title IV, HEA program 

purposes to the extent those policies are 

not in conflict with title IV, HEA 

program requirements. However, with 

respect to repeating coursework 

previously passed by a student in a 

term-based program, the student’s 

enrollment status for title IV, HEA 

purposes may include any coursework 

previously taken in the program, but we 

are limiting the provision so that it may 

not include more than one repetition of 

a previously passed course or any 

repetition of previously passed 

coursework that would be taken due to 

a student’s failure of other coursework. 

In other words, an institution may pay 

a student one time for retaking 

previously passed coursework if, for 

example, the student needed to meet an 

academic standard for that particular 

course, such as a minimum grade. 

Conversely, an institution may not pay 

a student for retaking previously passed 

courses if the student is required to 

retake those courses because the student 

failed a different course in a prior term. 

For example, if a student enrolls in four 

classes in the fall semester and passes 

three of them, the institution could 

require the student to retake the failed 

class and also require the student to 

retake the other three classes because of 

failing the one class. If the student 

retakes the four classes in the spring 

semester, the failed class would be 

included in the student’s enrollment 

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status, but the three classes passed in 

the fall would not be included in 

determining the student’s enrollment 

status for the spring semester for 

purposes of the title IV, HEA programs. 

We believe these revisions are necessary 

to limit potential abuse from courses 

being retaken multiple times, while 

providing institutions sufficient 

flexibility to meet the needs of most 

students. 

We would also note that an 

institution’s satisfactory academic 

progress policy could further limit a 

student from retaking coursework, 

because the credits associated with any 

course the student retakes count toward 

the maximum time-frame requirement. 

The regulations do not affect the oneyear academic limitation on noncredit 

and reduced-credit remedial coursework 

under § 668.20(d) and (f). For example, 

if a student repeats a remedial course 

that exceeds the one-year limitation, the 

course could not be considered in the 

student’s enrollment status. 

Changes: We have revised the 

definition of full-time student in 

§ 668.2(b) to provide that a student’s 

enrollment status for a term-based 

program may include repeating any 

coursework previously taken in the 

program but may not include more than 

one repetition of a previously passed 

course, or any repetition of a previously 

passed course due to the student’s 

failing other coursework. 

Comment: One commenter 

recommended that the change in the 

definition of full-time student should be 

expanded to include nonstandard-term 

and nonterm programs. 

Discussion: Since the change in the 

definition applies to all term-based 

programs, the change would apply to 

standard terms, including semesters, 

trimesters, and quarters, as well as 

nonstandard terms. Under the definition 

of a nonterm payment period in 

§ 668.4(c), a student’s coursework is 

divided into payment periods based on 

the hours and weeks of instructional 

time in the program. In general, under 

these nonterm provisions a student 

must successfully complete the credit or 

clock hours in a payment period to 

advance to the next payment period, 

and may not be paid for repeating 

coursework regardless of whether the 

student successfully completed it unless 

the provisions of § 668.4(g) apply. 

Changes: None. 

Written Arrangements (§§ 668.5 and 

668.43) 

General 

Comment: Several commenters agreed 

with the proposed regulations relating 

to written arrangements. One 

commenter commended the 

Department’s proposals on this topic, 

noting that they strike a fair balance in 

the presence of many minutia-driven 

concerns. Some commenters stated that 

the proposed changes eliminate 

inconsistencies that exist in the current 

regulations and provide better 

information to students while allowing 

institutions to determine the best way to 

disseminate the required information. 

Other commenters stated that they 

agreed with the proposed changes in 

§§ 668.5 and 668.43 because if an 

eligible institution enters into a written 

arrangement with another eligible 

institution, under which the other 

eligible institution provides part of the 

educational program to students 

enrolled in the first institution, it is 

important for all parties to have a clear 

understanding of which institution is 

providing the credential and the 

majority of the education and training. 

Discussion: We appreciate the 

commenters’ support of the proposed 

changes reflected in §§ 668.5 and 

668.43. 

Changes: None. 

Written Arrangements Between Two or 

More Eligible Institutions (§ 668.5(a)) 

Comment: Some commenters objected 

to the Department’s assertion—in the 

preamble of the NPRM (75 FR 34806, 

34815)—that students who want to take 

more than 50 percent of an educational 

program at another institution could 

transfer to the institution that provides 

the preponderance of the program’s 

coursework. One commenter stated that 

students should be allowed to take 

courses at more than one campus of 

eligible institutions that have a written 

arrangement without needing to go 

through unnecessary activities related to 

transfer of credit. 

Several commenters disagreed with 

the proposed changes reflected in 

§ 668.5(a)(2)(ii). First, they argued that 

imposing a limitation on the portion of 

an educational program one institution 

can provide under a written 

arrangement is not consistent with the 

purpose of consortium agreements, 

which is to allow students to obtain a 

degree or certificate from their 

institution of choice while allowing 

them to satisfy course requirements by 

taking courses delivered by another 

institution. Second, the commenters 

disagreed with the limitation because 

we do not place similar restrictions on 

institutions when they accept transfer 

students who have earned more than 

half of the credits that will go toward 

their educational program at another 

institution. Finally, the commenters 

argued that more students are attending 

multiple institutions before completing 

their degree or certificate programs and 

a requirement that the credentialgranting institution must provide 50 

percent of the individual student’s 

educational program would be a barrier 

to the students’ postsecondary success. 

In addition, a few commenters noted 

that current articulation agreements 

allow students to further their education 

at another institution that may accept 

enough credits on transfer that the 

student has less than 50 percent of the 

program remaining to be completed. 

Some commenters expressed the view 

that the proposed regulations governing 

written arrangements should not apply 

to articulation agreements while others 

sought clarification of whether the 

Department’s position is that they do 

apply to such agreements. Commenters 

expressed concern that the proposal 

would result in undue hardship and 

fewer opportunities for students in 

small communities who take a portion 

of their coursework locally. One 

commenter asked whether the proposed 

changes reflected in § 668.5 affect 

students who obtained college credit 

while still in high school. 

Discussion: There appears to be some 

confusion about the scope of the 

proposed changes to § 668.5. Under 

proposed § 668.5(a)(1), eligible 

institutions that are not under common 

ownership may enter into a written 

arrangement (which may include the 

type of consortium agreements 

mentioned by the commenters) under 

which the non-degree-granting 

institution offers part of the degreegranting institution’s educational 

program; this provision does not impose 

a specific limitation on the portion of 

the educational program that may be 

offered by the non-degree-granting 

institution. In contrast, under proposed 

§ 668.5(a)(2)(ii), if a written arrangement 

is between two or more eligible 

institutions that are under common 

ownership (i.e., are owned or controlled 

by the same individual, partnership or 

corporation), the degree- or certificategranting institution must provide more 

than 50 percent of the educational 

program. In this situation, a student is 

considered a regular student at the 

degree- or certificate-granting institution 

while taking a portion of the 

educational program at another 

institution under common ownership. 

Under this regulatory framework, a 

consortium agreement between two 

eligible institutions that are not under 

common ownership is not subject to the 

50 percent limitation in § 668.5(a)(2)(ii). 

Moreover, § 668.5(a) does not apply to 

articulation agreements under which 

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institutions agree to accept credits when 

students transfer from one institution to 

another, or to cases where individual 

students transfer to a different 

institution to complete their educational 

programs. Students who enroll in an 

institution and have college credits 

accepted on transfer that were earned 

while in high school also do not come 

within the scope of this regulation. 

Changes: None. 

Comment: A number of commenters 

disagreed with proposed § 668.5(a)(2), 

which has the effect of limiting the 

relative portions of an educational 

program provided by more than one 

institution under the same ownership or 

control. Some commenters argued that 

the limit is arbitrary and inappropriate 

because—for all intents and purposes— 

institutions under common ownership 

are the same. A few commenters 

suggested that the regulations should 

focus more narrowly on the institutions 

with problems as opposed to all 

institutions under common ownership. 

Some commenters were unclear about 

what constitutes ‘‘common ownership’’ 

and what types of written arrangements 

are subject to the 50 percent limitation 

in § 668.5(a)(2)(ii). 

Some commenters indicated that the 

proposed regulations should apply to all 

institutions and not apply only to forprofit institutions. Several commenters 

expressed concern about the 

applicability of this provision to the 

many written arrangements between 

public institutions within a State and 

whether a State is considered to ‘‘own’’ 

all of its institutions. Other commenters 

asked the Department to clarify that 

public and private nonprofit institutions 

are not covered by the proposed 

language in § 668.5(a)(2). 

In addition, commenters raised 

concerns about the potential impact 

these regulations could have on 

students who move to another area and 

want to transfer to another location of 

the same institution. One commenter 

stated that the proposed change would 

discourage students who finish a 

program from transferring to another 

institution under the same control for a 

higher level program. 

Some commenters objected to the 

Department’s assertions in the preamble 

of the NPRM that written arrangements 

are used by institutions under common 

ownership to circumvent other 

regulations and argued that the 

Department provided only anecdotal 

evidence to support the proposed 

changes in § 668.5. Commenters stated 

that institutions that are circumventing 

the current regulations will find other 

opportunities to do so and should face 

sanctions under the misrepresentation 

provisions. 

Discussion: As indicated in the 

preamble to the NPRM, the Department 

focused its regulatory changes on the 

types of institutions and situations 

where problems have been identified 

rather than expanding a requirement for 

accrediting agencies to review written 

arrangements between institutions 

under common ownership. We modeled 

these regulations on the language in 

§ 668.5(c)(3)(ii)(B), regarding written 

arrangements between an eligible 

institution and an ineligible institution 

or organization because that section of 

the regulations refers to institutions that 

are owned or controlled by the same 

individual, partnership, or corporation. 

We do not agree with the commenter 

who stated that the regulations are 

arbitrary and inappropriate because 

institutions under common ownership 

are the same entity. This is because 

institutions are approved to participate 

in the Federal student aid programs as 

separate entities, and they must 

individually demonstrate eligibility as 

an institution, eligibility for the 

programs they offer, program 

compliance, cohort default rates, 

financial responsibility, and 

administrative capability. Some 

limitations on institutions that are based 

on program measures can be 

circumvented if programs that appear to 

be offered by one institution are actually 

offered by another institution. The 

prohibition in this regulation will 

ensure that the institution providing 

most of the program will be the one 

associated with the students that are 

taking the program. 

Section 668.5(a)(2) does not apply to 

public or private nonprofit institutions 

because these institutions are not owned 

or controlled by other entities and 

generally act autonomously. Some 

nonprofit institutions may have 

business relationships through 

management agreements or service 

agreements where similar concerns 

could arise, but those instances are 

expected to be infrequent and will be 

addressed on a case-by-case basis. 

These provisions do not impact the 

ability of individual students to transfer 

to another location of the same 

institution or to another institution 

under the same ownership or control 

either to complete an educational 

program or to enroll in a higher-level 

program. When a student transfers to a 

new institution and enrolls for the 

purpose of completing a degree or 

certificate, the new institution becomes 

the degree-granting institution. 

We agree that institutions that 

circumvent or otherwise violate 

regulations should face appropriate 

sanctions. 

Changes: None. 

Comment: A number of commenters 

supported the proposed changes to 

§ 668.5 regarding the limitations on the 

portion of the educational program that 

may be offered by another institution 

under a written arrangement, but sought 

clarification on how to measure portions 

of educational programs for these 

purposes. These commenters suggested 

that, for the purposes of determining the 

percentage of the educational program 

provided by each institution, we should 

track the provision of educational 

services on a programmatic basis rather 

than by the amount of coursework an 

individual student may elect to take. 

Discussion: For purposes of 

determining the portions of the 

educational program provided by each 

institution under any written 

arrangement under § 668.5, the degreegranting institution is responsible for 

limiting the amount of the program that 

may be taken from any other institution. 

Because an institution cannot offer 

more than 50 percent of an educational 

program through another institution that 

is under common ownership or control, 

if an institution offered an educational 

program on campus and online (through 

a written arrangement with another 

institution under common ownership) 

and offered students the option of taking 

courses by either method, the institution 

must ensure that each student 

completes more than 50 percent of the 

educational program on campus. If the 

same institution enrolled students who 

live beyond a reasonable commuting 

distance to the campus and, therefore, 

take the online portion of the program 

first, the institution must be able to 

demonstrate that the students intend to 

attend on campus to complete at least 

50 percent of their educational program. 

Changes: None. 

Comment: Some commenters agreed 

that the institution that grants the 

degree or certificate should provide 

more than 50 percent of the educational 

program, but suggested that monitoring 

for compliance with this regulatory 

provision should be done by accrediting 

agencies rather than the Department. 

These commenters noted that to the 

extent that written arrangements are 

part of a deliberative process related to 

the development of curriculum and 

academic requirements, they are part of 

a decision-making process best 

performed by an institution’s faculty 

and leadership and best evaluated by 

accrediting agencies. Some commenters 

stated that the Department should rely 

on accrediting agencies to set 

appropriate limits on the portion of an 

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educational program that can be 

provided by the non-degree-granting 

institution. One commenter stated that, 

currently, some national accrediting 

agencies allow students the opportunity 

to take more than 50 percent of their 

educational program from the nondegree-granting institution. 

Discussion: We acknowledge the 

important role that an institution’s 

faculty and leadership play in the 

development of written arrangements as 

well as the role of accrediting agencies 

in monitoring the use of such 

arrangements in accordance with their 

standards. However, as we learned 

during negotiations, accrediting 

agencies have differing practices 

concerning the review of written 

arrangements, and some accrediting 

agencies do not routinely review written 

arrangements. As such, we believe that 

it is important to establish a threshold 

for the amount of the educational 

program that can be offered under a 

written arrangement by an institution 

under common ownership with a host 

institution. Accrediting agencies may 

establish a more restrictive measure if 

they wish to do so. 

Changes: None. 

Comment: One commenter expressed 

concern that proposed § 668.5(a) would 

affect the Service Members Opportunity 

College Army Degree (SOCAD) 

Institution Agreements currently in 

place, which allow 75 percent of an 

educational program to be provided by 

the non-degree-granting institution. 

However, the Contract Administrator of 

SOCAD provided a separate comment 

stating that the proposed regulations 

would not affect the current 

relationships provided to members of 

the military. 

Discussion: As noted earlier, the 

proposed limitations in § 668.5(a)(2) 

apply only to written arrangements 

between two or more eligible 

institutions that are owned or controlled 

by the same individual, partnership, or 

corporation. To the extent that the 

eligible institutions that participate in 

SOCAD are not owned or controlled by 

the same individual, partnership, or 

corporation, they are not subject to the 

proposed changes in § 668.5(a)(2). 

Changes: None. 

Comment: One commenter supported 

the clarification that the enrolling 

institution has all the necessary 

approvals to offer an educational 

program in the format in which it is 

being provided. Another commenter 

argued that it is nonsensical to require 

the enrolling institution to have all the 

same approvals as the providing 

institution. The commenter stated that 

written arrangements exist to permit 

flexibility for students and additional 

options for students in pursuing their 

education goals. One of the benefits of 

such arrangements, argued the 

commenter, is to provide student access 

to learning resources and opportunities 

that the degree-granting institution 

cannot provide. For example, written 

arrangements may afford students 

access to online learning from an 

institution with demonstrated 

competencies in providing distance 

education. Our clarification in the 

preamble to the NPRM that the 

institution enrolling the student must 

have the approval to offer an education 

program in the format in which it is 

being offered limits the ability for 

campus-based schools to offer cuttingedge online delivery methods for some 

programs even when these online 

courses are provided by affiliated and 

fully accredited institutions. One 

commenter argued that the Department 

had failed to provide data to support 

this limitation. Another commenter 

suggested that there should be a 

transition or grace period to allow 

institutions to get any needed approvals. 

Discussion: We agree that written 

arrangements are designed to provide 

educational flexibility for students and 

to allow them access to resources and 

opportunities that may not be available 

from their degree-granting institution. 

However, we believe that it is important 

that the degree-granting institution have 

all the necessary approvals to offer the 

educational program in the format in 

which it is being offered. We note that 

only in cases in which an institution is 

offering more than 50 percent of an 

educational program through distance 

education is the institution required to 

receive approval from its accrediting 

agency to offer distance education. 

Therefore, a student who is taking only 

a few courses online as part of a written 

arrangement would not be likely to 

trigger the requirement that an 

institution seek approval from its 

accrediting agency to offer distance 

education. We do not see a need for a 

transition or grace period to allow 

institutions to get any needed approvals 

because we believe that most 

institutions already have the necessary 

approvals in place. 

Changes: None. 

Requirements for Arrangements 

Between Eligible Institutions and 

Ineligible Institutions or Organizations 

(§ 668.5(c)) 

Comment: One commenter supported 

the expansion of the list of conditions 

that preclude an arrangement between 

an eligible institution and an ineligible 

entity reflected in proposed § 668.5(c). 

Another commenter stated that the list 

of exclusions in proposed § 668.5(c) is 

overly broad. This commenter agreed 

with the Department’s intent but 

pointed out that denial of recertification 

(§ 668.5(c)(iv)) may be due to a factor 

such as program length. The commenter 

suggested that we narrow § 668.5(c)(iv) 

to cover only denials of recertification 

that are based on the institution’s lack 

of administrative capability or financial 

responsibility. 

Discussion: We appreciate the support 

for the expansion of the list of 

conditions that preclude an arrangement 

between an eligible institution and an 

ineligible entity reflected in § 668.5(c). 

We disagree with the commenter who 

recommended that we limit the denial 

of recertification condition to cover only 

those recertification denials that are 

based on the institution’s lack of 

administrative capability or financial 

responsibility. An institution that has its 

recertification denied because it does 

not offer one or more programs of 

sufficient length to qualify to participate 

in the Title IV, HEA programs has 

committed a serious programmatic 

violation that the Department believes 

should be included in this prohibition. 

Changes: None. 

Disclosures to Students (§§ 668.5(e) and 

668.43(a)(12)) 

Comment: Several commenters 

supported the requirement that 

institutions providing an educational 

program under § 668.5(a), (b), or (c) 

inform students when part of their 

educational program is provided by a 

different institution and of additional 

charges that the student may incur 

when enrolling in an educational 

program that is provided in part by 

another institution. They noted that all 

communication to students should be 

clear, user-friendly, and understandable. 

One commenter suggested that we 

revise § 668.43(a)(12)(ii) to require the 

institution to include in its description 

of its written arrangements the Web 

sites along with the names and locations 

of the other institutions or organizations 

that are providing the portion of the 

educational program that the degree- or 

certificate-granting institution is not 

providing. Another commenter asked 

whether § 668.43(a)(12)(iv) requires the 

institution to include in its description 

of its written arrangements an estimate 

of the costs incurred by students taking 

online courses (e.g., the costs of 

purchasing a computer and obtaining 

Internet access). 

A few commenters requested 

clarification on whether the required 

student notifications apply only to 

educational programs that require 

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students to take coursework at another 

institution or whether they apply to 

institutions that enter into arrangements 

when students choose to take 

coursework at another institution. The 

commenters stated that if the 

notifications apply to both situations, 

the regulations would create an 

overwhelming burden for institutions. 

These commenters expressed concern 

that this burden would result in 

institutions limiting the use of written 

arrangements and that this, in turn, 

would result in less choice for students. 

Discussion: We appreciate the support 

for requiring additional disclosures 

regarding the portion of a program being 

provided by a different institution and 

the additional costs that a student may 

incur under such an arrangement. We 

agree that these disclosures should be 

clear and understandable. While we 

agree that providing the Web site of the 

non-degree-granting institution in the 

disclosures may be helpful to students, 

on balance, we determined that 

requiring that particular disclosure is 

not necessary and that the decision to 

include such information in the 

disclosure should be left to the degreegranting institution’s discretion. 

As noted by the commenters, the 

required disclosures include disclosure 

of the estimated additional costs 

students may incur as the result of 

enrolling in an educational program that 

is provided, in part, under a written 

arrangement. Therefore, when the 

coursework provided through the 

written arrangement is provided online, 

it would be appropriate to include 

estimated additional costs such as the 

costs of purchasing a computer and 

obtaining Internet access. 

As stated in the preamble to the 

NPRM, the disclosure requirements 

reflected in §§ 668.5(e) and 

668.43(a)(12) apply to written 

arrangements between or among 

institutions under which the degreegranting institution can offer 

educational programs that are provided, 

in part, by another institution (i.e., on an 

educational program-by-program basis) 

and not to individual, student-initiated 

written arrangements. We 

acknowledged that requiring disclosures 

to individual, student-initiated written 

arrangements would be impractical, 

burdensome and unnecessary because 

the student is a party to the arrangement 

and would already have the information 

required to be disclosed. 

Changes: None. 

Incentive Compensation (§ 668.14(b)) 

General 

Comment: A significant number of 

commenters supported the Secretary’s 

proposed changes to § 668.14(b)(22), 

which they stated would align the 

regulations with the statute and 

comprehensively ban the use of 

commissions, bonuses, and other direct 

forms of compensation based on success 

in securing enrollments or the award of 

financial aid. These commenters 

supported our efforts to ensure the 

integrity of the Federal student aid 

programs and to protect students against 

aggressive admissions and recruitment 

practices. They agreed that the current 

regulations, which included the 

language describing permitted 

compensation activities (i.e., ‘‘safe 

harbors’’), did not achieve the goals 

intended by the Congress. These 

commenters expressed the belief that 

the current safe harbors enable 

institutions to circumvent the law. 

Several commenters stated that the 

proposed definitions reflected in 

§ 668.14(b)(22)(iii) would be particularly 

helpful and expressed appreciation for 

our readiness to provide broad and 

appropriate guidance to institutions, 

rather than opinions on an individual 

institution’s arrangements, in evaluating 

compensation issues. 

Numerous commenters, particularly 

groups representing admissions 

counselors, specifically supported the 

deletion of the twelve safe harbors. The 

groups representing admissions 

counselors stated that they believe that 

counselors should be compensated in 

the form of a fixed salary. They further 

argued that because the admissions 

profession is a form of counseling, 

admissions professionals can only 

discharge their ethical obligations if 

they are free of vested interests in the 

enrollment decisions made by the 

prospective students they advise. The 

commenters representing admissions 

personnel also noted that elimination of 

the safe harbors would help prevent a 

recruiter’s financial interest from 

overriding a student’s academic interest. 

Discussion: The Secretary appreciates 

the support offered by the commenters. 

Changes: None. 

Comment: A number of commenters 

who expressed support for the 

Secretary’s goal in proposing changes to 

§ 668.14(b)(22) requested modifications 

to the regulatory language or to the 

preamble discussion. The majority of 

these commenters requested 

clarifications to assist institutions in 

understanding whether particular 

compensation activities would be 

prohibited under proposed 

§ 668.14(b)(22). 

Many commenters opposed the 

proposed changes and appealed for the 

Department to retain the current safe 

harbors. They challenged the legal 

adequacy of the changes and asserted 

that the need for the proposed changes 

remained unsupported by any evidence 

or data. Some commenters alleged that 

the Department had failed to specify 

sound reasons for the change in policy 

and instead had offered nonspecific 

references to its reviews of 

compensation practices and 

expenditures of resources. 

Other commenters asked whether all 

payments permitted under the current 

safe harbors would be prohibited under 

this new regulatory framework. 

Discussion: Under section 410 of the 

General Education Provisions Act (20 

U.S.C. 1221e–3), the Secretary has the 

authority to make, promulgate, issue, 

rescind, and amend rules and 

regulations governing the manner of 

operation of, and governing applicable 

programs administered by, the 

Department. For regulations governing 

the title IV, HEA programs, the 

Secretary also must ensure that the 

development and issuance of those 

regulations comply with the negotiated 

rulemaking requirements in section 492 

of the HEA. In 2002, the Department 

adopted the incentive compensation 

safe harbors reflected in current 

§ 668.14(b)(22)(ii) under the statutory 

authority granted in GEPA and the 

negotiated rulemaking requirements in 

the HEA. The Department adopted the 

current safe harbors based on a 

‘‘purposive reading of section 487(a)(20) 

of the HEA.’’ (67 FR 51723 (August 8, 

2002).) Since that time, however, the 

Department’s experience has 

demonstrated that unscrupulous actors 

routinely rely upon these safe harbors to 

circumvent the intent of section 

487(a)(20) of the HEA. As such, rather 

than serving to effectuate the goals 

intended by Congress through its 

adoption of section 487(a)(20) of the 

HEA, the safe harbors have served to 

obstruct those objectives and have 

hampered the Department’s ability to 

efficiently and effectively administer the 

title IV, HEA programs. 

For example, it has been the 

Department’s experience that many 

institutions routinely use employee 

evaluation forms that acknowledge that 

the number of students enrolled is an 

important, if not the most important, 

variable, in determining recruiter 

compensation. These forms also list 

certain qualitative factors that are 

ostensibly considered in making 

compensation decisions. The forms, on 

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their face, appear to demonstrate 

compliance with the first safe harbor, 

which permits compensation schemes 

that are not ‘‘solely’’ based on the 

number enrolled. However, the 

Department has been repeatedly advised 

by institutional employees that these 

other qualitative factors are not really 

considered when compensation 

decisions are made, and that they are 

identified only to create the appearance 

of title IV compliance. It is clear from 

this information that institutions are 

making actual compensation decisions 

based exclusively on the numbers of 

students enrolled. 

The Department’s need to look behind 

the documents that institutions allege 

they have used to make recruiter 

compensation decisions requires the 

expenditure of enormous amounts of 

resources, and has resulted in an 

inability to adequately determine 

whether institutions are in compliance 

with the incentive compensation ban in 

many cases. 

For these reasons, we believe it is 

appropriate to remove the safe harbors 

and instead to require institutions to 

demonstrate that their admissions 

compensation practices do not provide 

any commission, bonus, or other 

incentive payment based in any part, 

directly or indirectly, upon success in 

securing enrollments or the award of 

financial aid to any person or entity 

engaged in any student recruitment or 

admission activity or in making 

decisions regarding the award of title IV, 

HEA program funds. We believe that 

institutions can readily determine if a 

payment or compensation is permissible 

under section 487(a)(20) of the HEA by 

analyzing— 

(1) Whether it is a commission, bonus, 

or other incentive payment, defined as 

an award of a sum of money or 

something of value paid to or given to 

a person or entity for services rendered; 

and 

(2) Whether the commission, bonus, 

or other incentive payment is provided 

to any person based in any part, directly 

or indirectly, upon success in securing 

enrollments or the award of financial 

aid, which are defined as activities 

engaged in for the purpose of the 

admission or matriculation of students 

for any period of time or the award of 

financial aid. 

If the answer to each of these 

questions is yes, the commission, bonus, 

or incentive payment would not be 

permitted under the statute. 

Therefore, going forward, actions that 

were permitted under current 

§ 668.14(b)(22) will neither be 

automatically prohibited, nor 

automatically permitted. Instead, 

institutions will need to re-examine 

their practices to ensure that they 

comply with § 668.14(b)(22). To the 

extent that a safe harbor created an 

exception to the statutory prohibition 

found in section 487(a)(20) of the HEA, 

its removal would establish that such an 

exception no longer exists. 

Changes: None. 

Current Safe Harbors 

Comment: Several commenters stated 

that removing the safe harbor from 

current § 668.14(b)(22)(ii)(B), which 

permits compensation to recruiters 

based upon enrollment of students in 

ineligible title IV, HEA programs, is 

contrary to congressional intent. These 

commenters stated that the HEA was not 

intended to regulate other educational 

endeavors of the institution. In addition, 

one commenter asked about a specific 

practice permitted by some State 

cosmetology boards that allows two 

non-title IV, HEA eligible programs to 

be combined and in that form, to 

become eligible for title IV, HEA aid. 

Another commenter asked about how 

the removal of this safe harbor would 

impact advanced education classes that 

are not title IV eligible. 

Discussion: In our experience, 

institutions have used the safe harbor 

reflected in § 668.14(b)(22)(ii)(B) to steer 

students away from title IV, HEA 

programs. We believe that retaining this 

safe harbor would continue to allow 

institutions to manipulate the system by 

initially enrolling students in non-title 

IV, HEA eligible programs so that the 

institutions pay incentive compensation 

to recruiters based on such enrollments, 

only to later re-enroll the same students 

in title IV, HEA eligible programs. 

We do not agree that the removal of 

this safe harbor is contrary to 

congressional intent. In particular, the 

only exception Congress provided in 

section 487(a)(20) of the HEA is to the 

recruitment of foreign students residing 

in foreign countries who are not eligible 

to receive Federal student assistance. 

For the reasons addressed in the 

preceding discussions, we believe it is 

inappropriate to carve out a further 

exception to include non-foreign 

students who are not immediately 

receiving Title IV funds. 

Moreover, as to the comment 

regarding cosmetology schools, there is 

nothing in the identified practice that 

supports allowing compensation to be 

paid to recruitment personnel that is 

otherwise inconsistent with section 

487(a)(20) of the HEA. 

Finally, to the extent that the HEA’s 

ban on the payment of incentive 

compensation is not otherwise limited 

to students enrolled in title IV, HEA 

eligible programs, institutions need to 

make sure that they are in compliance 

with the prohibition on incentive 

compensation regardless of the nature of 

the particular program of instruction. 

Changes: None. 

Comment: A few commenters 

expressed concerns about the safe 

harbor reflected in current 

§ 668.14(b)(22)(ii)(C), which permits 

compensation to recruiters who arrange 

contracts between an institution and an 

employer, where the employer pays the 

tuition and fees for its employees (either 

directly to the institution or by 

reimbursement to the employee). One 

commenter noted that because under 

this type of contract there is no direct 

contact between the entity or individual 

seeking the arrangement and the 

student, these contracts seem to be 

permissible. Another commenter asked 

whether the following type of 

arrangement would be permissible 

without this safe harbor: An employee 

secures contracts for non-degree training 

that is not eligible for title IV, HEA 

program funding, and such contracts are 

billed at a flat rate and are paid for by 

the employer. This commenter 

specifically asked whether the employee 

in this situation may be compensated 

based on revenue from those contracts. 

Discussion: This safe harbor permits 

compensation that is ultimately based 

upon success in securing enrollments. 

Because this is inconsistent with section 

487(a)(20) of the HEA, we believe that 

the safe harbor should not be retained 

in these final regulations. We agree with 

the commenter that in some instances 

compensation to recruiters who arrange 

contracts between an institution and an 

employer, where the employer pays the 

tuition and fees for its employees, 

would be permissible under the ban on 

incentive compensation. As previously 

discussed, we encourage institutions to 

apply the two-part test provided within 

the NPRM in evaluating whether a 

particular compensation practice is 

permissible. Given the number of 

possible variables within any particular 

proposal, the Department is not 

prepared to say that the examples 

generally offered by commenters will 

always be permissible, but we 

acknowledge that there are 

circumstances where such arrangements 

may prove to be compliant with the 

HEA. 

We strongly believe that institutions 

do not need to rely on safe harbors to 

protect compensation that complies 

with section 487(a)(20) of the HEA. 

Ultimately, the institution must 

determine whether its compensation is 

based in any part, directly or indirectly, 

on securing enrollments or the award of 

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financial aid. If it is not, such 

compensation would continue to be 

permissible even with the removal of 

the safe harbor from current 

§ 668.14(b)(22)(ii)(C). 

Changes: None. 

Comment: A number of commenters 

voiced their support for the safe harbor 

from current § 668.14(b)(22)(ii)(E), 

which permits compensation based 

upon a student’s successfully 

completing his or her educational 

program or one academic year of his or 

her educational program, whichever is 

shorter. Some commenters expressed 

concern that removal of this safe harbor 

would eliminate an important safeguard 

for students because this safe harbor 

encourages institutions to admit only 

qualified students. Other commenters 

noted that to disallow incentive 

compensation based on completion of 

an educational program is contrary to 

the Administration’s stated goal of 

student retention. Several commenters 

suggested that the Department should 

measure the positive effect that 

incentive payments based on 

completion of an educational program 

can have on students’ educational 

experience. Another commenter asked 

whether payments based on a graduated 

student’s employment in the student’s 

field of study would be permitted under 

the new regulatory framework for 

incentive compensation. 

Discussion: The Department believes 

that an institution’s resolute and 

ongoing goal should be for its students 

to complete their educational programs. 

Employees should not be rewarded 

beyond their standard salary or wages 

for their contributions to this 

fundamental duty. The safe harbor in 

current § 668.14(b)(22)(ii)(E) permits 

compensation that is ‘‘indirectly’’ based 

upon securing enrollments—that is, 

unless the student enrolls, the student 

cannot successfully complete an 

educational program. With the 

proliferation of short-term, accelerated 

programs, and the potential for shorter 

and shorter programs, we have seen 

increased efforts by institutions to rely 

upon this safe harbor to incentivize 

recruiters. Accordingly, we believe that 

the retention of the current safe harbor 

can be readily exploited, and that it is 

not necessary for institutions to 

appreciate the value of keeping students 

in school. On balance, we believe that 

the proliferation of these types of 

programs justify any benefit that this 

safe harbor allegedly provided students 

by encouraging institutions to admit 

only qualified students. 

We disagree with the commenter who 

stated that removal of this safe harbor is 

inconsistent with the Administration’s 

goal of increasing student retention in 

postsecondary education. Institutions 

should not need this safe harbor 

allowing incentive payments to 

recruiters to demonstrate their 

commitment to retaining students 

within their program of instruction. 

In addition, there is nothing about the 

making of incentivized payments to 

recruiters based upon student retention 

that enhances the quality of a student’s 

educational experience. If the program 

of instruction has value and is 

appropriate for a student’s needs, a 

student will likely enjoy a positive 

educational experience regardless of the 

manner in which the student’s recruiter 

is compensated. 

Finally, the Department’s experience 

has shown that some institutions pay 

incentive compensation to recruiters 

based upon claims that the students 

who the recruiter enrolled graduated 

and received jobs in their fields of 

study. Yet, included among the abuses 

the Department has seen, for example, is 

a circumstance where a student’s field 

of study was culinary arts, and the socalled employed student was working 

an entry-level position in the fast food 

industry. Such a position did not 

require the student to purchase a higher 

education ‘‘credential.’’ As a result, we 

believe that paying bonuses to recruiters 

based upon retention, completion, 

graduation, or placement remain in 

violation of the HEA’s prohibition on 

the payment of incentive compensation. 

Changes: None. 

Comment: Many commenters 

questioned our rationale for eliminating 

the safe harbor in current 

§ 668.14(b)(22)(ii)(G), which exempts 

managerial and supervisory employees 

who do not directly manage or 

supervise employees who are directly 

involved in recruiting or admissions 

activities, or the awarding of title IV, 

HEA program funds from the 

prohibition on receiving incentive 

payments. These commenters argued 

that a bright line designation is needed 

and that the incentive compensation 

ban should only apply to employees 

who are involved in direct recruitment 

or admission of students or decisions 

involving the award of title IV, HEA aid. 

Others recommended that we retain this 

safe harbor, and that we clarify that the 

words ‘‘indirectly or directly’’ do not 

apply to the determination of which 

persons are covered by the prohibition. 

Several commenters expressed their 

concerns about having the regulations 

prohibit compensation practices at any 

level of an organization, no matter how 

far removed from actual recruitment, 

admissions, or financial aid activity. 

These commenters argued that such an 

approach would prevent institutions 

from evaluating top management with 

respect to student population metrics or 

any other business or organizational 

metric that is a function of student 

enrollment. 

A few commenters raised more 

specific concerns about the 

compensation of top college officials in 

situations where the president attends 

an open house or speaks with potential 

students who the institution is 

recruiting, either in a group or 

individually. Some commenters also 

asked whether the proposed regulations 

would permit a president to receive a 

bonus or other payment if one factor in 

attaining the bonus or other payment 

was meeting an institutional 

management plan or goal that included 

increasing minority enrollment by a 

certain percentage. 

Finally, a few commenters asked 

whether institutions can still reward 

athletic coaches whose student athletes 

stay in school and graduate. 

Discussion: We intend the incentive 

compensation ban in § 668.14(b)(22)(i) 

to apply to all employees at an 

institution who are engaged in any 

student recruitment or admission 

activity or in making decisions 

regarding the award of title IV, HEA 

program funds. We interpret these 

employees to include any higher level 

employee with responsibility for 

recruitment or admission of students, or 

making decisions about awarding title 

IV, HEA program funds. To make this 

clearer, we are revising 

§ 668.14(b)(22)(iii) to add a definition 

for the term entity or person engaged in 

any student recruitment or admission 

activity or in making decisions about 

the award of financial aid. This new 

definition expressly includes any 

employee who undertakes recruiting or 

admitting of students or who makes 

decisions about and awards title IV, 

HEA program funds, as well as higher 

level employees as specified. 

Therefore, the actions of a college 

president could potentially come within 

the HEA’s prohibition on the payment 

of incentive compensation. However, 

the Department does not see how mere 

attendance at an open house or speaking 

with prospective students about the 

value of a college education or the 

virtues of attending a particular 

institution would violate the incentive 

compensation plan. Other activities 

should be evaluated within the context 

of the Department’s previously 

discussed two-part test to receive 

assistance as to whether a particular 

activity is permissible. 

Finally, recruitment of student 

athletes is not different from 

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recruitment of other students. Incentive 

compensation payments to athletic 

department staff are governed by the 

restrictions included in § 668.14(b)(22). 

If the payments are made based on 

success in securing enrollments or the 

award of financial aid, the payments are 

prohibited; however, the Department 

does not consider ‘‘bonus’’ payments 

made to coaching staff or other athletic 

department personnel to be prohibited if 

they are rewarding performance other 

than securing enrollment or awarding 

financial aid, such as a successful 

athletic season, team academic 

performance, or other measures of a 

successful team. 

Changes: We have added a definition 

of the term entity or person engaged in 

any student recruitment or admission 

activity or in making decisions about 

the award of financial aid to 

§ 668.14(b)(22)(iii). New paragraph 

(b)(22)(iii)(C) of this section provides 

that the term means— 

(1) With respect to an entity, any 

institution or organization that 

undertakes the recruiting or the 

admitting of students or that makes 

decisions about and awards title IV, 

HEA program funds; and 

(2) With respect to a person, any 

employee who undertakes recruiting or 

admitting of students or who makes 

decisions about and awards title IV, 

HEA program funds, and any higher 

level employee with responsibility for 

recruitment or admission of students, or 

making decisions about awarding title 

IV, HEA program funds. 

Comment: One commenter asked how 

the removal of the safe harbor from 

current § 668.14(b)(22)(ii)(H), which 

permits an institution to provide a token 

gift not to exceed $100 to an alumnus 

or student provided that the gift is not 

in the form of money and no more than 

one gift is provided annually to an 

individual, will affect institutions 

compensating students for referrals. The 

commenter asked whether an individual 

who is referred can be given a 

scholarship for friends or family of the 

individual who is referring or a tuition 

waiver. 

Discussion: Section 668.14(b)(22) 

does not prohibit institutions from 

providing any commission, bonus, or 

incentive payment to students who are 

referrals. Therefore, an individual who 

is referred to an institution should be 

able to receive whatever scholarship 

money or tuition assistance that he or 

she may otherwise be eligible to receive 

without violating the HEA. 

Changes: None. 

Comment: Several commenters asked 

for clarification regarding the safe 

harbor in current § 668.14(b)(22)(ii)(J) 

permitting an institution to award 

compensation for Internet-based 

recruitment and admission activities 

that provide information about the 

institution to prospective students, refer 

prospective students to the institution, 

or permit prospective students to apply 

for admission online. Specifically, the 

commenters asked us to clarify that 

institutions can make payments to third 

parties that provide Internet-based 

recruitment and admission services as 

long as they do not otherwise violate the 

statutory prohibition. Other commenters 

asked for confirmation that clickthrough payments are permitted if the 

third party is paid based on those who 

click, not those who enroll. Other 

commenters requested examples of 

permitted relationships. 

Discussion: The HEA does not 

prohibit advertising and marketing 

activities by a third party, as long as 

payment to the third party is based on 

those who ‘‘click’’ and is not based in 

any part, directly or indirectly, on the 

number of individuals who enroll or are 

awarded financial aid; therefore, the 

regulatory language would not prohibit 

such click-through payments. Further, 

institutions may make payments to third 

parties and entities with formal thirdparty arrangements as long as the parties 

are not compensated in any part, 

directly or indirectly, based on success 

in securing enrollments or the award of 

financial aid. 

Changes: None. 

Comment: Many commenters offered 

suggestions regarding the safe harbors 

reflected in current § 668.14(b)(22)(ii)(K) 

and (b)(22)(ii)(L), which both involve 

payments to third parties for shared 

services. A number of commenters 

representing organizations that provide 

a variety of services to institutions asked 

for clarification about their continued 

ability to assist institutions in this way, 

as long as the compensation 

arrangements are not prohibited by the 

HEA. Many commenters asked whether 

tuition-sharing arrangements with thirdparties to secure servicers that include 

recruitment would be permitted. They 

questioned whether these arrangements 

should be treated the same as 

arrangements involving volume-driven 

payments. Several commenters 

expressed concern about the affect these 

regulations will have on third parties 

who provide services to assist students 

who study abroad. 

One commenter suggested that 

entities that provide enrollment services 

be able to elect to be treated as ‘‘thirdparty servicers,’’ with all of the 

restrictions, obligations, liabilities, 

reporting requirements, and oversight 

that accompany that status. 

Other commenters asked whether 

institutions would be held accountable 

for the actions of third-party servicers. 

A few commenters also requested the 

Department to provide examples of 

arrangements with third parties that 

would be permitted under the new 

regulatory framework (i.e., with the 

removal of the safe harbors from current 

§ 668.14(b)(22)(ii)(K) and (b)(22)(ii)(L)). 

Discussion: The Department 

understands the value of partnerships 

between institutions and entities that 

provide various support and 

administrative services to these 

institutions. Such arrangements are 

permitted under these regulations as 

long as no entity or person engaged in 

any student recruitment or admission 

activity or in making decisions about 

the award of financial aid (as defined in 

§ 668.14(b)(22)(iii)(C)) is compensated 

in any part, directly or indirectly, based 

upon success in securing enrollments or 

the award of financial aid. 

In addition, as the Department stated 

in the NPRM, arrangements under 

which an institution is billed based on 

the number of student files that are 

processed (e.g., a volume-driven 

arrangement) are not automatically 

precluded, provided that payment is not 

based in any part, directly or indirectly, 

on success in securing student 

enrollments or the award of financial 

aid. 

Further, it is longstanding Department 

policy that an institution is responsible 

for the actions of any entity that 

performs functions and tasks on the 

institution’s behalf. The definition of a 

third-party servicer is established in 

§ 668.2; the responsibilities of a thirdparty servicer are described in § 668.25. 

No additional language is needed. 

Changes: None. 

Permissible Compensation Activities 

Comment: Many commenters 

requested clarification on the types of 

compensation that would be permitted 

under proposed § 668.14(b)(22) and 

section 487(a)(20) of the HEA. A few 

commenters who supported the 

proposed changes to § 668.14(b)(22) 

suggested additional alterations to 

strengthen the language—such as 

moving language we had included in 

the NPRM preamble to the regulatory 

text—to ensure that incentive payments 

are not based ‘‘in any part’’ on success 

in securing enrollments or financial aid. 

In addition, several commenters 

suggested that more than two changes in 

pay in a calendar year should be 

considered evidence that the payments 

are incentive compensation. 

These commenters also requested 

guidance about allowable salary 

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adjustments, including whether raises 

(for promotions) would be permitted 

and whether reductions (for demotions) 

would be permitted. Some commenters 

requested clarification on whether a 

salary could be paid. One commenter 

asked whether benefits could be paid at 

differential rates by class of employee or 

on a sliding scale by salary. 

Discussion: Based on these comments, 

the Secretary agrees that some 

modifications to the language in 

proposed § 668.14(b)(22) would be 

helpful to ensure that incentive 

payments are not based ‘‘in any part’’ on 

success in securing enrollments or 

financial aid. In particular, we agree that 

it is appropriate to add language to 

avoid confusion as to whether some part 

of an individual’s compensation may be 

based on incentive compensation. For 

this reason, we are revising 

§ 668.14(b)(22)(i) to reinforce the idea 

that compensation must not be based in 

any part, directly or indirectly, on 

success in securing enrollments or the 

award of financial aid. 

In addition, we support revising the 

regulations to provide that an employee 

who receives multiple compensation 

adjustments in a calendar year is 

considered to have received adjustments 

based upon success in securing 

enrollments or the award of financial 

aid in violation of the incentive 

compensation ban in § 668.14(b)(22) if 

those adjustments create compensation 

that is based in any part, directly or 

indirectly, upon success in securing 

enrollments or the award of financial 

aid. 

Finally, with respect to the requests 

for clarification on allowable salary 

adjustments, we note that individuals 

may be compensated in any fashion that 

is consistent with the prohibition 

identified in section 487(a)(20) of the 

HEA. Accordingly, while not 

commenting on any specific 

compensation structure that an 

institution may choose to implement, 

the Department recognizes, for example, 

that institutions often maintain a 

hierarchy of recruitment personnel with 

different amounts of responsibility. As 

long as an institution complies with 

section 487(a)(20) of the HEA, it may be 

appropriate for an institution to have 

salary scales that reflect an added 

amount of responsibility. Institutions 

also remain free to promote and demote 

recruitment personnel, as long as these 

decisions are consistent with the HEA’s 

prohibition on the payment of incentive 

compensation. Finally, it is appropriate 

to pay recruitment personnel a fixed 

salary. 

Changes: We have revised 

§ 668.14(b)(22)(i)(A) (which has been 

redesignated as § 668.14(b)(22)(i)) to 

clarify that a prohibited incentive 

compensation includes any 

commission, bonus, or other incentive 

payment based in any part, directly or 

indirectly, upon success in securing 

enrollments or the award of financial 

aid to any person or entity engaged in 

any student recruitment or admission 

activity or in making decisions 

regarding the award of title IV, HEA 

program funds. 

In addition, we have redesignated 

proposed § 668.14(b)(22)(i)(B) as 

§ 668.14(b)(22)(i)(A) and added a new 

paragraph (b)(22)(i)(B) to provide that, 

for the purposes of this paragraph, an 

employee who receives multiple 

adjustments to compensation in a 

calendar year and is engaged in any 

student enrollment or admission 

activity or in making decisions 

regarding the award of title IV, HEA 

program funds is considered to have 

received such adjustments based upon 

success in securing enrollments or the 

award of financial aid if those 

adjustments create compensation that is 

based in any part, directly or indirectly, 

upon success in securing enrollments or 

the award of financial aid. 

Finally, we have revised 

§ 668.14(b)(22)(ii) to provide that 

eligible institutions, organizations that 

are contractors to eligible institutions, 

and other entities may make merit-based 

adjustments to employee compensation 

provided that such adjustments are not 

based in any part, directly or indirectly, 

upon success in securing enrollments or 

the award of financial aid. 

Comment: Commenters raised a 

number of questions related to the twopart test the Department has offered that 

will demonstrate whether a 

compensation plan or payment 

complies with the statute and the 

implementing regulations. Many 

commenters seemed confused about the 

application of the two-part test and 

raised a wide range of specific questions 

about employment possibilities and 

compensation practices. For example, 

some commenters asked for clarification 

about the types of items that could be 

considered something of value, such as 

letters of recommendation to volunteer 

interns. 

Several commenters asked that we 

include the language of the two-part test 

in the regulatory text. 

Finally, one commenter asserted that 

the two-part test will not add clarity on 

compensation issues but instead will 

raise questions about the legality of 

certain types of merit-based 

compensation systems that seem to fall 

outside the scope of compensation 

restriction but that could fail to satisfy 

the two-part test. 

Discussion: As discussed earlier in 

this preamble, the Department has 

described a two-part test for evaluating 

whether a payment constitutes a 

commission, bonus, or other incentive 

payment based in any part, directly or 

indirectly, upon success in securing 

enrollments or the award of financial 

aid to any person or entity engaged in 

any student recruitment or admission 

activity or in making decisions 

regarding the award of title IV, HEA 

program aid in violation of the ban 

reflected in § 668.14(b)(22)(i). The 

Department first described this test in 

the preamble to NPRM. (See 75 FR 

34818 (June 18, 2010).) The test consists 

of the following two questions, the 

answers to which will permit an 

institution to know whether the 

compensation is considered incentive 

compensation: 

(1) Whether the payment is a 

commission, bonus, or other incentive 

payment, defined as an award of a sum 

of money or something of value paid to 

or given to a person or entity for 

services rendered; and 

(2) Whether the commission, bonus, 

or other incentive payment is provided 

to any person based in any part, directly 

or indirectly, upon success in securing 

enrollments or the award of financial 

aid, which are defined as activities 

engaged in for the purpose of the 

admission or matriculation of students 

for any period of time or the award of 

financial aid. 

If the answer to each of these 

questions is yes, the payment would not 

be permitted under section 487(a)(20) of 

the HEA or § 668.14(b)(22). The 

Department merely provided this test as 

a tool to help institutions evaluate 

compensation practices they may 

consider implementing. The test does 

not add any substantive requirements 

that are not otherwise included in 

§ 668.14(b)(22)(i). For this reason, we do 

not think it is necessary or appropriate 

to include the text of the test in the 

regulations. 

The Department further notes that, as 

a general matter, it does not believe that 

the provision of letters of 

recommendation to volunteer interns 

would constitute a proscribed incentive 

payment. 

Finally, we disagree with the 

comment that the two-part test will not 

serve generally to answer institutions’ 

questions regarding a particular 

compensation plan. As previously 

stated, we believe that the prohibition 

identified in section 487(a)(20) of the 

HEA is clear and that institutions 

should not have difficulty maintaining 

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compliance with the new regulatory 

language. To the extent an institution 

has questions about what it intends to 

do, the Department has offered the twopart test as an aid to reaching a proper 

conclusion. To the extent that an 

institution does not wish to use the test 

to assist it in evaluating its practices, it 

is not required to do so. 

Changes: None. 

Comment: A number of commenters 

questioned the use of the term 

‘‘indirectly’’ in the prohibition on 

incentive compensation in proposed 

§ 668.14(b)(22). They expressed concern 

about the broad scope of this term and 

believed that interpretive discord will 

result from its inclusion in 

§ 668.14(b)(22). These commenters 

argued that any compensation involving 

an institution of higher education is 

based indirectly on success in securing 

enrollments and asked how far removed 

an activity must be in order for it not to 

be considered indirectly related. Other 

commenters specifically requested that 

we define the term ‘‘indirectly.’’ 

Several commenters suggested that 

proposed § 668.14(b)(22)(i)(A) should 

use the term ‘‘solely’’ rather than 

‘‘directly or indirectly’’ (i.e., ‘‘it will not 

provide any commission, bonus, or 

other incentive payment based solely 

upon success’’ rather than ‘‘it will not 

provide any commission, bonus, or 

other incentive payment based directly 

or indirectly upon success’’). These and 

other commenters alleged that the 

language in proposed 

§ 668.14(b)(22)(i)(A) is not consistent 

with congressional intent. Many of these 

commenters cited to the conference 

report, which states that the use of the 

term ‘‘indirectly’’ does not mean that 

institutions are prohibited from basing 

salaries on merit; they may not, 

however, be based ‘‘solely’’ on the 

number of students recruited, admitted, 

enrolled, or awarded. 

Discussion: The Department does not 

agree with the view that the use of the 

phrase ‘‘directly or indirectly’’ will lead 

to interpretation problems or that it is 

inconsistent with congressional intent. 

Given the Department’s experience with 

how the safe harbor in current 

§ 668.14(b)(22)(i)(A), which permits up 

to two salary adjustments per year 

provided that they are not based solely 

on the number of students recruited, 

admitted, enrolled, or awarded financial 

aid, has been abused, the Department 

does not believe that it serves 

congressional intent to limit the 

incentive compensation ban in section 

487(a)(20) of the HEA to those payments 

that are based solely upon success in 

securing enrollments or the award of 

financial aid. The Department believes 

that, consistent with section 487(a)(20) 

of the HEA, incentive payments should 

not be based in any part, directly or 

indirectly, on success in securing 

enrollments or the award of financial 

aid. 

The safe harbor in current 

§ 668.14(b)(22)(i)(A) has led to 

allegations in which institutions 

conceded that their compensation 

structures included consideration of the 

number of enrolled students, but 

averred that they were not solely based 

upon such numbers. In some of these 

instances, the substantial weight of the 

evidence suggested that the other factors 

purportedly analyzed were not truly 

considered, and that, in reality, the 

institution based salaries exclusively 

upon the number of students enrolled. 

After careful consideration, the 

Department determined that removal of 

the safe harbor was preferable to 

retaining but revising the safe harbor. 

For example, we considered suggestions 

that we change the word solely to some 

other modifier, such as ‘‘primarily’’ or 

‘‘substantially,’’ but ultimately 

determined that doing so would not 

correct the problem. With such a 

change, we believe the evaluation of any 

alternative arrangement would merely 

shift to whether the compensation was 

‘‘primarily’’ or ‘‘substantially’’ based 

upon enrollments. Such a shift would 

not reduce the ability of an 

unscrupulous actor to claim that student 

enrollments constituted this lesser 

factor within a recruiter’s evaluation 

and would foster the same sorts of 

abuses that have become apparent by 

institutions attempting to assert that 

their compensation practices are not 

solely based on enrollments. 

Changes: None. 

Comment: A number of commenters 

raised questions about proposed 

§ 668.14(b)(22)(ii), which allows eligible 

institutions, organizations that are 

contractors to eligible institutions, and 

other entities to make merit-based 

adjustments to employee compensation 

provided that such adjustments are not 

based upon success in securing 

enrollments or the award of financial 

aid. They expressed concern that 

limiting merit-based adjustments to 

those that are not based upon success in 

securing enrollments or the award of 

financial aid would make it impossible 

for them to award merit increases for 

employees whose job it is to enroll 

students. They noted that there are no 

standard evaluative factors concerning 

enrollment that are not directly or 

indirectly based on securing 

enrollments. 

Some commenters requested 

clarification about whether an increase 

could be based on seniority or length of 

employment, including whether a 

retention bonus could be paid based on 

the employee’s retention at the 

institution if it is paid evenly to all 

employees. 

Some commenters argued that the 

regulations should recognize and permit 

compensation based on the performance 

of, and success at, the core job functions 

of admissions representatives and 

financial aid officials. They questioned 

how it would be possible to measure 

employee performance without 

evaluating success. They asked that we 

provide concrete guidance about how 

institutions can make salary 

adjustments without violating the 

incentive compensation prohibition. 

Discussion: Section 668.14(b)(22) 

does not prohibit merit-based 

compensation for financial aid or 

admissions staff. An institution may use 

a variety of standard evaluative factors 

as the basis for this type of 

compensation; however, consistent with 

section 487(a)(20) of the HEA and 

§ 668.14(b)(22), an institution may not 

consider the employee’s success in 

securing student enrollments or the 

award of financial aid in providing this 

type of compensation. Further, an 

increase in compensation that is based 

in any part either directly or indirectly 

on the number of students recruited or 

awarded financial aid is prohibited. 

As previously mentioned, many 

institutions currently claim to evaluate 

their recruitment personnel on a series 

of qualitative factors, as well as on the 

number of enrolled students, to 

demonstrate compliance with the safe 

harbor reflected in current 

§ 668.14(b)(22)(i)(A), which prohibits 

compensation based solely on the 

number of students enrolled. As a 

result, it appears that these institutions 

have identified other factors that are not 

dependent upon student enrollments 

that we believe could by themselves be 

considered for making a merit-based 

compensation decision. In addition, 

seniority or length of employment is an 

appropriate basis for making a 

compensation decision separate and 

apart from any consideration of the 

numbers of students enrolled. Finally, 

as many commenters from groups 

representing admissions personnel 

noted, as a general matter, recruitment 

personnel should be compensated with 

a fixed salary to ensure that their ability 

to focus on what is in a student’s best 

interest is not compromised. 

Changes: None. 

Comment: Several commenters raised 

issues about the relationship between an 

institution’s goals and payments to 

employees. Many asked whether 

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employees could be rewarded through 

profit-sharing or other payments for 

success in meeting retention, 

graduation, and placement goals as long 

as they are not rewarded for the number 

of students recruited and admitted. 

These commenters requested that we 

define an acceptable percentage of an 

employee’s compensation adjustment 

that can be based on the number of 

students recruited, admitted, enrolled, 

or awarded financial aid. 

One commenter asked that we clarify 

whether payments tied to overall 

institutional revenues, including profitsharing, pension, and retirement plans 

are allowed. A number of commenters 

asked more broadly whether such plans 

would be permissible. A few 

commenters requested changes to 

incorporate the distribution of profitsharing or bonus payments under 

certain circumstances, such as when a 

payment is made to a broad group of 

employees. 

Discussion: While there is no 

statutory proscription upon offering 

employees either profit-sharing or a 

bonus, if either is based in any part, 

directly or indirectly, upon success in 

securing enrollments or the award of 

financial aid, it is not permitted under 

section 487(a)(20) of the HEA or 

§ 668.14(b)(22). 

The Department agrees with 

commenters that there are 

circumstances when profit-sharing 

payments should be permitted. Under 

proposed § 668.14(b)(22), an institution 

may distribute profit-sharing payments 

if those payments are not provided to 

any person who is engaged in student 

recruitment or admission activity or in 

making decisions regarding the award of 

title IV, HEA program funds. The 

Department believes that such payments 

are consistent with the HEA as they are 

not being made to a particular group 

who is active in admissions or financial 

aid. 

For this reason, we are making a 

change to § 668.14(b)(22)(ii) to provide 

that institutions may make payments, 

including profit-sharing payments, so 

long as they are not provided to any 

person who is engaged in student 

recruitment or admission activity or in 

making decisions regarding the award of 

title IV, HEA program funds. 

Changes: We have revised 

§ 668.14(b)(22)(ii) to clarify that, 

notwithstanding the ban in 

§ 668.14(b)(22)(i), eligible institutions, 

organizations that are contractors to 

eligible institutions, and other entities 

may make profit-sharing payments, so 

long as such payments are not provided 

to any person who is engaged in student 

recruitment or admission activity or in 

making decisions regarding the award of 

title IV, HEA program funds. 

Comment: Several commenters asked 

us to clarify what kinds of activities 

would not be considered under the 

definition of securing enrollments or the 

award of financial aid. They asked that 

we revise the regulations to provide 

explicitly that payments based on any 

additional activities are not allowed if 

they are directly or indirectly based on 

enrollment or the awarding of aid. 

Other commenters raised questions 

about the use of ‘‘aggregators,’’ that is, 

entities that assist an institution with 

the institution’s outreach efforts. These 

efforts include but are not limited to, 

identifying students, offering counseling 

and information on multiple 

institutions, and encouraging potential 

students to fill out an application 

directly with the individual institutions. 

Aggregators are paid based on the 

student remaining at the institution for 

a certain time period rather than based 

on the fact that the student enrolls. 

Commenters asked us to clarify whether 

these practices are permitted under 

section 487(a)(20) of the HEA and 

§ 668.14(b)(22). 

Some commenters focused on 

arrangements under which institutions 

pay third parties for student contact 

information and asked whether such 

information may be sorted or qualified. 

Further, they questioned whether 

institutions would be permitted to pay 

only for information that yields actual 

contact with a student. They asked that 

we confirm that institutions may pay 

students for contact information on a 

per person basis as long as payments are 

not based on the number of students 

who apply or enroll. In addition, they 

suggested that we allow qualitative 

factors to be included in the 

consideration of the price to provide 

incentives to third parties to 

appropriately identify students that 

more closely fit an institution’s profile. 

Some commenters believed that the 

proposed definition of securing 

enrollments or the award of financial 

aid does not make it clear that the 

activities are prohibited through the 

completion of a student’s educational 

program. 

Discussion: The Department agrees 

that it would be helpful to clarify the 

type of activities that are and are not 

considered securing enrollments or the 

award of financial aid. For this reason, 

we have revised the definition of 

securing enrollments or the award of 

financial aid to specifically include (as 

examples) contact through preadmission 

or advising activities, scheduling an 

appointment for the prospective student 

to visit the enrollment office or any 

other office of the institution, 

attendance at such an appointment, or 

involvement in a prospective student’s 

signing of an enrollment agreement or 

financial aid application (see 

§ 668.14(b)(22)(iii)(B)(1) of these final 

regulations). 

We also revised the definition to 

clarify that it does not include making 

a payment to a third party for the 

provision of student contact information 

provided that such payment is not based 

on any additional conduct by the third 

party, such as participation in 

preadmission or advertising activities, 

scheduling an appointment to visit the 

enrollment office or any other office of 

the institution or attendance at such an 

appointment, or the signing, or being 

involved in the signing of a prospective 

student’s enrollment agreement or 

financial aid application (see 

§ 668.14(b)(22)(iii)(B)(2) of these final 

regulations). 

With respect to the comments 

requesting guidance on ‘‘aggregators,’’ 

we do not believe it is necessary or 

appropriate for the Department to 

indicate whether these types of 

activities would, across the board, be 

permitted. Each arrangement must be 

evaluated on its specific terms. As noted 

earlier in this preamble, we believe any 

institution can determine whether a 

payment it intends to make is 

prohibited by § 668.14(b)(22) by 

applying the two-part test we have 

described. Specifically, the first step for 

an institution in determining if payment 

for an activity or action is considered 

incentive compensation is to evaluate 

whether the entity is receiving 

something of value, then to determine 

whether the payment is made based in 

any part, directly or indirectly, on 

success in securing enrollments or the 

award of financial aid. 

Finally, we agree with commenters 

that the definition of the term securing 

enrollments or the award of financial 

aid should be revised to specify that 

these activities include activities that 

run throughout completion of the 

student’s educational program. 

Changes: We have revised the 

definition of securing enrollments or the 

award of financial aid in 

§ 668.14(b)(22)(iii)(B) to provide more 

detail about actions that are considered 

to be covered by the definition. We also 

have revised the definition to clarify 

that it includes activities through the 

completion of an educational program. 

Comment: Numerous commenters 

requested that the Department offer 

guidance on the practical 

implementation of the proposed 

definitions. Many expressed concern 

about our stated intention to address 

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only broadly applicable principles 

rather than responding to questions on 

individual compensation issues. These 

commenters asserted that institutions 

need guidance before they should be the 

subject of an investigation or legal 

action. They raised concerns about the 

confusion that could result without 

additional clarification and the 

attendant costs to partners in the 

student aid process in ‘‘today’s legal 

environment.’’ They believed that the 

Department already knows that 

guidance will be needed based on our 

pre-2002 experiences and noted that 

issuing guidance is a fundamental 

purpose of the Department and should 

be continued. 

Discussion: The Department believes 

the proposed language is clear and 

reflective of section 487(a)(20) of the 

HEA. As modified, it is designed to 

appropriately guide institutions as they 

evaluate compensation practices. To the 

extent that ongoing questions arise on a 

particular aspect of the regulations, the 

Department will respond appropriately 

in a broadly applicable format and will 

distribute the information widely to all 

participating institutions. This response 

may include a clarification in a 

Department publication, such as the 

Federal Student Aid Handbook or a 

Dear Colleague Letter. The Department 

does not intend to provide private 

guidance regarding particular 

compensation structures in the future 

and will enforce the regulations as 

written. 

Changes: None. 

Satisfactory Academic Progress 

(§§ 668.16(e), 668.32(f), and 668.34) 

General 

Comment: Many commenters 

supported the proposed changes to the 

Satisfactory Academic Progress (SAP) 

regulations. Several commenters noted 

that the consolidation of the SAP 

requirements into § 668.34 would ease 

compliance and suggested that it would 

be helpful to revise the Federal Student 

Aid (FSA) Handbook to mirror the new 

organization of the requirements in the 

regulations. 

Several commenters noted that they 

appreciated that the proposed SAP 

regulations retain the flexibility 

provided under the current regulations 

for institutions to establish policies that 

best meet the needs of their students. 

Many commenters expressed support 

for the proposed changes to the SAP 

regulations because they viewed them 

as a means for helping hold students 

accountable for their academic goals 

earlier in their careers, which they 

believed would lead to lower student 

debt levels. Several commenters noted 

that their current policy and practices 

either met or exceeded the requirements 

in the proposed regulations. 

Many commenters supported, in 

particular, the definition of the terms 

financial aid warning and financial aid 

probation as well as the standardized 

definitions of other terms related to 

SAP. These commenters stated that this 

standardization would lead to a more 

consistent application of the SAP 

regulations among institutions, which, 

in turn, will make them more 

understandable to students. 

Many commenters also supported the 

SAP regulations because they give those 

institutions that choose to evaluate SAP 

more frequently than annually the 

ability to use a financial aid warning 

status, which they viewed as being 

beneficial to students. They stated that 

such a warning would lead to early 

intervention for students who face 

academic difficulties. Commenters also 

noted that the financial aid warning 

status will allow financial aid offices to 

strengthen their SAP policies to 

encourage students to use designated 

support services on campus and lead to 

further student success. 

Discussion: The Department 

appreciates the support of its efforts to 

improve program integrity through its 

SAP regulations. With regard to the 

comment recommending that we revise 

the FSA Handbook to align it with the 

changes we have made in the SAP 

regulations, we will take this 

recommendation into account during 

the next revision of the FSA Handbook. 

Changes: None. 

General 

Comment: Several commenters did 

not support the proposed changes to the 

SAP regulations. Two commenters 

stated that the Department should delay 

implementation of the SAP regulations, 

including proposed § 668.34, so that we 

can resubmit these proposals for 

negotiation and evaluation in a future 

negotiated rulemaking proceeding. 

These commenters argued that the 

Department had not made a sufficient 

argument for what would be gained by 

the changes, and how these benefits 

would justify the additional burden 

imposed upon institutions by these 

regulations. 

Two commenters stated that 

institutions were in the best position to 

design and implement a satisfactory 

academic progress policy that fit their 

institutional needs, and that the current 

regulations were sufficient for achieving 

this purpose. These commenters 

asserted that the proposed changes were 

intrusive and would lead to increased 

audit exceptions. These commenters 

also noted that the Department should 

consider incentives to encourage 

institutions to research student success 

in light of their own SAP policies. One 

commenter stated that the proposed 

regulations were too prescriptive, and 

that institutions would require 

significant guidance in the FSA 

Handbook in order to be able to comply 

with the new regulations. 

Two commenters stated that while 

they generally agreed with the 

Department’s desire to clarify the SAP 

regulations and with the proposed 

approach reflected in the NPRM, the 

regulations had a number of unintended 

consequences. These commenters 

indicated that the Department’s 

proposal would force institutions to 

choose whether to take on additional 

workload by evaluating students each 

term, or to take on the additional 

workload caused by the dramatic 

increase in appeals. One of the 

commenters noted as an example an 

institution that has a number of Alaskan 

Native students to whom it provides 

significant support, particularly early in 

their careers; in this case, the 

commenter stated that these students 

would be significantly harmed by these 

SAP regulations as the students often 

cannot remedy their academic problems 

in a short period of time. Both of these 

commenters noted that while the 

Department believes that it has to 

address abuses with the current 

regulations, that it should weigh this 

against the unintended consequences of 

the proposed regulations, which include 

increased workload for institutions and 

unfair impact on certain groups of 

students. 

Discussion: The Department disagrees 

with the commenters who suggested 

that these regulations should be 

resubmitted for the negotiated 

rulemaking process. The proposed 

changes to the SAP regulations in 

§§ 668.16(e), 668.32(f), and 668.34 have 

already been through the negotiated 

rulemaking process. In fact, the 

negotiators reached tentative agreement 

on these proposed changes. During 

negotiations, most negotiators stated 

that it was appropriate for the 

Department to provide certain 

flexibilities for those institutions that 

chose to check on the satisfactory 

academic progress of students more 

often than was required by the statutory 

minimum of annually. Many of the 

negotiators said that they supported the 

proposed changes to the SAP 

regulations because they continued to 

provide significant flexibilities for 

institutions to craft SAP policies that 

met the needs of their student bodies 

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while still preserving program integrity. 

For the commenter who suggested that 

the Department should encourage 

institutions to study the consequences 

of their SAP policies and allow 

incentives for doing so, we will take this 

under advisement when we next have 

the opportunity to develop experimental 

site proposals. 

We do not agree with the commenters 

who suggest that the SAP regulations 

are too prescriptive or intrusive. Section 

484(c)(1)(A) of the HEA requires that an 

eligible student be making satisfactory 

progress towards program completion, 

and that institutions check at least 

annually for programs longer than a 

year, that a student is annually meeting 

that requirement. These regulations do 

not require institutions to do any more 

than what is required by the HEA, and 

are not more difficult to comply with 

than the current regulations. Therefore, 

institutions should not experience 

increased incidents of noncompliance. 

We will continue to provide any 

applicable and needed guidance in the 

FSA Handbook to assist institutions in 

complying with the regulations. 

We do agree with the commenters 

who stated that an increase in SAP 

monitoring to a payment period by 

payment period basis would increase 

administrative burden. However, 

institutions are free to continue to 

monitor as frequently as they currently 

do, and are not required to change their 

SAP policy and monitor every payment 

period. As for the unintended 

consequences for particular groups of 

students, these regulations allow for 

institutions to craft SAP policies that 

best fit the needs of their students. An 

institution could evaluate the needs of 

any special student groups and find 

ways to work effectively with those 

students. For example, a specific 

student may need to have assistance 

developing an academic plan that will 

enable him or her to be successful. 

Changes: None. 

Delayed Implementation 

Comment: Several commenters 

suggested that implementation of the 

proposed changes to §§ 668.16(e), 

668.32(f) and 668.34 should be delayed 

for a couple of years to allow 

institutions to prepare their policies and 

procedures to comply with the 

regulatory changes. One commenter 

recommended that implementation be 

delayed until the 2012–13 award year to 

allow for institutions to make changes to 

their monitoring systems. Another 

commenter encouraged the Department 

to delay implementation of the 

regulations for SAP, but noted that if we 

do not delay implementation, then the 

Department should issue guidance as to 

how the new regulations will affect 

summer crossover payment periods. 

This commenter expressed concern that, 

without this additional guidance, it will 

be unclear as to which SAP regulations 

apply to students enrolled in summer. 

Discussion: While the Department 

appreciates that some institutions may 

have to make changes to computer 

monitoring systems, or written policies 

and procedures, we do not believe that 

the changes to the SAP regulations are 

extensive enough to warrant delayed 

implementation. Institutions that may 

have to adjust or change their SAP 

policy will have to publicize such a 

change to students, and let students 

know when any new SAP policy is 

effective. As such, the summer 

crossover payment period would be 

addressed by the school’s new policy 

and would be subject to the effective 

date of the school’s new policy. For 

example, a school may decide that for 

the purpose of this policy change, a 

2011–12 summer crossover period will 

be subject to their current SAP policy 

and procedures, as part of the 2010–11 

award year. This would be acceptable, 

and should be addressed in the school’s 

notification to their students of the 

effective date of any new policy. 

Changes: None. 

Satisfactory Academic Progress 

(§ 668.34) 

Comment: Two commenters stated 

that the term ‘‘financial aid applicants’’ 

should be substituted for the word 

‘‘students’’ in § 668.34. The commenters 

indicated that students who had not 

applied for financial aid would be 

confused by notifications about 

eligibility under the SAP regulations. 

These commenters argued that 

institutions should only be required to 

send notifications to financial aid 

applicants, and that the proposed 

requirement that notifications be sent to 

all of an institution’s students is 

unreasonable. 

Discussion: There is no requirement 

in the proposed regulations for schools 

to notify students who are not applying 

or receiving title IV, HEA aid of their 

eligibility under SAP. These regulations 

do not impose such a requirement. 

Moreover, we do not believe it is 

necessary to replace the term ‘‘student’’ 

with the term ‘‘financial aid applicant’’ 

in these regulations since we are 

referring to general student eligibility 

criteria, which affect not only financial 

aid applicants, but recipients of title IV, 

HEA funds as well. There is no attempt 

to regulate any other students in these 

regulations. 

Changes: None. 

Consistency Among Categories of 

Students 

Comment: One commenter noted that 

proposed § 668.34(a)(2) retained the 

language from current § 668.16(e)(3) that 

the institution’s policy must be 

consistent among categories of students. 

This commenter questioned whether, 

within the categories of students, an 

institution could evaluate sub-categories 

of students differently. For example, 

within the group of undergraduate 

students, could an institution choose to 

evaluate freshmen and sophomore 

students every payment period but 

upperclassmen only once a year. The 

commenter noted that this approach 

might be used if the institution 

determined that students in the first two 

years needed more intervention, and 

that after that time students were more 

likely to remain enrolled until 

graduation. The commenter also asked if 

this approach is allowable, could the 

institution use a financial aid warning 

for those students who are evaluated 

every payment period. 

One commenter noted that proposed 

§ 668.34(a)(2) does not appear to allow 

for different evaluation periods based 

upon the type of student or program 

being evaluated. For example, this 

commenter noted that an institution 

may want to evaluate undergraduates 

each payment period and evaluate 

graduate students annually. The 

commenter proposed changes to the 

regulatory language that would allow for 

such a difference. 

Discussion: These regulations retain 

the flexibility for an institution to 

evaluate different categories of students 

differently, as long as the policy 

provides for consistent application of 

standards within each of the categories 

of students. Institutions retain flexibility 

to create a policy within those groups of 

students to best meet the needs of its 

student body. If they wish to institute a 

policy that evaluates freshmen and 

sophomores every payment period, and 

juniors and seniors annually, an 

institution is free to do so. Such a policy 

would only allow for the automatic 

financial aid warning status to be used 

for those students who are evaluated 

every payment period. This would, 

however, allow for a policy that is 

sensitive to the needs of the institution’s 

student body. For this reason, we do not 

believe that any changes are needed to 

respond to the commenters’ concerns. 

Changes: None. 

Frequency of Evaluation 

Comment: One commenter supported 

the proposed regulations, but expressed 

concern that an institution may not have 

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time prior to the start of the next term 

to evaluate SAP, thereby resulting in 

students owing a repayment of title IV, 

HEA funds. Several commenters noted 

that for some academic periods there is 

not enough time to evaluate students 

prior to the beginning of the next 

payment period. These commenters 

noted that this is particularly true for 

institutions with quarters and even most 

traditional calendar schools for the 

period after the summer term. One 

commenter stated that, in order to 

accommodate the realities of 

institutions that use the quarter system, 

all institutions that monitor their 

students’ satisfactory academic progress 

more frequently than annually should 

be allowed to use the financial aid 

warning status. 

Several commenters argued that the 

Department should not require 

institutions to evaluate more frequently 

than annually. Numerous commenters 

did not agree with the Department 

giving additional flexibilities to those 

institutions that evaluate the satisfactory 

academic progress of its students each 

payment period rather than annually. 

One commenter stated that it was 

unfair to ‘‘pressure’’ institutions to check 

a student’s satisfactory academic 

progress more frequently than once per 

year, particularly if they have stable 

student populations and good 

graduation rates. This commenter 

argued that these types of institutions 

should be allowed to use the flexibility 

of the financial aid warning status even 

if they monitored SAP less frequently 

than every payment period. Another 

commenter representing an association 

noted that some of its members objected 

to what they perceived as the 

Department restricting flexibility when 

an institution is in compliance with the 

minimum yearly requirement 

established under section 484(c)(1)(A) of 

the HEA. Another commenter argued 

that it would decrease student success 

to require all institutions to check 

satisfactory progress each payment 

period, as students would not know 

from one term to the next what their 

eligibility for aid might be. This 

commenter expressed concern that this 

would particularly disadvantage low 

income and minority students. 

One commenter argued that by 

strengthening other parts of the SAP 

regulations, only one probationary 

period for example, abuses could be 

curtailed, and institutions would not be 

encouraged to create more lenient 

policies. 

Discussion: The Department 

appreciates the fact that there could be 

an increased administrative burden for 

some institutions to change the 

frequency with which they monitor the 

satisfactory academic progress of their 

students to a payment period-bypayment period basis. However, 

changing the frequency for monitoring 

satisfactory academic progress is not 

required under these regulations; 

institutions still have the flexibility to 

create a policy that best meets the needs 

of their student body. If an institution 

believes, for example, that evaluating 

SAP every payment period would create 

too much uncertainty for their students, 

then they are not required to develop 

such a policy. 

With respect to the commenter who 

suggested that institutions with stable 

student populations and good 

graduation rates should be able to use 

the flexibility of the financial aid 

warning status even if they monitored 

SAP on an annual basis, we do not 

believe it is appropriate to allow 

extended periods of financial aid 

warning because this is essentially 

providing title IV, HEA aid to students 

who are not making progress towards 

program completion. We understand 

that some institutions believe that the 

Department is unfairly placing 

restrictions on institutions that choose 

to stay with minimum annual 

evaluations, or to evaluate less 

frequently than every payment period. 

However, we do not believe that it is 

appropriate to continue to allow a 

student who does not meet eligibility 

criteria to continue to receive title IV, 

HEA funds without a formal 

intervention by the institution in the 

form of an appeal approval or an 

academic plan. 

Changes: None. 

Comment: Several commenters noted 

that students who attend quarter schools 

face an inequity under proposed 

§ 668.34 in that they could lose title IV, 

HEA eligibility after 20 weeks, whereas 

for a student at a semester school, they 

could lose title IV, HEA eligibility after 

30 weeks, which is an academic year. 

These commenters asserted that this 

subjects the student at a quarter school 

to more rigorous evaluation. These 

commenters expressed concern that 

institutions might choose to evaluate the 

SAP of their students annually in order 

to level the playing field for their 

students, as well as relieve 

administrative burden. 

One commenter expressed concern 

that the term ‘‘annually’’ in § 668.34 was 

subject to interpretation and that 

questions would arise as to whether this 

term referred to every calendar year, 

every 12 months, or every academic 

year. This commenter suggested that the 

Department revise § 668.34(a)(3)(ii) and 

(d) to refer to ‘‘every academic year’’ 

rather than ‘‘annually’’. 

Discussion: The Department notes 

that a student in a quarter program 

would be evaluated three times in an 

academic year, while the student in a 

semester program would be evaluated 

twice in an academic year. While some 

institutions may view this as a more 

rigorous evaluation, it also allows more 

opportunities for intervention by the 

institution. We would hope that an 

institution would develop a policy that 

would best serve the needs of students, 

and that if the institution believes that 

more frequent evaluations would be 

beneficial, that it would work with 

faculty and other parties to attempt to 

make such a review possible, for 

example, by shortening the amount of 

time that it takes grades to become 

available for evaluation. 

The Department notes that 

institutions that currently review 

student progress annually choose to 

review all students at a specific point in 

time, such as at the end of the spring 

term or spring payment period. The 

Department agrees that this is an 

appropriate and reasonable institutional 

policy for an institution that reviews 

academic progress annually. We do not 

believe that further regulatory language 

is necessary to specify that the reviews 

happen every academic year because if 

the review happens annually, it 

necessarily will happen every academic 

year. 

Changes: None. 

Comment: Several commenters 

indicated that the proposed SAP 

regulations will not work well for 

nonterm and nonstandard term 

programs. They noted that because 

students in these types of programs 

complete payment periods at various 

points during the year, institutions with 

these types of programs would be 

unable to evaluate SAP at the end of 

each payment period. One commenter 

specifically asked the Department to 

clarify how SAP in a nonterm program 

could be evaluated under proposed 

§ 668.34. Another commenter noted that 

institutions with 8-week terms would 

find it overly burdensome to evaluate 

academic progress every payment 

period. This commenter indicated that 

an unintended consequence of the 

proposed changes reflected in § 668.34 

would be that institutions with 

nonstandard term or nonterm programs 

would evaluate less frequently than 

currently, due to the administrative 

burden. Several commenters suggested 

that to avoid this unintended 

consequence, the regulations should 

allow institutions with nonterm 

programs to set evaluations based upon 

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calendar dates rather than payment 

period completion. One commenter 

stated that these ‘‘scheduled satisfactory 

academic progress calculation’’ periods 

could then be used as the basis for the 

student’s continued receipt of aid or 

placement on financial aid warning. 

This commenter also suggested that we 

revise § 668.34 to make the financial aid 

warning status available to those 

institutions with nonterm programs that 

evaluate student academic progress 

more frequently than annually but not 

in conjunction with payment periods. 

The commenter expressed that much 

confusion will result if the Department 

does not address how institutions with 

nonterm programs, where the annual 

review date chosen for SAP review does 

not coincide with a payment period, can 

comply with these regulations. 

Another commenter stated that the 

Department should consider studying 

different instructional delivery models 

in order to determine how to best 

regulate accountability for institutions 

that need to evaluate SAP for students 

in nonstandard programs. 

Discussion: The Department 

recognizes the complicated monitoring 

that institutions with nonterm and 

nonstandard term programs will need to 

implement to comply with § 668.34 for 

evaluating the academic progress of 

students in these programs, if they 

choose to evaluate SAP on a payment 

period-by-payment period bases. This is 

because, for these programs, institutions 

could have students completing 

payment periods on a daily basis. We 

understand why institutions may find it 

easier to set one particular calendar date 

to evaluate the SAP of all of their 

students in these programs. However, 

we do not believe that this approach 

will work because on any given date, 

any particular student could be at the 

beginning, middle, or end of a payment 

period. The SAP review must account 

for completed coursework, and students 

in the middle of a payment period, for 

example, might still have days or weeks 

to go to finish that work. We do believe 

that the institution could set a particular 

time period when it evaluates SAP for 

all of its students. For example, the 

institution could set a policy that SAP 

evaluation will occur for all students 

upon the completion of the payment 

period in a given month(s). The 

evaluation would then include all of the 

coursework that an individual student 

completes for the payment period 

completed in that month. We do not 

believe that evaluating students at any 

moment in time other than at the end of 

a payment period is an appropriate 

measure of the student’s current 

progress towards program completion, 

as it is not generally possible to evaluate 

the work in progress. By evaluating all 

of the most recently completed work, a 

SAP evaluation will be most accurate in 

portraying a student’s progress, and will 

enable the institution to evaluate SAP 

prior to making the payment for the next 

payment period thereby insuring 

payments only to eligible students. We 

have, therefore, made a change to the 

proposed regulations to clarify that the 

evaluation must occur at the end of a 

payment period. With regards to the 

commenter who suggested that the 

Department should conduct a study in 

order to determine the best way to 

regulate accountability for students in 

nontraditional programs, we will take 

this recommendation under advisement. 

Changes: We have revised 

§ 668.34(a)(3)(ii) to provide that, for 

programs longer than an academic year 

in length, satisfactory academic progress 

is measured at the end of each payment 

period or at least annually to correspond 

to the end of a payment period. 

Comment: Two commenters noted 

that the proposed SAP regulations do 

not address students with disabilities 

and their needs, especially during the 

appeals process, as such students may 

need several appeals. 

Discussion: When evaluating a 

student appeal under § 668.34, an 

institution may take into consideration 

factors that could have affected the 

student’s academic progress. These 

factors can include whether the student 

has a disability or other extenuating 

circumstances. Additional 

considerations may also be given in an 

academic plan for a student who has a 

disability as long as applicable title IV, 

HEA program requirements are 

followed. Therefore, we do not believe 

that it is necessary to include any 

additional regulatory language on 

evaluating the SAP of students with 

disabilities or the appeals process for 

those students. 

Changes: None. 

Comment: One commenter, who 

expressed concern that the proposed 

SAP regulations were cumbersome, 

asked whether the regulations would 

permit two specific types of situations. 

First, the commenter asked whether an 

institution could retain the ability to 

utilize the financial aid warning status 

if its SAP policy stated that it would 

begin monitoring a student’s academic 

progress after the student’s first 

academic year, and then continue to 

monitor the student’s progress every 

payment period thereafter. Second, the 

commenter asked whether a student 

could continue to receive title IV, HEA 

aid without further appeal if the student 

is in financial aid warning status and he 

or she submits, and continues to meet 

the terms of, an acceptable academic 

plan. 

Discussion: The proposed regulations 

allow for significant flexibilities for 

institutions. If the institution wishes to 

monitor at different periods in time, 

such as at the end of the first year, and 

then by payment period after that, it is 

free to do so. In this situation, only 

those students who are evaluated each 

payment period may receive the 

automatic financial aid warning status. 

With regard to the second scenario 

described by the commenter, a student 

who has appealed a determination that 

he or she is not meeting satisfactory 

academic progress and is attending his 

or her program under an approved 

academic plan because he or she is on 

financial aid warning status remains 

eligible for title IV, HEA aid as long as 

he or she continues to meet the 

conditions of that plan. In such a 

situation, the student’s academic 

progress would simply be re-evaluated 

at the same time as the institution’s 

other title IV, HEA aid recipients are 

evaluated, unless its policy called for a 

different review period. 

Changes: None. 

Comment: One commenter noted that 

at his institution summer is considered 

a trailing term, and the institution 

evaluates SAP at the end of the spring 

term. The commenter asked whether 

summer coursework could be used 

retroactively as part of the student’s 

academic plan. The commenter also 

questioned whether the institution 

could state in its SAP policy that it 

reviews SAP after all work for the 

academic year is completed. Under this 

approach, the institution would review 

some students in the spring and others 

after they complete summer term. 

Another commenter asked how to 

handle an optional summer term. 

Discussion: An institution may choose 

to state in its SAP policy that it 

monitors academic progress at the end 

of the student’s completion of the 

academic year. These SAP regulations 

still leave the flexibility to the 

institution to determine what policy 

will best serve its students. We note, 

however, that under an institution’s 

SAP policy, the institution must 

evaluate all of the student’s coursework 

at some point, and that the financial aid 

warning status described in § 668.34(b) 

is only available to institutions that 

evaluate a student’s academic progress 

every payment period. 

If an institution evaluates SAP by 

payment period, then it would evaluate 

a student’s academic progress at the end 

of each payment period that the student 

attends. If the institution evaluates SAP 

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annually, then it would evaluate all of 

the coursework that the student has 

attempted and completed since the last 

annual evaluation to determine whether 

the student is making satisfactory 

academic progress. There are no periods 

of the student’s attendance that are not 

considered in the evaluation. 

Changes: None. 

Minimum GPA 

Comment: One commenter noted that, 

under current § 668.34(b), a student 

must have a ‘‘C’’ average or its equivalent 

after two years in order to make 

satisfactory academic progress. The 

commenter noted that the Department’s 

guidance in this area has been that the 

student must have a ‘‘C’’ average or its 

equivalent after two years of attendance, 

regardless of the student’s enrollment 

status during that time. The commenter 

stated that proposed § 668.34(4)(ii) 

states that the ‘‘C’’ average is required at 

the end of two academic years. The 

commenter asked the Department to 

clarify whether the use of the phrase 

‘‘two academic years’’ as opposed to the 

phrase ‘‘two years’’ results in any 

substantive change in how the 

Department interprets this requirement. 

Another commenter stated that the 

current regulations are sufficient in this 

area, because they allow institutions to 

interpret the phrase ‘‘two years’’ in the 

way that is best for their students. 

Discussion: The term ‘‘academic year’’ 

is used in section 484(c)(1)(B) of the 

HEA, which states that a student is 

considered to be maintaining 

satisfactory academic progress if the 

student has a cumulative ‘‘C’’ average, or 

its equivalent or academic standing 

consistent with the requirements for 

graduation, as determined by the 

institution, at the end of the second 

such academic year. We changed the 

reference from ‘‘year’’ to ‘‘academic year’’ 

in § 668.34 to more closely align this 

regulatory language with the 

corresponding statutory language. This 

change, however, does not alter the 

Department’s interpretation that this 

requirement means that a student must 

have a ‘‘C’’ average or its equivalent after 

two years of attendance, regardless of 

the student’s enrollment status. 

Changes: None. 

Pace 

Comment: Two commenters noted 

that proposed § 668.34(a)(5)(ii) states 

that an institution is not required to 

include remedial coursework when 

determining the attempted and 

completed hours for purposes of 

evaluating a student’s pace toward 

completion of the program. Both 

commenters requested clarification that 

an institution may, but is not required 

to, include remedial coursework when 

making its SAP determination. 

Discussion: It is the Department’s 

longstanding position that an institution 

is not required to include remedial 

courses when calculating the student’s 

progress towards program completion. 

While an institution is not required to 

include remedial courses when 

calculating pace under the SAP 

analysis, it may do so as long as its SAP 

policy otherwise meets the requirements 

in § 668.34. 

Changes: None. 

Comment: One commenter, who 

noted that its students enter a program 

at multiple points during the year, asked 

the Department to clarify how to 

calculate a student’s ‘‘pace’’ toward 

program completion under proposed 

§ 668.34(a)(5)(ii). This commenter also 

asked whether full time or part time 

enrollment should be used to calculate 

pace toward completion under these 

regulations. Another commenter asked 

the Department to clarify how pace 

relates to maximum timeframe under 

these regulations. This commenter 

questioned whether a time component 

of weeks or months to program 

completion needed to be part of the 

pace measurement. Another commenter 

expressed concern that proposed 

§ 668.34(a)(5) is less clear than a strict 

percentage of completion policy. This 

commenter, who came up with a 67 

percent minimum required completion 

rate when applying the pace formula 

and the maximum timeframe 

requirements to the normal BA 

graduation requirements, argued that 

the Department should revise the 

regulations to list the minimum 

completion rate that would allow a 

student to complete his or her program 

in a 150 percent maximum timeframe 

(67 percent completion in the 

commenter’s calculation). 

This commenter also stated that any 

institution that had a stricter than 

minimum SAP policy, such as higher 

required completion rates, should be 

allowed to use the financial aid warning 

status, even if it only checked SAP on 

an annual basis. The commenter stated 

that this would allow those institutions 

with stricter policies and high 

completion rates to use the flexibility 

offered through the use of the financial 

aid warning status. 

Discussion: Proposed § 668.34(a)(5)(i), 

together with the definition of 

maximum timeframe in § 668.34(b), 

defines ‘‘pace’’ for purposes of SAP 

evaluations; it is the pace at which a 

student must progress through his or her 

educational program to ensure that the 

student will complete the program 

within the maximum timeframe and 

provides for measurement of the 

student’s progress at each SAP 

evaluation. Proposed § 668.34(a)(5)(ii) 

provides the formula that an institution 

must use at each SAP evaluation to 

calculate pace: divide the cumulative 

number of hours the student has 

successfully completed by the 

cumulative number of hours the student 

has attempted. This calculation is to be 

used regardless of the student’s 

enrollment status, as the formula is 

designed to measure completion 

appropriately for each student 

regardless of whether that student 

attends full time or part time. The 

Department believes that these 

requirements for measuring pace toward 

program completion provide maximum 

flexibility for both students and 

institutions. Students are free to attend 

at whatever enrollment status is 

appropriate for them, and institutions 

can measure the pace as appropriate for 

their students. Because a graduated pace 

standard (i.e., 50 percent the first year, 

60 percent the second year, and 70 

percent every year thereafter) is 

permissible, the Department does not 

believe it is appropriate to regulate a 

specific completion rate for all students 

in all programs at all institutions. 

Changes: None. 

Transfer Credits 

Comment: Several commenters stated 

that, for purposes of calculating pace 

toward program completion under 

§ 668.34(a)(5), transfer credits should 

only count in the completed hours 

category, but not the attempted hours 

category, because those credits were not 

taken at the institution determining 

SAP. Another commenter stated that 

transfer credits should only be counted 

in the attempted hours category but not 

the completed hours category. One 

commenter requested clarification as to 

whether the requirement in 

§ 668.34(a)(6) to count transfer credits as 

both attempted and completed means 

that institutions are required to request 

and evaluate all applicable transcripts. 

Discussion: Whether or not an 

institution evaluates the transcripts of 

all coursework taken by a student at 

previous institutions is a decision left to 

the institution. The Department has not 

required institutions to request 

transcripts for previously completed 

work, and is not doing so now. 

However, in so much as credits taken at 

another institution are accepted towards 

the student’s academic program under 

the institution’s academic requirements, 

we do believe it is appropriate to 

include those credits in both the 

attempted and completed hours 

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category when measuring pace towards 

completion for each SAP evaluation 

period. 

Changes: None. 

Comment: One commenter 

recommended that the Department 

revise § 668.34(a) to require transfer 

credits to be considered when 

determining progress towards maximum 

timeframe, but not for purposes of 

determining the pace of completion for 

each evaluation period. This commenter 

stated that counting transfer credits 

when looking at each evaluation period 

would give transfer students an unfair 

advantage in the pace to completion 

calculation. 

Another commenter noted that the 

practice of excluding courses that were 

not degree applicable from the pace 

calculation for evaluating SAP has 

prompted many students to change 

majors in order to retain financial aid 

eligibility. The commenter opined that 

this practice leaves the door open to 

abuse of the system. Additionally, the 

commenter stated that the Department 

should require that all courses that the 

student had attempted and completed in 

his entire career be included in the pace 

computation for purposes of 

determining the student’s progress 

toward program completion. 

Discussion: The Department 

acknowledges that transfer students may 

have a slight advantage over other 

students when an institution calculates 

their pace toward program completion. 

However, this inclusion of transfer 

credits in the calculation of pace will 

allow for a more level playing field for 

all students, and standardize treatment 

of completed credits in the SAP 

evaluation. This is because including 

transfer credits in the calculation of 

pace means we are considering all 

completed work for all students. 

We also note that the Department has 

had a longstanding policy that 

institutions are free to set their own SAP 

policy that deals with major changes as 

they relate to measurement of maximum 

timeframe. Therefore, if an institution 

wishes to limit the number of major 

changes that it will allow a student, 

then it is free to set a policy that does 

so. 

Changes: None. 

Financial Aid Probation and Financial 

Aid Warning Statuses 

Comment: Many commenters found 

the definitions of the terms financial aid 

warning and financial aid probation in 

proposed § 668.34(b) to be helpful. 

These commenters stated that it was 

very useful to have standard vocabulary 

to use when discussing SAP. Some 

commenters noted that these terms and 

concepts matched their current policy 

while others requested slight changes to 

the terms or definitions so that they 

align more closely with their own 

institution’s policies. Several 

commenters sought clarification, 

however, as to whether institutions are 

required under these regulations to use 

the newly defined terms of financial aid 

warning and financial aid probation in 

their consumer information and other 

communications with students, or 

whether we would allow them to 

continue to use their current 

terminology. These commenters 

expressed concern that their students 

might be confused if they changed the 

terminology used in this area. 

Discussion: The Department intends 

to allow institutions to have as much 

flexibility as possible in developing an 

appropriate SAP policy for their 

institution as well as consumer 

information materials for their students. 

However, institutions must incorporate 

these regulations changes into the 

information that they provide to 

students; this includes ensuring that the 

information made available by the 

institution uses the terminology used in 

these regulations. 

Changes: None. 

Comment: Several commenters 

expressed support for the addition of 

the concept of a financial aid warning 

status, but believed that the use of this 

status should be available to all 

institutions, regardless of how often 

they performed a SAP evaluation. Some 

of the commenters asserted that this 

would allow institutions additional 

flexibility in administering SAP that 

would be beneficial for students. Some 

commenters also noted that it would be 

an administrative burden to review 

students more frequently. Others 

indicated that they had stable student 

populations and did not need to 

evaluate more often than annually. At 

least one commenter opined that 

schools with good graduation and 

completion rates should be able to use 

the financial aid warning status 

regardless of how often they checked 

SAP. Some commenters argued that the 

financial aid warning status should be 

an option for all institutions to use 

automatically and without intervention, 

and for periods as long as a year or until 

the next scheduled evaluation. One 

commenter suggested that in exchange 

for allowing all institutions to use the 

financial aid warning status regardless 

of how often they evaluate students’ 

academic progress, institutions should 

be required to remind students of their 

SAP standards at the end of any 

payment period in which an evaluation 

is not done. Some commenters wanted 

to know if the financial aid warning 

status could be used to evaluate a 

student’s progress and to help to 

prepare an academic plan and appeal 

for the student, so that the student 

would not suffer a lapse in eligibility. 

Discussion: While we appreciate the 

fact that institutions support the 

flexibility that the financial aid warning 

status provides, the Department feels 

strongly that this option should only be 

available when an institution evaluates 

SAP each payment period. It is 

important to remember that a student 

who is on a financial aid warning status 

is one who is not actually meeting SAP 

standards. 

If an institution has a stable student 

population and does not believe it needs 

to evaluate SAP each payment period, 

then it is not required to do so. We 

recognize that there is an additional 

administrative burden involved for 

institutions to evaluate every payment 

period, but we also believe students 

benefit from the early intervention of 

this approach. We believe that this 

approach will impact favorably on 

student completion rates, as well as 

help minimize student debt levels for 

those that are not on track to complete 

a program successfully. We note that, 

during the negotiated rulemaking 

process, several negotiators had a SAP 

policy that required checking a 

student’s academic progress each 

payment period. These negotiators 

related numerous student success 

stories that resulted from early 

intervention. This demonstrated success 

with this approach led to the negotiators 

supporting the proposed SAP 

regulations. 

We believe that it is important to get 

students back on track as soon as 

possible, and not allow the continued 

provision of title IV, HEA aid to 

students who are not making progress 

towards program completion under the 

institution’s SAP standards. Allowing a 

financial aid warning status for one 

payment period allows the institution to 

provide an alert to that student of his 

status, as well as provide any needed 

support services. The institution could 

use the time to meet with the student 

and, if the situation means that an 

appeal will be necessary, to help the 

student prepare that appeal or to 

prepare an academic plan. The same 

benefit is not realized if the student 

simply receives notice of the 

institution’s SAP policy, as he may not 

understand his individual status with 

regards to the policy. 

Changes: None. 

Comment: Several commenters 

expressed support for the financial aid 

warning and financial aid probation 

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statuses proposed in § 668.34, but 

requested that the Department add to 

the SAP regulations a defined term for 

a student who has lost eligibility for title 

IV, HEA aid as a result of an 

institution’s evaluation under the SAP 

regulations. Several other commenters 

questioned what status would be 

assigned to a student who was 

reinstated on an academic plan and was 

making progress under that plan. These 

commenters wondered whether these 

individuals would still be considered to 

be on financial aid probation status, or 

if the Department planned to define 

another term to refer to them. 

Discussion: A student who is not 

meeting SAP is simply not eligible to 

receive title IV, HEA aid, as he or she 

does not meet one of the basic student 

eligibility criteria. For this reason, we 

do not believe it is necessary to define 

another term to describe this individual, 

just as we do not have specific terms to 

describe students who may not be 

meeting other basic student eligibility 

criteria. 

A student who has been reinstated to 

eligibility under an academic plan and 

is making progress under that plan is 

considered to be an eligible student. The 

student is not considered to be on 

financial aid warning status or financial 

probation status, provided he or she is 

otherwise making satisfactory progress. 

Changes: None. 

Comment: A few commenters argued 

that proposed § 668.34(c) could be 

interpreted to allow an institution to 

place a student on financial aid warning 

status for more than one payment 

period, and that, under this 

interpretation, the student would be 

able to get title IV, HEA aid for multiple 

payment periods when the student is on 

financial aid warning status as long as 

the student was within range of moving 

into compliance with the institution’s 

SAP standards. These commenters 

stated that the language in § 668.34(c) 

does not need to be interpreted so 

narrowly so as to limit the number of 

payment periods during which a 

student could be placed on financial aid 

status to one payment period. 

Other commenters suggested that 

students could develop and follow an 

academic plan during the period of their 

financial aid warning and that this 

approach would allow for students to be 

put on financial aid warning status for 

multiple periods. These commenters all 

opined that there was a range of 

deficiencies within any category of 

student failure, and that students may 

require differing amounts of 

intervention to get back on track to meet 

the institution’s SAP standards. The 

commenters stated that institutions 

should be able to define different bands 

of need for assigning financial aid 

warning statuses. Several other 

commenters requested that the 

Department clarify that students may be 

placed on financial aid warning or 

financial aid status for multiple 

payment periods throughout their 

academic careers. 

Other commenters asked the 

Department to clarify whether the 

requirements around financial aid 

warning or financial aid probationary 

statuses allow students to receive title 

IV, HEA aid for more than one payment 

period. One commenter indicated that 

lack of financial aid during a period in 

which the student is on financial aid 

probationary status would cause 

problems for students. The commenter 

stated that this would cause barriers for 

the most needy and at-risk students. 

Discussion: The financial aid warning 

status and the financial aid probationary 

status are both defined in § 668.34(b). A 

student who has not made satisfactory 

academic progress and is placed under 

one of these statuses may continue to 

receive title, IV HEA aid for one 

payment period only, under very 

specific circumstances. We do not 

intend for the language in § 668.34(b) to 

be interpreted in any other fashion. To 

respond to the commenter who believed 

that lack of financial support during this 

period would disadvantage students, it 

is important to note that both of these 

statuses provide for one payment period 

of title IV, HEA funds. It is possible for 

institutions that are able to use the 

financial aid warning status to do any 

sort of intervention with a student that 

they deem appropriate during the 

period of time the student is in that 

status, including help them to prepare 

an appeal or refer them to other student 

support services. We do not believe that 

it is appropriate, however, to continue 

placing students on a financial aid 

warning status for more than one 

payment period because these are 

students who are not making progress 

toward program completion. We do not 

believe it is appropriate to put the 

student on an academic plan and simply 

continue such a plan without an 

appropriate appeal. This is because we 

believe that a student should be 

required to file an appeal and explain 

the reason that he or she has not been 

able to meet the SAP standards, and 

what in his or her situation has 

changed. It is important for the student 

to have ownership in his or her current 

situation and the resulting academic 

plan, with an understanding of the 

consequences the student faces if he or 

she fails to follow the academic plan. 

We do agree with the commenters who 

suggest that it is possible for a student 

to be subject to more than one period of 

financial aid warning, or to submit more 

than one appeal throughout an 

academic career, if the institution’s SAP 

policy allows it. 

Changes: None. 

Comment: Numerous commenters 

objected to the requirement in the 

proposed regulations for institutions to 

check SAP on a payment period-bypayment period basis. They argued that 

it is unreasonable for the Department to 

impose such a requirement on 

institutions that do not have any history 

of abuse in this area and that otherwise 

have good SAP policies. These 

commenters noted that it would be 

overly burdensome to require 

institutions to change their SAP 

procedures to require SAP evaluations 

every payment period. 

Discussion: Section 668.34(a)(3) is 

consistent with current 

§ 668.16(e)(2)(ii)(B), which requires 

institutions to check academic progress 

for programs that are longer than an 

academic year at least annually. While 

institutions can check academic 

progress for these programs more 

frequently, they are not required to do 

so. Under these regulations, institutions 

are only required to evaluate satisfactory 

academic progress more frequently if 

the program is shorter than an academic 

year. 

Changes: None. 

Comment: A couple of commenters 

asked the Department to confirm that 

the financial aid warning and financial 

aid probation status would be applied to 

the student’s next payment period 

(following the institution’s 

determination that the student is not 

maintaining SAP) and not simply to the 

next payment period at the institution. 

These commenters argued that it was 

important to apply the status to the 

student during the next term that the 

student was actually in attendance. 

One commenter believed that a 

program of an academic year in length 

or shorter should not be allowed to use 

the financial aid warning status because 

a student in such a program would 

never be denied title IV, HEA funds for 

not making SAP. 

Discussion: Under these regulations, 

an institution would apply the financial 

aid warning or financial aid probation 

status to a student during the student’s 

next period of attendance. It is not 

reasonable to assume that the student 

would be considered to be on financial 

aid warning, for example, if he or she 

were not in attendance. For shorter 

programs (i.e., those that are an 

academic year or less), the definition of 

a payment period does not allow 

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disbursement of aid until the student 

has successfully completed the previous 

payment period. For such programs, if 

an institution places the student on 

financial aid warning, the student will 

either complete the program or 

withdraw. If the student completes the 

program, then he or she has been 

successful. If he or she withdraws, then 

the return of funds requirements in 

§ 668.22 will apply. In either case, the 

student received only those funds for 

which he or she was eligible. We do not 

plan to make any changes in this area. 

Changes: None. 

Appeals 

Comment: Many commenters agreed 

with allowing students who would 

otherwise lose eligibility for title IV, 

HEA aid to appeal the loss of eligibility. 

Some commenters expressed concern 

that the requirements for an appeal were 

too prescriptive; for example, the 

commenters noted that § 668.34(b) 

requires that students articulate what 

had changed in their situation and that 

students might not be able to comply 

with this requirement. Other 

commenters stated that the Department 

should make the SAP appeal regulations 

more prescriptive, including by 

specifying the type of documentation 

required to be submitted with an appeal. 

Several commenters believed that it was 

too burdensome on institutions to 

require them to address student appeals, 

while others stated that it was too 

burdensome to require institutions to 

develop or evaluate academic plans for 

students who appeal. 

Discussion: These SAP regulations do 

not require that an institution accept or 

evaluate student appeals of 

determinations that the student is not 

making SAP. Moreover, the regulations 

do not require institutions to develop or 

process an academic plan for a student 

who appeals. These are merely offered 

as options for institutions who wish to 

allow those students who are no longer 

meeting the SAP standards to continue 

to receive title IV, HEA aid. It is 

important to note that an academic plan 

for a student may be as complicated as 

a course by course plan toward degree 

completion, or as simple as a 

mathematical calculation that specifies 

the percentage of coursework that the 

student must now complete. Academic 

plans need not be complicated or 

detailed; the purpose of these plans is 

merely to put the student on track to 

successful program completion. Section 

668.34(a)(10) does require that an 

institution that does not accept appeals 

notify students as to how eligibility for 

title IV, HEA aid can be regained by 

those who do not meet SAP standards. 

An institution is free to craft a SAP 

policy that allows appeals or not, and to 

specify when and how such appeals 

will be permitted as well as how often 

and how many times a student may 

appeal. Likewise, an institution may or 

may not allow an academic plan to be 

submitted for a student. The SAP policy 

of the institution should specify the 

conditions under which an academic 

plan might be approved, or if one will 

be considered at all. Because 

institutions have significant flexibility 

in this area, the Department does not 

believe that these regulations will 

impose any additional burden. 

Changes: None. 

Comment: Some commenters 

requested clarification as to when 

students on an academic plan would be 

evaluated. Several commenters 

requested that we clarify that a student 

may submit more than one appeal 

during the course of his or her academic 

career. A couple of commenters 

inquired whether students could appeal 

the 150 percent completion 

requirement, and exceed this maximum 

timeframe if they are progressing under 

an approved academic plan. 

One commenter also asked the 

Department to clarify what is meant by 

the requirement in § 668.34(c)(3)(iii)(B) 

and (d)(2)(iii)(B) that an academic plan 

ensure that the student meet the SAP 

standards at a specific point in time. 

The commenter noted that the student 

could actually be able to graduate the 

following term, and questioned whether 

an appeal could be approved at that 

point. 

Discussion: Under these regulations, 

the institution has the flexibility to 

specify whether students on an 

academic plan would have their 

academic progress evaluated at the same 

time as other students, or whether they 

would be subject to more frequent SAP 

evaluations. They should determine 

what is best for students and make their 

policy clear in their SAP standards. 

As noted earlier in this preamble, an 

institution also retains flexibility under 

these SAP regulations to allow multiple 

appeals by an individual student. 

Alternatively, an institution could 

decide not to allow appeals at all. We 

note, however, that because pace to 

program completion within 150 percent 

of the published length of the 

educational program is required to be 

evaluated each SAP evaluation period, 

it would be reasonable to assume that a 

student who is not meeting the 

institution’s SAP standards is not on 

schedule to complete the program 

within the required maximum 

timeframe. Therefore, this component of 

the SAP standards would be subject to 

appeal, if the institution chooses to 

permit appeals. Finally, we expect 

institutions to assist a student who 

appeals on this basis to plot a course to 

successful completion within a new 

maximum timeframe and to then 

monitor this pace toward completion. 

Any academic plan would need to take 

into account the student’s progression to 

completion of his or her program, which 

could, in fact, be the next term. 

Changes: None. 

Maximum Timeframe 

Comment: Several commenters stated 

that the Department should clarify the 

150 percent maximum timeframe 

requirement. One of the commenters 

noted that § 668.34(b) did not define 

maximum timeframe, as applied to 

programs that are a combination of 

credit and clock hours or a combination 

of undergraduate and graduate work. 

One of the commenters argued that the 

final regulations should reinforce the 

150 percent maximum timeframe 

requirement for all programs. Another 

commenter stated that we should clarify 

that the 150 percent maximum 

timeframe only applies to determining 

title IV, HEA eligibility. This commenter 

suggested that this maximum timeframe 

should not be used for other purposes. 

For example, the commenter stated that 

it was not appropriate for the 

Government to determine whether or 

not a student should be allowed to 

complete a degree simply because title 

IV, HEA eligibility had run out. Another 

commenter asked whether the 150 

percent maximum timeframe applied to 

the student’s entire academic career or 

only to the student’s current academic 

program. The commenter gave the 

example of a student who had one 

degree, and asked if an institution 

would include those earned credits 

when evaluating whether the student 

was progressing in his or her program 

within the maximum timeframe. 

Discussion: The Department believes 

in allowing institutions the flexibility to 

define the 150 percent maximum 

timeframe in the most appropriate way 

for the program in question. In 

particular, individual institutions are in 

the best position to determine whether 

their combined programs, such as those 

noted by the commenters, should be 

evaluated as the sum of its parts (i.e., 

part clock hour and part credit for 

example) or as one type of program 

based on the structure of the majority of 

the program. 

The 150 percent maximum timeframe 

only applies to the student’s eligibility 

to receive title IV, HEA aid. The 

Department has never regulated whether 

or not a student is able to continue on 

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to degree completion under an 

institution’s academic criteria. The 

Department also wishes to clarify that 

the 150 percent maximum timeframe 

applies only to the student’s current 

program of study. Under these 

regulations, institutions retain flexibility 

to define their programs of study in 

their SAP policy, as well as how they 

will determine how previously taken 

coursework applies to the student’s 

current program of study. 

Changes: None. 

Notification 

Comment: Several commenters 

requested clarification of the 

notification requirement in 

§ 668.34(a)(11). Specifically, these 

commenters questioned whether this 

provision would require institutions to 

notify all students or only those who 

were not making SAP. 

Discussion: Proposed § 668.34(a)(11) 

only requires institutions to notify 

students of the results of their SAP 

evaluation if the results affect the 

student’s eligibility to receive title IV, 

HEA aid. Institutions are not required to 

notify students who are making SAP of 

the results of the evaluation. 

Changes: None. 

Evaluating the Validity of High School 

Diplomas (§ 668.16(p)) 

High School Diploma (§ 668.16(p)) 

The Department received over 100 

submissions about the new high school 

diploma regulation. Most of these 

supported our proposed changes, either 

with little or no qualification, or with 

suggested modifications and concerns. 

Others offered suggestions and concerns 

without explicitly supporting the 

proposed regulation. 

We noted in the preamble to the 

NPRM that the Department intends to 

add questions on the Free Application 

for Federal Student Aid (FAFSA) asking 

for the name of the high school the 

student graduated from and the State 

where the school is located. The 2011– 

2012 FAFSA will have one question 

with three fields. Students who indicate 

that they will have a high school 

diploma when they begin college for the 

2011–2012 year are instructed to 

provide the name of the high school 

where they received or will receive that 

diploma and the city and state where 

the school is located. In the online 

application, FAFSA on the Web, 

students will not be allowed to skip this 

question, though for 2011–2012 it will 

only be presented to first-time 

undergraduate students. There will be a 

drop-down list of both public and 

private high schools, populated by the 

National Center for Education Statistics 

(NCES), within the Department of 

Education, from which most students 

will be able to select the high school 

that awarded them a diploma. Students 

who cannot find their school and those 

who complete a paper FAFSA will write 

in the name, city, and State of their high 

school. It is important to note that the 

absence of a high school on the dropdown list does not mean that the high 

school the student indicated he or she 

graduated from is not legitimate. It just 

means that the school was not included 

in the NCES list. Similarly, the 

inclusion of a high school on the dropdown list does not necessarily mean 

that the high school is legitimate. 

In addition to the information in the 

following discussions, we will provide 

more guidance on implementing 

§ 668.16(p), as necessary, in Dear 

Colleague Letters, electronic 

announcements, and the Federal 

Student Aid Handbook. 

Comment: Several commenters 

observed that many institutions already 

perform some kind of high school 

evaluation as part of their admission 

process, and one noted that because of 

this, it is appropriate for the Department 

to establish regulations requiring the 

validation of high school diplomas. One 

commenter appreciated that proposed 

§ 668.16(p) would help institutions 

when they are challenged by students or 

high school diploma mills for looking 

into the validity of high school 

diplomas. Another commenter noted 

that a list of ‘‘good’’ high schools would 

be valuable for students in deciding 

whether they would want to obtain a 

diploma from a given source. Another 

commenter opined that the 

identification of suspect schools 

benefits students. 

Discussion: We appreciate the support 

of these commenters. The list of schools 

that will appear on FAFSA on the Web 

is meant only as an aid for students in 

completing the FAFSA. It is not a list of 

‘‘good’’ schools, and it may happen that 

an institution will need to evaluate the 

diploma from one of these schools. 

Also, a school that does not appear on 

the list should not be inferred to be 

‘‘bad.’’ The intent of new § 668.16(p) is 

to have institutions develop a process 

for evaluating the legitimacy of a 

student’s claim to have completed high 

school and not to have simply 

purchased a document that purports 

they completed a high school 

curriculum. Under this provision, 

institutions must develop and follow 

procedures to evaluate the validity of a 

student’s high school completion if the 

institution or the Secretary has reason to 

suspect the legitimacy of the diploma. 

Changes: None. 

Comment: Many commenters 

requested that the Department provide 

institutions with clear guidance on how 

to review the validity of high school 

diplomas and that it provide this 

guidance as soon as possible. Although, 

as noted previously, many institutions 

review high school credentials, one 

large college noted that there are no 

common practices for these types of 

reviews and asked that the Department 

delay the effective date of this 

regulatory requirement if it is unable to 

release the needed guidance far enough 

in advance of July 1, 2011. This 

commenter stated that such a delay 

would be needed for schools to have 

enough time to create their procedures 

and train their employees on following 

the procedures. One commenter asked 

what the effect of this requirement 

would be on the student’s eligibility for 

title IV, HEA program assistance when 

an institution is unable to determine 

whether a given diploma is valid. 

Discussion: There is no plan to delay 

the implementation of § 668.16(p). As 

noted earlier in this discussion, more 

guidance will be forthcoming about 

evaluating the validity of high school 

diplomas, and many institutions have 

been evaluating the validity of high 

school diplomas for years. We 

encourage financial aid administrators 

(FAAs) to consult with each other in 

this matter, which can be especially 

useful for similar types of institutions in 

the same State, where differing levels of 

oversight by State departments of 

education will have a significant effect 

on what procedures an institution might 

establish. 

With respect to the comment asking 

about student eligibility for title IV, 

HEA program assistance when an 

institution is unable to determine 

whether the student’s diploma is valid, 

we note that there are alternatives for 

the student to establish aid eligibility 

under § 668.32(e), such as passing an 

ATB test, or completing six credits of 

college coursework that apply to a 

program at the current school. 

Changes: None. 

Comment: Various commenters either 

requested that we create a list of 

fraudulent or ‘‘bad’’ high schools or 

asked if we planned to do so. Many 

commenters asked that we make 

available both a list of ‘‘bad’’ high 

schools and a list of acceptable schools 

and that we update them frequently, 

some suggesting at least quarterly. Some 

commenters requested that the effective 

date for this regulatory provision be 

delayed until at least 2012–2013 so the 

Department can have a complete list of 

acceptable schools and can address 

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issues such as foreign postsecondary 

schools, defunct schools, and missing 

records. 

Finally, some commenters asked what 

we would consider acceptable 

documentation when a high school does 

not appear in the Department’s database 

of acceptable high schools. 

Discussion: As noted earlier in this 

preamble, we are not delaying the 

effective date of § 668.16(p). We believe 

it is an important new provision that 

can be implemented for the 2011–2012 

year on the basis we describe in this 

preamble. 

To emphasize a point earlier in this 

preamble, a school’s inclusion on the 

list on FAFSA on the Web does not 

mean that it is exempt from possible 

review by an institution. Acceptable 

documentation for a review can include 

a high school diploma and a final 

transcript that shows all the courses the 

student completed. 

Changes: None. 

Comment: One commenter requested 

that the high school diploma validation 

required under § 668.16(p) apply only to 

undergraduates. Others asked for 

institutions to be able to waive diploma 

validation for students who are 

substantially older than traditional 

college age and for students whose high 

school no longer exists or cannot be 

readily identified. 

Discussion: For 2011–2012, the 

Department will only ask first-year 

undergraduate students to provide on 

FAFSA on the Web information about 

the high school they graduated from. 

However, § 668.16(p) requires 

institutions to review any high school 

diploma if the institution or the 

Secretary has reason to believe the 

diploma is not valid. In those instances 

the institution must evaluate the 

validity of the student’s high school 

completion whether the diploma was 

obtained by an undergraduate or other 

student and regardless of whether the 

student’s high school no longer exists or 

is not easily identified. We do not 

believe it is appropriate to limit this 

requirement to only undergraduate 

students or those whose high schools 

are not easily identified because the 

student eligibility requirement to have a 

high school diploma or its recognized 

equivalent or to meet an alternative 

standard applies to all students. 

Changes: None. 

Comment: Several commenters 

expressed concern about the difficulty 

of validating high schools, not only for 

older students, but also for students 

who graduated from a high school in a 

different part of the country, or in 

another country. One commenter 

suggested that the Department permit 

institutions to use copies of foreign 

secondary school credentials, 

attestations, and proof of entry into the 

United States after the age of 

compulsory attendance, when 

evaluating the secondary school 

education of foreign-born students. 

Another commenter stated that many 

admissions offices use the ‘‘credential 

score’’ for foreign countries instead of 

the name of the school, and that the 

Department should give guidance on 

how institutions can use that score to 

evaluate diplomas from foreign schools. 

A couple of commenters expressed 

concern that under proposed § 668.16(p) 

students who went to foreign schools 

would be adversely affected and 

possibly denied access to postsecondary 

education. 

Discussion: An institution may 

consider various kinds of 

documentation when developing its 

procedures for evaluating the validity of 

a student’s high school diploma. For 

example, there are companies that 

provide services for determining the 

validity of foreign secondary school 

diplomas; documentation from such 

companies can inform an institution’s 

diploma evaluation. 

Changes: None. 

Comment: A couple of commenters 

asked if there will be an appeal process 

for students if an institution determines 

that their high school diploma is 

invalid. Others observed that different 

institutions may decide differently 

about a given high school’s diploma and 

asked whether the Department will be 

the final arbiter in these situations. 

Discussion: The regulations do not 

provide for an appeal process for 

students if an institution determines 

their high school diploma is invalid. 

The Department considers institutions 

to be our agents in administering the 

title IV, HEA programs and to have final 

authority in many decisions. 

Consequently, we do not generally have 

appeal processes in place for 

institutional determinations of student 

eligibility. Moreover, the Department 

will not intervene in cases where a high 

school diploma is deemed valid at one 

institution but not another. 

Changes: None. 

Comment: Several commenters asked 

what the effect of proposed § 668.16(p) 

would be on homeschooling, and some 

commenters noted that a home school 

credential is different from a high 

school diploma and asked that the 

Department emphasize this difference. 

Others asked that we provide guidance 

on State-granted credentials for 

homeschoolers and best practices for 

verifying home school credentials. One 

organization asked that the 

achievements of homeschoolers not be 

ignored, and that the proposed 

regulations and any related FAFSA 

changes recognize that graduates of 

home schools receive a diploma from 

their program. 

Finally, one commenter questioned 

why the Department is so interested in 

the quality of a high school diploma 

(which is not defined in the HEA or the 

Department’s regulations) when 

homeschooled students are taught by 

their parents, who (typically) lack 

credentials and curriculum standards. 

Discussion: Section 668.16(p) does 

not apply to homeschooled students. 

For guidance pertaining to 

homeschooled students, please see 

Chapter 1 of Volume 1 of the Federal 

Student Aid Handbook. 

Changes: None. 

Comment: Many commenters asked if 

there would be, or suggested that there 

should be, a mechanism for schools and 

State and local agencies, accrediting 

bodies, and education departments to 

suggest schools that should be added to 

any acceptable and unacceptable lists 

that the Department develops in 

connection with § 668.16(p). One 

commenter requested that when we ask 

States to provide lists of approved 

schools, they provide all high schools 

and not just public high schools, which 

the commenter noted fall under more 

State oversight. Another commenter 

recommended referring to the College 

Entrance Examination Board (CEEB) 

code for high schools to determine 

whether those are acceptable, and 

another suggested consulting the 

College Board and the Department of 

Defense to help build the list of 

acceptable high schools. A few 

commenters asked what will happen 

when an institution evaluates a diploma 

from a school not on the Department’s 

list of acceptable high schools and finds 

that the school is acceptable. The 

commenter wondered if this will mean 

that institutions will have their own 

lists of acceptable schools separate from 

the Department’s. 

Discussion: As noted earlier in this 

preamble, we intend to use information 

from NCES to create a drop-down list in 

FAFSA on the Web populated by the 

names of public and private high 

schools that NCES provides to us. 

Neither inclusion on the list nor 

exclusion from it is an indication of 

whether a high school will need to be 

reviewed by a postsecondary institution 

under § 668.16(p). 

There is a procedure by which private 

schools may submit their name for 

inclusion on the private school list. 

Postsecondary institutions are not 

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responsible for submitting the names of 

secondary schools. 

Changes: None. 

Comment: A couple of commenters 

distinguished between a high school 

diploma and a transcript, and suggested 

that a transcript is more valuable for 

institutions to use to determine the 

validity of the student’s high school 

completion. Another commenter noted 

that transcripts and diplomas are not 

interchangeable and that the 

Department should clarify this. 

Discussion: We agree that a high 

school transcript is not the same as a 

diploma. It is the latter that is required 

under the student eligibility regulations 

and the statute, not the former. A 

transcript may be a valuable tool in 

determining whether a high school 

diploma is valid because by listing the 

courses the student completed, it 

demonstrates the extent of his or her 

secondary school education. 

Changes: None. 

Comment: One commenter seemed to 

think that an institution would submit 

documentation to the Department for 

review if a student was chosen for 

verification due to not answering the 

FAFSA questions about his or her high 

school diploma. 

Discussion: The Department does not 

plan to require institutions to submit 

individuals’ high school documentation 

for validation. Moreover, the 

Department does not intend to select 

applicants for verification just because 

they did not complete the high school 

diploma questions on the FAFSA. 

Changes: None. 

Comment: A few commenters 

suggested that institutions should not be 

considered to have reason to believe 

that an applicant’s high school diploma 

is not valid or was not obtained from an 

entity that provides secondary school 

education, unless the information from 

FAFSA processing suggests that. These 

commenters argued that institutions 

should not be obligated to investigate 

whether every applicant’s high school 

diploma is valid, nor should the 

institution be required, if it is an 

institution that collects diploma 

information as part of the admissions 

process, to cross-check that information 

against the information from the FAFSA 

because that would be too burdensome. 

Discussion: For the 2011–2012 award 

year, we will not provide any additional 

high school diploma information on the 

Institutional Student Information 

Record (ISIR) beyond what the student 

submitted on the FAFSA. We will not 

expect institutions to check the ISIR 

high school data for every student 

against other information obtained by 

the institution during the admissions 

process. However, if an institution has 

reason to believe (or the Secretary 

indicates) that a high school diploma is 

not valid, the institution must follow its 

procedures to evaluate the validity of 

the diploma. 

Changes: None. 

Comment: One commenter requested 

that the Department declare that 

§ 668.16(p) will not be retroactive. 

Discussion: This requirement will 

apply to institutions beginning on July 

1, 2011, the effective date for these 

regulations. This means that institutions 

will be required to follow the 

procedures developed under § 668.16(p) 

for any applicant who completes a 

FAFSA beginning with the 2011–2012 

award year. 

Changes: None. 

Comment: Several commenters 

requested that we allow FAAs to forego 

diploma validation for students who 

have completed six credits of college 

coursework that applies to a program of 

study at the institution or if the 

student’s ability to be admitted to the 

institution or eligibility for title IV, HEA 

aid is otherwise not affected. 

Discussion: It is correct that a student 

without a high school diploma would be 

eligible for title IV, HEA aid if he or she 

meets one of the other academic criteria, 

such as successfully completing six 

credits or 225 clock hours of collegelevel coursework that apply to a 

program at the current institution. 

However, because students have that 

flexibility does not obviate the 

requirement that for an institution to be 

eligible, it must admit as regular 

students only those with a high school 

diploma, or the recognized equivalent, 

or who are beyond the age of 

compulsory school attendance. 

Changes: None. 

Comment: One commenter asked that 

if the Department permits waivers to the 

requirement in § 668.16(p) to follow 

procedures to check the validity of a 

high school diploma, that institutions, 

in particular those that do not admit 

students without a diploma or the 

equivalent, be permitted to evaluate the 

validity of a diploma if they choose. 

Discussion: There will be no waivers 

of the requirement that an institution 

must evaluate the validity of a high 

school diploma when it or the Secretary 

has reason to believe that the diploma 

is not valid or was not obtained from a 

school that provides secondary school 

education. 

Changes: None. 

Comment: One commenter asked that 

we interpret section 123 of the HEA (20 

U.S.C. 1011l) to apply to high school 

diploma mills as well as college 

diploma mills. 

Discussion: This section of the HEA 

provides that the Department will, 

among other things, maintain 

information on its Web site to educate 

students, families, and employers about 

diploma mills and that it will 

collaborate with other Federal agencies 

to broadly disseminate to the public 

information on how to identify diploma 

mills. While section 105 of the HEA (20 

U.S.C. 1003) defines diploma mill only 

in terms of postsecondary education, we 

intend to examine the issue of high 

school diploma mills further. 

Changes: None. 

Comment: One commenter urged the 

Department’s Office of Inspector 

General to be actively engaged with 

other agencies in detecting fraud, 

especially given that high school 

diploma mills may adopt names of 

legitimate schools. 

Discussion: The Department’s Office 

of Inspector General will continue to 

work with other agencies as appropriate 

to detect fraud in this area. 

Changes: None. 

Comment: One institution commented 

that it finds it difficult to explain to 

students who present questionable high 

school credentials why those credentials 

are not sufficient for receiving title IV, 

HEA aid. 

Discussion: In a situation such as this, 

we believe that it would be appropriate 

for the institution to explain to students 

the concept of a high school diploma 

mill, i.e., an entity that offers a 

credential, typically for a fee, and 

requires little or no academic work on 

the part of the purchaser of the 

credential. We believe that students 

with a credential from a diploma mill 

would not have a sufficient educational 

foundation for success at the 

postsecondary level and should not 

receive title IV, HEA aid. 

Changes: None. 

Comment: One commenter urged the 

Department to clarify that the diplomas 

of high schools that are not accredited 

are not necessarily invalid under 

§ 668.16(p). Several commenters asked 

whether a new high school that was 

operating but had not yet received 

accreditation would be acceptable under 

this regulation. A small private high 

school expressed concern that the new 

provision would hinder its students 

from going to college because it is not 

accredited and this provision may be 

misinterpreted to mean that nonaccredited high schools are not 

acceptable. The school asked that we 

disabuse the public of the mistaken 

notion that for students to receive title 

IV, HEA aid, their high school diplomas 

must be from accredited schools. 

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Discussion: Diplomas issued by high 

schools that are not accredited (more 

common among private than public 

high schools) often meet college 

admissions standards and are generally 

acceptable for receiving title IV, HEA 

aid. We have noted for several years in 

the Federal Student Aid Handbook that 

high schools do not need to be 

accredited for their diplomas to be 

acceptable for title IV, HEA eligibility. 

The Department’s recognition of 

accreditation exists only at the 

postsecondary level. 

Changes: None. 

Comment: One organization 

representing colleges suggested that we 

should not remove a high school from 

any list we create if that school closes. 

Discussion: We do not plan to remove 

closed schools from a list. 

Changes: None. 

Comment: One commenter expressed 

concern that because many for-profit 

colleges do not require proof of a high 

school diploma (many require only that 

the applicant provide a signed statement 

of high school completion), they will 

not be diligent when evaluating the 

validity of their applicants’ high school 

diplomas. 

Discussion: Whether any institution 

fails to appropriately investigate the 

validity of a student’s high school 

completion will be determined in 

program reviews, audits, and other 

Department oversight processes. 

Changes: None. 

Comment: One commenter claimed 

that institutions are not qualified to 

determine the quality of anyone’s high 

school diploma, education, or secondary 

learning. 

Discussion: We disagree with this 

commenter. Section 668.16(p) only 

requires that institutions develop and 

follow procedures to determine the 

validity of a student’s high school 

completion when they or the Secretary 

have reason to believe that the high 

school diploma is not valid or was not 

obtained from an entity that provides 

secondary school education. We do not 

believe that an institution will need any 

unique qualifications to make this 

determination; as noted earlier, many 

institutions already evaluate the high 

school completion of students during 

the admissions process. 

Changes: None. 

Comment: One commenter opined 

that using a list of unacceptable schools 

is a less effective method of dealing 

with high school validation, and that 

the best method would be to have a 

large database of all high school 

graduation records. 

Discussion: While we appreciate the 

commenter’s suggestion, we do not 

believe that the creation or use of a 

single database of all graduation records 

from the entire country is feasible. 

Changes: None. 

Comment: One commenter stated that 

some institutions do not have the 

resources to evaluate the validity of high 

school diplomas and that the 

Department should make those 

determinations with the help of 

appropriate State agencies. 

Discussion: We believe that 

administrators at institutions, who have 

direct contact with applicants, are in the 

best position to evaluate the validity of 

high school completions. We will issue 

further guidance on how to make those 

evaluations efficient and will try to 

minimize the administrative burden on 

institutions. 

Changes: None. 

Comment: One commenter claimed 

that the Department wants to keep the 

list of acceptable high schools secret to 

avoid having to defend its inclusion of 

the schools on the FAFSA list. 

Discussion: As noted earlier in this 

preamble, FAFSA on the Web will 

include a list of schools to help students 

fill out the application; it will not be a 

list of acceptable schools. It will be 

available to the public via FAFSA on 

the Web, though whether it can be 

accessed without filling out the 

application and whether it will be 

available as a separate document, such 

as the Federal School Code List, are not 

yet decided. 

Changes: None. 

Comment: Several commenters 

expressed concern that complying with 

§ 668.16(p) would place a 

disproportionate burden on institutions 

and students, and that community 

colleges in particular would be 

burdened because of their larger 

numbers of immigrant and nontraditional students. These commenters 

noted that the FAFSA will get larger by 

two questions. One commenter noted 

that the added questions are acceptable 

even with the Department’s attempt to 

simplify the FAFSA, while another 

opined that requiring a high school 

diploma does not seem to be a 

significant hurdle. 

Discussion: The Department will be 

mindful of ways in which to limit the 

additional burden § 668.16(p) will 

impose. However, because one of the 

statutorily defined eligibility criteria for 

receiving title IV, HEA aid is that a 

student completed high school, we do 

not consider it an unacceptable burden 

on students to report on their FAFSA 

the name, city, and State of the high 

school that awarded them their 

diploma. Also, there are enough 

alternatives to having a high school 

diploma that make satisfying the 

academic criterion for student eligibility 

reasonable. Finally, we consider the 

inclusion on the FAFSA of three 

additional, easy-to-answer fields a 

reasonable increase in the size of the 

FAFSA. 

Changes: None. 

Comment: One commenter noted that 

the new questions on the FAFSA will 

not solve the problem of identifying 

questionable diplomas because the 

questions will only determine if a high 

school is on the approved list. 

Discussion: We agree that the 

Department’s list of schools will not 

solve the problem. Section 668.16(p), 

however, requires institutions to 

develop and follow procedures to 

determine the validity of a student’s 

high school completion when they or 

the Secretary has reason to believe that 

the high school diploma is not valid or 

was not obtained from an entity that 

provides secondary school education. 

Accordingly, we believe that the new 

FAFSA question and the requirements 

in § 668.16(p) will go a long way to 

identifying those schools that are 

providing invalid diplomas. 

Changes: None. 

Comment: One commenter expressed 

the opinion that institutions should be 

responsible for verifying high school 

diplomas or General Education 

Development (GED) certificates with a 

copy of either document, or with a 

transcript. The commenter argued that if 

students cannot provide this 

documentation to the institution, they 

should be required to take an ability-tobenefit (ATB) test. Other commenters 

stated that all institutions should be 

required to verify that every title IV, 

HEA aid recipient has a high school 

diploma or GED. 

Discussion: We do not plan to require 

that all institutions ask, in every 

instance, for a copy of a student’s 

diploma or transcript. Moreover, ATB 

tests are not the only alternative to a 

high school diploma or GED certificate 

for establishing title IV, HEA eligibility; 

for example, as noted earlier in this 

preamble, students who complete six 

credit hours or 225 clock hours of 

college coursework that apply to a 

program at the current institution and 

are beyond the age of compulsory 

school attendance do not need to have 

a high school diploma. Therefore, we 

decline to make any changes to the 

regulations in response to these 

comments. 

Changes: None. 

Comment: One commenter argued 

that verifying authenticity of high 

school diplomas is a waste of resources 

because even students who have 

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completed high school and obtained a 

valid high school diploma might still 

not be ready for college. The commenter 

stated that the Department should focus 

instead on improving secondary school 

education and not connect title IV, HEA 

eligibility to the high school credential 

until the work of improving high 

schools has been completed. 

Discussion: Improving high school 

education is an important objective of 

the Secretary; however, the Department 

does not consider it necessary to refrain 

from requiring institutions to develop 

and follow procedures for evaluating the 

validity of high school diplomas until 

the task of improving high school 

education nationwide has been 

completed. And we believe verifying the 

validity of high school diplomas is 

necessary to ensuring compliance with 

the eligibility requirements for the 

receipt of title IV, HEA aid. 

Changes: None. 

Comment: One commenter suggested 

that because § 668.16(p) does not 

require documentation of a diploma or 

graduation from an applicant’s high 

school directly, the fraud surrounding 

this issue will just switch to the use of 

fraudulent diplomas or transcripts 

purportedly from legitimate high 

schools. Also, this commenter pointed 

out that it will be easy for unscrupulous 

college employees to skirt this 

requirement by telling students to 

simply list the name of a legitimate 

school or where to get a forged diploma, 

just as recruiters now tell students 

where they can buy a high school 

diploma. 

Discussion: Institutions are free to 

request that documentation come 

directly from the high school. We also 

acknowledge that it will be impossible 

to eliminate all potential fraud, yet we 

believe that the extra step of requiring 

validation under § 668.16(p) will help to 

eliminate some of it. As we noted in the 

preamble to the NPRM, the Department 

has other avenues for addressing 

fraudulent activities committed at an 

institution. 

Changes: None. 

Comment: One commenter noted that 

when an institution is evaluating the 

validity of a student’s high school 

education and his or her diploma or 

transcript is not available, it should be 

able to accept a certified statement from 

the student that serves as 

documentation of graduation and 

explains why the student could not 

obtain a copy of the diploma. 

Discussion: A certified statement from 

a student is not sufficient 

documentation of this requirement. It 

should be rare that students cannot 

provide a copy of either their high 

school diploma or final transcript, and 

there might be such instances where an 

institution can still validate a student’s 

high school education without a copy of 

the diploma or transcript. But FAAs 

should remember that there are 

established alternatives for a high 

school diploma, such as the GED 

certificate or ATB test. 

Changes: None. 

Comment: One commenter suggested 

that the Department should determine if 

a significant number of students 

indicated they had valid diplomas, 

when they, in fact, did not. The 

commenter recommended that the 

Department make § 668.16(p) voluntary 

or require compliance through a pilot 

program because building and 

maintaining an accurate database will 

be difficult and students will make 

mistakes that could delay their 

eligibility for a semester, a year, or a 

whole degree program. 

Discussion: We do not plan to make 

compliance with § 668.16(p) voluntary 

or part of a pilot program. We expect 

that delays resulting from evaluation of 

high school diplomas will be minimal 

or nonexistent. 

Changes: None. 

Comment: One commenter stated that 

the new FAFSA questions on high 

school completion should be required 

and that students should not be able to 

enter an invalid school, or leave the 

questions blank. 

Discussion: As noted earlier, we 

intend to require that students who 

indicate that they have a high school 

diploma also give the name of the 

school that awarded the diploma and 

the city and State in which the school 

is located. They will be able to select a 

school from the Department’s list or be 

prompted to write in the name of the 

school. Students will be unable to 

complete the online FAFSA unless they 

provide this information. 

Changes: None. 

Comment: Commenters noted that, 

even if students indicate that their 

diploma is from an acceptable school, it 

does not prove the student actually 

graduated from that school. These 

commenters argued that proposed 

§ 668.16(p) is not an improvement to the 

current practice, and that the extra step 

required under the new regulatory 

provision will not help for institutions 

that do not require a diploma for 

admission. 

Discussion: The proposed change 

reflected in § 668.16(p) is designed to 

reduce the number of students who 

indicate that they have a high school 

diploma, but who do not, or who only 

possess a credential from a ‘‘diploma 

mill.’’ We believe that many students 

with such credentials will indicate the 

name of the entity they received it from, 

either because they honestly believe 

they have a legitimate high school 

diploma or because they will be 

reluctant to provide the name of a 

school they did not graduate from 

because the financial aid office will 

easily be able to determine that such a 

statement is false. All institutions, 

including those that do not require a 

high school diploma for admission, will 

be subject to the requirements in 

§ 668.16(p) and, therefore, will need to 

evaluate the credentials supplied by 

students as proof of high school 

completion if they or the Department 

has reason to believe the credential is 

not valid. We believe that this required 

process will reduce the number of bad 

credentials. 

Changes: None. 

Comment: One commenter suggested 

that unless the Department clarifies 

what is a valid high school diploma, it 

should not, as part of a program review, 

substitute its judgment for an 

institution’s determination. The 

commenter argued that if an institution 

acted reasonably, the eligibility of a 

student should not be questioned, even 

if the Department, or another school, 

reaches a different conclusion about the 

high school the student attended. 

Another commenter asked that the 

Department make clear in this preamble 

that institutions may change their 

determinations about a given high 

school. New information may move a 

school from the ‘‘good’’ list to the ‘‘bad’’ 

one, or vice versa. The commenter 

wanted to ensure that the Department 

does not dissuade institutions from 

making such adjustments by deeming 

that a later determination indicates an 

earlier one was inappropriate. 

Discussion: We do not plan to secondguess the decisions of college 

administrators in these matters, such as 

moving a high school from a ‘‘good’’ list 

to a ‘‘bad’’ list (or vice versa), as long as 

they are reasonable. 

Changes: None. 

Comment: One commenter stated that 

it was not fair to require students to 

provide a high school diploma because, 

in the commenter’s experience, 

homeschooled students have only a 

transcript as proof of completing a 

secondary school education. 

Discussion: As we noted earlier in this 

preamble, the procedure for determining 

the validity of homeschooled students’ 

education is not affected by § 668.16(p). 

Changes: None. 

Comment: One commenter observed 

that students in high school special 

education programs might receive a 

certificate or award that is not a high 

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school diploma when they did not 

complete the required coursework to 

receive an actual diploma from the 

school and that these students may 

incorrectly believe that the certificate or 

award is a diploma. 

Discussion: Students who do not 

complete the required coursework to 

receive a high school diploma from their 

secondary school by definition did not 

earn a high school diploma. These 

students are not eligible for title IV, 

HEA aid unless they meet the academic 

requirement under one of the 

alternatives to a high school diploma in 

§ 668.32(e), or they are students with 

intellectual disabilities who are seeking 

Pell, FSEOG, or FWS program assistance 

under § 668.233. 

Changes: None. 

Comment: One commenter asked us 

to clarify what would cause an 

institution to have ‘‘reason to believe 

that the high school diploma is not valid 

or was not obtained from an entity that 

provides secondary school education.’’ 

Discussion: We expect that there may 

be a number of situations in which an 

institution will have reason to believe 

that an applicant’s high school diploma 

is not valid or was not obtained from an 

entity that provides secondary school 

education. For example, institutions 

may come across information that 

suggests that the applicant’s diploma or 

transcript was purchased with little 

work expected of the student. Often 

FAAs receive conflicting information 

from students themselves, typically as 

remarks that cast doubt on some 

element of the students’ application 

information. We expect the same 

regarding valid high school diplomas. 

Moreover, institutions may have reason 

to believe that a high school diploma is 

invalid if they recognize the name of the 

high school as an entity that they 

identified in the past as being a high 

school diploma mill. 

Changes: None. 

Comment: One commenter requested 

that we add a check box on the FAFSA 

for applicants who completed secondary 

school in a foreign country and an 

empty space for them to fill in the name 

of their secondary school. The 

commenter suggested that in this 

situation, the student’s FAFSA would 

receive a ‘‘C’’ code, not automatically, 

but at random, so that due diligence 

would still be required by the 

institution. 

Discussion: When completing the 

FAFSA, applicants will be able to enter 

the name of their high school if it is not 

on the Department’s drop-down list. 

Changes: None. 

Comment: One commenter expressed 

concern that the wording of the second 

new question proposed for the FAFSA, 

as noted in the preamble to the NPRM, 

could be misleading and suggested that 

the Department use either of the 

following questions instead: 

• In what State is the school listed in 

question #1 located? or 

• In what State was the school in 

which the student completed high 

school located? 

Discussion: As we noted earlier in this 

preamble, the 2011–2012 FAFSA asks 

for applicants to indicate the name of 

the high school where they received or 

will receive their diploma and the city 

and State where the school is located. 

Changes: None. 

Return of Title IV, HEA Program Funds 

(§§ 668.22(a), 668.22(b), 668.22(f), and 

668.22(l)) 

Treatment of Title IV, HEA Program 

Funds When a Student Withdraws From 

Term-Based Programs With Modules or 

Compressed Courses (§§ 668.22(a), 

668.22 (f) and 668.22 (l)) 

Comment: Approximately 80 

commenters, mostly representing 

institutions, commented on the 

proposed changes to the treatment of 

title IV, HEA program funds when a 

student withdraws from a program 

offered in modules. Approximately 26 

of these commenters opposed the 

proposed changes, with some 

commenters recommending that the 

Department not issue final regulations at 

this time and instead seek further input 

from the community. 

Many of these commenters believed 

the proposed changes would be too 

burdensome to institutions. Several 

commenters were concerned about the 

additional administrative and financial 

burden the proposed changes would 

impose on institutions by requiring 

them to identify and process more 

students as withdrawals. A few 

commenters believed that, as a result of 

this burden, the proposed regulations 

would discourage schools from offering 

programs in modules, potentially 

causing disruptive changes in course 

offerings at institutions. A few 

commenters believed institutions would 

be unable to comply with the proposed 

regulations because they are too 

complicated or too difficult to explain to 

students. One commenter believed the 

proposed regulations would force an 

institution to delay disbursements to 

prevent the institution or student from 

having to return unearned title IV, HEA 

program funds if the student withdrew. 

Many of these commenters also 

believed that the proposed changes 

would be harmful to students because 

some students who withdrew after 

completing one course in one module 

would earn less title IV, HEA program 

funds. In particular, some commenters 

believed it was unfair to treat as a 

withdrawal a student who withdrew 

from a course or courses in the payment 

period or period of enrollment, but who 

would attend courses later in the same 

payment period or period of enrollment, 

and wanted to know how to handle title 

IV, HEA program funds in such cases. 

A few commenters believed the 

proposed regulations would discourage 

students from enrolling in programs 

structured in modules, including 

compressed courses to accelerate 

completion of their program, which the 

commenters believed was in conflict 

with the provisions for two Federal Pell 

Grants in one award year, which were 

implemented to support and make 

equitable aid available for students who 

wish to complete their program sooner. 

A few commenters were concerned that 

a student who would now be counted as 

a withdrawal would be burdened with 

more debt: To the institution for any 

remaining balance of tuition and fees, 

and to the Department for Federal loans 

and or grant overpayments. One 

commenter noted that treating a student 

as a withdrawal also has negative 

consequences for a student under the 

provisions on satisfactory academic 

progress and loan repayment. 

A few commenters believed the 

proposed regulations unfairly targeted 

certain programs or institutions. Some 

of the commenters believed the 

proposed changes would treat students 

in module programs inequitably when 

compared to students in more 

traditional programs where courses are 

offered concurrently. One commenter 

believed that the proposed regulations 

would have a disproportionately 

negative affect for students in career 

technical programs, as many of those 

programs are taught in a condensed, 

modular form. Some commenters 

believed the proposed regulations 

unfairly focused on only term-based 

credit-hour programs. 

Approximately 25 of the commenters 

expressed an understanding of the 

Department’s concern with students 

receiving full or large amounts of title 

IV, HEA program funds for a short 

period of attendance during a payment 

period or period of enrollment. A 

couple of those commenters agreed with 

the proposed changes. Others believed 

that the current guidance from Dear 

Colleague Letter of December 2000, 

GEN–00–24, Return of Title IV AidVolume #1—which provided that a 

student who completed only one 

module or compressed course within a 

term was not considered to have 

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withdrawn—should be incorporated 

into the regulations. These commenters 

believed that a student who has earned 

credits in a payment period or period of 

enrollment who then ceases attendance 

should not be treated as a withdrawal, 

as the existing regulations in 34 CFR 

690.80(b)(2)(ii), requiring recalculations 

of title IV, HEA program funds when a 

student did not begin attendance in all 

classes, are a sufficient safeguard against 

students receiving full or large amounts 

of title IV, HEA program funds for a 

short period of attendance in a program 

offered in modules. Two commenters 

believed that the satisfactory academic 

program provisions should be sufficient 

to prevent long-term abuse by students 

of title IV, HEA program funds. 

Several commenters suggested 

alternative approaches to ensure that 

students are not receiving title IV, HEA 

program funds for periods in which they 

are not in attendance. A few 

commenters believed that a student 

attending a certain percentage of the 

payment period or period of enrollment 

(commenters suggested 60 percent) 

should be deemed to have completed a 

payment period or period of enrollment. 

A couple of commenters believed that 

the determination of whether a student 

should be treated as a withdrawal 

should be based on credit hours 

completed, rather than days completed, 

meaning that a student who ceased 

attendance would not be treated as a 

withdrawal as long as the student 

completed the minimum number of 

credits required to be eligible for a 

particular title IV, HEA program. A few 

commenters supported setting a 

minimum length of a module that must 

be completed, after which a student 

who ceased attendance would not be 

considered to have withdrawn. A few 

commenters suggested requiring 

institutions to award or pay title IV, 

HEA program funds by module, or to 

delay payment until a student has 

earned enough credits to support the 

enrollment status necessary for 

eligibility of the aid. One commenter 

suggested limiting the amount of title 

IV, HEA program funds that can be 

earned by a student to the lesser of 

actual charges or the amount calculated 

under the Return of Title IV Funds 

provisions (i.e., the provisions of 

§ 668.22). A couple of commenters 

believed an institution should be able to 

exercise professional judgment or use its 

own discretion to determine whether a 

student has truly withdrawn from class. 

One commenter suggested that, for 

clock-hour and nonterm programs, a 

student be considered to have 

withdrawn if the student had not been 

in attendance for 35 consecutive days 

and had not completed the payment 

period or period of enrollment. 

One commenter believed that the 

proposed changes addressing 

completion of a payment period or 

period of enrollment by students in 

clock-hour programs were incorrect as 

all determinations of title IV, HEA 

program funds earned by students who 

withdraw from clock-hour programs aid 

are based on scheduled hours, and the 

changes referred to clock hours 

completed. 

Discussion: We note that these final 

regulations do not change how 

institutions are currently required to 

treat students when they withdraw from 

programs offered in modules (i.e., 

sequentially) in nonterm credit-hour 

programs, and some nonstandard-term 

credit-hour programs. The Secretary 

believes that the approach proposed in 

the NPRM treats students more 

equitably across all programs by 

eliminating the major differences in the 

treatment of students who withdraw 

from term-based and nonterm-based 

programs offered in modules and, 

therefore, is a better approach than 

basing the determination of completion 

of a payment period or period of 

enrollment on completion of one 

course/module, even if a minimum 

length of such a course/module were 

set. In addition, this approach more 

accurately reflects the statutory 

requirement in section 484B(a)(1) of the 

HEA that applies the Return of Title IV 

Funds requirements to any recipient of 

title IV, HEA program funds who 

‘‘withdraws from an institution during a 

payment period or period of enrollment 

in which the student began attendance’’ 

and the fact that title IV, HEA program 

funds are awarded for an entire payment 

period or period of enrollment. Some of 

the alternatives suggested by the 

commenters—determining completion 

based on attendance of a certain 

percentage of the payment period or 

period of enrollment; using credit hours 

completed, instead of days completed; 

delaying awarding or paying title IV, 

HEA program funds; equating unearned 

aid to actual charges; and leaving the 

determination of completion of the 

period up to institutional discretion— 

are not supported by the HEA, which 

requires in section 484B(a) that students 

earn title IV, HEA program funds on a 

pro rata basis up through the 60 percent 

point of a period based on days 

completed, for credit-hour programs, 

and clock hours completed, for clockhour programs. Completing more than 

60 percent of the period then entitles a 

student to have earned 100 percent of 

the funds for the period. The law 

therefore does not permit the alternative 

measures of when a student may keep 

100 percent of the title IV, HEA program 

funds that were suggested by the 

commenters. 

The Secretary agrees that it is 

reasonable to allow an institution not to 

treat as a withdrawal a student who 

ceases attendance during a payment 

period or period of enrollment, but 

intends to attend a course later in the 

payment period or period of enrollment. 

This position is consistent with the 

guidance provided in the Department’s 

Dear Colleague Letter of December 2000, 

GEN–00–24, Return of Title IV AidVolume #1, for the treatment of title IV, 

HEA program funds when a student 

withdraws without completing at least 

one course in a payment period or 

period of enrollment. These final 

regulations have been modified to 

incorporate this policy and provide that 

a student is not considered to have 

withdrawn if the student ceased 

attending the modules he or she was 

scheduled to attend, but the institution 

obtains a written confirmation from the 

student at the time of the withdrawal 

that he or she will attend a module that 

begins later in the same payment period 

or period of enrollment. This will 

provide more flexibility for a student 

who provides the authorization. This 

confirmation must be obtained at the 

time of withdrawal, even if the student 

has already registered for subsequent 

courses. However, these final 

regulations provide that, for nonterm 

and nonstandard-term programs, a 

confirmation is valid only if the module 

the student plans to attend begins no 

later than 45 calendar days after the end 

of the module the student ceased 

attending. If the institution has not 

obtained a written confirmation that the 

student intends to return to a nonterm 

or nonstandard-term program within 45 

calendar days of the end of the module 

the student ceased attending, the 

student is considered to have 

withdrawn. A student who has provided 

written confirmation of his or her intent 

to return is permitted to change the date 

of return to a module that begins even 

later in the same payment period or 

period of enrollment, provided that the 

student does so in writing prior to the 

return date that he or she had 

previously confirmed, and, for nonterm 

and nonstandard-term programs, the 

later module that he or she will attend 

begins no later than 45 calendar days 

after the end of the module the student 

ceased attending. If an institution 

obtains a written confirmation of future 

attendance but the student does not 

return as scheduled, the student is 

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66894 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations 

considered to have withdrawn from the 

payment period or period of enrollment 

and the student’s withdrawal date and 

the total number of calendar days in the 

payment period or period of enrollment 

would be the withdrawal date and total 

number of calendar days that would 

have applied if the student had not 

provided written confirmation of future 

attendance. 

Title IV, HEA program funds are 

awarded to a student with the 

expectation that the student will 

complete the period of time for which 

the aid has been awarded. When a 

student does not complete enough of his 

or her education to earn all of the 

originally awarded title IV, HEA 

program funds, it is in the best interest 

of the taxpayer to have the unearned 

Federal funds returned to the 

government as expeditiously as possible 

for use by other students. It is also fairer 

to all students receiving title IV, HEA 

program funds to have the way those 

funds are earned be comparable 

regardless of the way their programs are 

structured. In general, the Secretary 

believes that long gaps in attendance 

during a payment period or period of 

enrollment are not in the best interest of 

students and increase the likelihood 

that a student will not return to the 

institution. Should the student not 

return, the Secretary does not wish to 

unduly delay the return of title IV, HEA 

program funds. The Secretary agrees 

with the suggestion that, for clock-hour 

and nonterm programs, a student be 

considered to have withdrawn if the 

student has not been in attendance for 

a specified period of time and has not 

completed the payment period or period 

of enrollment, although the Secretary 

believes that 45 days, rather than 35 

days, as suggested by the commenter, is 

an appropriate period of time. Thus, in 

addition to limiting a student’s 

confirmation of return in a nonterm or 

nonstandard-term program to a module 

that begins no later than 45 calendar 

days after the end of the module the 

student ceased attending, if a student in 

a nonterm or nonstandard-term program 

is not scheduled to begin another course 

within a payment period or period of 

enrollment for more than 45 calendar 

days, the institution must treat the 

student as a withdrawal for title IV, 

HEA program fund purposes, unless the 

student is on an approved leave of 

absence, as defined in § 668.22(d). 

We do not believe that students 

should be penalized if they do not 

confirm an intent to return to a module 

later in the payment period or period of 

enrollment, but do return to the module 

anyway, or if they are not scheduled to 

begin a course within a payment period 

or period of enrollment in a nonterm or 

nonstandard-term program for over 45 

days, but do return and begin a course 

within that payment period or period of 

enrollment. Thus, in these situations, 

we believe it is appropriate for the 

institution to ‘‘undo’’ the Return of Title 

IV Funds calculation and treat those 

students as if they had not ceased 

attendance. This final regulation is 

consistent with current regulations for 

students who withdraw from clock-hour 

programs and nonterm credit-hour 

programs. Under § 668.4(f), a student 

who returns to a nonterm credit-hour 

program or clock-hour program 

(regardless of whether the program is 

offered in modules) within 180 days 

after withdrawing is treated as if he or 

she did not cease attendance (i.e., is 

considered to remain in that same 

payment period, and is eligible to 

receive any title IV, HEA program funds 

for which he or she was eligible prior to 

withdrawal, including funds that were 

returned by the institution or student 

under the provisions of § 668.22). If a 

student returns to a clock-hour or 

nonterm credit-hour programs after 180 

days, the student’s withdrawal is not 

‘‘undone’’; he or she must begin a new 

payment period and aid for that period 

is determined in accordance with the 

provisions of § 668.4(g). The Secretary 

believes that similar treatment is 

warranted for students who withdraw 

from term-based programs offered in 

modules. That is, if a student returns to 

a term-based credit-hour program 

offered in modules prior to the end of 

the payment period or period of 

enrollment, the student is treated as if 

he or she did not cease attendance, and 

is eligible to receive any title IV, HEA 

program funds for which he or she was 

eligible prior to withdrawal, including 

funds that were returned by the 

institution or student under the 

provisions of § 668.22. However, the 

institution must make adjustments to 

reflect any changes to the student’s 

enrollment status. 

While we acknowledge that requiring 

institutions to treat as withdrawals 

students who cease attending at any 

point during the payment period or 

period of enrollment, rather than just 

those students who cease attending 

before completing at least one course, is 

likely to increase the number of Return 

of Title IV Fund calculations an 

institution must perform for these 

programs, we note that institutions have 

always had to track students in module 

programs beyond the first course/ 

module to determine whether a student 

began attendance in all the courses they 

were scheduled to attend, in case the 

student’s enrollment status changed 

upon ceasing attendance, resulting in 

required recalculations of the title IV, 

HEA program funds awarded. While we 

recognize that some students must 

withdraw due to circumstances beyond 

their control, we are concerned with the 

commenters’ contention that there will 

be a substantial increase in burden due 

to the number of students who cease 

attendance during a payment period or 

period of enrollment. We do not believe 

that it is in a student’s best interest to 

withdraw and we would expect that 

institutions are doing all they can to 

prevent withdrawals through 

counseling, student support services, 

and proper enrollment procedures. In 

response to the commenter who 

believed the proposed regulations 

would force institutions to delay 

disbursements to prevent the institution 

or student from having to return 

unearned title IV, HEA program funds if 

they withdraw, we are providing that, 

under amended § 668.164(i), an 

institution would be required to provide 

a way for a Federal Pell Grant eligible 

student to obtain or purchase required 

books and supplies by the seventh day 

of a payment period under certain 

conditions if the student were to have 

a title IV credit balance. 

The commenter who noted that the 

determination of title IV, HEA program 

funds that are earned by a student who 

withdraws from a clock-hour program 

are based on scheduled hours is correct 

in that once it has been determined that 

a student has not completed the 

payment period or period of enrollment, 

the percentage of the payment period or 

period of enrollment completed is 

determined 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 at the time the student 

ceased attending (§ 668.22(f)(1)(ii)(A)). 

However, a student has not completed 

a clock hour payment period or period 

of enrollment until he or she has 

completed all the hours and all of the 

weeks of instructional time that he or 

she was scheduled to attend in that 

period. 

Because different institutions use 

different names to refer to this type of 

program structure, in amended 

§ 668.22(l)(6), we have defined the term 

‘‘offered in modules’’ to mean if a course 

or courses in the program do not span 

the entire length of the payment period 

or period of enrollment. In addition, to 

clarify the types of programs that are 

considered to be nonstandard-term 

programs or nonterm programs, in 

amended § 668.22(l)(8), we have defined 

the term ‘‘nonstandard-term program’’ as 

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a term-based program that does not 

qualify under 34 CFR 690.63(a)(1) or (2) 

to calculate Federal Pell Grant payments 

under 34 CFR 690.63(b) or (c). We note 

that nonterm programs include any 

program offered in clock hours for title 

IV, HEA program purposes as well as 

any nonterm credit-hour program. 

Changes: Section 668.22(a)(2) has 

been revised to provide that, for a 

payment period or period of enrollment 

in which courses in the program are 

offered in modules, a student who 

would otherwise be considered to have 

withdrawn from an institution because, 

prior to ceasing attendance the student 

has not completed all of the days or 

scheduled hours he or she was 

scheduled to attend, is not considered to 

have withdrawn if the institution 

obtains written confirmation from the 

student at the time of withdrawal that 

he or she will attend a module that 

begins later in the same payment period 

or period of enrollment, provided that, 

for a nonterm or nonstandard-term 

program, that module begins no later 

than 45 days after the end of the module 

the student ceased attending. However, 

if that student does not return as 

scheduled, the student is considered to 

have withdrawn from the payment 

period or period of enrollment and the 

student’s withdrawal date and the total 

number of calendar days in the payment 

period or period of enrollment would be 

the withdrawal date and total number of 

calendar days that would have applied 

if the student had not provided written 

confirmation of future attendance in 

accordance with § 668.22(a)(2)(ii)(A). 

Section 668.22(a)(2) also has been 

revised to cross-reference § 668.4(f), 

which provides that, if a student 

withdraws from a nonterm credit-hour 

or clock-hour program during a payment 

period or period of enrollment and then 

reenters the same program within 180 

days, the student remains in that same 

period when he or she returns and, 

subject to conditions established by the 

Secretary, is eligible to receive any title 

IV, HEA program funds for which he or 

she was eligible prior to withdrawal, 

including funds that were returned by 

the institution or student under the 

provisions of this section. Section 

668.22(a)(2) has been further revised to 

provide that, if a student withdraws 

from a term-based credit-hour program 

offered in modules during a payment 

period or period of enrollment and 

reenters the same program prior to the 

end of the period, the student remains 

in the same payment period or period of 

enrollment when he or she returns and, 

subject to conditions established by the 

Secretary, is eligible to receive any title 

IV, HEA program funds for which he or 

she was eligible prior to withdrawal, 

including funds that were returned by 

the institution or student under the 

provisions of this section. 

In addition, § 668.22(a)(2) has been 

revised to provide that, if a student in 

a nonterm or nonstandard-term program 

is not scheduled to begin another course 

within a payment period or period of 

enrollment for more than 45 calendar 

days, the institution must treat the 

student as a withdrawal for title IV, 

HEA program fund purposes, unless the 

student is on an approved leave of 

absence, as defined in § 668.22(d). 

Finally, § 668.22(a)(2) has been 

revised to clarify that a student in a 

clock hour program has not completed 

a payment period or period of 

enrollment until the student has 

completed both the weeks of 

instructional time and the clock hours 

scheduled to be completed in the 

period. 

Section 668.22(l)(6) and (8) has been 

revised to add definitions of a program 

that is offered in modules and of a 

nonstandard-term program. 

Comment: Approximately 40 

commenters asked the Department to 

clarify how the regulations would apply 

in different situations. Some of these 

commenters questioned how enrollment 

status changes due to an institution’s 

add/drop policy would be differentiated 

from a withdrawal. For example, some 

commenters asked for guidance on the 

handling of title IV, HEA program funds 

when a student withdraws without 

beginning attendance in all courses, or 

notifies the institution that he or she 

will not be attending a future module 

that he or she was scheduled to attend. 

One commenter believed that the 

proposed regulations would be in 

conflict with the Department’s guidance 

that allows a Direct Loan to be 

disbursed based on anticipated 

enrollment during a term, such as a 

summer term, where a student is 

enrolled for two consecutive courses. 

The commenter’s understanding is that 

if the student does not begin the second 

course to establish half time enrollment, 

the student can keep the funds. 

Discussion: A student that begins 

attending but then ceases attendance in 

all classes during a payment period is a 

withdrawal unless the institution 

obtains written confirmation from the 

student that he or she plans to attend a 

course that begins later in the payment 

period or period of enrollment, as 

applicable. Anytime a student begins 

attendance in at least one course, but 

does not begin attendance in all the 

courses he or she was scheduled to 

attend, regardless of whether the 

student is a withdrawal, the institution 

must check to see if it is necessary to 

recalculate the student’s eligibility for 

Pell Grant and campus-based funds 

based on a revised enrollment status 

and cost of education (34 CFR 

690.80(b)(2)(ii)). If the student is a 

withdrawal, this recalculation must be 

done before performing a Return of Title 

IV Funds calculation, and the 

institution must use the recalculated 

amounts of aid in the Return of Title IV 

Funds calculation. If the student has not 

begun attendance in enough courses to 

establish a half-time enrollment status, 

the institution may not make a first 

disbursement of a Direct Loan to the 

student (34 CFR 685.303(b)(2)(i)), or a 

second disbursement of Pell Grant 

funds, although the funds are included 

as aid that could have been disbursed in 

the Return of Title IV Funds calculation. 

Courses that were officially dropped 

prior to the student ceasing attendance 

are not days that the student was 

scheduled to attend, unless the student 

remained enrolled in other courses 

offered on those days. Correspondingly, 

courses that were officially added prior 

to the student ceasing attendance are 

days the student was scheduled to 

attend. 

If a student officially drops a course 

or courses he or she was scheduled to 

attend and doing so does not result in 

the student no longer attending any 

courses, the student is not a withdrawal, 

and the dropped courses are handled as 

changes in enrollment status, as 

applicable. 

An institution can determine whether 

a student in a program offered in 

modules is a withdrawal by answering 

the following questions: 

(1) After beginning attendance in the 

payment period or period of enrollment, 

did the student cease to attend or fail to 

begin attendance in a course he or she 

was scheduled to attend? If the answer 

is no, this is not a withdrawal. If the 

answer is yes, go to question 2. 

(2) When the student ceased to attend 

or failed to begin attendance in a course 

he or she was scheduled to attend, was 

the student still attending any other 

courses? If the answer is yes, this is not 

a withdrawal, however other regulatory 

provisions concerning recalculation 

may apply. If the answer is no, go to 

question 3. 

(3) Did the student confirm 

attendance in a course in a module 

beginning later in the period (for 

nonterm and nonstandard term 

programs, this must be no later than 45 

calendar days after the end of the 

module the student ceased attending). If 

the answer is yes, this is not a 

withdrawal, unless the student does not 

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return. If the answer is no, this is a 

withdrawal. 

Take, for example, a student who is a 

recipient of title IV, HEA program funds 

who is scheduled to complete two 

courses in each of the first two of three 

modules within the payment period. 

Scenario 1: The student begins 

attendance in both courses in the first 

module, but ceases to attend both 

courses after just a few days and does 

not confirm that he will return to any 

courses in modules two or three. The 

student is a withdrawal because he or 

she ceased to attend courses he or she 

was scheduled to attend (Yes to 

question 1); was not still attending any 

other courses (No to question 2); and 

did not confirm attendance in a course 

in a module beginning later in the 

period (No to question 3). 

Scenario 2: If, however, the student 

begins attendance in both courses in the 

first module, but drops just one of the 

courses after just a few days, the student 

is not a withdrawal. Although the 

student ceased to attend a course he or 

she was scheduled to attend (Yes to 

question 1), the student was still 

attending another course (Yes to 

question 2). 

Scenario 3: If the student completes 

both courses in module one, but 

officially drops both courses in module 

two while still attending the courses in 

module one, the student is not a 

withdrawal. Because the student 

officially dropped both courses in 

module two before they began, the 

student did not cease to attend or fail to 

begin attendance in a course he or she 

was scheduled to attend (No to question 

1). However, because the student did 

not begin attendance in all courses, 

other regulatory provisions concerning 

recalculation may apply. 

Changes: None. 

Comment: Several commenters asked 

the Department to clarify what it means 

to ‘‘complete all the days’’ or ‘‘complete 

all of the clock hours’’ in a payment 

period or period of enrollment. More 

specifically, commenters asked if 

students would be required to attend 

every day of every course, or be in 

attendance on the last day of the 

payment period or period of enrollment. 

Some of the commenters noted that, due 

to individual student schedules, 

students do not attend all days in the 

payment period or period of enrollment. 

Commenters were concerned that a 

student who was not in attendance on 

the last day of the payment period 

would be counted as a withdrawal. To 

address this concern, one commenter 

suggested that the wording of the 

regulations be changed to say that a 

student is considered to have 

withdrawn from a payment period or 

period of enrollment if the student does 

not complete substantially all of the 

days in the payment period or period of 

enrollment. 

Some of the commenters asked how 

limited absences (for example, for 

illness), incompletes, and leaves of 

absence would be treated. Commenters 

also asked if a student is considered to 

have completed a course in a payment 

period or period of enrollment if the 

student received a grade for that course 

or, for a clock-hour program, earns all 

the clock hours for the course, 

regardless of absences. A couple of the 

commenters asked if the definition of 

what it means to complete all the days 

or complete all the clock hours would 

affect in-school deferments for title IV, 

HEA program loans. Some commenters 

asked under what circumstances an 

institution would have to prove that the 

student attended all days in a period 

and what documentation would 

constitute that proof. Commenters asked 

if the issue would arise only if all of a 

student’s grades are Fs or if it becomes 

otherwise apparent that the student has 

ceased attendance without formally 

withdrawing. A few commenters 

wanted to know how intersessions—a 

period of time between terms when 

courses are offered—would be handled. 

A few commenters asked the 

Department to clarify what the length of 

the payment period or period of 

enrollment is when performing a Return 

of Title IV Funds calculation for a 

withdrawn student who was not 

scheduled to attend courses over the 

entire term and how an institution 

would determine whether the student 

has completed more than 60 percent of 

the payment period or period of 

enrollment (i.e., earned all of his or her 

title IV, HEA program funds). One 

commenter believed there would be no 

possible way for an institution to 

determine the days the student was 

scheduled to attend for an on-line class 

that is self-paced as there are no 

‘‘scheduled days’’ in a self-paced 

program. 

Discussion: Section 668.22(f)(1)(i) has 

always required an institution to 

determine the days in the payment 

period or period of enrollment that were 

completed by a student who withdraws 

from a program offered in credit hours 

in order to determine the percentage of 

the payment period or period of 

enrollment completed by the student. 

These final regulations do not change 

what it means to complete days for 

credit-hour programs, or clock hours for 

clock-hour programs, for purposes of the 

determination of the amount of aid 

earned by a student who withdraws 

from a program, nor do they change an 

institution’s responsibility for having a 

procedure for determining whether a 

title IV recipient who began attendance 

during a period completed the period or 

should be treated as a withdrawal. The 

Department does not require that an 

institution use a specific procedure for 

making this determination; however, we 

have provided guidance to assist 

institutions in making these 

determinations. For example, consistent 

with the Department’s guidance 

provided in its Dear Colleague Letter of 

November 2004, GEN–04–12, Return of 

Title IV Aid, an institution may 

presume a student completed the period 

in a program offered in modules if the 

student did not officially withdraw from 

the institution and received a passing 

grade in all courses the student was 

scheduled to attend during the period. 

If a student in a program offered in 

modules does not receive a passing 

grade in the last course or courses he or 

she was scheduled to attend, the 

institution must otherwise demonstrate 

that the student completed the period, 

which can sometimes be done using the 

institution’s grading policy if the failing 

grades reflect whether the student 

participated in those courses. Consistent 

with current requirements, if a student 

is determined to have withdrawn from 

an institution under § 668.22, the 

student is no longer considered to be 

enrolled and in attendance at an 

institution and, therefore, is ineligible 

for an in-school deferment and must be 

reported by the institution as a 

withdrawal for this purpose (34 CFR 

674.34(b)(1)(i) and 34 CFR 

685.204(b)(1)(i)(A)). 

Consistent with the guidance 

provided in the Department’s Dear 

Colleague Letter of December 2000, 

GEN–00–24, Return of Title IV AidVolume #1, for the treatment of title IV, 

HEA program funds when a student 

withdraws without completing at least 

one course in a payment period or 

period of enrollment, to determine 

whether the percentage of the payment 

period or period of enrollment 

completed for a student who withdraws 

from a program offered in modules, the 

institution would include in the 

denominator (the total number of 

calendar days in the payment period or 

period of enrollment) all the days in the 

modules the student was scheduled to 

attend, except for scheduled breaks of at 

least five consecutive days and days 

when the student was on an approved 

leave of absence. The numerator would 

include the number of the total days in 

the payment period or period of 

enrollment that the student has 

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completed. For example, a student was 

scheduled to attend an intersession of 

three weeks of instructional time at the 

end of a fall semester, and, in 

accordance with the Department’s past 

guidance, the institution has included 

that intersession with the fall term for 

purposes of the program’s academic 

calendar when determining the payment 

of title IV, HEA program funds. In this 

circumstance the days in that 

intersession are included in the total 

number of days in the payment period 

for that student, except for scheduled 

breaks of at least five consecutive days, 

and days in which the student was on 

an approved leave of absence. Note that 

all the courses in the fall term are 

considered modules for purposes of a 

Return of Title IV Funds calculation 

when the intersession is included in the 

payment period. 

Regarding the comment that there 

would be no possible way for an 

institution to determine the days the 

student was scheduled to attend for an 

on-line class that is self-paced, we note 

that, for Title IV, HEA program 

purposes, an institution is required to 

determine a program schedule for a 

payment period or period of enrollment. 

Changes: Section 668.22(f)(2)(ii) has 

been revised to clarify that, when 

determining the percentage of payment 

period or period of enrollment 

completed, the total number of calendar 

days in a payment period or period of 

enrollment does not include, for a 

payment period or period of enrollment 

in which any courses in the program are 

offered in modules, any scheduled 

breaks of at least five consecutive days 

when the student is not scheduled to 

attend a module or other course offered 

during that period of time. 

Withdrawal Date for a Student Who 

Withdraws From an Institution That Is 

Required To Take Attendance 

(§§ 668.22(b) and 668.22(l)) 

Comment: Commenters were unsure 

about the effect of the proposed 

changes, and a number of them asked 

for clarification. A few commenters 

expressed concern that the Department 

was requiring institutions to take 

attendance. Others thought that, in 

instances in which individual faculty 

members take attendance by choice, the 

entire institution would then be 

considered an institution required to 

take attendance. Some commenters 

believed that if an institution or an 

outside entity required attendance 

taking for students in some but not all 

programs, then the institution would be 

considered one that has to take 

attendance for students in all programs. 

Other commenters believed that the 

proposed regulations would require 

institutions that take attendance for a 

limited period of time and use those 

attendance records, to continue to take 

attendance beyond that point. 

Some commenters advocated a more 

restricted definition of an institution 

that is required to take attendance, 

suggesting that an institution should 

only be required to take attendance if an 

outside entity collects and maintains 

those records. One commenter did not 

believe that an outside entity should be 

able to require an institution to take 

attendance, and others opposed the 

provision that institutions required by 

an outside entity to take attendance 

must use these attendance records for 

the purposes of a Return of Title IV 

Funds calculation. 

In general, we received comments on 

the application of the regulations to 

subpopulations of students and on the 

use of attendance records during a 

limited period. With respect to 

attendance requirements for 

subpopulations of students, most 

commenters did not object to the 

current policy that if some students at 

the institution are subject to attendance 

taking requirements, then institutions 

would have to follow the last day of 

attendance regulations for those 

students. Other commenters agreed with 

this position, but believed that this 

condition should only be applied when 

taking attendance is required for the 

entire payment period, for all classes the 

student enrolls in, and only when 

imposed by an outside entity. One 

commenter disagreed with our position 

on the treatment of subpopulations of 

students, recommending that we modify 

the regulations to specify that the taking 

attendance requirement must be 

imposed by an outside entity and be 

applicable to the entire institution in 

order for an institution to be considered 

one required to take attendance. 

One commenter supported the 

proposed change that if an institution 

requires the taking of attendance for a 

limited period of time, then those 

attendance records must be used to 

determine a withdrawal date. A few 

commenters objected to considering 

institutions that take attendance during 

a limited period of time to be 

institutions required to take attendance, 

even for only that limited period, 

suggesting that this provision should 

only be applied when taking attendance 

is required for the entire payment 

period or period of enrollment. 

Discussion: The regulations do not 

require institutions to take attendance. 

Instead, under the regulations the 

Department considers an ‘‘institution 

that is required to take attendance’’ to 

include not only an institution that is 

required to take attendance by an 

outside entity, but also an institution 

that itself requires its faculty to take 

attendance in certain circumstances. 

Regarding faculty attendance records, 

if an institution does not require faculty 

to take attendance, but a faculty member 

chooses to take attendance, then the 

institution would not then be 

considered an institution required to 

take attendance. If, however, the 

institution requires its faculty to take 

attendance, whether at the program, 

department, or institutional level, then 

those attendance records must be used 

by the institution in determining a 

student’s date of withdrawal. 

Institutions that do not require the 

taking of attendance and are not 

required to take attendance by an 

outside entity are not prohibited from 

using individual faculty members’ 

attendance records in determining a 

student’s date of withdrawal. The 

Department encourages institutions to 

use the best information available in 

making this determination. 

We do not agree with commenters 

who believed that if attendance taking is 

required for some students, then the 

institution would be required to take 

attendance for all students. These final 

regulations do not change our existing 

policy. Under our current guidance and 

regulations, if an outside entity requires 

an institution to take attendance for 

only some students, for instance, for 

students receiving financial assistance 

under a State program, the institution 

must use its attendance records to 

determine a withdrawal date for those 

students. Similarly, under these final 

regulations, if the institution itself 

requires attendance taking for students 

in certain programs or departments, 

then the institution must use its 

attendance records to determine a 

withdrawal date for students in those 

programs or departments. These 

attendance taking regulations only 

apply when an institution either 

requires the taking of attendance or is 

required by an outside entity to take 

attendance, but not when a student is 

required to self-certify attendance 

directly to an outside entity. For 

example, a veterans’ benefits 

requirement that benefit recipients selfreport attendance would not result in an 

institutional requirement to take 

attendance of those students unless the 

institution is required to verify the 

student’s self-certification. 

An institution that is required by an 

outside entity to take attendance during 

a limited period, or that requires its 

faculty to do so, must use any 

attendance records from that limited 

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period in determining a withdrawal date 

for a student. For students in attendance 

at the end of that limited period, if the 

institution is not required to take 

attendance and does not require its 

faculty to do so, then the guidelines for 

determining a withdrawal date for an 

institution that is not required to take 

attendance would apply. The 

Department continues to believe that the 

best data available should be used in 

determining a student’s withdrawal date 

from classes, and, accordingly, if an 

institution requires the taking of 

attendance or is required to take 

attendance for any limited period, then 

those records must be used. 

Lastly, we disagree with the comment 

that an outside entity should not be able 

to require an institution to take 

attendance. We continue to believe that 

our policy that an ‘‘institution that is 

required to take attendance’’ means an 

institution that is required to take 

attendance by an outside entity is a 

reasonable interpretation of the statute. 

The phrase ‘‘required to take 

attendance’’ presupposes that an entity 

has this requirement, and under this 

regulation, that entity may be either the 

institution itself or a separate entity. 

Changes: None. 

Comment: A few commenters 

expressed concern about who would 

decide what ‘‘required to take 

attendance means.’’ Specifically, they 

were concerned that the Department 

would determine that an institution or 

outside entity had a requirement that 

attendance be taken at an institution, 

even if the institution or outside entity 

disagreed with that conclusion. The 

commenters believed that the entity 

requiring the taking of attendance 

should make the determination about 

when attendance must be taken and 

what kind of documentation to support 

attendance taking is necessary, and that 

the Department should not superimpose 

its view of attendance taking on that 

entity. In particular, a few commenters 

opposed the idea that the Department 

would consider clock-hour institutions 

to be institutions required to take 

attendance if an outside entity or the 

institutions themselves did not believe 

that they were. One commenter 

recommended that we remove 

§ 668.22(b)(3)(i)(C), believing that an 

institution could be found in 

noncompliance by the Department if the 

institution or outside entity had a 

different interpretation of whether 

taking attendance was required. 

A couple of commenters requested 

clarification that, in a case where a 

student must be physically present to 

demonstrate a competency or skill, 

attendance taking would not be 

automatically required. Instead, the 

institution or another outside entity 

would have the responsibility of 

deciding whether attendance taking was 

necessary. Further, one commenter 

suggested that a ‘‘requirement’’ to take 

attendance should mean a written 

regulation or policy tied to determining 

seat time and not a quality inherent to 

the type of program. 

Discussion: For institutions that are 

required to measure the clock hours a 

student completes in a program, the 

Department believes that this is, in 

substance, a requirement for those 

institutions to take attendance for those 

programs since they satisfy both the 

requirement of determining that a 

student is present and that the student 

is participating in a core academic 

activity. The Department is looking at 

the substance of the information that is 

available rather than the way that 

information is described or portrayed by 

the institution or outside entity. If the 

institution is required to collect 

information or record information about 

whether a student was in attendance 

during a payment period, or during a 

limited period of time during a payment 

period, that information should be used 

to determine if the student ceased 

attendance during that period. 

Changes: None. 

Comment: Commenters had a number 

of questions about the documentation 

and the maintenance of attendance 

records, generally requesting 

clarification about how attendance must 

be documented and what constitutes 

attendance in an academic or 

academically-related activity. One 

commenter asked for specific guidance 

as to the definition of an attendance 

record, and requested clarification as to 

how often attendance must be taken at 

an institution required to take 

attendance. Another commenter asked 

what documentation would be sufficient 

to demonstrate attendance in cases in 

which students do not physically attend 

class but watch a video or podcast of the 

lecture remotely. Similarly, a 

commenter asked whether a student 

would be considered in attendance if he 

or she participated in an academicallyrelated activity but was not physically 

present, such as working with an 

instructor by phone or e-mail. A few 

commenters requested clarification and 

guidance about what the Department 

believes constitutes attendance in a 

distance education context and how an 

institution should document that 

attendance. One commenter requested 

that the Department ensure that the 

evidence required of last day of 

attendance in online programs for the 

purpose of a Return of Title IV Funds 

calculation be substantially comparable 

to that required of traditional, face-toface programs. The same commenter 

was also concerned that the Department 

would be requiring documentation 

beyond that required in the past without 

providing sufficient time for institutions 

to implement this change. 

Discussion: In accordance with 

§ 668.22(b)(2) and (c)(4), an institution 

must document a student’s withdrawal 

date and maintain that documentation 

as of the date of the institution’s 

determination that the student 

withdrew. As noted in the Federal 

Student Aid Handbook (FSA 

Handbook), the determination of a 

student’s withdrawal date is the 

responsibility of the institution; a 

student’s certification of attendance that 

is not supported by institutional 

documentation would not be acceptable 

documentation of the student’s last date 

of attendance at an academically-related 

activity. As with other title IV, HEA 

program records, documentation of 

attendance must be retained and be 

available for examination in accordance 

with the provisions of § 668.24. If an 

institution is required to take attendance 

or is an institution that is not required 

to take attendance, but is using a last 

date of attendance at an academicallyrelated activity as a withdrawal date, it 

is up to the institution to ensure that 

accurate records are kept for purposes of 

identifying a student’s last date of 

academic attendance or last date of 

attendance at an academically-related 

activity. An institution must also 

determine and maintain the records that 

most accurately support its 

determination of a student’s withdrawal 

date and the institution’s use of one 

withdrawal date over another if the 

institution has conflicting information. 

To count as attendance for title IV, 

HEA program purposes, attendance 

must be ‘‘academic attendance’’ or 

‘‘attendance at an academically-related 

activity.’’ We have defined those terms 

in new § 668.22(l)(7) by providing 

examples of academically-related 

activities that institutions that are not 

required to take attendance may use in 

determining a student’s last date of 

attendance at an academically-related 

activity. Certainly, traditional academic 

attendance is acceptable, i.e., a student’s 

physical attendance in a class where 

there is an opportunity for direct 

interaction between the instructor and 

students. Additionally, academicallyrelated activities may include an exam, 

a tutorial, computer-assisted instruction, 

academic counseling, academic 

advising, turning in a class assignment, 

or attending a study group that is 

assigned by the institution. The 

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Department has provided further 

guidance on this policy in the FSA 

Handbook, specifying that living in 

institutional housing and participating 

in the institution’s meal plan are 

examples of activities that are not 

academically-related. The Department 

finds it acceptable for an institution that 

is required to take attendance to use the 

institution’s records of attendance at the 

activities listed in § 668.22(l)(7) as 

evidence of attendance, provided there 

is no conflict with the requirements of 

the outside entity that requires the 

institution to take attendance or, if 

applicable, the institution’s own 

requirements. 

However, in these final regulations, 

we are revising the list of acceptable 

activities because the Secretary no 

longer considers participation in 

academic counseling or advising to be 

an activity that demonstrates academic 

attendance or attendance at an 

academically-related activity. The 

Secretary has encountered several 

instances of abuse of this particular 

provision by institutions that contact 

students who have ceased attendance, 

and treated that contact as ‘‘academic 

counseling’’ to facilitate a later 

withdrawal date, resulting in an inflated 

amount of ‘‘earned’’ title IV, HEA 

program funds. The Secretary does not 

view such contact as evidence of 

academic attendance, but notes that if 

the student resumed attendance and 

completed the period of enrollment no 

return calculation would be needed. 

Even if the student resumed attendance 

and later stopped attending, the 

student’s participation in other 

activities that are already included on 

the list of academic activities could be 

used to establish a later withdrawal 

date. Thus, participation in academic 

counseling or advising without 

subsequent participation in other 

academic or academically-related 

activities is no longer an acceptable 

example of participation in an 

academically related activity. 

With respect to what constitutes 

attendance in a distance education 

context, the Department does not 

believe that documenting that a student 

has logged into an online class is 

sufficient by itself to demonstrate 

academic attendance by the student 

because a student logging in with no 

participation thereafter may indicate 

that the student is not even present at 

the computer past that point. Further, 

there is also a potential that someone 

other than the student may have logged 

into a class using the student’s 

information to create the appearance the 

student was on-line. Instead, an 

institution must demonstrate that a 

student participated in class or was 

otherwise engaged in an academicallyrelated activity, such as by contributing 

to an online discussion or initiating 

contact with a faculty member to ask a 

course-related question. This position is 

consistent with the current guidance the 

Department has provided to individual 

institutions regarding the applicability 

of the regulations to online programs. 

When assessing an institution’s 

compliance with any program 

requirement, the Department looks at 

information provided by the institution 

in support of the compliance of its 

policies and procedures. 

Changes: We have removed the 

reference to academic counseling and 

advising in current § 668.22(c)(3)(ii) and 

have added to the regulations a 

combined definition of academic 

attendance and attendance at an 

academically-related activity in 

§ 668.22(l)(7) to clarify that both 

institutions required to take attendance 

and those that are not required to take 

attendance may use institutionallydocumented attendance at certain 

activities as a student’s withdrawal date. 

We have also redesignated current 

§ 668.22(c)(3)(i) as § 668.22(c)(3) to 

reflect the removal of § 668.22(c)(3)(ii). 

We have added to the definition at 

§ 668.22(l)(7) both existing guidance 

from the FSA Handbook and examples 

of academic attendance for online 

programs. For additional clarity, we 

have specified that physically attending 

a class where there is an opportunity for 

direct interaction between the instructor 

and students is considered academic 

attendance and have specified that 

participating in academic counseling or 

advising is not considered academic 

attendance. 

Comment: A number of commenters 

opposed the proposed changes, 

believing that they would impose 

additional burdens on institutions, be 

too complex to administer, and prove 

counterproductive to the goals of the 

Department. 

In terms of additional burden, the 

commenters argued that the proposed 

regulations could become too complex, 

noting that institutions might have 

different attendance taking 

requirements, depending on the 

program or academic department. 

Others suggested that it would be too 

confusing and burdensome to take 

attendance for only a limited period. 

Two commenters did not support 

adverse actions or audit findings by the 

Department against institutions that did 

not demonstrate 100 percent 

compliance with the attendance taking 

requirements. 

Commenters also pointed out 

potential barriers to administering these 

regulations properly. A few believed 

that it would be difficult to ensure 

complete and accurate attendance 

records across faculty and programs, 

arguing that these records would not 

necessarily fully reflect a student’s 

attendance at academically-related 

activities. A couple of commenters 

questioned the feasibility of achieving 

full compliance with attendance taking 

policies across faculty. One commenter 

did not believe that attendance records 

held by individual faculty members or 

departments should constitute available 

data. One commenter believed that the 

additional complexity of the regulations 

would make it impossible to complete a 

Return of Title IV Funds calculation in 

the required timeframe. 

The commenters also argued that the 

additional burden and complexity of the 

regulations would ultimately undermine 

attempts to mitigate the potential for 

fraud and abuse of Federal funds and 

would hamper attempts to improve 

student success in higher education. 

Specifically, a number of commenters 

believed that the proposed regulations 

would create an economic disincentive 

to taking attendance, causing many 

institutions that voluntarily take 

attendance to stop doing so. They 

argued that this provision would make 

it more difficult to identify a date on 

which a student has withdrawn from 

classes, compelling more institutions to 

use a mid-point date when performing 

a Return of Title IV Funds calculation. 

The commenters further asserted that 

institutions take attendance for a variety 

of reasons, and that ending this practice 

would lead to lower retention and 

graduation rates and, subsequently, 

higher student loan default rates. 

Due to the perceived complexity of 

this issue, two commenters requested 

that the Department delay the 

implementation of these regulations. 

One suggested gathering additional 

input from the community to develop 

proposed regulations, while the other 

recommended reconvening a negotiated 

rulemaking committee to further 

consider these issues. 

Discussion: We appreciate the 

concerns of the commenters about 

possible harms that might come from 

the proposed changes. The goal of 

determining the amount of funds a 

student earned before he or she stopped 

attending should be a shared one, and 

the claim that the institutions would 

stop taking attendance in order to 

increase the funds a student would 

receive beyond the point where the 

student stopped attending is troubling. 

The Department continues to believe 

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that institutions should use the best data 

available in determining a student’s 

withdrawal date from classes. 

Accordingly, if an institution requires 

the taking of attendance or is required 

to take attendance for any limited 

period of a semester or other payment 

period, then those records should be 

used when determining a student’s date 

of withdrawal for the purposes of a 

Return of Title IV Funds calculation. 

With respect to comments regarding 

the complexity of the regulations, they 

address the taking attendance policies 

that are either required by an outside 

party or required by the institution 

itself. Institutions would already be 

expected to follow these requirements, 

and the regulations provide for that 

attendance information to be used when 

it indicates a student has stopped 

attending during this limited period. For 

students in attendance at the end of that 

limited period, the guidelines for 

determining a withdrawal date for an 

institution that is not required to take 

attendance would apply until the start 

of the next period during which 

attendance taking is required. Any 

increase in overall burden is mitigated 

since this requirement is tied to policies 

for taking attendance that are already in 

place at institutions, and uses the 

existing requirements for determining 

the amount of Federal funds a student 

earned based upon that information. 

Cases of noncompliance are addressed 

on a case by case basis when the 

occurrences are isolated, and 

institutions are expected to take 

appropriate corrective actions when an 

error is brought to their attention during 

a self-audit, a compliance audit, or a 

program review. Accordingly, the 

Department does not believe it is 

necessary to delay the implementation 

date of these regulations, or to reopen 

the issue for negotiation. 

Changes: None. 

Comment: A few commenters 

opposed the proposed changes, arguing 

that the proposed regulations exceed the 

Secretary’s authority under the law. The 

commenters believed that Congress 

intentionally allowed institutions the 

option to use the midpoint of the 

payment period because it recognized 

that institutions have already incurred 

costs when a student fails to withdraw 

officially. A few commenters believed 

that the definition of last day of 

attendance under the statute is 

sufficient and that the Department 

should not make any changes to the 

regulations. Some commenters opposed 

the proposal that an ‘‘institution 

required to take attendance’’ includes an 

institution that takes attendance 

voluntarily, arguing that the wording of 

the statute, which states ‘‘institutions 

that are required to take attendance’’ and 

not ‘‘institutions that take attendance,’’ 

indicates that Congress did not intend to 

include institutions that choose to take 

attendance in that category. Other 

commenters expressed strong support 

for the broadened definition. 

Discussion: Under the law, 

institutions that are required to take 

attendance must use that information to 

determine when students who do not 

complete a class stopped attending. It is 

common for the Department to view 

requirements established by an 

institution, such as an institutional 

refund policy, as being a requirement 

for that institution. The Secretary 

believes it is reasonable to interpret the 

law to include instances where the 

institution itself is establishing the 

requirement to take attendance for a 

program, a department, or the entire 

institution. The regulations do not 

include instances where a faculty 

member would monitor student 

attendance but was not required to do 

so by the institution. Furthermore, there 

is no reason that attendance information 

required by an institution would be 

different in substance from attendance 

information required by other entities. It 

is the process of taking attendance itself 

that leads to the information being 

available, regardless of whether it is 

required by the institution or an outside 

entity. The law provides that 

institutions that are required to take 

attendance must use that information 

for students who stop attending, and the 

regulations define the term ‘‘required to 

take attendance’’ to include instances 

where the institution itself is 

establishing that requirement for a 

program, a subpopulation of a program, 

a department, or the entire institution. 

The Secretary also believes that this 

information should be used when it is 

available, even if attendance is not 

required and is only taken for a limited 

period during the payment period or 

period of enrollment. 

Changes: None. 

Comment: A number of commenters 

requested clarification about whether an 

institution would be required to perform 

a Return of Title IV Funds calculation 

for students that were not in attendance 

on the last day of a limited census 

period. Specifically, a few commenters 

believed that § 668.22(b)(3)(iii)(B) could 

be interpreted in different ways. First, it 

could be read to mean that an 

institution must treat a student who is 

not in attendance on the last day of a 

limited period of attendance taking as a 

withdrawal, even if the student 

continued to attend classes or was 

engaged in another academically-related 

activity after the end of the limited 

period. Along these lines, a few 

commenters pointed out that it could be 

difficult for an institution to ascertain 

whether a student actually withdrew, or 

whether the student was in fact only 

absent for a class or two. Second, it 

could be read to mean that if an 

institution has attendance records 

during a limited period, the institution 

must use those attendance records, as 

the best available source of information, 

in determining a student’s date of 

withdrawal. One commenter believed 

that this interpretation could require an 

institution not otherwise required to 

take attendance to take attendance 

beyond the end of the limited 

attendance period to determine if the 

student came back. The commenter 

further requested clarification about 

when an institution in this situation 

would have to determine that the 

student actually withdrew. 

Three commenters provided potential 

modifications to the language related to 

taking attendance during a limited time 

period. The first suggested replacing the 

words ‘‘in attendance at the end of the 

limited period’’ with the words ‘‘in 

attendance during the limited period’’ to 

account for the fact that a student might 

have attended earlier in the limited 

period but was only absent on that last 

day, perhaps due to illness or another 

legitimate reason. The second 

commenter recommended modifying 

the words ‘‘a student in attendance’’ to 

read ‘‘a student determined by the 

institution to be in attendance’’ in order 

to give institutions the necessary 

flexibility to determine that a student 

actually withdrew from all courses and 

was not just absent on that particular 

day. The third commenter suggested 

replacing the phrase ‘‘in attendance at 

the end of the limited period’’ with ‘‘in 

attendance at the last regularly 

scheduled class meeting prior to the 

census date’’ to account for courses that 

do not meet on the last day of the 

limited period. 

One commenter believed that the 

Department should require institutions 

to have a limited number of hours or 

credits that a student may miss without 

having to be considered a withdrawal. 

Discussion: Standing alone, 

information that a student was absent 

on the last date attendance was taken 

during a limited period of time is the 

best evidence that the student has 

ceased attendance. That presumption is 

easily refuted when a student has gone 

on to complete the payment period, 

since the student will have earned a 

grade for the class. For a student who 

did not complete the class, the 

institution may determine whether there 

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is evidence that the student was 

academically engaged in the class at a 

point after the limited period when 

attendance was taken. Unless an 

institution demonstrates that a 

withdrawn student who is not in 

attendance at the end of the limited 

period of required attendance taking 

attended after the limited period, the 

student’s withdrawal date would be 

determined according to the 

requirements for an institution that is 

required to take attendance. That is, the 

student’s withdrawal date would be the 

last date of academic attendance, as 

determined by the institution from its 

attendance records. If the institution 

demonstrates that the student attended 

past the end of the limited period, the 

student’s withdrawal date is determined 

in accordance with the requirements for 

an institution that is not required to take 

attendance. So, for a student the 

institution has determined attended past 

the limited period and has unofficially 

withdrawn, the student’s withdrawal 

date is the midpoint of the payment 

period of period of enrollment unless 

the institution uses a later date when 

the student was academically engaged 

in the class. The institution therefore 

has the option to document a student’s 

last date of attendance at an 

academically-related activity, but an 

institution is not required to take 

attendance past the end of the limited 

period of attendance taking. 

We do not interpret a requirement to 

take attendance in one class for a 

‘‘census date’’ as taking attendance for 

purposes of this regulation. For 

example, some institutions have courses 

that meet only on Mondays and 

Wednesdays, and other courses that 

meet on Tuesdays and Thursdays. In 

those cases, a ‘‘census date’’ may be 

taken on two different days in order to 

establish attendance in both sets of 

courses that meet on alternate days. 

With respect to the suggestion that an 

institution be permitted to have a policy 

to establish a different procedure or 

presumption for a student who is absent 

at the end of a limited period of 

attendance taking, this is addressed in 

practice by having the institution 

determine if the student participated in 

an academically related activity at a 

later point in the payment period, not 

by adding a regulation that otherwise 

ignores an absence on the last date 

attendance was taken for the student. 

Changes: None. 

Comment: A few commenters 

believed that the proposed regulations 

would cause a greater financial burden 

for a student who withdraws from 

courses prior to the midpoint of the 

semester. A few commenters noted that 

institutions that voluntarily maintain 

attendance records would now have to 

use those records to determine the 

student’s actual last date of attendance 

instead of using a midpoint date. In the 

case of clock-hour institutions, 

commenters were concerned that 

institutions would be required to use an 

actual last date of attendance instead of 

a scheduled last date of attendance. In 

these situations, a student might receive 

fewer funds to cover costs incurred for 

the entire payment period, even if he or 

she withdrew before the end of that 

payment period. 

Discussion: The Department 

recognizes that using an actual last date 

of attendance instead of a midpoint of 

the semester may require an institution 

to return more unearned aid; this 

outcome, however, is equitable. For 

institutions using credit hours that are 

determined to be required to take 

attendance for all or a part of the period, 

the regulation may establish an earlier 

date of withdrawal for a student that 

stops attending during a period when 

attendance is taken. This outcome 

provides a more consistent treatment 

with other institutions that have 

programs where student progress is 

tracked by measuring clock hours, and 

more closely tracks the requirements in 

the law that students earn title IV funds 

as they progress through a period until 

they complete more than 60 percent of 

the period. Institutions are responsible 

for determining the amount of title IV, 

HEA program assistance that a student 

earned under the applicable regulations, 

and unearned funds for a student must 

be returned in accordance with the 

procedures in § 668.22. By establishing 

a more accurate date a student ceased 

attendance during a period when 

attendance is taken, the regulation will 

tend to increase the amount of unearned 

funds that are used to reduce the loan 

amounts students received for that 

period under § 668.22(i). 

Changes: None. 

Comment: A number of commenters 

from cosmetology schools believed that 

the proposed regulations would put 

some institutions in a position of being 

unable to comply with both Federal and 

State regulations. Specifically, they 

were concerned that the proposed 

regulations would require institutions 

that are credit-hour institutions to 

become clock-hour institutions if they 

take attendance, forcing them, 

depending on individual State laws, to 

be out of compliance with State 

requirements that those institutions use 

credit hours. 

Discussion: We do not agree that these 

regulations create a conflict between 

Federal and State laws. Institutions that 

use clock hours for a program for State 

reporting or licensing purposes will be 

treated as institutions that are required 

to take attendance under this regulation, 

and the clock hours attended will be 

used to determine when a student 

ceased attendance. To the extent that 

such an institution uses credit hours for 

its academic purposes, that institution 

will not be affected by this regulation. 

The requirement to determine the 

amount of aid a student earned before 

ceasing attendance is separate from the 

question of whether that institution uses 

credit hours for academic purposes. The 

clock hours are used to measure the 

amount of funds a student earned, the 

same way that other institutions that are 

required to take attendance will 

measure earnings under this regulation. 

Changes: None. 

Comment: A few commenters 

suggested modifications to the 

regulatory language that would require 

institutions to use the best information 

available in determining a student’s 

withdrawal date. Specifically, one 

commenter recommended amending 

§ 668.22(c) to make the midpoint of the 

payment period the ‘‘last resort’’ option 

for determining a student’s last date of 

attendance when a student unofficially 

withdraws such that a school would be 

required to use the midpoint of the 

payment period only in the absence of 

other documentation of a student’s 

attendance. Another commenter 

recommended that we require 

institutions to use the best available 

data when determining a withdrawal 

date instead of allowing schools that are 

not required to take attendance to use a 

default date of the midpoint of the 

payment period of period of enrollment. 

The commenter believed that using this 

language would best support the 

Department’s goals. 

Discussion: We do not believe that the 

suggested modifications are supportable 

under the HEA because the requirement 

to use attendance information is only 

applicable for periods when attendance 

taking is required. Under section 

484B(c)(1) of the HEA, if a student stops 

attending an institution at a point where 

attendance taking is not required, the 

institution uses the midpoint of the 

payment period, or may use a later date 

when the student was participating in 

an academically related activity. 

Changes: None. 

Comment: One commenter was 

concerned that if an institution that is 

required to take attendance did not have 

a valid ISIR before a student’s last date 

of attendance, the student would be 

unintentionally penalized and unable to 

receive title IV, HEA program 

assistance. 

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Discussion: We do not agree. An 

institution must act in accordance with 

§ 668.164(g), which contains the 

requirements for making a late 

disbursement, including circumstances 

where a student did not have a valid 

SAR or valid ISIR on the student’s last 

date of attendance. 

Changes: None. 

Verification and Updating of Student 

Aid Application Information (Subpart E 

of Part 668) 

General (§ 668.51) 

Comment: One commenter questioned 

whether the Department would 

describe, in the final regulations, our 

plans to provide training to assist 

institutions to prepare for and comply 

with verification requirements reflected 

in subpart E of part 668. 

Discussion: The Department will issue 

guidance through the Application and 

Verification Guide and other training 

materials, as needed. The Department 

will also provide training through our 

regional training officers. For 

information on our current and future 

training activities and learning 

resources, institutions should visit the 

Training for Financial Aid Professionals 

Web site at http://www2.ed.gov/offices/ 

OSFAP/training/index.html. 

Changes: None. 

Comment: Some commenters 

requested that the Department delay 

implementing the new verification 

requirements until the 2012–13 award 

year to give institutions sufficient time 

to train their staff and make the 

necessary system changes. 

Discussion: The Department 

recognizes that institutions may need 

time to make changes to their 

institutional processing systems to 

comply with the requirements in 

subpart E of part 668. Accordingly, as 

described in the DATES section of these 

final regulations, we will delay the 

effective date of the changes to this 

subpart until July 1, 2012, which means 

that it will be effective for the 2012–13 

award year. 

Changes: None. 

Comment: Some commenters noted 

that because no new loans can be 

certified under the Federal Family 

Education Loan (FFEL) Program 

effective July 1, 2010, all references to 

the FFEL Program and loan certification 

should be removed from the regulatory 

language in this subpart. 

Discussion: We concur with the 

commenters. We had not removed the 

references to FFEL in the NPRM because 

that notice was already under 

development when the legislative 

change to end new lending under the 

FFEL Program was enacted. Our intent 

was to make the necessary technical 

corrections in the final regulations. 

Changes: Throughout subpart E of 

part 668, we have removed references to 

the FFEL Program and any 

corresponding regulatory citations. 

Specifically, we have removed 

references to ‘‘Subsidized Stafford 

Loan,’’ ‘‘Unsubsidized Stafford Loan,’’ 

‘‘Federal PLUS Loan,’’ and ‘‘lender’’ as 

well as certifications for Subsidized 

Stafford loans from §§ 668.52, 668.58, 

and 668.60. 

Definitions (§ 668.52) 

Comment: Some commenters 

expressed support for the Department’s 

efforts to simplify and clarify the 

definitions used throughout the 

verification regulations under subpart E 

of part 668. One commenter noted that 

changing the defined term application 

to FAFSA, and using the term FAFSA 

information in place of the term 

application helps distinguish the 

FAFSA from other financial aid 

applications used at many institutions. 

Discussion: We appreciate the 

commenters’ support. 

Changes: None. 

Comment: Two commenters suggested 

that we change the names of the defined 

terms FAFSA information, subsidized 

student financial assistance programs, 

and unsubsidized student financial 

assistance programs. Specifically, one 

commenter suggested that we use the 

term ‘‘Federal Methodology (FM) need 

analysis data’’ or ‘‘ISIR data’’ rather than 

FAFSA information to better reflect 

what institutions receive once the data 

reported on the FAFSA have been 

processed. In addition, one commenter 

stated that using the terms ‘‘subsidized’’ 

and ‘‘unsubsidized’’ to modify student 

financial assistance programs will 

confuse applicants because those terms 

are more commonly used when referring 

to loan programs. The commenter stated 

that families would better understand 

the type of aid we are referring to by 

using the terms ‘‘need-based student 

financial assistance programs’’ and 

‘‘non-need-based student financial 

assistance programs.’’ 

Another commenter requested that 

the Department include in the 

regulations definitions for the terms 

‘‘applicant’’ and ‘‘timely manner.’’ 

Discussion: While we appreciate the 

suggestions, we do not believe the 

suggested changes are necessary. We 

also do not agree that using the term 

‘‘subsidized’’ and ‘‘unsubsidized’’ 

throughout subpart E will confuse 

applicants and their families about the 

type of aid we are referring to since 

these regulations are written for FAAs at 

institutions of higher education and not 

applicants and their families. An 

institution may, when communicating 

with students and families, use 

whatever terminology it believes will 

best be understood by its students and 

families. 

However, we did make some revisions 

to the list of definitions under § 668.52. 

Specifically, we determined that the 

definitions for Free Application for 

Federal Student Aid (FAFSA), 

Institutional Student Information 

Record (ISIR), and Student Aid Report 

(SAR) would be more appropriately 

included in § 668.2(b) of subpart A 

because these terms are used throughout 

part 668 of the Student Assistance 

General Provisions regulations and not 

just under subpart E. 

We also revised the definitions for 

Valid Student Aid Report (valid SAR) 

and Valid Institutional Student 

Information Record (valid ISIR) in 

§ 668.2(b) to specify that a valid ISIR is 

an ISIR on which all the information 

reported on a student’s FAFSA is 

accurate and complete as of the date the 

application is signed, and a valid SAR 

is a student aid report on which all of 

the information reported on a student’s 

FAFSA is accurate and complete as of 

the date the application is signed. 

In addition, we also changed the 

defined terms from Student Aid Report 

(SAR) to Valid Student Aid Report 

(valid SAR) and Institutional Student 

Information Record (ISIR) to Valid 

Institutional Student Information 

Record (valid ISIR) under §§ 668.54(b), 

668.58, 668.59, and 668.61. Prior to 

these final regulations, an institution 

was not required to obtain a valid SAR 

or valid ISIR in order to make a 

disbursement under the campus-based 

programs and the title IV, HEA loan 

programs. Institutions could rely on 

their own calculations to determine an 

applicant’s award amount without 

having to submit corrections through 

the Department’s Central Processing 

System (CPS) and receiving the 

corrected SAR or ISIR. Consistent with 

the revisions to § 668.59(a), which 

require that any change to a nondollar 

item and any change to a dollar item on 

the FAFSA that is $25 or more must be 

submitted to the CPS for reprocessing, 

an institution must have a valid SAR or 

a valid ISIR to disburse funds from the 

subsidized student financial assistance 

programs. By definition, a valid SAR or 

valid ISIR can only be created after 

information has been processed through 

the Department’s Central Processing 

System. 

Finally, we also determined that we 

no longer need to define the terms valid 

SAR or valid ISIR under 34 CFR 690.2 

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of the Federal Pell Grant Program 

regulations as they are defined in part 

668 because they apply to all of the title 

IV, HEA programs. For this reason, we 

have removed these definitions from 

this section. 

Changes: The terms and 

corresponding definitions for Free 

Application for Federal Student Aid 

(FAFSA), Institutional Student 

Information Record (ISIR), and Student 

Aid Report (SAR) have been removed 

from § 668.52. Instead, we now define 

Free Application for Federal Student 

Aid (FAFSA), Institutional Student 

Information Record (ISIR), and Student 

Aid Report (SAR) under General 

definitions in § 668.2(b). We have also 

revised the definitions for valid 

Institutional Student Information 

Record (valid ISIR) and valid Student 

Aid Report (valid SAR) in § 668.2(b). We 

have removed the definitions for the 

terms valid Student Aid Report (valid 

SAR) and valid Institutional Student 

Information Record (valid ISIR) from 34 

CFR 690.2(b) and revised the definition 

of these terms under § 668.2(b) to no 

longer refer to the definitions in 34 CFR 

690.2(b) of the Federal Pell Grant 

Program regulations. 

Comment: One commenter asked the 

Department to clarify the meaning of the 

term ‘‘applicant’’ as used throughout the 

verification regulations. The commenter 

suggested that the regulations should 

use the term ‘‘applicant’’ to refer to a 

student who is accepted for admission 

at an institution, rather than to a student 

who submits a FAFSA. The commenter 

argued that having ‘‘applicants’’ cover all 

students who submit a FAFSA would be 

administratively burdensome for 

institutions because it would require 

them to verify CPS-selected transactions 

for students who do not enroll at the 

institution. 

Discussion: The term ‘‘applicant,’’ as 

used throughout the verification 

regulations, refers to an individual who 

applies for assistance under the title IV, 

HEA program by completing and 

submitting a FAFSA. 

While the term ‘‘applicant,’’ as used in 

subpart E of part 668 covers individuals 

who may not enroll at the institution, 

we note that § 668.54 only requires an 

institution to verify the FAFSA 

information selected by the Secretary 

under § 668.56 and any FAFSA 

information the institution has reason to 

believe is inaccurate. Therefore, only 

those applicants who are enrolled at the 

institution and whose FAFSA 

information falls into one of these 

categories are subject to verification. 

Changes: None. 

Policies and Procedures—Professional 

Judgment (§ 668.53(c)) 

Comment: Many commenters 

expressed support for § 668.53(c), which 

requires an institution to complete 

verification prior to exercising the 

professional judgment authority allowed 

under section 479A of the HEA. These 

commenters indicated that this 

requirement, which is consistent with 

their policy to complete verification 

first, is important to ensure that the data 

reported on the FAFSA is accurate 

before making any adjustments to it. 

Discussion: We appreciate the 

commenters’ support. 

Changes: None. 

Comment: Some commenters 

questioned the process for completing 

verification prior to exercising 

professional judgment in special 

circumstances that require a 

dependency override in order to create 

a valid Student Aid Report (valid SAR) 

or valid Institutional Student 

Information Record (valid ISIR). 

Discussion: The authority given to 

FAAs to exercise professional judgment 

under section 479A of the HEA is 

separate and apart from the authority 

given FAAs to make a dependency 

override decision under section 

480(d)(1)(I) of the HEA. Section 479A of 

the HEA authorizes an FAA to make 

adjustments on a case-by-case basis to 

the cost of attendance or to the values 

of the data items used to calculate the 

EFC to allow for treatment of an 

individual eligible applicant with 

special circumstances as long as the 

adjustments are based on adequate 

documentation. 

In the definition of ‘‘independent 

student’’ in section 480(d)(1)(I) of the 

HEA, an applicant may be considered to 

be an independent student if the FAA 

makes a documented determination that 

the applicant is independent by reason 

of other unusual circumstances. 

In practice, an FAA would first 

determine whether an otherwise 

dependent applicant should be 

considered an independent student 

using the FAA’s authority under section 

480(d)(1) of the HEA, in order to obtain 

a valid SAR or valid ISIR, and then 

would subsequently make any 

corrections or professional judgment 

adjustments to the applicant’s FAFSA 

information. 

We will provide guidance in the 

Federal Student Aid Handbook to 

address operational details as needed. 

Changes: None. 

Comment: Several commenters 

expressed concern that requiring an 

institution to complete verification 

before exercising professional judgment 

would make it difficult for institutions 

to appropriately handle emergency 

situations. The commenters noted that 

delays would occur as a result of having 

to complete verification, submit any 

changes to CPS, and wait for the new 

SAR or ISIR upon which the 

professional judgment decision would 

be based. Some commenters suggested 

making modifications to systems 

software, i.e. FAA Access, to allow 

multiple changes to be made 

simultaneously to resolve this problem. 

Discussion: We appreciate the 

commenters’ suggestion for improving 

our operational process. We will take 

this suggestion into consideration as we 

look for ways to improve our services to 

institutions. 

Currently, the CPS will process 

changes to an applicant’s FAFSA 

information as a result of the 

verification process or a professional 

judgment determination and report the 

results on a new ISIR sent to the 

institution usually the next day. 

However the two transactions cannot be 

processed on the same day. This is 

because after the institution receives the 

ISIR that was created as a result of 

verification, the institution would use 

that ISIR transaction to make 

adjustments to the applicant’s FAFSA 

information using the professional 

judgment process. While we understand 

the commenters’ concerns about any 

delay that may occur with having to 

submit transactions separately, we 

believe that any delay will be slight. In 

addition, institutions have the option of 

making interim disbursements, as 

allowed under § 668.58, until a 

corrected valid SAR or valid ISIR is 

received. 

Changes: None. 

Comment: One commenter asked 

whether an applicant who is selected to 

verify the parent’s household size, but 

who requests that the institution use its 

professional judgment authority under 

section 479A of the HEA to examine the 

parent’s income listed on the FAFSA, 

would be required to verify all five 

items before the institution could 

exercise its professional judgment. 

Another commenter argued that the 

requirement to complete verification 

before exercising professional judgment 

would delay the financial aid process 

and would create an additional hurdle 

for families in need. This commenter 

questioned why institutions have to go 

through an extra step to evaluate an 

applicant’s eligibility through the 

verification process if the institution is 

updating those same fields when 

exercising professional judgment to 

revise an applicant’s eligibility under 

section 479A of the HEA. 

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Discussion: Under these final 

regulations, an institution must verify 

the items selected for verification before 

making any professional judgment 

adjustments regardless of whether an 

institution is making adjustments to the 

item being verified. Prior to the effective 

date for subpart E of part 668 of these 

final regulations, for an application 

selected for verification, an institution 

must verify the data elements identified 

in current § 668.56 before making any 

adjustments regardless of whether an 

institution is making adjustments to the 

item being verified. 

Changes: None. 

Comment: One commenter asked 

whether an institution must complete 

verification prior to exercising 

professional judgment if the applicant’s 

FAFSA information is selected for 

verification by the institution, rather 

than by the Secretary. 

Discussion: To ensure that any 

professional judgment adjustments 

made by an institution are based on 

accurate information, we believe that all 

FAFSA information selected for 

verification, whether selected by the 

Secretary or the institution, must be 

verified before the institution can 

exercise professional judgment. We are 

making a change to § 668.53(c) to make 

this clearer. 

Changes: We have revised § 668.53(c) 

by removing the phrase ‘‘by the 

Secretary’’ after the words ‘‘selected for 

verification’’ to provide that verification, 

regardless of whether the FAFSA 

information to be verified is selected by 

the Secretary or the institution, must be 

completed prior to exercising 

professional judgment. 

Selection of FAFSA Information for 

Verification (§ 668.54) 

Comment: Many commenters 

supported our proposal to target 

verification to those items reported on 

the FAFSA that are most prone to error, 

based on a set of criteria that identifies 

which items are most likely to contain 

erroneous data, instead of requiring 

verification of all five items listed in 

current § 668.56 for FAFSAs selected for 

verification. 

Another commenter agreed with 

proposed § 668.54(b)(1)(iii), which 

excludes from verification applicants 

who only receive unsubsidized student 

financial assistance. This commenter 

stated that this approach would be more 

efficient for applicants and free up time 

for institutional staff to help other 

applicants. 

Discussion: The Department 

appreciates the commenters’ support. 

Changes: None. 

Comment: Many commenters opposed 

removing the institutional option to 

limit the total number of applicants who 

must be verified to 30 percent of all 

applicants. They argued that removing 

this limitation, which is reflected in 

current § 668.54(a)(2)(ii), would increase 

the workload of FAAs already struggling 

with reductions in staff and in State 

budgets, with a multitude of regulatory 

changes, and with increased 

enrollments. Some commenters noted 

that the Department currently targets 

Pell-eligible applicants for verification 

and were concerned that community 

colleges would be unduly impacted if 

the 30 percent limitation were removed. 

Commenters stated that more 

institutions may need to use the 30 

percent limit to manage their workload 

due to the large increase in applicants 

applying to institutions with open 

enrollment. Many commenters 

expressed concern that the Department 

would significantly increase the number 

of applicants whose FAFSAs are 

selected for verification if a limit is not 

established in the regulations. 

One commenter noted that additional 

study of the current verification process 

is needed to determine which 

corrections provide the most meaningful 

improvements in program integrity. 

A commenter recommended that we 

retain the 30 percent limit for at least 

two years, during which time we can 

monitor whether the proposed approach 

of targeting information to be verified, 

as reflected in § 668.56, actually reduces 

an institution’s burden. If, after this twoyear period, we have evidence to show 

that burden on institutions has been 

reduced, the commenter suggested that 

the limit on the percentage of applicants 

whose FAFSAs must be verified should 

be lifted or modified. 

Discussion: The Department reviews, 

studies, and analyzes verification data 

on an ongoing basis. Annually, the 

Department develops a comprehensive 

predictive model by applying 

sophisticated statistical techniques to 

FAFSA application data from the most 

recent application filing years along 

with corresponding payment data from 

those same years. The model is designed 

to identify the characteristics of FAFSA 

applications containing information that 

is likely to have errors which, if not 

corrected, will result in an improper 

payment of title IV, HEA program funds. 

The model contains a series of 

application groupings that identifies 

that application’s statistical likelihood 

of error. The Department selects 

applications with the highest likelihood 

of significant error for verification. 

We are confident that, when fully 

implemented, the targeted selection of 

FAFSA information to be verified will 

result in a more efficient and effective 

verification process. While some 

institutions, particularly those that 

enroll greater numbers of Pell Grant 

applicants, have more applicants whose 

FAFSA information is selected for 

verification, we believe that overall 

burden will be reduced across 

institutions. This is because for each 

applicant whose FAFSA information is 

selected, the items to be verified will be 

limited to specific items the Secretary 

has selected for that applicant (see 

proposed § 668.56(b)) rather than all five 

items listed in current § 668.56. For 

example, one applicant may be required 

to verify the five items required under 

the current regulations (because the 

Secretary includes them in the Federal 

Register notice published under 

§ 668.56(a) and specifies that those 

items must be verified for that one 

applicant) while another applicant may 

only be required to verify adjusted gross 

income (AGI) and household size 

(because the Secretary includes these 

two items in the Federal Register notice 

published under § 668.56(a) and 

specifies that these are the only items 

that must be verified for this applicant). 

The Department also notes that it does 

not view the 30 percent limitation as 

applying to its own enforcement and 

monitoring activities, including program 

reviews and audits. 

Changes: None. 

Comment: Some commenters asked 

the Department to clarify how subpart E 

of part 668 will affect institutions that 

are currently allowed to establish their 

own verification criteria under the 

Quality Assurance (QA) Program. 

Discussion: The changes made to the 

verification regulations in subpart E of 

part 668 will not diminish the 

importance of the QA Program. In fact, 

we are currently in the process of 

developing a plan to expand the number 

of institutions that participate in the QA 

Program. We are especially interested in 

increasing the participation of minority 

serving institutions, community 

colleges, proprietary institutions, and 

institutions that serve non-traditional 

students or that offer instruction in nontraditional ways. Also, the changes 

made to the verification regulations are 

not expected to alter the way the QA 

Program operates. In fact, the 

Department expects that data and 

results generated from institutions 

participating in the QA Program will 

help us assess the effectiveness of the 

new verification regulations in subpart 

E of part 668. 

Changes: None. 

Comment: Two commenters stated 

that the FAFSA information of 

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applicants who are incarcerated at the 

time verification would occur and 

applicants who are immigrants who 

recently arrived in the United States 

should not be subject to verification. 

One commenter noted that verification 

in these cases would require institutions 

to spend a significant amount of time 

explaining the Federal requirements to 

these applicants when their eligibility 

for aid may not be affected by the data 

gathered to complete verification. 

Another commenter stated that a 

dependent applicant whose parents are 

deceased or are physically incapacitated 

should also be excluded from 

verification. 

Discussion: We do not agree with the 

commenters. Applicants who are 

incarcerated, recent immigrants to the 

United States, or whose parents are 

physically incapacitated, should be able 

to provide the documentation required 

to complete verification by providing 

their institution with the documentation 

that was used to complete the FAFSA. 

An applicant whose parents are 

deceased would be independent and 

therefore there would be no verification 

of parental information on an 

independent student’s FAFSA. 

Changes: None. 

Comment: Several commenters 

expressed concern that the new process 

for verifying different FAFSA items 

would cause difficulties because, after 

one instance of verification, there 

potentially would be other items that 

the applicant would need to verify 

during subsequent transactions (a 

‘‘verification loop’’). One commenter 

suggested that if the Department uses 

the targeted approach for verification, it 

should limit verification selection to 

one time per applicant and accept a 

subsequent correction for that targeted 

item as closure of the verification 

process for that application. One 

commenter noted that repeated 

verification does not currently occur 

because, under the current regulations, 

applicants are required to verify all 

items the first time. One commenter 

expressed concern that multiple 

verifications may occur for one student 

if the institution submits corrections to 

CPS and the student also initiates 

changes to the ISIR data. The 

commenter recommended including 

some protections for institutions that 

submit corrections to ISIR data. One 

commenter asked for guidance on what 

an institution is required to do when an 

applicant is selected for verification, 

completes it, is then selected for 

verification again but fails to complete 

the second verification process. 

Discussion: As noted earlier, the 

Department has delayed 

implementation of the changes to 

subpart E of part 668, including 

§§ 668.54 and 668.56, which provide for 

the targeted approach to verification, 

until the 2012–13 award year. 

Therefore, for the 2011–12 award year, 

institutions will continue to verify, for 

all FAFSAs selected for verification by 

the Secretary, the five data items listed 

in current § 668.56. As we develop the 

selection criteria for determining which 

FAFSA information must be verified for 

an individual applicant (i.e., selection 

criteria for determining which FAFSA 

information is prone to error), we will 

build into the system procedures that 

limit the possibility of any applicant 

being subject to additional FAFSA items 

needing verification after the first 

selection has been made. However if our 

analysis shows that, based on 

submissions of corrections, additional 

FAFSA information should be verified, 

perhaps because it is inconsistent with 

the ‘‘corrected information,’’ an 

applicant may have to verify those 

additional items. 

In the NPRM, we inadvertently 

omitted § 668.54(a)(4) from the 

verification regulations. Under current 

§ 668.54(a)(4), if an applicant is selected 

for verification by the Secretary, the 

institution must require the applicant to 

verify the information as specified in 

§ 668.56 on each additional application 

the applicant submits for the award year 

except for information already verified 

for the applicable award year. We are 

restoring § 668.54(a)(4) to provide that if 

an applicant is selected by the Secretary 

to verify his or her FAFSA information, 

the institution must require the 

applicant to verify the information in 

accordance with § 668.56 if the 

applicant is selected for a subsequent 

verification of FAFSA information, 

except that applicant is not required to 

provide documentation for that FAFSA 

information previously verified to the 

extent that the FAFSA information 

previously verified remains unchanged. 

Under current regulations, an 

applicant who has completed 

verification once, whose FAFSA 

information is selected a second time for 

verification, is only required to verify 

FAFSA information not verified 

previously. When the revised 

§ 668.54(a)(4) becomes effective, such an 

applicant would be required to 

complete the second verification 

process if the FAFSA information 

selected has changed for that award 

year. If the applicant fails to do so, he 

or she may forfeit eligibility for title IV 

aid in accordance with § 668.60(b). 

Changes: We have revised § 668.54 by 

reinstating current § 668.54(a)(4) to 

provide that if an applicant is selected 

by the Secretary to verify his or her 

FAFSA information under 

§ 668.54(a)(1), the institution must 

require the applicant to verify the 

information as specified in § 668.56 if 

the applicant is selected for a 

subsequent verification of FAFSA 

information, except that applicant is not 

required to provide documentation for 

the FAFSA information previously 

verified to the extent that the FAFSA 

information previously verified remains 

unchanged. 

Comment: Some commenters 

suggested that the proposed verification 

requirements in subpart E of part 668 

would increase barriers for the neediest 

students to apply for financial aid to 

pursue higher education. 

Discussion: We do not agree. When 

this subpart is fully implemented in the 

2012–13 award year, the verification 

process is expected to be more efficient 

and effective for both students and 

institutions. Thus, we do not expect that 

these new requirements will add a 

burden or increase barriers for students, 

including those from low-income 

backgrounds. We have not been 

presented with any evidence to support 

that these requirements will increase 

barriers for the neediest students to 

apply for financial aid to pursue higher 

education. 

Changes: None. 

Updating Information (§ 668.55) 

Comment: While a few commenters 

supported the requirement in 

§ 668.55(a)(1)(ii), which may result in 

making dependency status updates in 

mid-year, many stressed the difficulties 

that would arise as a result of this 

requirement. A primary concern 

expressed was that this requirement 

would result in a substantial increase in 

burden for institutions, particularly 

because a student’s financial aid 

package is affected by the student’s 

dependency status. One commenter 

claimed that to comply with this 

requirement, institutions would need to 

hire extra staff, which would not be 

possible in the current economy. In 

addition, some commenters noted that 

there would be undesirable 

consequences for the student: One who 

marries and becomes independent could 

lose eligibility for the Pell Grants 

already awarded and received because 

the spouse’s financial data would be 

taken into account. Others stated that 

students might get married to increase 

their Pell eligibility or that divorce, 

rather than marriage, would decrease 

Pell eligibility; as one institution noted, 

many of its dependent students become 

eligible for more aid after they marry 

and become independent. Some 

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commenters requested that there be no 

change in this area or that FAAs be 

permitted to make dependency status 

changes under certain circumstances, 

such as during verification, or at their 

discretion. For example, one commenter 

suggested requiring the reporting of a 

change to dependency status until the 

first disbursement of title IV, HEA aid 

has been made and that if the 

dependency status update results in a 

change in the applicant’s EFC, the lower 

value should be used. A couple of 

commenters observed that students who 

married late in the award year would 

become independent and need to have 

their aid repackaged for the award year. 

One commenter opposed all mid-year 

dependency status changes because they 

undermine the ‘‘snapshot’’ approach to 

the application process and create a 

large administrative burden. Another 

commenter noted the potential for 

students who divorced and became 

dependent again to lose eligibility for 

the aid they received because their 

parents would refuse to provide 

information for the application. Still 

another remarked that it is hard for 

institutions to track dependency status 

during the award year because accurate 

tracking requires that students notify the 

institution of changes. One commenter, 

who stated that he appreciated that 

when an update is due to a change in 

the student’s marital status, institutions 

would only be required to make the 

update if notified by the student, also 

noted that this approach can penalize 

the student who is honest and reports 

the marital status change. This 

commenter argued that such a change in 

dependency status should be reflected 

in the application for the following year, 

as occurs under the current regulations. 

Another commenter suggested that 

although the Department affirmed that it 

is not the institution’s responsibility to 

initiate updating, this view ignores the 

burden imposed on institutions to 

resolve conflicts in information they 

receive from different sources. This 

commenter requested relief for 

institutions so that they would only 

need to make a dependency status 

change in ISIR information if the 

student or family was the source of the 

information supporting the dependency 

change. Another commenter asked 

whether institutions are required to 

keep track of potential dependency 

status changes that are indicated by 

other campus offices when the student 

does not report the change. One 

commenter asked that there be a cut-off 

date after which an institution would no 

longer be required to make dependency 

status changes. Another commenter 

agreed with the Department’s logic for 

not having a cut-off date, and asked that 

institutions be permitted to set their 

own date based on their academic 

calendar. 

One commenter who supported midyear dependency status changes 

requested that the Department allow 

updates to household size and number 

in college when there is a change in 

marital status. Another commenter 

asked for early implementation of 

§ 668.55(c) because students are 

adversely affected by the current 

regulations. 

Discussion: We agree that mid-year 

verification updates to household size 

and number in college and dependency 

status updates would be burdensome to 

institutions if they resulted from a 

change in a student’s marital status. 

Accordingly, we have revised 

§ 668.55(a) to provide that if an 

applicant’s dependency status changes 

at any time during the award year, the 

applicant must update his or her FAFSA 

information, except when the 

dependency status change is due to a 

change in the applicant’s marital status. 

Also, to reduce burden to institutions 

with regard to updating information, in 

§ 668.55(b)(2), we specify that an 

applicant is not required to provide 

documentation of household size, 

number in college, or the financial data 

of an applicant’s spouse during a 

subsequent verification of these data 

items if the information has not 

changed. However, new paragraph (c) of 

this section would allow the institution, 

at its discretion, to require an applicant 

to update the applicant’s marital status, 

even if it results in a change in the 

applicant’s dependency status, if the 

institution determines the update is 

necessary to address an inequity or to 

reflect more accurately the applicant’s 

ability to pay. 

In response to the comments about 

establishing cut-off dates for making 

updates, we note that under the revised 

provisions, an institution that decides to 

have marital status updated pursuant to 

§ 668.55(c) may also incorporate in its 

policy a cut-off date after which it will 

not consider any updates to a student’s 

marital status. 

Changes: We have revised § 668.55(a) 

to provide that if any of the factors that 

impact an applicant’s dependency 

status changes at any time during the 

award year, the applicant must update 

his or her FAFSA information, except if 

the item is the applicant’s marital status. 

Paragraph (b) of § 668.55 has been 

revised to provide that an applicant who 

is selected for verification of his or her 

household size or number in college 

must update those items to be correct as 

of the date of verification, except when 

the update is due to a change in the 

applicant’s marital status. As revised, 

§ 668.55(b)(2) also provides that an 

applicant is not required to provide 

documentation of household size or 

number in college during a subsequent 

verification for the same award year of 

either item if the information has not 

changed. Finally, paragraph (c) of 

§ 668.55 provides that an institution 

may, at its discretion, update an 

applicant’s marital status, even if the 

update will result in a change in the 

applicant’s dependency status if the 

institution determines the update is 

necessary to address an inequity or to 

reflect more accurately the applicant’s 

ability to pay. 

Comment: One commenter asked 

whether, when a student’s marital status 

is updated, the student must have his or 

her spouse’s income reported to the CPS 

for recalculation of the student’s EFC. 

Another commenter requested that the 

Department clarify how to treat income 

in cases when the student marries or 

divorces, regardless of whether 

verification was performed. A third 

commenter wondered why the 

household size and number in college 

items are updated while the income and 

assets items are not updated for new 

family members (e.g., the stepparent of 

a dependent student or the spouse of an 

independent student). 

Discussion: As we stated earlier in 

this preamble, we have revised § 668.55 

to provide that there is no updating of 

an applicant’s dependency status based 

on a change in marital status except at 

the discretion of an FAA. In such cases 

where an FAA chooses to update a 

student’s dependency status as a result 

of a change in the student’s marital 

status regardless of whether the student 

is being verified, all of the information 

must be consistent with the change to 

the marital status. This includes income 

(either adding the spouse’s income or 

deducting a former spouse’s income) as 

well as household size and number in 

college. Note, however, that the revised 

regulations do not allow for updating 

when an otherwise independent student 

marries or divorces, i.e., there is no 

change in dependency status and the 

student is not selected for verification. 

During verification, household size 

and number in college are updated, but 

the income and assets of new family 

members are not typically includable 

items on the FAFSA; for example, the 

income or assets of a grandparent who 

comes to live in the dependent student’s 

family would not be includable. 

Moreover, section 475(f)(3) of the HEA 

excludes a stepparent’s income and 

assets from being reported on the 

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FAFSA when a dependent student’s 

parent remarries after the FAFSA was 

submitted, though we have stated for 

several years in the Application and 

Verification Guide that an institution 

may use professional judgment to 

include the stepparent’s financial 

information. 

Changes: As noted earlier in this 

discussion, we have revised § 668.55 to 

provide that applicants are not required 

to update their household size, number 

in college, and dependency status when 

the update is needed as a result of a 

change in the student’s marital status, 

unless the institution chooses to update 

those items. When the institution 

determines that updates are required as 

a result of a change in a student’s 

marital status, the student’s FAFSA 

information needs to reflect the accurate 

household size, number in college, 

dependency status, and the spouse’s 

financial information. 

Comment: Some commenters 

questioned whether, when completing 

the FAFSA, students could project their 

marital status. One commenter argued 

that students should not be able to 

project marital status as they project 

household size based on unborn 

children. 

Discussion: Because projected marital 

status is prone to error, applicants may 

not project their marital status when 

completing the FAFSA. 

Changes: None. 

Comment: A few commenters asked 

whether the student or the institution is 

responsible for updating information 

that impacts dependency status. 

Discussion: Students and institutions 

both are able to update information that 

impacts an applicant’s dependency 

status. Students can use FAFSA 

Corrections on the Web (COTW) or a 

paper SAR to submit updates. 

Institutions can use FAA Access to CPS 

Online or other Departmental electronic 

processes to submit updates on the 

student’s behalf. 

Changes: None. 

Comment: One commenter asked us 

to clarify whether an institution must 

process a change in dependency status 

if a student is no longer enrolled at the 

institution. 

Discussion: An institution is not 

required to process a change in an 

applicant’s dependency status if the 

student does not enroll or is no longer 

enrolled at the institution. However, if 

the student subsequently enrolls or 

reenrolls for the award year, required 

updates must be made. 

Changes: None. 

Information To Be Verified (§ 668.56) 

Comment: Several commenters 

expressed concern that even though the 

number of items to be verified under the 

new targeted approach reflected in 

§ 668.56 will be reduced, the new 

approach will not alleviate the burden 

on the applicant or the institution 

because the institution must still 

identify and resolve discrepancies in the 

information the institution receives 

from different sources pursuant to 

§ 668.16(f). For example, if a student 

were selected to verify AGI or untaxed 

IRA income, and the documentation for 

that is the tax return, the institution will 

need to check the other data on the tax 

return to ensure there are no conflicts 

with what was reported on the FAFSA. 

One of these commenters stated that it 

will continue to require full verification 

of all data items and to collect all 

documentation unless the applicant 

uses the IRS Data Retrieval Process. 

Another commenter suggested that 

relaxing the requirement to resolve 

discrepancies in information under 

§ 668.16(f) would be a reasonable 

solution if the Department is using 

historical data that supports targeting 

specific data elements. 

Discussion: Under § 668.16(f), an 

institution is required to resolve 

discrepancies in the information it 

receives from different sources with 

respect to a student’s application for 

financial aid under the title IV, HEA 

programs. Therefore, conflicting 

information between the FAFSA 

information and other information at the 

institution must be resolved, and these 

regulations under subpart E do not 

change this. We have no reason to 

believe that the new approach to 

selecting items for verification will 

increase instances of conflicting 

information since any such conflicts 

would occur under the current 

regulations where every applicant 

selected for verification must verify 

information from a tax return. 

Changes: None. 

Comment: Some commenters 

disagreed with the proposed targeted 

approach to select items to be verified 

reflected in § 668.56 because they 

predicted that it would add to the 

burden of institutions. One commenter 

stated that having verifiable items 

different from the current five would 

require institutions to modify their 

automated correspondence and other 

processes. This would result in the use 

of more paper at a time when 

institutions are trying to reduce their 

carbon footprint. 

Discussion: While a change in the 

number and type of verifiable items will 

require some work by financial aid 

offices, we believe that there should not 

necessarily be an increase in paper use 

and that once systems are automated, 

any additional administrative burden 

should be minimized. In fact, the use of 

the IRS Data Retrieval Process will 

reduce the amount of FAFSA 

information that institutions are 

required to verify and decrease the 

documentation an institution must 

collect and maintain. We believe the 

benefits to institutions and to students 

as a result of this process justify any 

extra work that institutions and students 

will experience in the short term. 

As explained earlier in this preamble, 

we are delaying the effective date for the 

changes to subpart E of part 668 until 

July 1, 2012, the 2012–13 award year. 

This will allow more time for 

institutions to prepare. 

Changes: None. 

Comment: Various commenters 

observed that because the items for 

verification will be unpredictable, 

institutions will not be able to inform 

applicants and parents before receiving 

the ISIR what documentation will be 

required for verification. Commenters 

requested that the Department provide 

the expected date for publishing the set 

of verifiable items in the Federal 

Register in advance so that institutions 

have time to implement any changes in 

the items to be verified. Commenters 

requested advance notice as late as midDecember to as early as 5 or 6 months 

prior to the beginning of the application 

cycle each January. Commenters stated 

that institutions will have difficulties 

setting up complicated systems and 

training aid administrators and other 

staff to comply with the changes 

reflected in the new approach to 

verification, especially given limited 

resources on so many campuses. One 

commenter asked the Department to set 

a maximum number of items that can be 

selected for verification each year. Some 

commenters suggested having multiyear sets of verification items, rather 

than different ones each year, to 

expedite the verification process and to 

allow institutions time to plan. One 

commenter asked that each year the 

Department obtain public comment on 

the selection criteria the Department 

will use to select items for verification. 

One commenter asked how institutions 

would verify applicants’ FAFSAs 

consistently for the overlap of two 

processing years. Another commenter 

asked that the new regulations be 

delayed until the IRS Data Retrieval 

Process is fully implemented, while 

another commenter asked for a safe 

harbor period during crossover periods 

when institutions can use the old 

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verification criteria, or adopt early the 

new criteria. 

Discussion: While institutions will 

need to wait for the receipt of the ISIR 

before requesting specific verification 

documentation from applicants, we do 

not envision that this will substantially 

delay the time required for applicants to 

complete verification. During the early 

years of implementation of the targeted 

approach to verification, there will be 

stability in the FAFSA information the 

Secretary selects from year to year. For 

example, we would retain the five items 

included in the current regulations and 

supplement them as needed. However, 

it is unlikely that an applicant would 

have to verify all five data elements. 

We will publish in the Federal 

Register the set of potential verification 

items the Department intends to verify 

for an upcoming award year four to six 

months prior to the start of the 

application processing year (January 1, 

2012 for the 2012–13 award year) to give 

institutions time to modify their 

systems. The maximum number of items 

that could be selected for verification in 

any given year is the entire list of items 

we plan to publish in the Federal 

Register notice for that year. Because 

the selection of verification items for a 

particular award year will be based 

upon a sophisticated statistical analysis 

of prior year and other relevant data, we 

do not anticipate the Federal Register 

notice providing multi-year selection 

criteria, nor, for the same reason, do we 

intend to solicit public comments on the 

verification items we select. 

To verify an applicant’s FAFSA 

information that overlaps two 

processing years, the institution must 

determine which award year’s EFC will 

be used and apply the verification 

criteria established for that award year. 

Changes: None. 

Comment: Various commenters 

expressed concern that the new 

approach for targeting items for 

verification will unfairly affect 

traditionally black, community, and 

career colleges. One commenter 

requested that we not use the 

verification process to target lowincome demographic groups and that 

we consider some kind of relief for these 

groups regarding discrepancies in 

information under § 668.16(f). Another 

commenter questioned whether the new 

approach for targeting items for 

verification could be seen as a means of 

profiling applicants. 

Discussion: Historically the 

Department has used verification to 

focus on those FAFSAs that are likely to 

include errors that will result in 

incorrect awards. It is not our intent to 

single out any demographic population 

or a particular type of institution; rather, 

our goal is to continue to select for 

verification FAFSA information that 

most likely needs to be corrected. 

As stated earlier, § 668.16(f) requires 

an institution to resolve discrepancies 

in the information it receives from 

different sources and these regulations 

under subpart E will not change this 

requirement. 

Changes: None. 

Comment: One commenter asked if 

verification should be required when a 

student appeals for a professional 

judgment change to the cost of 

attendance. 

Discussion: We do not plan to add to 

the list of verification exclusions in 

§ 668.54(b) students who request a 

professional judgment change. 

Changes: None. 

Comment: Several commenters stated 

that an exclusion from verification 

could be granted when the student or 

parent used the IRS Data Retrieval 

Process to supply income and tax data 

on the FAFSA. 

Discussion: Section 668.57(a)(2) of the 

new regulations codifies our 

determination that in instances when an 

applicant or parent is required to have 

his or her AGI, taxes paid, or income 

earned from work verified, the 

institution may consider as acceptable 

documentation the information reported 

by the student on the FAFSA and 

reported to the institution on the ISIR if 

the Secretary has identified those items 

as having come from the IRS and as 

having not been changed. The Secretary 

will so indicate by a flag on the ISIR that 

the information came directly from the 

IRS and was not changed. There will be 

separate flags for the student’s 

information and, if applicable, for the 

parents’ information. 

Changes: None. 

Comment: One commenter expressed 

concern that students will be confused 

and will miss the verification 

information on their SAR. The 

commenter stated that the verification 

worksheet will not work anymore 

because not all items will be used for 

each student and asked if institutions 

will need to develop their own 

interchangeable forms that will list only 

those items an applicant or parent must 

verify. 

Discussion: Institutions have always 

been able and will continue to be able 

to develop and use their own 

verification worksheets as long as it 

captures the essential verification items. 

Institutions could create a single form 

with all the verification criteria for the 

coming award year and select for each 

student the pertinent items, or they 

could modify their form so that each 

student receives an individualized 

request for documentation. We will 

work with the community to determine 

if there still is a need for a Departmentdeveloped verification worksheet, and, 

if so, how it should be formatted. 

Changes: None. 

Comment: One organization requested 

that we create unique codes on the ISIR 

that correspond with each verification 

item so that institutions can automate 

their correspondence with applicants 

and other processes. Another 

commenter suggested that comments 

included on the SAR should be 

expanded to assist the applicant in 

sending the documentation to verify the 

specific items selected for verification to 

the institution he or she is seeking to 

attend. 

Discussion: As suggested by the 

commenters, we will include on each 

applicant’s ISIR item specific flags that 

will indicate which items need to be 

verified. We will also provide 

notification to the applicant on the 

Student Aid Report (SAR) of the need to 

have information verified. 

Changes: None. 

Comment: One commenter asked that 

the Department be responsible for 

completing verification and that the 

Department report to institutions when 

an applicant’s aid can be disbursed. 

Discussion: The commenter’s request 

has been suggested before, and we have 

determined that most institutions are 

not interested in the Department 

performing verification and would, 

notwithstanding the workload, prefer to 

work with students directly. 

Changes: None. 

Acceptable Documentation 

(§ 668.57(a)(2), (a)(4)(ii)(A), (a)(5), (a)(7), 

and (d)) 

Comment: One commenter suggested 

that, for applicants and parents who 

have not filed their taxes prior to filling 

out the FAFSA and who indicate that 

they will be filing, the CPS should 

automatically draw down the IRS data 

and send a reprocessed ISIR, once the 

applicant files the required tax returns. 

A commenter noted that the IRS Data 

Retrieval Process would not benefit 

applicants and their families who 

complete the FAFSA (using estimated 

income) prior to completing their 

Federal income tax return in order to 

meet various State aid deadlines. One 

commenter asked whether data 

retrieved from the IRS can be used to 

make corrections to a FAFSA if the IRS 

Data Retrieval Process was not used to 

complete the original FAFSA. In this 

situation, the commenter asked whether 

the corrected data would be considered 

verified. 

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Discussion: Under our current 

agreement with the IRS, only the tax 

filer, at the time he or she is completing 

the FAFSA or, starting in 2011–12, at 

the time he or she is making corrections, 

can request that IRS tax information be 

displayed and only the tax filer can 

choose to have that information 

imported into the applicant’s FAFSA for 

initial filings or into the CPS record for 

corrections. However, working with the 

IRS we have been able to mitigate 

(although not eliminate) the inherent 

calendar conflicts between the 

beginning of a FAFSA processing year 

in January, the many State and 

institutional deadlines occurring as 

early as February, and the IRS tax return 

filing timelines. Beginning with the 

2011–12 processing year, the IRS plans 

to provide applicants and their families 

with FAFSA on the Web access to tax 

return information within 

approximately 10 days of the return’s 

filing date if the return was filed 

electronically and within two weeks if 

a paper return was filed. Also, 

beginning with the 2011–12 FAFSA 

processing year, applicants and parents 

will be able to access IRS tax return 

information using the FAFSA COTW 

process. Thus, many applicants, who, 

because of their original FAFSA filing 

date (or for any reason), did not use the 

IRS Data Retrieval Process when they 

originally completed the FAFSA will be 

able to use the process to ‘‘correct’’ the 

original FAFSA information. Like 

applicants who use the IRS Data 

Retrieval Process when originally 

completing the FAFSA, if applicants 

and parents use the FAFSA COTW 

process to import IRS data on the 

FAFSA, the institution may consider 

that data as acceptable documentation 

in accordance with § 668.57(a)(2) if that 

data was not changed. As mentioned 

earlier, an applicant’s ISIR will indicate 

that the information came directly from 

the IRS and was not changed. 

Changes: None. 

Comment: Several commenters 

supported the IRS Data Retrieval 

Process, which will allow applicants 

and their families to import data 

obtained from the IRS to populate an 

applicant’s online FAFSA. Many 

commenters agreed that this process 

will reduce an institution’s burden and 

help expedite the financial aid process 

by not requiring verification of IRS 

imported data; however, one commenter 

argued that it would be more 

appropriate to eliminate FAFSAs 

populated with IRS data through the IRS 

Data Retrieval Process entirely from 

verification. 

Discussion: The Department 

appreciates the commenters’ support. 

We do not agree that individuals who 

retrieve income and tax data from the 

IRS should be exempt from the 

verification process because not all 

FAFSA information can be imported 

from the IRS database and an 

applicant’s FAFSA may be selected for 

verification as a result of a data item 

that cannot be retrieved from the IRS. 

However, as discussed earlier in this 

preamble, an institution may consider 

as acceptable documentation IRS 

retrieved information if the Secretary 

has identified those items as having 

come from the IRS and not having been 

changed. We are exploring a process 

that would automatically exclude from 

verification FAFSA items that came 

from the IRS and were not changed. 

Changes: Section 668.57(a)(2) has 

been revised to clarify that an 

institution may use IRS transferred data 

as acceptable documentation for 

verification purposes if it is limited to 

the IRS data that was transferred for the 

specific award year, and the Secretary 

has identified the data as having been 

obtained from the IRS and not having 

been changed. 

Comment: One commenter questioned 

whether applicants should be allowed 

to use data from the second processing 

tax year because that data may not 

accurately reflect a student’s or parent’s 

current income. The commenter 

asserted that the use of these data may 

cause confusion when completing the 

FAFSA and that this, in turn, will 

increase burden on institutions, which 

will be responsible for responding to 

increased requests for professional 

judgment reviews. 

Another commenter pointed out that 

using data from the second processing 

tax year would not benefit some 

California Community Colleges that 

have a high population of families who 

have experienced job losses. 

Discussion: Section 480(a) of the HEA 

gives the Secretary the option of using 

income and other data from the second 

preceding tax year to calculate an 

applicant’s EFC. While the Department 

does not plan to exercise this option at 

this time, we believe it is appropriate to 

include this provision in the regulations 

to allow for this flexibility in the future. 

We are revising § 668.57(a)(1)(i), 

(a)(1)(ii), (a)(1)(iii) to make conforming 

changes consistent with other 

paragraphs under this section that 

clarify the specific year that the 

documentation provided for under this 

section must be submitted to the 

institution. 

Changes: Section 668.57 has been 

revised in paragraphs (a)(1)(i), (a)(1)(ii), 

(a)(1)(iii), and (a)(2) to add the phrase 

‘‘for the specified year’’ as defined under 

§ 668.52. 

Comment: We received a number of 

comments expressing concern regarding 

the operational aspect of the IRS Data 

Retrieval Process. For instance, a few 

commenters were unclear if an 

applicant, whose marital status has 

changed since filing an income tax 

return, could use the IRS Data Retrieval 

Process to import only his or her data 

from an income tax return filed jointly. 

Another commenter asked if the 

appropriate fields from a married 

couple’s separately filed tax return 

would be added together before the data 

are imported into an online FAFSA. 

Discussion: For the reasons noted by 

the commenters, the IRS Data Retrieval 

Process has not and will not be offered 

to an applicant (or parent) whose 

marital status changed after the end of 

the tax year. Also, because the current 

configuration of the IRS Data Retrieval 

Process cannot access both tax returns 

when a married applicant or the married 

parents of a dependent student filed 

separately (IRS Filing Status of ‘‘Married 

Filing Separately), our FAFSA on the 

Web instructions advise such tax filers 

not to use the IRS Data Retrieval 

Process. Similarly the IRS Data Retrieval 

Process cannot extract the income of 

one individual that filed jointly. We are 

working with the IRS to find a 

resolution to this issue. In the 

meantime, if an institution is aware that 

such individuals did use the IRS Data 

Retrieval Process the institution must 

collect tax return information from the 

other spouse. 

Changes: None. 

Comment: One commenter noted that 

most Pell-eligible applicants would not 

benefit from the IRS Data Retrieval 

Process since they are not required to 

file a Federal tax return because they do 

not earn enough. Therefore, this 

commenter argued that these applicants 

and the institutions that serve them 

would not experience the reduction in 

burden the IRS Data Retrieval Process is 

expected to provide. 

Discussion: The commenter is correct. 

Changes: None. 

Comment: One commenter requested 

guidance on the level of knowledge 

FAAs are expected to have regarding tax 

filing requirements. Specifically, the 

commenter expressed concern that 

FAAs may not have the knowledge 

necessary to ensure that applicants are 

filing their tax returns under the correct 

tax filing status (i.e., single, married 

filing jointly, married filing separately, 

and head of household). 

Discussion: We do not expect FAAs to 

be experts in IRS and tax filing 

requirements. However, FAAs are 

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expected to have a basic understanding 

of relevant tax issues that can 

considerably affect an applicant’s 

eligibility. We expect FAAs to be able to 

ascertain whether an applicant or his or 

her family members identified on the 

applicant’s FAFSA were required to file 

a tax return, what the correct filing 

status for the applicant should be, and 

that an individual cannot be claimed as 

an exemption by more than one person. 

Changes: None. 

Comment: One commenter asked for 

clarification on whether institutions 

have the authority to require an 

individual who is required to file a U.S. 

tax return but who has been granted a 

filing extension by the IRS to submit tax 

documents before proceeding with 

verification. Another commenter asked 

why the Department would not require 

the actual tax return filed with the IRS 

to be used to complete verification for 

a student or parent that files a tax 

extension. This commenter stated that a 

student should not receive any aid until 

verification is completed using the 

actual tax return (not the documentation 

provided under § 668.57(a)(4)(ii)). 

Another commenter supported the 

requirement that an applicant who is 

granted an extension to file his or her 

income tax return must submit a copy 

of the return that was filed, and the 

institution must re-verify the AGI and 

taxes paid by the applicant and his or 

her spouse or parents. 

Discussion: Section 668.57(a)(4)(ii)(A) 

provides that an institution must accept 

a copy of IRS Form 4868, ‘‘Application 

for Automatic Extension of Time to File 

U.S. Individual Income Tax Return,’’ 

that was filed with the IRS or a copy of 

the IRS’s approval for an extension 

beyond the automatic six-month 

extension as acceptable documentation 

to verify an applicant’s FAFSA 

information for an applicant that has 

been granted a tax filing extension. An 

institution may request a copy of the tax 

return once filed, but it may not delay 

verifying an applicant’s FAFSA 

information until the tax return is 

received if the applicant provides the 

documentation approved by the 

Secretary under § 668.57. 

The Department does not require an 

applicant that has been granted a tax 

extension to submit the actual tax return 

filed with the IRS because of the 

extended period of time that may elapse 

before the applicant actually files the 

return. This would delay the applicant’s 

aid, which we believe would be 

inappropriate. We believe the income 

information collected on IRS Form 4868 

and IRS Form W–2 should be sufficient 

documentation to verify the AGI, 

income earned from work, or U.S. taxes 

paid if those items are selected for 

verification. However, the regulations 

do provide that the institution may 

require the applicant to submit the 

actual tax return that was filed with the 

IRS. If the institution receives a copy of 

the return, it must reverify the AGI and 

taxes paid by the applicant and his or 

her spouse or parents. 

We believe clarification is needed for 

the one commenter who appeared to 

interpret § 668.57(a)(5) to mean that in 

all cases applicants who are granted a 

tax extension must submit the actual tax 

return once it is filed, and that the 

institution must reverify the AGI and 

taxes paid by the applicant and his or 

her spouse or parents once it receives 

the filed return. An applicant who files 

an extension is only required to provide 

a copy of the tax return that was filed 

if the institution requires a copy. Only 

if the institution requires the applicant 

to submit the tax return that was filed 

would the institution be required to 

reverify the AGI and taxes paid by the 

applicant and his or her spouse or 

parents. This differs from what occurs 

under the current regulations. Under the 

current regulations, if an institution 

required an applicant who was granted 

a tax filing extension to submit the 

return to the institution once it was 

filed, the institution could decide 

whether or not to reverify the AGI and 

taxes paid by the applicant and his or 

her spouse or parents. 

Changes: None. 

Comment: None. 

Discussion: We are making a technical 

change to § 668.57(a)(4)(iii)(B) to clarify 

that an individual who is self-employed 

or who has filed an income tax return 

with a foreign government must provide 

a signed statement that certifies the 

amount of taxes paid in addition to his 

or her AGI. 

Changes: Section 668.57(a)(4)(iii)(B) 

has been revised to provide that an 

institution must accept a written 

certification of the amount of taxes paid 

for an individual who is self-employed 

or has filed an income tax return with 

a foreign government. 

Comment: One commenter sought 

clarification on § 668.57(a)(7), which 

provides that an institution may accept 

in lieu of a copy of an income tax return 

signed by the filer of the return or one 

of the filers of a joint return, a copy of 

the filer’s return that includes the 

preparer’s Social Security Number, 

Employer Identification Number or the 

Preparer Tax Identification Number and 

has been signed by the preparer of the 

return or stamped with the name and 

address of the preparer of the return. 

The commenter asked whether it would 

be acceptable for the preparer to write 

or type his or her name on a filer’s tax 

return. The commenter noted that 

guidance in the 2010–11 Application 

and Verification Guide is much broader, 

as it allows the preparer to stamp, type, 

sign, or print his or her name on a filer’s 

tax return. 

Discussion: We agree with the 

commenter and have revised 

§ 668.57(a)(7) to expand the options a 

tax preparer has for being identified on 

an applicant’s tax return to make it 

consistent with the guidance provided 

in the 2010–11 Application and 

Verification Guide. 

Changes: We have revised 

§ 668.57(a)(7) to provide that in addition 

to having the preparer’s signature or 

stamp on a filer’s tax return, the 

institution may accept a paper return on 

which the tax preparer has typed or 

printed his or her own name. 

Interim Disbursements (§ 668.58(a)(3)) 

Comment: Some commenters 

supported § 668.58(a)(3), which allows 

an institution to make an interim 

disbursement prior to receiving the 

reprocessed SAR or ISIR if, after 

verification, the institution determines 

that changes to the applicant’s 

information will not change the amount 

the applicant would receive under a 

title IV, HEA program and the 

requirement in § 668.59(a) that requires 

institutions to submit all corrections to 

the Department for reprocessing. One 

commenter did not support allowing an 

institution to disburse aid to a student 

before the student’s corrected FAFSA 

information has been submitted and the 

institution receives a reprocessed SAR 

or ISIR. 

Discussion: The Department 

appreciates the commenters’ support 

and notes that interim disbursements 

are optional, not required. 

Changes: None. 

Comment: One commenter stated that 

because all corrections must be 

submitted to the Department under 

§ 668.59(a), there is no need to allow 

interim disbursements. This commenter 

recommended that we remove from the 

regulations all provisions related to 

interim disbursements. 

Discussion: We believe it is important 

to continue to give institutions the 

flexibility to determine whether to make 

interim disbursements to individual 

applicants prior to the completion of 

verification to alleviate a hardship a 

student may experience if there is a 

delay in receiving his or her financial 

aid. And, as noted earlier, interim 

disbursements are optional, not 

required. 

Changes: None. 

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Comment: One commenter indicated 

that there is a problem with the crossreferences in proposed § 668.58. The 

same commenter also expressed concern 

that this provision does not make clear 

how interim disbursements for the FWS 

Program are treated if the student after 

working is determined to have an 

overpayment. 

Discussion: We agree with the 

commenter that there are problems with 

the cross-references for interim 

disbursements in proposed § 668.58. 

Specifically, we believe that in 

§ 668.58(a)(1) and (a)(3)(i), we need to 

clarify that corrections to the student’s 

FAFSA information must be made in 

accordance with § 668.59(a). In 

addition, in proposed § 668.58(b) we 

had an erroneous cross-reference for the 

interim disbursements made under the 

FWS Program. Proposed § 668.58(b) also 

did not cross-reference each type of 

interim disbursement that is allowed 

under certain conditions, either before 

verification is completed or after 

verification is completed but before the 

institution has received the valid SAR 

or valid ISIR reflecting the corrections. 

For clarity, we believe it is appropriate 

to revise § 668.58(b) so that it addresses 

each type of interim disbursement. 

Further, we believe that specific crossreferences to § 668.61 need to be added 

to § 668.58(b) to clarify how institutions 

must handle any overpayments that 

occur because of an interim 

disbursement such as under the FWS 

Program. 

Changes: We have revised 

§ 668.58(a)(1) and (a)(3)(i) by clarifying 

that corrections to a student’s FAFSA 

information must be made in 

accordance with § 668.59(a). In 

addition, we have revised § 668.58(b) to 

correctly and completely cross-reference 

each type of interim disbursement that 

is allowed. Further, we have revised 

§ 668.58(b) to explain, with more 

specificity, how institutions must 

handle the recovery of each type of 

overpayment due to an interim 

disbursement, including those made for 

the FWS Program. We also added 

specific cross-references to § 668.61 in 

§ 668.58(b) to provide clarity to 

institutions on handling the recovery of 

any overpayments that may occur 

because of an interim disbursement. 

Consequences of a Change in an 

Applicant’s FAFSA Information 

(§ 668.59) 

Comment: A number of commenters 

agreed with the proposal to remove the 

$400 tolerance reflected in current 

§ 668.59(a) and, instead, to require all 

changes to an applicant’s FAFSA 

information be reported to the 

Department for reprocessing to ensure a 

student’s award is based on accurate 

information. 

Several other commenters objected to 

the proposal to remove the dollar 

tolerance because they believed it 

would increase administrative burden, 

particularly for larger institutions, and 

would delay payments to students. One 

commenter noted that the current 

tolerance allows FAAs to use their own 

judgment to determine when it was 

necessary to reprocess corrections that 

have minimal impact on student 

eligibility. 

One commenter noted that removing 

the $400 tolerance will not be a problem 

for institutions but, like many other 

commenters, opposed requiring all 

changes to an applicant’s FAFSA 

information to be submitted to the 

Department for reprocessing. The 

commenter expressed concern about 

this requirement, especially when the 

student’s eligibility either would not be 

affected or where there were minor 

errors, i.e., an AGI was off by $1. One 

commenter recommended that the 

Department consider providing 

institutions with some administrative 

relief in this area, given that institutions 

will need to implement several other 

changes as a result of the issuance of 

these verification regulations. Many 

commenters recommended that the 

Department retain the current $400 

tolerance or allow for a reasonable 

tolerance of a modest sum to allow for 

minor errors made by applicants and 

their families. 

Discussion: We appreciate the 

concerns raised by commenters and 

acknowledge the burden associated with 

having to submit all changes to an 

applicant’s FAFSA information to the 

Department for reprocessing. While our 

goal is to obtain the most accurate data 

available to help in our efforts to 

identify error-prone applications, we 

agree that the regulations should 

provide a means for dealing with minor 

errors in financial information reported 

on an applicant’s FAFSA information 

without requiring that these minor 

changes be submitted to the Department 

for reprocessing. While we do not agree 

that it is appropriate to retain the $400 

tolerance from current § 668.59(a), we 

are revising § 668.59 to address minor 

errors in financial information so that 

institutions need not submit changes 

resulting from these types of errors to 

the Department for reprocessing. It is 

important to note, however, that 

institutions will still be required to 

submit all errors in nonfinancial 

information to the Department for 

reprocessing. 

Specifically, we have revised 

§ 668.59(a) to require institutions to 

submit, for reprocessing, any change to 

an individual data element on an 

applicant’s FAFSA that is $25 or more. 

For example if the difference reported 

for AGI is $24, and taxes paid is $20, the 

institution would not be required to 

submit changes to the Department for 

reprocessing. However, if the difference 

for AGI is $25, and $20 for taxes paid, 

the institution would be required to 

update all changes, not just the change 

that exceeded the tolerance. 

We also made conforming changes in 

§ 668.164(g)(2)(i) to reflect that any 

dependent student, whose parent is 

applying for a Direct PLUS Loan must 

complete a FAFSA in accordance with 

section 483 of the HEA in order to 

obtain a SAR or ISIR with an official 

EFC to meet the conditions for a late 

disbursement. 

In addition we have amended 

§ 668.164(g)(4)(iv) to reflect the changes 

that were made under § 668.59(a) that 

require all changes to an applicant’s 

FAFSA information be submitted to the 

CPS System for correction, except 

financial data that is less than $25. 

Therefore, an institution may not make 

a late disbursement of any title IV, HEA 

assistance until it obtains a valid SAR 

or valid ISIR. 

Changes: We have revised § 668.59(a) 

to provide that if an applicant’s FAFSA 

information changes as a result of 

verification, the applicant or the 

institution must submit to the Secretary 

any change to a nondollar item on the 

FAFSA and any change to a dollar item 

on the FAFSA if the change to that 

dollar item is $25 or more. 

We have revised § 668.164(g)(2)(i) to 

require an applicant whose parent is 

applying for a Direct PLUS loan to have 

a SAR or ISIR with an official EFC to 

meet the conditions for a late 

disbursement. 

We have also revised 

§ 668.164(g)(4)(iv) to provide that an 

institution may not make a late 

disbursement of any title IV, HEA 

program assistance unless it receives a 

valid SAR or valid ISIR for the student 

by the deadline date established by the 

Secretary in a Federal Register notice. 

Comment: One commenter stated that 

it is not opposed to requiring that 

institutions submit all corrections to 

CPS but expressed concern with the 

increased number of applicants selected 

for verification when there is a change 

to a school code or address. 

Discussion: It is true that, in a limited 

number of instances, verification could 

be triggered when an applicant makes a 

correction to his or her address or to a 

school code. This is because the 

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statistical analysis that determines 

whether an applicant’s record or a 

particular item should be verified due to 

the likelihood of error includes factors 

beyond those that are used to calculate 

the EFC. We do not believe that the 

number of these instances will be 

significant. 

Changes: None. 

Comment: One commenter indicated 

that the proposed regulations are 

confusing with respect to the handling 

of overpayments due to interim 

disbursements made after an applicant 

had been selected for verification, and 

the handling of overpayments due to 

disbursements made before an applicant 

was selected for verification. 

Discussion: We agree with the 

commenter that proposed § 668.59(b), 

(c), and (d) may be confusing because 

these paragraphs do not clearly state 

how institutions must handle an 

overpayment that is the result of interim 

disbursements made after the applicant 

is selected for verification. Further, 

proposed § 668.59(b), (c), and (d) may 

also be confusing because these 

paragraphs do not clearly state how 

institutions must handle an 

overpayment that is the result of a 

disbursement that is made before the 

applicant is selected for verification but 

that is later discovered to be an 

overpayment. While proposed 

§ 668.59(b), (c), and (d) was intended to 

describe how to handle an overpayment 

in both of these situations if the 

applicant is receiving aid under the 

subsidized student financial assistance 

programs, we believe that further 

changes are needed so that this section 

clearly states that an institution must 

comply with both the procedures in 

§ 668.61 for an interim disbursement 

that is determined later to be an 

overpayment, and the appropriate 

overpayment requirements in the 

applicable program regulations for 

overpayments discovered during 

verification that were due to 

disbursements made prior to a student 

being selected for verification. 

Changes: We have revised § 668.59(b), 

which covers the consequences of a 

change in an applicant’s FAFSA 

information as the result of verification 

for the Federal Pell Grant Program, to 

provide that for purposes of the Federal 

Pell Grant Program the institution must 

follow the procedures in § 668.61 for 

handling overpayments due to interim 

disbursements, and the procedures in 

§ 690.79 for overpayments that are not 

the result of interim disbursements. 

We have also revised § 668.59(c), 

which covers the consequences of a 

change in an applicant’s FAFSA 

information as the result of verification 

for the subsidized student financial 

assistance programs, excluding the 

Federal Pell Grant Program. Section 

668.59(c) also covers the Direct 

Subsidized Loan Program that was 

handled originally in proposed 

§ 668.59(d). As revised, § 668.59(c) now 

provides that the institution must follow 

the procedures in § 668.61 for handling 

overpayments due to interim 

disbursements, including for the FWS 

Program. Further, § 668.59(c) now 

provides that the institution must follow 

the procedures in § 673.5(f) for handling 

overpayments that are not the result of 

interim disbursements under the 

Federal Perkins Loan or FSEOG 

programs. Finally, we have revised 

§ 668.59(c) to also provide that the 

institution must follow the procedures 

in § 685.303(e) for handling 

overpayments that are not the result of 

interim disbursements under the Direct 

Subsidized Loan Program. 

The content in § 668.59(d) has been 

incorporated into paragraph § 668.59(c). 

Deadlines for Submitting 

Documentation and the Consequences 

of Failing To Provide Documentation 

(§ 668.60(c)(1)) 

Comment: Two commenters 

concurred with the provision under 

proposed § 668.60(c)(1) that allows a 

student who completes verification 

while the student is no longer enrolled 

to be paid based on the valid SAR or 

valid ISIR. These commenters stated 

that this approach was preferable to 

current § 668.60(c)(1), which provides 

that the student is paid based on the 

higher of the two EFCs if the student 

submits a valid SAR or valid ISIR while 

the student is no longer enrolled. Under 

that approach, the student would 

receive the lesser amount of a Federal 

Pell Grant. 

Discussion: We appreciate the 

commenters’ support. 

Changes: None. 

Comment: One commenter 

encouraged the Department to allow 

institutions to implement § 668.60(c)(1) 

prior to the 2011–12 award year. 

Discussion: While we appreciate the 

commenter’s desire to implement this 

provision prior to the 2011–12 award 

year, we believe that allowing early 

implementation would interfere with 

policies already in place for the 2010– 

11 award year, and how that may 

impact aid already disbursed, i.e., how 

to account for aid disbursed for a 

summer term that was assigned to the 

prior award year. As noted earlier in 

this preamble, the changes to subpart E 

of part 668, including § 668.60, will 

become effective on July 1, 2012, so that 

it will be implemented beginning with 

the 2012–13 award year and forward. 

Changes: None. 

Recovery of Funds (§ 668.61) 

Comment: One commenter supported 

the proposed changes to § 668.61. 

Another commenter noted that § 668.61 

should only address recovery of funds 

in the event of overpayments resulting 

from interim disbursements—not 

overpayments that are not the result of 

interim disbursements. This commenter 

indicated that this section also contains 

erroneous cross-references. In addition, 

this commenter stated that this section 

should provide information on how to 

treat overpayments made under the 

FWS Program as interim disbursements 

because the student must be paid for all 

hours worked. 

Discussion: Section 668.61 is about 

handling the recovery of overpayments 

due to interim disbursements. The 

recovery of overpayments that are not 

the result of interim disbursements, 

including overpayments that result from 

disbursements made before an applicant 

was selected for verification and later 

after selection for verification the 

applicant’s SAR and ISIR must be 

corrected, are addressed by the 

appropriate overpayment requirements 

in the applicable program regulations. 

We agree with the commenter that some 

of the cross-references in proposed 

§ 668.61 need to be corrected. 

We also agree with the commenter 

that it would be helpful for § 668.61 to 

provide details on how to handle the 

recovery of overpayments that occur 

from interim disbursements for students 

employed under the FWS Program. 

Under § 668.58(a)(2)(ii), an institution is 

allowed to employ an applicant under 

the FWS Program for the first 60 

consecutive days after the student’s 

enrollment in that award year prior to 

verification, if the institution does not 

have reason to believe that an 

applicant’s FAFSA information is 

inaccurate. If an FWS overpayment 

occurs due to this interim disbursement, 

the institution must follow the 

procedures in § 668.61(b). We have 

revised § 668.61(b) to clarify that the 

institution must attempt to adjust the 

applicant’s other financial aid to 

eliminate the overpayment due to an 

interim disbursement under the FWS 

Program. This revised § 668.61(b) 

provides that, if the institution is unable 

to eliminate the overpayment by 

adjusting the applicant’s other financial 

aid, the institution must reimburse the 

FWS Program account by making 

restitution from its own funds. The 

applicant must still be paid for all work 

performed under the Federal labor laws. 

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Because the applicant was employed, 

the applicant must be placed on the 

institution’s own payroll account and 

all required employer contributions for 

social security, workers’ compensation, 

or any other welfare or insurance 

program, must still be paid by the 

institution because this applicant was 

an employee. 

In addition, the institution is allowed 

under § 668.58(a)(3) to employ a student 

under the FWS Program for the first 60 

consecutive days prior to receiving the 

corrected valid SAR or valid ISIR if, 

after verification, it determines that an 

applicant’s information will not change 

the amount that the applicant would 

receive under that program. In 

§ 668.61(c), we require that if an FWS 

overpayment occurs because the 

institution does not receive the valid 

SAR or valid ISIR reflecting corrections 

within the established deadline dates, 

the institution must reimburse the FWS 

Program account by making restitution 

from its own funds. In § 668.61(c), we 

clarify that the student must still be 

paid for all work performed under the 

institution’s own payroll account and 

the institution must still handle all 

employer requirements. 

Changes: We have revised § 668.61, 

including the section heading, to clarify 

that this section is about handling 

overpayments due to interim 

disbursements made under § 668.58. We 

have also corrected the cross-references 

in this section. In addition, we have 

revised § 668.61(b) to provide specific 

procedures for recovering funds from 

any FWS overpayment that results from 

an interim disbursement made before 

verification is completed. We have 

revised § 668.61(c) that describes the 

procedures for handling overpayments 

due to an allowable interim 

disbursement of subsidized student 

financial assistance, including any 

disbursement from FWS employment, 

before the institution receives the valid 

SAR or valid ISIR reflecting the 

corrections. Section 668.61(c) now 

makes it clear that the applicant must 

still be paid for all work performed 

under the institution’s own payroll 

account. 

Misrepresentation (Subpart F— 

§§ 668.71 Through 668.75) 

General 

Comment: A significant number of 

commenters generally or fundamentally 

supported the proposed regulations in 

subpart F of part 668. Several 

commenters stated that the proposed 

regulations on misrepresentation reflect 

an excellent, much-needed 

improvement over current regulatory 

language and that they will significantly 

enhance the Department’s ability to 

address deceptive practices that 

compromise the ability of students to 

make informed choices about 

institutions and the expenditure of their 

resources on higher education. One 

commenter agreed, in particular, with 

proposed §§ 668.72 and 668.73, which 

ensure that all students have access and 

transparent information about their 

educational program and its cost. This 

commenter noted that accurate 

disclosures are needed in order to 

protect students, especially in light of 

the many documented instances in 

which students have had their 

expectations regarding postsecondary 

education outcomes (e.g., completed 

degrees, good jobs and high salaries) not 

met with success but with failure and 

mountains of debt instead. One 

commenter stated that the proposed 

regulations on misrepresentation 

provide additional protections against 

misleading and overly aggressive 

advertising and marketing tactics. 

Another commenter strongly supported 

the proposals and stated that integrity in 

how institutions present themselves is 

key to ensuring students are not victims 

of false promises or misunderstanding 

when making a decision about higher 

education. Finally, we received many 

comments that supported the 

Department’s mission of helping 

students make sound decisions and 

maintaining the integrity of the title IV, 

HEA programs but expressed concern 

about some of the specific language. 

Discussion: We appreciate the 

commenters’ support. We address the 

comments and concerns on specific 

language in the relevant sections that 

follow. 

Changes: None. 

Comment: Many commenters 

strenuously opposed the proposed 

revisions to the misrepresentation 

regulations in subpart F of part 668. 

Some commenters argued that, because 

misrepresentation is an issue more 

appropriately addressed by the Federal 

Trade Commission (FTC), the 

Department should have adopted in 

these regulations the language from the 

FTC guidelines so that those guidelines 

would be applicable to all institutions 

participating in the title IV, HEA 

programs. These commenters noted that 

for-profit institutions are already subject 

to the FTC guidelines and that the 

results of that guidance have served 

their students well and that other 

sectors of higher education should be 

subject to the FTC guidelines as well. 

Several commenters stated that 

students would be confused by the 

proposed regulations dealing with 

misrepresentation. Specifically, the 

commenters expressed concern that 

because institutions disclose 

information to many parties, including 

accrediting agencies, the Department, 

current and prospective students, and 

the general public, information required 

to be disclosed under the title IV, HEA 

program regulations is complex and not 

always easy to understand. Therefore, 

the commenters argued that students 

will not be able to make informed 

decisions about which institution to 

attend because, under the title IV, HEA 

program regulations, they will be 

provided different statistics and will 

have difficulty understanding them. 

One commenter expressed concern 

that while the education community is 

in need of clear guidance on ethical 

practices and the proposed regulations 

are well-intended, they are too vague 

and subjective. A few commenters urged 

the Department not to adopt the 

proposed regulations as final unless 

they are significantly clarified. 

Finally, one group of commenters 

stated that the proposed changes to 

subpart F of part 668 are unfair to forprofit schools. Some commenters 

appeared to believe that the revisions 

reflected in proposed subpart F of part 

668 would only apply to for-profit 

schools. 

Discussion: During the negotiations 

that were held during the months of 

November 2009 through January 2010, 

we discussed whether to adopt the FTC 

guidelines in our misrepresentation 

regulations. Some non-Federal 

negotiators strongly opposed adopting 

the FTC guidelines in the Department’s 

regulations because doing so, they 

argued, would be duplicative and 

heavy-handed. 

The FTC only has jurisdiction over 

for-profit entities, and those entities are 

already subject to the FTC guidelines. 

The FTC guidelines do not apply to 

degree-granting institutions, and we 

believe it would not be appropriate to 

adopt the FTC guidelines wholesale. 

Instead, we have reviewed the 

guidelines carefully and incorporated 

only those that we determined are 

appropriate for inclusion in our 

regulations (i.e., those that we believe 

should be applicable to all eligible 

institutions participating in the title IV, 

HEA programs). 

With regard to the commenters who 

expressed concern for students being 

confused by these regulations, we note 

that the proposed regulations apply to 

institutions participating in the title IV, 

HEA programs and not to students. 

Because students are not the intended 

audience for these regulations, we do 

not believe that students will be 

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confused by the regulations. If students 

have questions about the regulations, 

they have a variety of sources to assist 

them in understanding them, including 

by contacting the Department with their 

questions. 

We disagree with the commenters 

who opined that the proposed 

regulations are too vague and subjective. 

Section 487 of the HEA provides that 

institutions participating in the title IV, 

HEA programs shall not engage in 

substantial misrepresentation of the 

nature of the institution’s educational 

program, its financial charges, or the 

employability of its graduates. The 

regulations in subpart F of part 668 set 

forth the types of activities that 

constitute misrepresentation by an 

institution and describe the actions that 

the Secretary may take if the Secretary 

determines that an institution has 

engaged in substantial 

misrepresentation. The proposed 

changes to the regulations strengthen 

the Department’s regulatory 

enforcement authority against 

institutions that engage in substantial 

misrepresentation and clarify what 

constitutes misrepresentation. 

The commenters who stated that the 

proposed regulations are unfair because 

they only apply to for-profit institutions 

are incorrect. Subpart F of part 668 

applies to all institutions that 

participate in the title IV, HEA 

programs. 

Changes: None. 

Comment: Some commenters argued 

that the proposed regulations are legally 

deficient on their face, redundant, and 

provide no insight or guidance on 

conduct that may constitute ‘‘substantial 

misrepresentation.’’ They stated that the 

proposed regulations do not contain any 

standards of intent, harm, or materiality. 

In addition, some commenters stated 

that the regulations are missing a 

quantitative element because they do 

not identify what exactly would trigger 

penalties (e.g., a single complaint, a 

pattern of misrepresentation, a dollar 

amount of title IV, HEA aid). These 

commenters stated that a degree of 

materiality of misrepresentation should 

be taken into account when determining 

whether to impose a sanction on an 

institution. 

Discussion: We disagree with the 

commenters who opined that the 

Department does not have the legal 

authority to regulate in this area. 

Current subpart F of part 668 has been 

in place for over 25 years. The proposed 

changes strengthen the Department’s 

regulatory enforcement authority over 

institutions that engage in substantial 

misrepresentation and further clarify 

what constitutes misrepresentation. 

The U.S. Government Accountability 

Office (GAO) was recently asked to 

conduct undercover testing to determine 

whether for-profit colleges’ 

representatives engaged in fraudulent, 

deceptive, or otherwise questionable 

marketing practices. The undercover 

tests at 15 for-profit institutions found 

that four institutions encouraged 

fraudulent practices and that all 15 

made deceptive or otherwise 

questionable statements to GAO’s 

undercover applicants. Institutional 

personnel engaged in deceptive 

practices, including by encouraging 

applicants to falsify their FAFSA 

information, by exaggerating applicants’ 

potential salary after graduation, and by 

failing to provide clear information 

about the institution’s program 

duration, costs, and graduation rate. In 

some instances, the undercover 

applicants received accurate and helpful 

information from institutional 

personnel, such as not to borrow more 

money than necessary. 

The information uncovered by the 

GAO during its investigation reinforces 

the Department’s decision to amend the 

misrepresentation regulations in subpart 

F. 

We disagree with commenters who 

claim the regulations are legally 

deficient because they fail to establish 

the need for specific intent as an 

element of misrepresentation or do not 

define a requisite degree of harm before 

the Department may initiate an 

enforcement action. 

The Department has always possessed 

the legal authority to initiate a sanction 

under part 668, subpart G for any 

violation of the title IV, HEA program 

regulations. However, the Department 

has also always operated within a rule 

of reasonableness and has not pursued 

sanctions without evaluating the 

available evidence in extenuation and 

mitigation as well as in aggravation. 

The Department intends to continue 

to properly consider the circumstance 

surrounding any misrepresentation 

before determining an appropriate 

response. Depending on the facts 

presented, an appropriate response 

could run the gamut from no action at 

all to termination of an institution’s title 

IV, HEA eligibility depending upon all 

of the facts that are present. 

We disagree with the commenters 

who stated that the proposed 

regulations are redundant. Although the 

FTC publishes guidelines for consumers 

to use to avoid deceptive advertising, 

promotional, marketing, and sales 

practices by vocational training 

providers, the FTC guidelines are 

considered administrative 

interpretations of the statutes that the 

FTC is charged with implementing as 

opposed to implementing the statutory 

requirement in section 487 of the HEA, 

which the Department is charged with 

implementing. 

We disagree with the commenters 

who stated that the proposed 

regulations do not provide guidance on 

what constitutes ‘‘substantial 

misrepresentation.’’ The proposed 

regulations define ‘‘substantial 

misrepresentation’’ as ‘‘any 

misrepresentation on which the person 

to whom it was made could reasonably 

be expected to rely, or has reasonably 

relied, to that person’s detriment.’’ 

In determining whether an institution 

has engaged in substantial 

misrepresentation and whether to 

impose penalties, the Department uses a 

rule of reasonableness and considers 

various factors. 

Changes: None. 

Comment: Some commenters 

suggested that we adopt more concrete 

and narrowly defined terms in subpart 

F of part 668 to address abuses while 

protecting legitimate institutions and 

programs from baseless charges. These 

commenters stated that the proposed 

regulations on misrepresentation 

contain a number of vague and broad 

phrases that leave the door wide open 

for interpretation by States, accrediting 

agencies, and the Department. These 

commenters expressed concern that the 

lack of specificity in the regulations will 

fuel the potential for frivolous lawsuits 

brought as class actions against 

institutions. One commenter opined 

that the proposed regulations would 

function as a ‘‘perpetual employment act 

for lawyers’’ because, under the 

regulations, routine marketing claims 

would become a potential source of 

lawsuits and claims for years. 

Some commenters also expressed 

concern about allegations of 

misrepresentation from disgruntled 

students and employees or former 

employees and as a result of journalists 

misreporting facts. These commenters 

argued that it is not appropriate for the 

actions of a single individual or a single 

incident, whether malicious or 

unintended in nature, to dramatically 

affect an institution. 

Discussion: We disagree with the 

commenters who stated that the 

proposed regulations are too broad and 

open for interpretation. We proposed 

specific changes to the current 

regulations to clarify the types of false, 

erroneous, or misleading statements 

about an institution’s educational 

program, the cost of the program, 

financial aid available, and the 

employability of its graduates that 

would be prohibited as 

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misrepresentations under subpart F of 

part 668. 

We understand that some commenters 

have concerns about baseless charges 

and frivolous lawsuits that may be 

brought by students and employees 

including by dissatisfied students and 

disgruntled employees as well as fears 

that ‘‘routine marketing claims’’ would 

lead to lawsuits. We do not believe that 

the proposed regulations will increase 

litigation by students and employees 

against the institution. These 

regulations do not provide an additional 

avenue for litigation for students, 

employees and other members of the 

public. Instead, the regulations specify 

the conditions under which the 

Department may determine that an 

institution has engaged in substantial 

misrepresentation and the enforcement 

actions that the Department may choose 

to pursue. As the Department does in 

evaluating any regulatory violation, in 

determining whether an institution has 

engaged in substantial 

misrepresentation and the appropriate 

enforcement action to take, the 

Department will consider the magnitude 

of the violation and whether there was 

a single, isolated occurrence. 

Changes: None. 

Comment: Many commenters 

expressed concern that the proposed 

changes would eliminate due process 

protections for institutions in the case of 

substantial misrepresentation. The 

commenters requested that we retain the 

procedures from current § 668.75, 

arguing that the removal of these 

procedures conflicts with the HEA and 

exceeds the Department’s statutory 

authority to regulate in this area. 

Several commenters also expressed 

concern about the proposed removal of 

current § 668.75 because that section 

required the Department to review 

complaints and to dispose of them 

informally if the complaints were 

determined to be minor and could be 

readily corrected. The commenters 

argued that the proposed regulations 

would eliminate this sensible approach 

in exchange for using other procedures. 

These commenters recommended that 

we amend § 668.71(a) to include an 

option for the Department to allow an 

institution to correct minor, inadvertent, 

and readily correctable 

misrepresentations and to make 

appropriate restitution. They noted that 

these types of misrepresentations are 

bound to occur given the amount of 

information institutions must report and 

that simple human error should not 

constitute misrepresentation. Other 

commenters expressed concern that, 

under the proposed regulations, simple 

mistakes could trigger sanctions even if 

an institution has no history of 

misrepresentation problems. 

Discussion: The Department is 

removing the provisions in § 668.75 

because they are formulaic and have 

been proven unnecessary. The 

Departments takes its enforcement 

responsibilities seriously, and its history 

demonstrates that it does not overreact 

to single, isolated transgressions. We 

intend to enforce the misrepresentation 

regulations with the same degree of 

fairness that we enforce all other title 

IV, HEA program requirements. To the 

extent the Department chooses to 

initiate an action based upon a violation 

of the misrepresentation regulations, 

nothing in the proposed regulations 

diminishes the procedural rights that an 

institution otherwise possesses to 

respond to that action. 

Changes: None. 

Comment: Some commenters stated 

that enforcement by the Department is 

not necessary and is not the best way to 

allocate the Department’s resources 

because State agencies, accrediting 

agencies and the FTC already enforce 

laws prohibiting misrepresentation. For 

example, some commenters noted that 

accrediting agencies have standards on 

institutional integrity and review the 

ways in which each institution 

represents itself as part of the 

accrediting process. The accrediting 

agencies perform regular reviews of all 

advertising and promotional material 

and publish specific guidelines for 

institutions regarding acceptable 

statements by staff. The commenters 

recommended that the Department 

continue to rely on this process, rather 

than adopting the proposed regulations, 

which they argue, will result in an 

unnecessary duplication of enforcement 

efforts. Another commenter asked us to 

clarify whether the Department—and 

not State authorizing agencies—is 

responsible for monitoring compliance 

with the misrepresentation regulations. 

While a number of commenters 

argued that it is not appropriate for the 

Department to take enforcement actions 

to prevent misrepresentation, other 

commenters stated that in cases of true 

misrepresentation strong enforcement 

steps would go a long way in 

eliminating fraud and abuse and 

limiting the need for other measures to 

combat abuse that arises in the absence 

of such enforcement. 

Discussion: We disagree with the 

commenters who stated that the 

Department should not be responsible 

for enforcement of these 

misrepresentation regulations because 

others, including State agencies, 

accrediting agencies, and the FTC are 

already enforcing laws against 

misrepresentation. The Department is 

responsible for ensuring that 

institutions participating in the title IV, 

HEA programs comply with section 487 

of the HEA, which prohibits institutions 

from engaging in substantial 

misrepresentation of the nature of the 

institution’s educational program, its 

financial charges, or the employability 

of its graduates. We acknowledge that 

other agencies and entities also enforce 

various laws and standards that guard 

against misrepresentation and are 

pleased that we have partners in 

ensuring that institutions do not make 

false, erroneous, or misleading 

statements to students, prospective 

students, and members of the public. 

We agree with the commenters who 

supported strong enforcement in this 

area. We believe that strengthening the 

misrepresentation regulations and 

enforcement of these regulations is 

critical to maintaining the integrity of 

the title IV, HEA programs. 

Changes: None. 

Comment: Many commenters argued 

that we should revise the regulations to 

link enforcement to situations in which 

the institution or its employees are 

making a conscious decision to mislead 

the consumer. The commenters 

suggested that the definition of 

misrepresentation be amended to 

include an element of intent to deceive; 

under this definition, institutions would 

face sanctions only if the Department 

determined that the misleading 

statement was made with the intent to 

deceive. 

Discussion: In determining whether 

an institution has engaged in substantial 

misrepresentation and the appropriate 

sanctions to impose if substantial 

misrepresentation has occurred, the 

Department considers a variety of 

factors, including whether the 

misrepresentation was intentional or 

inadvertent. 

Changes: None. 

Comment: Some commenters 

expressed concern that they will be 

unable to comply with the 

misrepresentation regulations because 

they are required to comply with so 

many regulations that inadvertent 

misrepresentations are bound to occur. 

Discussion: As previously discussed, 

before initiating any action, the 

Department carefully evaluates all of the 

circumstances surrounding an alleged 

misrepresentation. However, the 

Department rejects the notion that 

institutions are incapable of complying 

with multiple title IV, HEA program 

regulations, while at the same time 

ensuring that they do not make 

misrepresentations, inadvertent or 

otherwise. 

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Changes: None. 

Comment: Some commenters 

expressed concern with the effect these 

proposed misrepresentation regulations 

could have on students. They argued 

that the regulations would conflict with 

State laws and create confusion in an 

area long regulated by the States. For 

example, given that students file 

complaints with the State, the 

commenters stated that an additional 

Federal remedy would be duplicative 

and would create uncertainty for 

students. 

Other commenters expressed concern 

about institutions that require students 

to sign arbitration and confidentiality 

agreements as part of their enrollment 

contracts. These agreements serve to 

limit access to qualified legal counsel 

for students who may want to pursue a 

misrepresentation claim. Some 

commenters stated that the regulations 

should not be interpreted to create an 

express or implied private right of 

action against an institution for 

misrepresentation. 

Discussion: We disagree with the 

commenters who stated that students 

will be confused by the 

misrepresentation regulations because 

they otherwise typically pursue claims 

of misrepresentation under State law. 

Nothing in the proposed regulations 

alters a student’s ability to pursue 

claims of misrepresentation pursuant to 

State law and nothing in the proposed 

regulations creates a new Federal 

private right of action. The regulations 

are intended to make sure that 

institutions are on notice that the 

Department believes that 

misrepresentations constitute a serious 

violation of the institutions’ fiduciary 

duty and that the Department will 

carefully and fairly evaluate claims of 

misrepresentation before determining an 

appropriate course of action. 

Changes: None. 

Scope and Special Definitions (§ 668.71) 

Comment: Many commenters 

expressed concern about the expansion 

of the misrepresentation regulations to 

cover false or misleading statements 

made by representatives of the 

institution or any ineligible institution, 

organization or person with whom the 

institution has an agreement. The 

commenters believed that this change 

will result in holding institutions 

accountable for what is said, may be 

said, or inadvertently is said, by 

individuals or organizations that may 

have no official connection to an 

institution, and that institutions cannot 

monitor inadvertent and unofficial 

comments. Commenters argued that the 

proposals would expose good 

institutions to sanctions based on 

actions beyond their control. Many 

commenters sought clarification about 

which representatives of the institution 

are covered by the regulations. For 

example, commenters pointed to 

statements that may be made by 

students through the use of social 

media. One commenter suggested we 

modify the definition of 

misrepresentation to clarify that 

institutions are responsible for 

statements made by representatives or 

entities compensated by the institution. 

Another commenter recommended that 

we include only individuals under the 

direct control of the institution, 

including spokespersons and 

enrollment management companies. 

We received another suggestion to 

limit covered agreements to those 

relating to marketing or admissions. 

Many commenters expressed concern 

that, without this change, the proposed 

regulations would apply to the 

hundreds of contracts a large institution 

may have with various vendors and 

service providers. They suggested that 

the institution only be responsible for 

communications from and statements by 

individuals or entities authorized to 

speak for the institution or who have 

representative authority to respond to 

the subject in question. 

Commenters were particularly 

concerned about the penalties that 

could result from misinformation 

provided by an entity other than the 

institution. The commenters argued that 

the institution should not be subjected 

to undue penalties if the institution took 

steps to monitor and mitigate such 

possible misrepresentations, and in fact, 

took action upon identifying any 

incidences. For example, institutions 

provide information to companies that 

compile college rankings that are often 

derided as inaccurate, incomplete or 

false. Commenters believed that any 

penalties should be limited to 

statements related to the relationship 

between the institution and the entity. 

Discussion: As noted elsewhere in 

this preamble, the Department enforces 

its regulations, including those in 

subpart F of part 668 within a rule of 

reasonableness. We strongly believe that 

the concerns voiced by many 

commenters have ignored this fact. We 

do not expect, for example, to find 

actionable violations in the comments 

made by students and routine vendors. 

However, the Department acknowledges 

that the language in § 668.71 may be 

unnecessarily broad. For this reason, we 

agree to limit the reach of the ban on 

making substantial misrepresentations 

to statements made by any ineligible 

institution, organization, or person with 

whom the eligible institution has an 

agreement to provide educational 

programs or those that provide 

marketing, advertising, recruiting, or 

admissions services. We have done this 

by narrowing the language in § 668.71(b) 

and the definition of the term 

misrepresentation. As a result, 

statements made by students through 

social media outlets would not be 

covered by these misrepresentation 

regulations. Also, statements made by 

entities that have agreements with the 

institution to provide services, such as 

food service, other than educational 

programs, marketing, advertising, 

recruiting, or admissions services would 

not be covered by these 

misrepresentation regulations. 

Changes: We have revised § 668.71(b) 

and the definition of the term 

misrepresentation in § 668.71(c) to 

clarify that the ban on 

misrepresentations for which an 

institution is responsible only extends 

to false, erroneous, or misleading 

statements about the institution that are 

made by an ineligible institution, 

organization, or persons with whom the 

institution has an agreement to provide 

educational programs or to provide 

marketing, advertising, recruiting, or 

admissions services. 

Comment: Some commenters noted a 

need for the regulations to clearly 

differentiate between 

‘‘misrepresentation’’ and ‘‘substantial 

misrepresentation.’’ Other commenters 

questioned how we will determine what 

constitutes ‘‘substantial 

misrepresentation.’’ These commenters 

asked what the standards are for 

determining what constitutes harm, 

materiality, or intent to misrepresent. 

Another commenter suggested that we 

revise the definition of substantial 

misrepresentation to include 

misrepresentations that are 

disseminated—not only those that are 

‘‘made’’. 

Discussion: The Department is 

comfortable with its ability to make the 

distinction between a misrepresentation 

and a substantial misrepresentation. We 

believe that the regulatory definitions 

we are establishing are clear and can 

easily be used to evaluate alleged 

violations of the regulations. Moreover, 

as previously stated, we routinely 

evaluate the seriousness of title IV, HEA 

program violations before determining 

what, if any, action is appropriate. 

There is nothing in the proposed 

misrepresentation regulations that will 

alter the manner in which the 

Department reviews any violation of 

part 668, subpart F before deciding how 

it should respond. 

Changes: None. 

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Comment: Some commenters 

supported the proposed definition of 

misrepresentation in § 668.71(c), which, 

as applied in these regulations, 

prohibits making false, erroneous, or 

misleading statements directly or 

indirectly to students, prospective 

students, or any member of the public, 

an accrediting agency, a State agency or 

the Secretary. They stated that these 

changes provide much needed updates 

to the current regulations and that the 

remedies give the Department needed 

flexibility. The commenters noted that 

the Department should not tolerate 

institutions that knowingly 

misrepresent facts and provide 

misinformation on purpose to students, 

their families and the public, and that 

we should hold institutions accountable 

that encourage students to enroll but fail 

to deliver on statements regarding 

accreditation and employability. 

Other commenters expressed concern 

about broadening the list of entities to 

which an institution may not make a 

false, erroneous, or misleading 

statement to include accrediting 

agencies, State agencies or any member 

of the public. These commenters 

remarked that the effect of this 

regulatory change is that the list now 

includes anyone. The commenters 

argued that the determination of 

whether an institution has made 

misleading statements to an accrediting 

agency or State agency should be made 

by that agency, not the Department, and 

that the agency should take appropriate 

action. One commenter suggested that 

the list of entities should also include 

parents who may be signing or 

cosigning loans. 

Discussion: The Department believes 

that in its stewardship of the title IV, 

HEA programs, it is essential to monitor 

the claims made by institutions not only 

to students and prospective students, 

but also those made to the Department’s 

partners who help maintain the integrity 

of these programs. While it is likely that 

other oversight agencies will respond 

appropriately to any substantial 

misrepresentations that are made to 

them, only the Department has the 

overall responsibility for preserving the 

propriety of the administration of the 

title IV, HEA programs. 

In addition, because parents are also 

members of the public, and most, if not 

all, statements made to them will also 

be made to students or prospective 

students, the Department does not 

believe that further enumeration to 

include parents is necessary. 

Changes: None. 

Comment: Some commenters noted 

that the term ‘‘misleading statement’’ is 

not defined by the FTC, and opined 

that, because the term’s definition 

merely reiterates what has always been 

required for a finding of a substantial 

misrepresentation, it is unnecessary for 

the Department to define the term in its 

regulations. Some commenters 

suggested that, instead, the Department 

follow the FTC’s practice of 

acknowledging that a finding of 

misrepresentation is a fact-specific 

inquiry based on a flexible standard. 

Many commenters appeared to be 

particularly concerned about the use of 

the phrase ‘‘capacity, likelihood, or 

tendency to deceive or confuse’’ in the 

description of a ‘‘misleading statement’’. 

Some commenters stated that they do 

not believe that an enforceable or 

defensible basis for misrepresentation is 

created by including the likelihood of 

any form of communication to confuse 

or ‘‘have the capacity’’ to confuse a 

student or potential student. One 

commenter suggested we clarify that in 

order to constitute misrepresentation, 

the statement must have the ‘‘capacity or 

tendency’’ to deceive or confuse and be 

‘‘likely’’ to deceive or confuse. The 

commenter cited examples of statements 

frequently made in marketing materials 

by institutions, such as ‘‘there is a place 

for everyone at XYZ.’’ Other commenters 

noted that institutions provide 

information on a variety of complex 

issues that students and others may find 

confusing. In particular, certain terms of 

art such as ‘‘cost of attendance’’ and 

‘‘graduation rate’’ may not be familiar to 

the general public and may be confusing 

to them. Another commenter requested 

that we clarify that a misrepresentation 

is not made if confusion results from the 

accurate reporting of disclosures 

required under various laws. 

These commenters expressed concern 

that attempts to comply with recently 

promulgated regulations on college cost, 

transparency, and outcomes measures 

may result in confusion and lead to 

reported complaints of 

misrepresentation. 

Several commenters argued that the 

Department needs to address the issue 

of misrepresentation through omissions 

of important information. One 

commenter suggested that we add 

language in the description of the term 

misleading statement to include an 

omission, if in the absence of an 

affirmative disclosure is likely to result 

in a person assuming something that is 

incorrect. 

One commenter stated that oral 

statements should not be included in 

the definition of misrepresentation. The 

commenter questioned how the 

Department would know that an oral 

misleading statement was made. 

Many commenters expressed concern 

that the proposed misrepresentation 

regulations will restrict their capability 

to use the Internet for fear of 

misrepresentation. These commenters 

noted that their top lead source is the 

Internet and that Internet marketing is 

the bloodline of all institutions. The 

commenters also pointed out that 

Internet marketing has issues relating to 

domain name ownership, name 

confusion, and pirating, and that, when 

the Department enforces these 

regulations, it needs to be careful in 

ensuring that it has the correct 

institution. 

Discussion: The Department believes 

that it is appropriate to define the term 

misrepresentation in its regulations in 

order to distinguish misrepresentation 

from substantial misrepresentation. As 

discussed elsewhere in this preamble, 

the Department agrees that determining 

whether a misrepresentation has been 

made should be accomplished through 

a fact-specific inquiry and that 

enforcement actions should only be 

brought when reasonable. 

With regard to the comments who 

stated that the ‘‘capacity, likelihood, or 

tendency to deceive or confuse’’ 

language will be confusing, we have no 

reason to believe that this language will 

have any such effect. Moreover, we do 

not believe that it is necessary to revise 

the regulations to state that a misleading 

statement must have both the capacity 

or tendency and likelihood to deceive 

because we believe that a statement that 

has any of the characteristics of the 

capacity, likelihood, or tendency to 

deceive or confuse is misleading. 

By adopting these proposed 

regulations, the Department is not 

seeking to create extraneous bases upon 

which it can initiate enforcement 

actions. Rather, we want to ensure that 

the regulations help, rather than hinder, 

our ability to protect students, 

prospective students, and others from 

misleading statements made about an 

eligible institution, the nature of its 

educational program, its financial 

charges, or the employability of its 

graduates. The Department believes it 

can be trusted to properly evaluate 

whether a claim is confusing to a degree 

that it becomes actionable. It is also 

important to remember that it is only 

substantial misrepresentations that rise 

to the level where the Department may 

contemplate action. 

As far as the failure of the proposed 

regulations to address affirmative 

omissions, the Department believes that 

the purpose of these regulations is to 

make sure that all statements an 

institution makes are truthful. 

Separately, the Department requires an 

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institution to make a number of 

disclosures to students and to the extent 

that any of these disclosures are 

inaccurate and constitute substantial 

misrepresentation, they are actionable. 

The Department believes that the 

totality of its regulations provides a 

sufficient basis to protect against the 

making of substantial 

misrepresentations without creating 

another category of misrepresentations 

that are more logically covered within 

the context of disclosures. 

In addition, we disagree with the 

commenter who argued that oral 

statements should not be included in 

the definition of the term 

misrepresentation. We have seen and 

heard clear and unambiguous examples 

of oral statements that we view as 

misrepresentations in the GAO’s video 

of its undercover testing. 

With respect to the commenters who 

expressed concern about how these 

regulations may affect an institution’s 

ability to use the Internet for marketing 

purposes, we note that it should not 

matter where a misrepresentation takes 

place. What is important is to curb the 

practice of misleading students 

regarding an eligible institution, 

including about the nature of its 

educational program, its financial 

charges, or the employability of its 

graduates. We strongly believe that 

institutions should be able to find a way 

to comply with these regulations when 

using the Internet for marketing. 

Finally, we understand the many 

complexities of domain name 

ownership, trademark infringement and 

the like and will ensure that we are 

targeting the correct entities in any 

enforcement action we take under these 

regulations. 

Changes: None. 

Comment: Several commenters 

objected to including testimonials and 

endorsements in the definition of 

misrepresentation, because doing so 

holds institutions responsible for 

unsolicited testimonials or 

endorsements of any kind. The 

commenters noted that testimonials are 

widely used as the most relevant form 

of marketing. One commenter suggested 

that we modify the regulations to refer 

to testimonials that the institution 

‘‘requested’’ a student to make ‘‘as part 

of the student’s program’’ as opposed to 

‘‘required’’ the student to make ‘‘to 

participate in a program.’’ Another 

commenter believed we should expand 

the definition of the term 

misrepresentation to include 

endorsements or testimonials for which 

students are given incentives or 

rewards. 

Discussion: The Department disagrees 

that changes to the definition of 

misrepresentation are needed. First, 

with respect to the commenters who 

stated that the definition is too broad, 

we note that the thrust of the definition 

is that the statement must be false, 

erroneous, or misleading. The inclusion 

within the definition of certain student 

endorsements or testimonials (i.e., those 

that are given under duress or are 

required for participation in a program) 

establishes the circumstances under 

which endorsements or testimonials are 

necessarily considered to be false, 

erroneous, or misleading. We believe 

that including these types of 

endorsements and testimonials in the 

definition of misrepresentation is 

appropriate because endorsements or 

testimonials provided under these 

circumstances are suspect, at best. 

Second, we do not believe it is 

necessary to expand the definition of 

misrepresentation to include 

endorsements or testimonials for which 

students are given incentives or 

rewards. We do not believe that an 

endorsement or testimonial for which a 

student was given a token reward such 

as a mug or t-shirt should automatically 

be considered false, erroneous, or 

misleading. 

Changes: None. 

Nature of Educational Program 

(§ 668.72) 

Comment: One commenter supported 

the proposed changes to § 668.72 stating 

that the changes will reduce the 

motivation for institutions to use 

aggressive and misleading recruitment 

tactics to increase enrollment. The 

commenter noted that the requirements 

in this section align with their 

association’s principles of good practice 

under which members represent and 

promote their schools, institutions or 

services by providing precise 

information about their academic major 

and degree programs. 

Discussion: The Department 

appreciates this support. 

Changes: None. 

Comment: One commenter stated that 

§ 668.72 was inherently unclear and 

asked for additional clarification 

without providing any specifics. 

Discussion: The Department disagrees 

with this commenter and believes that 

the language in this section is clear. 

Moreover, because only false, erroneous, 

or misleading statements that constitute 

substantial misrepresentations are 

potentially actionable, institutions are 

on notice as to what they need to do to 

assure themselves of compliance. 

Changes: None. 

Comment: Some commenters 

recommended that we add language to 

this section to address specific concerns 

about clinical experience. One 

commenter argued that institutions 

should be required to inform students of 

any clinical experience the student 

needs to obtain a required license or 

certification, whether the institution or 

the student secures the appropriate 

clinical placement, and how the clinical 

experience relates to the ability to 

obtain employment. The commenter 

argued that the failure to inform a 

student of this information should 

constitute misrepresentation. 

Discussion: We believe that the 

language in § 668.72 sufficiently covers 

false, erroneous, or misleading 

statements made by institutions 

concerning their educational programs. 

We further note that information such as 

that suggested by the commenter is 

more appropriately addressed in the 

student consumer information 

disclosures contained in subpart D of 

part 668 and note that institutions are 

required to disclose information about 

the academic program of the institution, 

which would include information about 

any required clinical experience. 

Changes: None. 

Comment: One commenter suggested 

that we add language to § 668.72 to 

specifically address misrepresentation 

related to whether course credits earned 

at the institution are transferable toward 

a substantially similar degree. This 

commenter noted that, in some cases, 

courses may be accepted but not count 

toward a degree at the new institution. 

Discussion: We believe that the 

language in § 668.72(b)(1), which 

prohibits false, erroneous, or misleading 

statements about whether a student may 

transfer course credits earned at the 

institution to any other institution, is 

sufficient and provides more protection 

for students than the commenter’s 

suggestion to limit the coverage to 

statements related to whether course 

credits are transferable toward a 

substantially similar degree. 

Changes: None. 

Comment: A few commenters 

suggested that we expand § 668.72(c)(2) 

to include ‘‘States in which the program 

is offered’’ rather than merely ‘‘the State 

in which the institution is located’’ so 

that the requirement reaches students 

who are enrolled through distance 

learning. One commenter noted that 

institutions that offer courses online 

should have additional responsibilities 

to students who take these courses. The 

commenter also asserted that these 

institutions should know and 

communicate to students what the 

State’s requirements are to be employed 

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in that job and whether successful 

completion of the program will qualify 

them for such a job. Another commenter 

stated that an institution should know 

State licensing requirements in all the 

States in which it is providing the 

program and further opined that if the 

institution does not know the 

requirements, it could limit enrollment 

to students residing in the States in 

which it does know. 

Discussion: The Department agrees 

with the commenters who believe 

institutions should be responsible for 

making statements that are not false, 

erroneous, or misleading in States in 

which the institution’s educational 

programs are offered and not only in the 

State where the institution is located. 

Changes: We have revised § 668.72(c) 

to prohibit false, erroneous, or 

misleading statements concerning 

whether completion of an educational 

program qualifies a student for licensure 

or employment in the States in which 

the educational program is offered. 

Comment: One commenter suggested 

that we add ‘‘including the recognized 

occupations for which the program 

prepares students’’ at the end of 

§ 668.72(g) to address the proposed 

requirements in § 668.6(b)(1) under 

which an institution must disclose on 

its Web site the occupations the 

program prepares students to enter and 

that we add a new paragraph to address 

misrepresentation about the kinds of 

disclosures that will be required under 

proposed § 668.6. 

Discussion: We disagree with the 

commenter’s suggestion to add language 

in § 668.72 to address the proposed 

regulations in § 668.6. The language in 

§ 668.72(g) prohibits false, erroneous, or 

misleading statements concerning the 

availability, frequency, and 

appropriateness of its courses and 

programs to the employment objectives 

that it states its programs are designed 

to meet. We believe that this language 

is sufficient to guard against 

misrepresentation in the disclosures 

required under § 668.6. For additional 

information on those requirements, 

please see the section on Gainful 

Employment (§ 668.6) earlier in the 

preamble to these final regulations. 

Changes: None. 

Comment: Some commenters 

recommended that we add language to 

this section to address specific concerns 

about accreditation. One commenter 

suggested that the regulations be 

modified to require an institution to 

explicitly disclose a lack of specialized 

program or institutional accreditation if 

such accreditation is associated with the 

ability to apply to take or to take, the 

examination required for a local, State, 

or Federal license, or a nongovernmental certification generally 

required as a precondition for 

employment or to perform certain 

functions in the State in which the 

institution is located. Some commenters 

suggested that misrepresentation related 

to requirements that are generally 

needed to be employed in the fields for 

which the training is provided be 

expanded to include withheld 

information. The commenters cited the 

testimony of Yasmine Issa who testified 

before the Senate Health, Education, 

Labor, and Pensions Committee on June 

24, 2010. Ms. Issa testified that 

important information about the value 

of the educational credential she was 

pursuing and future employability was 

withheld. In particular, the program in 

which she was enrolled lacked 

specialized accreditation and, as a 

result, she was unable to sit for a 

licensing exam. The commenters argued 

that omission of important information 

should constitute misrepresentation if 

such omission is likely to lead someone 

to make incorrect assumptions as 

happened with Ms. Issa. 

Discussion: The Department agrees 

with the commenters who requested 

that we expand these regulations to 

prohibit the withholding of information 

related to requirements that are 

generally needed to be employed in the 

fields for which the training is provided. 

To address circumstances such as the 

ones experienced by Ms. Issa, the 

Department has inserted the words ‘‘or 

requires specialized accreditation’’ in 

§ 668.72(n). As amended, this provision 

now provides that misrepresentation 

concerning the nature of an eligible 

institution’s educational program 

includes any failure by an eligible 

institution to disclose the fact that a 

degree has not been authorized by the 

appropriate State educational agency or 

that it requires specialized accreditation 

in any advertising or promotional 

materials that reference such degree. 

Changes: We have revised § 668.72(n) 

to include a failure to disclose that the 

degree requires specialized 

accreditation as misrepresentation. 

Employability of Graduates (§ 668.74) 

Comment: Some commenters raised 

concerns about misrepresentation 

related to the institution’s knowledge 

about the current or likely future 

employment conditions, compensation 

or opportunities in the occupation for 

which students are being prepared. 

Commenters argued that predictions 

about future employment or 

compensation should not be deemed 

misrepresentations unless such 

predictions are based on statements of 

fact which at the time they were made 

are objectively false or themselves 

misleading. The commenters requested 

confirmation that general statements of 

opinion about the benefits of enrolling 

in or completing a program would not 

be treated as misrepresentation about 

the future. Other commenters sought 

clarification that any information 

provided by an institution that is 

directly attributable to a State or the 

Federal government or any direct link to 

a governmental Web site such as the 

O*NET Web site would not be 

considered misrepresentation if the data 

and projections from the government or 

on the Web site are incorrect, confusing, 

or do not come true. 

Discussion: As noted elsewhere in 

this preamble, the regulations in subpart 

F of part 668 only address false, 

erroneous, or misleading statements. 

Moreover, in enforcing this subpart, the 

Department intends to continue to 

carefully evaluate all of the surrounding 

circumstances before reaching any 

conclusions regarding the occurrence of 

a violation and the appropriate 

response. Predictions that are not based 

on false or misleading information, 

general statements and opinions, and 

information provided by State and 

Federal governments would not be the 

basis for a misrepresentation claim. 

Changes: None. 

Ability To Benefit (§ 668.32(e) and 

Subpart J) 

Student Eligibility—General 

(§ 668.32(e)) 

Comment: Most commenters 

supported the Department’s 

implementation of section 484(d)(4) of 

the HEA, which was added in 2008. 

This statutory change provided that a 

student shall be determined by an 

institution of higher education as having 

the ability to benefit from the education 

or training offered by the institution of 

higher education upon satisfactory 

completion of six credit hours, or the 

equivalent coursework that are 

applicable toward a degree or certificate 

offered by the institution. Several 

commenters expressed appreciation for 

the implementation of this new option 

of establishing an ability to benefit. 

Several of the commenters supported 

the equivalency of the six credit hours 

to six semester, six trimester, six quarter 

hours or 225 clock hours. One 

commenter expressly supported the 

continued individual institutional 

determination to accept any of the 

ability-to-benefit (ATB) options 

available in current § 668.32(e). One 

commenter recommended that the 

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Department monitor the application of 

this ATB option. 

Discussion: We appreciate the support 

for these changes. With regard to the 

suggestion that the Department monitor 

the use of this eligibility option, we plan 

in 2011–2012 to implement a variety of 

changes to the data that institutions will 

provide to the Department that will help 

us determine when title IV, HEA 

program assistance is awarded to 

students who establish their title IV, 

HEA eligibility on the basis of either 

successfully completing six credit hours 

(or its equivalent) that are applicable 

toward a degree or certificate program 

offered at that institution, or when the 

student successfully passes an approved 

ATB test. We believe that this data will 

help us better understand the frequency 

that these options are employed and can 

lead to further study on the 

effectiveness of these alternatives to a 

high school diploma or its recognized 

equivalent. 

Changes: None. 

Comment: Some commenters offered 

conditional support for the regulatory 

change reflected in § 668.32(e)(5), but 

expressed some concerns. For example, 

one commenter expressed disagreement 

about the equivalency of six credit 

hours to six semester, six trimester, six 

quarter hours or 225 clock hours. In 

addition, several commenters did not 

agree with the application of 225 clock 

hours stating that this approach would 

not benefit students at clock hour 

institutions. Finally, a few commenters 

suggested that a conversion rate of 6 

credit hours to 180 clock hours would 

be more reasonable. 

Discussion: As discussed during the 

negotiated rulemaking sessions and in 

the preamble to the NPRM, the statute 

is silent on equivalency. The 

Department believes that it is a 

reasonable interpretation to use the 

successful completion of 6 semester, 6 

trimester, 6 quarter or 225 clock hours 

for purposes of equivalency because 

these all would be equal to completion 

of one quarter of an academic year. For 

this reason, we are adopting as final the 

changes we proposed in § 668.32(e). 

Changes: None. 

Comment: A few commenters asked 

about the transferability of the 

successful completion of six credits (or 

its equivalent) among title IV, HEA 

eligible institutions. One commenter 

expressed concern that it appeared that 

the courses where the six credits were 

initially earned could not be college 

preparatory coursework, because they 

are not applicable to an eligible 

program. Therefore, the commenter 

argued, § 668.32(e)(5) would not benefit 

those students for whom ATB would be 

most helpful, students who may need 

preparatory coursework. 

Discussion: Section 484(d)(4) of the 

HEA specifies that a student has the 

ability to benefit from the education or 

training offered by the institution of 

higher education if the student 

completes six credit hours or the 

equivalent coursework that are 

applicable toward a degree or certificate 

offered by the institution of higher 

education. When a student who earns 

six or more credits (or their equivalent) 

applicable toward a degree or certificate 

offered by that institution of higher 

education subsequently transfers to 

another institution, if those credits are 

applicable toward the degree or 

certificate offered by the subsequent 

institution, the previously-earned 

credits meet the requirements of section 

484(d) of the HEA. However, we point 

out that the earning of credit hours 

based upon testing out is not 

comparable to taking and successfully 

completing six credit hours (or its 

equivalent) and, therefore, would not 

satisfy this ATB option. 

If the courses that a student enrolls in 

are considered preparatory in nature, an 

institution must first determine whether 

these preparatory courses are a part of 

the student’s program. To the extent that 

the preparatory courses are a part of the 

student’s eligible program, the 

successful completion of six credits in 

these preparatory courses would meet 

this ATB standard. However, if the 

institution determines that these 

preparatory courses are not part of the 

eligible program, the successful 

completion of the six credits would not 

meet this ATB standard. It may be 

important to note that generally 

institutions develop their admissions 

policies in accordance with State 

licensing and accrediting requirements 

and, as a result, some institutional 

admissions requirements may require 

that all students have a high school 

diploma. In those situations, because all 

of the students would be required to 

have a high school diploma, the 

recognized equivalent of a high school 

diploma option and the ATB options in 

section 484(d) of the HEA would be 

inapplicable. However, for institutions 

that admit students either with the 

recognized equivalent of a high school 

diploma or under one of the optional 

ATB standards for students who do not 

have a high school diploma, those 

institutions cannot fail to accept, for 

title IV, HEA student eligibility 

purposes, the following— 

• A student’s passing of an approved 

ATB test; 

• A determination that a student has 

the ability to benefit from the education 

or training in accordance with an 

approved State process; 

• A student’s successful completion 

of a secondary school education in a 

home school setting that is treated as a 

home school or private school under 

State law; or 

• The satisfactory completion of six 

credit hours (or the equivalent 

coursework), that are applicable toward 

a degree or certificate at that institution. 

As such, the new ATB option added 

in section 484(d)(4) of the HEA, and 

reflected in § 668.32(e)(5), is not the 

only opportunity for a student to 

establish that he or she has the ability 

to benefit from the education or training 

offered by the institution. 

Changes: None. 

Comment: One commenter expressed 

support for the inclusion of language in 

the preamble to the NPRM that 

indicated that the six credits or its 

equivalent used to establish ATB 

eligibility should be applicable to an 

eligible program offered at that school 

and suggested it should be included in 

the regulatory language. Another 

commenter expressed concern about the 

inclusion of this language in the 

preamble, opining that it went beyond 

the statutory language and intent. This 

commenter recommended that the 

Department consider removing such 

language in the final regulations. 

Discussion: We recognize that the 

statute does not require that the 

coursework completed for purposes of 

this ATB option be applicable to an 

eligible program, but we remind 

institutions that this ATB option is 

designed to allow an otherwise 

ineligible student to obtain title IV, HEA 

program assistance while working to 

obtain a certificate or degree. Therefore, 

we expect that the coursework be 

applicable to an eligible program. We 

also acknowledge that students may 

change programs throughout their 

postsecondary career. For this reason, 

these regulations do not require that the 

student successfully complete six 

credits or their equivalent that are 

applicable to the specific degree or 

certificate program in which the student 

is enrolled. Instead, § 668.32(e)(5) 

requires only that the six credits be 

applicable to a degree or certificate 

program at the institution where the six 

credits are earned. 

Changes: None. 

Comment: Several commenters 

expressed opposition to the new 

§ 668.32(e)(5). One commenter argued 

that the ATB options under current 

§ 668.32(e)(2) and (e)(3) provide a better 

method of evaluating a student’s ability 

to benefit and that the new option is not 

needed. One commenter stated that new 

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§ 668.32(e)(5) would cause greater 

financial hardship for students because 

it would require students to pay for 

these six credits without the benefit of 

title IV, HEA program assistance and 

that this, in turn, may lead to some 

students turning to high cost private 

financing. One commenter expressed 

disappointment that the Department did 

not seize the opportunity to fully reevaluate the ATB regulations and make 

more broad and sweeping changes to the 

standards. Finally, some commenters 

expressed concern that § 668.32(e)(5) 

may penalize students who are very able 

to successfully perform class work and 

demonstrate learned skills, but who 

have difficulty taking tests and therefore 

may be unable to successfully complete 

the requisite six credit hours (or its 

equivalent), due to their inability to do 

well on written tests. 

Discussion: Section 668.32(e)(5) 

incorporates the language from section 

484(d)(4) of the HEA. The Department 

does not have the authority to not 

recognize this statutorily mandated ATB 

option. Moreover, we recognize that this 

new standard for establishing the ability 

to benefit for students who do not have 

a high school diploma or its recognized 

equivalent may not be appropriate for 

all students. However, we do not view 

this as a problem, because § 668.32(e)(5) 

supplements—rather than replaces—the 

current standards for establishing the 

ability to benefit under § 668.32(e)(2) 

and (e)(3). 

Changes: None. 

Comment: Most of the commenters 

who objected to § 668.32(e)(5) objected 

to this provision at least in part because 

the Department has stated that title IV, 

HEA funds may not be used to pay for 

any portion of the payment period in 

which those credits or equivalent were 

earned. 

Discussion: The underlying student 

eligibility issue here is that a student 

without a high school diploma or its 

equivalent cannot be eligible for title IV, 

HEA program assistance, except under 

the four circumstances described in 

section 484(d) of the HEA. The payment 

period during which a student 

successfully earns the six credits (or its 

equivalent) under section 484(d)(4) of 

the HEA and § 668.32(e)(5) is a period 

when the student has yet to meet this 

statutory requirement or standard. We 

recognize that this inability to ‘‘go back’’ 

and establish eligibility may be fiscally 

problematic for some students or 

institutions, but we continue to believe 

that until a student’s eligibility is 

established, the student is ineligible for 

title IV, HEA funds. That said, in cases 

where a student is enrolled in a program 

that has several modules within a 

payment period that are independently 

completed and graded prior to the end 

of that payment period, there could be 

a situation where a student successfully 

completes a module and earns six or 

more credits (or the equivalent) prior to 

the end of the payment period. In this 

scenario, an institution could make a 

determination of the cost of attendance 

for the remaining modules in the 

payment period, and award and 

disburse title IV, HEA funds for those 

remaining credits, based upon the 

limited cost of attendance in the 

payment period after the student has 

successfully completed the initial six 

credits. 

Changes: None. 

Comment: One commenter stated that 

he would encourage other institutions to 

establish admissions policies to prohibit 

the use of the earned credit ATB option 

reflected in § 668.32(e)(5) because of the 

unique complications created with this 

provision and State licensing boards. 

Specifically, the commenter expressed 

concern that students who do not 

complete the six credit hours (or their 

equivalent) under this option may not 

be able to obtain title IV, HEA program 

assistance to pay for their coursework. 

Discussion: As noted earlier in this 

preamble, we recognize that the ATB 

option reflected in section 484(d)(4) of 

the HEA and § 668.32(e)(5) may not 

meet the needs of all students, or all 

institutions, and is simply one method 

by which a student can show that he or 

she has the ability to benefit from a 

degree or certificate program of study 

and, therefore, is eligible to receive title 

IV, HEA program assistance. 

Changes: None. 

Subpart J—Approval of Independently 

Administered Tests; Specification of 

Passing Score; Approval of State 

Process 

Special Definitions (§ 668.142) 

Comment: In response to the 

Department’s request in the NPRM for 

feedback on the appropriateness of 

permitting specified test administrators 

in the assessment center to train other 

individuals at that assessment center to 

administer ATB tests, several 

commenters suggested that it would not 

be advisable or appropriate for senior 

test administrators in an assessment 

center to perform the required training 

of other individuals at the assessment 

center for the administration of 

approved ATB tests. 

Discussion: The Department agrees 

that, consistent with the definition of 

the term test administrator, an 

individual must be certified by the test 

publisher or State, as applicable, to 

administer tests under subpart J of part 

668 in accordance with the instructions 

provided by the test publisher or State. 

The only practical way for a test 

publisher or State to make a 

determination of whether an individual 

has the necessary training required in 

order to certify the individual as a test 

administrator is to provide the training 

that will insure that test administrators 

are cognizant of the test publisher’s or 

State’s written requirements. To 

emphasize and add clarity that the test 

administrator is required to be certified 

by the test publisher or State, as 

applicable, when a test is given at an 

assessment center by a test 

administrator who is an employee of the 

center, we have modified § 668.151(b)(1) 

by adding the word certified prior to the 

reference to test administrator. 

Changes: We have amended 

§ 668.151(b)(1) by adding the word 

‘‘certified’’ prior to the reference to test 

administrator. 

Comment: One commenter objected to 

the increased burden associated with 

the proposed requirement that test 

administrators at assessment centers be 

certified by the test publisher or State, 

as applicable. 

Discussion: During the negotiations, 

the Department was told about the high 

incidence of staff turnover at assessment 

centers. One test publisher participating 

in the negotiations expressed concern 

that new staff have been trained to 

administer the approved ATB tests by 

other members of the assessment center 

staff and, as a result, were providing 

ATB tests without being properly 

certified by the test publisher or State. 

We agree that in order to meet the new 

definition of the term test administrator 

in § 668.142 and to meet the increased 

standards of training, knowledge, skills 

and integrity, that it is vital for all test 

administrators to be certified in order to 

administer an approved ATB test 

consistent with the requirements of 

subpart J of part 668 and the written 

instructions of the test provider. 

Moreover, we believe that the increase 

in burden falls mainly upon the test 

publisher or the State, rather than the 

institution. 

Changes: None. 

Comment: One commenter suggested 

that we clarify the definition of the term 

independent test administrator by 

modifying it to clarify that an 

independent test administrator cannot 

have any current or prior financial 

interest in the institution, but that he or 

she may earn fees for properly 

administering an approved ATB test at 

that institution. Another commenter 

suggested that the definition of the term 

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test administrator be expanded to 

include test proctors. 

Discussion: Section 668.142, in 

pertinent part, defines an independent 

test administrator as a test administrator 

who administers tests at a location other 

than an assessment center and who has 

no current or prior financial or 

ownership interest in the institution, its 

affiliates, or its parent corporation, other 

than the fees earned for administering 

approved ATB tests through an 

agreement with the test publisher or 

State, and has no controlling interest in 

any other institution and has no 

controlling interest in any other 

institution. We agree that independent 

test administrators may obtain a fee for 

the administration of ATB tests 

generally through a written contract 

between the test publisher or State and 

the test administrator. In order to clarify 

this single type of allowable financial 

interest, we have made a change to the 

language in this definition. 

On the matter of expanding the 

definition of the term test administrator 

to include test proctors, we disagree 

with this suggestion. The reason we 

disagree with the commenter’s 

suggestion is that subpart J of part 668 

specifically restricts the administration 

of ATB tests to test administrators 

certified by the test publisher or State to 

administer their tests, as defined in the 

agreement between the Secretary and 

the test publisher or State, as applicable. 

We believe it would be confusing to add 

test proctors to the definition of a test 

administrator because only certified test 

administrators can administer ATB tests 

for title IV, HEA program purposes. We 

believe certification is an appropriate 

requirement because it insures that the 

approved tests are administered by 

trained, skilled, and knowledgeable 

professions. 

Changes: We have amended the 

definition of the term independent test 

administrator by clarifying that an 

independent test administrator must 

have no current or prior financial or 

ownership interest in the institution, its 

affiliates, or its parent corporation, other 

than the fees earned through the 

agreement an independent test 

administrator has with the test 

publisher or State to administer the test. 

Application for Test Approval 

(§ 668.144) 

Comment: One commenter strongly 

supported the proposed change in the 

language regarding the norming group 

in §§ 668.144(c)(11)(iv)(B) and 

668.146(c)(4)(ii) that requires the group 

to be a contemporary sample that is 

representative of the population of 

persons who have earned a high school 

diploma in the United States. 

Discussion: The statute provides that 

a student who does not have a high 

school diploma or its equivalent can 

become eligible for title IV, HEA 

program assistance if the student takes 

an independently administered 

examination and achieves the score 

specified by the Secretary that 

demonstrates that the student has the 

ability to benefit from the training being 

offered. As an alternative to obtaining a 

high school diploma, it is appropriate 

that the normative group used to 

establish the relative placement of the 

test-taker’s results should be comprised 

of U.S. high school graduates rather 

than a group of persons who are beyond 

the usual age of compulsory school 

attendance in the United States. 

However, we take this opportunity to 

remind institutions that a fundamental 

component of the definition of the term 

institution of higher education requires 

that an eligible and participating 

institution may admit as regular 

students only persons who have a high 

school diploma (or have the recognized 

equivalent) or are beyond the age of 

compulsory school attendance. 

Therefore, it is clear that for the purpose 

of establishing title IV, HEA program 

eligibility, approved ATB tests may only 

be provided to students who are beyond 

the age of compulsory school 

attendance. 

Changes: None. 

Comment: Several commenters 

supported the proposal to include in the 

test publisher’s or State’s screening of 

potential test administrators, their 

evaluation of a test administrator’s 

integrity. In response to our request in 

the NPRM for feedback about how a test 

publisher or a State will determine—in 

accordance with §§ 668.144(c)(16)(i) and 

668.144(d)(7)(i)—that a test 

administrator has the integrity necessary 

to administer tests, we received a 

number of suggestions. These included 

the following— 

• Requiring a prospective test 

administrator to sign, under penalty of 

perjury, an application indicating 

whether he or she had ever been 

convicted of fraud, breach of fiduciary 

responsibilities, or other illegal conduct 

involving title IV, HEA programs; 

• Including a question on the test 

administrator’s application asking 

whether the applicant has ever been 

convicted of a crime and, if the answer 

to this question is ‘‘yes’’, requiring the 

applicant to provide additional details; 

• Including a question on the test 

administer application asking whether 

the applicant has ever worked at an 

institution of higher education, and if 

the answer to this question is ‘‘yes’’, 

requiring the applicant to provide 

additional details; and 

• Requiring test publishers and States 

to perform fingerprinting and 

background checks, including a check 

for being included in any lawsuit, as 

well as, checking for arrests and 

convictions, for each test administer. 

Discussion: We appreciate the 

commenters’ suggestions regarding ways 

test publishers and States can evaluate 

whether a test administrator has the 

integrity necessary to administer ATB 

tests. While test publishers and States 

can adopt any of the methods proposed 

by the commenters, we do not believe 

it is appropriate to require all test 

publishers and States to use those 

methods to evaluate test administrator 

integrity. Rather, we believe § 668.144, 

as proposed, will provide test 

publishers and States with the 

flexibility they need to determine that 

the test administrator will have the 

necessary training, knowledge, skills 

and integrity to test students in 

accordance with subpart J of part 668 

and the requirements of the test 

administration technical manual. Under 

§ 668.144, test publishers and States are 

required to disclose how they will go 

about making these determinations. 

When evaluating the information 

provided by test publishers and States, 

we will be looking at their processes 

and to what extent information 

collected by the test publisher or State 

supports their determination of whether 

a prospective test administrator can 

demonstrate his or her training, 

knowledge, skills and integrity. In 

addition, we will compare the 

requirements in the test administration 

technical manual to the other provisions 

in § 668.144 that require test 

administrators to have both the ability 

and facilities to keep the ATB tests 

secure against disclosure or release and 

how those issues are explained to 

prospective test administrators, how any 

monitoring may be achieved to insure 

that the tests are being protected. 

Changes: None. 

Comment: One commenter 

recommended that test publishers and 

States should not be required to disclose 

any proprietary information, such as test 

anomaly analysis, to the Department 

due to the proprietary nature of the 

study techniques. The commenter stated 

that, if the Department decides that test 

publishers and States must provide their 

test anomaly study procedures, the 

Department should provide assurances 

that the information will be kept 

confidential. 

Discussion: It is important that test 

publishers and States provide the 

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Department with their test anomaly 

analysis because the Department needs 

to understand the specific test anomaly 

analysis methodology employed by each 

test publisher or State, as applicable, to 

insure that they have established a 

robust process and procedures to 

identify potential test anomalies, 

methods to investigate test anomalies, 

due process in the investigation of these 

anomalies, as well as, the types of 

corrective action plans and the means of 

implementation of the corrective action 

plans, up to and including the 

decertification of test administrators. 

Because the Department agrees that test 

anomaly analyses may be proprietary, 

the Department will not release this 

information to the public and will 

otherwise treat the information as 

confidential. 

Changes: None. 

Comment: One commenter suggested 

that the Department define the term 

‘‘test irregularities’’ and explain the 

distinction between test irregularities 

and test score irregularities. 

Discussion: An ATB test irregularity 

occurs when the ATB test is 

administered in a manner that does not 

conform to the established rules for test 

administration. An ATB test score 

irregularity is one type of ATB test 

irregularity. For example, improper 

seating that would allow test-takers to 

be so close to one another that each testtaker could observe the test answer 

sheets or test answers on another testtaker’s computer screen is an example of 

an ATB test score irregularity. We agree 

with the commenter that a clear 

understanding of proper test 

administration is needed to prevent test 

irregularities. For this reason, we have 

added a definition of the term ATB test 

irregularity to § 668.142. In addition, 

test publishers and States include 

instructions to the ATB test 

administrator in their test 

administration manuals. Section 

§ 668.144(c)(12) requires test publishers 

to include in their applications the 

manual they provide to test 

administrators. We believe it is 

appropriate to also require States to 

include their test manuals in their 

applications. Accordingly, we have 

added a new § 668.144(d)(11) to require 

States to include, as part of its 

submission to the Secretary, the State’s 

manual for test administration. 

Additionally, we have determined 

that in proposed § 668.144(c)(10), 

regarding test-taking time 

determinations, our reference to 

§ 668.146(b)(2) was imprecise. Section 

668.146(b)(2) relates only to sampling 

the major content domains, not to 

sampling the major content domains 

with regard to test-taking time. 

Therefore, we have revised this 

paragraph to refer to § 668.146(b)(3), 

which includes as a requirement for test 

approval, the appropriate test-taking 

time to permit adequate sampling of the 

major content domains. We have also 

added a provision to specify that a test 

publisher may include with its 

application a description of the manner 

in which test-taking time was 

determined in relation to the other 

requirements in § 668.146(b) to provide 

the flexibility for test publishers to 

include a more comprehensive 

description of the way in which testtaking time was determined. 

Changes: In § 668.142, we have 

defined an ATB test irregularity as an 

irregularity that results from an ATB test 

being administered in a manner that 

does not conform to the established 

rules for test administration consistent 

with the provisions of subpart J and the 

test administrator’s manual. We also 

have added new § 668.144(d)(12) to 

include a requirement that a State, in its 

submission of an ATB test for approval, 

must include a manual provided to test 

administrators containing the 

procedures and instructions for test 

security and administration. 

In § 668.144(c)(10), we have made a 

technical correction to specifically 

reference § 668.146(b)(3) rather than 

§ 668.146(b)(2) and added a provision to 

specify that a test publisher may include 

with its application a description of the 

manner in which test-taking time was 

determined in relation to the other 

requirements in § 668.146(b). 

Test Approval Procedures (§ 668.145) 

Comment: One commenter requested 

that the Department provide examples 

of a substantial change that would cause 

the Department to revoke its approval 

consistent with proposed 

§ 668.145(d)(1). 

Discussion: Section 668.144 lists the 

components of an application that test 

publishers and States must submit for 

the Secretary’s approval of an ATB test 

as an alternative to having a high school 

diploma or its recognized equivalent. 

The list of required items for submission 

includes a summary of the precise 

editions, forms, levels, and sub-tests for 

which approval is being sought. In 

addition, we require that a minimum of 

two or more secure, equated, alternate 

forms of the test must be submitted. 

Moreover, the regulations require that if 

a test is being submitted as a revision of 

a previously approved test, the test 

publisher or State, as applicable, must 

also submit an analysis of the revisions, 

including the reasons for the revisions, 

the implications of the revisions for the 

comparability of scores on the currently 

approved test to scores on the revised 

test, and the data from validity studies 

of the revised test undertaken 

subsequent to the revisions. Taken 

together, the regulations require the test 

publisher and the State to submit their 

tests, including all forms or editions of 

those tests, for approval. If the approved 

tests are revised, we have addressed 

how revised tests along with the 

supportive data must be submitted for 

approval under §§ 668.144(c)(9) and 

(d)(12). 

Examples of substantive changes are 

(1) when a previously approved ATB 

test in a pencil and paper format is 

converted to a computerized test, and 

(2) when a previously approved ATB 

test in a pencil and paper format is 

converted to a voice recorded format. In 

each of these examples, the test 

publisher or State is required to submit 

the list of required submissions above. 

An example of a non-substantive 

change is a correction of a typographical 

error. We will not require analysis of 

and submission for approval for nonsubstantive changes; however, it is 

important to note that if these changes 

are documented and shared with the 

Secretary, we would be able to address 

inquiries or comments from the public 

regarding these changes. Recognizing 

that we cannot provide an exhaustive 

list that would cover every situation, we 

encourage test developers to contact us 

if they have questions about changes to 

an approved test and whether the 

proposed changes would be considered 

substantive or non-substantive. 

Changes: None. 

Criteria for Approving Tests (§ 668.146) 

Comment: One commenter noted that 

the 1985 American Psychological 

Association (APA) edition of the 

Standards for Educational and 

Psychological Testing (Standards) 

addressed test construction in terms of 

meeting ‘‘primary, secondary and 

conditional’’ standards. The commenter 

pointed out that the 1999 revised 

edition of the Standards no longer 

makes these distinctions and instead 

requires test developers and users to 

consider all the standards before 

operational use and does not continue 

the practice of designating levels of 

importance. As a result, the commenter 

suggested that we remove the reference 

to the words ‘‘meeting all primary and 

applicable conditional and secondary 

standards for test construction’’ in 

proposed in § 668.146(b)(6) because 

they are confusing. The commenter 

suggested—as an alternative—that we 

adopt language that the Department 

used in 34 CFR 462.13(c)(1) (i.e., ‘‘The 

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test must meet all applicable and 

feasible standards for test construction 

and validity provided in the 1999 

edition of the Standards for Educational 

and Psychological Testing’’). 

Discussion: As discussed in the 1999 

edition of the Standards, each standard 

should be considered to determine its 

applicability to the test being 

constructed. There may be reasons why 

a particular standard cannot be adopted; 

for example, if the test in question is 

relatively new, it may not be possible to 

have sufficient data for a complete 

analysis. As a result of the information 

in the 1999 edition of the Standards, we 

have made a change to the proposed 

language in § 668.146(b)(6) to reflect 

that tests must meet all applicable 

standards. However, we do not believe 

that we should include all ‘‘feasible’’ 

standards in the regulatory language. 

We believe that where a standard is not 

feasible, it would also not be applicable, 

as provided in the example, thus the 

inclusion of the word ‘‘feasible’’ is 

duplicative. 

Changes: We have revised 

§ 668.146(b)(6) by eliminating outdated 

references to primary, secondary and 

conditional standards to make the 

provision consistent with the language 

used in the most recent edition of the 

Standards. 

Additional Criteria for the Approval of 

Certain Tests (§ 668.148) 

Comment: One commenter indicated 

that their program of instruction is 

taught in Spanish to non-English 

speakers with an English as a Second 

Language (ESL) component. The 

commenter asked the Department for 

guidance for populations where there is 

no approved ATB test in the native 

language of the students. 

Discussion: Under § 668.148, if a 

program is taught in a foreign language, 

a test in that foreign language would 

need to satisfy the conditions for 

approval under §§ 668.146 and 668.148. 

Absent an approved ATB test, students 

without a high school diploma or its 

equivalent could meet the alternative 

under proposed § 668.32(e)(5), whereby 

a student has been determined to have 

the ability to benefit from the education 

or training offered by the institution 

based upon the satisfactory completion 

of 6 semester hours, 6 quarter hours, or 

225 clock hours that are applicable 

toward a degree or certificate offered by 

that institution where the hours were 

earned. If no test is reasonably available 

for students whose native language is 

not English and who are not fluent in 

English, institutions will no longer be 

able to use any test that has not been 

previously rejected for approval by the 

Secretary. We proposed this regulatory 

change because we recognized that, in 

the last 15 years, no ATB test in a 

foreign language has been submitted for 

approval. Therefore, under the current 

ATB regulations, any test in a foreign 

language became an approved ATB test 

regardless of whether it measured basic 

verbal and quantitative skills and 

general learned abilities, whether the 

passing scores related to the passing 

scores of other recent high school 

graduates, or whether these tests were 

developed in accordance with the APA 

standards. We believe that the removal 

of this overly broad exception from the 

current regulations will improve 

compliance and works in concert with 

the change reflected in § 668.32(e)(5), 

which allows for an exception where 

ability to benefit can be measured 

against a standard (the successful 

earning of six credits toward a degree or 

certificate program at that institution). 

Changes: None. 

Agreement Between the Secretary and a 

Test Publisher or a State (§ 668.150) 

Comment: Under proposed 

§ 668.150(b)(3)(ii), the agreement 

between the Secretary and a test 

publisher or a State requires that 

certified test administrators have the 

ability and facilities to keep ATB tests 

secure. One commenter stated that it 

does not favor storage of ATB tests 

anywhere other than at the institution. 

Another commenter offered to work 

with the Department and other test 

publishers to develop guidelines that 

will improve ATB test security. 

Discussion: While ATB tests can be 

used for more than title IV, student 

eligibility determination purposes (such 

as for other assessment purposes), 

institutions, assessment center staff, as 

well as, independent test administrators 

will continue to have access to these 

tests. Given this reality, we 

acknowledge that securing tests and 

preventing test disclosure or release is 

difficult. We established the 

requirement in § 668.150(b)(3)(ii) in 

order to balance the need for legitimate 

access and security. We appreciate the 

commenter’s offer to work with the 

Department and other test publishers to 

develop guidelines to improve test 

security. 

Changes: None. 

Comment: One commenter supported 

the requirement in proposed 

§ 668.150(b)(3)(iii) that only allows test 

administrators to be certified when they 

have not been decertified within the last 

three years by any test publisher. This 

commenter inquired how, other than 

through self-reporting, a test publisher 

or State would have the information 

necessary to meet this requirement. The 

commenter also asked if we intend to 

develop, implement, and maintain a 

database of decertified test 

administrators. 

Discussion: Under proposed 

§ 668.144(c)(16) and (d)(7), a test 

publisher and a State, respectively, must 

describe its test administrator 

certification process. The Department 

plans to evaluate each of the test 

publisher’s or State’s certification plans 

to determine how they will obtain the 

information about test administrator 

decertifications by other test publishers 

or States. Under proposed 

§ 668.150(b)(2), each test administrator 

will be required to provide to the 

publisher or State, as appropriate, a 

certification statement to indicate that 

the test administrator is not currently 

decertified and that the test 

administrator will notify the test 

publisher or State immediately if any 

other test publisher or State decertifies 

the test administrator. At this time, the 

Department does not plan to establish a 

list of all decertified test administrators. 

Changes: None. 

Comment: One commenter indicated 

that proposed § 668.150(b)(4), which 

provides that test administrators must 

be decertified under certain 

circumstances, will require States and 

test publishers to take great care when 

analyzing the facts prior to decertifying 

any test administrator. Section 

668.150(b)(4) states that the agreement 

between the Secretary and a test 

publisher or a State must require the 

decertification of a test administrator 

who (a) Fails to administer the test in 

accordance with the test publisher’s or 

State’s requirements, (b) has not kept 

the test secure, (c) has compromised the 

integrity of the testing process, or (d) 

violated the test administration 

requirements in § 668.151. 

One commenter also expressed 

concern that proposed § 668.150(b)(4) 

seems to remove the test publisher’s or 

State’s discretion about how to address 

certain violations of test administration 

rules. That commenter asked whether 

other corrective action is still a possible 

outcome, or whether decertification for 

any violation of the regulations or the 

test publisher’s or State’s test 

administration requirements is the only 

permissible outcome. 

Discussion: We understand the 

comment regarding decertification of 

test administrators and that test 

publishers and States will need to take 

care when carrying out their obligations 

under these regulations. For example, 

we expect that a test publisher or State 

would provide an administrator an 

opportunity to respond to any finding 

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warranting decertification, including 

any finding based on inferences from 

the analysis required under 

§ 668.151(b)(13). Regarding the inquiry 

whether § 668.151(b)(4) removes 

discretion and requires decertification 

without the possibility of other 

corrective action, we note that States 

and publishers are required to establish 

appropriate test instructions that ensure 

the integrity of the test and compliance 

with the requirements of the 

regulations. Having established the 

appropriate instructions, we do expect 

States and test publishers to decertify 

test administrators that fail to follow the 

test instructions or for any of the other 

reasons specified in § 668.151(b)(4). For 

example, we expect a test publisher or 

State to decertify a test administrator 

whenever it finds that a certified test 

administrator— 

• Alters or falsifies answers or scores; 

• Provides a test-taker with answers 

to the ATB test in order to improve the 

test-taker’s score; or 

• Allows a test-taker—other than a 

test-taker who is a person with a 

documented disability—extra time 

beyond the approved amount time as 

provided by the test publisher or State. 

In situations where there is no evidence 

or basis to conclude that one or more of 

the four reasons specified in 

§ 668.151(b)(4) has occurred, but there 

are other irregularities of another or 

lesser nature, we would expect test 

publishers and States to take the 

appropriate corrective action to protect 

the proper administration of its ATB 

test. 

Changes: None. 

Comment: Several commenters 

expressed concern about § 668.150(b)(5), 

which requires the test publisher or 

State to reevaluate the qualifications of 

a test administrator who has been 

decertified by another test publisher or 

State, even when the test publisher or 

State lacks any evidence of its own that 

the test administrator has performed in 

a manner inconsistent with the 

requirements in subpart J of part 668 or 

as required in the test administration 

manual. 

Discussion: Under § 668.150(b)(2), a 

test administrator is required to certify 

that he or she is not currently 

decertified and, in the event he or she 

subsequently is decertified, that he or 

she will immediately notify all other 

test publishers and States who have 

provided their certification. To the 

extent that a test administrator, who is 

certified by test publishers A, B, and C, 

as well as States 1 and 2, is decertified 

by State 1, the test administrator is 

required to immediately notify the other 

testing organizations and make them 

aware that the test administrator has 

been decertified by State 1. Upon 

receipt of such notification, under 

§ 668.150(b)(5), each of the other test 

publishers and the other State will 

reevaluate the qualifications of that test 

administrator. While the other testing 

organizations may not know the factual 

basis for the decertification by State 1, 

§ 668.150(b)(5) requires the other testing 

organizations to examine this test 

administrator’s work. Based upon the 

testing organization’s analysis, 

additional professional scrutiny, and the 

facts as a result of their reevaluation, the 

other testing organizations must make a 

determination of whether to continue 

the test administrator’s certification or 

to decertify the test administrator for 

cause. The fact that a test administrator 

has been decertified by one testing 

entity is sufficient cause to require that 

all other test publishers or States be 

alerted both to the fact that there was a 

problem of sufficient magnitude to 

require decertification by the other test 

publisher or State, and that they need to 

make an additional review and 

subsequent determination of whether 

testing problems could be occurring 

with the administration of their ATB 

test. 

Changes: None. 

Comment: One commenter 

recommended that we modify proposed 

§ 668.150(b)(5) to provide that test 

publishers and States are not liable for 

damages in the event a test 

administrator is decertified wrongly. 

This commenter indicated that 

proposed § 668.150(b)(6), which 

requires that the test publisher or State 

notify the Secretary and institutions 

immediately after decertifying a test 

administrator, is overly broad and that 

test publishers and States should be able 

to end their relationship with a test 

administrator for any reason. 

Discussion: We cannot indemnify test 

publishers or States for actions that a 

former employee may take against a test 

publisher or State. This is one of the 

reasons it is so important to strengthen 

these regulations including by requiring 

that, as a part of the test developer’s (a 

test publisher or a State) submission, it 

describe in detail the test administrator 

certification process—specifically how 

the test developer will determine that 

the test administrator will have the 

training, knowledge, skills and integrity 

to administer the test consistent with 

the regulations and the requirements as 

established by the test publisher or the 

State. Because the current regulations 

already require the decertification of test 

administrators who fail to give the test 

in accordance with the test publisher’s 

instructions, who fail to secure the tests, 

who compromise the test, or who 

violate the provisions of § 668.151 

(Administration of tests), we do not 

anticipate that the changes to subpart J 

of part 668 reflected in these final 

regulations will cause an increase in 

legal actions brought by former test 

administrators. However, we do expect 

that these regulations will cause test 

publishers and States to strengthen their 

procedures and training to ensure that 

only properly trained test administrators 

will be certified by test publishers and 

States. 

Notification of the Secretary and 

institutions when a test administrator is 

decertified is required for a variety of 

compliance and other issues. The 

Secretary needs to know to what extent 

a test publisher or State has a problem 

causing the decertification of test 

administrators. Recent GAO and OIG 

reports have reported a variety of 

compliance concerns around ATB 

testing. The Secretary has a 

responsibility to protect students, 

prospective students, institutions and 

taxpayers. Through these requirements, 

one new compliance metric will be the 

number of decertifications by test 

publishers or States, which the 

Secretary will monitor. Notification of 

any decertification by a test publisher or 

State to the institution is required due 

to the fact that institutions depend on 

the test publisher or State to provide 

certified test administrators and, 

therefore, are completely reliant upon 

test publishers and States to notify the 

institution of when a test administrator 

is no longer certified and must not be 

administering tests to students for title 

IV, HEA student eligibility 

determination purposes. 

Changes: None. 

Comment: One commenter suggested 

that when a test publisher or State 

suspends a test administrator while it 

conducts an investigation into a 

possible violation of its requirements or 

the regulations, the test publisher or 

State should not have to immediately 

report the suspension to the Secretary 

and the institution. The commenter also 

suggested that there should be a time 

limit after which notification by the test 

publisher or State to the Secretary and 

the institutions would not be required. 

Discussion: Proposed § 668.150(b)(6) 

requires the immediate notification of 

the Secretary and all institutions where 

the test administrator administered tests 

upon decertification. We assume that in 

cases of suspected test administrator 

violations, a suspension period will 

occur while fact-finding, analysis, and 

ultimately a determination will be made 

to either continue the test 

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administrator’s certification or to 

decertify the test administrator. The 

notification requirement reflected in 

§ 668.150(b)(6) only applies 

immediately after a test administrator is 

decertified—not during the suspension 

period. Notification of the Secretary or 

others of a test administrator’s 

suspended status is voluntary, but is an 

action that the Department supports. 

The commenter suggested that this 

notification requirement be waived after 

a certain appropriate period of time. We 

do not agree. Consistent with the 

provisions of §§ 682.402(e) and 

685.212(e), students may have their loan 

debt obligations discharged under a 

false certification discharge if the school 

certified the student’s eligibility for a 

FFEL or a William D. Ford Federal 

Direct Loan on the basis of ability to 

benefit from its training and the student 

did not meet the applicable 

requirements of subpart J of part 668. 

Because these loans generally have a 10- 

year repayment schedule (and may have 

repayment plans under which 

repayment schedules can be extended to 

25 or more years), we do not agree to 

limit the requirement to notify to the 

Secretary and institutions. 

Changes: None. 

Comment: One commenter strongly 

supported proposed § 668.150(b)(7), 

which requires that all test results 

administered by a test administrator 

who the test publisher or State 

decertifies be reviewed and that a 

determination be made about which 

tests were improperly administered. 

Upon a determination of which tests 

had been improperly administered, the 

test publisher or State must then 

immediately notify the affected 

institutions, affected students and 

affected prospective students. This 

commenter suggested that we revise this 

provision to require that the test 

publisher or State notify all students 

tested by the decertified test 

administrator. 

Another commenter suggested that we 

add a time limit to § 668.150(b)(7)(i) so 

that test publishers and States that 

decertify a test administrator are only 

required to review tests administered by 

the decertified administrator during a 

specified period of time. 

Discussion: Under proposed 

§ 668.150(b)(7)(ii), when a 

determination of improper test 

administration is made, the test 

publisher or State must provide 

notification to all affected institutions 

and students or prospective students. 

Under § 668.150(b)(7)(iii), the test 

publisher or State must also provide a 

report to the Secretary on the results of 

the review of the decertified test 

administrator’s previously administered 

tests that may have been improperly 

administered. When a determination is 

made that tests were improperly 

administered, the affected entities 

would include institutions, students, 

and prospective students affected by 

those tests that were improperly 

administered. Under § 668.150(b)(7), 

notifications to those affected entities 

are required. We believe that these 

notification and reporting requirements 

are adequate to inform all affected 

parties, including students and 

prospective students. We do not believe 

it is necessary to notify a student who 

took a test administered by a test 

administrator who was subsequently 

decertified when there is no evidence 

that the particular test the student took 

was improperly administered. 

Under proposed § 668.150(b)(7), if a 

test administrator was certified over a 

long number of years, test publishers 

and States potentially would be 

required to review many years’ worth of 

previously administered ATB tests 

because, as proposed, this regulatory 

requirement included no limit on how 

far back test publishers and States 

would need to go when reviewing tests 

previously administered by a decertified 

test administrator. We believe that the 

burden on test publishers and States 

associated with such an extensive 

review should be balanced against the 

significant student loan debt that 

students tested by the decertified test 

administrator may have incurred. For 

this reason, we are modifying the 

language in proposed § 668.150(b)(7)(i) 

to limit the period of the review to the 

five-year period prior the date of 

decertification. We believe that a fiveyear period is reasonable for the 

following reasons. First, we are 

decreasing the period of time for test 

publishers and States to conduct their 

test data anomaly studies from 3 years 

to 18 months. These studies, which are 

designed, in part, to analyze if there are 

ATB test irregularities, will be 

conducted more frequently and can be 

used to identify possible instances of 

improper test administration. Second, 

we believe that a longer review period 

will increase the likelihood that the 

student notification efforts of test 

publishers and States (in the event that 

their review reveals that previously 

administered tests were improperly 

administered) will be ineffective, in 

part, due to the low probability that the 

student address information that a test 

publisher or State obtains when the 

student takes the test will remain 

accurate over this period of the review. 

Finally, we strongly recommend that 

test publishers and States consider 

additional disclosures to students 

asking that they update their address 

information with test publishers and 

States over time, in order for test 

publishers and States to provide 

students and prospective students with 

potential future notifications that could 

reduce their future title IV, student loan 

indebtedness. 

Changes: We have revised 

§ 668.150(b)(7)(i) to indicate that the 

period of the review of all the test 

results of the tests administered by a 

decertified test administrator is 5 years 

preceding the date of decertification. 

Comment: One commenter, who 

expressed support for the proposed 

change reflected in § 668.150(b)(13) 

decreasing the timeframe from 3 years to 

18 months for test publishers and States 

to analyze ATB test scores to determine 

whether the test scores and data 

produce any irregular patterns, 

suggested that that the Department also 

consider a separate metric for test 

administrators who administer large 

numbers of ATB test within an 18 

month period. 

Discussion: We appreciate the 

recommendation and acknowledge that 

test publishers and States are free to 

adopt such a suggestion for test 

administrators who are providing large 

numbers of ATB test administrations in 

a short period of time. As some test 

publishers have pointed out, test 

publishers have everything to gain from 

ensuring that their ATB tests are 

properly administered in accordance 

with the regulations and their test 

administration manual. To the extent 

that there are high volume test 

administrators, test publishers and 

States can best protect their tests by 

developing processes to help them to 

determine early whether these high 

volume test administrators are in 

compliance. 

Changes: None. 

Comment: One commenter suggested 

that the Department consider a 

modification to the language in 

§ 668.150(b)(13) to change the emphasis 

from an analysis of the test scores to an 

analysis of the test data. 

Discussion: The purpose of proposed 

§ 668.150(b)(13) (in concert with 

proposed §§ 668.144(c)(17) and (d)(8), 

which require test publishers and 

States, as applicable, to explain their 

methodology for identifying test 

irregularities) is to require test 

publishers and States to collect and 

analyze test data, to determine whether 

the test scores and data produce any 

irregular patterns that raise an inference 

that the tests were not being properly 

administered, and to provide the 

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1The use of the term ‘‘temporary impairments’’ for 

the purposes of these regulations should not be 

confused with the definition of disability as defined 

by these regulations (see § 668.142), section 504 of 

the Rehabilitation Act, or the Americans with 

Disabilities Act. 

Secretary with a copy of the test 

anomaly analysis. We acknowledge that 

this type of analysis is broader than just 

examining the test outcomes, i.e. the test 

scores. Because this type of item 

analysis, which can yield statistical 

irregularities, goes beyond test score 

results, we have modified the proposed 

language accordingly. 

Changes: We have modified 

§ 668.150(b)(13) so that it refers to ‘‘test 

data of students who take the test’’ and 

not to ‘‘test scores of students who take 

the test’’ to determine whether the test 

data (rather than ‘‘the test scores and 

data’’) produce any irregular pattern that 

raises an inference that the tests were 

not being properly administered. 

Comment: One commenter suggested 

that the Department modify proposed 

§ 668.150(b)(14) to require that any 

request for information by the Secretary 

or other listed agencies and entities be 

in writing. 

Discussion: Nothing in the regulations 

would prevent the test publisher or 

State from asking the entities listed in 

§ 668.150(b)(14) to request the 

information in writing, and from 

implementing other safeguards to 

protect the security and confidentiality 

of the data. 

Changes: None. 

Comment: One commenter stated that 

§ 668.150(b)(16), as proposed, is 

ambiguous. The commenter suggested 

that we delete the word ‘‘other,’’ as it 

modifies ‘‘criminal misconduct,’’ from 

this section. 

Discussion: Upon further review, we 

have determined that alternative 

language that specifically provides for 

both civil and criminal fraud would 

clarify what we mean in this regulatory 

provision. The purpose of 

§ 668.150(b)(16) is to require test 

publishers and States to immediately 

report any credible information 

indicating that a test administrator or 

institution may have engaged in fraud or 

other criminal misconduct. We intend 

for test publishers and States to report 

suspected fraud or misconduct without 

requiring them to ascertain whether the 

conduct constitutes civil fraud, criminal 

fraud or ‘‘other criminal misconduct.’’ 

Changes: We have revised 

§ 668.150(b)(16) to require that the 

agreement between a test publisher or a 

State, as applicable, and the Secretary 

must provide that the test publisher or 

the State, as applicable, must 

immediately contact the Office of the 

Inspector General of the Department of 

Education if the test publisher or the 

State finds any credible information 

indicating that a test administrator or 

institution has engaged in civil or 

criminal fraud or other misconduct. 

Comment: One commenter expressed 

general support for proposed 

§ 668.150(b)(17), which requires test 

administrators who provide an ATB test 

to an individual with a disability who 

requires an accommodation, to report to 

the test publisher or State both the 

disability and the accommodation. 

However, the commenter recommended 

that the Department provide 

clarification on how test publishers and 

States can exchange this information in 

a manner that would be compliant with 

the Health Insurance Portability and 

Accountability Act (HIPAA). 

Additionally, the commenter requested 

an explanation of the Department’s 

position on distinguishing between an 

accommodation provided for an 

individual with a temporary impairment 

and an accommodation required by a 

person with a permanent or long-term 

disability. 

Discussion: HIPAA is administered by 

the U.S. Department of Health and 

Human Services and the Department of 

Education does not provide guidance on 

how entities should comply with 

another agency’s requirements. 

However, it is our expectation that test 

administrators, test publishers and 

States will implement the requirement 

reflected in § 668.150(b)(17) consistent 

with all other applicable Federal 

statutes and their implementing 

regulations. 

With regard to the comment 

requesting an explanation of the 

Department’s position on the differences 

between accommodations for test-takers 

with temporary impairments and 

accommodations for test-takers with 

permanent or long-term disabilities, we 

note that the regulations do not 

distinguish between types of 

accommodations. However, we 

acknowledge that test-takers may 

require accommodations for either 

temporary impairments or for 

individuals with disabilities.1

The following two examples are 

provided: 

Example 1 (Temporary Impairment). 

If an approved ATB test is provided via 

paper and pencil and the test-taker, who 

is normally right-handed, has a broken 

right hand and, as a result, must write 

with his or her left hand, the test 

administrator must provide the testtaker an accommodation in accordance 

with the test publisher or State’s 

technical manual for test 

administration. So, in this case, if the 

technical manual indicates that under a 

temporary impairment, such as, but not 

limited to, a broken writing hand, the 

test administrator should allow the testtaker an additional ‘‘X’’ minutes to 

complete the test, the test administrator 

must allow the test-taker with the 

broken writing hand an extra ‘‘X’’ 

minutes to complete the test. 

Example 2 (Disability). If an approved 

ATB test is provided via paper and 

pencil and the test-taker is an individual 

with a disability, such as blindness. To 

the extent that the test publisher or State 

has addressed in the technical manual 

consistent with the requirements of 

§ 668.144(c)(11)(vii) and provided 

additional guidance on the 

interpretation of scores resulting from 

any modifications of the test for 

individuals with disabilities, for 

example, the use of a previously 

approved audio recorded version would 

be permissible. In this example, there 

may or may not be scoring implications, 

however, an appropriate 

accommodation as provided in the 

technical manual is allowable as 

approved under this subpart. 

Absent any instructions in the 

technical manual about 

accommodations for individuals with 

disabilities or individuals with 

temporary impairments, the test 

administrator does not have the 

authority to create or provide an 

accommodation other than what is 

provided in § 668.149. Historically, test 

publishers have addressed types of 

accommodations available to test 

administrators in their test 

administration technical manual, which 

the test publisher or State provides to 

the Secretary as part of its test 

submission. Once the test is approved 

by the Secretary, the accommodations 

indicated in the test administration 

technical manual are the approved 

accommodations for the test. In 

addition, subsequent to the Secretary’s 

initial approval of an ATB test, some 

test publishers, consistent with the 

provisions of § 668.144(c)(9), have 

developed large-print versions, braille 

versions, and audio-recorded versions of 

their previously-approved tests and 

submitted the alternative versions along 

with the requisite analysis of the 

revisions for their comparability of 

scores to the previously approved test, 

as well as the data on the validity 

studies of the revised or alternative 

version of the previously approved test. 

Once approved, and as published in the 

Federal Register, these alternative 

versions of the previously approved test 

would provide for certain 

accommodations that may be required 

by individuals with disabilities. 

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Changes: None. 

Administration of Tests (§ 668.151) 

Comment: One commenter provided a 

number of suggestions regarding test 

administration security, including 

requiring that (1) test publishers contact 

the Department when tests are being 

used for ATB and non-ATB purposes, 

(2) different versions of the test be used 

for different purposes so that one 

version is used exclusively for ATB 

purposes, (3) ATB tests only be shipped 

to test administrators and not to 

institutions, and (4) ATB tests be locked 

in an area that cannot be accessed by 

non-certified test administrators. 

Discussion: Many ATB tests that have 

been submitted to the Secretary and 

subsequently approved for title IV, HEA 

student eligibility purposes are also 

used for general academic placement 

purposes not related to ATB. Regarding 

the suggestion that test administrators 

report to the Department when a test is 

used for ATB purposes, beginning with 

the 2011–2012 award year, we will 

begin collecting information on the use 

of an ATB test for each student who 

receives title IV, HEA funds; therefore 

test administrators will not have to 

provide the information to us. In terms 

of requiring that approved ATB tests 

must be used exclusively for this single 

purpose, that would require a statutory 

change. While it has been suggested that 

we revise the regulations to allow ATB 

tests only be shipped to test 

administrators and not to institutions, 

we believe that this is not feasible given 

that ATB tests are used both for title IV, 

HEA eligibility and non-title IV 

purposes, such as for course placement 

purposes. Finally, while it may be 

possible that at the discretion of the 

institution’s assessment center (or as a 

result of an agreement between the test 

publisher or State and the institution) 

that ATB tests be locked in an area only 

accessible by certified test 

administrators, this may be impractical 

since these tests are used for non-title IV 

eligibility purposes. 

Changes: None. 

Comment: A commenter indicated 

that for computer-based tests, 

institutions maintain the associated 

system components on their computers, 

so test administrators (particularly 

independent test administrators) cannot 

be held responsible for maintaining the 

security of these types of tests, other 

than during the test administration. 

For paper-and-pencil tests, the 

commenter expressed strong concerns 

regarding independent test 

administrators being held responsible 

for storing test materials. The 

commenter stated that independent test 

administrators often do not have access 

to secure storage, other than at the 

campuses where they administer the 

test. Use of their home or automobile for 

storage and transportation to test sites is 

clearly unacceptable for security. 

Institutions typically have a secure 

location (a locked facility to which only 

the test administrator and possibly a 

select few individuals have a key) where 

materials can be stored. In addition, 

many institutions use the same test 

forms for ATB purposes and other 

purposes, and thus would already have 

copies of the test forms in storage at the 

institution. The commenter argued that 

maintaining test forms at the institution 

while emphasizing the chain of custody, 

under written agreements, will better 

contribute to the goal of keeping test 

forms secure. 

Discussion: We disagree. Proposed 

§ 668.144(c)(16) and (d)(7) require test 

publishers and States, respectively, to 

ensure not only that the test 

administrator has the training, 

knowledge, skill and integrity to test 

students in accordance with the 

requirements of this subpart, and the 

requirements of the test administration 

technical manual, but also, that the test 

administrator has the ability and 

facilities to keep the ATB tests secure 

against disclosure or release. We believe 

that these requirements are reasonable, 

and prudent, and will help ensure the 

integrity of ATB tests. While at this 

time, we are not prescribing how test 

publishers or States must make these 

determinations about their test 

administrators, we expect that they will 

base their determinations on the 

measures taken by the test administrator 

to protect the security of the tests. For 

example, one could envision a test 

administrator satisfying this 

requirement by having a secure safe in 

the assessment center where only 

certified test administrators had the key 

or combination to obtain the tests. In the 

case of an independent test 

administrator, one could envision the 

test administrator satisfying the 

requirement by maintaining the tests in 

a mobile, portable safe or some other 

secure device. As these examples 

illustrate, test publishers and States will 

be required to distinguish between 

secure and non-secure methods of 

storing ATB tests that limit access and 

protect against unintended release or 

disclosure if these tests are going to 

continue to be used for ATB purposes, 

otherwise the Secretary will consider 

that the test is improperly administered. 

Changes: None. 

Administration of Tests for Individuals 

Whose Native Language Is Not English 

or for Individuals With Disabilities 

(§ 668.153) 

Comment: One commenter noted that 

if a non-English speaking student is in 

a program of study which is taught in 

the student’s native language and the 

program also has an ESL component or 

that at least a portion of the program 

will be taught in English, there are two 

aspects that need to be tested, the 

student’s reading, verbal and 

quantitative skills in their own native 

language, as well as, their knowledge of 

English in order to understand the 

portion of the program taught in 

English. The commenter expressed 

concern regarding the timing of these 

tests. 

Discussion: We appreciate this 

comment because it highlights the need 

to address a situation not covered by the 

proposed regulations. Under proposed 

§ 668.153(a)(1), we require institutions 

to use an ATB test in the student’s 

native language when the student’s 

native language is other than English 

and the student will be enrolled in a 

program that is taught in the student’s 

native language. Paragraphs (a)(2) and 

(a)(3) of proposed § 668.153 address 

situations where individuals who are 

not native speakers of English and who 

are not fluent in English are enrolled (or 

plan to enroll) in a program (a) that is 

taught in English with an ESL 

component and (b) that is taught in 

English without an ESL component, 

respectively. The proposed regulations 

do not address what happens in the case 

of a non-English speaker who is 

enrolled or plans on enrolling in a 

program that will be taught in his or her 

native language that includes an ESL 

component or a portion of the program 

will be taught in English. In situations 

such as these, we believe that 

institutions should require the student 

to take an English proficiency 

assessment approved under § 668.148(b) 

prior to when the English or ESL 

portion of the program commences. 

Changes: We have added a new 

paragraph (a)(5) to § 668.153 to provide 

that if the individual is a non-native 

speaker of English who is enrolled or 

plans to enroll in a program that will be 

taught in his or her native language and 

the program includes an ESL 

component or a portion of the program 

will be taught in English, the individual 

must take a test approved under 

§§ 668.146 and 668.148(a)(1) in the 

student’s native language. This new 

paragraph also provides that prior to the 

beginning of the ESL component or 

when the English portion of the program 

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commences, the individual must take an 

English proficiency test approved under 

§ 668.148(b). 

Comment: One commenter suggested 

that most test administrators do not 

have the training or experience to 

determine appropriate accommodations 

for students with disabilities, and thus 

are not qualified to identify or provide 

an appropriate accommodation. This 

commenter argued that test publishers 

and States should not be held 

accountable for training test 

administrators in the intricacies of laws 

regarding the rights of persons with 

disabilities. The commenter stated that, 

to protect the privacy of the examinee, 

the test administrator should not need 

to know the specifics of the disability. 

This commenter argued that the test 

administrator only needs to know what 

the accommodation is. For this reason, 

the commenter recommended that the 

test administrator only be required to 

verify that the institution has provided 

the appropriate documentation of the 

student’s disability, as described in 

§ 668.153(b)(4). It was the commenter’s 

view that the responsibility for 

determining the appropriate 

accommodation for the student’s 

disability lies with the institution’s staff. 

Discussion: We agree that test 

administrators may not have extensive 

training or experience to determine 

whether or not a requested 

accommodation is appropriate. 

However, each test must be 

administered in accordance with the 

test publisher’s or State’s technical 

manual. Consistent with proposed 

§ 668.144(c)(11)(vii) and (d)(11)(vii), the 

technical manual must include 

additional guidance on the 

interpretation of scores resulting from 

any modifications of the test for 

individuals with disabilities. We expect 

that a test publisher or State will 

provide examples in the technical 

manual of the types of both allowable 

and non-allowable accommodations 

associated with a range of temporary 

impairments and for individuals with 

disabilities in order to insure that the 

test administrator has the necessary 

protocols to follow to ensure the 

validity of the test administration 

process, while allowing for a range of 

specialized needs to be met. While these 

examples of allowable and nonallowable accommodations cannot be 

exhaustive, we will expect them to be 

expansive so that test administrators 

have clear examples of how the 

approved tests can and cannot be used 

for individuals with temporary 

impairments and for individuals with 

disabilities. These protocols may 

include, for example, the use, when 

appropriate, of alternative tests (e.g., 

approved audio-recorded ATB tests for 

individuals who are blind) and 

providing a test-taker whose vision is 

impaired (as documented by a 

physician) additional time to complete 

an approved large print version of an 

ATB test. To make this expectation 

clearer, we will revise 

§ 668.144(c)(11)(vii) and (d)(11)(vii) to 

require a test’s technical manual to 

include additional guidance on the 

types of accommodations that are 

allowable for individuals with 

temporary impairments or individuals 

with disabilities and the interpretation 

of scores resulting from any 

modifications of the test for individuals 

with temporary impairments or 

individuals with disabilities. 

Changes: We have modified 

§ 668.144(c)(11)(vii)and (d)(11)(vii) to 

require the test manual to include, in 

addition to guidance on the 

interpretation of scores resulting from 

modification of the test for individuals 

with temporary impairments or 

individuals with disabilities, guidance 

on the types of accommodations that are 

allowable. 

Disbursements (§§ 668.164(i), 

685.102(b), 685.301(e), 686.2(b), and 

686.37(b)) 

Provisions for Books and Supplies 

(§ 668.164(i)) 

Comment: Several commenters agreed 

with the proposal in § 668.164(i) to 

require an institution to provide, under 

certain conditions, a way for a Federal 

Pell Grant eligible student to obtain or 

purchase required books and supplies 

by the seventh day of a payment period. 

Various commenters noted the 

academic importance of enabling 

students to have early access to their 

books and supplies. However, some of 

these commenters argued that bookstore 

vouchers were not the most affordable 

option for students, noting that under 

current guidance an institution that 

issues vouchers in lieu of cash must 

demonstrate it provides students ‘‘a real 

and reasonable opportunity’’ to obtain 

materials from other vendors. 

Two commenters requested that the 

regulations also apply to students who 

are eligible for the Iraq and Afghanistan 

Service Grants. 

Various commenters believed the 

proposed regulations would be 

administratively difficult and 

burdensome to carry out. One of the 

commenters stated that institutions with 

nonterm programs would have special 

administrative problems meeting the 

proposed regulations because of 

different start dates and different 

payment period completion rates for 

students. Another commenter requested 

the Department to delay implementing 

the regulations so that institutions have 

sufficient time to make needed software 

and procedural changes. One 

commenter believed that the student 

should be required to initiate a request 

to obtain or purchase books and 

supplies instead of requiring an 

institution to perform this process for all 

Federal Pell Grant eligible students. 

Discussion: Because we have 

identified situations where low-cost 

institutions delay disbursing funds for 

an extended time, or make partial 

disbursements to cover costs for only 

tuition and fees, the Department 

believes that these provisions are 

essential in enabling needy students to 

purchase books and supplies at the 

beginning of the term or enrollment 

period. Moreover, we find it troubling 

that disbursement delays at some 

institutions may force very needy 

students to take out private loans to pay 

for books and supplies that would 

otherwise be paid by Federal Pell Grant 

funds. 

We believe that the regulations in 

§ 668.164(i) provide an appropriate 

balance between the need for Federal 

Pell Grant eligible students to be able to 

purchase or obtain books and supplies 

early in the payment period and the 

administrative needs of institutions. For 

example, an institution may issue a 

bookstore voucher, make a cash 

disbursement, issue a stored-value card, 

or otherwise extend credit to students to 

make needed purchases. The institution 

has the flexibility to choose one or more 

of these methods or a similar method 

based on its administrative needs and 

constraints or an evaluation of the costs 

and benefits of implementing one or 

more of these methods. 

With regard to the request to expand 

the scope of the regulations to include 

recipients of Iraq and Afghanistan 

Service Grants, we believe that students 

who are not eligible for a Federal Pell 

Grant should have sufficient resources, 

as indicated by their higher expected 

family contributions, to purchase books 

and supplies. We note however, that 

nothing in these regulations prevents an 

institution from making credit balance 

funds available early in the payment 

period to any student. 

In response to concerns about 

administrative issues for nonterm 

programs, we note that for purposes of 

the Federal Pell Grant Program an 

institution is already responsible for 

knowing when a student has either 

completed a payment period or started 

a payment period. These regulations fall 

within that framework. 

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Concerning the request for a delay in 

implementing these regulations, we 

believe that an institution has ample 

time to make any administrative and 

software changes required since the 

regulations are not effective until the 

2011–2012 award year. 

Changes: None. 

Comment: Some commenters 

questioned whether the anticipated 

credit balance for a student under the 

proposed regulations is calculated based 

only on Federal Pell Grant funds; all 

title IV, HEA program funds; or all 

financial aid funds. 

In determining whether an institution 

could disburse title IV, HEA program 

funds to an eligible student 10 days 

before the beginning of a payment 

period, several commenters requested 

the Department to clarify how an 

institution treats a student who (1) Is 

selected for verification, (2) is subject to 

the 30 day delayed disbursement 

provisions for first-time, first-year 

undergraduate borrowers, (3) is 

attending a term-based program with 

minisessions, (4) has a ‘‘C’’ code on the 

SAR or ISIR, or (5) has other unresolved 

eligibility issues. 

Some commenters requested that the 

regulations provide that an institution is 

only required to provide a student with 

the funds or bookstore vouchers for 

books and supplies after the student has 

attended at least one day of class. 

One commenter noted that under 

Federal law a bank must have a 

customer identification program to help 

the government fight the funding of 

terrorism. Under that program, a bank 

must verify the identity of any person 

who opens an account and have 

procedures in place to resolve 

conflicting identity data. The 

commenter was concerned that for 

institutions using bank-issued storedvalue cards or prepaid debit cards to 

deliver funds for books and supplies, 

any delays by the bank in resolving the 

conflicts would delay the delivery of 

funds to students. Consequently, the 

commenter requested that the 

regulations allow for this type of delay. 

One commenter asked how the 

proposed regulations would apply 

under a consortium agreement between 

two eligible institutions if the student is 

enrolled in a course at the host 

institution with the class starting prior 

to the payment period at the home 

institution and the home institution is 

processing and paying the title IV, HEA 

program assistance. Another commenter 

asked what action would be required by 

an institution if it includes books and 

supplies in the tuition and provides all 

of those materials to the student when 

he or she starts class. 

Discussion: With regard to which aid 

funds are used to determine whether a 

credit balance would be created 10 days 

before the beginning of a payment 

period, an institution must consider all 

the title IV, HEA program funds that a 

student is eligible to receive at that time. 

The institution does not have to 

consider aid from any other sources. 

To be eligible, the student must meet 

all the eligibility requirements in 

subpart C of 34 CFR part 668 at least 10 

days before the start of the student’s 

payment period. A student who has not 

completed the verification process, has 

an unresolved ‘‘C’’ code on the SAR and 

ISIR, or has unresolved conflicting 

information is not covered by the 

regulations if those issues have not been 

resolved at least 10 days before the start 

of the student’s payment period. With 

regard to the 30-day delayed 

disbursement provisions for Stafford 

Loans, the institution would not 

consider the amount of the loan 

disbursement in determining the credit 

balance because the institution may not 

disburse that loan 10 days before the 

start of that student’s payment period. 

Also, the institution would not consider 

title IV, HEA program assistance that 

has not yet been awarded to a student 

at least 10 days before the start of 

classes because the student missed a 

financial aid deadline date. 

The amount that the institution must 

provide to a qualifying student to obtain 

or purchase books and supplies is the 

lesser of the presumed credit balance or 

the amount needed by the student as 

determined by the institution. In 

determining the amount needed, an 

institution may use the actual costs of 

books and supplies or the allowance for 

those materials used in the student’s 

cost of attendance for the payment 

period. 

Since an institution has until the 

seventh day of a student’s payment 

period to provide the way for the 

student to obtain or purchase the books 

and supplies, the institution may 

determine whether the student has 

attended classes if it has, or chooses to 

implement, a process for taking or 

monitoring attendance. However, by the 

seventh day of the payment period, that 

student must be able to obtain books 

and supplies unless the institution 

knows that the student is not attending. 

When an institution uses a bankissued stored-value or prepaid debit 

card that is supported by a federally 

insured bank account to deliver funds 

for books and supplies, a student must 

have access to the funds via the card by 

the seventh day of his or her payment 

period. If a bank delays issuing a storedvalue or prepaid debit card to the 

student because it must resolve 

conflicting identity data under Federal 

law, the Department will not hold the 

institution accountable as long as the 

institution exercises reasonable care and 

diligence in providing in a timely 

manner any identity information about 

the student to the bank. Likewise, the 

institution is not responsible if the 

student provides inaccurate information 

or delays in responding to a request 

from the bank to resolve any 

discrepancies. 

Under a consortium agreement 

between two eligible institutions, if a 

student is enrolled in a course at the 

host institution and classes start before 

the payment period begins at the home 

institution that is paying the title IV, 

HEA program assistance, the regulations 

require that the student obtain the books 

and supplies by the seventh day of the 

start of the payment period of the home 

institution. If the host institution is 

paying the title IV, HEA program 

assistance, the student must be able to 

obtain the books and supplies by the 

seventh day of the start of the payment 

period of the host institution. 

An institution that includes the costs 

of books and supplies in the tuition 

charged and provides all of those 

materials to the student at the start of 

his or her classes meets the 

requirements of these regulations. 

Changes: None. 

Comment: Several commenters were 

concerned over who would be liable for 

advancing funds to a student for books 

and supplies if the student fails to start 

all of his or her classes. Some 

commenters indicated that the potential 

debt owed to an institution by students 

under the proposed regulations is not in 

the best interest of the student. A few 

commenters noted that the use of 

bookstore vouchers as the way for a 

student to obtain books and supplies 

appears to increase the amount of 

unearned title IV funds that the 

institution must return when a student 

withdraws. 

Discussion: These regulations do not 

change the provisions under 34 CFR 

668.21 concerning the treatment of title 

IV grant and loan funds if the recipient 

does not begin attendance at the 

institution. In the case where the 

institution has credited the student’s 

account at the institution or disbursed 

directly to the student any Federal Pell 

Grant, FSEOG, Federal Perkins Loan, 

TEACH Grant, ACG, or National 

SMART Grant program funds and the 

student fails to begin attendance in a 

payment period, the institution must 

return all of those program funds to the 

respective program. 

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Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations 66931 

In addition, an institution must return 

any Direct Loan funds that were 

credited to the student’s account at the 

institution for the payment period or 

period of enrollment. For any Direct 

Loan funds disbursed directly to a 

student, the institution must notify the 

Department of the loan funds that are 

outstanding, so that the Department can 

issue a 30-day demand letter to the 

student under 34 CFR 685.211. If the 

institution knew prior to disbursing any 

of the Direct Loan funds directly to the 

student that he or she would not begin 

attendance, the institution must also 

return those Direct Loan funds. This 

would apply when, for example, a 

student had previously notified the 

institution that he or she would not be 

attending or the institution had expelled 

the student before disbursing the Direct 

Loan directly to the student. 

When an institution is responsible for 

returning title IV, HEA program funds 

for a student who failed to begin 

attendance at the institution it must 

return those funds as soon as possible, 

but no later than 30 days after the date 

that the institution becomes aware that 

the student will not or has not begun 

attendance. The funds that are required 

to be returned by the institution are not 

a student title IV, HEA liability and will 

not affect the student’s title IV, HEA 

eligibility. However, institutional 

charges not paid by financial assistance 

are a student liability owed to the 

institution and subject to its own 

collection process. 

The new requirement also does not 

change the regulations in 34 CFR 668.22 

on handling the Return of Title IV Aid 

when a student began attendance but 

withdraws from the payment period or 

period of enrollment. If the institution 

provides a bookstore voucher for a 

student to obtain or purchase books and 

supplies, those expenses for the 

required course materials are considered 

institutional charges because the 

student does not have a real and 

reasonable opportunity to purchase the 

materials from any other place except 

the institution. The institution must 

include the charges for books and 

supplies from a bookstore voucher as 

institutional charges in determining the 

portion of unearned title IV, HEA 

program assistance that the institution is 

responsible for returning. However, an 

institution does not have to select the 

bookstore voucher as the way to meet 

the new requirement, it is just one 

option. 

Changes: None. 

Comment: One commenter opined 

that students who are not Pell Grant 

eligible would be unfairly responsible 

for obtaining funds to purchase books 

while others at the same institution 

would be confused about who should or 

should not receive the means to obtain 

or purchase books and supplies at the 

beginning of the term or enrollment 

period. A few commenters suggested or 

asked whether a student could opt out 

of the way offered by an institution to 

obtain or purchase books and supplies. 

Some commenters asked if the 

proposed regulations were in conflict 

with the current Cash Management 

regulations in §§ 668.164 and 668.165. 

A few commenters requested 

clarification on how student 

authorizations applied to the new 

requirements. Some commenters 

suggested that an institution should not 

be required to obtain a student’s 

authorization to credit his or her 

account at the institution with title IV, 

HEA program funds for books and 

supplies, while other commenters 

recommended that an institution should 

be able to require the student’s 

authorization before advancing funds 

for books and supplies. 

Discussion: Under § 668.16(h), an 

institution is required to provide 

adequate financial aid counseling to 

eligible students who apply for title IV, 

HEA program assistance and under 

§ 668.42, an institution is required to 

provide consumer information to 

enrolled and prospective students that, 

among other things, describe the 

method by which aid is determined and 

disbursed, delivered, or applied to a 

student’s account and the frequency of 

those disbursements. Further under 

§ 668.165(a)(1), before an institution 

disburses title IV, HEA funds it must 

notify a student how and when those 

funds will be disbursed. Based on these 

requirements, an institution must 

describe in its financial aid information 

and its notifications provided to 

students receiving title IV, HEA funds 

the way under § 668.164(i) that it 

provides for Federal Pell Grant eligible 

students to obtain or purchase required 

books and supplies by the seventh day 

of a payment period under certain 

conditions. The information must 

indicate whether the institution would 

enter a charge on the student’s account 

at the institution for books and supplies 

or pay funds to the student directly. 

Institutions also routinely counsel 

students about the variations in the 

amounts of Federal student aid or other 

resources that are available to them 

based upon their need and expected 

family contribution. We believe that this 

counseling process will mitigate any 

confusion by explaining to a student 

who qualifies for funds advanced to 

purchase books and supplies, how the 

process is handled at the institution, 

and how a student may opt-out of the 

process. 

Regardless of the way an institution 

provides for a student to obtain books 

and supplies, the student may opt out. 

For instance, if an institution provides 

a bookstore voucher, the student may 

opt out by not using the voucher. If the 

institution uses another way, such as a 

bank-issued stored-value or prepaid 

debit card, it must have a policy under 

which the student may opt out. For 

example, a student might have to notify 

the institution by a certain date so that 

the institution does not unnecessarily 

issue a check to the student or transfer 

funds to the student’s bank account. In 

any case, if the student opts out, the 

institution may, but is not required to, 

offer the student another way to 

purchase books and supplies so long as 

it does not otherwise delay providing 

funds to the student as a credit balance. 

We are amending the regulations to 

clarify that a student may opt out of the 

way that an institution provides for a 

student to obtain books and supplies. 

In addition, to facilitate advancing 

funds or credit by the seventh day of 

classes of a payment period under this 

provision, the Department considers 

that a student authorizes the use of title 

IV, HEA funds at the time the student 

uses the method provided by the 

institution to purchase books and 

supplies. This means that an institution 

does not need to obtain a written 

authorization under §§ 668.164(d)(1)(iv) 

and 668.165(b) from the student to 

credit a student’s account at the 

institution for the books and supplies 

that may be provided only under 

§ 668.164(i). We are amending the 

regulations to indicate that an 

institution does not need to obtain a 

written authorization from a student to 

credit the student’s account at the 

institution for books and supplies 

provided under § 668.164(i). 

Changes: Section 668.164(i) has been 

revised to specify that an institution 

must have a policy under which a 

Federal Pell Grant eligible student may 

opt out of the way the institution 

provides for the student to purchase 

books and supplies by the seventh day 

of classes of a payment period. In 

addition, § 668.164(i) has been revised 

to specify that if the Federal Pell Grant 

eligible student uses the method 

provided by the institution to purchase 

books and supplies, the student is 

considered to have authorized the use of 

title IV, HEA funds and the institution 

does not need to obtain a written 

authorization under §§ 668.164(d)(1)(iv) 

and 668.165(b) for this purpose only. 

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66932 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations 

Reporting Disbursements, Adjustments, 

and Cancellations (§§ 685.102(b), 

685.301(e), 686.2(b), and 686.37(b)) 

Comment: A few commenters 

supported the proposed regulations to 

adopt the Federal Pell Grant reporting 

requirements for the TEACH Grant and 

Direct Loan programs and to add the 

Federal Pell Grant definition of the term 

Payment Data to the two other 

programs. 

Discussion: We believe that 

harmonizing the reporting requirements 

for the Federal Pell Grant, TEACH 

Grant, and Direct Loan programs in 

accordance with procedures established 

by the Secretary through publication in 

the Federal Register will make it easier 

for institutions to administer the 

programs. In addition, this flexibility to 

adjust the reporting requirements for all 

three programs through publication in 

the Federal Register will enable the 

Secretary to make changes in the future 

that take advantage of new technology 

and improved business processes. 

Changes: None. 

Executive Order 12866 

Regulatory Impact Analysis 

Under Executive Order 12866, the 

Secretary must determine whether the 

regulatory action is ‘‘significant’’ and 

therefore subject to the requirements of 

the Executive Order and subject to 

review by the OMB. Section 3(f) of 

Executive Order 12866 defines a 

‘‘significant regulatory action’’ as an 

action likely to result in a rule that may 

(1) Have an annual effect on the 

economy of $100 million or more, or 

adversely affect a sector of the economy, 

productivity, competition, jobs, the 

environment, public health or safety, or 

State, local or tribal governments or 

communities in a material way (also 

referred to as an ‘‘economically 

significant’’ rule); (2) create serious 

inconsistency or otherwise interfere 

with an action taken or planned by 

another agency; (3) materially alter the 

budgetary impacts of entitlement grants, 

user fees, or loan programs or the rights 

and obligations of recipients thereof; or 

(4) raise novel legal or policy issues 

arising out of legal mandates, the 

President’s priorities, or the principles 

set forth in the Executive order. 

Pursuant to the terms of the Executive 

order, we have determined this 

proposed regulatory action will have an 

annual effect on the economy of more 

than $100 million. Therefore, this action 

is ‘‘economically significant’’ and subject 

to OMB review under section 3(f)(1) of 

Executive Order 12866. 

Notwithstanding this determination, we 

have assessed the potential costs and 

benefits—both quantitative and 

qualitative—of this regulatory action. 

The agency believes that the benefits 

justify the costs. 

A detailed analysis, including the 

Department’s Regulatory Flexibility Act 

certification, is found in Appendix A to 

these final regulations. 

Paperwork Reduction Act of 1995 

Sections 668.6, 668.8, 668.16, 668.22, 

668.34, 668.43, 668.55, 668.56, 668.57, 

668.59, 668.144, 668.150, 668.151, 

668.152, and 668.164 contain 

information collection requirements. 

Under the Paperwork Reduction Act of 

1995 (44 U.S.C. 3507(d)), the 

Department has submitted a copy of 

these sections to OMB for its review. 

Section 668.6—Gainful Employment 

The final regulations will impose new 

requirements on certain programs that 

by law must, for purposes of the title IV, 

HEA programs, prepare students for 

gainful employment in a recognized 

occupation. For public and private 

nonprofit institutions, a program that 

does not lead to a degree will be subject 

to the eligibility requirement that the 

program lead to gainful employment in 

a recognized occupation, while a 

program leading to a degree, including 

a two-academic-year program fully 

transferrable to a baccalaureate degree, 

will not be subject to this eligibility 

requirement. For proprietary 

institutions, all eligible degree and nondegree programs will be required to lead 

to gainful employment in a recognized 

occupation, except for a liberal arts 

baccalaureate program under section 

102(b)(1)(A)(ii) of the HEA. 

An institution will be required under 

final § 668.6(a) to report for each 

student, who during an award year, 

began attending or completed a program 

under § 668.8(c)(3) or (d), information 

that includes, at a minimum, 

information needed to identify the 

student and the location of the 

institution the student attended, the CIP 

code of the program, the date the 

student completed the program, the 

amounts the student received from 

private educational loans and the 

amount from institutional financing 

plans that the student owes the 

institution after completing the 

program, and whether the student 

matriculated to a higher credentialed 

program at the institution or another 

institution. We estimate that it will take 

the affected 1,950 proprietary 

institutions, on average, 12 hours to 

develop the processes necessary to 

implement the requirements in 

§ 668.6(a) for students who, during the 

award year, began attending or 

completed a program under § 668.6(c)(3) 

or (d). These processes include ones to 

record student identifier information, to 

record the CIP codes associated with 

these programs, to record completion 

dates, to determine and record the 

amounts the student received from 

private educational loans and the 

amount from institutional financing 

plans that the student owes the 

institution after completing the 

program, and to record data on students 

who matriculate to higher credentialed 

programs at the same or at another 

institution. Therefore, burden will 

increase for these affected proprietary 

institutions by 23,400 hours. 

We estimate that it will take the 

affected 1,736 private not-for-profit 

institutions, on average, 12 hours to 

develop the processes necessary to 

implement the requirements in 

§ 668.6(a) for students who, during the 

award year, began attending or 

completed a program under § 668.6. 

These processes include ones to record 

student identifier information, to record 

the CIP codes associated with these 

programs, to record completion dates, to 

determine and record the amounts the 

student received from private 

educational loans and the amount from 

institutional financing plans that the 

student owes the institution after 

completing the program, and to record 

data on students who matriculate to 

higher credentialed programs at the 

same or at another institution. 

Therefore, burden will increase for these 

affected private not-for-profit 

institutions by 20,832 hours. 

We estimate that it will take the 

affected 1,915 public institutions, on 

average, 12 hours to develop the 

processes necessary to implement the 

requirements in § 668.6(a) for students 

who, during the award year, began 

attending or completed a program under 

§ 668.6. These processes include ones to 

record student identifier information, to 

record the CIP codes associated with 

these programs, to record completion 

dates, to determine and record the 

amounts the student received from 

private educational loans and the 

amount from institutional financing 

plans that the student owes the 

institution after completing the 

program, and to record data on students 

who matriculate to higher credentialed 

programs at the same or at another 

institution. Therefore, burden will 

increase for these affected public 

institutions by 22,980 hours. 

Collectively, we estimate that burden for 

institutions to meet these process 

development requirements in 

accordance with procedures established 

by the Secretary will increase burden by 

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Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations 66933 

67,212 hours in OMB Control Number 

1845–NEW1. 

We estimate that annually there will 

be 3,499,998 students who will begin 

attendance in occupational programs 

that train students for gainful 

employment in a recognized 

occupation. We estimate that 1,996,593 

of the 3,499,998 students will attend a 

proprietary institution. Therefore, with 

regard to proprietary institutions, the 

total number of affected students is 

estimated to be 5,989,779 students 

(1,996,593 times 3) for the initial 

reporting period that will cover the 

2006–2007 award year, the 2007–2008 

award year and the 2008–2009 award 

year. We estimate that the reporting of 

student identifier information, the 

location of the institution the student 

attended, and the CIP codes for each 

beginning student (i.e., a student who 

during the award year began attending 

a program under § 668.8(c)(3) or (d)) 

will average .03 hours (2 minutes) per 

student or 179,693 hours of increased 

burden. 

We estimate that 161,308 of the 

3,499,998 students will attend a private 

not-for-profit institution. Therefore, 

with regard to not-for-profit institutions, 

the total number of affected students is 

estimated to be 483,924 students 

(161,308 times 3) for the initial 

reporting period that will cover the 

2006–2007 award year, the 2007–2008 

award year and the 2008–2009 award 

year. We estimate that the reporting of 

student identifier information, the 

location of the institution the student 

attended, and the CIP codes for each 

beginning student will average .03 hours 

(2 minutes) per student or 14,518 hours 

of increased burden. 

We estimate that 1,342,097 of the 

3,499,998 students will attend a public 

institution. Therefore, with regard to 

public institutions, the total number of 

affected students is estimated to be 

4,026,291 students (1,342,097 times 3) 

for the initial reporting period that will 

cover the 2006–2007 award year, the 

2007–2008 award year and the 2008– 

2009 award year. We estimate that the 

reporting of student identifier 

information, the location of the 

institution the student attended, and the 

CIP codes for each beginning student 

will average .03 hours (2 minutes) per 

student or 120,789 hours of increased 

burden. 

Collectively, we estimate that burden 

for institutions to meet these reporting 

requirements for a student who during 

the award year began attending a 

program under § 668.8(c)(3) or (d) will 

increase burden by 315,000 hours in 

OMB Control Number 1845–NEW1. 

We estimate that annually there will 

be 567,334 students who will complete 

their occupational programs that train 

students for gainful employment in a 

recognized occupation. We estimate that 

325,416 of the 567,334 students will 

attend a proprietary institution. 

Therefore, with regard to proprietary 

institutions, the total number of affected 

students is estimated to be 976,248 

students (325,416 times 3) for the initial 

reporting period that will cover the 

2006–2007 award year, the 2007–2008 

award year and the 2008–2009 award 

year. We estimate that the reporting of 

student identifier information, the 

location of the institution the student 

attended, the CIP codes for each 

graduate, the date of completion, the 

amounts the students received from 

private education loans and the amount 

from institutional financing plans that 

the student owes the institution after 

completing the program, and whether 

the student matriculated to a higher 

credentialed program at the same or 

another institution will average .08 

hours (5 minutes) per student or 78,100 

hours of increased burden. 

We estimate that 33,627 of the 

567,334 students will attend a private 

not-for-profit institution. Therefore, 

with regard to not-for-profit institutions, 

the total number of affected students is 

estimated to be 100,881 students (33,627 

times 3) for the initial reporting period 

that will cover the 2006–2007 award 

year, the 2007–2008 award year and the 

2008–2009 award year. We estimate that 

the reporting of student identifier 

information, the location of the 

institution the student attended, the CIP 

codes for each graduate, the date of 

completion, the amounts the student 

received from private education loans 

and the amount from institutional 

financing plans that the student owes 

the institution after completing the 

program, and whether the student 

matriculated to a higher credentialed 

program at the same or another 

institution will average .08 hours (5 

minutes) per student or 8,070 hours of 

increased burden. 

We estimate that 208,291 of the 

567,334 students will attend a public 

institution. Therefore, with regard to 

public institutions, the total number of 

affected students is estimated to be 

624,873 students (208,291 times 3) for 

the initial reporting period that will 

cover the 2006–2007 award year, the 

2007–2008 award year and the 2008– 

2009 award year. We estimate that the 

reporting of student identifier 

information, the location of the 

institution the student attended, the CIP 

codes for each graduate, the date of 

completion, the amounts the student 

received from private education loans 

and the amount from institutional 

financing plans that the student owes 

the institution after completing the 

program, and whether the student 

matriculated to a higher credentialed 

program at the same or another 

institution will average .08 hours (5 

minutes) per student or 49,990 hours of 

increased burden. 

Additionally, later in the initial year 

of reporting, institutions will have to 

report information on students who 

began attendance during the 2009–2010 

award year. We estimate that annually 

there will be 3,499,998 students who 

will begin attendance in occupational 

programs that train students for gainful 

employment in a recognized 

occupation. As established above, we 

estimate that 1,996,593 of the 3,499,998 

students will begin occupational 

programs at proprietary institutions 

during the 2009–2010 award year. We 

estimate that the reporting of student 

identifier information, the location of 

the institution the student attended, and 

the CIP codes for each beginning 

student (i.e., a student who during the 

award year began attending a program 

under § 668.8(c)(3) or (d)) will average 

.03 hours (2 minutes) per student or 

59,898 hours of increased burden. 

We estimate that 161,308 of the 

3,499,998 students will attend a private 

not-for-profit institution. We estimate 

that the reporting of student identifier 

information, the location of the 

institution the student attended, and the 

CIP codes for each beginning student 

will average .03 hours (2 minutes) per 

student or 4,839 hours of increased 

burden. 

We estimate that 1,342,097 of the 

3,499,998 students will attend a public 

institution. We estimate that the 

reporting of student identifier 

information, the location of the 

institution the student attended, and the 

CIP codes for each beginning student 

will average .03 hours (2 minutes) per 

student or 40,263 hours of increased 

burden. 

Similarly, we estimate that annually 

there will be 567,334 students who will 

complete their occupational programs 

that train students for gainful 

employment in a recognized occupation 

during the 2009–2010 award year. We 

estimate that 325,416 of the 567,334 

students will complete their program at 

a proprietary institution during the 

2009–2010 award year. We estimate that 

the reporting of student identifier 

information, the location of the 

institution the student attended, the CIP 

codes for each graduate, the date of 

completion, the amounts the students 

received from private education loans 

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66934 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations 

and the amount from institutional 

financing plans that the student owes 

the institution after completing the 

program, and whether the student 

matriculated to a higher credentialed 

program at the same or another 

institution will average .08 hours (5 

minutes) per student or 26,033 hours of 

increased burden for the 2009–2010 

award year. 

We estimate that 33,627 of the 

567,334 students will complete their 

program at a private not-for-profit 

institution. We estimate that the 

reporting of student identifier 

information, the location of the 

institution the student attended, the CIP 

codes for each graduate, the date of 

completion, the amounts the student 

received from private education loans 

and the amount from institutional 

financing plans that the student owes 

the institution after completing the 

program, and whether the student 

matriculated to a higher credentialed 

program at the same or another 

institution will average .08 hours (5 

minutes) per student or 2,690 hours of 

increased burden during the 2009–2010 

award year. 

We estimate that 208,291 of the 

567,334 students will complete their 

program at a public institution during 

the 2009–2010 award year. We estimate 

that the reporting of student identifier 

information, the location of the 

institution the student attended, the CIP 

codes for each graduate, the date of 

completion, the amounts the student 

received from private education loans 

and the amount from institutional 

financing plans that the student owes 

the institution after completing the 

program, and whether the student 

matriculated to a higher credentialed 

program at the same or another 

institution will average .08 hours (5 

minutes) per student or 16,663 hours of 

increased burden for the 2009–2010 

award year. 

Collectively, we estimate that burden 

for institutions to meet these reporting 

requirements for students who begin 

attendance or complete their 

occupational programs that train 

students for gainful employment in a 

recognized occupation will increase 

burden by 658,758 hours in OMB 

Control Number 1845–NEW1. 

Finally, under § 668.6(b) an 

institution will be required to disclose 

to each prospective student information 

about (1) The occupations (by names 

and Standard Occupational Code (SOC) 

codes) that its programs prepare 

students to enter, along with links to 

occupational profiles on O*NET or its 

successor site, or if the number of 

occupations related to the program on 

O*Net is more than ten (10), the 

institution may provide Web links to a 

representative sample of SOC codes for 

which its graduates typically find 

employment within a few years after 

completing their program; (2) the ontime graduation rate for students 

entering the program; (3) the total 

amount of tuition and fees it charges a 

student for completing the program 

within normal time as defined in 

§ 668.41(a), the typical costs for books 

and supplies, and the cost of room and 

board, if applicable. The institution may 

include information on other costs, such 

as transportation and living expenses, 

but it must provide a Web link, or 

access, to the program cost information 

the institution makes available under 

§ 668.43(a); (4) beginning on July 1, 

2011, the placement rate for students 

completing the program, as determined 

under the institution’s accrediting 

agency or State requirements, until a 

new placement rate methodology is 

developed by the National Center for 

Education Statistics (NCES) and 

reported to the institution; and (5) the 

median loan debt incurred by students 

who completed the program as provided 

by the Secretary, as well as any other 

information the Secretary provided to 

the institution about that program. The 

institution must identify separately the 

median loan debt from title IV, HEA 

programs and the median loan debt 

from private educational loans and 

institutional financing plans. 

We estimate that of the 5,601 

institutions with these occupational 

programs that 1,950, or 35%, are 

proprietary institutions. We estimate 

that of the 5,601 with these 

occupational programs that 1,736, or 

31%, are private not-for-profit 

institutions. We estimate that of the 

5,601 with these occupational programs 

that 1,915, or 34%, are public 

institutions. Because under the revised 

disclosure requirements, institutions 

may use a representative sample of SOC 

codes and use placement rate data 

already required by their accrediting 

agency or State, or data that will be 

provided by the Department, we 

estimate that on average, it will take 1.5 

hours for an institution to obtain the 

required disclosure information from 

O*Net and its own programmatic cost 

information and to provide that 

information on its Web site and in its 

promotional materials. Therefore, we 

estimate that burden for 1,950 

proprietary institutions will increase by 

2,925 hours. We estimate that burden 

for 1,736 private not-for-profit 

institutions will increase by 2,604 

hours. We estimate that burden for 

1,915 public institutions will increase 

by 2,873 hours. 

Collectively, we estimate that burden 

for institutions to meet these disclosure 

requirements for prospective students 

will increase burden by 8,402 hours in 

OMB Control Number 1845–NEW1. 

We estimate the total burden under 

this section to increase by 677,160 hours 

in OMB Control Number 1845–NEW1. 

Section 668.8—Eligible Program 

Under S668.8(l)(1), we will revise the 

method of converting clock hours to 

credit hours to use a ratio of the 

minimum clock hours in an academic 

year to the minimum credit hours in an 

academic year, i.e., 900 clock hours to 

24 semester or trimester hours or 36 

quarter hours. Thus, a semester or 

trimester hour will be based on at least 

37.5 clock hours, and a quarter hour 

will be based on at least 25 clock hours. 

Section 668.8(l)(2) will create an 

exception to the conversion ratio in 

§ 668.8(l)(1) if neither an institution’s 

designated accrediting agency nor the 

relevant State licensing authority for 

participation in the title IV, HEA 

programs determines there are any 

deficiencies in the institution’s policies, 

procedures, and practices for 

establishing the credit hours that the 

institution awards for programs and 

courses, as defined in § 600.2. Under the 

exception provided by § 668.8(l)(2), an 

institution will be permitted to combine 

students’ work outside of class with the 

clock-hours of instruction in order to 

meet or exceed the numeric 

requirements established in 

§ 668.8(l)(1). However, under 

§ 668.8(l)(2), the institution will need to 

use at least 30 clock hours for a semester 

or trimester hour or 20 clock hours for 

a quarter hour. 

In determining whether there is 

outside work that a student must 

perform, the analysis will need to take 

into account differences in coursework 

and educational activities within the 

program. Some portions of a program 

may require student work outside of 

class that justifies the application of 

§ 668.8(l)(2). In addition, the application 

of § 668.8(l)(2) could vary within a 

program depending on variances in 

required student work outside of class 

for different portions of the program. 

Other portions of the program may not 

have outside work, and § 668.8(l)(1) will 

need to be applied. Of course, an 

institution applying only § 668.8(l)(1) to 

a program eligible for conversion from 

clock hours to credit hours, without an 

analysis of the program’s coursework, 

will be considered compliant with the 

requirements of § 668.8(l). 

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Section 668.8(k)(1)(ii) will modify a 

provision in current regulations to 

provide that a program is not subject to 

the conversion formula in § 668.8(l) 

where each course within the program 

is acceptable for full credit toward a 

degree that is offered by the institution 

and that this degree requires at least two 

academic years of study. Additionally, 

under § 668.8(k)(1)(ii), the institution 

will be required to demonstrate that 

students enroll in, and graduate from, 

the degree program. 

Section 668.8(k)(2)(i) will provide that 

a program is considered to be a clockhour program if the program must be 

measured in clock hours to receive 

Federal or State approval or licensure, 

or if completing clock hours is a 

requirement for graduates to apply for 

licensure or the authorization to 

practice the occupation that the student 

is intending to pursue. Under 

§ 668.8(k)(2)(ii) and (iii), the program 

will also be considered to be offered in 

clock hours if the credit hours awarded 

for the program are not in compliance 

with the definition of a credit hour in 

§ 600.2, or if the institution does not 

provide the clock hours that are the 

basis for the credit hours awarded for 

the program or each course in the 

program and, except as provided in 

current § 668.4(e), requires attendance 

in the clock hours that are the basis for 

the credit hours awarded. The final 

regulations on which tentative 

agreement was reached will not include 

the provision in § 668.8(k)(2)(iii) that, 

except as provided in current § 668.4(e), 

an institution must require attendance 

in the clock hours that are the basis for 

the credit hours awarded. 

Section 668.8(k)(3) will provide that 

§ 668.8(k)(2)(i) will not apply if a 

limited portion of the program includes 

a practicum, internship, or clinical 

experience component that must 

include a minimum number of clock 

hours due to a State or Federal approval 

or licensure requirement. 

We estimate that on average, for each 

affected program it will take .5 hours (30 

minutes) for an institution to make the 

determination of whether the program is 

an affected program, to evaluate the 

amount of outside student work that 

should be included as final and to 

perform the clock hour to credit hour 

conversion. We further estimate that of 

the 4,587 institutions of higher 

education with less than 2-year 

programs, that on average, each 

institution has approximately 8 nondegree programs of study for a total of 

36,696 affected programs. We estimate 

that there are 16,513 affected programs 

at proprietary institutions times .5 hours 

(30 minutes) which will increase burden 

by 8,257 hours. We estimate that there 

are 1,835 affected programs at private 

non-profit institutions times .5 hours 

(30 minutes) which will increase burden 

by 918 hours. We estimate that there are 

18,348 affected programs at public 

institutions times .5 hours (30 minutes) 

which will increase burden by 9,174 

hours. 

Collectively, the final regulatory 

changes reflected in § 668.8 will 

increase burden by 18,349 hours in 

OMB Control Number 1845–0022. 

Section 668.16—Standards of 

Administrative Capability 

Under the final regulations, the 

elements of the institution’s satisfactory 

academic progress plan have been 

moved from current § 668.16(e) to 

§ 668.34. We also have updated these 

provisions. As a result, the estimated 

burden upon institutions associated 

with measuring academic progress 

currently in OMB Control Number 

1845–0022 of 21,000 hours will be 

administratively removed from this 

collection and transferred to OMB 

Control Number 1845–NEW2. 

Under § 668.16(p), an institution will 

be required to develop and follow 

procedures to evaluate the validity of a 

student’s high school completion if the 

institution or the Secretary has reason to 

believe that the high school diploma is 

not valid or was not obtained from an 

entity that provides secondary school 

education. The burden associated with 

this requirement will be mitigated by 

the fact that many institutions already 

have processes in place to collect high 

school diplomas and make 

determinations about their validity. 

We estimate that burden will increase 

for each institution by 3.5 hours for the 

development of a high school diploma 

validity process. We estimate that 2,086 

proprietary institutions will on average 

take 3.5 hours to develop the final 

procedures to evaluate the validity of 

high school completions, which will 

increase burden by 7,301 hours. We 

estimate that 1,731 private non-profit 

institutions will on average take 3.5 

hours to develop the final procedures to 

evaluate the validity of high school 

completion, which will increase burden 

by 6,059 hours. We estimate that 1,892 

public institutions will on average take 

3.5 hours to develop the final 

procedures to evaluate the validity of 

high school completion, which will 

increase burden by 6,622 hours. 

Additionally, we estimate that the 

validity of approximately 4,000 high 

school diplomas per year will be 

questioned and that these diplomas will 

require additional verification, which 

we estimate will take .5 hours (30 

minutes) per questionable diploma. We 

estimate that proprietary institutions 

will have 2,000 questionable diplomas, 

which will result in an estimated 1,000 

hours of increased burden (2000 

diplomas multiplied by .5 hours). We 

estimate that private non-profit 

institutions will have 600 questionable 

diplomas, which will result in an 

estimated 300 hours of increased burden 

(600 diplomas multiplied by .5 hours). 

We estimate that public institutions will 

have 1,400 questionable, which will 

result in an estimated 700 hours of 

increased burden (1400 diplomas 

multiplied by .5 hours). 

Collectively, the final regulatory 

changes reflected in § 668.16 will 

increase burden by 21,982 hours in 

OMB Control Number 1845–0022. 

Section 668.22—Treatment of Title IV, 

HEA Program Funds When a Student 

Withdraws 

The changes to § 668.22(a)(2) clarify 

when a student is considered to have 

withdrawn from a payment period or 

period of enrollment. In the case of a 

program that is measured in credit 

hours, the student will be considered to 

have withdrawn if he or she does not 

complete all the days in the payment 

period or period of enrollment that the 

student was scheduled to complete 

prior to withdrawing. In the case of a 

program that is measured in clock 

hours, the student will be considered to 

have withdrawn if he or she does not 

complete all of the clock hours in the 

payment period or period of enrollment 

that the student was scheduled to 

complete prior to withdrawing. 

Section 668.22(f)(2)(i) clarifies that, 

for credit hour programs, in calculating 

the percentage of the payment period or 

period of enrollment completed, it is 

necessary to take into account the total 

number of calendar days that the 

student was scheduled to complete 

prior to withdrawing without regard to 

any course completed by the student 

that is less than the length of the term. 

These final regulations will affect all 

programs with courses that are less than 

the length of a term, including, for 

example, a semester-based program that 

has a summer nonstandard term with 

two consecutive six-week sessions 

within the term. 

We estimate that approximately 

425,075 students in term-based 

programs with modules or compressed 

courses will withdraw prior to 

completing more than 60 percent of 

their program of study. We estimate that 

on average, the burden per individual 

student who withdraws prior to the 60 

percent point of their term-based 

program to be .75 hours (45 minutes) 

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per affected individual which will 

increase burden for the estimated 

425,075 students by 318,806 hours in 

OMB Control Number 1845–0022. Of 

these 425,075 withdrawals, we estimate 

that 50 percent of the withdrawals 

(212,538) will occur at proprietary 

institutions and will increase burden by 

1 hour per withdrawal increasing 

burden by 212,538 hours. We estimate 

that 10 percent of the withdrawals 

(42,508) will occur at private non-profit 

institutions and will increase burden by 

1 hour per withdrawal increasing 

burden by 42,508 hours. We estimate 

that 40 percent of the withdrawals 

(170,029) will occur at public 

institutions and will increase burden by 

1 hour per withdrawal increasing 

burden by 170,029 hours. Collectively, 

we estimate that burden will increase by 

743,881 hours in OMB Control Number 

1845–0022, of which 318,806 hours is 

for individuals and 425,075 hours is for 

institutions. 

Section 668.34—Satisfactory Progress 

The final regulations restructure the 

satisfactory academic progress 

requirements. Section 668.16(e) 

(Standards of administrative capability) 

has been revised to include only the 

requirement that an institution 

establish, publish and apply satisfactory 

academic progress standards that meet 

the requirements of § 668.34. The 

remainder of current § 668.16(e) has 

been moved to § 668.34 such that it, 

alone, describes all of the required 

elements of a satisfactory academic 

progress policy, as well as how an 

institution will implement such a 

policy. The references in § 668.32(e) 

have been updated to conform the 

section with the final changes we have 

made to §§ 668.16(e) and 668.32. 

Section 668.34(a) specifies the 

elements an institution’s satisfactory 

academic policy must contain to be 

considered a reasonable policy. Under 

these regulations, institutions will 

continue to have flexibility in 

establishing their own policies; 

institutions that choose to measure 

satisfactory academic progress more 

frequently than at the minimum 

required intervals will have additional 

flexibility (see § 668.34(a)(3)). 

All of the policy elements in the 

current regulations under §§ 668.16(e) 

and 668.34 are combined in § 668.34. In 

addition, § 668.34(a)(5) makes explicit 

the requirement that institutions specify 

the pace at which a student must 

progress through his or her educational 

program to ensure that the student will 

complete the program within the 

maximum timeframe, and provide for 

measurement of a student’s pace at each 

evaluation. Under § 668.34(a)(6), 

institutional policies will need to 

describe how a student’s GPA and pace 

of completion are affected by transfers 

of credit from other institutions. This 

provision will also require institutions 

to count credit hours from another 

institution that are accepted toward a 

student’s educational program as both 

attempted and completed hours. 

Section 668.34(a)(7) provides that, 

except as permitted in § 668.34(c) and 

(d), the policy requires that, at the time 

of each evaluation, if the student is not 

making satisfactory academic progress, 

the student is no longer eligible to 

receive the title IV, HEA assistance. 

Section 668.34(a)(8) requires 

institutions that use ‘‘financial aid 

warning’’ and ‘‘financial aid probation’’ 

statuses (concepts that are defined in 

§ 668.34(b)) in connection with 

satisfactory academic progress 

evaluations to describe these statuses 

and how they are used in their 

satisfactory academic progress policies. 

Section 668.34(a)(8)(i) specifies that a 

student on financial aid warning may 

continue to receive assistance under the 

title IV, HEA programs for one payment 

period despite a determination that the 

student is not making satisfactory 

academic progress. Financial aid 

warning status may be assigned without 

an appeal or other action by the student. 

Section 668.34(a)(8)(ii) makes clear that 

an institution with a satisfactory 

academic progress policy that includes 

the use of the financial aid probation 

status could require that a student on 

financial aid probation fulfill specific 

terms and conditions, such as taking a 

reduced course load or enrolling in 

specific courses. 

Section 668.34(a)(9) will require an 

institution that permits a student to 

appeal a determination that the student 

is not making satisfactory academic 

progress to describe the appeal process 

in its policy. The policy will need to 

contain specified elements. Section 

668.34(a)(9)(i) will require an institution 

to describe how a student may reestablish his or her eligibility to receive 

assistance under the title IV, HEA 

programs. 

Under § 668.34(a)(9)(ii), a student will 

be permitted to file an appeal based on 

the death of a relative, an injury or 

illness of the student, or other special 

circumstances. Under § 668.34(a)(9)(iii), 

a student will be required to submit, as 

part of the appeal, information regarding 

why the student failed to make 

satisfactory academic progress, and 

what has changed in the student’s 

situation that will allow the student to 

demonstrate satisfactory academic 

progress at the next evaluation. 

Section 668.34(a)(10) will require the 

satisfactory academic progress policy of 

an institution that does not permit 

students to appeal a determination that 

they are not making satisfactory 

academic progress, to describe how a 

student may regain eligibility for 

assistance under the title IV, HEA 

programs. 

Section 668.34(a)(11) will require that 

an institution’s policy provide for 

notification to students of the results of 

an evaluation that impacts the student’s 

eligibility for title IV, HEA program 

funds. 

We estimate that, on average, 

institutions will take 3 hours per 

institution to review the final 

regulations in § 668.34(a) and 

implement any changes to their 

satisfactory academic policies to insure 

compliance. We estimate that 2,086 

proprietary institutions will take 3 

hours per institution to review and 

implement the final regulations, which 

will result in an estimated increase of 

6,258 hours in burden. We estimate that 

1,731 private non-profit institutions will 

take 3 hours per institution to review 

and implement the final regulations, 

which will result in an estimated 

increase of 5,193 hours in burden. We 

estimate that 1,892 public institutions 

will take 3 hours per institution to 

review and implement the final 

regulations, which will result in an 

estimated increase of 5,676 hours in 

burden. 

Collectively, the final regulatory 

changes reflected in § 668.34(a) will 

increase burden by 17,127 hours. 

Section 668.34(c) and (d) will specify 

that an institution’s policy may provide 

for disbursement of title IV, HEA 

program funds to a student who has not 

met an institution’s satisfactory 

academic standards in certain 

circumstances. Of the 17 million 

applicants in 2008–2009, we estimate 

that 90 percent (or 15,300,000 

individuals) will begin attendance. We 

estimate that of the 15,300,000 

individuals that begin attendance, that 

90 percent (or 13,770,000 individuals) 

will persist at least through the end of 

the initial payment period and, 

therefore, will be subject to the 

institutions’ satisfactory academic 

progress consistent with the provisions 

of § 668.34. We estimate that 38 percent 

of participating institutions will 

evaluate their students at the end of 

each payment period under § 668.34(c); 

therefore we expect 5,232,600 

individuals to be evaluated more than 

annually (13,770,000 individuals 

multiplied 38 percent). We estimate that 

62 percent of participating institutions 

will evaluate their students once per 

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academic year under § 668.34(d); 

therefore, we expect 8,537,400 

individuals to be evaluated annually 

(13,770,000 individuals multiplied by 

62 percent). 

Section 668.34(c) will permit an 

institution that measures satisfactory 

academic progress at the end of each 

payment period to have a policy that 

will permit a student who is not making 

satisfactory academic progress to be 

placed automatically on financial aid 

warning, a newly defined term. We 

estimate that, as a result of this 

requirement, the burden associated with 

an academic progress measurement at 

the end of each payment period, and 

when required, the development of an 

academic plan for the student, will 

increase. We estimate that 1,936,062 

individuals at proprietary institutions 

will require an academic review more 

than once per academic year 

(proprietary institutions, which 

comprise 37 percent of the total number 

of institutions of higher education, 

multiplied by 5,232,600 individuals). 

Given this number of individuals 

(1,936,062) and an average of 2 reviews 

per academic year under this 

requirement, we expect these 

institutions to conduct 3,872,124 

satisfactory academic progress reviews. 

Because these academic progress 

reviews are generally highly automated, 

we estimate that, on average, each 

review will take .02 hours (1.2 minutes) 

and will increase burden by 77,442 

hours. 

We estimate that 1,569,780 

individuals at private non-profit 

institutions will require an academic 

review (private non-profit institutions, 

which comprise 30 percent of the total 

number of institutions of higher 

education, multiplied by 5,232,600 

individuals). Given this number of 

individuals (1,569,780) and an average 

of 2 reviews per academic year under 

this requirement, we expect these 

institutions to conduct 3,139,560 

satisfactory academic progress reviews. 

Because these academic progress 

reviews are generally highly automated, 

we estimate that, on average, each 

review will take .02 hours (1.2 minutes) 

and will increase burden by 62,791 

hours. 

We estimate that 1,726,758 

individuals at public institutions will 

require an academic review (public 

institutions, which comprise 33 percent 

of the total number of institutions of 

higher education, multiplied by 

5,232,600 individuals). Given this 

number of individuals (1,726,758) and 

an average of 2 reviews per academic 

year under this requirement, we expect 

these institutions to conduct 3,453,516 

satisfactory academic progress reviews. 

Because these academic progress 

reviews are generally highly automated, 

we estimate that, on average, each 

review will take .02 hours (1.2 minutes) 

and will increase burden by 69,070 

hours. 

Collectively, we estimate that the 

burden for institutions under this 

requirement will increase by 209,303 

hours, in OMB Control Number 1845– 

NEW2. 

As a result of the final satisfactory 

academic progress reviews conducted 

by institutions, we estimate that 7 

percent of the 5,232,600 enrolled 

students (at institutions that review 

academic progress more often than 

annually) or 366,282 will not 

successfully achieve satisfactory 

academic progress. For these students, 

institutions will need to work with each 

student to develop an academic plan 

and this will increase burden for the 

individual and the institutions. We 

estimate that under § 668.34(c), that 

366,282 students will, on average, take 

.17 hours (10 minutes) to establish an 

academic plan for an increase of 62,268 

burden hours and re-evaluate the plan a 

second time within the academic year 

for an additional increase of 62,268 

burden hours (2 times per academic 

year), increasing burden to individuals 

by a total of 124,536 hours. 

We estimate that 1,936,062 

individuals at proprietary institutions 

will require the development of an 

academic plan as a result of not 

progressing academically (proprietary 

institutions, which comprise 37 percent 

of the total number of institutions of 

higher education, multiplied by 

5,232,600 individuals). Given this 

number of individuals (1,936,062) 

multiplied by 7 percent (which is our 

estimate for those who will not 

academically progress), we expect that 

135,524 individuals will need to work 

with their institutions to develop an 

academic plan. We estimate that each 

academic plan will take, on average, .25 

hours (15 minutes) of staff time at two 

times within the academic year, 

increasing burden by 67,762 hours. 

We estimate that 1,569,780 

individuals at private non-profit 

institutions will require the 

development of an academic plan as a 

result of not progressing academically 

(private non-profit institutions, which 

comprise 30 percent of the total number 

of institutions of higher education, 

multiplied by 5,232,600 individuals). 

Given this number of individuals 

(1,569,780) multiplied by 7 percent 

(which is our estimate for those who 

will not academically progress), we 

expect that 109,885 individuals will 

need to work with their institutions to 

develop an academic plan. We estimate 

that each academic plan will take, on 

average, .25 hours (15 minutes) of staff 

time at two times within the academic 

year, increasing burden by 54,943 hours. 

We estimate that 1,726,758 

individuals at public institutions will 

require the development of an academic 

plan as a result of not progressing 

academically (public institutions, which 

comprise 33 percent of the total number 

of institutions of higher education, 

multiplied by 5,232,600 individuals). 

Given this number of individuals 

(1,726,758) multiplied by 7 percent 

(which is our estimate for those who 

will not academically progress), we 

expect that 120,873 individuals will 

need to work with their institutions to 

develop an academic plan. We estimate 

that each academic plan will take, on 

average, .25 hours (15 minutes) of staff 

time at two times within the academic 

year, increasing burden by 60,437 hours. 

Collectively, therefore, we estimate 

that the burden for institutions will 

increase by 183,142 hours, in OMB 

Control Number 1845–NEW2. 

Under § 668.34(d), at an institution 

that measures satisfactory academic 

progress annually, or less frequently 

than at the end of each payment period, 

a student who has been determined not 

to be making satisfactory academic 

progress will be able to receive title IV, 

HEA program funds only after filing an 

appeal and meeting one of two 

conditions: (1) The institution has 

determined that the student should be 

able to meet satisfactory progress 

standards after the subsequent payment 

period, or (2) the institution develops an 

academic plan with the student that, if 

followed, will ensure that the student is 

able to meet the institution’s satisfactory 

academic progress standards by a 

specific point in time. 

Because the final regulations will 

transfer the elements of an institution’s 

satisfactory academic policy from 

§ 668.16(e) to § 668.34, we are 

transferring the current burden estimate 

of 21,000 hours from the current OMB 

Control Number 1845–0022 to OMB 

Control Number 1845–NEW2. 

We estimate that 3,158,838 

individuals at proprietary institutions 

(proprietary institutions, which 

comprise 37 percent of the total number 

of institutions of higher education, 

multiplied by 8,537,400 individuals) 

will require an academic review. 

Because the academic progress reviews 

are generally highly automated, we 

estimate that, on average, each review 

will take .02 hours (1.2 minutes) and 

will increase burden by 63,177 hours. 

We estimate that 2,561,220 individuals 

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at private non-profit institutions will 

require an academic review (private 

non-profit institutions, which comprise 

30 percent of the total number of 

institutions of higher education, 

multiplied by 8,537,400 individuals). 

Because the academic progress reviews 

are generally highly automated, we 

estimate that, on average, each review 

will take .02 hours (1.2 minutes) and 

will increase burden by 51,224 hours. 

We estimate that 2,817,342 

individuals at public institutions will 

require an academic review (public 

institutions, which comprise 33 percent 

of the total number of institutions of 

higher education, multiplied by 

8,537,400 individuals). Because the 

academic progress reviews are generally 

highly automated, we estimate that, on 

average, each review will take .02 hours 

(1.2 minutes) and will increase burden 

by 56,347 hours. 

Collectively, we estimate that the 

burden for institutions will increase by 

170,748 hours, in OMB Control Number 

1845–NEW2. 

As a result of the final satisfactory 

academic progress reviews conducted 

by the institutions, we estimate that 7 

percent of the 8,537,400 enrolled 

students (at institutions that review 

academic progress annually) or 597,618 

will not successfully achieve 

satisfactory academic progress. For 

these students, institutions will need to 

work with each student to develop an 

academic plan and this will increase 

burden for the individual and the 

institutions. We estimate that under 

§ 668.34(d), 597,618 students will, on 

average, take .17 hours (10 minutes) to 

establish an academic plan, increasing 

burden to individuals by 101,595 hours. 

We estimate that 3,158,838 

individuals at proprietary institutions 

will require the development of an 

academic plan as a result of not 

progressing academically (proprietary 

institutions, which comprise 37 percent 

of the total number of institutions of 

higher education, multiplied by 

8,537,400 individuals). Given this 

number of individuals (3,158,838) 

multiplied by 7 percent (which is our 

estimate for those who will not 

academically progress), we expect 

221,119 individuals will need to work 

with their institutions to develop an 

academic plan. We estimate that each 

academic plan will take, on average, .25 

hours (15 minutes) of staff time, 

increasing burden by 55,280 hours. 

We estimate that 2,561,220 

individuals at private non-profit 

institutions will require the 

development of an academic plan as a 

result of not progressing academically 

(private non-profit institutions, which 

comprise 30 percent of the total number 

of institutions of higher education, 

multiplied by 8,537,400 individuals). 

Given this number of individuals 

(2,561,220) multiplied by 7 percent 

(which is our estimate for those who 

will not academically progress), we 

expect 179,285 individuals will need to 

work with their institutions to develop 

an academic plan. We estimate that each 

academic plan will take, on average, .25 

hours (15 minutes) of staff time, 

increasing burden by 44,821 hours. 

We estimate that 2,817,342 

individuals at public institutions will 

require the development of an academic 

plan as a result of not progressing 

academically (public institutions, which 

comprise 33 percent of the total number 

of institutions of higher education, 

multiplied by 8,537,400 individuals). 

Given this number of individuals 

(2,817,342) multiplied by 7 percent (our 

estimate for those who will not 

academically progress), we expect 

197,214 individuals will need to work 

with their institutions to develop an 

academic plan. We estimate that each 

academic plan will take, on average, .25 

hours (15 minutes) of staff time, 

increasing burden by 49,304 hours. 

Collectively, we estimate that the 

burden for institutions will increase by 

149,405 hours, in OMB Control Number 

1845–NEW2. 

In total, the final regulatory changes 

reflected in § 668.34 will increase 

burden by a total of 955,856 hours in 

OMB Control Number 1845–NEW2; 

however, when the 21,000 hours of 

burden currently in OMB 1845–0022 are 

administratively transferred from OMB 

1845–0022 to OMB 1845–NEW2, the 

grand total of burden hours under this 

section will increase to 976,856 in OMB 

1845–NEW2. 

Section 668.43—Institutional 

Information 

The Department has amended current 

§ 668.5(a) by revising and redesignating 

paragraph (a) as paragraph (a)(1) and 

adding a new paragraph (a)(2). Section 

668.5(a)(1) is based on the language that 

is in current § 668.5(a), but has been 

modified to make it consistent with the 

definition of an ‘‘educational program’’ 

in 34 CFR 600.2. 

Section 668.5(a)(2) specifies that if a 

written arrangement is between two or 

more eligible institutions that are owned 

or controlled by the same individual, 

partnership, or corporation, the 

institution that grants the degree or 

certificate must provide more than 50 

percent of the educational program. 

These clarifications are also intended to 

ensure that the institution enrolling the 

student has all necessary approvals to 

offer an educational program in the 

format in which it is being provided, 

such as through distance education 

when the other institution is providing 

instruction under a written agreement 

using that method of delivery. 

Section 668.5(c)(1) includes an 

expanded list of conditions that will 

preclude an arrangement between an 

eligible institution and an ineligible 

institution. 

Sections 668.5(e) and 668.43 will 

require an institution that enters into a 

written arrangement to provide a 

description of the arrangement to 

enrolled and prospective students. 

We estimate that 104 proprietary 

institutions will enter into an average of 

1 written arrangement per institution 

and that, on average, the burden 

associated with the information 

collections about written agreements 

and its disclosure required under 

§ 668.5(e) and 668.43 will take .5 hours 

(30 minutes) per arrangement, 

increasing burden by 52 hours. 

We estimate that 1,731 private nonprofit institutions will enter into an 

average of 50 written arrangements per 

institution and that, on average, the 

burden associated with the final 

collection of information about written 

agreements and its disclosure will take 

.5 hours (30 minutes) per arrangement, 

increasing burden by 43,275 hours. 

We estimate that 1,892 public 

institutions will enter into an average of 

25 written arrangements per institution 

and that, on average, the burden 

associated with the final collection of 

information about written agreements 

and its disclosure will take .5 hours (30 

minutes) per arrangement, increasing 

burden by 23,650 hours. 

Collectively, we estimate that burden 

will increase for institutions in their 

reporting of the details of written 

agreements by 66,977 hours in OMB 

Control Number 1845–0022. 

Currently, the Department requires 

that an institution must make available 

for review to any enrolled or 

prospective student upon request, a 

copy of the documents describing the 

institution’s accreditation and its State, 

Federal, or tribal approval or licensing. 

The Department requires in § 668.43(b) 

that the institution must also provide its 

students or prospective students with 

contact information for filing 

complaints with its accreditor and State 

approval or licensing entity. 

We estimate that 1,919 (or 92 percent 

of all 2,086 proprietary institutions) will 

have to begin providing contact 

information for filing complaints with 

accreditors, approval or licensing 

agencies. We estimate that the other 8 

percent of proprietary institutions are 

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already providing this information. We 

estimate that on average, this disclosure 

will take .17 hours (10 minutes) per 

disclosure and that it will, therefore, 

increase burden to proprietary 

institutions by 326 hours. 

We estimate that 1,593 (or 92 percent 

of all 1,731 private non-profit 

institutions) will have to begin 

providing contact information for filing 

complaints with accreditors, approval or 

licensing agencies. We estimate that the 

other 8 percent of private non-profit 

institutions are already providing this 

information. We estimate that on 

average, this disclosure will take .17 

hours (10 minutes) per disclosure and 

that it will, therefore, increase burden to 

private non-profit institutions by 271 

hours. 

We estimate that 1,740 (or 92 percent 

of all 1,892 public institutions) will 

have to begin providing contact 

information for filing complaints with 

accreditors, approval or licensing 

agencies. We estimate that the other 8 

percent of public institutions are 

already providing this information. We 

estimate that on average, this disclosure 

will take .17 hours (10 minutes) per 

disclosure and that it will, therefore, 

increase burden to proprietary 

institutions by 296 hours. 

Collectively, we estimate that burden 

will increase for institutions in their 

reporting of the contact information for 

filing complaints to accreditors and 

approval or licensing agencies by 893 

hours in OMB Control Number 1845– 

0022. 

In total, the final regulatory changes 

reflected in § 668.43 will increase 

burden by 67,870 hours in OMB Control 

Number 1845–0022. 

Section 668.55—Updating Information 

Section 668.55 will require an 

applicant to update all applicable 

changes in dependency status that occur 

throughout the award year, including 

changes in the applicant’s household 

size and the number of those household 

members attending postsecondary 

educational institutions. We estimate 

that 1,530,000 individuals will update 

their household size or the number of 

household members attending 

postsecondary educational institutions 

and that, on average, reporting will take 

.08 hours (5 minutes) per individual, 

increasing burden by 122,400 hours. 

We estimate that proprietary 

institutions will receive updated 

household size or the updated number 

of household members attending 

postsecondary educational institutions 

from 566,100 applicants. We estimate 

that each updated record will take 

.17 hours (10 minutes) to review, which 

will increase burden by 96,237 hours. 

We estimate that private non-profit 

institutions will receive updated 

household size or the updated number 

of household members attending 

postsecondary educational institutions 

from 459,000 applicants. We estimate 

that each updated record will take .17 

hours (10 minutes) to review, which 

will increase burden by 78,030 hours. 

We estimate that public institutions 

will receive updated household size or 

the updated number of household 

members attending postsecondary 

educational institutions from 504,900 

applicants. We estimate that each 

updated record will take .17 hours 

(10 minutes) to review, which will 

increase burden by 85,833 hours. 

Collectively, we estimate that burden 

will increase for individuals and 

institutions as a result of being required 

to report updated household size and 

the updated number of household 

members attending postsecondary 

educational institutions by 382,500 

hours in OMB Control Number 

1845–0041, of which 122,400 hours is 

for individuals and 260,100 hours is for 

institutions. 

This section also requires individuals 

to make changes to their FAFSA 

information if their marital status 

changes, but only at the discretion of the 

financial aid administrator because such 

an update is necessary to address an 

inequity or to reflect more accurately 

the applicant’s ability to pay. As a 

result, we estimate that of the 170,000 

individuals that will have a change of 

marital status, we expect that this 

discretion will be applied in only ten 

percent of the cases, therefore, ten 

percent of the 170,000 estimated cases 

is 17,000 cases that on average the 

reporting will take .08 hours (5 minutes) 

per individual, increasing burden by 

1,360 hours. 

We estimate that proprietary 

institutions will receive updated marital 

status information from 6,290 

applicants. We estimate that each 

updated record will take .17 hours (10 

minutes) to review, which will increase 

burden by 1,069 hours. 

We estimate that private non-profit 

institutions will receive updated marital 

status information from 5,100 

applicants. We estimate that each 

updated record will take .17 hours (10 

minutes) to review, which will increase 

burden by 867 hours. 

We estimate that public institutions 

will receive updated marital status 

information from 5,610 applicants. We 

estimate that each updated record will 

take .17 hours (10 minutes) to review, 

which will increase burden by 954 

hours. 

Collectively, we estimate that burden 

will increase for individuals and 

institutions in their reporting updated 

marital status information by 4,250 

hours in OMB Control Number 

1845–0041. 

Section 668.55 will also include a 

number of other changes to remove 

language that implements the marital 

status exception in the current 

regulations, including removing current 

§ 668.55(a)(3) and revising § 668.55(b). 

In total, the final regulatory changes 

reflected in § 668.55 will increase 

burden by 386,750 hours in OMB 

Control Number 1845–0041. 

Section 668.56—Information To Be 

Verified 

The Department will eliminate from 

the regulations the five items that an 

institution currently is required to verify 

for all applicants selected for 

verification. Instead, pursuant to 

§ 668.56(a), for each award year, the 

Secretary will specify in a Federal 

Register notice the FAFSA information 

and documentation that an institution 

and an applicant may be required to 

verify. The Department will then specify 

on an individual student’s SAR and ISIR 

what information must be verified for 

that applicant. 

Currently, under OMB Control 

Number 1845–0041, there are 1,022,384 

hours of burden associated with the 

verification regulations of which 

1,010,072 hours of burden are a result 

of the data gathering and submission by 

each individual applicant selected for 

verification. This estimate was based 

upon the number of applicants in the 

2002–2003 award year. Since then, the 

number of applicants has grown 

significantly to 17.4 million applicants 

for the 2008–2009 award year, of which 

we project 5.1 million individual 

applicants to be selected for verification. 

The projected number of items to be 

verified under the final regulations is 

expected to be reduced from the current 

five required data elements to an 

average of three items per individual. 

This projected reduction in items to be 

verified will result in a reduction of 

burden per individual applicant. Also, 

as a result of collecting information to 

verify applicant data on this smaller 

average number of data elements (three 

items instead of five items), the average 

amount of time for the individual 

applicant to review verification form 

instructions, gather the data, respond on 

a form and submit a form and the 

supporting data will decrease from the 

current average of .20 hours (12 

minutes) per individual to .12 hours (7 

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minutes), thus further reducing burden 

on the individual applicant. 

For example, when we consider the 

estimated 5.1 million 2008–2009 

applicants selected for verification at an 

average of .20 hours (12 minutes) to 

collect and submit information, 

including supporting documentation for 

the five required data elements (which 

is the estimated amount of time that is 

associated with the requirements in 

current § 668.56(a)), the requirements in 

that section yields a total burden of 

1,020,000 hours added to OMB Control 

Number 1845–0041. However, under 

§ 668.56(b), where the number of 

verification data elements will be 

reduced to an average of three, the 

estimated 5.1 million individuals 

selected for verification multiplied by 

the reduced average of .12 minutes 

(7 minutes) yields an increase of 

612,000 hours in burden. Therefore, we 

will expect the burden to be 408,000 

hours less than under the current 

regulations. 

As a result, for OMB reporting 

purposes, we estimate that the 

individuals, as a group, will have an 

increase in burden by 612,000 hours in 

OMB Control Number 1845–0041 

(rather than 1,020,000 hours). 

Section 668.57—Acceptable 

Documentation 

We have made a number of technical 

and conforming changes throughout 

§ 668.57. We also have made the 

following substantive changes described 

in this section. 

Section 668.57(a)(2) will allow an 

institution to accept, in lieu of an 

income tax return or an IRS form that 

lists tax account information, the 

electronic importation of data obtained 

from the IRS into an applicant’s online 

FAFSA. 

We also have amended 

§ 668.57(a)(4)(ii)(A) to accurately reflect 

that, upon application, the IRS grants a 

six-month extension beyond the April 

15 deadline rather than the four-month 

extension currently stated in the 

regulations. 

Under § 668.57(a)(5), an institution 

may require an applicant who has been 

granted an extension to file his or her 

income tax return to provide a copy of 

that tax return once it has been filed. If 

the institution requires the applicant to 

submit the tax return, it will need to reverify the AGI and taxes paid of the 

applicant and his or her spouse or 

parents when the institution receives 

the return. 

Section 668.57(a)(7) clarifies that an 

applicant’s income tax return that is 

signed by the preparer or stamped with 

the preparer’s name and address must 

also include the preparer’s Social 

Security number, Employer 

Identification Number or the Preparer 

Tax Identification Number. 

Section 668.57(b) and (c) remain 

substantively unchanged. 

We have deleted current § 668.57(d) 

regarding acceptable documentation for 

untaxed income and benefits and 

replaced it with a new § 668.57(d). This 

new section provides that, if an 

applicant is selected to verify other 

information specified in an annual 

Federal Register notice, the applicant 

must provide the documentation 

specified for that information in the 

Federal Register notice. 

Currently under OMB Control 

Number 1845–0041, there are 1,022,384 

hours of burden associated with the 

verification regulations, of which 12,312 

hours are attributable to institutions of 

higher education to establish their 

verification policies and procedures. 

Under § 668.57, we estimate that, on 

average, institutions will take .12 hours 

(7 minutes) per applicant selected for 

verification to review and take 

appropriate action based upon the 

information provided by the applicant, 

which in some cases may mean 

correcting applicant data or having the 

applicant correct his or her data. Under 

current § 668.57, when we consider the 

significant increase to 17.4 million 

applicants in the 2008–2009 award year, 

of which 5.1 million will be selected for 

verification at an average of .20 hours 

(12 minutes) per verification response 

received from applicants by the 

institutions for review, the total increase 

in burden will be 1,020,000 additional 

hours. However, under § 668.57, both 

the average number of items to be 

verified will be reduced from five items 

to three items, as well as the average 

amount of time to review will decrease 

from .20 hours (12 minutes) to .12 hours 

(7 minutes). Therefore, the burden to 

institutions will be 612,000 burden 

hours (that is, 5.1 million multiplied by 

.12 hours (7 minutes))—rather than 

1,020,000 burden hours (i.e., 5.1 million 

applicants multiplied by .20 hours (12 

minutes)). Thus, as compared to the 

burden under the current regulations, 

using the number of applicants from 

2008–2009—17.4 million—there will be 

408,000 fewer burden hours for 

institutions. 

We estimate 226,440 hours of 

increased burden for proprietary 

institutions (2,086 proprietary 

institutions of the total 5,709 affected 

institutions or 37 percent multiplied by 

5,100,000 applicants equals 1,887,000 

applicants multiplied by .12 hours (7 

minutes)). 

We estimate 183,600 hours of 

increased burden for private non-profit 

institutions (1,731 private non-profit 

institutions of the total 5,709 affected 

institutions or 30 percent multiplied by 

5,100,000 applicants equals 1,530,000 

applicants multiplied by .12 hours (7 

minutes)). 

We estimate 201,960 hours of 

increased burden for public institutions 

(1,892 public institutions of the total 

5,709 affected institution or 33 percent 

multiplied by 5,100,000 applicants 

multiplied by .12 hours (7 minutes)). 

As a result, for OMB reporting 

purposes, collectively there will be a 

projected increase of 612,000 hours of 

burden for institutions in OMB Control 

Number 1845–0041. 

Section 668.59—Consequences of a 

Change in FAFSA Information 

We have amended § 668.59 by 

removing all allowable tolerances and 

requiring instead that an institution 

submit to the Department all applicable 

changes to an applicant’s FAFSA 

information resulting from verification 

for those applicants receiving assistance 

under any of the subsidized student 

financial assistance programs (see 

§ 668.59(a)). 

Under § 668.59(b), for the Federal Pell 

Grant program, once the applicant 

provides the institution with the 

corrected SAR or ISIR, the institution 

will be required to recalculate the 

applicant’s Federal Pell Grant and 

disburse any additional funds, if 

additional funds are payable. If the 

applicant’s Federal Pell Grant will be 

reduced as a result of verification, the 

institution will be required to eliminate 

any overpayment by adjusting 

subsequent disbursements or 

reimbursing the program account by 

requiring the applicant to return the 

overpayment or making restitution from 

its own funds (see § 668.59(b)(2)(ii)). 

Section 668.59(c) provides that, for 

the subsidized student financial 

assistance programs, excluding the 

Federal Pell Grant Program, if an 

applicant’s FAFSA information changes 

as a result of verification, the institution 

must recalculate the applicant’s EFC 

and adjust the applicant’s financial aid 

package on the basis of the EFC on the 

corrected SAR or ISIR. 

With the exception of minor technical 

edits, § 668.59(d), which describes the 

consequences of a change in an 

applicant’s FAFSA information, remains 

substantively the same as current 

§ 668.59(d). 

Finally, we have removed current 

§ 668.59(e), the provision that requires 

an institution to refer to the Department 

unresolved disputes over the accuracy 

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of information provided by the 

applicant if the applicant received funds 

on the basis of that information. 

Both individuals (students) and 

institutions will be making corrections 

to FAFSA information as a result of the 

verification process. We estimate that 30 

percent of the 17,000,000 applicants or 

5,100,000 individuals (students) will be 

selected for verification. Of those 

5,100,000 individuals, students will 

submit, on average, 1.4 changes in 

FAFSA information as a result of 

verification for 7,140,000 changes, 

which will take an average of .12 hours 

(7 minutes) per change, increasing 

burden to individuals by 856,800 hours. 

We estimate that institutions will 

need to submit 10,200,000 changes in 

FAFSA information as a result of 

verification (that is, 5,100,000 

individuals selected for verification 

multiplied by 2.0 changes, which is 

what we estimate will be the average per 

individual). 

Of the estimated total 10,200,000 

changes, we estimate that 3,774,000 

changes to FAFSA information as a 

result of verification will occur at 

proprietary institutions, which will take 

an average of .12 hours (7 minutes) per 

change, increasing burden by 452,880 

hours. 

Of the estimated total 10,200,000 

changes, we estimate that 3,060,000 

changes to FAFSA information as a 

result of verification will occur at 

private non-profit institutions, which 

will take an average of .12 hours (7 

minutes) per change, increasing burden 

by 367,200 hours. 

Of the estimated total 10,200,000 

changes, we estimate that 3,366,000 

changes to FAFSA information as a 

result of verification will occur at public 

institutions, which will take an average 

of .12 hours (7 minutes) per change, 

increasing burden by 403,920 hours. 

Collectively, therefore, the final 

regulatory changes reflected in § 668.59 

will increase for individuals and 

institutions by 2,080,800 hours in OMB 

Control Number 1845–0041. 

Section 668.144—Application for Test 

Approval 

We have clarified and expanded the 

requirements in current §§ 668.143 and 

668.144. In addition, we have 

consolidated all of the requirements for 

test approval in one section, § 668.144. 

Paragraphs (a) and (b) of § 668.144 

describe the general requirement for test 

publishers and States to submit to the 

Secretary any test they wish to have 

approved under subpart J of part 668. 

Paragraph (c) of § 668.144 describes the 

information that a test publisher must 

include with its application for approval 

of a test. Paragraph (d) of § 668.144 

describes the information a State must 

include with its application when it 

submits a test to the Secretary for 

approval. 

Section 668.144(c)(16) will require 

test publishers to include in their 

applications a description of their test 

administrator certification process. 

Under § 668.144(c)(17), we will require 

test publishers to include in their 

applications, a description of the test 

anomaly analysis the test publisher will 

conduct and submit to the Secretary. 

Finally, § 668.144(c)(18) will require 

test publishers to include in their 

applications a description of the types 

of accommodations available for 

individuals with disabilities, including 

a description of the process used to 

identify and report when 

accommodations for individuals with 

disabilities were provided. 

We have added § 668.144(d) to 

describe what States must include in 

their test submissions to the Secretary. 

While this provision replaces the 

content in current § 668.143, its 

language has been revised to be parallel, 

where appropriate, to the test publisher 

submission requirements in current 

§ 668.144. In addition to making these 

requirements parallel, § 668.144(d) also 

includes the new requirements to be 

added to the test publisher submissions. 

A description of those new provisions 

follows: 

Both test publishers and States will be 

required to submit a description of their 

test administrator certification process 

that indicates how the test publisher or 

State, as applicable, will determine that 

a test administrator has the necessary 

training, knowledge, skills and integrity 

to test students in accordance with 

requirements and how the test publisher 

or the State will determine that the test 

administrator has the ability and 

facilities to keep its test secure against 

disclosure or release (see 

§ 668.144(c)(16) (test publishers) and 

§ 668.144(d)(7) (States)). 

We estimate that a test publisher and 

State will, on average, take 2.5 hours to 

develop its process to establish that a 

test administrator has the necessary 

training, knowledge, skills and integrity 

to administer ability-to-benefit (ATB) 

tests and then to report that process to 

the Secretary. 

We estimate that the burden 

associated with the currently approved 

eight (8) ATB tests will increase for the 

test publishers and States by 20 hours. 

The regulations will require both test 

publishers and States to submit a 

description of the test anomaly analysis 

they will conduct. This description 

must include a description of how they 

will identify potential test irregularities 

and make a determination that test 

irregularities have occurred; an 

explanation of corrective action to be 

taken in the event of test irregularities; 

and information on when and how the 

Secretary, test administrator, and 

institutions will be notified if a test 

administrator is decertified (see 

§ 668.144(c)(17) (test publishers) and 

§ 668.144(d)(8) (States)). 

We estimate that each test publisher 

and State will, on average, take 75 hours 

to develop its test anomaly process, to 

establish its test anomaly analysis 

(where it explains its test irregularity 

detection process including its 

decertification of test administrator 

process) and to establish its reporting 

process to the Secretary. We estimate 

that the burden associated with the 

currently approved eight (8) ATB tests 

will increase for the test publishers and 

States by 600 hours. 

Under § 668.144(c)(18) and (d)(9) 

respectively, both test publishers and 

States will be required to describe the 

types of accommodations available for 

individuals with disabilities, and the 

process for a test administrator to 

identify and report to the test publisher 

when accommodations for individuals 

with disabilities were provided. We 

estimate that test publishers and States 

will, on average, take 1 hour to develop 

and describe to the Secretary the types 

of accommodations available to 

individuals with disabilities, to describe 

the process the test administrator will 

use to support the identification of the 

disability and to develop the process to 

report when accommodations will be 

used. 

We estimate that the burden 

associated with the currently approved 

eight (8) ATB tests will increase for the 

current test publishers by 8 hours. 

Collectively, the final regulatory 

changes in § 668.144 will increase 

burden for test publishers and States by 

628 hours in OMB 1845–0049. 

Section 668.150—Agreement Between 

the Secretary and a Test-Publisher or a 

State 

Section 668.150 provides that States, 

as well as test publishers, must enter 

into agreements with the Secretary in 

order to have their tests approved. 

We also have revised this section to 

require both test publishers and States 

to comply with a number of new 

requirements that will be added to the 

agreement with the Secretary. 

These requirements will include: 

Requiring the test administrators that 

they certify to provide them with certain 

information about whether they have 

been decertified (see § 668.150(b)(2)). 

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We estimate that 3,774 individuals (test 

administrators) will take, on average, .17 

hours (10 minutes) to access, read, 

complete and submit the written 

certification to a test publisher or State, 

which will increase burden by 642 

hours. 

We estimate that it will take each test 

publisher or State 1 hour per test 

submission to develop its process to 

obtain a certification statement from 

each prospective test administrator, 

which will increase burden by 8 hours. 

We estimate that the review of the 

submitted written certifications by the 

test publishers or States for the 3,774 

test administrators will take, on average, 

.08 hours (5 minutes) per certification 

form, which will increase burden by 302 

hours. 

With regard to the requirement to 

immediately notify the test 

administrator, the Secretary, and 

institutions when the test administrator 

is decertified (see § 668.150(b)(6)), we 

estimate that 1 percent of the 3,774 test 

administrators will be decertified. We 

estimate that it will take test publishers 

and States, on average, 1 hour per 

decertification to provide all of the final 

notifications, which will increase 

burden for test publishers and States by 

38 hours. 

With regard to the requirement to 

review test results of tests administered 

by a decertified test administrator and 

immediately to notify affected 

institutions and students (see 

§ 668.150(b)(7)), we estimate that 

burden will increase. We estimate that 

481,763 ATB tests will be taken for title 

IV, HEA purposes annually. Of the 

annual total of ATB tests provided, we 

estimate that 1 percent will be 

improperly administered and that 4,818 

individuals will be contacted, which 

will take, on average, .25 hours (15 

minutes) per individual. As a result, we 

estimate that burden will increase to test 

publishers and States by 1,205 hours. 

In addition, we estimate that it will 

take test publishers and States, on 

average, 5 hours per ATB test submitted, 

to develop the process to determine 

when ATB tests have been improperly 

administered, which for 8 approved 

ATB tests will increase burden by 40 

hours. 

We estimate that test publishers and 

States will, on average, take .33 hours 

(20 minutes) for each of the 4,818 

estimated improperly administered ATB 

tests to make the final notifications to 

institutions, students and prospective 

students, which will increase burden by 

1,590 hours. 

We estimate that 38 test 

administrators (1 percent of the 3,774 

test administrators) will be decertified. 

Of the 38 decertified test administrators, 

we estimate that 1 previously decertified test administrator (2 percent of 

38 test administrators) will be recertified after a three-year period and, 

therefore, reported to the Secretary. We 

estimate the burden for test publishers 

and States for this reporting will be 1 

hour. We project that it will be very rare 

that a decertified test administrator will 

seek re-certification after the three-year 

decertification period. 

Under § 668.150(b)(13), test 

publishers and States must provide 

copies of test anomaly analysis every 18 

months instead of every 3 years. We 

estimate that it will take a test publisher 

or State, on average, 75 hours to conduct 

its test anomaly analysis and report the 

results to the Secretary every 18 months. 

We estimate the burden on test 

publishers and States for the submission 

of the 8 test anomaly analysis every 18 

months will be 600 hours. 

Under § 668.150(b)(15), test 

publishers and States will be required to 

report to the Secretary any credible 

information indicating that a test has 

been compromised (see 

§ 668.150(b)(15)). We estimate that 

481,763 ATB tests for title IV, HEA 

purposes will be given on an annual 

basis. Of that total number ATB tests 

given, we estimate that 482 ATB tests 

will be compromised. On average, we 

estimate that test publishers and States 

will take 1 hour per test to collect the 

credible information to make the 

determination that a test will be 

compromised and report it to the 

Secretary. We estimate that burden will 

increase by 482 hours. 

Section 668.150(b)(16) will require 

test publishers and States to report to 

the Office of Inspector General of the 

Department of Education any credible 

information indicating that a test 

administrator or institution may have 

engaged in civil or criminal fraud or 

other misconduct. We estimate that 

481,763 ATB tests for title IV, HEA 

purposes will be given on an annual 

basis. Of that total number ATB tests 

given, we estimate that 482 ATB tests 

will be compromised. On average, we 

estimate that test publishers or States 

will take 1 hour per test to collect the 

credible information to make the 

determination that a test administrator 

or institution may have engaged in fraud 

or other misconduct and report it to the 

U.S. Department of Education’s Office of 

the Inspector General. We estimate that, 

as a result of this requirement, burden 

will increase by 482 hours. 

Section 668.150(b)(17) requires a test 

administrator who provides a test to an 

individual with a disability who 

requires an accommodation in the test’s 

administration to report to the test 

publisher or the State the nature of the 

disability and the accommodations that 

were provided. Census data indicate 

that 12 percent of the U.S. population is 

severely disabled. We estimate that 12 

percent of the ATB test population 

(481,763 ATB test takers) or 57,812 of 

the ATB test takers will be individuals 

with disabilities that will need 

accommodations for an ATB test. We 

estimate that it will take .08 hours (5 

minutes) to report the nature of the 

disability and any accommodation that 

the test administrator made for the test 

taker, increasing burden by 4,625 hours. 

We estimate that, on average, test 

publishers and States will take 2 hours 

per ATB test to develop the process for 

having test administrators report the 

nature of the test taker’s disability and 

any accommodations provided. We 

expect this to result in an increase 

burden for test publishers and States by 

16 hours (2 hours multiplied by 8 ATB 

tests). 

Collectively, the final changes 

reflected in § 668.150 will increase 

burden by 10,031 hours in OMB Control 

Number 1845–0049. 

Section 668.151—Administration of 

Tests 

Section 668.151(g)(4) will require 

institutions to keep a record of each 

individual who took an ATB test and 

the name and address of the test 

administrator who administered the test 

and any identifier assigned to the test 

administrator by the test publisher or 

the State. 

We estimate that 481,763 ATB tests 

for title IV, HEA purposes will be given 

on an annual basis. We estimate that 

proprietary institutions will give 

173,445 tests (36 percent of those ATB 

tests) and that, on average, the amount 

of time to record the test takers’ name 

and address as well as the test 

administrators’ identifiers will be .08 

hours (5 minutes) per test, increasing 

burden for proprietary institutions by 

13,876 hours. 

We estimate that private non-profit 

institutions will give 149,347 tests (31 

percent of the total annual ATB tests 

given) and that, on average, the amount 

of time to record the test takers’ name 

and address, as well as the test 

administrators’ identifiers will be .08 

hours (5 minutes) per test, increasing 

burden for private non-profit 

institutions by 11,948 hours. 

We estimate that public institutions 

will give 158,962 tests (33 percent of the 

total annual ATB tests given) and that, 

on average, the amount of time to record 

the test takers’ name and address as well 

as the test administrators’ identifiers 

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will be .08 hours (5 minutes) per test, 

increasing burden for public institutions 

by 12,717 hours. 

If the individual who took the test has 

a disability and is unable to be 

evaluated by the use of an approved 

ATB test, or the individual requested or 

required a testing accommodation, the 

institution will be required, under 

§ 668.151(g)(5), to maintain 

documentation of the individual’s 

disability and of the testing 

arrangements provided. Census data 

indicate that 12 percent of the U.S. 

population is severely disabled. We 

estimate that 12 percent of the ATB test 

population (481,763 ATB test takers) or 

57,812 of the ATB test takers will be 

individuals with disabilities that will 

need accommodations for the ATB test. 

We estimate that it will take .08 hours 

(5 minutes) to collect and maintain 

documentation of the individual’s 

disability and of the testing 

accommodations provided to the test 

taker. 

We estimate that proprietary 

institutions will give 20,812 tests (36 of 

the total annual ATB tests given), 

resulting in an increase in burden for 

proprietary institutions by 1,665 hours 

(20,812 tests multiplied by .08 hours). 

We estimate that private non-profit 

institutions will give 17,922 tests (31 

percent of the total annual ATB tests 

given), resulting in an increase in 

burden for private non-profit 

institutions by 1,434 hours (17,922 tests 

multiplied by .08 hours). 

We estimate that public institutions 

will give 19,078 tests (33 percent of the 

total annual ATB tests given), resulting 

in an increase in burden for public 

institutions by 1,526 hours (19,078 tests 

multiplied by .08 hours). 

Collectively, the final regulatory 

changes reflected in § 668.151 will 

increase burden by 43,166 hours in 

OMB Control Number 1845–0049. 

Section 668.152—Administration of 

Tests by Assessment Centers 

Section 668.152(a) clarifies that 

assessment centers are also required to 

comply with the provisions of § 688.153 

(Administration of tests for individuals 

whose native language is not English or 

for individuals with disabilities), if 

applicable. 

Under § 668.152(b)(2), assessment 

centers that score tests will be required 

to provide copies of completed tests or 

lists of test-takers’ scores to the test 

publisher or the State, as applicable, on 

a weekly basis. Under § 668.152(b)(2)(i) 

and (b)(2)(ii), copies of completed tests 

or reports listing test-takers’ scores will 

be required to include the name and 

address of the test administrator who 

administered the test and any identifier 

assigned to the test administrator by the 

test publisher or the State. 

We estimate that of the 3,774 ATB test 

administrators approximately one-third 

(.3328 times 3,774) or 1,256 of the ATB 

test administrators are at test assessment 

centers. Of the 1,256 test assessment 

centers, we estimate that 18 percent or 

226 test assessment centers are at 

private non-profit institutions and 82 

percent or 1,030 test assessment centers 

are at public institutions. We estimate 

that 92 percent of the ATB tests 

provided at test assessment centers are 

scored by the test administrators. 

Therefore, under the regulations, the 

institution will be required to maintain 

the scored ATB tests, to collect and 

submit copies of the completed ATB 

tests or a listing to the test publisher or 

State on a weekly basis, while the other 

8 percent will not be impacted by these 

regulations. We estimate that, on 

average, it will take .08 hours (5 

minutes) per week for the test 

assessment center (institution) to collect 

and submit the final information. 

For the 226 test assessment centers at 

private non-profit institutions, we 

expect 940 hours of increased annual 

burden (226 test assessment centers 

multiplied by .08 hours (5 minutes) and 

then multiplied by 52 weeks in a year). 

For the 1,030 test assessment centers 

at public institutions, we expect 4,285 

hours of increased annual burden (1,030 

test assessment centers multiplied by.08 

hours (5 minutes) and then multiplied 

by 52 weeks in a year). 

Collectively, the final regulatory 

changes reflected in § 668.152 will 

increase burden by 5,225 hours in OMB 

Control Number 1845–0049. 

Section 668.164—Disbursing Funds 

Under § 668.164(i), an institution will 

provide a way for a Federal Pell Grant 

eligible student to obtain or purchase 

required books and supplies by the 

seventh day of a payment period under 

certain conditions. An institution will 

have to comply with this requirement 

only if, 10 days before the beginning of 

the payment period, the institution 

could disburse the title IV, HEA 

program funds for which the student is 

eligible, and presuming that those funds 

were disbursed, the student will have a 

title IV, HEA credit balance under 

§ 668.164(e). The amount the institution 

will provide to the student for books 

and supplies will be the lesser of the 

presumed credit balance or the amount 

needed by the student, as determined by 

the institution. In determining the 

amount needed by the student, the 

institution could use the actual costs of 

books and supplies or the allowance for 

books and supplies used in the student’s 

cost of attendance for the payment 

period. 

We estimate that of the 6,321,678 

Federal Pell Grant recipients in the 

2008–2009 award year, that 

approximately 30 percent or 1,896,503 

will have or did have a title IV, HEA 

credit balance. Of that number of 

Federal Pell Grant recipients, we 

estimate that 25 percent or 474,126 

Federal Pell Grant recipients will have 

a presumed credit balance 10 days prior 

to the beginning of the payment period, 

and as final, that the institution will 

have to provide a way for those 

recipients to either obtain or purchase 

their books and supplies within 7 days 

of the beginning of the payment period. 

We estimate that the 2,063 proprietary 

institutions participating in the Federal 

Pell Grant program will take, on average 

3 hours per institution to analyze and 

make programming change needed to 

identify these recipients with presumed 

credit balances, increasing burden by 

6,189 hours. Additionally, we estimate 

that proprietary institutions will be 

required to disburse the presumed 

credit balance to 38 percent of the 

474,126 at proprietary institutions 

(180,168 recipients), which on average, 

will take .08 hours (5 minutes) per 

recipient, increasing burden by 14,413 

hours. 

We estimate that the 1,523 private 

non-profit institutions participating in 

the Federal Pell Grant program will 

take, on average, 3 hours per institution 

to analyze and make programming 

change needed to identify these 

recipients with presumed credit 

balances, increasing burden by 4,569 

hours. Additionally, we estimate that 

private non-profit institutions will be 

required to disburse the presumed 

credit balance to 28 percent of the 

474,126 at proprietary institutions 

(132,755 recipients) which on average, 

will take .08 hours (5 minutes) per 

recipient, increasing burden by 10,620 

hours. 

We estimate that the 1,883 public 

institutions participating in the Federal 

Pell Grant program will take, on average 

3 hours per institution to analyze and 

make programming change needed to 

identify these recipients with presumed 

credit balances, increasing burden by 

5,649 hours. Additionally, we estimate 

that proprietary institutions will be 

required to disburse the presumed 

credit balance to 34 percent of the 

474,126 at proprietary institutions 

(161,203 recipients) which on average, 

will take .08 hours (5 minutes) per 

recipient, increasing burden by 12,896 

hours. 

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Collectively, the final regulatory 

changes reflected in § 668.164 will 

increase burden by 54,336 hours in 

OMB Control Number 1845–NEW3. 

COLLECTION OF INFORMATION

Regulatory Section Information collection Collection 

668.6 ....................... This regulatory section will require institutions to report for each student who 

during an award year began attending or completed a program that prepares 

a student for gainful employment information needed to identify the student 

and the location of the institution the student attended, the CIP code for the 

program, the date the student completed the program, the amounts the student received from private educational loans and the amount from institutional financing plans that the student owes the institution after completing 

the program, and whether the student matriculated to a higher credentialed 

program at the same institution or another institution. Institutions will have to 

disclose information to prospective students about the occupations (by 

names and SOC codes) that its programs prepare students to enter, along 

with links to occupational profiles on O–NET or its successor site, or if the 

number of occupations related to the programs on O–Net is more than ten 

(10), the institution may provide Web links to a representative sample of the 

SOCs for which its graduates typically find employment within a few years 

after completing the program. In addition, the institution will also have to report the on-time graduation rate for students entering the program; the total 

amount of tuition and fees it charges a student for completing the program 

within the normal timeframe, the typical costs for books and supplies, and the 

typical costs for room and board, if applicable. The institution may include information on other costs, such as transportation and living expenses, but it 

must provide a Web link, or access, to the program cost information the institution makes available under § 668.43(a). Beginning July 1, 2011, the institution must provide prospective students with the placement rate for students 

completing the program, as determined by the institution’s accrediting agency 

or State requirements, until NCES develops and makes available a new 

placement rate, and the median loan debt incurred by students who completed the program, as provided by the Secretary, as well as other information the Secretary provided to the institution about the program. Separately, 

the institution must identify the median loan dept from title IV, HEA program 

loans, and the median loan debt from private educational loan and institutional financing plans.

OMB 1845–NEW1. This will be a new 

collection. Separate 60-day and 30- 

day Federal Register notices were 

published to solicit comment. The 

burden will increase by 677,160 

hours. 

668.8 ....................... This regulatory section provides for a new conversion ratio when converting 

clock hours to credit hours. As finalized, this section will include an exemption for affected institutions if the accrediting agency or the State approval 

agency finds that there are no deficiencies in the institutions policies and procedures for these conversions. Under the exception, the institution will use a 

lower ratio and could consider student’s outside work in the total hours being 

converted to credit hours. Burden will increase for proprietary, not-for profit 

and public institutions when they measure whether certain programs when 

converted from clock hours to credit hours have sufficient credit hours to receive title VI, HEA funds.

OMB 1845–0022. The burden will increase by 18,349 hours. 

668.16 ..................... This regulatory section will be streamlined by moving most of the elements of 

satisfactory academic progress (SAP) from this section to § 668.34. Under 

this proposal, the required elements of SAP will be expanded to provide 

greater institutional flexibility. Burden will increase for proprietary, not-for profit and public institutions to develop a high school diploma validity process 

and will increase when certain diplomas are verified.

OMB 1845–0022 and OMB 1845– 

NEW2. The burden hours attributable 

to SAP in OMB 1845–0022 will be 

administratively transferred to OMB 

1845–NEW2. Additionally, the burden 

will increase by 21,982 hours in OMB 

1845–0022. 

668.22 ..................... This regulatory section will consider a student to have withdrawn if the student 

does not complete all the days in the payment period or period of enrollment 

that the student was scheduled to complete prior to withdrawing. Burden will 

increase for individuals, proprietary, not-for profit and public institutions when 

students in term-based programs with modules or compressed courses withdraw before completing more than 60 percent of the payment period or period of enrollment for which a calculation will be performed to determine the 

earned and unearned portions of title IV, HEA program assistance.

OMB 1845–0022. The burden will increase by 743,881 hours. 

668.34 ..................... This regulatory section has been restructured and the satisfactory academic 

progress requirements have been expanded to allow for more frequent 

measuring of SAP. Burden will increase for individuals and proprietary, notfor profit and public institutions for institutions to measure academic progress 

and when academic plans or alternatives will be provided to students who do 

not meet the institution’s academic standards.

OMB 1845–NEW2. This will be a new 

collection. Separate 60-day and 30- 

day Federal Register notices were 

published to solicit comment. The 

burden will increase by 976,856 

hours. 

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Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations 66945 

COLLECTION OF INFORMATION—Continued 

Regulatory Section Information collection Collection 

668.43 ..................... This regulatory section will require that for institutions that enter into written arrangements with other institutions to provide for a portion of its programs’ 

training by the institution that is not providing the degree or certificate, the institution providing the degree or certificate must provide a variety of disclosures to enrolled and prospective students about the written arrangements. 

Burden will increase for proprietary, not-for profit and public institutions for reporting the details of written arrangements with other institutions offering a 

portion of a student’s program of study.

OMB 1845–0022. The burden will increase by 67,870 hours. 

668.55 ..................... This regulatory provision will require that all updated applicant data information 

as a result of verification be reported to the Secretary via the Central Processing System. This also will cover changes made as a result of a dependent student becoming married during the award year when a financial aid administrator exercises their discretion to require marital status change to address an inequity or accurately reflect the student’s ability to pay, such 

change in status due to marriage had previously been prohibited.

OMB 1845–0041. The burden will increase by 386,750 hours. 

668.56 ..................... This regulation changes from the current five mandatory items included in the 

verification process to a more flexible list of items that will be selected on an 

individualized basis. For example, there is no need to verify data that can be 

obtained directly from the IRS. Burden will increase for individuals; however, 

the average number of data elements to be verified is expected to be reduced.

OMB 1845–0041. The burden will increase by 612,000 hours. 

668.57 ..................... This final regulatory provision will modify the requirements related to acceptable 

documentation required as a part of the verification process. It will allow for 

the importation of data obtained directly from the IRS that has been unchanged and will provide other flexibilities that will reduce burden; however, 

due to the large increase in applicants, there will be an overall increase in 

burden.

OMB 1845–0041. The burden will increase by 612,000 hours. 

668.59 ..................... This provision eliminates all allowable tolerances and will require an institution 

to submit to the Department all changes to an applicant’s FAFSA as a result 

of verification. Burden will increase for proprietary, not-for profit and public institutions that will recalculate title IV, HEA awards as a result of data 

changes due to verification.

OMB 1845–0041. The burden will increase by 2,080,800 hours. 

668.144 ................... This regulatory section expands the required elements that a test publisher or a 

State must submit to the Secretary for approval.

OMB 1845–0049. The burden will increase by 628 hours. 

668.150 ................... This provision expands the provisions of the agreement between the Secretary 

and the ability to benefit test (ATB) publishers or a State. The expanded provisions include requiring test administrators to certify that they have not been 

decertified, notification requirements when a test administrator is decertified, 

and providing test anomaly studies every eighteen months rather than every 

36 months. Burden will increase for individuals, proprietary, not-for profit and 

public institutions for the collection and maintenance of certifications, for required notifications, and for submission of test anomaly studies.

OMB 1845–0049. The burden will increase by 10,031 hours. 

668.151 ................... This provision will require independent test administrators to submit completed 

tests for scoring to the test publisher or the State in no more than two business days following the test. Institutions will be required to maintain a record 

of each individual who takes an ATB test and information about the test administrator. When the test taker has a disability, it will be the institution’s responsibility to maintain documentation of the individual’s disability and any 

accommodation provided the individual.

OMB 1845–0049. The burden will increase by 43,166 hours. 

668.152 ................... This provision will require that test assessment centers provide either copies of 

the completed tests or lists of the test takers’ scores, including the test administrator’s name, address, and any other test administrator identifier to the 

test publisher or State, as applicable, on a weekly basis.

OMB 1845–0049. The burden will increase by 5,225 hours. 

668.164 ................... This provision will require that institutions provide a way for Federal Pell Grant 

program recipients to obtain or purchase books and supplies by the seventh 

day of the payment period if certain conditions are met and a credit balance 

or projected credit balance exists. Burden will increase for proprietary, not-for 

profit and public institutions to identify and notify Pell recipients with a presumed credit balance about ways to obtain or purchase books and supplies.

OMB 1845–NEW3. This will be a new 

collection. Separate 60-day and 30- 

day Federal Register notices were 

published to solicit comment. The 

burden will increase by 54,336 hours. 

Intergovernmental Review 

These programs are not subject to 

Executive Order 12372 and the 

regulations in 34 CFR part 79. 

Assessment of Educational Impact 

In accordance with section 411 of the 

General Education Provisions Act, 20 

U.S.C. 1221e–4, and based on our own 

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. 

Electronic Access to This Document 

You can view this document, as well 

as all other documents of this 

Department published in the Federal 

Register, in text or Adobe Portable 

Document Format (PDF) on the Internet 

at the following site: http://www.ed.gov/ 

news/fedregister. To use PDF, you must 

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66946 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations 

have Adobe Acrobat Reader, which is 

available free at this site. 

Note: The official version of this document 

is the document published in the Federal 

Register. Free Internet access to the official 

edition of the Federal Register and the Code 

of Federal Regulations is available on GPO 

Access at: http://www.gpoaccess.gov/nara/ 

index/html. 

(Catalog of Federal Domestic Assistance: 

84.007 FSEOG; 84.032 Federal Family 

Education Loan Program; 84.033 Federal 

Work-Study Program; 84.037 Federal Perkins 

Loan Program; 84.063 Federal Pell Grant 

Program; 84.069 LEAP; 84.268 William D. 

Ford Federal Direct Loan Program; 84.376 

ACG/SMART; 84.379 TEACH Grant Program) 

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 Part 602 

Colleges and universities, Reporting 

and recordkeeping requirements. 

34 CFR Part 603 

Colleges and universities, Vocational 

education. 

34 CFR Part 668 

Administrative practice and 

procedure, Aliens, Colleges and 

universities, Consumer protection, 

Grant programs-education, 

Incorporation by reference, Loan 

programs-education, Reporting and 

recordkeeping requirements, Selective 

Service System, Student aid, Vocational 

education. 

34 CFR Part 682 

Administrative practice and 

procedure, Colleges and universities, 

Loan programs-education, Reporting 

and recordkeeping requirements, 

Student aid, Vocational education. 

34 CFR Part 685 

Administrative practice and 

procedure, Colleges and universities, 

Loan programs-education, Reporting 

and recordkeeping requirements, 

Student aid, Vocational education. 

34 CFR Part 686 

Administrative practice and 

procedure, Colleges and universities, 

Education, Elementary and secondary 

education, Grant programs-education, 

Reporting and recordkeeping 

requirements, Student aid. 

34 CFR Part 690 

Colleges and universities, Education 

of disadvantaged, Grant programseducation, Reporting and recordkeeping 

requirements, Student aid. 

34 CFR Part 691 

Colleges and universities, Elementary 

and secondary education, Grant 

programs-education, Student aid. 

Dated: October 18, 2010. 

Arne Duncan, 

Secretary of Education. 

■ For the reasons discussed in the 

preamble, the Secretary amends parts 

600, 602, 603, 668, 682, 685, 686, 690, 

and 691 of title 34 of the Code of 

Federal Regulations as follows: 

PART 600—INSTITUTIONAL 

ELIGIBILITY UNDER THE HIGHER 

EDUCATION ACT OF 1965, AS 

AMENDED 

■ 1. The authority citation for part 600 

continues to read as follows: 

Authority: 20 U.S.C. 1001, 1002, 1003, 

1088, 1091, 1094, 1099b, and 1099c, unless 

otherwise noted. 

■ 2. Section 600.2 is amended by: 

■ A. Adding, in alphabetical order, the 

definition of a Credit hour. 

■ B. Revising the definition of 

Recognized occupation. 

The addition and revision read as 

follows: 

§ 600.2 Definitions. 

* * * * * 

Credit hour: Except as provided in 34 

CFR 668.8(k) and (l), a credit hour is an 

amount of work represented in intended 

learning outcomes and verified by 

evidence of student achievement that is 

an institutionally established 

equivalency that reasonably 

approximates not less than— 

(1) One hour of classroom or direct 

faculty instruction and a minimum of 

two hours of out of class student work 

each week for approximately fifteen 

weeks for one semester or trimester hour 

of credit, or ten to twelve weeks for one 

quarter hour of credit, or the equivalent 

amount of work over a different amount 

of time; or 

(2) At least an equivalent amount of 

work as required in paragraph (1) of this 

definition for other academic activities 

as established by the institution 

including laboratory work, internships, 

practica, studio work, and other 

academic work leading to the award of 

credit hours. 

* * * * * 

Recognized occupation: An 

occupation that is— 

(1) Identified by a Standard 

Occupational Classification (SOC) code 

established by the Office of Management 

and Budget or an Occupational 

Information Network O*NET–SOC code 

established by the Department of Labor 

and available at http:// 

online.onetcenter.org or its successor 

site; or 

(2) Determined by the Secretary in 

consultation with the Secretary of Labor 

to be a recognized occupation. 

* * * * * 

■ 3. Section 600.4 is amended by: 

■ A. In paragraph (a)(3), adding the 

words, ‘‘in accordance with § 600.9’’ 

immediately after the word ‘‘located’’. 

■ B. Revising paragraph (a)(4)(i)(C). 

The revision reads as follows: 

§ 600.4 Institution of higher education. 

(a) * * *

(4) * * * 

(i) * * * 

(C) That is at least a one academic 

year training program that leads to a 

certificate, or other nondegree 

recognized credential, and prepares 

students for gainful employment in a 

recognized occupation; and 

* * * * * 

§ 600.5 [Amended] 

■ 4. Section 600.5(a)(4) is amended by 

adding the words, ‘‘in accordance with 

§ 600.9’’ immediately after the word 

‘‘located’’. 

§ 600.6 [Amended] 

■ 5. Section 600.6(a)(3) is amended by 

adding the words, ‘‘in accordance with 

§ 600.9’’ immediately after the word 

‘‘located’’. 

■ 6. Section 600.9 is added to subpart A 

to read as follows: 

§ 600.9 State authorization. 

(a)(1) An institution described under 

§§ 600.4, 600.5, and 600.6 is legally 

authorized by a State if the State has a 

process to review and appropriately act 

on complaints concerning the 

institution including enforcing 

applicable State laws, and the 

institution meets the provisions of 

paragraphs (a)(1)(i), (a)(1)(ii), or (b) of 

this section. 

(i)(A) The institution is established by 

name as an educational institution by a 

State through a charter, statute, 

constitutional provision, or other action 

issued by an appropriate State agency or 

State entity and is authorized to operate 

educational programs beyond secondary 

education, including programs leading 

to a degree or certificate. 

(B) The institution complies with any 

applicable State approval or licensure 

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Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations 66947 

requirements, except that the State may 

exempt the institution from any State 

approval or licensure requirements 

based on the institution’s accreditation 

by one or more accrediting agencies 

recognized by the Secretary or based 

upon the institution being in operation 

for at least 20 years. 

(ii) If an institution is established by 

a State on the basis of an authorization 

to conduct business in the State or to 

operate as a nonprofit charitable 

organization, but not established by 

name as an educational institution 

under paragraph (a)(1)(i) of this section, 

the institution— 

(A) By name, must be approved or 

licensed by the State to offer programs 

beyond secondary education, including 

programs leading to a degree or 

certificate; and 

(B) May not be exempt from the 

State’s approval or licensure 

requirements based on accreditation, 

years in operation, or other comparable 

exemption. 

(2) The Secretary considers an 

institution to meet the provisions of 

paragraph (a)(1) of this section if the 

institution is authorized by name to 

offer educational programs beyond 

secondary education by— 

(i) The Federal Government; or 

(ii) As defined in 25 U.S.C. 1802(2), 

an Indian tribe, provided that the 

institution is located on tribal lands and 

the tribal government has a process to 

review and appropriately act on 

complaints concerning an institution 

and enforces applicable tribal 

requirements or laws. 

(b)(1) Notwithstanding paragraph 

(a)(1)(i) and (ii) of this section, an 

institution is considered to be legally 

authorized to operate educational 

programs beyond secondary education if 

it is exempt from State authorization as 

a religious institution under the State 

constitution or by State law. 

(2) For purposes of paragraph (b)(1) of 

this section, a religious institution is an 

institution that— 

(i) Is owned, controlled, operated, and 

maintained by a religious organization 

lawfully operating as a nonprofit 

religious corporation; and 

(ii) Awards only religious degrees or 

certificates including, but not limited to, 

a certificate of Talmudic studies, an 

associate of Biblical studies, a bachelor 

of religious studies, a master of divinity, 

or a doctor of divinity. 

(c) If an institution is offering 

postsecondary education through 

distance or correspondence education to 

students in a State in which it is not 

physically located or in which it is 

otherwise subject to State jurisdiction as 

determined by the State, the institution 

must meet any State requirements for it 

to be legally offering postsecondary 

distance or correspondence education in 

that State. An institution must be able 

to document to the Secretary the State’s 

approval upon request. 

(Authority: 20 U.S.C. 1001 and 1002) 

PART 602—THE SECRETARY’S 

RECOGNITION OF ACCREDITING 

AGENCIES 

■ 7. The authority citation for part 602 

continues to read as follows: 

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

otherwise noted. 

■ 8. Section 602.24 is amended by 

adding a new paragraph (f) to read as 

follows: 

§ 602.24 Additional procedures certain 

institutional accreditors must have. 

* * * * * 

(f) Credit-hour policies. The 

accrediting agency, as part of its review 

of an institution for initial accreditation 

or preaccreditation or renewal of 

accreditation, must conduct an effective 

review and evaluation of the reliability 

and accuracy of the institution’s 

assignment of credit hours. 

(1) The accrediting agency meets this 

requirement if— 

(i) It reviews the institution’s— 

(A) Policies and procedures for 

determining the credit hours, as defined 

in 34 CFR 600.2, that the institution 

awards for courses and programs; and 

(B) The application of the institution’s 

policies and procedures to its programs 

and coursework; and 

(ii) Makes a reasonable determination 

of whether the institution’s assignment 

of credit hours conforms to commonly 

accepted practice in higher education. 

(2) In reviewing and evaluating an 

institution’s policies and procedures for 

determining credit hour assignments, an 

accrediting agency may use sampling or 

other methods in the evaluation, 

sufficient to comply with paragraph 

(f)(1)(i)(B) of this section. 

(3) The accrediting agency must take 

such actions that it deems appropriate 

to address any deficiencies that it 

identifies at an institution as part of its 

reviews and evaluations under 

paragraph (f)(1)(i) and (ii) of this 

section, as it does in relation to other 

deficiencies it may identify, subject to 

the requirements of this part. 

(4) If, following the institutional 

review process under this paragraph (f), 

the agency finds systemic 

noncompliance with the agency’s 

policies or significant noncompliance 

regarding one or more programs at the 

institution, the agency must promptly 

notify the Secretary. 

* * * * * 

PART 603—SECRETARY’S 

RECOGNITION PROCEDURES FOR 

STATE AGENCIES 

■ 9. The authority citation for part 603 

is revised to read as follows: 

Authority: 20 U.S.C. 1001, 1002, 

1094(c)(4); 38 U.S.C. 3675, unless otherwise 

noted. 

■ 10. Section 603.24 is amended by 

redesignating paragraph (c) as paragraph 

(d), adding a new paragraph (c), and 

revising the authority citation after 

redesignated paragraph (d) to read as 

follows: 

§ 603.24 Criteria for State agencies. 

* * * * * 

(c) Credit-hour policies. The State 

agency, as part of its review of an 

institution for initial approval or 

renewal of approval, must conduct an 

effective review and evaluation of the 

reliability and accuracy of the 

institution’s assignment of credit hours. 

(1) The State agency meets this 

requirement if— 

(i) It reviews the institution’s— 

(A) Policies and procedures for 

determining the credit hours, as defined 

in 34 CFR 600.2, that the institution 

awards for courses and programs; and 

(B) The application of the institution’s 

policies and procedures to its programs 

and coursework; and 

(ii) Makes a reasonable determination 

of whether the institution’s assignment 

of credit hours conforms to commonly 

accepted practice in higher education. 

(2) In reviewing and evaluating an 

institution’s policies and procedures for 

determining credit hour assignments, a 

State agency may use sampling or other 

methods in the evaluation, sufficient to 

comply with paragraph (c)(1)(i)(B) of 

this section. 

(3) The State agency must take such 

actions that it deems appropriate to 

address any deficiencies that it 

identifies at an institution as part of its 

reviews and evaluations under 

paragraph (c)(1)(i) and (ii) of this 

section, as it does in relation to other 

deficiencies it may identify, subject to 

the requirements of this part. 

(4) If, following the institutional 

review process under this paragraph (c), 

the agency finds systemic 

noncompliance with the agency’s 

policies or significant noncompliance 

regarding one or more programs at the 

institution, the agency must promptly 

notify the Secretary. 

* * * * * 

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(Authority: 20 U.S.C. 1094(c)(4)) 

PART 668—STUDENT ASSISTANCE 

GENERAL PROVISIONS 

■ 11. The authority citation for part 668 

continues to read as follows: 

Authority: 20 U.S.C. 1001, 1002, 1003, 

1070g, 1085, 1088, 1091, 1092, 1094, 1099c, 

and 1099c–1, unless otherwise noted. 

■ 12. Section 668.2 is amended by: 

■ A. In paragraph (a), adding, in 

alphabetical order, the term ‘‘Credit 

hour’’. 

■ B. In paragraph (b), in the definition 

of Full-time student, adding the words, 

‘‘including for a term-based program, 

repeating any coursework previously 

taken in the program but not including 

either more than one repetition of a 

previously passed course, or any 

repetition of a previously passed course 

due to the student failing other 

coursework’’ immediately before the 

period in the second sentence. 

■ C. In paragraph (b), adding, in 

alphabetical order, definitions of ‘‘Free 

application for Federal student aid 

(FAFSA)’’, ‘‘Institutional student 

information record (ISIR)’’, and ‘‘Student 

aid report (SAR)’’. 

■ D. In paragraph (b), revising the 

definitions for ‘‘Valid Institutional 

Student Information Record (valid 

ISIR)’’ and ‘‘Valid Student Aid Report 

(valid SAR)’’. 

The additions and revisions read as 

follows: 

§ 668.2 General definitions. 

* * * * * 

(b) * * * 

Free application for Federal student 

aid (FAFSA): The student aid 

application provided for under section 

483 of the HEA, which is used to 

determine an applicant’s eligibility for 

the title IV, HEA programs. 

* * * * * 

Institutional student information 

record (ISIR): An electronic record that 

the Secretary transmits to an institution 

that includes an applicant’s— 

(1) FAFSA information; and 

(2) EFC. 

* * * * * 

Student aid report (SAR): A report 

provided to an applicant by the 

Secretary showing his or her FAFSA 

information and the amount of his or 

her EFC. 

* * * * * 

Valid institutional student 

information record (valid ISIR): An ISIR 

on which all the information reported 

on a student’s FAFSA is accurate and 

complete as of the date the application 

is signed. 

Valid student aid report (valid SAR): 

A student aid report on which all of the 

information reported on a student’s 

FAFSA is accurate and complete as of 

the date the application is signed. 

* * * * * 

■ 13. Section 668.5 is amended by: 

■ A. Revising paragraph (a). 

■ B. Revising paragraph (c)(1). 

■ C. In paragraph (c)(2), adding the 

words ‘‘offered by the institution that 

grants the degree or certificate’’ after the 

word ‘‘program’’. 

■ D. In paragraph (c)(3)(i), removing the 

words ‘‘not more than’’ and adding the 

words ‘‘or less’’ after the word ‘‘percent’’. 

■ E. In paragraph (c)(3)(ii)(A), removing 

the words ‘‘not more’’ and adding, in 

their place, the word ‘‘less’’. 

■ F. Adding new paragraph (e). 

The addition and revisions read as 

follows: 

§ 668.5 Written arrangements to provide 

educational programs. 

(a) Written arrangements between 

eligible institutions. (1) Except as 

provided in paragraph (a)(2) of this 

section, if an eligible institution enters 

into a written arrangement with another 

eligible institution, or with a consortium 

of eligible institutions, under which the 

other eligible institution or consortium 

provides part of the educational 

program to students enrolled in the first 

institution, the Secretary considers that 

educational program to be an eligible 

program if the educational program 

offered by the institution that grants the 

degree or certificate otherwise satisfies 

the requirements of § 668.8. 

(2) If the written arrangement is 

between two or more eligible 

institutions that are owned or controlled 

by the same individual, partnership, or 

corporation, the Secretary considers the 

educational program to be an eligible 

program if— 

(i) The educational program offered 

by the institution that grants the degree 

or certificate otherwise satisfies the 

requirements of § 668.8; and 

(ii) The institution that grants the 

degree or certificate provides more than 

50 percent of the educational program. 

* * * * * 

(c) * * * 

(1) The ineligible institution or 

organization has not— 

(i) Had its eligibility to participate in 

the title IV, HEA programs terminated 

by the Secretary; 

(ii) Voluntarily withdrawn from 

participation in the title IV, HEA 

programs under a termination, showcause, suspension, or similar type 

proceeding initiated by the institution’s 

State licensing agency, accrediting 

agency, guarantor, or by the Secretary; 

(iii) Had its certification to participate 

in the title IV, HEA programs revoked 

by the Secretary; 

(iv) Had its application for recertification to participate in the title IV, 

HEA programs denied by the Secretary; 

or 

(v) Had its application for certification 

to participate in the title IV, HEA 

programs denied by the Secretary; 

* * * * * 

(e) Information made available to 

students. If an institution enters into a 

written arrangement described in 

paragraph (a), (b), or (c) of this section, 

the institution must provide the 

information described in § 668.43(a)(12) 

to enrolled and prospective students. 

* * * * * 

■ 14. Section 668.6 is added to subpart 

A to read as follows: 

§ 668.6 Reporting and disclosure 

requirements for programs that prepare 

students for gainful employment in a 

recognized occupation. 

(a) Reporting requirements. (1) In 

accordance with procedures established 

by the Secretary an institution must 

report information that includes— 

(i) For each student who enrolled in 

a program under § 668.8(c)(3) or (d) 

during an award year— 

(A) Information needed to identify the 

student and the institution the student 

attended; 

(B) If the student began attending a 

program during the award year, the 

name and the Classification of 

Instructional Program (CIP) code of that 

program; and 

(C) If the student completed a 

program during the award year— 

(1) The name and CIP code of that 

program, and the date the student 

completed the program; 

(2) The amounts the student received 

from private education loans and the 

amount from institutional financing 

plans that the student owes the 

institution upon completing the 

program; and 

(3) Whether the student matriculated 

to a higher credentialed program at the 

institution or if available, evidence that 

the student transferred to a higher 

credentialed program at another 

institution; and 

(ii) For each program, by name and 

CIP code, offered by the institution 

under § 668.8(c)(3) or (d), the total 

number of students that are enrolled in 

the program at the end of each award 

year and identifying information for 

those students. 

(2)(i) An institution must report the 

information required under paragraph 

(a)(1) of this section— 

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(A) No later than October 1, 2011 for 

information from the 2006–07 award 

year to the extent that the information 

is available; 

(B) No later than October 1, 2011 for 

information from the 2007–08 through 

2009–10 award years; and 

(C) No earlier than September 30, but 

no later than the date established by the 

Secretary through a notice published in 

the Federal Register, for information 

from the most recently completed award 

year. 

(ii) For any award year, if an 

institution is unable to provide all or 

some of the information required under 

paragraph (a)(1) of this section, the 

institution must provide an explanation 

of why the missing information is not 

available. 

(b) Disclosures. (1) For each program 

offered by an institution under this 

section, the institution must provide 

prospective students with— 

(i) The occupations (by names and 

SOC codes) that the program prepares 

students to enter, along with links to 

occupational profiles on O*NET or its 

successor site. If the number of 

occupations related to the program, as 

identified by entering the program’s full 

six digit CIP code on the O*NET 

crosswalk at http:// 

online.onetcenter.org/crosswalk/ is 

more than ten, the institution may 

provide Web links to a representative 

sample of the identified occupations (by 

name and SOC code) for which its 

graduates typically find employment 

within a few years after completing the 

program; 

(ii) The on-time graduation rate for 

students completing the program, as 

provided under paragraph (c) of this 

section; 

(iii) The tuition and fees it charges a 

student for completing the program 

within normal time as defined in 

§ 668.41(a), the typical costs for books 

and supplies (unless those costs are 

included as part of tuition and fees), and 

the cost of room and board, if 

applicable. The institution may include 

information on other costs, such as 

transportation and living expenses, but 

it must provide a Web link, or access, 

to the program cost information the 

institutions makes available under 

§ 668.43(a); 

(iv) The placement rate for students 

completing the program, as determined 

under a methodology developed by the 

National Center for Education Statistics 

(NCES) when that rate is available. In 

the meantime, beginning on July 1, 

2011, if the institution is required by its 

accrediting agency or State to calculate 

a placement rate on a program basis, it 

must disclose the rate under this section 

and identify the accrediting agency or 

State agency under whose requirements 

the rate was calculated. If the 

accrediting agency or State requires an 

institution to calculate a placement rate 

at the institutional level or other than a 

program basis, the institution must use 

the accrediting agency or State 

methodology to calculate a placement 

rate for the program and disclose that 

rate; and 

(v) The median loan debt incurred by 

students who completed the program as 

provided by the Secretary, as well as 

any other information the Secretary 

provided to the institution about that 

program. The institution must identify 

separately the median loan debt from 

title IV, HEA program loans, and the 

median loan debt from private 

educational loans and institutional 

financing plans. 

(2) For each program, the institution 

must— 

(i) Include the information required 

under paragraph (b)(1) of this section in 

promotional materials it makes available 

to prospective students and post this 

information on its Web site; 

(ii) Prominently provide the 

information required under paragraph 

(b)(1) of this section in a simple and 

meaningful manner on the home page of 

its program Web site, and provide a 

prominent and direct link on any other 

Web page containing general, academic, 

or admissions information about the 

program, to the single Web page that 

contains all the required information; 

(iii) Display the information required 

under paragraph (b)(1) of this section on 

the institution’s Web site in an open 

format that can be retrieved, 

downloaded, indexed, and searched by 

commonly used Web search 

applications. An open format is one that 

is platform-independent, is machinereadable, and is made available to the 

public without restrictions that would 

impede the reuse of that information; 

and 

(iv) Use the disclosure form issued by 

the Secretary to provide the information 

in paragraph (b)(1), and other 

information, when that form is 

available. 

(c) On-time completion rate. An 

institution calculates an on-time 

completion rate for each program 

subject to this section by— 

(1) Determining the number of 

students who completed the program 

during the most recently completed 

award year; 

(2) Determining the number of 

students in paragraph (c)(1) of this 

section who completed the program 

within normal time, as defined under 

§ 668.41(a), regardless of whether the 

students transferred into the program or 

changed programs at the institution. For 

example, the normal time to complete 

an associate degree is two years and this 

timeframe applies to all students in the 

program. If a student transfers into the 

program, regardless of the number of 

credits the institution accepts from the 

student’s attendance at the prior 

institution, those transfer credits have 

no bearing on the two-year timeframe. 

The student would still have two years 

to complete from the date he or she 

began attending the two-year program. 

To be counted as completing on time, a 

student who changes programs at the 

institution and begins attending the 

two-year program must complete within 

the two-year timeframe beginning from 

the date the student began attending the 

prior program; and 

(3) Dividing the number of students 

who completed the program within 

normal time, as determined under 

paragraph (c)(2) of this section, by the 

total number of students who completed 

the program, as determined under 

paragraph (c)(1) of this section, and 

multiplying the result by 100. 

(Approved by the Office of Management and 

Budget under control number 1845–NEW1) 

(Authority: 20 U.S.C 1001(b), 1002(b) and (c)) 

■ 15. Section 668.8 is amended by: 

■ A. Revising paragraph (c)(3). 

■ B. In paragraph (d)(2)(iii), adding the 

words, ‘‘as provided under § 668.6’’ 

immediately after the word 

‘‘occupation.’’ 

■ C. In paragraph (d)(3)(iii), adding the 

words, ‘‘as provided under § 668.6’’ 

immediately after the word 

‘‘occupation.’’ 

■ D. Revising paragraphs (k) and (l). 

The revisions read as follows: 

§ 668.8 Eligible program. 

* * * * * 

(c) * * * 

(3) Be at least a one-academic-year 

training program that leads to a 

certificate, or other nondegree 

recognized credential, and prepares 

students for gainful employment in a 

recognized occupation. 

* * * * * 

(k) Undergraduate educational 

program in credit hours. (1) Except as 

provided in paragraph (k)(2) of this 

section, if an institution offers an 

undergraduate educational program in 

credit hours, the institution must use 

the formula contained in paragraph (l) 

of this section to determine whether that 

program satisfies the requirements 

contained in paragraph (c)(3) or (d) of 

this section, and the number of credit 

hours in that educational program for 

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purposes of the title IV, HEA programs, 

unless— 

(i) The program is at least two 

academic years in length and provides 

an associate degree, a bachelor’s degree, 

a professional degree, or an equivalent 

degree as determined by the Secretary; 

or 

(ii) Each course within the program is 

acceptable for full credit toward that 

institution’s associate degree, bachelor’s 

degree, professional degree, or 

equivalent degree as determined by the 

Secretary provided that— 

(A) The institution’s degree requires 

at least two academic years of study; 

and 

(B) The institution demonstrates that 

students enroll in, and graduate from, 

the degree program. 

(2) A program is considered to be a 

clock-hour program for purposes of the 

title IV, HEA programs if— 

(i) Except as provided in paragraph 

(k)(3) of this section, a program is 

required to measure student progress in 

clock hours when— 

(A) Receiving Federal or State 

approval or licensure to offer the 

program; or 

(B) Completing clock hours is a 

requirement for graduates to apply for 

licensure or the authorization to 

practice the occupation that the student 

is intending to pursue; 

(ii) The credit hours awarded for the 

program are not in compliance with the 

definition of a credit hour in 34 CFR 

600.2; or 

(iii) The institution does not provide 

the clock hours that are the basis for the 

credit hours awarded for the program or 

each course in the program and, except 

as provided in § 668.4(e), requires 

attendance in the clock hours that are 

the basis for the credit hours awarded. 

(3) The requirements of paragraph 

(k)(2)(i) of this section do not apply to 

a program if there is a State or Federal 

approval or licensure requirement that a 

limited component of the program must 

include a practicum, internship, or 

clinical experience component of the 

program that must include a minimum 

number of clock hours. 

(l) Formula. (1) Except as provided in 

paragraph (l)(2) of this section, for 

purposes of determining whether a 

program described in paragraph (k) of 

this section satisfies the requirements 

contained in paragraph (c)(3) or (d) of 

this section, and of determining the 

number of credit hours in that 

educational program with regard to the 

title IV, HEA programs— 

(i) A semester hour must include at 

least 37.5 clock hours of instruction; 

(ii) A trimester hour must include at 

least 37.5 clock hours of instruction; 

and 

(iii) A quarter hour must include at 

least 25 clock hours of instruction. 

(2) The institution’s conversions to 

establish a minimum number of clock 

hours of instruction per credit may be 

less than those specified in paragraph 

(l)(1) of this section, if the institution’s 

designated accrediting agency, or 

recognized State agency for the approval 

of public postsecondary vocational 

institutions, for participation in the title 

IV, HEA programs has identified any 

deficiencies with the institution’s 

policies and procedures, or their 

implementation, for determining the 

credit hours, as defined in 34 CFR 

600.2, that the institution awards for 

programs and courses, in accordance 

with 34 CFR 602.24(f), or, if applicable, 

34 CFR 603.24(c), so long as— 

(i) The institution’s student work 

outside of class combined with the 

clock-hours of instruction meet or 

exceed the numeric requirements in 

paragraph (l)(1) of this section; and 

(ii)(A) A semester hour must include 

at least 30 clock hours of instruction; 

(B) A trimester hour must include at 

least 30 clock hours of instruction; and 

(C) A quarter hour must include at 

least 20 hours of instruction. 

* * * * * 

■ 16. Section 668.14 is amended by 

revising paragraph (b)(22) to read as 

follows: 

§ 668.14 Program participation agreement. 

* * * * * 

(b) * * * 

(22)(i) It will not provide any 

commission, bonus, or other incentive 

payment based in any part, directly or 

indirectly, upon success in securing 

enrollments or the award of financial 

aid, to any person or entity who is 

engaged in any student recruitment or 

admission activity, or in making 

decisions regarding the award of title IV, 

HEA program funds. 

(A) The restrictions in paragraph 

(b)(22) of this section do not apply to 

the recruitment of foreign students 

residing in foreign countries who are 

not eligible to receive Federal student 

assistance. 

(B) For the purpose of paragraph 

(b)(22) of this section, an employee who 

receives multiple adjustments to 

compensation in a calendar year and is 

engaged in any student enrollment or 

admission activity or in making 

decisions regarding the award of title IV, 

HEA program funds is considered to 

have received such adjustments based 

upon success in securing enrollments or 

the award of financial aid if those 

adjustments create compensation that is 

based in any part, directly or indirectly, 

upon success in securing enrollments or 

the award of financial aid. 

(ii) Notwithstanding paragraph 

(b)(22)(i) of this section, eligible 

institutions, organizations that are 

contractors to eligible institutions, and 

other entities may make— 

(A) Merit-based adjustments to 

employee compensation provided that 

such adjustments are not based in any 

part, directly or indirectly, upon success 

in securing enrollments or the award of 

financial aid; and 

(B) Profit-sharing payments so long as 

such payments are not provided to any 

person who is engaged in student 

recruitment or admission activity or in 

making decisions regarding the award of 

title IV, HEA program funds. 

(iii) As used in paragraph (b)(22) of 

this section, 

(A) Commission, bonus, or other 

incentive payment means a sum of 

money or something of value, other than 

a fixed salary or wages, paid to or given 

to a person or an entity for services 

rendered. 

(B) Securing enrollments or the award 

of financial aid means activities that a 

person or entity engages in at any point 

in time through completion of an 

educational program for the purpose of 

the admission or matriculation of 

students for any period of time or the 

award of financial aid to students. 

(1) These activities include contact in 

any form with a prospective student, 

such as, but not limited to—contact 

through preadmission or advising 

activities, scheduling an appointment to 

visit the enrollment office or any other 

office of the institution, attendance at 

such an appointment, or involvement in 

a prospective student’s signing of an 

enrollment agreement or financial aid 

application. 

(2) These activities do not include 

making a payment to a third party for 

the provision of student contact 

information for prospective students 

provided that such payment is not based 

on— 

(i) Any additional conduct or action 

by the third party or the prospective 

students, such as participation in 

preadmission or advising activities, 

scheduling an appointment to visit the 

enrollment office or any other office of 

the institution or attendance at such an 

appointment, or the signing, or being 

involved in the signing, of a prospective 

student’s enrollment agreement or 

financial aid application; or 

(ii) The number of students 

(calculated at any point in time of an 

educational program) who apply for 

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enrollment, are awarded financial aid, 

or are enrolled for any period of time, 

including through completion of an 

educational program. 

(C) Entity or person engaged in any 

student recruitment or admission 

activity or in making decisions about 

the award of financial aid means— 

(1) With respect to an entity engaged 

in any student recruitment or admission 

activity or in making decisions about 

the award of financial aid, any 

institution or organization that 

undertakes the recruiting or the 

admitting of students or that makes 

decisions about and awards title IV, 

HEA program funds; and 

(2) With respect to a person engaged 

in any student recruitment or admission 

activity or in making decisions about 

the award of financial aid, any 

employee who undertakes recruiting or 

admitting of students or who makes 

decisions about and awards title IV, 

HEA program funds, and any higher 

level employee with responsibility for 

recruitment or admission of students, or 

making decisions about awarding title 

IV, HEA program funds. 

(D) Enrollment means the admission 

or matriculation of a student into an 

eligible institution. 

* * * * * 

■ 17. Section 668.16 is amended by: 

■ A. Revising paragraph (e). 

■ B. In paragraph (n) introductory text, 

removing the word ‘‘and’’ that appears 

after the punctuation‘‘;’’. 

■ C. In paragraph (o)(2), removing the 

punctuation ‘‘.’’ and adding, in its place, 

the punctuation and word ‘‘; and’’. 

■ D. Adding paragraph (p). 

■ E. Revising the OMB control number 

at the end of the section. 

The revisions and addition read as 

follows: 

§ 668.16 Standards of administrative 

capability. 

* * * * * 

(e) For purposes of determining 

student eligibility for assistance under a 

title IV, HEA program, establishes, 

publishes, and applies reasonable 

standards for measuring whether an 

otherwise eligible student is 

maintaining satisfactory academic 

progress in his or her educational 

program. The Secretary considers an 

institution’s standards to be reasonable 

if the standards are in accordance with 

the provisions specified in § 668.34. 

* * * * * 

(p) Develops and follows procedures 

to evaluate the validity of a student’s 

high school completion if the institution 

or the Secretary has reason to believe 

that the high school diploma is not valid 

or was not obtained from an entity that 

provides secondary school education. 

(Approved by the Office of Management 

and Budget under control number 1845– 

0022) 

* * * * * 

■ 18. Section 668.22 is amended by: 

■ A. Redesignating paragraphs (a)(2) 

through (a)(5) as paragraphs (a)(3) 

through (a)(6), respectively. 

■ B. Adding new paragraph (a)(2). 

■ C. In newly redesignated paragraph 

(a)(5), removing the citation ‘‘(a)(5)’’ and 

adding, in its place, the citation ‘‘(a)(6)’’. 

■ D. In newly redesignated paragraph 

(a)(6)(ii)(A)(2), removing the citation 

‘‘(a)(5)(iii)’’ and adding, in its place, the 

citation ‘‘(a)(6)(iii)’’. 

■ E. In newly redesignated paragraph 

(a)(6)(ii)(B)(2), removing the citation 

‘‘(a)(5)(iii)’’ and adding, in its place, the 

citation ‘‘(a)(6)(iii)’’. 

■ F. In newly redesignated paragraph 

(a)(6)(ii)(B)(3), removing the citation 

‘‘(a)(5)(iii)’’ and adding, in its place, the 

citation ‘‘(a)(6)(iii)’’. 

■ G. In newly redesignated paragraph 

(a)(6)(iii)(A)(1), removing the citation 

‘‘(a)(5)(ii)(A)(2)’’ and adding, in its place, 

the citation ‘‘(a)(6)(ii)(A)(2)’’. 

■ H. In newly redesignated paragraph 

(a)(6)(iii)(A)(5), removing the citation 

‘‘(a)(5)(iii)(C)’’ and adding, in its place, 

the citation ‘‘(a)(6)(iii)(C)’’. 

■ I. In newly redesignated paragraph 

(a)(6)(iii)(B), removing the citation 

‘‘(a)(5)(iii)(A)’’ and adding, in its place, 

the citation ‘‘(a)(6)(iii)(A)’’. 

■ J. In newly redesignated paragraph 

(a)(6)(iv), removing the citation 

‘‘(a)(5)(iii)’’ and adding, in its place, the 

citation ‘‘(a)(6)(iii)’’. 

■ K. Revising paragraph (b)(3). 

■ L. Removing paragraph (c)(3)(ii) and 

redesignating paragraph (c)(3)(i) as 

paragraph (c)(3). 

■ M. Revising paragraph (f)(2). 

■ N. In the introductory text of 

paragraph (j)(2), removing the first word 

‘‘An’’ and adding, in its place, the words 

‘‘For an institution that is not required 

to take attendance, an’’. 

■ O. In paragraph (l)(3), adding the 

words ‘‘for an institution that is not 

required to take attendance’’ after the 

words ‘‘date of the institution’s 

determination that the student 

withdrew’’. 

■ P. Adding paragraphs (l)(6), (l)(7), and 

(l)(8). 

The additions and revisions read as 

follows: 

§ 668.22 Treatment of title IV funds when 

a student withdraws. 

* * * * * 

(a) * * * 

(2)(i) Except as provided in 

paragraphs (a)(2)(ii) and (a)(2)(iii) of this 

section, a student is considered to have 

withdrawn from a payment period or 

period of enrollment if— 

(A) In the case of a program that is 

measured in credit hours, the student 

does not complete all the days in the 

payment period or period of enrollment 

that the student was scheduled to 

complete; 

(B) In the case of a program that is 

measured in clock hours, the student 

does not complete all of the clock hours 

and weeks of instructional time in the 

payment period or period of enrollment 

that the student was scheduled to 

complete; or 

(C) For a student in a nonterm or 

nonstandard-term program, the student 

is not scheduled to begin another course 

within a payment period or period of 

enrollment for more than 45 calendar 

days after the end of the module the 

student ceased attending, unless the 

student is on an approved leave of 

absence, as defined in paragraph (d) of 

this section. 

(ii)(A) Notwithstanding paragraph 

(a)(2)(i)(A) and (a)(2)(i)(B) of this 

section, for a payment period or period 

of enrollment in which courses in the 

program are offered in modules— 

(1) A student is not considered to 

have withdrawn if the institution 

obtains written confirmation from the 

student at the time that would have 

been a withdrawal of the date that he or 

she will attend a module that begins 

later in the same payment period or 

period of enrollment; and 

(2) For nonterm and nonstandardterm programs, that module begins no 

later than 45 calendar days after the end 

of the module the student ceased 

attending. 

(B) If an institution has obtained the 

written confirmation of future 

attendance in accordance with 

paragraph (a)(2)(ii)(A) of this section— 

(1) A student may change the date of 

return to a module that begins later in 

the same payment period or period of 

enrollment, provided that the student 

does so in writing prior to the return 

date that he or she had previously 

confirmed; and 

(2) For nonterm and nonstandardterm programs, the later module that he 

or she will attend begins no later than 

45 calendar days after the end of 

module the student ceased attending. 

(C) If an institution obtains written 

confirmation of future attendance in 

accordance with paragraph (a)(2)(ii)(A) 

and, if applicable, (a)(2)(ii)(B) of this 

section, but the student does not return 

as scheduled— 

(1) The student is considered to have 

withdrawn from the payment period or 

period of enrollment; and 

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(2) The student’s withdrawal date and 

the total number of calendar days in the 

payment period or period of enrollment 

would be the withdrawal date and total 

number of calendar days that would 

have applied if the student had not 

provided written confirmation of a 

future date of attendance in accordance 

with paragraph (a)(2)(ii)(A) of this 

section. 

(iii)(A) If a student withdraws from a 

term-based credit-hour program offered 

in modules during a payment period or 

period of enrollment and reenters the 

same program prior to the end of the 

period, subject to conditions established 

by the Secretary, the student is eligible 

to receive any title IV, HEA program 

funds for which he or she was eligible 

prior to withdrawal, including funds 

that were returned by the institution or 

student under the provisions of this 

section, provided the student’s 

enrollment status continues to support 

the full amount of those funds. 

(B) In accordance with § 668.4(f), if a 

student withdraws from a clock-hour or 

nonterm credit hour program during a 

payment period or period of enrollment 

and then reenters the same program 

within 180 calendar days, the student 

remains in that same period when he or 

she returns and, subject to conditions 

established by the Secretary, is eligible 

to receive any title IV, HEA program 

funds for which he or she was eligible 

prior to withdrawal, including funds 

that were returned by the institution or 

student under the provisions of this 

section. 

* * * * * 

(b) * * * 

(3)(i) An institution is required to take 

attendance if— 

(A) An outside entity (such as the 

institution’s accrediting agency or a 

State agency) has a requirement that the 

institution take attendance; 

(B) The institution itself has a 

requirement that its instructors take 

attendance; or 

(C) The institution or an outside 

entity has a requirement that can only 

be met by taking attendance or a 

comparable process, including, but not 

limited to, requiring that students in a 

program demonstrate attendance in the 

classes of that program, or a portion of 

that program. 

(ii) If, in accordance with paragraph 

(b)(3)(i) of this section, an institution is 

required to take attendance or requires 

that attendance be taken for only some 

students, the institution must use its 

attendance records to determine a 

withdrawal date in accordance with 

paragraph (b)(1) of this section for those 

students. 

(iii)(A) If, in accordance with 

paragraph (b)(3)(i) of this section, an 

institution is required to take 

attendance, or requires that attendance 

be taken, for a limited period, the 

institution must use its attendance 

records to determine a withdrawal date 

in accordance with paragraph (b)(3)(i) of 

this section for that limited period. 

(B) A student in attendance the last 

time attendance is required to be taken 

during the limited period identified in 

paragraph (b)(3)(iii)(A) of this section 

who subsequently stops attending 

during the payment period will be 

treated as a student for whom the 

institution was not required to take 

attendance. 

(iv) If an institution is required to take 

attendance or requires that attendance 

be taken, on only one specified day to 

meet a census reporting requirement, 

the institution is not considered to take 

attendance. 

* * * * * 

(f) * * * 

(2)(i) The total number of calendar 

days in a payment period or period of 

enrollment includes all days within the 

period that the student was scheduled 

to complete, except that scheduled 

breaks of at least five consecutive days 

are excluded from the total number of 

calendar days in a payment period or 

period of enrollment and the number of 

calendar days completed in that period. 

(ii) The total number of calendar days 

in a payment period or period of 

enrollment does not include— 

(A) Days in which the student was on 

an approved leave of absence; or 

(B) For a payment period or period of 

enrollment in which any courses in the 

program are offered in modules, any 

scheduled breaks of at least five 

consecutive days when the student is 

not scheduled to attend a module or 

other course offered during that period 

of time. 

* * * * * 

(l) * * * 

(6) A program is ‘‘offered in modules’’ 

if a course or courses in the program do 

not span the entire length of the 

payment period or period of enrollment. 

(7)(i) ‘‘Academic attendance’’ and 

‘‘attendance at an academically-related 

activity’’— 

(A) Include, but are not limited to— 

(1) Physically attending a class where 

there is an opportunity for direct 

interaction between the instructor and 

students; 

(2) Submitting an academic 

assignment; 

(3) Taking an exam, an interactive 

tutorial, or computer-assisted 

instruction; 

(4) Attending a study group that is 

assigned by the institution; 

(5) Participating in an online 

discussion about academic matters; and 

(6) Initiating contact with a faculty 

member to ask a question about the 

academic subject studied in the course; 

and 

(B) Do not include activities where a 

student may be present, but not 

academically engaged, such as— 

(1) Living in institutional housing; 

(2) Participating in the institution’s 

meal plan; 

(3) Logging into an online class 

without active participation; or 

(4) Participating in academic 

counseling or advisement. 

(ii) A determination of ‘‘academic 

attendance’’ or ‘‘attendance at an 

academically-related activity’’ must be 

made by the institution; a student’s 

certification of attendance that is not 

supported by institutional 

documentation is not acceptable. 

(8) A program is a nonstandard-term 

program if the program is a term-based 

program that does not qualify under 34 

CFR 690.63(a)(1) or (a)(2) to calculate 

Federal Pell Grant payments under 34 

CFR 690.63(b) or (c). 

* * * * * 

■ 19. Section 668.25 is amended by: 

■ A. In paragraph (c)(2)(v), removing the 

word ‘‘and’’. 

■ B. In paragraph (c)(2)(vi), adding the 

word ‘‘and’’ after the punctuation ‘‘;’’. 

■ C. Adding paragraph (c)(2)(vii). 

The addition reads as follows: 

§ 668.25 Contracts between an institution 

and a third party servicer. 

* * * * * 

(c) * * * 

(2) * * * 

(vii) Payment of any commission, 

bonus, or other incentive payment based 

in any part, directly or indirectly, upon 

success in securing enrollments or the 

award of financial aid to any person or 

entity engaged in any student 

recruitment or admission activity or in 

making decisions regarding the award of 

title IV, HEA program funds. 

* * * * * 

■ 20. Section 668.32 is amended by: 

■ A. In paragraph (e)(3), removing the 

word ‘‘or’’ that appears after the 

punctuation ‘‘;’’. 

■ B. In paragraph (e)(4)(ii), removing the 

punctuation ‘‘.’’ and adding, in its place, 

the punctuation and word ‘‘; or’’. 

■ C. Adding new paragraph (e)(5). 

■ D. Revising paragraph (f). 

The addition and revision read as 

follows: 

§ 668.32 Student eligibility—general. 

* * * * * 

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(e) * * * 

(5) Has been determined by the 

institution to have the ability to benefit 

from the education or training offered 

by the institution based on the 

satisfactory completion of 6 semester 

hours, 6 trimester hours, 6 quarter 

hours, or 225 clock hours that are 

applicable toward a degree or certificate 

offered by the institution. 

(f) Maintains satisfactory academic 

progress in his or her course of study 

according to the institution’s published 

standards of satisfactory academic 

progress that meet the requirements of 

§ 668.34. 

* * * * * 

■ 21. Section 668.34 is revised to read 

as follows: 

§ 668.34 Satisfactory academic progress. 

(a) Satisfactory academic progress 

policy. An institution must establish a 

reasonable satisfactory academic 

progress policy for determining whether 

an otherwise eligible student is making 

satisfactory academic progress in his or 

her educational program and may 

receive assistance under the title IV, 

HEA programs. The Secretary considers 

the institution’s policy to be reasonable 

if— 

(1) The policy is at least as strict as 

the policy the institution applies to a 

student who is not receiving assistance 

under the title IV, HEA programs; 

(2) The policy provides for consistent 

application of standards to all students 

within categories of students, e.g., fulltime, part-time, undergraduate, and 

graduate students, and educational 

programs established by the institution; 

(3) The policy provides that a 

student’s academic progress is 

evaluated— 

(i) At the end of each payment period 

if the educational program is either one 

academic year in length or shorter than 

an academic year; or 

(ii) For all other educational 

programs, at the end of each payment 

period or at least annually to correspond 

with the end of a payment period; 

(4)(i) The policy specifies the grade 

point average (GPA) that a student must 

achieve at each evaluation, or if a GPA 

is not an appropriate qualitative 

measure, a comparable assessment 

measured against a norm; and 

(ii) If a student is enrolled in an 

educational program of more than two 

academic years, the policy specifies that 

at the end of the second academic year, 

the student must have a GPA of at least 

a ‘‘C’’ or its equivalent, or have academic 

standing consistent with the 

institution’s requirements for 

graduation; 

(5)(i) The policy specifies the pace at 

which a student must progress through 

his or her educational program to ensure 

that the student will complete the 

program within the maximum 

timeframe, as defined in paragraph (b) 

of this section, and provides for 

measurement of the student’s progress 

at each evaluation; and 

(ii) An institution calculates the pace 

at which the student is progressing by 

dividing the cumulative number of 

hours the student has successfully 

completed by the cumulative number of 

hours the student has attempted. In 

making this calculation, the institution 

is not required to include remedial 

courses; 

(6) The policy describes how a 

student’s GPA and pace of completion 

are affected by course incompletes, 

withdrawals, or repetitions, or transfers 

of credit from other institutions. Credit 

hours from another institution that are 

accepted toward the student’s 

educational program must count as both 

attempted and completed hours; 

(7) Except as provided in paragraphs 

(c) and (d) of this section, the policy 

provides that, at the time of each 

evaluation, a student who has not 

achieved the required GPA, or who is 

not successfully completing his or her 

educational program at the required 

pace, is no longer eligible to receive 

assistance under the title IV, HEA 

programs; 

(8) If the institution places students 

on financial aid warning, or on financial 

aid probation, as defined in paragraph 

(b) of this section, the policy describes 

these statuses and that— 

(i) A student on financial aid warning 

may continue to receive assistance 

under the title IV, HEA programs for one 

payment period despite a determination 

that the student is not making 

satisfactory academic progress. 

Financial aid warning status may be 

assigned without an appeal or other 

action by the student; and 

(ii) A student on financial aid 

probation may receive title IV, HEA 

program funds for one payment period. 

While a student is on financial aid 

probation, the institution may require 

the student to fulfill specific terms and 

conditions such as taking a reduced 

course load or enrolling in specific 

courses. At the end of one payment 

period on financial aid probation, the 

student must meet the institution’s 

satisfactory academic progress standards 

or meet the requirements of the 

academic plan developed by the 

institution and the student to qualify for 

further title IV, HEA program funds; 

(9) If the institution permits a student 

to appeal a determination by the 

institution that he or she is not making 

satisfactory academic progress, the 

policy describes— 

(i) How the student may reestablish 

his or her eligibility to receive 

assistance under the title IV, HEA 

programs; 

(ii) The basis on which a student may 

file an appeal: The death of a relative, 

an injury or illness of the student, or 

other special circumstances; and 

(iii) Information the student must 

submit regarding why the student failed 

to make satisfactory academic progress, 

and what has changed in the student’s 

situation that will allow the student to 

demonstrate satisfactory academic 

progress at the next evaluation; 

(10) If the institution does not permit 

a student to appeal a determination by 

the institution that he or she is not 

making satisfactory academic progress, 

the policy must describe how the 

student may reestablish his or her 

eligibility to receive assistance under 

the title IV, HEA programs; and 

(11) The policy provides for 

notification to students of the results of 

an evaluation that impacts the student’s 

eligibility for title IV, HEA program 

funds. 

(b) Definitions. The following 

definitions apply to the terms used in 

this section: 

Appeal. Appeal means a process by 

which a student who is not meeting the 

institution’s satisfactory academic 

progress standards petitions the 

institution for reconsideration of the 

student’s eligibility for title IV, HEA 

program assistance. 

Financial aid probation. Financial aid 

probation means a status assigned by an 

institution to a student who fails to 

make satisfactory academic progress and 

who has appealed and has had 

eligibility for aid reinstated. 

Financial aid warning. Financial aid 

warning means a status assigned to a 

student who fails to make satisfactory 

academic progress at an institution that 

evaluates academic progress at the end 

of each payment period. 

Maximum timeframe. Maximum 

timeframe means— 

(1) For an undergraduate program 

measured in credit hours, a period that 

is no longer than 150 percent of the 

published length of the educational 

program, as measured in credit hours; 

(2) For an undergraduate program 

measured in clock hours, a period that 

is no longer than 150 percent of the 

published length of the educational 

program, as measured by the cumulative 

number of clock hours the student is 

required to complete and expressed in 

calendar time; and 

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(3) For a graduate program, a period 

defined by the institution that is based 

on the length of the educational 

program. 

(c) Institutions that evaluate 

satisfactory academic progress at the 

end of each payment period. (1) An 

institution that evaluates satisfactory 

academic progress at the end of each 

payment period and determines that a 

student is not making progress under its 

policy may nevertheless disburse title 

IV, HEA program funds to the student 

under the provisions of paragraph (c)(2), 

(c)(3), or (c)(4) of this section. 

(2) For the payment period following 

the payment period in which the 

student did not make satisfactory 

academic progress, the institution 

may— 

(i) Place the student on financial aid 

warning, and disburse title IV, HEA 

program funds to the student; or 

(ii) Place a student directly on 

financial aid probation, following the 

procedures outlined in paragraph (d)(2) 

of this section and disburse title IV, 

HEA program funds to the student. 

(3) For the payment period following 

a payment period during which a 

student was on financial aid warning, 

the institution may place the student on 

financial aid probation, and disburse 

title IV, HEA program funds to the 

student if— 

(i) The institution evaluates the 

student’s progress and determines that 

student did not make satisfactory 

academic progress during the payment 

period the student was on financial aid 

warning; 

(ii) The student appeals the 

determination; and 

(iii)(A) The institution determines 

that the student should be able to meet 

the institution’s satisfactory academic 

progress standards by the end of the 

subsequent payment period; or 

(B) The institution develops an 

academic plan for the student that, if 

followed, will ensure that the student is 

able to meet the institution’s satisfactory 

academic progress standards by a 

specific point in time. 

(4) A student on financial aid 

probation for a payment period may not 

receive title IV, HEA program funds for 

the subsequent payment period unless 

the student makes satisfactory academic 

progress or the institution determines 

that the student met the requirements 

specified by the institution in the 

academic plan for the student. 

(d) Institutions that evaluate 

satisfactory academic progress annually 

or less frequently than at the end of 

each payment period. (1) An institution 

that evaluates satisfactory academic 

progress annually or less frequently 

than at the end of each payment period 

and determines that a student is not 

making progress under its policy may 

nevertheless disburse title IV, HEA 

program funds to the student under the 

provisions of paragraph (d)(2) or (d)(3) 

of this section. 

(2) The institution may place the 

student on financial aid probation and 

may disburse title IV, HEA program 

funds to the student for the subsequent 

payment period if— 

(i) The institution evaluates the 

student and determines that the student 

is not making satisfactory academic 

progress; 

(ii) The student appeals the 

determination; and 

(iii)(A) The institution determines 

that the student should be able to be 

make satisfactory academic progress 

during the subsequent payment period 

and meet the institution’s satisfactory 

academic progress standards at the end 

of that payment period; or 

(B) The institution develops an 

academic plan for the student that, if 

followed, will ensure that the student is 

able to meet the institution’s satisfactory 

academic progress standards by a 

specific point in time. 

(3) A student on financial aid 

probation for a payment period may not 

receive title IV, HEA program funds for 

the subsequent payment period unless 

the student makes satisfactory academic 

progress or the institution determines 

that the student met the requirements 

specified by the institution in the 

academic plan for the student. 

(Authority: 20 U.S.C. 1091(d)) 

■ 22. Section 668.43 is amended by: 

■ A. In paragraph (a)(10)(ii), removing 

the word ‘‘and’’ that appears after the 

punctuation ‘‘;’’. 

■ B. In paragraph (a)(11)(ii), removing 

the punctuation ‘‘.’’ and adding, in its 

place, the punctuation and word ‘‘; and’’. 

■ C. Adding paragraph (a)(12). 

■ D. Revising paragraph (b). 

The addition and revision read as 

follows: 

§ 668.43 Institutional information. 

(a) * * * 

(12) A description of written 

arrangements the institution has entered 

into in accordance with § 668.5, 

including, but not limited to, 

information on— 

(i) The portion of the educational 

program that the institution that grants 

the degree or certificate is not providing; 

(ii) The name and location of the 

other institutions or organizations that 

are providing the portion of the 

educational program that the institution 

that grants the degree or certificate is 

not providing; 

(iii) The method of delivery of the 

portion of the educational program that 

the institution that grants the degree or 

certificate is not providing; and 

(iv) Estimated additional costs 

students may incur as the result of 

enrolling in an educational program that 

is provided, in part, under the written 

arrangement. 

(b) The institution must make 

available for review to any enrolled or 

prospective student upon request, a 

copy of the documents describing the 

institution’s accreditation and its State, 

Federal, or tribal approval or licensing. 

The institution must also provide its 

students or prospective students with 

contact information for filing 

complaints with its accreditor and with 

its State approval or licensing entity and 

any other relevant State official or 

agency that would appropriately handle 

a student’s complaint. 

* * * * * 

■ 23. Subpart E of part 668 is revised to 

read as follows: 

Subpart E—Verification and Updating of 

Student Aid Application Information 

Sec. 

668.51 General. 

668.52 Definitions. 

668.53 Policies and procedures. 

668.54 Selection of an applicant’s FAFSA 

information for verification. 

668.55 Updating information. 

668.56 Information to be verified. 

668.57 Acceptable documentation. 

668.58 Interim disbursements. 

668.59 Consequences of a change in an 

applicant’s FAFSA information. 

668.60 Deadlines for submitting 

documentation and the consequences of 

failing to provide documentation. 

668.61 Recovery of funds from interim 

disbursements. 

Subpart E—Verification and Updating 

of Student Aid Application Information 

§ 668.51 General. 

(a) Scope and purpose. The 

regulations in this subpart govern the 

verification by institutions of 

information submitted by applicants for 

student financial assistance under the 

subsidized student financial assistance 

programs. 

(b) Applicant responsibility. If the 

Secretary or the institution requests 

documents or information from an 

applicant under this subpart, the 

applicant must provide the specified 

documents or information. 

(c) Foreign schools. The Secretary 

exempts from the provisions of this 

subpart participating institutions that 

are not located in a State. 

(Authority: 20 U.S.C. 1094) 

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§ 668.52 Definitions. 

The following definitions apply to 

this subpart: 

Specified year: (1) The calendar year 

preceding the first calendar year of an 

award year, i.e., the base year; or 

(2) The year preceding the year 

described in paragraph (1) of this 

definition. 

Subsidized student financial 

assistance programs: Title IV, HEA 

programs for which eligibility is 

determined on the basis of an 

applicant’s EFC. These programs 

include the Federal Pell Grant, Federal 

Supplemental Educational Opportunity 

Grant (FSEOG), Federal Work-Study 

(FWS), Federal Perkins Loan, and Direct 

Subsidized Loan programs. 

Unsubsidized student financial 

assistance programs: Title IV, HEA 

programs for which eligibility is not 

based on an applicant’s EFC. These 

programs include the Teacher Education 

Assistance for College and Higher 

Education (TEACH) Grant, Direct 

Unsubsidized Loan, and Direct PLUS 

Loan programs. 

(Authority: 20 U.S.C. 1094) 

§ 668.53 Policies and procedures. 

(a) An institution must establish and 

use written policies and procedures for 

verifying an applicant’s FAFSA 

information in accordance with the 

provisions of this subpart. These 

policies and procedures must include— 

(1) The time period within which an 

applicant must provide any 

documentation requested by the 

institution in accordance with § 668.57; 

(2) The consequences of an 

applicant’s failure to provide the 

requested documentation within the 

specified time period; 

(3) The method by which the 

institution notifies an applicant of the 

results of its verification if, as a result 

of verification, the applicant’s EFC 

changes and results in a change in the 

amount of the applicant’s assistance 

under the title IV, HEA programs; 

(4) The procedures the institution will 

follow itself or the procedures the 

institution will require an applicant to 

follow to correct FAFSA information 

determined to be in error; and 

(5) The procedures for making 

referrals under § 668.16(g). 

(b) An institution’s procedures must 

provide that it will furnish, in a timely 

manner, to each applicant whose 

FAFSA information is selected for 

verification a clear explanation of— 

(1) The documentation needed to 

satisfy the verification requirements; 

and 

(2) The applicant’s responsibilities 

with respect to the verification of 

FAFSA information, including the 

deadlines for completing any actions 

required under this subpart and the 

consequences of failing to complete any 

required action. 

(c) An institution’s procedures must 

provide that an applicant whose FAFSA 

information is selected for verification is 

required to complete verification before 

the institution exercises any authority 

under section 479A(a) of the HEA to 

make changes to the applicant’s cost of 

attendance or to the values of the data 

items required to calculate the EFC. 

(Approved by the Office of Management and 

Budget under control number 1845–0041) 

(Authority: 20 U.S.C. 1094) 

§ 668.54 Selection of an applicant’s FAFSA 

information for verification. 

(a) General requirements. (1) Except 

as provided in paragraph (b) of this 

section, an institution must require an 

applicant whose FAFSA information is 

selected for verification by the 

Secretary, to verify the information 

specified by the Secretary pursuant to 

§ 668.56. 

(2) If an institution has reason to 

believe that an applicant’s FAFSA 

information is inaccurate, it must verify 

the accuracy of that information. 

(3) An institution may require an 

applicant to verify any FAFSA 

information that it specifies. 

(4) If an applicant is selected to verify 

FAFSA information under paragraph 

(a)(1) of this section, the institution 

must require the applicant to verify the 

information as specified in § 668.56 if 

the applicant is selected for a 

subsequent verification of FAFSA 

information, except that the applicant is 

not required to provide documentation 

for the FAFSA information previously 

verified for the applicable award year to 

the extent that the FAFSA information 

previously verified remains unchanged. 

(b) Exclusions from verification. (1) 

An institution need not verify an 

applicant’s FAFSA information if— 

(i) The applicant dies; 

(ii) The applicant does not receive 

assistance under the title IV, HEA 

programs for reasons other than failure 

to verify FAFSA information; 

(iii) The applicant is eligible to 

receive only unsubsidized student 

financial assistance; or 

(iv) The applicant who transfers to the 

institution, had previously completed 

verification at the institution from 

which he or she transferred, and applies 

for assistance based on the same FAFSA 

information used at the previous 

institution, if the current institution 

obtains a letter from the previous 

institution— 

(A) Stating that it has verified the 

applicant’s information; and 

(B) Providing the transaction number 

of the applicable valid ISIR. 

(2) Unless the institution has reason 

to believe that the information reported 

by a dependent student is incorrect, it 

need not verify the applicant’s parents’ 

FAFSA information if— 

(i) The parents are residing in a 

country other than the United States 

and cannot be contacted by normal 

means of communication; 

(ii) The parents cannot be located 

because their contact information is 

unknown and cannot be obtained by the 

applicant; or 

(iii) Both of the applicant’s parents are 

mentally incapacitated. 

(3) Unless the institution has reason 

to believe that the information reported 

by an independent student is incorrect, 

it need not verify the applicant’s 

spouse’s information if— 

(i) The spouse is deceased; 

(ii) The spouse is mentally 

incapacitated; 

(iii) The spouse is residing in a 

country other than the United States 

and cannot be contacted by normal 

means of communication; or 

(iv) The spouse cannot be located 

because his or her contact information 

is unknown and cannot be obtained by 

the applicant. 

(Approved by the Office of Management and 

Budget under control number 1845–0041) 

(Authority: 20 U.S.C. 1091, 1094) 

§ 668.55 Updating information. 

(a) If an applicant’s dependency status 

changes at any time during the award 

year, the applicant must update FAFSA 

information, except when the update is 

due to a change in his or her marital 

status. 

(b)(1) An applicant who is selected for 

verification of the number of persons in 

his or her household (household size) or 

the number of those in the household 

who are attending postsecondary 

institutions (number in college) must 

update those items to be correct as of 

the date of verification, except when the 

update is due to a change in his or her 

marital status. 

(2) Notwithstanding paragraph (b)(1) 

of this section, an applicant is not 

required to provide documentation of 

household size or number in college 

during a subsequent verification of 

either item if the information has not 

changed. 

(c) An institution may require an 

applicant to update FAFSA information 

under paragraph (a) or (b) of this section 

for a change in the applicant’s marital 

status if the institution determines the 

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update is necessary to address an 

inequity or to reflect more accurately 

the applicant’s ability to pay. 

(Approved by the Office of Management and 

Budget under control number 1845–0041) 

(Authority: 20 U.S.C. 1094) 

§ 668.56 Information to be verified. 

(a) For each award year the Secretary 

publishes in the Federal Register notice 

the FAFSA information that an 

institution and an applicant may be 

required to verify. 

(b) For each applicant whose FAFSA 

information is selected for verification 

by the Secretary, the Secretary specifies 

the specific information under 

paragraph (a) of this section that the 

applicant must verify. 

(Approved by the Office of Management and 

Budget under control number 1845–0041) 

(Authority: 20 U.S.C. 1094, 1095) 

§ 668.57 Acceptable documentation. 

If an applicant is selected to verify 

any of the following information, an 

institution must obtain the specified 

documentation. 

(a) Adjusted Gross Income (AGI), 

income earned from work, or U.S. 

income tax paid. (1) Except as provided 

in paragraphs (a)(2), (a)(3), and (a)(4) of 

this section, an institution must require 

an applicant selected for verification of 

AGI, income earned from work or U.S. 

income tax paid to submit to it— 

(i) A copy of the income tax return or 

an Internal Revenue Service (IRS) form 

that lists tax account information of the 

applicant, his or her spouse, or his or 

her parents, as applicable for the 

specified year. The copy of the return 

must include the signature (which need 

not be an original) of the filer of the 

return or of one of the filers of a joint 

return; 

(ii) For a dependent student, a copy 

of each IRS Form W–2 for the specified 

year received by the parent whose 

income is being taken into account if— 

(A) The parents filed a joint return; 

and 

(B) The parents are divorced or 

separated or one of the parents has died; 

and 

(iii) For an independent student, a 

copy of each IRS Form W–2 for the 

specified year he or she received if the 

independent student— 

(A) Filed a joint return; and 

(B) Is a widow or widower, or is 

divorced or separated. 

(2) An institution may accept, in lieu 

of an income tax return or an IRS form 

that lists tax account information, the 

information reported for an item on the 

applicant’s FAFSA for the specified year 

if the Secretary has identified that item 

as having been obtained from the IRS 

and not having been changed. 

(3) An institution must accept, in lieu 

of an income tax return or an IRS form 

that lists tax account information, the 

documentation set forth in paragraph 

(a)(4) of this section if the individual for 

the specified year— 

(i) Has not filed and, under IRS rules, 

or other applicable government agency 

rules, is not required to file an income 

tax return; 

(ii) Is required to file a U.S. tax return 

and has been granted a filing extension 

by the IRS; or 

(iii) Has requested a copy of the tax 

return or an IRS form that lists tax 

account information, and the IRS or a 

government of a U.S. territory or 

commonwealth or a foreign central 

government cannot locate the return or 

provide an IRS form that lists tax 

account information. 

(4) An institution must accept— 

(i) For an individual described in 

paragraph (a)(3)(i) of this section, a 

statement signed by that individual 

certifying that he or she has not filed 

and is not required to file an income tax 

return for the specified year and 

certifying for that year that 

individual’s— 

(A) Sources of income earned from 

work as stated on the FAFSA; and 

(B) Amounts of income from each 

source. In lieu of a certification of these 

amounts of income, the applicant may 

provide a copy of his or her IRS Form 

W–2 for each source listed under 

paragraph (a)(4)(i)(A) of this section; 

(ii) For an individual described in 

paragraph (a)(3)(ii) of this section— 

(A) A copy of the IRS Form 4868, 

‘‘Application for Automatic Extension of 

Time to File U.S. Individual Income Tax 

Return,’’ that the individual filed with 

the IRS for the specified year, or a copy 

of the IRS’s approval of an extension 

beyond the automatic six-month 

extension if the individual requested an 

additional extension of the filing time; 

and 

(B) A copy of each IRS Form W–2 that 

the individual received for the specified 

year, or for a self-employed individual, 

a statement signed by the individual 

certifying the amount of the AGI for the 

specified year; and 

(iii) For an individual described in 

paragraph (a)(3)(iii) of this section— 

(A) A copy of each IRS Form W–2 that 

the individual received for the specified 

year; or 

(B) For an individual who is selfemployed or has filed an income tax 

return with a government of a U. S. 

territory or commonwealth, or a foreign 

central government, a statement signed 

by the individual certifying the amount 

of AGI and taxes paid for the specified 

year. 

(5) An institution may require an 

individual described in paragraph 

(a)(3)(ii) of this section to provide to it 

a copy of his or her completed and 

signed income tax return when filed. If 

an institution receives the copy of the 

return, it must reverify the AGI and 

taxes paid by the applicant and his or 

her spouse or parents. 

(6) If an individual who is required to 

submit an IRS Form W–2, under 

paragraph (a) of this section, is unable 

to obtain one in a timely manner, the 

institution may permit that individual 

to set forth, in a statement signed by the 

individual, the amount of income 

earned from work, the source of that 

income, and the reason that the IRS 

Form W–2 is not available in a timely 

manner. 

(7) For the purpose of this section, an 

institution may accept in lieu of a copy 

of an income tax return signed by the 

filer of the return or one of the filers of 

a joint return, a copy of the filer’s return 

that includes the preparer’s Social 

Security Number, Employer 

Identification Number or the Preparer 

Tax Identification Number and has been 

signed, stamped, typed, or printed with 

the name and address of the preparer of 

the return. 

(b) Number of family members in 

household. An institution must require 

an applicant selected for verification of 

the number of family members in the 

household to submit to it a statement 

signed by both the applicant and one of 

the applicant’s parents if the applicant 

is a dependent student, or only the 

applicant if the applicant is an 

independent student, listing the name 

and age of each family member in the 

household and the relationship of that 

household member to the applicant. 

(c) Number of family household 

members enrolled in eligible 

postsecondary institutions. (1) An 

institution must require an applicant 

selected for verification of the number 

of household members in the 

applicant’s family enrolled on at least a 

half-time basis in eligible postsecondary 

institutions to submit a statement signed 

by both the applicant and one of the 

applicant’s parents, if the applicant is a 

dependent student, or by only the 

applicant if the applicant is an 

independent student, listing— 

(i) The name of each family member 

who is or will be attending an eligible 

postsecondary educational institution as 

at least a half-time student in the award 

year; 

(ii) The age of each student; and 

(iii) The name of the institution that 

each student is or will be attending. 

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(2) If the institution has reason to 

believe that an applicant’s FAFSA 

information or the statement provided 

under paragraph (c)(1) of this section 

regarding the number of family 

household members enrolled in eligible 

postsecondary institutions is inaccurate, 

the institution must obtain a statement 

from each institution named by the 

applicant in response to the requirement 

of paragraph (c)(1)(iii) of this section 

that the household member in question 

is or will be attending the institution on 

at least a half-time basis, unless— 

(i) The institution the student is 

attending determines that such a 

statement is not available because the 

household member in question has not 

yet registered at the institution he or she 

plans to attend; or 

(ii) The institution has information 

indicating that the student will be 

attending the same institution as the 

applicant. 

(d) Other information. If an applicant 

is selected to verify other information 

specified in the annual Federal Register 

notice, the applicant must provide the 

documentation specified for that 

information in the Federal Register 

notice. 

(Approved by the Office of Management and 

Budget under control number 1845–0041) 

(Authority: 20 U.S.C. 1094) 

§ 668.58 Interim disbursements. 

(a)(1) If an institution has reason to 

believe that an applicant’s FAFSA 

information is inaccurate, until the 

information is verified and any 

corrections are made in accordance with 

§ 668.59(a), the institution may not— 

(i) Disburse any Federal Pell Grant, 

FSEOG, or Federal Perkins Loan 

Program funds to the applicant; 

(ii) Employ or allow an employer to 

employ the applicant in its FWS 

Program; or 

(iii) Originate a Direct Subsidized 

Loan, or disburse any such loan 

proceeds for any previously certified 

originated Direct Subsidized Loan to the 

applicant. 

(2) If an institution does not have 

reason to believe that an applicant’s 

FAFSA information is inaccurate prior 

to verification, the institution may— 

(i)(A) Withhold payment of Federal 

Pell Grant, Federal Perkins Loan, or 

FSEOG Program funds for the applicant; 

or 

(B) Make one disbursement from each 

of the Federal Pell Grant, Federal 

Perkins Loan, or FSEOG Program funds 

for the applicant’s first payment period 

of the award year; 

(ii) Employ or allow an employer to 

employ that applicant, once he or she is 

an eligible student, under the FWS 

Program for the first 60 consecutive 

days after the student’s enrollment in 

that award year; or 

(iii)(A) Withhold origination of the 

applicant’s Direct Subsidized Loan; or 

(B) Originate the Direct Subsidized 

Loan provided that the institution does 

not disburse Subsidized Stafford Loan 

or Direct Subsidized Loan proceeds. 

(3) If, after verification, an institution 

determines that changes to an 

applicant’s information will not change 

the amount the applicant would receive 

under a title IV, HEA program, the 

institution— 

(i) Must ensure corrections are made 

in accordance with § 668.59(a); and 

(ii) May prior to receiving the 

corrected valid SAR or valid ISIR— 

(A) Make one disbursement from each 

of the Federal Pell Grant, Federal 

Perkins Loan, or FSEOG Program funds 

for the applicant’s first payment period 

of the award year; 

(B) Employ or allow an employer to 

employ the applicant, once he or she is 

an eligible student, under the FWS 

Program for the first 60 consecutive 

days after the student’s enrollment in 

that award year; or 

(C) Originate the Direct Subsidized 

Loan and disburse the Subsidized 

Stafford Loan or Direct Subsidized Loan 

proceeds for the applicant. 

(b) If an institution chooses to make 

a disbursement under— 

(1) Paragraph (a)(2)(i)(B) of this 

section, it— 

(i) Is liable for any overpayment 

discovered as a result of verification to 

the extent that the overpayment is not 

recovered through reducing subsequent 

disbursements in the award year or from 

the student; and 

(ii) Must recover the overpayment in 

accordance with § 668.61(a); 

(2) Paragraph (a)(2)(ii) of this section, 

it— 

(i) Is liable for any overpayment 

discovered as a result of verification to 

the extent that the overpayment is not 

eliminated by adjusting other financial 

assistance; and 

(ii) Must recover the overpayment in 

accordance with § 668.61(b); or 

(3) Paragraph (a)(3) of this section, 

it— 

(i) Is liable for any subsidized student 

financial assistance disbursed if it does 

not receive the valid SAR or valid ISIR 

reflecting corrections within the 

deadlines established under § 668.60; 

and 

(ii) Must recover the funds in 

accordance with § 668.61(c). 

(Authority: 20 U.S.C. 1094) 

§ 668.59 Consequences of a change in an 

applicant’s FAFSA information. 

(a) For the subsidized student 

financial assistance programs, if an 

applicant’s FAFSA information changes 

as a result of verification, the applicant 

or the institution must submit to the 

Secretary any changes to— 

(1) A nondollar item; or 

(2) A single dollar item of $25 or 

more. 

(b) For the Federal Pell Grant 

Program, if an applicant’s FAFSA 

information changes as a result of 

verification, an institution must— 

(1) Recalculate the applicant’s Federal 

Pell Grant on the basis of the EFC on the 

corrected valid SAR or valid ISIR; and 

(2)(i) Disburse any additional funds 

under that award only if the institution 

receives a corrected valid SAR or valid 

ISIR for the applicant and only to the 

extent that additional funds are payable 

based on the recalculation; 

(ii) Comply with the procedures 

specified in § 668.61 for an interim 

disbursement if, as a result of 

verification, the Federal Pell Grant 

award is reduced; or— 

(iii) Comply with the procedures 

specified in 34 CFR 690.79 for an 

overpayment that is not an interim 

disbursement if, as a result of 

verification, the Federal Pell Grant 

award is reduced. 

(c) For the subsidized student 

financial assistance programs, excluding 

the Federal Pell Grant Program, if an 

applicant’s FAFSA information changes 

as a result of verification, the institution 

must— 

(1) Adjust the applicant’s financial aid 

package on the basis of the EFC on the 

corrected valid SAR or valid ISIR; and 

(2)(i) Comply with the procedures 

specified in § 668.61 for an interim 

disbursement if, as a result of 

verification, the financial aid package 

must be reduced; 

(ii) Comply with the procedures 

specified in 34 CFR 673.5(f) for a 

Federal Perkins loan or an FSEOG 

overpayment that is not the result of an 

interim disbursement if, as a result of 

verification, the financial aid package 

must be reduced; and 

(iii) Comply with the procedures 

specified in 34 CFR 685.303(e) for Direct 

Subsidized Loan excess loan proceeds 

that are not the result of an interim 

disbursement if, as a result of 

verification, the financial aid package 

must be reduced. 

(Approved by the Office of Management and 

Budget under control number 1845–0041) 

(Authority: 20 U.S.C. 1094) 

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§ 668.60 Deadlines for submitting 

documentation and the consequences of 

failing to provide documentation. 

(a) An institution must require an 

applicant selected for verification to 

submit to it, within the period of time 

it or the Secretary specifies, the 

documentation set forth in § 668.57 that 

is requested by the institution. 

(b) For purposes of the subsidized 

student financial assistance programs, 

excluding the Federal Pell Grant 

Program— 

(1) If an applicant fails to provide the 

requested documentation within a 

reasonable time period established by 

the institution— 

(i) The institution may not— 

(A) Disburse any additional Federal 

Perkins Loan or FSEOG Program funds 

to the applicant; 

(B) Employ, continue to employ or 

allow an employer to employ the 

applicant under FWS; or 

(C) Originate the applicant’s Direct 

Subsidized Loan or disburse any 

additional Direct Subsidized Loan 

proceeds for the applicant; and 

(ii) The applicant must repay to the 

institution any Federal Perkins Loan or 

FSEOG received for that award year; 

(2) If the applicant provides the 

requested documentation after the time 

period established by the institution, the 

institution may, at its option, disburse 

aid to the applicant notwithstanding 

paragraph (b)(1) of this section; and 

(3) If an institution has received 

proceeds for a Direct Subsidized Loan 

on behalf of an applicant, the institution 

must return all or a portion of those 

funds as provided under § 668.166(b) if 

the applicant does not complete 

verification within the time period 

specified. 

(c) For purposes of the Federal Pell 

Grant Program— 

(1) An applicant may submit a valid 

SAR to the institution or the institution 

may receive a valid ISIR after the 

applicable deadline specified in 34 CFR 

690.61 but within an established 

additional time period set by the 

Secretary through publication of a 

notice in the Federal Register; and 

(2) If the applicant does not provide 

to the institution the requested 

documentation and, if necessary, a valid 

SAR or the institution does not receive 

a valid ISIR, within the additional time 

period referenced in paragraph (c)(1) of 

this section, the applicant— 

(i) Forfeits the Federal Pell Grant for 

the award year; and 

(ii) Must return any Federal Pell Grant 

payments previously received for that 

award year. 

(d) The Secretary may determine not 

to process FAFSA information of an 

applicant who has been requested to 

provide documentation until the 

applicant provides the documentation 

or the Secretary decides that there is no 

longer a need for the documentation. 

(e) If an applicant selected for 

verification for an award year dies 

before the deadline for completing 

verification without completing that 

process, the institution may not— 

(1) Make any further disbursements 

on behalf of that applicant; 

(2) Originate that applicant’s Direct 

Subsidized Loan, or disburse that 

applicant’s Direct Subsidized Loan 

proceeds; or 

(3) Consider any funds it disbursed to 

that applicant under § 668.58(a)(2) as an 

overpayment. 

(Authority: 20 U.S.C. 1094) 

§ 668.61 Recovery of funds from interim 

disbursements. 

(a) If an institution discovers, as a 

result of verification, that an applicant 

received under § 668.58(a)(2)(i)(B) more 

financial aid than the applicant was 

eligible to receive, the institution must 

eliminate the Federal Pell Grant, Federal 

Perkins Loan, or FSEOG overpayment 

by— 

(1) Adjusting subsequent 

disbursements in the award year in 

which the overpayment occurred; or 

(2) Reimbursing the appropriate 

program account by— 

(i) Requiring the applicant to return 

the overpayment to the institution if the 

institution cannot correct the 

overpayment under paragraph (a)(1) of 

this section; or 

(ii) Making restitution from its own 

funds, by the earlier of the following 

dates, if the applicant does not return 

the overpayment: 

(A) Sixty days after the applicant’s 

last day of attendance. 

(B) The last day of the award year in 

which the institution disbursed Federal 

Pell Grant, Federal Perkins Loan, or 

FSEOG Program funds to the applicant. 

(b) If an institution discovers, as a 

result of verification, that an applicant 

received under § 668.58(a)(2)(ii) more 

financial aid than the applicant was 

eligible to receive, the institution must 

eliminate the FWS overpayment by— 

(1) Adjusting the applicant’s other 

financial aid; or 

(2) Reimbursing the FWS program 

account by making restitution from its 

own funds, if the institution cannot 

correct the overpayment under 

paragraph (b)(1) of this section. The 

applicant must still be paid for all work 

performed under the institution’s own 

payroll account. 

(c) If an institution disbursed 

subsidized student financial assistance 

to an applicant under § 668.58(a)(3), and 

did not receive the valid SAR or valid 

ISIR reflecting corrections within the 

deadlines established under § 668.60, 

the institution must reimburse the 

appropriate program account by making 

restitution from its own funds. The 

applicant must still be paid for all work 

performed under the institution’s own 

payroll account. 

(Approved by the Office of Management and 

Budget under control number 1845–0041) 

(Authority: 20 U.S.C. 1094) 

■ 24. Subpart F of part 668 is revised to 

read as follows: 

Subpart F—Misrepresentation 

Sec. 

668.71 Scope and special definitions. 

668.72 Nature of educational program. 

668.73 Nature of financial charges. 

668.74 Employability of graduates. 

668.75 Relationship with the Department of 

Education. 

Subpart F—Misrepresentation 

§ 668.71 Scope and special definitions. 

(a) If the Secretary determines that an 

eligible institution has engaged in 

substantial misrepresentation, the 

Secretary may— 

(1) Revoke the eligible institution’s 

program participation agreement; 

(2) Impose limitations on the 

institution’s participation in the title IV, 

HEA programs; 

(3) Deny participation applications 

made on behalf of the institution; or 

(4) Initiate a proceeding against the 

eligible institution under subpart G of 

this part. 

(b) This subpart establishes the types 

of activities that constitute substantial 

misrepresentation by an eligible 

institution. An eligible institution is 

deemed to have engaged in substantial 

misrepresentation when the institution 

itself, one of its representatives, or any 

ineligible institution, organization, or 

person with whom the eligible 

institution has an agreement to provide 

educational programs, marketing, 

advertising, recruiting or admissions 

services, makes a substantial 

misrepresentation regarding the eligible 

institution, including about the nature 

of its educational program, its financial 

charges, or the employability of its 

graduates. Substantial 

misrepresentations are prohibited in all 

forms, including those made in any 

advertising, promotional materials, or in 

the marketing or sale of courses or 

programs of instruction offered by the 

institution. 

(c) The following definitions apply to 

this subpart: 

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Misrepresentation: Any false, 

erroneous or misleading statement an 

eligible institution, one of its 

representatives, or any ineligible 

institution, organization, or person with 

whom the eligible institution has an 

agreement to provide educational 

programs, or to provide marketing, 

advertising, recruiting or admissions 

services makes directly or indirectly to 

a student, prospective student or any 

member of the public, or to an 

accrediting agency, to a State agency, or 

to the Secretary. A misleading statement 

includes any statement that has the 

likelihood or tendency to deceive or 

confuse. A statement is any 

communication made in writing, 

visually, orally, or through other means. 

Misrepresentation includes the 

dissemination of a student endorsement 

or testimonial that a student gives either 

under duress or because the institution 

required the student to make such an 

endorsement or testimonial to 

participate in a program. 

Prospective student: Any individual 

who has contacted an eligible 

institution for the purpose of requesting 

information about enrolling at the 

institution or who has been contacted 

directly by the institution or indirectly 

through advertising about enrolling at 

the institution. 

Substantial misrepresentation: Any 

misrepresentation on which the person 

to whom it was made could reasonably 

be expected to rely, or has reasonably 

relied, to that person’s detriment. 

(Authority: 20 U.S.C. 1094) 

§ 668.72 Nature of educational program. 

Misrepresentation concerning the 

nature of an eligible institution’s 

educational program includes, but is not 

limited to, false, erroneous or 

misleading statements concerning— 

(a) The particular type(s), specific 

source(s), nature and extent of its 

institutional, programmatic, or 

specialized accreditation; 

(b)(1) Whether a student may transfer 

course credits earned at the institution 

to any other institution; 

(2) Conditions under which the 

institution will accept transfer credits 

earned at another institution; 

(c) Whether successful completion of 

a course of instruction qualifies a 

student— 

(1) For acceptance to a labor union or 

similar organization; or 

(2) To receive, to apply to take or to 

take the examination required to 

receive, a local, State, or Federal license, 

or a nongovernmental certification 

required as a precondition for 

employment, or to perform certain 

functions in the States in which the 

educational program is offered, or to 

meet additional conditions that the 

institution knows or reasonably should 

know are generally needed to secure 

employment in a recognized occupation 

for which the program is represented to 

prepare students; 

(d) The requirements for successfully 

completing the course of study or 

program and the circumstances that 

would constitute grounds for 

terminating the student’s enrollment; 

(e) Whether its courses are 

recommended or have been the subject 

of unsolicited testimonials or 

endorsements by— 

(1) Vocational counselors, high 

schools, colleges, educational 

organizations, employment agencies, 

members of a particular industry, 

students, former students, or others; or 

(2) Governmental officials for 

governmental employment; 

(f) Its size, location, facilities, or 

equipment; 

(g) The availability, frequency, and 

appropriateness of its courses and 

programs to the employment objectives 

that it states its programs are designed 

to meet; 

(h) The nature, age, and availability of 

its training devices or equipment and 

their appropriateness to the 

employment objectives that it states its 

programs and courses are designed to 

meet; 

(i) The number, availability, and 

qualifications, including the training 

and experience, of its faculty and other 

personnel; 

(j) The availability of part-time 

employment or other forms of financial 

assistance; 

(k) The nature and availability of any 

tutorial or specialized instruction, 

guidance and counseling, or other 

supplementary assistance it will provide 

its students before, during or after the 

completion of a course; 

(l) The nature or extent of any 

prerequisites established for enrollment 

in any course; 

(m) The subject matter, content of the 

course of study, or any other fact related 

to the degree, diploma, certificate of 

completion, or any similar document 

that the student is to be, or is, awarded 

upon completion of the course of study; 

(n) Whether the academic, 

professional, or occupational degree that 

the institution will confer upon 

completion of the course of study has 

been authorized by the appropriate State 

educational agency. This type of 

misrepresentation includes, in the case 

of a degree that has not been authorized 

by the appropriate State educational 

agency or that requires specialized 

accreditation, any failure by an eligible 

institution to disclose these facts in any 

advertising or promotional materials 

that reference such degree; or 

(o) Any matters required to be 

disclosed to prospective students under 

§§ 668.42 and 668.43 of this part. 

(Authority: 20 U.S.C. 1094) 

§ 668.73 Nature of financial charges. 

Misrepresentation concerning the 

nature of an eligible institution’s 

financial charges includes, but is not 

limited to, false, erroneous, or 

misleading statements concerning— 

(a) Offers of scholarships to pay all or 

part of a course charge; 

(b) Whether a particular charge is the 

customary charge at the institution for a 

course; 

(c) The cost of the program and the 

institution’s refund policy if the student 

does not complete the program; 

(d) The availability or nature of any 

financial assistance offered to students, 

including a student’s responsibility to 

repay any loans, regardless of whether 

the student is successful in completing 

the program and obtaining employment; 

or 

(e) The student’s right to reject any 

particular type of financial aid or other 

assistance, or whether the student must 

apply for a particular type of financial 

aid, such as financing offered by the 

institution. 

(Authority: 20 U.S.C. 1094) 

§ 668.74 Employability of graduates. 

Misrepresentation regarding the 

employability of an eligible institution’s 

graduates includes, but is not limited to, 

false, erroneous, or misleading 

statements concerning— 

(a) The institution’s relationship with 

any organization, employment agency, 

or other agency providing authorized 

training leading directly to employment; 

(b) The institution’s plans to maintain 

a placement service for graduates or 

otherwise assist its graduates to obtain 

employment; 

(c) The institution’s knowledge about 

the current or likely future conditions, 

compensation, or employment 

opportunities in the industry or 

occupation for which the students are 

being prepared; 

(d) Whether employment is being 

offered by the institution or that a talent 

hunt or contest is being conducted, 

including, but not limited to, through 

the use of phrases such as ‘‘Men/women 

wanted to train for * * *,’’ ‘‘Help 

Wanted,’’ ‘‘Employment,’’ or ‘‘Business 

Opportunities’’; 

(e) Government job market statistics 

in relation to the potential placement of 

its graduates; or 

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(f) Other requirements that are 

generally needed to be employed in the 

fields for which the training is provided, 

such as requirements related to 

commercial driving licenses or permits 

to carry firearms, and failing to disclose 

factors that would prevent an applicant 

from qualifying for such requirements, 

such as prior criminal records or 

preexisting medical conditions. 

(Authority: 20 U.S.C. 1094) 

§ 668.75 Relationship with the Department 

of Education. 

An eligible institution, its 

representatives, or any ineligible 

institution, organization, or person with 

whom the eligible institution has an 

agreement may not describe the eligible 

institution’s participation in the title IV, 

HEA programs in a manner that suggests 

approval or endorsement by the U.S. 

Department of Education of the quality 

of its educational programs. 

(Authority: 20 U.S.C. 1094) 

■ 25. Subpart J of part 668 is revised to 

read as follows: 

Subpart J—Approval of Independently 

Administered Tests; Specification of 

Passing Score; Approval of State Process 

Sec. 

668.141 Scope. 

668.142 Special definitions. 

668.143 [Reserved] 

668.144 Application for test approval. 

668.145 Test approval procedures. 

668.146 Criteria for approving tests. 

668.147 Passing scores. 

668.148 Additional criteria for the approval 

of certain tests. 

668.149 Special provisions for the approval 

of assessment procedures for individuals 

with disabilities. 

668.150 Agreement between the Secretary 

and a test publisher or a State. 

668.151 Administration of tests. 

668.152 Administration of tests by 

assessment centers. 

668.153 Administration of tests for 

individuals whose native language is not 

English or for individuals with 

disabilities. 

668.154 Institutional accountability. 

668.155 [Reserved] 

668.156 Approved State process. 

Subpart J—Approval of Independently 

Administered Tests; Specification of 

Passing Score; Approval of State 

Process 

§ 668.141 Scope. 

(a) This subpart sets forth the 

provisions under which a student who 

has neither a high school diploma nor 

its recognized equivalent may become 

eligible to receive title IV, HEA program 

funds by— 

(1) Achieving a passing score, 

specified by the Secretary, on an 

independently administered test 

approved by the Secretary under this 

subpart; or 

(2) Being enrolled in an eligible 

institution that participates in a State 

process approved by the Secretary 

under this subpart. 

(b) Under this subpart, the Secretary 

sets forth— 

(1) The procedures and criteria the 

Secretary uses to approve tests; 

(2) The basis on which the Secretary 

specifies a passing score on each 

approved test; 

(3) The procedures and conditions 

under which the Secretary determines 

that an approved test is independently 

administered; 

(4) The information that a test 

publisher or a State must submit, as part 

of its test submission, to explain the 

methodology it will use for the test 

anomaly studies as described in 

§ 668.144(c)(17) and (d)(8), as 

appropriate; 

(5) The requirements that a test 

publisher or a State, as appropriate— 

(i) Have a process to identify and 

follow up on test score irregularities; 

(ii) Take corrective action—up to and 

including decertification of test 

administrators—if the test publisher or 

the State determines that test score 

irregularities have occurred; and 

(iii) Report to the Secretary the names 

of any test administrators it decertifies 

and any other action taken as a result of 

test score analyses; and 

(6) The procedures and conditions 

under which the Secretary determines 

that a State process demonstrates that 

students in the process have the ability 

to benefit from the education and 

training being offered to them. 

(Authority: 20 U.S.C. 1091(d)) 

§ 668.142 Special definitions. 

The following definitions apply to 

this subpart: 

Assessment center: A facility that— 

(1) Is located at an eligible institution 

that provides two-year or four-year 

degrees or is a postsecondary vocational 

institution; 

(2) Is responsible for gathering and 

evaluating information about individual 

students for multiple purposes, 

including appropriate course placement; 

(3) Is independent of the admissions 

and financial aid processes at the 

institution at which it is located; 

(4) Is staffed by professionally trained 

personnel; 

(5) Uses test administrators to 

administer tests approved by the 

Secretary under this subpart; and 

(6) Does not have as its primary 

purpose the administration of ability to 

benefit tests. 

ATB test irregularity: An irregularity 

that results from an ATB test being 

administered in a manner that does not 

conform to the established rules for test 

administration consistent with the 

provisions of subpart J of part 668 and 

the test administrator’s manual. 

Computer-based test: A test taken by 

a student on a computer and scored by 

a computer. 

General learned abilities: Cognitive 

operations, such as deductive reasoning, 

reading comprehension, or translation 

from graphic to numerical 

representation, that may be learned in 

both school and non-school 

environments. 

Independent test administrator: A test 

administrator who administers tests at a 

location other than an assessment center 

and who— 

(1) Has no current or prior financial 

or ownership interest in the institution, 

its affiliates, or its parent corporation, 

other than the fees earned for 

administering approved ATB tests 

through an agreement with the test 

publisher or State and has no 

controlling interest in any other 

institution; 

(2) Is not a current or former 

employee of or consultant to the 

institution, its affiliates, or its parent 

corporation, a person in control of 

another institution, or a member of the 

family of any of these individuals; 

(3) Is not a current or former member 

of the board of directors, a current or 

former employee of or a consultant to a 

member of the board of directors, chief 

executive officer, chief financial officer 

of the institution, its affiliates, or its 

parent corporation or of any other 

institution, or a member of the family of 

any of these individuals; and 

(4) Is not a current or former student 

of the institution. 

Individual with a disability: A person 

who has a physical or mental 

impairment which substantially limits 

one or more major life activities, has a 

record of such an impairment, or is 

regarded as having such an impairment. 

Non-native speaker of English: A 

person whose first language is not 

English and who is not fluent in 

English. 

Secondary school level: As applied to 

‘‘content,’’ ‘‘curricula,’’ or ‘‘basic verbal 

and quantitative skills,’’ the basic 

knowledge or skills generally learned in 

the 9th through 12th grades in United 

States secondary schools. 

Test: A standardized test, assessment 

or instrument that has formal protocols 

on how it is to be administered in order 

to be valid. These protocols include, for 

example, the use of parallel, equated 

forms; testing conditions; time allowed 

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for the test; and standardized scoring. 

Tests are not limited to traditional paper 

and pencil (or computer-administered) 

instruments for which forms are 

constructed prior to administration to 

examinees. Tests may also include 

adaptive instruments that use 

computerized algorithms for selecting 

and administering items in real time; 

however, for such instruments, the size 

of the item pool and the method of item 

selection must ensure negligible overlap 

in items across retests. 

Test administrator: An individual 

who is certified by the test publisher (or 

the State, in the case of an approved 

State test or assessment) to administer 

tests approved under this subpart in 

accordance with the instructions 

provided by the test publisher or the 

State, as applicable, which includes 

protecting the test and the test results 

from improper disclosure or release, and 

who is not compensated on the basis of 

test outcomes. 

Test item: A question on a test. 

Test publisher: An individual, 

organization, or agency that owns a 

registered copyright of a test, or has 

been authorized by the copyright holder 

to represent the copyright holder’s 

interests regarding the test. 

(Authority: 20 U.S.C. 1091(d)) 

§ 668.143 [Reserved] 

§ 668.144 Application for test approval. 

(a) The Secretary only reviews tests 

under this subpart that are submitted by 

the publisher of that test or by a State. 

(b) A test publisher or a State that 

wishes to have its test approved by the 

Secretary under this subpart must 

submit an application to the Secretary at 

such time and in such manner as the 

Secretary may prescribe. The 

application must contain all the 

information necessary for the Secretary 

to approve the test under this subpart, 

including but not limited to, the 

information contained in paragraph (c) 

or (d) of this section, as applicable. 

(c) A test publisher must include with 

its application— 

(1) A summary of the precise editions, 

forms, levels, and (if applicable) subtests for which approval is being sought; 

(2) The name, address, telephone 

number, and e-mail address of a contact 

person to whom the Secretary may 

address inquiries; 

(3) Each edition, form, level, and subtest of the test for which the test 

publisher requests approval; 

(4) The distribution of test scores for 

each edition, form, level, or sub-test for 

which approval is sought, that allows 

the Secretary to prescribe the passing 

score for each test in accordance with 

§ 668.147; 

(5) Documentation of test 

development, including a history of the 

test’s use; 

(6) Norming data and other evidence 

used in determining the distribution of 

test scores; 

(7) Material that defines the content 

domains addressed by the test; 

(8) Documentation of periodic reviews 

of the content and specifications of the 

test to ensure that the test reflects 

secondary school level verbal and 

quantitative skills; 

(9) If a test being submitted is a 

revision of the most recent edition 

approved by the Secretary, an analysis 

of the revisions, including the reasons 

for the revisions, the implications of the 

revisions for the comparability of scores 

on the current test to scores on the 

previous test, and data from validity 

studies of the test undertaken 

subsequent to the revisions; 

(10) A description of the manner in 

which test-taking time was determined 

in relation to the content 

representativeness requirements in 

§ 668.146(b)(3) and an analysis of the 

effects of time on performance. This 

description may also include the 

manner in which test-taking time was 

determined in relation to the other 

requirements in § 668.146(b); 

(11) A technical manual that 

includes— 

(i) An explanation of the methodology 

and procedures for measuring the 

reliability of the test; 

(ii) Evidence that different forms of 

the test, including, if applicable, short 

forms, are comparable in reliability; 

(iii) Other evidence demonstrating 

that the test permits consistent 

assessment of individual skill and 

ability; 

(iv) Evidence that the test was normed 

using— 

(A) Groups that were of sufficient size 

to produce defensible standard errors of 

the mean and were not 

disproportionately composed of any 

race or gender; and 

(B) A contemporary sample that is 

representative of the population of 

persons who have earned a high school 

diploma in the United States; 

(v) Documentation of the level of 

difficulty of the test; 

(vi) Unambiguous scales and scale 

values so that standard errors of 

measurement can be used to determine 

statistically significant differences in 

performance; and 

(vii) Additional guidance on the 

interpretation of scores resulting from 

any modifications of the test for 

individuals with temporary 

impairments, individuals with 

disabilities and guidance on the types of 

accommodations that are allowable; 

(12) The manual provided to test 

administrators containing procedures 

and instructions for test security and 

administration, and the forwarding of 

tests to the test publisher; 

(13) An analysis of the item-content of 

each edition, form, level, and (if 

applicable) sub-test to demonstrate 

compliance with the required secondary 

school level criterion specified in 

§ 668.146(b); 

(14) A description of retesting 

procedures and the analysis upon which 

the criteria for retesting are based; 

(15) Other evidence establishing the 

test’s compliance with the criteria for 

approval of tests as provided in 

§ 668.146; 

(16) A description of its test 

administrator certification process that 

provides— 

(i) How the test publisher will 

determine that the test administrator has 

the necessary training, knowledge, skill, 

and integrity to test students in 

accordance with this subpart and the 

test publisher’s requirements; and 

(ii) How the test publisher will 

determine that the test administrator has 

the ability and facilities to keep its test 

secure against disclosure or release; 

(17) A description of the test anomaly 

analysis the test publisher will conduct 

and submit to the Secretary that 

includes— 

(i) An explanation of how the test 

publisher will identify potential test 

irregularities and make a determination 

that test irregularities have occurred; 

(ii) An explanation of the process and 

procedures for corrective action (up to 

and including decertification of a 

certified test administrator) when the 

test publisher determines that test 

irregularities have occurred; and 

(iii) Information on when and how the 

test publisher will notify a test 

administrator, the Secretary, and the 

institutions for which the test 

administrator had previously provided 

testing services for that test publisher, 

that the test administrator has been 

decertified; and 

(18)(i) An explanation of any 

accessible technologies that are 

available to accommodate individuals 

with disabilities, and 

(ii) A description of the process for a 

test administrator to identify and report 

to the test publisher when 

accommodations for individuals with 

disabilities were provided, for scoring 

and norming purposes. 

(d) A State must include with its 

application— 

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66962 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations 

(1) The information necessary for the 

Secretary to determine that the test the 

State uses measures a student’s skills 

and abilities for the purpose of 

determining whether the student has the 

skills and abilities the State expects of 

a high school graduate in that State; 

(2) The passing scores on that test; 

(3) Any guidance on the interpretation 

of scores resulting from any 

modifications of the test for individuals 

with disabilities; 

(4) A statement regarding how the test 

will be kept secure; 

(5) A description of retesting 

procedures and the analysis upon which 

the criteria for retesting are based; 

(6) Other evidence establishing the 

test’s compliance with the criteria for 

approval of tests as provided in 

§ 668.146; 

(7) A description of its test 

administrator certification process that 

provides— 

(i) How the State will determine that 

the test administrator has the necessary 

training, knowledge, skill, and integrity 

to test students in accordance with the 

State’s requirements; and 

(ii) How the State will determine that 

the test administrator has the ability and 

facilities to keep its test secure against 

disclosure or release; 

(8) A description of the test anomaly 

analysis that the State will conduct and 

submit to the Secretary that includes— 

(i) An explanation of how the State 

will identify potential test irregularities 

and make a determination that test 

irregularities have occurred; 

(ii) An explanation of the process and 

procedures for corrective action (up to 

and including decertification of a test 

administrator) when the State 

determines that test irregularities have 

occurred; and 

(iii) Information on when and how the 

State will notify a test administrator, the 

Secretary, and the institutions for which 

the test administrator had previously 

provided testing services for that State, 

that the test administrator has been 

decertified; 

(9)(i) An explanation of any accessible 

technologies that are available to 

accommodate individuals with 

disabilities; and 

(ii) A description of the process for a 

test administrator to identify and report 

to the test publisher when 

accommodations for individuals with 

disabilities were provided, for scoring 

and norming purposes; and 

(10) The name, address, telephone 

number, and e-mail address of a contact 

person to whom the Secretary may 

address inquiries. 

(11) A technical manual that 

includes— 

(i) An explanation of the methodology 

and procedures for measuring the 

reliability of the test; 

(ii) Evidence that different forms of 

the test, including, if applicable, short 

forms, are comparable in reliability; 

(iii) Other evidence demonstrating 

that the test permits consistent 

assessment of individual skill and 

ability; 

(iv) Evidence that the test was normed 

using— 

(A) Groups that were of sufficient size 

to produce defensible standard errors of 

the mean and were not 

disproportionately composed of any 

race or gender; and 

(B) A contemporary sample that is 

representative of the population of 

persons who have earned a high school 

diploma in the United States; 

(v) Documentation of the level of 

difficulty of the test; 

(vi) Unambiguous scales and scale 

values so that standard errors of 

measurement can be used to determine 

statistically significant differences in 

performance; and 

(vii) Additional guidance on the 

interpretation of scores resulting from 

any modifications of the test for 

individuals with temporary 

impairments, individuals with 

disabilities and guidance on the types of 

accommodations that are allowable; 

(12) the manual provided to test 

administrators containing procedures 

and instructions for test security and 

administration, and the forwarding of 

tests to the State. 

(Approved by the Office of Management and 

Budget under control number 1845–0049) 

(Authority: 20 U.S.C. 1091(d)) 

§ 668.145 Test approval procedures. 

(a)(1) When the Secretary receives a 

complete application from a test 

publisher or a State, the Secretary 

selects one or more experts in the field 

of educational testing and assessment, 

who possess appropriate advanced 

degrees and experience in test 

development or psychometric research, 

to determine whether the test meets the 

requirements for test approval contained 

in §§ 668.146, 668.147, 668.148, or 

668.149, as appropriate, and to advise 

the Secretary of their determinations. 

(2) If the test involves a language 

other than English, the Secretary selects 

at least one individual who is fluent in 

the language in which the test is written 

to collaborate with the testing expert or 

experts described in paragraph (a)(1) of 

this section and to advise the Secretary 

on whether the test meets the additional 

criteria, provisions, and conditions for 

test approval contained in §§ 668.148 

and 668.149. 

(3) For test batteries that contain 

multiple sub-tests measuring content 

domains other than verbal and 

quantitative domains, the Secretary 

reviews only those sub-tests covering 

the verbal and quantitative domains. 

(b)(1) If the Secretary determines that 

a test satisfies the criteria and 

requirements for test approval, the 

Secretary notifies the test publisher or 

the State, as applicable, of the 

Secretary’s decision, and publishes the 

name of the test and the passing scores 

in the Federal Register. 

(2) If the Secretary determines that a 

test does not satisfy the criteria and 

requirements for test approval, the 

Secretary notifies the test publisher or 

the State, as applicable, of the 

Secretary’s decision, and the reasons 

why the test did not meet those criteria 

and requirements. 

(3) If the Secretary determines that a 

test does not satisfy the criteria and 

requirements for test approval, the test 

publisher or the State that submitted the 

test for approval may request that the 

Secretary reevaluate the Secretary’s 

decision. Such a request must be 

accompanied by— 

(i) Documentation and information 

that address the reasons for the nonapproval of the test; and 

(ii) An analysis of why the 

information and documentation 

submitted meet the criteria and 

requirements for test approval 

notwithstanding the Secretary’s earlier 

decision to the contrary. 

(c)(1) The Secretary approves a test for 

a period not to exceed five years from 

the date the notice of approval of the 

test is published in the Federal Register. 

(2) The Secretary extends the 

approval period of a test to include the 

period of review if the test publisher or 

the State, as applicable, re-submits the 

test for review and approval under 

§ 668.144 at least six months before the 

date on which the test approval is 

scheduled to expire. 

(d)(1) The Secretary’s approval of a 

test may be revoked if the Secretary 

determines that the test publisher or the 

State violated any terms of the 

agreement described in § 668.150, that 

the information the test publisher or the 

State submitted as a basis for approval 

of the test was inaccurate, or that the 

test publisher or the State substantially 

changed the test and did not resubmit 

the test, as revised, for approval. 

(2) If the Secretary revokes approval 

of a previously approved test, the 

Secretary publishes a notice of that 

revocation in the Federal Register. The 

revocation becomes effective— 

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Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations 66963 

(i) One hundred and twenty days from 

the date the notice of revocation is 

published in the Federal Register; or 

(ii) An earlier date specified by the 

Secretary in a notice published in the 

Federal Register. 

(Approved by the Office of Management and 

Budget under control number 1845–0049) 

(Authority: 20 U.S.C. 1091(d)) 

§ 668.146 Criteria for approving tests. 

(a) Except as provided in § 668.148, 

the Secretary approves a test under this 

subpart if— 

(1) The test meets the criteria set forth 

in paragraph (b) of this section; 

(2) The test publisher or the State 

satisfies the requirements set forth in 

paragraph (c) of this section; and 

(3) The Secretary makes a 

determination that the information the 

test publisher or State submitted in 

accordance with § 668.144(c)(17) or 

(d)(8), as applicable, provides adequate 

assurance that the test publisher or State 

will conduct rigorous test anomaly 

analyses and take appropriate action if 

test administrators do not comply with 

testing procedures. 

(b) To be approved under this subpart, 

a test must— 

(1) Assess secondary school level 

basic verbal and quantitative skills and 

general learned abilities; 

(2) Sample the major content domains 

of secondary school level verbal and 

quantitative skills with sufficient 

numbers of questions to— 

(i) Adequately represent each domain; 

and 

(ii) Permit meaningful analyses of 

item-level performance by students who 

are representative of the contemporary 

population beyond the age of 

compulsory school attendance and have 

earned a high school diploma; 

(3) Require appropriate test-taking 

time to permit adequate sampling of the 

major content domains described in 

paragraph (b)(2) of this section; 

(4) Have all forms (including short 

forms) comparable in reliability; 

(5) Have, in the case of a test that is 

revised, new scales, scale values, and 

scores that are demonstrably 

comparable to the old scales, scale 

values, and scores; 

(6) Meet all standards for test 

construction provided in the 1999 

edition of the Standards for Educational 

and Psychological Testing, prepared by 

a joint committee of the American 

Educational Research Association, the 

American Psychological Association, 

and the National Council on 

Measurement in Education incorporated 

by reference in this section. 

Incorporation by reference of this 

document has been approved by the 

Director of the Office of the Federal 

Register pursuant to the Director’s 

authority under 5 U.S.C. 552(a) and 1 

CFR part 51. The incorporated 

document is on file at the Department 

of Education, Federal Student Aid, room 

113E2, 830 First Street, NE., 

Washington, DC 20002, phone (202) 

377–4026, and at the National Archives 

and Records Administration (NARA). 

For information on the availability of 

this material at NARA, call 1–866–272– 

6272, or go to: http://www.archives.gov/ 

federal_register/ 

code_of_federal_regulations/ 

ibr_locations.html. The document also 

may be obtained from the American 

Educational Research Association at: 

http://www.aera.net; and 

(7) Have the test publisher’s or the 

State’s guidelines for retesting, 

including time between test-taking, be 

based on empirical analyses that are 

part of the studies of test reliability. 

(c) In order for a test to be approved 

under this subpart, a test publisher or a 

State must— 

(1) Include in the test booklet or 

package— 

(i) Clear, specific, and complete 

instructions for test administration, 

including information for test takers on 

the purpose, timing, and scoring of the 

test; and 

(ii) Sample questions representative of 

the content and average difficulty of the 

test; 

(2) Have two or more secure, equated, 

alternate forms of the test; 

(3) Except as provided in §§ 668.148 

and 668.149, provide tables of 

distributions of test scores which clearly 

indicate the mean score and standard 

deviation for high school graduates who 

have taken the test within three years 

prior to the date that the test is 

submitted to the Secretary for approval 

under § 668.144; 

(4) Norm the test with— 

(i) Groups that are of sufficient size to 

produce defensible standard errors of 

the mean and are not disproportionately 

composed of any race or gender; and 

(ii) A contemporary sample that is 

representative of the population of 

persons who have earned a high school 

diploma in the United States; and 

(5) If test batteries include sub-tests 

assessing different verbal and/or 

quantitative skills, a distribution of test 

scores as described in paragraph (c)(3) 

of this section that allows the Secretary 

to prescribe either— 

(i) A passing score for each sub-test; 

or 

(ii) One composite passing score for 

verbal skills and one composite passing 

score for quantitative skills. 

(Approved by the Office of Management and 

Budget under control number 1845–0049) 

(Authority: 20 U.S.C. 1091(d)) 

§ 668.147 Passing scores. 

Except as provided in §§ 668.144(d), 

668.148, and 668.149, to demonstrate 

that a test taker has the ability to benefit 

from the education and training offered 

by the institution, the Secretary 

specifies that the passing score on each 

approved test is one standard deviation 

below the mean score of a sample of 

individuals who have taken the test 

within the three years before the test is 

submitted to the Secretary for approval. 

The sample must be representative of 

the population of high school graduates 

in the United States. 

(Authority: 20 U.S.C. 1091(d)) 

§ 668.148 Additional criteria for the 

approval of certain tests. 

(a) In addition to satisfying the criteria 

in § 668.146, to be approved by the 

Secretary, a test must meet the following 

criteria, if applicable: 

(1) In the case of a test developed for 

a non-native speaker of English who is 

enrolled in a program that is taught in 

his or her native language, the test must 

be— 

(i) Linguistically accurate and 

culturally sensitive to the population for 

which the test is designed, regardless of 

the language in which the test is 

written; 

(ii) Supported by documentation 

detailing the development of normative 

data; 

(iii) If translated from an English 

version, supported by documentation of 

procedures to determine its reliability 

and validity with reference to the 

population for which the translated test 

was designed; 

(iv) Developed in accordance with 

guidelines provided in the 1999 edition 

of the ‘‘Testing Individuals of Diverse 

Linguistic Backgrounds’’ section of the 

Standards for Educational and 

Psychological Testing prepared by a 

joint committee of the American 

Educational Research Association, the 

American Psychological Association, 

and the National Council on 

Measurement in Education incorporated 

by reference in this section. 

Incorporation by reference of this 

document has been approved by the 

Director of the Office of the Federal 

Register pursuant to the Director’s 

authority under 5 U.S.C. 552(a) and 1 

CFR part 51. The incorporated 

document is on file at the Department 

of Education, Federal Student Aid, room 

113E2, 830 First Street, NE., 

Washington, DC 20002, phone (202) 

377–4026, and at the National Archives 

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66964 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations 

and Records Administration (NARA). 

For information on the availability of 

this material at NARA, call 1–866–272– 

6272, or go to: http://www.archives.gov/ 

federal_register/ 

code_of_federal_regulations/ 

ibr_locations.html. The document also 

may be obtained from the American 

Educational Research Association at: 

http://www.aera.net; and 

(v)(A) If the test is in Spanish, 

accompanied by a distribution of test 

scores that clearly indicates the mean 

score and standard deviation for 

Spanish-speaking students with high 

school diplomas who have taken the test 

within five years before the date on 

which the test is submitted to the 

Secretary for approval. 

(B) If the test is in a language other 

than Spanish, accompanied by a 

recommendation for a provisional 

passing score based upon performance 

of a sample of test takers representative 

of non-English speaking individuals 

who speak a language other than 

Spanish and who have a high school 

diploma. The sample upon which the 

recommended provisional passing score 

is based must be large enough to 

produce stable norms. 

(2) In the case of a test that is 

modified for use for individuals with 

disabilities, the test publisher or State 

must— 

(i) Follow guidelines provided in the 

‘‘Testing Individuals with Disabilities’’ 

section of the Standards for Educational 

and Psychological Testing; and 

(ii) Provide documentation of the 

appropriateness and feasibility of the 

modifications relevant to test 

performance. 

(3) In the case of a computer-based 

test, the test publisher or State, as 

applicable, must— 

(i) Provide documentation to the 

Secretary that the test complies with the 

basic principles of test construction and 

standards of reliability and validity as 

promulgated in the Standards for 

Educational and Psychological Testing; 

(ii) Provide test administrators with 

instructions for familiarizing test takers 

with computer hardware prior to testtaking; and 

(iii) Provide two or more parallel, 

equated forms of the test, or, if parallel 

forms are generated from an item pool, 

provide documentation of the methods 

of item selection for alternate forms. 

(b) If a test is designed solely to 

measure the English language 

competence of non-native speakers of 

English— 

(1) The test must meet the criteria set 

forth in § 668.146(b)(6), (c)(1), (c)(2), and 

(c)(4); and 

(2) The test publisher must 

recommend a passing score based on the 

mean score of test takers beyond the age 

of compulsory school attendance who 

completed U.S. high school equivalency 

programs, formal training programs, or 

bilingual vocational programs. 

(Approved by the Office of Management and 

Budget under control number 1845–0049) 

(Authority: 20 U.S.C. 1091(d)) 

§ 668.149 Special provisions for the 

approval of assessment procedures for 

individuals with disabilities. 

If no test is reasonably available for 

individuals with disabilities so that no 

test can be approved under §§ 668.146 

or 668.148 for these individuals, the 

following procedures apply: 

(a) The Secretary considers a modified 

test or testing procedure, or instrument 

that has been scientifically developed 

specifically for the purpose of 

evaluating the ability to benefit from 

postsecondary training or education of 

individuals with disabilities to be an 

approved test for purposes of this 

subpart provided that the testing 

procedure or instrument measures both 

basic verbal and quantitative skills at 

the secondary school level. 

(b) The Secretary considers the 

passing scores for these testing 

procedures or instruments to be those 

recommended by the test publisher or 

State, as applicable. 

(c) The test publisher or State, as 

applicable, must— 

(1) Maintain appropriate 

documentation, including a description 

of the procedures or instruments, their 

content domains, technical properties, 

and scoring procedures; and 

(2) Require the test administrator to— 

(i) Use the procedures or instruments 

in accordance with instructions 

provided by the test publisher or State, 

as applicable; and 

(ii) Use the passing scores 

recommended by the test publisher or 

State, as applicable. 

(Approved by the Office of Management and 

Budget under control number 1845–0049) 

(Authority: 20 U.S.C. 1091(d)) 

§ 668.150 Agreement between the 

Secretary and a test publisher or a State. 

(a) If the Secretary approves a test 

under this subpart, the test publisher or 

the State that submitted the test must 

enter into an agreement with the 

Secretary that contains the provisions 

set forth in paragraph (b) of this section 

before an institution may use the test to 

determine a student’s eligibility for title 

IV, HEA program funds. 

(b) The agreement between a test 

publisher or a State, as applicable, and 

the Secretary provides that the test 

publisher or the State, as applicable, 

must— 

(1) Allow only test administrators that 

it certifies to give its test; 

(2) Require each test administrator it 

certifies to— 

(i) Provide the test publisher or the 

State, as applicable, with a certification 

statement that indicates he or she is not 

currently decertified; and 

(ii) Notify the test publisher or the 

State, as applicable, immediately if any 

other test publisher or State decertifies 

the test administrator; 

(3) Only certify test administrators 

who— 

(i) Have the necessary training, 

knowledge, and skill to test students in 

accordance with the test publisher’s or 

the State’s testing requirements; 

(ii) Have the ability and facilities to 

keep its test secure against disclosure or 

release; and 

(iii) Have not been decertified within 

the last three years by any test publisher 

or State; 

(4) Decertify a test administrator for a 

period of three years if the test publisher 

or the State finds that the test 

administrator— 

(i) Has failed to give its test in 

accordance with the test publisher’s or 

the State’s instructions; 

(ii) Has not kept the test secure; 

(iii) Has compromised the integrity of 

the testing process; or 

(iv) Has given the test in violation of 

the provisions contained in § 668.151; 

(5) Reevaluate the qualifications of a 

test administrator who has been 

decertified by another test publisher or 

State and determine whether to 

continue the test administrator’s 

certification or to decertify the test 

administrator; 

(6) Immediately notify the test 

administrator, the Secretary, and the 

institutions where the test administrator 

previously administered approved tests 

when the test publisher or the State 

decertifies a test administrator; 

(7)(i) Review the test results of the 

tests administered by a decertified test 

administrator and determine which tests 

may have been improperly administered 

during the five (5) year period preceding 

the date of decertification; 

(ii) Immediately notify the affected 

institutions and students or prospective 

students; and 

(iii) Provide a report to the Secretary 

on the results of the review and the 

notifications provided to institutions 

and students or prospective students; 

(8) Report to the Secretary if the test 

publisher or the State certifies a 

previously decertified test administrator 

after the three year period specified in 

paragraph (b)(4) of this section; 

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(9) Score a test answer sheet that it 

receives from a test administrator; 

(10) If a computer-based test is used, 

provide the test administrator with 

software that will— 

(i) Immediately generate a score report 

for each test taker; 

(ii) Allow the test administrator to 

send to the test publisher or the State, 

as applicable, a record of the test taker’s 

performance on each test item and the 

test taker’s test scores using a data 

transfer method that is encrypted and 

secure; and 

(iii) Prohibit any changes in test taker 

responses or test scores; 

(11) Promptly send to the student and 

the institution the student indicated he 

or she is attending or scheduled to 

attend a notice stating the student’s 

score for the test and whether or not the 

student passed the test; 

(12) Keep each test answer sheet or 

electronic record forwarded for scoring 

and all other documents forwarded by 

the test administrator with regard to the 

test for a period of three years from the 

date the analysis of the tests results, 

described in paragraph (b)(13) of this 

section, was sent to the Secretary; 

(13) Analyze the test scores of 

students who take the test to determine 

whether the test scores and data 

produce any irregular pattern that raises 

an inference that the tests were not 

being properly administered, and 

provide the Secretary with a copy of this 

analysis within 18 months after the test 

was approved and every 18 months 

thereafter during the period of test 

approval; 

(14) Upon request, give the Secretary, 

a State agency, an accrediting agency, 

and law enforcement agencies access to 

test records or other documents related 

to an audit, investigation, or program 

review of an institution, the test 

publisher, or a test administrator; 

(15) Immediately report to the 

Secretary if the test publisher or the 

State finds any credible information 

indicating that a test has been 

compromised; 

(16) Immediately report to the Office 

of Inspector General of the Department 

of Education for investigation if the test 

publisher or the State finds any credible 

information indicating that a test 

administrator or institution may have 

engaged in civil or criminal fraud, or 

other misconduct; and 

(17) Require a test administrator who 

provides a test to an individual with a 

disability who requires an 

accommodation in the test’s 

administration to report to the test 

publisher or the State within the time 

period specified in § 668.151(b)(2) or 

§ 668.152(b)(2), as applicable, the nature 

of the disability and the 

accommodations that were provided. 

(c)(1) The Secretary may terminate an 

agreement with a test publisher or a 

State, as applicable, if the test publisher 

or the State fails to carry out the terms 

of the agreement described in paragraph 

(b) of this section. 

(2) Before terminating the agreement, 

the Secretary gives the test publisher or 

the State, as applicable, the opportunity 

to show that it has not failed to carry out 

the terms of its agreement. 

(3) If the Secretary terminates an 

agreement with a test publisher or a 

State under this section, the Secretary 

publishes a notice in the Federal 

Register specifying when institutions 

may no longer use the test publisher’s 

or the State’s test(s) for purposes of 

determining a student’s eligibility for 

title IV, HEA program funds. 

(Approved by the Office of Management and 

Budget under control number 1845–0049) 

(Authority: 20 U.S.C. 1091(d)) 

§ 668.151 Administration of tests. 

(a)(1) To establish a student’s 

eligibility for title IV, HEA program 

funds under this subpart, an institution 

must select a test administrator to give 

an approved test. 

(2) An institution may use the results 

of an approved test it received from an 

approved test publisher or assessment 

center to determine a student’s 

eligibility to receive title IV, HEA 

program funds if the test was 

independently administered and 

properly administered in accordance 

with this subpart. 

(b) The Secretary considers that a test 

is independently administered if the test 

is— 

(1) Given at an assessment center by 

a certified test administrator who is an 

employee of the center; or 

(2) Given by an independent test 

administrator who maintains the test at 

a secure location and submits the test 

for scoring by the test publisher or the 

State or, for a computer-based test, a 

record of the test scores, within two 

business days of administering the test. 

(c) The Secretary considers that a test 

is not independently administered if an 

institution— 

(1) Compromises test security or 

testing procedures; 

(2) Pays a test administrator a bonus, 

commission, or any other incentive 

based upon the test scores or pass rates 

of its students who take the test; or 

(3) Otherwise interferes with the test 

administrator’s independence or test 

administration. 

(d) The Secretary considers that a test 

is properly administered if the test 

administrator— 

(1) Is certified by the test publisher or 

the State, as applicable, to give the test 

publisher’s or the State’s test; 

(2) Administers the test in accordance 

with instructions provided by the test 

publisher or the State, as applicable, 

and in a manner that ensures the 

integrity and security of the test; 

(3) Makes the test available only to a 

test-taker, and then only during a 

regularly scheduled test; 

(4) Secures the test against disclosure 

or release; and 

(5) Submits the completed test or, for 

a computer-based test, a record of test 

scores, to the test publisher or the State, 

as applicable, within the time period 

specified in § 668.152(b) or paragraph 

(b)(2) of this section, as appropriate, and 

in accordance with the test publisher’s 

or the State’s instructions. 

(e) An independent test administrator 

may not score a test. 

(f) An individual who fails to pass a 

test approved under this subpart may 

not retake the same form of the test for 

the period prescribed by the test 

publisher or the State responsible for 

the test. 

(g) An institution must maintain a 

record for each individual who took a 

test under this subpart. The record must 

include— 

(1) The test taken by the individual; 

(2) The date of the test; 

(3) The individual’s scores as reported 

by the test publisher, an assessment 

center, or the State; 

(4) The name and address of the test 

administrator who administered the test 

and any identifier assigned to the test 

administrator by the test publisher or 

the State; and 

(5) If the individual who took the test 

is an individual with a disability and 

was unable to be evaluated by the use 

of an approved ATB test or the 

individual requested or required testing 

accommodations, documentation of the 

individual’s disability and of the testing 

arrangements provided in accordance 

with § 668.153(b). 

(Approved by the Office of Management 

and Budget under control number 1845– 

0049) 

(Authority: 20 U.S.C. 1091(d)) 

§ 668.152 Administration of tests by 

assessment centers. 

(a) If a test is given by an assessment 

center, the assessment center must 

properly administer the test as 

described in § 668.151(d), and 

§ 668.153, if applicable. 

(b)(1) Unless an agreement between a 

test publisher or a State, as applicable, 

and an assessment center indicates 

otherwise, an assessment center scores 

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the tests it gives and promptly notifies 

the institution and the student of the 

student’s score on the test and whether 

the student passed the test. 

(2) If the assessment center scores the 

test, it must provide weekly to the test 

publisher or the State, as applicable— 

(i) All copies of the completed test, 

including the name and address of the 

test administrator who administered the 

test and any identifier assigned to the 

test administrator by the test publisher 

or the State, as applicable; or 

(ii) A report listing all test-takers’ 

scores and institutions to which the 

scores were sent and the name and 

address of the test administrator who 

administered the test and any identifier 

assigned to the test administrator by the 

test publisher or the State, as applicable. 

(Approved by the Office of Management 

and Budget under control number 1845– 

0049) 

(Authority: 20 U.S.C. 1091(d)) 

§ 668.153 Administration of tests for 

individuals whose native language is not 

English or for individuals with disabilities. 

(a) Individuals whose native language 

is not English. For an individual whose 

native language is not English and who 

is not fluent in English, the institution 

must use the following tests, as 

applicable: 

(1) If the individual is enrolled or 

plans to enroll in a program conducted 

entirely in his or her native language, 

the individual must take a test approved 

under §§ 668.146 and 668.148(a)(1). 

(2) If the individual is enrolled or 

plans to enroll in a program that is 

taught in English with an ESL 

component, the individual must take an 

English language proficiency assessment 

approved under § 668.148(b) and, before 

beginning the portion of the program 

taught in English, a test approved under 

§ 668.146. 

(3) If the individual is enrolled or 

plans to enroll in a program that is 

taught in English without an ESL 

component, or the individual does not 

enroll in any ESL component offered, 

the individual must take a test in 

English approved under § 668.146. 

(4) If the individual enrolls in an ESL 

program, the individual must take an 

ESL test approved under § 668.148(b). 

(5) If the individual enrolls or plans 

to enroll in a program that is taught in 

the student’s native language that either 

has an ESL component or a portion of 

the program will be taught in English, 

the individual must take an English 

proficiency test approved under 

§ 668.148(b) prior to beginning the 

portion of the program taught in 

English. 

(b) Individuals with disabilities. (1) 

For an individual with a disability who 

has neither a high school diploma nor 

its equivalent and who is applying for 

title IV, HEA program funds and seeks 

to show his or her ability to benefit 

through the testing procedures in this 

subpart, an institution must use a test 

described in § 668.148(a)(2) or 

§ 668.149(a). 

(2) The test must reflect the 

individual’s skills and general learned 

abilities. 

(3) The test administrator must ensure 

that there is documentation to support 

the determination that the individual is 

an individual with a disability and 

requires accommodations—such as 

extra time or a quiet room—for taking an 

approved test, or is unable to be 

evaluated by the use of an approved 

ATB test. 

(4) Documentation of an individual’s 

disability may be satisfied by— 

(i) A written determination, including 

a diagnosis and information about 

testing accommodations, if such 

accommodation information is 

available, by a licensed psychologist or 

physician; or 

(ii) A record of the disability from a 

local or State educational agency, or 

other government agency, such as the 

Social Security Administration or a 

vocational rehabilitation agency, that 

identifies the individual’s disability. 

This record may, but is not required to, 

include a diagnosis and recommended 

testing accommodations. 

(Approved by the Office of Management 

and Budget under control number 1845– 

0049) 

(Authority: 20 U.S.C. 1091(d)) 

§ 668.154 Institutional accountability. 

An institution is liable for the title IV, 

HEA program funds disbursed to a 

student whose eligibility is determined 

under this subpart only if— 

(a) The institution used a test that was 

not administered independently, in 

accordance with § 668.151(b); 

(b) The institution or an employee of 

the institution compromised the testing 

process in any way; or 

(c) The institution is unable to 

document that the student received a 

passing score on an approved test. 

(Authority: 20 U.S.C. 1091(d)) 

§ 668.155 [Reserved] 

§ 668.156 Approved State process. 

(a)(1) A State that wishes the 

Secretary to consider its State process as 

an alternative to achieving a passing 

score on an approved, independently 

administered test for the purpose of 

determining a student’s eligibility for 

title IV, HEA program funds must apply 

to the Secretary for approval of that 

process. 

(2) To be an approved State process, 

the State process does not have to 

include all the institutions located in 

that State, but must indicate which 

institutions are included. 

(b) The Secretary approves a State’s 

process if— 

(1) The State administering the 

process can demonstrate that the 

students it admits under that process 

without a high school diploma or its 

equivalent, who enroll in participating 

institutions have a success rate as 

determined under paragraph (h) of this 

section that is within 95 percent of the 

success rate of students with high 

school diplomas; and 

(2) The State’s process satisfies the 

requirements contained in paragraphs 

(c) and (d) of this section. 

(c) A State process must require 

institutions participating in the process 

to provide each student they admit 

without a high school diploma or its 

recognized equivalent with the 

following services: 

(1) Orientation regarding the 

institution’s academic standards and 

requirements, and student rights. 

(2) Assessment of each student’s 

existing capabilities through means 

other than a single standardized test. 

(3) Tutoring in basic verbal and 

quantitative skills, if appropriate. 

(4) Assistance in developing 

educational goals. 

(5) Counseling, including counseling 

regarding the appropriate class level for 

that student given the student’s 

individual’s capabilities. 

(6) Follow-up by teachers and 

counselors regarding the student’s 

classroom performance and satisfactory 

progress toward program completion. 

(d) A State process must— 

(1) Monitor on an annual basis each 

participating institution’s compliance 

with the requirements and standards 

contained in the State’s process; 

(2) Require corrective action if an 

institution is found to be in 

noncompliance with the State process 

requirements; and 

(3) Terminate an institution from the 

State process if the institution refuses or 

fails to comply with the State process 

requirements. 

(e)(1) The Secretary responds to a 

State’s request for approval of its State’s 

process within six months after the 

Secretary’s receipt of that request. If the 

Secretary does not respond by the end 

of six months, the State’s process is 

deemed to be approved. 

(2) An approved State process 

becomes effective for purposes of 

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determining student eligibility for title 

IV, HEA program funds under this 

subpart— 

(i) On the date the Secretary approves 

the process; or 

(ii) Six months after the date on 

which the State submits the process to 

the Secretary for approval, if the 

Secretary neither approves nor 

disapproves the process during that six 

month period. 

(f) The Secretary approves a State 

process for a period not to exceed five 

years. 

(g)(1) The Secretary withdraws 

approval of a State process if the 

Secretary determines that the State 

process violated any terms of this 

section or that the information that the 

State submitted as a basis for approval 

of the State process was inaccurate. 

(2) The Secretary provides a State 

with the opportunity to contest a 

finding that the State process violated 

any terms of this section or that the 

information that the State submitted as 

a basis for approval of the State process 

was inaccurate. 

(h) The State must calculate the 

success rates as referenced in paragraph 

(b) of this section by— 

(1) Determining the number of 

students with high school diplomas 

who, during the applicable award year 

described in paragraph (i) of this 

section, enrolled in participating 

institutions and— 

(i) Successfully completed education 

or training programs; 

(ii) Remained enrolled in education or 

training programs at the end of that 

award year; or 

(iii) Successfully transferred to and 

remained enrolled in another institution 

at the end of that award year; 

(2) Determining the number of 

students with high school diplomas 

who enrolled in education or training 

programs in participating institutions 

during that award year; 

(3) Determining the number of 

students calculated in paragraph (h)(2) 

of this section who remained enrolled 

after subtracting the number of students 

who subsequently withdrew or were 

expelled from participating institutions 

and received a 100 percent refund of 

their tuition under the institutions’ 

refund policies; 

(4) Dividing the number of students 

determined in paragraph (h)(1) of this 

section by the number of students 

determined in paragraph (h)(3) of this 

section; 

(5) Making the calculations described 

in paragraphs (h)(1) through (h)(4) of 

this section for students without a high 

school diploma or its recognized 

equivalent who enrolled in participating 

institutions. 

(i) For purposes of paragraph (h) of 

this section, the applicable award year 

is the latest complete award year for 

which information is available that 

immediately precedes the date on which 

the State requests the Secretary to 

approve its State process, except that 

the award year selected must be one of 

the latest two completed award years 

preceding that application date. 

(Approved by the Office of Management 

and Budget under control number 1845– 

0049) 

(Authority: 20 U.S.C. 1091(d)) 

■ 26. Section 668.164 is amended by: 

■ A. In paragraph (g)(2)(i), removing the 

words ‘‘Except in the case of a parent 

PLUS loan, the’’, and adding, in their 

place, the word ‘‘The’’. 

■ B. In paragraph (g)(4)(iv), removing 

the words ‘‘a Federal Pell Grant, an 

ACG, or a National SMART Grant’’, and 

adding, in their place, the words ‘‘any 

title IV, HEA program assistance’’. 

■ C. Adding paragraph (i). 

The addition reads as follows: 

§ 668.164 Disbursing funds. 

* * * * * 

(i) Provisions for books and supplies. 

(1) An institution must provide a way 

for a Federal Pell Grant eligible student 

to obtain or purchase, by the seventh 

day of a payment period, the books and 

supplies required for the payment 

period if, 10 days before the beginning 

of the payment period— 

(i) The institution could disburse the 

title IV, HEA program funds for which 

the student is eligible; and 

(ii) Presuming the funds were 

disbursed, the student would have a 

credit balance under paragraph (e) of 

this section. 

(2) The amount the institution 

provides to the Federal Pell Grant 

eligible student to obtain or purchase 

books and supplies is the lesser of the 

presumed credit balance under this 

paragraph or the amount needed by the 

student, as determined by the 

institution. 

(3) The institution must have a policy 

under which a Federal Pell Grant 

eligible student may opt out of the way 

the institution provides for the student 

to obtain or purchase books and 

supplies under this paragraph. 

(4) If a Federal Pell Grant eligible 

student uses the way provided by the 

institution to obtain or purchase books 

and supplies under this paragraph, the 

student is considered to have authorized 

the use of title IV, HEA funds and the 

institution does not need to obtain a 

written authorization under paragraph 

(d)(1)(iv) of this section and § 668.165(b) 

for this purpose. 

* * * * * 

PART 682—FEDERAL FAMILY 

EDUCATION LOAN (FFEL) PROGRAM 

■ 27. The authority citation for part 682 

is revised to read as follows: 

Authority: 20 U.S.C. 1071 to 1087–2, 

unless otherwise noted. 

§ 682.200 [Amended] 

■ 28. Section 682.200(a)(2) is amended 

by adding, in alphabetical order, the 

term ‘‘Credit hour’’. 

PART 685—WILLIAM D. FORD 

FEDERAL DIRECT LOAN PROGRAM 

■ 29. The authority citation for part 685 

continues to read as follows: 

Authority: 20 U.S.C. 1070g, 1087a, et seq., 

unless otherwise noted. 

■ 30. Section 685.102 is amended by: 

■ A. In paragraph (a)(2), adding, in 

alphabetical order, the term ‘‘Credit 

hour’’. 

■ B. In paragraph (b), adding, in 

alphabetical order, the definition of 

Payment data to read as follows: 

§ 685.102 Definitions. 

* * * * * 

(b) * * * 

Payment data: An electronic record 

that is provided to the Secretary by an 

institution showing student 

disbursement information. 

* * * * * 

■ 31. Section 685.301 is amended by 

revising paragraph (e)(1) to read as 

follows: 

§ 685.301 Origination of a loan by a Direct 

Loan Program school. 

* * * * * 

(e) * * * 

(1) The Secretary accepts a student’s 

Payment Data that is submitted in 

accordance with procedures established 

through publication in the Federal 

Register, and that contains information 

the Secretary considers to be accurate in 

light of other available information 

including that previously provided by 

the student and the institution. 

* * * * * 

PART 686—TEACHER EDUCATION 

ASSISTANCE FOR COLLEGE AND 

HIGHER EDUCATION (TEACH) GRANT 

PROGRAM 

■ 32. The authority citation for part 686 

continues to read as follows: 

Authority: 20 U.S.C. 1070g, et seq., unless 

otherwise noted. 

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■ 33. Section 686.2 is amended by: 

■ A. In paragraph (a), adding, in 

alphabetical order, the term ‘‘Credit 

hour’’. 

■ B. In paragraph (d), revising the 

definition of Payment Data to read as 

follows: 

§ 686.2 Definitions. 

* * * * * 

(d) * * * 

Payment Data: An electronic record 

that is provided to the Secretary by an 

institution showing student 

disbursement information. 

* * * * * 

■ 34. Section 686.37 is amended by 

revising paragraph (b) to read as follows: 

§ 686.37 Institutional reporting 

requirements. 

* * * * * 

(b) The Secretary accepts a student’s 

Payment Data that is submitted in 

accordance with procedures established 

through publication in the Federal 

Register, and that contains information 

the Secretary considers to be accurate in 

light of other available information 

including that previously provided by 

the student and the institution. 

* * * * * 

PART 690—FEDERAL PELL GRANT 

PROGRAM 

■ 35. The authority citation for part 690 

continues to read as follows: 

Authority: 20 U.S.C. 1070a, 1070g, unless 

otherwise noted. 

§ 690.2 [Amended] 

■ 36. Section 690.2 is amended by: 

■ A. In paragraph (a), adding, in 

alphabetical order, the term ‘‘Credit 

hour’’. 

■ B. In paragraph (b), adding, in 

alphabetical order, the terms 

‘‘Institutional student information 

record (ISIR)’’, ‘‘Student aid report 

(SAR)’’, ‘‘Valid institutional student 

information record (valid ISIR)’’, and 

‘‘Valid student aid report (valid SAR)’’. 

■ C. In paragraph (c), by removing the 

definitions for the terms ‘‘Institutional 

Student Information Record (ISIR)’’, 

‘‘Student Aid Report (SAR)’’, ‘‘Valid 

Institutional Student Information 

Record (valid ISIR)’’, and ‘‘Valid Student 

Aid Report’’. 

§ 690.61 [Amended] 

■ 37. Section 690.61 is amended by: 

■ A. In the paragraph (b) heading, 

adding the word ‘‘Valid’’ before the 

words ‘‘Student Aid Report’’ and before 

the words ‘‘Institutional Student 

Information Record’’. 

■ B. In the paragraph (b) introductory 

text, adding the word ‘‘valid’’ before the 

word ‘‘SAR’’. 

PART 691—ACADEMIC 

COMPETITIVENESS GRANT (ACG) 

AND NATIONAL SCIENCE AND 

MATHEMATICS ACCESS TO RETAIN 

TALENT GRANT (NATIONAL SMART 

GRANT) PROGRAMS 

■ 38. The authority citation for part 691 

continues to read as follows: 

Authority: 20 U.S.C. 1070a–1, unless 

otherwise noted. 

§ 691.2 [Amended] 

■ 39. Section 691.2(a) is amended by 

adding, in alphabetical order, the term 

‘‘Credit hour’’. 

Note: The following appendix will not 

appear in the Code of Federal Regulations. 

Appendix A—Regulatory Impact 

Analysis 

Executive Order 12866 

Regulatory Impact Analysis 

Under Executive Order 12866, the 

Secretary must determine whether the 

regulatory action is ‘‘significant’’ and 

therefore subject to the requirements of the 

Executive Order and subject to review by the 

OMB. Section 3(f) of Executive Order 12866 

defines a ‘‘significant regulatory action’’ as an 

action likely to result in a rule that may (1) 

Have an annual effect on the economy of 

$100 million or more, or adversely affect a 

sector of the economy, productivity, 

competition, jobs, the environment, public 

health or safety, or State, local, or tribal 

governments or communities in a material 

way (also referred to as an ‘‘economically 

significant’’ rule); (2) create serious 

inconsistency or otherwise interfere with an 

action taken or planned by another agency; 

(3) materially alter the budgetary impacts of 

entitlement grants, user fees, or loan 

programs or the rights and obligations of 

recipients thereof; or (4) raise novel legal or 

policy issues arising out of legal mandates, 

the President’s priorities, or the principles set 

forth in the Executive order. 

Pursuant to the terms of the Executive 

order, we have determined that this 

regulatory action will have an annual effect 

on the economy of more than $100 million. 

Therefore, this action is ‘‘economically 

significant’’ and subject to OMB review under 

section 3(f)(1) of Executive Order 12866. 

Notwithstanding this determination, we have 

assessed the potential costs and benefits— 

both quantitative and qualitative—of this 

regulatory action and have determined that 

the benefits justify the costs. 

Need for Federal Regulatory Action 

Student debt is more prevalent and 

individual borrowers are incurring more debt 

than ever before. Twenty years ago, only one 

in six full-time freshmen at four-year public 

colleges and universities took out a Federal 

student loan; now more than half do. Today, 

nearly two-thirds of all graduating college 

seniors carry student loan debt. The 

availability of Federal student aid allows 

students to access post-secondary 

educational opportunities crucial for 

obtaining employment. It is therefore 

important for the Department to have a strong 

regulatory foundation on which to build to 

protect student aid funds. The fourteen 

provisions described in this Regulatory 

Impact Analysis represent a broad set of 

regulations and definitions that strengthen 

the Federal student aid programs by 

protecting students from aggressive and 

misleading recruiting practices, providing 

consumers with better information about the 

effectiveness of career college and training 

programs, and ensuring that only eligible 

students or programs receive title IV, HEA 

aid. 

These regulations are needed to implement 

provisions of the HEA, as amended by the 

HEOA, particularly related to (1) Programs 

that prepare students for gainful 

employment, (2) incentive compensation, (3) 

satisfactory academic progress policies, and 

(4) verification of information on student aid 

applications. These regulations also would 

implement changes made by the HEOA to 

provisions related to ability to benefit 

options. A description of the regulations, the 

reasons for adopting them, and an analysis of 

their effects were presented in the NPRM 

published on June 18, 2010. The NPRM 

included a Regulatory Impact Analysis and 

this section updates that analysis and 

describes changes to the proposed 

regulations that we considered in response to 

comments received and our reasons for 

adopting or rejecting them. 

Regulatory Alternatives Considered 

The Department considered a number of 

regulatory alternatives as part of the 

rulemaking process. These alternatives were 

described in detail in the preamble to the 

NPRM under both the Regulatory Impact 

Analysis and the Reasons sections 

accompanying the discussion of each 

proposed regulatory provision. To the extent 

that the Department has addressed 

alternatives in response to comments 

received on the NPRM, these are discussed 

elsewhere in the preamble to these final 

regulations under the Analysis of Comments 

and Changes section. 

As discussed in the Analysis of Comments 

and Changes section, these final regulations 

reflect decisions reached through negotiated 

rulemaking, statutory amendments included 

in the HEOA, and revisions in response to 

public comments. In many cases, these 

revisions were technical in nature and 

intended to address drafting issues or 

provide additional clarity. 

While we received many comments 

relating to the validation of high school 

diplomas and written arrangements, for the 

reasons we describe elsewhere in this 

preamble, we did not make any changes to 

those provisions. 

In response to comments related to 

disbursement of funds to Pell Grant 

recipients for books and supplies, 

§ 668.164(i) has been revised to specify that 

an institution must have a policy under 

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which a student may opt out of the way the 

institution provides for the student to 

purchase books and supplies by the seventh 

day of classes of a payment period. In 

addition, § 668.164(i) has been revised to 

specify that if a Federal Pell Grant eligible 

student uses the method provided by the 

institution to purchase books and supplies, 

the student is considered to have authorized 

the use of title IV, HEA funds and the 

institution does not need to obtain a written 

authorization under § 668.164(d)(1)(iv) and 

§ 668.165(b) for this purpose only. 

We also have updated the definition of fulltime student to provide that a student’s 

enrollment status for a term-based program 

may include repeating any coursework 

previously taken in the program but may not 

include more than one repetition of a 

previously passed course, or any repetition of 

a previously passed course due to the 

student’s failing other coursework. The only 

change we have made to the satisfactory 

academic progress provisions has been to 

revise § 668.34(a)(3)(ii) to provide that, for 

programs longer than an academic year in 

length, satisfactory academic progress is 

measured at the end of each payment period 

or at least annually to correspond to the end 

of a payment period. 

As discussed in the Analysis of Comments 

and Changes, the majority of the comments 

related to the Return of Title IV, HEA funds 

opposed the proposed changes or requested 

a delay in the effective date of this provision 

to allow further input from the community. 

Commenters were concerned with the burden 

on institutions, the potential harm to 

students who might withdraw after one 

module but return within the same payment 

period or period of enrollment, and the 

targeting of certain programs. In response to 

these comments, we revised § 668.22(a)(2) to 

provide that a student is not considered to 

have withdrawn if the student ceased 

attending the modules he or she was 

scheduled to attend, but the institution 

obtains a written confirmation from the 

student at the time of the withdrawal that he 

or she will attend a module that begins later 

in the same payment period or period of 

enrollment. This will provide more flexibility 

for a student who provides the authorization. 

This confirmation must be obtained at the 

time of withdrawal even if the student has 

already registered for subsequent courses. 

However, these final regulations provide that, 

for nonterm and nonstandard-term programs, 

a confirmation is valid only if the module the 

student plans to attend begins no later than 

45 calendar days after the end of the module 

the student ceased attending. 

Some additional technical and clarifying 

changes were made, including revising 

§ 668.22(f)(2)(ii) to clarify that, when 

determining the percentage of payment 

period or period of enrollment completed, 

the total number of calendar days in a 

payment period or period of enrollment does 

not include, for a payment period or period 

of enrollment in which any courses in the 

program are offered in modules, any 

scheduled breaks of at least five consecutive 

days when the student is not scheduled to 

attend a module or other course offered 

during that period of time. In response to 

commenters’ requests, we have included in 

the Analysis of Comments and Changes 

examples of scenarios for return of title IV, 

HEA program funds. 

We received extensive comments on the 

provisions related to the definition of a credit 

hour. Some of these comments supported the 

Department’s efforts and pointed out that 

many institutions and others, including 

States, are already following the definition or 

a comparable standard that would require 

only a minimal adjustment. As described in 

the Analysis of Comments and Changes 

section, other commenters opposed the 

definition of a credit hour and expressed 

concern that it would stifle innovation, 

especially in delivery methods, undermine 

the American higher education system, 

emphasize ‘‘seat-time’’, and interfere in a core 

academic issue. The Department maintains 

that the credit-hour definition is intended to 

provide a minimum, consistent standard for 

all institutions in determining the amount of 

student work necessary to award credit hours 

equitably for Federal program purposes. In 

response to the discussion of the credit hour 

provision, we have revised the definition of 

credit hour to clarify the basic principles 

applied in the proposed definition of a credit 

hour and have specified further in the 

definition that it is the institution’s 

responsibility to determine the appropriate 

credit hours or equivalencies. We also have 

revised the credit-hour definition to clarify 

that the amount of work specified is a 

minimum standard with no requirement for 

the standard to be exceeded. 

With respect to the provisions relating to 

misrepresentation, we have revised 

§ 668.72(c) to prohibit false, erroneous, or 

misleading statements concerning whether 

completion of an educational program 

qualifies a students for licensure or 

employment in the States in which the 

educational program is offered and not just 

the State in which the institution is located. 

Additionally, we have revised § 668.72(n) to 

specify that a failure to disclose that the 

degree requires specialized accreditation is a 

misrepresentation. To address concerns over 

liability for third-party statements, we agreed 

to limit the reach of the ban on making 

substantial misrepresentations to statements 

made by any ineligible institution, 

organization, or person with whom the 

eligible institution has an agreement to 

provide educational programs or those that 

provide marketing, advertising, recruiting, or 

admissions services. We revised the 

definition of misleading statement in 

§ 668.71(c) to remove the word ‘‘capacity’’ 

from the phrase ‘‘capacity, likelihood, or 

tendency to deceive or confuse.’’ 

We received numerous comments 

regarding the incentive compensation 

provisions in the NPRM. Some of these 

comments supported the proposed changes 

due to the conflict of interest between an 

enrollment professional’s ethical obligations 

and financial interest. Other commenters 

opposed the changes, questioning the 

Department’s legal authority to regulate, 

whether there was sufficient evidence to 

support the regulations, and the reasoning for 

the policy changes. We maintain that the 

elimination of the 12 ‘‘safe harbors’’ in 

§ 668.14(b)(22) is needed to ensure program 

integrity, protect students, and align 

institutional practices with the goals 

intended by Congress. The Department did 

make a few clarifying changes. For example, 

the changes to § 668.14(b) based on 

comments include: (i) Adding ‘‘in any part’’ 

to § 668.14(b)(22) when referring to incentive 

payments to eliminate confusion that a 

portion of an individual’s compensation may 

be based on enrollments or the award of 

financial aid; (ii) revising the regulations to 

provide that an employee who receives 

multiple compensation adjustments in a 

calendar year and is engaged in any student 

enrollment or admission activity or in 

making decisions regarding the award of title 

IV, HEA program funds is considered to have 

received such adjustments based on securing 

enrollment or the award of financial aid if 

those adjustments create compensation that 

is based in any part, directly or indirectly, 

upon success in securing enrollments or the 

award of financial aid; (iii) revising 

§ 668.14(b)(22)(ii) to provide that eligible 

institutions, organizations that are 

contractors to eligible institutions, and other 

entities may make merit-based adjustments to 

employee compensation provided that such 

adjustments are not based in any part, 

directly or indirectly, upon success in 

securing enrollments or the award of 

financial aid; (iv) confirming that prohibited 

incentive compensation includes any 

commission, bonus, or other incentive 

payment; (v) providing that profit sharing 

and bonuses are not prohibited as long as 

they are based on an institutional goal and 

distributed to all employees who have 

otherwise contributed to satisfaction of a 

particular institutional goal; and (vi) revising 

the definition of securing enrollments or the 

award of financial aid to provide more detail 

and to clarify that it includes activities 

through the completion of an educational 

program. 

The reporting and disclosure requirements 

related to gainful employment have also been 

updated in response to comments and further 

evaluation by the Department. We confirmed 

that the reporting and disclosure 

requirements apply only to programs subject 

to the gainful employment regulations and 

revised § 668.6(a) to require the reporting of 

CIP code and other information not only for 

program completers, but for all students who 

attend gainful employment programs. We 

also removed proposed § 600.4(a)(4)(iii) and 

revised § 600.4(a)(4)(i)(c) to clarify the 

programs subject to the regulations. The time 

period for which information has to be 

provided has been changed so that an 

institution must report the required 

information for each student, who during the 

award year beginning July 1, 2006, and for 

any subsequent award year, began attending 

or completed a program under § 668.8(c)(3) 

or (d). 

In addition to the student identifiers, CIP 

codes, program completion dates, and private 

education loan and institutional financing 

amounts specified in the NPRM, institutions 

will also have to report the name of the 

program and whether the student 

matriculated to a higher credentialed 

program at the institution or if available, 

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evidence that the student transferred to a 

higher credentialed program at another 

institution. To ensure the information is 

accessible, § 668.6(b) has been revised to 

require an institution to provide a prominent 

and direct link to information about a 

program on the home page of its Web site and 

on other pages where general, academic, or 

admissions information is provided about the 

program. The information must also be 

provided in promotional materials conveyed 

to prospective students. The information 

must be provided in a simple and meaningful 

manner. The information to be disclosed 

includes the on-time graduation rate, the 

total amount of tuition and fees the 

institution charges a student for completing 

the program within normal time, the typical 

costs for books and supplies, unless included 

as part of tuition and fees, and the amount 

of room and board, if applicable. The 

institution may include information on other 

costs, such as transportation and living 

expenses, but must provide a Web link or 

access to the program cost information it 

makes available under § 668.43(a). The 

Department intends to develop in the future 

a disclosure form and will be seeking public 

comment about the design of the form 

through the information collection process 

under the Paperwork Reduction Act of 1995 

(PRA). Until a form is developed and 

approved under the PRA process, institutions 

must comply with the disclosure 

requirements independently. 

Another area of disclosure is providing 

students information about potential 

occupations by linking to O*Net. 

Commenters expressed concern that this 

would require an unwieldy amount of data 

for some degree programs and the resulting 

information overload would not serve to 

accurately inform students. Section 668.6(b) 

has been revised so that if the number of 

occupations related to the program, as 

identified by entering the program’s full six 

digit CIP code on the O*NET crosswalk at 

http://online.onetcenter.org/crosswalk/ is 

more than ten, an institution is allowed to 

provide prospective students with Web links 

to a representative sample of the SOCs for 

which its graduates typically find 

employment within a few years after 

completing the program. 

In response to comments that the proposed 

placement rate was administratively complex 

and overly burdensome, we decided to direct 

the National Center for Education Statistics 

(NCES) to develop a placement rate 

methodology and the processes necessary for 

determining and documenting student 

employment and reporting placement data to 

the Department using IPEDS no later than 

July 1, 2012. The collaborative process used 

by NCES and the opportunity for public 

comment on the proposed measure will 

allow for a considered review and 

development of a meaningful placement rate. 

Section 668.6(b) has been revised to specify 

that an institution must disclose for each 

program the placement rate calculated under 

a methodology developed by its accrediting 

agency, State, or NCES. The institution 

would have to disclose the accrediting 

agency or State-required placement rate 

beginning on July 1, 2011 and to identify the 

accrediting agency or State under whose 

requirements the rate was calculated. The 

NCES-developed rate would have to be 

disclosed when the rates become available. 

To remove uncertainty and to ensure a 

consistent calculation, we have revised 

§ 668.6(b) to specify how an institution 

calculates an on-time completion rate for its 

programs. This is a measure designed to 

provide students meaningful information 

about the extent to which former students 

completed the program within the published 

length. As described elsewhere in this 

preamble, the on-time completion rate will 

be calculated by: (1) Determining the number 

of students who completed the program 

during the most recently completed calendar 

year; (2) determining the number of students 

in step (1) who completed the program 

within normal time, regardless of whether 

the students transferred into the program or 

changed programs at the institution; and (3) 

dividing the number of students who 

completed in normal time in step (2) by the 

total number of completers in step (1) and 

multiplying by 100. 

We also received comments about the use 

of median loan debt, the definition of private 

loans, and the treatment of debt incurred at 

prior programs or institutions. The examples 

that we provide earlier in this preamble 

clarify the treatment of loan debt from prior 

programs and institutions. In general, median 

loan debt for a program at an institution does 

not include debt incurred by students in 

attending a prior institution, unless the prior 

and current institutions are under common 

ownership or control or are otherwise related 

entities. In cases where a student changes 

programs while attending an institution or 

matriculates to a higher credentialed program 

at the institutions, the Department will 

associate the total amount of debt incurred by 

the student to the program the student 

completed. In order to perform the 

calculation of the median loan debt, 

§ 668.6(a) has been revised to provide that an 

institution must provide information about 

whether a student matriculated to a higher 

credentialed program at the same institution, 

or, if it has evidence, that a student 

transferred to a higher credentialed program 

at another institution. 

The provisions related to State 

authorization generated comments from 

those who supported the regulations as an 

effort to address fraud and abuse in Federal 

programs through State oversight and from 

others who believed the regulations infringed 

on States’ authority and upset the balance of 

the ‘‘Triad’’ of oversight by States, accrediting 

agencies, and the Federal Government. We 

clarified that the final regulations do not 

mandate that a State create any licensing 

agency for purposes of Federal program 

eligibility as an institution may be legally 

authorized by the State based on methods 

such as State charters, State laws, State 

constitutional provisions, or articles of 

incorporation that authorize an entity to offer 

educational programs beyond secondary 

education in the State. 

We revised § 600.9 to clarify that an 

institution’s legal authority to offer 

postsecondary education in a State must be 

by name and, thus, it must include the name 

of the institution being authorized. We have 

removed proposed § 600.9(b)(2) regarding 

adverse actions. In response to concerns 

about the effect on distance education and 

reciprocity arrangements, we clarified that an 

institution must meet any State requirements 

for it to be legally offering distance or 

correspondence education in that State and 

must be able to document to the Secretary the 

State’s approval upon request. Thus, a public 

institution is considered to comply with 

§ 600.9 to the extent it is operating in its 

home State, and, if operating in another 

State, it would be expected to comply with 

the requirements, if any, the other State 

considers applicable or with any reciprocal 

agreement that may be applicable. In making 

these clarifications, we are not preempting 

any State laws, regulations, or other 

requirements regarding reciprocal 

agreements, distance education, or 

correspondence study. 

We also have revised the State 

authorization provisions in § 600.9 to 

distinguish between a legal entity that is 

established as an educational institution and 

one established as a business or nonprofit 

entity. An institution authorized as an 

educational institution may be exempted by 

name from any State approval or licensure 

requirements based on the institution’s 

accreditation by an accrediting agency 

recognized by the Secretary or based on the 

institution being in operation for at least 20 

years. An institution established as a 

business or nonprofit charitable organization 

and not specifically as an educational 

institution may not be exempted from the 

State’s approval or licensure requirements 

based on accreditation, years in operation, or 

other comparable exemption. Chart A 

illustrates the basic principles of § 600.9 of 

these final regulations, with additional 

examples discussed in the preamble to these 

regulations. 

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CHART A—STATE AUTHORIZATION REQUIREMENTS

[Meets state authorization requirements*] 

Legal entity Entity description Approval or licensure process 

Educational institution .................. A public, private nonprofit, or for-profit institution established by name by a State through a charter, 

statute, or other action issued by an appropriate 

State agency or State entity as an educational institution authorized to operate educational programs beyond secondary education, including programs leading to a degree or certificate.

The institution must comply with any applicable State 

approval or licensure process and be approved or 

licensed by name, and may be exempted from 

such requirement based on its accreditation, or 

being in operation at least 20 years, or use both 

criteria. 

Business ....................................... A for-profit entity established by the State on the 

basis of an authorization or license to conduct 

commerce or provide services.

The State must have a State approval or licensure 

process, and the institution must comply with the 

State approval or licensure process and be approved or licensed by name. 

Charitable organization ................ A nonprofit entity established by the State on the 

basis of an authorization or license for the public 

interest or common good.

An institution in this category may not be exempted 

from State approval or licensure based on accreditation, years in operation, or a comparable exemption. 

*Notes: 

• Federal, tribal, and religious institutions are exempt from these requirements. 

• A State must have a process, applicable to all institutions except tribal and Federal institutions, to review and address complaints directly or 

through referrals. 

• The chart does not take into requirements related to State reciprocity. 

To maintain the State’s role in student 

consumer protection and handling student 

complaints related to State laws, we have 

revised § 668.43(b) to provide that an 

institution must make available to students 

or prospective students contact information 

for not only the State approval or licensing 

entities but also any other relevant State 

official or agency that would appropriately 

handle a student’s complaint. 

Finally, we have clarified the meaning of 

a religious institution for the applicability of 

the religious exemption. We also have 

expanded § 600.9(b) to provide that an 

institution is considered to be legally 

authorized by the State if it is exempt from 

State authorization as a religious institution 

by State law, in addition to the provision of 

the proposed regulations that an institution 

be exempt from State authorization as a 

religious institution under the State’s 

constitution. We also have included a 

definition of a religious institution providing 

that an institution is considered a religious 

institution if it is owned, controlled, 

operated, and maintained by a religious 

organization lawfully operating as a 

nonprofit religious corporation and awards 

only religious degrees or religious certificates 

including, but not limited to, a certificate of 

Talmudic studies, an associate of biblical 

studies, a bachelor of religious studies, a 

master of divinity, or a doctor of divinity. 

In response to comments, we confirmed 

that tribal institutions are not subject to State 

oversight or subject to the State process for 

handling complaints and revised § 600.9 to 

clarify the status of tribal institutions. As 

noted in the preamble discussion of State 

Authorization, we have removed proposed 

§ 600.9(b)(2) regarding adverse actions. 

Further, we are providing that, in 

§ 600.9(a)(2)(ii) of the final regulations, the 

tribal government must have a process to 

review and appropriately act on complaints 

concerning a tribal institution and enforce 

applicable tribal requirements or laws. 

Finally, while the Secretary has designated 

amended § 600.9(a) and (b) as being effective 

July 1, 2011, we recognize that a State may 

be unable to provide appropriate State 

authorizations to its institutions by that date. 

We are providing that the institutions unable 

to obtain State authorization in that State 

may request a one-year extension of the 

effective date of these final regulations to July 

1, 2012, and if necessary, an additional oneyear extension of the effective date to July 1, 

2013. To receive an extension of the effective 

date of amended § 600.9(a) and (b) for 

institutions in a State, an institution must 

obtain from the State an explanation of how 

a one-year extension will permit the State to 

modify its procedures to comply with 

amended § 600.9. 

As discussed in the preamble to these 

regulations, we made a number of clarifying 

changes to the regulations regarding the 

administration of ability to benefit tests. We 

revised the definition of the term 

independent test administrator to clarify that 

an independent test administrator must have 

no current or prior financial or ownership 

interest in the institution, its affiliates, or its 

parent corporation, other than the fees earned 

through the agreement to administer the test. 

In § 668.142, we have defined an ATB test 

irregularity as an irregularity that results 

from an ATB test being administered in a 

manner that does not conform to the 

established regulations for test 

administration consistent with the provision 

of subpart J and the test administrator’s 

manual. We also added a provision to specify 

that a test publisher may include with its 

application a description of the manner in 

which test-taking time was determined in 

relation to the other requirements in 

§ 668.146(b). We have revised 

§ 668.150(b)(7)(i) to indicate that the period 

of review of all test results of the tests 

administered by a decertified test 

administrator is five years preceding the date 

of decertification. 

In response to a comment regarding testing 

of non-native speakers of English, we have 

revised § 668.153 to provide that if a nonnative speaker of English who is enrolled or 

plans to enroll in a program that will be 

taught in his or her native language with a 

component or portion in English, the 

individual must take a test approved under 

§§ 668.146 and 668.148(a)(1) in the student’s 

native language. New § 668.153(a)(5) 

provides that prior to the beginning of the 

English portion of the program, the 

individual must take an English proficiency 

test approved under § 668.148(b). Finally, we 

have modified § 668.144(c)(11)(vii) to require 

that the test manual include, in addition to 

guidance on the interpretation of scores 

resulting from modification of the test for 

individuals with disabilities, guidance on the 

types of accommodations that are allowable. 

This responds to concerns that test 

administrators may not have extensive 

training or experience to determine if a 

requested accommodation is appropriate. 

The effect of these changes on the cost 

estimates prepared for and discussed in the 

Regulatory Impact Analysis of the NPRM is 

discussed in the Costs section of this 

Regulatory Impact Analysis. 

Benefits 

As discussed in the NPRM, benefits 

provided in these regulations include 

updated administrative procedures for the 

Federal student aid programs; a definition 

and process to determine the validity of a 

student’s high school diploma; enhanced 

reliability and security of ATB tests; an 

additional option for students to prove ability 

to benefit by successfully completing college 

coursework; increased clarity about incentive 

compensation for employees at institutions of 

higher education; reporting of information on 

program completers for programs leading to 

gainful employment, including costs, debt 

levels, graduation rates, and placement rates; 

the establishment of minimum standards for 

credit hours; greater transparency for 

borrowers participating in the programs 

offered under written agreements between 

institutions; greater detail about 

misrepresentation in marketing and 

recruitment materials; a more structured and 

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consistent approach to the development and 

implementation of satisfactory academic 

progress policies; updated and simplified 

procedures for verifying FAFSA applicant 

information; updated regulations related to 

the return of title IV, HEA funds when a 

student withdraws; harmonization of Direct 

Loan and Teach Grant disbursement 

procedures with other title IV, HEA 

programs; and revised disbursement 

requirements to ensure Federal Pell Grant 

recipients can access funds in a timely 

manner. As noted in the Regulatory Impact 

Analysis in the NPRM, these provisions 

result in no net costs to the Federal 

Government over 2011–2015. 

Costs 

As discussed in the Regulatory Impact 

Analysis in the NPRM, many of the 

provisions implemented through these 

regulations will require regulated entities to 

develop new disclosures and other materials, 

as well as accompanying dissemination 

processes. Other regulations generally will 

require discrete changes in specific 

parameters associated with existing guidance 

and regulations—such as changes to title IV, 

HEA disbursement procedures, updated 

processes for verification of FAFSA 

application information, clearer standards for 

the return of title IV, HEA program funds 

following a student’s withdrawal, and 

updated definitions and processes for 

confirming the validity of a high school 

diploma—rather than wholly new 

requirements. Accordingly, entities wishing 

to continue to participate in the title IV, HEA 

programs have already absorbed many of the 

administrative costs related to implementing 

these regulations. Marginal costs over this 

baseline are primarily due to new procedures 

that, while possibly significant in some cases, 

are an unavoidable cost of continued 

program participation. 

In assessing the potential impact of these 

regulations, the Department recognizes that 

certain provisions are likely to increase 

workload for some program participants. 

This additional workload is discussed in 

more detail under the Paperwork Reduction 

Act of 1995 section of this preamble. 

Additional workload would normally be 

expected to result in estimated costs 

associated with either the hiring of additional 

employees or opportunity costs related to the 

reassignment of existing staff from other 

activities. In total, these changes are 

estimated to increase burden on entities 

participating in the title IV, HEA programs by 

6,010,320 hours. Of this increased burden, 

3,862,165 hours are associated with 

institutions and 9,454 hours with ATB test 

publishers, States, and ATB test 

administrators. An additional 2,138,701 

hours are associated with borrowers, 

generally reflecting the time required to read 

new disclosures or submit required 

information. 

As detailed in the Paperwork Reduction 

Act of 1995 section of these final regulations, 

the additional paperwork burden is 

attributable to several provisions, with the 

greatest additional burden coming from the 

revised FAFSA verification process. Of the 

3.9 million hours of additional burden 

associated with institutions, 1.8 million 

relate to FAFSA verification. While the 

average number of items to be verified is 

expected to decrease, the growth in the 

number of applicants and the requirement to 

submit all changes to the Department is 

estimated to increase overall burden. Other 

paperwork burden increases include the 

following: 

• 750,725 hours related to academic 

reviews and development of academic plans 

under § 668.34; 

• 425,075 hours related to calculation of 

unearned amounts when a student 

withdraws under § 668.22; 

• 262,990 hours associated with updating 

marital and dependency status under 

§ 668.55; 

• 376,417 hours annually and an 

additional 300,773 hours in the initial 

reporting period related to the gainful 

employment reporting and disclosure 

provisions in § 668.6; 

• 48,391 hours related to ATB test 

administration and reporting under 

§§ 668.151 and 668.152; 

• 67,870 hours associated with disclosure 

of information about an institution’s written 

agreements in § 668.43; 

• 54,366 hours related to disbursement of 

funds to Pell Grant recipients for books and 

supplies under § 668.164; 

• 21,982 hours related to the development 

of a high school diploma validation process 

and the validation of questionable diplomas 

under § 668.16; and 

• 18,349 hours related to clock hour to 

credit hour conversion and the inclusion of 

outside work for program eligibility under 

§ 668.8. 

For ATB test publishers, States, and 

administrators, the increased burden of 9,454 

hours comes from the reporting, recordkeeping, test anomaly analysis, and other 

requirements in §§ 668.144, 668.150, and 

668.151. The increased burden on students is 

concentrated in the FAFSA verification and 

status updating processes with 1,604,800 

hours under §§ 668.55, 668.56, and 668.59, 

with additional burden associated with the 

withdrawal process under § 668.22 and 

satisfactory academic progress policies under 

§ 668.34. 

Thus, for the specific information 

collections listed in the Paperwork Reduction 

Act of 1995 section of these final regulations, 

the total cost estimates are as follows: 

• For Information Collection 1845–0041, 

the total cost will be $72,594,870; 

• For Information Collection 1845–NEW2, 

the total cost attributable to these regulatory 

changes will be $21,834,272; 

• For Information Collection 1845–0022, 

the total cost will be $15,533,671; 

• For Information Collection 1845–NEW1, 

the total cost attributable to the regulatory 

changes will be $9,543,677 annually with an 

additional $7,624,784 in the initial reporting 

period; 

• For Information Collection 1845–0049, 

the total cost will be $1,300,595; and 

• For Information Collection 1845–NEW3, 

the total cost attributable to these regulatory 

changes will be $1,203,799. 

The monetized cost of this additional 

burden, using wage data developed using 

Bureau of Labor Statistics available at 

http://www.bls.gov/ncs/ect/sp/ecsuphst.pdf, 

is $122,010,883, of which $86.7 million is 

associated with institutions, $0.21 million 

with ATB test publishers, States, and 

administrators, and $35.07 million with 

borrowers. For institutions, test publishers, 

and test administrators, an hourly rate of 

$22.14 was used to monetize the burden of 

these provisions. This was a blended rate 

based on wages of $16.79 for office and 

administrative staff and $38.20 for managers, 

assuming that office staff would perform 75 

percent of the work affected by these 

regulations. For the gainful employment 

provision, an hourly rate of $25.35 was used 

to reflect increased management time to 

establish new data collection procedures 

associated with that provision. For students, 

the first quarter 2010 median weekly 

earnings for full-time wage and salary 

workers were used. This was weighted to 

reflect the age profile of the student loan 

portfolio, with half at the $457 per week of 

the 20 to 24 age bracket and half at the $691 

per week of the 25 to 34 year old bracket. 

This resulted in a $16.40 hourly wage rate to 

use in monetizing the burden on students. 

Because data underlying many of these 

burden estimates was limited, in the NPRM, 

the Department requested comments and 

supporting information for use in developing 

more robust estimates. In particular, we 

asked institutions to provide detailed data on 

actual staffing and system costs associated 

with implementing these regulations. In 

response to comments that the regulations 

would be costly, we reviewed the wage rates 

for more recent information and the share of 

work performed by office workers and 

management and professional staff. This 

increased the general wage rate from $18.63 

to $22.14 and the wage rate for gainful 

employment related matters from $20.71 to 

$25.35. The other areas that changed between 

the NPRM published on June 18, 2010 and 

these final regulations related to changes to 

the disclosure requirements related to gainful 

employment that extended the reporting to 

students who began or completed programs 

beginning July 1, 2006, required specified 

information for all students at a program, and 

established a requirement to report on 

student matriculations to higher credentialed 

programs. 

Net Budget Impacts 

These regulations are estimated to have no 

net budget impact over FY 2011–2015. 

Consistent with the requirements of the 

Credit Reform Act of 1990, budget cost 

estimates for the student loan programs 

reflect the estimated net present value of all 

future non-administrative Federal costs 

associated with a cohort of loans. (A cohort 

reflects all loans originated in a given fiscal 

year.) 

These estimates were developed using the 

Office of Management and Budget’s Credit 

Subsidy Calculator. This calculator will also 

be used for re-estimates of prior-year costs, 

which will be performed each year beginning 

in FY 2009. The OMB calculator takes 

projected future cash flows from the 

Department’s student loan cost estimation 

model and produces discounted subsidy 

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rates reflecting the net present value of all 

future Federal costs associated with awards 

made in a given fiscal year. Values are 

calculated using a ‘‘basket of zeros’’ 

methodology under which each cash flow is 

discounted using the interest rate of a zerocoupon Treasury bond with the same 

maturity as that cash flow. To ensure 

comparability across programs, this 

methodology is incorporated into the 

calculator and used governmentwide to 

develop estimates of the Federal cost of 

credit programs. Accordingly, the 

Department believes it is the appropriate 

methodology to use in developing estimates 

for these regulations. That said, however, in 

developing the following Accounting 

Statement, the Department consulted with 

OMB on how to integrate our discounting 

methodology with the discounting 

methodology traditionally used in 

developing regulatory impact analyses. 

Absent evidence of the impact these 

regulations would have on student behavior, 

budget cost estimates were based on behavior 

as reflected in various Department data sets 

and longitudinal surveys listed under 

Assumptions, Limitations, and Data Sources. 

Program cost estimates were generated by 

running projected cash flows related to each 

provision through the Department’s student 

loan cost estimation model. Student loan cost 

estimates are developed across five risk 

categories: Two-year proprietary institutions, 

two-year public and private, not-for-profit 

institutions; freshmen and sophomores at 

four-year institutions, juniors and seniors at 

four-year institutions, and graduate students. 

Risk categories have separate assumptions 

based on the historical pattern of behavior— 

for example, the likelihood of default or the 

likelihood to use statutory deferment or 

discharge benefits—of borrowers in each 

category. 

The Department estimates no budgetary 

impact for most of these regulations as there 

is no data indicating that the provisions will 

have any impact on the volume or 

composition of the title IV, HEA programs. 

Assumptions, Limitations, and Data Sources 

The impact estimates provided in the 

preceding section reflect a pre-statutory 

baseline in which the HEOA changes 

implemented in these regulations do not 

exist. Costs have been quantified for five 

years. 

In developing these estimates, a wide range 

of data sources were used, including data 

from the National Student Loan Data System; 

operational and financial data from 

Department of Education systems, including 

especially the Fiscal Operations Report and 

Application to Participate (FISAP); and data 

from a range of surveys conducted by the 

National Center for Education Statistics such 

as the 2008 National Postsecondary Student 

Aid Survey, the 1994 National Education 

Longitudinal Study, and the 1996 Beginning 

Postsecondary Student Survey. Data from 

other sources, such as the U.S. Census 

Bureau, were also used. Data on 

administrative burden at participating 

institutions are extremely limited; 

accordingly, in the NPRM, the Department 

expressed interest in receiving comments in 

this area. No comments were received. 

Elsewhere in this SUPPLEMENTARY

INFORMATION section we identify and explain 

burdens specifically associated with 

information collection requirements. See the 

heading Paperwork Reduction Act of 1995. 

Accounting Statement 

As required by OMB Circular A–4 

(available at http://www.Whitehouse.gov/ 

omb/Circulars/a004/a-4.pdf), in Table 2, we 

have prepared an accounting statement 

showing the classification of the 

expenditures associated with the provisions 

of these regulations. This table provides our 

best estimate of the changes in Federal 

student aid payments as a result of these 

regulations. Expenditures are classified as 

transfers from the Federal Government to 

student loan borrowers. 

TABLE 2—ACCOUNTING STATEMENT: 

CLASSIFICATION OF ESTIMATED EXPENDITURES

[In millions] 

Category Transfers 

Annualized Monetized 

Costs.

$126.1. 

Cost of compliance 

with paperwork requirements. 

Annualized Monetized 

Transfers.

$0. 

From Whom To 

Whom? 

Federal Government 

To Student Loan 

Borrowers. 

Regulatory Flexibility Act Certification 

The Secretary certifies that these 

regulations will not have a significant 

economic impact on a substantial number of 

small entities. These regulations will affect 

institutions that participate in title IV, HEA 

programs, ATB test publishers, and 

individual students and loan borrowers. The 

U.S. Small Business Administration Size 

Standards define for-profit institutions as 

‘‘small businesses’’ if they are independently 

owned and operated and not dominant in 

their field of operation with total annual 

revenue below $7,000,000, and defines nonprofit institutions as small organizations if 

they are independently owned and operated 

and not dominant in their field of operation, 

or if they are institutions controlled by 

governmental entities with populations 

below 50,000. 

Data from the Integrated Postsecondary 

Education Data System (IPEDS) indicate that 

roughly 4,379 institutions participating in the 

Federal student assistance programs meet the 

definition of ‘‘small entities.’’ The following 

table provides the distribution of institutions 

and students by revenue category and 

institutional control. 

Revenue 

category 

Public Private NFP Proprietary Tribal 

Number of 

schools 

Number of 

students 

Number of 

schools 

Number of 

students 

Number of 

schools 

Number of 

students 

Number of 

schools 

Number of 

students 

$0 to $500,000 43 2,124 103 13,208 510 38,774 ...................... ......................

$500,000 to $1 

million ........... 44 7,182 81 9,806 438 61,906 1 137 

$1 million to $3 

million ........... 98 29,332 243 65,614 745 217,715 3 555 

$3 million to $5 

million ........... 75 65,442 138 60,923 303 182,362 ...................... ......................

$5 million to $7 

million ........... 49 73,798 99 62,776 224 185,705 5 2,525 

$7 million to $10 

million ........... 78 129,079 110 84,659 228 235,888 9 4,935 

$10 million and 

above ............ 1,585 18,480,000 1,067 4,312,010 383 1,793,951 14 18,065 

Total .......... 1,972 18,786,957 1,841 4,608,996 2,831 2,716,301 32 26,217 

Approximately two-thirds of these 

institutions are for-profit schools subject to 

the disclosure and reporting requirements 

related to programs leading to gainful 

employment. Other affected small 

institutions include small community 

colleges and tribally controlled schools. For 

these institutions, the new disclosure and 

administrative requirements imposed under 

the regulations could impose some new costs 

as described below. The impact of the 

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regulations on individuals is not subject to 

the Regulatory Flexibility Act. 

As discussed in the preamble to these 

regulations, the program integrity regulations 

were developed to update administrative 

procedures for the Federal student aid 

programs and to ensure that funds are 

provided to students at eligible programs and 

institutions. As detailed in the Paperwork 

Reduction Act of 1995 section of these final 

regulations, many of these regulations modify 

existing regulations and requirements. For 

example, the regulations on FAFSA 

verification would change the number of 

items to be verified, but do not require the 

creation of a new process. The table below 

summarizes the estimated total hours, costs, 

and requirements applicable to small entities 

from these provisions on an annual basis. In 

the initial reporting period, there will be an 

additional 235,866 hours and $5,979,203 in 

gainful employment reporting for award 

years back to 2006–07. 

Provision & requirement Reg. section OMB control 

No. Hours Costs 

Gainful Employment ................................................................................ 668.6 1845–NEW1 295,186 7,482,964 

Annual submission of private loan, CIP, program name, further 

matriculation, and identifying data for entrants and completers 

by program .................................................................................... 668.6(a) .......................... 288,597 7,315,937 

Disclose occupational information, graduation rates, on-time completion rates, program placement rates, and program costs ........ 668.6(b) .......................... 6,589 167,027 

Eligible Program ...................................................................................... 668.8 1845–0022 8,800 194,836 

Determine if program is affected, evaluate amount of outside student work that should be included, and perform credit to clock 

hour conversion. 

Standards of Administrative Capability .................................................... 668.16 1845–0022 10,543 233,412 

Develop a high school diploma validity process .............................. 668.16(p) .......................... 9,583 212,176 

Verify questionable diplomas ........................................................... 668.16(p) .......................... 959 21,237 

Student Withdrawal .................................................................................. 668.22 1845–0022 203,866 4,513,593 

Establish withdrawal date and calculate percentage of payment 

period or period of enrollment completed. 

Satisfactory Academic Progress .............................................................. 668.34 1845–NEW2 349,976 7,748,471 

Review regulations and implement changes to ensure compliance 668.34(a) .......................... 8,214 181,860 

Perform academic reviews at the end of each payment period ...... 668.34(c) .......................... 100,382 2,222,451 

Develop academic plan for students who do not achieve satisfactory academic progress when reviewed at end of payment period ................................................................................................ 668.34(c) .......................... 87,835 1,944,655 

Perform academic reviews at institutions that do so annually ......... 668.34(d) .......................... 81,891 1,813,061 

Develop academic plan for students who do not achieve satisfactory academic progress when reviewed annually ........................ 668.34(d) .......................... 71,655 1,586,434 

Institutional Information—Written Agreements ........................................ 668.43 1845–NEW2 32,550 720,667 

Disclose information about written agreements ............................... .......................... .......................... 32,122 711,185 

Make contact information for filing complaints to accreditor and 

State approval or licensing agency available to enrolled and 

prospective students ..................................................................... 668.43(b) .......................... 428 9,482 

Updating Information ............................................................................... 668.55 1845–0041 126,130 2,792,518 

Update household size throughout award year ............................... .......................... .......................... 124,744 2,761,831 

Update marital status throughout award year .................................. .......................... .......................... 1,386 30,687 

Acceptable Documentation ...................................................................... 668.57 1845–0041 293,515 6,498,427 

Review verification responses for acceptable documentation. 

Consequences of a change in FAFSA information ................................. 668.59 1845–0041 587,030 12,996,853 

Reduces tolerances and, if outside of tolerances, requires institutions to report all changes to applicants’ FAFSA information resulting from verification. 

Recalculate applicant’s EFC if information changes from 

verification. 

Administration of Ability to Benefit Tests ................................................. 668.151 1845–0049 20,702 458,351 

Keep records of individuals who take ATB tests and details about 

the administrator ........................................................................... 668.151(g)(4) .......................... 18,484 402,242 

Keep documentation of individual’s disability and testing arrangements provided ............................................................................. 668.151(g)(5) .......................... 2,218 49,110 

Administration of Tests by Assessment Centers .................................... 668.152 1845–0049 2,506 55,487 

Maintain the scored ATB tests and collect and submit copies of completed ATB tests or a listing to the test publisher or State weekly ..... .......................... .......................... 14,415 319,145 

Disbursing Funds ..................................................................................... 668.164 1845–NEW3 26,074 577,277 

Provide a way for Pell Grant recipients to obtain or purchase required books and supplies by the 7th day of a payment period 

under certain conditions. 

To assess overall burden imposed on 

institutions meeting the definition of small 

entities, the Department developed a 

methodology using IPEDS data and the 

percentage of institutions with revenues 

below $7 million and all non-profit 

institutions, allocating approximately 66 

percent of the paperwork burden to small 

institutions. Using this methodology, the 

Department estimates the regulations will 

increase total burden hours for these schools 

by 2.58 million, or roughly 590 hours per 

institution. Monetized using salary data from 

the Bureau of Labor Statistics, this burden is 

$58.1 million and $13,270, respectively. If 

calculated using the distribution of students 

from 2007–08, the share of the burden 

allocated to small institutions would be 

much lower at approximately 21 percent, 

resulting in an estimated burden of 235 hours 

and $5,410 per institution. Even the more 

conservative estimate of $13,270 represents 

one percent or less of the midpoint revenue 

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for all but the lowest revenue category, for 

which it is four percent of midpoint revenue. 

For institutions, an hourly rate of $22.14 

was used to monetize the burden of these 

provisions. This rate was a blended rate 

based on wages of $16.79 for office and 

administrative staff and $38.20 for managers, 

assuming that office staff would perform 75 

percent of the work affected by these 

regulations. For the gainful employment 

provision, an hourly rate of $25.35 was used 

to reflect increased management time to 

establish new data collection procedures 

associated with that provision. 

These rates are the same as those used for 

all institutions in the Costs section of this 

analysis, reflecting the fact that the primary 

cost of meeting the paperwork burden is in 

additional labor and that wages at small 

institutions should not be systematically 

higher than those at all institutions. In 

response to comments that the regulations 

would be costly, we reviewed the wage rates 

for more recent information and the share of 

work performed by office workers and 

management and professional staff. This 

review increased the general wage rate from 

$18.63 to $22.14 and the wage rate for gainful 

employment related matters from $20.71 to 

$25.35. 

The costs discussed above represent the 

cost of the regulations in the first year of 

implementation, beginning on July 1, 2011, 

but several provisions will have a longer 

period to take effect. Most importantly, the 

regulations contained in subpart E of part 

668, Verification and Updating of Student 

Aid Application Information, are effective 

July 1, 2012. These regulations account for 

approximately 50 percent of the estimated 

burden described above. We would expect 30 

percent of the verification costs to be 

incurred in 2011 as institutions update their 

systems for the changes, but the main part of 

those costs will occur in the second year. 

These costs would occur after the other 

provisions had been implemented and, while 

we do not have a split between the 

development and ongoing costs of each 

provision, we would expect the costs to taper 

off as the institutions become familiar with 

the regulations and have the systems in place 

to comply. Seventy percent of the estimated 

costs for the Verification regulation would 

not be realized in the first year, reducing the 

overall projected costs for small institutions 

during the first year by approximately onethird to approximately $8,000. Assuming a 

10 percent reduction in the costs of other 

provisions from reduced development costs 

and prior experience, full implementation in 

2012 would cost approximately $11,000. The 

State authorization provision is also subject 

to a delayed implementation, but that 

implementation is not expected to have a 

significant cost effect on small entities. 

Additionally, the recurring costs of many of 

the provisions are based on the number of 

students enrolled. As shown above, schools 

with small revenues have lower enrollments 

than others classified as small entities and 

would have to perform fewer verifications 

and reviews on an ongoing basis. Since they 

already have some systems and processes in 

place to comply with the existing regulations, 

once the development changes have been 

made to implement the regulatory changes, 

we would expect their ongoing costs to be 

lower than the averages estimated above. 

Where possible, the Department has 

allowed institutions flexibility to establish 

processes that fit the institution’s 

administrative capabilities. For example, the 

requirement to distribute funds to Pell Grant 

recipients for books and supplies within 

seven days of the start of the payment period 

allows institutions to use book vouchers or 

a credit to the student’s account. The 

Department has also tried to allow more time 

for all entities affected by these regulations 

to establish procedures for new data 

collections, such as the placement rate 

information required in the data collection 

related to gainful employment. While these 

timing provisions are available to all 

institutions, they should permit small 

institutions sufficient time to make the 

necessary adjustments. Approximately 60 

percent of the paperwork burden associated 

with these regulations is in OMB 1845–0041, 

which relates to the updating of FAFSA 

application information and reporting all 

changes resulting from verification. These 

updated requirements will help ensure 

eligible students receive aid. As detailed in 

the Paperwork Reduction Act of 1995 section 

of these final regulations, the increase in 

burden associated with the FAFSA 

acceptable documentation provision is 

largely driven by the increase in student 

applicants since the burden for these 

requirements was last calculated. Given the 

increase in the number of students applying 

for title IV, HEA aid, the number of 

verifications is estimated to have increased 

from 3.0 million in 2002–03 to 5.1 million in 

2008–09. Without the regulatory changes 

reflected in these regulations, which are 

estimated to reduce the number of items to 

be verified, the paperwork burden on small 

institutions in OMB 1845–0041 would 

increase by an additional 195,677 hours. 

Based on these estimates, the Department 

believes the new requirements do not impose 

significant new costs on these institutions. 

We considered whether there would be any 

benefit to allowing small institutions 

additional time to come into compliance 

with the regulations and concluded that there 

would be no benefit to taking such action. 

First and foremost, we think the risk of 

delaying implementation of these program 

integrity regulations and the resulting 

negative impact on students and taxpayers 

would be far too high. 

Second, we do not believe the comments 

or the facts would support such action. In the 

NPRM, the Secretary invited comments from 

small institutions and other affected entities 

as to whether they believed the proposed 

changes would have a significant economic 

impact on them and requested evidence to 

support that belief. Several commenters 

indicated that the provisions would be costly 

and the Department reviewed the estimates 

as described above. However, commenters 

did not provide us with evidence to suggest 

that small institutions or entities would need 

additional time beyond July 1, 2011 to come 

into compliance with the regulations. 

Additionally, because we did not include 

such a proposal in the NPRM, we do not 

believe we could take this type of action 

without seeking further public comment. 

Finally, we note that, where possible, we 

have built in additional time or flexibility for 

all institutions based on the nature of the 

provision and the data requested. 

[FR Doc. 2010–26531 Filed 10–28–10; 8:45 am] 

BILLING CODE 4000–01–P 

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