67170 Federal Register / Vol. 75, No. 210 / Monday, November 1, 2010 / Rules and Regulations 

DEPARTMENT OF EDUCATION 

34 CFR Parts 600, 668, 682 and 685 

[Docket ID ED—2010—OPE—0009] 

RIN 1840–AD03 

Foreign Institutions—Federal Student 

Aid Programs 

AGENCY: Office of Postsecondary 

Education, Department of Education. 

ACTION: Final regulations. 

SUMMARY: The Secretary amends the 

regulations for Institutional Eligibility 

Under the Higher Education Act of 

1965, the Student Assistance General 

Provisions, the Federal Family 

Education Loan (FFEL) Program, and 

the William D. Ford Federal Direct Loan 

(Direct Loan) Program to implement 

provisions related to the eligibility of 

foreign institutions for participation in 

the Federal student aid programs that 

were added to the Higher Education Act 

of 1965, as amended (HEA), by the 

Higher Education Opportunity Act of 

2008 (Pub. L. 110–315) (HEOA), as well 

as other provisions related to the 

eligibility of foreign institutions. 

DATES: Effective Date: These regulations 

are effective July 1, 2011, except as 

follows: The amendments to § 600.20, 

§ 600.21, and § 600.55 become effective 

July 20, 2011; § 600.56(a)(4) becomes 

effective July 1, 2015. For § 668.23, 

these final regulations are applicable for 

compliance audits and audited financial 

statements due on or after July 1, 2011. 

However, affected parties do not have to 

comply with the information collection 

requirements in §§ 600.20, 600.21, 

600.54, 600.55, 600.56, 600.57, 668.13, 

668.23, 668.171 until the Department of 

Education publishes in the Federal 

Register the control number assigned by 

the Office of Management and Budget 

(OMB) to these information collection 

requirements. Publication of the control 

number notifies the public that OMB 

has approved these information 

collection requirements under the 

Paperwork Reduction Act of 1995. 

Implementation date: The Secretary 

has determined, in accordance with 

section 482(c)(2)(A) of the HEA, that 

institutions may, at their discretion, 

choose to implement the new and 

amended provisions of these regulations 

on or after November 1, 2010, except 

§ 600.55(f)(1)(i)(B), with respect to a 

foreign graduate medical school having 

a clinical training program that was not 

approved by a State until after January 

1, 1992. For further information, see the 

section entitled Implementation Date of 

These Regulations in the 

SUPPLEMENTARY INFORMATION section of 

this preamble. 

FOR FURTHER INFORMATION CONTACT: For 

general information or information 

related to nonprofit status for foreign 

institutions, public foreign institutions 

and financial responsibility, eligibility 

of training programs at foreign 

institutions, and foreign graduate 

medical schools, Wendy Macias. 

Telephone: (202) 502–7526 or via the 

Internet at: Wendy.Macias@ed.gov. 

For information related to audited 

financial statements and compliance 

audits, Anthony Gargano. Telephone: 

(202) 502–7519, or via the Internet at: 

Anthony.Gargano@ed.gov. 

For information related to the 

definition of a foreign institution, Gail 

McLarnon. Telephone: (202) 219–7048, 

or via the Internet at: 

Gail.McLarnon@ed.gov. 

For information related to single legal 

authorization for groups of foreign 

institutions, foreign veterinary schools, 

foreign nursing schools, and 

certification of foreign institutions, 

Brian Smith. Telephone: (202) 502– 

7551, or via the Internet at 

Brian.Smith@ed.gov. 

If you use a telecommunications 

device for the deaf, 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 July 

20, 2010, the Secretary published a 

notice of proposed rulemaking (NPRM) 

for issues related to foreign institutions 

in the Federal Register (75 FR 42190). 

In the preamble to the NPRM, the 

Secretary discussed on pages 42191 

through 42213 the major changes 

proposed in that document, including 

the following: 

• Amending § 668.23 to establish 

submission requirements for 

compliance audits and audited financial 

statements specific to foreign 

institutions; 

• Amending §§ 600.51, 600.52, 

600.54, 682.200, and 682.611 to clarify 

and revise the definition of a foreign 

institution; 

• Amending § 600.2 to establish a 

definition of nonprofit status specific to 

foreign institutions; 

• Amending § 668.171 to establish a 

financial responsibility standard for 

foreign public institutions that is 

comparable to the financial 

responsibility standard for domestic 

public institutions; 

• Amending § 600.54 to permit a 

single legal authorization for groups of 

foreign institutions under the purview 

of a single government entity; 

• Amending § 600.54 to establish 

eligibility of training programs at foreign 

institutions; 

• Amending §§ 600.52 and 668.13 to 

establish institutional eligibility criteria 

specific to foreign graduate medical 

schools; 

• Amending § 600.56 to establish 

institutional eligibility criteria specific 

to foreign veterinary schools; 

• Amending § 600.57 to establish 

institutional eligibility criteria specific 

to foreign nursing schools; and 

• Amending §§ 600.52 and 668.13 to 

revise the maximum certification period 

for some foreign institutions. 

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 a 

regulation as one that an entity subject 

to the regulation may choose to 

implement earlier and the conditions 

under which the entity may implement 

the provisions early. 

Consistent with the intent of this 

regulatory effort to strengthen and 

improve the administration of the Title 

IV, HEA programs, the Secretary is 

using the authority granted him under 

section 482(c) of the HEA to designate 

the regulations included in this 

document as permissible for 

implementation before July 1, 2011 at 

the discretion of each institution, except 

that foreign graduate medical schools 

having training programs continuously 

approved by a State or States beginning 

only after January 1, 1992, may not 

apply § 600.56(f)(1)(i)(B) until July 20, 

2011, as a result of a statutory effective 

date provision in HEA Section 

102(a)(2)(B)(iii)(IV)(bb) that does not 

leave the Secretary discretion under 

HEA section 482(c) to designate 

provisions conferring eligibility on that 

group of foreign medical schools for 

implementation before July 20, 2011. 

Analysis of Comments and Changes 

The regulations in this document 

were developed through the use of 

negotiated rulemaking. Under section 

492 of the HEA, before publishing most 

proposed regulations to implement 

programs under Title IV of the HEA, the 

Secretary must obtain public 

involvement in the development of the 

proposed regulations. In such cases, 


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after obtaining advice and 

recommendations, the Secretary must 

conduct a negotiated rulemaking 

process to develop the proposed 

regulations. All proposed regulations 

must conform to agreements resulting 

from the negotiated rulemaking process 

unless the Secretary reopens that 

process or explains any departure from 

the agreements to the negotiated 

rulemaking participants. 

These regulations were published in 

proposed form on July 20, 2010, in 

conformance with the consensus of the 

negotiated rulemaking committee. 

Under the committee’s protocols, 

consensus means that no member of the 

committee dissented from the agreedupon language. The Secretary invited 

comments on the proposed regulations 

by August 19, 2010, and 60 parties 

submitted comments. The Department 

received many comments from entities 

that were represented by individuals 

serving as non-Federal negotiators in the 

negotiated rulemaking sessions. The 

negotiated rulemaking protocols, 

unanimously agreed to by the 

negotiating committee, provided that if 

the committee reached a final consensus 

on all issues, the Department would use 

the consensus-based language in its 

proposed regulations, and committee 

members and the organizations whom 

they represented would refrain from 

commenting negatively on the 

consensus-based regulatory language. 

Final consensus was reached, and the 

Department used the consensus-based 

language in its NPRM; as a result, the 

obligation of the non-Federal negotiators 

and the entities they represented to 

refrain from commenting negatively 

applies. As a result, the Department will 

not discuss in this preamble negative 

comments received from entities 

represented on the committee. The 

Department notes that many such 

comments are duplicative of comments 

received from individuals or entities not 

bound by the protocols, and that the 

comments of those individuals or 

entities are addressed here. In addition, 

the Department reviewed and 

considered all comments received, 

regardless of their source. An analysis of 

the comments and 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, non-substantive 

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. 

Until amended effective July 1, 2010, 

section 102(a)(1)(C) of the HEA 

provided that foreign institutions may 

participate in the Title IV, HEA 

programs ‘‘only for purposes of part B of 

Title IV.’’ Part B of Title IV contains the 

statutory requirements for the FFEL 

Program. With the enactment of the 

Health Care and Education 

Reconciliation Act of 2010 (Pub. L. 111– 

152) (HCERA) on March 30, 2010, as of 

July 1, 2010, there are no new 

originations of FFEL Program loans. All 

new originations with a first 

disbursement on or after July 1, 2010, 

are made via the Direct Loan Program, 

including loans for students attending 

foreign institutions. At the time the 

proposed regulations were negotiated, it 

was unclear whether the proposed 

legislation that would end the FFEL 

Program would be enacted. As a result, 

with a few exceptions, the proposed 

regulations referenced participation in 

the FFEL Program. These final 

regulations correct those references in 

the proposed regulations to indicate 

participation in the Direct Loan 

Program, rather than the FFEL Program. 

In addition, these final regulations make 

technical corrections to the Direct Loan 

Program regulations in response to 

statutory directives addressed 

specifically to foreign institutions. 

These corrections reflect changes made 

by the Higher Education Reconciliation 

Act of 2005 (Pub. L. 109–17) which (1) 

eliminated the option for foreign 

institutions to make single 

disbursements of Title IV, HEA program 

loan funds; and (2) eliminated the 

exemption for foreign institutions from 

the ‘‘30-day delayed disbursement 

requirement’’ which prohibits 

institutions from disbursing the first 

installment of a Direct Subsidized or 

Direct Unsubsidized Loan until a 

student has completed 30 calendar days 

of the student’s program of study, if the 

student is in the first year of an 

undergraduate program and is a firsttime FFEL Stafford loan, Direct 

Subsidized or Direct Unsubsidized 

borrower. These changes have been 

made to § 685.301 and § 685.303, 

respectively. 

Substantive and technical changes to 

the Title IV, HEA program regulations 

resulting from the HCERA will be 

addressed through future rulemaking 

efforts. For more information about the 

transition of foreign institutions to the 

Direct Loan Program, contact the Office 

of Federal Student Aid’s Foreign 

Schools Team at 

fsa.foreign.schools@ed.gov or (202) 377– 

3168. 

Part 600 Institutional Eligibility Under 

the Higher Education Act of 1965, as 

Amended 

Definition of a Foreign Institution 

(§§ 600.51, 600.52, 600.54, 682.200 and 

682.611) 

Comments: Several commenters had 

concerns with paragraph (1)(ii)(B) of the 

definition of foreign institution in 

§ 600.52, which states that a foreign 

institution cannot have written 

arrangements, within the meaning of 

§ 668.5, with institutions or 

organizations located in the United 

States under which students enrolling at 

the foreign institution would take 

courses from institutions located in the 

United States. One commenter asked 

that we add language to paragraph 

(1)(ii)(B) specifying that this paragraph 

applies only to U.S. students receiving 

Title IV, HEA program funds. Another 

commenter asked the Department to 

explain what ‘‘written arrangements, 

within the meaning of § 668.5’’ means. 

One commenter asked for clarification 

as to whether study abroad and student 

exchange agreements would be 

permitted under paragraph (1)(ii)(B). 

The commenter also asked if paragraph 

(1)(ii)(B) would prohibit foreign 

institutions from stair-casing students 

under articulation agreements from 

partial programs in the United States 

into full degree programs with credit 

recognition in foreign institutions. Staircasing is a process that allows a student 

to earn a degree by completing 

educational programs and earning 

credentials with each completed 

program of study acceptable for full 

credit toward the next program and each 

credential earned subsumed into the 

subsequent credential upon successful 

completion of each program. 

Discussion: We do not agree that it is 

necessary to add language specifying 

that paragraph (1)(ii)(B) of the definition 

of foreign institution applies only to 

U.S. students receiving Title IV, HEA 

program funds is necessary. Lead-in 

paragraph (1) of the definition, which 

applies to all of the subsequent 

paragraphs, already specifies that the 

definition applies to foreign institutions 

‘‘for the purposes of students who 

receive Title IV aid.’’ 

For clarification regarding ‘‘written 

arrangements, within the meaning of 

§ 668.5,’’ a ‘‘written arrangement’’ under 

§ 668.5(a) means a consortium or 

contractual agreement entered into by 

two or more institutions to allow a 

student to receive Title IV, HEA 

program funds even though part of the 


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student’s program is being provided by 

an institution other than the one at 

which the student is enrolled. Section 

668.5(a) provides that, 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 all or part of the educational 

program for the former institution, the 

Secretary considers that educational 

program to be an eligible program if the 

program otherwise satisfies the 

requirements of program eligibility 

found in § 668.8. 

However, these final regulations 

modify § 668.5(a) for foreign institutions 

in that, under paragraph (1)(ii)(B) of the 

definition of foreign institution in 

§ 600.52, a foreign institution cannot 

have written arrangements, within the 

meaning of § 668.5, with institutions or 

organizations located in the United 

States, for students who receive Title IV, 

HEA program funds who enroll at the 

foreign institution to take courses from 

institutions located in the United States. 

We note that § 668.5(a) may undergo 

further revisions applicable to all 

institutions. In an NPRM published on 

June 18, 2010 in the Federal Register 

(75 FR 34806), the Department proposed 

to amend § 668.5(a) to specify 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. 

Section 668.5(c) addresses written 

arrangements between an eligible 

institution (an institution that meets the 

requirements of participation in the 

Title IV, HEA programs in 34 CFR 600) 

and an ineligible institution or 

organization (an institution or 

organization that does not participate in 

the Title IV, HEA programs), under 

which the ineligible institution or 

organization provides part of the 

educational program of students 

enrolled at the eligible institution. 

Although under § 668.5(c) the Secretary 

considers such an educational program 

to be an eligible program in certain 

circumstances, under these final 

regulations, § 600.54(c)(1) provides that 

an eligible foreign institution may not 

enter into a written arrangement under 

which an ineligible institution or 

organization provides any portion of 

one or more of the eligible foreign 

institution’s programs. Thus, foreign 

institutions are not permitted to enter 

into the written arrangements described 

in § 668.5(c). 

Further, with respect to ‘‘written 

arrangements under 668.5,’’ written 

arrangements do not include affiliation 

agreements for the provision of clinical 

training for foreign medical, veterinary, 

and nursing schools; these affiliation 

agreements are addressed separately in 

§ 600.55(h)(1), § 600.56(b), 

§ 600.57(a)(2). In addition, and pertinent 

to all written arrangements under 

§ 668.5, in the NPRM published on June 

18, 2010 in the Federal Register (75 FR 

34806), the Department proposed to add 

a new paragraph § 668.5(e), which 

would require an institution that enters 

into a written arrangement under 

§ 668.5 to provide the consumer 

information described in § 668.43(a)(12) 

to enrolled and prospective students. 

In response to the request for 

clarification as to whether study abroad 

and student exchange agreements would 

be permitted under paragraph (1)(ii)(B) 

of the definition of foreign institution, 

these agreements are discussed 

generally in section 668.5(b), which 

provides that under a study abroad 

program, if an eligible institution enters 

into a written arrangement with a 

‘‘foreign institution’’ or an organization 

acting on behalf of a foreign institution 

under which a foreign institution 

provides part of the educational 

program of students enrolled in the 

eligible institution, the Secretary 

considers that educational program to 

be an eligible program if it meets the 

limitations in § 668.5(c). The 

Department notes that the use of 

‘‘foreign institution’’ in § 668.5(b) predates these regulations and, in contrast 

to the meaning of that term as defined 

in these regulations, refers more 

generally to an agreement between an 

eligible institution and an institution or 

organization in another country. The 

Department is therefore making a 

technical change to § 668.5(b) to replace 

the phrase ‘‘foreign institution’’ with 

language to reflect the more general 

meaning that paragraph has always had. 

With that clarification made, under 

paragraph (1)(ii)(B) of the definition of 

‘‘foreign institution,’’ for the purposes of 

students who receive Title IV, HEA 

program aid, a foreign institution may 

enter into a consortium agreement for 

study abroad and student exchange 

purposes, but only with another eligible 

institution located and offering eligible 

programs outside the United States. 

Moreover, the study abroad and student 

exchange provisions of § 668.5 do not 

apply to foreign medical, veterinary, 

and nursing schools, because such 

schools are generally prohibited under 

the regulations from offering portions of 

their programs in third countries, and 

from offering the non-clinical portions 

of their program in the United States. 

In response to the comment about 

whether paragraph (1)(ii)(B) of the 

definition of foreign institution would 

prohibit foreign institutions from staircasing students under articulation 

agreements, because paragraph (1)(ii)(B) 

prohibits a foreign institution from 

having written arrangements with 

institutions or organizations located in 

the United States for students enrolling 

at the foreign institution to take courses 

from institutions located in the United 

States, a foreign institution would not 

be permitted to stair-case students 

under articulation agreements that 

required students taking the beginning 

of their programs in the United States to 

complete their programs through credit 

recognition in foreign institutions. 

However, a foreign institution would be 

permitted to accept transfer credits 

earned by individual students in eligible 

programs offered by eligible U.S. 

institutions, and generally to stair-case 

students under articulation agreements 

offered by an eligible institution outside 

the United States into full degree 

programs with credit recognition in the 

foreign institution, as long as both 

eligible foreign institutions each 

provided all Title IV, HEA program 

recipients with an eligible program 

leading to a recognized credential. As 

stated earlier in this discussion, 

§ 600.54(c)(1) would prohibit an 

ineligible institution from providing any 

portion of one or more of the eligible 

foreign institution’s programs, and this 

prohibition would extend to articulation 

agreements. 

Changes: We have made a technical 

amendment to § 668.5(b), to remove the 

reference to ‘‘foreign institution’’ and 

replace it with ‘‘institution in another 

country.’’ 

Comments: One commenter asked 

why the Department added paragraph 

(1)(ii)(C) to the definition of foreign 

institution in § 600.52. Under paragraph 

(1)(ii)(C), a foreign institution cannot 

permit students who receive Title IV, 

HEA program funds to enroll in any 

course offered by the foreign institution 

in the United States, including research, 

work, internship, externship, or special 

studies with the United States, except 

that independent research done by an 

individual student in the United States 

for not more than one academic year is 

permitted, if it is conducted during the 

dissertation phase of a doctoral program 

under the guidance of faculty, and the 

research can only be performed in a 

facility in the United States. 

Discussion: The general intent of 

paragraph (1)(ii)(C) in the definition of 

foreign institution is to address abuses 


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that the Department has seen whereby a 

U.S. institution sets up an offshore 

campus to claim foreign institution 

status and thus avoid domestic 

requirements even though the 

institution is, for all intents and 

purposes, a domestic institution. In 

addition, the Department does not want 

a foreign institution to send its U.S. 

students to a U.S. location of a foreign 

institution, because the Department 

wants U.S. students attending a U.S. 

institution to be eligible for the full 

range of Title IV, HEA program funds, 

rather than limited to Direct Loan 

Program funds, as, by statute, students 

attending foreign institutions are. The 

Department was persuaded, however, at 

the request of several non-Federal 

negotiators, to carve out a narrow 

exception for independent research 

done by an individual student in the 

United States for not more than one 

academic year, if it is conducted during 

the dissertation phase of a doctoral 

program under the guidance of faculty, 

and the research can only be performed 

in a facility in the United States. 

Changes: None. 

Comments: One commenter requested 

clarification of paragraphs (1)(v)(A) and 

(B) of the definition of foreign 

institution in proposed § 600.52, which, 

for the purposes of students who receive 

Title IV, HEA program funds, requires a 

foreign institution that offers any 

program designed to prepare a student 

for employment in a recognized 

occupation, with or without licensure, 

to provide a credential or degree that 

satisfies both the educational 

requirements, including requirements 

for licensure, for entry into that 

occupation in the country in which the 

institution is located and the United 

States. The commenter noted that, 

unless there is a mutual recognition 

agreement in place among the relevant 

professional authorities, meeting the 

requirements for professional licensure 

in the United States is not guaranteed by 

the successful completion of many 

otherwise eligible programs offered by 

foreign institutions. The commenter 

requested clarification as to what types 

of foreign institutions and what types of 

programs would be covered by both 

paragraphs (1)(v)(A) and (B) of the 

definition of foreign institution, and if 

there were any foreign institutions that 

could offer programs that satisfied either 

paragraph (A) or (B) and still meet the 

definition’s requirements. 

Discussion: After further 

consideration and in light of the 

comment received, we believe that our 

original concern, that students attending 

a foreign institution would not be able 

to enter a recognized occupation 

without further study, is addressed in 

other areas of the regulations, and we 

have therefore eliminated paragraphs 

(1)(v)(A) and (B) of the definition of 

foreign institution in § 600.52 of these 

final regulations. In particular, the 

Department’s concerns are addressed in 

paragraph (1)(iv) of the definition of 

foreign institution, which requires a 

foreign institution to award degrees, 

certificates, or other recognized 

educational credentials in accordance 

with § 600.54(e) that are officially 

recognized by the country in which the 

institution is located. Other applicable 

provisions of the Student Assistance 

General Provisions (34 CFR part 668) 

which address our concerns include, 

but are not limited to, subpart F, which 

prohibits any substantial 

misrepresentation made by an 

institution regarding the nature of its 

educational program, its financial 

charges or the employability of its 

graduates. 

Changes: We have removed 

paragraphs (1)(v)(A) and (B) of the 

definition of foreign institution in 

§ 600.52. 

Comment: None. 

Discussion: Section 600.51(c)(1), as 

proposed in the NPRM, specified that 

foreign institutions must comply with 

all of the requirements that apply to 

eligible and participating domestic 

institutions unless provisions regarding 

foreign institutions in the HEA or the 

Department’s regulations were 

inconsistent. In addition, proposed 

§ 600.52(c)(2) provided that a foreign 

institution would not be required to 

comply with Title IV, HEA program 

requirements that the Secretary, through 

a notice in the Federal Register, 

identifies as inapplicable to foreign 

institutions. 

To more clearly set forth existing law 

specifically regarding foreign 

institutions’ regulatory responsibilities 

with regard to their participation in the 

Title IV, HEA programs, we are making 

several technical changes. We are 

consolidating proposed paragraphs 

§ 600.51(c)(1) and (2) to state that 

foreign institutions must comply with 

all requirements for eligible and 

participating institutions except where 

made inapplicable by the HEA, or when 

the Secretary, through regulations or a 

notice in the Federal Register, 

indentifies specific provisions as 

inapplicable to foreign institutions. In 

addition, because many requirements 

pertaining to institutions that are 

participating, or seeking to participate, 

in the Title IV, HEA programs are 

framed as requirements applicable to 

public and non-profit ‘‘institutions of 

higher education,’’ as defined in § 600.4, 

or to for-profit ‘‘proprietary institutions 

of higher education,’’ as defined in 

§ 600.5, we are adding new paragraph 

§ 600.51(c)(2), to make clear that, to be 

considered an ‘‘institution of higher 

education’’ in order to be eligible to 

participate in the Title IV, HEA 

programs, public or nonprofit foreign 

institutions must meet both the 

applicable requirements of § 600.4 and 

the applicable requirements of subpart 

E, and that, to be considered a 

‘‘proprietary institution’’ in order to be 

eligible to participate in the Title IV, 

HEA programs, a for-profit foreign 

institution must meet both the 

applicable requirements of § 600.5 and 

the applicable requirements of subpart 

E. These changes reflect the 

Department’s past and current 

interpretation of the law. 

In addition, we are revising 

§ 600.54(a) to specify which 

requirements in § 600.4 and § 600.5 

foreign institutions must meet and 

which they need not. The provisions of 

§ 600.4 and § 600.5 that are not 

applicable to public or private nonprofit 

foreign institutions, and for-profit 

foreign institutions, respectively are: (1) 

The requirement that an institution be 

in a State (§ 600.4(a)(1), and 

§ 600.5(a)(2)) because, by definition, a 

foreign institution is an institution that 

is not located in a State (see paragraph 

(1) of the definition of foreign institution 

in § 600.52); (2) the requirement that an 

institution admit as regular students 

only persons who have a high school 

diploma, have the recognized equivalent 

of a high school diploma, or are beyond 

the age of compulsory school attendance 

in the State in which the institution is 

physically located (§ 600.4(a)(2) and 

§ 600.5(a)(3)) because, as reflected by 

§ 600.54(b), most students enrolling in 

foreign institutions will have a 

secondary school completion credential 

or its equivalent, rather than a high 

school diploma and, as foreign 

institutions are not located in a State, 

the provision allowing the admission of 

students without a high school diploma 

or its equivalent if the student is beyond 

the age of compulsory school attendance 

in the State in which the institution is 

physically located is inapplicable; (3) 

the requirement that an institution be 

legally authorized by the State in which 

it is located (§ 600.4 (a)(3), and 

§ 600.5(a)(4)) again, because, by 

definition, a foreign institution is an 

institution that is not located in a State, 

and paragraph (1)(iii) of the definition of 

foreign institution in § 600.52 instead 

requires a foreign institution to be 

legally authorized by the education 

ministry, council or equivalent agency 


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of the country in which the institution 

is located; (4) the requirement that an 

institution may provide a 

comprehensive transition and 

postsecondary program, as described in 

34 CFR part 668, subpart O 

(§ 600.4(a)(4)(ii) and § 600.5(a)(5)(ii)), 

because under the HEA these programs 

are not available to Direct Loan 

borrowers, and because foreign 

institutions are not eligible for programs 

other than Direct Loans; (5) 

accreditation requirements 

(§ 600.4(a)(5), and § 600.5(a)(6)) because 

the Secretary does not recognize 

accrediting agencies for the purpose of 

accrediting foreign institutions; (6) the 

conditions under which an institution is 

considered to be located in a State 

(§ 600.4(b), and § 600.5(c)) again, 

because, by definition, a foreign 

institution is an institution that is not 

located in a State; and (7) the conditions 

under which the Secretary recognizes an 

institution’s accreditation (§ 600.4(c), 

and § 600.5(d)) again, because the 

Secretary does not recognize accrediting 

agencies for the purpose of accrediting 

foreign institutions. In addition, for a 

for-profit foreign institution, 

§ 600.5(a)(5)(i)(B), which allows an 

institution to meet the definition of a 

for-profit institution by providing a 

program leading to a baccalaureate 

degree in liberal arts, is not applicable 

because the Secretary does not 

recognize accrediting agencies for the 

purpose of accrediting foreign 

institutions and, in order to meet this 

provision, an institution must be 

accredited by a recognized regional 

accrediting agency or association, and 

have continuously held such 

accreditation since October 1, 2007, or 

earlier. 

Changes: We have revised § 600.51(c) 

to more explicitly set forth current law 

by stating that foreign institutions must 

comply with all requirements for 

eligible and participating institutions 

except where provided for in the HEA, 

and when the Secretary, through 

regulations or a notice in the Federal 

Register, indentifies specific provisions 

as inapplicable to foreign institutions, 

and to make clear that requirements 

applicable to ‘‘institutions of higher 

education’’ apply to foreign public and 

non-profit institutions, and that 

requirements applicable to ‘‘proprietary 

institutions of higher education’’ apply 

to foreign for-profit institutions, for 

purposes of determining eligibility to 

participate in the Title IV, HEA 

programs, as well as for determining 

applicability of other Title IV 

requirements not related to institutional 

eligibility. Finally, in § 600.54, we are 

revising paragraph (a) to specify which 

requirements in § 600.4 and § 600.5 

foreign institutions must meet and 

which they need not. 

Foreign Graduate Medical Schools 

(§§ 600.20, 600.21, 600.52, and 600.55) 

General 

Comments: One commenter, the 

Federation of State Medical Boards, 

applauded the Department’s initiative to 

strengthen the eligibility criteria specific 

to foreign graduate medical schools, but 

was concerned about the requirement in 

§ 600.55(a)(2)(ii) that requires that a 

foreign graduate medical school 

program offered by a foreign graduate 

medical school be approved by all 

medical licensing boards and evaluating 

bodies whose views are considered 

relevant by the Secretary. The 

commenter believed that the regulatory 

provision was unclear. The commenter 

noted that the Federation of State 

Medical Boards and its member 

licensing boards require U.S. medical 

students attending U.S. and Canadian 

medical schools to graduate from 

medical schools accredited by the 

Liaison Committee on Medical 

Education (LCME) or the American 

Osteopathic Association (AOA). The 

commenter asserted that, if the intent of 

the proposed regulations was to extend 

the approval of foreign graduate medical 

schools to State medical boards, it may 

not be administratively feasible. The 

commenter noted that there are 

currently no mechanisms or resources 

available for the majority of State 

medical boards to approve individual 

foreign graduate medical school 

programs and establishing and 

implementing such a mechanism could 

be a complex, costly, time consuming, 

and burdensome process. 

Discussion: The provision in 

§ 600.55(a)(2)(ii), requiring that a foreign 

graduate medical school program 

offered by a foreign graduate medical 

school be approved by all medical 

licensing boards and evaluating bodies 

whose views are considered relevant by 

the Secretary, does not require State 

medical boards to approve programs 

from foreign graduate medical schools. 

Rather, the provision gives the Secretary 

discretion to take into account the views 

of relevant medical licensing boards and 

evaluating bodies if they are available. 

We note that this provision has been in 

the regulations for some time and no 

changes to it were proposed in the 

NPRM. 

Changes: None. 

Location of a Graduate Medical 

Education Program, Affiliation 

Agreements, and Application and 

Notification Procedures for Foreign 

Graduate Medical Schools 

Comments: One commenter believed 

that an exception to the provisions in 

the regulations that limit the location of 

foreign graduate medical school clinical 

training should be made for locations 

included in the accreditation of the 

AOA, as was proposed for locations 

included in the accreditation of the 

LCME. 

One commenter asked the Department 

to remove the sections of the proposed 

regulations that place limitations on the 

location of graduate medical education 

programs, as Recommendation 12(a) of 

the National Committee on Foreign 

Medical Education and Accreditation’s 

(NCFMEA) 2009 Report to the U.S. 

Congress by the National Committee on 

Foreign Medical Education and 

Accreditation Recommending 

Institutional Eligibility Criteria for 

Participation by Certain Foreign 

Medical Schools in the Federal Family 

Education Loan Program (NCFMEA 

report), on which those regulations were 

based, was outside the scope of the 

charge provided by Congress to the 

NCFMEA. (The NCFMEA report is 

available at http://www2.ed.gov/about/ 

bdscomm/list/ncfmea-dir/ 

reporttocongress2009.pdf.) The 

commenter felt that limitations to preclinical coursework are inconsistent 

with section 484(o) of the HEA, 

§ 668.5(b) of the regulations, and 

guidance in the Federal Student Aid 

Handbook addressing study abroad, 

which permit eligible institutions to 

enter into written arrangements with 

institutions in other countries to offer 

part of a program. The commenter 

believed the proposed limitations to be 

arbitrary, as they are only applicable to 

foreign graduate medical schools. The 

commenter also believed that the 

limitations prohibit cooperative 

international medical education efforts 

without any statutory basis, and are 

inconsistent with the standard of 

comparability that the HEA attempts to 

establish between foreign and U.S. 

institutions. The commenter also felt the 

proposed limitations to be 

discriminatory to foreign graduate 

medical schools located in small 

countries, many of which have a long 

history of multi-lateral and regional 

cooperation in the areas of health care 

and education. The commenter felt that 

the limitations on clinical training 

would prevent efforts to expand medical 

services in developing countries and 

discourage cooperative efforts in 


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international education. The commenter 

asked that the Department modify the 

proposed limitations in the regulations 

that are applicable only to foreign 

graduate medical schools to allow 

students at such schools to take 

coursework outside of the country in 

which the school is located as long as 

the requirements for written agreements 

between schools to provide educational 

programs in § 668.5, or comparable 

standards for foreign graduate medical 

schools, are met. 

One commenter, an organization 

representing all twenty universities in 

Australia and New Zealand that confer 

professional, entry-level medical 

degrees, stated that the proposed 

requirements addressing affiliation 

agreements between foreign graduate 

medical schools and hospitals or clinics 

for clinical training would impose a 

significant administrative burden on 

their schools, as some of the proposed 

requirements are not normally included 

in most affiliation agreements between 

their schools and health services, 

particularly agreements covering longterm, general-practice placements. 

Another commenter, representing a 

foreign graduate medical school in 

Australia, felt it was unnecessarily 

bureaucratic to impose detailed 

reporting requirements, such as the 

information that would have to be 

included in an affiliation agreement, 

and the requirement that a foreign 

graduate medical school notify its 

accrediting body within one year of any 

material changes in the program. The 

commenter felt that, despite Australia’s 

stringent accreditation processes, this 

approach fails to reflect that the 

commenter’s school is a professional 

institution of high standing, teaching to 

standards recognized as comparable to 

U.S. standards. 

Discussion: We agree that an 

exception to the provisions in the 

regulations that limit the location of 

foreign graduate medical school clinical 

training should be made for locations 

included in the accreditation of the 

AOA. The Department’s rationale for 

making an exception for locations 

included in the accreditation of the 

LCME was because LCME is an 

accrediting agency that accredits U.S. 

medical schools. As the Federation of 

State Medical Boards recognizes both 

the LCME and the AOA for 

accreditation of domestic medical 

schools, the Department agrees that 

locations accredited by the AOA should 

also be exempt from the provisions in 

the regulations that limit the location of 

foreign graduate medical school clinical 

training. 

Although the majority of the 

regulations addressing the location of 

medical education programs offered by 

foreign graduate medical schools are 

supported by Recommendation 12(a) of 

the NCFMEA report, the regulations also 

represent, with some variation, the 

Department’s current policy. The 

Department continues to believe that 

many of the reasons for that current 

policy are sound and support the 

positions taken in these final 

regulations. That is, because of the lack 

of direct authority of an accrediting 

body over educational sites located 

outside the country in which the main 

campus is located, the basic science 

portion of a medical program offered by 

a foreign graduate medical school must 

be located in the same country as the 

school’s main campus to ensure that the 

majority of classroom instruction will be 

under the direct authority of the 

school’s accrediting body. Also, it is 

acceptable for the Department to 

balance the benefits of closer oversight 

by the school’s accrediting agency of the 

clinical training parts of the program 

with the benefits to students of exposure 

to other medical environments, and to 

craft its regulations to permit clinical 

sites to be located in countries other 

than the country in which the main 

campus is located in specified 

circumstances. Whereas foreign 

institutions other than foreign graduate 

medical schools (and, by July 1, 2015, 

foreign veterinary schools) are not 

required to be accredited to be eligible 

to participate in the Title IV, HEA 

programs, foreign graduate medical 

schools are required to be accredited 

(section 102(a)(2)(B) of the HEA). Thus, 

the Secretary believes it is appropriate 

to place restrictions on foreign graduate 

medical schools when the authority of 

the school’s accrediting agency to 

provide oversight is in question. 

In accordance with the Guidelines of 

the NCFMEA, the entity that determines 

whether the medical school accrediting 

standards used in other countries are 

comparable to those applied to medical 

schools in the United States for 

purposes of evaluating the eligibility of 

accredited foreign graduate medical 

schools to participate in the Title IV, 

HEA programs, a foreign medical 

school’s accrediting body must have 

standards comparable to LCME 

standards, including the standard that a 

medical school must have approved 

affiliation agreements with each 

teaching hospital or clinical facility it 

uses that define the responsibilities of 

each party. The Department believes 

that the responsibilities that the 

regulations require a foreign graduate 

medical school to include in affiliation 

agreements with hospitals or clinics at 

which all or a portion of the school’s 

clinical training is provided are 

essential responsibilities that must be 

addressed in order to ensure the quality 

of the clinical training portion of the 

program. NCFMEA Guidelines also 

require foreign medical school 

accrediting bodies to demonstrate that 

their accreditation/approval processes 

require medical schools to notify the 

appropriate authorities of any 

substantive changes to the educational 

program, student body, or resources, 

and to review the substantive changes to 

determine if the accredited schools 

remain in compliance with the 

standards. The Secretary believes that 

requiring a foreign graduate medical 

school to notify its accrediting body 

within one year of any material changes 

in educational programs is a reasonable 

minimum standard. The NCFMEA 

Guidelines can be accessed at http:// 

www2.ed.gov/about/bdscomm/list/ 

ncfmea.html#review. 

Changes: We have revised 

§§ 600.20(c)(5), 600.21(a)(10), 

600.55(a)(2)(iii), and 600.55(h)(3)(ii)(A) 

to provide an exception to the 

provisions limiting the location of 

foreign graduate medical school clinical 

training sites. The new exception 

applies to locations included in 

accreditation granted by the AOA. 

Admission Criteria and Collection and 

Submission of Data 

Comments: A few commenters 

objected to the proposed regulations 

addressing admission criteria and the 

collection and submission of data. One 

commenter also felt that obtaining 

information about residency placements 

when students have left the school and 

the country would be extremely 

challenging. 

One commenter, representing a school 

in Australia, believed it was 

unreasonable to require a foreign 

graduate medical school to require U.S. 

students accepted for admission to have 

taken the Medical College Admission 

Test (MCAT) and to have reported their 

scores for each time they took the test. 

The commenter felt that some form of 

equivalency should be granted the test 

it requires for admission, the 

International Student Admissions Test 

(ISAT). One commenter, an organization 

representing all twenty universities in 

Australia and New Zealand that confer 

professional, entry-level medical 

degrees, stated that requiring foreign 

graduate medical schools to collect and 

submit data on MCAT scores, United 

States Medical Licensing Examination 

(USMLE) pass rates, and U.S. medical 


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residency placements would be 

administratively onerous for their 

institutions. The commenter noted that 

Australian universities are subject to 

stringent privacy legislation, which 

precludes institutions from supplying 

individual data on students to third 

parties without the student’s written 

permission. The commenter stated that 

the economics of compliance as well as 

the complexity of the proposed 

regulations would discourage 

participation of their schools in the Title 

IV, HEA programs. Another commenter 

representing an institution in Australia 

recommended that foreign graduate 

medical schools with small numbers of 

Title IV, HEA program recipients be 

exempt from collecting and submitting 

data on MCAT scores and U.S. medical 

residency placements. The commenter 

stated that the MCAT is not an 

admission requirement for entry into its 

medical program and, therefore, the 

results are not provided to the school. 

Discussion: The Department 

continues to believe that analysis of the 

submitted data is essential for the 

development of future statutory and 

regulatory provisions, as well as 

strengthening of the accreditation 

process, resulting in a more accurate 

assessment of the quality of education 

being provided to students attending 

foreign graduate medical schools. As 

such, the Department believes it is 

beneficial to have data on all foreign 

graduate medical schools that 

participate in the Title IV, HEA 

programs, regardless of the number of 

Title IV, HEA program fund recipients. 

Although obtaining information about 

residency placements will require 

foreign graduate medical schools that do 

not already track this information to 

now do so, we believe the added burden 

is justified in light of these long-term 

benefits. In order for the comparison of 

data on entry tests to be useful, it must 

be for results on a common test. As the 

Department’s interest in this area is in 

U.S. students, the test given to U.S. 

students to determine entry to U.S. 

medical schools, the MCAT, is the most 

appropriate test for this purpose. We 

note that a foreign graduate medical 

school is required to have U.S. students 

report only one MCAT score; they are 

not required to collect scores for each 

time a student took the MCAT. 

To the extent that a foreign country 

has privacy laws requiring student 

consent to release the required data, 

§ 600.55(c)(2) requires a foreign graduate 

medical school to determine those 

consent requirements and require the 

necessary consents of all students 

accepted for admission for whom the 

school must report to enable the school 

to comply with the required collection 

and submission of data. If a foreign 

country’s privacy laws preclude 

obtaining the information and materials 

necessary for establishing compliance, 

the institutions located in those 

countries will not qualify for 

participation in the Title IV, HEA 

programs. 

Changes: None. 

Citizenship and USMLE Pass Rate 

Percentages 

Comments: One commenter 

supported the provisions in the 

proposed regulations that address 

institutions with small numbers of 

USMLE test-takers. 

A few commenters asserted that the 

proposed calculation of the USMLE pass 

rate was likely to restrict American 

students’ ability to enroll in or complete 

their education at select, prestigious 

foreign graduate medical schools 

because it would make institutions 

ineligible for participation in the Direct 

Loan Program. More specifically, some 

of the commenters felt that an aggregate 

USMLE pass rate, rather than one that 

requires a foreign graduate medical 

school to have a 75-percent pass rate on 

each step/test, would give the 

Department a better assessment of the 

quality of a foreign graduate medical 

school education. One of these 

commenters felt that an evaluation of 

the combined scores would reduce the 

variance in test scores based on student 

variability—a concern expressed by the 

NCFMEA in their report and by the U.S. 

Government Accountability Office 

(GAO) in their report entitled, ‘‘Foreign 

Medical Schools: Education Should 

Improve Monitoring of Schools That 

Participate in the Federal Student Loan 

Program’’ (GAO–10–412) (GAO report), 

available at http://www.gao.gov/ 

new.items/d10412.pdf. One commenter 

noted that, while USMLE pass rates can 

be useful for determining the quality of 

education offered to American students 

at foreign graduate medical schools, the 

data must be properly interpreted to 

ensure that it accounts for the 

differences in medical education 

curricula, the sequencing of curricula, 

and different methods of student 

assessment in different countries. The 

commenter, who represented an 

institution in Ireland, stated that the 

medical education in Ireland is 

provided in a different sequence and 

uses different types of examination and 

assessment. More specifically, the 

commenter noted that although Irish 

medical schools may use multiple 

choice question (MCQ) examinations, 

which are similar to the USMLE, other 

methods of assessment—including 

continuous assessment, modified essay 

questions (MEQs), essays, and Objective 

Structured Clinical Exams (OSCEs)—are 

given greater weight, so their students 

have significantly less experience with 

a USMLE-type examination and, 

therefore, are disadvantaged, 

particularly on Step 1, the pre-clinical 

exam, which is entirely MCQ. The 

commenter noted that their school’s 

pass rates on Step 2–Clinical Knowledge 

(Step 2–CK) and Step 2–Clinical Skills 

(Step 2–CS) are comparable to U.S. 

universities. Thus, an aggregate pass 

rate would better reflect the quality of 

the education provided. The commenter 

felt that this position was supported by 

the GAO report, which states that many 

factors contribute to a graduate medical 

education program’s USMLE pass rate, 

including ‘‘the extent to which foreign 

schools may or may not focus on 

preparing students for the exam.’’ In 

addition, the commenter pointed out 

that the report notes the burden these 

requirements place on schools with a 

small proportion of the American 

students who study medicine abroad. 

The commenter also noted that the GAO 

report analysis states ‘‘that the new pass 

rate requirement may dissuade or even 

disqualify many schools from 

participating in the loan program,’’ thus 

reducing the foreign graduate medical 

school options available to U.S. 

students. The commenter asked the 

Department to seriously consider the 

GAO report in the development of these 

final regulations. One commenter, a 

member of the Committee that 

negotiated and came to consensus on 

the NPRM, supported the proposal to 

require a foreign graduate medical 

school to have a 75 percent pass rate on 

each step/test, and felt it and the other 

proposed regulations were critical 

toward ensuring the availability of highquality international programs of 

medical education. 

A couple of commenters objected to 

the proposal to include only first-time 

test takers in the calculation of USMLE 

pass rates. The commenters stated that, 

in contrast to the assertions made by 

non-Federal negotiators that the pass 

rates of students in subsequent attempts 

are typically quite low, the commenter’s 

school has had many high-performing 

students and graduates who have passed 

the exam only on the second or third 

attempts. The commenters believed that 

the non-Federal negotiators’ assertion 

was also in conflict with the National 

Board of Medical Examiners (NBME) 

Annual Report on USMLE Performance. 

The commenter recommended that the 

Department adopt Recommendation 4(b) 

of the NCFMEA report—that each 


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student or graduate who repeats a step 

in a particular year only be counted 

once in the denominator for that year for 

that step, and be counted once in the 

numerator if he/she passes. The 

commenter felt that, at a minimum, the 

Department should examine the validity 

of using such a method to determine the 

effectiveness of the testing procedure as 

a means of defining eligibility for 

foreign graduate medical schools. 

One commenter supported the 

proposed change to limit the USMLE 

pass rates calculation to U.S. citizens, 

nationals, and eligible permanent 

residents. Two commenters opposed the 

proposed change to limit the USMLE 

pass rate calculation to U.S. citizens, 

nationals, and eligible permanent 

residents, arguing that it goes beyond 

the plain language of the statute. These 

commenters felt that the exclusion of 

other students creates an administrative 

burden on foreign graduate medical 

schools and excludes from the 

calculation a true representative sample 

of a school’s students and graduates, 

creating an incomplete picture of a 

school’s level of training. The 

commenters felt that the calculation of 

the USMLE pass rate should include all 

students, with data for U.S. citizens, 

nationals, and eligible permanent 

residents treated as supplementary 

information. 

One commenter felt that the USMLE 

pass rate was not an appropriate 

measure of the quality of foreign 

medical schools, and that 75 percent is 

not an appropriate benchmark for Title 

IV, HEA program eligibility. A few 

commenters asked the Department to 

consider phasing in the 75-percent pass 

rate requirement through 2014, as was 

suggested by the NCFMEA report. One 

of these commenters believed that the 

Department could enter into informal 

compliance agreements to allow foreign 

graduate medical schools that initially 

do not meet the 75-percent threshold to 

continue to participate in the Title IV, 

HEA programs, conditioned upon 

compliance with a written agreement 

that the school will make certain 

changes in its policies designed to boost 

its USMLE pass rate by 2014. 

A few commenters asked the 

Department to expand the exemption 

from the USMLE pass rate requirement 

for foreign graduate medical schools 

that had a clinical training program that 

has been continuously approved by a 

State as of January 1, 1992. A couple of 

these commenters asked that the 

exemption be expanded to include 

public foreign graduate medical schools 

that had clinical programs in their own 

countries well before January 1, 1992, 

and that had graduates practicing in the 

United States well before the exempted 

foreign graduate medical schools were 

even established. One commenter felt 

that participation in the Fifth Pathway 

Program should qualify a school for the 

exemption. 

Discussion: The GAO, as a result of 

the report referenced by the commenter, 

made four recommendations to the 

Department. The GAO recommended 

that the Department: 

1. Collect consumer information, such 

as aggregate student debt level and 

graduation rates, from foreign medical 

schools participating in the federal 

student loan program and make it 

publically available. 

2. Require foreign medical schools to 

submit aggregate institutional pass rate 

data to the Department annually. 

3. Verify data submitted by schools, 

for example by entering into a datasharing agreement with the testing 

organizations. 

4. Evaluate the potential impact of the 

75 percent pass rate requirement on 

school participation in the federal 

student loan program and advise 

Congress of any needed revisions to the 

requirement. 

The Department agreed with all four 

recommendations. The Department is 

committed to collecting and examining 

data on the USMLE pass rate to provide 

Congress with recommendations for 

change, if necessary. However, as noted 

in the GAO report, complete data have 

not been available to all schools to 

provide to the Department until 

recently. As such information is now 

available, in June of this year, the 

Department sent a letter to foreign 

graduate medical schools requiring that 

USMLE pass rate information be 

supplied annually, starting with exams 

taken during calendar year 2009. The 

letter required foreign graduate medical 

schools to submit the information for 

2009 to the Department by September 

30, 2010. The Department will study 

this data, as well as data submitted for 

2010, to determine what changes we 

will recommend to Congress. 

The Department does not support 

using an aggregate USMLE pass rate of 

75 percent in lieu of a required pass rate 

of 75 percent on each step/test. The 

Department believes that an individual 

assessment of each step/test is a better 

measure, precisely because such an 

approach provides an assessment of the 

sequential performance on the USMLE. 

The Department agrees with the 

NCFMEA’s opinion in Recommendation 

4(c) of the NCFMEA report, ‘‘The 

USMLE examinations are taken at 

different stages of the student’s progress 

toward becoming a licensed medical 

practitioner and reflect the quality of 

education delivered by related, but 

different, sequential processes. As such, 

the Committee feels that separately 

reporting performance on each step 

examination will allow the Department 

to more adequately judge the 

performance of each school in preparing 

students for future clinical 

performance.’’ 

Although the Department believes 

that Recommendation 4(b) of the 

NCFMEA report—to include each 

student or graduate who repeats a step 

in a particular year once in the 

denominator for that year, and in the 

numerator if he/she passes—would be 

an acceptable approach to calculating 

the USMLE pass rate, we believe that 

including only first-time test takers is a 

better approach. While a couple of 

commenters believed that recognizing 

subsequent attempts on steps/tests of 

the USMLE would more accurately 

reflect the quality of education at 

foreign graduate medical schools, data 

presented in the 2009 Annual Report of 

the National Board of Medical 

Examiners (pages 56–59) indicate that 

repeat examinees from non-U.S. and 

Canadian schools pass at lower rates 

than first-time test takers. For example, 

the 2008 pass rate on Step 1 for repeat 

examinations was 37 percent as 

opposed to 73 percent for first-time test 

takers, and 36 percent as opposed to 73 

percent in 2009. The 2009 Annual 

Report is available at http:// 

www.nbme.org/PDF/ 

2009AnnualReport.pdf. Thus, the 

Department is persuaded that, generally, 

for students attending foreign graduate 

medical schools, the pass rates in 

subsequent attempts on steps/tests of 

the USMLE are low, and therefore 

redundant and less indicative of the 

quality of instruction than first-time test 

scores. 

After further consideration of the 

issue, the Department agrees with the 

commenters who believed that the 

USMLE pass rate score should not be 

limited to U.S. citizens, nationals, and 

eligible permanent residents. The 

Department believes that the inclusion 

of U.S. and non-U.S. students provides 

a fair evaluation of a foreign graduate 

medical school’s program, while 

reducing burden on schools by not 

requiring the separation of pass rates by 

citizenship. Although the Department 

heard from non-Federal negotiators that 

the USMLE pass rates for non-U.S. 

students at some foreign institutions are 

lower than those of U.S. students, data 

provided in the 2009 Annual Report of 

the Education Commission for Foreign 

Graduate Medical Graduates (ECFMG) 

(available at: http://www.ecfmg.org/ 

annuals/ECFMG2009.pdf) indicate that, 


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generally, that is not the case for two of 

the three steps/tests for which a pass 

rate is determined. For Step 1, U.S. 

citizens who are first-time test takers 

have a pass rate of 67 percent, compared 

to a pass rate of 75 percent for foreign 

citizens who are first-time test takers, 

while for Step 2–CK, U.S. citizens who 

are first-time test takers have a pass rate 

of 76 percent, compared to a pass rate 

of 85 percent for foreign citizens who 

are first-time test takers. For Step 2–CS, 

scores generally are lower. U.S. citizens 

who are first-time test takers have a pass 

rate of 82 percent, compared to a pass 

rate of 70 percent for foreign citizens 

who are first-time test takers. 

As noted in the preamble to the 

NPRM, the HEA does not currently 

provide an exemption for any foreign 

graduate medical schools, even those 

with small numbers of U.S. students, 

from the USMLE pass rate requirement, 

with the exception of those that have a 

clinical training program that had State 

approval continuously since January 1, 

1992. The Department does not have the 

authority to expand that statutory 

exemption to include other schools, 

delay implementation of the 75-percent 

threshold, or enter into compliance 

agreements allowing schools that do not 

meet the statutory requirement to 

continue participation. While the 

NCFMEA report did recommend 

delaying the implementation of the 

increased 75-percent threshold until 

2014 to allow a stepped approach to the 

higher threshold, the recommendation 

recognized that Congress would need to 

change the law before this 

recommendation could be implemented. 

In addition, participation in the 

American Medical Association’s (AMA) 

‘‘Fifth Pathway’’ program does not 

satisfy the criteria for the pass rate 

exemption. Individuals participating in 

the Fifth Pathway program do not 

complete a foreign graduate medical 

school’s program and do not receive the 

school’s credential, so are not 

considered to have been attending a 

Title IV, HEA eligible program. In 

addition, we note that the AMA has 

decided that it will not support the Fifth 

Pathway program as a route to residency 

for individuals pursuing the Fifth 

Pathway program after December, 2009. 

Finally, the Department continues to 

believe that the methodology 

established in the proposed regulations 

allowing for combined step/test pass 

rate results for foreign graduate medical 

schools with small numbers of U.S. 

students sufficiently addresses concerns 

as to the reliability of pass rates as 

indicators of quality at such schools. 

Changes: We have revised 

§ 600.55(d)(1)(iii), (f)(1)(ii), and (f)(3) to 

require foreign graduate medical schools 

to report on USMLE pass rates for all 

students and graduates, regardless of 

their citizenship. 

Comments: None. 

Discussion: These final regulations 

require a foreign graduate medical 

school to submit USMLE pass rate 

information for a calendar year, rather 

than an award year, as was proposed. 

The Department is making this change 

for consistency with the Department’s 

current request for pass rate 

information, which requires information 

for the 2009 calendar year. The change 

will allow the Department to evaluate 

data from a consistent period to 

facilitate its evaluation of the potential 

impact of the 75-percent pass rate 

requirement and to advise Congress of 

any necessary statutory changes to the 

requirement. As a result, these final 

regulations require an institution to 

submit the information to the 

Department by April 30, rather than the 

proposed submission date of September 

30. The Department has extended the 

submission date by a month past the 

end of the reporting period and 

provided that the Department may 

change the submission date by notice in 

the Federal Register, to accommodate 

any changes to the timing of the receipt 

of test scores by institutions or the 

timing of the receipt of test scores by the 

ECFMG (or other responsible third 

party). For consistency, the reporting 

period and submission date for MCAT, 

residency placement, and citizenship 

data have also been changed. 

Changes: We have revised 

§ 600.55(d)(1) and (d)(3) to require 

foreign graduate medical schools to 

report on USMLE pass rates, MCAT 

scores, residency placement and 

citizenship data (unless it is exempt 

from providing citizenship data) for a 

calendar year, and to submit that 

information, to its accrediting authority 

or the Department, as applicable, no 

later than April 30 of each year, unless 

the Secretary specifies a different date 

through a notice in the Federal Register. 

Comments: None. 

Discussion: The proposed regulations 

provided that, instead of submitting 

USMLE pass rate data directly to the 

Department, a foreign graduate medical 

school could choose to allow the 

ECFMG or other responsible third party 

to calculate and report the school’s 

USMLE rates directly to the Secretary. 

The Department has reconsidered this 

provision, however, in view of the fact 

that the ECMFG does not provide 

schools with individual pass rate data, 

except with written student-by-student 

consent. In addition, ECFMG does not 

calculate or report a school pass rate if 

fewer than five test results would be 

included in the rate. 

The Department regards the ECFMG 

as the most reliable source for pass rates 

and pass rate data. We note that the 

pertinent HEA provision refers 

explicitly to pass rates on examinations 

administered by ECFMG, and the 

Department cannot identify any more 

authoritative source for ECMFG data 

and pass rates than ECFMG. The 

Department also recognizes that the 

option of having ECFMG calculate and 

report a school’s rate may be a 

significant convenience to foreign 

graduate medical schools participating 

or seeking to participate in the Direct 

Loan program, in contrast to obtaining 

individual consents in a manner 

consistent with applicable privacy laws, 

and then submitting those consents to 

ECFMG so as to obtain all individual 

test results, and then furnishing those 

results to the Department. Furthermore, 

reliance on ECFMG to provide pass rates 

is consistent with the GAO’s 

recommendation regarding data sharing. 

For these reasons, with two 

limitations, the Department is retaining 

the option in proposed § 600.55(d)(2) for 

foreign graduate medical schools to rely 

on ECFMG pass rate reports in lieu of 

obtaining individual student and 

graduate consents and then collecting 

and submitting reports of all test results 

to the Department under 

§ 600.55(d)(1)(iii). The first limitation is 

that foreign graduate medical schools 

desiring to invoke the option of relying 

on ECFMG reports of pass rates must 

annually provide written consent 

acknowledging that the ECFMG 

calculation will be conclusive for 

purposes of Title IV institutional 

eligibility. This limitation is necessary 

because the data needed to confirm the 

accuracy of ECMFG calculations is 

available only through obtaining 

individual consents from all students 

and graduates included in the ECFMG 

rate, and because the availability of such 

consents is not within the control of the 

Department, the ECFMG, or, at that 

stage, the foreign graduate medical 

school. As long as the foreign graduate 

medical school is fully informed of this 

circumstance, the Department regards 

the ECFMG option as contributing to 

effective administration of the Title IV 

programs. 

The second limitation is that the 

option cannot be used by foreign 

graduate medical schools that had fewer 

than eight test results during the year on 

any of the three USMLE tests for which 

rates are to be determined. Under 

§ 600.55(f)(4), the Department uses an 

alternate methodology to compute rates 

for these schools. ECFMG does not use 


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this methodology, nor in most cases will 

its reports contain the data the 

Department would need to do the 

calculation itself. This means that 

schools will need to determine whether 

the number of test takers will be high 

enough to invoke the ECFMG option 

early enough to obtain individual 

consents if there is any possibility it 

will not. We note that the previously 

discussed change to include the USMLE 

pass rate scores of all students, rather 

than limiting the calculation to U.S. 

citizens, nationals, and eligible 

permanent residents, is likely to result 

in fewer schools that will be barred by 

low numbers of test takers from using 

the ECFMG reported rates option. 

Finally, because the language of the 

HEA makes clear that a loss of eligibility 

for a failure to meet the USMLE pass 

rate threshold is nondiscretionary, and 

to reflect the discussion above, 

including the new regulatory 

requirement for written consent from 

the school to considering an ECFMG 

report as conclusive regarding the 

calculation of the school’s pass rates, 

the Department is revising its provision 

regarding administrative appeals from 

loss of institutional eligibility to reflect 

the limited scope remaining for such an 

appeal. The Department’s approach is 

consistent with treatment of other 

nondiscretionary eligibility 

requirements, such as accreditation and 

state licensure (§ 600.41(e)(1) and 

(e)(2))). 

Changes: Sections 600.55(d)(1)(iii) 

and (d)(2) provide that a foreign 

graduate medical school may choose to 

allow the ECFMG or other responsible 

third party to provide the school’s 

USMLE pass rate directly to the 

Secretary only if that school has 

provided by April 30 to the Secretary 

written consent acceptable to the 

Secretary (1) allowing the Secretary to 

rely on the USMLE pass rate 

information provided to the Department 

by the ECFMG or other responsible third 

party; and (2) agreeing that the rate 

calculated by the ECFMG will be 

conclusive for purposes of determining 

the school’s compliance with the 

required 75-percent pass rate 

thresholds. Section 600.55(d)(2) 

provides that a foreign graduate medical 

school that, in accordance with 

§ 600.55(f)(4), must use the alternative 

means of providing pass rate 

information to the Department because 

it does not have a sufficient number of 

step/test results, may not opt to have its 

pass rates provided to the Department 

by the ECFMG. We have added 

§ 600.41(e)(3) to make clear that, in an 

appeal from a loss of institutional 

eligibility resulting from a pass rate or 

pass rates below 75 percent, the level of 

the pass rate for the foreign graduate 

medical school for the preceding 

calendar year is the sole issue, and that, 

for a foreign graduate medical school 

that invoked the ECFMG report option, 

ECFMG’s calculation of the rate or rates 

is conclusive. 

Comments: None. 

Discussion: Under section 

102(a)(2)(A)(i)(I)(aa) of the HEA, for a 

foreign graduate medical school to 

remain eligible for participation in the 

Title IV, HEA programs, during the 

preceding year at least 60 percent of the 

school’s students and graduates must 

not have been U.S. citizens, nationals, 

or eligible permanent residents, unless 

the school has had a State-approved 

clinical training program since prior to 

January 1, 2008. Schools must submit 

their citizenship rates in order for the 

Department to implement this HEA 

requirement. The requirement for 

submission of such data was implicit in, 

but not explicitly set out in, 

§ 600.55(f)(1)(i)(A) of the proposed 

regulations. The Department is, 

therefore, adding to the data-submission 

provision in § 600.55(d)(1)(iv) new 

language to clarify that schools that 

have not had clinical training programs 

approved by a State since prior to 

January 1, 2008, must annually supply 

the Secretary with their citizenship 

rates, together with the methodology 

used to determine them, for purposes of 

enabling the Secretary to ensure 

compliance with section 

102(a)(2)(A)(i)(I)(aa) of the HEA. In 

connection with this change, and for 

conformity with the ECFMG datasubmission requirements, the 

Department has also changed the phrase 

‘‘academic year,’’ in § 600.55(f)(1)(i)(A), 

relating to citizenship rates, to ‘‘calendar 

year.’’ 

Changes: The Department is adding 

new language in § 600.55(d)(1)(iv) to 

require schools that have not had 

clinical training programs approved by 

a State since prior to January 1, 2008, to 

annually supply the Secretary with their 

citizenship rates, together with the 

methodology used to determine them, 

for purposes of enabling the Secretary to 

ensure compliance with section 

102(a)(2)(A)(i)(I)(aa) of the HEA. 

Foreign Veterinary Schools (§ 600.56) 

Comments: Seven commenters were 

concerned that the proposed regulations 

would prevent students enrolled in 

public or private nonprofit foreign 

veterinary schools that receive Title IV, 

HEA program funds from taking any 

part of the program in the United States, 

except for a limited portion of the 

clinical training program. The 

commenters felt that such a limitation 

was too strict and would be detrimental 

to the educational experience and future 

careers of U.S. veterinary students. A 

few of these commenters noted that 

their school permits up to nine weeks of 

clinical placements and six weeks of 

pre-clinical placements overseas. Some 

of the commenters noted that allowing 

their U.S. students to take a greater 

portion of the program in the United 

States would be beneficial because it 

would enable them to build up contacts 

in the industry and experience 

veterinary practice in the United States, 

where they will eventually be 

practicing. Some of the commenters also 

noted that, as much of this placement 

activity takes place during the 

Christmas, Easter, and summer 

vacations, students can combine 

placements in the United States with 

the opportunity to visit home. 

Discussion: The commenters have 

misinterpreted some parts of the 

proposed regulations. While the 

proposed regulations prohibit the 

offering of the non-clinical portion of a 

veterinary program outside of the home 

country, and also limit the offering of 

the clinical training portion of the 

program outside of the home country 

and the United States, they do not 

prohibit or limit the offering of any 

portion of the clinical training portion 

of the program in the United States. 

As with the location of graduate 

medical programs offered by foreign 

schools, the Department believes that a 

foreign veterinary school seeking to 

participate in the Title IV, HEA 

programs should offer the non-clinical 

portion of its program solely in the 

country in which the main campus is 

located, to ensure greater consistency 

and accountability, as the oversight of a 

foreign veterinary school generally 

exists primarily in the country in which 

the school is established. Pursuant to 

section 102(a)(2)(A)(ii) of the HEA, 

clinical training in the United States is 

permitted, and, for for-profit veterinary 

schools, required. However, because 

these final regulations permit foreign 

graduate medical schools also to 

provide clinical training in third 

countries as long as the locations are 

included in accreditation granted by the 

LCME and the AOA, the Department has 

decided to provide a similar exception, 

applicable to public and private 

nonprofit foreign veterinary schools, 

permitting the provision of clinical 

training in third countries at locations 

included in accreditation granted by the 

American Veterinary Medical 

Association (AVMA). Just as the LCME 

and AOA are accreditors for U.S. 


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medical schools, the AVMA is the 

accreditor for U.S. veterinary schools. 

Changes: We have revised 

§ 600.56(b)(2)(ii)(C) to provide an 

exception to the provisions limiting the 

location of clinical training locations, 

that applies to locations of a public or 

private nonprofit foreign veterinary 

school that are included in accreditation 

granted by the AVMA. 

Foreign Nursing Schools (§ 600.57) 

Comments: Two commenters objected 

to changes made to the HEA by the 

HEOA that, in their view, effectively 

preclude foreign nursing schools from 

participating in the Title IV, HEA 

programs. One of these commenters 

requested that the Department 

grandfather in foreign nursing schools 

that currently participate in the Title IV, 

HEA programs, to ensure that existing 

students at those schools continue to 

receive Title IV, HEA program funding 

to complete their programs at these 

schools. 

Discussion: We agree that the changes 

made to the HEA will likely preclude 

many foreign nursing schools from 

continuing to participate in the Title IV, 

HEA programs. However, proposed 

§ 600.57 is consistent with the new 

statutory requirements that govern 

eligibility of foreign nursing schools to 

participate in the Title IV, HEA 

programs. 

The Department does not have the 

authority to grandfather in indefinitely, 

through regulations, foreign nursing 

schools that are currently participating 

in the Title IV, HEA programs. However, 

the statute gives foreign nursing schools 

that were participating in the Title IV, 

HEA programs on August 13, 2008 until 

July 1, 2012 to comply with the new 

requirements. Therefore, the regulations 

in § 600.57 do not apply to foreign 

nursing schools that were participating 

in the Title IV, HEA programs on 

August 13, 2008 until July 1, 2012. 

Changes: None. 

Comments: Two commenters raised 

concerns over proposed § 600.57(c), 

which requires a foreign nursing school 

to reimburse the Department for the cost 

of a loan default if the borrower defaults 

during the cohort default rate period. 

Under the proposed regulations, after 

the school reimburses the Department 

for the default, the Department assigns 

the loan to the foreign nursing school. 

The commenters generally were 

concerned that students obtaining Title 

IV, HEA program loans to enroll in 

foreign nursing schools may not be 

aware of the statutory and regulatory 

benefits that apply to their loans, and 

that a foreign nursing school will not 

have the capacity or expertise to 

properly service Title IV, HEA program 

loans that have been assigned to it. The 

commenters stated that procedures for 

the collection of Title IV, HEA program 

loans that have lost their eligibility are 

not clearly defined and readily 

locatable. The commenters believed that 

the lack of operational guidance in the 

proposed rules may be problematic in 

the servicing of these loans. 

The commenters recommended that 

the Department require foreign nursing 

schools participating in the Direct Loan 

Program on or after the effective date of 

the final regulations to alert prospective 

and currently enrolled students that 

their Direct Loan Program loans may be 

assigned to the school for collection if 

the borrower defaults on the loan. The 

commenters recommended that the 

notification identify any potentially 

adverse consequences of the loan 

assignment on the borrower’s ability to 

take advantage of Title IV, HEA program 

loan benefits. The commenters 

recommended that the Department 

require the foreign nursing school to 

provide this notification on its Web site 

and in its promotional, enrollment, 

registration, and other materials. 

The commenters also recommended 

that the final regulations include a 

requirement that prior to assigning the 

loan to the school the Department 

advise a defaulted borrower that the 

borrower’s loans will be assigned to the 

foreign nursing school for further 

collection. The commenters 

recommended that the Department’s 

notification provide contact information 

for the Federal Student Aid (FSA) 

Ombudsman’s Office. In addition, the 

commenters recommended that the 

notice advise the borrower that the 

borrower will still be entitled to take 

advantage of loan repayment and 

discharge options available to defaulted 

Title IV, HEA program loan borrowers 

after the loan has been assigned to the 

school. 

The commenters expressed concern 

that there will be a lack of Federal 

oversight and consumer advocacy 

assistance to ensure that the schools 

service these loans in accordance with 

the terms and conditions of the 

promissory note. The commenters 

recommended that the Department 

review the handling of these loans 

during the regular compliance audit 

process, and develop sanctions for 

schools that do not comply with the 

terms and conditions of the promissory 

note. 

The commenters noted several areas 

where they anticipated complications or 

limitations on the exercise of benefits 

available to Title IV, HEA program loan 

borrowers whose loans have been 

assigned to a foreign nursing school. 

One commenter questioned whether 

foreign nursing schools would be 

required to grant discharges due to 

death, total and permanent disability, or 

for school-related issues, such as school 

closure or unpaid refunds. 

Another commenter questioned 

whether foreign nursing schools would 

be able to make accurate determinations 

of eligibility for a total and permanent 

disability discharge, or have access to 

the necessary resources to determine if 

a borrower’s income exceeded the 

regulatory limits, or if the borrower 

received a Title IV, HEA program loan 

or TEACH Grant, during the three-year 

post-discharge monitoring period. 

The commenters recommended that 

the Department allow foreign nursing 

schools to assign these loans back to the 

Department in the event of a total and 

permanent disability discharge request. 

The Department would then make the 

determination of eligibility for a total 

and permanent disability discharge on 

these loans, as it does currently for 

FFEL and Direct Loans. 

One commenter contended that 

unpaid refund and false certification 

discharges are based on a dispute 

between a Title IV, HEA program loan 

borrower and a school, and argued that 

a foreign nursing school would have a 

conflict of interest adjudicating these 

types of discharge requests. The 

commenter recommended that unpaid 

refund and false certification discharge 

determinations for borrowers whose 

loans are held by a foreign nursing 

school be handled by a disinterested 

party, such as the Department. 

The commenters noted that 

rehabilitation is an option available to 

defaulted Title IV, HEA loan program 

borrowers, and asked the Department to 

confirm that loan rehabilitation will 

remain an option for defaulted Direct 

Loan borrowers whose loans have been 

assigned to a foreign nursing school. 

The commenters also recommended that 

the Department allow borrowers to 

consolidate defaulted Direct Loans that 

have been assigned to a foreign nursing 

school. 

Commenters recommended that if the 

Department determines that the loans 

cannot be consolidated or rehabilitated, 

that this information be included in the 

adverse impact disclosures to 

prospective and actual borrowers. The 

commenters felt that this would help 

potential borrowers to make fully 

informed decisions before borrowing a 

Direct Loan to attend a foreign nursing 

school. 

One commenter recommended that 

the Department not proceed with 


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assigning the loan to the school if the 

borrower has rehabilitated or 

consolidated the defaulted loan by the 

time the Department is prepared to 

make the assignment. 

One commenter recommended that a 

borrower who is in the process of 

rehabilitating a loan during the cohort 

default rate period be allowed to 

continue making rehabilitation 

payments to prevent the assignment, 

even if the stream of monthly payments 

required to rehabilitate the loan would 

not be completed until after the cohort 

default rate period ends. 

Discussion: We share the commenters 

concerns regarding the treatment of a 

Direct Loan that is assigned to a school 

and becomes an institutional loan. The 

statutory and regulatory provisions that 

govern Title IV, HEA program loans 

would not apply to these loans. The 

promissory note signed by the borrower 

would be the contract that the foreign 

nursing school has with the borrower to 

collect on the loan. Not all benefits that 

apply to Title IV, HEA program loans 

would continue to apply to loans that 

have been assigned to a foreign nursing 

school. 

The commenters asked if a borrower 

whose loan has been assigned to a 

foreign nursing school would be able to 

rehabilitate the defaulted loan, or to 

consolidate it into a Direct 

Consolidation Loan. Loan rehabilitation 

is not provided for in the Federal Direct 

Stafford/Federal Direct Unsubsidized 

Stafford Loan MPN. Therefore, the 

borrower would no longer be able to 

rehabilitate the loan. 

Loan consolidation is addressed in 

the MPN, but the MPN specifies that 

consolidation is only available for 

‘‘eligible federal education loans.’’ The 

borrower’s loan would no longer be a 

Federal education loan, and would not 

be eligible for consolidation. 

Loan discharges are provided for in 

the MPN. However, the granting of such 

discharges would be at the discretion of 

the foreign nursing school. Given the 

numerous Title IV, HEA program 

benefits that these borrowers could lose, 

the Department has concluded that it is 

not in the best interest of borrowers to 

assign their Direct Loans to a foreign 

nursing school. We have determined 

that these loans may remain Direct 

Loans, and that the Direct Loan terms 

and conditions and all applicable Title 

IV, HEA program benefits continue to 

apply to the loan, as long as the 

Department makes provisions to avoid 

‘‘double recovery’’ of the loan. Double 

recovery will be avoided if the 

Department revises the definition of 

‘‘cost of a loan default’’ that was 

proposed in § 600.57(b) of the NPRM to 

include only the estimated future 

collection costs on the loan. The 

Department annually announces a 

program-wide average cost of 

collections for Direct Loans. Estimated 

future collection costs will be derived 

from this program-wide average, but 

may be adjusted based on our 

experiences with borrowers who 

obtained Direct Loans to attend foreign 

nursing schools, or our experiences with 

the particular borrower whose loan has 

defaulted. For example, the estimated 

future collection costs might be higher 

for a borrower who is living outside of 

the United States than for a borrower 

who is living in the United States. 

Under the revised definition, the 

reimbursement by the foreign nursing 

school to the Department of the cost of 

a loan default will not include 

outstanding principal, accrued interest, 

unpaid late fees or collection charges, or 

other costs associated with the loan. 

Under the final regulations, the 

Department will continue to hold a 

Direct Loan that would have been 

assigned to a foreign nursing school 

under the proposed regulations, and 

will collect on the loan as we normally 

do. 

A reimbursement by the school of the 

cost of a loan default will have no 

impact on the borrower. The borrower 

will continue to owe the Direct Loan to 

the Department, and the Title IV, HEA 

program benefits will still apply. The 

borrower will be able to rehabilitate the 

loan, have access to loan consolidation, 

choose among Direct Loan repayment 

plans, and may qualify for a discharge 

under all of the existing loan discharge 

regulations and procedures in the Direct 

Loan Program. Therefore, there will be 

no need to provide adverse impact 

disclosures or notifications to borrowers 

regarding assignment of their Direct 

Loans to a foreign nursing school. Since 

the loans will be collected by the 

Department, there will be no need to 

develop special audit rules or sanctions 

around these loans for foreign nursing 

schools. 

Changes: We have modified the 

definition of ‘‘cost of a loan default’’ in 

§ 600.57(b) of the final regulations by 

removing the references to outstanding 

principal, accrued interest, and unpaid 

late fees and collection costs. We’ve also 

removed the references to special 

allowance and reinsurance payments 

and other similar payments made on the 

loan. We’ve replaced these amounts 

with estimated future cost of collections 

on the loan. 

We have revised § 600.57(c) by 

removing the requirement that Direct 

Loans be assigned to the school after the 

school reimburses the Department for 

the cost of a loan default. In its place, 

we have specified that the Department 

will continue to collect on the loan until 

it is paid in full, otherwise satisfied, or 

the loan account is closed out. 

Part 668 Student Assistance General 

Provisions 

Audited Financial Statements (§ 668.23) 

Comments: A majority of the 

commenters opposed the proposed 

changes to the financial audit 

submission requirements for foreign 

institutions. Specifically, the 

commenters opposed the proposed 

requirement for public or nonprofit 

foreign institutions that annually 

received at least $3,000,000 but less 

than $5,000,000 in U.S. Title IV, HEA 

program funds during its most recently 

completed fiscal year to submit once 

every three years audited financial 

statements prepared in accordance with 

the generally accepted accounting 

principles of both the institution’s home 

country and U.S. generally accepted 

accounting principles (U.S. GAAP), and 

for the two years in between would be 

allowed to submit, in English, audited 

financial statements prepared in 

accordance with generally accepted 

accounting principles of the 

institution’s home country in lieu of 

financial statements prepared in 

accordance with U.S. GAAP. Other 

commenters from institutions and 

associations argued that the requirement 

to produce a U.S. GAAP financial 

statement, even once every third year, 

would be cost prohibitive, yield little 

value above what would be provided in 

the home country audit, and would not 

realistically alter the opinion of the 

financial security of the institution as 

originally expressed in audited financial 

statements prepared in their home 

country’s standards. 

Many commenters also opposed the 

requirement in § 668.23 that public and 

nonprofit foreign institutions that 

annually received $5,000,000 or more in 

U.S. Title IV, HEA program funds would 

be required to submit annually, audited 

financial statements prepared in 

accordance with the generally accepted 

accounting principles of both the 

institution’s home country and U.S. 

GAAP. The commenters asserted that 

the proposed requirement would create 

an unjustified administrative burden. 

These commenters echoed the concerns 

related to the translated audits for 

institutions with smaller volumes of 

Title IV, HEA program funds, noting 

that the expense of producing U.S. 

GAAP financial statements would be 

cost prohibitive, with first year cost 

estimates to produce the U.S. GAAP 


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financial statement ranging from 

$300,000 for a single year’s activity to as 

much as $770,000 for institutions that 

would also be required to provide prioryear figures as a part of their financial 

statement submission. The commenters 

claimed that the significant expense of 

providing a U.S. GAAP restatement of 

the home country’s audited financial 

statement would be unlikely to alter the 

opinion of the financial security of the 

institution as originally expressed in 

audited financial statements prepared in 

their home country’s standards. 

Other commenters claimed that a 

home country audited financial 

statement that had been restated to 

reflect U.S. GAAP would be confusing, 

incompatible or otherwise offer little 

additional value to the Department. 

Several commenters expressed 

concern that the increased costs to 

provide U.S. GAAP financial statements 

would be passed on to international 

students through higher educational 

costs, or could end an institution’s 

continued participation in the U.S. Title 

IV, HEA programs. 

Several commenters were concerned 

that the additional audit expenses 

conflict with the U.S. government’s goal 

to provide access for international 

educational opportunities for U.S. 

residents (GAO–03–647). 

Some commenters suggested that the 

regulations be modified to allow all 

public and nonprofit foreign institutions 

to submit financial statements under the 

generally accepted accounting 

principles of the institution’s home 

country in lieu of any required 

submission of U.S. GAAP financial 

statements, and suggested that the 

regulations permit the Department to 

require U.S. GAAP financial statements 

if an institution’s home country audited 

financial statement revealed any 

suspected problems with their financial 

condition or reporting. Commenters also 

mentioned that auditing standards for 

other countries have their own history 

of consistent and strong governance that 

already provide sufficient and strict 

controls. Additionally, when viewed 

along with strong credit ratings by a 

nationally recognized statistical rating 

organization (NRSRO), such as Moody’s, 

Standard and Poor’s, or Fitch, the 

Department’s need for a U.S. GAAP 

prepared financial statement would be 

obviated. 

One commenter indicated that there 

was not sufficient expertise within its 

country to perform the restatement of 

their financial statement prepared under 

their home country standards to U.S. 

GAAP. 

Two commenters suggested that the 

Department replace the requirement for 

financial statements to be prepared to 

U.S. GAAP standards with the 

Department’s acceptance of financial 

statements prepared under home 

accounting standards supported by a 

bond to indemnify against possible 

institutional financial failure. 

Lastly, several commenters suggested 

that the Department raise the threshold 

amount of U.S. Title IV, HEA program 

funds from $3,000,000 to $10,000,000 

before requiring an institution to submit 

audited financial statements prepared in 

accordance with the generally accepted 

accounting principles of both the 

institution’s home country and U.S. 

GAAP, with one commenter suggesting 

the threshold be increased to 

$15,000,000. 

Discussion: The Department 

continues to believe that there is a risk 

threshold of Title IV, HEA program 

dollars administered by foreign 

institutions where the audited financial 

statements for those institutions should 

be provided in the same format and at 

the level of testing required from 

domestic institutions. Audited financial 

statements for an institution prepared 

under the accounting standards of a 

foreign country do not readily support 

relative comparisons of financial 

strength with institutions that are 

audited under U.S. GAAP standards, 

and the Department believes that this 

comparability is important when 

evaluating the financial condition of 

domestic and foreign institutions under 

the standards set out in the statute and 

regulations. 

As stated in the preamble to the 

NPRM, the Department believes that 

audited financial statement submissions 

from foreign institutions with a Title IV, 

HEA program fund volume at or above 

this threshold must be reviewed on an 

equal footing with domestic institutions, 

and allow the Department to evaluate 

efficiently and effectively the financial 

condition of those institutions. The 

framework that requires audit 

submissions of home country standards 

in addition to periodic submissions of 

U.S. GAAP audits for the foreign 

institutions will provide some flexibility 

and permit the Department to evaluate 

the comparability of the audits for 

foreign institutions over time. This 

approach will further the ability to deal 

with changes in the United States 

acceptance of international auditing 

standards that may be implemented 

during the coming years. Contrary to the 

suggestion that such submissions would 

create the potential for confusion, the 

ability to compare audited financial 

statements prepared under home 

country standards and U.S. GAAP will 

permit the Department to assess over 

time whether a greater reliance on 

audited financial statements prepared 

under home country standards would be 

reasonable. 

The Department does not agree that 

submission of U.S. GAAP financial 

statements will provide little value to 

the review process. On the contrary, the 

benefit of receiving U.S. GAAP financial 

statements from foreign institutions is 

that the Department will be able to 

assess the financial strength of these 

institutions under the same regulatory 

measures used for domestic institutions. 

Audits prepared under U.S. GAAP 

contain detailed footnotes describing 

significant activities during the fiscal 

year, and also contain certain required 

disclosures by the auditors about 

concerns identified at an institution, 

and about the general reliability of the 

financial information maintained by the 

entity. At the same time, these U.S. 

GAAP audits can be compared with 

audits for the same institutions prepared 

under audit standards for the home 

countries to determine if the detailed 

disclosures are comparable, and to 

assess whether the requirement to 

provide U.S. GAAP financial statements 

could be changed in the future. 

In response to comments that it is 

costly for foreign institutions to prepare 

U.S. GAAP financial statements, the 

Department acknowledges that the audit 

expense to have an institution’s home 

country audit translated to U.S. GAAP, 

particularly for the initial engagement, 

may be significant, but believes it is 

justified, particularly in light of the 

tiered audit submission requirements 

that reduce audit cost and burden for 

institutions with smaller Title IV, HEA 

program fund volumes. Institutions may 

be able to reduce the costs for having 

home country audits translated to U.S. 

GAAP standards for subsequent years, 

particularly if an institution is 

continuing to use the same auditing 

firm. We also note that the routine 

engagement of auditing firms to 

translate the home country audited 

financial statements to U.S. GAAP will 

tend to increase the availability of 

accounting firms that can perform this 

work. The accounting firms that are 

retained to perform these audits will 

develop more expertise in this area, and 

should provide more choices of auditors 

for institutions over time. The largest 

costs for providing annual audited 

financial statements in U.S. GAAP will 

be for the foreign institutions that have 

the highest volume of Title IV, HEA 

program funds, and in that context these 

are the institutions for whom the audit 

expense will be relatively low compared 

to the amount of federal student aid 

funds they receive. 


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We note that, under these final 

regulations, as the International 

Financial Reporting Standards (IFRS) 

are phased-in, the Department will be 

able to accept financial audits prepared 

under IFRS. U.S. GAAP is a set of 

standards established by the Financial 

Accounting Standards Board that are 

recognized as authoritative by the 

American Institute of Certified Public 

Accountants (AICPA). 

When IFRS is accepted by the AICPA 

in an acceptable audit presentation 

format for a type of entity (for-profit, 

non-profit, and public), the audits 

prepared under IFRS in those 

designated formats for those types of 

entities in other countries would also 

meet U.S. GAAP. Thus, when the 

Department receives an audit for a 

foreign institution prepared under IFRS 

that is prepared in the required format 

for that type of entity, and U.S. GAAP 

has adopted IFRS for that type of entity, 

the audit will meet the U.S. GAAP 

submission requirements. We will 

notify foreign institutions as audits 

prepared under IFRS for each type of 

entity are deemed acceptable under U.S. 

GAAP. 

Lastly, the Department does not 

accept the suggestion that a public or 

nonprofit foreign institution that holds 

either a strong credit rating from a 

NRSRO, or provides surety such as a 

performance bond or letter of credit, 

should be excused from submitting a 

U.S. GAAP audited financial statement. 

A credit rating offers little to mitigate 

the financial risks that might be present 

but undisclosed at an institution, while 

such information might be disclosed 

under U.S. GAAP requirements. 

Accepting surety from an institution 

would mitigate some financial risk, but 

it would make it difficult to evaluate the 

relative financial strength of the 

institution and determine how much 

risk was present. The Department also 

rejects the approach suggested by some 

commenters to use the flexibility under 

proposed § 668.23(h)(3)(i) to base the 

submission requirements for foreign 

institutions on whether a particular 

institution has been identified as having 

problems with its financial condition or 

financial reporting. The goal of 

monitoring the financial health of an 

institution on an ongoing basis is to 

track its relative strength over time, and 

also in comparison to other institutions 

so that safeguards may be put in place 

before other problems are experienced. 

Given that the financial statement audits 

are the baseline for these 

determinations, it is problematic to 

consider waiting until a financial 

problem is identified to then require 

U.S. GAAP audit submissions. 

In consideration of the concerns 

expressed about the expense for foreign 

institutions to submit audited financial 

statements prepared in accordance with 

U.S. GAAP, the Department is raising 

the threshold from $5,000,000 to 

$10,000,000 in annual federal student 

aid funding amounts to determine when 

a foreign institution must submit U.S. 

GAAP audited financial statements 

annually. We believe that this tiered 

approach for the audit submission 

requirements will support the goal of 

providing international education 

opportunities for U.S. students. 

Changes: The thresholds originally 

proposed in § 668.23 will be revised 

such that the maximum amount of Title 

IV, HEA program funds that public and 

nonprofit foreign institutions may 

receive annually and submit U.S. GAAP 

audited financial statements once every 

three years is increased from $5,000,000 

to $10,000,000. These foreign 

institutions will also be required to 

submit annually audited financial 

statements that are prepared under their 

home country standards. 

Public and nonprofit foreign 

institutions that receive more than 

$10,000,000 annually in federal student 

aid funds are required to provide annual 

U.S. GAAP audited financial statements 

along with audited financial statements 

prepared under their home country 

standards. 

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, it has been determined this 

proposed regulatory action would not 

have an annual effect on the economy 

of more than $100 million. Therefore, 

this action is not ‘‘economically 

significant’’ and subject to OMB review 

under section 3(f)(1) of Executive Order 

12866. Notwithstanding this 

determination, the Secretary has 

assessed the potential costs and benefits 

of this regulatory action and has 

determined that the benefits justify the 

costs. 

Need for Federal Regulatory Action 

These proposed regulations are 

needed to implement provisions of the 

HEA, as amended by the HEOA, 

particularly related to audit 

requirements for foreign institutions, the 

USMLE pass rate for foreign graduate 

medical schools, clinical training 

programs of foreign graduate medical 

schools, new eligibility criteria for 

foreign graduate medical, clinical 

training programs for foreign veterinary 

schools, provisions for participation by 

for-profit foreign nursing schools, and 

eligibility restrictions applicable to forprofit (and, later, all) foreign nursing 

schools. A brief description of the 

proposed regulations, the reasons for 

adopting them, and an analysis of their 

effects was presented in the NPRM 

published July 20, 2010. This updated 

Regulatory Impact Analysis describes 

changes considered in response to 

comments received and the reasons for 

adopting or rejecting them. 

A recent report from the GAO entitled 

‘‘Foreign Medical Schools: Education 

Should Improve Monitoring of Schools 

that Participate in the Federal Student 

Loan Program’’ (GAO–10–412) (available 

at http://www.gao.gov/new.items/ 

d10412.pdf) described the need for 

improved data collection and analysis 

related to foreign medical schools 

receiving Title IV, HEA program funds. 

As the GAO noted, approximately $1.5 

billion was borrowed between 1998 and 

2008 by U.S. students to attend foreign 

medical schools, with almost ninety 

percent of those funds going to students 

at three for-profit medical schools in the 

Caribbean. Federal student loans enable 

U.S. citizens and eligible noncitizens to 

attend eligible foreign institutions, and 

these graduates are an important source 

of medical providers in the United 

States. The GAO indicated that almost 

twenty percent of the approximately 

244,000 international medical graduates 

practicing in the United States were 

U.S. citizens and that these graduates 

were more likely to go into primary care 

(67.9% of international graduates versus 


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1 GAO–10–412 p. 39. 

2 GAO–10–412 pp 20–21. 

3 GAO–10–412 pp 30–31. 

37.2% of U.S.-educated graduates).1

While these schools provide a valuable 

option for potential medical students 

and source of primary care physicians, 

there is evidence that their graduates 

have lower pass rates on licensing 

exams than U.S.-educated medical 

graduates.2 Reasons for these results 

could be the academic background of 

students who attend foreign institutions, 

the degree of emphasis the institutions 

place on preparing students for the U.S. 

licensing exams, and the percentage of 

the institution’s student body taking the 

exam.3 These final regulations are 

meant to enable enforcement of the 

licensing exam pass rate requirement, to 

improve monitoring of foreign 

institutions receiving Title IV, HEA 

program funds, and to provide 

information that will allow students to 

evaluate their foreign educational 

options. 

Regulatory Alternatives Considered 

Regulatory alternatives were 

considered as part of the rulemaking 

process. These alternatives were 

reviewed 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 they were addressed 

in response to comments received on 

the NPRM, alternatives are also 

considered elsewhere in the preamble to 

these final regulations under the 

Comments sections related to each 

provision. No comments were received 

related to the Regulatory Impact 

Analysis discussion of these 

alternatives. 

As discussed above in the Analysis of 

Comments and Changes section, these 

final regulations reflect statutory 

amendments included in the HEOA and 

revisions in response to public 

comments. In most cases, these 

revisions were intended to address 

drafting issues or provide additional 

clarity. References to the FFEL Program 

in the NPRM were revised to refer to the 

Direct Loan Program, as appropriate. In 

response to comments, the Department 

clarified that, with some exceptions, 

public and private nonprofit institutions 

must meet the definition of § 600.4 and 

for-profit foreign institutions must meet 

the definition of proprietary institutions 

in § 600.5. In addition, in response to 

comments about programs at foreign 

institutions designed to prepare a 

student for gainful employment to 

satisfy the educational and occupational 

entry requirements in the United States 

and the country in which the institution 

is located, the Department dropped 

paragraphs (1)(v)(A) and (B) of § 600.52. 

Specific changes made in response to 

comments related to foreign graduate 

medical schools include: (i) Exempting 

locations accredited by the AOA from 

the provisions limiting the location of 

foreign graduate medical school clinical 

training; and (ii) amending 

§§ 600.55(d)(1)(iii), (f)(1)(ii), and (f)(3) to 

require foreign graduate medical schools 

to report on USMLE pass rates for all 

students and graduates, regardless of 

citizenship. Other changes related to 

foreign graduate medical schools were 

made by the Department for clarification 

or technical reasons, and not in 

response to comments, including the 

following changes. Schools that have 

not had clinical training programs 

approved by a State since prior to 

January 1, 2008 are required to annually 

supply the Secretary with citizenship 

rates and the methodology for 

determining them. The requirement to 

submit USMLE pass rates has been 

changed from an award-year basis to a 

calendar-year basis to be consistent with 

the data request for 2009 and allow 

comparison over a consistent period. 

This will require submission of USMLE 

pass rate, MCAT scores, and residency 

placement for a calendar year to the 

Department or an institution’s 

accrediting authority by no later than 

April 30 of each year, unless the 

Secretary specifies a different date 

through notice in the Federal Register. 

This is a change from the September 30 

deadline that was proposed in the 

NPRM. In addition, most institutions 

may, in lieu of submitting USMLE pass 

rate information to the Secretary, 

provide for calculation of pass rates, and 

reporting of pass rates for the institution 

to the Secretary, by the ECFMG or other 

responsible third party, but only if the 

school has provided the Secretary by 

April 30 with written consent agreeing 

that the calculation of the pass rates to 

be provided by the ECFMG or other 

responsible third party to the Secretary 

will be conclusive for the purposes of 

determining compliance with the 75- 

percent pass rate thresholds. 

For foreign veterinary schools, these 

final regulations provide an exception to 

the provision limiting the location of 

clinical training locations applicable to 

locations of a public or private nonprofit 

foreign veterinary school that are 

included in accreditation granted by the 

AVMA. 

Comments were received about the 

provisions related to foreign nursing 

schools, but, as discussed in the 

Analysis of Comments and Changes, the 

Department does not have the authority 

to undertake some of the changes 

proposed by the commenters, such as 

indefinitely, through regulations, 

grandfathering in foreign nursing 

schools that currently participate in 

Title IV, HEA programs. In response to 

concerns about borrowers’ loss of 

benefits, we have concluded that it is 

not in the best interest of borrowers to 

assign their Direct Loans to a foreign 

nursing school. The loans will remain 

Direct Loans with all the Direct Loan 

terms and conditions, and the 

Department will collect on the loan as 

we normally do until the loan is paid in 

full, otherwise satisfied, or the account 

is closed out. The Department will make 

provisions to avoid ‘‘double recovery’’ 

by revising the definition of ‘‘cost of a 

loan’’ that was proposed in § 600.57(b) 

of the NPRM to include only the 

estimated future collection costs on the 

loan. These collection costs would be 

estimated as follows: The Department 

annually announces a program-wide 

average cost of collections for Direct 

Loans. Estimated future collection costs 

will be derived from this program-wide 

average, but may be adjusted based on 

our experiences with borrowers who 

obtained Direct Loans to attend foreign 

nursing schools, or our experiences with 

the particular borrower whose loan has 

defaulted. 

Under the revised definition, the 

reimbursement by the foreign nursing 

school to the Department of the cost of 

a loan default will not include 

outstanding principal, accrued interest, 

unpaid late fees or collection charges, or 

other costs associated with the loan. We 

also removed references to special 

allowances and reinsurance payments, 

and, as discussed above, added 

estimated future collection costs. 

Because reimbursement by the school 

will have no effect on the borrower’s 

obligations and the terms and 

conditions of the Direct Loan, there is 

no need for adverse impact disclosures 

or notifications to borrowers regarding 

assignment of their Direct Loans to a 

foreign nursing school. 

Several comments were submitted 

that requiring U.S. GAAP audited 

financial statements would be cost 

prohibitive and lead some schools to 

reduce participation in Title IV, HEA 

programs and would not provide added 

value to the review process. The 

Department maintains that U.S. GAAP 

audits will provide valuable information 

and allow the comparability of detailed 

disclosures between foreign and 

domestic institutions. In response to 

these comments about the cost of U.S. 

GAAP audits, however, the Department 

agreed to raise the threshold for annual 


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submission of U.S. GAAP audited 

financial statements to $10,000,000 in 

Title IV, HEA program funds received 

annually. 

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 

submission requirements for 

compliance audits and audited financial 

statements specific to foreign 

institutions; a revised definition of a 

foreign institution and a definition of 

nonprofit status specific to foreign 

institutions; the creation of a financial 

responsibility standard for foreign 

public institutions that is comparable to 

the financial responsibility standard for 

domestic public institutions; permission 

for a single legal authorization for 

groups of foreign institutions under the 

purview of a single government entity; 

the establishment of program eligibility 

requirements specific to training 

programs at foreign institutions; 

institutional eligibility criteria specific 

to foreign graduate medical schools, 

foreign veterinary schools, and foreign 

nursing schools; and revised maximum 

certification periods for some foreign 

institutions. The revised requirements 

for audited financial statements improve 

comparability between foreign and 

domestic institutions and enhance the 

security of Title IV, HEA program funds 

while taking into account the burden on 

foreign institutions of different sizes. 

The specific eligibility criteria for 

foreign graduate medical schools allow 

students to benefit from exposure to 

other medical environments and 

cultures while ensuring a comparable 

education to that available in domestic 

institutions. 

Benefits under these regulations flow 

directly from statutory changes included 

in the HEOA; they are not materially 

affected by discretionary choices 

exercised by the Department in 

developing these regulations, or by 

changes made in response to comments 

on the NPRM. As noted in the 

Regulatory Impact Analysis in the 

NPRM, these final regulations result in 

net savings to the government of $2.6 

million over 2011–2015 from the 

collections associated with the 

estimated future cost of collections on 

defaulted loans at foreign nursing 

schools. 

Costs 

As discussed extensively in the 

Regulatory Impact Analysis in the 

NPRM, several of the provisions 

implemented though these final 

regulations would require regulated 

entities to update existing policies and 

procedures related to financial and 

compliance audits. Other regulations 

generally would require discrete 

changes in specific parameters 

associated with existing requirements— 

such as changes to clinical training 

programs, application procedures, 

USMLE pass rates, and notification 

requirements—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 final 

regulations. Some foreign institutions 

may choose to withdraw from 

participation in the Title IV, HEA 

programs as a result of these final 

regulations. The changes to statutory 

provisions governing foreign nursing 

schools that are implemented in these 

regulations will likely result in the 

transfer of approximately $286 million 

in loan volume over 2011 to 2015 from 

institutions that do not meet the revised 

criteria to institutions that do meet the 

revised criteria and enroll the students 

who would have attended the ineligible 

foreign nursing schools. The foreign 

nursing schools that continue to 

participate would also be expected to 

pay approximately $0.4 million in 

default costs over 2011 to 2015. 

However, the Department believes the 

flexibility of the regulations should 

allow institutions to remain in the Title 

IV, HEA programs, while enhancing the 

security of Title IV, HEA program funds 

and ensuring compliance with statutory 

requirements. 

In assessing the potential impact of 

these final 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 independent 

auditors 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 Federal 

Student Assistance programs by 18,684 

hours. Of this increased burden, 18,554 

hours are associated with foreign 

institutions and 320 hours are 

associated with borrowers, generally 

reflecting the time required to read new 

disclosures or submit required 

information. Approximately 95 percent 

of this burden is associated with the 

financial and compliance audit 

requirements in proposed § 668.23. As 

described in the Paperwork Reduction 

Act section, if the regulatory changes 

had not been proposed, the burden 

associated with the financial statement 

and compliance audit requirements 

would be significantly higher. 

Of these hours, approximately 3,200 

hours were related to the requirement to 

submit U.S. GAAP compliant audited 

financial statements. Current regulations 

require all institutions to annually 

submit financial statements prepared in 

accordance with U.S. GAAP, with an 

exception for foreign institutions whose 

enrolled students received less than 

$500,000 (in U.S. dollars) in Title IV, 

HEA program funds per fiscal year. 

These institutions are allowed to submit 

audited financial statements prepared 

according to the generally accepted 

accounting principles of the 

institution’s home country. The final 

regulations described here waive the 

U.S. GAAP reporting requirement for 

foreign institutions whose enrolled 

students received less than $500,000 (in 

U.S. dollars) in Title IV, HEA program 

funds per fiscal year, and establish the 

$3,000,000 and $10,000,000 thresholds 

described above. Comments received 

from Universities and Associations 

representing University Finance 

Directors provided estimates indicating 

that preparation of U.S. GAAP audited 

financial statements would cost 

approximately $300,000 to $400,000 per 

year in professional accounting 

expenses. The development of U.S. 

GAAP reporting could increase costs up 

to $770,000 in the first year or two, and 

tri-annual submission for institutions 

under the threshold for annual 

submission could also be more 

expensive given the need to prepare 

prior-year data. The comments stated 

that an additional $100,000 to $120,000 

would be required for actuarial services 

and between $25,000 and $50,000 in 

internal costs related to the provision. In 

response to the comments about the 

costs of U.S. GAAP audits, the 

Department increased the threshold for 

annual submission of U.S. GAAP audits 

from $5,000,000 to $10,000,000 in Title 

IV, HEA funds received annually. In the 

Department’s data, approximately 9 

foreign institutions would be subject to 

the revised annual submission 

requirement compared to approximately 

14 that would be subject to annual 

reporting under the $5,000,000 

threshold proposed in the NPRM. 

Applying the estimated costs provided 

through the comments and the 


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Department’s research, increasing the 

threshold to $10,000,000 results in 

reducing the estimated costs of U.S. 

GAAP audits from $20.5 million to 

$18.7 million when all institutions with 

Title IV receipts over $3 million have to 

report and from $7.2 million to $4.6 

million in years when only annual 

submitters must provide U.S. GAAP 

statements. While some institutions will 

continue to incur costs to comply with 

the audit regulations as shown above, 

this regulation reduces the number of 

institutions subject to the U.S. GAAP 

reporting requirements. 

The monetized cost of the additional 

paperwork burden outside of the U.S. 

GAAP audited financial statement 

submission requirement, using loaded 

wage data developed by the Bureau of 

Labor Statistics and used for domestic 

institutions, is $466,868 of which 

$461,620 is associated with foreign 

institutions and $5,248 with 

individuals. The wage data for foreign 

institutions was assumed to be 

comparable to domestic institutions as 

many are located in developed 

economies with wages similar to those 

in the United States. Institutions located 

in countries with lower wage scales 

have to compete for employees familiar 

with the lending programs, and 

substituting U.S. wage rates for those in 

lower wage countries results in a 

conservative estimate. For institutions, 

an hourly rate of $26.40 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 and financial professionals, 

assuming that office staff would perform 

55 percent of the work affected by these 

regulations. 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. Additional data received in 

the comments about the costs of U.S. 

GAAP audits were incorporated into 

this Regulatory Impact Analysis. 

Net Budget Impacts 

The provisions implemented by these 

final regulations are estimated to have a 

net budget impact of ¥$0.4 million over 

FY 2011–2015, from savings associated 

with the estimated future cost of 

collections on defaulted loans from 

foreign nursing schools. Consistent with 

the requirements of the Credit Reform 

Act of 1990, budget cost estimates for 

the Title IV, HEA 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. The OMB 

calculator takes projected future cash 

flows from the Department’s student 

loan cost estimation model and 

produces discounted subsidy 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 zero-coupon Treasury 

bond with the same maturity as that 

cash flow. To ensure comparability 

across programs, this methodology is 

incorporated into the calculator and 

used government-wide 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 proposed 

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 on the impact of 

these final regulations 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 

institutions, not-for-profit, freshman and 

sophomore at four-year institutions, 

junior and senior 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. 

Estimates indicate that three foreign 

graduate medical schools may become 

eligible under these provisions in the 

next few years but that this would 

potentially shift volume among schools, 

but not significantly increase the total 

volume of loans. The Department 

estimates no budgetary impact for most 

of these final regulations, as there is no 

data indicating that the provisions will 

have any impact on the volume or 

composition of Federal student aid 

programs. The provision requiring 

foreign nursing schools to reimburse the 

Secretary for the estimated future cost of 

collections on defaulted loans is 

expected to generate approximately $0.4 

million in savings for the Department 

between 2011 and 2015. This is based 

on the expectation that many foreign 

nursing schools would not be eligible 

under the statutory criteria 

implemented in these regulations and 

the expected loan volume subject to the 

default provision would drop from 

approximately $336 million to $50 

million. This reduced volume is not 

expected to affect Federal costs as the 

students would be expected to enroll in 

eligible programs. Applying the subsidy 

costs of defaults to the estimated new 

volume, which are approximately .96% 

for subsidized loans, .86% for 

unsubsidized loans, and .62% for 

graduate plus loans, resulted in the $0.4 

million in default savings over FY 

2011–2015. 

Assumptions, Limitations, and Data 

Sources 

Impact estimates provided in the 

preceding section reflect a pre-statutory 

baseline in which the HEOA changes 

implemented in these final 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. The 

comments received were incorporated 

in the analysis of costs related to the 

provisions. 

Elsewhere in this SUPPLEMENTARY

INFORMATION section we identify and 

explain burdens specifically associated 

with information collection 


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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 proposed 

regulations. This table provides our best 

estimate of the changes in Federal 

student aid payments as a result of these 

final 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 .......... $3.9. 

Cost of defaults for foreign nursing schools and cost of compliance with paperwork and audit requirements. 

Annualized Monetized Transfers .... $58.7. 

From Whom To Whom? ................. Ineligible Foreign Nursing Programs to Eligible Nursing Programs. 

Regulatory Flexibility Act Certification 

The Secretary certifies that these final 

regulations would not have a significant 

economic impact on a substantial 

number of small entities. These final 

regulations would affect foreign 

institutions that participate in Title IV, 

HEA programs and loan borrowers. The 

definition of ‘‘small entity’’ in the 

Regulatory Flexibility Act encompasses 

‘‘small businesses,’’ ‘‘small 

organizations,’’ and ‘‘small governmental 

jurisdictions.’’ The definition of ‘‘small 

business’’ comes from the definition of 

‘‘small business concern’’ under section 

3 of the Small Business Act as well as 

regulations issued by the U.S. Small 

Business Administration. The SBA 

defines a ‘‘small business concern’’ as 

one that is ‘‘organized for profit; has a 

place of business in the United States; 

operates primarily within the United 

States or makes a significant 

contribution to the U.S. economy 

through payment of taxes or use of 

American products, materials or labor 

***’’ ‘‘Small organizations,’’ are 

further defined as any ‘‘not-for-profit 

enterprise that is independently owned 

and operated and not dominant in its 

field.’’ For the purposes of the 

Regulatory Flexibility Act analysis, the 

foreign institutions would not fall 

within the definition of small 

businesses or small organizations based 

upon this definition of ‘‘small business 

concern.’’ 

The definition of ‘‘small entity’’ also 

includes ‘‘small governmental 

jurisdictions,’’ which includes ‘‘school 

districts with a population less than 

50,000.’’ The definition of ‘‘small 

governmental jurisdictions’’ is not 

applicable to this rule. In the NPRM, the 

Secretary invited comments from small 

institutions and other affected entities 

as to whether they believe the proposed 

changes would have a significant 

economic impact on them and requested 

evidence to support that belief. No 

comments were received. 

Paperwork Reduction Act of 1995 

Sections 600.20, 600.21, 600.54, 

600.55, 600.56, 600.57, 668.13, 668.23, 

and 668.171 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 600.20—Application Procedures 

for Establishing, Reestablishing, 

Maintaining, or Expanding Institutional 

Eligibility and Certification 

Final § 600.20(a)(3) and § 600.20(b)(3) 

provide that, for initial certification or 

for recertification, a foreign graduate 

medical school (i.e., a freestanding 

foreign graduate medical school or a 

foreign institution that includes a 

foreign graduate medical school) is 

required to— 

• List on the application to 

participate all educational sites and 

where they are located, except for those 

locations that are not used regularly, but 

instead are chosen by individual 

students who take no more than two 

electives at the location for no more 

than a total of eight weeks; 

• Identify, for each clinical site 

reported in the certification or 

recertification application, the type of 

clinical training (core, required clinical 

rotation, not required clinical rotation) 

offered at that site; 

• Indicate whether it offers only postbaccalaureate/equivalent medical 

programs, other types of programs that 

lead to employment as a doctor of 

osteopathic medicine, doctor or 

medicine, or both; 

• Provide copies of the affiliation 

agreements with hospitals and clinics 

that it is required to have as a part of 

any application for initial certification 

or recertification to participate in the 

Title IV, HEA programs. 

Final § 600.20(c)(5) requires a foreign 

graduate medical school that adds a 

location that offers all or a portion of the 

school’s core clinical training or 

required clinical rotations, to apply to 

the Secretary and wait for approval if it 

wishes to provide Title IV, HEA 

program funds to the students at that 

location, except for those locations that 

are included in the accreditation of a 

medical program accredited by the 

LCME and the AOA. 

While we recognize that there will be 

burden assessed under § 600.20(a)(3) 

and § 600.20(c)(5), we do not anticipate 

either an initial eligibility application or 

an application to expand eligibility at 

this time. 

We estimate that 58 public 

institutions will take .58 hours (35 

minutes) per institution to submit a 

reapplication, which will increase 

burden by 34 hours. We estimate that 10 

private nonprofit institutions will take 

.58 hours (35 minutes) per institution to 

submit a reapplication, which will 

increase burden by 6 hours. We estimate 

that 3 for-profit institutions will take .58 

hours (35 minutes) per institution to 

submit a reapplication, which will 

increase burden by 2 hours. There will 

therefore be a total 42 hours of burden 

associated with § 600.20(b)(3) in OMB 

Control Number 1845–0012. 

Section 600.21—Updating Application 

Information 

Final § 600.21(a)(10) requires, if a 

foreign graduate medical school adds a 

location that offers all or a portion of the 

school’s clinical rotations that are not 

required, that the school notify the 

Department no later than 10 days after 

the location is added, except for those 

locations that are included in the 

accreditation of a medical program 

accredited by the LCME, the AOA, or 

those locations that are not used 

regularly, but instead are chosen by 

individual students who take no more 

than two electives at the location for no 


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more than a combined total of eight 

weeks. This requirement mirrors the 

requirement in § 600.20(c)(5). 

We estimate that 6 public institutions 

will take .17 hours (10 minutes) per 

institution to fulfill the reporting 

requirement, which will increase 

burden by 1 hour. We estimate that 1 

private nonprofit institution will take 

.17 hours (10 minutes) to fulfill the 

reporting requirement, which will 

increase burden by 10 minutes. We 

estimate that 1 for-profit institution will 

take .17 hours (10 minutes) to fulfill the 

reporting requirement, which will 

increase burden by 10 minutes. 

Therefore, to account for rounding, the 

total increase in burden will be 1 hour 

associated with § 600.21(a)(10) in OMB 

Control Number 1845–0012. 

Section 600.54—Criteria for 

Determining Whether a Foreign 

Institution Is Eligible To Apply To 

Participate in the Direct Loan Program 

Under final § 600.54(e)(3)(ii), a foreign 

institution has to demonstrate to the 

satisfaction of the Secretary (who will 

make program-by-program 

determinations of comparability) that 

the amount of academic work required 

by a program it seeks to qualify as 

eligible as at least a one-academic-year 

training program is equivalent to an 

academic year as defined in § 668.3. 

We estimate that 93 public 

institutions will take .17 hours (10 

minutes) to demonstrate the 

comparability of the academic work and 

will increase burden by 16 hours. We 

estimate that 33 private institutions will 

take .17 hours (10 minutes) to 

demonstrate the comparability of the 

academic work and will increase burden 

by 6 hours. Therefore, the total increase 

in burden will be 22 hours associated 

with § 600.54(e)(3)(ii) in OMB Control 

Number 1845–NEWA. 

Section 600.55—Additional Criteria for 

Determining Whether a Foreign 

Graduate Medical School Is Eligible To 

Apply To Participate in the Direct Loan 

Program 

Final § 600.55(c)(2) requires a foreign 

graduate medical school to determine 

the consent requirements for, and 

require the necessary consents of, all 

students accepted for admission for 

whom the school must report to enable 

the school to comply with the collection 

and submission requirements in 

§ 600.55(d) for Medical College 

Admission Test (MCAT) scores, 

residency placement, U.S. Medical 

Licensing Examination (USMLE) scores, 

and citizenship rate. 

We estimate that 58 public 

institutions will take .50 hours (30 

minutes) to develop this consent form 

and would increase burden by 29 hours. 

We estimate that 5 private nonprofit 

institutions will take .50 hours (30 

minutes) to develop this consent form 

and will increase burden by 3 hours. We 

estimate that 3 for-profit institutions 

will take .50 hours (30 minutes) to 

develop this consent form and will 

increase burden by 2 hours. We estimate 

that 2,800 individuals will take .08 

hours (5 minutes) to complete this 

consent form and will increase burden 

by 224 hours. Therefore, the total 

burden increase will be 258 hours 

associated with § 600.55(c)(2) in OMB 

Control Number 1845–NEWA. 

Final § 600.55(d)(1)(i) and (1)(ii) 

requires that a foreign graduate medical 

school obtain, at its own expense and no 

later than April 30 of each year submit 

to its accrediting authority for all 

students who are U.S. citizens, 

nationals, or eligible permanent 

residents: (1) The MCAT or successor 

examination scores for students 

admitted during the preceding calendar 

year who are U.S. citizens, nationals, or 

eligible permanent residents and the 

number of times each student took the 

exam; and (2) the percentage of students 

graduating during the preceding 

calendar year (including at least all 

graduates who are U.S. citizens, 

nationals, or eligible permanent 

residents) who obtain placement in an 

accredited U.S. medical residency 

program. Under the regulations, a 

school will have to submit the data on 

MCAT scores and placement in a U.S. 

residency program to the Department 

only upon request. 

Final § 600.55(d)(1)(iii) requires a 

foreign graduate medical school to 

obtain, at its own expense and no later 

than April 30 of each year, unless the 

Secretary specifies a different date 

through a notice in the Federal Register, 

submit to the Secretary, USMLE scores 

earned during the preceding calendar 

year by each student and graduate and 

the date each student/graduate took 

each test, including any failed tests. The 

USMLE scores submitted must be 

disaggregated by step/test for Step 1, 

Step 2–Clinical Skills (Step 2–CS), and 

Step 2–Clinical Knowledge (Step 2–CK), 

and by attempt. A school will not be 

required to submit data on the USMLE 

Step 3. 

Final § 600.55(d)(1)(iv) requires 

foreign medical schools to submit, no 

later than April 30 of each year, unless 

the Secretary specifies a different date 

through a notice in the Federal Register, 

directly to the Secretary a statement of 

its citizenship rate for the preceding 

calendar year with a description of the 

methodology used to obtain the rate. 

Alternatively, new § 600.55(d)(2) 

allows foreign medical schools, under 

specific conditions, to provide 

acceptable written consent to the 

Secretary, by April 30, in which the 

school agrees that, in lieu of submission 

of the USMLE pass rate information 

required under 600.55(d)(1)(iii), 

ECFMG, or another responsible third 

party, will calculate and provide the 

Secretary with the school’s USMLE pass 

rates required for purposes of 

determining compliance with 

§ 600.55(f). This written consent must 

specify that the pass rates provided by 

the ECFMG or other responsible third 

party will be conclusive for determining 

compliance with the pass rate 

thresholds set in § 600.55(f). 

For § 600.55(d)(1), we estimate that 36 

public institutions will require 1.41 

hours (1 hour 25 minutes) to create this 

annual report and will increase burden 

by 51 hours. We estimate that 7 private 

nonprofit institutions will require 1.41 

hours (1 hour 25 minutes) to create this 

annual report and will increase burden 

by 10 hours. We estimate that 3 forprofit institutions will require 1.41 

hours (1 hour 25 minutes) to create this 

annual report and will increase burden 

by 4 hours. The total burden increase for 

§ 600.55(d)(1) will therefore be 65 hours. 

Additionally, we estimate that 25 

schools with more than eight but fewer 

than 50 borrowers will use the option in 

§ 600.55(d)(2) to replace the 

requirements in § 600.55(d)(1)(iii). We 

estimate that institutions will require 

.75 hours (45 minutes) to create the 

report using data under § 600.55(d)(1)(i), 

(ii), and (iv) and to execute the written 

consent letter to the Secretary and the 

request letter to ECFMG or other 

responsible third party as required in 

§ 600.55(d)(2). We estimate that 22 

public institutions will require .75 

hours (45 minutes) to fulfill this 

requirement and will increase burden 

by 17 hours. We estimate that 3 private 

institutions will require .75 hours (45 

minutes) to fulfill this requirement and 

will increase burden by 2 hours. The 

total burden increase for using the 

option in § 600.55(d)(2) and for 

completing the requirements of 

§ 600.55(d)(1)(i) and (ii) will be 19 

hours. Therefore, the total burden 

increase will be 84 hours associated 

with § 600.55(d) in OMB Control 

Number 1845–NEWA. 

Final § 600.55(e)(2) requires a foreign 

graduate medical school to notify its 

accrediting body within one year of any 

material changes in the educational 

programs, including changes in clinical 

training programs; and the overseeing 

bodies and in the formal affiliation 


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agreements it has with hospitals and 

clinics. 

We estimate that 15 public 

institutions will require .82 hours (50 

minutes) to complete the accrediting 

agency clinical training notifications 

and will increase burden by 12 hours. 

We estimate that 3 private nonprofit 

institutions will require .82 hours (50 

minutes) to complete the accrediting 

agency clinical training notifications 

and will increase burden by 3 hours. We 

estimate that 1 for-profit institution will 

require .82 hours (50 minutes) to 

complete the accrediting agency clinical 

training notifications and will increase 

burden by 1 hour. Therefore, the total 

burden increase will be 16 hours 

associated with § 600.55(e) in OMB 

Control Number 1845–NEWA. 

Final § 600.55(g)(1) requires a foreign 

graduate medical school to apply the 

existing satisfactory academic progress 

regulations in § 668.16(e) for 

establishing a maximum timeframe in 

which a student must complete their 

educational program and require that a 

student complete their educational 

program within 150 percent of the 

published length of the educational 

program. In addition, final § 600.55(g)(2) 

requires a foreign graduate medical 

school to document the educational 

remediation it provides to assist 

students in making satisfactory 

academic progress. 

We estimate that 58 public 

institutions will require 2.5 hours (2 

hours 30 minutes) to update the 

satisfactory academic policy and 

document remediation provided to 

student and will increase burden by 145 

hours. We estimate that 10 private 

nonprofit institutions will require 2.5 

hours (2 hours 30 minutes) to update 

the satisfactory academic policy and 

document remediation provided to 

student and will increase burden by 25 

hours. We estimate that 3 for-profit 

institutions will require 2.5 hours (2 

hours 30 minutes) to update the 

satisfactory academic policy and 

document remediation provided to 

student and will increase burden by 7 

hours and 30 minutes. Therefore, to 

account for rounding, total burden 

increase will be 178 hours associated 

with § 600.55(g)(1) and (2) in OMB 

Control Number 1845–NEW2. 

Final § 600.55(g)(3) requires a foreign 

graduate medical school to publish all 

the languages in which instruction is 

offered. 

We estimate that 58 public 

institutions will require .33 hours (20 

minutes) to publish the languages in 

which instruction is provided, 

increasing burden by 19 hours. We 

estimate that 10 private nonprofit 

institutions will require .33 hours (20 

minutes) to publish the languages in 

which instruction is provided, 

increasing burden by 3 hours. We 

estimate that 3 for-profit institutions 

will require .33 hours (20 minutes) to 

publish the languages in which 

instruction is provided, increasing 

burden by 1 hour. Therefore, the total 

burden increase will be 23 hours 

associated with § 600.55(g)(3) in OMB 

Control Number 1845–NEWA. 

In total, we estimate that § 600.55 will 

increase burden by 381 hours in OMB 

1845–NEWA, and 178 hours in OMB 

1845–NEW2. 

Section 600.56—Additional Criteria for 

Determining Whether a Foreign 

Veterinary School Is Eligible To Apply 

To Participate in the Direct Loan 

Program 

Final § 600.56(a)(4) requires a foreign 

veterinary school to be accredited or 

provisionally accredited by an 

organization acceptable to the Secretary. 

Section 600.56(a)(4) specifies that the 

requirement for accreditation or 

provisional accreditation does not take 

effect until July 1, 2015. 

The Department delayed the effective 

date of the accreditation requirement in 

§ 600.56(a)(4) until July 1, 2015 to allow 

foreign veterinary schools that are 

currently in the Title IV, HEA programs 

additional time after the final 

regulations are published to obtain 

accreditation from an acceptable 

accrediting agency. Therefore, no 

burden assessment has been made at 

this time. The issue will be reviewed 

closer to the effective date of this 

section of the regulations, to enable the 

Department to use a more accurate 

number of participating veterinary 

schools in its assessment. 

Section 600.57—Additional Criteria for 

Determining Whether a Foreign Nursing 

School Is Eligible To Apply To 

Participate in the Direct Loan Program 

The final regulations add a new 

§ 600.57 that specifies additional Title 

IV, HEA program eligibility criteria for 

foreign nursing schools. These criteria 

include § 600.57(a)(6)(i), which requires 

the school to determine the consent 

requirements for, and require the 

necessary consents of, all students 

accepted for admission who are U.S. 

citizens, nationals, or eligible 

permanent residents, to enable the 

school to comply with the requirements 

for collection and submission of 

National Council Licensure 

Examination for Registered Nurses 

(NCLEX–RN) results or pass rates. 

We estimate that 3 new for-profit 

nursing institutions will require .50 

hours (30 minutes) to develop the 

consent form, increasing burden by 1 

hour and 30 minutes. We estimate that 

1,200 individuals will require .08 hours 

(5 minutes) to respond to this consent 

form, increasing burden by 96 hours in 

OMB Control Number 1845–NEWA. 

The foreign nursing school eligibility 

requirements also include 

§ 600.57(a)(6)(ii), which requires an 

institution to annually, at its own 

expense, obtain all results on the 

NCLEX–RN achieved by students and 

graduates who are U.S. citizens, 

nationals, or eligible permanent 

residents, together with the dates the 

student has taken the examination 

(including any failed examinations) and 

provide the results to the Department. 

As an alternative to obtaining the 

NCLEX results individually, the school 

may obtain a report or reports from the 

National Council of State Boards of 

Nursing (NCSB), or an NCSB affiliate or 

NCSB contractor, reflecting the 

percentage of the school’s students and 

graduates taking the NCLEX–RN in the 

preceding year who passed the 

examination, or the data from which the 

percentage could be derived, and 

provide the report to the Department. 

We estimate that 3 new for profit 

nursing institutions will require 1.5 

hours (1 hour 30 minutes) to compile 

this annual report submission, 

increasing burden by 4 hours 30 

minutes in OMB Control Number 1845– 

NEWA. In total, we estimate that there 

will be 102 hours of burden associated 

with § 600.57(a)(6) in OMB Control 

Number 1845–NEWA. 

In addition, § 600.57(c) specifies that 

the Department continues to collect on 

the Direct Loan after a school 

reimburses the Secretary for the cost of 

a loan default, until the loan is paid in 

full or until the loan account is closed 

out for any reason. 

While burden would normally be 

associated with the payment of the 

default to the Department, because there 

is no history of Federal borrowing for 

attendance at these new nursing 

schools, and due to the extended period 

of time prior to a student borrower 

defaulting on a Title IV, HEA loan at a 

newly approved foreign nursing school 

during the first year after the 

implementation of the final regulations, 

we believe that it would be 

inappropriate to project burden to 

schools and individuals at this time. 

Section 668.13—Certification 

Procedures 

Final § 668.13(b)(1)(i) specifies that 

the period of participation in Title IV, 

HEA programs for a private, for-profit 

foreign institution expires three years 


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after the date the institution is certified 

by the Department, rather than the 

current six years. 

While the duration of the approval 

period is reduced from six years to three 

years and, therefore, submissions for 

recertification will be required more 

often, this change in the regulations 

does not represent a substantive impact 

on the amount of annual burden to the 

institutions affected by these 

regulations. We do not estimate a 

change in the annual burden as a result 

of the regulations for OMB Control 

Number 1845–0022. 

Section 668.23—Compliance Audits 

and Audited Financial Statements 

The final regulations in § 668.23(h)(1) 

revise financial statement submission 

requirements for foreign institutions 

receiving Title IV, HEA program funds 

in the most recently completed fiscal 

year. 

In § 668.23(h)(1)(i), for a public or 

nonprofit foreign institution that 

received less than $500,000 in U.S. Title 

IV, HEA program funds during the 

institution’s most recently completed 

fiscal year, the audited financial 

statements submission will be waived, 

unless the institution is in its initial 

provisional period of participation and 

received Title IV, HEA program funds 

during that year, in which case the 

institution must submit, in English, 

audited financial statements prepared in 

accordance with the generally accepted 

accounting principles of the 

institution’s home country. 

In § 668.23(h)(1)(iii)(A), for a public or 

nonprofit foreign institution that 

received $500,000 or more in U.S. Title 

IV, HEA program funds, but less than 

$3,000,000 in U.S. Title IV, HEA 

program funds during its most recently 

completed fiscal year, the institution 

will be allowed to submit for that year, 

in English, audited financial statements 

prepared in accordance with the 

generally accepted accounting 

principles of the institution’s home 

country in lieu of financial statements 

prepared in accordance with U.S. 

GAAP. 

In § 668.23(h)(1)(iii)(B), for a public or 

nonprofit foreign institution that 

received at least $3,000,000 but less 

than $10,000,000 in U.S. Title IV, HEA 

program funds during its most recently 

completed fiscal year, the institution 

will be required to submit once every 

three years audited financial statements 

prepared in accordance with the 

generally accepted accounting 

principles of both the institution’s home 

country and U.S. GAAP, but for the two 

years in between would be allowed to 

submit, in English, audited financial 

statements prepared in accordance with 

the generally accepted accounting 

principles of the institution’s home 

country in lieu of financial statements 

prepared in accordance with U.S. 

GAAP. 

In § 668.23(h)(1)(ii), for a public or 

nonprofit foreign institution that 

received $500,000 or more in U.S. Title 

IV, HEA program funds during its most 

recently completed fiscal year, and for 

any for-profit foreign institution, the 

institution would be required to submit 

for that year, in English, audited 

financial statements prepared in 

accordance with the generally accepted 

accounting principles of both the 

institution’s home country and U.S. 

GAAP, except as described above with 

respect to public and nonprofit 

institutions. 

We estimate that 16 public 

institutions will require 35 hours for the 

translation of financial statements to 

English, increasing burden by 560 

hours. We estimate that 20 private 

institutions will require 35 hours for the 

translation of financial statements to 

English increasing burden by 700 hours 

for a total of 1,260 hours. 

We estimate, if the final regulations 

(allowing for alternate submissions for 

institutions with funding over $500,000 

in U.S. Title IV, HEA program funds) 

had not been promulgated, that 123 

foreign institutions would have been 

required to continue to submit annually 

audited financial statements prepared in 

accordance with U.S. GAAP at a burden 

of 12,300 hours (123 institutions × 100 

hours = 12,300 hours). Instead only 32 

foreign institutions will continue to be 

required to submit annually audited 

financial statements prepared in 

accordance with U.S. GAAP with a 

burden of 3,200 hours. Therefore the 

final regulations reduce burden by 9,100 

hours (burden of 3,200 hours subtracted 

from the burden of 12,300 hours 

required under prior regulations). 

Collectively, we estimate that there 

will be a reduction of 7,840 hours of 

burden (9,100 hours minus 1,260) 

associated with § 668.23(h)(1) in OMB 

Control Number 1845–0038. 

Final § 668.23(h)(2) separates foreign 

institutions into two groups, 

establishing new compliance audit 

requirements for foreign institutions 

based upon whether the institution 

received less than $500,000 or $500,000 

or more in U.S. Title IV, HEA program 

funds during the institution’s most 

recently completed fiscal year. 

Under final § 668.23(h)(2)(ii), foreign 

institutions that receive less than 

$500,000 per year in U.S. Title IV, HEA 

program funds, will be required to 

submit an alternative compliance audit 

performed in accordance with the 

Foreign School Audit Guide from the 

Department’s Office of Inspector 

General. An alternative compliance 

audit is an agreed-upon procedures 

attestation engagement, which consists 

of specific procedures performed on a 

subject matter and is substantially 

narrower in scope than a standard 

compliance audit, which is an 

examination level attestation. 

The final regulations in 

§ 668.23(h)(2)(iii) require an annual 

submission of the compliance audit but 

allow, under certain conditions as 

described in the following paragraphs, 

an institution to submit a compliance 

audit annually for two consecutive 

years, and then, if notified by the 

Department, will be permitted to submit 

a cumulative compliance audit every 

three years thereafter as long as the 

institution continues to receive less than 

$500,000 in U.S. Title IV funds each 

fiscal year being audited. 

Under final § 668.23(h)(2)(i), as in the 

current regulations, foreign institutions 

that receive $500,000 or more per year 

in U.S. Title IV, HEA program funds, 

will be required to submit annual 

compliance audits using the standard 

audit procedures for foreign institutions 

set out in the audit guide issued by the 

Department’s Office of Inspector 

General. This compliance audit will be 

submitted together with an alternative 

compliance audit or audits prepared in 

accordance with § 668.23(h)(2)(ii) for 

any preceding fiscal year or years in 

which the foreign institution received 

less than $500,000 in U.S. Title IV, HEA 

program funds. 

We estimate, if the final regulations 

(allowing for alternate compliance audit 

submission for institutions with funding 

less than $500,000) had not been 

promulgated, that 350 foreign 

institutions would have been required 

to continue to complete a full 

compliance audit for 14,000 hours of 

burden (350 institutions × 40 hours). 

Instead, these 350 foreign institutions 

will have their burden reduced to 8,750 

hours (350 institutions × 25 hours). The 

final regulations realize a decrease of 

5,250 hours of burden associated with 

§ 668.23(h)(2) in OMB Control Number 

1845–0038. 

In total, we estimate that there will be 

a reduction of 13,090 hours of burden 

related to § 668.23(h) in OMB Control 

Number 1845–0038. 

Section 668.171—General (Subpart L— 

Financial Responsibility) 

Final § 668.171 considers a public 

foreign institution to be financially 

responsible if the institution: (1) 

Notifies the Secretary that it is 


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designated as a public institution by the 

country or other government entity that 

has the legal authority to make that 

designation; and (2) provides 

documentation from an official of that 

country or other government entity 

confirming that the institution is a 

public institution and is backed by the 

full faith and credit of the country or 

other government entity. A foreign 

public institution will not meet this 

standard of financial responsibility if it 

is in violation of any past performance 

requirements in § 668.174. 

If a foreign public institution does not 

meet the new requirements, its financial 

responsibility will be determined under 

the general requirements of financial 

responsibility, including the application 

of the equity, primary reserve, and net 

income ratios. Although the full faith 

and credit provision will provide an 

alternate way of meeting the financial 

responsibility standards for public 

foreign institutions, it will not excuse 

the institution from required 

submissions of audited financial 

statements. In addition, if a government 

entity provides full faith and credit 

backing, the entity will be held liable for 

any Title IV, HEA program liabilities 

that are not paid by the institution. 

We estimate that 13 public 

institutions will require 16 hours to 

obtain documentation from the 

applicable government entity for an 

increase in burden of 208 hours in OMB 

Control Number 1845–0022. 

COLLECTION OF INFORMATION

Regulatory section Information collection Collection 

600.20—Application procedures for establishing, reestablishing, maintaining, or expanding institutional eligibility and certification.This final regulation change adds information 

that must be collected to determine the eligibility of foreign graduate medical, veterinary, and nursing schools to participate in 

Title IV programs.

OMB 1845–0012. The burden will increase by 

42 hours. 

600.21—Updating application information ......... This final regulation identifies when a foreign 

graduate medical school must notify the 

Department of specific changes in locations 

used by the school.

OMB 1845–0012. The burden increases by 1 

hour. 

600.54—Criteria for determining whether a foreign institution is eligible to participate in the 

Direct Loan Program.

This final regulation requires that the foreign 

school demonstrate that its academic work 

for each training program of at least oneacademic-year is equivalent to an academic 

year as defined for domestic institutions.

OMB 1845–NEWA. This would be a new collection. Separate 60-day and 30-day Federal Register notices were published to solicit comment. The burden increases by 22 

hours. 

600.55—Additional criteria for determining 

whether a foreign graduate medical school is 

eligible to apply to participate in the Direct 

Loan Program.

This final regulation requires the schools to 

develop and provide a consent form allowing the school to receive a copy of the students’ MCAT scores, and requires a medical school to annually produce and provide 

to its accrediting agency a report with data 

regarding its students who are U.S. citizens, nationals or eligible permanent residents. Some of the same information will be 

required to be submitted to the Department 

on an annual basis. It requires the school to 

notify the accrediting body within one year 

of material changes to its educational program, and of formal affiliation agreements. 

This section also requires a school to identify the languages in which it provides instruction.

OMB 1845–NEWA. This would be a new collection. Separate 60-day and 30-day Federal Register notices were published to solicit comment. The burden increases by 381 

hours. 

600.55(g)(1)&(2) ................................................. This final regulation requires that the foreign 

graduate medical school expands the satisfactory academic progress policy requirements to include foreign schools; requires 

calculations of maximum timeframes to 

complete the program; and requires the 

school to document any student remediation regarding SAP.

OMB 1845–NEW2. This is a new collection. 

Separate 60-day and 30-day Federal Register notices were published to solicit comment. The burden increases by 178 hours. 

600.57—Additional criteria for determining 

whether a foreign nursing school is eligible to 

apply to participate in the Direct Loan Program.

This final regulation requires the schools to 

develop and provide a consent form allowing the school to receive a copy of the students’ NCLEX–RN results or pass rate; requires a nursing school to annually produce 

and provide to the Department a report with 

data regarding the results of the NCLEX– 

RN exam taken by its students and graduates.

OMB 1845–NEWA. This would be a new collection. Separate 60-day and 30-day Federal Register notices were published to solicit comment. The burden increases by 102 

hours. 

668.13—Certification procedures ....................... This final regulation changes the certification 

time frame for for-profit schools from 6 to 3 

years.

OMB 1845–0022. We do not estimate an increase in burden. 

668.23(h)(1)(ii) & 668.23(h)(1)(iii)(B)—Compliance audits and audited financial statements.This final regulation requires the translation of 

certain financial statements into English.

OMB 1845–0038. The burden increases by 

1,260 hours. 

668.23(h)(1)—Compliance audits and audited 

financial statements.

This final regulation changes the requirements 

for submission by institutions to the Department of audited financial statements.

OMB 1845–0038. The burden decreases by 

9,100 hours. 


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67192 Federal Register / Vol. 75, No. 210 / Monday, November 1, 2010 / Rules and Regulations 

COLLECTION OF INFORMATION—Continued 

Regulatory section Information collection Collection 

668.23(h)(2)—Compliance audits and audited 

financial statements.

This final regulation changes the requirements 

for submission by institutions to the Department of compliance audits.

OMB 1845–0038. The burden decreases by 

5,250 hours. 

668.171—General (Subpart L—Financial Responsibility).This final regulation provides an alternate 

method to show financial responsibility, by 

showing it is a public institution designated 

by proper governing authority in the country 

and providing documentation of the full faith 

and credit of that country.

OMB 1845–0022. The burden increases by 

208 hours. 

Assessment of Educational Impact 

In the NPRM we requested comments 

on whether the proposed regulations 

would require transmission of 

information that any other agency or 

authority of the United States gathers or 

makes available. 

Based on the response to the NPRM 

and on our review, we have determined 

that these final regulations do not 

require transmission of information that 

any other agency or authority of the 

United States gathers or makes 

available. 

Electronic Access to This Document: 

You can view this document, as well as 

all other Department of Education 

documents published in the Federal 

Register, in text or Adobe Portable 

Document Format (PDF) on the Internet 

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

news/fedregister. 

To use PDF you must have Adobe 

Acrobat Reader, which is available free 

at this site. If you have questions about 

using PDF, call the U.S. Government 

Printing Office (GPO), toll free, at 1– 

888–293–6498; or in the Washington, 

DC, area at (202) 512–1530. 

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 

Numbers: 84.063 Federal Pell Grant Program; 

84.033 Federal Work-Study Program; 84.379 

TEACH Grant Program; 84.069 LEAP) 

List of Subjects 

34 CFR Part 600 

Colleges and universities, Foreign 

relations, Grant programs—education, 

Loan programs—education, Reporting 

and recordkeeping requirements, 

Student aid, Vocational education. 

34 CFR Part 668 

Administrative practice and 

procedure, Aliens, Colleges and 

universities, Consumer protection, 

Grant programs—education, 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, 

Education, Loan programs—education, 

Reporting and recordkeeping 

requirements, Student aid, Vocational 

education. 

34 CFR Part 685 

Administrative practice and 

procedure, Colleges and universities, 

Education, Loan programs—education, 

Reporting and recordkeeping 

requirements, Student aid, Vocational 

education. 

Dated: October 19, 2010. 

Arne Duncan, 

Secretary of Education. 

■ For the reasons discussed in the 

preamble, the Secretary amends parts 

600, 668, 682 and 685 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 

revising paragraphs (1) and (2) of the 

definition of Nonprofit institution. 

The revision reads as follows: 

§ 600.2 Definitions. 

* * * * * 

Nonprofit institution: An institution 

that— 

(1)(i) Is owned and operated by one or 

more nonprofit corporations or 

associations, no part of the net earnings 

of which benefits any private 

shareholder or individual; 

(ii) Is legally authorized to operate as 

a nonprofit organization by each State in 

which it is physically located; and 

(iii) Is determined by the U.S. Internal 

Revenue Service to be an organization to 

which contributions are tax-deductible 

in accordance with section 501(c)(3) of 

the Internal Revenue Code (26 U.S.C. 

501(c)(3)); or 

(2) For a foreign institution— 

(i) An institution that is owned and 

operated only by one or more nonprofit 

corporations or associations; and 

(ii)(A) If a recognized tax authority of 

the institution’s home country is 

recognized by the Secretary for purposes 

of making determinations of an 

institution’s nonprofit status for title IV 

purposes, is determined by that tax 

authority to be a nonprofit educational 

institution; or 

(B) If no recognized tax authority of 

the institution’s home country is 

recognized by the Secretary for purposes 

of making determinations of an 

institution’s nonprofit status for title IV 

purposes, the foreign institution 

demonstrates to the satisfaction of the 

Secretary that it is a nonprofit 

educational institution. 

* * * * * 

■ 3. Section 600.20 is amended by: 

■ A. Revising paragraph (a). 

■ B. Adding a new paragraph (b)(3). 

■ C. In paragraph (c)(4), removing the 

word ‘‘or’’. 

■ D. Redesignating paragraph (c)(5) as 

paragraph (c)(6). 

■ E. Adding a new paragraph (c)(5). 

The revision and additions read as 

follows: 

§ 600.20 Application procedures for 

establishing, reestablishing, maintaining, or 

expanding institutional eligibility and 

certification. 

(a) Initial eligibility application. (1) 

An institution that wishes to establish 

its eligibility to participate in any HEA 

program must submit an application to 

the Secretary for a determination that it 

qualifies as an eligible institution under 

this part. 

(2) If the institution also wishes to be 

certified to participate in the title IV, 


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HEA programs, it must indicate that 

intent on the application, and submit all 

the documentation indicated on the 

application to enable the Secretary to 

determine that it satisfies the relevant 

certification requirements contained in 

34 CFR part 668, subparts B and L. 

(3) A freestanding foreign graduate 

medical school, or a foreign institution 

that includes a foreign graduate medical 

school, must include in its application 

to participate— 

(i)(A) A list of all medical school 

educational sites and where they are 

located, including all sites at which its 

students receive clinical training, except 

those clinical training sites that are not 

used regularly, but instead are chosen 

by individual students who take no 

more than two electives at the location 

for no more than a total of eight weeks; 

and 

(B) The type of clinical training (core, 

required clinical rotation, not required 

clinical rotation) offered at each site 

listed on the application in accordance 

with paragraph (a)(3)(i)(A) of this 

section; and 

(ii) Whether the school offers— 

(A) Only post-baccalaureate/ 

equivalent medical programs, as defined 

in § 600.52; 

(B) Other types of programs that lead 

to employment as a doctor of 

osteopathic medicine or doctor of 

medicine; or 

(C) Both; and 

(iii) Copies of the formal affiliation 

agreements with hospitals or clinics 

providing all or a portion of a clinical 

training program required under 

§ 600.55(e)(1). 

(b) * * * 

(3) A freestanding foreign graduate 

medical school, or a foreign institution 

that includes a foreign graduate medical 

school, must include in its reapplication 

to participate— 

(i)(A) A list of all of the foreign 

graduate medical school’s educational 

sites and where they are located, 

including all sites at which its students 

receive clinical training, except those 

clinical training sites that are not used 

regularly, but instead are chosen by 

individual students who take no more 

than two electives at the location for no 

more than a total of eight weeks; and 

(B) The type of clinical training (core, 

required clinical rotation, not required 

clinical rotation) offered at each site 

listed on the application in accordance 

with paragraph (b)(3)(i)(A) of this 

section; and 

(ii) Whether the school offers— 

(A) Only post-baccalaureate/ 

equivalent medical programs, as defined 

in § 600.52; 

(B) Other types of programs that lead 

to employment as a doctor of 

osteopathic medicine or doctor of 

medicine; or 

(C) Both; and 

(iii) Copies of the formal affiliation 

agreements with hospitals or clinics 

providing all or a portion of a clinical 

training program required under 

§ 600.55(e)(1). 

* * * * * 

(c) * * * 

(5) For a freestanding foreign graduate 

medical school, or a foreign institution 

that includes a foreign graduate medical 

school, add a location that offers all or 

a portion of the foreign graduate 

medical school’s core clinical training 

or required clinical rotations, except for 

those locations that are included in the 

accreditation of a medical program 

accredited by the Liaison Committee on 

Medical Education (LCME) or the 

American Osteopathic Association 

(AOA); or 

* * * * * 

■ 4. Section 600.21 is amended by 

adding paragraph (a)(10) to read as 

follows: 

§ 600.21 Updating application information. 

(a) * * * 

(10) For a freestanding foreign 

graduate medical school, or a foreign 

institution that includes a foreign 

graduate medical school, the school 

adds a location that offers all or a 

portion of the school’s clinical rotations 

that are not required, except for those 

that are included in the accreditation of 

a medical program accredited by the 

Liaison Committee on Medical 

Education (LCME) or the American 

Osteopathic Association (AOA), or that 

are not used regularly, but instead are 

chosen by individual students who take 

no more than two electives at the 

location for no more than a total of eight 

weeks. 

* * * * * 

■ 5. Section 600.41 is amended by 

adding paragraph (e)(3) to read as 

follows: 

§ 600.41 Termination and emergency 

action proceedings. 

* * * * * 

(e) * * * 

(3) If the basis for the loss of eligibility 

of a foreign graduate medical school is 

one or more annual pass rates on the 

U.S. Medical Licensing Examination 

below the threshold required in 

§ 600.55(f)(1)(ii), the sole issue is 

whether one or more of the foreign 

medical school’s pass rate or rates for 

the preceding calendar year fell below 

that threshold. For a foreign graduate 

medical school that opted to have the 

Educational Commission for Foreign 

Medical Graduates (ECFMG) calculate 

and provide the pass rates directly to 

the Secretary for the preceding calendar 

year as permitted under § 600.55(d)(2) 

in lieu of the foreign graduate medical 

school providing pass rate data to the 

Secretary under § 600.55(d)(1)(iii), the 

ECFMG’s calculations of the school’s 

rates are conclusive; and the presiding 

official has no authority to consider 

challenges to the computation of the 

rate or rates by the ECFMG. 

* * * * * 

■ 6. Section 600.51 is amended by 

revising paragraph (c) to read as follows: 

§ 600.51 Purpose and scope. 

* * * * * 

(c) Applicability of other title IV, HEA 

program regulations. 

(1) A foreign institution must comply 

with all requirements for eligible and 

participating institutions except when 

made inapplicable by the HEA or when 

the Secretary, through publication in the 

Federal Register, identifies specific 

provisions as inapplicable to foreign 

institutions. 

(2)(i) A public or nonprofit foreign 

institution that meets the requirements 

of this subpart, and that also meets the 

requirements of this part except as 

provided in §§ 600.51(c)(1) and 

600.54(a), is considered an ‘‘institution 

of higher education’’ for purposes of the 

title IV, HEA program regulations; and 

(ii) A for-profit foreign institution that 

meets the requirements of this subpart, 

and that also meets the requirements of 

this Part, except as provided in 

§§ 600.51(c)(1) and 600.54(a), is 

considered a ‘‘proprietary institution’’ 

for purposes of title IV, HEA program 

regulations. 

* * * * * 

■ 7. Section 600.52 is amended by: 

■ A. Adding, in alphabetical order, a 

definition of Associate degree school of 

nursing. 

■ B. Adding, in alphabetical order, a 

definition of Clinical training. 

■ C. Adding, in alphabetical order, a 

definition of Collegiate school of 

nursing. 

■ D. Adding, in alphabetical order, a 

definition of Diploma school of nursing. 

■ E. Revising the definition of Foreign 

graduate medical school. 

■ F. Revising the definition of Foreign 

institution. 

■ G. Adding, in alphabetical order, a 

definition of Foreign nursing school. 

■ H. Adding, in alphabetical order, a 

definition of Foreign veterinary school. 


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■ I. Adding, in alphabetical order, a 

definition of National Committee on 

Foreign Medical Education and 

Accreditation (NCFMEA). 

■ J. Revising the definition of Passing 

score. 

■ K. Adding, in alphabetical order, a 

definition of Post-baccalaureate/ 

equivalent medical program. 

The additions and revisions read as 

follows: 

§ 600.52 Definitions. 

* * * * * 

Associate degree school of nursing: A 

school that provides primarily or 

exclusively a two-year program of 

postsecondary education in professional 

nursing leading to a degree equivalent to 

an associate degree in the United States. 

Clinical training: The portion of a 

graduate medical education program 

that counts as a clinical clerkship for 

purposes of medical licensure 

comprising core, required clinical 

rotation, and not required clinical 

rotation. 

Collegiate school of nursing: A school 

that provides primarily or exclusively a 

minimum of a two-year program of 

postsecondary education in professional 

nursing leading to a degree equivalent to 

a bachelor of arts, bachelor of science, 

or bachelor of nursing in the United 

States, or to a degree equivalent to a 

graduate degree in nursing in the United 

States, and including advanced training 

related to the program of education 

provided by the school. 

Diploma school of nursing: A school 

affiliated with a hospital or university, 

or an independent school, which 

provides primarily or exclusively a twoyear program of postsecondary 

education in professional nursing 

leading to the equivalent of a diploma 

in the United States or to equivalent 

indicia that the program has been 

satisfactorily completed. 

Foreign graduate medical school: A 

foreign institution (or, for a foreign 

institution that is a university, a 

component of that foreign institution) 

having as its sole mission providing an 

educational program that leads to a 

degree of medical doctor, doctor of 

osteopathic medicine, or the equivalent. 

A reference in these regulations to a 

foreign graduate medical school as 

‘‘freestanding’’ pertains solely to those 

schools that qualify by themselves as 

foreign institutions and not to schools 

that are components of universities that 

qualify as foreign institutions. 

Foreign institution: 

(1) For the purposes of students who 

receive title IV aid, an institution that— 

(i) Is not located in a State; 

(ii) Except as provided with respect to 

clinical training offered under 

§ 600.55(h)(1), § 600.56(b), or 

§ 600.57(a)(2)— 

(A) Has no U.S. location; 

(B) Has no written arrangements, 

within the meaning of § 668.5, with 

institutions or organizations located in 

the United States for students enrolling 

at the foreign institution to take courses 

from institutions located in the United 

States; 

(C) Does not permit students to enroll 

in any course offered by the foreign 

institution in the United States, 

including research, work, internship, 

externship, or special studies within the 

United States, except that independent 

research done by an individual student 

in the United States for not more than 

one academic year is permitted, if it is 

conducted during the dissertation phase 

of a doctoral program under the 

guidance of faculty, and the research 

can only be performed in a facility in 

the United States; 

(iii) Is legally authorized by the 

education ministry, council, or 

equivalent agency of the country in 

which the institution is located to 

provide an educational program beyond 

the secondary education level; and 

(iv) Awards degrees, certificates, or 

other recognized educational credentials 

in accordance with § 600.54(e) that are 

officially recognized by the country in 

which the institution is located; or 

(2) If the educational enterprise 

enrolls students both within a State and 

outside a State, and the number of 

students who would be eligible to 

receive title IV, HEA program funds 

attending locations outside a State is at 

least twice the number of students 

enrolled within a State, the locations 

outside a State must apply to participate 

as one or more foreign institutions and 

must meet all requirements of paragraph 

(1) of this definition, and the other 

requirements of this part. For the 

purposes of this paragraph, an 

educational enterprise consists of two or 

more locations offering all or part of an 

educational program that are directly or 

indirectly under common ownership. 

Foreign nursing school: A foreign 

institution (or, for a foreign institution 

that is a university, a component of that 

foreign institution) that is an associate 

degree school of nursing, a collegiate 

school of nursing, or a diploma school 

of nursing. A reference in these 

regulations to a foreign nursing school 

as ‘‘freestanding’’ pertains solely to those 

schools that qualify by themselves as 

foreign institutions and not to schools 

that are components of universities that 

qualify as foreign institutions. 

Foreign veterinary school: A foreign 

institution (or, for a foreign institution 

that is a university, a component of that 

foreign institution) having as its sole 

mission providing an educational 

program that leads to the degree of 

doctor of veterinary medicine, or the 

equivalent. A reference in these 

regulations to a foreign veterinary 

school as ‘‘freestanding’’ pertains solely 

to those schools that qualify by 

themselves as foreign institutions and 

not to schools that are components of 

universities that qualify as foreign 

institutions. 

National Committee on Foreign 

Medical Education and Accreditation 

(NCFMEA): The operational committee 

of medical experts established by the 

Secretary to determine whether the 

medical school accrediting standards 

used in other countries are comparable 

to those applied to medical schools in 

the United States, for purposes of 

evaluating the eligibility of accredited 

foreign graduate medical schools to 

participate in the title IV, HEA 

programs. 

Passing score: The minimum passing 

score as defined by the Educational 

Commission for Foreign Medical 

Graduates (ECFMG), or on the National 

Council Licensure Examination for 

Registered Nurses (NCLEX–RN), as 

applicable. 

Post-baccalaureate/equivalent 

medical program: A program offered by 

a foreign graduate medical school that 

requires, as a condition of admission, 

that its students have already completed 

their non-medical undergraduate 

studies and that consists solely of 

courses and training leading to 

employment as a doctor of medicine or 

doctor of osteopathic medicine. 

* * * * * 

■ 8. Section 600.54 is revised to read as 

follows: 

§ 600.54 Criteria for determining whether a 

foreign institution is eligible to apply to 

participate in the Direct Loan Program. 

The Secretary considers a foreign 

institution to be comparable to an 

eligible institution of higher education 

in the United States and eligible to 

apply to participate in the Direct Loan 

Program if the foreign institution meets 

the following requirements: 

(a)(1) Except for a freestanding foreign 

graduate medical school, foreign 

veterinary school, or foreign nursing 

school, the foreign institution is a public 

or private nonprofit educational 

institution. 

(2) For a public or private nonprofit 

foreign institution, the institution meets 

the requirements of § 600.4, except 

§ 600.4(a)(1), (a)(2), (a)(3), (a)(4)(ii), 


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(a)(5), (b), (c), and any requirements the 

HEA or the Secretary has designated as 

inapplicable in accordance with 

§ 600.51(c)(1). 

(3) For a for-profit foreign medical, 

veterinary, or nursing school, the school 

meets the requirements of § 600.5, 

except § 600.5(a)(2), (a)(3), (a)(4), 

(a)(5)(i)(B), (a)(5)(ii), (a)(6), (c), (d), (e) 

and any requirements the HEA or the 

Secretary has designated as inapplicable 

in accordance with § 600.51(c)(1). 

(b) The foreign institution admits as 

regular students only persons who— 

(1) Have a secondary school 

completion credential; or 

(2) Have the recognized equivalent of 

a secondary school completion 

credential. 

(c) Notwithstanding § 668.5, an 

eligible foreign institution may not enter 

into a written arrangement under which 

an ineligible institution or organization 

provides any portion of one or more of 

the eligible foreign institution’s 

programs. For the purposes of this 

paragraph, written arrangements do not 

include affiliation agreements for the 

provision of clinical training for foreign 

medical, veterinary, and nursing 

schools. 

(d) An additional location of a foreign 

institution must separately meet the 

definition of a foreign institution in 

§ 600.52 if the additional location is— 

(1) Located outside of the country in 

which the main campus is located, 

except as provided in § 600.55(h)(1), 

§ 600.56(b), § 600.57(a)(2), 

§ 600.55(h)(3), and the definition of 

foreign institution found in § 600.52; or 

(2) Located within the same country 

as the main campus, but is not covered 

by the legal authorization of the main 

campus. 

(e) The foreign institution provides an 

eligible education program— 

(1) For which the institution is legally 

authorized to award a degree that is 

equivalent to an associate, 

baccalaureate, graduate, or professional 

degree awarded in the United States; 

(2) That is at least a two-academicyear program acceptable for full credit 

toward the equivalent of a baccalaureate 

degree awarded in the United States; or 

(3)(i) That is equivalent to at least a 

one-academic-year training program in 

the United States that leads to a 

certificate, degree, or other recognized 

educational credential and prepares 

students for gainful employment in a 

recognized occupation within the 

meaning of the gainful employment 

provisions. 

(ii) An institution must demonstrate 

to the satisfaction of the Secretary that 

the amount of academic work required 

by a program in paragraph (e)(3)(i) of 

this section is equivalent to at least the 

definition of an academic year in 

§ 668.3. 

(f) For a for-profit foreign medical, 

veterinary, or nursing school— 

(1) No portion of an eligible medical 

or veterinary program offered may be at 

what would be an undergraduate level 

in the United States; and 

(2) The title IV, HEA program 

eligibility does not extend to any joint 

degree program. 

(g) Proof that a foreign institution 

meets the requirements of paragraph 

(1)(iii) of the definition of a foreign 

institution in § 600.52 may be provided 

to the Secretary by a legal authorization 

from the appropriate education 

ministry, council, or equivalent 

agency— 

(1) For all eligible foreign institutions 

in the country; 

(2) For all eligible foreign institutions 

in a jurisdiction within the country; or 

(3) For each separate eligible foreign 

institution in the country. 

(Authority: 20 U.S.C. 1082, 1088) 

■ 9. Section 600.55 is revised to read as 

follows: 

§ 600.55 Additional criteria for determining 

whether a foreign graduate medical school 

is eligible to apply to participate in the 

Direct Loan Program. 

(a) General. (1) The Secretary 

considers a foreign graduate medical 

school to be eligible to apply to 

participate in the title IV, HEA programs 

if, in addition to satisfying the criteria 

of this part (except the criterion in 

§ 600.54 that the institution be public or 

private nonprofit), the school satisfies 

the criteria of this section. 

(2) A foreign graduate medical school 

must provide, and in the normal course 

require its students to complete, a 

program of clinical training and 

classroom medical instruction of not 

less than 32 months in length, that is 

supervised closely by members of the 

school’s faculty and that— 

(i) Is provided in facilities adequately 

equipped and staffed to afford students 

comprehensive clinical training and 

classroom medical instruction; 

(ii) Is approved by all medical 

licensing boards and evaluating bodies 

whose views are considered relevant by 

the Secretary; and 

(iii) As part of its clinical training, 

does not offer more than two electives 

consisting of no more than eight weeks 

per student at a site located in a foreign 

country other than the country in which 

the main campus is located or in the 

United States, unless that location is 

included in the accreditation of a 

medical program accredited by the 

Liaison Committee on Medical 

Education (LCME) or the American 

Osteopathic Association (AOA). 

(3) A foreign graduate medical school 

must appoint for the program described 

in paragraph (a)(2) of this section only 

those faculty members whose academic 

credentials are the equivalent of 

credentials required of faculty members 

teaching the same or similar courses at 

medical schools in the United States. 

(4) A foreign graduate medical school 

must have graduated classes during 

each of the two twelve-month periods 

immediately preceding the date the 

Secretary receives the school’s request 

for an eligibility determination. 

(b) Accreditation. A foreign graduate 

medical school must— 

(1) Be approved by an accrediting 

body— 

(i) That is legally authorized to 

evaluate the quality of graduate medical 

school educational programs and 

facilities in the country where the 

school is located; and 

(ii) Whose standards of accreditation 

of graduate medical schools have been 

evaluated by the NCFMEA or its 

successor committee of medical experts 

and have been determined to be 

comparable to standards of accreditation 

applied to medical schools in the 

United States; or 

(2) Be a public or private nonprofit 

educational institution that satisfies the 

requirements in § 600.4(a)(5)(i). 

(c) Admission criteria. (1) A foreign 

graduate medical school having a postbaccalaureate/equivalent medical 

program must require students accepted 

for admission who are U.S. citizens, 

nationals, or permanent residents to 

have taken the Medical College 

Admission Test (MCAT) and to have 

reported their scores to the foreign 

graduate medical school; and 

(2) A foreign graduate medical school 

must determine the consent 

requirements for, and require the 

necessary consents of, all students 

accepted for admission for whom the 

school must report to enable the school 

to comply with the collection and 

submission requirements of paragraph 

(d) of this section. 

(d) Collection and submission of data. 

(1) A foreign graduate medical school 

must obtain, at its own expense, and 

submit, by the date required by 

paragraph (d)(3) of this section— 

(i) To its accrediting authority and, on 

request, to the Secretary, the scores on 

the MCAT or successor examination, of 

all students admitted during the 

preceding calendar year who are U.S. 

citizens, nationals, or eligible 

permanent residents, together with a 

statement of the number of times each 

student took the examination; 


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(ii) To its accrediting authority and, 

on request, to the Secretary, the 

percentage of students graduating 

during the preceding calendar year 

(including at least all graduates who are 

U.S. citizens, nationals, or eligible 

permanent residents) who obtain 

placement in an accredited U.S. medical 

residency program; 

(iii) To the Secretary, except as 

provided for in paragraph (d)(2) of this 

section, all scores, disaggregated by 

step/test—i.e., Step 1, Step 2—Clinical 

Skills (Step 2–CS), and Step 2—Clinical 

Knowledge (Step 2–CK), or the 

successor examinations—and attempt, 

earned during the preceding calendar 

year by each student and graduate, on 

Step 1, Step 2–CS, and Step 2–CK, or 

the successor examinations, of the U.S. 

Medical Licensing Examination 

(USMLE), together with the dates the 

student has taken each test, including 

any failed tests; 

(iv) To the Secretary, a statement of its 

citizenship rate for the preceding 

calendar year for a school that is subject 

to paragraph (f)(1)(i)(A) of this section, 

together with a description of the 

methodology used in deriving the rate 

that is acceptable to the Secretary. 

(2) In lieu of submitting the 

information required in paragraph 

(d)(1)(iii) of this section to the Secretary, 

a foreign graduate medical school that is 

not subject to paragraph (f)(4) of this 

section may agree to allow the 

Educational Commission for Foreign 

Medical Graduates (ECFMG) or other 

responsible third party to calculate the 

rate described in paragraph (f)(1)(ii) and 

(f)(3) of this section for the preceding 

calendar year and provide the rate 

directly to the Secretary on the school’s 

behalf with a copy to the foreign 

graduate medical school, provided— 

(i) The foreign graduate medical 

school has provided by April 30 to the 

Secretary written consent acceptable to 

the Secretary to reliance by the 

Secretary on the pass rate as calculated 

by the ECFMG or other responsible third 

party for purposes of determining 

compliance with paragraph (f)(1)(ii) and 

(f)(3) of this section for the preceding 

calendar year; and 

(ii) The foreign graduate medical 

school agrees in its written consent that 

for the preceding calendar year the rate 

as calculated by the ECFMG or other 

designated third party will be 

conclusive for purposes of determining 

compliance with paragraph (f)(1)(ii) and 

(f)(3) of this section. 

(3) A foreign graduate medical school 

must submit the data it collects in 

accordance with paragraph (d)(1) of this 

section no later than April 30 of each 

year, unless the Secretary specifies a 

different date through a notice in the 

Federal Register. 

(e) Requirements for clinical training. 

(1)(i) A foreign graduate medical school 

must have— 

(A) A formal affiliation agreement 

with any hospital or clinic at which all 

or a portion of the school’s core clinical 

training or required clinical rotations 

are provided; and 

(B) Either a formal affiliation 

agreement or other written arrangements 

with any hospital or clinic at which all 

or a portion of its clinical rotations that 

are not required are provided, except for 

those locations that are not used 

regularly, but instead are chosen by 

individual students who take no more 

than two electives at the location for no 

more than a total of eight weeks. 

(ii) The agreements described in 

paragraph (e)(1)(i) of this section must 

state how the following will be 

addressed at each site— 

(A) Maintenance of the school’s 

standards; 

(B) Appointment of faculty to the 

medical school staff; 

(C) Design of the curriculum; 

(D) Supervision of students; 

(E) Evaluation of student 

performance; and 

(F) Provision of liability insurance. 

(2) A foreign graduate medical school 

must notify its accrediting body within 

one year of any material changes in— 

(i) The educational programs, 

including changes in clinical training 

programs; and 

(ii) The overseeing bodies and in the 

formal affiliation agreements with 

hospitals and clinics described in 

paragraph (e)(1)(i) of this section. 

(f) Citizenship and USMLE pass rate 

percentages. (1)(i)(A) During the 

calendar year preceding the year for 

which any of the school’s students seeks 

an title IV, HEA program loan, at least 

60 percent of those enrolled as full-time 

regular students in the school and at 

least 60 percent of the school’s most 

recent graduating class must have been 

persons who did not meet the 

citizenship and residency criteria 

contained in section 484(a)(5) of the 

HEA, 20 U.S.C. 1091(a)(5); or 

(B) The school must have had a 

clinical training program approved by a 

State prior to January 1, 2008, and must 

continue to operate a clinical training 

program in at least one State that 

approves the program; and 

(ii) Except as provided in paragraph 

(f)(4) of this section, for a foreign 

graduate medical school outside of 

Canada, for Step 1, Step 2–CS, and Step 

2–CK, or the successor examinations, of 

the USMLE administered by the 

ECFMG, at least 75 percent of the 

school’s students and graduates who 

took that step/test of the examination in 

the year preceding the year for which 

any of the school’s students seeks a title 

IV, HEA program loan must have 

received a passing score on that step/ 

test and are taking the step/test for the 

first time; or 

(2)(i) The school must have had a 

clinical training program approved by a 

State as of January 1, 1992; and 

(ii) The school must continue to 

operate a clinical training program in at 

least one State that approves the 

program. 

(3) In performing the calculation 

required in paragraph (f)(1)(ii) of this 

section, a foreign graduate medical 

school shall— 

(i) Include as a graduate each student 

who graduated from the school during 

the three years preceding the year for 

which the calculation is performed and 

who took that step/test for the first time 

in that year; and 

(ii) Include students and graduates 

who take more than one step/test of the 

USMLE examination for the first time in 

the same year in the denominator for 

each of those steps/tests; 

(4)(i) If the calculation described in 

paragraph (f)(1)(ii) of this section would 

result in any step/test pass rate based on 

fewer than eight students, a single pass 

rate for the school is determined instead 

based on the performance of the 

school’s students and graduates on Step 

1, Step 2–CS, and Step 2–CK combined; 

(ii) If combining the results on all 

three step/tests as permitted in 

paragraph (f)(4)(i) of this section would 

result in a pass rate based on fewer than 

eight step/test results, the school is 

deemed to have no pass rate for that 

year and the results for the year are 

combined with each subsequent year 

until a pass rate based on at least eight 

step/test results is derived. 

(g) Other criteria. (1) As part of 

establishing, publishing, and applying 

reasonable satisfactory academic 

progress standards, a foreign graduate 

medical school must include as a 

quantitative component a maximum 

timeframe in which a student must 

complete his or her educational program 

that must— 

(i) Be no longer than 150 percent of 

the published length of the educational 

program measured in academic years, 

terms, credit hours attempted, clock 

hours completed, etc., as appropriate; 

and 

(ii) Meet the requirements of 

§ 668.16(e)(2)(ii)(B), (C) and (D). 

(2) A foreign graduate medical school 

must document the educational 

remediation it provides to assist 


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students in making satisfactory 

academic progress. 

(3) A foreign graduate medical school 

must publish all the languages in which 

instruction is offered. 

(h) Location of a program. (1) Except 

as provided in paragraph (h)(3)(ii) of 

this section, all portions of a graduate 

medical education program offered to 

U.S. students must be located in a 

country whose medical school 

accrediting standards are comparable to 

standards used in the United States, as 

determined by the NCFMEA, except for 

clinical training sites located in the 

United States. 

(2) No portion of the graduate medical 

educational program offered to U.S. 

students, other than the clinical training 

portion of the program, may be located 

outside of the country in which the 

main campus of the foreign graduate 

medical school is located. 

(3)(i) Except as provided in paragraph 

(h)(3)(ii) of this section, for any part of 

the clinical training portion of the 

educational program located in a foreign 

country other than the country in which 

the main campus is located or in the 

United States, in order for students 

attending the site to be eligible to 

borrow title IV, HEA program funds— 

(A) The site must be located in an 

NCFMEA approved comparable foreign 

country; 

(B) The institution’s medical 

accrediting agency must have conducted 

an on-site evaluation and specifically 

approved the clinical training site; and 

(C) Clinical instruction must be 

offered in conjunction with medical 

educational programs offered to 

students enrolled in accredited medical 

schools located in that approved foreign 

country. 

(ii) A clinical training site located in 

a foreign country other than the country 

in which the main campus is located or 

in the United States is not required to 

meet the requirements of paragraph 

(h)(3)(i) of this section in order for 

students attending that site to be eligible 

to borrow title IV, HEA program funds 

if— 

(A) The location is included in the 

accreditation of a medical program 

accredited by the Liaison Committee on 

Medical Education (LCME) or the 

American Osteopathic Association 

(AOA); or 

(B) No individual student takes more 

than two electives at the location and 

the combined length of the electives 

does not exceed eight weeks. 

■ 10. Section 600.56 is revised as 

follows: 

§ 600.56 Additional criteria for determining 

whether a foreign veterinary school is 

eligible to apply to participate in the Direct 

Loan Program. 

(a) The Secretary considers a foreign 

veterinary school to be eligible to apply 

to participate in the Direct Loan 

Program if, in addition to satisfying the 

criteria in this part (except the criterion 

in § 600.54 that the institution be public 

or private nonprofit), the school satisfies 

all of the following criteria: 

(1) The school provides, and in the 

normal course requires its students to 

complete, a program of clinical and 

classroom veterinary instruction that is 

supervised closely by members of the 

school’s faculty, and that is provided in 

facilities adequately equipped and 

staffed to afford students comprehensive 

clinical and classroom veterinary 

instruction through a training program 

for foreign veterinary students that has 

been approved by all veterinary 

licensing boards and evaluating bodies 

whose views are considered relevant by 

the Secretary. 

(2) The school has graduated classes 

during each of the two twelve-month 

periods immediately preceding the date 

the Secretary receives the school’s 

request for an eligibility determination. 

(3) The school employs for the 

program described in paragraph (a)(1) of 

this section only those faculty members 

whose academic credentials are the 

equivalent of credentials required of 

faculty members teaching the same or 

similar courses at veterinary schools in 

the United States. 

(4) Effective July 1, 2015, the school 

is accredited or provisionally accredited 

by an organization acceptable to the 

Secretary for the purpose of evaluating 

veterinary programs. 

(b)(1) No portion of the foreign 

veterinary educational program offered 

to U.S. students, other than the clinical 

training portion of the program as 

provided for in paragraph (b)(2) of this 

section, may be located outside of the 

country in which the main campus of 

the foreign veterinary school is located; 

(2)(i) For a veterinary school that is 

neither public nor private nonprofit, the 

school’s students must complete their 

clinical training at an approved 

veterinary school located in the United 

States; 

(ii) For a veterinary school that is 

public or private nonprofit, the school’s 

students may complete their clinical 

training at an approved veterinary 

school located— 

(A) In the United States; 

(B) In the home country; or 

(C) Outside of the United States or the 

home country, if— 

(1) The location is included in the 

accreditation of a veterinary program 

accredited by the American Veterinary 

Medical Association (AVMA); or 

(2) No individual student takes more 

than two electives at the location and 

the combined length of the elective does 

not exceed eight weeks. 

(Authority: 20 U.S.C. 1002 and 1092.) 

■ 11. Section 600.57 is redesignated as 

§ 600.58 and a new § 600.57 is added to 

read as follows: 

§ 600.57 Additional criteria for determining 

whether a foreign nursing school is eligible 

to apply to participate in the Direct Loan 

Program. 

(a) Effective July 1, 2012 for a foreign 

nursing school that was participating in 

any title IV, HEA program on August 13, 

2008, and effective July 1, 2011 for all 

other foreign nursing schools, the 

Secretary considers the foreign nursing 

school to be eligible to apply to 

participate in the Direct Loan Program 

if, in addition to satisfying the criteria 

in this part (except the criterion in 

§ 600.54 that the institution be public or 

private nonprofit), the nursing school 

satisfies all of the following criteria: 

(1) The nursing school is an associate 

degree school of nursing, a collegiate 

school of nursing, or a diploma school 

of nursing. 

(2) The nursing school has an 

agreement with a hospital located in the 

United States or an accredited school of 

nursing located in the United States that 

requires students of the nursing school 

to complete the student’s clinical 

training at the hospital or accredited 

school of nursing. 

(3) The nursing school has an 

agreement with an accredited school of 

nursing located in the United States 

providing that students graduating from 

the nursing school located outside of the 

United States also receive a degree from 

the accredited school of nursing located 

in the United States. 

(4) The nursing school certifies only 

Federal Stafford Loan program loans or 

Federal PLUS program loans, as those 

terms are defined in § 668.2, for 

students attending the nursing school. 

(5) The nursing school reimburses the 

Secretary for the cost of any loan 

defaults for current and former students 

included in the calculation of the 

institution’s cohort default rate during 

the previous fiscal year. 

(6)(i) The nursing school determines 

the consent requirements for and 

requires the necessary consents of all 

students accepted for admission who 

are U.S. citizens, nationals, or eligible 

permanent residents to enable the 

school to comply with the collection 


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and submission requirements of 

paragraph (a)(6)(ii) of this section. 

(ii) The nursing school annually 

either— 

(A) Obtains, at its own expense, all 

results achieved by students and 

graduates who are U.S. citizens, 

nationals, or eligible permanent 

residents on the National Council 

Licensure Examination for Registered 

Nurses (NCLEX–RN), together with the 

dates the student has taken the 

examination, including any failed 

examinations, and provides such results 

to the Secretary; or 

(B) Obtains a report or reports from 

the National Council of State Boards of 

Nursing (NCSB), or an NCSB affiliate or 

NCSB contractor, reflecting the 

percentage of the school’s students and 

graduates taking the NCLEX–RN in the 

preceding year who passed the 

examination, or the data from which the 

percentage could be derived, and 

provides the report to the Secretary. 

(7) Not less than 75 percent of the 

school’s students and graduates who are 

U.S. citizens, nationals, or eligible 

permanent residents who took the 

NCLEX–RN in the year preceding the 

year for which the institution is 

certifying a Federal Stafford Loan or a 

Federal Plus Loan, passed the 

examination. 

(8) The school provides, including 

under the agreements described in 

paragraphs (a)(2) and (a)(3) of this 

section, and in the normal course 

requires its students to complete, a 

program of clinical and classroom 

nursing instruction that is supervised 

closely by members of the school’s 

faculty that is provided in facilities 

adequately equipped and staffed to 

afford students comprehensive clinical 

and classroom nursing instruction, 

through a training program for foreign 

nursing students that has been approved 

by all nurse licensing boards and 

evaluating bodies whose views are 

considered relevant by the Secretary. 

(9) The school has graduated classes 

during each of the two twelve-month 

periods immediately preceding the date 

the Secretary receives the school’s 

request for an eligibility determination. 

(10) The school employs only those 

faculty members whose academic 

credentials are the equivalent of 

credentials required of faculty members 

teaching the same or similar courses at 

nursing schools in the United States. 

(b) For purposes of paragraph (a)(5) of 

this section, the cost of a loan default is 

the estimated future cost of collections 

on the defaulted loan. 

(c) The Department continues to 

collect on the Direct Loan after a school 

reimburses the Secretary for the amount 

specified in paragraph (b) of this section 

until the loan is paid in full or 

otherwise satisfied, or the loan account 

is closed out. 

(d) No portion of the foreign nursing 

program offered to U.S. students may be 

located outside of the country in which 

the main campus of the foreign nursing 

school is located, except for clinical 

sites located in the United States. 

PART 668—STUDENT ASSISTANCE 

GENERAL PROVISIONS 

■ 12. 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. 

§ 668.2 [Amended] 

■ 13. Section 668.2 is amended by 

adding the words ‘‘Foreign institution’’ 

immediately after ‘‘Federal Family 

Education Loan (FFEL) programs’’ in the 

list of definitions in paragraph (a). 

■ 14. Section 668.5 is amended by 

revising paragraph (b) to read as follows: 

§ 668.5 Written arrangements to provide 

educational programs. 

* * * * * 

(b) Written arrangements for studyabroad. Under a study abroad program, 

if an eligible institution enters into a 

written arrangement under which an 

institution in another country, or an 

organization acting on behalf of an 

institution in another country, provides 

part of the educational program of 

students enrolled in the eligible 

institution, the Secretary considers that 

educational program to be an eligible 

program if it otherwise satisfies the 

requirements of paragraphs (c)(1) 

through (c)(3) of this section. 

■ 15. Section 668.13 is amended by 

revising paragraph (b) to read as follows: 

§ 668.13 Certification procedures. 

* * * * * 

(b) Period of participation. (1) If the 

Secretary certifies that an institution 

meets the standards of this subpart, the 

Secretary also specifies the period for 

which the institution may participate in 

a title IV, HEA program. An institution’s 

period of participation expires no more 

than six years after the date that the 

Secretary certifies that the institution 

meets the standards of this subpart, 

except that— 

(i) The period of participation for a 

private, for profit foreign institution 

expires three years after the date of the 

Secretary’s certification; and 

(ii) The Secretary may specify a 

shorter period. 

(2) Provided that an institution has 

submitted an application for a renewal 

of certification that is materially 

complete at least 90 days prior to the 

expiration of its current period of 

participation, the institution’s existing 

certification will be extended on a 

month to month basis following the 

expiration of the institution’s period of 

participation until the end of the month 

in which the Secretary issues a decision 

on the application for recertification. 

* * * * * 

■ 16. Section 668.15 is amended by 

revising paragraph (h) to read as 

follows: 

§ 668.15 Factors of financial responsibility. 

* * * * * 

(h) Foreign institutions. The Secretary 

makes a determination of the financial 

responsibility for a foreign institution 

on the basis of financial statements 

submitted under § 668.23(h). 

* * * * * 

■ 17. Section 668.23 is amended by: 

■ A. In paragraph (a)(5), removing the 

words ‘‘ ‘‘Audits of Institutions of Higher 

Education and Other Non-profit 

Organizations’’; Office of Management 

and Budget Circular A–128, ‘‘Audits of 

State and Local Governments’’ ’’ and 

adding, in their place, the words 

‘‘Audits of States, Local Governments, 

and Non-Profit Organizations’’. 

■ B. In paragraph (d)(1), adding the 

words ‘‘issued by the Comptroller 

General of the United States’’ after ‘‘with 

generally accepted government auditing 

standards’’ and removing the words 

‘‘ ‘‘Audits of Institutions of Higher 

Education and Other Non-profit 

Organizations’’; Office of Management 

and Budget Circular A–128, ‘‘Audits of 

State and Local Governments’’ ’’; and 

adding, in their place, ‘‘Audits of States, 

Local Governments, and Non-Profit 

Organizations’’. 

■ C. Removing paragraph (d)(3). 

■ D. Redesignating paragraph (d)(4) as 

paragraph (d)(3). 

■ E. Redesignating paragraph (d)(5) as 

paragraph (d)(4). 

■ F. Adding paragraph (h). 

The addition reads as follows: 

§ 668.23 Compliance audits and audited 

financial statements. 

* * * * * 

(h) Audit submission requirements for 

foreign institutions. (1) Audited 

financial statements. (i) The Secretary 

waives for that fiscal year the 

submission of audited financial 

statements if the institution is a foreign 

public or nonprofit institution that 

received less than $500,000 in U.S. title 

IV program funds during its most 

recently completed fiscal year, unless 

that foreign public or nonprofit 


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institution is in its initial provisional 

period of participation, and received 

title IV program funds during that fiscal 

year, in which case the institution must 

submit, in English, audited financial 

statements prepared in accordance with 

generally accepted accounting 

principles of the institution’s home 

country. 

(ii) Except as provided in paragraph 

(h)(1)(iii) of this section, a foreign 

institution that received $500,000 or 

more in U.S. title IV program funds 

during its most recently completed 

fiscal year must submit, in English, for 

each most recently completed fiscal year 

in which it received title IV program 

funds, audited financial statements 

prepared in accordance with generally 

accepted accounting principles of the 

institution’s home country along with 

corresponding audited financial 

statements that meet the requirements of 

paragraph (d) of this section. 

(iii) In lieu of making the submission 

required by paragraph (h)(1)(ii) of this 

section, a public or private nonprofit 

institution that received— 

(A) $500,000 or more in U.S. title IV 

program funds, but less than $3,000,000 

in U.S. title IV program funds during its 

most recently completed fiscal year, 

may submit for that year, in English, 

audited financial statements prepared in 

accordance with the generally accepted 

accounting principles of the 

institution’s home country, and is not 

required to submit the corresponding 

audited financial statements that meet 

the requirements of paragraph (d) of this 

section; 

(B) At least $3,000,000, but less than 

$10,000,000 in U.S. title IV, program 

funds during its most recently 

completed fiscal year, must submit in 

English, for each most recently 

completed fiscal year, audited financial 

statements prepared in accordance with 

the generally accepted accounting 

principles of the institution’s home 

country along with corresponding 

audited financial statements that meet 

the requirements of paragraph (d) of this 

section, except that an institution that 

continues to receive at least $3,000,000 

but less than $10,000,000, in U.S. title 

IV funds during its most recently 

completed fiscal year may omit the 

audited financial statements that meet 

the requirements of paragraph (d) of this 

section for up to two consecutive years 

following the submission of audited 

financial statements that meet the 

requirements of paragraph (d) of this 

section. 

(2) Compliance audits. A foreign 

institution’s compliance audit must 

cover, on a fiscal year basis, all title IV, 

HEA program transactions, and must 

cover all of those transactions that have 

occurred since the period covered by 

the institution’s last compliance audit. 

A compliance audit that is due under 

this paragraph must be submitted no 

later than six months after the last day 

of the institution’s fiscal year, and must 

meet the following requirements: 

(i) If the foreign institution received 

$500,000 or more in U.S. dollars in title 

IV, HEA program funds during its most 

recently completed fiscal year, it must 

submit a standard compliance audit for 

that prior fiscal year that is performed 

in accordance with audit guides 

developed by, and available from, the 

Department of Education’s Office of 

Inspector General, together with an 

alternative compliance audit or audits 

prepared in accordance with paragraph 

(h)(2)(ii) of this section for any 

preceding fiscal year or years in which 

the foreign institution received less than 

$500,000 in U.S. dollars in title IV, HEA 

program funds and for which a 

compliance audit has not already been 

submitted; 

(ii) If the foreign institution received 

less than $500,000 U.S. in title IV, HEA 

program funds for its most recently 

completed fiscal year, it must submit an 

alternative compliance audit for that 

prior fiscal year that is performed in 

accordance with audit guides developed 

by, and available from, the Department 

of Education’s Office of Inspector 

General, except as noted in paragraph 

(h)(2)(iii) of this section. 

(iii) If so notified by the Secretary, a 

foreign institution may submit an 

alternative compliance audit performed 

in accordance with audit guides 

developed by, and available from, the 

Department of Education’s Office of 

Inspector General, that covers a period 

not to exceed three of the institution’s 

consecutive fiscal years if such audit is 

submitted either no later than six 

months after the last day of the most 

recent fiscal year, or contemporaneously 

with a standard compliance audit timely 

submitted under paragraph (h)(2)(i) or 

(h)(3)(ii) of this section for the most 

recently completed fiscal year, and if 

the following conditions are met: 

(A) The institution received less than 

$500,000 in title IV, HEA program funds 

for its most recently completed fiscal 

year. 

(B) The institution has timely 

submitted acceptable compliance audits 

for two consecutive fiscal years, and 

following such submission, has no 

history of late submission since then. 

(C) The institution is fully certified. 

(3)(i) Exceptions. Notwithstanding the 

provisions of paragraphs (h)(1)(i) and 

(h)(1)(iii) of this section, the Secretary 

may issue a letter to a foreign institution 

that identifies problems with its 

financial condition or financial 

reporting and requires the submission of 

audited financial statements in the 

manner specified by the Secretary. 

(ii) Notwithstanding the provisions of 

paragraphs (h)(2)(ii) and (h)(2)(iii) of 

this section, the Secretary may issue to 

a foreign institution a letter that 

identifies problems with its 

administrative capability or compliance 

reporting that may require the 

compliance audit to be performed at a 

higher level of engagement, and may 

require the compliance audit to be 

submitted annually. 

* * * * * 

■ 18. Section 668.171 is amended by 

revising paragraph (c) to read as follows: 

§ 668.171 General. 

* * * * * 

(c) Public institutions. (1) The 

Secretary considers a domestic public 

institution to be financially responsible 

if the institution— 

(i)(A) Notifies the Secretary that it is 

designated as a public institution by the 

State, local, or municipal government 

entity, tribal authority, or other 

government entity that has the legal 

authority to make that designation; and 

(B) Provides a letter from an official 

of that State or other government entity 

confirming that the institution is a 

public institution; and 

(ii) Is not in violation of any past 

performance requirement under 

§ 668.174. 

(2) The Secretary considers a foreign 

public institution to be financially 

responsible if the institution— 

(i)(A) Notifies the Secretary that it is 

designated as a public institution by the 

country or other government entity that 

has the legal authority to make that 

designation; and 

(B) Provides documentation from an 

official of that country or other 

government entity confirming that the 

institution is a public institution and is 

backed by the full faith and credit of the 

country or other government entity; and 

(ii) Is not in violation of any past 

performance requirement under 

§ 668.174. 

* * * * * 

PART 682—FEDERAL FAMILY 

EDUCATION LOAN (FFEL) PROGRAM 

■ 19. The authority citation for part 682 

continues to read as follows: 

Authority: 20 U.S.C. 1071–1087–2, unless 

otherwise noted. 

§ 682.200 [Amended] 

■ 20. Section 682.200 is amended by: 


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67200 Federal Register / Vol. 75, No. 210 / Monday, November 1, 2010 / Rules and Regulations 

■ A. Adding the words ‘‘Foreign 

institution’’ immediately after ‘‘Federal 

Family Education Loan Program 

(formerly known as the Guaranteed 

Student Loan (GSL) Program’’ in the list 

of definitions in paragraph (a)(2). 

■ B. Removing the definition of Foreign 

school in paragraph (b). 

§ 682.611 [Removed and Reserved] 

■ 21. Section 682.611 is removed and 

reserved. 

PART 685–WILLIAM D. FORD 

FEDERAL DIRECT LOAN PROGRAM 

■ 22. The authority citation for part 685 

continues to read as follows: 

Authority: 20 U.S.C. 1070g, 1087a, et seq. 

unless otherwise noted. 

§ 685.102 [Amended] 

■ 23. Section 685.102 is amended by: 

■ A. Adding the words ‘‘Foreign 

institution’’ immediately after ‘‘Federal 

Family Education Loan (FFEL) Program’’ 

in the list of definitions in paragraph 

(a)(2). 

■ B. Removing the words ‘‘Foreign 

school’’ immediately after ‘‘Federal 

Stafford Loan Program’’ in the list of 

definitions in paragraph (a)(3). 

§ 682.301 [Amended] 

■ 24. Section 685.301 is amended by: 

■ A. In paragraph (b)(6)(i)(B), removing 

‘‘; or’’ at the end of the sentence and 

adding, in its place, a period. 

■ B. Removing paragraph (b)(6)(i)(C). 

§ 685.303 [Amended] 

■ 25. Section 685.303 is amended by: 

■ A. In paragraph (b)(4)(i)(B), removing 

‘‘; or’’ at the end of the sentence and 

adding, in its place, a period. 

■ B. Removing paragraph (b)(4)(i)(C). 

[FR Doc. 2010–26796 Filed 10–29–10; 8:45 am] 

BILLING CODE 4000–01–P 


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